Hello, and welcome to the SEB 2024 first quarter sales and financial data. My name is Jess, and I'll be your coordinator for today's event. Please note, this call is being recorded, and for the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero, and you'll be connected to an operator. I will now hand over to your hosts, Stanislas de Gramont, CEO, and Olivier Casanova, CFO, to begin today's call. Thank you.
Thank you very much. Good afternoon, ladies and gentlemen. Indeed, Stanislas de Gramont speaking. I'm with Olivier Casanova, and we'll take you through the results of our first quarter in sales and financials. This will be followed by a question and answer. Going straight, maybe, to our page, number four, key results. Yeah, this one. Thank you. The first quarter comes out with continued good dynamics and comes out as expected. We post sales for the quarter upon nearly EUR 1.9 billion, that is 7.3% growth, like-for-like, versus our first quarter last year. That has converted in a ORfA level of EUR 111 million. This is a 70% increase on a low Q1 2023.
That in turn is converted in a 5.8% operating margin, 220 basis points versus first quarter of last year. And finally, our financial debt, at the end of the quarter is, stands at EUR 1.836 billion, 28 billion lower than last year, same period. If we move on to the first quarter activity highlights, going straight to this bridge. A few things to, to comment on this bridge. The first one is our absolute, reported sales number is up 3.9% year-on-year on the quarter. That breaks down in 7.3% organic growth, as mentioned previously.
We have a current CFA, I'll come back to that, of -4.1%, and a scope effect of 0.7%, mainly driven by the integration in our full-year sales of La San Marco, Pacojet and Forge Adour, that were acquired in the course of 2023. Moving on to the next slide, you see, on top right, a first quarter, negative Forex, foreign exchange impact on sales of EUR 75 million. That Forex impact is driven primarily, by the, Chinese Yuan, devaluation year quarter on quarter, whilst, the, usual suspect, Russian Ruble or the Turkish Lira, are also contributing substantially, to that, negative, FX impact on sales.
Now, looking ahead, we see and we foresee that this impact, especially on the Chinese yuan, if currencies stay as they are, will become lower and lower as time goes by, as last year, the devaluation of the yuan really took place in the second half of the year. So we should see a gradual decrease of that foreign exchange impact, and indeed, this quarter is lower than the previous quarter. Moving on to the next slide. The growth of this quarter is well balanced between consumers and professional.
Consumers are now growing 1.4%, reported +5.8% like for like, which is great, and professional on each side is pursuing its pretty good growth at 18.5% like for like, 23.3% reported against last year. Now, if we go to the next slide and look in detail at the professional business, well, the first point is that 18.5% is on a pretty high comparison base. Last year, Q1 was already posting a growth of 29% like for like, so that's 19 on 29. That's pretty good.
The second comment I would make is that this growth comes from existing markets, Germany, China, Italy, but also a good set of new markets or, expanding markets, countries that we barely ever speak about in the professional environment, Mexico, Taiwan, Malaysia, Eastern Europe. That means our strategy of expanding continuously our geographical coverage is bearing some fruits. The third key element in this quarter is that we start to expand our portfolio in China from coffee shops into tea shops. Tea chains in China are substantially greater in penetration than coffee chains, and they start to show some appetite for selling coffee-based products, and we start to see some appetite for buying professional coffee machines.
And the fourth thing that you need to bear in mind is that the first quarter performance is also fed with substantial contribution of large contracts. Those large contracts will be more phased towards the first half of the year than towards the second half of this year. So expect a first half more dynamic than the second half. If we move on to the consumer business... Oh, pardon. Sorry. I missed one. The other event of the quarter is the acquisition of the Groupe Sofilac. Sofilac is a group of cooking equipment, professional and semi-professional, with well-known brands, Charvet and Lacanche. It's a EUR 62 million business in 2023, mostly majority in professional, present in 45 countries. One third of the sales come from export.
I think this acquisition is another evidence of our appetite to develop professional culinary business and reminding ourselves of our ambition to become a reference player in professional equipment overall, as stated in our capital market day back in December fourteenth. That acquisition was closed a couple of weeks ago. Now, if we move on to consumers, we have a solid growth in markets which overall have been pretty resilient. Organic growth exceeding 5% for another quarter. We'll see the details of that, driven by new product launches and some gains in renewed ranges, product ranges. We still have a penalizing FX impact that's expected to ease over the year.
Now, if we go into the detail of countries and products, the first key fact of that quarter is that we have an increasing number of countries in growth. That graph on the left gives you the performance year-on-year of the top 20 market companies, country companies of the group. H1 2023, we had six out of the first 20 that were growing. Second half 2023, we have 14 out of the 20 that are growing. First quarter of 2024, we have 17 out of 20 that are growing. As the question will come, the three that are not growing are Germany, UK, and Japan, and I'll come back to that in a second. Not in much detail, but I will comment on that.
When it comes to categories, we have our big categories, kitchen electrics and cookware, are posting a healthy growth around 5%, and home and personal care driven by vacuum cleaners, but also linen care, but also home comfort fans, is growing 18.4%, which is a remarkable performance. So a growth driven both by our geographic drivers and by our product drivers, which again, is very much in line with what we describe as the growth model of the group. We are growing in a multi-category and multi-country environment, and that's the combination of those country categories, combinations that makes the group strong and successful. Now, when we move into the performance by regions, starting with EMEA, maybe with one overall comment.
We have EUR 30 million of loyalty programs that were in the first quarter of last year, that will be in the fourth quarter this year. So when you look at EMEA like-for-like numbers, there's around EUR 30 million that are bouncing back from Q1 to Q4. Besides that, most countries in Western Europe are positive, driven by positive markets, and positive markets consumption, driven again by online sales. And our group performance is supported or enhanced by our recent launches in oil-less fryers, in versatile vacuum cleaners, in full automatic coffee machines, but also in coffee partnerships. We have some ECAPs in Germany and UK, which we believe are temporary, and driven by tough market conditions in the United Kingdom and set up of new organizations in Germany.
Now, the second part of Europe is other EMEA countries, which are posting another one, another time, a staggering growth of over 30%, driven by all countries, driven by most categories. And even in Turkey, which is facing a rather difficult economic environment, we still enjoy a pretty dynamic growth. Now, moving west to the Americas, a very good quarter. We grow 15.8% in the Americas, 14% like-for-like, with North America growing at 7.7%. We confirm that we recovered growth after a very positive half two last year. We carry on with a positive growth in the US, driven by cookware, which is the bulk of our activities, but also a sustained double-digit growth in Mexico.
Solid performance in most categories, particularly linen care and a very brisk growth for fans, of course. But Mexico is posting another great quarter based on a very high base of performance. South America had a very strong activity this quarter, 27% organic growth, fueled mainly by fan sales. Fan sales are supported by the El Niño weather phenomenon that applies to both Brazil and Colombia, our two biggest markets out there. But we also have a strong performance in coffee partnerships in Brazil, and very good sales momentum across all categories in Colombia, cookware, blenders, and other small domestic appliance categories.
If we move east to China, or to Asia, sorry, we have a flat performance like-for-like, -5.8% in reported, driven by a very weak Chinese yuan on the quarter. We are satisfied with our Chinese performance. We see a slight growth, like-for-like in China. We know that the consumer environment is still unfavorable. We have a muted market that is mostly unchanged versus the second half of 2023. We keep on gaining shares in China, driven by our product mix, driven by our innovation, driven by our online commercial execution, driven by our fantastic teams in support, which are really doing making a difference on the market.
Mixed performance in other Asian countries, we have Japan, that is still heavily penalized by a very weak yen, compared to most currencies. The euro, we buy a lot of products from Europe for the Japanese market. And as inflation is not picking up, consumers are struggling to make up for their purchasing power, and the Japanese economy is in a not very good condition, nor are our categories. We see some good dynamics in other Southeast Asian markets, but overall, that makes for a flat sales performance year-on-year that quarter. That was my piece on my round the world traditional review of sales by market. Now, I'll leave the floor to Olivier Casanova to take us through the financial performance.
Thank you, Stanislas. So moving on to ORfA. We are confirming this quarter the trend of recovery with an operating result from activity of EUR 111 million, as indicated by Stanislas, up 70% on the first quarter of last year. This is, of course, the result of strong performance in volumes, both in professional, but that was also already the case last year. But the good news is that it's also supported by strong volume growth in consumer segments.
Coming, as we said, from an increasing number of countries, of course, countries such as Eastern Europe, Turkey, Mexico, Brazil, but also interestingly from Western Europe, Spain, Netherlands, France, if we exclude the loyalty program effect, as indicated by Stanislas, and also Germany. And of course, volume growth also in China. We are also supported by positive product mix, in fact, in all categories. Principally, of course, HPC, both linen care, floor care, and home comfort, and also very much in kitchen electrics, electrical cooking, and also beverages. Third element, we have also a declining cost of goods sales versus the first quarter of 2023.
It's a combination of the carry-over effect from benefits that we obtained gradually in 2023, but also new savings, and of course, the benefit of increased absorption of fixed costs due to the volume effect. And finally, as last year, we have a negative impact, of course, from the effects movement. But bear in mind that a large portion of this is, in fact, in part compensated by a positive price effect, because it's taking place in countries with significant inflation, or where we have a capacity to pass price increases. So that leads to an operating margin of 5.8%. So as I said, we are continuing on our good trend.
In Q4 of 2023, we were 100 basis points above a year before, and in Q1 2024, we are 220 basis points above a year before. To conclude, a brief word on our financial structure as indicated in the opening statement, the net debt stands at EUR 1.8 billion. It's marginally down on the first quarter last year. We still benefit from a healthy working capital position. It translates into a net debt to EBITDA ratio of 1.8 x, so stable versus the end of last year. It's not very meaningful in Q1, nevertheless. Maybe two things to note on our financial structure.
You, you've seen that we have concluded two important refinancing in the first four months of the year. First, in March 2024, we have signed a new club deal with our relationship bank of nearly EUR 500 million. Secondly, in April, we announced a EUR 150 million private placement with institutional investors, which is notable for its length of 12 years. With this refinancing, we have, of course, pre-financed the upcoming maturities, in particular, the EUR 500 million bond, which is maturing in May. That concludes the financial section. So over to you, Stanislas-
Thank you, Stanislas.
... to conclude on, on the outlook.
It will be very fast. If you look for differences versus the outlook that we published at the end of February for the annual results, there is none. So it's exactly the same guidance. We still expect an environment that will be uncertain from a macroeconomic and geopolitical point of view, a slow economic recovery, especially in China. We do see a resilient consumer market that's confirmed, and a continued brisk development in our professional markets. That is unchanged. Likewise, on our sales, we see and we confirm a more widespread return to growth in mature countries. I think the performance of 17 out of our top 20 coming back to growth after 14 in half two last year confirms that.
A gradual year-round recovery in China, the good news is at the base is, is already positive. A continued good dynamic in emerging markets amidst a still penalizing currency environment. We've talked about the Turkish lira, the ruble, we could have talked about the Egyptian pound, and maybe others that will become, or the Argentine pesos, of course, and a continued growth in professional on a high comparison basis. And last, we said, we've said since December that we would have an operating margin close to 10%, and we confirm that guidance. Thank you very much for your attention. Now, we have, plenty of time for your questions.
If you would like to ask a question, please press star one on your telephone keypad. Please ensure your line is unmuted locally, as you will be advised when to ask your question. Once again, that's star one, if you would like to ask a question. Our first question comes from the line of Charles Scotti from Kepler Cheuvreux. Please go ahead.
Yes, good evening. I have a couple of questions. The first one is on your organic sales growth in Q1. I know you don't like to break it down between volume, price, mix, but it seems that there was an outsized impact of foreign exchange driven price increases in, especially in Eastern Europe and Latin America. That grew close or over 30% in Q1. Any chance you can tell us how much FX related price hikes contributed to your top line growth this quarter? My second question relates to China. Support seems to be holding up well in a still sluggish market there. There is still no indication that the demand is improving.
I guess, what makes you confident that the growth will gradually improve throughout the balance of the year? Then my third question is on your business in Western Europe. Excluding LPs, the business is flat, but it's up 8% in France. And I think France accounts for, you know, a significant share of the Western European sales. So it seems that other markets are significantly negative. You mentioned U.K. and Germany. Can you give more color on the performance there? And, if you are, you know, losing market share, and what are the initiatives to turn around the business in those countries?
Finally, if I may, with such a strong underlying growth in France, but also in North America, do you think that some of your clients may have to replenish their stocks at some point? Or do you think they're happy with the current inventory levels? Thank you.
Merci, shall we? No, I will not give you our sales statistics by market and by week, but I will try to answer at best your questions. Maybe Olivier, you want to take the first one on the,
Yes.
the growth mix in Q1.
So, as I mentioned, in fact, the biggest impact is from volume growth and from mix. The price impact is more moderate in the first quarter of this year. So yes, there is some adjustment in certain countries which are impacted by currency devaluation. But those are not the ones you mentioned, Eastern Europe and Latam.
Right. Thank you. So I will take your your question on China and Western Europe. On China, I think we are first, we are confident because we've been consistently doing better than the market in the last two, three, four years. And we're able to do better than the market, even when our competition is dropping price. So that means our innovation engine works, that means our distribution engine works, that means our activation engine works, and that means our pricing power engine works. Now we know that we are against positive or favorable comps numbers last year, so that makes us think and believe that it can get better.
I'm not promising 10% growth in China, but when you look at the sequence of the different, the various quarters, yes, we believe that we can have a positive outlook for China for the rest of the year. When it comes to Western Europe, I will not start to break out or break down the performance by month and by market. I think France is pretty positive and has great news. UK has a bad start of the year, Germany has a slow start of the year. We pretty much know what's going on in all markets.
So we see that all those countries should be positive, including France, through the year. So we confirm that we see Western Europe on a positive trend for the entire year. And we will explain the relative counterperformance of that month or that quarter in this market or that market for very specific product phasing investment phasing reasons, with maybe a caveat on the British market that is substantially negative in the first two or three months of the year, mainly due to the fact that it was very positive last year, first quarter. Last, on the replenishment of inventories, I have no idea whether our retailers will replenish their stock.
I can only repeat what is, I think, in the market. The first thing is the Red Sea events do create some delays in the sourcing products, around two weeks, that may impact the sourcing activities of our customers. The second fact is our customers, our retailers are hampered or under pretty tough objectives or ambitions in terms of operating cash flow management, therefore working capital management. So they will not buy anything that they don't need. So all in all, we don't plan for any replenishment in our selling projections for this year, nor for any further reduction of trade inventory.
That doesn't mean it will not happen in this region, or that customer, or that region, or that customer, but it's not, we work on sell in equal sell out. Does that answer your question, Charlie?
Yes, perfect.
Okay.
Thank you very much.
Thank you very much.
The next question comes from the line of Marie Faure from Bernstein. Please go ahead.
Yes, good evening. Thank you to take my questions. I've got some questions about the professional division. I would like to know if you, what is the pipeline there, if you've got visibility, a good visibility over the year, and probably also some idea of the phasing, all over the year, because we know that, with the big contracts, you, you can have, some volatility in your reporting numbers. Thank you.
Marie, I didn't hear the first part of your question.
Sorry.
Phasing is the second. What is the first part of your question on the professional?
The pipeline, the outlook, the order book.
Pipeline. Okay.
Some comments.
Okay.
Thank you.
Okay, I'll take that. As you know, we have a pretty balanced business between the contracts and the regular business, and machine, and the service. We have highlighted this quarter the fact that contracts are somewhat higher than they are on average, and that contracts will be somewhat front loaded this year. Now, if you ask me a guidance for professional business, the pipeline is such that we see a robust sales growth for the year, and we see a positive sales growth at this stage for the second half of the year, including for the second half of the year.
Thank you.
Thank you.
Before we take our next question, as a reminder, if you would like to ask a question, please press star one. Our next question comes from the line of Alessandro Cecchini from Equita. Please go ahead.
Hello, everybody, and thank you for taking my question. The first one is about the Forex impact on ORfA. So you add minus EUR 43 million in the first quarter. So if you could provide, so typically in the past, you did this, provide a sort of rough indication at current spot rates, what kind of impact could be for the year? This is the first question. The second question is instead about the business environment that you are seeing in Europe and Western Europe and U.S. It seems to me, looking at numbers, that North America is pretty okay, while Western Europe is more mixed, I would say. But if you can provide something on this.
And finally, on margins, so just to make some historical considerations, so now you have a 5.8% margin in the first quarter, so if you exclude the Forex's 7.8%, that is more or less in line with your historical average of around 8%, 7-8%. But now you have a professional business that probably so certainly is much more remunerative for you. So I was just wondering why actually your setup could provide, I would say, better margins considering your mix, product mix that you have now. So just if you can elaborate on this. Thank you.
I'll take the last one. I think you're going fast from margin and margin before Forex. I think the margin is the margin. So, we've already said that we will go back towards 10% MUP this year, which would be substantial improvement around 100 basis points versus or 80 basis points versus what we have in 2023. We are progressively recovering our margins. We are still very early in the year, Sandro, with only 15% of the year done in terms of profit realization. So bear with us, we maintain our guidance because we think it's important to give you an indication of where we see the market and the business going.
And when we do this projection, we do this projection with the full mix in mind, both consumer and professional, but also by geographies, but also by product lines and by product categories. I will let Olivier answer the first question on the FX impact. When it comes to the business environment, we actually have a just as good feeling about the markets in Europe and the markets in North America. We see our markets are as on a positive trend.
Yes, we have a variation of performance between Western Europe and North America this quarter, but if we look at the state of consumption in small domestic appliance and in cookware, in U.S. or in Europe, we see positive signs where our interest is, and our interest is in cookware in the U.S., SD in Europe, and cookware in Europe. So, don't read through our numbers of Q1 a difference of performance between Europe and U.S. We've said that we would see mature countries recover healthy growth this year. We have no reason to change that point of view after this first quarter. Olivier?
Okay. So, on FX, it's very difficult to predict FX movements. I'm not going to try to do that. So unfortunately, I cannot give you a precise answer on what we expect for the balance of the year. What I can say, though, is that based on you know levels of exchange rates today, we see that let's say a majority of the impact will be in countries where we have pricing power, and we have the ability to follow inflation and compensate for the negative effect. That's all we can say at this stage.
Of course, in the first half results we'll be a little bit more specific on the bridge of the ORfA.
We can say also that we expect the first half to be substantially more impacted by FX variations than the second half, for what we see and what we know today. Which is the mirror effect of last year, where I think three-quarters of the FX impact on sales was in the second half.
Okay, many thanks. Just a clarification on your answer, but China is, of course, your expectation for some improvement is also driven by easier comparison. It's your answer, because of course, first quarter was tougher if you compare the turnover versus, for instance, pre-COVID, et cetera. So it's just part of your equation-
Yes.
easier comparison. Okay.
Yes.
Okay. Thank you.
All right. Thank you, everyone.
We currently have no questions in the queue. So as one final reminder, please press star one if you would like to ask a question. We have no further questions in the queue, so I'll now turn the call back over to your hosts for any closing remarks.
Well, thank you very much for your questions and your interest. Our next appointments will be on May the 23rd. We have our annual general meeting in Paris. We will publish our first-half financial results July 24th, after market close, and nine months results will be October 24th. Thank you very much everyone, for your interest and attention, and I look forward to seeing you all in the near future in virtual or other events. Thank you.
Thank you for joining today's call. You may now disconnect your lines.