Welcome, and thank you for joining us on this presentation and discussion of Electrolux Q4 and Full Year Results. With me today, I have our CFO, Therese Friberg, and our head of IR, Sophie Arnius. I would also like to mention that this session is recorded and will be available on our website as an on-demand version. Before getting into the highlights and the detail of the full year and the quarter, I would like to make some brief comments on this morning's press release and the announcement we did yesterday regarding the reorganization of our core appliance business and the decision to spin off the Professional products business. We have announced three significant changes to accelerate profitable growth. First, we are starting the process to separate the Electrolux Professional business, aiming to create substantial shareholder value.
I think, as you know, the Professional business and our home appliance business have different end markets, different consumers, and different success drivers. This will enable both entities to focus on their distinct opportunities to drive profitable growth. Also, we are transferring our Home Care and SDA business area into four regional consumer business areas. This will allow a more unified consumer-facing approach on each market, allowing a unified interaction between consumers and our brands. Third, we are creating a global function for consumer experiences. We are putting together our marketing, design, product line, digital solutions, and ownership experience innovation capabilities to leverage our group expertise in achieving outstanding consumer experiences. All of this focused on accelerating our profitable growth. Digging into a little bit Electrolux Professional spin-off.
Last night, as you saw, our board of directors decided to initiate the process to look at a possible spin-off of Electrolux Professional to the Stockholm Stock Exchange. The reason for this is, first of all, Professional is the only supplier that has a full and integrated offer for the hospitality industry under one brand. You have seen that we have had very positive and profitable growth for a number of years, driven by strong innovation in the various product categories and the combination of offering consumers a one-stop shop solution, with more and more digital all combined solutions. We are operating in a global footprint in a resilient and steadily growing underlying end market. This Electrolux Professional business will offer an attractive financial profile with good growth and strong margin improvement potential.
From here on, you will hear an update from the board of directors, in the mid-year of 2019, based on the analysis that now is commencing. If that is positive, there will then be a proposal to shareholders at an extraordinary general meeting, probably later in the year. Then if all that is successful, an eventual listing of Electrolux Professional on Nasdaq in Stockholm here in the first half of 2020. You may have also seen that Investor AB just issued a press release saying that they intend to remain core shareholders of both entities following an eventual listing. If we then focus in on our consumer business, we are making two significant changes.
First of all, we're creating a new business area structure where we're unifying our major appliance business and our Home Care and SDA business on a regional basis to offer a more unified interaction with our consumers based on a brand-by-brand basis. As new business models merge with more digital interaction, we see that there's a strong need to offer a more integrated and unified interaction with our consumers, both from a sales perspective and from an ownership experience perspective. We're also, starting last year, we announced that we are accelerating our focus on driving emerging markets growth with the combination of our Middle East and Africa business with our Asia Pacific business to increase the focus on emerging markets. We are also creating a new consumer experience function. This is intended to accelerate our product and ownership innovation capabilities.
This is about translating our experience innovation that we have focused a lot on in recent years in great tasting food, perfect care for clothes, and healthy well-being in your home into strong brand storytelling and product design. Of course, this is all underpinned by an acceleration in digital solutions, both in terms of the product interaction and how we accelerate the growth in ownership solutions in the aftermarket. This will result in accelerating our profitable growth in the consumer business, and we're reflecting that in keeping our financial targets unchanged for the consumer business, also following the eventual spin-off of Professional products. This is very significant and important, and I think exciting steps that we're taking to sharpen our business, focus it on the two main customer areas, and accelerating profitable growth. Turning back to our full year 2018.
We continued to execute and perform well in 2018, despite a very challenging cost environment. Our strategic focus on consumer experience innovation, together with high agility, are great competitive assets. During the year, we improved both our pricing and our product mix in combination with cost efficiency. Sales reached SEK 124 billion, corresponding to a sales growth of 1.7%. We achieved organic growth in several of our business areas, including EMEA, Latin America, Asia Pacific and Professional Products. Sales in North America was however impacted by the decline in private label business. For the full year, EBIT excluding NRI was SEK 6.7 billion. We faced significantly increased cost pressure of almost SEK 3 billion and implemented price increases to offset the headwinds we faced from raw materials, U.S. trade tariffs and currency. Our underlying EBIT margin was 5.4% versus 6.1% in 2017.
I'm pleased that most of our business areas showed earnings resilience despite the tough environment. Operating cash flow after investments was SEK 3.6 billion for the full year, and we completed two strategic acquisitions in Professional Products. We're entering 2019 with a strong balance sheet that provides the opportunity to create profitable organic growth as well as selective acquisitions. The board now proposes an increase of the ordinary dividend to SEK 8.50 per share. This reflects Electrolux's commitment to deliver shareholder value. Let's now go on to the Q4 highlights and turn the presentation to our business overview. The performance in the quarter was good and in line with our planned progress, despite significant cost pressures across our business areas, especially in North America with the implemented trade tariffs. We continue to invest in consumer innovation that further improved mix in the quarter.
Net sales increased versus last year and grew to SEK 34.4 billion. Organic growth was up 2.7%, driven by price increases and mix improvements. Our business areas, EMEA, Latin America, Asia Pacific, Home Appliances, and Professional Products continued to deliver organic growth. In North America, price increases improved while volumes declined, mainly due to the private label business. Operating income was SEK 2 billion with a healthy margin of 5.7%. This was despite a SEK 900 million increase from raw material costs, tariffs, and currency. In light of the tough comparison, I'm pleased that all business areas had positive price mix contributions. This could not fully offset the high headwinds we faced. Turning to our innovations. I'm really pleased to share with you our journey on front-load washers in Southeast Asia.
This is really a great example of how we're combining global technology innovation to provide great care for garments in beautifully designed products, in combination with local adaptations for local consumer needs, such as washing batik or hijabs in Southeast Asia. Through combining these two strengths, we have achieved over 15% cumulative annual growth for the last several years, and we're now market leaders on front-load washers in Southeast Asia. This is the type of combination of innovation and close understanding of local consumer needs that really fuels profitable growth for us going forward. We want to accelerate that further by combining our efforts on emerging markets. Secondly, you know that we've refocused and sharpened our brand approach for AEG a couple of years ago, for Frigidaire in 2018, and now we're doing the same for our Electrolux brand, just in time for our 100-year celebration in 2019.
We're taking the opportunity to really clarify the Electrolux brand heritage of sustainability, of Swedish values, of inclusiveness, and of innovation. We're now launching a new range of built-in kitchen products in Europe and in the rest of the world as well. That really takes those values very closely into account, driving and delivering the most intuitive and interactive kitchen experience ever. We're extremely excited about our significant number of large product launches coming in 2019 going forward. If we turn to our business operation in Europe, major appliances EMEA continued to show solid sales performance with an organic growth of 3.8%. We continued to gain market share under our premium brands and in strategic categories such as laundry and built-in kitchen. This resulted in accelerating product mix improvement and higher sales volume. Price was slightly positive in the quarter.
Year-over-year, operating income increased 7% and the EBIT margin came in at 8.5%. As previously announced, operating income includes a reversal of a provision of SEK 71 million related to the French competition authority investigation that was concluded in the quarter. Excluding the non-recurring item, operating income was on par with last year as the positive contribution from volume, price and mix offset higher costs for raw material and currency headwinds, as well as investments in innovation and marketing. Let's move to the market development on the next slide. Demand in the European market showed a positive trend in the quarter, with total industry shipments up 2%. This was driven by strong growth in Eastern Europe of 7%, where we saw demand increase across most markets. Market volumes in Western Europe are stable and at a relatively high level. Now let's talk about North America.
Our organic growth in North America declined in the quarter. Sales volumes continued to decline, primarily due to private label, but also due to higher prices. Cost-based price increases improved sequentially, net of market promotions contributing positively to sales. Operating income in the quarter, however, declined significantly as a result of lower volumes and the cost headwinds from raw materials and tariffs. This is against the quarter last year with high cost savings. To mitigate continued cost inflation and trade tariffs, we have announced further price increases started beginning of 2019. We are, as you can see on the next slide, taking active measures to strengthen our competitiveness in North America. As we announced yesterday and discussed last year, we're now moving forward with our Springfield investment and are on track to complete the expansion of our Anderson facility.
We've also decided to consolidate our cooking production to Springfield, meaning we will cease manufacturing at our plant in Memphis. This is a tough decision to make, and we're committed to supporting the Memphis team going through this transition. It is one of several necessary steps to safeguard our competitiveness in North America, where we're facing tough headwinds and have seen declining earnings trend in 2018. We expect savings from the consolidation of cooking production of close to SEK 1 billion from 2022. As a result of these measures, a restructuring charge of approximately SEK 800 million will be taken, of which close to SEK 300 million has a cash impact. We expect the first new Anderson refrigeration products to roll out in mid-2019, and the phaseover from St. Cloud to be done at the end of 2019.
During 2018, we've simplified our product offering and reduced the number of SKUs, meaning unique product types, by 50% compared to mid-2017, eliminating unprofitable and costly products. Our key focus for the coming years is now to further sharpen our Frigidaire offering to consumers. We have already in 2018 strengthened our Frigidaire position through well-received product launches. The increased use of modular product platforms enables us to step up the pace in bringing relevant innovations to U.S. consumers also in the coming years. We're also continuing to expand our distribution network and are now able to reach 95% of U.S. households directly. Let's briefly comment on the market development in North America. Industry shipments for core appliances in the U.S. continued to decline in Q4, but at a lower rate of 1%. Demand for home comfort and microwaves was up 15%.
The quarter ended with positive December growth, which we have assessed was partly driven by some customers pre-buying ahead of a year with higher list prices. The weak industry shipments overall in Q4 is partly explained by the higher prices in the market, but also the shortfall in the big laundry category. In addition, Sears, a large retailer, filed for restructuring under Chapter 11 in the beginning of the quarter. We estimate the sellout to consumers to have been better than the industry shipments. The macro environment in the U.S. has in general been favorable, with consumer confidence and unemployment rates at very healthy levels. Although, we have noted some inflationary pressures and somewhat of a slowdown in the housing market going into 2019. Let's turn to the next slide and talk about Latin America.
Macroeconomic uncertainty continued to impact demand for appliances in key markets in the region. The market in Brazil and Argentina was down, while consumer demand in Chile was up. Central America, Caribbean, and Andean combined regional markets showed stability during the quarter. Organic growth came in at a high level of 12%, driven by higher price together with positive mix, mainly in Brazil. Sales volumes, however, showed a decline in the quarter. Our earnings were also positively impacted by higher prices and mix in combination with strong contribution from cost measures in the quarter. This more than offset increased raw material cost and currency headwinds. I'm very happy that our operating income increased and margins improved versus last year from 4.3% to 5.6%. Q4 is, as you know, a seasonally strong quarter. We continue to see cost inflation in Latin America, and increased uncertainty in Argentina in particular.
At current rates, the negative currency headwinds continue into the beginning of this year. Price remains our key tool to mitigate these headwinds. We have decided to transfer refrigeration manufacturing from our facility in Santiago, Chile, to primarily our Rayong facility in Thailand. This will allow us to increase the use of modular product platforms, resulting in improved efficiency and a sharper local product offering. Let's turn page and look into our Asia Pacific business. In Australia, the market was somewhat softer in Q4, which mainly related to the slower property market as we highlighted in previous quarters. We increased prices to mitigate higher costs from continued currency headwinds. These had somewhat of a negative impact on volumes. In Southeast Asia, we were able to continue our profitable growth, thanks to higher volumes, especially in laundry, which contributed to favorable mix.
I'm pleased with the team's work that would take the high currency headwind, mainly in Australia. The contribution from price and mix did not fully offset this. Hence operating income declined year-over-year. Let's continue to Home Care and SDA. For our Home Care and SDA business, there is an ongoing market shift from corded canister products to strong demand in cordless products. This trend continued in Q4. We saw an organic growth of 14%, which was driven by positive product mix related to strong growth in the cordless category, fueled partly by the new innovative product, Pure F9, that we launched last quarter. We also saw growth in corded vacuums in Europe, where we gained market share. The divestment of the U.S. floor care business in the previous quarter impacted sales negatively.
Earnings was in line with last year, thanks to the strong mix improvement, even though sales volumes were lower. Headwinds from cost inflation and currency impacted results negatively. We remain focused on executing on our business transition plan in Home Care and SDA. We'll continue with investments in new products and support future product launches in 2019. As from Q1 2019, we will report our Home Care and SDA business as part of our regional consumer business areas, as I indicated earlier. Let's turn to our Professional business. Professional Product delivered a solid quarter. Organic sales grew by 4.7%, driven by higher sales in the laundry and beverage segment, as well as improved price contribution and growth in the customer care business, which is an area that we're focusing on growing. The previously acquired company, Schneidereit and SPM Drink Systems, contributed to sales further with about 6% growth.
Earnings increased slightly compared to the same period last year and benefited from positive price and mix. Higher costs for investments in customer care and R&D for new products, as well as increased raw material costs, however, had a negative impact on our operating margin. The acquisitions we made in 2018 fully accounted, actually, for the dilutive impact of margins in the quarter. Before turning over to Therese for the financial review, I just wanted to highlight again that we are planning to have our Capital Markets Day on March 27th in Pordenone, Italy, at our Professional products headquarters. Especially in light, I guess, of the announcements we made last night, I think this will be a very interesting session that I recommend you all take part of.
I would say, though, that seating is limited, if you want to participate, please go ahead and register as quickly as possible. With that, I hand over to Therese for the financial review.
Thank you, Jonas, let's go through the financial overview. As Jonas mentioned earlier, in the quarter, higher prices across all business areas in combination with improved mix thanks to our innovative products, resulted in an organic sales growth of 2.7%. The currency translation contributed positively, in total, sales were up 5.7%. Gross operating income declined somewhat year-over-year to SEK 6.6 billion, corresponding to a margin of 19%. This as we were not able to fully offset the high cost inflation relating to raw material, tariffs, and as well as currency. Despite this, operating income was close to SEK 2 billion, somewhat lower compared to last year's strong quarter. All in all, our operating margin came in at 5.7%. Earnings per share in the quarter was SEK 5.48 compared to SEK 6.97 last year, which was impacted favorably by a one-time positive effect on tax in the U.S.
Let's go through the EBIT bridge for the quarter on the next slide. Volume, price, and mix had a positive impact on earnings in the quarter. The leverage from price was strong, especially from our price actions in North and Latin America, actually, all business areas reported positive price in Q4. Strong mix also contributed positively. As Jonas mentioned, sales volumes had a negative impact due to volume decline in North America, mainly driven by lower private label sales, also from lower volumes in Latin America. Headwind from raw materials and tariffs was SEK 602 million in the quarter. The currency impact intensified and was in total SEK 290 million. Net cost efficiency came in as planned, our underlying productivity was offset by higher cost inflation and higher investments in R&D and in marketing.
Acquisitions had a slight negative effect on the group's margin relating to the divestment of the U.S. floor care business. A non-recurring item of SEK 71 million related to the French antitrust proceedings had a positive impact on earnings. To sum up, despite sequentially improved organic contribution in the quarter, we were not yet able to fully offset the effects from the record high headwinds we faced. This resulted in an underlying margin of 5.5%. For the full year, volume, price, and mix had a positive earnings impact of SEK 1.5 billion. Price was a key positive driver as we increased prices in several markets. The mix contribution was also strong as a result of new product launches and market share gains in the focus areas. Volume were impacted by the decline of private label volumes in North America and also by the business transition in Home Care and SDA.
Net cost efficiency for the full year was close to SEK 800 million, which was in line with our expectations. Higher raw material costs and trade tariffs resulted in a headwind of SEK 2 billion and currency accounted for an additional SEK 900 million in headwind. The net result from acquisitions and divestments during the year gave a slight dilution effect on margins. We had non-recurring items of SEK 1.3 billion in 2018 impacting major appliances in EMEA as well as North America. Excluding NRI, our EBIT declined somewhat versus last year's strong performance. For the full year, this corresponded to an EBIT margin of 5.4%. Looking into the currency effects in more detail. In Q4, we had SEK 352 million in negative transactional currency effect year-over-year.
The negative impact was mainly in the emerging market currencies, such as the weaker Argentinian peso and Brazilian real versus the U.S. dollar. Asia-Pacific continued to face a currency headwind driven by the Australian dollar versus the U.S. dollar, and in Europe, the stronger dollar versus euro and the weaker Russian ruble impacted negatively. The translation effect was positive SEK 62 million, and it's relating to the year-over-year EBIT effect from a weaker Swedish krona. At current rates, the negative transaction effect would continue to impact Latin America and Asia-Pacific negatively in 2019. I'm very pleased to see that all our business areas contributed to the 2.7 percentage points EBIT margin accretion for the group from price and mix. EMEA had favorable mix fueled by the premium brands and market share gains.
Price was slightly positive with selective increases in targeted markets, and we have further announced price increases across the region with effect from Q1. In North America, price sequentially improved slightly versus the previous quarter. We continue to go for price and have announced further price increases in North America, effective from the beginning of 2019. In Latin America, the implemented price increases show the positive effect with a significant EBIT contribution. In Asia-Pacific, the price actions we have taken in Australia since the summer is now contributing positively, and mix as well, partly related to the strong growth we have in Southeast Asia within the laundry category. Home Care and SDA and Professional also benefited from price and mix across markets. We had a strong cash flow after investments of SEK 3.2 billion in Q4, an improvement compared to a good level in the previous year.
The increase was mainly due to positive working capital contribution. The average operating working capital in relation to rolling 12 months net sales showed an increase to 4.5% versus last year's 4%. The sales mix shift within our business areas and increased inventory level, as well as acquisitions, were the main negative factors that were impacted. As previously highlighted, the working capital efficiency we have achieved over the last 10 years are now expected to flatten out and remain at this healthy level. Investments are slightly higher versus last year due to the ongoing investments project in re-engineering, innovation, and automation in primarily North America and Latin America. With that, I would like to hand back to you, Jonas, to review our outlook and summarize the quarter.
Thank you, Therese. Let's move on to our outlook and start with our market view. The overall demand trend across most markets in 2018 is expected to continue in 2019, the visibility is impacted by high uncertainties in the world. A tougher cost environment triggers further price increases in the appliance industry, putting pressure on shipments in markets such as North America and Latin America. In terms of value growth, however, the impact from price increases is positive. We anticipate market demand for appliances in Europe to be slightly positive. Western Europe continues to be relatively stable, although impacted by the U.K. and Brexit. Eastern Europe, driven by Russia, is expected to show good growth. For North America, based on current industry dynamics with higher prices in the market, we estimate U.S. industry shipments to be flat to slightly negative for the full year 2019.
Latin America continues to be impacted by the current economic and political uncertainty, with currency fluctuations in combination with continued market price increases. We expect demand from the ABC countries, Argentina, Brazil, and Chile as a whole to be flat to slightly negative. As a result of the weaker housing market, we expect the full year market outlook for Australia to be flat. The positive demand trend in Southeast Asia, however, is expected to continue in 2019. Looking ahead at Q1 and the full year 2019 outlook. We expect favorable organic contribution driven by higher prices and positive mix development, fueled by launches of new and innovative products. As previously mentioned, Sears, our main private label customer in North America, filed for Chapter 11, there are still uncertainties on how this will impact our private label volumes.
Price increases is our main tool to mitigate cost inflation, we expect prices in Q1 and the full year to have a significant positive contribution, mainly from North America and Latin America. In addition to the price increases achieved last year, we have started 2019 by implementing already announced price increases in key markets. This is, during the year, expected to offset the external headwinds we face from raw materials, tariffs, and currency. We estimate the negative year-over-year impact from raw materials and tariffs to be approximately SEK 1.7 billion-SEK 2.1 billion in 2019, with the range driven mainly by uncertainties on tariffs. The currency headwind for 2019 is roughly SEK 300 million based on currency rates as per 22nd January, most of that will impact our Q1. We continue to have strong focus on cost productivity.
To drive organic growth through innovation and consumer experience, we will invest more on new product launches in terms of R&D, marketing, and brand compared to last year. This, combined with manufacturing transition costs in North America and increased cost inflation, will not be fully offset by the growth savings we aim to deliver. Hence, we expect a somewhat unfavorable impact on the net cost efficiency for both Q1 and the full year 2019. Our CapEx projects to strengthen our competitiveness through automation and modernization continues in 2019 and will, as mentioned, also include the new projects in North America. We expect CapEx investments to increase to about SEK 7 billion in 2019. Our journey to profitable growth continues. We have implemented higher prices across all business areas.
We're improving product mix, supported by new products and our focus on premium brands. We're continuing to invest significantly in R&D and innovation for new product launches. We're creating value. We're generating strong cash flow, and we're raising our dividend proposal to SEK 8.50 from SEK 8.30 last year. This, in combination with the exciting announcements we made last night and this morning, further accelerates our profitable growth journey. With that, I turn over to Q&A.
Yes. Thank you, Jonas and Therese. We are now opening up for questions via the telephone conference.
Thank you. The first question is over to the line of Andre Kukhnin at Credit Suisse. Please go ahead. Your line is open.
Yes. Good morning. Thanks so much for taking my questions. I'll go one on the quarter and outlook and one on the strategic moves, if that's okay. Just on the quarter and outlook, the net cost efficiency guidance that you put out is somewhat surprising, that you expect that to land in the negative for the full year 2019. Could you maybe walk us through the moving parts there in terms of year-over-year moves? Or what may be in absolute numbers you expect to generate in terms of savings in 2019, and what are the factors that are offsetting it?
Right. Of course, we're continuing our work to continuously improve our productivity and cost structure. We did give some guidance at the Capital Markets Day last year on the continued progress there. If you recall, and you were able to see that as well, we had projected a slightly lower ongoing cost productivity in 2019. That is because of the significant effort we're driving on the big investments in North and in Latin America. That's driving a tremendous amount of effort and focus and also cost, of course, during 2018 and even more in 2019, but with massive productivity improvements starting in 2020 and into the coming years. It's a little bit a question of phasing of the benefits there, where we are, in fact, really accelerating our cost productivity actions. The impact is slightly lower here in 2019. That's the first one.
Still very good contribution from continuous improvement, but a little bit less than in prior years and with a further acceleration in 2020 and beyond. On top of that, the manufacturing transition, particularly in Anderson, in the H2 of the year will result in some double cost, let's say, as we ramp down our St. Cloud facility and ramp up Anderson with a new product. That will result in some reasonably significant additional cost that's temporary and natural, and we want to make sure that we ensure a smooth ramp-up of that facility. Also, as we mentioned, we have a lot of exciting innovations coming to market here in 2019. We are on a very positive curve, as you have been able to see, especially here in the H2 of 2018 on mix.
We want to, of course, continue to drive that and support both the positive mix and our continued price increases with strong focus here in 2019. Finally, there were, in 2018, a few positive one-offs that we actually highlighted also during the course of 2018. Of course, the negative reversal of that shows up in net cost efficiency as we go into 2019. We do have a fairly significant degree of discretion over, of course, these investments. We will, of course, make them only as we see the benefits materializing in price and mix. We have a little bit of the ability to toggle between the strong contribution that we foresee in price and mix and the cost investments that we make to support that.
Got it. Thank you. If I may, just on the spin-off of electrolux Professional.
Yeah.
Do you expect substantial synergies? Then maybe on the other side, what is it that this business will be able to do as a stand-alone basis that it hasn't been doing under Electrolux?
Right. Actually, the two entities operate on a quite stand-alone basis already. The separation cost, as well as the ongoing cost for having two separate entities are expected to be relatively minor. We will come back with more indication of that, of course, as the project continues, we're not ready to give specific guidance on that yet. We do see that this will be relatively limited. If we look at the development of Electrolux Professional, I think you've seen that we've had a number of years of profitable growth and margin improvement. Indeed, Electrolux Professional is executing very well inside of the current structure. However, just because of the fact that these are very different end markets, different technologies, different manufacturing locations, and so on, we really see limited benefits of keeping the two entities together.
In fact, that we see significant benefits from allowing the two to really focus exclusively on their individual opportunities. Also, and very importantly, with separate access to capital markets. We do want to grow both organically and through M&A in Electrolux Professional. Given the significantly higher valuation multiples in the Professional space, we've struggled to really be able to see a strong enough return on those types of M&A acquisitions as Electrolux Professional, as part of the consumer business with lower multiples. As a stand-alone entity with a higher trading multiple, the M&A-driven growth will be able to create a lot more value going forward. Those are the main reasons.
Great. That's very clear. Thank you.
Sure.
We now go to the line of Johan Eliason at Kepler Cheuvreux. Please go ahead.
Hi, it's Johan here. Congratulations to a decent set of numbers despite the headwinds. Just coming back to your net cost efficiency guidance here. We got the input that you include the negative effect from 2018 positive one-off, sort of. Now, just to make it clear, this SEK 1 billion restructuring charge you plan for Q1, is that part of this guidance, or is it just a separate item? Thank you.
The one-off costs are not part of that. Of course, there will be some extra operating costs as we go forward. Develop a new product in Springfield and accelerate their construction. That's part of the negative cost efficiency, but the restructuring cost itself is not part of it.
Okay, good. On the price hikes you're talking about, Whirlpool is also doing it similarly, now we are starting to see tariffs being postponed potentially and some inflation on the raw material side coming off. Do you see a risk that price will start to be eroded again towards the end of the year? How do you expect this to play out? Thanks.
Well, we've always been very clear that we think that macro things that impact all players end up, at the end of the day, in consumer pricing, both on the upswing and on the downswing. I don't think there's any unclarity about that. However, it's clear, I think that despite the fact that the pricing for steel and plastics have come off their highs recently, it's still at a very elevated level and definitely higher than it was two years ago. We do, of course, expect to continue to see market pricing to adjust to input costs. It's definitely still an elevated cost level that we're seeing.
The impact from the Koreans now having plants soon up and running fully, don't you think that will change the competitive picture again in North America?
Well, honestly, we think that's a good thing for the market dynamics because then all players are playing on the same playing field, so to speak, and differences in currency rates or tariffs and so on will play a smaller impact going forward. This is actually not new capacity they're adding. They're transferring capacity from other manufacturing locations. On balance, we don't worry about that.
Okay. Thank you very much.
Sure. You're welcome.
Okay, we now go to the line of Andreas Willi at J.P. Morgan. Please go ahead.
Good morning. Thanks for the time. The first question is a clarification on the bridge. You gave a lot of elements for the guidance for 2019. I just wanted to make sure I understand it correctly. You said, that you expect the price increases to offset the effects tariff and raw materials.
Yeah.
Is that price, just price or is that including mix as well?
That's just the price.
That's just the price.
Yeah. We continue to see favorable mix. Again, that's what I think is important to look at these sort of corresponding elements of the bridge that yes, we're pricing to offset currency and raw material, and then we're investing to drive mix and volume in our net cost efficiency. Of course, these are corresponding and we're able to kind of pull and push on these different aspects depending on the development as we go forward.
Basically the message is that if we had SEK 6.6 billion underlying profits in 2018, that if price offsets FX tariffs and RMI, then mix can offset the negative net cost efficiency or the investment. That is kind of how we should think about it as a starting point.
As you know, we do not give specific guidance. We are just sort of indicating the outlook of our different.
Yeah.
drivers. I think we are going to focus a lot on, of course, driving profitable growth in 2019 as we always do, and as we guided our financial objectives remain, to achieve a 6% margin over time, and that is what we are going to work towards, of course.
That is my kind of second question. If the 6% margin target in terms of, obviously it's positive that you maintain that ex Professional, what's the timeframe for this? Do we need to wait until the U.S. is back on track with the savings running fully by 2022? Is that a target you think you could achieve before the U.S. is fixed?
Yeah, as you know, we don't give a specific timeline for these things. This is 6% across the business cycle that we see that this business should operate on also, let's say the consumer business here. We have a major investment program ongoing right now, not just in North America, also in Latin America. We see really good traction and progress on those investments. We will ramp up our Anderson facility with a completely new range of refrigeration products with massively improved productivity compared to the previous setup in two factories. That's coming on stream here starting in mid-2019 with some sort of duplication costs, of course, throughout the fall as we ramp down St. Cloud and ramp up Anderson. That's unavoidable. The benefits are really significant.
As we look at doing a similar set of actions in our cooking facilities in Springfield, with the new combined product architecture for built-in ovens as well as freestanding cookers, with very significantly increased productivity and reduced cost. Of course, we'll have a completely different setup in an efficient set of efficient factories in North America. That journey starting in mid-year 2019 and continuing to accelerate, of course, that would be a major contribution to our 6% target going forward.
Thank you very much. I go back into the queue for the further questions.
I appreciate it. Thank you for holding on to our guidance.
Okay, we now go to Lucie Carrier at Morgan Stanley. Please go ahead. Your line is now open.
Hi. Good morning. Thanks for taking my question. I will have two. The second one is just more an accounting or housekeeping question. The first one is around the objective around the price. I'm just curious to understand the dynamic you're observing now with your distributors, specifically in the U.S., because I remember you were trying to increase your presence with other distributors outside of Sears, but what we are hearing from a lot of distributors now in the U.S. is they are quite pressured by lower volume that they see in terms of demand and also increased cost in terms of transportation and labor.
I'm just trying to understand, how do you see the balance between that massive price increase that you are expecting to pass through in 2019, which seems to be much larger than what you have already passed in 2018, and 2018 was already a very big number. How does that work in terms of your strategy with the distributors and the volume level also in terms of filling up the factories?
Yes, I think you're correct in saying that there are significant inflationary pressures in North America. Of course, that's the reason why we have to make the price increases that we're doing, whether it's raw materials, transportation costs, labor costs, tariffs. That's something that's impacting us, and it's impacting our competitors more or less in a similar magnitude. That is, of course, also the reason why we are somewhat cautious in our market demand guidance for 2019 in North America. This is all part of our analysis of the market. When it comes to increasing our distribution scope, that's something that we've worked very intensively on throughout 2018 to increase our regional and local distribution capability.
As I mentioned before, we now have the capability to reach 95% of American households through our distribution network, and that's something that is a massive improvement compared to previously, and that, of course, supports our distribution reach ambitions, and we've made major investments in that. As we go now into 2019, we have a sharper and more focused product offering. We've refreshed the Frigidaire range and the brand. We have much better distribution capability, but we also have higher costs. We have to raise prices, but we see that we can do that, and continue to drive positive mix and expanded distribution.
All right. Just my second question, housekeeping. You mentioned SEK 1 billion restructuring. I think you have SEK 800 million to come in Q1 in North America. Is the SEK 200 million coming into LatAm for the Chile plant or?
Yes.
Okay.
We're moving one product line, you could say, from our factory in Santiago, Chile, to Rayong in Thailand. That would result in mainly actually some asset write-offs. This is not so much a cash consequence.
That would be taken inside of it?
Sorry. This is existing capacity that we have in Thailand, there's no additional investment. Sorry, say that again.
That would be taken in the EBIT of this division, yeah, as usual?
If that's what you want. Yes, correct. Yeah.
Thank you.
Sure. You're welcome. Thanks.
We now go to ABG and Olof Cederholm. Please go ahead. Your line is now open.
Yes. Hi, it's Olof from ABG. Just a question on the net cost efficiency, but not for 2019. I'm thinking about 2020 already. You said that the cost savings from your investments will be accelerating, and the fact that it will be negative this year is more the phasing of this progression. Could you talk a little bit about that development into 2020 already now?
Sure. Absolutely. One, it's a question of phasing, yes. Two, it's also a question of how much we decide to invest in marketing and R&D to support our positive and profitable mix development, right? You have to, of course, see that there's a discretionary element in this, and not all costs are bad. In fact, a lot of costs are there to drive the positive mix development that we're currently seeing, and that we want to accelerate further. Coming back to your question about 2020. Of course, we are currently actually in the middle of four major manufacturing transformation and product innovation programs. We have Anderson, which is ramping up here in middle of 2019. Springfield, which will start to ramp up actually mainly in the early 2021 timeframe.
Actually, a significant part of the savings, the SEK 1 billion that we're talking about here, will be achieved in 2021, with full realization in 2022. We're doing a major restructuring or actually re-engineering in our large refrigeration plant in Curitiba, Brazil. That's also coming on stream end of the year, this year, early next year. We're also making significant investment in our cooking products, similar to what we just announced in Springfield, in our facility in São Carlos, Brazil. Of course, this is really unprecedented work we're doing on productivity and on product innovation. Which will really start to kick in heavily from the beginning of 2020. We have a very favorable outlook on our cost productivity starting in 2020 and beyond the coming years.
I would say this is even more importantly, these are cutting-edge innovative products that will allow us to continue the positive mix journey that we're on. We look very favorably at the development that we're seeing going forward.
Great. Just one question about more a current theme, the private label situation. Q4 was messy. How should we think about this in North America going forward? If you could maybe specify a little bit what the Frigidaire brand, how that is developing in the market.
Right. Private label development will be impacted by the outcome of the Chapter 11 proceedings that are currently ongoing for Sears. It's very difficult for me to speculate on how that's going to turn out. I would say, it's fair to say that regardless of how it turns out, private label will be a significantly smaller business for us going forward. Also, if the current were to exit Sears from restructuring would be successful because it's a smaller store footprint that's being proposed. We're following that very closely. We are a key supplier to Kenmore, and we want to continue to be that if they reemerge from reorganization. We're ready to and willing to do that.
When it comes to Frigidaire, as you know, we've worked hard to refresh the brand with a new line of very nicely designed products that have been well received in the market. We're really able to price up for these new products, and that's a big reason why we have been successful in our price increases that we've realized. Of course, there is some pressure on demand because of the price increases. Overall, it's a very well-received new range of product under an attractive brand. We expect to continue to fuel that already here in 2019, we have significant new product launches with multi-door refrigeration, new built-in ovens, and new dishwashers. We have a really exciting range of new Frigidaire products coming already this year. Of course, we're wrapping up from EMEA, the new refrigeration products from Anderson.
It's a busy year.
Great. Thank you very much.
You're welcome.
We are now over to David MacGregor at Longbow Research. Please go ahead.
Yes, good morning. I guess you talked about pricing. A lot of the commentary has been around North America and Latin America.
You did mention that you get some pricing in Europe. It's historically been a difficult part of the world or difficult region within which to get pricing. I'm guessing that everybody pervasively is feeling the impact of inflation, and that would be a reason to increase pricing and to be optimistic about the ability to get pricing there. Historically, there's been disruptions to that. I guess I'm just trying to get a sense of what might be changing in the European market competitively or structurally that would allow you to achieve pricing and giving you maybe a better level of confidence this time around with those pricing actions.
In Q4, we saw quite nice contribution from net pricing for the first time in a long time in Europe. We saw that in combination with strong mix contribution. I think that's what's really encouraging about our ability to execute now in Europe. Our journey so far has been, as you know, we're continuing to launch great new products at higher price points and drive positive mix, but the like-for-like pricing has been negative and then flat, but now positive. That's, of course, driven by a combination of unfavorable currency in a few places that we and all our competitors are facing, as well as then the higher raw material prices. As you mentioned, also inflationary pressures on the salary side, especially in places like Germany as well as Eastern Europe. The cost pressures are higher.
We see that continuing, and we're reacting to that through higher list prices, and we're raising them further here in the Q1 of 2019. I think that's just the cycle we're in right now that we all kind of have to get a bit of pricing given the higher costs that we're facing.
Do these inflationary pressures just bring about a more rational competitive environment in Europe?
It's probably hard to speculate on, but I always say this, right? The significant changes in the cost environment that impact all competitors tend to get reflected in pricing over time. That's a, I think, relatively unavoidable feature of a low-margin industry like ours.
Okay. The second question is just on the Professional products. I realize you'll talk about this more at your analyst meeting, but you mentioned that there's an opportunity to drive margin improvement with the separation.
Yeah.
Just, I'm looking at your business versus some of the other publicly traded peers like a Middleby or a Welbilt. It's been impressive in terms of the context within your consumer business, but it's lagged behind some of these other peers in the commercial food equipment business. What is the margin-driving opportunity here? Where is the upside in margin?
Yeah. I think there are a couple of different areas that we'll be able to accelerate now. One obvious one is that our exposure to North America in Professional business is much lower compared to the peers that you typically look at, our listed North American peers. The different feature about the North American business is that it's more exposed to the chains business. Once you have chains business, it's usually ongoing, relatively high-margin business. We've made good progress in increasing our exposure to North America. I think now as a standalone business, we will be able to really accelerate that through M&A and through organic investments. That's one big opportunity we have to increase margins going forward.
The second part is a higher focus on the aftermarket business, and that's something we also kicked off in earnest about a year and a half ago, and that's really starting to pay off in better performance. I think that if you look forward here, and that's what's really making us excited about the Professional business, what's happening is that more and more of maintenance and repair work will be driven by connected appliances that we will be able to remote monitor. Electrolux Professional is the only brand in the industry that is delivering a full suite of products, both food service, beverage, and laundry products under one brand, meaning that we can offer one sort of surveillance system and one response system through aftermarket service to support our customers in a much better and much more attractive way for them.
This is a significant margin expansion opportunity. We see a really strong continuation and acceleration of both our top line and our margin improvement in Professional going forward.
Thanks very much, and good luck.
Sure. Thank you.
We now go to the line of James Moore at Redburn. Please go ahead.
Yeah. Morning, Jonas, Therese, Ron. Can I return to the unfavorable net cost efficiency? Just back to slide 154 that you referred to in your 2017 Capital Markets Day. On that slide, it showed your MAVC savings of SEK 3 billion a year, ex RMI and inflation over 2% for 2017, 2018, 2021. I get that it dropped to SEK 2.2 billion in 2019. On other occasions, you've talked about a couple of billion, SEK 2 billion of MAVC savings a year, not the SEK 3 billion. Can you help me out on what the correct picture is and whether that SEK 2.2 billion 2019 productivity number or MAVC savings number is still valid for 2019? Is that now lower perhaps because of the U.S. investment delay? If it is lower, can you quantify it?
On the other side, can you say how much above the 2% threshold you're planning on inflation being in 2019?
First of all, I think I'm impressed that you quickly dug up the slide there. That's great. I think that's a percent slide. I think we didn't give an exact guidance. It's around that 2% range of MAVC, excluding RMI and inflation over 2%. That, of course, is a number that's substantially lower than SEK 2.2 billion. We're sticking to that indication. What is happening, of course, is that we are seeing continuation of a substantially higher inflationary case of salaries in particular, of course, in Latin America as a consequence of the currency drops that we've seen there and the inflationary acceleration from that. We're seeing significant inflation also in the U.S. and in Eastern Europe and in Germany, as I mentioned. We have a fairly significant wage inflation going on.
We are seeing, of course, as I mentioned, some substantial transition costs as we transition from St. Cloud to Anderson in the H2 of the year. On other costs related to the high investments that we're driving in manufacturing re-engineering as well as innovation. I think that's important to understand that these are discretionary investments that we're making in order to continue to drive profitable growth. Of course, if that's not working, we have the ability to pull down on that ambition. I think it's dangerous and not right to just focus on the net cost efficiency number, because there's a corresponding sort of impact on our mix and also price realization. Our underlying cost productivity work that we guided for in the Capital Markets Day remains as we indicated.
Okay. Thank you. You mentioned earlier that your margin target is 6% for the consumer business. Just want to clarify, are you talking about the future group excluding Electrolux Professional?
Correct.
If so, do you see all the four regions being similar?
Yeah, I think that first of all, we kind of always had the ambition that all our business areas or sectors should be over that 6% hurdle. For us, that's not really new. We do see the opportunity to deliver that over time. I think, of course, several of our sector or two of our business areas in Asia Pacific and in EMEA are already above that. We are taking these very aggressive actions both in North America and in Latin America to ensure that we have a really competitive product offering and manufacturing footprint in both those regions. We have strong brands and are well-positioned to take advantage of that with the right manufacturing and product setup.
That's very helpful. One last technical one if I could quickly. Do you have a saving from the reorganization and the moving of Home Care into the regions? Do you have any guidance on how central costs could change with the Electrolux Professional spin-off?
First of all, we're making the transfer of Home Care and SDA not primarily for cost reasons. I think this is about providing a sharper, more focused approach to consumers and really leveraging the strength of our brands in our interaction. Mainly now more and more digital online, as you know. That makes a lot of sense. We think there are efficiencies in that, but I think that is mainly focused on accelerating profitable growth. When it comes to our group common cost, they will be a little bit higher this year than they were in 2018. That's part of our negative net cost efficiency, and it's driven by a number of things, including, of course, our bonus programs and so on didn't pay out very well, unfortunately, in 2018. We expect to do better in 2019.
Of course, that impacts, for example, among other things, our group common cost. For Electrolux Professional and the consumer business as separate entities, we don't foresee any material or any noticeable increase in our running cost in terms of group common for the two entities combined. That means, of course, that we have to be efficient as we set up the Electrolux Professional business and make sure that we have a very efficient structure also in consumer business going forward.
Very helpful. Thanks, Jonas.
Sure. Welcome.
We are now open the line of Gustav Sandström of SEB. Please go ahead.
Thank you, operator. Good morning, everyone. Congrats, a good result. A question on R&D, if I may. You mentioned that R&D investments will continue in 2019. Is it then fair to assume that R&D to sales will grow in proportion in 2019? The second part to that question would be, if you could let us in a little bit on to what extent you've been sharing R&D resources with the Professional segment and the consumer segment, and then how you assume to take actions following the split. Thanks.
Right. Yes, we are increasing our investments in R&D, and of course, it has to do with the high intensity right now of product development, which we're super excited about. We're happy to spend that money. When it comes to the collaboration between consumer and Professional, it has been mainly in the, let's call it the R part of R&D, right? The more advanced research. In things like material science, induction technology. We intend to continue in that collaboration. Physically, we're very closely co-located in Pordenone and Noncello, where we have that research activity going on. We'll be able to continue that without any major issues.
Great. Just to be clear, you're also referring to increased R&D to sales next year, not in absolute terms?
Yeah. Correct.
The second one, where would you feel comfortable, say, with the R&D to sales on a longer-term perspective? I noticed that you now passed one of your more pronounced American competitors in terms of R&D to sales. Do you feel that you're approaching a level where you're happy, or should we see this as a multi-year trend?
I think we are at a level that we're quite happy with. Of course, as I mentioned, the intensity is quite high right now with these big programs. I think that it's a competitive level that we're at. We do have the capability, of course, to adjust a little bit up and down, depending on how successful we are with the new product launches and the overall macro environment. This is not something that is exactly fixed every year. We have a fair amount of discretion in sort of the pace of investment that we're driving.
Great. Lastly from me, just a quick one. Relating to your guided favorable pricing in 2019, how much of this relates to pricing that was implemented before year-end, and how much relates to the pricing you now implemented during January?
We don't give specific guidance on that, a relatively sizable chunk of it is, of course, the pricing that we implemented in the H2 and also into the Q4 of 2018. We have, both in Europe and in North America and in Latin America, introduced further price increases here as of Q1. It's a combination.
Great. I appreciate your time. Thanks.
Sure. Thank you.
We now go to the line of Björn Enarson at Danske Bank. Please go ahead, Björn, your line is now open.
Thank you for that. I have a question on private label and on your ongoing structural changes in North America. If you could give some more color on that development. These actions that you are taking right now, is that part or only part of your ongoing work that you do in North America, or is this also reflecting what you believe will be the end game for your private label offering? What kind of visibility do you have there?
Right. A number of different pieces to this. Of course, as you recall, we paused the investment back in Q1 or April, I guess it was, of 2018. Given the big changes in raw material costs, the announcements of tariffs, and so on, and the changing market circumstances that we saw. Of course, we didn't stop our work. We wanted to make sure that we have the right scope and size of the investment that we're intending to make. As we look at the changing market dynamics, demand situation, and so on, we came to the conclusion that we can actually scope and size this Springfield facility using a common architecture between freestanding products and built-in products that allows us to meet the market demands from one architecture in one plant.
Of course, that enables significant cost savings that are required given the changes that we've seen in the demand environment in 2018. That, of course, includes the lower demand of private labels. It's impossible to tie one exactly to the other. It's a combined analysis, both from, let's say, technical side and modularization architecture side, and the overall sort of demand and market and cost dynamics.
Dependent on how the end game will be on the private label situation, the structure that you are now putting forward, is that a structure that is able to handle in an efficient way the different outcomes?
Absolutely. Yes. For sure. This is, in a true sense, a very modular factory, where different than before, we can easily add a manufacturing capability as needed. That's one of the strong benefits, actually, of this new factory that we're building.
Due to the recent events on private label or late events, do you believe that your volume development in North America will be more aligned with the market development than we have seen last few years?
Yeah. I think, if you look at the development, and honestly, you're going to have to kind of make your own assessment of that, but last year, private label was about 9% of our sales in North America. Depending now on the outcome, and we don't know what the outcome will be of the Sears reorganization. That's going to impact the outcome of that. What we are doing is we're making sure that we have a very sharp product offering and a very effective cost structure to make sure that we can grow profitably regardless of the outcome of that.
Very good. The offer on the table on the private label situation involves a reduced number of stores also year-on-year up until at least throughout 2019, basically.
Yeah.
Cool. Thank you.
Sure. Thank you.
We are now over to the line of Karri Rinta at Handelsbanken. Please go ahead. Your line is now open.
Yes. Thank you. Karri Rinta, Handelsbanken. Just one question on North America, that your comment that price increases will mitigate input cost and tariffs. Firstly, does that apply to North America as well? Secondly, does that take into account the possible tariff hike from 10% to 25% from March 1? Finally, how should we then think about the outlook for 2019 if we sort of start with the H2 of 2018 as a base? How should we look at the first half of 2019 sequentially, then H2 of 2019? I don't need the exact numbers, but some directional guidance would be helpful given how weak the H2 of 2018 turned out to be. Thank you.
Yeah. On your first two questions, yes and yes. The intent is to offset in North America, including the higher tariffs. In fact, the price increases that we announced in the beginning of the year are reflecting the 25% rate of tariffs. We're sort of modulating depending on the actual outcome. When you then look at the roll forward of the H2 of 2018 into 2019, of course, we are continuing to see some of the effects that impacted us in the H2 of 2018, meaning higher tariffs, slightly weaker market demand in North America, as well as the significant currency impacts in Latin America.
That will continue to impact us here, certainly in Q1, but as the year goes on, we'll then get the benefits of our price increases, continued benefits from new product launches, and ongoing cost efficiency work. We see a gradual sort of improvement of that as the year moves on.
All right. Perfect. Thank you.
Sure.
We are now over to the line of Ji Cheong at Citi. Please go ahead. Your line is open.
Hi. Thanks for taking my questions. I just have a couple. I might have missed this if this was brought up in the beginning of the call. Just wanted the firstly on the, what's the traction you're getting on pricing increases by region, if possible? Secondly, on the tariff headwind expectations, does this guidance include the 25% List Three? Thank you.
Right. We are getting good traction throughout Q3 and Q4, I was on a positive curve. Then I'm very, let's say, confident in the price increases that we now have announced for Q1, both in Europe, North America, Latin America. Also in Australia, we had a good trend in terms of pricing in Q4 of 2018. We actually had positive price, as you may have seen, positive price in all regions and positive mix in most regions in Q4. The cost guidance that we gave, there's a range there, as you may see. The lower end of that range, the SEK 1.7 billion indicates the current level of tariffs, more or less. Of course, there are other things that are still not completely locked for the year.
The higher end of the range indicates the 25% rate on the List Three, Section 301 tariffs.
Thank you very much.
Sure. Welcome.
We are now over to the line of Jack O'Brien at Goldman Sachs. Please go ahead.
Hi, Jonas. Just a quick question on the industry and more sort of structural changes that are happening. I was wondering if you could just give an update on how you're seeing the evolution of buying practices in the market, i.e., the shift from sort of traditional retail to online and how you're seeing that developing.
There's an ongoing shift to more and more consumers, of course, first of all, and most importantly, doing their research online. I think that's honestly the most significant change that we've seen in recent year, and it's continuing. A very large proportion of consumers do most of their research online. It's extremely important that we're strong there, and we've invested heavily in that capability. If you look at sort of the proportion of consumers actually transacting online, that varies still quite significantly market to market from, let's say, mid-single digits up to, in some cases, 30%-40%, with a wide span between those.
That span has a lot to do with the structure of the market, if it's a very sort of dense population or not, and things like that makes it attractive or not to have a sort of an online-based distribution system. In terms of who the actors are that are providing those online sales services, that's actually predominantly, in most markets, our traditional retail partners. From our perspective, the way consumers transact doesn't necessarily change so much who we transact with. I think that's important to understand. We're perfectly happy, of course, to support online sales as much as in-store. That's something we're relatively neutral to, as long as we serve our consumers in the best possible way with a great offer that helps them understand the benefits of the product and helps us get the benefit of our innovation.
That's really what we care about going forward, and we're pleased with that development.
I think in the past you've mentioned there can be working capital implications of providing for online sales. Do you also see sort of differential margins between those regions where you maybe have 30%-40% of sales going online via relative to those countries with lower proportions?
No, actually not. In fact, there's no clear correlation between margins in a specific geography and the penetration of online. The cost structure might look a little bit different, and that's, I think, important to understand. If we execute the full sort of final mile logistics, of course, that means that we have slightly higher inventory, and that's actually something we've seen throughout 2018, and before as well, that it will require a little bit more inventory to be able to execute that final mile distribution. From a total margin perspective, it's relatively indifferent to whether we do the final mile execution or whether the retail partner does that. Of course, that cost has to be covered one way or the other, regardless of who does it. It's a slightly different sort of look to the income statement.
Great. Thank you.
Sure.
We are now back to the line of Andre Kukhnin at Credit Suisse. Please go ahead with your follow-up question.
Great. Thanks so much for taking a follow-up question.
Sure.
I just wanted to get a bit better idea on the magnitude of pricing we can get in 2019. I think we've mapped out the price increases as you announced them during the 2018 quarter by quarter. In Q4 and beginning of this year, is it just the North America price increase that you're planning, or is there anything else that you announced at the end of the quarter or planning for Q1?
Yeah. We announced higher prices also in Europe for Q1 and also in most of our Latin American countries, mainly Brazil and Argentina. That will contribute. In fact, I think we gave a quite significant clear guidance or outlook on our pricing, saying that we are going to offset the raw material and tariff elements that we're guiding for.
Right. Yes. Indeed. Just looking at the momentum you achieved in Q4, and it looks like you're raising further, it looks like it's got a scope to overachieve that. Certainly note the guidance. Just on that mix of the SEK 1.7 billion-SEK 2.1 billion, if List Three is the SEK 400 million swing factor within that, and given the other tariffs that were announced being arguably less severe, it kind of implies that even within the SEK 1.7 billion, your raw materials expectation is well over SEK 1 billion. Would that be the right sort of inference to make?
Starting with your first question, of course, I think it's important that when you look at the organic, it's of course the combination of volume, price, and mix. Pricing was a very strong contributor in Q4, but also mix. We intend to continue to drive favorable mix. Again, as I said before, when you look at the different buckets here, the unfavorable net cost efficiency has the mirror of continued favorable mix in addition to the price offsetting the raw material and the tariffs. As you look at the raw material guidance that we gave, the biggest individual factor in the range is the 10%-25% on the List Three tariffs. There are also other, let's say, cost drivers that are open, mainly plastics for the H2 of 2019 that we have to take into account.
The tariff versus raw material discussion is, I'll tell you, it's impossible for us to give you that level of detailed guidance because, of course, a lot of the tariff effects are indirect. As we buy components that are impacted by market prices that in turn are impacted by tariffs or not. To try and break that apart becomes an artificial exercise that unfortunately I can't help you with.
Got it. Thank you. On the restructuring that you announced today, in terms of the phasing of that SEK 1 billion of savings, I'm thinking about it as the sort of SEK 200 million and SEK 800 million bucket of savings proportionate to the charges for Chile and U.S. First, smaller bucket coming in over 2019, kind of H2 through to 2020, then the other one coming in through to in 2021, through to 2022. Would that be broadly the right way to think about it, or is there anything to calibrate?
I think that's broadly okay as an estimate. I think for sure the transitions that we're doing in Chile will have a faster impact because we're not building any new capacity. This is capacity that already exists, and we're just sort of phasing that over. In North America, indeed, the big chunk of the savings come from the beginning of 2021, when we will have phased out the Memphis factory, as well as then launching the new products coming out of Springfield. That then is an ongoing sort of launch that will happen throughout the course of 2021 with new products coming in. The full effect only kicks in from 2022, but a good chunk of it is from 2021.
Got it. Thank you. Then just one final one. On Small Domestic Appliances, a much broader question. You've obviously had the experience of breaking it out into standalone entity, and now we're bringing it back to regions. Could you maybe share with us what was the exercise behind it and what results it yielded to decided to take it back into regions? I guess you have got pretty clear listed peers to that business as well, and one could have extended maybe the logic of what you just announced with Electrolux Professional to Small Domestic Appliances at some point, maybe in the future. Taking back into regions, just quite interested to find out what drove that.
Right. This is now, what, nine, 10 years ago that we started to report Home Care and SDA separately. Actually, at that time, we didn't really do any physical change to the operation. It was more actually to more appropriately to reflect how the reporting structure was set up to have a proper segment reporting for the business. That was not an operational change. It was actually just better reflecting how we're actually running the business. What has happened then during this time period are a couple of things. First of all, the importance of having a unified brand approach to consumers, especially online and also increasingly in sort of the after sales phase of the ownership phase of the interaction. It's really important that we have one phase, one interaction.
Historically, when this was predominantly an interaction with retailers, it was actually okay to have two organizational entities sort of interacting with our retailers, even if there might have been some inefficiency with that, there were also some benefits. As we get much more online sort of interaction with consumers, it's important that we have that in one organization internally for us, to make sure that we serve our consumers in the best possible way. Then, of course, it's about gathering our forces to really drive profitable growth in innovation and aftermarket sales growth. We think we can do that better with a unified approach. First of all, then in the front end, by integrating Home Care and SDA, which I think will be really good for our markets and help the consumers interact in a better way.
I think very importantly, and this is something we wanted to highlight, we're also pulling together all our innovation forces in the group, from product line and R&D, design, marketing, digitalization, and ownership experience solutions into one combined group under a chief experience officer. This allows us to really accelerate innovation of consumer experiences, and there, major appliances and small appliances fit very well together. Whether we're talking about a kitchen where we have the large installed appliances as well as small kitchen appliances offering a combined sort of approach to how consumers cook and get the most out of their cooking experience, as well as then on the Home Care and comfort side, where we talk about floor care and air care being a combined well-being offer.
Historically, we've had the floor care team in one organization and the air care team in a different one, and that's just not efficient as we want to be driving innovation in the overall home well-being area. This just helps us organize ourselves in a way that accelerates innovation in a meaningful way to consumers and also in a very efficient way. These are actually very significant and important announcements for us in order to serve consumers in a better and faster way.
Very clear. Thank you. Very last one, just on mix in Q4, running some calculations here, what you're saying, it sounds like it's kind of quite way above 100 basis points in Q4. Would that be kind of in the right ballpark?
We don't break out price and mix because, honestly, it's sort of two sides of the same coin. Of course, in overall, we did give you the 2.7% number for price and mix combined in the quarter. We're of course, quite pleased with that performance, and we intend to accelerate that further.
Got it. Thanks. Thanks for the answer.
Thank you.
I think that was.
Yep.
We have one final question, and that is over to the line of Erik Paulsson at Pareto Securities. Please go ahead.
Thank you.
Yes. Hello. Thank you for my question. In terms of the separation of Professional, and in terms of the intended value created from this separation, would you say that this would rather come from organic initiatives, or would it rather come from M&A initiatives in your way?
I think it's hard to kind of break the two apart, but I for sure see a combination of an acceleration of the organic profitable growth that we've seen now over a number of years with even more focus and attention by the Professional management team and as a separate entity. I think that's a significant opportunity. Then I'm really excited about the M&A opportunities with the better valuation of Professional on its own, giving them the ammunition to accelerate on M&A. This is still a very unconsolidated industry in the big scheme of things. Especially as we want to focus more on North America and also in emerging markets, we think that that access to capital is a really strong opportunity for Professional going forward.
Okay. Thank you very much.
Thank you very much. Really appreciate all the interest and the questions. Just in summary, we're really excited about the changes that we've announced today. We think the separation of Professional and consumer will allow both entities to focus on their distinct opportunities to accelerate profitable growth, again, both organically and through M&A. We're excited about good performance in Q4, offsetting really record headwinds in the quarter in a very good way through price and innovative products driving mix. Of course, we're excited about the big investments that we're continuing to drive to accelerate cost and productivity as well as innovative and fantastic products driving our brands further. We're looking forward to 2019 with a lot of confidence, and we can assure you that we will work very hard to deliver value going forward. Thank you so much, and look forward to seeing you going forward.
This now concludes today's session. Thank you all very much for attending, and you can now disconnect.