Hello, everyone. I'm Ann-Sofi Jönsson, Head of Investor Relations and Sustainability Reporting here at Electrolux Group. Welcome to this webcast, where we will focus on the news from tonight. Note that our full Q1 report will be released tomorrow morning at 7:00 A.M., followed by a webcast at 9:00 A.M. We will run through the presentation and after that we will have a Q&A. For those who are on the webcast, feel free to enter your Q&As throughout the whole presentation and we'll pick them up afterwards. Welcome to everyone on the webcast, and for those of you who are on the conference call. With me here today, I have our CEO, Yannick Fierling, and Therese Friberg, our CFO. With that, over to you, Yannick.
Thank you very much, Ann-Sofi. Good evening, good day to all of you. Thank you very much for attending for what is a significant milestone for Electrolux. We're about to announce a series of initiatives which would be changing long-term future of this company. The first initiative we are announcing tonight is a partnership in North America with the Midea Group in order to accelerate our growth in the region, in order to improve our profit. That will be representing a very solid platform in order to improve in this region moving forward. We're also announcing a series of initiative in order to improve and optimize our footprint, increase efficiency throughout the organization. Our aim is to expand. Expand from a product perspective, expand from a geographical perspective, and that's the fourth column you see on this page.
In order to finance these four pillars, and in order to strengthen our balance sheet, we're announcing as well tonight a fully underwritten rights issue. Beginning of December, we have been unveiling our vision. Our vision is to be the home appliance industry leader in consumer satisfaction, delivering outstanding lifetime experiences with solutions that always get better. In order to do so, we have been defining four pillars. The first one is consumer preference, the second one is lifetime value creation, the third one is cost leadership, and the last one is cash generation. With these four pillars, our aim is to deliver a long-term profitable growth for the decades to come. I've been saying many times 2025 was a year of progress, but it was as well a year where we have been defining our long-term strategy. In 2025, we have been improving the results in North America.
We have been growing profitably at the level of 3.9%. We have been strengthening our market position by gaining market share with Electrolux, with AEG, and with Frigidaire. We have been reaching SEK 4 billion cost reduction at year-end. In order to deliver this strategy, we have been aligning as well our organization. 2026 will be about executing the strategy we have been working on in 2025. This strategy is, again, about a partnership in North America with Midea for food preservation and fabric care. It will be about gaining efficiency through our footprint and through our organization, and it is about launching new initiative to grow and expand geographically. Again, to finance all of that and to strengthen our balance sheet, we are announcing a fully underwritten rights issue tonight. Cost reduction is one of the biggest contributor in our EBIT bridge for 2025.
We have been delivering SEK 4 billion, and we have, again, the ambition in 2026 to deliver between SEK 3.5 billion and SEK 4 billion. These cost savings are vital for the company. We are evolving in an environment which is extremely volatile, extremely uncertain, and that's why we're happy to announce that two of the initiatives I mentioned previously will be bringing SEK 2 billion additional cost saving in year three. First, the partnership with Midea, we will be generating SEK 600 million in year three for a capital investment of SEK 1.1 million. The efficiency gain we'll be gaining through footprint and through the organization will be generating an additional cost saving of SEK 1.4 billion in year three for a total investment of SEK 600 million. Again, in year three, these two initiative alone will be generating a cost saving of SEK 2 billion.
We have been presenting this EBIT bridge during the market capital update beginning of December, and I'm sure you recognize some of the numbers. We have been delivering in 2025, 2.8% EBIT, a total of SEK 3.7 billion, and we have been defining very clearly the three pillars on which we will be building in order to reach our midterm target, which is 6% EBIT. These three pillars are consumer preference, lifetime value creation, and cost leadership. I'm happy to say that what we're announcing today is simply adding a lot of substance in these three pillars. For consumer preference, we will be launching new products, expanding in some markets, develop new channels. In terms of lifetime value creation, we will be able to target a full new ecosystem around the product.
In terms of cost leadership, as I mentioned previously, we will be generating SEK 2 billion in year three thanks to this initiative. All of that to face very strong external factors and deliver mid-term more than 6% EBIT. I would like now to address the first pillar we have, which is the strategic partnership for Fabric Care and food preservation in North America. Let me start by introducing who this partner is, Midea. Midea is one of the giants for home appliances today. It was founded in 1968, pretty young company, but this company has been delivering a turnover of $64 million in 2025, which is about five times the size of Electrolux. It has, in terms of engineering, 23,000 engineers dedicated to home appliances, which again is 10 times the number of engineers we do have in Electrolux. It is a company which is located in Asia.
Asia is ahead in terms of digital transformation. Midea does have today 140 million connected appliances. They have been producing, in 2025, 23 million cooling products. Again, the level of complementarity we have with Midea is very strong. We certainly have a strong go-to-market based on more than 100 years of history. We have three strong global brands, Electrolux, Frigidaire, and AEG. We have very good consumer insights. We have one of the best C-star ratings in North America in home appliances, and we have a strong network in North America. What Midea brings on the table on the other side is highly efficient supply chain, cost leadership, will be leapfrogging in terms of digitalization, and they're certainly bringing scale and operational flexibility. We will be building this partnership on more than 20-year sourcing supplier relationship. Let me now give you a couple of examples.
We have, again, a very strong distribution channel and service network in North America. We have been winning numerous prizes in terms of products. We know our customer better than anybody else. What Midea brings on the other side is a strong vertical integration, and you see on this page one example. Midea is producing their own motors under the brand Welling. I will spend quite some time on the next page in order to give you all the detail on what this partnership is about. We are announcing tonight the creation of three joint ventures, one sales joint venture in food preservation, one manufacturing joint venture in food preservation, and one additional manufacturing joint venture in fabric care. These three joint ventures will be enabling us to grow in a profitable manner, broaden the level of offers we'll have in the different product category.
We will be leveraging our R&D resources between Electrolux and Midea. We will be increasing our operational flexibility and certainly we will be improving greatly our cost efficiency. Let me now go joint venture by joint venture. The first joint venture we're announcing tonight is a sales joint venture for food preservation, which is cooling products. Electrolux will keep 50% of ownership in this sales joint venture. We will be selling all the food preservation products in North America through this sales joint venture. The sales joint venture will be fed in terms of product by the manufacturing joint venture we're announcing in Juárez, but not only. It will be fed by all the factories we do have in food preservation as Electrolux and as Midea. We're announcing as well a manufacturing joint venture in Juárez for food preservation, for cooling products.
Electrolux will keep 35% of ownership in this manufacturing joint venture. We have been selling 65% of the asset of Juárez, again, for cooling, and that will be generating a positive cash flow of SEK 1 billion in the second quarter of 2026. Anderson. We're announcing tonight the creation of a manufacturing joint venture in Anderson. We are currently producing cooling products in the factory of Anderson. We'll cease to produce refrigerators in Anderson in the third quarter 2026. We'll start producing Fabric Care products, washing machine, and dryers in the first half of 2027. We will have 55% of ownership in this manufacturing joint venture. We'll be declaring in the second quarter of 2026 in order to make this transformation from cooling to Fabric Care, a Non-Recurring Item of SEK 2.4 billion. SEK 1.5 billion will be non-cash.
It will be to write off the assets we do have in Anderson and SEK 0.9 billion will be dedicated mainly to restructuring. We will be investing as well in terms of capital, in order to have new products both in Anderson and in Juárez, a total of SEK 1.1 billion. That's for Fabric Care and food preservation. Certainly, we are keeping our factory in Springfield 100% owned by Electrolux in order to produce food preparation product. We'll be keeping our factory in Kinston producing dishwasher, and we will be keeping our Fabric Care factory in Juárez, producing today front loader. Let me go again into more detail. First, Anderson and a manufacturing joint venture, where we will have 55% of ownership. We will be producing starting in 2027 in the first half, both top loader washer and top loader dryer in this factory.
We have been working hand in hand with Midea in order to gain product leadership in this product category. Of course, Electrolux will keep its identity in terms of design and in terms of features for this product category moving forward. Now, moving to the manufacturing footprint in Juárez for food preservation, we will be accessing brand-new platforms thanks to the know-how we do have and we're building with Midea. We will be broadening the product offer in food preservation in North America. Now let me give you an example or an illustration of the potential of this partnership moving forward long term. If we focus now for a second on Fabric Care, the total turnover Fabric Care represents in the North American market is about $12 billion. We have more than 18% market share in food preservation, including product.
We have far more than 10% market share in dishwashing and in food preparation cooking product. We only have 7% market share in front loader and less than 2% market share in top loader washer and dryer. Just imagine if we're able to reach 10% market share in laundry, that would be representing an additional 1 million unit for Electrolux. Gigantic potential today. Today, we don't have, as Electrolux, our fair share in laundry. Moving now into Juárez and the manufacturing joint venture we are announcing in cooling. Lots of potential, certainly from a product platform perspective, as I mentioned previously. We'll be able to access and develop new platforms on the site of Juárez. We'll be benefiting from a cost side of the equation from a high level of vertical integration coming from Midea. As an illustration, Midea is manufacturing their own compressors under the brand GMCC.
We will be able to leverage the R&D capabilities between Electrolux and Midea. We will be able to benefit from best practice sharing through all the manufacturing sites Midea does have worldwide and from our factories in refrigeration. Finally, the last line is really important. We will be able to share CapEx in order to be faster, more agile, going to market with new products and new innovation, which will be delighting our end consumer. Moving now to the sales joint venture for refrigeration. We'll be launching the sales joint venture in the third quarter 2026. We will be owning 50% of the sales joint venture, and we will be consolidating our P&L line by line in the financial income statement of Electrolux. We will be able to work together with Midea to align on the right product offer in the market in North America.
The sales team between Electrolux and Midea will be divided. We will have our sales team, our Electrolux sales team, facing the end consumer and the customers we do have in North America. This sales joint venture will be fed, once again, by a full range of new product we will be able to source from Midea and from our factories. It is a long-term partnership, and I just want to show you now how the EBIT bridge looks like. Again, we have been adding a lot of substance in consumer preferences, lifetime value creation, and cost leadership. In consumer preference, it's pretty easy. It is about all the new product we will be launching in North America. Top loaders, washers, and dryers are probably the best example. It's not only that. It will be new food preservation products as well. We'll be improving our mix.
We'll be strengthening our competitiveness in terms of R&D and innovation. We'll be faster, more agile going to market. In terms of life value creation, we'll be able to access to a brand-new expanded ecosystem around the product. We'll be able to develop the D2C channel. Finally, as I mentioned previously, in year three, but not only in year three, we'll be saving SEK 600 million through this partnership. It is a very strong and solid platform to deliver the 6% EBIT we're aiming for mid-term and to overcome the very strong external factors we have to face in this region. Let me move now to the second pillar, which is the improvement, the optimization of the manufacturing footprint and the gain in efficiency we will be having throughout the organization.
First, as I have been mentioning previously, we will be ceasing the cooling activity in Anderson in the third quarter 2026, and our resources will go down by 1,500 people. We'll be rehiring 1,200 people in over 2027 and 2028 in order to start the Fabric Care factory in Anderson. On top of the Anderson closure and reopening, we will be reducing our workforce by 3,000 people over the next three years. This reduction will be coming through by optimizing our footprint, better leveraging the assets we do have today, but also working on the overall organization in order to make it more efficient, use modern tool like AI and getting some reduction in terms of corporate functions in order to focus much more on the front line and on the end consumer.
Over the next three years, we'll be reducing our staff by 8%. Let me just now move into the manufacturing footprint optimization we are announcing today. This footprint is about better leveraging our assets. As we announced in the last two weeks, we have been closing our factory in Santiago, in Chile. This market has been opening up, and it was not making much sense, looking at the competitive landscape, to keep on producing in Chile. We have been announcing as well yesterday the closure of our factory in Hungary. That's two closures. Certainly, there will be more announcements to come in the coming future. We want to become a more consumer-centric organization, and we have been announcing changes end of 2025 and beginning of 2026, going exactly in this direction. First, we have been announcing the creation of four regions, North America, Latin America, EMEA, and APAC.
P&Ls will be clearly driven by these four regions. What we have been announcing as well is the creation of a very strong and efficient product organization. The aim of this product organization will be to serve the four regions. We'll be accelerating in terms of wellbeing and SDA because there is a lot of potential in this product category for a company who has been inventing vacuum cleaner. What we want to do is to be more efficient in terms of global manufacturing. We want to source product whenever that is making sense as well. We want to reduce the level of corporate staffing and reinvesting into the frontline. If I summarize the footprint optimization and the efficiency we'll be gaining, that's probably the best page we can present. We'll be better utilizing our global manufacturing footprint.
We'll be flattening our organization in order to make it closer to the end consumer. We will be creating, and we have been creating, a very high efficient product organization. We are deploying AI tools wherever we can in order to get more efficient, agile, and fast in the market. Certainly, and I want to repeat that, we are reinforcing our frontline in order to be faster in reacting to our consumer needs. I will move now to the third bucket, which is about profitable growth. I would just remind everybody that one third of our turnover is made in Europe, Asia, one other third is made in North America, and we have about 22% of our turnover made in LATAM. We have a lot of areas where in all fairness, we don't have our fair share. I would just mention two of them.
India, very small, gigantic market with a high level of development. Mexico. We're strong in LATAM, but we're not selling products in Mexico. We are studying this type of possibility in order to extend in the future. We'll be extending as well and taking advantage of the quickly expanding D2C channel in every single region. We'll be looking at any single product category we can sell on the top of what we're selling today. Top loader in North America is a very good example. Lifetime value creation expansion is one of our priority. We are accelerating in terms of connectivity. We will have access to a much broader ecosystem moving forward in terms of consumables, accessories. This category has a much higher profit percentage than appliances. We have been moving part of our organization in this direction.
We have a clear strategy in this field, and we will be delivering as well, under this pillar. That's closing my part, and I will pass now it to Therese.
Thank you, Yannick. Yes, now we will take a deep dive into the fully underwritten rights issue and the different components of that. As Yannick mentioned, we will be spending approximately half of the SEK 9 billion of the fully underwritten rights issue on the strategic initiatives that we are announcing today. The partnership with Midea, driving additional efficiency in our organization and in our optimizing our manufacturing footprint, and to boost the additional strategic initiative for long-term growth that we can invest in. We will also spend approximately half of the rights issue on strengthening the balance sheet. Of course, to have a strong balance sheet under these conditions with very volatile market environments, to have a company that can have a flexibility and agility and resilience in these tough market conditions makes us a stronger company.
Of course, you know we have a commitment to have a strong balance sheet and a strong capital structure. We also have the objective to be at 2x net debt/EBITDA, which if you look at the graph, you see that we have been solidly below 2x net debt/EBITDA for a long period of time as a company. In 2022, when we had a lot of disturbance after the post-COVID time period, we have been at elevated levels. We have been taking decisive actions, as you know, over the last number of years, and we did bring down the net debt/EBITDA to 3x by the end of 2025.
With this additional rights issue of SEK 9 billion that we're now asking for, that would take down the 3x net debt/EBITDA to 2x , if we would have the SEK 9 billion additional. I think what we still want to say is that as you understand, this is a large transformation ahead of us. We will have a number of non-recurring items, both in cash and also in non-cash, and also in cost, over the quarters to come. Even with the SEK 9 billion, we do not see that we will be below 2x in the next coming quarters. We see that when we are executing on the strategic initiatives, we will come down to below 2x in this time period. Looking a bit closer then at the underwritten rights issue.
As you can imagine, we have been going through a quarter of really identifying what should the number be, and we have concluded together with our board that SEK 9 billion is the right number for us both to be able to fund these additional strategic initiatives we are driving and also to create the financial flexibility and agility that we need while executing these initiatives. As you may have also seen today, Investor AB, our main shareholder, is also fully supporting us and they are subscribing to their pro rata of 18.78% and also an additional guarantee of the same percentage, which means that their total undertaking is 37.56%. The rest of the rights issue is fully underwritten by Morgan Stanley and SEB. The rights issue will include both Class A and Class B shares.
When it comes to the overall time plan in brief, on the 22nd of May, we will announce the terms for the rights issue. On the 27th of May, we will call for an extra general meeting to approve the rights issue. On the 28th of May, we will publish the prospectus and the 29th of May is the record date where you need to be recorded as a shareholder to be able to subscribe to the rights issue. The subscription period is from the 2nd to the 16th of June and the preliminary results of the rights issue we will have on the 17th of June. Summarizing what Yannick has really gone through in more detail, where will we use the proceeds from the SEK 9 billion rights issue?
SEK 1 billion-SEK 1.5 billion will be allocated to the partnership with the Midea Group, with the majority around SEK 0.9 billion out of this will be a non-recurring item as we transform the Anderson facility from being a food preservation factory today to a Fabric Care factory in the future. The second part, so SEK 2 billion-SEK 2.5 billion will be allocated to drive efficiency improvements in our organization overall but also in optimizing our manufacturing footprint. This is where you will also find the two announcements that we've had in the last days and weeks with the closure of Chile and Hungary.
The third bucket, SEK 1 billion will be allocated to long-term profitable growth initiatives that you saw we have very exciting opportunities that today with a constrained balance sheet, we would not be embarking on and executing on, which we will now have the possibility to do in parallel. About half of the rights issue will be about reinforcing the balance sheet for us to have the flexibility to execute this transformational strategy. Just as a calculation example then, it would take down the Net Debt/EBITDA that we had by the end of 2025 of 3x down to around 2x.
To do the same then calculation, you probably saw it as well in the communication today that the Net Debt/EBITDA by the end of the first quarter was 3.8x , and with the same methodology there, it would also take down the 3.8 down to 2.8 by the end of the first quarter. We will take a look as well at the update for the first quarter. As Ann-Sofi mentioned, we will come with the full report tomorrow morning and we will also have the press conference where we will go into a lot more details, of course, tomorrow. Some financial highlights. The net sales was SEK 30 billion for the first quarter and the operating income excluding Non-Recurring Item was SEK 0.2 billion.
The operating cash flow after investments was SEK 4.6 billion, which was negatively impacted by our seasonal increase in operating working capital that you usually see in the first quarter. It was also impacted by a large operating loss in North America. Net EBITDA, as I mentioned on the previous slide, ended at 3.8x for the first quarter. Moving into some more details on the operating income where we did see a significant loss in our region, North America. The market in North America has been extremely tough in the first quarter, so -10% with the home appliance market, which is actually the largest negative impact we have had in a 10-year period in a quarter. We also then have a very volatile pricing environment. We have done a change in accounting estimates for customer rebate provisions.
We also, as you may have seen, have done a recall of a limited number of gas ranges in North America. These two items in combination resulted in a negative impact to earnings of SEK 0.3 billion. Really the main reason for North America making such a large loss was a combination of the very negative market environment in combination with, of course, still significant continued year-over-year external factors related to tariff cost. If we then take a couple of minutes as well on our two other regions, so Europe, Middle East, Africa and Asia Pacific and Latin America. In both these regions we had solid performance in the first quarter where both of them were showing improvement in operating income year-over-year and both of them landed on SEK 0.6 billion for the quarter. Also taking a look at the market and the business outlook.
As you can imagine then, the market in North America that was significantly negative for the first quarter. We have revised the market outlook down from neutral to negative, to negative for the full year. On the opposite, we did see a strong market in Brazil for the first quarter. Here we have actually changed in the other direction from neutral to positive. While the European market was relatively flat and we continue to see a neutral outlook for Europe. Looking at the business outlook. Overall it remains essentially unchanged, compared to when we talked about the business outlook the last time in connection to when we released the Q4 result for 2025. This is despite the newly introduced tariff structure related to Section 232 in U.S. that was going into the market from the 6th of April.
Just to mention on that, we have already announced relevant price increases in the U.S. market to offset these additional headwinds from the Section 232 tariffs. With that, I hand back to
Thank you very much, Therese.
Yannick to conclude.
Certainly, we'll be speaking more and going more into detail about Q1 tomorrow morning. Some concluding remarks. What we have been presenting tonight are long-term items which will be changing the profile of profit we'll have in the coming years. It will be accelerating in terms of growth, it will be improving the profit level, and it is once again building a very strong platform for us to move forward. First, in North America, we have been announcing a partnership with Midea, in food preservation and in Fabric Care. We'll be growing in a profitable manner by launching far more products. We'll be faster in terms of go to market. We'll be more innovative. We'll be broadening our product offer. We'll be expanding our offer in other markets, as well. We'll be strengthening our market position. We're gaining market share with Electrolux, AEG, and Frigidaire.
We'll be optimizing our footprint, and we're becoming more efficient in terms of organization moving forward with a significant level of additional cost saving we will be generating through these initiatives. With all of that here, we will be gaining in agility and speed throughout the organization, being more consumer focused than ever before. It is a long-term move we're announcing tonight. It is a milestone for the company, and we're all very confident that the strategy we have been building throughout the last month, we will be gaining the fruits pretty soon. Thank you very much.
Thank you very much. We will turn over to Q&A. We will open up with the questions on the conference call. For those of you who are on the webcast, just put it into the chat. I turn over to the moderator.
Thank you. If you wish to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. If you wish to ask a question via the webcast, please type it into the box and click submit. We will take our first question. The question comes from the line of Akash Gupta from JP Morgan. Please go ahead. Your line is open.
Hi, Yannick, Therese, and Ann-Sofi. Thanks for your time. I have couple of questions. The first one is that, how big are these two categories, Food Preservation and Fabric Care for you now in North America? I think based on your 2023 capital markets disclosure, it used to be around half of your North American revenues in 2022. I'm curious to know how big these categories are, and then how does that compare to revenues of Midea in these two businesses so we have a rough idea of how much additional revenue you might get. The second question is, how does the margin look like in the business that you are injecting in the joint venture compared to the businesses that you're keeping with you in North America? Thank you.
We'll answer the first two questions and give you some market shares I've been giving early on. We have 18% of market share today in North America in food preservation, 18%. We have 7% of market share in front loader, and we have less than 2% of market share today in top loader in North America, which is, once again, the biggest platform, in North America. Certainly, what is in this deal for Midea is the strength we do have in food preservation in terms of distribution and the volume we do have over there. I think what we are gaining on the other hand is, of course, much bigger scale access to new platforms, much better cost. We're leapfrogging in terms of digitalization. What I can tell you in terms, I cannot tell you exactly and disclose the turnover Midea does have today in North America.
What I can tell you certainly is that we are growing in this market. The sales joint venture, and I just want to repeat what I said during the call, if I may. We'll have a 50% of ownership in the food preservation sales joint venture, but we will be consolidating line by line the results of the sales joint venture in the financial statement of Electrolux. That will certainly be an advantage. Therese, you want to add anything on that?
Yeah, maybe too. I think it was very clear, but of course the only part that we will include in the sales joint venture is the Fabric Care. Or, sorry, is the food preservation.
Preservation.
When it comes to the Fabric Care or actually the top-load laundry manufacturing joint venture, that will only be a manufacturing joint venture. That will not generate any additional, let's say, consolidated sales with Midea or anything like that. That will be pure sales from us. Of course, it will be boosted because we will have the additional platform on top loader that we don't sell today. That will not be co-owned sales JV with Midea.
Thank you. We will take our next question. Your next question comes from the line of John Kim from Deutsche Bank. Please go ahead. Your line is open.
Hi, good evening. Thanks for the opportunity. Exciting times here. If we think about kind of the figures you gave towards the efficiencies, should we think of these as a pretty linear cadence, or is there a bit of asymptote to it? Put slightly differently, are the costs and charges front-end loaded and the benefits non-linear? You made some pointed comments about relative market share, but is there kind of a midpoint targets or a certain level you need to see in Fabric Care before we really start to see margin improvements?
You want to expand on the cost, and I will be taking the market share.
Yes. We actually had a slide in the deck. I don't think we need to go back with the cost efficiencies then coming up to SEK 2 billion. Of course we're talking about SEK 2 billion in year three, where we are seeing a steady progression, I would say, with a smaller number for sure in 2026, but then a relevant uptick, I would say, in 2027 and then the full impact in 2028.
I was not fast enough. Sorry for that. I was not fast enough.
Yeah, in terms of market share, of course, we want to go as high as possible. That's the simple answer. Certainly, as I said, we have a market share, which is north of 10% on dishwasher in food preparation, which again, will be remaining Electrolux products. We have 18% in food preservation, so aiming for 10% market share in Fabric Care seems to be pretty reasonable. If we're getting to this 10% market share for laundry and dryers, that will be generating 1 million additional pieces for Electrolux in North America, which is very substantial, of course.
Of course, we have a timing impact here where we talked about that we actually aim to start the production in the first half of 2027. Of course, until we are fully ramped up and these products are fully out in the market on a fully run rate perspective, it will take some time.
Absolutely.
Also, of course, why we would want the rights issue is exactly what you are after that, of course, we are seeing that some part of the cost and also some part of the cash out to do the transformation and the restructuring will come up front. It's a timing issue of when we will need the cash compared to when we will then deliver the savings.
Just a quick follow-up there. You characterized the laundry market or Fabric Care as SEK 12 billion annually, if I heard you correctly. How would that divide between the front and the top loading segments, if I may?
Yeah, absolutely. The top loader segment is bigger than the front loader segment in North America today, pretty substantially. I can't tell you a clear percentage, but it is substantially bigger than front loader.
Okay, thank you.
Thank you. We will take our next question. Your next question comes from the line of Martin Wilkie from Citi. Please go ahead. Your line is open.
Thank you. Yeah, good evening. It's Martin from Citi. Just to understand a little bit more about the structure of the food preservation JV. I'm not familiar with Midea at all in Mexico. Are they effectively bringing cash to the JV, or are there any assets from Midea that are forming part of that? Just to clarify, when you've got food preservation at Anderson and you talk about that being phased out, is anything moving there into this JV as well? Or what happens to those products that are currently manufactured in Anderson?
Okay, very good. I think, let me, and I have a right slide here just to explain that again. Today we are producing refrigerators in Anderson, and we will be stopping the production of refrigerators in the third quarter 2026, and that has been announced today. We will be starting producing washing machines and dryers in the first half of 2027. We will be writing off the vast majority of the assets we do have today for cooling in Anderson. That's a total write-off of SEK 1.5 million, that we will be placing as an NRI in the second quarter 2026. On the Juárez side of the equation, it's a little bit different because of course, we'll keep on producing refrigerators as we are producing refrigerators today. However, we'll be injecting additional capital in order to develop and manufacture new platforms as well in Juárez.
We'll be sharing this capital injection together with Midea, which has, again, a gigantic knowledge. They are producing 23 million cooling products a year currently. I think to answer your question, we'll be writing off the vast majority of the assets in Anderson in the second quarter. We'll be investing in terms of capital in a top-load washer and dryer in the first half of 2027. In Juárez, we'll be injecting capital here in order to develop additional platforms in food preservation.
Maybe just one additional comment. As you see on this slide, we will have a 35% ownership of the Juárez manufacturing JV, so the majority ownership will be with Midea. Related to that, we're also selling our factory that we have for food preservation today to Midea to be part of the joint venture. We are selling it essentially for book value. We will be generating SEK 1 billion in cash as the transaction comes through, probably in the third quarter. This will not be generating any profit to the P&L.
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Yeah. Sorry.
I just wanted a follow-on question on the principal of manufacturing in Mexico. You mentioned that you've been able to offset Section 232 tariffs, but obviously there's been a lot of movement on that in the past few months, and obviously you're effectively increasing your reliance on Mexico. Yeah, just want to understand the thought process behind that. Are you comfortable with the position of the continued reliance on Mexico for the U.S. market?
Yeah. The important thing is to have a balanced manufacturing footprint. Mexico is not in isolation. We will have additional factories in Asia producing cooling products as well. We have a factory ourselves in Thailand, for instance. You need to keep a good balance. On top of that, Mexico is still today competitive in order to increase production in North America. Of course, it has been losing some level of competitiveness now with recent Section 232. We, all our competitors, vast majority of them at least, are producing appliances today in Mexico. We will not be isolated in terms of impact from Section 232 from the Mexican production. Therese has been mentioning it, because of tariff, because of Section 232, but not only because of Section 232, we will be increasing prices in North America end of April by between 5% and 20%.
Great. Thank you very much.
Thank you. We will take our next question. Your next question comes from the line of Hai Huynh from UBS. Please go ahead. Your line is open.
Hi. It's Hai Huynh from UBS. Thank you for taking my question. My first one is on the CapEx phasing. How should we think about the SEK 1.6 billion investments across the three years? You've guided for SEK 4 billion before. Is it safe to assume that SEK 4.5 billion is for FY 2026 if you split it out evenly by three years?
No. As we mentioned on our business outlook, our business outlook overall remains unchanged, also including these initiatives. That means that for 2026, specifically, we will be able to do the additional CapEx that we need to do within the SEK 4 billion. Then, of course, a large part of this transformation is going to happen in 2027 for sure. We have, of course, not given a guidance on CapEx for 2027, but you can believe that the larger part of the increased CapEx will come in 2027. I would say the majority and partly as well in 2028.
I want to repeat what I said previously. The fact that we will be able to share CapEx for new product launches with Midea, both on the Fabric Care side and on Food Preservation side of the equation, is certainly an advantage in terms of speed and in terms of CapEx spending.
Yes. We should also be able to be more flexible in the manufacturing and sourcing footprint going forward with a smaller CapEx as well over a longer period of time.
Got it. Understood. My next question is on the economics of the JVs, separately, the sales JV and the manufacturing JV. I understand that you're consolidating the sales JV line by line. Top line, that's 50/50, I get that, but how does that work down the line in terms of profitability? How do you split that? Then, is that because of different cost base? As in, what's the economics of splitting that in terms of the profit line for the sales JV? Just to clarify on the manufacturing JV, essentially these will be consolidated as an associate income line. Essentially, you're sharing a cost line, right? Is that how I should understand it in terms of consolidation?
Yeah, of course, this is a quite technical question. How it will work is both that the sales joint venture for Food Preservation, we will consolidate fully. The full net sales and the full, let's say, P&L, and then 50% of the net income will then be shared under net income with Midea. The same for the Anderson JV. This will also be fully consolidated by us. Then the margin on that flow, so the margin in that JV, will also then be, let's say, redistributed to Midea below net income. For the Juárez manufacturing JV, you are absolutely correct that the profit from this JV, because we really think that the way the structure is set up with the transfer prices between the manufacturing JV and the sales JV. We believe that the manufacturing JV should actually have a profit.
You are absolutely correct then that profit will come up in our P&L as an income from associates.
Got it. My final question is on the front lines customer relations, sales execution, aftermarket. I think in the release it says that each company will manage their own. How do you own pricing and then customer contracts and margin management at that JV?
What we'll be doing in the sales JV is we will be developing a lineup together, and make sure that we are keeping our identity. That's extremely important to us. We have key features which have been making basically Electrolux very successful in the past. We'll be developing together, leveraging the R&D capabilities we do have on both sides of the equation within the said JV. I mentioned during the presentation as well, we thought it was important to keep our identity as well when we'll be facing our customers. There will be a sales organization dedicated to Electrolux and another sales organization dedicated to Midea.
Understood perfectly. Thank you very much.
Thank you. We will take our next question, and the question comes from the line of James Moore from Rothschild & Co Redburn. Please go ahead. Your line is open.
Yeah. Good evening, everybody. It's James. I have a few questions if I could. Would it be possible to give the pro forma revenue for 2025 for North America, imagining that this structure had been in place for the full year? Trying to understand what the actual increase to revenue and what the change to adjusted EBIT would be. Could you just talk through the margin implications for North America for each of the three JVs separately? As there are no pro forma numbers whatsoever, and it is impossible to understand truly from the outside at this point with what you've disclosed, what it does for the sales and EBIT direction of North America. Could you also talk about the effective EBITDA of Midea's acquisition in Juárez? Then my final question is, why do you think this is enough? Why not more?
It still leaves you with quite a tight balance sheet. You could potentially done more. Is that about the preservation of equity for existing shareholders or other topics?
Yeah, maybe on the first question. We have decided not to do a pro forma because it's really not possible because this is a partnership that is driving the business going forward. It would be completely impossible to look at this and reconstruct this in the rearview mirror. That we have decided not to do, and it would actually be completely impossible and would not give a fair picture. I believe that the comment that we had on the previous question is around how we will consolidate, and that's why we are quite clear more from the perspective of what we believe from an operating result. This improvement will look like over time over these coming three years. That is really the number that we believe is of interest for you to understand at this point in time.
You say that, Therese, but having listened to 25 years of the company hoping for a 6% margin and you hitting it maybe twice in 20 years, I'm more interested in what the reality is upfront. Would it be possible to talk about whether the margin is initially diluted by these new structures or is accreted by these new structures from the beginning start point before we deal with the speculative hope that you generate the efficiencies in the future? Is the starting margin about the same or less or more with the creation of the JVs?
Yeah, I think the best representative of that, of course, as you know with this, it's not only a partnership, but we are really closing one factory, moving and ramping up another factory. The construction is really not the same and comparable. I think the best relevant number to take a look at is the number we have in that case for 2026. We have a graph in the presentation with focus on the North American business, with focus on the Midea partnership. That then in year three is coming up to an additional SEK 600 million. You do see, we don't have the number per se, but I think you get the quite good estimate of what the additional contribution from this partnership will be in 2026.
Okay, I'll have to study that. Is it possible to talk about the effect of EBITDA of their acquisition in Juárez and to address the topic of whether this is a sufficient amount of equity raise, and why not more?
Yeah, I think on the sufficient equity raise, of course, as you can imagine, this has been a quite, yeah, period in the first quarter with quite a lot of analysis and of course quite heavy work together with Yannick and the full board to conclude on the SEK 9 billion. We have really concluded that the SEK 9 billion is the right number, both to be able to execute on these transformative initiatives, but also then to, with confidence, say that we will come down to the 2x net debt/EBITDA after a number of quarters when we have gone through these largest transformations. We do see, and we have confidence in that we will come down to the 2x net debt/EBITDA, and that is really what is behind the rights issue.
This is to do the best for the company, both in the short term, but also to set the company up for a long-term success.
Are you able to comment on the multiple for the disposal to Midea?
Yeah. What we said is that we are essentially selling the factory for book value.
Yes, you said that. I was after the profit multiple.
We probably need to follow up on that. Exactly what you mean with that question?
Okay, thank you. Thanks very much.
Thank you. We will take our next question. The question comes from the line of Johan Eliason from SB1 Markets. Please go ahead. Your line is open. Johan Eliason, your line is open. Please ask your question.
Now I hope you can hear me.
Yes, we do.
Yeah. Good, excellent. Exciting changes here. The focus is mainly on the food preservation, the refrigeration stuff. Is that sort of implying that the profitability levels that you are seeing today in cooking and, yeah, in the front loaders that you do have is supporting your 6% margin ambitions already?
Thanks a lot for the question, Johan. What is certain is that the food preservation category worldwide is certainly the category which is the most under margin pressure. It is a category, let's face it as well, which is widely developed in Asia. Asia has been starting with food preservation. You saw that Midea is manufacturing 23 million cooling products every single year. It is a category which is much more a commodity today, and which is more under margin pressure. It is the one we need to fix. It is the one we will be fixing with this partnership with Midea. As I said, and it's very important, we will keep our identity in terms of design, in terms of features. We will not have the same product as Midea has. I think that's really important in the North American market.
Certainly it is a product category which is under a lot of pressure in terms of margin. Cost is very important, scale is very important, and through the partnership with Midea, we will have access to a brand new supply chain overall. I think it is about cost, it's about scale, and we are absolutely confident that we will be improving the profit of this product category substantially moving forward through this partnership. It is a product category, again, which is severely under pressure. Cooking, that's why we're keeping as well Springfield cooking is a product category where usually full built-in full kitchen , the margin levels are, for instance, higher. That counts as well for dishwashing. You're absolutely right, Johan. Food preservation is usually the product category where margins are the lowest, at least in most of the regions we do have today.
Does this imply that these joint ventures are for North America today? What will we see in the other regions in the coming period? Shouldn't it make similar sense to do something like that in Europe, Asia with Midea?
Yeah, I think, of course, the question is logical. Today what we're announcing is a partnership in North America here, and I think we are remaining totally independent, in the other regions. However, as you can imagine, a partnership with a giant like Midea is opening many opportunities, and I think we have been describing some of them here, and it will be our duty to work on these opportunities moving forward. I will not draw any conclusions tonight on what we will be doing next in other regions.
Okay. Just a final detail, then, on trying to figure out the numbers here in the quarters going forward. You are obviously closing down the Anderson manufacturing in Q3. Your supply, will that be sort of managed by building inventories on a huge scale in Q2? Do you have other areas where you can source from to make on the sales numbers, a smooth transition or volume numbers or whatever?
Yeah, I really want to insist on one thing, Johan, and you're allowing me to do it. We're announcing a big initiative tonight. We have not been creating this initiative to substantiate a rights issue. We have been working on this initiative for more than a year now. I think it has been complex set up, and we're absolutely convinced that the four pillars we're announcing tonight will be changing the profit level we do have in these companies. As you can imagine, for Anderson, we have been planning very well ramp down and ramp up in these factories in order to make sure that we will not be handicapping sales in North America moving forward.
It is something we have been studying for quite some time here, we have been working on, and we have been looking, of course, at ramping up and ramping down this factory and ramping it up again in the first half of 2027.
I think it's fair to say that we did say, of course, we have a seasonal increase in working capital in the first quarter as normal. Of course, as we are now soon approaching the closure of the Anderson factory, we have been, of course, producing a little bit extra. I would say to some extent, it's already included in the other buildup of working capital that you would see already at this point.
Okay. Thank you very much. Looking forward to the transition with 20 years following Electrolux, I'm sort of wishing you the best for a smooth transition.
Thank you.
Thank you. We will take our next question. The next question comes from Uma Samlin from Bank of America. Please go ahead. Your line is open.
Hi. Good evening. Thank you very much for taking my questions. I just want to follow up with the structure of the joint venture. If we take, I guess consensus have around SEK 43 billion of sales from North America in 2026. How should we think about that evolution? What's the proportion that's going to be in the JV versus what's the proportion in Electrolux, and then how should we think about what part of the cost will be shared at Electrolux versus Midea? Just want to get some clarity there, to think about the numbers going forward into 2026 and 2027.
Yes. Of course, the full SEK 43 billion that you're referring to will also be consolidated by Electrolux going forward, even though the food preservation part of that SEK 43 billion will be under a different legal entity, which is then the sales joint venture. It will be still fully consolidated under Electrolux. What you will have additional that you will actually see then, we will not do a pro forma, so we'll not come back and tell about the numbers for 2025. What will also go through the sales JV then for the future is the sales for Midea food preservation. This is what you will then see coming on top, and that you will clearly see in our sales bridge moving forward, because that you will see as sort of an acquisition part of our sales.
When it comes to the different structures then, so again, we will fully consolidate the SJV with all of the different lines in the P&L, and we will then share 50% of the net income with Midea below net income. The same for the Anderson JV. We will again consolidate all of the lines for the Anderson JV, which will of course be cost, and then it will be sales through our Fabric Care sales through our normal Electrolux company, and then consolidated all of the way down. For the Juárez manufacturing JV, of course, we will buy at cost, including a transfer price between the Juárez MJV to our SJV for food preservation. Whatever net profit there will be in the Juárez MJV, we will then include in our P&L as share of associates.
All in all, this should generate an additional profit in year three of SEK 600 million.
Okay. That's very clear. Thank you very much.
Thank you. We will take our next question. The question comes from the line of Timothy Lee from Barclays. Please go ahead. Your line is open.
Hi. Thanks for taking my question. My first question is about the rights issue itself. I'm understanding you're probably going to do these kind of initiatives and also fix the balance sheet properly in one go. I think, in the past, if I remember correctly, you have been saying that the priority in terms of capital raising is probably, or let's say fundraising is probably using debts over equity. I'm just wondering how you make the decision to do the right issue at this point in time.
Okay, very good. I think I got your question. I mean, the line is not very good. Of course, in all fairness, our strategy has been evolving. We have been working hard on the different initiatives and the level of opportunities we have seen moving forward during the year 2025, building this strategy is becoming to a level where we said that the best tool we can use is a rights issue to, at the same time, finance this initiative in which we truly believe and where we see a very big potential, and at the same time strengthen our balance sheet. I don't think it's counterintuitive that a few months ago, we're not looking strongly at rights issue. Of course, the level of debt was always making us consider a lot of options, but that was maybe not the first option at the beginning of the year.
Looking at the potential we had for this partnership with Midea in terms of efficiency, in terms of manufacturing optimization, it became pretty obvious at some point of time that the best solution in order to both finance these initiatives with high potential and strengthening the balance sheet was a rights issue. As Therese said several times, we have been debating for quite some time on how much, and together with the board, we all have been aligning that SEK 9 billion was the right amount.
Understood. To achieve the 2x leverage, do you have a timeline now to achieve that target, given you have a lot of initiatives, you have a lot of CapEx to be spent under the new initiatives as well. Whether you have a schedule or a timetable for achieving the 2x leverage?
Yeah. The indication that we can give, of course, the large part of this transformative initiatives should really be concluded by the end of 2028. We will not be through. We will have additional growth opportunities, and of course, the efficiencies will continue to come beyond that timeframe. The majority and the large, heavy lifting of these initiatives will be during this year, 2027, and 2028. We are really looking at when we are through the large part of these initiatives, we should come down to the 2x net debt to EBITDA.
Again, partnering with Midea should bring a lot of speed. I don't want to give you the impression that we will be slow. We are starting the manufacturing joint JV in Juárez in the third quarter. We're starting the sale JV in the third quarter. We are starting the production of the top loader, which is on this picture, in the first half of 2027. Which means, we have been working really hard already with Midea and with the engineering team in order to develop this product you see on this picture here, which will have product leadership beginning of 2027. What Therese is explaining is absolutely not slow. It's a standard type of processes and timeline we do have when you are launching this type of big transformation here.
We want to be as fast as possible, and we want to become faster actually, moving forward, introducing more and more products, by leveraging the capabilities of Midea's and in order to delight our customers in North America.
Copy. Maybe lastly, in terms of pricing, as you mentioned, your incremental price increase in North America. How do the other players in the market behave right now? Are they also announcing any price increase like us? Midea too?
I cannot-
How's the response of the customers?
Thanks for the question. As Therese said, what we can tell you today is that we have been sending letters, very clear letters to our customers that we will be increasing pricing starting April 30, between 5% and 20%. I really want to insist between 5% and 20%. We certainly cannot speak for our competitors. However, what we can say is that looking at the level of additional external factors we will have to face coming from the 232 tariff, or coming from the war in Iran, we have a high confidence level to see the entire industry moving towards a price increase.
We can say with our customers, we're not getting a large pushback, which I think is also indicative of that price increases are actually, yeah, coming through on a broader base.
Okay. Understood. Thank you.
Thank you. We will take our final question. The final question comes from the line of Ope Otaniyi from Goldman Sachs. Please go ahead. Your line is open.
Hi. Good evening, Yannick, Therese, Ann-Sofi . Thanks for taking my question. Maybe three from my end, one a clarification. Maybe starting with that one. At some point in the slides, you have a footprint going down 8% over the next three years, I believe. Could you give a sort of cost out number associated with that? I'm still trying to think of all the announcements today.
Yeah. We're not only talking about footprint, but we're talking about the manufacturing footprint optimization and of course, a broader organizational efficiency where we will be reducing around 3,000 employees, as mentioned. As Yannick showed on one of the slides, this will generate additional cost efficiencies of SEK 1.4 billion then by year 3. You see on this graph that it's quite a large part of that saving will come through already in year 2.
Okay. Maybe just firming up sort of what capital allocation might look like now two years. I appreciate there's loads of moving parts between 2026 and 2028, but I suppose with leverage down to 2x now, could you give a sense of what your ideal capital allocation would look like in the future in terms of, do you have a firm sort of leverage target number and what you're comfortable with and how to think of potential buybacks dividends?
Yeah, to be fair, that is not a discussion that we have started at this point in time. With the board, I think that is well ahead of us. I think right now, of course, the main part will be really to transform the company to become a stronger long-term company and getting to the 2x Net Debt/EBITDA. Of course, we would want to come back to the general dividend that you know for the last couple of years, we have not been giving a dividend to the shareholders.
Okay.
Before we would start to talk about anything around share buybacks or anything like that, if it would ever become relevant, we would as first go back to normally, yeah, giving out dividend.
Great. I suppose there's loads of moving parts, but I haven't quite worked out sort of in terms of the footprint of the JV in terms of Asia versus the U.S. My guess is it's quite U.S. skewed, but could you just give a sense of sort of price competitiveness versus all the Asian players given tariffs kind of negate some of the U.S. footprints, and how you're thinking of sort of ability to compete on price with other Asian players?
Yeah, I think it's a difficult question. What we can tell you certainly is, we're looking at tariff, and I think China is very heavily tariffed, more than 40%. Southeast Asia as well, is at a level now of 25% according to 232. Asia is heavy tariffed, for products entering into North America, not only at finished product level, but also at components level. Mexico now is entering, and is hit by the 232 tariff. Certainly, discussions have been starting in the frame of the U.S. MCA negotiation. Negotiations are ongoing, and I'm sure that there will be evolution as well in the coming months.
Great. Thanks very much.
Thank you. This concludes today's question and answer session. I will now hand back for closing remarks.
Thank you very much. I think I hand over to you, Yannick.
I think again, what we're announcing today is truly a big milestone for the company. It is not a strategy we have been building short-term. It is a long-term strategy where we have been paying a lot of effort with the entire organization to build and announce tonight. We're all absolutely convinced that it will change long-term the face of this company and deliver mid-term the 6% EBIT we're all aiming for. Thank you very much for your attention.