Earnings Call: Q3 2020

Oct 30, 2020

Good morning and welcome to Electrolux Professional Q3 Result Presentation. My name is Jacob Blubay, Head of Investor Relations. With me, I have Alberto Sanata, President and CEO of Electrolux Professional and Fabio Sarpelon, CFO. So I will start with handing over to you, Alberto. Please go ahead. We closed the quarter with declining sales still affected by the pandemic, but much less affected compared to the Q2. So sales declined 16%, 16.1% compared to the same quarter of last year, showing a recovery of the market that improved steadily from June. We closed the quarter with the EBITDA margin that improved significantly versus the breakeven in Q2, reporting a 9.9% EBITA margin without item affecting comparability. And we will come back about this subject. Such a result has been achieved thanks to one volumes, so the sales that declined less compared to the previous quarter. Secondly, the continued action on cost, We reduced cost less than in Q2, but still significantly compared to last year. 3rd, a better mix, mix coming from the new product that we introduced in 2019 during the 2nd part of 2019 and during the 1st part of this year and the laundry product, the laundry sales that declined less than the food and beverage. An additional word about the cost. So the continued action on cost, we reduced cost, but differently from Q2, close to half of the savings that we generated in Q3 are structural savings. So these are savings that we will continue to enjoy in Q4 and along the next year. Let's go back to the sales development because we said that the first element giving us the possibility to to deliver the EBITDA margin close to 10% was the recovery of the business, recovery of the market and recovering of our sales. We experienced a recovery, I would say, all across the regions. Europe that also in Q2 was region. In Europe, sales declined roughly 10%, with a clear difference between the Nordic countries and the South European countries. Italy in particular was down 25%, while in average in the Nordic countries, so Sweden, Denmark, Finland, Norway, we deliver basically the same turnover that we delivered last year in Q3. In some cases, for instance, Russia, I'm mentioning Russia, we had significant increase of sales during the quarter. I think the significant change is also in the Americas. Americas overall were down 30%, but in U. S. Sales were down 15%. I have to say that in September sales in U. S. Were even positive compared to last year. So a recovery of the situation considering that in Q2 the sales in North America were 65% down. And this is coming from food and beverage business, but also from the laundry business, where during the 1st part of the year we had or during the Q2 of this year, we had the distributor who was destocking because he created a large stock at the beginning of the year and then we had together with him we have to use that stock. And now in September, he restarted creating again bringing product to North America. The Asia Pacific market region is reporting a 25% decline that is better than what we reported in Q2, but it's a mix situation where we have some regions significantly down, in particular the Southeast European markets that were already down, that were also down in Q2. While there are some countries, for instance, in New Zealand, where we are reporting even a growth of the sales. So what we experienced in Q3 is a recovery of the market. In particular, the recovery was good in September. In September, we reported a 10% decline of sales compared to last year, a recovery that continued also into October. In this case, we are today is the last day of October. So the trend is similar, but we have also to say that the last days of October showed a weakening of the demand. That is easy to explain to be explained with the situation in the European markets, particularly in Italy, France, in Spain, in Germany, in UK. One note also about the sales trend in Q3 that we have been suffering quite a lot for what concern the spare parts, the parts, the accessory, the customer care business. So part accessories and consumable, Because during Q2, we were not allowed to serve our customer, we were not allowed to enter the site. In Q3, we reported a recovery of this business. We can say that during the Q3, sales of parts, accessories and consumables, they were declining as slightly less than the sales of products. So, clear improvement month after month during the quarter. Now, couple of words about the 2 specific segments, the food and beverage and the laundry. As well as in Q2, also in Q3, food and beverage has suffered more than the laundry business. This is something that we have been repeating since the beginning saying that the laundry business is more resilient than the food and beverage. And also the Q3 when the market recovered, we see that food and beverage declined close to 20%, 15% in Europe, still Europe, some way the less affected, 30% in the Americas and Asia Pacific. But as I said, also in the Americas, there is a clear difference between North America and Latin America. With North America more positive, In September, U. S. In particular was even positive on the same level of last year in terms of sales. We have been we had also other region that have been performing relatively well considering the context, Middle East and Africa was unchanged compared to last year. The EBIT margin without item affecting comparability was on 9% in the quarter for food and beverage, while the operating margin was more or less on the same level of last year. In this case, in particular for food and beverage, but also for laundry, during the quarter, during Q3, we have been invoicing a lot of the project that we had in North Starks. So a contribution of the good sales performance, I'm mentioning this now because we were commenting Middle East and Africa that is exactly an area where we invoice some large project. I think we already in Q2, we mentioned the fact that we did not experience order cancellation but postponement on orders and this is exactly confirmed by the result in Q3 where we have been able start invoicing the order stock that we had. Going into the laundry, Organic sales in laundry declined 9.8%, so basically half of food and beverage decline. And in laundry, we had, in this case, I would say, a very good result in term of margin. The margin is even higher than the one we had in Q3 last year. And such a result is coming from surely the sales that have been declining less, but in particular by the action on cost that we have been taking. We have been taking the same in food and beverage, but clearly, the decline of the sales was much larger in that part of the business. And clearly also on the mix, this is also a result of the new product of the Line 6000 that we launched end of last year, beginning of this year. That is a very good product, having good success in the market and with a good margin. Laundry sales, unchanged in Europe with growing sales in the Nordic country, in East Europe and with and declining much less in Asia, Middle East, in Africa. Still significant is decline in North America because I repeat the activities about the destocking basically stopped in August. So we had a good September and we restarted to learn recovery also on that part of the world. With this said, I would like Fabio to comment about the financials. Thank you, Alberto, and good morning to everybody. As you heard from Alberto, sales recovered in quarter 3 compared to the level of quarter 2, reaching $1,700,000,000 in terms of sales value. The combination of higher sales and the continued execution, the cost reduction measure allow us to deliver a 10% EBITDA margin this quarter, excluding the items affecting comparability. Profitability was pretty good in the laundry segment, where we delivered a 15% EBITDA margin and was 9% in food and beverage, quite a recovery compared to the negative profitability in quarter 2 for particular Gross margin was somehow stable year over year despite lower sales and production volumes. Good contribution came from price, direct material and productivity in the quarter, especially coming from the growth segment. Selling and administrative expenses have also been reduced in the quarter and fully compensating the incremental cost coming from the additional cost that we had in the group related to the fact that we operate as a standalone organization like function that we created and we did not have a feel like tax, legal, IT specific cost. In the P and L, we report item affecting comparability. These items refer for both quarter to the restructuring provision. We provisioned SEK77 1,000,000 for restructuring in September this year, and we booked €122,000,000 in quarter 3 last year. As I said, action on cost continue in Q3, generating SEK75 1,000,000 saving. And as Alberto anticipated, this saving compensated more than 50 percent of the decline margin due to volumes. When looking into this cost reduction initiative, roughly half of it, €35,000,000 are structurally. What does it mean? It means that they are really a structured cost reduction of our organization coming from the 2 restructuring plan. The first one that we launched September last year and now is fully executed. Plus the contribution of the second plan that we anticipated during Q2 call that we were working on it and is already under execution. The second plan on top of the first one we launched September last year is expected to generate additional yearly saving of around SEK110,000,000 from the Q2 of next year and will be fully in place with SEK130 1,000,000 contribution from quarter 2, 2022. The second piece of the saving is coming from government subsidies. Around SEK20 1,000,000 is a contribution that we got from this area and is mainly but not only limited to 3 major countries, Italy, Sweden and France. The remaining $20,000,000 is coming from the management of the discretionary spending and we continue a strict monitor of the spending, in particular when it comes to travel cost, consultancy cost, marketing cost. Whilst happy also to report that our R and D activities really pick it up in quarter 3, creating really the condition to really develop and continue the development of key innovation for our market and our customers. At the end of September, as you see in this chart, operating working capital was down and was down roughly 10% year over year at the same currency. Account receivables declined in line with sales. And happy also to report that past due was reduced compared to the peak we had at the end of June, where as I was reporting, we faced a request from the customer to prolong the payment term, in particular in the South European countries. Payment terms or better prolonged payment term that so far have been expected by majority of our customers. Inventory was also reduced both compared to last year, but also the level we had in June. And these results has been achieved, whilst at the same time improving the product availability and the service level, in particular, for the replacement business that is a clear ingredient of competitiveness in particular in these days. The financial position of Electrolux Professional remains very solid. As you see here from the chart, the net debt has been further reduced compared to the level of March and the level we had in June and is now equal to SEK1 1,000,000,000. After end of September, we have a liquid found for close to SEK650 1,000,000 and revolving credit facility available for SEK 188,000,000 We are still and we are a low leverage company with a ratio of net debt on EBITDA around 1.4, slightly up compared to the level we had in end of June that was 1.3 because of the lower contribution from EBITDA. When it comes to the cash flow, we delivered $63,000,000 operating cash flow in the quarter. That is becoming $110,000,000 when we look to the full year base so far. CapEx in the quarter was $57,000,000 with the majority of it roughly close to $40,000,000 is related to the construction of the new production site in Thailand that we anticipated during the investor meeting and the quarter 2 call. This project is a project where we are going to build a new production site in Thailand, where we are going to consolidate our operation in laundry and our operation in beverage, creating a state of the art facility to serve the Asian market and the market globally. This investment is proceeding according to plan and is expected to be completed by quarter 1 next year. Once this investment will be completed, our plan is to proceed with our investment. But clearly, we will see going forward a weight of CapEx on net sales more in line with the historical average around 2% on sales. And with this, let me say back to you, Alberto. Thank you, Fabio. Few words about the product that we brought to market in Q3. In Q2, we focused on quickly adjusting ranges to the rising needs of hygiene, sanitization, and we came out with products that were serving the healthcare sectors or any other sectors that were that was in the need of this solution to address the pandemic the problem presented by the rising the spread of the pandemic. In Q3, we start focusing on our product roadmap to bring to market product and solutions that are addressing the growing segment and the strategic segments that we are targeting. On the laundry side, we brought to market solutions that are still in line with the need of hygienic solution, but they are specific product for a sector that have been working continuously all during these months and clearly is in the need of a specific solution. It's showing our capabilities to develop specific solution with the competencies that we have or we develop together with external partner. The second one, the Nitrochrome High Productivity Fry Top is a product that is typically used in the quick service restaurant. We all know that among the different kind of customer segment, the quick service restaurant chains are the ones that have been recovering faster than any other. And this is a beautiful product with unique features, in particular this nitrochrome top that is giving us the possibility to serve a growing segment, a growing part of the market. The third one is in the beverage area and it is a new espresso coffee machine that we bring to market going back to the pillar of our product development that is the one that is addressing the life cycle cost. So to try to reduce the cost of running the product, that is a growing way of thinking, I would say, among all our customers, because they are not just focusing on thinking about the ticket price of our product, but they are thinking about the impact that the usage of the product has in their economy, but also on the world, on the environment where they are used along the entire life. With this said, we are going to the summary, how I can summarize a quarter. A quarter that first let me say that I'm proud as the team reacted to the pandemic. We had to make a lot of sacrifice, our people had to sacrifice during this quarter personally and professionally obviously. But all of our operation have been up and running. They are today all up and running. And that is very good and it's thanks to the team to the strong and engaged team that we have. It is a quarter where we recovered sales and we despite or in addition to seeing the business coming back, we also focus on reducing the cost of keeping the cost down. The market where we operated is still heavily impacted by the pandemic. We had a clear recovery during the summer, ending with a good September, relatively good September. This good trend continued in October. We see these days, obviously, we are a little bit worried for what is coming, at least in the South European markets. At the same time, we see other markets that are developing positively. Japan, Korea, China, Oceania in general, Singapore are all countries that are going back to a certain kind of normality. And as a consequence, we could expect a recovery of the business in that area. United States presented a recovery of the business, but it's still, I would say, an area where we have quite high level of uncertainty. In this scenario, we continue to see the laundry business suffering less or being less affected than the food and beverage. And this is something that we believe will continue along the coming quarters. The short term savings are less than in the previous quarter, But at the same time, we have been proactively launching the restructuring in September and that started to provide some benefit. And as Fabio said, half of our cost activities are coming from structural savings. So these are savings that will gradually then grow during the coming quarters. And thanks to these savings, at least in Q3, we have been able to compensate half of the losses generated by the drop of the volume. And in this scenario, we have been continuing investing to bring new product, and I'm expecting that in Q4 and even more beginning of next year, we will bring a new product to the market that will give us the possibility to address the rising needs and the growing segments. With this said, Jacob, I give you back the mic for Q and A. Thank you, Alberto. And I go back to the operator. So please go ahead, operator. Thank Our first question comes from the line of Matthijs Homburg from DNB. Your line is now open. Please go ahead. Thank you. Hello, everyone. A question, thinking back to the Q2 results when you commented on the order book saying that it was up year over year. Could you make any comments on the status of the order book now? And also perhaps if you still have any pent up demand for deliveries that's been pushed into the later part of the year? Or as you mentioned, some of this had already been materialized in Q3, if sort of that is done by now? Okay. So yes, we still have an order stock. It's a healthy order stock because it is on the same level of last year. So while we had a higher order stock at the end of Q2, now the order stock is on the same level of last year. And this is clearly because we delivered a large portion of the order that we had that we restock during Q3. I can add also that the mix in the order stock is different in meaning that we still have a very high order stock in laundry higher than what we had last year. This is confirming that laundry is doing very well and it will continue to do well. The order stock on the food product is more or less on the same level of last year. Most of the projects that we delivered during the summer period, so during Q3, were for food for kitchen installations. The order stock that is weaker than last year is beverage, the beverage order stock and it is a combination of the fact that last year we had in house order for some change and the fact that the beverage business is suffering much more than the other ones. Thank you. And one more question for me, if I may. Reflecting a bit on the Luwandry in Q2 sorry, Q3 now with the 10% organic sales decline and you've depicted here what's happened in the U. S. With the destocking. Could you elaborate a bit on how big the destocking effect has been to help us understand sort of the underlying demand environment a bit better? And also perhaps if you believe that your customers are happy with the inventory levels at this point or if there could be any further risk for destocking? No. We are working with our distributor. We are weekly discussing the situation. Now there is the level of stock is okay. We already planned the full year and also the beginning of next year. So also because the lead time to serve clearly the customer in U. S. Is pretty long. So I would say that the stock level is now the appropriate one. We are okay with the stock level that we have in the United States and we are constantly delivering container of product to our distributor in the United States. Thank you so much. That's all for me. Our next question comes from the line of Lucy Carrier from Morgan Stanley. Your line is open. Please go ahead. Good morning, gentlemen, and thanks for taking my question. I will have 3 questions. I will go one at a time. Actually, the first one is just a follow-up on the previous question on the laundry side and the destocking effect. Do you think that the Q3 has been impacted still by this destocking operation? And I guess if it is the case, what would you see as kind of the effect of that destocking or what would have been the underlying demand from your standpoint? What I can tell you is that July August, the sales in the U. S, the external sales in the U. S, they were done using product that we had in stock. While during the month of September, we started to deliver the product to our distributors. So I would say that also September, the external sales in September were done using the local stock because we have to consider roughly 3, 4 weeks to get the product there. So we restarted the delivery, the refilling of the stock basically in the middle of August, end of the month. Okay. So is it fair to so if I understand well, is it fair to assume that you think that the performance you have reported in the Q3, I. E. The minus 10% organic, could have been a little bit better if you hadn't been impacted by this kind of stock destock effect? Yes, yes. Because we should have delivered product to our distributor much earlier. Okay. Understood. That's very helpful. My second question, Alberto, thank you for being quite transparent around the current trading. I think you've mentioned that September October were recovering in the hospitality industry, but maybe the end of October starts to be a little bit more under pressure. Can you maybe describe the type of conversation you are having now with your customer on the hospitality sector? Is it that you are seeing them postponing orders or you're seeing them canceling orders or are they trading down maybe for equipment which are a little bit cheaper, a little bit kind of a lower range than what they normally get? And are you seeing this also in any specific type of product? So is it more on the combi oven? Is it more on the other kitchen equipment? Just for us maybe to have a sense on whether, first of all, the content, a little bit of this conversation and also if things could go as bad as what we have seen in the second quarter, if you see this as a risk. Okay. And here really are yes, we can describe this as impression that we are getting because everything is pretty recent, I would say. If we would have had this call 10 days ago, probably this subject would have been addressed in such a way. So fixed deteriorated pretty rapidly in some European countries. In my opinion, that is the first things to consider. Things are deteriorating with semi or light lockdowns as they call it in some European countries. I mean Italy is an important country obviously. France is another one. We know Germany and Spain. So in these countries, the calls we are getting from the customer are in general asking for putting on all the activities that we had with them because they have this month. Until now, remember that what has been declared by government is a month of light or semi lockdown if you want to call it, because at the end all operations are working. Reality is that all these operations are working are working less than before, but are working. So we see also that the activities are not stopping as they did in Q2. Service is working because you can access sites, you can do, you can run the business. It is pretty different from Q2. But at the same time, clearly, there is uncertainty and we cannot neglect the fact that the level of uncertainty is still high and at least, my focus that the uncertainty is in some way the worst enemy of whatever we are doing. Then we have to say that after the same time, we have other region of the world that are opening up. I was mentioning Japan that is for us a very important laundry market. Korea, where we do well both in laundry and kitchen appliances. China that is very important for us. And in China, I'm also happy to report that last week we have been awarded with a larger global chains with the rollout in China that we should start in 3 weeks from now. New Zealand, Australia, Singapore is also lifting the lockdown. So there is a combination of countries that are reopening and restarting and other countries where the government are imposing restrictions, lockdown France is the ones that in this moment is clearly shutting down restaurants, bars. So activities that are our customers, but at the same time, for instance, the factory are working. So we still have the segments, the so called institutional segment that for us is very important that is operating. It is a very mixed picture, I have to say, both from the geographical and the customer segment point of view. Understood. And thank you very much for the color. And my last question was around the cost saving just to have absolute clarification. So I understand the EUR 110,000,000 that you had already started to work on last year, that's going to come or that's going to be completed in the Q2 2021. And then you were talking of SEK130,000,000 to be completed by the Q2 2022. I'm guessing the SEK130,000,000 comes on top of the SEK110. I know you may be able to give us some indication around the phasings of this program. I mean, the 130,000,000,000, for example, you've just started. So should we expect most of it to come in 2022? Or could we see already a lot of it next year? How should we think about those programs, please? Yes. I will let Fabio to be more clear on the matter. But first, one thing that I want to clarify is the program we launched last year has been completed and we have the full benefit already starting from July 1 this year. So that program that we completed and you are already enjoying the savings that are coming from this activity. The activity we launched and we announced in September, we are already enjoying part of the benefit of this one because there have been activities that have been activated already in July, August. But part of these activities will have a pretty long implementation timeline because it's related to other plans that we have in the pipeline. But please, Fabio, can you give more color and details about the cost savings? Yes. We have 2 plans. The first one that Alberto mentioned, we launched September last year fully executed. That plan was aiming to fully compensate the emerging cost coming from the separation. And from July 1, we got the benefit, fully executing and put in place and the benefit is into the P and L. As we have stated during the Hutu call, we launched a second plan that is staging. We partly enjoy the benefit into the quarter 3 results. And the benefit will progressively come in. The full run of the program will be from Q2 2022 with $130,000,000 But as I mentioned earlier, we expect that already from quarter to next year, we will have yearly running saving of 110 $1,000,000 And this staging is due to the fact that this link to program that we are running within the group of transformational specific activities. Okay. That's very clear. Sorry for the confusion because I think the 2 the old program is 110,000,000 and now you expect the run rate of the new program to be 110,000,000 by next year or like Q2 2021. Okay, but that's all very clear now. Thank you very much both for your insights and stay safe. Welcome. I'll take a question from the web here. It's Stefan von Hoan from Nordea asking about given the slow demand, are there any signs of increase on price pressure? That's the first question. The second question, raw material FX impact in 2021, Can you say something about that? That's the 2 questions. Okay. So price, we are still experiencing the positive price contribution in Q3, but there is an increased price pressure in particular on the food and beverage. That is what we are experiencing, yes. The second one about raw material, we are right now finalizing the negotiation for 2021. We are it is a situation where we could expect some headwind on the raw material, but it's not finalized yet. I have another question from the web from Per Jorgensen. He or he has in fact 2 questions. 1, I think you have partially touched upon that. But if the markets are more resilient now in the 2nd wave compared to the 1st wave speaking about corona And also, it is too early to see the start of the replacement cycle from old products that are sort of 10 to 12 years old? Okay. So it's more resilient. Difficult to say, I would say, because the level of uncertainty is high. What we see is that at least this 1st week, when the country entered the lockdown, the situation is different compared to Q2. It could deteriorate, but it could also improve. And again, geography are quite different. It's difficult to give an answer considering that the world, let me say, because case by case of the situation are pretty different. Second question, sorry, Jacob, can you repeat it? That was replacement. I mean, from old products, about 10 to 12 years old has that replacement cycle started? It's not too early. And we have a program. I said it that that will most probably be majority of the business during the coming months or the coming quarters, because the projects, the new project, at least the one that can be postponed in general, the hotel chains, at least this is what we are experiencing, putting on all the large investment for larger refurbishment of completely new installation unless they are already ongoing. And majority of the business will be replacement. Are well set both in term of product availability and also tools to go back to go behind this business opportunity. So it is not too early. We are already experiencing part of this business. Okay. Operator, please go ahead. The next question comes from the line of Johan Eliason from Kepler Cheuvreux. Please go ahead. Your line is open. Yes, good morning. This is Johan. Congratulations to good work on the margin side, I must say. Coming back to the market development a little bit in terms of how the market share dynamics have developed during the quarter or so far during the year, obviously, if that's more easy to sort of comment on. Are you seeing any significant changes here either in the food and beverage or laundry side? You mean changing in our presence versus competitors or other things? Yes. Are you gaining or losing market share you think? Difficult to say honestly. For what we can see, at least from some competitors, I believe in Europe, we are performing pretty well. I believe the performance that we are having in Europe are again, in some parts of Europe, we are even growing compared to the market. So I would say that in Europe, our presence is becoming even stronger. In U. S, clearly, we have a relatively small position compared to the large competitor. So I would say that in this case, changing in the market share is more among the 3 big players, 3, 4 big players. In Asia Pacific, I think it will be important the Q4 because is the quarter where the markets are reopening and so we could say what is happening. In the area where we are strong, but that is I believe is true for everybody, every company and not only in this industry, in the area where we are strong. So Europe and the laundry business, I believe we are doing pretty well and reinforcing our position, also thanks to the new product. What we are very happy for instance is the development of the new combi oven because that is a strategic product that we have been launching and the development of the sales of the combi oven are better than the average of the And then here you can judge how we are doing versus competitor or others. Yes. I think you have a competitor that's also launched a big product introduction in the ChemGOV. And but you haven't seen any sort of changes there yet. It might be earlier. Exactly. On the coming back to the structural cost savings, I noticed you took charge sort of 50 5 to 22 in food and beverage versus laundry. Is this also how we should expect the cost benefits to come through divisionally? I would say that in term of direction, the answer is yes. There is not a one to one approach, but directionally, yes. Yes. Okay. Thank you very much. Thank you. The next question comes from the line of Frederic Morigot from Pareto Securities. First of all, just a question on the coming quarter. And obviously, you saw a stronger October in September compared to the summer months. Could you say something about how much of Q4 October normally makes up even though obviously there's no such thing as normality these days? October is I would say while Q2 you have September is typically a stronger month compared to August that is a weaker one. In Q4 normally the 3 months are more or less on the same level. Sometimes the month of December is presenting some peaks. For instance, when there are public budget that has to be spent on other things, that is something that we are not expecting this year in the meaning that if there are these budgets will be spent on something else. So I'm expecting sorry, historically, the 3 months, they have more or less the same wafer in the quarter. Okay. Perfect. And then a question on the comparable cost base from last year. I think you had some pretty big product launches that drove some significant costs in H2 last year. Any possibility that you could quantify that for Q3 and Q4? Not specifically about the quantification of the cost, but you're perfectly right that one of the reason of the significant improvement of the margin performance in laundry in particular during the quarter is coming also from the difference between the cost we had last year, cost related to the investment done to complete the development and launch the new product, but also the cost that we had in the factory to start up the production of the Line 6,000 costs that we didn't repeat this year. Okay. But no ballpark figure of how much that could be approximately? No, we are not entering this detail. We are not giving this detail. Okay. Thank you very much. Thank you. The next question comes from the line of Gustav Hajjes from SEB. Your line is now open. Please go ahead. Thank you, operator, Gummer and guys. I was kicked out of the call, so sorry if you already answered some of these questions. Please let me know. But firstly, regarding if I understand correctly, if I understood it correctly on the call, you had note you had some longer payment terms. And again, if I understood you correctly, you were saying that the majority were respecting these rather than all customers. So I'm just curious about your internal evaluation process here regarding these payments? Would you typically evaluate any provisions on a quarterly basis or is this something you evaluate by year end? Okay. I take the question, Alberto. First of all, as we anticipated during quarter 2, we have had a request from customers, in particular, in selected country and referring to the South European countries to prolong the payment term. And as I mentioned, we did it selectively, making sure that we got the same protection we had before. And so far, I will say that the respect of payment terms was on schedule. I also remind during quarter 2 call that let me say a large part of our customer base is related to government related activities like hospitals, elderly homes and so on. As much as we have in fact, the credit insurance. And I would consider that more than half of our open receivable are fully protected or via credit insurance and via the fact that they are government somehow protected. We have a thorough process in place, very strict. We are evaluating every customers regularly as well as every new orders. And when it comes to calculation of provision, this is done mostly, not even quarterly according to IFRS principles and looking into the solidity of the customer. As I mentioned, we have had to put some provision in particular in quarter 2, whilst if I have to say in quarter 3, thanks also to the positive development of the payment, there was no material increase in the reserve for customer risk. Okay. That's very clear. And you don't sort of see a bigger risk into Q4 in any way. We shouldn't expect any one off provisions relating to credit losses. So you can see it now. Is that how you interpret it? As we can see now, no. We have to say that we are at a very early we see signal coming from the market because of the down of our customer activity, in particular in the rice work business in some countries. If the horizontal is pretty limited, I don't see this having material impact from us, at least not today. Okay. That's reassuring. And again, sorry if you already answered this, but your exit rate of or revenue declines into Q4, should you interpret that as 10% down year over year? And if you could give us a little bit of a breakdown between the 2 divisions, that would be helpful. The decline in Q3, yes, we had the decline in Q3. You mean in Q3 or in September? I mean into Q4 in September. Okay. In Q4? Or October, October, if you could what's your current run rate? Okay. In October, the decline is more or less in line with the decline we experienced in September. And the decline in September, we said that it was roughly minus 10% compared to last year. And as well as during the past the previous month, much stronger stronger in food and beverage and less declining in laundry. So more or less the trend is similar between the two segments. In October, we are experiencing a similar performance of the month of September with, as I said, deterioration of the demand during the blast days. And this is reflecting the fact that in some countries, in particular the South European countries, the government are imposing some sort of lockdown. Right. And then finally for me, looking at sort of your order book, I appreciate it's sort of flattish year over year then. And then you also say there are some projects being pushed forward, which I assume you would have expected to deliberate on as of now when you got the orders. So could you please also let us in a little bit on the order intake in the quarter? We are not disclosing the order intake data, but as well as for the declining of sales that was less in September October compared to the previous month, we experienced an improvement of the order intake still lower than what it was last year. But I would say move more or less in parallel with the recovery of the sales, also the recovery of the order intake. So we have been able to rebuild part of the order stock with the order that are coming. As I said, at the end of the quarter, so at the end of September, the order stock now is on the same level of last year with very strong double digit higher order stock in laundry, order stock on the same level in food and a weaker order stock in beverage. Great. Thank you for taking all those questions. I appreciate it. Good luck now. Thank you. Our final question comes from the line of Henrik Christiansen from Carnegie. Please go ahead. Your line is open. Yes, good morning. Two questions, please. Firstly, one point you made, Alberto, there was about visibility and lead times. You talked and said that you already planned shipments for end of this year and beginning of next year in the laundry business in the U. S. Could you just talk a little bit about visibility and lead times for your products in both in the laundry business and food and beverage? And perhaps if you translate the order book into months of production, obviously, things are being delayed and pushed forward. But the current order book, for how long would that fill production? You mean in general obviously not specifically about U. S. In this case? In general, yes. Yes. In general, the order stock is covering, I would say, 1.5 months. This is what for instance last year the order stock we had at the end of September was covering 1.5 months and that is what is in general happening in our business. These are the means that we are delivering the order stock in the following half the following month because clearly part of the order stock is going even longer. So what we experienced at the end of Q2 was to have an order stock that was coming from the month of March. So the month previous that were before the lockdown that we were not able to deliver. As I said, during the month, in particular, on September, we delivered a lot of order in Russia, I could mention Middle East and Africa. So the projects that were put on hold because of the restriction imposed by the pandemic. Now we are sitting on the same order stock that we had last year. And I would say in term of mix of lead time of the order stock is on a pretty regular basis. So there are no big differences, let me say, or things that are looking quite strange or extraordinary. And is there a difference between food and beverage and laundry? You get the impression that you have better visibility in the longer? Yes. Normally, for instance more than the business as such is the kind of customers in the meaning the beverage order stock is lower than last year because we had in stock chain orders. The chain order is a pretty long order stock because you get the pretty long lead time, sorry, because you get the order and then you deliver the product sometimes even a long quarters. So it's more the type of customer than the kind of product. And in this moment, I would say that there are no big differences between the 3 businesses, the 3 product families or categories. Understood. Second question is on product mix. You highlighted new products were positive for the mix and margins. Could you give any more color around that, share of sales that you would classify as new? And then perhaps also some indication how much higher profitability you have for these new products? Is it 5%, 10%? Any kind of color there would be helpful. Okay. The good things and that is something that is again one of the pillar of what we do is about the innovation, the product innovation. 50% of the net sales in 2019 and now twenty 20 are coming from products that we introduced in 2020, 2019 and 2018. So the share of our net sales coming from new product is very high. And this is because it constantly bring new product to the market. Whenever we bring new product to the market, we are clearly trying to address the benefit that we can bring to the customer, but we have clearly also the good rule to be more efficient, more better also for what concern the cost or eventually the price we can bring if we bring new value to the customers. The starts in this case are the Life 6000 that we introduced last year and that is providing a good benefit to our performances. The combi oven is another high margin and the blast chiller by the way that we launched together. You know better than me that these are products that by them sells are very high margin product compared to the other that we have in our portfolio. So all the new products that we have been introducing recently are targeting high margin category. If you combine this one with the customer care business that have been gradually performing better, and as I said in September, declining sales less than the product sales, the combination of these things is what I mean with mixing positively. Perfect. Thank you very much. Welcome. Thank you. That concludes our Q and A for today. I'll now pass back to the speakers for some closing comments. So thank you everyone for listening in and asking questions. With that, I think we say thank you and goodbye for today. Have a good day and weekend. Thank you and goodbye. Thanks a lot. Thank you. Bye.