Earnings Call: Q4 2020

Feb 3, 2021

So welcome to Electrolux Professional Q4 Presentation. My name is Jacob Plubay. I'm Head of Investor Relations. With me, I have Alberto Sanata, CEO and Fabio Sarpalone, the CFO. We now leave the floor to Alberto. Please go ahead, Alberto. Good morning. Thank you, Jacob, and good morning to everybody. Q4, I would summarize the quarter saying that along the quarter we had a strong cash flow generation Despite the turbulent times that we have been facing during the last part of the quarter, Sales declined by 13.2% with an EBIT margin stable compared to last year. Considering the situation, we have also to say that the Board proposed to pay no dividend. And we have also the other highlight that I want to raise in the quarter is the fact that We continue in our strategic initiatives. Strategic initiatives in particular, the factory in Rayong, The 28 February, we will complete the factory will be completed and there will be And the final handover to give us the possibility to start moving into the factory and The digital investments in product, but also in digitalizing our company. Let's start from the market. As I said, a turbulent time. And Also here we see 2 different dynamics. 1st, clearly, the most affected segments are Italia 1, so restaurant, hotel bars and this is reflected on the performance of the food and beverage segment. The second is the geography, in the meaning that the second wave, And in particular, Europe. So, in particular, the south part of Europe. And also this one will be reflected on the performance considering the presence and the market That we have in the South European market in particular for what the beverage is concerned. At the same time, We experienced a recovery of the business in U. S. With laundry growing and food basically flat, food and beverage basically flat, and in particular, in some parts of Asia, China and Oceania, so Australia and New Zealand. In Asia, particularly the Southeast If the countries that are still suffering considering the dependency of the business, of the hospitality business on the tourism And considering that those countries are still in a lockdown mode. So as I said, sales heavily impacted by the 2nd wave. Customer reacted differently compared to the first one because they were more prepared. So restaurants, hotels, But already ready to face this kind of challenge, but sales decline, in particular during the second part of the quarter. This kind of trend The sales again are mainly impacting the Food and Beverage Business. Food and Beverage Business declined close to 21%. And between food and beverage, beverage is suffering much more than food. Beverage is suffering much more For two reasons. The first one is the type of business in the meaning that while many restaurants adapted To delivery, to take away, this is more difficult for the bar, the pubs, the cafe. And secondly is the geography that because our last part of our beverage business, Developing countries that are heavily affected, Italy, just to mention, France, where there are the 2 companies that we Recently acquired, but also the business of our U. S. Operation in Mexico that is heavily affected by the lockdowns. In the food and beverage scenario, The positive element is the U. S. That after Quite negative development during the summer and early fall recovered and decline Between brackets only 5%. So this steep decline of the volume Impacted that negatively the EBITA. It was around 1%. The other element is that we our costs are lower, But the savings are less than before because many activities that have been put on hold during The Q2, in particular, so the really negative period of the pandemic, We have started and in particular, I'm talking about the product development that is preparing us for a lot of Very interesting and hopefully successful launches during the quarter we are in right now. As it has been all along the year, the dynamic of laundry are different. Andre was basically flat compared to last year, Q4. Growing in Europe, particularly the northern part of Europe And growing dollars in the U. S. So couple of words about U. S, because during Q2 And Q3 would have been always commenting the decline of the sales to U. S. And explaining them because they were building the stock they've been building the stock in Q1 And then depleting or using the product that were stocked in the U. S. By our distributor to generate the sales, the Low sales that there were during the Q2 and Q3. When the stock was over, they restarted The ordering and we restarted building the stock with good result as you can see. Clearly, in Q1, This year, we will face the opposite because this was last year, the quarter when we have been building the stock that was used in Q2 and Q3. Other element about the laundry business, very positive is the EBITDA that with fresh results, thanks to the cost efficiency activities, thanks To all we did with a new product brought to market, the EBITA improved. And This is quite significant and quite remarkable. Let's move now Fabio to the financials. Thank you, Alberto. Good morning to everybody. As anticipated by Alberto, EBITDA margin in the quarter was 7.3%. We closed the ones that we delivered in Q4 2019, but down SEK 40,000,000 in value. We have reported a pretty different dynamics Between 2 segments, laundry was up SEK 30,000,000 SEK in the quarter and we delivered a Strong profitability, really close to 17%. While in Food and Beverage, at the time value declined SEK 70,000,000 compared to same quarter of 2019. No material change we had in The group common cost. When it comes to the dynamic of the profitability, We had 2 main factors that reduced the EBITDA value, the base and production volume and negative currency impact. On the other side, we continue to We reported positive contribution from price, direct material cost reduction and The impact of the cost measure that in the quarter compensated roughly 80% of the impact of the low volumes. When reading through the P and L, We see a decline of roughly a couple of points in the gross margin. And this is mainly related The lower volumes and the negative impact of the currency transaction. As I mentioned earlier, Price, dark material and production efficiency, in particular and laundry, have positively contributed to sustain the margin. Selling administrative expenses declined both in value and also in weight on sales. Let me at this point take the opportunity also to give you an update on the cost reduction initiative that Generator also in this quarter a pretty remarkable contribution to the profitability around roughly SEK 90,000,000. This initiative can be clustered in 3 main buckets. Around SEK 30 million are what we call the structural one coming from the 2 restructuring plans, the ones that we launched in September 2019 and now are fully executed And the ones we launched in September last year that is under execution. The second plan that we anticipated during last call is expected to generate around SEK 110,000,000 Thanks already from the Q2 of this year, plus an additional €20,000,000 from the Q2 of 2022. 2nd bucket is coming from government subsidies, mainly related to countries, in Italy in France. And the remaining €40,000,000 the 3rd bucket is coming from the reduction of the discretionary spending. To be considered that in this 3rd packet, last year we had One time cost related to separation that represented more or less SEK 30,000,000. This cost measure are not over. We are continuing with this cost measure Also in this first part of 2021, benefits are expected to come, but a lower scale than the previous quarter. Indeed, because as Alberto mentioned a while ago, we are increasing the investment in our strategic initiative, the digital product and solution, but also we will have in quarter 1 and somehow in quarter 2 Some specific one time cost related to the consolidation of our operation in Thailand that Perbato will develop Happy to report that in Q4, we have Further strengthening our balance sheet. At the end of December, operating working capital was down 23% In same currency compared to December 2019 and down 28% compared to the level we had in September, where we started also to revert the trend of average operating working capital of Receivable is significantly down, but also inventory has been progressively reduced in Q3 and then in Q4. And I believe that this is a pretty good achievement because We have reduced significantly the operating working capital whilst at the same time increasing the Service and delivery to our customer, in particular, replacement sales. We closed the year with even a stronger finance position. Net debt, As you see from the reporting, has been reduced to SEK0.5 billion, half of the level we had in December 2019. And as of December, we have liquid found for SEK810 1,000,000 and revolving credit facility available for additional €210,000,000 Our net debt On EBITDA ratio is below 1 at 0.8. So significant improvement to what we reported in quarter 3 and in quarter 4. So pretty strong finance position. The strong finance position has been achieved Thanks to very strong cash flow in quarter 4, we reported $460,000,000 cash flow generation. And overall, for the full year 2020, dollars 570,000,000 Operating working capital reduction represented the major contribution in the cash flow generation. CapEx in the quarter was close to €70,000,000 with the majority of it €50,000,000 is related to the construction of the new operation in Thailand. That confirm Our focus on delivery, on the strategic priority, whilst maintaining great focus on Cash flow generation and sustaining profitability in the short term. Now, Alberto, back to you. Thank you, Fabio. So as Paolo mentioned, again, the strong cash flow generation, But at the same time, continuous investments in new product and improving productivity and efficiency of this company. Let me start from the product that we brought to market in Q4. And we are going also to bring during the 1st part of 2021. And here you see that I'm not talking about physical product as such, but as I believe it is the future For many products in this industry and probably also in other, we are investing a lot on the digitalization of our equipment. And Because the service, the additional service and the additional solution will be offered through An announcement of the digital capabilities. I think I already announced that one of the Nextiva Laboratories is the ability to provide one connected solution for whatever you have in your kitchen or your own laundry Operations. Considering that we are the only company bringing to market laundry, food and beverage product, We are also giving the possibility to the customer to have one connected solution to manage control And get additional service from the product. During the quarter, we launched what we call OneConnected, that is the platform That is aggregating not only product features, but also services that the customer can get And we've already started to have the first installation. We are very proud for that, even if it is just at the beginning of a path. Another important thing that is a cornerstone or something that is really base of our DNA It's the sustainability. During the quarter, we published our strategy and the targets that are reflecting again Our legacy, but also what we do every day, When we said that our mission is to provide the customer solution that are making day life Easier, more profitable and truly sustainable every day is because we are investing on products that are sustainable and with innovative low running cost solution. And we do this producing them in factories that we operate In order to reuse or use Cycle Energies and clearly as the base of everything, we are looking for our people, but also for whoever is working for us to make sure that we have ethical practices. So this one already part of our way of working, but We have been detailing this one in our sustainability strategy and setting the targets for the years to As I mentioned earlier, despite the challenging time, despite the decline of the business, thanks also To the solid financial position, we have been able to continue to invest, invest to prepare this company for the recovery. We still believe that the short term is obviously the pandemic creates challenges. A lot of our customers, in particular in Europe these days, are in a lockdown mode. But we also believe that when the largest part of the population worldwide will be vaccinated Against the coronavirus, we are confident that the business in restaurant, hotel and bar will come back. We see this talking to the customer that are preparing for the summer. We saw this last year when After the first wave, the summer came and people went back to this habit. And it is important to be prepared for this restart. And we are doing this, as I said, investing on product. I mentioned earlier that Q1 will be a quarter with new Product solution and features bring growth market, but also investing in our infrastructure. The big one The factory in Rayon, we are basically at the end of the building process, As I said, we already entered the factory, at least some area of the factory and by the 28th February, The handover of the factory from the construction company to us will be completed. It will take another 3, 4 months, but we are expecting to have the official opening June 1 With the new facility, fully operating with all the laundry products and the beverage product that we have been moving and concentrating in this new facility from the other 2 that will be obviously at the same time closed. The other important investments is again related to the digitalization of this factory. I mentioned earlier What we are doing on the product side, this is more on the improvement of our ability to run the company. So the plan is a multi year plan to convert all the IP system, the different IT system that we have in the factory. They are different because they are coming from acquisitions from historical solutions that were back in the history of this organization to a new one, a modern one, JD Edwards. So a well known and worldwide user system that for sure will improve our performances, will give us possibility to be more efficient and more cost effective. We already implemented the system in the first plan, Jarrod's first Implementation, the rollout went very well. I have to give credit to the people because we had to do it with Normally, when you have a rollout, you have a lot of people on-site to support the local management During this critical phase, this was done locally, but also remotely. This means that we have been learning a lot during this month, how to do things without being physically present. I think it's An important learning of this difficult situation. And we have been doing this business also that we can run The rollout, we came around the implementation of this new system pretty quickly also in the other sites around the world. So as you said, so let's have a summary of what we saw happening in Q4. The first one is that the recovery that we experienced in Q3 In some way, halted during the last month of Q4. It was mainly Europe and partially United States, but Europe is the most affected area. And you know that a lot of our business is in Europe. We have to say that this market condition is we experienced it towards the end of the quarter and We are still experiencing in January the same trend. In the quarter, Food and Beverage business were more affected than the laundry 1. It happened also in Q2 and Q3. The longer business is more resilient also because the segments served The specific one like apartment house laundry, coin shops, basically only With laundry products are less affected than the ones that where we have common laundry and food Business is there. We continue to reduce our running cost. So we continue to have Cost savings positively contributing to the everyday, but the short term savings Decreasing. So we have more benefit from the structural savings, the one that Fabio described and that will be And even increasing impact in Q2 this year, but the short terms are Reducing the impact because we restarted investing and as I said and preparing for the recovery. We continue to invest for the future, product, the Thailand factory and the IT Infrastructure. And then despite all the things happening around us, We also came out to publish our sustainability strategy and target. With this said that Jacob, I would come back to you and open for questions. Thank Our first question comes from Lucille Carrier from Morgan Stanley. Please go ahead. Good morning, gentlemen, and thanks for taking my question. I actually have 3 questions, and I would go one at a time. The first one was more around kind of current trading and what you are currently seeing in the market because On one hand, you have spoken about some costs, especially in the food and bev division related to kind of restarting the activity. So it seems that you are kind of picking up on that front. But I was curious to know how that compares with what you are seeing in terms of market demand And whether you are seeing maybe some of your distributors, whether this is in Food and Bever or Laundry, starting to kind of Trying to increase a little bit the inventory level. So that's question number 1 around the overall demand environment. Okay. So 1 by 1, we take it by 1 by 1. So current trading, as I said, The height of the recovery that we experienced in November, December is still there in January. So the conditions around us, The fact that the majority of the European market are in a they are in a lockdown mode is still there. We are experiencing a recovery of the business in Asia, China, Most of the Japan, Singapore are showing a different trend. This is still affecting more the food and beverage business than the laundry one. I think we mentioned it, but we have also to say that we see for instance, we see some customers visiting Our facilities to look at the product, to test the product, there are operations also In the South European markets that are planning for the reopening Late April, May. So I believe that Q1 Will still be challenging because the situation is will not be significantly different. The impact of the vaccine The positive impact obviously of the vaccine will not be significant in Q1. But if I look at what is going to happen, thanks to the vaccine, but also looking at the last year when With the summer, we had the heart Of the first wave and the recovery of the reopening of many businesses, For this reason, if one people will regain confidence, I'm confident that they will go back Today, I would say that bringing back again customers to our customers Because the problem is this one, obviously. So what we see is that It's not only us investing on product to prepare for a possible recovery, but also our customers. Okay. Thank you. My second question was around the cost structure. And I was hoping you could give us a little bit more details on your exposure to raw materials. I appreciate that you might be mostly buying components made out of metals and plastic, but Even those are probably going to face some form of inflation. So I was hoping you could give us some indication on your components exposure. How you think about the inflation we are seeing currently in logistical costs considering that you have a fairly kind of You know, a fragmented manufacturing based around the world. And lastly, as well, you've mentioned Two times during the call that you were impacted by FX headwind on your profitability in the Q4. So I was hoping you could maybe give us some Guidance on the FX impact that you expect for 2021? Okay. Let's split the question. I think the first part and probably Fabio can comment more about the FX impact. If we talk about the material, First, majority of our material cost or raw material is the steel. And we have been hedging our purchasing Basically for the whole 2021. So we see movements absolutely, But in this moment, we feel confident that we are covered for the last just part of the year. And then what is going to happen in 5, 6 months from now is in some way difficult to But we are covered for the largest part of 2021. And then you were also talking about the logistic cost and the fragmented distribution. In some way, sorry, not distribution, but the But the manufacturing footprint, in some way, you have to consider that the factory, in particular, the ones that we have in China, for instance, or also some of the small in Europe are mainly serving The countries where they are located. So in some way, our global manufacturing plants are The one in Italy, the one in Sweden and the one that we are building in Thailand. For instance, I'm mentioning that the site that we have in China is, if not 100%, 90% Dedicated to the Chinese market, to the local market. That is important because they are Also the investment we did when we acquired, again, I'm using the Chinese example, investment we did was to develop the local market and to do this, That was a strategic and important move. Now, Fabio, if you want to comment a little bit about Currency, yes. As I mentioned earlier, the quarter results has been impacted by currency negatively. We have 2 components, the currency translation. Our group is reporting SEK and year over year we have seen a strengthened of the SEK against the other group currency, mainly, I would say, U. S. Dollars and euro. The second Within the currency, the second piece is currency transaction. And in particular, when comparing the 2 quarters, We have also here seen a strengthening of spec versus US dollar that generated the main impact in the P and L. Having said so, what about the future? What about this year? I believe Very difficult to predict the currency development. We are monitoring, Of course, the development and also looking into the possibility where it is possible and commercial reasonable to see what we can do in terms of pricing. Thank you. And lastly, I just wanted to ask around the IT migration program that you've described at the end of the presentation. How we should think about that in terms of cost? And obviously, is there a risk maybe of disruption to production procurement As you are executing on this migration, because we know that it tends to be sometimes a bit of a challenging process to kind of do that type of migration. So I just wanted Have an idea on cost and how you assess the risk? Okay. So for what the cost, We do this because we believe we will benefit from this one, from implementing this system, Eliminating because we will just continue at the same time more than one system in the different operations. Some of them, in particular, when we talk about the acquired company, they were relatively obsolete System or system that were not giving us the possibility to fully Benefit from what a system can give. For what concern the disruption, I think I mentioned that I was really proud of what happened in the Fez Factory. We started with the factory in France, so not one of the largest, But one of probably of the most complex because of the characteristic of the product that are produced in that factory. And the migration went very smoothly without any disruption for customers. A lot of the products producing that factory are made on order. So we didn't even have the, let me say, the safety valve To have the stock in the between or to create a stock in the between. So very happy about that and very proud of the team that conducted the migration. We have obviously a dedicated team. We know what it means. It is something that we already experienced and so we'll learn from also from the mistake that we did in the past to make sure that are not repeated. Okay. Thank you very much. Welcome. The next question comes from Gustaf Haegerses from SEB. Please go ahead. Thank you, operator. Good morning, guys. A few questions, if I may. I think we're all trying to understand sort of the lag between when the vaccine is rolled out and people start going to restaurants And when you we should start to see a material order pickup for your food and beverage business. So I guess there are few geographies now like Australia where you see bookings at restaurants being well above last year's. And I know you're not particularly big in Australia, but to give us a sense, perhaps what is the market reaction there in terms of equipment? Is that A short lag, a few weeks or do entrepreneurs and restaurant owners sort of have a wait and see approach rather? That would be very helpful. That's right. We said Australia and New Zealand are obviously not Super Large Market, but we have a relatively good presence. And I tell you that already since September, We experienced growing sales in both countries. So this means that People, as soon as they get confident that they can socialize again in a safer way, They'll go back immediately to let me say back to the normal life they had before. We were again it is just please take it very please because I'm also not able to travel so much. So also I'm not able to meet so many customers as I was using the bus. But we started to have Customer visiting, what we call center of excellence here in Italy where I'm located, that is the big showroom with a kitchen where And we started to have customers coming to test the product spending more than one day a year with our staff And we didn't see this in the past. And they do this because they are preparing for the spring, summer. Well, they believe That customer will come back. At the end, this is the trigger for them and for the dealer and then ultimately for us. And Food and beverage teams for large hotel that are already planning the opening 28th April. And last year, they worked between the June 15 and 15 September. That's it. That was the all Working periods for these large facilities. This year, they are already planning the 28 April and they are already having At least pre booking. So I believe people believe that they could restart. And I personally think that as soon as you will get this confidence, the recovery will be faster. As soon as we have this confidence, and it is not the case yet. Okay. Just a follow-up on that. Again, Australia, I mean there might be some effects temporary effects from pent up demand in the 1st few months. But as you mentioned, Australia has been open, I think, since September or so. But you're still seeing a healthy growth in Australia going into this year, so it hasn't faded. And second, do you think that It's not you taking market share. It's a market dynamic phenomenon really. Okay. So first answer is yes, sir. We see still the business going Repeat well in that part of the world. I would include the China by the way, where we have a much larger presence, a much more significant market share. To talk about if we take market share or if we keep it difficult to say, in particular in those markets. So I would say that in this case, I am not able to answer to you. I am saying that we are growing More than our current sales are higher than the ones that we had a year ago Or they were also during the last part of last year. Okay, great. A few more if I may. There are some of your peers who talked about initial fines of price pressure, perhaps Mainly related to U. S. And within the Combi Open segment. But do you see any indications that there are price pressure in the market? Are you lowering prices at all? No. The answer to the Second part of the question, in the meaning of that, I think, Fabio was highlighting that we still have a positive contribution from price. So still the contribution for prices is positive. In this moment, we're still, let me say, the market is full of uncertainty. We are experiencing some pressure on price, in particular in Europe, I would say, more than any other Then again, this is related to the speed of the recovery clearly because as soon as the market is quick Or if the market is quickly recovering, then also the pressure will be released. But in this moment, In particular, on the food and beverage and beverages because it's the most suffering part of the business, we are experiencing some price pressure, yes. Okay. And if I may follow-up on the question on raw material inflation. Obviously, you don't have a big exposure to steel directly. But coming back to your components and sourcing, What type of contracts do you have? Do you have a contract where you incorporate increased costs? Or are they negotiated yearly? So any additional price Inflation for that components provider will not be passed on until later? Or could you give us some sort of insight on how that price dynamic works given What we see now is price for several raw materials going up quite significantly year over year. Okay. I can take that question. As I've anticipated, we are covering Directly or indirectly the raw material that are included into also our components. And we have, I would say, a pretty good coverage at least over the first half of twenty twenty one. It's clear that Recent dynamic, but I would say, call it really recent, putting additional pressure on it, but I would wait before coming to conclusion. So overall message, 1st part of the year, I don't see any material impact for the profitability of the group. On the other side, Yes. Anyway, activating cost reduction initiative negotiation activity To mitigate this impact and bring additional saving regardless of the development of the raw material All right. That's very clear. And lastly for me. I'm trying to sort of make out the EBIT bridge year over year. And there are a lot of sort of Larger items here, the temporary cost avoidance from 2020, including government support, Yes. The cost savings program, yes, spin off related costs. Could we just I know you tried to explain, but perhaps make it One more try to sort of sum it up. What's the year over year impact as you see it now from all these initiatives and temporary costs And savings for 'twenty one versus 2020, that would be helpful. Thanks. Okay. Let me summarize What we have seen in quarter 4 and somehow all along 2020. The first component in the quarter, but also I would say in the 4th year is what the first bucket was related By the structural cost reduction coming from the 2 restructuring, 1 completed and one in execution. And in the quarter, the restructuring has generated roughly SEK 30,000,000 saving The second piece in the quarter and the full year was government subsidies, €20,000,000 The remaining bucket, the third one was the management of discretionary spending that contributed with SEK40 1,000,000 in the quarter. And as we reported in the previous call, Positive contributor all along the year. Going forward, I believe that First, the execution of the restructuring plan is proceeding according to plan. So what we anticipated In terms of saving from future fit to our confirm, I mean, that is our second the plan, as I mentioned, we expect that this plan will contribute with €110,000,000 yearly saving All from the Q2 of this year, plus an additional €20,000,000 from the Q2 of 2022. We will see government support at least we expect to have a government support As long as the market will not pick up. And for what concerns the let me call the discretionary We are continuing with a short term cost containment measure as we did All along 2020, but as we anticipated earlier, the contribution will be still positive, But reducing size because at the same time, we increase in investment for the future. On the let me say, The strategic initiative that Alberto mentioned, the digitalization of the products and the company and then specifically For quarter 1, with some tailing quarter 2, we will have 1 off costs related to The consolidation, the move of the factory in Thailand. Just to give you a flavor, This one time cost for tight consolidation can range in area between €15,000,000 to €20,000,000 for quarter 1, 2021. Thank you. That's helpful. Our next question comes from Frederic Muttergrupp from Pericel Securities. Please go ahead. Good morning, everyone, and thank you, operator. First off, on the U. S, I think you mentioned 5% sales decline in the U. S. This to me seems very strong given also the weak dollar versus the Swedish krona. Could you give us any insight if there is any larger projects or so impact Nice to hear. No, not specific large Project or specific chain rollout, it was our present. I would say majority of this Are the product categories going better or performing better than the other in the U. S? Where the ones sold through the network, through the dealers for replacement business, for day to day business. So it was, I would say general market sales development. Okay. So that would be The trend that we that the U. S. Is currently trading at that? Secondly, you mentioned that beverage is Suffering more than food. Could you just remind us how that could affect your mix going forward? Sorry, back one second to the previous question. This was about the food and beverage obviously only because the development in laundry was even Stronger and this is related to the fact that again that we had a recovery of the sales after having depleted the Jok that we built in Q1 2020. So just to make sure that I completed the first answer. Sorry, your second question was about the mix between food and beverage, right? Yes. So beverage is suffering significantly more than food. I think I mentioned about two reasons. The first one is that in the country where there is a lockdown, You have many restaurants adapted to the new reality doing the delivery or takeaway. That is obviously hard for a bar, for a coffee shop, partially also for a tap. Yes, there are some, but you don't do delivery of drinks or even less of coffee. So this was the business as such was impacted heavily. The second element and this is in general, so it is for us and for everybody, I would say. That's specifically for us, considering that we have been building The beverage business through the acquisitions and again we are in the process of globalizing the product offer of this company through the Alacholac network. But it's still a process where we are clearly it's a way of beginning. Majority of the business of our beverage business is still around the Home markets of the whole home markets of the acquired company. So example, the operations that we have in the U. S, A big portion of the business was in Mexico with the larger chains operating in that part. And Mexico is really down. It's not just house. Whoever is operating in Mexico, including our customer, are heavily affected by the pandemic. The company, the coffee espresso company that we have in France, More than half of the business is in France. And if you talk to the roasters that are operating in France, They are declining business even more than us in terms of equipment. It's really the market that is not receiving. And the same applies to the company that we acquired in Italy that is that has more than half of the business again in Italy. And I don't have to say the situation of the country considering the lockdown. So we have very specific Situation well identified, but it's also giving us the confidence that it is not a generic problem of Efficiency or low productivity, but it's strictly related to the specific situation, Some specific geographies and then back again to what I said at the beginning that short term, The pandemic creates clearly challenges, in particular to beverage. But when The vaccine or the recovery will be over. Also, we know that this operation will be addressed. Sure. I appreciate the market dynamics. I think I was mainly thinking about the margin mix The stronger decline in beverage would have on your profitability? Yes. And again, also in this one, I'm Sorry, I misunderstood that one. But in relation to the margin, the margin is, I would say 100% influenced by the drop of the volume. And again, it's mainly the Beverage side. Okay. Thank you very much. Our next question comes from Johan Eliason from Kepler Cheuvreux. Please go ahead. Yes. Hi, Johan here. Thank you for taking my questions. I appreciate you had a decent cash flow, but still Besides no dividend for 2020 and in extreme circumstances like this, that's obviously Not unexpected. Now you do have a solid balance sheet. And part of your growth story is also related to Acquisitions. And I think, for example, we have seen Nelbead announcing 2 acquisitions recently. Are you missing out there? Or Haven't you got the targets you want from your M and A pipeline? No, we saw the acquisition of Middleby and At least the one in China, that is the one in the food and beverage business, we didn't yes, It was there. It was not something public evidentially. I think I mentioned earlier that We restarted our activities during the fall. So we restarted looking around Reconnecting with the connections that we had in the past, still following our Strategic priorities, so acquisition that can help us to deliver against the pillar of our strategy. It is still a market that is full of uncertainty and there's a consequence also the dialogue with the companies Not so easy, I would say. There are some companies that are coming up available for sales, But typically, they are not the company that could add value, both for what the financial performance are concerned and The strategic match is concerned. So still looking. I think you know that the M and A process is Something where it's difficult to predict when you are able to bring result. Yes. Okay. Then just coming back on the Thailand plant. I understand you will have some extra costs now short term, but I suppose this With yield benefits further down the road, can you sort of give us some indication? And maybe you've done it already, but What the positives are from the Thailand plant, if you compare with cost base 2019, for example, and then what do you expect 2022 for the setup. Is it like SEK 50,000,000 improvement or how should we Thank you about it. Without providing The figures, the values of the different activities, the cost efficiency will come from, 1st, Currently, we are running 2 factories. We will run 1 factory only. So it will be one site only instead of Two sites where we were operating before. Secondly, we took the opportunity to build a new To have state of the art facility with all the design of the lines, the design of the preparation area, the flow, designing the best possible way in order to have the maximum efficiency. 3rd, we will improve I think I said that, but that will be one of the 3 global factory, Currently global factory, meaning factory that are delivering product all over the board, meaning that majority of the production coming out of that So we will not stay in Thailand, but we'll go outside of the country. And we took also the opportunity to rebuild the To redesign also all our logistic setup and logistic flow to have efficiency over there. 4th one, this is not something that we will achieve in June, but it will come later. This factor is not designed Just for what we have, but it is designed to prepare ourselves for future expansions. That means that in that factory, we will have additional production pretty soon. Okay. Thank you very much. Welcome. Thank you. Due to time restraints, We will not be able to take any further questions. So I'll hand it back to the speakers for any other remarks. Okay. So thank you very much for today and speak to you next time. Thank you and goodbye.