AB Electrolux (publ) (ELUXB) Earnings Call Transcript & Summary

A warm welcome to Electrolux Capital Markets Update 2023. My name is Sophie Arnius, I'm Head of Investor Relations and will also be the moderator for today's event. Last time we had an event like this was in November 2020. And a lot of things has happened since then. At that time, we were dealing with COVID, and the effect of the pandemic carried on in 2021 and also into 2022. And there has also been other foreseen events in the world, impacting almost every industry. One thing though, remains the same, and that is our strategy. It's still a strong one, and the focus on innovation and efficiency remains. And you will hear more about that in the coming hours from my colleagues. If we look at the agenda for today, you can see there are 2 clear themes. Firstly, how we are harnessing the growth opportunities in the aftermarket while gaining deeper consumer insights and relationships via new touchpoints. Secondly, how we are creating stability in business area, North America, by executing on the turnaround program, paving the way for sustainable growth and increased profitability in this region. Of course, there will be opportunities to ask questions during the event, both from our audience here in Stockholm as well as virtually. [Operator Instructions] And if you want to look at this event, again, you have the opportunity to do so. So there will be an on-demand version available on our website tomorrow. And already now, you can access the presentation material, including some extra slides with additional information. And now let's get started. With a deeper look on how we are executing on Electrolux strategy, driving profitable growth. It's a great pleasure to welcome our CEO, Jonas Samuelson, on to stage.

Thank you, Sophie. And a warm welcome also from me for you who join us here and everybody joining us online. The last 6, 7 years, we have implemented a consistent strategic framework, leveraging the industry trends impacting us the most and in particular, the increasing importance of consumer power through digitalization and also the importance of sustainability, both from a society perspective and as a premium qualifier that consumers relate to. We've done that by driving sustainable consumer experience innovation as one of our platforms. Secondly, we're also taking advantage of the opportunity and need for global scale. Through investments in increasing efficiency through digitalization, automation and modularization. And today, we will talk about why the recent challenges that we have experienced in the last few years during COVID do not fundamentally impact our path to achieving our financial targets of over 6% operating profit, over 20% return on net assets, and over 4% annual growth rate. Let's talk about why. So first, in Europe, where we started to implement the strategy back in 2013, '14, we've had a consistent delivery of profitable growth. Also, in recent years as we've extended that strategy to our emerging market BAs, Latin America and APAC, EMEA, we're also increasingly delivering strong financial performance and especially as Latin America is now leveraging the big investments that we've made over recent years. And the 2022 performance hit that we took in these business areas are just temporary impacts from the supply constraints, there's significant cost increases and the drop in consumer demand in the second half of the year. This will reverse gradually as we go through 2023 and beyond. Our challenge has been North America. Whereas you can see that already since 2017, '18, we've had some significant challenges. And we'll talk about that and how we're now at an inflection point to turn that around. Another perspective on our performance trajectory is to look at the performance drivers since 2019. So in 2019, we had EBIT of SEK 4.5 billion, which was already then significantly impacted by weak performance in North America, only SEK 0.6 billion in profit at that time. Since 2019, we've been hit with unprecedented external headwinds, whether it's increasing raw material cost, currency headwinds, accelerating inflation, SEK 15 billion. We have more than offset that through price execution in the market. And on top of that, through our focus on innovation, through our focus on our premium brands, Electrolux, AEG, Frigidaire Gallery, Frigidaire Professional. We've delivered an additional SEK 6 billion of mix during this time period, increasing our profitability by SEK 6 billion. And I want to emphasize that also in North America, we've delivered strong price and mix performance and with only a fairly limited increase in investments in innovation and marketing. So fantastic return on investment on our investment in increasing innovation and marketing spend. So this part of our strategy is already now delivering. The challenge has been the unprecedented cost headwinds that we've faced in the business, again, driven by supply constraints following COVID and primarily hitting our North America business. So out of the SEK 8.7 billion of cost headwinds, cost inefficiencies that we faced, SEK 6.3 billion comes -- has hit our North American business. And just as a thought experiment, if we assume that the North American headwinds were only proportional to what hit the other BAs, we would had a solid 2022 financial performance. So from both these perspectives, it's clear that the strategy is being delivered in a significant part of our business and delivering good financial results, but we have a challenge in North America in particular, and a temporary challenge from the particular constraints that we saw towards the end of last year. So let's look at the North America and what it is that has driven this challenging performance. So going back to 2018, we were in a situation where we had been under-investing in our core Frigidaire offering, unfortunately. We had high dependence on private label business with Sears. We were exposed to sourcing -- significant sourcing from China, which was hit them by the tariffs that were implemented by the Trump administration. As Sears went bankrupt, the fundamental financial performance of the business area was challenged in 2019. By then, though, we had already started implementing our new strategy by investing in innovation, investing in modularization, investing in the consolidation of our industrial footprint. But of course, this was during -- just before the COVID pandemic struck. So as we were starting to ramp up, particularly our new factory in Anderson and closing our factory in St. Cloud, COVID hit. And this resulted in very challenging conditions to ramp up production in our new factories. And on top of that, the supply chain constraints following the COVID pandemic, massively increased cost at a period where we not -- could not run our factories in a productive way. So why are we now at an inflection point? Well, we have made the investments in these new factories. We have new management in place, and you will see and talk with Ricardo later on today that have established grip on the business. The turnaround program that we have announced is executing right now according to plan. And again, importantly, the new products that we have launched are winning in the marketplace. We're leveraging the competitive modularized architectures and new automated factories. And this even though it's delayed, it's now fully in place to support our performance going forward. So we have a path, a clear path, a plan to get back to our target financial performance of 6% operating margin in the medium term. We've announced the cost reduction program that will deliver SEK 4 billion to SEK 5 billion this year and a total of SEK 7 billion by 2024. I'll get into that in more detail in a moment. The biggest part of those cost reductions come from North America, where, as you remember, we saw the biggest cost headwinds post the pandemic, SEK 6.2 billion. Also in North America, as I mentioned, we have invested in new product architectures that are extremely well received, enabling us to drive commercial growth on top of the cost savings in North America. And in addition to the commercial growth in North America, we also have significant new product investments in the other BAs, driving mix. We will recover lost volumes in Europe where we had been significantly impacted by the supply constraint in 2022. We'll recover that. We'll continue our profitable growth in emerging markets that we're already on. And we will continue to leverage the growth of the profitable aftermarket business. Of course, there's always a little bit of price erosion in the market over time, and we've assumed that in our plans to get back to over 6% operating margin in the medium term. So the biggest chunk of that is the cost reduction program that we already announced late last year. Initially, the first year 2023, as this gets implemented over time, where we deliver net performance improvement, net cost efficiency of SEK 4 million to SEK 5 billion. And with the full annual run rate of the program in 2024, we will deliver over SEK 7 billion of cost savings. The biggest chunk of that is in the dark gray bar, which is essentially reversing the inefficiencies that we incurred during the pandemic and post pandemic. So it's about reducing premium freight, reducing spot buys, improving our sourcing cost, implementing the new logistics costs and more efficient routing of logistics following the constraints that we saw in the prior year. That's the biggest improvement, just reversing the cost inefficiencies that we were experiencing. The next big chunk is production -- cost reductions, mainly driven by the investments in modularization and automation in North America, which we have not yet delivered on, but now we have the conditions in place to do so. And finally, given the lower demand environment that we've experienced, we're reducing our structural costs to a new level, reflecting the market conditions, leveraging the new organizational setup where we have globalized more of our organization structure to enable more optimization, whether it comes to investments in R&D, marketing, or the support functions around the company. So in total, SEK 7 billion, we're reducing our full-time headcount by 3,800 people, as we've discussed proportionally between white and blue collars, and an additional 1,900 temporary employees and consultants. So this is all executing to plan and part of the announcements that we've made late last year. So this reduction in our cost base gives us the ability to accelerate the rollout of new products and platforms, leveraging the significant investments or unprecedented investments that we've done in recent years. So this is a bit of a complicated chart, but the light area of the bubbles show the penetration -- sales penetration of new products launched on modularized platforms globally. So North America will become fully modularized. Laundry was still -- or already before on a modular platform, so we're not counting that. But these are the products launched since 2021 off of new modular architectures. So it would be fully modularized in North America. Same in Europe, we were already on modularized platforms, and this indicates that the next generation of products coming off that platform -- those platforms. APAC, EMEA basically leverages the European investments that we've made. And Latin America, as you know, we've made significant investments like in North America for new modularized platforms that we're ramping up in the coming years. So why are we so confident that we will win with these new products and platforms. It's because we're already getting really, really strong consumer feedback on our new products. So this is then the consumer star ratings. We keep referring to that. 5 is the highest rating that consumers can give. This is the harvesting of hundreds of thousands of reviews from our website. And we know that in particular in the U.S., the new products that we've launched are actually industry-leading. There are differences a little bit in how, let's say, different cultures rate. So the 4.6 and 4.5 in North America is industry-leading. And you can see we have fantastic ratings of the new products all over the group. I also want to highlight because it's really important that we've rebaselined, re-platformed our Electrolux and AEG apps and are now getting fantastic ratings for usability and benefits of the new connected apps. So if you look at the last several years, our consumer star ratings are consistently improving over time. And again, there are cultural differences in how people rate, but these are industry-leading ratings in all of our business areas. That has delivered over SEK 1 billion per year in bottom line EBIT benefits of mix. And we are very confident that, that continued positive trajectory of the fantastic new products that we have will deliver additional mix over time, as mentioned. I talked initially about sustainability as a, of course, an extremely important societal factor, but it's also becoming increasingly a premium qualifier from our consumers. And for that I'm super proud that we're already in 2022 as one of the first companies globally delivering our 2015 science-based targets where we committed to reduce Scope 1 and 2 emissions by 80% by 2025, and Scope 3 emissions by 25% by 2025. And we're 3 years ahead of target in delivering on those. And again, the good news is that consumers are paying us or rewarding us for that performance. We know that consumers want to live more sustainably. We also know that they want to consume less energy and electricity. So our most sustainable products are also our most profitable. On top of this, aftermarket has been on a very favorable growth trajectory. You remember, we set the target of 10% penetration of aftermarket sales by 2025. Last 5, 6 years, we've had 7% annual CAGR in revenue growth and this is extremely important as our aftermarket business has over 4x higher profitability, operating profit than our finished goods business. And of course, it's an opportunity for us to connect directly with our consumers and deliver better experiences. And we'll talk quite extensively about that later on today. So the foundation of our strategy is to have a strong balance sheet to enable these big investments. And of course, we had some questions recently about the challenged debt ratios that we had towards the end of last year. And you will have seen that we got downgraded to BBB+ last week. This is fully in line with our perception of a solid investment-grade rating. And the stable outlook puts a stamp on, let's say, a qualifier that yes, we have the plans to deliver back to our target debt ratios of approximately net debt-to-EBITDA. We have very strong liquidity, SEK 34.4 billion in cash and committed revolving credit facilities at the end of the year, last year. We have no financial covenants and the combination of improving EBITDA this year and positive operating cash flow puts on a trajectory back to our target balance sheet ratios. So in summary, we have a strategy that is extremely well aligned to industry trends. The 2022 temporary performance challenges that we incurred are not fundamentally impacting the achievability of our financial targets. We have a clear turnaround plan for our North America business that's already delivering. We have fantastic traction on our sustainable consumer experience innovation, delivering strong mix contributions already today and will continue to do so. More to come through our accelerated rollout of innovative new products on modularized platforms in the coming years, and the foundation of increased efficiency through digitalization, automation, modularization is in place, but of course, the delivery of those benefits have been challenged by the volatility we have seen in recent years. On top of that, we have the growth trajectory in our profitable aftermarket business, as we will talk more about. And our clear plan, our clear commitment is to deliver on our financial targets in the midterm. Thank you very much for now, and I look forward to seeing you back in the Q&A in a moment. Back to you, Sophie.

Thank you, Jonas. And as Jonas said, there will be opportunities to ask questions to Jonas later at this event. So now let's turn to aftermarket and the growth opportunities we are harnessing in this area. And I know for a fact, this is an area of great interest for our analysts and investors, and we will dig deeper into that. First up is our Chief Commercial Officer, Anna Ohlsson-Leijon. Several of you have already met Anna in a previous role as group CFO a couple of years ago, and lately as CO of Business Area Europe. Anna, please.

Thank you, Sophie. Innovation and brands they are key growth levers. And I stood at the Capital Markets Day here in 2020, talking about together with my team, how we see the profitable growth journey for business area Europe, really driven by innovation, creating that mix and volume potential and strengthening our brands, creating a price premium and also making sure that we are connecting and creating loyalty with our consumers. But now I'm here as Chief Commercial Officer, to talk about how we grow the profitable aftermarket business and how we also create routes to market to consumers that are direct. This is about creating a lifetime journey with our products and consumers and really delivering that aftermarket growth. In the commercial organization, we have now set up consumer direct interaction heads in all of the business areas. We do this to make sure that we live and breathe the results of the aftermarket business and also that will leverage key investments that we've already done over the years starting in Europe. Is also, of course, important that we cross-fertilize the good innovation that we've seen, what works with consumers in the ownership phase when it comes to products and service offerings. On top, we have that lean team that really leverage that. So why are we doubling down on aftermarket and consumer direct right now? There are 4 consumer trends that I think you're familiar with. The most important one is the omnichannel. We know that today, 64% of consumers prefer to interact with our retail partner or a brand that have a clear omnichannel presence, meaning physical and digital. And consumers expect this to be seamless. Consumers more and more interact directly with the brands. And today, we can see that 15% of consumers have an intention to buy directly with the brand. They see this as a guarantee for consumers to be taken care of during the ownership phase. The key point to create loyalty is personalization, and this is really enabled through data and digitization. And here today, we see that consumers over 60% actually of consumers are willing to pay up to 15% more for a better experience. Sustainability is a fundamental factor when consumers decide what and where to buy and how to buy. And we see now that over 70% of consumers actually with that retailers and brand had even better sustainability offerings. So if we zoom out and take a holistic more strategic perspective, we're in the midst of a transformation. And when it comes to innovation and design, we have already over the last 20 years, really moved from the engineer and industry-driven innovation process to an innovation process that is based on true consumer insight, solving real consumer pain points. When it comes to brand, we have doubled down on Electrolux, AEG and Frigidaire, really focusing on those A brands and connecting with consumers in a more purpose-driven and differentiated way, investing consistently in these brands renders that price premium and creates this loyalty with consumers. But in the heart of this transformation is really the consumer-centric part of the business logic, to move from the unit's transactional foundation of the business to a more lifetime loyal to builder. And of course, over time, we also want to make sure that we have an even more circular business model offerings to our consumers. So what are the opportunities with this change and this transformation for Electrolux if you take a closer look at it. Today, we sell around 60 million products per year around the globe either through our B2B partners or through our D2C websites. And today, we have an installed base of 350 million products around the world. So it's really about leveraging that installed base to create aftermarket revenue and profit and also to gauge more with consumers with each and every sell of products that we do. So how will this work? We start with an appliance registration, and tickets to engage further with consumers. If it's a connected product, this is a very seamless, effortless experience, but it's not a prerequisite to really have a good aftermarket growth. It can be done through a simple QR code or through an online registration. Maybe the first offer we make the consumer is an extended warranty. Through the data and insights we get by really interacting with consumers, we know when to offer what. It can be an accessory, for example, to that sell of products we've done or it can be consumable that really fits into the product that we have designed through our innovation process to be an integral part of the product offering. Maybe we prompt that through our connected apps. If the product breaks down after the warranty period, we're there for a fixed price repair for a repair and protect offering to the consumers. And all this data that we collect will give better insights to us to feed into our innovation process. And if we do this consumer journey well, we will create that loyalty in that repeat purchase. So to summarize, why we're doubling down in a structured way on aftermarket and consumer direct right now is we see clear benefits with this to do it an even more structured approach. We see we create mix, we create volume. We strengthen our brand rendering a price premium, and we get information that become -- that makes us and our partners more relevant with consumers. So that's why consumer direct and aftermarket is a key value creation accelerator.

Thank you, Anna. And you mentioned SEK 350 million in installed base. That's quite many consumers that interact almost daily with our products.

For sure. Of course, we want to leverage that possibility of interaction even further. And my colleague, Louise here will explain a little bit more, where you can find this installed base and how we work with that aftermarket penetration in terms of sales.

Perfect. And Louise that Anna refers to is, Louise Mortimer Undén, Senior Vice President of Group, Consumer Direct Interactions. And great to see you here, Louise. Let's talk about, let's zoom in on the business opportunities that Consumer Direct Interaction that Anna talked about brings to us Electrolux.

Absolutely. So Anna talked about how we're on this journey continuing to move from a more transactional selling appliance space to actually create consumer lifetime value. And we are already innovation -- sorry, consumer-centric in our innovation processes. But historically, our primary focus has been to develop these best-in-class clients' experiences and then bringing them to market. So initially focusing on the first consumer journey faces up until that point of the actual first transaction. And what we're aiming to do now is to really double down on the phase that starts with the transaction. So remaining with the consumer throughout that journey in ongoing use through to when there is a need for service or repair and all the way through to the replacement product at the end of the life cycle. Being close with the consumer and helping them to get the most out of their clients is not only helping us to build brand loyalty, but it also open up the opportunity for us to tap into categories that Jonas mentioned, brings us at least 4x higher profit margin. So that's the business opportunity of it.

And it's also been highlighted here by Anna, for example, that consumers are becoming more digital -- so how are we tapping into that?

Yes, that's actually playing to our favor. Getting closer to consumers clearly means we need to be able to have a direct link to them. And as consumers have more digital behavior, we have some key opportunities to create that access. And one of them is our growing installed base for connected appliances. This is, of course, a way for us to communicate directly through our app, but it's also a way for us to understand exactly which product this particular consumer owns. And in that way we can make the communication relevant, and we can prompt for example, when you need to perform a maintenance cycle of your appliance. Second route to automate this relationship is selling direct. Because when we sell direct, we can automatically capture consumer data, and we also know what product is being purchased. So adding to that, the content from the consumer to be in contact with us and opting for marketing communication, that creates that link with us. But of course, the vast majority of our appliance that we sell today are still nonconnected and are sold through our retail partners. But also selling through retail partners, we can connect with the consumers by incentivizing them to register their product for the benefits that we can unlock. So in both channels, direct and indirect, we still aim to create this directly with consumers. Once we have that, this is our opportunity to present our brand certified experiences, whether it starts with an extended warranty and leads on to captive consumables or accessories and also the branded service and genuine parts.

And it's interesting you mentioned here earlier that aftermarket increases brand loyalty. How does that work?

Well, as mentioned, we start with creating this link to the consumer to connect to register the product and the consumer data to have that opt in. And then it's about us providing value to the consumer. The first store opener is obviously helping the consumer to onboard their appliances and learn the tips and tricks to make their everyday life smooth and easy. And then staying on with them, not to spam them by sending too many e-mails or just trying to sell things, but really providing inspiration or support in maintenance. And of course, highlighting the value of using original parts in order to ensure that the consumer keeps their appliance up and running for as long as possible. So that is the value-creating part. And of course, doing that right, that earns us the right to also monetize and unlock those revenue streams along the ownership phase.

And let's get tangible here. What are those revenue streams when it comes to aftermarket?

So we speak about 4 distinct aftermarket categories. The first one is spares, and that's today the most valuable for us. And the second one is consumables and accessories. The third one is the service portfolio that we offer in the out-of-warranty time of the clients. And then the fourth one is extended warranties where we can offer the consumer piece of mind from the beginning, knowing that we will take care of any inconvenience that happens throughout ownership.

And how can we grow this business, 10% in 2025 has been already mentioned here by Jonas. But what is your view going forward?

Yes. So as Jonas said, we are remaining with that target of 10% by 2025. And we're moving from last year, 7%. So we're on that journey. But for a more longer term, our goal is to reach approximately 15% share of business and reaching 15% is not really us capturing the full addressable market of our installed base, but we also know we will never ever get 100% of it. We know that retailers are taking part of that value share, but we also know that in part of our markets, those out of warranty repairs will never be profitable enough for us to pursue.

And I'm sure the audience is eager to learn more on how we can get to those 10% in 2025. And I know you will take us through that now, Louise.

Absolutely. I'm happy to. So 7% last year, and we're targeting 10% share of business by 2025. Clearly, we will grow all of these aftermarket categories to make that happen. But the biggest opportunity to grow we see in the out warranty service area and also in the consumables and accessories. And growing our penetration into the out-of-warranty repairs will automatically, of course, grow our spares business as well. And selling that extended warranty is kind of preselling that out-of-warranty repair, so we get the consumer locked into our brand universe from the beginning. And today, we have an installed base of 350 million appliances, and that is major appliances only. And installed base means the appliances we have sold over a number of years and are still assessed to be up and running in consumer's home. And this is our addressable market. So to get those products registered and to capture the consumer data of the users of these appliances, that will be key to unlock growth. And if we take a regional perspective and look at our 4 business areas, we see that it's quite varying distribution of these aftermarket categories and the share they take of the total business by region. Starting with North America. We see that consumables and accessories is taking the biggest share of their aftermarket business, and that's primarily driven by the air and water filtration business. In Europe, we are more developed in the out of warranty repair and the extended warranty business. And I can say that in Latin America and APAC, EMEA, we are in generally not as developed in tapping into this aftermarket opportunity. So of course, cross fertilizing the learnings and best practices we have within the different categories to all the other regions is a big growth opportunity. If I now zoom into consumables and accessories, as you saw, that was one of our key growth levers. Here today, half of this business is consisting of consumables. And that's fundamentally very healthy because this is where we keep bringing those recurrent revenue streams in. And on the accessory side, our strategic focus is to grow the captive. The captive accessories are the accessories that are designed to fit specifically with our appliances. So this is where we have the brand, the differentiation and where we can really pull on our strength from a branded perspective to ensure that no one can really compete on the same grounds as we can to ensure that great experience, cooking or cleaning. Anna mentioned that it all starts with us knowing our consumers, understanding their needs, understanding their pain points and how to remove friction. So we always plan for the product lifetime and the consumer journey already from early R&D phases. And we do that to ensure captive fit and to ensure patented solutions. We know best how to guide our consumers to take care of their appliance to keep it running as long as possible. And the last key here to unlock the growth is to make it as simple as possible, effortless for consumers to really have what they need at the time they need to use it. So now let's look at an example of how we execute this strategy in this case in North America and in the category of food preservation. [Presentation]

The starting point in our innovation process is to understand the needs of the consumers during the entire consumer journey. When consumers buy an appliance, they are expecting more than just a product. They're expecting an experience from when they start looking at it, either online or at the retail, when they buy it, when they install it, when they use it. And even if it breaks, they expect a good experience. This means that we are looking at the aftermarket service in an integrated way in the process. And it all starts by understanding consumer needs, in order to do that, we conduct consumer research, including focus groups, in home observations, and we co-create with our target audience. We listen to their feedback and input in every single step of the development. And even after the launch, through connected appliances, we can establish an even stronger link with the consumers. And by using insights data and learnings from current usage, we can identify and prioritize the most critical needs and desires of our target audiences. A good example of how this works is our water filters, which is an important market for us in North America. We have a dedicated R&D team with a state-of-the-art laboratory working on ice making and trans-filtration solutions for our refrigerators. Well, it starts with understanding our consumers and North American consumers, they love their ice and water and our Frigidaire families, in particular, prioritize that healthy lifestyle for their families. And so they're looking for solutions that make healthier eating and drinking effortless and they trust Frigidaire so they want to make sure if they are buying a water filter it is going to fit in the refrigerate. It's going to keep running well. And importantly, it's going to taste good. We constantly work on our D2C e-commerce platform, our website, to make sure that we're optimizing for conversion and we recently ran a test where we gently reminded people the importance of buying a genuine filter, and we saw a 10% lift in our conversion rates when we did that. Our Frigidaire families are super busy. The last thing they're thinking about is changing a water filter. So we have to make it really easy for them. That light comes on the refrigerator. It tells them it's time for a new filter. And so there's a QR code right there that they can scan goes directly to the web page. They can reorder right then or they can sign up for a subscription to and just keep them coming. We also have e-mails that go out 6 months after you bought the product, also you can go directly on to our website, and you can go to the find my filter page. We get over 2 million views on our water filter pages annually. Also, e-commerce has been a big channel for us with that shipping and delivery. And so we now have over 0.25 million subscribers signed up for water filters that show up at their home every 6 months. So that been a huge factor in what's driving our incremental growth in this category. We've seen an average compound anniversary of 10% over the last 5 years, and it's really profitable growth. To be truly consumer-centric requires having the right process. And it all starts by understanding the consumer needs. When we do that well, then we don't just create the premium consumer experience but a profitable business.

So shifting gears now and moving into the addressable market at the end of the product life cycle. And that addressable market starts with the annual number of appliances that has a malfunction within a year. Some of those appliances that malfunction will unfortunately do so within the legal warranty period. And here is, of course, instrumental for us to take care of the consumer to help them in a timely manner to get back to perfect appliance use as soon as possible. That's again, building the brand. Then we also know that approximately 1/3 of the appliances will not be repaired, but they will instead be replaced. And this is a decision the consumer comes to based on what their perceived value of repairing is or cost of repairing is and also how all the appliances when the malfunction happens. But then we have the base of the volume that will be repaired. And here, 1/3 approximately will be repaired by the consumer themselves or someone in their family or close friendship, and 2/3 will be repaired of professional service engineer. In the do-it-yourself space, this is actually very important for us to take care of because here if we manage to be the go-to source for the consumer to learn how to self-solve and we can do that by growing our online content by ensuring that we produce how-to videos. But if we are the speaking partner to the consumer to help themselves solve then we can actually drive growth of our competitive spares. So spares that are not captive to our appliances, it could be supplied by someone else. But being the speaking partner with the consumer, we can drive those spare sales. We can also remain with the consumer if they fail in their self-service, we can either be there to help them book a service with us or eventually also look at the replacement product. In the professional service execution. We speak about Electrolux service. And this is where the consumer transacts directly with us and books a service through us. Execution of that service or repair can be executed by our own employed service technician, but it can also be executed by one of our strategic independent service provider partners. And as you see here, we have a moderate penetration into the installed base when it comes to out of warranty repairs. So this is why we see a strong growth opportunity. Independent of where and how the consumer service and repair journey unfolds, it always provides opportunities for us to leverage our aftermarket offerings. And that's why we see that this consumer direct relationship and access and communication is so important. We also know that consumers, in general, have a quite high awareness about the fact that branded manufacturers will provide this type of service. We also know that our competition is mainly our retail partners that also offer similar service, but it's also the smaller next door independent service providers. So for us to close the gap between our penetration rate today and maximizing the awareness that consumers already have is to continuously focus on search engine optimization to gain that Google share of voice and also to provide digital solutions online and to our call centers so that our call agents in a very smooth and seamless way can guide the consumer to repair. And I mentioned that we have quite moderate penetration into the installed market. Despite the low base, we're still seeing quite some growth here over the past 4 years as a group, we have had an average growth of 15% per year, and that's mainly derived from Europe. Europe, as you could see from the installed base represents 43% of our installed base, but it's representing 65% of our out of warranty services. So taking the learnings, the development of the portfolio that we have executed in Europe into the other regions will help us to speed up this growth. In order to grow out of warranty repairs, clearly, we need to have access to more service technicians. And we're going about this in a flexible manner, meaning it all starts with the knowledge about our installed base. So we run advanced installed base analytics to combine, of course, the number of sold appliances with the geographical location together with industry assessment of lifetime for each product category and our own quality data. Once we know that we have a density -- a certain density of our installed base that would be up for repairs within a given year, we can also plan to prepare ourselves with an expansion of our own service technician network. But where we know that the density is lower. This is where we will always contract or subcontract third-party providers or our strategic partners to execute on that repair while still having the consumer being able to book it directly with us. And now entry into spare parts. I already shared that this is providing the most value to us in the aftermarket space today. And we need to grow and protect the value of spares. And during that, it's also linked into the understanding of consumer behavior and this growing part of do-it-yourself, 1/3 of the repairs are being carried out by the consumers themselves, and we see this growing. So here, it's about us tapping in underpinning the value of genuine parts and ensuring that we can provide the guidance to the consumers. And then, of course, managing the different channels where we have wholesalers, we have the independent service providers, and we have our direct-to-consumer sales. And then when it comes to the profitability, you heard Jonas earlier talk about modularization and how important that is and how we are leveraging those investments. Modularization is also a key lever for us when it comes to spare parts as we have an evolving legislative environment here, and we need to keep those spares for a very long time to be able to optimize the spares portfolio is key to keep the profitability of the category. And of course, value-based pricing is another end of that protecting strategy we have, and we're rolling it out region by region. You heard Amy, my colleague, in North America in the film talking about how important it is for consumers to feel at ease and safe when they take care of their clients. And this was the case of the water filtration in North America, but we have seen overall in our D2C channel that gently reminding the consumers how important it is to use the genuine part that actually drives conversion. The fourth and last category that I wanted to deep dive a bit in extended warranties. We sell extended warranties in all the 4 regions today, even if we're just in the starting blocks in APAC, EMEA, but up until now, we've been selling them in upfront payments to the consumers with fixed time plans. So in this example, you see a fridge. And then in U.S., the consumer has the opportunity to choose either 1-, 3- or 5-year fixed time plan. Now the hurdle here for growth is, of course, that the 5-year time plan extend warranty agreement will come at the price of approximately 20% of the appliance purchase price. And that's quite some money for a consumer to put upfront in the case of an eventual breakdown of the appliance. So in Europe, we have launched a subscription-based offering where we have a care offering, which is allowing the consumer to subscribe a peace of mind, meaning they pay a lower monthly fee, and we take care of the appliance in case of breakdown and even replace it if it's not repairable. We have a second offering that we call repair and care. And that offering is in the event we didn't catch the consumer early on in the consumer journey, but we're actually there for them giving and executing a repair. We can give that repair to a fixed price and the consumer can pay it in 12 installments over a year and then continue at the lower monthly fee to have the same protection as the care offering. And I'm quite proud to say that we doubled number of subscribers in the first year of launch in this in Europe, and this is also something that we're now going to leverage for the rest of the group. So with this structured approach to how we develop our branded aftermarket portfolio, and by leveraging the learnings and the best practices that we already have from the different regions and then cross fertilize that to all the other regions. And together with the new globally integrated business approach we have under Consumer Direct interaction umbrella we can leverage our tech investments and even modernize the tech investment to design this digital consumer journey. And I feel confident that we have the building blocks and the direction to build towards this 10% share of business 2025 and even further onwards to the 15% on the longer term.

Thank you, Louise. And we are soon going to open up for questions on this topic, aftermarket and consumer direct interactions. But before that Anna, and how can -- what type of investments is required to accelerate consumer direct interactions and to create a successful aftermarket business.

Yes. We talked about the technology road map here. And of course, it is about our website so our web shops. But it's also about consumer identity, customer relationship management tools. We, of course, also see that to leverage the services, of course, we need to service technicians and also the last mile for delivery when it comes to our D2C offering. When it comes to the technology road map, we really see a big potential to leverage what we have already now for the rest of the BAs.

So do we have any questions for Anna and Louise on the topic aftermarket and consumer direct interactions. And I see we have a question from Gustav there. So we can have a microphone on the way, yes.

This is Gustav Hagéus with SEB. So regarding -- if you could clarify first, the 4x margin on the aftermarket business, what level that is on. And secondly, assuming that it's EBIT or something like that, that would -- and the 7% of sales being aftermarket now. That would mean that you would probably made roughly SEK 2 billion earnings last year on aftermarket. So more than twice of what your combined EBIT was? Is it your view that this was fully incremental? Or is there a shift from where you need to take less margins at the point of sale to leverage your aftermarket business later in that cycle?

So we see over a period of years that this 4x higher EBIT margin is materializing in a normalized year of profitability. And we do not necessarily see that the aftermarket opportunities compromises the initial margin. Of course, when we sell direct, we have occasions where we can bundle offerings. But basically, we are trying to address all consumers through product registration and actually take our fair value share of categories that are already being consumed today. So it's not so much about us changing our initial transaction or margin for our finished goods sales, but more tapping into this market as other players are now benefiting from.

And I will take one question here from our online audience. It's from Andre Kukhnin, Credit Suisse. And it's aftermarket target incorporate the largest move in out-of-warranty repairs and have you been adding engineered headcount or I assume then service technicians to deliver this? It's a question for you, Louise.

Yes. So that's an ongoing journey. And every time we look at opportunities link into the installed base data analytics, we are continuously recruiting service technicians or partnering up with partners that can execute. We know that there is a scarcity of this profession in certain countries and certain markets. So it's an ongoing quest. It's not that we decide now we open up a country and we employ a lot of service engineers. We do that in line with where we see the growth happening.

And we have time for one more question here, and we have from -- if we can get a microphone to the gentleman over there, yes.

It's Elliott from Bank of America. My question is, actually, what is your current conversion from sale to having customers registered? And how has that sort of developed over time? How do you see it going?

I don't have an exact number of conversion. So as I said, we are going about it in mainly 3 routes. One is direct sales to consumers and there it's automated, of course. We know what product it is. It doesn't mean it's registered, but we have the relevant knowledge for us to execute that relationship with the consumer having have them opt in. And then the second part is connected appliances where it's all sort of automated. When it comes to leveraging product registration on nonconnected appliances that have been sold through retail partners. We incentivizes and we know that it's only a small part of incentive that is required for them to register their product, but we are also very far from having all of the installed base register. So we are continuously working on how to improve conversion, when is the right moment to contact the consumers? And how do we make that a frequent kind of question in our call centers and by our call agents to ensure that whenever we have that inbound flow of communication from a consumer so that we make that automatic registration and create benefits for the consumer.

Thank you, Louise. And we will have a much longer Q&A session at the end of the event. So there is plenty of opportunities to ask questions to Louise and Anna on the aftermarket topic. And we will now take a break. So for the audience here in Stockholm, we have coffee and cake served here. And we see you back here sharp at 20 past the hour. Thank you. [Break]

A warm welcome back to Electrolux Capital Markets update. It's now time to focus on North America. And as we heard from Jonas earlier today, the importance of this business area to really meet our financial targets. We also know that this business area has not performed according to our own expectations nor our shareholders. So it's important that we bring back stability and return to profitability. And a few months ago, we appointed Ricardo Cons as new Head of Business Area North America. And Ricardo, he has a long and extensive experience from the appliance industry, most recently been the Head of the business area, Latin America, where during his leadership, the business area has successfully grown profitably and this in a volatile market. And I'm very glad to have Ricardo Cons with us today. Hi, Ricardo. So you have now been the Head of Business Area North America for a couple of months. And what's your reflections when it comes to creating stability in North America and returning to profitability.

Well, not pleased with the situation. It's not an easy one. My initial view starts with being more or less size related to having a too high cost in this moment. And this is positive because this is fully addressed by the turnaround program that we already initiated. The second point that I mentioned is the strategy, innovation and efficiency. This is the right one. We have the right foundations in North America to deliver. And I'm convinced that the foundations are in place and we will deliver to our targets. And the third and perhaps the most important part is people. We have a great team. Yes, we have had issues with the supply chain in balances during the pandemic ramping up production in particularly Anderson. But the team is strong, and I trust the team to deliver to everything that we'll discuss today.

And if we stay on the strategy, how is that paving wave them for profitable growth in North America?

Well, in our industry, like many others, competitive products, I mean, winning products are important. So our large investments in Anderson, Cold products, Springfield Cooking products are delivering those competitive products. And those 2 product categories, they respond to approximately 2/3 of North America revenue. And so coming back now to the 2 elements, I mean, innovation and efficiency. Innovation. In the time window of 2021 to end of '23, we will have renewed approximately 80% of our products in North America. And we will increase the share of sales of our higher and sub-brands fridge their gallery and professional. We'll come to more details on those brands. But it's also important to mention modularization, and we will bring a tangible application of modularization that can bring cost reduction in a faster way, we can deploy group technology through modularization, and we can also offer superior design and quality to our consumers. Now talking about efficiency, modularization also enables product development efficiency, less components. So this is also into sourcing and manufacturing. So all in all, lower cost and higher quality coming out of modularization and automation. But we'll have -- we'll see more during Carsten's presentation later today and how we apply those items in practice.

And you mentioned we are in the middle of executing on this turnaround program and also how important that program is. So how are you making sure that you gain the right traction from the measures you are taking?

Correct. Well, with the large investments well underway, we have to focus on cost. And we have structured the program in 7 interconnected work streams. 3 of them are commercial oriented, and they address the product lines. Food preservation, food preparation and care, fabric and dish care. So they go all the way from cost to distribution and branding. And then we have 3 work streams that are purely focused on cost, eliminated excess cost from our base. And there is 1 work stream that works on the processes, revamping some of our processes, for instance, integrated business planning. And our long supply chain is important to have demand sensing, and we are investing time and resources to revamp those processes. Important to say a few things about the turnaround program. One of them is about having clear targets and accountability. As we speak, we have over 900 initiatives identified and we'll work on those. And we'll talk more about how to get the stability through that turnaround program.

And we have a number loving audience here with us today. So can you share some light on how big this cost issue is?

Yes. Here we go. Well, the question here is can the North America get to stability and profitability near midterm. So let's cut to the chase and talk about that. So coming from a baseline that is 2022, we have 4 building blocks here, starting with 3 of them on cost. This is supply chain variable, manufacturing and structural costs. So those 3 buckets are in the turnaround, as we said before. And there is 1 commercial growth element here that is near term, a negative or unfavorable volume development that is driven by an unfavorable market development in North America this year. But positive mix, and this includes aftermarket and is net of marketing investments. Important to us to say that this -- in this assumption, we have price and direct material or raw material offset each other, okay? So we have a net commercial growth here that is mainly driven by mix, and we will elaborate more on that. Well, from near to midterm, we will then have both favorable volume and mix, and we will continue to aggregate aftermarket growth. And we continue to capture some cost favorabilities reaching 6% profitability midterm. Okay? So let me go more granular into the 3 main or the first building blocks that are related to cost. Supply chain variable is what is in there is about reducing premium freight and spot buys that we had to do during the pandemic. We have the privileged service level. So we had an extra cost here. Increased utilization and optimization of our distribution routes and the warehousing footprint. When we talk about variable costs, we have then production to match demand. And here, I repeat, is about integrated business planning. It is less tangible in terms of cost reduction, but it's important to stabilize the supply chain. Personnel, rightsizing and improved efficiency in both Anderson and Springfield sites. Structural cost is about completing transformation of both sites and leverage global organizations like R&D and marketing investments. So we'll go deeper into those cost reduction initiatives. And to do that, I turn back to you again.

Thank you, Ricardo. Well, it's clear how important the new 2 factors, Springfield and Anderson are for the North American competitiveness. And it's great then to have our Group Operations Officer, Carsten Franke, with us today. Carsten has spent more or less his entire professional career within operations. The last 2 years as Group Operations Officer and before that, in business area, Europe. So hi, Carsten, and you -- it would be interesting to hear more about your reflections for the last 2 years because it's been an intense period, I know.

So first of all, good to be here. And as you heard before from my colleagues from Jonas, Ricardo, it has been a volatile period with pandemic, resulting in big swings in both -- in the demand side. So we saw the big market swings coming up 2021 until 2022, and then the market decline in middle of the last year, but also on the supply side with electronic shortages, with the logistics constraints, the port contest that we've seen in North America. And in all the things in operation, we have to operate in. And we're doing it in a best possible way at this point of time. However, being in this position for almost 2 years, I'm quite convinced with these investments we have taken now under my leadership to really strengthen the group function, the group operations becoming much more integrated between group and also between the business areas and the investment we're taking in the modernization we talked about this, automation, digitization that this is the right way to do.

And both Anderson and Springfield, we have invested in over the last couple of years. They are highly automated, highly modernized. And we take you virtually to these great and important factories. So you see the films here running in the back. But, Carsten, how can we really leverage group scale when it comes to investments like these?

So first of all, this kind of investment we're doing there in North America, in the Springfield, we're not doing it only in principally in the North America. We're doing the same with new technologies, new products, high degree of digitalization and automation. We're doing that on the globe. We have done it successfully in Latin America or it's in Europe, we are successfully implementing a new product range as well. So this is fundamental at this point of time. And all these investments are consequence of what we discussed before. As operations, you need to have the capability and the ability to response to the market changes very fast, but also to the supply chain constraints. And they are not over yet, even if you see the stabilization, and you have to respond in the way with scale, with better quality to the market with the speed to innovation, but also with a faster time to market. And this is what those kind of investments helping us very much here. And on top of this, what we are doing is we are strengthening and leverage our group competence and skills, here. So really getting our colleagues from R&D, quality, purchasing, manufacturing, engineering together right from the beginning to work together on the development working on the modularity, working on standardized processes, making sure that those ones also clearly implemented into the factories and they have the full accountability until it takes over. So it is a big change, we have done over the last 2 years. And on top of this, with all these information investments we are taking here, we also have a reduced supplier base. Both for components, but also for equipment suppliers. That gives us scale on the one hand, but it also gives us a lot of opportunities to reduce the risks in the supply chain, mitigate those risks we're seeing here and there. So there are a lot of good things we have accomplished now in these days as well.

And we have had our fair share of hiccups when it comes to the Anderson ramp-up. So how are we applying those lessons learned on to Springfield?

We said it several times today, and it's clear we are not happy with the performance and the ramp-up of Anderson, they're not performing according to our plans here. But what I can share with you, we are stabilized now. The factory -- they are -- the factory is in a good shape at this point of time, and they are delivering according to the latest plans. And if we really take the learnings out of Anderson, what we are applying also in Springfield, because we started a little bit later, and Springfield in the ramp-up, but also in the other transformation programs are 2 of those. One is you need to have the capability, the skills of the blue colors, white colors right from the beginning, and you have to train them all the time. And there, we have seen that we lost a lot of capabilities and skills in Anderson at the beginning. Secondly, and I think Ricardo mentioned as well, you need to have a really rigorously strong government process when you ramp up products and a factory. And another important thing, you need to have the disciplined execution. What I was a little missing in North America, the discipline of execution is fundamental as well to be successful.

And I'm sure the audience is eager to learn more about how we can significantly cut cost and leverage modernization.

Absolutely, yes. Good. So let me invite you to have a more deeper dive into the North American operations where we are at this point of time. I would like to start with the footprint. So what we have done over the last couple of years, we have consolidated the footprint in North America to 5 factories. Latest, we closed the Memphis facility, the cooker factories middle of the last year, and we consolidated into Springfield. And what we have done now and what you see now that we have rightsized the capacity of the factories between 1 million and 3 million for the North American business at this point of time. Another important point, you heard about this from Jonas and Ricardo, the importance of modernization. What I can confirm to you that we have significantly improved the modernization in North America. In our Springfield Cooker factories at the end of this transformation by end of this year, beginning of next year. We have principal every platform on the modularization. On the reiteration, we have the Anderson factory already on modernization 100%. And we still have our also very competitive footprint in Juarez with multi-door and side-by-side production. And we have invested also here recently in Juarez operations to make those products more competitive. I would like to dig a little bit more in Anderson and Springfield because these you might interested on. So looking at the glance at Anderson at this point of time. So -- has been completed with all the ramp-up by quarter 4, 2021. Investment around $250 million. We took the advantage also to reduce the product variance level significantly by 75%. And this also gives you, at the end of the day with investment, a big opportunity to have an automation level up to 30%. And this is in line with what we see in all the other factors as well around the globe. In Springfield, similar situation, similar investment. Here also, we have the different platforms. Also, we have reduced significant the product variances by more than 70%. The difference to Anderson is that we are still in a ramp-up phase. So we already launched 2 platforms which is wall oven and the front control cooker factory. And we are now in 2023. And these days, we are launching now the rear control. So everything of those launches will be completed by end of the year, beginning of the next year, they will be in the market. Now, we talked a lot about the cost and how important the cost structure is to achieve the profitable growth in North America. Here put together a slide, it's the same then for Springfield later on to make a comparison of the product cost, 2022, the cost. And the target cost we need to have when we achieve the profitable growth mentioned by Ricardo. So here is divided into 2, 3 pockets. We have the diet material, which is the biggest share of the product cost. We have the supply chain cost. Supply chain cost is the warehousing costs, the inbound transportation cost to get the material into the factory from North America, from overseas, and it's also the finished goods transportation and warehousing to get those products to the consumers and customers. And the third bucket, we have the production cost where the cost is mainly related to the labor cost and the scrap cost. And what you see here as well is significant. We have to improve those ones compared to 2022. What we positive can mention that on the diet material, we're already there with the cost. So the bill of material fits very well to our cost structure. And for sure, over the time, we do our contingency cost out to be further better material cost over the time. So supply chain costs mentioned also by Jonas, those are costs that have been accommodated over the last 1 or 2 years because of the global supply chain constraints in Electronic in Logistics, I mentioned it before. And these are costs we're taking significantly down. So we are already here at this time, much lower than in 2022 or the primary cost because we had to fly in material from overseas to keep the production running. It's already on 0 at this point of time. The transportation costs have been reduced. And what we're doing now is to optimizing also our footprint in particular on the finished goods warehouses to be quicker and better serving the customers. Then on the production cost. This is a big hit deck we had over the last couple of years. Main reason for this one, as I mentioned before, is we had -- when we ramp up a factory, high fluctuation of people during the pandemic, not having the right skills of people, especially engineering, maintenance people. They left also at that time. We had delays of our equipment suppliers because a majority of the equipment coming came from Europe. So it's very, very difficult to get to doing the pandemic, get those equipment in. We also had delays and issues as well, and we had also underperforming suppliers. All this combined with the pandemic and the dynamic in the market is center, this caused this extremely high underperformance of Anderson. But as said before, we're operating since a couple of months very well, very stable. And we ticked a lot of those boxes, structurally, my team is over there. And we always have the team fully upscaled. The fluctuation has come to a normal level. And now we are in a continuous improvement process to get the productivity out, reducing the scrap cost, but also the efficiencies of the equipment is in a good way at this point of time. And just to give an example of this, today, in these days, we're producing that factors with 8 shift what we have produced with 12 shift 1 year before. So a significant improvement over the time, and we're also accelerating these kind of improvements in this state. So I'm feeling quite confident that we're hitting also the near target and getting this continuous improvement on the productivity. Springfield, you see a similar structure, cost structure. Also the material content is good, is fine, doing the activities. Supply chain same situation, accumulate a lot of costs, not as big as for Anderson because we started late and at Anderson and refrigerate is much more bulky products inside. And then if you look at the production variable cost, where we have to take a big change out over the next time. But this is related that this factory is still in the ramp-up at this point of time. Means we're ramping up the assembly lines. We are ramping up technology area, means extra training, extra workload. So we are not efficient at this point of time. But once the factory is fully running by end of the year and beginning of next year, we also get principally the efficiency back to the normal level. So this is about the cost structure and the improvement activities we are running here in both factories, Anderson and Springfield. And as I'm quite confident that we are achieving those near-term costs, but also, I'm confident that we have a competitive cost structure. And here, I put something together to make a comparison with our competition. In North America, there are 2 parameters is the total weight of a product but also the total number of parts we have in those products, and we have significantly improved with the new product structure. And this gives a lot of confidence because lower weight, lower part numbers means also that we are more efficient, have less direct material cost. And this is a good way to see it also compared to our competition. Now I would like to talk a little bit more on modularization. And I want to ask you a question, do you like Lego, these Lego bricks. I like them very much because I do have them at home, still at home. And the Lego bricks is a very good explanation how it works. And here is an example from the modularization about our cooker modularization. And you see like Lego bricks, we can build whatever we want as a plug-and-play. And here you see freestanding products based on the same structure like built-in products for electric and gas. And this gives scale, especially in the time to market once the first products are defined and the interface are defined and to give you a little bit direction to a time to market, you can save 30% of the time compared to normal development need as well. And the good thing is we are the only player in North America that offers this kind of architecture for both built-in and freestanding gas and electric. So very exciting, very good. And we also have proof points in winning innovation. And we talked about this before, Jonas, mentioned before, we see very good feedback from our customers, well perceived, not only compared to the previous products. But also compared to our competitors. And here, you see principally the very, very good results we received so far for those product categories from Anderson and Springfield. And this is fantastic and great to see at this point of time. And last, before I hand back to Sophie. There is an exciting year 2023 coming. We are middle in, it's coming this year, and we have many, many launches in the cooker categories. And those launches are also including great features like steam baking and steam cleaning. I'm really happy to see those things also into the market coming up over this year. And with this, I really would like to thank you, and I would like to hand back to Sophie.

Thank you, Carsten. And Ricardo mentioned the importance on staying with our strategy when it comes to innovation and efficiency. And now we have heard from Carsten, a lot when it comes to efficiency. So let's look at the other arm of our strategy, innovation. It's great to welcome Ricardo back on stage.

Thank you, Sophie. And we have now that we discussed a little bit more the efficiency part and the cost. We have some other questions to answer. And I will talk about innovation in a minute. And the first question I want to discuss with you is about North America, the attractiveness of the market itself. Some numbers here. Well, we'll have some figures from the last decade where the U.S. market was the main engine for global value growth for appliances in general. So the U.S. market is the growth engine, and we expect it to continue to be the growth engine in the future. And if you take both markets, Canada and U.S., they are top 5 in the following metric. The appliances spend per household. So we are talking about 2 elements here, growth and high-value spend per household. So this is a very important element. The next one is about now looking ahead is about leading indicators. The first one is about housing starts at the green line on the chart. So housing starts, very solid growth since 2010, a spike during the pandemic now a slowdown mainly reflecting higher interest rates. But there is another element that is also a leading indicator to us, which is remodeled. So I mean home improvement in general is a very important business and it shows that we'll continue to have attractive market in North America. Now there is another question about our ability to become stable and profitable, is about our brands. Is Frigidaire brand strong enough to sustain our product offer in the future. So let's discuss that question for a moment. And I'll start with the positioning of our portfolio of brands in North America, where we have Frigidaire there as the base brand, addressing more conservative and modern type of consumer in different price indexes, then we have Fridigaire Gallery and Fridigaire Professional going up in the price index scale. Electrolux is addressing a more progressive consumer at higher price points. So this conservative modern consumer segment is very relevant in North America. And if we check then our ability to mix up from base Frigidaire to the sub-brands, Gallery and Professional, we see that from 2019 until these days, we've been able to increase the share of those higher-end brands. And if we take a comparable cargo products, when we go from the base brand to Gallery, we increased the average selling pricing 50%. If you go to Professional, increased by 90% and Electrolux by 180%. So this is the actual growth of our higher-end brands in the recent past. And now let's take that same perspective, but looking products because the products are sustaining the brand positioning. And to explain this chart, I will focus on one of the categories cooking, for example, where we have in the base of the chart, the freestanding rear control ranges. So you see in the bars, this is the breakdown of sales. When we go up from a rear control unit to a freestanding front control unit, the prices go up by 60% average selling price. And if we go to Wall Ovens, the price goes up compared to the baseline 150%. And you have also the track record of the recent years of our progression from growing the higher-priced categories. And if I now go back to the other categories, we've been able to do so across product lines, increasing; for instance, in food preservation, multidoors and tall twins; in laundry, growing front-loading and laundry centers over top loads and growing stainless steel tub and dish care over plastic tub. So you can see across the board that we've been able to initiate that mix into higher price categories. But this is a comparison of our higher-priced products against our base products. What if we compare those higher priced units to competition? What's our performance? So I brought what is -- what we call internally, the focus having categories that are the ones building higher price points in the previous chart to competition. We've been able to gain market share last year across the board. This is measured in basis points. And we have here a list of products that have significantly higher gross margin compared to the rest of the business. Okay? So we can see the bars to our right, that we've been able to grow in the recent years, significantly in those categories, whereas we maintain the rest of the business relatively stable, which is also important because of scale -- manufacturing scale and also to have access to distribution. So the next conversation here is about portfolio vitality. We said in the beginning that in the time window that will end this year, we'll have renewed nearly 80% of our product offer in North America. And well, we'll end up with the strongest portfolio vitality in the market. Of course, there is a question about that, new products are not necessarily performing. So I'd like to share with you some examples of execution of recently launched products. And I'll start with multi-door refrigerators. I will focus on the left upper part here, where we have the consumer insight testing during the product development phase, we take our concepts, design, features and compared to the strongest competitor, and we adjust until we have the right product to go to market. In case of multidoors, we reached 70% target consumer preference before we launch the product towards end of 2021. Then I move to the right-hand side of the chart that shows our market share progression in that segment. And even more important is the information at the bottom that is the consumer star rating where we compare what the consumers are telling us about our product compared to competition. So Frigidaire products today are best-in-class from that angle with 4.6 star rating multidoor. So I can share also another category with you, which is Wall Ovens. Same metrics when we talk about the consumer insight testing during the product development phase, we reached 57% for testing against the 3 strongest competitors. If we normalize the market share curve, we see that we start to gain traction in terms of market share in the recent quarters. And about consumer star rating the same best-in-class product with Frigidaire Gallery brand. With that said, I'd like to emphasize the importance of product innovation. But there is also a powerful element here that the ability to combine high consumer preference with modularized products and more competitive cost. With that said, I would like to refer back to our bridge. We said in the beginning that we will talk more in detail about the 3 cost building blocks as we did. And in these last few charts, we discussed our ability to generate commercial growth and this is based on mixing up to higher price points but also defend our core products with more competitive cost. And with that, I would like to say that, yes, and I'll repeat what I said in the beginning, I'm confident that we have a solid turnaround plan in place. We have the right strategy and we are delivering competitive and superior products. And I trust the team we have in North America behind execution to deliver to those commitments. Okay. With that said, I'd like to hand it back to you, Sophie.

Thank you, Ricardo. And we are about to open up for questions, so all speakers will join me and Ricardo on stage here. But let's start with a question here, Ricardo, on the topic you just talked about. And you have been with the group for quite some time now. And can you share some light on how we are leveraging these consumer preference testing you touched upon?

Correct. Well, if you allow me, I will go back and make reference to these slides because the process, and I'm focusing on the consumer preference testing is a process that the group masters. We know how to do this. And I can refer to my previous experience in Latin America, where we consistently apply that kind of process throughout the year. So even more important than branding is what we are able to deliver in the product itself. Because today is sure that the consumers will prefer to hear from other consumers, how they like our products instead of hearing that from ourselves. And so a superior product offer will deliver that. So mastering and I'll refer to the process a little bit is to identify, first of all, the target consumer segment. And then we test what are the main attributes and then we test and retest, we have to prototype, we have to test design fit fill finish. And then it's not an easy process to end up with a preferred product. But that consistency is driving preference and driving preference with high quality will lead to superior consumer star rating.

And we talked a lot about consumer star rating. And why is this so important?

Yes. Well, we are basically talking about those ratings and reviews that we've seen in the websites when we check to buy something for us -- for ourselves as consumers, right? And it is important because of that because people will refer more to their friends and family or to other consumers to say, well, I can trust that product because people tell this is a reliable product or brand. So that changed a little bit in marketing equation we had some time ago, it's about investing heavily on brands, which is still very important, but it's also very important to refer to the experience we give with our products and services to the consumer so that we can have a superior consumer star rating to generate loyalty. So basically, this is what we're talking about. But to your question, consumer star rating as an indicator to us is simply the ratings and reviews that people give to our products online.

Thank you, Ricardo. And now let's open up for questions, and I see all speakers have joined us on stage here. And may I just -- we will have questions from the audience here in Stockholm as well as from the audience virtually so please keep sending those questions in. And I will start with one question here to you, Jonas. It's from David MacGregor at Longbow Research. And it's about, if you can hit that SEK 4 billion and SEK 7 billion savings and productivity targets on your current North American unit volumes? Or do these targets depends on winning back some portion of your previously full-weighted share?

So first of all, we've guided for a negative market development in North America in '23 as well as globally. So we're assuming that lower market volume. And by the way, during the second half of 2022, we gained market share already then. So market share is not the main challenge, and that's not the core assumption here. It's about basically the guidance that we've given and a strong reversal, first of all, of the excess cost that we've -- the we've accumulated and then getting these new factories to really deliver with the productivity that they're signed for, and that's what we're doing.

So do we have questions here? Yes, we have one Christer Magnergard, I see. We have a microphone coming up, sir.

Christer Magnergard from DNB. Firstly, question on let's say the cost structure in Anderson and Springfield. You compare that with 2022, yes. Is suppose to compare the cost structure you're targeting with like 2019 or before you had all these issues because '22 was an exceptional year? You'll take it up?

Yes. So you'll recall that when we launched these big transformation programs, we were targeting to get over SEK 3 billion of cost productivity globally from these investments. And that fundamental performance of these factories and these new product architecture is still there. It's just that with those huge fluctuations and volatility we've seen in cost, it became almost impossible to rebaseline to those prior targets. So that's why we said, okay, we're reversing the cost inefficiencies that we've had, and we're delivering on the full potential of these new factories. So you can say, yes, that's included in those assumptions that we put in place at the beginning of this journey.

And then the second question relates to the shift we have seen when it comes to consumer spending over the past years, where -- when money was free, where everyone started to buy more expensive products and start to move up in the value chain to mass premium products. Given that things have changed, do you still see that kind of trend shifts that you talked about? Or have things changed already now?

Yes, it changed slightly already now like if you take side-by-side they gained relative share in the recent months. So just supporting your point. But our market share in higher price categories is still -- we still have room to grow. Even if there is a change or a temporary change in that trend. But I agree with you recently, we have seen that effect. But. I have to say, not as much as you could, and I think that's driven by the -- what you pointed to, that the remodeling of existing houses is actually accelerating, if anything. So I think this is an important fact because typically, when you remodel you upgrade, when you buy -- when somebody is constructing a new home, yes, there could be any kind of market position. So yes, and home improvement or remodeling is supported by an aging population that is willing to spend more with that in that area, I mean, home improvement. And so that's -- we have a lot of data around that shift. And so the aging population will support that remodeling in that sense. So there is opportunity and higher priced categories will still be an opportunity.

And we have a question there. If we can have a microphone. It's on its way.

It's Martin Wilkie from Citi. A couple of questions. The first just on market share. You -- again, you've been talking about gaining share in these focus saving appliances. When we look at some of the external data, it's not so obvious to see that. Has it been supply chain led and it's really a temporary feature if there has been some categories where you've lost share? Or are there categories that are perhaps not the focus saving you talked about whether be a deliberate loss of share to improve the mix?

Yes. There is some loss of market share more related to our product availability during the last 2 years than any other factor. And that is correct. There is an erosion -- market share erosion in base categories and your assumption is correct.

Yes. It's true, especially as we switched over from St. Cloud to Anderson, we lost a fair amount of share in base upstanding upright refrigerators. And also as we ramped up the new top mount refrigerator factory because of supply issues, we lost a little bit of share there. These are relatively speaking, lower value categories. So -- and the fact that we're gaining share then in the higher-priced categories, lower volumes than what we're losing, but the net gain is value creating.

Can I take a second question just on -- you've talked about modularization and you talked about components per appliance being better than the competition and the weight and so forth. Obviously, in some categories, you're a lot smaller and therefore, you might not have a scale advantage of some other competitors. Does that matter? Or is it really the modularization and the sort of simpler manufacturing is more important than simply size?

I would say that's the question -- Carsten, do you want to take that?

Well, I don't know if I stand correctly. Your answer at the end of the day is what we are modeling the full range, yes. Complete -- globally, yes, the full range. Independent of smaller, not smaller categories. we have the opportunity, what we talked about. We are around 50%, 60% on the way. maximum, we can do around 70% of modularization. If you look at the global product portfolio, there's the remaining 20% or 30% of products. We're not putting on this global modularity, but still, they are there in the market, and we do our principle, our improvement activities as well, yes. I don't know, 100% if this answered your question.

I think that's true. I think there are 2 parameters that are relevant here, even though you're right that in certain categories in North America, other competitors have had more scale. But 2 things. One, the factories themselves are -- have the critical scale, right? So we've reduced the 5 sites with high potential productivity. We're about to deliver on that. And we have this global modularized product architecture that allows us to sourcing and product development efficiency based on our global scale. And our global scale is highly relevant in the industry, especially given some recent changes. So I think we're overcoming some of those, let's say, call it, subsegment challenges that we might have had, certainly historically in North America in terms of scale.

And let's take a question from our online audience here. It's from Ben Poster, Lodbrok Capital. And it's for you, Louise. It's, how do you expect extended warranty to change as a percentage of aftermarket sales by 2025 or longer term? And the second question to that is, are the higher, lower margin than the average of aftermarket sales and roughly what proportion of the total aftermarket EBIT is from extended warranties today? And I can say, we don't give that much details, but we can shed some light.

Yes, sure. So you saw the bridge, right, where I showed and presented that all the form aftermarket categories will bring the growth 2% to 10%. And one of the important building blocks is extended warranty. It's not the one that contributes the most to the growth but is still there. And I can say that it has a higher than average profit margin out of the 4 aftermarket categories, but I can't detail the exact level for 2025.

And I believe we have a question from Johan Eliason there. We have a microphone on the way.

Johan Eliason, Kepler Cheuvreux. Question regarding the aftermarket. You have this target to go from 7% of sales to 15% of sales. And that obviously implies a lot of investments. You've been really careful about saying investments in technicians, et cetera, that's obviously needed. But are you considering some M&A in this area? I remember you did buy business in France a few years ago, for example. Would that be part of this 15% target level? Or do you think you can sort of do it organically all the way up to that number?

Good question. We have investments to be able to grow the business clearly. And it's, I would say, even more in the tech side of creating this consumer digital journey. And that has already started a couple of years ago in Europe. So let's say we're halfway through that investment phase. Speaking particularly about service technicians and how we grow that capacity, as I said during the presentation, it boils down to the installed base analytics and our ability to operate efficiently with our own employed service technicians. And dependent on market and we're reviewing market by market, there might be strategic reasons why an M&A would be more suitable to grow that capacity then to grow it organically or through partners. So that is part of the mix and what we'll review going forward. But it's not one strategy we call M&A or we don't. We have to review that country by country even.

And then 15% level, is that something you see in the industry? Is there a peer that has this level of aftermarket already today?

So we don't have exact data of our industry peers. But if I compare it to both kind of automotive industry and also the professional appliance industry. And combining that with price level of our appliances to consumers and their considerations of repairing or replacement. I see that 15% is a reasonable but stretched target for us as a business to pursue.

Okay. I was just wanting to ask a little bit about this moving up the price points as well. I remember when you bought back the Electrolux brand and introduced it in North America. You talked about this premium segment would have price points maybe 200 percentage points higher, but they would have sort of margins that would be triple your premium? Is that sort of deleverage still today?

Do you want to take that?

Yes. We won't go into detailed margin bridges here. But suffice it to say that, yes, I mean, on the gross margin level, they're quite significantly higher. And then, of course, on the operating it's even more of a significant difference. So the -- you saw, of course, the bridges that we've shown both in my presentation and in yours. It's driven by that. It's driven by mixing up, selling more of the higher branded products and those more premium categories per se. It goes a lot hand-in-hand these two.

It's the brand position combined with the product offer that builds that positioning, as we said. And I wanted to emphasize the product offer because of that. It's not necessarily brand investment, but is the product itself that will sustain the price positioning of some categories.

And we have a question here from Andre Kukhnin, Credit Suisse. And I think, Anna, this is suitable for this discussion. So mix where brand is, of course, impacting that in the EBIT bridge. Can we expect a continuous SEK 1 billion that Jonas talked about here per annum contribution also going forward? Is there a scope for an acceleration?

Yes, of course, we want to continue with a good mix performance. And I think the product vitality, as we showed here for the group is [indiscernible] sending a message that mix will continue to be to be strong even though we don't give exact guidance on any numbers specifically on mix. Then of course, we talked about the acceleration in the aftermarket growth and the structured approach we take now in the near term. So adding on to that mix potential.

We have a question from Bjorn Enarson. We have a microphone coming there. Thank you.

Danske Bank. A question on -- you talked about your near-term guidance outlook here. And as I understood it you are not expecting material market share gains and you have some price erosions and negative volumes. Looking at volumes in Q4, how much of that would you say were inventories productions among your clients? And how much of that was demand or end user demand? And how do you see that now looking ahead? And then looking forward, is it then savings primarily that would take you to you near-term guidance and your midterm guidance eventually?

Yes. So I think we showed -- Ricardo showed the pieces there on the -- specifically on the North America turnaround. So the biggest part also in the near term is cost. But there's some part of commercial growth, again, mix driven by mix since price and volume is not really a near-term contributor. On the total group perspective and looking at the second half of last year, we clearly saw a fair amount of destocking among retailers, both in North America and in Europe in particular. And we haven't broken up exactly what is what. But it was a meaningful part, especially towards the end of Q4 of the sales development. I think we indicated, and I think that's true that most of that dealer-retailer destocking is done or was done by the end of Q4 for the most part, globally. And so the guidance that we're giving is effectively that the run rate that we saw in demand in the latter part of last year, retail demand is continuing into the first half and also the foreseeable future into the second half. We're not seeing any significant additional run rate step down in North America and in Europe, in particular, which is the biggest market. Then, of course, we have some markets that are just more volatile inherently like in Latin America, where we had already seen very depressed levels. And hopefully, that can -- they can come back a little bit. But again, the year-over-year numbers make it difficult to point to growth in the full year. But from a run rate perspective, our emerging markets are a little bit more volatile, of course.

And then restoring profitability outside North America near term? Is that also saving lot of [indiscernible]?

Yes, it's 2 things. One is that, again, we have built up the significant inefficiencies globally. North America by far, the most it, but globally. So we're recovering those spot buys, premium freight, high logistic costs in general, inefficient staffing of our factories. So that we are working through relatively rapidly, I would say now because it was -- it's less, I should say, less endemic, less structural than it has been in Europe where we're ramping up this -- in North America, they were ramping up these new factories. So that's a relatively quick one. And then, in particular, in Europe, we had an extended period of time where we were really suffering from component shortages, especially impacting our more premium, more electronic intensive product ranges. So as that is now cycling through and coming through with much better availability, we have the opportunity to recover some of that lost volume at premium -- in premium categories and premium price point in Europe. So those are the big elements that we see right now.

And then the risk of mixing down now when we see the consumers where they are -- or where we expect them to go, at least, isn't that a big risk in Europe?

No, I think it's clear the market is mixing down a little bit, both in Europe and in North America. And maybe, Anna, you want to comment a bit more on that. But we were hit more, let's say, in the premium end of the market particularly in the first 3 quarters of last year in Europe and just the ability to now supply and recover that position, which we don't see any significant challenges in recovering that more than compensates for that relative mixing down in the market.

I would like to add to that also. We see some components of that consumers mixing that down. But we also see, especially in Europe, is that consumers are also actually mixing up. So it's a polarized market, you can say. And consumers, for example, on the back of the high energy prices want to go for those more sustainable, higher end product. So there is a somewhat polarization you can see in Europe.

There's one element that I think some of us have talked about this over the years that if you think about the appliance population out there of appliance buyers, you basically have the lower end of the market, which is generally speaking, renters. And there, you have more of a let's say, a wear and tear based replacement cycle. So the -- so even if you're, let's say, a lower income consumer, when appliance breaks down, it gets replaced as part of your rental contract. And the higher-end products are typically bought by consumers that have more discretionary income and are less impacted by, for example, energy inflation, food price inflation and so on. So it's a smaller part of their disposable income. So I think this is part of the reason why we're not experiencing as significant mix down as you might expect.

And let's go to a question from James Moore at Redburn. And I believe this is a question for you, Jonas. Can you give the time frame for the 6% margin? Can we assume that you aim to be at a greater than 6% margin in full year 2024 when the SEK 7 billion savings have come through.?

No, I think the SEK 7 billion, given the outlook that Ricardo mentioned for the near term, it's not going to be enough to get us to 6% run rate by '24. Based on what we're seeing now, the market can recover more quickly and a lot of things can happen. But that's not the baseline. We're not -- I'm not going to give any specific guidance for 2024. But not that far after that, right? We're talking about midterm, we're talking about a few years given the pipeline of both cost savings that we've talked about and accelerating aftermarket growth and a very fresh product lineup, it's not far after that, that we should be able to deliver at that 6% level.

I see we have a question from Gustav.

Just to check, you referenced 3,800 reductions in employees. Can you give us what's the incremental number? Because I recall you had like a 4-digit number also with the reengineering program. Is this a net?

This is -- well, no, I don't think we gave a number back then, but I can't remember, but the 3,800 is exactly what we announced in December in the restructuring program. And then on top of that, we have an additional 1,900 contractors and consultants, short-term temporary employees that we're reducing as well.

So none of these were included in the reengineering program that you guided for a few years back?

As I said, the complexity of the ups and downs here make it very difficult to track back, but of course, we have already reduced the number of employees as we reduced the number of factories back in time. So that's already partially past us. And now this is the incremental from now going forward.

Okay. And then I think you referenced also in the press release that you're going to optimize R&D. I think you're running now at almost 4% of sales. Can you give us a rough ambition on where we will be at in a few years?

Yes. I think based on the new structure that we have, the fact that we are pretty much done with the modularization investments and engineering, we can marginally kind of flatten out that level of spend and also CapEx investment. And we need to do that. We need to reduce that sort of core engineering to invest a bit more in the digital -- in digital engineering and also the growing our aftermarket capability. So it's kind of a rebalancing there, net-net, a small reduction, but quite significant in the modularization part increases in the digital part, net a small reduction.

Do we have more questions? Yes, over there?

Yes. It's Akash here from JPMorgan. I have a few questions as well. The first one is on North American supply chain. So Jonas, you said you got hit in 2018, '19 by these tariffs. So can you provide an update on where do we stand on supply chain diversification? And I guess you also had some extra costs during pandemic. So where do we stand? What steps have you taken in terms of bringing supply chain more online. So maybe if you can elaborate on that?

Yes. I'll give it to Carsten maybe and I can fill in as well.

So what I see today [indiscernible] looking over the last 2 years at this point of time, I think from a supply chain perspective, we are greatly stabilizing now, yes. We have seen some hiccups over there, for sure, during the pandemic, I said underperforming on supplier base. So here we are. I don't see a big difference in our principal to others as well, the congestion of the port. I think what we're doing together now with Ricardo especially on the sales side to optimize our footprint when it comes to the warehouses, to the RDCs, how we distribute our consumers and customers, where we have a couple of them. I think this is also what we mentioned. This is now the next focus on it that we're really making sure that we're able to deliver all the different regions in North America in the right time and how we are feeding those warehouses for finished goods to this. But from a supply chain perspective, from an inbound perspective, I think here, we are quite leveraged at this point of time. We have done a good job over the last time.

So referring specifically to the tariffs back then, it was before you had -- your current role is that we're quite heavy in sourcing on air care products, microwave ovens, some refrigeration products that were hit heavily by the tariffs at the time. That rendered a significant part, specifically of that air care business unprofitable, and we have mixed out almost. So that's now a fairly small part of our North American business, and we're mainly targeting more niche segments in air care following that. There used to be a big and actually a very profitable business for us, which is not longer delivering there. On the microwave oven, those go a lot with the ranges, right? We have this over the range microwave. So there, we've been able to defend the position reasonably well. But a lot of the other categories that were hit by tariffs and also a number of components, we've gradually shifted the sourcing in a way from China just for cost reasons to Southeast Asia and Mexico. So right now, I wouldn't say that for cost reasons, we have anything that we need to address in terms of our sourcing footprint. However, from a let's call it, geopolitical mix risk management. We're making sure that we have more double sourcing and more near-shoring of critical components going forward.

And second is on product cycle. I think you elaborated that you are almost renewing your entire product line in North America as well. Do you know where competition sits because my worry is that you are renewing right now. So probably you have some scope to gain share. And let's say, 6, 12 months down the line, if your competitors do the same. Is there any risk that some of the market share might change in the future?

Right. So I think the topic is not so much that we have a fresh lineup because we always have to have a fresh lineup. The topic is we didn't before. And so now we're kind of level setting our offer versus what we expect to see from competition. So yes, we've made this massive let's say, surge in investment to catch up. We have to keep investing, of course, we have to keep our products fresh, and that's what we're doing. I mentioned the example of Europe, where we were already on these modularized product architectures. Now we're rolling out the next generation of products across, and we will do that, of course, in North America as well. So this is not a one-off game where you're kind of riding on this catch-up, it's a continuous gain. Why -- the reason why we feel confident is, number one is we're going from a bad space to a really competitive space, and we expect to continue to do that. But the other piece is what you mentioned, which is that the market is continuing to premiumize structurally, okay? We have interest rates going up and down and housing construction. But structurally, people around the world. I'm not just talking about North America, but around the world, people are spending more money on their homes, particularly on their kitchens. And this is a trend that we've seen for the last 15, 20 years, and we don't expect that to go down. And it's driven to a significant extent, as you mentioned, by consumers that have a lot of discretionary wealth and income. In many cases, empty nesters that are reinvesting in their home. Another just is more of an anecdote is that you can see that the number of house transactions. So sales of existing houses in North America has gone down because of the higher interest rates. Sort of from a -- conversely, that has an impact on the intent to remodel in your existing home because quite often, you have a home with a fairly low mortgage rate, maybe a 30-year mortgage in the U.S. You wanted to move. But if you move, you get this double mortgage rate. So instead, you're investing in the home that you're sitting in. And that's why we're seeing that continued positive curve on remodeling. I don't know if you want to add on...

Yes. The home improvement in general is boosted by that. And we could have brought some additional elements here, but it is very much supported by demographics here. And that gives that assumption a very solid baseline because this is a macro trend global, I would say.

And we do actually have some additional information in that -- on that extra slides. I mentioned that you can download on the website.

But you can never sense it. That's the key point. You have to keep reinvesting. And this is now back to the point of modularization, right? Because historically, when we wanted to upgrade or refresh the product or add new innovation modules, we had to do more significant redesign. The modular architectures allow us to, let's say, integrate and increase the penetration and rollout of new innovative models in existing product architectures. That's an extremely important, let's say, leverage factor as we go forward to increase our speed of innovation while actually reducing the capital intensity of that innovation.

By the way, this is a discussion we've had in the recent years [indiscernible] I referred to that, the powerful combination of high consumer preference with modularization to be able to keep ahead in that game because it's clear competition. We'll invest and we'll catch up. That's for sure.

And we have a question here from David MacGregor at Longbow Research for you, Ricardo, on this topic. So how do you think North American retailers are looking at Electrolux? And what do they tell you they need to see in order to give you more listings?

Yes. Well, I'll start with the service level. We have to be, as always been the case, a reliable partner. And we had difficulties in terms of components and supply chain as we all know. But the fact is we are gaining share recently. As we speak, we have been awarded with some new floor spots that we will materialize later this year. So it's been positive, I must say, the recent development. And -- but this is, of course, a combination of the right service level, the relationship we have with them and the product offering.

And I believe Karri wants to ask a question or 2. There, we have a microphone.

Yes. Karri Rinta, Handelsbanken. Going back to modularization and the margin lift that you had in Europe between 2013 and '18. We did during the same period, Whirlpool struggled to make money. So market arguably didn't get any better, yet you lifted your margins from 0% to 6%, 7%. So what percentage of that or what share of that would you say that was due to modularization.

It's -- I actually cannot answer. I don't know, to be honest, because it's a package, right? It's a package of very strong portfolio management, where we really increase the investment levels in the product categories where we saw that we would have the opportunity to win in the marketplace. We invested much less in our tactical brands and a less competitive part of the portfolio. And with the strong intent to kind of mix out of the lower end and mix into the higher-end products. And of course, doing that is extremely, extremely difficult and capital-intensive unless you have modularized products. But because we have we were able to do that in a relatively smooth and efficient way, right? So it's a, I would say, a necessary ingredient but it's difficult to assign a particular value to it. I don't know, Anna, you were CFO at that time. I don't know you...

No, but I think you're right. And the -- you can't really split it out. And then, of course, we had the brand focus on Electrolux in AG also moving away from [indiscernible]. Yes, tactical brands if we call it and very structured and kind of cost focused as well.

So. Yes. No. And I think the journey is not dissimilar in what you have done in Latin America and what we're doing now in North America. Is this combination of significant investments in core product architectures, automation levels, enabling much more flexibility, enabling us to mix up into higher-priced categories, giving us a return on investment in investing in supporting the brand premiumization. You can't do one without -- well, you only get the return if you do all of that together, and that's the mix that we're driving.

And it's also important to emphasize that we bring those product architectures to all regions. So it's not just benefiting then Europe, for example. We also have laundry product architectures benefiting [indiscernible] and North America, Latin America. So that's also really important, as Carsten was talking about the LEGO, it's benefiting the entire group here.

I had a quick question to Ricardo as well, if I may. What are the biggest differences between the North American operation and Latin American operation, maybe in relation to how independent they have been run versus how tightly they have been connected to the Swedish or to the Electrolux as a whole? And maybe going forward, what needs to change so that from a management systems perspective so that you can reach your ambitious targets?

Well, first, I wouldn't differ them in terms of connection to Sweden and independency, I don't think there is a difference there. When we compare, I mean, the reengineering and investments, I must say that there is a fundamental difference that we have. We have closed factories in North America, while we revamped existing factories in Latin America. And this, on one hand, is more complex to -- so to speak. But has a different impact in the workforce. So we are revamping a factory versus shutting down. And so the change management is different. So that is a fundamental thing. The other one, I would say, is related to the challenges we had in North America in terms of people, high people turnover and the labor force availability because this impacted our ability to deliver some projects on time. We had somewhat the same situation in Latin America, but not to the same extent. So the challenges from a technical standpoint, they are comparable, but we had some nuances that are different. But I certainly wouldn't differentiate the connection or independence of the BA.

I think we had a little bit -- we have more capability of resident in Brazil than we had resident in North America from a manufacturing engineering...

I can fully agree to this as well. Yes, it's a capability. It's is a brownfield is greenfield at this point of time and the ramping up in Brazil was good in capabilities. And this was lacking in North America. And if you go today to give you an example, if you go to Anderson today, compare it with 2 years ago, you see a different culture. So we are -- as I said before in my speech here, we leverage group competencies. You see Brazilians, you see German, you see Italians now in these factories not only working for this factory as well, but also working for the full group from engine perspective. So we are leveraging this group perspective. And it doesn't matter if they are in North America or they're in Brazil or they're in Europe as well. So this is exactly when I said, we leverage group capabilities and skills around the globe. And the production at the end of the day is similar to the production we have as well. But it's really getting the scale, get the fluctuation under control. And this is what we have done so far, yes.

And I see Henrik has that question here. And then we can take the microphone to you as well.

Yes. Henrik Christiansson from Carnegie. More of a structural question. You reiterate your 20% or about 20% return on asset return target. That, of course, is driven by your very low working capital need. And specifically, perhaps more on the payment terms that you have with our suppliers. Now interest rates have gone up. It's getting more costly for your suppliers to fund yourself and other businesses? Have you seen any type of pressure from your suppliers to change payment terms or to get more compensation? And if not, you expect the current working capital level to remain at the levels we've seen in recent history going forward as well?

Yes. So we're not seeing that kind of pressure right now, and we don't foresee it, you can have a chat with Therese later on [indiscernible]. But no, we're not seeing that. I think it is clear that our working capital has been challenged, particularly in the second half of last year as we had all these imbalances in inventory. And also as we then started to reduce inventory, we bought less components to our accounts payable came down as well, right? So we have a bit of pressure on our working capital in the latter part of last year and into the first part of this year. But those are temporary readjustments. There are no fundamental changes to our business dynamic in any element of working capital that would deviate from where we've been historically. So we'll get back to that over time. And again, as I mentioned, the combination of operating cash flow coming from some of that working capital release and better EBITDA income, which then reduces the debt levels and then in combination with the better EBITDA, our balance sheet will look a lot better going forward.

Yes, please go ahead.

It's Elliott from Bank of America again. So you were talking about the cost savings that you're getting you closer to that 6% alone, plus you'll have the commercial growth. After that, 2024, you'll still get more premium product mix, more aftermarket mix. What's stopping you from going higher than 6% across the cycle? Or I suppose a different way of saying it, what is also your biggest challenge of meeting that 6% target that is stopping you from being more constructive?

Right. So I would say, if I take that one, we certainly have enough actions and initiatives to significantly outperform the 6% target in a status quo environment. But to one of the prior questions, the environment is not status quo, right? So new innovation after a while becomes yesterday's innovation. So you see that sort of market price pressure on a continuous basis. We have to keep innovating, keep driving innovation. And it's not that I think 6% is a natural ceiling in terms of profitability. We see it with some other competitors given the right circumstances, you can substantially over deliver on that. But we are not in a position where we can confidently say that in a very dynamic market environment we will consistently deliver above 6%. Again, remember, 6% is our target across the business cycle. So good times and bad should average out to 6%. And there, we have high confidence in getting that -- I don't think in a dynamic environment, we will promise more right now.

And we have a question here from [indiscernible]. And it's a plan that the U.S. production structure will be more efficient than the European cost level when Springfield and Anderson are fully up and running. And Carsten, do you want to start and Ricardo...

We'll be at the end of the same level at the end of the day, they will not be different. For sure, the cost structure differently from a labor perspective. But from a labor productivity perspective, with the automation level, where we are going hand in hand at the end of the day, there will be not significant changes...

Maybe to give just a little bit of light on that. Is that you could say that our North America hourly cost is like somewhere in between what we have in Germany...

Germany and Italy.

Correct, right? So the rate of automation that is -- gives a strong ROI varies a little bit between those markets. So we're -- our most highly automated factories in Germany and Northern Italy are around 50%.

Yes, 40% to up to 50%, going up to 50%.

So North America, around 30%, Eastern Europe significantly less, right? Because the ROI on that automation investment varies a lot. So that's the only -- structurally, there's no difference. This product design capability, all those things are relative harmonized. It's more a question of what ROI you get.

Yes. Exactly.

And time flies. So that was our last question. But Jonas, what is your reflection of looking back at the last 2 to 3 hours now?

Yes. Let me first say a big thanks to all of you for your attention for these hours, your good questions. And let me thank the team for really excellent presentation. I hope we've been able to give you clarity and confidence that we're really on track with our strategy. We have a strategy that's extremely well aligned to the key industry trends now and for the past 7 years, we don't think they will change materially. The performance setbacks that we've seen clearly in the last -- particularly the last half of 2022 is extremely disappointing but they're temporary in nature. In 3 of our BAs, we will turn around quite quickly. In North America, we know that the challenges we're faced were both temporary in nature and more structural. So it takes a little bit longer time to get to that target level of profitability, but the road map is super clear. And I think that maybe the most engaging, rewarding thing to me is that I think we've been able to show that the investments we've made over a number of years now in sustainable consumer experience innovation is winning everywhere. Also in North America. We're delivering on our consumer-driven sustainable experience innovation everywhere. The cost is not there yet. We've -- but the investments that we've made in automated, modularized manufacturing locations, as Carsten has shown as we've all discussed, has laid the foundation to really lift our performance and really take out both the temporary cost challenges and the more structural impediments to profitability in North America. So in summary, we are now back on track to deliver on all of our financial targets. And I hope we've been able to convey that clearly. And I really want to thank you, everybody online, everybody here for your strong focus and attention. Thank you so much, and we'll go to mingle.

Yes, thanks for -- we then conclude that this CMU is completed. Yes?