AB Electrolux (publ) ($ELUXB)

Welcome to Electrolux Group and the presentation of our Q1 report. I'm Ann-Sofi Jönsson, Head of Investor Relations and Sustainability Reporting. I'm here with our CEO, Yannick Fierling and Therese Friberg, our CFO. We will run through the presentation and after that, we will open up for the Q&A. With that, I hand over to Yannick.

Thank you very much, Ann-Sofi and good morning, good day to all of you, very glad to be with you for this Q1 2026 report. We have been making some significant announcements last night. 2025 was the year of progress and strategic building. We are now executing this strategy. We have been announcing a series of initiatives. I would like to remind you this morning -- the first one is about a partnership we announced in the North American region with Midea. This partnership will be driving growth, will be driving better profit, thanks to savings and share of CapEx. And certainly, it will represent a very strong platform to move forward in this region. We have been announcing as well that we'll be optimizing our footprint and gaining efficiency across our organization. We are planning to expand in terms of product and geography moving forward. In order to finance these major initiatives and strengthen our balance sheet, we have been announcing a fully underwritten rights issue. Let me now deep dive into Q1. We had to face 2 very different realities. The first one was about Europe, Middle East and Africa, APAC and Latin America, where we have been delivering in this first quarter strong results, results which were significantly better than last year. On the other hand, North America has been declining significantly. The market has been down more than 10%. The food preservation business unit has been down more than 14% from a market perspective. In terms of operating margin, we have been delivering SEK 198 million, excluding nonrecurring items. In the operating income, we have been including minus SEK 463 million due to the closure of our factory in Chile in Santiago. We have been delivering in this first quarter SEK 700 million in terms of cost reduction, which is placing us well to deliver the year-end target, which is between SEK 3.5 billion and SEK 4 billion. Let me now deep dive into Europe, Middle East and Africa and APAC. Strong quarter for this region. We have been once again gaining market share with our main brands, Electrolux and AEG in a market which has been flat in this first quarter. We have been growing organically by 3.6%, delivering 4.1% of EBIT. This EBIT has been supported by strong delivery in terms of cost reduction. And yes, we have been investing in marketing in order to fuel all the innovation we have been launching in this first quarter. As I mentioned previously, the market was once again flat in this first quarter. Actually, it was flat in Western Europe, which represents 80% of the volume, and it was up 1% in Eastern Europe, with 20% of our volume in the market. The market was mainly replacement driven once again. But if you look at this curve, it has been the lowest quarter in the 12 last year. We are in a 12-year low volume figure in Europe here. So if you take into account that a normal organic growth in this industry is 2% to 3%, we are down between 20% and 30% versus where we should be today. Now as I said, we have been investing in marketing. We are adjusting the Electrolux brand, and I'm very proud to show you one of our latest commercial. [Presentation]

Now moving into North America. And as I mentioned in my introduction, the market has been significantly down in this first quarter, over 10% down. Food preservation has been over 14% down. It has been the weakest quarter in terms of market in the last 10 years. And that's why we are having an operating profit, which is pretty low in this first quarter. The market was down. And on the top of that, we had very significant external factors, mainly driven by tariffs. We had 2 internal issues, a change in accounting estimates for consumer rebates and a voluntary recall of a limited number of Frigidaire gas ranges, which have been affecting the results by SEK 0.3 billion. Looking at the market, and I mentioned that, minus 10% in this first quarter. If you're looking the volume trend over the last 10 years, you will notice that, that has been the most challenging quarter over the last 10 years. The decline has been most significant and the decline we have been observing after 2022, so post COVID. Moving into Latin America. Strong quarter in Latin America. Again, we have been growing organically more than 8%, delivering an EBIT excluding nonrecurring items of 8% again. Strong market in a market where we have been observing a significant level of price erosion. We have been announcing the closure of a plant in Chile, and this closure has been inducing a nonrecurring item of SEK 463 million in this quarter in our margin. Moving now into cost reduction. Once again, I mean, our objective at year-end is to deliver between SEK 3.5 billion and SEK 4 billion. We have been delivering SEK 700 million in this first quarter, with value engineering, best cost country sourcing and by having an additional productivity in our factory. So good results again in this first quarter, which is aligned with the objective -- ambitious objective we do have at year-end to deliver between SEK 3.5 billion and SEK 4 billion. With that, I'm passing it to Therese.

Yes. Thank you, Yannick. And then taking a look at the sales and the EBIT bridge in a little bit more detail. We had essentially a flat organic growth in the quarter, where we did see volume growth, as Yannick mentioned, in Latin America and in Europe, Middle East, Africa and Asia Pacific. But this was offset by volume decline in North America and also price pressure across the markets. So if we look at the organic contribution to EBIT, this was actually the negative as the pressure on price was more than offsetting the positive volume we had. Investments in innovation and market essentially was flat year-over-year, and we did see continued strong and stable cost efficiency coming through to the bottom line. But you can also see that year-over-year, the external factors are still quite a large negative headwinds as we are having continued high tariffs in North America mainly. And then looking at the operating cash flow. So operating cash flow after investments for the quarter was negative SEK 4.6 billion, and also lower than last year. And this was partly related to the reduced EBIT year-over-year. And then we also have a seasonal buildup in the operating working capital. But on top of that, we also have a somewhat higher buildup in inventory, specifically in North America related to the very weak market in North America, weaker than we expected going into the quarter and some small buildup related to the Anderson transition of production that you probably heard about yesterday. And then taking a look at our liquidity and maturity profile. We still have a high liquidity with SEK 27.6 billion in liquidity, including revolving credit facilities. And we have a well-balanced maturity profile. We have no financial covenants, as you know, and we have the ambition to have a solid investment grade rating. And to get -- have a solid investment grade rating, of course, the main components will continue to be to improve our operating performance and also to generate cash flow. But of course, you heard about yesterday, the announced rights issue -- of a fully underwritten rights issue of SEK 9 billion that partly will be used to drive the additional strategic initiatives Yannick mentioned earlier, but also partly to strengthen the balance sheet going forward. And the net debt to EBITDA by the end of the quarter was 3.8x. And if we would be adjusting for the rights issue of SEK 9 billion, this number would have been 2.8x. And with that, I hand back over to Yannick.

Thank you very much, Therese. Moving now into the market and business outlook. Following the downturn in the U.S. home appliance market in the first quarter, the market outlook for North America in 2026 is revised from neutral to negative to negative. Geopolitical uncertainty is foreseen to continue in North America, but under the assumption that the current tariff structure stays, general market pricing should logically adjust to reflect associated tariff costs. Should these materialize, it may adversely impact consumer demand and market growth. The Brazilian home appliance market developed positively in the first quarter. And although growth rates may slow somewhat throughout the year, the market outlook for Brazil in 2026 is changed from neutral to positive. The market demand in Europe is unchanged with geopolitical and macroeconomical uncertainty weighing on consumer sentiment. Also, consumers continued postponing discretionary purchases and demand for built-in kitchen products remain subdued. In a larger perspective, it is important to remember that the European market is on a 12-year low. Therefore, the market outlook for Europe remains neutral. Moving to business outlook. That's -- our business outlook for 2026 remains overall unchanged. Despite expected additional cost related to extended U.S. Section 232 import tariffs on products that contain steel and aluminum applicable since April 6. Sizable price increases with 5% to 20% have been announced in North America, and it is our ambition to increase prices in order to offset the negative impact from tariffs. Volume, price and mix is expected to be positive in 2026 driven by volume growth and a favorable product mix. We expect investments in innovation and marketing for a full year to increase. The new product launches provide us with a great platform to continue driving growth in our focused categories. Our focus on cost saving and to improve efficiency throughout the group is critical for our competitiveness, and we anticipate between SEK 3.5 billion and SEK 4 billion earnings contribution from cost efficiency in 2026. External factors are expected to significantly negatively impact the year. mainly due to higher tariff costs from extended U.S. Section 232 import tariff. This cost inflation is reflected in external factor in our EBIT bridge. Raw material costs are also estimated to be negative. For the full year capital expenditure, we're expecting to reach about SEK 4 billion. Again, I just want to summarize our Q1 performance. And as I said, as an introduction, we have really 2 very different realities. On one side, EMEA, APAC and Latin America, where we have been performing well, where we have been growing, 3.6% in Europe in a flat market, 8% in Latin America and Brazil. But we have been observing as well a very notable decline in North America, over 10%, the worst and strongest decline we have seen in the last 10 years. In terms of cost reduction, we have been reaching SEK 0.7 billion in the first quarter, and we have a good confidence to reach the SEK 3.5 billion to SEK 4 billion by year-end. We have been making last night very big strategical announcements, a strategy we have been working on for the last months. The partnership with Midea in North America will be key in order to structure this region, grow in this region and add savings, improve our profit and share our capital expenditure with Midea. We have been announcing as well that we'll be optimizing our footprint and gaining efficiency in the rest of the organization. And we will be expanding our product offering from a geographical perspective and from a product perspective here. So big milestone for the company has been announced last night. With that, I would be glad to answer any questions we may have. Ann-Sofi?

Yes. Thank you, Yannick. So now we will turn over to the conference call first, to take questions from the conference call.

[Operator Instructions] And our first question comes from the line of [indiscernible] from Goldman Sachs.

Maybe just starting with the U.S., could you sort of break down what you're seeing sort of was changed in terms of organic growth. I think sort of maybe through last year, we're seeing some market share gains. And so how much of sort of the minus 10 is the market versus what's happening in terms of things on a competitive basis?

Yes. Thank you very much for the question. So as we said, I mean -- and of course, we are referring to sell-in data and volume. We have seen the biggest drop in terms of volume in the first quarter over the last 10 years. And of course, I mean, the geopolitical environment has not been helping in North America. From a mix perspective as well, we were hit from the fact that, I mean, the biggest drop we have seen in the North American market is coming from our biggest product category, which is food preservation. Certainly, I mean, we did not lose a significant level of market share in the quarter. We have been losing a little bit of market share due to the recall we made at the beginning of the quarter, and we're always placing the safety of our customers first. Certainly, it would be very interesting to observe our North American market will be evolving in terms of demand in the coming months. The big announcement we are making today is certainly in terms of price increase. We are facing very significant external factors in North America, and that has been a big part of the profit decline we had in the first quarter. On April 6, there was the announcement about the 232 tariff. So we have been announcing to our customers that we'll be increasing prices between 5% and 20% by the end of April. Most of our competitors are producing appliances as well in Mexico. So we have a good confidence level that we will see price increases in North America overall as an industry in the coming weeks.

But the 10%, just to be specific, that is the market decline. So pure market and we were declining, as you saw, somewhat more than that, but only slightly.

Great. And maybe just on our Section 232, I don't know if you can't give a number, but do you have a sort of an estimate on sort of external factors for -- so 2026 and as the year goes on?

No, we don't have an updated number. Of course, as you see, we are already guiding for significantly negative. And I think it's fair to say that if the current 232 tariff stays in place as it is today, it will be even more significantly negative than, of course, we had going into the year. But on the other hand, as Yannick mentioned, I think this is really now leveling the playing field with lower debt if these tariffs are legally valid and so forth. So the confidence to actually increase prices and have them stick in the market is higher than ever before, I would say.

Great. And maybe just the last one for me. Could you just maybe comment on sort of what you're seeing on cost from a commodity perspective, given what's going on? And just remind us of how sort of hedging works from your perspective and therefore, how we should think of things assuming sort of spot prices remain where they are?

Yes. In terms of, of course, I mean, the geopolitical war in Iran is influencing raw material. As we mentioned previously, I mean, we're hedging plastic over 3 months, usually 1 quarter. So the impact we have seen in Q1 is limited, very limited. I mean, the main impact we see is much more transportation costs and fuel costs. So the bunker costs we have on sea freight, for example. But I mean, we are largely protected in this quarter, in the Q1 quarter, thanks to the hedging we do have on raw material and plastic.

We are -- but it's also included in the forecast that we have now. Of course, it's -- as you all know, it's extremely volatile, but we do see somewhat increase in -- now in the second quarter, partly related to logistics and partly related to plastics that we have then had to lock at slightly higher prices for the second quarter. But it's already included, let's say, in our business outlook with our current understanding.

Your next question today comes from the line of John Kim from Deutsche Bank.

Could we get a little bit of a steer impacting the external factors? Any sense on ForEx versus tariffs versus underlying cost inflation?

Yes. I mean, really, the majority -- you have a little bit of inflation and a little bit of currency, I would say, if we talk about Q1, but the vast majority of the number is really tariffs.

Understood. And can you help us -- can you help characterize kind of pricing dynamics from your competitors in Q1?

I think in North America in Q1, in North America, we have seen a very light price increase in North America. What we're expecting is to see larger movements in the second quarter and moving forward due to the additional pressure we're experiencing from 232 and this pressure will be experienced as well by our competitors moving forward. In the other regions, if I may, in Europe and in Latin America, of course, we see price pressure, and we see price erosion, which is higher than what we were originally expecting. However, again, we are performing really well in these markets. I mean, in Europe, we are improving our mix as well moving more into a kitchen and built-in. So I think we have all the measures in place in this region to counteract against this price erosion we're experiencing.

Your next question today comes from the line of David MacGregor from Longbow Research.

Just with regard to the North American market, you've discussed pricing of 5% to 20%. That's a pretty large range, obviously. Can you just discuss that range and what constitutes the lower end? What would constitute the upper end?

Of course, I mean, you're absolutely right. It is a low range. However, we will not be butter spreading the price increase. We have products which are more impacted than others. And we have product categories which are more under, I would say, competitive pressure than others. Food preservation, for instance, is a product which is far more a commodity, I would say, in the market and under price pressure. That's exactly by the way why we are putting in place all the strategy we do have with Midea moving forward. We'll be reinforcing food preservation significantly in the future. But I mean, in terms of price increase, it would very much depend on the impact we do see from tariffs. So we will filter and have a price increase by product category, which is needed in the market in order to overcome the tariff impact.

And do you foresee -- just as a follow-up question, do you foresee the potential for further price increases as the year goes on? Is this kind of the first of the sequence of multiple increases you would consider?

I think it's a very good question, but I mean the North American market has been extremely dynamic in the last months. I mean the tariff structure has been changing several times in the last 12 months and the way it has been really big in terms of external factors. We're absolutely convinced that there will be now a significant price movement because simply, I mean, 232 is putting a significant level of pressure on the entire competitive landscape, but it's very difficult to predict how, I mean, these external factors will be evolving in the coming months. And as a consequence, our prices would be evolving in the coming months. But certainly, I mean, our ambition and I won't repeat it, is to compensate for the vast majority of the impact we are facing in terms of tariff through price increase.

So this 5% to 20% series of price increases would be sufficient to fully offset the tariff expenses on 232 that you're incurring now?

Yes. I think that's our intent for sure. The intent is to compensate for the vast majority of the impact we are inducing through tariff.

Your next question comes from the line of Akash Gupta from JPMorgan.

I got a couple as well. The first one is on Europe. So maybe if you can talk about what's your -- I mean you left your market for Europe unchanged, but given the war in the Middle East and in higher interest rates, how do you see prospect of a recovery in the European market? And have quantified price increases in North America because of tariffs, but I guess prices need to go up in Europe as well when your hedges especially run out. So can you quantify what sort of magnitude we will be looking at price increases in Europe in rest of the year? So that's number one. And number 2 is on free cash flow. So again, I mean, if you look at the North American business and your outlook, clearly, that will be a drag for this year. We also have some outflow -- cash outflow from restructuring and actions that you are taking to drive efficiency. So maybe if you can give us a high-level view of how shall we think about free cash flow for this year? And if it will be negative, then how big negative it might be?

I will take the first, and I will leave the second one to Therese. On the European market, I think the good news really is that, I mean, in a market which is still very much subdued in Europe. Again, I've been mentioning -- I mean we're missing 20% to 30% of volume versus what could have been expected prior to COVID. I mean we are truly winning and gaining market share. We're not only gaining market share with Electrolux and AEG, but we're also reinforcing our price positioning in the market. We're gaining market share in the product category where we are really strong, like in cooking, for example, in some markets. So it is really a winning equation today. And we are investing in marketing in order to dust and promote the brands we do have in Europe. So it is right now a positive dynamic we see in these markets, thanks to all the work the team has been putting in place in the market, which is very difficult. Right now, we don't see price increase in Europe. I mean it's rather the opposite. As I've been mentioning, when I covered the region, we see a level of price erosion which is more or higher than what we have been expecting probably at the beginning of the year. Of course, I mean, I mentioned it. In Q1, the impact we do have due to raw material and the war in the Middle East, I mean, it's very limited. I mean, this impact, as Therese said, would be growing throughout the quarters here. But at this point of time, we don't see any price movements in these regions. And in all fairness, I mean, we don't see -- we're not expecting any significant price movement moving forward.

Maybe one comment on the market as such. I mean, as you're saying, we do see some increases in interest rates and so forth in Europe. The market was flat essentially in the first quarter. Of course, we have been expecting the market to start to grow for the last 2 to 3 years, at least. And it hasn't started to grow yet. And the reason for that is that, I mean, it's only, only driven by replacement today. So even with an elevated interest rate or even with increased uncertainty related to Middle East conflict and so forth. It's really hard to see that the European market could go even more south from here. And on price, I mean, we did see, as Yannick said, quite high price pressure in Europe. I mean, to see price increases in Europe is very, very unusual. Of course, what could happen is more that the price pressure downwards could ease a little bit, but to see price increases in Europe, I think, is very rare. And then on the cash flow, you are absolutely right. We're not guiding on cash flow. I mean, we're keeping our CapEx for the year at SEK 4 billion. So we don't see an additional pressure from these initiatives on CapEx as such. But you are right that with the announcements we are having both related to Chile and Hungary that we have announced in the last few days and weeks and also related now to the cash NRI in North America that we will have in the second quarter of SEK 0.9 billion. All of that will be paid out pretty much this year. So yes, that will be an additional drag to our net cash flow for the year.

And maybe on working capital because you'll be closing down production in Anderson. So how should we think about working capital swing from cash point of view in 2026?

Yes. Working capital, I think in North America was in the first quarter pretty negative because the market was simply down. very much. Of course, on the Anderson side of the question, as you can understand, you're not making these type of decisions and building a strategy as the one we have been building with this partnership in Midea in a few weeks. We have been planning for that long in advance. So we have been planning for ramp down in Anderson for quite some time here. So we don't see a significant impact. And we have been planning for this impact, if there is any in the third quarter. So we're ramping down Anderson in the third quarter, but that's all basically taken into account.

And maybe a follow-up on tariffs. I mean we saw that U.S. Supreme Court ruled against reciprocal tariff and the administration has started issuing refunds in, I think, this week or maybe last week from last week. Can you quantify when it comes to tariff, especially what you paid last year? Is there any potential for refunds if you have paid significant reciprocal tariff?

Yes. So we have not disclosed the amount, but we can say that it is a material amount as you can imagine, and you know that we had a very large external factors during last year, and we can say that a large portion of this was related to the reciprocal tariffs. When it comes to the process, it's divided depending on the type of claim you will have, it's divided in 2 different process flows. So what is starting to -- and has been clarified from a process perspective now is what is the easier claims, so which is in the first flow, so to say. And our claims will be in the second process flow, which has not yet been clarified how it will happen and when it will happen. So of course, as we would know more about this process going forward and also potential timing of a refund, we will come out with additional information.

We will now take the next question, and the question comes from the line of Hai Huynh from UBS.

I have 3, if you don't mind. The first one is on the cost efficiency. So you delivered SEK 700-ish million now and reiterated the SEK 3.5 billion to SEK 4 billion. How should we think about the phasing of this to the rest of the year? And the SEK 2 billion savings by year 3 from your partnership initiatives, does it already get included at all in FY '26 target? Do you expect anything to flow through that SEK 3.5 billion to SEK 4 billion this year?

So thank you very much for the question. It's a very important question. And as we said, I mean, the cost saving piece in the environment we are in today is extremely important for us to deliver the year and target. And that's why we have been putting in front of ourselves a very ambitious target once again for '26, which is between SEK 3.5 billion and SEK 4 billion. To your point, we have been delivering SEK 0.7 billion, which is basically meeting our expectation for the first quarter usually in terms of cost savings, especially when you're looking at value engineering, I mean, best cost country sourcing or conversion costs, you have basically an increase quarter by quarter because, of course, I mean, you are having and adding projects throughout the different years. That's why the SEK 0.7 billion is aligned with what we have been expecting for the first quarter, and we are repeating and reiterating our ambition to reach SEK 3.5 billion to SEK 4 billion at year-end. Now thanks for your question about the additional cost savings or what we're announcing here in terms of strategic cost savings moving forward. We have been announcing is that we will be saving SEK 600 million in year 3 with a partnership of Midea and that will be saving an additional EUR 1.4 billion in year 3, thanks to the optimized footprint and the efficiency we'll be gaining through the organization efficiency. That's, of course, I mean, this saving will be growing year-after-year. And you can see it in the graph I showed it last night, we'll have a saving year 1, year 2, and we'll have a SEK 2 billion saving in year 3. What I want to insist on is that, I mean, the partnership for Midea is a long-term partnership. It is a long-term partnership where we'll be growing. We'll be saving more money, and we will be sharing capital. And saving more money is pretty important because of the scale we do have, the access of the supply base we do have moving forward. So I think it will be progressively increasing. And I think the amount we'll be reaching and the amount we'll be disclosing is the SEK 2 billion in year 3.

And of course, this is progressing. So year 2 already will be quite a bit of a step-up. But for the first year now, it's really about getting everything up and running, and we are in a squeezed timing. So there will be limited amount in 2026, and it is included in our business outlook essentially, you could say.

Understood. My second question is on the Midea partnership. So I understand the perspective of the cost base outsourcing story. What about the market share dynamic? So you mentioned you are 2% or below on the top load washers and you're trying to get more penetration there. So can you give us a bit of an idea of what is Midea market share on those categories? And I'm trying to get to what is the additional revenue that you may get from this kind of initiative?

I cannot -- unfortunately, I cannot disclose the market share or the turnover of Midea in North America. However, what I can tell you, and you mentioned it, we have 18% market share in food preservation. We have over 10% market share in food preparation in Springfield and Springfield will be long, 100%, of course, to Electolux. So we have more than 10% market share in dishwashing out of Kingston and that will be 100% of electrics. Where we see a big potential moving forward is in the 2 categories where we will be partnering with them First, I mean, Fabric Care, you mentioned 7% market share in front loader less than 2% market share in top loader, which is, again, the biggest platform sold in North America in washing and in drying. So we have a significant potential to grow in fabric and moving forward. If you're reaching, I mentioned it last night, if we're reaching only 10%, which is half of the market share we have in food preservation for reaching 10% in Fabric Care in the future, that would be 1 million additional pieces for Electrolux. So a significant source of growth moving forward. That's for Fabric Care. But even if we have 18% market share in food preservation, there is still space for growth, and we will be able to access new platforms, thanks to the broad range of product Midea is having today, and we will be able to lower our cost, thanks to the vertical integration and the scale this partner does have today. So significant level of potential in terms of growth. I've been mentioning that, thanks to these new products, significant level of potential in terms of saving, and it will be an increasing saving as you mentioned it previously as well. And we will be sharing CapEx here, which would be a positive item in terms of cash flow.

Understood. And then my final question. Of the SEK 0.3 billion headwind from both rebate provisions and the Frigidaire recall, how much is it -- and should we expect any further impact beyond this closes?

Yes, we don't separate up the 2 items of the SEK 0.3 billion. We thought that in combination, they are a relevant amount to mention, and that's why we highlight it and also why we highlighted it is because we believe that this is behind us. So you should not be including that in your forward-looking expectation. Of course, it will still stay in our results for the full year, but we should not incur additional similar costs in the quarters to come.

Our next question comes from the line of Timothy Lee from Barclays.

So my first question is about the price increase in the North American market again. So if the market decline for the first quarter is probably due to, let's say, economy or inflation, then how are you the confidence that the price increase will not be -- will not affect your product demand going forward?

I'm not sure I got to tell you the question. I mean the connection is not really good. But in terms of price increase, once again, I mean, we are pretty confident that this price increase will stick in the coming months because we really truly believe that the industry will be moving towards price increases due to the latest tariff structure we see in North America. So of course, I mean, the big question mark is the one you have been mentioning and is how much demand will be impacted by this price increase. We certainly have been putting quite a lot of flexibility in our industrial assets in order to cope with a potential demand decrease in North America. But I mean, it is absolutely, it is a price increase, which is needed. It's a price increase we have been announcing to our customers, and we are personally pretty confident that, I mean, competition will be following in the same direction.

Got it. And then my second question is about the expenses related to the recall. So we have a couple expenses related to that in the first quarter. Would that be some more expense in the second quarter going forward as well?

Therese mentioned it, and I want just to be very clear. I mean, first of all, I think it is a voluntary recall. I mean we're putting safety as an absolute priority for our customers, and I want to underline that. I mean -- but this recall is behind us. I mean the entire expenses, which are linked to this recall were basically spend in the first quarter, and that's what we have in -- that's the impact we have basically in the profit we have in North America as well. So it is behind us, and we not see any additional expenses in the coming quarters due to this limited recall we had in North America.

Understood. Very helpful. And then my last question is about Latin America. So -- but still, obviously, it was very strong in the first quarter. But you also mentioned the growth rate may slow somewhat throughout the year. So what would be the reason to result in the slowdown in terms of growth? And last quarter, I think we also had the supplier rebate to help on the margin in Latin America. So I'm just wondering whether there will be any -- that kind of increased rebate from supplier in the first quarter as well?

I would -- first, I think we're very proud of our results. In Latin America, we have been organically growing again by 8% in the first quarter. I mean, we are gaining market share in the upper price segment. We have been having a very strong results in this first quarter in small domestic appliances as well, which I want to underline. And in all fairness, I mean, as I said previously, many times, the strategy is sound. The product pipeline we do have is sound. We have been investing in the market here. The Electrolux brand is extremely strong in the market. We don't see why we would be slowing down in terms of dynamic in this market. In terms of supply rebate, in all fairness, I don't know what you're referring to I mean, to my knowledge, we didn't declare any supply rebate in Latin America. Therese, I mean, do you have anything in that?

Yes, you're right. In Q4, we -- yes, we talked about an amount related to supplier rebate. This quarter was not including any additional supplier rebate. So this was really underlying strong performance by our team in Latin America.

But we are not expecting that right now.

No, we're not expecting -- yes, let's say, the supplier rebate. I mean, of course, we're always working with our cost efficiency. As you know, it's included in the SEK 3.5 billion to SEK 4 billion. but there was a higher amount than usual, I would say, in the fourth quarter, but this is something we're continuously working with our suppliers for sure.

And the next question comes from the line of James Moore from Rothschild & Co.

I've got some questions on North America and external factors. Maybe we could go one at a time. On North America, if I take out your recall, it looks like your clean margin is about 6.5% negative. I just wondered if you could talk about how you expect that to develop into the second quarter? I mean normally, historically, you've done sort of 200 basis point increase quarter-on-quarter which will give you minus 4.5%. But I guess what I'm thinking about is does Section 232 take it worse with prices taking longer to cycle through floor retail. Do we get worse on price/cost before we get better? I guess is the question or any other topics for margin next quarter to consider.

As we said, I mean, certainly, we're not happy about the results we do have in North America in the first quarter. But I mean, the main lever we'd be executing now in the second quarter is the price increase we have been mentioning which will be between 5% and 20%. And as I said previously, I mean, our ambition is to compensate for the tariff increase through the price increase. So I think we have certainly no doubt that we'll have a positive development in terms of prices, I mean, starting end of April.

And how it practically work, of course, I mean we started to pay the additional tariffs from the 6th of April, but it also takes some time before that negative impact is flowing through the P&L as it's flowing through. The cost is flowing through the P&L as you sell the products. And as we mentioned earlier, the price increase will go live in the market really here in 1 week's time. So we believe that we are well in terms of timing of being able to match the negative cost we will incur because of the increased tariff costs and the price increases in terms of timing when it will be in the market.

It's very helpful. And just on margin mix in the North American business. I mean, are my assumptions that cold and laundry are your 2 biggest negative margin businesses by quite some way. And I see you've been quite clever about how you derisk the business. But would it be fair to assume that the rest of the U.S., which I guess is hot, dish, small aftermarket collectively is a profitable business at the moment?

I would just be repeating the answer I gave last night to the same question is that, I mean, there is absolutely no doubt that food preservation worldwide globally in the home appliance industry is the category, which is the most on the price pressure overall. Because, I mean, it is becoming a commodity for many platforms. So that's exactly why we're putting in place the actions we are putting in place with the partnership from Midea. But I mean food preservation is the category with the highest level of price pressure.

Could you help us understand the actions at Anderson, specifically, I just don't really understand why you would lay off 1,500 people in fridge freezer before rehiring 1,300. Obviously, go into laundry maybe require different skills, but are there any other reasons why you're doing it that way and not transferring the employees?

Yes. Let me just repeat what we'll be doing in Anderson, and thank you very much for asking the question, what we have in front of us is a factory transformation. I mean we will be stopping manufacturing cooling products because we have the manufacturing joint venture in Juarez for cooling, and we will be leveraging the entire footprint we do have in cooling and Midea as in cooling as well. And we'll be transforming this factory from cooling into Fabric Care, so washing and drying top loaders in the first half of 2027. So what will be happening is that we'll be stopping production. We need, of course, to dismantle the entire equipment we do have in the Anderson factory. That's why you will see a write-off of SEK 1.5 billion in the second quarter due to this dismantling, and we would be reinstalling equipment in the Anderson factory in the second half and then in the first half of -- second half of '26, first half of '27 to start production on the laundry side of the equation. I think, again, as I said previously, gigantic potential on the laundry side. And we need to underline as well the fact that most of our competitors are producing laundry in North America today in the U.S. today. So I think having a footprint for laundry in Anderson is making absolute sense here.

So it's a pure timing impact that we will not be producing in the facility for almost 1 year. So we cannot keep the employees without working for 1 year. So that's the practical timing issue.

But we'll be reemploying 1,200 people between '27 and '28.

That makes a lot of sense. And just lastly, if I could. I mean I understand you don't want to put a hard number on your new internal forecast for external factors. But is there any way you could quantify the change of your internal expectation compared to what you expected sort of 3 months ago at the last set of results. And could you just qualify that the increase -- I understand that you're going to pass it on, and that's your ambition. I'm just talking about the gross cost side. Is the change -- did you say earlier that all of the changes basically Section 232 and is there any way you could say whether the increase in your assumptions are SEK 0.5 billion, SEK 2 billion? Just trying to understand rough orders of magnitude.

Yes. I mean all of the increases are essentially 232, then, of course, it's a little bit more complex than that because originally, we, of course, had the reciprocal and the IEEPA tariffs that we're actually still flowing through the P&L in the first quarter. We then had the Section 122 for a period of time that we're also right now then have been paying also in the first quarter and then when we now have the new 232, then the 122 is not stacking upon the 232 but replacing. So it's a lot of dynamics and a lot of mathematics. I mean what we can say we won't go into exact numbers, but what we can say is if the current tariff structure stays the way it is right now, also fully impacting the flow from Mexico to the U.S. Of course, we also know that it's in the middle of negotiation of the new agreement for USMCA. So I mean, we don't know exactly where this will develop, and we're not speculating about that. But what we can say is that it is a material increase if the current structure stays in place the way it is today.

Your next question today comes from the line of Johan Eliason from SB1 Markets.

Just coming back to your JV setup. I noticed you are keeping 50% to 55% ownership in the U.S. JVs you're setting up the sales JV on cold products and the Anderson manufacturing for laundry. Was that a requirement from CFIUS to approve the deal? Or why keeping these shares?

No, absolutely not. It was not a requirement from CFIUS. That was absolutely our choice, full discussions as well with our partner Midea. So I think that has not been at all a requirement from CFIUS.

And your next question today comes from the line of Martin Wilkie from Citi.

It's Martin from Citi. Just a couple of questions coming back to the transaction announced last night. And I understand that you can't give details on the Midea revenue that's coming in as part of the transaction. But 1 question we've certainly had this morning from investors is, obviously, you've got a SEK 600 million uplift in profit coming from that Mexican joint ventures. There's obviously an element of is consolidating Midea revenue and is an element of it that's a pure upside to you. Can you give us some sort of sense as to what portion of that sort of belongs to Electrolux, if you like? Is it safe to assume that the vast majority of that SEK 600 million effectively accrues economically to Electrolux?

Yes, that's what we have tried to portray with the SEK 600 million. So how we see it is that the SEK 600 million will be the additional profit in the Electrolux P&L. So yes, what additional profit potentially Midea will make on this partnership. We have not been including in what we have communicated yesterday. And that's also why we try to keep it clean, let's say, with the -- yes, with the revenue and the profit. And we think that the important number for you to include and to encompass is the SEK 600 million that we believe will be an additional profit in our bottom line.

Again, I want to repeat what I said several times, it is a long-term partnership. So we have been giving figures for the next 3 years, and you see them basically evolving. But I mean the partnership with Midea is a long-term partnership for the region.

I know that and I think that number can grow over time is all. But when you say the SEK 600 million accrued to Electrolux. And obviously if that's an operating profit level, there will be a minority. So in terms of how we think about the earnings number, just to get some sort of sense as to the net income benefit of that because you are going to get some, if I understand it correctly, some offset of a minority to Midea.

Yes, that offset will actually go below net income. So what we're trying to portray here is our improvement to EBIT and to net income.

Okay. And then if I could follow-up just on cash because obviously, you talked about delevering down to about 2x net debt to EBITDA. There's a lot of moving parts this year. Obviously, the equity raise and so forth. But just to get an understanding of the timing, and you gave us some detail on this on the timing of the various investments that you're making. Will any of those be significantly cash effective in 2026 in terms of the outflows for the investments and from some of these other restructuring? I know it's over 3 years. But should we assume those largely come in '27, '28 or could some of those come in '26 as well?

Yes, an answer you correct me, but I think we have one slide in the appendix from the presentation yesterday, which is actually breaking up the Q1 and the Q2 NRIs that we right now have announced. So if we then talk about the Chile that we announced a few weeks ago and then Hungary that we announced earlier this week and then, of course, the North American transaction that we are -- did announce yesterday that will come into the second quarter. So I think from an NRI perspective, you have it quite detailed there on how much is cash and how much is noncash. And what we can say is what we are announcing now in Q1 and Q2 essentially will flow out this year because the Anderson factory will close in the third quarter, and Chile will close now as we speak in the second quarter, and Hungary will close by the end of the year. So potentially for Hungary, you will pay out partly then exactly at the end of '26 and then -- yes, a small part maybe at the beginning of '27. But essentially, the large part will come this year from what we have announced.

And just for North America, as we have been saying it, it's SEK 2.4 billion in the second quarter, SEK 1.5 billion being noncash and SEK 900 million being dedicated mostly to restructuring.

Okay. Thank you very much. We still have a few questions on the conference call. We will take the next question from John at Deutsche Bank. And John, if we could ask you, please only one question, that would be great. Thank you very much.

Yes. Just wanted to clarify the accounting treatment on the Fabric Care JV. So 55% ownership,will you consolidate this? Or does it go below the line because you're deemed not to have operational control?

Yes, we will have operational control. So we will fully so -- with the manufacturing JV in Anderson, we will fully consolidate line.

Your next question today comes from the line of Akash Gupta from JPMorgan.

I had a follow-up on this 5% to 20% price increase in North America. Does it cover all of your sales in the region or part of it?

It's all our sales in the region.

Your next question comes from the line of David MacGregor from Longbow Research.

Have you spoken to your big box retail customers in North America and secured their support for this?

Yes, absolutely. Of course, I mean customer first, and I think we have been calling all our main customers yesterday afternoon about the strategy we're deploying over there. And let me tell you that, I mean, the feedback was overly positive about what we are putting in place in the region. I've been exchanging myself with a North American team late last night and this morning, and it has been positive. So absolutely, yes. Of course, we have been reaching out to each of them.

And then just very quickly, do you give up any flooring space in order to accommodate the Midea brand on those sales floors?

I didn't get your question.

No, no, for sure not. I mean our sales forces, as Yannick, went into yesterday, they will still be working separately with our customers. And no, for sure not, we rather expect that we will have a broader product portfolio, and it's something we would have the ambition to gain additional floor spots.

Yes. Sorry, I didn't get the question. But absolutely thanks, Therese. I mean it is very important to underline and we will keep our identity in North America in terms of design, in terms of features, in terms of go-to-market here in the sales joint venture. What the sales joint venture we'll be doing is to define the optimal range lineup in North America in food preservation for both Midea and ourselves will be working together. We'll be leveraging the R&D resources here. But I mean, our sales force, as I mentioned yesterday, will be separate and there will be an Electrolux sales force facing the end customers in North America.

Thank you. I will now hand the call back to Ann-Sofi Jönsson, Head of Investor Relations.

Thank you very much. So with that, we are going to conclude the Q&A session and this call. I hand over to you for some closing remarks, Yannick.

Yes. Thank you very much. Again, difficult first quarter in North America, strong results in the other regions. But more importantly, we have been announcing a series of initiatives, which are building the future of Electrolux, which have a fruit of a well-thought strategy we have been developing in the last month. And we're absolutely convinced that with this new platform, we will be accelerating our growth, improving our profit and reaching the target we have been communicating in the MCU long term, which is midterm, which is 6%. Thank you very much.