SEB SA (SK) Earnings Call Transcript & Summary

Good morning, and a very warm welcome to this presentation of the Half Yearly Accounts for 2021 for Group SEB. I will give this presentation as per usual with Stanislas De Gramont, General Delegate Director; and Nathalie Lomon, in charge of Finance for the group. So we are taking our masks off because we are protected by transparent walls. You might not be able to see them, but these transparent walls are there in order to protect us and that way it will be a lot more practical for us in order to express ourselves. So we're going to start out with the presentation. And of course, after that, we'll answer any questions that you might have. So first of all, 4 points that I think are very important. We're going to be talking about the first quarter and starting the first 6 months and about the figures. We'll also talk about the issues and outlook for 2021. And in your file, you also have the appendixes. So to get the ball rolling, let me talk about the environment. The environment, of course, is one that is still uncertain. Of course, this is related to the health crisis for COVID-19. This health crisis that we've now been experiencing for quite a large number of months. But alongside this, we have markets nevertheless, as you will see throughout this presentation, that have remained extremely buoyant in our business activity and at least for what we call the consumer activity. So basically, the COVID-19 crisis is ongoing. We have no idea, of course, how long this is going to last, but we will be agile. We will manage to adapt, depending on what happens over the next few months. As I said earlier, ongoing very good momentum for small domestic equipment for the first half of 2021. The professional market, as you know, that has suffered a great deal -- that suffered a great deal in 2020 due to the closure of hotels, restaurants et cetera. But we have noted for this first half year, not just for the first quarter, a clear turnaround notably for the second quarter of this year. This has been the case, I would argue for quite a few sizable contracts that have been signed. But also with our standard business with small clients that has been very, very good. Of course, what we're also seeing, and you might remember that we saw this for the first quarter, unprecedented inflationary tensions in the supply chain. And of course, we will talk about this -- so inflation in terms of the raw materials, in terms of the components, a lack of components, electronic components in certain areas and also an increase in freight prices. Also, there's a certain degree of volatility in terms of currencies with an impact on the results, but the impact is lower than what we've experienced last year, for example. Just a quick glance at the key figures up to the end of June 2021, the revenue, the sales amounts to EUR 3.6 billion -- As you can see, 23.9% and -- on a like-for-like basis, we have a very strong increase of 26.3% in our sales. The operational result from the activity amounts to EUR 320 million and multiplies by 3, the figures that we achieved for 2020, not for 2021. The net profit shows very strong growth. I'm not even going to give you the percentage because I think it amounts to EUR 151 million in relation to EUR 3 million. So 50x more this year. And the net debt amounts to EUR 1.8 billion and this is a drop of EUR 235 million in relation to the 30th of June last year. Let me remind you that the debt is very different between the 30th of June and the 30th of December due to the seasonality of our sales. So basically, these figures, I believe, illustrate very clearly that our business activity is very buoyant. If we take the analysis a tiny bit further. And if we look at how these sales balance out between our consumer activity. And between the larger part of our revenue, the professional sector, we're able to see that consumer sector shows a growth of 27.3% on a like-for-like basis, and the professional sector with EUR 290 million is virtually at the same level as last year on a like-for-like basis. And so the situation is very different from that that we experienced last year. So of course, with the net improvement. Let's now go into even more detail and take a look at the consumer business. Here, you've got the figures on the screen in the top right-hand corner. It's very clear that in this sector for the first half of the year, demand has been very, very persistent, very strong. For all of our small domestic appliances. And alongside that, we've seen very good quality in terms of the sales. Yes, there's been a certain amount of promotional pressure, but it's remained moderate. Lots and lots of demand out there. And we've been able to deliver what has been requested. So we're healthy very good situation for maintaining our price mix. Now this sales growth that we're seeing is actually faster than the market, faster than what we've encountered in the past and faster than what our competitors are seeing. So very steady growth. We're seeing it across all of our geographies, across all of our categories possibly to a certain extent, with the exception of 1 or 2 countries. But globally speaking, it's all geographies, all categories. And as was the case in 2020, we have a very strong catalyzer which is e-commerce. And as I said earlier, and we refer back to this, of course, there is a certain amount of tension in terms of the supply chain. When it comes to our professional business activity, there's been a massive difference between the first quarter and the second quarter. The first quarter was negatively impacted, of course, by the hospitality and catering sector that we still are at stand still. And 2020, of course, the comparatives were very demanding. Do you remember that in 2020, the difficulty that the professional sector encountered began only in the second quarter. For the second quarter, however, as I said, we've seen a return to growth with very good business, a very good trend in terms of the sale of machines and services, also in terms of the maintenance of our machines, with on top of that, an excellent rollout of contracts in the EMEA sector, and also in the United States. And of course, it goes without saying that for the whole of the 6 months, the comparatives were better than in 2020. So let's now go into detail and have a look at the results country by country.

Thank you, Thierry. Good morning, ladies and gentlemen. So I'm now going to go through the detailed presentation of the results and the financial situation. I'd like to start on the organic sales. So we have organic growth that amounts to 26.3%. So EUR 768 million. The currency effect is negative. We'll talk revert to that, so down 4.3%. And also the parameter effect mainly because of the acquisition of StoreBound acquired in the second half of 2020 for 1.8% which gives us the 23.9% in the growth rate as published. If we look now at the currency impact for the first half year, the currency impact is negative in terms of the impact in relation to the revenue, mainly drawn forward by the ruble, the American dollar, the Turkish pound, and also the Brazilian real. The yen, of course, also has a negative impact. So the currency effect overall amounts to minus EUR 125 million on sales stronger in the first quarter, EUR 81 million lower for the second quarter, EUR 44 million. If we now perform an analysis of the actual sales, I'd like to go into detail on how this works is the organic growth in comparison with 2020. So the first set of figures corresponds to the first quarter. The second, the second quarter and the third set for the first half year. So you've got consumer sales initially. Here, we're up 39% for the first quarter, up 20.6% for the second quarter and up 29.6% for the first half year. If we look at the professional sectors, as Thierry de La d'Artaise said, minus 26.2% for the first quarter, up 34.2% for the second quarter. So flat for the first half of the year -- And what's interesting in particular is the comparison with 2019. That, let's say, was our base year, our reference year. And we're able to see that the total for the group is up in 2021 by 7.15%, 8.1% for the second quarter and the overall progress for the half year is minus 8%. So the consumer results are pretty constant, up 12%, then up 13% and up 12.6% and yet Professional Coffee is gradually rising up. As you can see, they're gradually progressing, but there is a drop for the first half of the year, nevertheless. If we now divide up the sales and look at them in relation to each individual continent, we're able to see for the consumer sales that the growth is there for each of the 3 continents. Look at the Americas, for example, at 57.2%; then EMEA, up 34.9%; and Asia, up 15.3%. This is the growth rate on a like-for-like basis. Next, when we look at it individually per country. And I think this is quite historical because here you've got our 20 largest countries and each of our 20 largest countries achieved growth superior to 10% compared with last year. And I think the lowest one is South Korea at 9.4%. And we can see remarkable performances for the Western European countries, notably with France, for example, Belgium, Poland and the Netherlands, above 30%. And then you've also got countries that are extremely dynamic. Russia, Italy, in the top 10, Brazil, the United States, but also Turkey, Colombia. And so the performance overall, as Thierry de La d'Artaise said, is very much across the board for all of our markets. If we now take a look at the rest of the world, starting out, for example, with Western Europe, I think this is a very interesting point and a true element that shows how successful we've been over the first half of this year. Western Europe shows growth that amounts to 27.2% on a like-for-like basis, pulled forward by all the markets by demand, but we've done better than the market. Generally speaking, we've seen that France is very dynamic with over 30% in growth rate. The context is one of restrictive health measures, a lot of uncertainty. We've seen, for example, that Germany was confined for a long, long time for the first half year, France as well. All of these measures have become more subtle at the end of the first half year. We can see gradually that physical stores are reopening. So we have a context that is unsettled, and yet our growth is very dynamic in all of the markets. E-commerce, as we said, is the main growth driver. I referred earlier on to 2019. Just to give you an idea, in Western Europe, we are up 13%, nevertheless, in comparison with 2019. And this growth is drawn forward by a certain number of blockbusters, multicookers, grills, WMF products. WMF is doing extremely well for this first half year, but also the full auto coffee machines, the versatile and robot vacuum cleaners and so on and so forth. So very good news for this first half year due to remarkable performance for Western Europe, and this is drawing the group's growth forward. Now if we go east here, we're more used to seeing very dynamic growth. This is confirmed up 55% growth rate on a like-for-like basis. And a few modifications up 57% for the first quarter, up 52% for the second. So up 55% overall for the first half year. All our markets are confirming the general momentum, Russia, Ukraine, Central Europe, a return to organic growth also in Turkey after 2020 that was rather difficult. And also, we have rapid advances in new territories, countries such as Croatia, Slovakia, Kazakhstan, Bulgaria, Israel and so on and so forth. We really talk about these countries, these territories, but they are areas where we're considerably reinforcing our positions. The same flagship products is in Western Europe, I won't refer back to them in detail. So another element that is worth noting and worth highlighting for this first half year is the unprecedented growth in the United States in North America specifically. In the United States, the growth is unprecedented, as I said, with very strong demand for the cookware articles. This is of one of the main drivers, record performance, for example, with some of our brands, All-Clad, T-fal and Imusa, they are doing extremely well, growing very fast. The United States is also borne forward by the integration of StoreBound. The sales are excellent and take place mainly in the United States. I think we're up 80% for the first half year. And we're also seeing the continued expansion of the retail network for StoreBound. And we're able to see in Canada and Mexico, for example, that we have the same robust momentum in terms of sales for the first half year. So in total, we have a first half year that is up 66.6%. That's what we've published and over 50% growth rate on a like-for-like basis. Further south in South America, we have a level of performance that is highly impressive when we look at the figures. So up 72.2% for the first half year, up 48.5% published. The economic and health situation is still a source of concern. The currency situation is complex, whether it's in Brazil or in Colombia, these are our 2 main markets. We also have very strong growth. Historically speaking, we've done very well in Brazil. The growth currently is fueled by the volumes and also by price increases in a context where there's a lot of currency depreciation and also higher raw material costs. And this nevertheless, is not preventing us from continuing to grow. In Colombia, the growth is very healthy. Record performances, for example, for sales for the second quarter, up 73% in terms of growth on a like-for-like basis. If we now move ahead and look at Asia, starting with China. China is up 13.8% in terms of its growth on a like-for-like basis for the first half of the year, so up 13% for what we published. And so this first half year has been very contrasting. We had a reverse kind of dynamics between third -- contrast between the first quarter and second quarter. The sales were stable in the second quarter versus 2020, but up versus 2019. So we suffered a lot more in the first quarter than in the second quarter, where things were very dynamic. And so this year, if we compare the figures illustrate that we're now doing okay. The half year shows a growth rate of 14%. In terms of the categories, we've seen a recovery in the cookware business. We haven't yet reached the same level as 2019, but things are gradually ramping up -- we're seeing solid sales dynamics in kitchen electrics, excluding food preparation. This is a sector where we've had a rather difficult quarter. And more generally speaking, we're seeing a slowdown in terms of consumption and continuous transformation of the retail sector. Obviously, we're doing more and more business in the e-commerce sector. Social networks within market sites. This is all having an impact on the prices that are dropping on average. And when we look at online sales in China, it's what we've always done right from the beginning. We've worked on extending our product range and upgrading the product offering, thanks to our innovations. And this is the way in which we wish to continue to work on this market. So we have excellent innovation capabilities. If we now look at the other Asian countries, here, we're seeing very good sales dynamics. The first half of the year is up 20% in terms of growth on a like-for-like basis. The second quarter was up 14.8% compared with up 25.5% in the first quarter. This is mainly due to the varied interest, very good double-digit growth in Japan in Q1 and Q2. Our cookware articles are doing very well; Ingenio, the new G6 range; and the electrical cooking range, but also electrical cookware. We've got an extension of Cookeo that is doing well. Japan things rather unstable. Of course, there's a new surge of COVID-19, which means that the state of emergency has been reinstated in the country. This takes play sporadically spreading around the country. And as we've got a lot of owned stores, we are impacted when different regions close down for COVID. One point that is interesting. South Korea, we have sustained growth in the first half of the year, driven largely by e-commerce. That is the case elsewhere. But driven also buy the best sellers cookware, of course. And also what's interesting to note, it's driven by the vacuum cleaner world that is showing a lot of promise. In the other countries of Southeast Asia, business is globally buoyant for the whole period. And as we've said, this is despite the complex health situation. Let's move on now and look at the sales change per product line. Thierry de La d'Artaise said in his preliminary remarks, all of the cash ops are showing growth starting out, for example, with cookware, as you can see, this is our core business. Here, we have a growth rate of about 30%, whether it's for electrical cookware or cookware articles. It's also important to note the very good performance of house maintenance or home comfort. We've said that we've developed the versatiles. We've developed the robot hoovers or vacuum cleaners. Here, the growth rate is, as you can see, very high. And the third comment I'd like to make concerns the fact that we're going into the drinks sector, the beverages sector. As you can see, we have coffee machines that are doing very well, the full automatic machines. And let me just round off what I'm saying, saying that basically, all our categories are showing growth. It's too clear that in certain markets, linen care for example, the growth is lower, but the overall average for the group, as Thierry said, is very good. The professional sector is gradually ramping up its business compared with what was the case last year. So that's the overview for sales. Let me now pass the floor over to Nathalie Lomon for the operating result from activity in the overall financial results.

Thank you very much, Stanislas. Good morning, everybody. So as Thierry and Stanislas have indicated, the group has achieved a revenue of EUR 3.6 billion for the first half of the year. So this is up quite considerably in relation to the first half of the year for 2020. And also, we've achieved an operating result from activity of EUR 320 million. So this is 3x the profits achieved for first half of 2020. But if I remember rightly, it's an increase of 40% compared with the performance that the group achieved back in 2019. So it really is a notable improvement of the group's performance for the first half of the year. And we would also like to remind you that given the seasonality of the group's business activities, the performance for this first half year is never fully revealing of the annual performance. I'd now like to go into detail on the elements that enable us to explain the growth in the ORfA between the first half of 2020 and the first half of 2021. Now first of all, I'd say you need to look at the volume impact. This year, our factories are working at full capacity. And hence, you can see that this is due to the increase in the revenue that has led to these increased volumes. Also, the price mix has played a role. We have EUR 160 million in contribution in terms of the improvement to the operating result. Let me remind you that last year, for example, at the end of the year, the group noted that there was an unfavorable impact of currency on its operating result and this amounted to EUR 110 million at the time. This impact was mainly due to what happened in the second part of the year, and we started to enter price increases into our business to improve the price mix. And in 2020, we were only able to offset EUR 60 million of this. We indicated to you at the time that compensating for currency took time. This is what is currently materializing because you can see that the currency effect is low for this first half year compared with last year. But we have the price mix that is making a significant contribution that is up considerably. And this illustrates the impact of the first price increases that we introduced last year, notably in those countries where the currency is more volatile. When it comes to the cost of sales, the cost of sales has dropped by EUR 11 million. This requires a certain number of comments. It's important to look at this in this minus EUR 11 million. There's a lot that we could say. First of all, excellent industrial performance notably compared with the first half of 2020, whereby as you know, part of our sites had to stop work. They had to close between 4 and 12 weeks, depending on the factory. We faced a drop in our industrial performance. We weren't able to absorb our fixed costs in the same ways this year. This year, the situation is very much the opposite. And so here, we're making a positive contribution to the improvement in the cost of sales. Very, very positive, very, very significant. Unfortunately, this is offset by exogenous aspects that we will refer back to at the end of the presentation. Notably, the increase in transport. This is mainly maritime transport products that are exported from Asia towards Europe, for example, and also products that are exported towards the Americas also. So this offsets this good industrial performance. And the third element that also has an impact on the industrial performance is the increase in the cost of raw materials. Here, for example, it's only having a moderate impact for the first half of the year and notably for the second quarter. A lot of this increase, it means that we've got products in stock. But it's likely that in the profit and loss account, we will see that the increase in the cost of raw materials will have an impact on our results further down the line. And this impact has been ongoing since the first quarter. Next, in terms of our advertising resources, as you can see, we're spending more money. This is what we forecasted. The variation in relation to the first quarter of 2021 is important because I would say that initially speaking, we were very attentive to our spending in terms of administrative and commercial expenses in 2020. We knew that the market was difficult due to the lockdown measures. This year, however, we know that the first half of the year is in line with what we did at the end of last year. So a lot of extra spending on administrative and commercial expenses so as to advertise for our product in all the different sectors across all of our geographies. You can also see that our administrative and commercial expenses just show an increase in EUR 3 million. So this basically means that our operating result on a like-for-like basis amounts to EUR 353 million. And this is affected by the currency effect minus EUR 36 million for the first half of the year. Let me now move on to the next slide that basically shows you the growth drivers. In other words, the advertising and marketing spending. We're going into a bit more detail on this in relation to what was presented to you earlier on. Here, you can see a strong increase in the marketing and advertising expenditure, EUR 244 million compared with EUR 176 million in 2020, and also growth or an increase in relation to the spending that we had back in 2019. I'd now like to move on to the comments concerning the net profit. So from the ORfA for the operating result from activity through to the net profit, there are a certain number of elements. First of all, we have discretionary and non-discretionary profit sharing. As you can see, the cost of this is up, but this is normal when the business is doing well, obviously you pay out more in terms of profit sharing. The line other operating income and expense, this corresponds to EUR 46 million in cost. This notably contains the spending for the closure of Erbach that we described in detail just a few weeks ago. And you also have the closure of a site, a smaller site that is located in Shanghai. This is [ SSEFC ]. Next, you have the net financial expenses. This is very close to 2020. No particular comments on this. And then you have the tax costs that have increased. This is due to the increase in the operating result from activity compared with 2020. Next, the noncontrolling interest or the minority holding interest. They are higher than last year, but this, of course, is also due to the increased business. And notably Supor. All of this enables us to have a net profit at the end of June that amounts to EUR 151 million. So this is a record performance for the group. And it shows a marked increase in relation to the profits last year that were virtually at breakeven point. Next, concerning the balance sheet. I'm going to comment on this in just some detail. There are 2 lines I'd like to focus on. First of all, the evolution of our needs in terms of working capital and also the evolution in the net debt. First of all, when it comes to our working capital requirement, we do require more money at the moment, more cash, that's normal. We're gradually building up our working capital requirement and have been during this first half year in relation to December. You might remember that we made comments on this last year and we benefited from supplier funding that was very, very high. We, at the end of the year, committed a lot of spending to promote our products. This is something that weighed heavily on our spending. There was a lot of seasonality up to the end of December. At the end -- up to the end of June 2020, we've been able rebuild up our stocks, our inventory, so that we can serve our clients for the third and fourth quarter. And this is the main reason why this working capital requirement has increased in addition to the fact that the business is very buoyant. Next, a comment on the net financial debt for the group, of course, this has increased in relation to the 31st of December. But please note that we have quite considerable drop in our debt in relation to the 30th of June 2020. So this is in line with the cash performance that we've been able to come up with through to the end of last year. I'm not going to go into detail on the operating result. Nevertheless, you can see that we have an EBITDA of EUR 438 million. This is due to the work that we've done. The group's investments amount to EUR 104 million. And we've also taken into account IFRS 16, you have tax and interest paid at this stage. This amounts to a spending of EUR 98 million. And then you've got other elements as well in terms of nonoperating working capital requirements and others that amount to EUR 24 million. So the group has used up EUR 67 million in cash overall for the first half of the year. Next, when it comes to the evolution of the net debt, as you can see that we're using cash as time goes by and the other elements, notwithstanding operations are made up of buyback of shares. For example, the buyback of shares in Supor, Supor buying its own shares. And also the buyback of shares by SEB SA in order to be able to cover the long-term action plans that the group has. The second element, the significant element here. And once again, it's specific for the first half of the year, it's the payment of dividends. So EUR 147 million of dividends paid out for the first half of the year, some being paid out to the minority shareholders for Supor. And approximately the rest will be paid out to the SEB group shareholders. All of this enables us to have a net debt at the end of June that amounts to EUR 1.8 billion. So now our last slide on the financial report. Just a few graphics on the working capital requirement. As a percentage of sales. Now here, as we were saying, we are rebuilding the WCR. When you compare the position with the 30th of June. Over the last 9 years, you can see that the situation in June 2021 is very healthy with operating WCR at 14.8% of sales. The company is continuing on to deleverage. So when you look at seasonality, this type of lever doesn't have perhaps the same meaning as it would on a full year, you can see that deleveraging of the company at the bottom layer is 1.6, which is an extremely good figure for the net debt/adjusted EBITDA. So if we're looking at comparison we've got excellent operating results at record levels and a leveraging situation, which is good too, very good and which shows that we have a very robust balance sheet situation. Now -- Let me give you an introduction to the upcoming -- the issues for 2021 with a focus on a certain number of elements which have impacted our cost base and which I think justified reaction from the group in terms of the change in our price and mix. Now we've already talked about these points when we published our quarterly results, the impact has increased throughout the year, and that is why we are coming back to that in detail on the impact in terms of the increase in price of raw materials, the scarcity of certain components, and also the attention in terms of transport and particularly shipping -- maritime shipping. Now you can see on this slide, there are two graphs, you are familiar with them, and they illustrate what I'm saying. The first shows the change in aluminum prices in London. And the second is the Shanghai Containerized Freight index. So between Asia and China, this is a 20-foot container equivalent. So you can see here, there is a lot of change in these figures, looking both at prices and in freight costs, you can see we had a very -- we had figures that were well under $1,000 for a container -- a 20-foot container. We've gone up now to pretty much $4,000. So this is a very high increase, and this index does not reflect the spot prices on this type of container, where we've seen prices in some cases multiplied by 10 compared to the long-term trend that we've seen. Now in terms of electronic components, there is a question -- there's an issue on price. These are prices, which are quite low in terms of unit prices. It's not so much the price is the fact that some components are extremely scarce. That means we have to manage our suppliers very carefully to ensure that we are able to deliver on our sales and service our customers on the -- with the products they're expecting. To summarize, we are revising up the impact of the extra costs in all of these areas. So components of raw materials. At the end of April, we had an estimate -- an estimated impact of EUR 50 million in '21 full year, but we expect it now to be over EUR 110 million. That's our latest forecast. In terms of freight, particularly sea shipping, sea freight, we were expecting EUR 50 million at the end of April also for the full year. We expect again over EUR 110 million. And now as far as currencies are concerned, we estimated an impact of EUR 40 million on our full year results and we expect that now to be around EUR 30 million with the help of a reevaluation of certain currencies and compared to the euro. So all of these points will require us to increase our prices in Q4. We're expecting it to be 5% to 10% up in certain product categories, categories are mainly imported products. Imported from Asia and also products which contain electronic components. This will help us offset a part of these extra costs.

Thank you very much, Nathalie, for those explanations on our -- the increase in our costs. So the conclusion for all of that is if we look at the outlook for 2021, the full year. As I like to remind you, we think we've had a very good first half, excellent first half in 2021. The second quarter, Q2, was really much better than we expected. And as we discussed when we met a few months ago, we, of course, have to remain cautious about the second half year. We have very limited visibility for the consumer business. That will, of course, depend on the coronavirus crisis. As I was saying, though, our business activity is very robust. And we also have uncertainties for the same reason, for the health crisis, given how things will perform in terms of Professional Coffee recovery. So we are revising up our estimates. We expect it to go over 10% now in terms of our 2021 revenue growth assumption. We said it would be around 10%. Now we expect it to be a little better -- higher than 10%, and we are maintaining our assumption of an ORfA margin close to 10% despite the fact that we have this extra costs of around EUR 250 million, as Nathalie was explaining, we had estimated those at the end of April of EUR 140 million. Now of course, we will deal with that by increased prices by our excellent business activity with the fact that it's a less promotional market, we have excellent industrial activity. All of that means that despite this very high increase, we are confident in our -- the group's ability to generate excellent results for 2021. So those are the points that we wanted to share with you. Now we are, of course, ready to answer your questions. I think the questions will be projected on the slide on the screens.

[Operator Instructions]

Good morning to all. I hope you can all hear me well. I think that the introduction -- you're looking at market, all geographies, especially in China. Could you give us an idea of the trends in the market in the United States, ideally looking at, particularly both online and offline. Second question. For China, could you tell us a little bit about the retail partners? Third question, a very naive question. you have price increases in Q4, will the retailers be able to anticipate on that and sell more in Q3. I imagine that there is an effect in terms of transport. For example, that means that they wouldn't be able to do that. So just to check that point.

Thank you very much. I'm going to ask Stanislas to answer these questions.

I would like to answer these questions. So good morning, delighted to answer your questions. Now in terms of market share change in China, the first -- the main point is that it's difficult to really read market shares in China. It's a very big country. They don't really have very comprehensive panels. So we don't generally -- we don't publish our market share in China, but we can say that we are growing a little faster than the market in cookware, on electric cooking, which represents about 2/3 of our business, perhaps even more, both on and off-line. We can also note that the market in China is more dynamic in vacuum cleaners, which is the segment really driving growth in that market. And that is a segment where that we moved into a few years ago, and we are still a small player. So if you look at the overall statistics, you can see that some players are more dynamic than us. It's more because of their category mix rather than the performance within each category. The second question on our distributor stocks. We don't have any statistical information or full statistical information on that. However, we can see not necessarily out of stock, but delays in deliveries. So that does create some tension in terms of stocks and in terms of inventory and because we have higher demand than we -- than many people expected, that means that our retail inventory is at a fairly moderate or low level rather than a high level. The third point, and that fits into the first point, the price rises in Q4, will they generate extra orders in Q3? I think we are in a phase with our retail customers, we are managing the demand better. And we are more concerned about having a balanced response to demand in different countries rather than this question of over orders or under orders when we may have some price rises. But of course, nothing prevents a retailer to increase their order levels because they're expecting higher prices, but I would say that our order books are quite solid, quite stable in the weeks ahead. I don't think they will be disturbed or strongly impacted by any outlook in the price rises we're announcing for Q4.

Just if I may add a couple of points to the first question on China. I think you mentioned or you asked a question about the online market or online and offline. Now just to say that as -- in 2020, we really insisted in China with a much higher increase in online sales and a downturn in off-line sales, which explains the fact that all the major players in that market, our colleagues were -- they were already started out in off-line. So of course, we did suffer from this drop in off-line. Just wanted to specify that on China. Now we can take your second question.

So hello. I hope you can hear me. My first question is on spending on 1 point, a very high impact in the first quarter. We think that must be phasing. Can you tell us more about that? The second on the price rises in general, you do that when you launch new products, is that the same case now for Q4? Or is it price rises -- it will also involve products that are already in your range and have done for some time? Third question on Professional Coffee, good performance in Q2. I wanted to know about what your outlook was for the rest of the year and a bit on your order book for that area. And if you could just give us a few comments on your upcoming General Shareholders' Meeting and particularly on terms.

Thank you. So thank you for your questions. Now as far as promotional and advertising spend, of course, you're right, the first point in extra investment in Q1 was an important element. In Q2 last year, we were waiting to see how things would evolve and change before we started making investments. Now this -- we have now started to strongly increase our advertising spend in the Q3 and Q4 last year with very positive results on our growth. We've continued to make those investments in Q1 and Q2 with positive impact on results. Our intention is to maintain this comparable level of investment or slightly higher than what we've been doing until now. And of course, we want to keep -- remain agile and flexible in adjusting our investments depending on demand, supplies, and also the change in our costs. We have a very clear strategy in terms of developing our business growth through innovation and media spend, but we are also pragmatic and responsive depending on the change in our market situation. Now in terms of the price rises, yes, new products are an opportunity not to, in fact, have a price rise, but to introduce new products at higher price levels than we intended -- we expected. However, there is a strong impact in terms of costs. So we will also increase prices as Nathalie said, for certain products, particularly products imported from Asia, we will increase the price of those products, and that will happen as from Q4. So the answer is it will be both on new products and on imported product. I meant Q4 this year, not next year.

Now on Professional Coffee, as I was trying to show in the positive case earlier, the positive side of things is that this recovery of growth we've seen in Q2 concerns both the recurrent contracts, for example, in Germany, we have a very large number of customers, and all of those customers have started to send through more orders for machines or for maintenance. So that shows their confidence in the future and in the reopening of all the restaurants and coffee shops in -- on a long-term basis. The second thing is that we've seen particularly in the U.S., and I think this is also a very positive sign. We've seen that we've had a large number of orders from new customers, big contracts. It may be coffee shop chains. It may be gas stations, gas stations or stores. And we've seen that the recovery is there in America. It's happening. And so we can see that in the orders from our customers. Now I hope now, of course, it will depend on what happens with coronavirus in those countries. But for now, we can see that there is a real feeling of opening up the economy in the U.S. And of course, we're remaining cautious in terms of how consumer spending in the U.S. However, in terms of Professional Coffee, we are quite positive because the economy is starting up again. Now the comment on the reason for having called general assembly on the 6th of August, it's really a question -- a family story between shareholder -- iterative shareholder who's on the minority shareholder within the family and the overall family. But I would say that this particular incident doesn't have any impact on the solidity and the robustness of our shareholder and its interest in the long-term future of the group. I think you've seen a few months ago the creation of a family holding company, which will buy SEB shares, and that will not change anything in terms of the good functioning of our Board of Directors and the group in general. Now we have some questions which have written questions. Our guidance is uplift. I presume higher pricing to offset cost and the better-than-expected third -- second quarter '21. Am I correct? I would say you're right, you are. Yes, you are definitely correct. [Foreign Language] So yes, as we said, the second quarter has been much better than we anticipated. And therefore, we believe that this growth that we have incurred will remain and will certainly allow us to have better sales than anticipated, and that's why we're increasing our rate of sales for our estimate for 2021? And secondly, the higher prices, as I said, the much better activity in all our factories allow us to think that we will be able to compensate the huge increase in freight and raw materials. I hope I answered your question. The second one is consumer trend. You see more challenging your Q3 or Q4 given your previous year trends and current dynamics. I will let Stanislas answer, and China, what is your current trend in China versus 2019. I think we have answered, but you will take it.

Right. Thank you. Thank you, Thierry. On the Q3 and Q4, of course, the comparative numbers are much higher than they were in S1 versus 2020. We don't -- we keep the same prudent approach. We see a market that is going to be stabilizing versus a very dynamic growth in the first semester. And our guidance reflects, as Thierry said, the very good first semester and the ability to compensate through a variety of measures: pricing, quality of sales, absorption, the impact of the extra cost on our sales. So the answer is we are prudent, we are more confident than we were 3 months ago because on the base of this second quarter, but we don't change notably our perspective for the second half. On the current trend in China versus 2019, if you look at published numbers, we are currently at minus 4% at the end of S1 versus 2019, and there will be a couple of points of negative currency impact, difficult to have currency impact over 2 years, but we are aiming towards stability or recovering the levels of 2019 in China. I hope this answers your last 2 questions.

Which categories and countries are the ones where you intend to increase your sizes and what will be the size increase?

So we expect it to be 5% to 10% in terms of categories. I'll hand it back over to Stanislas.

So that will be about a little less than half of our references. So 5% to 10% in terms of price increases in all countries with perhaps 3 major product categories, often the ones that are imported from China or Asia because one of the big cost elements that we want to offset is maritime freight, which, of course, does not impact products manufactured in Europe. Now in terms of these increases, they involve the developed countries, North America, West Europe, Eastern Europe. We have more specific and more frequent increases in the countries affected by the currencies which have reduced considerably: Russia, Brazil, Mexico, for example, there we have brought in price increases once or twice, depending on the country, and we will continue to do that to offset the impact of cost, but also the currency impact. And if you want to have a panorama, 5% to 10% increases on a little less than half of our references, mostly in imported products coming from Asia. And of course, we are trying to look very carefully at the competitiveness of our product references. We're not just doing price increases, which will be across the board, and they will be recurrent and regular.

Now I think you know that the business model of the group, when we have had a major currency changes or in variations in the prices of our raw materials or our components. We've always offset that by price increases. That's something we've done regularly. And of course, given the scale of the increase this year, we need to do the same thing. Could you remind us about the seasonality of your business? I think that the second half year is usually higher growth, more profitable. Can you explain that, please? I'll try to answer that. Yes, we do have strong seasonality in our business, particularly because Christmas, the holidays is a very major sales period, and that is in the second half of the year. So of course, that really drives our sales strongly. A few years ago, it was very well ahead of Christmas now if the dealers start ordering later. But of course, the last quarter is very high because of -- because of Christmas. And there's another part of the fluctuation, which is China because you know that Chinese New Year is not on a fixed date. It varies. So some years, we have delivery for the Chinese New Year early if it's at the beginning of the year. Sometimes it's at the very beginning of the year for delivery when the Chinese New Year takes place later. But yes, always the second half year is always much higher at business growth than -- much business activity is higher than the second half.

Just to add a point, we did last year give you a very macro analysis of our cost structure where we showed that 70% of our costs were variable and 30% of our costs were fixed. Now taking account of what Thierry has just said on Q4 where we -- which is a very strong quarter in Europe, Asia and the United States with lots of promotional events online. So there, we have a very major operational lever in the second half of the year, given our cost structure of 70% variable and 30% fixed.

I think there are a lot of financial points that help you to understand why it's much more positive. So could you give us some more detail on competition trends in Chinese markets, particularly online? Stanislas.

I'm going to try. Thank you, Thierry. Now you need to really split up the way the market changes in China. Online is more dynamic than off-line. Off-line is still down and off-line very much up. Now within online, you have the, what I call, traditional platforms, Alibaba and JD.com, I say traditional, but they're quite recent. But -- these are the traditional platforms we can say, and they are attacked by new platforms, mostly social media that are becoming sales outlets, TikTok, WeChat, and there are others, too. Now these social networks are coming into the market in terms of business transactions via offers that are entry level prices and references. So online generally is cheaper than offline. You have online, which is growing, whereas off-line is downward. But within off-line, you have a strong increase in traffic on platforms that are selling entry-level products. So that means you have a downwards tension on average prices, given this twofold trend in retail in China. Now within that, the prices at Supor are going up off-line, the average prices, they are going up also on online, but not fast enough today to offset this effect of switch or change. It's not really a switch. It's a trend, a trend in the market. So what are we doing? The Supor is working as it has been for -- in recent years on off-line. Supor is working in key categories by trying to go up in the range in terms of the products they're selling online, higher-end products. And we can see that explains the average price increase at Supor. That will take time to have an impact on all categories across the whole market, but we are continuing to do what we've always done in China, which means that we have downward tensions with people who are trying to go for volume. We are trying to look for value, and we're doing that through innovation and communication. And so we have strong development, strong increase in our marketing activation in digital. We do many streaming activities every day in Supor. We are applying on online, the recipes that have allowed us to bring value to our business off-line over recent years.

Now I'd like to remind you also that a few years ago, I think that our most expensive rice cooker was around the equivalent of EUR 40 to EUR 50. And today, we are selling rice cookers that cost EUR 150 to EUR 200. So we are looking at premium products, which we have done, not alone, also our competitors really looking at premium products in off-line. We now need to do that also online, which is exactly what Stanislas has just explained very well indeed. Could you look at a relocalization strategy, relocalizing your production? I'll try to answer that now. Those who are bringing their factories back locally are the ones who have gone offshore, a great deal of assets. We are not the only one in our business who kept so many industrial sites in Europe, in France and Germany. Frankly, we don't intend or even have the possibility to bring things back locally. Now I hope that those who massively transferred their production to China will come back into Europe. That would be a very good thing for the European industry. But as far as we're concerned, we will maintain our strategy as we always have, which fundamentally means that we focus our industrial sites in -- when we have high added value products where we can really add something, bring something to the consumer, bring them something extra, which means that we can sell them more expensively, but with margins that mean that we can manufacture them in Europe. And on the other hand, we manufacture all the products that I would call commodities -- So very simple products, those we produce in our Chinese plants, particularly in Shaoxing because, as you know, for several years now, we have started to bring back to Europe, some of the production more -- it's more subcontractors in China, which we have brought back to our in-house production in China. And today, we have a lot of -- with reduced sourcing a lot. And we are manufacturing things in-house a great deal. That is why Shaoxing, to my knowledge, is by far the biggest kettle producer in China, and it means we can sell throughout the world. I hope that I've answered your question. So can you refer back to your partnership with that market? Well, just a few words about this. There are 2 things to be said here. We have this partnership -- and it has 2 aspects inherent in it. First of all, there is a holding through our company, SEB Alliance, because we believe that it's worthwhile investing and we think there's a great deal to be learned in this sector. And secondly, I think that the sale of repackaged products is definitely part of our vision. It's an intrinsic part of our vision regarding products in the circular economy. I'm sure you know that we are no doubt the group that is the furthest ahead when it comes to the repairability of our products. We've had this for a long, long time. So we design our products so that they can be repaired. And today, all of our products can be repaired. We've worked a great deal, as you know, as well, concerning the recyclability of our products. This has been the case since last year, whereby we've had recycled aluminum pans for example, that are permanently part of our range, along with other materials, such as stainless steels? So yes, we definitely believe in the circular economy. And for us, it was perfectly logical and important to reach out towards selling products, reconditioned, repackaged products. Back market has become present in a certain number of countries, and we believe they're a very interesting partner. And this is why we decided to enter into a partnership with them. We're working currently in numerous countries, notably in Spain, and we think we'll ramp it up to more countries. And we will also do this by selling through our repair SEB sales. We have one that is due to open in Paris. This will be a repair center for products and it will combine work with disabled people, so who will be able to repair the products. So we will serve a social function and then we'll also repackage products. And it's very interesting because we will be able to rent products as well, something we already do. So it's all part of the circular economy. And we believe that we have to be present on this market. We're already present and we'll continue to do so. Let me see. Just 1 additional comment. Of course, we are also going to increase the repairability of our products. We said it would be 10 years, and we're going to ramp it up to 15 years. So we're looking much further -- forward. So programmed obsolescence is not something that we like. Next question. The crisis has -- it changed your approach to your external growth strategy. Well, let me just say that I'm sure you've noticed that our business activity, if I talk about our specific business activity in the consumer sector has been very good. The crisis, then the COVID crisis meant that people were in lockdown and hence, they weren't able to go to the cinema or to restaurants, they weren't able to go out to bars. So of course, that had quite a strong impact on the amount of households that were consuming our products. So as a result, our sales are up considerably this year compared with last year. So to be totally honest, I think a lot of our colleagues, a lot of our competitors have also benefited from the COVID crisis if this is possible. And so we haven't yet seen any companies in our sector that are having a lot of difficulty. It's very difficult in the professional sector, and it's true there that possibly, there will be opportunities. This being said, we do not make acquisitions in a random manner. It's part of our strategy. And we make acquisitions on a regular basis, not just when we're exiting from a crisis. So no doubt, yes, there will be acquisitions. But if you want me to tell you where they will be, I'm sure you know that I'm not able to answer specifically in terms of the markets, in terms of the segments because in order for there to be a buyer, there has to be a seller. And more often than not, we can't dictate that. Our industry is still an industry in which there are lots of family-owned groups, and family -- in family-owned groups, they only sell when there's a change in generation. So we don't always know exactly when certain family members are going to withdraw. So I think around the world, we know all of the different actors in our business and we're ready to seize any opportunities that come about whatever the continent. The only thing that we always look at, of course, is the fact that our acquisitions have to be complementary. They have to enable us to strengthen either one of our geographies. It has to enable us to make inroads in the given geography much faster or it has to enable us to ramp up our growth for a specific product category. So I 100% certain that there will be acquisitions over the next few months. Will there be a lot in 2021? Well, we'll talk about that next time we meet up, but it goes without saying that naturally as highlighted, for example, that the group's debt situation is extremely favorable. We have a debt situation that is very close to the 1 ratio in relation to the EBITDA. So yes, of course, there is absolutely no obstacle from a financial or management perspective for acquiring another company. And so no doubt, there will be opportunities. Question. Do you believe that consumers -- I hope I've answered your question. Question, do you believe that consumers will be ready to pay for the higher prices with a price increase of 5% to 10%? And what about promotional aspects? Stanislas.

Well, the first point that you raised means that basically, we define a price increase for our clients, and of course, the sales price to the consumers, the resale price to the consumers, that's under the responsibility of the retailers. It's -- and they can decide to offer promotions if they wish, of course, we have indicated that these price increases are very important for certain products. We believe there's a level of acceptability for certain products, higher for some products than for others. And we indicate this to the clients. But basically, all of the costs are increasing for all of the industry. So we do expect to see price increases pretty much across the board, not just for SEB's products but also for our competitors' products. Will that have an impact on consumer demand? It's very difficult to say at this stage. We believe that consumers will accept these price increases, we perceive that the overall perception of the value we're able to provide, thanks to our innovations, thanks to our product mix, thanks to the promotional office that will be out there and factors in these new prices. We believe that we will continue to be competitive in relation to the rest of the market and the competition.

Thank you very much. Now there are no further questions. Time is going by. Let's wait for just a few moments to see if there are any further questions. No further questions. Okay. Maybe I'd just like to conclude by saying a few words, 1 or 2 sentences. Just to say that we believe that this first half of the year has enabled us to highlight results that are clearly up in relation to 2020, but that was the least we could expect, but we also show strong growth even in relation to 2019. So I think this illustrates that the group has come out of the crisis very well. The first half. Well, the second half of the year, of course, we don't yet know what will happen because we have no idea what impact the health crisis or the health situation will have on the economy. Nevertheless, I would say that we are very confident for this financial year. We have numerous new products that will come out in the second half of the year. We're making sure that we're very busy in the field and we're confident in terms of the hypothesis that we've communicated on, and we believe that we will achieve double-digit growth, strong growth in relation to our revenue, and we believe that we will return to an operating margin of approximately 10%. And let's get together in that case in a few months' time in order to be able to measure the growth for the third quarter before we talk at the beginning of next year about the whole year. So thank you very much for listening and being with us, and we wish you a wonderful summer. [Statements in English on this transcript were spoken by an interpreter present on the live call.]