SEB SA (SK) Earnings Call Transcript & Summary

Hello, and welcome to the Groupe SEB Provisional 2024 Sales Conference Call. Please note, this call is being recorded. [Operator Instructions]. I will now hand you over to your host, Mr. Stanislas de Gramont, CEO, to begin today's conference. Thank you.

Good morning, good afternoon, good evening, everyone. Welcome to our Provisional sales conference. I will, as usual, be running this presentation together with our CFO, Olivier Casanova, who will be talking for 20, 25 minutes, and then we will, of course, be taking all your questions. So thank you first to be here, and thank you for being with us to celebrate or share what has been a pretty solid growth year and solid growth over the full year. As you've seen in the press release, we have an annual revenue that is up by 5% organically, spot on our expectations and our guidance. And that's in a small domestic appliance market, small domestic equipment market, including cookware, that has been buoyant overall, and we'll see with Olivier the detail of some regions. And that dynamism of the market, as usual, has been mainly driven by innovation and innovation and innovation. 2024 is a landmark because you will all remember that we had a huge 2021 that was the COVID crisis, where people stayed home and there are some question marks whether the market would resume and whether we would resume anytime soon the same level of sales, well, 2024 is a landmark because we have beaten in the consumer business, our record sales levels of 2021. And I think this means that, that confirms that our industry is one of structural sustained growth. That means that, yes, there was a positive blip during COVID, but with all this is now behind us and that's great news. And the industry, we believe, will continue to grow because of the structural reasons why it's one of growth. Conversely, in the professional business, you'll remember that we had an exceptional year last year at 27% overall growth. And 2024 is a year of consolidation at high levels in this professional business declining by around 5%. And last but not least, in this interruption, we've been making more acquisitions and strategically on for further our business in the consumer and in the Professional business. Now if I go directly to the sales forecast, the sales performance -- and I'm on Page 6 for those who follow the slides. As I said, full year sales EUR 8.266 billion, 5% like-for-like growth versus 2023 with a fourth quarter at EUR 2.541 billion spot on our expectations at 3.6% like-for-like growth. When you look at how this growth decomposes between organic and reported, we see that organic growth, EUR 400 million, 5% growth. We have a negative currency effect of EUR 205 million, minus EUR 2.6 million. We have a positive scope effect, the acquisitions that were integrated in the year, notably Sofilac, for 0.8% of growth leading to this EUR 8.266 billion. When you look at the way this currency effect spreads between currency first, well, we have the usual suspects. You'll see the Turkish lira. We see the Argentinian peso, the Russian Ruble, the Egyptian pound, the Brazilian real, but also the Japanese yen and hryvnia, the Ukranian hryvnia. We see the Chinese Yuan that has had a negative contribution, and of course, that weighs a lot on us. But at the same time, we see that this currency effect has been reducing quarter after quarter. This EUR 205 million negative currency effects splits or spread EUR 75 million in Q1, EUR 52 million in Q2, EUR 41 million in Q3 and EUR 38 million in Q4. Now when we look by big business segments, starting with professional, as I said, the full year is minus 4.5% like-for-like. The plus 1.4% represents the additions to the parameter mainly modern currencies. And at the fourth quarter, we have a decline of 12.3% like-for-like and minus 6% in total. Whilst in the consumer business, the year is very solid and we grew the year 6.3% like-for-like. As I say, we beat 2021 record. And at the same time, Q4 against the high comparison base is at 5.5% like-for-like growth. I'll take you through the details of the professional and Olivier will navigate us through what happened in the world on the consumer business. As I said, of professional, it's a year of consolidation. It's a year of consolidation at a high level. Yes, we have an organic decline in 2024. That's on the back of exceptional 2023 comparison base, 27% was the growth last year. Notably, this is the second highest year in terms of revenue growth -- of total revenue, sorry, for Professional Coffee. As you know, in Professional business, we have big contracts and we have what we call core business, recurring business, that recurring core business is up by around 7% over the year, and that has been pretty consistent through the various quarters of the year. So that tells us that -- and that answers one of the questions, but is it something structural? Well, no, because the structural business, the recurring business or the core business is still growing 7%. It's growing also on the back of the ramp-up of new customers in Mexico but also in China, but also the development of new markets. We've expanded notably or significantly our business in Malaysia, in Taiwan, in Eastern Europe, so that growth of our business is sustained and fed by a core business that is growing substantially, 7%, but also by geographical expansion, which, by the way, is the core of our strategy. And in fact, indeed, we had fewer deliveries on the large deals, and that explains mainly the gap versus the negative performance versus last year. In the Professional business, and that's a journey we started 4, 5 years ago, we've continued our strategic enforcement in the culinary business. Back in April, we announced the acquisition of Sofilac Group. Sofilac is a high-end professional and semiprofessional cooking equipment companies. They have very iconic Charvet and Lacanche brands amongst others. It's around EUR 60 million, mainly majorities in the professional business. It's present in over 45 countries with 1/3 of its revenues from export, not fully integrated in the group. We just announced yesterday the acquisition of La Brigade de Buyer. La Brigade de Buyer is a fantastic company, made of mainly 3 brands: de Buyer, Sabatier, and 32 Dumas brands that are symbols of excellence and expertise in cookware for de Buyer and cutlery and [indiscernible] for Sabatier and 32 Dumas brands. They have strong positions -- in professional cookware and premium consumer that generated a revenue of EUR 66 million in 2024, half of which international, they have 3 production sites in France with 290 employees. And that's, that's I think, the reflection of a clear determination to become a reference player in Professional culinary. So if you look at the acquisitions that we've been making in the professional culinary business, PACOJET, Krampouz, [indiscernible] , De Buyer, I think we are creating this embryo of very high well-regarded brands with strong technological difference with a massive opportunity for international expansion and De Buyer is one more part of that, I'm sure there will be questions. But we are dealing too much. I will hand over to Olivier to take us through the consumer year.

Thank you, Stanislas. So turning to consumers. So you can see that we reached EUR 7.3 billion of sales, up 6.3% full year on a like-for-like basis and up 5.5% in Q4. Of course, we continue to operate in an environment geopolitically and macro economically, which is complex. But in this environment, it's, let's say, worth to note that the small domestic equipment market remained resilient and generally well oriented. This is not necessarily in a uniform manner, but it's driven as Stanislas said earlier, by product innovation in most product categories. So a strong organic growth over the year. And as we will see it was particularly strong outside of China, where we registered 9% growth on a like-for-like basis. I'll come back to that. This is, let's say, supported by a return to solid growth in Western Europe and North America and a continued strong momentum in Eastern Europe and South America. Supor operated in a market, which is still weak, which hasn't improved, in fact, throughout the year. And in this market, Supor continued to outperform and achieved revenue, which was broadly stable, slightly down on last year. And outside of China, in the rest of Asia Pacific, we have managed to achieve a slight growth over the year. So this translates into the following trajectory in terms of quarterly growth. You can see that we've been above 5% organic growth in each quarter this year and the 5.5% in Q4 2024 compares to, in fact, a high basis of comparison of plus 7.7% in Q4 2023. So let's turn to the regional, let's say, explanation. So in Western Europe, you can see that we achieved sales of EUR 2.5 billion, which were up 4.8% on a full year basis and a strong 7.2% in Q4. We mentioned earlier that the seasonality of our loyalty program was different than last year. So we did benefit from a slight let's say, uptick in growth, but you can see in the footnote on the left-hand side that the growth, excluding a loyalty program was still very strong at 5.6% in Q4. We have seen widespread growth across Western Europe with, in particular, sustained sales in France. France was up 7% with strong growth, in particular, on cookware, but also in oil-less fryers and versatile. We've seen also strong growth in Southern Europe, that is Iberia and the Iberian Peninsula and Italy. But also in Northern Europe, notably in Benelux and the Nordic countries. One word maybe on Germany to highlight that we've seen a return to growth this year with positive and growing sales dynamic following the merger of our sales force between WMS and Group SEB that we did in beginning of 2024, and this has been translating into market share gains. And in the U.K., you remember that we had a slow or a difficult start of the year, the market has been depressed, but we have seen an improvement in the second half of course, on a lower basis of comparison, but still, let's say, worth noting. Overall, in terms of product, we are seeing good growth in cookware, in fact, in all product segments, nonstick stainless steel, but also ceramic, of course. And we benefited from the rollout of innovation in small domestic appliances. Of course, in electrical cooking, notably oil-less fryers, in floor care in versatile and to name but a few in full-auto coffee machines. And as we said, a solid growth in Q4. So turning to other EMEA countries. EUR 1.2 billion of revenue in 2024, plus 22.5% on a like-for-like basis, 12% on a reported basis. The difference, of course, is explained by the depreciation of the Turkish lira, the Russian ruble and the Egyptian pound in particular. We have seen, of course, excellent full year performance in Eastern Europe. The markets there remain very buoyant. And in these markets, we benefited, in particular, from the successful launch of our product innovations, versatile, oil-less fryer, garment steamer as well and as well as full-auto coffee machine and cookware. We're seeing also strong growth in Turkey despite, of course, a complex environment marked by substantial inflation and depreciation of the currency. And finally, in the region, it's worth noting the important strategic development that we did last year with the acquisition of the majority of the control of our distributor in Saudi Arabia, which for us is an important market for the future, and that we will accelerate our sales in this market going forward. Moving to North America. We had revenue of over EUR 100 -- EUR 800 million in 2024, up 7.5% on a full year basis like-for-like and a solid 4.9% in Q4. I -- if we look at the different countries that made the region in the United States, the market remains slow, but we consolidated our leadership in cookware. And we benefited from a gradual recovery or improvement in the market as well in linen care. This is driven, of course, by innovations, which is helping with trade up, but also helped by new customer listings and range extensions. In Mexico, we continue to have a very dynamic market. And in this market, we are registering further market share gains, of course, in cookware but also full-auto coffee machines or [ fans ]. We are also extending further our ranges into electrical cooking and floor care. And we've been, of course, offsetting the depreciation of the peso, since the summer. And then finally, in Canada, we are returning to sales growth and benefiting in part from, of course, a low basis of comparison last week -- last year. Turning now to South America. We achieved sales of EUR 354 million, up 13.5% on a like-for-like basis. In Colombia, we consolidated our leadership. We achieved very strong double-digit growth, excluding fans. We have been growing and improving our competitive positions in all categories, of course, on our main historic categories, cookware, kitchen electrics and food preparation, but also extending into new categories, full-auto coffee machines and versatile in particular. In Brazil, we have a positive performance over the year. Although in Brazil and in the rest of the region, we have, in fact, 2 quite different halves in 2024. And -- you remember that there was a strong any new effect, which boosted sales of funds in H2 2023 and in the first half of 2024. And that, let's say, positive effect waned in the second half of 2024. And at the same time, we have seen also further depreciation of the currencies in the second half, which impacted a little bit the performance in the second half. Turning now to China. We had a revenue of EUR 1.9 billion. So as I said, slightly declining or broadly stable over the year. The market remains weak. There is a weak consumption and relatively promotional environment. But in this market, support continues to outperform. Thanks, of course, to its product innovation in works, in megs, in steamers, in linen care, which is leading to market share gains both in our 2 big, let's say, business unit cookware and kitchen electrics, where we have been consolidating our leadership. If we turn now to the rest of Asia, EUR 483 million of revenue, plus 2% on a like-for-like basis and plus 4% in Q4. So we are, let's say, satisfied with solid performance in Australia, for example, but also in Vietnam and Malaysia, where we are gaining market share. We're expanding our product offering and our network. The situation, of course, remains still difficult in Japan and South Korea, in particular, because of the weakness of the consumer demand and the weakness of the currency. So overall, if we step back on the following chart, you can see that we had, in fact, 9% to 10% organic growth full year, both in EMEA and in the Americas. In Asia, we are broadly stable or slightly down, minus 0.7% full year and as I mentioned, excluding China, we had a growth full year of 9%. So now Stanislas, I will hand over to you so that we can give us a bit more perspective on the product category basis.

Mercy Olivier, thank you very much. So that's the way our product categories have evolved over the year. And the first satisfaction is that all product categories have been positive. I'll start with the right with the [ Hero ] category, which is home care, home cleaning mainly that has had over 12% growth last year. That is driven by innovation, innovation on versatile vacuum cleaners and washers. We see an unusually high food preparation at double-digit growth. Well, that's in part impacted by a strong loyalty program we had in France with a major customer. Now what's interesting is that all the other categories, linen care, cookware, beverage, and also electrical cooking have been driven by innovation. Definition of the low positioning of electrical cooking is mainly driven by China negative market performance. Now off with the analysis of the business, both consumer and professional, let's see now how we see -- how we can conclude this year. As I said in introduction, it's a year of a solid and steady growth. The year-end 2024 is supported in line with our expectations, showing an organic growth -- sales growth of 5%. We confirm an operating margin close to 10%. That was our guidance. And in fact, we expect 2024 offer to increase by about 10% based on 2023 offer. We don't give a number, but that gives you a pretty precise indication. Right. Without further ado, I will now hand over to the audience to take your questions.

[Operator Instructions] The first question comes from the line of Louise Wiseur calling from UBS.

So the first one is with regards to the professional business. I was just wondering, if there's any indication you can give us around how you think about the organic growth for 2025 and understand obviously that the comps were offering in Q3 and Q4. So any indication would be helpful. And the second question is around the consumer business. I mean, the consumer growth is still very good in all regions except China. And any color you can give on China more specifically in terms of the recent trends and whether you've seen that -- there may be a start to shift in terms of the trend because Q4 remained quite weak. And especially, if you can comment also around the government's announcement of extended the subsidies to the rice cookers. And the third question is with regards to tariffs, please. Is it fair to say that products sold in the U.S. are mostly manufactured in the U.S. or China, but not in Europe or Mexico and Canada. I don't think you've seen manufacturing that you have there in Mexico and Canada. So is that correct kind of like just trying to understand the risks on potential tariffs on your business?

I will let Olivier take the first one, and I will take the other 2.

Okay. So the -- as we said, in fact, the -- our professional business is, let's say, the market for our professional business has a growth between 5% and 10% organically. In coffee, in particular, this is true for the full-auto coffee segment. In fact, the demand -- we estimate that the demand for coffee consumption in the world is growing at around 3%, 4%. But there is a substantial shift of the demand towards full-auto coffee machines because they, let's say, correspond , they are more efficient, in particular, as the recipe become more complicated. And therefore, there is an additional boost of 4%, 5%, 6% for the full-auto, let's say, segment and therefore, we estimate that the growth of the full-auto coffee machine market is somewhere between 5% and 10%. Now this is not necessarily consistent every quarter or indeed, every single 12-month period because it is also dependent on, let's say, the timing of the big contracts and those are not -- they say they are few and far between, and they tend to work in waves and so this tends to blur a little bit the picture. But fundamentally, the market is growing at this speed. And this is similar to, let's say, on the culinary side, in part because also there is a lot of potential for market share consolidation in a market, which is still highly fragmented.

And I guess this is why we don't give a quarterly guidance because that doesn't really make any sense to guide on a growth on a quarterly basis. I'll take your next question, I'll take the third one first, which is on the U.S. tariffs. What obviously -- well, the first straight answer is we don't make any -- we don't manufacture any products in Canada and Mexico made in -- sold in the U.S. We have -- our sourcing -- well, U.S. is around 10% of our consumer business. And our sourcing is a mix of Europe, Chinese and China, but also Vietnam substantial. So we are -- we have, as you say, as you know, an integrated supply chain model, we have factory in several parts of the world. So -- and we have a pretty high reactivity. So we -- we are preparing ourselves, of course, to various scenarios. We are preparing ourselves also for those scenarios that don't have any alternative to use our suppliers and to use price increases potentially to compensate. But we don't see tariffs in the U.S. at this stage with what's currently in the street as a substantial material threat to our business next year. Your second question was on consumer China. Whether we see a shift and one of other government announcements. Well, consumer China, as you've seen, is around about steady between Q3 and Q4. The Q4 number is slightly lower, but Q3 last year was plus point -- Q4 last year was plus 3.3%. So there's a base effect. But in any case, it is a stable negative-ish and it's not very exciting still. Yes, there have been some government announcements to incentivize the purchase of rice cookers. It's very early to say because we don't have any details yet on what shape and form and amounts these subsidies would mean for us. So I cannot really tell you we are a big rice cooker player in China. I mean, I think, we sell around 15 million rice cookers per year. So it's materially substantial. We are leaders in this category. But we don't have yet the details of how this is going to work and whether it's going to be material or not. But if anything, I think it's good news to see that the Chinese government eventually is looking at ways to stimulate consumption and to stimulate consumption on product categories, which are close to our business. It can only accelerate the return to growing China, which, as you know, we see growing mid-single digit long term. on the back of the equipment level on the back of Chinese consumers' appetite for our product categories. Does that answer your questions?

Yes, that's perfect.

The second question comes from Christophe Chaput from ODDO BHF.

Yes. My question -- my first question, sorry, was as well on China and the cash back. Just to be clear, in fact -- well, yes, -- how much of your sales in China could benefit from those cash back operation? I mean, is it 20% of the sales that are concerned or on the 10 to 30. And just will it concern the full year 2025 or a limited number of months? And the second question is about the general manager that leaves or if you have specific comments that could be great because it seems to be immediately, which could be surprising, let's say. So again, if you want to make comments, it would be appreciated. And the last question is on the U.S. dollar. So obviously, a sorting for you, it appreciates so it could have a negative impact on the [indiscernible] for 2025, but you are probably mainly age already for 2025. So if you have a kind of [indiscernible] impact you offer, would be great as well.

I'll take the Chinese questions and Olivier will take the American question, right? Starting with maybe John Chang, well John Chang, is a long prepared I mean it's going on retirement, he has been 4 years in support and he has to leave. So it's the announcement comes on the [indiscernible] it is Chinese New Year, as you know, in China. So there is not much more to talk about on this topic. On the China cash back and timing, well, I'd love to have the answer I can say that rice cooker is around 15% of Supor business. So it's material for Supor. We don't know yet whether those cash backs would be on no regions of China. We don't know yet what will be the mechanism, and we don't know yet what will be the timing. So I'd love to be able to answer your question, but I have, unfortunately, no more specific answers to your question. Olivier, you [indiscernible].

I think maybe to complete on China. I think at this stage, it's too early really to consider this as a strong positive I think we all remain relatively prudent. And as we know more and more concrete details, of course, this will filter to the market, and we will answer this question in the future. But I think at this stage, let's not get over excited by this news. On the U.S. dollar, you're right, we have a well-known policy to hedge. In fact, our exposure up to 80% of our ROPA exposure, so we reached that level at the end of last year, and we are, let's say, hedged very well hedged against the current levels because the -- let's say, the strengthening of the dollar is accelerated particularly recently. So I think we can say that normally, the impact should be, let's say, relatively contained on ROPA in 2025.

[Operator Instructions] The next question comes from the line of Alessandro Cecchini calling from Equita.

The first one actually is still on the professional business, try to maybe to rephrase. So just to think about -- I mean, the underlying business, you are right that is running at the speed that is like what you did in 2024. So just to understand, if do you expect a 2025 in terms of large deals similar to 2024, if you can comment a little bit on this. My second question is still on 2025 on the cost base. I know that is early at this stage to discuss, but if you can, I mean, provide some color at the same volumes for U.S. backed material or not material deviation versus current cost base in 2024? And I mean the last question is what is the feeling in, I mean, major markets like, I would say, excluding China, so Europe and North America, what is the level of inventories for your I mean, clients, retailers. So just to say if you think that the sell-in was broadly in line with the sell-out in Europe and in North America.

Okay. I'll take 1 and 3, and Olivier will take the second one. We don't provide yet a guidance for 2025 on professional. I think what is -- I think there are 2 dimensions. One is the underlying business is growing. And second, the first half comparison base is very high. Beyond that, I think it's too early to talk about large deals and our materiality for the year we are in. On the selling and inventories in major markets, I think the net answer is sell in equal sellout. You may have 15 million, EUR 20 million, EUR 25 million traveling here and there. But at the group level, I think it is not material. We've seen some replenishment issues in some countries in Europe in some online players that have delayed some shipments. We've seen some other customers loading a bit of stock through December for Christmas for replenishing strong like. I mean it's -- all in all, it's flat. Olivier, 25 cost base. I think it's also -- I'm sure we'll talk more when we have, let's say, the comments on the '24 results and '24 cost base evolution. But I think there are still many elements which are, of course, not yet known. But we can say that 2023 and to some extent, 2024 also saw, let's say, a large cost reduction, which corresponded to the flow of the reversal, if you want, of the cost increase that has been seen in the previous COVID period. So this was very material. I think we can say that we are more normalizing the evolution. So we should not expect, let's say, impact of the same order of magnitude. But of course, there will be continuous, let's say, cost reduction. Of course, both on our production cost and on our, let's say, purchases and sourcing of finished goods. We also continue to benefit. We will expect to continue to benefit from volume -- positive volume effect as we continue to expand our business, and therefore, this should lead also to a positive absorption of fixed costs in our factories.

Okay. Last -- sorry, just if I understood correctly that -- so the Chinese market is still not exciting. So you said that, yes, but the comment on China is it. Right?

I mean the performance of the China in the second half of the year, we were expecting a gradual recovery that hasn't materialized. Supor, as Olivier as explained, is still gaining share online, offline, cookware, electrical bookings. So in all its categories, the market is not good. So do we see any material improvement in 2025, so far, no. This hint of support on the rice cooker is both a direct use if that materializes for our business in terms of the materiality of the support. And it's an indirect good news that the government is investing to support consumption. But at this stage, it is still speculation. And China is breaking out for Chinese real now I think they have 1 or 2 weeks holiday during the year. So I think we'll see more clearly what's going on in China around the end of the month of February.