SEB SA (SK) Earnings Call Transcript & Summary

Welcome to the Groupe SEB First Half 2025 Sales and Results Presentation. My name is Alan, and I will be your coordinator for today's event. Please note this call is being recorded. [Operator Instructions] Today, we will be joined by Stanislas de Gramont, CEO; and Olivier Casanova, Executive VP and CFO. I will now hand you over to your host, Stanislas de Gramont, to begin today's conference. Thank you.

Thank you very much, Alan. Good afternoon, everyone. Welcome to this first half results call. I will cover the presentation together with Olivier Casanova, our Chief Financial Officer. And of course, afterwards, as I said, we will answer your questions. Starting with the first half highlights. It's been a pretty busy and in many terms, positive quarter for us and half year. We've seen, in particular, in the second quarter, an acceleration of our sales in Western Europe. We've seen continued growth in Asia, and that's a very reassuring fact. We've seen a return to growth in the Professional business in the second quarter, although half 1 still negative as this was expected. And of course, all this has been pretty blurred by let's call it, a series of uncertainties and wait-and-see attitudes related to the U.S. tariffs and a consequence of that strong currency volatility that has impacted in Parcels sales and more importantly, our bottom line. During this first half, we've done a few transformational things for the group. We've acquired La Brigade de Buyer in premium and professional cookware. We've issued in May a EUR 500 million bond with a 5-year maturity. We've inaugurated our new European logistics platform for cookware in Burgundy in France. We've opened our first European refurbishment center in France in Is-sur-Tille, and we've launched our first recycling programs for used pans using waste collection areas and lately La Poste, which is a French post office, the mass collection scheme. Now back to the numbers for the first half. We see half 1 -- first half sales slightly growing 0.6% like-for-like versus 2024, while Q2 is, in fact, growing 1.9% versus 2024. We've seen our first ORfA at EUR 119 million versus EUR 244 million last year with EUR 69 million in second quarter against EUR 133 million last year. Net financial debt stands at EUR 2.658 billion at the end of June 2025, of which EUR 190 million of the French competition authority fine, which means like-for-like an increase of EUR 46 million versus June 2024. If we -- and of course, we will analyze in detail all these numbers in the next few minutes, myself and Olivier. Starting with the sales increase. As I said, 0.6% organic growth in half one. We have a negative currency effect of 1.7%, EUR 64 million, a scope effect of 1.3%, leading to EUR 3.748 billion in sales. The second quarter has been slightly better in organic growth, 1.9% with a slightly worse currency effect at EUR 57 million negative, 3.1%, a scope effect of EUR 17 million, leading to EUR 1.842 billion in sales in Q2. Now currencies have been extremely volatile during this semester, in particular, and also during the second quarter. In fact, the first half is impacted for EUR 64 million negative currency impact on sales with EUR 7 million in Q1 and EUR 57 million in Q2. Now that's a strong acceleration in Q2, yet pretty contained versus 2024 half one, which was EUR 127 million negative currency impact on sales. When we look at the split of the business between Consumer and Professional, starting with Consumer, I'll go with Professional straightaway. We see consumer business in first half at 2.2% like-for-like sales growth when the Professional business post 0.3% reported and minus 9.6% like-for-like. And I'd like to elaborate immediately on the Professional business as, yes, first half is still negative 10% like-for-like, but the second quarter is 3.5% positive like-for-like, 10.7% growth reported, which is in line with our expectations. We've said in the last 4 quarters that Professional would be suffering comps between the last 2 quarters of '24 and the first 2 quarters in '25. And in fact, we see that as of Q2 '25, we are back to positive territory in like-for-like sales growth. This graph shows the quarterly sales growth year-on-year, and it's pretty -- it's visual that Q3, Q4 '24, Q1 '25 were negatively impacted by the base and Q2 is a positive 4% against a positive 4% last year. Now if we go into the details of what is made of, I've talked about the comps. We see that excluding these large deals in China, we have approximately 10% growth year-on-year in the second quarter. That is great. This is driven by services and new contracts with a good contribution of tea chains in China and good rollouts in Eastern Europe and in the rest of Asia. We've acquired in the end of Q1, a company called Tasty in China that allows us to expand and deepen our service offering to coffee chains and tea chain, thus increasing our customers' penetration and further enhancing loyalty of those customers. And we confirm that we expect a return to growth of the Coffee division and Professional Coffee in the second half of this year, which is going to be a key element of difference in financial performance year-on-year. This quarter -- this half year has also seen the first half year of consolidation of La Brigade de Buyer that was acquired in January. So far, so good. Sales and profit contribution are positive. Moving on to consumers. So Consumer, we started with -- we started the year with a slight growth. We put a first half at 2.2% like-for-like growth, of which 1.6% in the second quarter. We see a very contrasted situation in the second quarter. Good acceleration in Europe in Q2, with markets which are still resilient. We confirm the return to growth in Asia, especially in China. We have an unfavorable comparison base in South America that is already starting to ease at the end of the second quarter. We have big uncertainties about U.S. tariffs with a very marked wait-and-see attitude from retailers in North America. And last high currency volatility with a negative impact on sales increased in the second quarter. Now if I elaborate on each of those points. First, graphically, you see what we say, which is the Americas are in negative territory in sales. South America, Q1, Q2, North America, an inversion between Q1 and Q2, plus 4.9% becoming minus 11.5%. We see EMEA hitting plus 3.5% in the first semester with a good second quarter in Western Europe, plus 6.8%, and that is great. I'll come to that in a second. And other EMEA countries also, I will explain what's going on. We think it's a bit of a [indiscernible] drop in sales, but I'll explain that further. And as we said, China and Asia hold a good growth rate, plus 3.9% in Asia, of which plus 3.2% in China, consistent with Q1 at plus 3.5%. Now moving on to Consumer and Western Europe. We see a marked acceleration in growth between Q1 and Q2. Q2 is at plus 6.8%. Half one is at plus 3.4%. There is a double-digit growth in Floor Care, in Cookware and in Linen Care. We see the effect and the impact of our marketing investments and the success of recent launches in floor washers, in garment steamers, in oil-less fryers, in blenders. And we mentioned back in the end of Q1, some disalignment between sell-in and sellout, when in fact, this of course corrected compared to Q1, in particular in France, and that supports also the improvement of the sell-out in the second quarter. So a pretty good first quarter driven by what is probably the bigger or the more important pillar for growth of the group, which is innovation. Other EMEA countries show a very contrasted situation. So numbers first. First half is 3.6% like-for-like growth with the second quarter barely flat, slightly negative. And in fact, we have some great and some not so great in this first half. The first thing is the half one last year was a very high comp basis, I think high double-digit growth. The positive is a very impactful rollout of innovations and double-digit growth in categories such as oilless fryers, full auto coffee machines or cookware. We see positive momentum in Eastern Europe and Turkey. We have suffered some political or geopolitical disturbances, which have negatively impacted our Q2 business in some countries in the region. Romania, a big political turmoil from April all the way through -- to the end of June and carries on so far. The Middle East, which no need to say has been pretty badly impacted by the events in the Gulf and in Iran and Algeria, which has stopped allowing or reduced substantially the ability to import products in this country against a pretty robust historical number last year. So very immediate, not so great in terms of numbers, but we see that the reasons are well understood and can be recovered. North America. North America has been bad, has been bad with sales down 11.5% in the second quarter. That was after a 5% growth in Q1. We have uncertainties regarding the U.S. tariffs and much higher than expected. And in fact, I remember answering a question back in April about what was our scenario and our scenario was a median scenario. Well, in fact, what we have now is -- we don't have a scenario yet. We have uncertainties. We have a lack of visibility of what's going on, and that is a much longer -- that is lasting much longer and much deeper than where we would ever have expected that to last. The direct consequence of that is that the selling is heavily impacted by American retailers' wait-and-see attitudes, that's one. And also some turmoil in import patterns. Some customers are moving from direct imports where the -- the sales are materialized from China and they take care of the imports into a direct selling business in the United States. That creates a lag in the selling timing that creates uncertainty in who pays what tariffs. So there's a lot of turmoil in the import patterns in North America and the U.S. in particular, which have a pretty bad effect on our sales and our performance. We don't see at this stage that these disturbances should stop in the second half. In fact, when we all read the same press articles and the same newspapers with good news one day, bad news the next day, uncertainty anyway through the period. Whilst in terms of our mitigation plans that we are talking and commenting back in April, they are currently being implemented with new pricing hitting the market with so far contained impact on consumer demand. So flat performance in North America in the second quarter, direct -- negative direct impact on the uncertainties of tariff and probably those disturbances should carry on through the Q3 at least. South America is a bit simpler to understand. It all starts and stops with the comparison base, which was still high in the second quarter. Half one sales were comparing to a particularly high level of sales in 2024. We've talked at length about the El Nino climate phenomenon in 2024, where we saw sales grow or sales by 29% versus previous year. And today, we are in the La Nina phenomenon, which is a colder weather, and therefore, we are comparing against a very high sales level last year with a negative weather effect. Excluding fans, we see our sales are growing nicely, particularly in Colombia. And we see that this seasonal effect or the comps effect is fading away at the end of the first half with more positive trends expected in the second half. So summary in Europe and North America, Americas are bad. Europe is good, much better in Q2, especially in Western Europe. Now moving into a second engine of the group, which is China. China is holding up pretty well with 3.2% like-for-like growth in Q2, very comparable to 3.4% like-for-like growth in Q1. You see the effect on the devaluation of the Chinese -- devaluation on the strengthening or weakening of the Chinese yuan against the euro with a 4-point difference in the reported sales between Q1 and Q2 -- first half, sorry. And the story is pretty much always the same. We are consolidating our market shares and our leadership, both in cookware and in kitchen electrics. We've been successful in Q2 on recent product launches, oil-less fryers somewhat, some water dispensers, some blenders. We see that there is some limiting impact on our sales of the stimulus programs that are more focused on large kitchen appliances, and we maintain a positive outlook for the full year. So the second growth engine of the year -- of the group, China is holding up quite well. The positive upside on this quarter, which is confirming what we had in Q1 is the positive performance of the sales in other Asian countries with a second quarter 4.9% growth like-for-like, leading to a 6.3% growth like-for-like in half one. That performance is driven by mostly by almost all the markets in the region with an acceleration of Southeast Asian countries, Malaysia, Thailand, Vietnam, a strong momentum in cookware, especially in Japan and South Korea. We continuously expand our product portfolio. We are launching and expanding oil-less fryers, rice cookers, versatile vacuum cleaners, washers, knives. So that gives us some positive outlook for the full year on the back of a pretty positive first half. Now we thought to give a bit of color to that performance, it would be great to share with you what are the key product initiatives and how they are contributing to the performance. Starting with floor washers. Floor washers is a fast-growing market with sales doubling in Europe. We've launched a full range of products with our master product, Rowenta [indiscernible] reaching #2 position in Europe. We've rolled out this product offering over 30 countries in 6 months, and that's a key positive contributor to the sales growth of the quarter and probably of the full year. We also mentioned back in February and April, the expansion of garment steamers with the first garment steamer that is vacuuming in a way the linen. That is driving a 25% sales growth in this category in Western Europe in half one, and this is expanding to 25 countries through the year for this new aerosteam product. We expanded our product range into spot cleaners, launching in 13 countries, sold over 100,000 units in 6 months, expanding the range in the second half and the number of countries. So again, it's going to be not as big as floor washers, but a nice addition to our range of growing categories. We see and we know that oil-less fryers have become very big. We are still posting double-digit sales growth in half one with sales doubling in Eastern Europe where the category is a bit less mature than in Western Europe. So again, we have great initiatives on that product category. Same for blenders. I mean, we have 10% sales growth on the back of a good innovation [indiscernible]. And even in cookware, which, as you know, is our biggest or one of our biggest categories, we see first half sales up 6% globally with growth close to 10% in Europe, driven by innovation. We see a diversification of consumer expectations. We see an expansion of our product offering that drives, that allows us to trade up, that allows us to bring functional innovations, which are feeding that growth. And beyond that, we also have continued growth of our Ingenio innovation, stackable cookware with double-digit growth in 17 markets throughout the globe. So overall, we see that our performance, in particular, in Western Europe and in the developed world where we operate is driven by innovation. That growth applies to many of our categories. We have one difficult spot, which is electrical cooking, where we are suffering -- we are positive, very positive on air fryers. We are suffering on some of our historical categories like electric pressure cooker and [ Tefal ], but we think we can correct that in the second half. Professional, we've commented. Home Comfort, we've commented. This is the fans business in Latin America. And on the very positive side, we see Home Care forecast double-digit growth. We see cookware very positive, food preparation, beverage in positive territories, Linen Care. So again, our growth is driven by innovation. And I would say the summary of the second quarter is that our growth engines, albeit not very fast yet, are all 3 working positively, and we end the quarter with a positive view on our sales outlook for the year. Now I will hand over to Olivier Casanova to comment through the financial results through, and I will come back with the evolution of our guidance for the full year. Olivier?

Thank you, Stanislas. So moving on to results. So as Stanislas has already indicated, we have, let's say, a weak profit contribution of EUR 119 million in H1, which is down 50% on last year. As you know, however, we need to bear in mind that Q1 and Q2 are let's say, provide generally a modest contribution to the profit of the full year. And I think we've already mentioned in -- earlier in the year that this, let's say, seasonal bias is going to be even more the case this year. There are effectively a number of elements, which -- some of which will reverse in the second half, which impacted our profitability in the first half, and I will explain them one by one. So the first element, which is explaining, let's say, a big swing versus last year is the lower contribution from professional coffee. I think we mentioned at length, let's say, the drop in the big contract or let's say, the sales in China. And this is, of course, in a business which is a large fixed cost base. This is explaining, let's say, EUR 40 million drop year-on-year in the first half. The second element, of course, is the situation in North America, which has unfortunately 2 negative effects in the quarter, and I will come back again on the situation for the second half. But in the quarter, we have first a wait-and-see attitude from retailers. And you saw how this translated into lower sales. We had a 4.9% growth in North America in Q1 and minus 11.5% in the second quarter. The second negative effect is the time lag between the increased tariffs, which impacted from, let's say, beginning of April and the implementation of our compensatory measures. I think we discussed that during our first quarter results. In part, it's, of course, increased prices and those increased prices were passed on to our customers in, let's say, the back end of May and in June, and therefore, they are contributing modestly to compensate the negative impact of tariffs in the quarter. The third element is, unfortunately, in some ways, linked to the situation with tariffs, which is the strong volatility of currency, the appreciation of the euro and the strong volatility in many emerging currencies. This has 2 effects. In fact, on the long currencies on emerging markets, the strong fluctuation is, again, creating a time lag between let's say, the devaluation of the currency, which is impacting our results and our ability to compensate that by price increases. It is not done immediately, and it takes some time to be implemented. And the second element is on the short currency. So normally, we would expect, of course, when the euro is strengthening against the dollar and the Chinese yuan that this would have a positive impact on our results. This will definitely be the case in the second half, but it's not the case in the first half. Why? Because we have, on the one hand, the negative translation effect when we convert the profits from North America or more importantly, from China into euro. And we don't have yet the positive impact of -- on our purchases because we are -- this is, let's say, stocked into inventory during the quarter and will be released in the second half of the year. So this is creating a EUR 20 million net impact in the first half. The third element -- sorry, the EUR 25 million net and EUR 20 million for North America. And the fourth element is the fact that, as Stanislas highlighted just a few minutes ago, we have a rich pipeline of product launches, not only, of course, in existing categories, but with washers or spot cleaners into new categories. So this, we wanted to support this rich product pipeline with strong investments in growth drivers, in particular, because in some of these new categories, we need to educate consumers. And so there is an investment. And we will see, of course, the growing benefits of these investments over the year with certainly an acceleration of sales growth in the second half. And as we saw, it's already evident in Western Europe, for example, in the second quarter. Now let's take a moment to see what -- how these parameters will behave in the second half. We certainly expect the negative effect to reverse on professional coffee. As we said, we are coming out of this negative comparison basis. And therefore, we expect that the growth of our core business will translate into increased contribution in the second half. The appreciation or, let's say, the compensation of currency volatility will certainly be much better in the second half and in particular, with the benefit of the drop of the CNY and the U.S. dollar into our purchase cost. We -- as I mentioned, we also expect acceleration of our sales growth in the second half, thanks to the investments. And there will be, of course, a lower growth in our growth drivers in the second half compared to last year than in the first half compared to the first half last year. The one element that remains unknown at this stage, of course, is the impact on North America. As Stanislas has indicated, at the moment, of course, we know that there is still a lot of uncertainty. We heard just a few hours ago that there is an agreement with Japan, but there is still a lot of, let's say, agreements to be struck. And so this will remain, unfortunately, let's say, an unknown at least, potentially a negative element, but an unknown. So in a nutshell, there are many of these negative elements that impacted the first half that should reverse in the second half. Now moving on to the -- from ROPA to net result. Of course, not surprisingly, the ROPA decrease of EUR 125 million is impacting net income by a similar amount. The reason is simple. Employee profit sharing and other operating income and expenses are similar to last year. Our finance costs are slightly increased compared to last year, reflecting, in fact, mostly a lower average cash balance in the semester. And on the other hand, on the positive side, of course, the lower profit before tax is leading to lower income tax. And all this leads to a very modest EUR 1 million net income for the first half. But as we said, it is always, let's say, biased to the second half given the seasonality of our business. Let's move on to working capital. So working capital stands at 18.6% of sales compared to 18.2%. So not very far from last year. It -- therefore, it hides, unfortunately, a big difference in terms of inventory levels. As you can see, we are at EUR 1.9 billion compared to just under EUR 1.7 billion last year. Of course, we always have a seasonal peak of inventory at the end of June, given the weight of our sales in H2. This, let's say, element is heightened this year, in particular, because of our expectation for sales in H2, but also because we advanced, in fact, supply of products in the first half, given, in particular, let's say, the uncertainty around supply chains linked to tariffs. And of course, we continue to be impacted by the Red Sea crisis. This has not changed. In fact, we have even more stock on water than last year. Moving on to -- so this, as you can see, is, let's say, within, let's say, the average of the last few years for a position at the end of the first half. Moving on to free cash flow generation. So I commented on EBITDA and evolution of working capital requirements. On the CapEx, we have EUR 160 million of CapEx in the first half, which compares to roughly EUR 144 million of depreciation. So we are not very far. We're slightly above. This, of course, reflects the investments that we are making in some major projects such as the completion of the cookware warehouse, which was inaugurated in the second quarter of this year. And of course, the Shaoxing professional coffee hub, which is being built as we speak and the completion should be done in the second half. And then we have also some slight investment in Vietnam to expand, as we discussed to expand our production capacity, and we are going to relocate, let's say, the bulk of what we produce in China for the U.S. market to Vietnam. Secondly, on CapEx, we have a slight peak in lease renewals, but nothing to be worried about. It's linked to retail, let's say, the timing of renewal of retail shops and warehouses. So moving on to evolution of net debt. So you can see the impact of dividends. So of course, it's the SEB dividend for EUR 159 million, but it's also the dividend, which is paid to the super minorities for just under EUR 50 million. We continue, of course, year after year to repatriate a large portion of the results made and the cash generated by Supor to the rest of the group. We had some acquisitions, of course, La Brigade de Buyer and some minor investment on SEB Alliance. And all this led to, let's say, a sub total of EUR 2.468 billion, which, let's say, on a comparable basis to last year was just marginally EUR 46 million higher. But of course, to this subtotal, we need to add EUR 190 million, which was paid in relation to the fine from the French competition authorities. This was paid in May despite the fact, of course, that we have lodged an appeal in the court, we had to pay disburse, in fact, this amount -- and as we indicated before, we are, of course, asking for an enablement of this decision and hoping, of course, to be reimbursed in due course. Finally, to conclude on our financial structure. So we continue to have a very healthy balance sheet with some -- just under EUR 700 million of cash at the end of June, to which we can add EUR 1.5 billion of committed but undrawn backup facilities. And as Stanislas indicated in his introduction, we have, let's say, further improved our financing structure and lengthened our average maturity in the second quarter with a successful EUR 500 million 5-year bond issue, which was done at a competitive coupon of 3.625%, so very, let's say, satisfactory cost of financing. And we have today an average maturity of long-term drawn debt, which is above 4 years. With this, I hand over to you, Stanislas, to cover the prospects.

Yes. Thank you very much -- sorry, my mic was off. Thank you, Olivier. We'll look at the outlook for -- starting with sales. And we revised our annual outlook considering maybe 2 adverse factors. The first one is our second quarter has been negatively impacted by a very unfavorable economic environment in North America. And we see that those disturbances are persistent. The persistence of these disturbances is expected through all or part of the second half. Again, as I said, the current scenario is that there is no firm scenario and that absence of firm scenario hinders our customers and our own ability to stabilize the business. We see, however, that our sales forecast can be fueled by an improvement in overall organic performance in H2. We see good momentum, and we expect good momentum in EMEA. We see continued growth in China and the rest of Asia. We see a return to growth in South America, and we see the confirmation of the return to growth in Professional, which already began in the second quarter. That leads us to a full year organic growth -- sales growth guidance between 2% and 4% versus around 5% previously as guided at the end of April. When it comes to the ORfA guidance, again, that revision includes of course, the decline in the half one results versus 2024, which weren't expected as difficult as turned out. It also includes this persistent uncertainty related to tariffs. Of course, we are implementing some margin protection measures in the U.S.A. that we do and we've done, yet the general wait-and-see attitude is impacted sales in North America. We see other indirect effects on the rest of the group, and that will have a negative net impact on ORfA. Yet we see again some positive reasons for a return to growth of our profit in the second half. We expect our profits to return to growth in the second half with, of course, driven first by the growth in the consumer activities, the accretive effect on margins of the return to growth in the Professional business, strict discipline in managing operating expenses and the higher offsetting of currency effects than we've been able to do in the first half of the year. Thus, we expect ORfA between EUR 700 million and EUR 750 million in 2025, where we were planning an increase of the ORfA previously. And in fact, we see that half two, after a negative half one should go back to the trajectory of the group's midterm ambition. We have not commented, as you will have noticed, the classical bridge because we thought sharing with you a bridge with the key building blocks of the ORfA between last year half one and this year half one was more clear and more relevant. But this bridge is in appendix -- the classical bridge is in appendix in the presentation. So feel free to ask questions on that if you feel the need or they wish to. We are now done with our presentation. Let's now move to your questions, and I hand it over back to you, Alan.

[Operator Instructions] We will take our first question from Louise Wiseur, UBS.

Firstly, on your new guidance, it implies strong growth in also in H2. Could you give some more color on what are your assumptions behind your new guidance? I understand that you discussed about the increased contribution from professionals, some acceleration in sales growth. But I wondered what tariff scenario are you including in there, although I appreciate that just the wait-and-see attitude and the uncertainty obviously is impacting the business. The second question is with regards to North America. It was strongly challenged in Q2. Could you give more color on this with regards to kind of like how much volumes were impacted and how much prices were up? And how do you think about this for the rest of the year in North America as maybe you will get more price increases in H2? And the last question is with regards to Professional. The good news is that the Professional business is back to growth in Q2. Do you have more visibility on large deals now? And how do you think about the growth for that part of the business in H2, please?

Thank you, Louise. Thank you for your questions. I'll take 1 and 3, and Olivier will cover number 2. The new guidance growth is -- it's based on 3 or 4 assumptions. The first one is China and Asia are pretty constant, and we see no reason why that current trend would change half 2 versus half 1. We've invested substantially in marketing expenses in the first half in Western Europe in particular. And we see that there is an acceleration of the growth momentum, and we expect that growth momentum to hold on in Europe in the second half. And we see the Professional business that will -- that has confirmed that is more or less on track with what we're expecting Q1, Q2, and we have no reason to believe why it should go off track, which means a net growth of the professional sales in the second half of the year, not particularly driven by more large deals. It's more a recurring business that is feeding this growth. So we think that we have in our second quarter, a lot of the reasons to believe the sales growth guidance in the second half of the year. And of course, I'm sorry, I forgot Latin America, which is a direct mechanical impact. I mean here, it's almost a graphical impact, but it's not so big. So we see in our first half -- in our first quarter and second quarter trajectory that allows us to believe that the second half sales growth, including professional is credible and feasible. Olivier?

Okay. So on North America, as we said, we have implemented our price increases to compensate for the tariff impact gradually over, let's say, end of May and June for some of it. So it's still early days. And of course, let's say, the price increase on a pan, which is sold at [ $0.99 ] is a relatively modest dent on the consumer purchasing power, but we will have to see the lingering impact over a longer period of time. Today, what we note is that we don't see a big impact on our sellout over the last few weeks. But again, it's still early days, and it's difficult to have a firm view on the evolution. It will also depend, of course, on the ultimate level of all the tariffs that are currently being contemplated. And so we don't have a view at this stage. What, let's say, gives us confidence is that we have strong market positions. We have leadership in cookware and linen care, which are our 2 biggest categories. We have, of course, very strong brands with Tefal and All-Clad and we have long-standing relationship with our customers. So all of this, let's say, puts us in a good position to weather the uncertain situations. But at the moment, we are more impacted by the wait-and-see attitude and the uncertainty, which is surrounding the level of tariffs.

Does that answer your questions, Louise?

Yes. I was just wondering within the guidance also, like is there like a specific tariff scenario you put in there is just about kind of like whatever the scenario anyway you're impacted by the wait-and-see attitude? Because it does feel like a lot is going to depend also on what happens with the U.S. and the rest of the business performing very well in order to achieve the strong growth in offer. So just wanted to know about that.

Yes. Yes. We don't expect a worsening impact of the tariffs, if that's...

Yes. What we said is that...

We don't expect a worsening impact of the uncertainties linked to tariffs.

Yes. So we had in 1 quarter a negative impact of EUR 20 million. In our, let's say, best scenario today, we are expecting a continuation of the situation for part of H2. And so that gives you some idea of, let's say, the order of magnitude of the impact that -- the lingering impact that we have taken into account in our revised guidance. And of course, it's one of the reason -- one of the big reasons for, let's say, the revised guidance compared to earlier in the year.

We will take our next question from Mary Fort, Bernstein.

I just want to come back on the ForEx impact on the second half because if I'm right, you should start to benefit from better ForEx. What did you factor in your projections for 2025? And what do you foresee for 2026?

2026. Marie-Line, you are testing my ability to project FX at a 12-month horizon. That's -- you have, let's say, a high opinion of my abilities.

It's just regarding the hedging that you've got...

No, no, of course...

At the same level next year. It's just a sense of my question. It's not about projection about ForEx.

Okay. So for H2, you're right. So we expect, one, let's say, to go back to our historic ability to compensate currency depreciation in emerging markets. We said consistently that we are able to increase prices generally. It doesn't happen from one day to another, but over a period of time, we can compensate this. We don't compensate 100%, but we compensate a large part of the negative effect. So we expect to be in that situation in the second half for emerging market currencies. Of course, there is a slight, let's say, additional difficulty this year, which is that some of these currencies are not depreciating against the dollar, but they have depreciated against the euro, but we have to manage that. On the short currencies, absolutely, we should see a benefit -- a net benefit in the second half. because as you know very well, we are very short of U.S. dollar and CNY. And if the U.S. dollar and the CNY remain very weak in the second half, we will definitely have a positive impact in our results. Of course, we don't have 100% of the benefit because we have hedges, which are not at 1.18 for the dollar and 8.40 for the CNY, but we will have, nevertheless, a net positive impact in the second half.

And in fact, if I may, Marie-Line, what supports the guidance for the full year profit and therefore, the second half profit is professional coffee turnaround in terms of sales trend, much better, if not positive impact management of the ForEx and further dynamic activity on the consumer business in Europe and APAC and LatAm. So that's -- these are the 3 key things that explain a guidance that can seem a bit ambitious on the second half.

We will take our next question from Alessandro Cecchini, Equita.

The first one actually is on Europe. I would like to understand what is the current business climate, consumer climate in major countries. You had a very good performance in Western Europe, while Eastern Europe was strangely, I would say, flattish. So I would like to understand your current dynamics. And secondly, my second question is a follow-up on the U.S. impact that you factor in. So you had minus 20 roughly speaking of negative in the second quarter. I didn't understand, I mean, your building blocks for second half in North America and the potential impact that you are incorporating.

I'll take the first one, Olivier will take the second one. Thank you, Alessandro. The European climate, well, you see that -- well, first, Western Europe is at 6.8% growth. The climate isn't particularly positive. I think the current promotional periods are not delivering great results. I think there is some uncertainties in consumers. Traffic in store is not remarkably high. So the climate is not very good. What helps us in our sales is a strong push behind new product initiatives and innovations, but it's, I would say, a lot dependent on our actions and our activities. You're right that the performance in other EMEA markets is odd or strange. I mean we are more used to see plus 15%, plus 25%, plus 30%. I think that flat sales is against a plus 29% last year. So the comps was particularly high in half one last year. And second, we have some I would say, spot geopolitical challenges spot, I don't know. You never know if a geopolitical challenge is spot or not, but there's clearly an impact in the Gulf and in the Middle East of what happened in May, June between Iran, Israel and the United States. There is clearly an impact on import authorization in Algeria. I mean if you don't have currencies or if you're not allowed to import, you don't make any sales. There has been a lagging effect in Romania of this political this presidential election, which has been lasting since the beginning of April through May and June. So the market there is pretty much flat or negative unlike what it was in the last 3, 5 years. So all in all, we do expect a better performance in the second half in other EMEA markets. Difficult to point to this or that market that is doing bad now that would do better then. But overall, I think we -- net-net, the business climate in Western Europe isn't particularly great. There isn't particularly good traffic in stores. There isn't particularly good morale for consumers. If anything, French and Germans would be a bit more than others. But that's, I would say, the way I would describe the business climate in Europe. Olivier?

So as we said, we have a negative impact from the situation in North America of EUR 20 million in the second quarter. And our scenario for the second half or for the full year is based on a continuation of, let's say, the wait-and-see attitude from retailers for part of the second half. It doesn't include -- it's not estimating that this will last until the end of the year, but it will continue for a little while. And therefore, we have, let's say, a lingering negative impact in the second half.

Okay. But probably not [ EUR 20 million, EUR 20 million, EUR 20 million, ] so not additional EUR 40 million lower...

That's what I said, we don't -- we are not -- let's say, at this stage, we are not as pessimistic as that, we are not expecting the situation to continue until the end of the year. But we can see that it is continuing for part of the second half, which was not our expectation back in April.

I think the point of giving a number for the first half or second quarter impact is to precisely frame and understand the magnitude of the impact because if we say conversely, well, we have an impact, but we don't give a number, you can work out -- we don't know if it's EUR 10 million or EUR 30 million. So it's better to tell you that's what it is. That's what we assume it could be in terms of magnitude in the second half, it's more difficult for us to point precisely to give a number.

Okay. Last question is on the organic top line growth that the midpoint is basically to assume mid-single-digit organic growth in the second half. Considering price increases, you expect, I mean, still volumes to be positive or to have the vast majority, driven by price/mix in the second half or a mix of these 3 elements?

Thank you very much. I'll take that. That's a very good question because that allows to lift the ambiguity. We haven't raised our prices. We've raised our prices in the United States. So we don't see price increases outside of the U.S. We've raised our prices in the U.S. as a mitigation measure against tariffs to mitigate or to protect our gross margin. But apart from the U.S., there is no price increase in the group plan in the second half. Now that said, of course, the U.S. will have some impact on the overall price mix of the group. But the U.S., as you know, is 10% of the group. So the impact will be contained in terms of its impact on the full year total group bridge. Thanks for the question.

Okay. So basically, if I understood it correctly, even in emerging markets, so in Brazil, where you are not raising prices.

Thank you, Alessandro. We are raising price. Thank you. And I'm sorry if I was too short or quick. We raised price in the U.S. to address tariff. That's a one shot price increase. We routinely raise prices in emerging markets when we are up against devaluation, and we'll do that in the second half as we did it in the first half and in the last 10 or 15 years and probably in the next 5 and 10 years, we don't raise prices other than otherwise.

Sorry. Maybe in conclusion, we continue to see a positive volume increase, and this will accelerate in the second half. And we will see a greater contribution from price/mix in the second half than we've seen in the first half.

Sorry, Alessandro, for the confusion. I was too fast and too focused on the U.S. My fault.

[Operator Instructions] We will take our next question from Geoffrey d'Halluin, BNP Paribas.

I will have 2 questions, please. Sorry, just getting back to North America and the EUR 20 million impact you mentioned for the Q2. Just wondering if it's just driven by, let's say, a decline in terms of top line growth? Or I mean, have you also seen a kind of increase in terms of cost of goods sold due to the tariffs in Q2, just to get a sense on your H2 comments in North America. And my second question is related to China. So you reported a growth rate above 3% in Q2, which is largely in line with Q1. So -- just wondering what's driven the growth? Is it volumes? Is it price? And have you seen any impact from the incentive measures from the China government? And maybe any thoughts regarding the second half of the year would be helpful, please.

Thank you, Geoffrey. I'll take the second one, Olivier will cover the first one. On China, it's -- I mean, we are operating in a lot of product families and in a lot of categories. We see that -- well, some categories are up, some are down. But the main answer or the core of the answer is we are able through mix and product family management to gain market share overall driven by some winning categories and some less winning categories. What we can say is that the impact -- and that can be different between Q1 and Q2. I think we had a better Q2 in woks and in blenders than Q1, but it doesn't mean anything. And the other thing that we can see is that the impact on tariffs on subsidies or government helps on our business is minimal. This impacts way more on large kitchen appliance than on small domestic appliance. Now there's a bit of a confusion maybe nowadays in China that some local governments have kept the subsidy, some others have dropped them. So it's creating some price disturbances, but nothing to be commented at the level of this performance. We see China as very strong, as a strong contributor to growth, driven by innovation, driven by market share gains. And what we see in Q1, we see in Q2 and what we see in Q2, we have no reason not to expect it in the second half of the year. Olivier?

Okay. So on North America, just to clarify. So you have 2 effects. On the top line, as we said, we moved from plus 4.9% to minus 11.5%. It's the wait-and-see attitude. So the fact that customers not knowing what would be the applicable tariffs decided to delay decisions on sell-in. It's also the change of supply chains. If you move from direct import -- when we sell direct import, we sell ex China. When we have to bring the goods to the U.S. and go through customs ourselves, it's a 3, 4 months delay in the same sale. So it's impacting, let's say, our sell-in in the quarter. In terms of results, we have, of course, the first element, which is the drop in sales. But the second element that we have as well is the delay between the negative impact from tariffs and the implementation of tariff increase, which, as I said, was largely towards the end of the quarter. So that's why for a few months, it is creating an imbalance between the additional cost and the implementation of the price compensation.

Does that clarify your question, Geoffrey?

Yes. Just maybe a very last follow-up. So that means in your H2 scenario, you broadly expect the price increase to offset the U.S. tariff impact given you said you should have a lower impact than the EUR 20 million numbers you saw in Q2. Is that a fair comment?

Yes. So the price increase has been, let's say, sized to compensate for the majority of the negative impact. Of course, what we don't know at this stage is the impact on the sell-in on the one hand and the impact on consumption and therefore, volumes on the other hand. It's too early to say. So that's why there is a net negative, if you want. Otherwise, you could say if you are compensating, so at the end of the day, it's a zero-sum game, but it's not completely zero-sum game. That's why we...

The uncertainty.

We will take our next question from Christophe Chaput, ODDO BHF.

Just a quick follow-up from my side. Coming back to the direct import in the U.S. So if I understand correctly, the client, let's say, doesn't take the products in China, but in U.S. and so you have a lag effect from 3 weeks to 4 weeks. So at the end of the day, the level of inventories of the client is decreasing. Is there a chance that at some point, you will, let's say, benefit from a reversal, so a catch-up effect on inventories because they are going to be very, very minimal, let's say, if we consider that the demand is not changing?

It's a very smart analysis, and this can happen. What we don't know is, first, when you have double-digit price increase, which we had, there is a direct impact on volume inventory in terms of coverage. I mean we see sales in dollars, we see inventory in volume. So we need to stabilize. Well, first, in theory, you are absolutely right. What we lose in the lag of moving from direct imports to local sales. If they go back to direct imports, we should win back that lag. That's absolutely true. What remains to be seen is how inventories in volumes will behave during that move. And you may lose -- if you lose volume sales because you've increased your price and your value sales are flat, then you may gain that lag back, but lose the overall volume inventory levels. Does that make any sense?

Okay. We have to think about it -- okay. Okay, that's clear for me. But you say that the sellout is nevertheless at a good level, let's say, in the U.S.

Sellout so far holds in dollars. Prices have increased, which suggests that sell-out in volume is behind, right?

We have no further questions on the line. So I will now hand you back to your host for closing remarks.

Okay. Well, ladies and gentlemen, thank you very much for your questions. Thank you very much for your interest. We will be meeting I'm sure many of you in roadshows in the next couple of days. So we'll have opportunities to cover these points. Our next appointment will be on the 22nd of October to cover the 9-month sales and financial data. In the meanwhile, for those who in the roadshows, I'll see you -- we'll speak tomorrow, the day after tomorrow or next week. And for the other ones, if you take some holidays, well, enjoy your holidays, and thank you for your continued support and interest in our company. Good evening.

Thank you. Bye-bye.

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