SEB SA (SK) Earnings Call Transcript & Summary

Welcome to the Group SEB 2025 Third Quarter Sales Presentation. Today's conference will be hosted by Stanislas de Gramont, Chief Executive Officer; and Olivier Casanova, Senior Executive Vice President and Chief Financial Officer. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead.

Good afternoon, ladies and gentlemen. Thank you for being with us tonight. As discussed, we'll be with Olivier Casanova managing this results presentation. We're talking about the first 9 months and third quarter key figures, sales and profit for group sales, and we will review also the 2025 outlook. Now when we look at the numbers at the end of September 2025, we are posting a flat like-for-like sales growth at EUR 5.66 billion, converting into EUR 267 million ORfA for the first 9 months. In the third quarter, sales are EUR 1.9 billion, minus 1.2% like-for-like, posting an ORfA performance at EUR 148 million, down EUR 52 million versus 2024. Now I think it's worth starting this conversation by commenting on the revised 2025 outlook that we posted on the 6th of October. Starting with the sales outlook. We were talking in July about the full year organic sales growth between 2.2% and 4% that we've moved to stable to slightly positive sales growth forecast for -- on the 6th of October. Now when we look at what has changed between July and October, first, we had a softer-than-expected Q3 activity, especially in September, which is the start of the high season. We have and that was planned or expected a continued wait-and-see attitude among customers in North America. Olivier will come back to that. We've seen European markets less buoyant than anticipating, which hides 2 realities. We have several, if not many, of our European markets that are posting very healthy growth. But at the same time, some of our key bigger markets have had a stagnant third quarter. We continue to see positive growth in Asia, albeit lower than expected outside of China. China posts a very consistent growth path between H1 and Q3 around 3.5%. We did see some recovery in South America, albeit lower than expected. And we have, and that's good news, returned growth in professional coffee but this wasn't as good as we expected, tempered in particular by the U.S. market. And overall, what drives also our guidance is we're still in a pretty uncertain and volatile environment, hence a more cautious approach for year-end. So that's on the sales front. On the ORfA front, we've revised our full year ORfA from between EUR 700 million and EUR 750 million to EUR 500 million to EUR 600 million. Now where does come from? Well, primarily from softer-than-expected sales growth expectation in second half. I won't come back to that but that's clear and in particular, the less accretion of results from professional markets in Europe. We see a lower-than-expected offsetting of our currency effects, which is due to the appreciation of the euro. We see a lower-than-expected compensation through price in emerging markets of the euro revaluation against these volatile currencies. And last, we see, that's confirmed, continued pretty strict discipline in managing operating expenses. So this is what drives the revision of our guidance. Now I leave it up to Olivier to take you through the organic sales performance in the sales performance in the third quarter, and I'll come back with the last comments.

Thank you, Stanislas, and good evening to you all. So starting with our 9 months organic sales. As you can see, organic growth is flat, in fact, compared to last year. We have a negative currency effect, and I'll come back to that in a second, and a slight 1.1 percentage point perimeter effect, which is both the consolidation of La Brigade de Buyer since the beginning of this year but also the fact that we consolidated Sofilac only from the second quarter onwards last year. And therefore, we have 1 quarter this year of perimeter effect. Moving on to the performance in the third quarter. You can see that we have a slight negative growth of minus 1.2% and a currency effect of minus 3% and a slight scope effect. Let's address straight away the currency effect on the following slide. So you can see that we've had a continuation of the negative impact in Q3 of minus EUR 60 million compared to minus EUR 57 million in Q2 and only minus EUR 7 million in Q1. Of course, we highlight here on this slide the effect on the U.S. dollar and the CNY, even though the year-on-year decrease is only a moderate 3%, of course, they represent a significant portion of our sales, and therefore, they lead to a significant currency impact. The other significant deviations concern emerging market currencies, the Turkish lira, the Mexican peso, the Brazilian real, to name the top 3. And there, the fluctuation versus last year is very significant. In particular, for example, for the Turkish lira, it's depreciated year-on-year by 22%. So moving on to the breakdown by division. You can see that the minus 1.2% in Q3 breaks down into minus 4.1% in Professional and minus 0.8% in Consumer. And I will dive into Professional straight away. So here on the Professional, the first thing to note is that on the 9-month basis, we are down around EUR 45 million versus last year, and it's all due to the delta of sales in China versus last year. The second thing to note is that in Q3, we are, let's say, showing a negative like-for-like sales of minus 4.1% but it includes an unfavorable, let's say, accounting effect, which is that last year, in the third quarter, we consolidated the first 6 months of Sofilac after the acquisition in April. We're not ready to consolidate in the second quarter, and therefore, we consolidated 6 months into 1 quarter, which, of course, distorts the basis of comparison. And if you remove this Sofilac effect, the like-for-like sales growth is 2.4%. And this is due in particular to a return to growth as expected, as announced in Professional Coffee, which grew 3% on a like-for-like basis. So it's very good news. And of course, we expect this trend to continue in the fourth quarter. This is due to a dynamic core business in Germany, also renewed growth in China but also significant, let's say, continued momentum in Southeast Asia, in the Middle East and in North and Eastern Europe. We're also reinforcing, strengthening our offer of services with the recruitment of service technicians in Germany. And as you know, we also announced a small acquisition, but quite sort of strategic with Tasty in China, which provides us with a basis to provide services to our customers in the country. And then finally, let's say, the slight negative in the quarter is the decline in sales in the United States, which reflects, in fact, the wait-and-see attitude, which we will see in a second in consumer goods, which is also impacting, of course, the Professional sales in the country. And we've seen a couple of deals delayed into next year because of the current situation in the U.S. One -- on the next page, one, let's say, important milestone, which was passed in the third quarter this year. We have reached over 100,000 machines on each of our 2, let's say, star models, which is the Schaerer Soul C and the WMF 1100 S. And in total, since the launch of these 2 machines, they represent over EUR 1 billion of cumulative sales. So clearly, star products in the market of professional coffee machine in full auto coffee machines. Moving on to the Consumer segment. So the first thing is that in the quarter, we report minus 0.8% like-for-like growth. Last year, we had a significant loyalty program in the second half, which is, therefore, distorting the basis of comparison. If you exclude this, we are slightly up at 0.5%. As Stanislas has indicated, the activity in the third quarter in our consumer business has been softer than expected, in particular, less buoyant markets in Europe, notably in France and Germany. And in the U.S., the continuation but that was largely expected, the continuation of the wait-and-see attitude from our customers. However, there are some noteworthy achievements, which are worth pointing out. The first thing is that, if you exclude LP and North America in the rest of the business, we grew 3% organically in the third quarter. This is due in particular to the success of recent launches, and Stanislas will come back on this with washers, spot cleaners and versatile. It's also due to continued strong sales momentum in Southern Europe, in Eastern Europe and in Northern Europe, including the U.K., and that's worthwhile to note. And then finally, the continuation of a solid growth in China. So let's take a look at the global picture. Here, starting with the 9 months, you can see a very, let's say, different dynamic in our 3 major, let's say, geographic areas. In Americas, a decrease of 7.3% versus 9 months last year, whereas in EMEA and Asia, we had a growth of 3.5%, excluding LP in EMEA and 3.6% in Asia. More specifically, in the third quarter, as Stanislas indicated, we had a slightly more negative dynamic in the U.S. in North America than expected with minus 14.4%. So instead of a slight improvement versus the dynamic in Q2, we had a slight worsening. We also had a softer market conditions in South America, other EMEA and other Asian countries. Two of those are positive, and in particular, South America turned back to a positive territory but slightly more modest than initially expected. And then on a more positive note, we can see that EMEA, Western Europe is growing at 4.3%, excluding LP, and China continues its solid trajectory at 3.5% growth. So let's now focus on the first geographic area, Americas. You can see that we are down, as I said, 14.4%, which is largely reflecting the wait-and-see attitude from customers, which are, let's say, lowering their inventory level, which are shortening their replenishment cycle. There has been also a significant change in, let's say, the import patterns. There was a substantial part of our business, which was direct import, and this has now moved to delivered in the U.S. This obviously creates a lag effect on sales a couple of weeks of delay basically in the recognition of turnover. The sellout, however, is proving to be quite resilient in cookware and linen care. We are, in fact, up on last year, and we're consolidating our leadership positions in these categories. In Mexico, we are continuing to grow despite reductions in retailers' inventories. A word on South America. We have a very strong performance in Colombia with sharp increases in many categories but the region is impacted by the continuous, let's say, unfavorable climate or weather climate in Brazil, which has delayed, unfortunately, the start of the fan seasons, which we're expecting initially in the third quarter. And unfortunately, there is still a high level of inventory and therefore, delaying, let's say, the replenishment of fans at retail. Let's now, let's say, focus on the U.S. tariff situation. First, to note that it's still, as you know, a very moving target, and there is almost a continuous flow of news in this regard. There has been a change in the Section 232, which is applicable for aluminum and steel and their derivatives and therefore, concerns cookware. The percentage applicable has moved from 25% to 50%, but it's not the same basis of calculation. The first one was on the entire, let's say, cost of the product, whereas the 50% is only applicable on the raw material portion. Therefore, in total, it is marginally higher than before but not very significantly. We are obviously continuing with speed on the implementation of the measures to offset this tariff increase. As we mentioned in July, it's both, of course, the increase in our local production capacity in All-Clad in Canonsburg. It's also the relocation of our cookware production in Supor from China to Supor in Vietnam. It's also supplier diversification and renegotiation with our Chinese suppliers and also relocation or move of transfer of production to supplier facilities outside of China. Our action plan also includes the increase of selling prices. As we said, we started in May and June and continued over the summer. So we have only, let's say, a partial offset at this stage, but still it is starting to show. And finally, we are also implementing some measures to mitigate the impact on the Professional segment. So all in all, to -- the conclusion is that our measures are being increasingly effective but this does not compensate, of course, the wait-and-see attitude of retailers. Moving to Asia. In China, we see a moderate but solid growth still at 3.5%, 3.6% for the whole region and 3.5% for China, which is, of course, reflecting the strength of Supor in digital activation in particular. As you know, social commerce is becoming a big thing in China, and Supor is very agile and very efficient in those new channels. In this context, we are consolidating our global leadership, in particular, on cookware and on kitchen electrics. In cookware, the works are still very important, particularly titanium nonstick work. And in electrical cooking, we can note the successes in rice cookers and oil-less fryers. In the rest of Asia, we have a contrasted performance, very strong performance in Southeast Asia with expansion of retail distribution network and development of new categories. We have, unfortunately, as you know, a weak situation in Japan and South Korea, in particular, impacted by weak consumer spending but also the depreciation of the currency, which has increased in the third quarter. And in Australia, we have a continued product expansion, including with the recent launch of our ice cream maker, Dolce and -- but in a competitive environment. Moving to EMEA. In Western Europe, as I mentioned, we have a positive performance, 1% like-for-like, excluding LP, we're at plus 4.3%. However, it is a little bit softer than anticipated. It is driven by double-digit growth in cookware but also Floor Care and Linen Care, continuing the trend that we saw in H1. We noted that our performance was weaker than expected in France and Germany, in particular, because we are suffering on some of our historic electrical cooking core categories. But we still see a very positive momentum in Southern and Northern Europe, fueled by our innovation success, including on washers and versatile and oil-less fryers, for example. On other EMEA countries, the trend remains very positive in Eastern Europe, driven by Poland but we are also experiencing more difficulties, more issues in Africa and the Middle East related in particular to the geopolitical environment. With that, I hand over now to Stanislas for the remainder of the presentation.

Thank you, Olivier. It's interesting to hand over now because we see that in Southern Europe, in Northern Europe, in Eastern Europe, our growth is driven and is fueled by innovation. And it's interesting to review some of the big innovations we have or we are introducing this quarter or this semester. Starting with versatile vacuum cleaners. We've sold over 1 million units of this X-Force Flex range of 2024. This is a key driver of the growth made in France products for 3 out of 4. We are now #2 in Europe on versatile vacuum cleaners, and we see the continuous introduction in the second half of 2025 of the flagship, the most expensive products X-Force Flex 1660. This year also marks the development and the explosion of the robot -- of the versatile vacuum cleaner market. It is a market that is going to deliver over EUR 100 million of sales this year only for Group, the first full year. We've rolled it out in 70 countries since the end of 2024, and our XP10 is the best seller in Europe in the first 6 months of the year on the GFK panel. So we are introducing in the second half of the year 3 new variants, XP2, XP5, XP7, again, feeding a strong portfolio of innovation that is delivering material sales growth. And the last [indiscernible] , I was going to say, the last arrival is the Cookeo Infinity that we've just launched in France around about a month ago. It is the first all-in-one device that combines pressure cooker and a fryer in the same appliance. It has been introduced in France on the 23rd of September and already shows on the French market a significant material impact on the development. And last, within -- we've chosen quite a few innovations. We are expanding further the [indiscernible] launch in the second half '25 in cookware in Europe with a ceramic cover that is 4x more resistant than the previous, confirming our leadership in multi-material coatings, including ceramic with that product being expanding and launched across Europe. So you see a quite dynamic product activity, which supports and funds and feeds the growth of our fourth quarter, and that helps compensate some of the more negative news we have on some geographies or some segments of the market. Now when we step back and go back to the first 9 months, we see -- if we look at it by product line, we see that Floor Care is growing a strong double-digit growth in the first 9 months of the year, followed by cookware that has, again, a pretty strong dynamic. Linen Care confirms its dynamism. Food preparation is positive. We see more mixed performance in electrical cooking due to some difficulties in our core and historical product families but we are fixing it. And I think the launch of Cookeo Infinity is a great answer to that. And home comfort, I think Olivier has mentioned that the weather issues we have in Brazil. The last part of this presentation or the one before last is around the Q3 ORfA. As you've seen, the ORfA in Q3 is down EUR 52 million versus 2024. It is primarily driven by sales level, which is slightly below 2024 and the impact on the operational leverage. We continue to see a decline in North America, around EUR 20 million in the quarter, which is close to the one of half 1 and Q2. As I said, the strengthening of the euro and the ability to offset currency effects is still penalizing in emerging countries. That weighs for EUR 15 million in the third quarter against EUR 25 million in the first half. The contribution on Professional Coffee on the contrary is in line with last year in Q3, and that's after a decrease of EUR 40 million in the first half, and our investment in growth drivers have been stable in Q3 when it was up EUR 60 million in the third quarter -- in the -- sorry, first half. So that leads to an ORfA margin that is declining 230 basis points versus the ORfA margin last year. Now the last part is the outlook and some comments about the plan we just announced. The outlook for 2025, I'm just confirming what we said a couple of weeks ago is for a full year organic growth sales stable to slightly positive with a full year ORfA landing between EUR 550 million and EUR 600 million. Now of course, as you know, the fourth quarter is the most important quarter in the year. So we're in the middle of the peak season. What do we see as key actions now? We see -- we continue to see a growth acceleration in the most promising segments. We've seen, and I just described them, intensive product launches with unoptimized multichannel activation. We will have sustained and targeting marketing and advertising investments in the period, which is pretty dense of commercial events, of course, Black Friday in New York -- in Europe and the United States, Christmas holidays, 11/11 Singles Day in China and so on. We are focusing on strengthening the service offering in professional, and that goes with continued good momentum in coffee machine sales in Europe and Asia. So we see a positive outlook for professional coffee in the fourth quarter. And we, of course, continue and intensify our cost reduction programs of nonessential spending throughout all lines of the P&L. On top of that, we've announced today that we are launching a plan with the aim to restore profitable growth momentum by 2027. What's the situation? What's the objectives? Well we want to restore our growth momentum, we want to restore our profitability standards, and we want to adapt the group to the rapid shift in our markets. So the actions we implement are around generating approximately EUR 200 million of recurring cost savings by 2027, focusing our initiatives on purchases, on structure optimization, on improving industrial efficiency and on simplifying our work processes. That will allow us to accelerate our growth by substantially increasing our investment capacity in innovation, in artificial intelligence and in digital marketing, in particular, to streamline our organization to enhance our agility and our speed and to strengthen our consumer engagement around experience and sustainability. We don't give more details on this plan today. I think it's already some details. We will communicate more on this topic in early 2026. I think we're done with our presentation. Thank you very much for your attention. I will hand over to our administrator to organize the question-and-answer session. Thank you.

[Operator Instructions] The next question comes from Geoffrey d'Halluin from BNPP Exane.

I have 3 questions, please. The first one is related to competition. I guess you mentioned in your press release 2 weeks ago, sustained market competition. Just curious to get your thoughts on what you are seeing? Do you think you are losing market shares in a few product categories or in a few geographies? And maybe overall, are you seeing any competitors being more aggressive in terms of pricing? My second question is related to your revenue and EBIT bridge into 2026. Just wondering if you think any elements which have impacted your 2025 numbers are one-off by nature and so should not come back in 2026 and may support next year growth? And the last question is on the balance sheet. If you can share any thoughts on where do you expect to land in terms of leverage at the end of this year?

[Foreign Language] I will take the first and second and Olivier will take the third one. I'll start with the second to say it's pretty early to comment on 2026. We are -- as you've seen, we have been unsettled in 2025 in our forecast. So we are now working very hard on landing 2025 and taking the landings of 2025. When it comes to competition, we see some aggressiveness on the market from, I would say, Western competitors and from Chinese competition. We are able to manage that on our margins because that would be a question that comes immediately after. But yes, there is a high intensity -- highly intense competition on the market. We don't think we are losing share in the segments we operate in broadly. Now there may be some market swings between categories that robot vacuum cleaners in particular, that may impact our global share. But when you look at our competitive position on the main markets we operate in, there is no sign of a share loss. I think we are more affected by category mix and the country mix. Olivier?

Okay. So on the leverage, of course, we're not going to provide a precise guidelines at this stage of the year. But I think I can give you a few pointers. The first one, of course, you remember that we paid a fine from the French Competition Authority of around EUR 190 million in the second quarter. So of course, that will remain, let's say, a difference between last year's position and this year. Our working capital remains on the high side, even though we are progressively, let's say, reducing our inventory level versus last year, we are still penalized by the Red Sea crisis. And therefore, we have a working capital, which is higher than our target range. And this year, we have a few CapEx. We have, of course, CapEx cycles. And this year, we have a few important investments, in particular, to expand or build our new Shaoxing hub in Professional Coffee machines in China. And therefore, they will be a little bit, let's say, higher than the average. So we can expect a leverage position, which will be higher than our standards this year. We are, however, looking to fix that. Of course, we are -- as you saw today, we are announcing a significant plan. So we are determined to recover in our ROPA. We also -- we will continue to work on working capital to go back to our standards of 15% to 17% of sales. And we'll see whether they -- there are some good news on the Red Sea crisis but we'll certainly work to improve our working capital position and therefore, contribute to go back to our standards. We are, as you know, very comfortable around 2x net debt to EBITDA. And when occasionally we diverge from this target position, we take the necessary actions to go back as soon as possible to our comfort zone.

The next question comes from Alessandro Cecchini from Equita.

The first one is on the saving plan. You know that -- we know that you don't provide additional information but just to understand how much of the portion of savings are you cashing in this year? I mean, in 2025, you stated in the press release. And if you expect -- when you expect most of the benefits come through the P&L? And if you expect, I mean, restructuring charges relevant or something, I would say, not so relevant. So just if you can elaborate a little bit more on these topics. My second question is still about competition. Probably I lost a little bit because to understand if the level of competition that you are seeing in this moment is like you had in the first half or you are seeing a different situation? So already, you stated a high level of competition. So just to understand if the competitive environment is competitive but stable. And I missed if you talked about, in particular, Chinese company. So if you can elaborate a little bit more on this? And my final question was on the ForEx headwinds. Can you elaborate a little bit more on the total ForEx headwinds on ORfA for the 9 months because probably minus 15% is just a portion.

Okay. Thank you, Alessandro. On the saving plan, the portion of the saving plan, the plan is Okay. We are announcing a structural plan. And we say that we will complete this plan by 2027, which means we would like to get a very strong chunk of the savings by 2027, not all of it because there will be phasing. As far as 2025 is concerned, I think the first measures were taken back in June, July this year. And you see that in our ORfA results in the third quarter already that our spending growth has been almost totally curved versus -- or in line with last year. Most -- now the portion of the benefits that will go to the P&L, I think this plan is a plan to restore growth. There will be some reinvestments on this plan. But of course, the aim is to go back to our profit growth trajectory that I remind you, we discussed in the Capital Market Day back in 2023, where we said we want to go towards 11% [indiscernible]. We should finish this year 7%, 7.5% [indiscernible]. So of course, there is a clear priority to recover ORfA and operating margin through this plan. Now it's very early to say when and how much will be hitting 2026 and 2027 and 2028. But you should keep from this plan that it's material, it's important. It will be recurring structural savings, and it will be fast because we want to complete it by 2027. Your second question on competition sorry.

No, no, please. And then please...

No, if you have any comment because I was going to switch to your second question.

No, yes. On the second question, so if I understood correctly, so the plan is having already, I mean, some benefits in 2025 and the plan will be rolled out through 2027 with, I presume, the full impact on 2028. It's correct?

I mean it's early to say. I mean, you are -- I understand and I recognize your impatience -- what I'm saying is that we have already undertaken some cost-saving measures in the second half of 2025. We are accelerating that and put together a plan that will generate in the next 2 years, EUR 200 million additional recurrent savings. Okay?

Okay. Yes. And on the final...

So on the Chinese -- on the competition intensity and the Chinese companies, we see, I think, probably more intense competition than there was in the first half of the year. This is driven by all competitors. We see more and more Chinese companies in the areas of floor care and kitchen electrics coming in, in Europe. We think we are able within our guidance to face this Chinese competition, and we're confident that with what we know and what we see in the market, we will be able to confront that competition as we've done it in the first half of the year. Olivier, do you want to take the first ForEX question?

Absolutely. So on FX, let's say, several -- in total, let's say, for the first 9 months, it's just under EUR 50 million of negative impact. So it's obviously very material, but it's made of several components. The first one is on U.S. dollar and CNY. We commented on this in the first half. We're expecting the impact to be breakeven in the third quarter and to turn positive in the fourth quarter because, obviously, we are typically short of those 2 currencies are short. What happened is that, in fact, in the third quarter, we still had a negative net impact. So we -- this is delaying, let's say, the positive momentum to Q4. But clearly, this will be going forward, if the levels stay where they are, this will be a positive effect on our margins. We are also suffering from the Chinese -- from the Japanese yen and the Korean won weakness. Last year, we were -- on the Japanese yen, we were protected by our hedges. But unfortunately, this year, they are not providing much of a cover. And then the last point, which is probably the more material is that we are facing difficulties this year to compensate the depreciation of emerging market currencies by price increases. As you know, traditionally, in the past, we've been able to compensate the majority, let's say, 70%, 80% of the negative impact. The different situation that we are facing this year is the diverging trajectory between U.S. dollar, in particular and the euro. And many of our competitors, of course, and many of those markets are dollar market. And when the euro is strengthening like this and the U.S. dollar is depreciating, it is making it more difficult, at least in the short term, to pass those price increases to compensate for the depreciation. So this is one of the significant component of the negative FX impact in our results this year.

I'd like to maybe add something on the -- Olivier, on the intensity of the competition. You know that we are Chinese in China. And you know that facing Chinese competition and the Chinese aggressiveness is our daily bread and butter in China. So I think you shouldn't keep from my comments that the competition is increasing and that will impact the results. You should keep from our comment that competition is increasing, and we feel we are able to navigate with this increased competition intensity with a good management of our margins. I think this is the key message you should keep for this part.

Okay. And lastly, asking restructuring charges. So if you -- just a sense.

Too early to say. Too early to say. We'll come back to you -- we'll come back to the market early in 2026 to give you the full details. And of course, this will be part of the details, okay?

Okay.

[Operator Instructions] The next question comes from Sarah Thirion from TPICAP Europe.

I was wondering if you could remind me the date of the big renewal of major contracts in Coffee -- Professional Coffee, sorry. Because if I remember well, the medium-term ambition was supposed assumed an increase in Professional division weight in percentage of consolidated revenues. And if there is no acquisition, I think that the medium-term targets could be harder to achieve. So if you could remind me the renewal date would be great.

[Foreign Language] Right. We had a big wave of contracts in the U.S. in '17, '18, '19 mainly, I think. And we say that those contracts are -- those machines have 6, 7, 8 years life expectancy. Our machines, unfortunately, are more reliable and last longer. So we expect to start to see an impact, let's say, in '27, '28 with a bigger impact in the, call it, '27, '28, just to be precise. There will be -- and that's the first comment. The second comment on the Professional Coffee is that with all those blips and the cycle effects, we still see that the underlying growth of the business is between 5% and 10% quarter after quarter. So we are confident that this will -- that we stay in course with the Professional Coffee. And of course, the exit of these bad comps and Q4 should be the first clear quarter of growth should be -- should help us see more clearly in that direction. The last thing I wanted to say on Professional coffee is that, as you know, we've opened -- we are opening now the Shaoxing Professional Coffee hub that will expand further our ability to develop machines for the Semipro entry market, thus allowing us to enter more easily on coffee chains on office work. So we see a potential for expansion of the professional coffee category through those new ranges of machines that should help us deliver our expectations on that segment. Olivier?

Just to complement, mass production. So we are -- the facility, as you know, has been built in record time. It was delivered this summer. The machines and the ramp-up of the production is starting as we speak. And in fact, we expect mass production to start in the beginning of 2026. And as we mentioned, Sarah, in the past, we are developing, in fact, very rapidly several new products for the semiprofessional and entry-level segment. And those will be, of course, additional to what we do today.

Okay. Just if I may, I guess that the U.S. tariff could be challenging for share in the U.S. Do you have any comments on this?

Yes. We are -- as many of our Professional Coffee competitors, we are manufacturing in Switzerland. We are looking at it. We have options in Germany. We have options in China. So it is something that we're looking at, and it is not -- it may be an operational concern short term. It is not a strategic concern for us. We will fix it. We will have solutions if those tariffs are confirmed and if that impacts materially our P&L, okay?

Okay.

The next question comes from Alessandro Cuglietta from Kepler.

Just a quick one for me. On China, could you maybe elaborate on the current market trends and especially the sustainability of the current like-for-like growth you posted because we have a lot of headlines on China quite negative at the moment. So I wanted to have your opinion on that.

Right. We see a slightly slower fourth quarter in China. but it would be still positive. It will be -- we see a market that is not markedly slowing down. I mean the first holiday season, the Golden Week was an impressive in terms of retail sales. And I mean, we've seen the same statistics as you've seen. But our business is holding up quite well. Our channel mix is holding quite well. Our margin mix is holding quite well. Our core categories on cookware and kitchen electrics are holding up quite well. So no sign of a change of a trend that has now been on for 4, 5 quarters in China with consistent year-on-year and quarter-on-quarter evolutions, which are positive and which are driven and fed by sound business.

The next question comes from Christophe Chaput from ODDO.

Just a quick one for me on North America. So you say that you have a negative impact by EUR 20 million in Q3, obviously. I just wonder, is it possible to strip out the volume effect on your sales and the price effect or the -- yes, the price hike that you are going to -- that you already passed, sorry, to offset the tariffs. So in another word, on the minus 20, do you fully, let's say, offset the impact of the tariff with your price increase? And so the minus 20% came from the volume? Or do you need a further price increase?

Olivier?

[Foreign Language] So in -- the extent of our price increases is designed to offset the majority of the negative impact from increased tariff. And this is implemented progressively, not at the same time on all categories. So it's a growing, let's say, it's a growing offset, and it was not -- it did not offset 100% of the tariff in the third quarter. That being said, the big impact is really on volumes, which is due to, as we said, the wait-and-see attitude from customers and the change of incoterms, the change of -- from direct import locally to local sales. And that's why we are expecting an improved performance in the fourth quarter. So progressively, the measures that we are taking are, let's say, delivering their results. And progressively, we expect the markets to normalize. In total, we still have positive sell-out momentum, not quite to the extent of the price increases. So it means that there is a slight negative impact on volumes, but it's a very moderate impact. Okay.

There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks.

Okay. Thank you. Thank you very much, everyone. We are -- first, we are in action, we are in movement. We have the biggest quarter in front of us. We're in the middle of it. So all our teams are mobilized and in action and very active to fight against those headwinds that we are facing. We know that our guidance has led to some disappointment, but we are determined, and that's my second point, to bring the group back to the financial trajectory that we've set for ourselves a couple of years ago. And the third comment is this is why we put together a plan that will accelerate that path to recovery, both in terms of resetting our operating margin and in terms of giving ourselves the resources to deliver the growth that is absolutely needed to deliver value creation in this company. Fourth, we have a year where we've had ups and down more hubs, in fact, on inventories. We may not catch up everything on this year's lending on inventory but we are very conscious of the market and our investors' expectations and ambitions in terms of cash flow delivery, and this is one of our preoccupations. I thank you all for your continuous follow-up and support for your questions, and I wish you a good results week or season. Thank you very much.

Thank you.