Electrolux Professional publ AB

F:4KK1

Earnings Call Transcript 2022-Q1

[Jacob Broberg, executive]

Good morning, and welcome to Electrolux Professional Q1 results presentation. My name is Jacob Broberg. I'm Head of Investor Relations. And with me, I have Alberto Zanata. He's the President and CEO of Electrolux Professional. And Fabio Zarpellon, he's the CFO. And as always, in the quarterly presentation, we kick off with Alberto. Please, Alberto.

[Alberto Zanata, executive]

Thank you, Jacob, and good morning to everybody. So Q1 2022, I would summarize the quarter in high point basically. The first one is clearly strong sales development, following the positive trend initiated spring, summer last year. We continue to grow the sales with -- supported by a positive development of the market. The demand is increasing. It's growing, I would say, across all regions with some exception, particularly to be mentioned, China, where the return or the new lockdown due to COVID that clearly stopped a trend -- a positive trend that was in some way the first one -- China was the first market recovering and recently stopped due to the new lockdowns.

The second point is that this strong sales development -- we've been able to deliver this strong sales development despite supply chain challenges. Supply chain is a challenge since fall last year. I would say that increasing during the first quarter. But despite this one with the great job done by the team, the multifunctional team putting together purchasing, engineering and R&D, we have been able to make sure that we did not stop our factories. We had to stop some lines here and there. But we've been able to, in any case, produce product to fill the inventories, to fill the warehouses and to provide product to be invoiced to our customers. So we are still delivering product with a reasonable lead time despite all these challenges.

The third important point is that this is the first quarter we report a full quarter with the Unified Brands, the company that we acquired last quarter in December last year. And Unified Brands is confirming the positive impression we had, obviously, during the due diligence, the acquisition phase at the initial time spent working together. They delivered a strong quarter with an underlying business that is accretive to the group profitability.

Integration of Unified Brands is continuing. It's progressing well according to plan. And as expected, we are also very close to start working together to make sure that we will be able to create value with Unified Brands together with the Electrolux Professional.

The fourth point that also is important is that execution of the strategic priority continues very positively, meaning that sales to chains and sales of customer care so all the products that are sold after having delivered the product to our customers, product and services are growing -- healthily growing. Despite the strong sales, the growth of this sales to chains and customer product is above the product sales. So very positive also this one, and you remember that is one of our targets to mix up with this customer segment and this business typology.

And the fifth point is, in some way, the summary of all the 3 that I mentioned earlier. So all in all, the profitability is confirmed around the 10%, slightly below, including the acquisition cost and all the other extraordinary costs that we had during the quarter. But if I look at the underlying profitability, it's above 10% during Q1, so we are confirming the positive trend of the past quarters.

If we look at the development per region and this is the time we see -- the first time we see all the arrow trending positively. The trend is different because the trend in the Asia Pac, in the Middle East area is, let me say, less positive than in the other 2, in particular, because of China. I think I mentioned it. China, in some way, is in lockdown. So the business has stopped there.

And while the other region, Middle East or some Southeast Asian countries are recovering fast. I mentioned here is that some countries, France, U.K., Central Europe, if we talk about the European one or Australia, Singapore, New Zealand, Middle East and Africa, if we talk about the Asia Pac region and the Middle East, Turkey, in Europe, Turkey is -- all these countries are above 2019 level, so the pre-COVID season.

Turkey is more or less doubling the turnover in the quarter in that period of time. Also North America is very positive compared to the '19 level. Even if I have to consider '19 level without the Subway deal that was very significant. Specifically, going into Food & Beverage. Clearly, the Food & Beverage business was delivering most of the growth, 76% up. Half is coming from organic, half is coming from the inorganic, so the acquisition of Unified Brands.

Also in this case, I would say, significant growth everywhere, specifically, again, North America and Europe beverage, that was the area that was suffering the most during the pandemic is very high. Again, without the Subway deal, we are on level in North America that are higher than 2019. And in the quarter or in the recent month also, Europe is above the '19 level. So very positive.

For customer care, the other thing that is very positive is that the customer care business in Food & Beverage is above the '19 level in all the regions. So very positive activities in particularly related to the consumable that are sold to our customers.

If we move to Laundry. Laundry is confirming the stable growth, not as high as Food & Beverage, but steadily progression, in particular with the profitability. And I think it is important to mention this one because in some way, the Laundry business is the most affected by the increase of the material cost. Despite this increase of material cost, the margin went up significantly, and it is now above 17% in the quarter.

In the Laundry business, Europe and North America are already above the '19 level along the full quarter -- the full first quarter. So it's clear that the market suffered less during the pandemic and is already on the '19 level. In Asia, it's not back yet. But this is mainly related to a specific situation that we have in a pretty large market that is Japan in that region. With this said, I would let Fabio commenting the financials with more details.

[Fabio Zarpellon, executive]

Thank you, Alberto, and good morning to everybody. As you see from the material, since quarter 2 last year with the market recovery, we have been able to consistently increase top line but also the operational EBITA compared to the previous year. In absolute term, quarter 1 EBITA was more than double of what we delivered last year, and it was the highest quarterly EBITA since quarter 2 2019.

Margin was 9.5%. And as said by Alberto, if we excluded the Unified Brands integration cost mainly related to inventory step-up and IT-related costs, underlying EBITA margin was 10%. That I would call a remarkable and consistent performance along the last 4 quarters. Volumes were the main driver of the EBITA improvement clearly in this scenario.

While reading through the P&L, as you see, the gross margin was in line with the previous year despite the large increase in material cost. And this is due to the price increase we put in place and higher sales and production volume. Productivity in operation in quarter 1 was also quite better than the previous year, and currency also contributed positively with roughly SEK 15 million to the gross margin and EBITA of the quarter.

I'm very happy to report that the announced price increase has been executed in a very disciplined way. But as anticipated, was not enough in quarter 1 to cover completely the additional material and logistic costs. And we reported what we anticipated, a gap of roughly SEK 70 million between the benefit from price increase and the additional cost we had in direct material component and logistic cost.

Our team has worked hard to secure product availability, component availability along the quarter but also put in place additional measures to, let me say, secure pricing for the remaining part of the year. And happy to report that we have also secured at this moment, a majority, I would say, price for the second part of the year. But the cost level that we covered was higher then original plan due to the development of raw material costs in the market.

As a consequence of this situation, we have decided to put in place an additional price increase with effective day quarter 2 last year -- quarter 2 this year. The new price increase will be in place already from first of May, meaning a few days from now. And we estimate that this additional price increase we will be able to compensate on a full year basis at the overall material, transportation, energy cost increase.

The gap that we have for SEK 70 million between price, direct material, cost in quarter 1 will be a significant reduce for quarter 2. And I expect that the gap will be, let me say, minimum, I would estimate below SEK 10 million. Still looking through the P&L, selling & administrative expensive increase in value, but the weight on sales was reduced by roughly 3 points compared to quarter 1 last year.

Business initiatives are in place to support the volume growth. And the labor cost in the P&L consider also the accrual for the variable pay of the people. Investment in innovation as well as digitalization of our company are continuing in -- according to our plan and are flat into our P&L.

A few additional words on Unified Brands to complete what Alberto was saying. Performance of the company both in terms of top line and bottom line was in line with the plan. Integration activity are well proceeding and we count to conclude them, let me say, by quarter 2 where we expect also to book, let me say, roughly SEK 5 million of remaining integration cost.

When it comes to the operating working capital, as you see from the [ column ] represented here, we have been able to further improve the ratio of operating working capital on sales that is now running at 14.4%, well below the level we had last year but also below December 2021 when we had close to 15%.

After the acquisition of Unified Brands, Clearly, our financial position remain pretty strong with a ratio net debt on EBITA below 2, meaning at 1.8, slightly reduced compared also to the December level. We have a solid balance sheet, but also a solid liquidity situation with the cash in our hands for SEK 690 million and the revolving credit facility available for over EUR 100 million, meaning that we are fully equipped to support the development of this group going forward.

Cash flow was negative in the quarter. The negative cash generation was not due to profitability that was reported so far has been pretty strong, but due to higher working capital requirement due to the significant growth of the business. I would say that despite the performance in terms of cash generation in quarter 1, we have a good underlying condition to continue to deliver solid yearly cash flow for 2022 and going forward.

So I would say pretty good sales profitability development in quarter 1, and we are ending the quarter also with a strong balance sheet to support the business growth, the profitable business growth going forward.

And with that, back to you, Alberto.

[Alberto Zanata, executive]

Thank you, Fabio. Thanks a lot. And let's continue with the quarter mentioning that the activities according to the strategic priority beginning, I mentioned the results of the achievement, if you want to say, for what the quarter is concerned, for what concern chains and customer care. Another thing that is part of our priority is to continue to bring to market the innovative solution. And this is what we have been doing also in Q1, introducing to the market at the safe box that is a pretty good tool, a good product that we developed, by the way, coming from an idea that was generated by our people during the pandemic when we added the innovation competition among our people that were in lockdown.

This was an idea that we transformed in a product, we tested with chains because it's addressing a specific need that is the takeaway the delivery that every restaurant turned out to create as an alternative to the normal business and now it's something that is going to stay until the further development. So this is a great product that we introduced in the market, just introduced, is under test with several chains around the world, and we are expecting a lot from this innovative solution.

In addition to that, we also -- lucky -- happy to report that we received the Red Dot design award that is probably the major design award referring design of product, the overall concept of design, not only the aesthetic but all the characteristics. And this year, we received it for 2 products. The Trinity product was introduced at the end of 2021 and the LiberoPro that we introduced at the beginning of this year. Again, new product that we introduced that are addressing the growing trend of the new trend in this industry. So again, company that is continuously bringing new products to the market. I strongly believe that the new products are the fuel, let me say, for the growth and these are clearly good products to support our development.

With this said and before coming to the summary, let me have a couple of words also about something that is obviously in the mind of everybody that is the situation in Russia. I have to say that we took actions immediately when the sanctions came in place when the war started and we stopped receiving orders from customers in Russia independently if they were sanctioned or not, but at the beginning, we put on all -- we stopped collecting orders. Then obviously, we comply with the sanctions list so not delivering product to any sanctioned customer or products that were in the sanction at least.

We still have an organization in Russia, roughly 25 people. We care about them. They are mainly used to manage business outside Russia. Currently, we are not only, as I said, since the beginning, collecting order, but we are not even sending shipping product to Russia. We stopped weeks ago to do this. So this is the situation in Russia. Russia, in any case, business-wise, beside the humanitarian situation, and as you probably know, we supported both with donation, my donation matching the donation of our people, but also with product delivery to organizations that are supporting the refugees in Romania and in Poland, the neighboring countries.

But besides this humanitarian situation, business-wise, Russia is a tiny business for Electrolux Professional. It's less than 1% of our net sales last year. So it is not impacting our performance, the current situation. We don't have a supplier base in those countries. So also the supply chain is not impacted by what is happening in that part of the world.

With this said, I would summarize the first quarter result, confirming that recovery of the market is still there, still a good recovery. As we said, we were expecting the market to be back to the '19 level. It is the case in most of the countries in Europe, in some countries in Asia Pac, surely in North America, the market is back to the '19 level and our sales are back to this one. Also in terms of typology, beginning, it was mainly the quick service restaurants, the chains were back and now also institutions are moving, beginning, it was mainly replacement business.

Now we clearly see that both of the chains are restarting the rollouts, but also the project business is back, medium-size, but also large-size projects restarted. The second, this recovery is happening and the growth of the sales are strong despite the supply chain challenges. Both in terms of availability of components, but also in term of price.

As Fabio said, the negative impact during Q1 was significant. We believe that in Q2, it will be pretty close to be neutral between the price and the material cost increase. We are implementing additional price increase in May to make sure that we are able to compensate to this delta. It will be price increase or surcharges according to the different geographies to make sure that we are then effective from May 1.

Another important thing that I'd like to mention is that a week ago, we announced a new -- an evolution of the organization. Still, we will be reporting under the 2 segments, Food & Beverage and Laundry. But within the 2 segments, we decided to have decentralization of the business ownership. We created business areas that will be focused on specific geography or product categories, and this is in line with the guiding principle that we announced a year ago and that are the ones that we want to see. That in some way, as I said, guiding the behavior and the way of working of our people.

It is, in some way, a progression from the separation from the Electrolux Group when we said that one of the reasons was to be closer to the customers, to be very specific, to become more flexible, agile and faster. I believe this evolution of the organization is exactly addressing these things.

The last point is about Unified Brands, integration continues, continues well according to plan, and I'm confident that in a quarter -- in a couple of quarters, we will be able to start thinking about the additional value that we can create having Unified Brands part of the group. So Q2, with quite confirming the positive trend, the order stock is large. It has been confirmed despite the strong sales, so the confidence about Q2 are good. The second half of the year still with a lot of uncertainty related to the geopolitical situation, social situation that are affecting the different region of the world. With this said, I would turn it to you, Jacob, for the Q&A.

[Jacob Broberg, executive]

Thank you, Alberto. We will now open up for questions. So please go ahead, operator.

[Operator]

[Operator Instructions] The first question comes from Johan Eliason from Kepler Cheuvreux.

[Johan Eliason, analyst]

Yes. This is Johan. I have 3 small detailed questions here. On Laundry, it's fairly well, obviously. But we remember that sometimes there's some restocking going on with your big distributors like I understood Q1 2020, for example. Was there anything similar impacting the quarter this time around?

[Alberto Zanata, executive]

There is not an effect like the one we had during 2020 when it was destocking, let me say, and then restocking later on, absolutely not in the meaning that, that sales to our distributors in Q1 were strong, very strong. But also its external sales were very strong. So no, there is not an effect like this one.

[Johan Eliason, analyst]

Okay. Excellent. Then on the gross margin and this sort of cost inflation you're talking about not fully recovered SEK 70 million. Is the logistics part of that also included in the gross profit impact? Or is that also further down below the gross profit margin?

[Fabio Zarpellon, executive]

The logistics-related costs being transportation, warehousing and so on are into the gross margin. So when I mentioned the gap between price and cost, this cost of material and logistic cost that was SEK 70 million for quarter 1 and is expected to, let me say, reduced to less than SEK 10 million for quarter 2, it includes also the logistic cost.

[Johan Eliason, analyst]

Excellent. And then I was just curious a little bit about the price hikes. You mentioned something about surcharges. And I can't remember I've heard you mentioning that before. Has there been some sort of change so you are using surcharges to recover the cost inflation a bit faster? Or this is just...

[Alberto Zanata, executive]

Yes. You're perfectly right in the meaning of that. We didn't use this in the past. It was used in some spot situations, but it was not used. And for sure, I did not mention it in the past. We are using this one because it keeps us the possibility to be effective short term. So it will be in place from May 1. So in some countries, you need to have 3 months before having a price increase effective. Material are impacting us today. So with this one, we are very fast in being effective.

And secondly, it is temporary. So the surcharge has a temporary effect, limited in time. It will -- we announced it for 6 months. So this means that in 6 months from now, we will take a decision if we have to further increase the price of our product or I don't know the conditions. That is the -- the big thing is that the second half is still full of uncertainty. So we are covered, and we have the freedom to decide what to do.

[Johan Eliason, analyst]

Okay. But does it also mean that the orders you have in the backlog from Q1, you can add surcharge on or is it just on new orders?

[Alberto Zanata, executive]

It is automatically on new orders, for all the orders and not for all of them it is applicable. We had also this one for the price increase that we applied from January 1. We said that for every order that are not invoiced by the end of February, the new price would have been applied even in the order were placed before January 1. This cannot be done for all the prices -- sorry, for all the orders and for all the customers because we are binded by contract in many cases. But whenever it is possible, and it is justified, yes, it will be done.

[Johan Eliason, analyst]

Okay. Excellent. And then just finally, you mentioned Laundry Japan declined. Was there any specific reason behind that?

[Alberto Zanata, executive]

There are some specific reasons related to the market and something also related to our performance, the performance of our organization. Obviously, again, Japan is not a super large market, but in Laundry and in the Asia Pacific, we have always to remember that Japan is the second largest market in the world after North America, and that's the situation. And we have -- traditionally, we are the first non-Japanese company. So ahead of us, there are a couple of Japanese companies. So it is a pretty significant business in the market, limited if I look at global -- if I have a global view, but quite significantly, if I just specifically look at Laundry and the Asia Pacific region.

[Operator]

[Operator Instructions] Our next question comes from Karri Rinta from Handelsbanken.

[Karri Rinta, analyst]

Karri from Handelsbanken. I have 2 questions. Firstly, about the pricing and these price increases that you announced. Firstly, can you give us a sense of with these price increases that you're now putting in place from 1st of May, roughly, where are we if we would sort of compare price index from 1st of May to price -- where prices were in 2019?

And then secondly, with this sort of announcement that you have made to your customers, are you starting to see any meaningful pushback in some of the categories, some of the geographies in some customer groups? Those were my 2 pricing-related questions.

[Alberto Zanata, executive]

Okay. So the price increase that we are going to apply from May 1 without being specific because, again, it is different region by region and business -- and product by product because the material increase as a completely different effect considering the different product and location where we produce them.

I think I mentioned the fact when I was commenting the development of the profit of Laundry, that the Laundry product are more affected by the increase of the material than the Food & Beverage one because of the use, for instance, of carbon steel that is increasing more than the others. So we cannot be. But in average, we are talking about the May 1 low single digit. Remember that the increase that we had in January was in reality in the high single digit. So all in all, we are talking about a pretty significant price increase. Compared to '19, I personally didn't look at that one.

The comment I can make is that in the '19 year was the year where the price increase was basically following the inflation. So we are talking about low single digit. Then for sure, during the pandemic, there have not been price variations. And so this means that probably we can aggregate what the price increase we have in 2021, the one in June and the one on January 1, 2022. And this one, this is the delta compared to the '19 level. So we are talking about more than 10% in term of price. And I'm looking at Fabio, if he has a different comment on the matter, but I see him confirming more or less this delta. So we are talking about price.

The second one is the pushback. And here again, I can only tell you that the order intake, so receiving orders also during the month of April is still stronger than the net sales. So we still have a good collection of orders. I believe in this moment, our customers are more concerned about the product availability than all the rest. I said that the market is recovering, so we had a look also at the statistic, at least the one in Europe about the touristic trends during the Easter season. That is the first in some way, how can I say, signal related to how it's going, the movement, the hospitality industry for 2021, and they were super good. They were super good, basically all across the European countries.

There's been a notice about Americans coming back. Obviously, there are no still Chinese, Asian, Russian tourists, but the Americans are back. The Europeans are moving, and they are back also in the cities. So if you remember a year ago, we mentioned that tourist most good along the cost in the, let me say, open space touristic place was very weak in the big city like Paris or the typical touristic destination like Rome, Venice and Italy, London or places like Madrid, the Spanish ones. In the cities, the cities were fully booked and that is an important signal for the market. So in this moment, our customers are concerned about product availability. They are placing orders. And this is, in some ways, the reason why I'm still cautious about the second half of the year.

[Karri Rinta, analyst]

It sounds like demand is not a problem at the moment. But what about supply? I think you mentioned that you had to take some short-term downtime with some of machines during the first quarter. So how confident are you that you will manage these component shortages in the second quarter? And is there any difference between Laundry versus Food & Beverage in terms of component availability?

[Alberto Zanata, executive]

There are no significant differences. Depend on from where we get the component. In this moment, the factories that are, for instance, using the electronic component, maybe in China are the ones that have more troubles or challenges because of the lockdown in Shanghai, Shenzhen, in that part of the region. So it is still a moving target, let me say, that we are managing with the team that I mentioned earlier, we call it the speedboat in the meaning that it is a multi-functional team that is looking at the planning of the factory and is looking for resourcing, replanning, and in some way also replacement of a component to make sure that we are able to deliver the product. It's not a great situation, absolutely not. It is good to see that in any case, productivity improving our facility, it is true that it is compared to 2020 that was a year still affected by the pandemic in some way, but it is good how they've been able to manage this in the different operations.

[Karri Rinta, analyst]

And then finally, the customer care business that you mentioned that has been growing faster than your overall growth rate. So what have you done to drive this growth? And what actions do you have planned for the future?

[Alberto Zanata, executive]

What we have been done? We have been -- honestly, I think probably the easy thing is to say that we executed, we really did what we were supposed to do in the meaning that we have been talking quite a while about the program that we mentioned Essentia, that is a holistic project that is encompassing the creation of a complete program of product. So this means accessories, consumable, but also services that we can offer to the customer. We have been hammering the customer over this program. It is relatively new for our industry. So it took time to get grip on or to get the customer understanding the benefit, evaluating the cost versus the benefit of having the product being maintained during the life, understanding that the real cost of the product is when the product is installed. So the running cost in many cases are, by far, overtaking the ticket price.

So step-by-step, we are getting traction on the market. The first one are the big customer chains, so the multi-unit operator. So people that they have a better understanding of the business. But now we are really happy about that. And what is good is that it is not happening only in countries where we are very strong, likely European one, where it was expected because of the large installed base, what is happening also in Asia Pacific. So it seems a general meaning I have to say that we have to consider with the lack of product availability that generally is around the market. The customers are caring more about the product that they have and to make sure that the product can work longer.

[Jacob Broberg, executive]

Okay. We take a question from the web then. Here is Stefan Stjernholm from Nordea. He asked group common costs are up substantially year-over-year in Q1. What's behind? Is this a new level? And how should we think about group common costs going forward?

[Fabio Zarpellon, executive]

Yes. We had a growth of group common cost compared to Q1 last year and the previous quarter. I will say that besides some inflation item related mainly to labor cost, the main growth related to, I would say, specific advisory costs that we have for several projects we run in quarter 1. I'm expecting for the quarters to come that group common cost will come back to a more normalized level, meaning in line with 2021 plus some inflationary items to be included.

[Jacob Broberg, executive]

Thank you, operator. I don't know if there are any more questions.

[Operator]

We have one question from Henrik Christiansson from Carnegie.

[Henrik Christiansson, analyst]

So I have 2 questions here. First one is on the cash flow that's a bit weak. You called out inventory buildup and receivables. Could you give a bit more color what the inventory buildup is about, is the top finished product is components? And when do you expect that to normalize? And is there any sort of Unified Brands effect there as well?

[Fabio Zarpellon, executive]

Okay. So let me develop this concept. First, overall, operating working capital on sales was reduced further, and I believe we have achieved one of the lowest level of the very recent quarters. In absolute term, operating working capital increased. Increased because what you said, we have added Unified Brands that, by the way, overall, is operating with a level of operating working capital in line with the rest of the group. And we have increased also in value receivable and inventory.

To develop around these 2 last items, yes, we grew receivable. We grew receivable consistently with sales. I have to report that in terms of quality of receivables, the balance sheet is pretty strong because we have reported even a further reduction of past due in this quarter also compared to the previous quarter. I believe we have one of the best historical level in term of past due on total receivables. So the quality of the balance sheet is pretty strong.

When it comes to inventory, yes, inventory went up. Inventory went up because of the inflation, let me say, that is reported on raw material and therefore, on the value of an inventory, this is definitely affect. But also, we have -- we are building up the inventory to serve customer and, I would say, pretty strong all the stock that we have to enter into quarter 2. I would say that is a situation that is pretty well under control, both in terms of receivable and inventory. And I have not any specific concern for it going forward, meaning I expect, as I mentioned earlier, net income in terms of cash generation for the year, all the ingredients -- all the historical good ingredients out there.

[Henrik Christiansson, analyst]

And then on the EBIT, you mentioned, if I heard correctly, that you had an FX tailwind in Q1 of around SEK 15 million in both gross margin and on the EBIT margin. What do you expect the effect to be for the full year based on current FX rates?

[Fabio Zarpellon, executive]

First of all, I'm not going to speculate to the development of the currency because it's not my role and it's very, very difficult to predict. We see also I was looking in this hour, the development of the U.S. dollar that has been further strengthening against the other currencies. I mean, just to give you a hint, if U.S. dollar continue with this development, we will see also some positive currency contribution in quarter 2, difficult to predict more.

[Henrik Christiansson, analyst]

Great. And then a final question here. Talk about strong order book and you say you're comfortable ahead of Q2. But I mean how long is the order book, if you would receive zero orders from today, how long will the current order book last? And then if you could talk a little bit about lead time in deliveries as well. If you're a customer, if you order something today when do you actually get it delivered?

[Alberto Zanata, executive]

As I said, the lead time is a reasonable time. Reasonable means longer than what it was normally the lead time. We have a pretty large stock. So we have a product that can be delivered [indiscernible] to customers. Depending on the product categories. There are product categories that we are delivering with the lead time that is more than a month. There are others that we can deliver on the spot. So it is not a generic prolongment of the lead time. It is more case by case.

Again, I believe the important thing or at least the one that I'm following is if it is reasonable. If we are able to manage the urgent orders of some customer and for the time being, I have to say that we have been able to do it. We did not receive order cancellation because of such a situation probably also because it is, in general, a critical situation for the entire industry with the large stock that we have portion of the stock is booked. So this means it is really be the name of the customers. In case we are waiting for product to complete the order of the customer to pick them up, and we can redirect some of this product when there are urgencies. So for the time being, we are able to manage the situation. We are monitoring it day by day because clearly, the supply chain is very critical. So...

[Operator]

The next question comes from Bjorn Enarson from Danske Bank.

[Björn Enarson, analyst]

Sorry if you have answered this question already or maybe I just didn't get it. But on the surcharges that you are now implementing and they are temporary for 6 months. If we would assume a continued inflationary pressure, is it possible to renew them? Or is there a risk for a negative gap, et cetera? Or how quickly can you renew those if needed?

[Alberto Zanata, executive]

For what we know, this should be enough. This should be enough. And again, is limited in time also because typically, the fall period or the after summer period is the period where normally not only us, but in general, all the companies are relooking at the price list. I believe during these crazy years when all the price lists have been increased every 4, 6 months, I think in October, we will have to realign the price according to the new situation. Hopefully, in a more stable situation, if not, they are renewable. We can renew and we can extend and we can change the surcharges. Absolutely, yes.

[Björn Enarson, analyst]

Okay. I got it. So you are raising prices in the meantime and then they should be matched hopefully.

[Alberto Zanata, executive]

Hopefully.

[Operator]

The next question comes from Fredrik Moregard from Pareto Securities.

[Fredrik Moregard, analyst]

Just a question on potential bottlenecks when it comes to demand. I think a couple of quarters ago, you mentioned lack of craftsmen in the industry holding back growth and holding back the market recovery. Is that still an issue? Or has that situation improved? Or is it simply that the bottleneck has moved from craftsman to product visibility?

[Alberto Zanata, executive]

You mean craftsman for us to produce or in the industry? So...

[Fredrik Moregard, analyst]

No, in the industry for your customers...

[Alberto Zanata, executive]

For our customer, it's still an issue. It is still an issue. If you walk around, you see that they are looking for people. I would say that more than holding back the development of the market is at least probably also a personal opinion as a customer is reducing the level of service you get. But it is an issue this one, generic issues across all the countries in the industry. Absolutely, yes. But I don't think it's holding back the development of the industry.

[Fredrik Moregard, analyst]

Okay. Good to hear. And to what extent is it an obstacle for you in developing your customer care offering?

[Alberto Zanata, executive]

No. I would say, no, not at all.

[Operator]

There appears to be no further questions. I will turn the conference back to you.

[Jacob Broberg, executive]

Okay. We say thank you for today, and speak to you next time. Have a good day. Goodbye.