Electrolux Professional publ AB

F:4KK1

Earnings Call Transcript 2020-Q4

[Jacob Broberg]

So welcome to Electrolux Professional Q4 presentation. My name is Jacob Broberg. I'm Head of Investor Relations. With me I have Alberto Zanata, CEO; and Fabio Zarpellon, CFO. I will now leave the floor to Alberto. Please go ahead, Alberto.

[Alberto Zanata, President & CEO]

Good morning. Thank you, Jacob, and good morning to everybody. Q4, I would summarize the quarter saying that along the quarter, we had a strong cash flow generation despite the turbulent times that we have been facing during the last part of the quarter. Sales declined by 13.2% with an EBIT margin stable compared to last year. Considering the situation, we have also to say that the Board proposed to pay no dividend. And we have also -- the other highlight that I wanted to raise in the quarter is the fact that we continued in our strategic initiatives. Strategic initiatives, in particular, the factory in Rayong, the 28th of February, we will complete -- the factory will be completed, and there will be the final handover to give us the possibility to start moving into the factory. And the digital investment, investment in product, but also digitalizing our company.But let's start from the market. As we said, turbulent times, and also here, we see 2 different dynamics. First, clearly, the most affected segments are the hospitality ones or restaurant, hotel, bars, and this is reflected on the performance of the Food & Beverage segment. The second is the geography and the meaning that the second wave in particular, Europe, so -- in particular, the South part of Europe. And also this will be reflected on the performance considering the presence and the market share that we have in the South European market, in particular, where Food & Beverage is concerned. At the same time, we experienced a recovery of the business, U.S. with the Laundry growing and Food basically flat -- Food & Beverage basically flat, and in particular, in some parts of Asia, China and Oceania, so Australia and New Zealand. In Asia and particularly the Southeast countries that are still suffering, considering the dependency of the business, of the hospitality business, on the tourism and considering that those countries are still in a lockdown mode.So as I said, sales heavily impacted by the second wave. Customer reacted differently compared to the first one, because they were more prepared. So restaurants, hotels were already ready to face this kind of challenge. But sales declined in particular during the second part of the quarter. This kind of trend is still going on also in January. The sales, again, are mainly impacting the Food & Beverage business. Food & Beverage business declined close to 21%. And between Food & Beverage, Beverage is suffering much more than Food. Beverage is suffering much more than Food for 2 reasons. The first one is the type of business and the meaning of that while many restaurants adapted that to delivery, to take away, this is more difficult for the bar, the pubs, the cafe. And secondly it's the geography that -- because our large part of our Beverage business in developing countries that are heavily affected. Italy, just to mention. France, where there are the 2 companies that we recently acquired, but also the business of our U.S. operation and Mexico that is heavily affected by the lockdowns.In the Food & Beverage scenario, the positive element is the U.S. that after a quite negative development during the summer and the early fall, recovered and declined between brackets only 5%. So this steep decline of the volume impacted us negatively, the EBITA that was around 1%. The other element is that we -- our costs are lower, but the savings are less than before, because many activities that have been put on hold during the second quarter, in particular, so the really negative period of the pandemic. We started -- and in particular, I'm talking about the product development that is preparing ourselves for a lot of very interesting and hopefully, successful launches during the quarter we are in right now.As it has been all along the year, the dynamic of Laundry are different. Laundry was basically flat compared to last year, Q4. Growing in Europe, particularly the northern part of Europe and growing also in the U.S. So a couple of words about U.S., because during Q2 and Q3, we have been always commenting the decline of the sales to U.S. and explaining them, because they were building the stock. They've been building the stock in Q1 and then [ depleting ] of using the product that were stocked in the U.S. by our distributor to generate the sales, the low sales that there were during the Q2 and Q3. When the stock goes over, they restarted ordering and we restarted building the stock with good results, as you can see.Clearly, in Q1, this year, we will face the opposite because this was last year the quarter when we have been building the stock that was used in Q2 and Q3. Other element about the Laundry business, very positive is the EBITA that with fresh results, thanks to the cost efficiency activities, thanks to all -- we did with the new product brought to market, the EBITA improved and this is quite significant and quite remarkable. Let's move now, Fabio, to the financials.

[Fabio Zarpellon, Chief Financial Officer]

Thank you, Alberto. Good morning to everybody. As anticipated by Alberto, EBITA margin in the quarter was 7.3%, this includes the ones we delivered in Q4 2019, but down SEK 40 million in value. We have reported a pretty different dynamics between the 2 segments. Laundry was up SEK 30 million in the quarter, and we delivered strong profitability, really close to 17%. Whilst in Food & Beverage EBITA value declined SEK 70 million compared to same quarter of 2019. No material change we had in the group common cost.When it comes to the dynamic of the profitability, we had 2 main factors that reduced the EBITA value. Sales and production volume and negative currency impact. On the other side, we continue to report a positive contribution from price, direct material cost reduction and the impact of the cost measure, that in the quarter compensates roughly 80% of the impact of the low volumes.While reading through the P&L, we see a decline of roughly a couple of points in the gross margin. And this is mainly related to the lower volumes and the negative impact of the currency transaction. As I mentioned earlier, price, direct material and production efficiency, in particular in Laundry, has positively contributed to sustain the margin.Selling, administrative expenses declined, both in value and also in weight on sales. Let me, at this point, take the opportunity also to give you an update on the cost reduction initiative that generated also in this quarter a pretty remarkable contribution to the profitability, around roughly SEK 90 million. This initiative can be clustered in 3 main buckets: around SEK 30 million are what we call the structural one coming from the 2 restructuring plans, the ones that we launched in September '19 and now are fully executed, and the ones we launched in September last year that is under execution. The second plan that we anticipated during last call is expected to generate around SEK 110 million for -- from the second quarter of this year plus an additional SEK 20 million from the second quarter of 2022.Second bucket is coming from government subsidies, mainly related to 2 countries, Italy and France. And the remaining SEK 40 million, the third bucket is coming from the reduction of the discretionary spending. To be considered that in this third bucket, last year, we had the onetime cost -- onetime cost related to separation that represented more or less SEK 30 million. This cost measure in October, we are continuing with this measure also in this first part of 2021. Benefits are expected to come, but the lowest case than the previous quarter. And this because, as Alberto mentioned a while ago, we are increasing the investment in our strategic initiative, the digital product and solution. But also, we will have, in quarter 1 and somehow in quarter 2, some specific onetime costs related to the consolidation of our operation in Thailand that Alberto will develop in a while.Happy to report that in Q4, we have further strengthened our balance sheet. At the end of December, operating working capital was down 23% in same currency compared to December 2019 and down 28% compared to the level we had last year in September where we started also to revert the trend of average operating working capital of sales. Receivable is significantly down, but also inventory has been progressively reduced in Q3 and then in Q4. And I believe that this is a pretty good achievement, because we have reduced significantly the operating working capital whilst at the same time, increasing the service and delivery to our customer, in particular, on replacement sales. We closed the year with leaving a stronger finance position. Net debt, as you see from the reporting, has been reduced to SEK 500 million as of the level we had in December 2019, and after December, we have liquid fund for SEK 810 million and revolving credit facility available for additional [ EUR 210 million ]. Our net debt on EBITDA ratio is below 1 at 0.8. So significantly improved to what we reported in quarter 3 and quarter 4. So pretty strong finance position. This strong finance position has been achieved thanks to very strong cash flow in quarter 4. We reported SEK 460 million cash flow generation. And overall, for the full year 2020, SEK 570 million. Operating working capital reduction represented the major contribution in the cash flow generation. CapEx in the quarter was close to SEK 70 million, with the majority of it, SEK 50 million, is related to the construction of the new operation in Thailand that confirms our focus on delivering on the strategic priority whilst maintaining great focus on cash flow generation and sustaining profitability in the short term.Now, Alberto, back to you.

[Alberto Zanata, President & CEO]

Thank you, Fabio. So as Fabio mentioned that, again, the strong cash flow generation, but at the same time, continuous investment in new products and improving the productivity and efficiency of this company.Let me start from the product that we brought to market in Q4, we are going also to bring during the first part of 2021. And here you see that I'm not talking about the physical product as such, but as I believe it is the future for many products in this industry and probably also in other. We are investing a lot on the digitalization of our equipment, and because the service -- the additional service and the additional solution will be offered through an enhancement of the digital capabilities. I think I already announced that one of the uniqueness of Electrolux is the ability to provide OnE Connected solution for whatever you have in your kitchen or your own laundry operations, considering that we are the only company bringing to market Laundry, Food & Beverage product. We are also giving the possibility to the customer to have OnE Connected solution to manage, control and get additional service from the product. During the quarter, we launched what we call OnE Connected, that is the platform that is aggregating not only features, but also services that the customer can get and we really started to have the first installation. We are really proud for that, even if it is just at the beginning of that.Another important thing that is a cornerstone or something that is really the base of our DNA is the sustainability. During the quarter, we published our strategy and the targets that are reflecting, again, our legacy, but also what we do every day. When we said that our mission is to provide the customer solution that are making their life easier, more profitable and truly sustainable every day is because we are investing on products that are sustainable and with innovative low running cost solution. And we do this, producing them in factories that we operate in order to reuse or use recyclable energies, and clearly, as the base of everything, we are looking for our people, but also for whoever is working for us to make sure that we have ethical practices. So these were already part of our way of working, but we have been detailing this one in our sustainability strategy and setting the targets for the years to come.As I mentioned earlier, despite the challenging time, despite the decline of the business, thanks also to the solid financial position, we have been able to continue to invest. Invest to prepare these company for the recovery. We still believe that the short-term is obviously the pandemic created challenges. A lot of our customers, in particular in Europe these days, are in a lockdown mode, but we also believe that when the largest part of the population worldwide will be vaccinated against the coronavirus, we are confident that the business in restaurant, hotel and bar will come back. We see this talking to the customers that are preparing for the summer. We saw this last year when, after the first wave, the summer came and people went back to this habit. And it is important to be prepared for this restart. And we are doing this as I said, investing on product.I mentioned earlier that Q1 will be a quarter with new product solution and features bring -- brought to market, but also investing in our infrastructure. The big one is the factory in Rayong. We are basically at the end of the building process, as I said. We already entered that factory, at least some area of the factory, and by the 28th of February, the handover of the factory from the construction company to us will be completed. It will take another 3, 4 months, but we are expecting to have the official opening June 1 with the new facility fully operating with all the Laundry product and the Beverage product that we have been moving and concentrating in this new facility from the other 2 that will be obviously, at the same time, closed.The other important investment is again related to the digitalization of this factory. I mentioned earlier what we are doing on the product side. This is more on the improvement of our ability to run the company. So the plan is a multiyear plan to convert all the IT system, the different IT system that we have in the factory. And they are different because they are coming from acquisitions or from historical solutions that were back in the history of this organization, to a new one, a modern one, JD Edwards so -- a well-known and worldwide user system that, for sure, will improve our performances, will give us possibility to be more efficient and more cost effective.We already implemented the system in the first plan, January 1. Implementation of the rollout went very well. I have to give credit to the people because we had to do it with -- normally, when you have a rollout you have a lot of people on-site to support the local management during this critical phase. And this was done locally, but also remotely. This means that we have been learning a lot during this month, how to do things without being physically present. I think it's an important learning of this difficult situation. And we have been doing this business also that we can run the rollout or we can run the implementation of this new system pretty quickly also in the other sites around the world.So having said so, let's have a summary of what we saw happening in Q4. The first one is that the recovery that we experienced in Q3, in some way, halted during the last month of Q4. It was mainly Europe and partially in the United States, but Europe is the most affected area. And you know that a lot of our business is in Europe. We have to say that this market condition is -- we experienced it towards the end of the quarter and we are still experiencing in January the same trend. In the quarter, Food & Beverage business were more affected than the Laundry one. It happened also in Q2 and Q3. The Laundry business is more resilient also because the segment served a specific one, like apartment house laundry, coin shops, basically only -- with Laundry products are less affected than the ones that -- where we have common, Laundry and Food businesses there. We continue to reduce our running costs. So we continue to have cost savings positively contributing to the EBITDA, but the short-term savings are decreasing. So we have more benefits from the structural savings, the one that Fabio described, and that will be an even increasing impact in Q2 this year. But the short terms are reducing the impact, because we restarted investing, as I said, and preparing for the recovery. We continue to invest for the future, product, the Thailand factory and the IT infrastructure. And then despite all the things happening around us, we also came out to publish out our sustainability strategy and target.With this said, Jacob, I would come back to you and open for questions.

[Operator]

[Operator Instructions] Our first question comes from Lucie Carrier from Morgan Stanley.

[Lucie Anne Lise Carrier, Executive Director]

I actually have 3 questions, and I would go one at a time. The first one was more around kind of current trading and what your currently seeing in the market because, on one hand, you have spoken about some costs, especially in the Food & Bev division related to kind of restarting the activity. So it seems that you are kind of picking up on that front. But I was curious to know how that compares with what you are seeing in terms of market demand, and whether you are seeing maybe some of your distributors, whether this is in Food & Bev or Laundry, starting to kind of trying to increase a little bit the inventory level? So that's question #1 around the overall demand environment.

[Alberto Zanata, President & CEO]

Okay. So one by one, we take it by -- one by one. So current rating, as I said, the height of the recovery that we experienced in November, December, is still there in January. So the conditions around us, the fact that majority of the European market are in a -- they are in a lockdown mode still there. We are experiencing a recovery of the business in Asia, China. Not only China, Australia, also Oceania, so North Asia, Oceania, Australia, New Zealand. Most of the Japan, Singapore are showing a different trend. This is still affecting more the Food & Beverage business than the Laundry one, I think we mentioned it. But we have also to say that we see -- for instance, we see some customers visiting our facilities to look at the product, to test the product. There are operations also in the South European markets that are planning for the reopening late April, May. So I believe that Q1 will still be challenging, because the situation is -- will not be significantly different. The impact of the vaccine -- the positive impact obviously of the vaccine will not be significant in Q1. But if I look at what is going to happen, thanks to the vaccine, but also looking at the last year when -- with the summer, we had the halt of the first wave and the recovery or the reopening of many businesses. For this reason, if and when people will regain confidence, I'm confident that they will go back to the habits that are bringing back again, customers to our customers. Because the problem is this one, obviously.So what we see is that it's not only us investing on product or to prepare for a possible recovery, but also our customers or the end customer, hotels and restaurants are doing so.

[Lucie Anne Lise Carrier, Executive Director]

Okay. My second question was around the cost structure. And I was hoping you could give us a little bit more details on your exposure to raw materials. I appreciate that you might be mostly buying components made out of metals and plastic, but even those are probably going to face some form of inflation. So I was hoping you could give us some indication on your components exposure. How you think about the inflation we are seeing currently in logistical costs considering that you have a fairly kind of fragmented manufacturing base around the world.And lastly as well, you've mentioned a few times during the call that you were impacted by FX headwind on your profitability in the fourth quarter. So I was hoping you could maybe give us some guidance on the FX impact that you expect for 2021.

[Alberto Zanata, President & CEO]

Okay. Let's list the question. I take the first part and probably Fabio can comment more about the FX impact. If we talk about the material, first, majority of our material cost raw material is the steel. And we have been hedging our purchasing basically for the whole 2021. So we see movements, absolutely. But in this moment, we feel confident that we are covered for the largest part of the year. And then what is going to happen in 5, 6 months from now is in some way, difficult to predict. But we are covered for the largest part of 2021.And then you were also talking about the logistic cost and the fragmented distribution. In some way -- sorry, not distribution but the manufacturing footprint. In some way, you have to consider that the factory, in particular, the ones that we have in China, for instance, or also some of the small in Europe, are mainly serving the countries where they are located. So in some way, our global manufacturing plants are the one in Italy, the one in Sweden and the one that we are building in Thailand. For instance, I'm mentioning that the size that we have in China, is it not 100% or 90% dedicated to the Chinese market, to the local market. That is important because they are also the investment we did when we acquired -- again, I'm using the Chinese example, the investment we did was to develop the local market. And to do this, that was a strategic and important move. Now Fabio, if you want to comment a little bit about currency.

[Fabio Zarpellon, Chief Financial Officer]

Yes. As I mentioned earlier, the quarter results has been impacted by currency negatively. We have 2 components, the currency translation. Our group is reporting SEK. And year-over-year, we have seen the strengthening of the SEK against the other group currency, mainly, I would say, U.S. dollar and euro. The second -- within the currency, the second piece is currency transaction. And in particular, when comparing the 2 quarters, we have also here seeing a strengthening of SEK versus U.S. dollar that generated the main impact in the P&L.Having said so, what about the future? What about this year? I believe, very difficult to predict the currency development. We are monitoring, of course, the development and also looking into the possibility where it is possible and commercially reasonable to see what we can do in terms of pricing.

[Lucie Anne Lise Carrier, Executive Director]

And lastly, I just wanted to ask around the IT migration program that you've described at the end of the presentation. How we should think about that in terms of cost. And obviously, is there a risk maybe of disruption to production and procurement as you are executing on those migration? Because we know that it tends to be sometimes a bit of a challenging process to kind of do that type of migration. So I just wanted to have an idea on cost and how you assess the risk.

[Alberto Zanata, President & CEO]

Okay. So for what -- the cost, we do this because we believe we will benefit from this one, from implementing this system, eliminating -- because we will discontinue at the same time more than one system in the different operations. Some of them, in particular, when we talk about the acquired company, they were relatively obsolete system or system that were not giving us the possibility to fully benefit from what the system can be. For what concerned the disruption, I think I mentioned that I was really proud of what happened in the first factory. We started with a factory in France, so not one of the largest, but one probably of the most complex because of the characteristic of the product that are produced in that factory. And the migration went very smoothly without any disruption for customers. A lot of the products produced in that factory are made on order. So we didn't even have the, let me say, the safety valve to have the stock in between or to create a stock in between. So very happy about that. I'm very proud of the team that conducted the migration. It's obviously a dedicated team. We know what it means. It is something that we already experienced. And so we learned from -- also from the mistake that we did in the past to make sure that they're not repeated.

[Operator]

Next question comes from Gustav Hagéus from SEB.

[Gustav Hagéus, Research Analyst]

A few questions, if I may. I think we're all trying to understand sort of the lag between when the vaccine is rolled out and people start going to restaurants, and when you -- we should start to see a material order pickup for your Food & Beverage business. So I guess there are a few geographies now like Australia where you see bookings at restaurants being well above last year's. And I know you're not particularly big in Australia, but to give us a sense, perhaps, what is the market reaction there in terms of equipment? Is that a short lag? A few weeks? Or to entrepreneurs and restaurant owners sort of have a wait and see approach, rather? That would be very helpful.

[Alberto Zanata, President & CEO]

That's rightly said Australia and New Zealand are obviously not super large market, but we are now relatively good presence. And I tell you that already since September, we experienced growing sales in both countries. So this means that people, as soon as they get confidence that they can socialize again in a safe way, they go back immediately to, let me say, back to the normal life they had before. We were -- again, it is just -- please take it as it is, because I'm also not able to travel so much. So also I'm not able to meet so many customers as I was used in the past. But we started to have customer visiting what we called Center of Excellence here in Italy, where I'm located. That is the big showroom with a kitchen where customers are coming. And we started to have customers coming to test the product, spending more than 1 day here with our chef. And we didn't see this in the past. And they do this because they are preparing for the spring/summer well. They believe that customer will come back.At the end, this is the trigger for them and for the dealer and then ultimately for us. And that Food & Beverage teams for large hotels that are already planning the opening 28th of April. And last year, they worked between the 15th of June and 15th of September. That's it. That was the all working periods for these large facilities. This year, they are already planning the 28th of April, and they are already having at least pre-booking. So I believe people believe that they could restart and I personally think that as soon as you will get this confidence, the recovery will be faster, as soon as we have this confidence. And it is not to the case yet.

[Gustav Hagéus, Research Analyst]

Okay. Just a follow-up on that. Again, Australia. I mean there might be some effect -- temporary effects from pent-up demand in the first few months, but as you mentioned Australia has been open, I think, in September or so, but you're still seeing a healthy growth in Australia going into this year. So it hasn't stayed. And secondly, do you think that it's not you taking market share, it's a market dynamic phenomenon, really?

[Alberto Zanata, President & CEO]

Okay. So first answer is, yes, sir. We see still the business going pretty well in that part of the world. I would include China, by the way, where we have a much larger presence, a much more significant market share. To talk about if we take market share or if we keep, it difficult to say, in particular, in those markets. So I would say that in this case, I'm not able to answer to you. I'm saying that we are growing more than -- our current sales are higher than the ones that we had a year ago or they were also during the last part of last year.

[Gustav Hagéus, Research Analyst]

Okay. Great. A few more, if I may. There's some -- some of your peers have talked about initial financial price pressure, perhaps mainly related to U.S. and within the Colombia open segment, but do you see any indications that there are price pressure in the market? And are you lowering prices at all?

[Alberto Zanata, President & CEO]

No. I believe no is the answer to the second part of the question. In the meaning of that, I think Fabio was highlighting that we still have a positive contribution from price. So still, the contribution for price is positive. In this moment, we're still, let me say, the market is full of uncertainty. We are experiencing some pressure on price, in particular in Europe, I would say, more than any other part. Then again, it is related to the speed of the recovery clearly, because as soon as the market is -- or if the market is quickly recovered, then also the pressure will be released. But in this moment, in particular, on the Food & Beverage, and Beverage, because it's the most suffering part of the business, we are experiencing some price pressure, yes.

[Gustav Hagéus, Research Analyst]

Okay. And if I may follow-up on the question on the raw material inflation. Obviously, you don't have a big exposure to steel directly, but by coming back to your component and sourcing, what type of contracts do you have? Do you have a contract where you incorporate increased costs? Or are they negotiated yearly, so any additional price inflation for that components provider will not be passed on until later? Or could you give us some sort of insight on how that price dynamic works given what we see now with price for several raw materials going up quite significantly year-over-year.

[Fabio Zarpellon, Chief Financial Officer]

Okay. I can take that question. As Alberto anticipated, we have -- we are covering directly or indirectly the raw material that are included into also our components. And we have, I would say, a pretty good coverage, at least over the first half of 2021. It's clear that recent dynamic, but I would say, call it really recent putting additional pressure on it, but I would wait before coming to conclusion. So overall message, first part of the year, I don't see any material impact for the profitability of the group.On the other side, we are anyway activating cost reduction initiative, negotiation activities to mitigate this impact and bring additional saving regardless of the development of the raw material itself.

[Gustav Hagéus, Research Analyst]

All right. That's very clear. And lastly for me, I'm trying to sort of make out the EBIT bridge year-over-year, and there are a lot of sort of larger items here. The temporary cost avoidance for 2020, including government support, you have the cost savings program, you have spin-off related costs. Could we just -- I know you tried to explain it, but perhaps make it, one would try to sort of sum it up. What's the year-over-year impact as you see it now from all these initiatives and temporary costs and savings for '21 versus 2020? That would be helpful.

[Fabio Zarpellon, Chief Financial Officer]

Okay. Let me summarize what we have seen in quarter 4 and somehow all along 2020. The first component in the quarter, but also I would say, in the full year is what -- the first bucket was related by the structural cost reduction coming from the 2 restructuring, 1 completed and 1 in execution. And in the quarter, the restructuring has generated roughly SEK 30 million savings year-over-year. The second piece in the quarter and the full year was government subsidies, SEK 20 million. The remaining bucket, the third one, was the management of discretionary spending that contributed with SEK 40 million in the quarter. And as we reported in the previous call, positive contributed all along the year.Going forward, I believe that, first, the execution of the restructuring plan is proceeding according to plan. So what we anticipated in terms of savings from future-fit to are confirmed. I mean that is our second restructuring plan. As I mentioned, we expect this plan will contribute with SEK 110 million yearly saving all from the second quarter of this year, plus an additional SEK 20 million from the second quarter of 2022. We will see government support, at least we expect to have government support as long as the market will not pick up. And for what concern, the -- let me call the discretionary spending, we have continued with the short-term cost containment measure, as we did all along 2020. But as we anticipated earlier, the contribution will be still positive, but reduced in size, because at the same time, we increased investment for the future. On the -- let me say, the strategic initiative that Alberto mentioned, the digitalization of the products and the company and timed specifically for quarter 1 with some tail in quarter 2, we will have one-off costs related to the consolidation, the move of the factory in Thailand. Just to give you a flavor, this onetime cost for Thai consolidation can range in area between SEK 15 million to SEK 20 million for quarter 1 2021.

[Operator]

Our next question comes from Fredrik Moregard from Pareto Securities.

[Fredrik Moregard, Analyst]

First off, on U.S., I think you mentioned 5% sales decline in the U.S. At least to me, seems very strong, given also the weak dollar versus the Swedish krona. Could you give us any insight if there's any larger projects or so impacting that figure?

[Alberto Zanata, President & CEO]

No. Not specific large project or specific chain rollout. It was -- our presence -- I would say majority of this or the product category going better or performing better than the other in the U.S. were the ones sold through the network, through the dealers for replacement business, for day-to-day business. So it was, I would say, general market sales development.

[Fredrik Moregard, Analyst]

Okay. So that would be the trend that we -- that the U.S. is currently trading at then? Secondly, you mentioned that Beverage is suffering more than Food. Could you just remind us how that could affect your mix going forward?

[Alberto Zanata, President & CEO]

Sorry, back one second to the previous question. This was about the Food & Beverage, obviously, only. Because the development in Laundry was even stronger and this is related to the fact, again, that we had a recovery of the sales after having depleted the stock that we built in Q1 2020. Just to make sure that I completed the first answer.Sorry, your second question was about the mix between Food & Beverage, right?

[Fredrik Moregard, Analyst]

Yes.

[Alberto Zanata, President & CEO]

Yes. So Beverage is suffering significantly more than Food. I think I mentioned the 2 reasons. The first one is that in the country where there is a lockdown, you have many restaurants adapted to the new reality, doing the delivery or takeaway. That is obviously harder for a bar, for a coffee shop, partially also for a pub. Yes, there are some, but you don't do delivery on drinks or even less of coffee. So this was -- the business as such was impacted heavily. The second element -- and this is in general. So it is for us and for everybody, I would say. Then specifically for us, considering that we have been building the Beverage business through the acquisitions and, again, we are in the process of globalizing the product offer of this company through the Electrolux network. But it's still a process where we are clearly -- so we're beginning, majority of the business -- of our Beverage business is still around the home market -- of whole home markets of the acquired company. So example, the operations that we have in the U.S., a big portion out of the business was in Mexico with the larger chains operating in that part. And Mexico is really down, is not half, whoever is operating in Mexico, including our customers are heavily affected by the pandemic. The company, the coffee espresso company that we have in France, more than half of the business is in France. And if you talk to the roasters that are operating in France, they are declining business even more than us in terms of equipment. It's really the market that is not receiving. And the same applies to the company that we acquired in Italy, that is -- that has more than half of the business, again, in Italy. And I don't have to say the situation of the country, considering the lockdown.So they are very specific situations, well identified. That is also giving us the confidence that it is not a generic problem of inefficiency or low productivity, but is strictly related to the specific situation, some specific geographies. And then back again to what I said at the beginning that short term, the pandemic created clearly challenges, in particular to Beverage. But when the vaccine or the recovery will be over, also, we know that this operation will be addressed.

[Fredrik Moregard, Analyst]

Sure. I appreciate the market dynamics. I think I was mainly thinking about the margin mix that the stronger decline in Beverage would have on your profitability.

[Alberto Zanata, President & CEO]

Yes. And again, also in this one, I'm sorry, I misunderstood that one. But in relation to the margin, the margin is I would say, 100% [ interest ] by the drop of the volume. And again, it's mainly the Beverage side.

[Operator]

Our next question comes from Johan Eliason from Kepler Cheuvreux.

[Johan Eliason, Analyst]

It's Johan here. So I appreciate you had a decent cash flow, but still decides no dividend for 2020 in circumstances like this, that's obviously not unexpected. Now you do have a solid balance sheet and part of your growth story is also related to acquisitions. And I think, for example, we have seen Middleby announcing 2 acquisitions recently. Are you missing out there? Or have you got the targets you want from your M&A pipeline?

[Alberto Zanata, President & CEO]

No, we saw the acquisition of Middleby and at least the ones in China, that is the 1 in the Food & Beverage business. We didn't -- it was there, it was not something public evidently. I think I mentioned earlier that we restarted our activities during the fall. So we restarted looking around reconnecting with the connections that we had in the past, still following our strategic priorities. So acquisition that can help us to deliver against the pillar of our strategy. It is still a market that is full of uncertainty, and as a consequence, also the dialogue with the companies are not so easy, I would say. There are some companies that are coming up, available for sale, but typically, they are not the company that could add value, both for what the financial performance are concerned and the strategic match is concerned. So still looking. I think you know that the M&A process is something where it's difficult to predict when you are able to bring result.

[Johan Eliason, Analyst]

Yes. Okay. And then just coming back on the Thailand plant. I understand you will have some extra costs now short term, but I suppose that will yield benefits further down the road. Can you sort of give us some indication, and maybe you have done it already, but what the positives are from the Thailand plant, if you compare with cost base 2019, for example? And then what you expect for 2022 for the set up? Is it like SEK 50 million improvement? Or how should we think about it?

[Alberto Zanata, President & CEO]

Without combining the figures, the values of the different activities, the cost efficiency will come from, first, currently, we are running 2 factories. We will run 1 factory only. So it will be 1 site only instead of 2 sites where we were operating before. Secondly, we took the opportunity to build a new factory to have state-of-the-art facility with all the design of the lines, the design of the preparation area, the flow, designing the best possible way in order to have the maximum efficiency. Further, we will improve -- I think I said that, that will be one of the 3 global factories. Currently, global factory, and meaning factory that are delivering product all over the world, and meaning that majority of the production coming out of that factory will not stay in Thailand, but will go outside of the country. And we took also the opportunity to rebuild the factory, to redesign also all our logistic setup and logistic flow to have efficiency over there. Fourth one, this is not something that we will achieve in June, but it will come later. This factory is not designed just for what we have, but it is designed to prepare ourselves for future expansions. That means that in that factory, we will have additional production pretty soon.

[Operator]

Due to time restraints, we will not be able to take any further questions. So I'll hand it back to the speakers for any further remarks.

[Jacob Broberg]

Okay. So thank you very much for today, and speak to you next time. Thank you, and goodbye.