Electrolux Professional publ AB
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Electrolux Professional publ AB
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Good morning, and welcome to the Q4 presentation of Electrolux Professional Group. As always, I have Alberto Zanata, the CEO; and Fabio Zarpellon, our CFO, with me. My name is Jacob Broberg, I am Head of Investor Relations.
So with that, I hand directly over to Alberto, please go ahead.
Thank you, Jacob. Good morning to everybody. Straight to the result of the last quarter of 2022. During the fourth quarter of the year, the last quarter of last year, we continue to grow the business organically, and obviously, inorganically, thanks to the acquisition of Unified Brands and improved earning and margin.
In the quarter, we basically double the earning, moving from SEK 164 million to SEK 324 million, with a double-digit margin compared to roughly 7% of last year. This quarter completed a full year recovery of the business, where if I account to the full year, we went over the SEK 11 billion in sales, that is the record results in terms of sales over EUR 1 billion in earnings, one of the highest ever, and back to double-digit in margin.
If I look at the quarter, that is something that I can also recognize along the year, we continue to hold the price in the fourth quarter fully compensating the delta material, so the delta cost on the material.
We completed something that we announced since the beginning that the delta would have been negative in Q1, more or less break-even, so break-even in the meaning with a 0 gap in the second quarter and positive in the third and more positive in the fourth one. That is exactly what happened. And if I look again at the full year, the price fully compensated the delta cost.
The other highlight of the quarter is the operating cash flow. It is one of the area where we are not performing for several reason, and also -- we can go also into the details, and I'm sure Fabio will comment about that later on, is the operating cash flow.
Operating cash flow in the fourth quarter was very strong, in some way as predicted and expected. It is normally very strong in the last quarter of the year. So in some way, no surprise about that. But thanks to this strong cash flow, we have also been able to reduce -- significantly reduce the ratio between net debt and EBITA that moved from 2.3% to 1.5% at the end of the year.
If we move on with the development of the sales, I mentioned the fact that the growth continued -- the organic growth. The highlight of the quarter compared to others is that, this more or less, the percentage of the growth or the growth came more or less from each and every region.
So you see that the 14% in the United States that is restated number, so considering 3 months of Unified Brands, so the full Unified Brands. So in order to have a comparable number showing the growth in the market, it's more or less the same that we had in Europe and in the Asia-Pac region.
Asia-Pac region is still slightly behind in terms of growth to the other 2 regions because China is still -- that for us is the most important country in that region, is still behind. But it's -- the sign of reopening are very strong and very promising for us.
If we move on to the Food & Beverage. Food & Beverage, organical increase close to 10%. Also in this case, the growth is quite similar in the different part of the world. Also in this case, when we talk about Americas, we are considering a restated number for Unified Brands in order to have a comparable measure.
We have to say that Unified Brands grew a lot, 20% roughly, in the United States, so just in North America. So Unified Brands, we are very pleased about the performance of the acquired company.
It is another highlight of the quarter, if you want, in addition to the price execution, because the company that we acquired in December 2021 performed very well. Separation from the group was completed on time. Integration completed on time. And in addition to all these things, we have been also able to deliver according to our target, both in terms of growth and in terms of earning. So very good also from this point of view.
Profitability of the Food & Beverage segment also improved significantly, because it's close to roughly 4x what it was the previous year.
If we move to the Laundry segment, here we have, in some way, star performances. I would call it. We have been always talking about Laundry as a resilient business, highly profitable business, and it's proven that.
Despite what happened in July during the spring, summer last year, when we had, in some way, decrease of the performance due to the problem with the supply chain, we have been able to recover very well, both in terms of growth and in terms of profitability. So we are ending up a quarter with the margin that is above 18%, so very positive, increasing both the earning and the margin.
The other comment is that, and it is valid for Laundry, for Food, the order intake during the past weeks and months has been improving. We were commenting also after the Q3 that we would have expected a significant decline of the order intake in December because of the comparison with 2021 when we received a lot of orders from customers, dealers and users that were placing the order to avoid the price increase or because they wanted to book production, being afraid of not receiving the product.
Reality is that, the order intake was lower than what it was the year before, but it was a very healthy level. So it seems that the demand for our product continued both for Laundry and Food & Beverage in all the regions, including Asia-Pac and Middle East, so including the region that suffered the most the previous year.
The only area with a relatively softening of the demand is still Europe. That's the reason why we are still, obviously, cautious in our planning for the coming weeks.
With this said, I would let Fabio comment on the financials.
Thank you, Alberto, and good morning to everybody. As you heard from Alberto, we have delivered 10.7% EBITA in the quarter without item affecting comparability, 10.4% for the full year or over SEK 1.1 billion in EBITA value. We need to go back to 2018, meaning pre-COVID, but also pre-separation to find over SEK 1.1 billion EBITA delivered in a year.
2022 was also a year with, I would say, the highest historical performance in Laundry. We delivered close to SEK 630 million in EBITA with a margin at 16.7%. Also in Food & Beverage, the margin for the full year was close to 10% and 9.5 percentage point.
You heard Alberto talking about Unified Brands, a successful acquisition. Unified Brands is part of Electrolux Professional Group since December 1, 2021, and the performance, Unified Brands have been accretive to the group margin, both in the quarter, it is last quarter but also for the full year.
One final note, when it comes to the group common cost, we have an increase in the quarter, and this is related to project and advisory cost.
Going through the P&L, what do we come observe is that the gross margin in the quarter declined roughly 1 points compared to last year. There is one item. It is Unified Brands.
As I said earlier, Unified Brands is accretive to the group in terms of EBITA margin, but generating a larger portion compared of -- compared to the many operation of a business which is, we operate with Unified Brands with a lower gross margin, but also a lower cost to sell. That is the reason behind the accretive performance of Unified Brands.
Alberto commented regarding price. Price contribution was important in the quarter. We catch up the gap -- the negative gap that we have between price and raw material for the full year. Now the gap is positive. So we have more than compensating the direct material cost increase and additional low single-digit price increase are already in place since the beginning of this year.
The disruption in the supply chains have been somehow slightly down along the years, but they are still somehow affecting the productivity of our plants.
When it comes to the SG&A development, we increased the SG&A in value. But I believe that what matters is that we reduced the ratio from over 26% we had last year, 26.6% to 22% this year. Such a reduction is coming from 3 main factors.
First, last year we had one one-off cost. If you remember, we reported SEK 56 million onetime acquisition, integration cost related to Unified Brands. Unified Brands, as I mentioned earlier, is operating with lower cost to sell compared to remaining part of the business. But we have also seen a reduction of the SG&A weight on sales also on the traditional business. And this is, I would say, a pretty remarkable results, because we have been delivering this, whilst continuing to invest in the digitalization of our product offer as well as the company processes.
We closed the year with an operating working capital of sales at 16.7%. I believe that during the previous call, we have been commenting the disruption that we face on the supply chain and the need to take also conscious decision to increase the reorder point for components, the safety stock for finished product in order to serve the customer. That was the main reason behind the development of the operating working capital ratio.
At the same time, I'm happy to report that with the improvement that we have seen in the supply chain, the action that we have been able to put in place to work on the safety stock, for example. In December, we reduced operating working capital value compared to September by over SEK 300 million, and we are going to see the positive impact in the cash flow.
The second remarkable improvement we had in the quarter is related to the net debt. If you remember, before the acquisition of Unified Brands, we had no net debt. We generate net debt to buy the company. We reached a peak of the net debt on EBITA at 2.3x at the end of September. But thanks to the good performance in the quarter 4, now net debt are at SEK 2 billion, and our ratio on net debt is an healthy ratio of 1.5x.
We are operating with a pretty solid balance sheet. As you see from the document, the company has SEK 1.1 billion in cash. We have a revolving credit facility of SEK 200 million fully available. We have no -- and we have no reimbursement obligation for 2023. So we are, let me say, pretty equipped to support the business development of this group in 2023.
Last, few words on the cash flow. As Alberto anticipated, cash flow was pretty stronger in the quarter, over SEK 0.5 billion, generated both from a solid EBITA performance, but also from a significant reduction of the working capital.
With the stabilization in the supply chain, with the action we put in place on the operating working capital management, not only on the inventory, but also even a more strict monitor on the receivable, I'm looking forward for 2023 where I count that we are going to see a more normalized cash generation, in line with historical performances.
And with that, back to you, Alberto.
Thank you, Fabio. And a few words about some highlights of the coming quarters and year.
Last year, we celebrated 120 years or the 120 anniversary of our Laundry business. This year, we are celebrating the 100 anniversary of our Molteni brand. The Molteni brand is surely not a larger part of our business. It is a niche product, a niche portion of our business in the Food & Beverage segment. But it is also something that is giving a lot of visibility.
We have to remember that a large portion of the Michelin Star chefs use -- wants to have a Molteni in their kitchen. It is, in some way, we call it the dream for the lovers, for the guys who are in this industry because it is the one used by the most famous chef and in the most famous schools.
So the second highlight is something that we announced during the Investor Day, is the introduction of the Electrolux Professional Group brand. It is the way to some way endorse all the brands that are part of the family.
It is part of the evolution of this company that through acquisition acquired companies with the strong legacy brands, that they have a long history in this industry and that we want to leverage to further develop our business into different area.
In the picture you see the example of the SPM, but the super important moment will be in some way tomorrow, when The NAFEM Show in the United States opens and where we will introduce the Electrolux Professional Group brand to replace the Unified Brands that was the one putting together the strong brand that we have -- we acquired in the United States, Groen, Randell Power Soak and CapKold, so all important brands that now are, we show to the market belonging to the Electrolux Professional Group.
Last but not least, we continue to repeat, and this -- will be something that we will continue to repeat during all along 2023, because we continue to be recognized as a leader in our industry for what concern sustainability.
We also started and we submitted our target for the science-based target to start measuring our performance on this Scope tree. We already started actions to significantly reduce the impact of our product for what concern the emission and the CO2 emission. It is important because more than 90% of the CO2 emissions are coming from the usage of our product.
We have ambitious target, both with the existing product, but also with the new products that are in the pipeline and that are going to come to market during the coming years. It is something that makes me personally very proud, but makes whoever works in Electrolux Professional, very proud to know that we can contribute to a more sustainable world.
With this said, if I have to summarize the quarter and the year, I have to say that, again, the quarter confirm our performance along the year. We closed, as Fabio said, with record high sales, the full year, with one of the highest in earnings doubling the earnings in the quarter and growing more than 50% all along the year.
It is important, also the earnings development, because thanks to this one, we improved significantly the earnings per share. And this also means that it gave the possibility to the Board to propose a dividend that is roughly 50% higher dividend per share higher than what it was last year.
The order intake during the quarter, but the improvement started basically in September, so after the summer, improved month-by-month. Again, in December, it was not at the same level of last year for the reason that I explained also. But this is giving us quite a positive -- yes, we are quite confident about the coming quarters. This doesn't means that we are not considering what is happening around. The wave 1 actions to reduce the discretionary spending is still in place, because we need to be cautious of what is happening around us.
As the highlight of the quarter and we already said repeating the price execution, this was important in 2022 to compensate -- to fully compensate the delta material. But in some way is giving us an edge in 2023 for the beginning of the year, because we have been executing an additional price increase in January 1, not at the same level of the one we did it January 1, 2022, clearly. But an additional price increase that is giving us to compensate also the other inflationary items that have been coming against us, specifically the increase of the labor, the transportation cost, the energy cost.
Unified Brands is now fully integrated. As you clearly understood, it's one of the things, in addition to the price execution, that makes us proud of the operational performance. Now we are expecting the value that we can create through synergy, cost and sales synergies in 2023.
At least during the last Investor Day, we said that the first step would have been the integration of the IT system. In the United States, last year, we were running the operation with 3 systems. Now there are already 2, and we are planning to move to one IT system during the summer of this year.
We continue to be a leader in sustainability. For sure, other company will move in the area. But at the same time, our plans are such that we believe we will continue to move ahead and to improve our performances in this area.
Concluding, I'm still optimistic on the future that is in front of us. That the order intake is supporting this basically all over the geography. We see also China moving after the new Chinese year.
But at the same time, we continue to keep the different scenarios under control. We are continuing to look around us. We continue to have in place the wave 1 actions, so actions to reduce the discretionary spending to postpone whatever is postponable in order to face -- to be prepared for what it could come, particularly in Q1. That typically it is the stronger -- sorry, the weakest quarter of the year, because of seasonality and because of the characteristic of the quarter.
I believe with this said, I will let you Jacob check with the questions.
Thank you, Alberto, and Fabio. And with that, we open up for questions. Operator, please go ahead.
[Operator Instructions] The first question comes from Hageus Gustav from SEB.
This is Gustav Hageus with SEB. A few questions, if I may. First will be, going into 2023, delta -- the possible delta here in Q4 regarding price versus raw mats, is there reason to assume that H1 will be also positively impacted or any of those price increases rolled back into 2023?
We are talking about the delta between price and material that we expect to be positive in Q1 during the first half of 2023, right?
Yes.
Okay. So Yes, we expect that the price will continue to be there. So as I said, we implemented the second -- another price increase January 1. With this new price increase, we are expecting to be able to compensate also the other inflationary item. I believe now we should not limit our analysis about the delta cost -- the general delta cost increase just to the material.
Cost material is stabilizing. In some cases, it's slightly going down, but less than expected, I have to say. But we have all the other things, energy, labor, in particular, transportation cost that, obviously, they also increase in 2022, and they are expected to be there in 2023.
So is this still a reasonable assumption that 3% to your top line will be the impact on price in 2023?
It can be, again, we didn't disclose the price increase. It will be -- it will not be in the high-single digit as it was last year. It will be on the low-single digit, so 3% can be a guess.
As usual, it is not -- typically, you don't have a flat price increase all across the geography and all across the product categories. The only time that we had something flat was when in May last year we implemented the surcharge. In that case, it was a flat, because it was specific for the cost.
But now we are more, let me say, surgical going into the different geography and different product categories. But you can keep it as a reference, if you want. It will be a low-single digit, the price increase. It was a low-single digit the price increase that we had January 1.
Yes. Okay. And regarding order book momentum, which seems to be then strong in Laundry and sequentially improving at lower level in Food & Beverage. Do you see the same trends at the start of the New Year in terms of order book momentum?
Yes.
First month?
Yes. It is the trend that we saw in November, December is continuing also into January with a strong -- in Laundry its surely positive, order intake. I have to say that is a positive order intake also in Food & Beverage. A little bit softening or softer in Europe, but it is a positive order intake.
And finally, could you just remind us what a typical order book length is per year? Is it like 3 months or something?
The order stock now is shorter. I believe last year, I was talking about healthy order stock because a too long order stock was not so healthy, because -- this also means that we are having too long lead time to our customers. So we are bringing back to basically normality. But it is still longer than 1.5 months as it was before COVID. So we still are sitting on a good order stock or order book, as you call it.
Then I have a follow-up question from the web.
It's Stefan Stjernholm at Nordea, who asked about the net impact from raw material, transportation cost and general cost inflation. Is there a need for further price increases after the one implemented in January this year?
I mean, I can answer this question. I mean, we are monitoring the situation because we are operating in a pretty volatile environment, as you know. As it looks today, we are confident that with the price increase, we have put in place January 1, we are in condition to cover not only the direct material development, labor and any other inflationary cost increases like the energy.
So we are, let me say, pretty positive in that respect. As you have seen in late 2021 and 2022, we are carefully monitored the situation, and we are ready to take additional measure, meaning additional price increase if the inflationary situation is accelerating compared to what we foresee today.
And sorry to complete also Fabio's answer, in some way, if it is related to transportation costs, as you said, our energy costs, one thing that we didn't use -- we never used before that. But in May last year, we implemented the surcharges and the result is that it worked very well, because it was immediately impacting -- it was effective day 1, let me say, without any delay and it worked pretty well through the distribution chain. So we have the tools to eventually compensate a big difference, even if we don't see them today.
I have a few more questions from the web.
It's Magnus [indiscernible], who asked why we are so cautious on outlook?
We are cautious about outlook, because in some way, our industry is driven by investments. In the meaning that if I look at the particular Laundry, 50% of our Laundry business is a consumer operated machine, so apartment has laundry coin shops. That means that there are individuals that are -- or companies that are investing. And normally, they are borrowing money. The interest rates are increasing. So at least this is making us cautious, the money is costing more.
The same apply for the investment in kitchens. You need to get the money to buy the equipment, in particular, the large installation to buy our equipment and then invest. That makes us cautious, and as a consequence, remaining quite -- trying to remain prepared to different scenario to a possible decrease of the demand.
Reality is that, the order intake is still good. So this means that there are still customers, in particular, in Laundry that are placing orders to get our product. So that is, in some way, the big things that is in front of us. We see order coming, but at the same time, we see the economical environment around us with the same challenges that probably you face.
And one more question from the web, it's from Henrik Christiansson at Carnegie.
What is driving the increase in group common costs? Is it related to M&A? Or is it related to integration of Unified Brands? Some more details, please?
First it's not related to Unified Brands in the sense that the integration activity have been completed by the summer. And now in -- Unified Brands is operating fully part of the group with additional onetime cost.
At the same time, we are working on other initiatives on different dimension, and these are the reasons about the increase we have seen in the quarter in the group common cost. There are different projects on different dimensions.
Thank you, Fabio. With that, operator, please go ahead if there are more questions from the phone.
The next question comes from Eliason Johan from Kepler Cheuvreux.
I had just a question on -- you discussed the orders, et cetera. Previously, we've discussed a little bit where the orders are versus the 2019 level. How do you see that today in sort of Food & Beverage and Laundry, respectively?
They are on the pre-COVID level.
Already, yes?
Yes.
And then just financial net moved up quite a lot in the fourth quarter. You have a very strong cash flow coming in, though. But I suppose there's some sort of element of floating rates in those interest costs. How should we look at the interest costs into 2023? Should we expect this higher level that we saw in Q4 or how will this pan out?
There are 2 ingredients in the development of financial net. There is one related -- that is somehow, let me say, also in our control, that is at the level of financial net debt. And as you have seen from our balance sheet that we reduced net debt, but we have also reduced the financial net debt. And let me say, I expect in 2023 to come back to a more normalized historical cash flow generation. So we will be in condition to accelerate the reimbursement of our loans. So we will reduce the base.
The second ingredient is about the interest rate in it. I mean, for what we see, at the moment there could be some increase that are going to affect the financial net cost. But let me say, in a normalized circumstances, I expect that the benefit from the debt reduction will overcompensate the potential increase on the financial cost of the interest rate going forward.
The next question comes from Rinta Karri from Handelsbanken.
Firstly, about the organic growth on a full year basis, it was 16%, 17% for both divisions. Can you give us an idea of how much of that was volume for Food & Beverage and for Laundry? That's my first question.
Okay. So -- for what concern, the volume -- okay. So for Laundry, we have been growing volumes compared to the previous year and also compared to the pre-COVID level. So volume means units. For Beverage, we are not yet on the pre-COVID level. So the volume growth was not as strong as in Laundry in 2022, and it is still behind the pre-COVID level.
Not in every product category. We had some product category, for instance, Combi Ovens, where volume grew in 2022 versus 2021, and they are already above the pre-COVID level. It is a product category in itself that is growing more than others.
There are other product category, like for us, one core category is the cooking -- the horizontal cooking where we are not yet developing. It's more related to the project business, and as a consequence they didn't develop as much as the other.
If we look at the Beverage category, they are all still behind the numbers. They improved in 2023, they are still behind the numbers.
All right. And just a quick follow-up. You mentioned that Combi Ovens had a good sales momentum, so that you ended up with roughly the same organic growth for both Laundry and Food & Beverage. Is it because you had higher price increases in Food & Beverage or because you had a, I would say, favorable sales mix development in Food & Beverage?
Let's say that in Food & Beverage -- there is a little bit difference between Food & Beverage and Laundry. In the meaning that, in Food & Beverage we have been able to have the price increase much earlier than Laundry. In some way, this was a comment after the second quarter of this year when we said that Food & Beverage was already compensating the delta cost material, on that time we were focusing on the closing the gap.
But let me say, while Laundry was not. This is also because in Food & Beverage, we have been faster than in Laundry to implement -- to execute the price increase, not because we were lazy in one business compared to the other, but because the dynamic of the industries are different. In the meaning, that in Laundry, in particular, we have many contracts with public institutions, with a large distributor in the United States that grew a lot, by the way. It has to be noticed this one gaining market share versus competitor in 2022. But at the same time, with this big partner or customers, obviously, the execution of the price increase is slower and it took longer. So the component of price increase was lower in Laundry compared to Food & Beverage.
Okay. Then just a follow-up on previous question about the finance cost. So should we expect that in the coming quarters, the sort of the net number will be similar to what we saw in Q4? Or how should we model finance costs in the coming quarters?
Looking at the development in particular into quarter 1, I believe that quarter 1 may look like pretty similar to quarter 4 2022.
Okay. And then if you manage to deleverage and may be the finance costs will be lower after that?
As I mentioned -- as I mentioned to you, we expect a normalized cash flow development in 2023 in line with historical. And this will bring definitely strong benefit in reduction of the net debt and the financial net debt.
Within this picture, we know that quarter 1, we expect to have a solid cash flow. But if you look into the historical performance, the cash flow in quarter 1 is never the stronger within the year. So I'm taking this prudent approach when I give you some potential trend in the finance net in the quarter 1.
And finally, you mentioned, when asked about why you're cautious, but Q1 tends to be -- and now we'll talk about order intake -- tends to be a weaker quarter. So can you give us any flavor on what you have seen so far in January? Or is January always such a slow month, so it's very difficult to extrapolate from these early weeks of the quarter?
So you are asking about a general comment about the January month. So the characteristic of the month, right?
Yes, that's correct.
Okay. January -- yes, January is short first, because of the, let me say, the Christmas break were both of the factories typically reduce production, but also many of our customers are clearly off. So it is a short month in terms of working days. So first.
Secondly, it is clearly a low seasonality, in the meaning that many customers have been ordering or getting the product before the Christmas break. But it is also the month where all our customer, distributor or end users are preparing for the spring time, the big months are from March onwards.
The order intake in January was positive. I think I already said it. We are reporting a positive trend in the order intake, both in Laundry and in Food & Beverage.
[Operator Instructions] The next question comes from Lindbo Hanna from DNB.
I was wondering if you could give some more color on the supply chain issues, where if you could say may be how much it impacted EBITA during the quarter? And if you have seen that it has eased during the first quarter and when you expect it to fully normalize?
Okay. So the supply chain in Q4, in this case, as you mentioned, was impactful for the U.S. business more than the other. It normalized in Laundry and Food & Beverage, particularly the European and Asian factories, while it was still a challenge for our operation in the United States.
United States, it was mainly October, November. Then in December, we have been able to recover quite a lot. We did exactly the same things that we did for Laundry during the spring, so pre-producing and then completing the product. Obviously, not the same quantity of product and the same amount of product, a much smaller and what -- that was the case or the reason why we have been able to recover already during the month of December these delays.
Currently, it is not normalized yet, but we do not have any situation that put us in an emergence case -- in an emergency status. This is the reason why also we started to reduce the safety stock, not at the same level that we had, obviously, before the supply chain crisis, if you want to call it. We still have a larger than before component stock in our factories. But we are going -- gradually going back, in general, on the component, also on the electronic component that have been the most critical.
Then now we feel that we are better prepared than what we were before to possible other critical situation, because all the critical components now they have a double suppliers that, in some cases we didn't have it in different parts of the world in case something happened. Obviously, on one side, as it did for the Chinese supplier for Laundry.
So the situation is surely better, but it is not normalized yet. Here and there, there are still cases that are, in this case, producing an efficiency, but not jeopardizing production from our factories.
Okay. That's clear. Then I have one question on Food & Beverage, Europe. I think you might have touched upon it, but would you see that the demand in Q4 stable and you feel like demand as softening or do you have -- you feel that it's -- have softening? And if you could say how like the start of the year is, continuation of soft trend.
Food & Beverage in some ways the area where ...
In Europe.
In Europe is the area where we saw a softening of the demand. We have also to say that, in particular, Beverage in this case, is very seasonal. So typically, the last quarter of the year is the weakest quarter of the full year in Beverage. Also, because our beverage -- majority of our beverage products are frozen or cold beverages. So they are typically the product for the summer.
This is, again, one of the other reasons why we are cautious. In the meaning that, we see that our customers in some way are postponing some decisions, looking at what is coming. And this is one of the reason to be cautious in addition to the one that I mentioned earlier.
At the same time, if I look at the statistic about tourism or people traveling, they are not showing any decline. And as a consequence, we are confident that that the trend could even change during the coming months.
We have 2 more questions from the web. The first one is from Per Johansson.
Do you see 2022 as a step to reach your medium-term EBITA margin? Do you see 2023 better margins from better Laundry performance and synergies from Unified Brands without any organic sales growth?
So first -- to answer to the first question, yes, the answer is yes. It is a step in the right direction. Earnings improved significantly. We grew organically. We grew also inorganically and the inorganic acquisitions, Unified Brands was well integrated into the existing group. So the group went above SEK 11 billion in sales as they reported beginning, record sales with over SEK 1.1 billion in earnings and back to the double digits. So it is a step in the right direction to grow the business in a profitable way, not just growing it.
This result has been achieved despite the extraordinary impact of the increase of raw material despite the fact that we went through the closure of the operation in Russia, despite the fact that, obviously, part of the organization will also focus on the integration of Unified Brands. Despite all the supply chain issues that means missing components, missing whatever, that you can imagine created a lot of inefficiency inside of the operation. It has not been a quiet year, if you want to call it, from the operational point of view.
So if this is what happening in 2022, we believe that 2023, there are all the ingredients to continue in this profitable development. Uncertainty is still in front of us. So again, we don't know yet what is happening to the energy cost.
We know that there is inflation -- inflationary items that are growing the labor cost. We don't see the cost of the material going down significantly. But at the same time, for reasons we have already quite significant price increase, that are covering our back.
We have a lot of things, a lot of actions that are in place. In 2023, we are expecting clearly that Unified Brands will create value in terms of cost, but also -- and probably at least from my point of view, even more significantly from the business point of view, the meaning that there are many opportunities to grow sales working together with chains or even with distribution.
Laundry is doing very well. And during 2023, we will also start to have the first benefits and payback both in terms of cost and business development from the investment that we have been doing on digitalizing the company. During the first half and second half, we will launch our connected solution, the One Connected that we presented also during the Investor Day. It is something unique. It is something great. I'm very happy and passionate about that.
But we are also complete -- not completing, because it will be a continuous evolution, but continuously implementing the One platform that is on the other side the tool that is connecting dealer, service agent, customers to us, digitalizing the process. So there are many things that could help us to continue in our profitable growth path.
The final question comes from Arne Karlsson at Alecta.
Can you elaborate on the China sales, down in Q4 year-on-year, but trending sequentially strong to the better or what?
The China sales.
I get it. China sales, they've been terrible in 2022, in the meaning that the factory was constantly closed, I would say, and people were locked at home. So our customers didn't work. It was the big gap in the Asia-Pac regions. We see now with the reopening of China, a restart of traveling, at least internally, I believe a lot will be seen during the coming weeks because they are back from the Chinese New Year last Monday. So they just restarted.
Before that, the level of absent teams also in our factory, you can use this one as an index if you want, it was very high. So it -- it was still not an healthy situation. But for what we can see, and we have a good plan for that is that China should be the changemaker, let we say, in our Asia-Pac region performances.
Thank you, Alberto. And with that, we finalize this Q4 call. Thank you for today, and speak to you next time. Goodbye.