SEB SA

PAR:SK

Earnings Call Transcript 2021-Q3

[Operator]

Hello, and welcome to the presentation of the Groupe SEB 9-Month Sale and Financial Data. This conference will be presented by Stanislas De Gramont, Chief Operating Officer; Nathalie Lomon, Senior Executive Vice President, Finance; and Isabelle Posth, Vice President, Financial Communications and Investor Relations. My name is Molly, and I'll be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions] I will now hand you over to Nathalie Lomon to begin today's conference. Thank you.

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

Thank you very much, Molly. So good evening, ladies and gentlemen, and welcome to this conference call and webcast dedicated to our 9-month and Q3 sales and financial key figures. So today, I'm very pleased to comment the performance over the first 9 months with Stanislas De Gramont, our Chief Operating Officer; and Isabelle Posth, in charge of Investor Relations. I suggest we directly move to Slide 5, and Stanislas, I'll leave you the floor to comment on the 9-month performance highlights.

[Stanislas De Gramont, Chief Operating Officer]

Thank you, Nathalie. Good afternoon, everyone. Well, maybe starting with a couple of characteristics of this 9-months performance. Starting with the sales, we have record high year-to-date sales, which are both strongly overperforming 2020 and 2019 levels. We put on the slide a 5-year perspective that gives you the 9-month sales in 2017, '18, '19, '20 and '21. And you observed that 2019 was already a record high at EUR 5.1 billion. We've reached EUR 5.57 billion in the first 9 months to September 2021. So a remarkable performance. That has converted again into a remarkable record high of ORfA margin, which confirms the group's capacity to offset the various headwinds that we've been commenting. In the first 9 months of the year, again, referring to the data over 5 years, 2019 was a record high ORfA at EUR 407 million that we've beaten, reaching EUR 528 million in the first 9 months of the year. When it comes to the financial debt, we have a stable debt versus the end of September 2020, and that includes a substantial improvement or increase of our inventories. As in effect, we've built proactively inventories to secure supply going into the high season of sales Q4, which I remind you is the highest sales period for the group. As a consequence of these very, very robust performance in the first 9 months and in Q3, in particular, we have revised upwards the outlook for 2021, with a reported sales growth that we now expect around 14% year-on-year and an ORfA margin close to 10% that is unchanged versus what we communicated at the end of July. If we move to the detail of this performance in sales first. I commented in Q3 just under EUR 2 billion at EUR 1,961,000,000. That is 9.1% over last year, 6.4% like-for-like on the quarter, and more interestingly, a 10.3% growth versus 2019, which you will hear as a reference of a, call it, normalized year as 2020 was quite shaky. Over 9 months, the same performance, EUR 5.57 billion, 18.2% growth versus 9 months 2020, 18.8% like-for-like and a very robust 8.9% growth versus 2019. That has converted, respectively, in operating results of EUR 208 million over Q3 -- in Q3 2021 with a 5.8% reduction versus 2020. We'll come back to that a bit later on -- and a 17.1% versus 2019. Over the 9 months, that means an operating result of EUR 528 million. We saw that staggering 62.8% increase versus 2020 and 29.6% versus 2019. Again, when it comes to the net debt, net debt of EUR 1.951 billion, a EUR 20 million improvement versus same period 30th of September 2020 and an increase of the debt of EUR 433 million on the back of increase of inventories. Now I will leave the floor to Nathalie to comment in a bit more detail on the sales performance.

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

Thank you very much, Stanislas. So first slide snapshot on the Consumer segment where we report record in quality sales with 9-month sales at EUR 5,115,000,000, that's plus 19.8% like-for-like, and a strong Q3 at EUR 1,796,000,000. What we can tell you, and I will get into more details in the coming slides, but is that for the time being, all geographies, all categories are up over 9 months. Moving to the Professional. Nice trend also in the third quarter, plus 35% or very close to like-for-like at EUR 165 million. We have 8.7% growth like-for-like over 9 months. You may recall that Q1 was not in good shape with very high comparison base in Q1 2020, but it is the second quarter in a row that we delivered sales above 30% for the Consumer segment. Moving to the Professional segment -- yes. Sorry. Moving to the next slide with the traditional sales bridge comparing September 2020 and September 2021. We have a magnificent organic growth, EUR 884 million, plus 18.8%, which is compensated by some negative impacts on -- from currencies, minus 87% and a positive impact of EUR 62 million coming from the acquisition of StoreBound that the group has acquired in August last year. If we move to the next slide, it gives you a bit of details regarding the currency impact. So it's a total of minus EUR 87 million, while the FX as a penalizing effect on H1 sales, minus EUR 81 million in Q1 and minus EUR 44 million in Q2. We see that the trend has been improving over this time over the quarter, and the main contributor to this reversal of trend is Chinese brands, which you may recall is our largest FX exposure in terms of sales. Moving to the next slide, and I'm not going into too many details as Isabelle will do that in a few minutes. But what you can see here is that all our regions have been contributing to the 9-month growth in the Consumer segment. It's double digit in almost all cases or very close to -- for China. EMEA and Americas are almost on par, posting a very robust momentum, 27%, 25% growth, while Asian sales were up around 10% like-for-like. In addition, you can see that there are some differences between reported and organic growth for some areas, particularly in other EMEA countries and Americas. And this is, of course, due to the FX variation that I have just commented. As for the third quarter, Consumer organic growth stands at 4.4%, while with ongoing double-digit increase in EMEA, broadly stable figures for Asia and a slight decline in the Americas. Thanks to the very strong second and third quarter, in Q3, Professional business is back to growth over the 9-month period. I'm now moving to the next slide with a focus on the Consumer segment. And I'm giving you here more granularity on the business development over the quarter and over the 9 months. So you may recall that we had a buoyant momentum in the first half with a growth that was close to 30% organic on the back of a very strong demand and the low comparative base from lockdown's impact last year. The embarked effect of H1 continues to drive the progression over 9 months. It is fueled by both SDA and cookware. And growth has mainly been driven by as, in the first half, a less promotional environment, entailing quality sales, a still very strong e-commerce momentum through all channels and revival of store footfall in most geographies. On top of those market trends, the Groupe SEB has leveraged with delivering innovation and product launch on the market, which is leading the group to strengthen its position across the business over the period. So in an overall more challenging environment and on the basis of a more demanding comparative in the third quarter, the growth in the third quarter has remained sustained at 4.4% like-for-like and is showing a robust plus 14% growth versus Q3 2019. And this figure is broadly in line with the growth rate we posted in Q1 and Q2. I'm moving to the Slide 14, which is summarizing the revenue growth of our top 20 countries. Those countries are representing around 85% of the group consumer turnover. And as you can see, all of them have been contributing to the growth over the period, with more than half of them posting growth rates above 25%, including 3 countries above 50%. On the next slide, as I mentioned previously, all our product categories have been on the up over 9 months 2021. Home care, cleaning has recorded impressive growth over the period. Cooking categories have also posted double-digit expansion, with strong performance coming from beverage, notably full automatic coffee machines and espresso coffee machines. From electrical cooking, cookware was strong as well, thanks to the ongoing successful rollout of our new G6 range. And food prep reported also good performance. Linen care is back to positive territory. And if we were to compare versus 2019, all our categories are growing. Cookware is growing close to 9% over 2019 and SDA 15%. I'm moving to the next slide and now commenting on the Professional segment. So as a reminder, Professional includes PCM, Professional Coffee Machines, around 90% of the total business activity, Hotel Equipment and Krampouz. So we'll focus the comments on PCM. As I mentioned, it is the bulk of our business. So in line with the very strong rebound that resumed in the second quarter, Q3 has been also very solid with a 35% like-for-like growth. This performance is coming from the development of our core business with our key customers such as quick service restaurants, convenience stores, gas station chains. We have rolled out new deals, especially in the U.K. and in the U.S. And our service business is back to 2019 level. Regarding the core business, the growth was fueled by a nice momentum in Europe and in the U.S., while the business in China has regained some strength, thanks to new orders from key customers. Regarding the new deals, we've been working since the beginning of the year on equipment projects, and we have told you that these deals have started to deliver revenue in April. It's a large rollout that has been done in the U.S. from April until October with Schaerer Coffee Art machines delivered to KCs.It's also worth mentioning that in the context of supply chain tension, our commitment and our capacity to produce and to deliver with the said deadline was key in winning the deal. Now I'm handing over to Isabelle Posth for more details of the market. And so we're moving to Slide 18.

[Isabelle Posth]

That's right. Yes, good evening. Yes, indeed, let me take you for the traditional world tour and starting with EMEA, where we overall achieved a record 9-month sales and growth. And this is particularly true with Western Europe, which has performed outstandingly well since the beginning of the year. The stay-at-home imperative proved, as you know, highly favorable to the SDA market to the Small Domestic Equipment market overall, and the group has benefited from this positive trend. As a reminder, H1 has shown a very strong dynamic, with revenue up 27% like-for-like, admittedly low comps in 2020. In the third quarter, the group delivered a solid momentum, achieving organic growth of almost 10% bolstered by both firm core business and loyalty programs in France, in Germany, in Italy, et cetera. Such performance must be put in perspective of higher comps in 2020 and especially a huge market surge as from summer 2020. It is also achieved in the context of softer demand, as anticipated, of inflation as well as of a challenging supply chain, and as a matter of fact, these both are closely linked. All in all, Groupe SEB has been outperforming the market, hence, reinforcing its positions in most European countries. Worth to be mentioned is the fact that all Western European markets have contributed to growth, and by the way, has posted higher sales than in 2019. Revenue expansion was fueled by both solidly developing core business and loyalty programs in France and Germany, as I said before, but also in the Netherlands. In addition, considerably higher growth drivers versus weaker comp -- versus weak comps over 9 months last year have obviously boosted sales progression. In terms of product lines, growth was fueled by all categories, including cookware, bakeware and kitchenware, including the Ingenio ranges, but also kitchen knives and the 5 Second Chopper that we have spoken about quite a certain number of times and also WMF items. And they've been clearly strong growth drivers. Electrical cooking featuring oilless fryers have confirmed its ongoing fast development. Grilling also with Optigrill, which remains clearly our flagship model as well as multi-cookers and electrical pressure cookers that have been strongly up, also growth in beverage preparation that was driven by full automatic and espresso coffee machines and WMF ranges that were very successful overall. Home cleaning, finally, continued to be boosted by all-in-one versatile vacuum cleaners as well as robots. As already explained previously, e-commerce, including pure players, be they global or national marketplaces, brick and clicks, et cetera, continue to be the main driver of the solid momentum, but fully reopened brick-and-mortar trade also added a revitalized imports on sales following several months of sluggish business activity. Coming now to the other EMEA countries, which continue to be the fastest-growing region over the long term on an organic basis. No change in trend this year, be it over 9 months or for the quarter. The group's performance has been great and widespread across countries over 2020 as well as over 2019. In this context, the group has been strongly beating markets whose dynamic was more normalized versus a brisk trend previously. As such, strengthening position for the group for sure. This is true in almost all countries where we achieved excellent 9-month sales. It's the case for Central Europe with a special mention for Romania, Bulgaria, Poland and the Czech Republic. It's the case also for Ukraine, where we have considerably increased our investments in growth drivers and pursued our product offering extension. It's also the case in Egypt, where momentum was mainly driven by our own retail. You probably remember that we have around 25 stores in Egypt. As usual, in Eurasia, we have faced significant FX issues since the beginning of the year that was mainly related to the ruble and the Turkish lira, but the third quarter mitigated somewhat the effect. However, currency fluctuations have had a negative impact on 9-month reported sales while the effect was substantially lower for Q3. Price increases have been implemented in several countries, in Russia, in Turkey and Egypt, to preserve the local profitability of the subsidiaries as we do it usually. More recently, the very challenging situation regarding supply chain led most SDA players to raise prices in order to compensate for raw material and freight inflation in a view to protecting margin. Most of these hikes will take place as from October. In Eurasia, online now comes for more than 40% of total small domestic appliance market, and it still represents the bulk of market growth, although physical trade is clearly bouncing back and progressively returning to precrisis growth rates. Notwithstanding temporarily softening demand, we have continued to accelerate our digital transformation in the region, strengthening our presence in the e-commerce at large, including brick-and-mortar players, pure players, especially regional and local ones, and also a group-specific online D2C approach. It's still early days and a tiny share of our sales, but clearly, fast growing. The strong momentum continues to be nurtured by a wide array of product lines, including, in particular, cookware, electrical cooking and home cleaning. Now getting to North America, where 9-month sales stood at EUR 550 million, including, on one hand, EUR 62 million stemming from July 2020 acquired StoreBound, and on the other hand, negative currency impacts coming mainly from the depreciation of the dollar against the euro. Well, the same does not apply for Q3 as the impact of StoreBound integration is much smaller and the dollar has strengthened versus the euro. 9-month revenue growth amounts to 21% like-for-like versus 2020 or 38% versus 2019, including an outstanding performance in H1 for 50% like-for-like on low comps, followed by a slowdown in Q3 on a much more demanding 2020 basis. The U.S. has primarily driven the changes in sales, and I will focus on them as they represent more or less 3/4 of our North American revenue. In the U.S., year-to-date sales at the end of September have been up 20% like-for-like versus 2020 and 57% versus 2019. The highly robust performance versus last year was fueled by a very strong momentum in cookware driven by our 3 brands, T-fal in core, All-Clad in premium and Imusa, ethnic, and by StoreBound, excellent expansion dynamic. However, while H1 growth was extremely strong, thanks to pipe sales and increased demand, third quarter business activity has been slower as anticipated, and the quarter has been affected by the non-repeat of last year's surge in demand that was bolstered by all the consumption stimulus packages that were put in place by the Trump administration. These government incentives have now vanished with an impact on consumption. In addition, due to the new COVID outbreak in Vietnam, our cookware manufacturing facility over there was temporarily shut down, which, of course, penalized deliveries of pots and pans for Tefal in the U.S. Conversely, leveraging its local production with a strong profitability, All-Clad confirmed in Q3 the amazing job done over the last years. Nevertheless, despite supply changes, the group maintained its clear leadership in the U.S. cookware market and launched new ranges in September, driving innovation and trade up on the Tefal brand. In small electrical appliances, this is mainly kitchen electrics, StoreBound continued to achieve solid sales momentum, navigating well in a more challenging environment. With strong inventory position, StoreBound has been able to overall ensure proper deliveries to its customer -- customers and achieved a record high month of September. Now going to Latin America, South America, which posted an impressive 44% like-for-like growth over the 9 months, with sales now back to 2019 levels, as you can see on the graph. The discrepancy between reported and organic growth is, of course, attributable to adverse FX changes in the region, and namely the Brazilian real and, to a lower extent, the Colombian pesos despite a slight improvement over the summer. In Q3, more specifically, sales have also been up double digit with an 11% organic increase. And here again, sales are back to 2019 levels. More specifically, in Brazil, the general environment remains volatile and quite uncertain. Health situation shows positive evolution that has entailed overall reopenings and restriction softening. After a highly dynamic momentum in the first half, with like-for-like growth that was above 60% on, obviously, depressed performances last year, business activity has been stable in the third quarter, leading to this 44% organic sales rise year-to-date. That was driven by price increases implemented with key accounts and top regional customers in order to offset the negative FX impact I mentioned previously as well as heavy supply chain tensions; and second, a good growth in volumes in blenders, thanks to the launch of new models and an important communication plan, but also electrical cooking, primarily oilless friers and cookware ranges. In Colombia, the overall momentum remained excellent against a backdrop of challenging high demand that reflected in impressive performances achieved by most national and regional retailers. We kept on leveraging both our continued commercial progress and our industrial competitiveness there to make the most of this very supportive environment. This led to strong double-digit growth for both 9 months and Q3. Champion product categories include electrical cooking with oilless fryers as key growth drivers, but also blenders, which posted great performance in all distribution channels, and pots and pans with all families growing. Now getting to Asia. And speaking of China, our first market worldwide, sales for the 9 months have been up 9.4% like-for-like, including positive growth of 0.6% in Q3 versus last year. This was achieved in an overall market environment that was marked by softer demand and store footfall that remains significantly lower than in 2019. As such, Supor's revenue growth continue to be propelled by e-commerce, which currently accounts for more than 60% of Supor's business activity. In this context, Supor outperformed the market, leveraging its product dynamic, well-targeted whether dedicated to online or off-line, as well as digital activation, including an increased exposure to social networks, with results becoming more and more tangible. At the same time, besides the strong and well-established presence with giant online specialists, such as Tmall and JD.com, Supor continued to extend and diversify its retail distribution network, focusing on online D2C development with these pure players but also marketplaces opening Supor flagship stores as well as enhancing its sales on surging new platforms. This required us to optimize market access and supply chain with these customers, which is now on track. Supor's advances in this field over the past months had clear positive impact. As communicated previously, the rising weight of e-commerce in the market has had a negative impact on ASP, average selling prices, mitigating revenue growth. With the increased conversion to online D2C, Supor has been able to steadily improve performance, materializing in a better online operating margin, now exceeding the off-line operating margin. Regarding cookware, the online share of sale is still weaker than for small domestic appliances, although progressing. As such, the transition process is still ongoing and led in the third quarter to slower sell-in due to inventory shifts in the trade. Regarding small domestic appliances, electrical appliances, online D2C transition is way more completed, with positive effects from business as well as on operating profitability as indicated a few minutes ago. Sales growth in Q3 has been nurtured by cookware, featuring new materials and coatings as well as a wide array of kitchen tools; kitchen electrics, including revitalized models of rice cookers and electrical pressure cookers with, for instance, infrared heating, but also oilless fryers, a booming category in China, blenders with new specifications, multi-cookers and cooking food processors, baking pans and more Western-style appliances; and last but not least, home cleaning with new models of vacuum cleaners that were introduced in the market. Finally, other Asia. In other Asian countries, 9-month sales have been up, nearly 12% on a like-for-like basis, with the dynamic having been fueled by all the countries in the region. As you can see on the graph, sales remain well above 9-month 2019 and 9-month 2020. In Q3, sales have been slightly down, and this slight decline must be put in perspective of a particularly challenging comparison basis as solid performances were achieved in Q3 last year and in 2019. All in all, our Q3 '21 sales in the region remain above 2019, which is a great performance as this quarter had been boosted by anticipated purchases ahead of VAT increase in Japan. Several countries in the region have been hit by the resurgence of COVID-19 that led to the implementation of new restriction measures. In Japan, for instance, the state of health emergency has been reinstated during the quarter, leading mechanically to a decline in traffic and physical trade, including in our own retail network, which you know is quite significant in the country, 50 Home & Cook stores. Nevertheless, the situation has progressively improved over the quarter, mainly driven by our cookware and kitchenware sales, which ended the quarter well, notably, thanks to the successful rollout of our new G6 range. Situation has been broadly similar in Australia with the lockdown that has just been lifted, having impacted our business activity, while in South Korea, the slight decline in sales in Q3 is mainly attributable to the temporary closure of the Ningbo port in China in August that has partially disrupted our supply. However, as mentioned in the press release, the group has consolidated its market shares in these countries. Conversely, performances have been excellent in Vietnam and Malaysia, with both markets driven by the continued strong development of e-commerce and great performance, too, in Taiwan, thanks in particular to the WMF range, cookware and new listing. This ends up my comments on geographies.

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

Thank you very much, Isabelle. So I'm now moving to Slide 25, please, with the focus on the operating margin and on the ORfA. So as you can see, it's a record high performance for Groupe SEB. We are delivering over 9 months EUR 528 million of ORfA. It's an increase of 63%. It's more than EUR 200 million when compared to 2020, and it's also 30% more than what we delivered in 2019. Q3 is showing an operating margin of EUR 208 million, slightly below 2020 but significantly above 2019. So this massive increase in margin delivery comes from several factors. First of all, a very strong sales progression with a very strong price impact coming from price increases and also mix enrichment in an overall less promotional environment. We also have a very strong momentum, and this momentum makes us invest more in growth drivers. When compared to 2020, 2020 was very volatile in that extent. But on a year-to-date basis, we are investing 30% more in growth drivers when compared to 2020. We also have productivity gains and significant overabsorption in our plants when compared to last year as all our manufacturing sites are running at full capacity to make sure that we deliver the best service to our customers in the context of the supply chain that we know, all of us. And last but not least, we keep on having a very strong and strict cost control on our G&A. So all of these items combined have allowed the group to absorb current headwinds, namely higher input costs for raw materials, components and sea freight. In this context, our ORfA margin is 9.5% for the first 9 months. It's 260 basis points above 2020 and 150 basis points above 2019. When focusing on Q3, story is a bit different, but the main difference coming from this fact that we have decided to invest more in terms of growth drivers, and this is basically the explanation for the difference in ORfA margin and in ORfA when compared to 2020. Now looking at the debt on Slide 26. Thank you. So in the context of a business, which is strongly growing, the net debt level is stable when compared to September 2020, and it's actually a small reduction of EUR 20 million. Most of the EBITDA growth that we have achieved has been used to fund stock building, and it's a conscious decision that we have made to build inventory in order to secure supply for the coming quarters. So this obviously has an impact on our working capital requirement that should also be reflected at the end of the year. CapEx, at the normative level for the group. And as a reminder, our financing structure remains healthy, well balanced, both in terms of instruments and maturities. And no financial covenants on our debt. So that's it for me. I will leave the floor then to Stanislas again for the conclusion.

[Stanislas De Gramont, Chief Operating Officer]

Thank you, Nathalie. Thank you, Isabelle. Well, I think the conclusion is a very positive outlook for the full year 2021. We revised at par our reportages of lending for the year based on better sales prospects. Now the rationale for that is, obviously, we have a quarter 3 that is better than anticipated, and that's on very demanding comparatives. Our Consumer business is stronger than expected in most regions, Europe, of course, but also China, but also America. We have a continued Professional rebound that we told you at the end of Q2 that we are expecting Q3 to be good. It's been better than expected. And we've also confirmed during this quarter our ability to absorb, through the various levers that Nathalie has anticipated to you a minute ago, the various headwinds that we're confronted with. In this context, we've decided to revise upwards our revenue growth assumption for 2021, which we now expect around 14%. As a reminder, our previous assumption at the end of July was for net sales value growth published of above 10%. And the good management of the cost base and the good balance of the P&L allows us to confirm an assumption of an ORfA margin close to 10%, as we discussed -- as we guided again at the end of July, and that's despite headwinds currently estimated at around EUR 300 million where we told you around -- above EUR 250 million at the end of July. We put into headwinds the raw materials, the components, the freight and the FX and, obviously, volume effect because revising up our sales volumes ambition, obviously, has an impact on the total headwinds. Right. I think this is the end of our formal presentation. I think I'll leave the room -- the floor to questions.

[Operator]

[Operator Instructions] The first question comes from the line of Charles Scotti calling from Kepler.

[Charles-Louis Scotti]

A couple of questions from my side. You doesn't seem to be really impacted by a shortage of components so far. Can you give us an update on the current situation? Do you think your rating are improving from your perspective? And then in terms of price increases, can you give us an idea of the magnitude of the price hike that we should assume on average for 2022 compared to 2021? And then another question on the sea freight. Have you already secured sea freight capacity from China to Europe and to the U.S. for 2022? And finally, on the Professional business. You indicated alongside the H1 earnings, a wait-and-see attitude from European customers. Is it still the case in Q3? And when shall we expect the PCM business to recover to prepandemic level?

[Stanislas De Gramont, Chief Operating Officer]

Right. Thank you very much for your questions. Maybe I will start answering, and then Nathalie you take over on the points I didn't cover. On the -- your first question relates to components prospects, which I probably tie in also to the third question on sea freight capacities. Well, it's -- the first comment is we are -- we have been anticipating substantially our supplies in components and raw materials and finished goods, and that reflects in the high inventory levels. And we've done that against a strong ambition of growth and against strong investments in growth drivers. So today, we have some tension on our component supply. We've lengthened the order book with our suppliers, but we don't see any material impact in terms of availability of finished products, give or take, that shortage of capacity in China because of electricity shortage. But when you look at the overall picture, we are comfortable in our ability to supply our products because we've taken the right measures to anticipate what's required in terms of short and midterm demand. Same on sea freight capacities. We have a combination of long-term vision on our sea freight capacities and a short-term reaction to the immediate needs. It's early to say or to speak about the prospects for 2022 because the sea freight market is evolving very rapidly, both in terms of available capacity and, more importantly, on the price. When it comes to -- I will leave the question on price increases to Nathalie because it's a bit more technical. On the Professional business, we talk about rebound because the market is still unstable. We have good prospects, both on the base business and on the contracts, to see that business progressively recovering. It's pretty early to say that the COVID crisis is over or that this business is back on the cruising speed. We are monitoring it very carefully, and we are satisfied so far with the performance we've delivered in Q2 and Q3.

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

Okay. So to your question regarding price increases, first of all, and you know that the group is used to place price increases over time to compensate for headwinds. So in the past years, it was mostly compensation for ForEx when we are selling in countries where we do not have any manufacturing capacities. And so this is what we have done throughout the year. I'm thinking of price increases in Brazil or in Turkey, for instance. And then we have announced in the month of July that we would place further price increases to offset the impact of higher cost on freight and on raw mats. So this is currently executed, and it's one of the reasons why we are in a position to offset on the 9-month basis the impact of those headwinds on our profitability. We will get more of those price increases in the fourth quarter. And should the situation worsen in 2022, we will keep on increasing our prices. Now it's a bit early for us to comment on this. As Stanislas was saying, we see a lot of fluctuation in the freight cost. We think that we have reached, for the time being, the higher points in terms of spot prices on freight. We see since a few weeks, 2 to 3 weeks, that the prices seems to decrease a bit. So we will monitor carefully those assumptions to decide whether we have to place further price increases in 2022. Does this answer your question?

[Charles-Louis Scotti]

Yes. Very clear.

[Operator]

The next question comes from the line of Lorenzo Margiotta calling from Bank of America.

[Lorenzo Margiotta, Research Analyst & Associate]

Two for me. One, so I think you commented that the inventory is already built in advance of the quarter. So is it fair to say then that, that EUR 300 million headwind you've guided to is basically a known figure at this point? There's not really too much movement in that? And then secondly, on China -- so look, I understand online has obviously increased in scale since pre-COVID, and there's a different pricing structure there, but I would have thought that was already in the base in the third quarter of 2020. So can you maybe expand on when we will start to lap that higher online share? And is it sensible to then expect the business to return to high single-digit growth because once it's sort of like-for-like, it shouldn't be a headwind anymore, if that makes sense?

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

Okay. So to your first question on the inventory that we built, there is no, I would say, impact when compared to what we had disclosed regarding headwinds on the inventory. It's still very limited. So the increase of inventory is really coming from the fact that we want to have on shelf more units to serve our customers. This has been a very volatile year in terms of components, in terms of freight, not only cost, but also availability. And so we've made the decision that we would rather produce a bit more and maybe have a higher inventory than being in a position not to serve our customers in the fourth quarter and in the first quarter next year. Now to your...

[Stanislas De Gramont, Chief Operating Officer]

You can take it if you want.

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

Yes, second question, Stanislas will answer you.

[Stanislas De Gramont, Chief Operating Officer]

Just to be more specific on the first one, yes, the inventory we've been building is already reflected in our end of September number, and this will serve to sell the sales ambition for the Q4. So we don't expect a further degradation of the inventory going into 31st of December. Now when it comes to China, we have -- the shift from off-line to online is continuing. The great news is that we now have a relative operating margin in online versus off-line. So for us now, the shift of off-line to online is positive in terms of profitability in Supor. The second thing I can say about China is that we are still in a pretty unstable market performance. The short-short-short-term market performance is flat or slightly negative, but we confirm that we see very positive prospects on this market, not double digit, but we see markets probably seeing 3% to 5% on the mid- to long term, and we see Supor progressing faster than the market because on the back of innovation into existing categories and development were expansion into new categories, all this in a profitable manner. Does that cover your questions?

[Lorenzo Margiotta, Research Analyst & Associate]

Yes. No, that's clear. So just to sort of put a fine point on it then, in terms of Q4, should we expect an ongoing headwind from higher online penetration in China? Or do you think Q4 2020 will be representative?

[Stanislas De Gramont, Chief Operating Officer]

Well, I don't know what you have in your model or your system. It's difficult to evaluate or compare. We see Q4 as positive for Supor in China, but there may be some instability due to the power shortage, but it's very early to -- I mean these are 1-week-old news, but we don't see any substantial change in the trend for China Q4 versus China year-to-date bar these electricity shortage challenges, which we are currently evaluating.

[Operator]

The next question comes from the line of Alessandro Cecchini calling from Equita.

[Alessandro Cecchini, Analyst]

It's again -- sorry to point this on China. So on top line growth, I saw that in the second quarter, like-for-like organic growth versus 2019, of course, a reference year, you had basically top line growth that was plus 10%. Now it's roughly plus 5% versus 2019. So I would like to better understand the Supor performance. So it seems decelerating, but I would like to -- versus 2019, I would like to have your point on this. And on China, you stated that -- if I understood correctly, that your fourth quarter is broadly in-line, similar to the trend that you experienced in third quarter, if you could add something on this. My second question is about your guidance. So just to go into details. So it seems to me that on top line is very consistent with what you did in the second, third quarter. So very consistent and, I think, very visible. While looking at your ORfA guidance, it seems to me that fourth quarter ORfA margins, it's below the fourth quarter '19 and below fourth quarter -- sorry, fourth quarter 2000, and so basically materially below '19. So I would like to better understand your assumption. It's a question of higher headwinds that will be influenced in the fourth quarter. So just to go into details, this kind of assumption for the fourth quarter is a question of prudence and so on, on margins.

[Stanislas De Gramont, Chief Operating Officer]

Great. Thank you for your questions. I will take your question on China, and then Nathalie will complement on the ORfA margin question. There are 3 things to remember on China. The first one is that we see a positive market development midterm, long term. We have a hiccup in Q3 market that we see slightly negative, but that doesn't change our progression -- our prospect on this market. And there are 2 more things, which I would like to repeat. The first one is that we are beating the market -- Supor is beating the market, and that explains why we are still posting positive numbers in Q3 against a slightly negative market. And the second thing, the key driver of the market is the online versus the off-line. And we are progressing in share in online, and we are progressing in margin in online and more profitable in online versus off-line. So there will always be circumstantial evolutions of the market on a quarter-to-quarter basis, but we confirm that we see our markets with potential growth of 3% to 5% consolidated in the future. And we see Supor capability to generate better sales in the market and Supor capability to generate positive mix online versus off-line in terms of margin. Nathalie?

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

Yes. And to your question on the way we see the fourth quarter. So very much in line with what we have delivered in the third quarter, just having in mind that our mix is usually a bit richer in the fourth quarter when compared to the third. Usually, we are delivering also operational leverage on the fourth quarter because of the fixed cost part not being as high as in the previous quarters. This year, obviously, we will have to face headwinds. So as we have just told you, we think that it is going to accelerate in the fourth quarter. And so this is all the things that we have put together to come up with a growth margin and then ultimately an operating margin, which should be around 10% on a full year basis. I think it's quite difficult to compare with 2020. You may recall that 2020 was very volatile. So a quarter-by-quarter comparison may not be that fair. But in 2019, it was also a quarter where there has been some one-offs impacting the operating margin, and this is maybe the explanation you're looking for.

[Alessandro Cecchini, Analyst]

Okay. So basically, just to sum up, you see margins in the fourth quarter similar to the third quarter. So better mix is offset by higher -- so better price/mix is offset by higher headwinds.

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

I think it's higher headwinds offsetting what we could have expected in terms of operational leverage.

[Operator]

[Operator Instructions] The next question comes from the line of Mourad Lahmidi calling from BNP Paribas.

[Mourad Lahmidi, Analyst]

So I have -- the first one is on raw materials. So from my recollection, I think that you are hedging your direct exposure to raw materials. So I was just wondering, as those hedges wind down at the beginning of next year, should you see some hiccup in the headwind? This is the first question. And the second question is about China. So you talked about some repositioning of Supor across the channels, especially in the digital part of the market. Can you just lay out what you are doing over there? What is the impact? What are the players that are involved? So just to have some details and so we can have some context about what's happening over there.

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

Yes, Mourad, so Nathalie answering the question on the raw material hedge. So you're right, we are hedging our direct exposure. And obviously, you would understand that we are not in a capacity to hedge the components of the product that we source or the raw mats that are using components that we buy. So you're right. So we -- you know that we have a long-term hedging policy. We hedge over 12 to 18 months. And so if the prices remain as they are today, we will likely have a positive impact from our hedges in the 2022.

[Stanislas De Gramont, Chief Operating Officer]

I'll take the question on China. You're asking for a competitive landscape online in China. Well, that's probably through our conference. So I'll try and make it in 3 or 4 sentences. The Chinese market is extremely dynamic. We see the emergence of new platforms, platforms that we all know already Pingduoduo but also TikTok, WeChat, that become merchant platforms, and that's the first source of business. We see the movement on big traditional platforms like Alibaba, Jingdong of new direct-to-consumer stores -- superstores on these marketplaces that changes the business model. We see a lot of price activity on the market, but it's not because prices are down, that turnover is down or volume is down. This is just a reflection of the way the market evolves, and I have said several times we have now found the way to maintain or improve our operating margin on online despite lower prices potentially. And in terms -- as far as our competition is concerned, we are facing more competitors online as we are off-line because access to the business is easier, but we are gaining share online, and we are beating even the newer entrants on the market that have been in the news in the last 2 or 3 years. We are now overperforming our competition in online as well as in off-line in China. I could spend hours on talking about China, but it's -- this is the summary of what's going on -- what has gone on in China in the last 4 months.

[Mourad Lahmidi, Analyst]

And just to confirm what Nathalie said about the hedging. So if the raw material prices stay where they are, at some point, as those hedges wind down, you should benefit, that's what you said.

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

Yes. That's what I said.

[Operator]

The final question comes from the line of Marie Fort calling from SG.

[Marie-Line Fort]

I've got one additional question on the Professional Coffee machine. Could you give some colors about the order book evolution and the visibility you've got for the end of the year and perhaps the beginning of next year?

[Stanislas De Gramont, Chief Operating Officer]

Right. That's a difficult one. As I said, well, it's a difficult one. Maybe in 3 parts. The first one is we are as positive and as enthusiastic about the Professional business as we've ever been. All the indicators show that the request or the appetite for Professional Coffee machines and the surrounding businesses of services is growing, and is growing in many geographies. When it comes to the order book short-short term, we see a positive Q4. Difficult to say at this stage how positive Q4 is going to be versus last year. There's a lot of ups and downs and volatility in the evolution of the business. And the third thing, and that may be an advanced indication, we see service back to 2019 levels, and that's a good prospect of our customers resuming their regular activities and that announced the short-term or midterm that we will have a recovery or an acceleration of machine sales as well. On a more anecdotal note, we start to see deals coming up on the market again. We start winning deals. So we are very positive. Difficult to tell you and more probably -- as vague as we were in Q2 and Q3, difficult to tell you if it's going to be mid-November or mid-February, but we see definitely positive signs and continuous positive signs of the recovery of the rebound of the Professional Coffee business.

[Operator]

The next question comes from the line of J.P. Rolandez calling from L.T. Funds.

[J.P. Rolandez]

First, congratulations for these outstanding results, which should be able to dissipate many doubts that the market had recently on your share price. I have a question, which is not really related to Q4, but to mid- to long-term developments into new categories. There is a new category, which seems to be doing very well, which is barbecues. And you've seen that Weber has listed, is a $4 billion company. So are you considering developing a barbecue range? And also, there is a new range of pizza ovens, which could be successful. So that was my question. Are you considering entering new categories such as barbecues or pizza ovens?

[Stanislas De Gramont, Chief Operating Officer]

It's a very exciting question. Well, first, thank you for your comments on our performance. We are obviously -- well, it's a lot of work for all the teams in the group, and I'm sure they'll be delighted to hear that your front is really positive about our performance. Now when it comes to barbecue, we do have some barbecue activity with some Tefal products, but it's not big today in our business. We have more interesting activities through WMF and Krampouz. Krampouz, which is this -- this company from Brittany that we acquired 15 months ago and, that has a very interesting range of our planchas and barbecues, which are developing very nicely in Germany. At this stage, I wouldn't say that we are up against Weber in terms of size and scale, but it's a market that we're looking very -- with some interest, both when it comes to electricity or gas barbecues. So the answer is yes, we're looking at it. Don't plug barbecues as the next big thing for Groupe SEB in the next 2 years.

[Operator]

We have no further questions coming through on the phone lines. So I'd like to hand the call back over to your host.

[Stanislas De Gramont, Chief Operating Officer]

Right. Nathalie?

[Nathalie Lomon, Senior Executive VP of Finance & CFO]

Okay. So first of all, thank you for your questions. So just a wrap up of what we have told you. So as we have announced in July, we are implementing all the necessary action plans to cover for the impact of headwinds. This is clearly demonstrated in our Q3 performance. It will also be demonstrated in our Q4 performance. I kindly remind you that we are updating the assumption we make regarding revenue growth, so plus 14% on a reported basis when compared to last year. And we confirm that our operating margin should be close to 10% for this year despite all what we have discussed throughout the year. So that's it as a conclusion. We're looking forward to speak with you in February when we release our full year numbers and also in January when we comment on our sales. Thank you very much. Bye-bye.

[Stanislas De Gramont, Chief Operating Officer]

Thank you. Bye-bye.

[Isabelle Posth]

Bye-bye.

[Operator]

Thank you for joining today's call. You may now disconnect your lines. Hosts, please stay connected.