Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SEB SA (SEBYF, Financial) reported a 6.5% like-for-like growth in H1 sales, reaching EUR 3.74 billion.
- Operating profit increased by 35.4% to EUR 244 million, marking the highest-ever operating result for the Group in Q2.
- The Professional division posted a remarkable 13.8% growth, driven by strong performance in China and the USA.
- The consumer business showed a 5.9% like-for-like growth, with notable strength outside of China at 9%.
- The company successfully launched several new products and initiatives, including a versatile vacuum cleaner made in France and a repair and refurbishing center.
Negative Points
- Negative currency effects impacted sales by EUR 127 million, with significant contributions from the Turkish lira, Russian ruble, Argentine peso, Japanese yen, and Chinese yuan.
- The market environment in Asia, particularly China, remains weak with high promotional intensity and a sluggish consumer environment.
- The UK market continues to decline, although it is not a significant market for SEB SA (SEBYF).
- The company faced increased freight costs due to the Red Sea crisis, impacting inventory levels and supply chain efficiency.
- Working capital was slightly inflated by EUR 120 million due to increased inventory in transit and EUR 50 million in short-term overdues.
Q & A Highlights
Q: Can you comment on your pricing policy in Europe, North America, and China, and the promotional environment in these mature markets?
A: (Olivier Casanova, CFO) In emerging markets, we typically pass on price increases due to currency depreciation. In Europe and China, we have seen a negative price effect due to cost decreases. This is a normal cycle where we adjust prices based on cost fluctuations. (Stanislaus de Gramont, CEO) Our policy is to protect our margins while balancing commercial activation and growth. We focus on margin management and discipline.
Q: Can you elaborate on the freight costs and the impact of the Red Sea disruption?
A: (Olivier Casanova, CFO) We have seen an increase in ocean freight prices due to the Red Sea crisis, but the impact will be smaller than in 2022. We have managed to minimize the impact by using contracted prices for a large part of our volume. Prices are starting to recede, so the impact will be manageable.
Q: What is your outlook for organic growth and the performance of the European and North American consumer markets?
A: (Stanislaus de Gramont, CEO) We expect around 5% organic sales growth, with strong performance in Europe, USA, and emerging markets driving growth in the second half of the year. The context in Q2 was less favorable than Q1, but we are confident in our trajectory.
Q: How did your sales perform during the Prime Day period?
A: (Stanislaus de Gramont, CEO) We had very strong double-digit growth during Prime Day, especially in Europe. The performance in the US was good compared to the investment. However, Prime Day is a short promotional period, so we do not draw conclusions for overall Q3 performance from it.
Q: What is the current status regarding inventories in the trade? Is there any restocking from retailers?
A: (Stanislaus de Gramont, CEO) Trade inventory levels are low to fairly low, especially in the United States and Europe. We do not see any restocking from retailers in the first half of the year. Retailers are cautious about their cash flow management, and there is no significant change in their low inventory policies.
Q: Can you provide more details on the organic growth expectations for the Professional division for the rest of the year?
A: (Stanislaus de Gramont, CEO) We expect the Professional division to face high comps in the second half, but the long-term growth potential remains strong. The market for professional products continues to grow, and we anticipate a growth rate of 5% to 10% in the higher end for the Professional division.
Q: What proportion of your sales in the US come from imports from China, and are you concerned about potential tariff measures?
A: (Stanislaus de Gramont, CEO) The majority of our US business is cookware, with a significant portion made in Canada and Pennsylvania. Of the imports, three-quarters come from Vietnam and one-quarter from China. Overall, the exposure of our US business to China is around 10% to 15%.
Q: How do you reconcile your double-digit growth in certain categories with your overall like-for-like sales growth of 6.5%?
A: (Stanislaus de Gramont, CEO) While categories like air fryers and versatile vacuum cleaners are growing strongly, they are not as prominent in our portfolio as they are for specialized companies. Our strategy is to have a wide portfolio of products, which dilutes the impact of strong performance in specific categories. Additionally, the overall growth is affected by the performance in China and Asia.
Q: What are your plans for the upcoming ESG Investor Day?
A: (Stanislaus de Gramont, CEO) We have announced an ESG Investor Day on December 12th, which will be a two to three-hour session conducted via video conference. This session will address questions about our CSR ambitions and trajectory, and we invite as many participants as possible to join.
Q: How did your sales perform during the 618 event in China?
A: (Stanislaus de Gramont, CEO) Our sales during the 618 event in China were slightly positive, with 1% to 2% growth, outperforming the market, which was around minus 5% to minus 7%. This confirms our ability to perform better than the market despite challenging conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
