Annual Report 2020 Electrolux Professional Food, Beverage and Laundry Contents Introduction Goals and strategies Our industry Our business Sustainability Corporate Financial GRI report Share and report governance reports supplement Shareholders Contents This is Electrolux Professional 1 The year in brief 2 Key figures 3 CEO comments 4 The pandemic impact & response 6 How we create value 8 Read more on page Goals and strategies 10 37 Strategic goals 11 Markets Financial targets and dividend policy 14 Read more on page Our commercial activities focus Sustainability strategy and targets 15 4 on three geographical regions – Our industry 16 ALBERTO ZANATA, Europe, Americas, and Asia Pacific PRESIDENT AND CEO: Global trends 17 & Middle East and Africa (APAC & “ We are strong and well MEA). Global industry 18 positioned for the future” Key growth drivers 20 Our business 23 The OnE approach 24 Food & Beverage 26 Laundry 28 Customers 30 Sales and marketing 33 Our markets 37 Our production 41 Research and development 45 Our people 46 Sustainability report 49 Read more on page Mission, our commitment and framework 50 24 Targets and 2020 achievements 52 Our offering - the OnE OnE is our global product and service offering, with both single and full Sustainable Development Goals 53 solutions and services across Food, Beverage and Laundry – under one The Climate challenge 54 brand – allowing customers to manage their operations through connectivity Our value chain 55 and a digital ecosystem. Sustainable solutions 56 Sustainable operations 58 Ethics and relationships 61 Read more on page Corporate governance 64 Chairman’s comments 65 26 Corporate governance report 66 Board of Directors 74 Executive Management Team 76 Remuneration report 78 Risk and risk management 80 Read more on page 28 Financial reports 84 Administration report 87 Food & Beverage Laundry Financial statements 94 A wide range of professional food A wide range of equipment for Notes 102 service and beverage solutions. professional laundry businesses. Proposed distribution of earnings 146 Auditor’s report 147 Four years in summary 150 Definitions 151 GRI-report supplement 153 Share and shareholders 160 Electrolux Professional’s history 164 The Annual Report for Electrolux Professional AB (publ) 556003-0354, consists of the Administration Report on pages 87–93, the Financial Statements and notes on pages 94–146, the Corporate Governance report on pages 64–84 and the Sustainability Report on pages 49–63 and 153-159. Read more on page The annual report is published in Swedish and English. The 50 Swedish version is the original. Sustainability Electrolux Professional was part of Electrolux, founded in Sustainability is a key part of our strategy, culture, and day-to-day 1919, until March 23, 2020 when the shares in Electrolux Professional were distributed to the shareholders of operations. Our climate ambition is to become climate neutral within our Electrolux, and listed on Nasdaq Stockholm. industrial operations by 2030 Electrolux Professional – Annual Report 2020 Contents Introduction Goals and strategies Our industry Our business Sustainability Corporate Financial GRI report Share and report governance reports supplement Shareholders This is Electrolux Professional Electrolux Professional is one of the leading global providers of professional food, beverage and laundry solutions, serving a wide range of customers globally, from restaurants and hotels to healthcare, educational and other service facilities. 2020 in brief Net sales Sales in approximately Headquarters in Stockholm, SEK 7,263m Sweden 110countries Operating income Approximately SEK 387m 11 3,500 incl items affecting comparability manufacturing units in employees of SEK –77m seven countries Electrolux Professional – Annual Report 2020 This is Electrolux Professional P. 1 Contents Introduction Goals and strategies Our industry Our business Sustainability Corporate Financial GRI report Share and report governance reports supplement Shareholders The year in brief Ours has been one of the most affected industries due to the pandemic. Read about the impact of the pandemic and how we and our customers have responded on pages 6–7 . Q1 Q2 > The extraordinary general meeting of Electrolux > New Chief Human Resources Officer appointed. approved the distribution of all shares in > ”Two Pairs of Eyes” remote contact-less customer Electrolux Professional to the shareholders of service launched. Electrolux. > Ideation challenge launched internally. > Prospectus published ahead of the listing of Electrolux Professional. > Electrolux Professional’s first Investor Day. > Supplement prospectus published following the Coronavirus outbreak. > First day of trading of Electrolux Professional’s shares Q4 on March 23, 2020. > “hygiene&clean” dishwasher range was launched to meet pandemic-related demand for hygiene. > The new factory project in Rayong, Thailand merging two plants into one is almost complete. To be opened in June 2021. > Partnership agreement with École Ducasse-Paris Q3 Campus announced. > Sustainability commitments launched with the ambition to become climate neutral in the company’s operations by 2030. > Structural measures implemented leading to cost savings of SEK 130m. > NitroChrome3 High Productivity fry top and new line of ironers launched for Laundry. > The Company’s Series A shares were delisted from trading on Nasdaq Stockholm. > Digital transformation program approved and accelerated. Selection of product launches 2020 CLASSIC ESPRESSO SINGLE & DOUBLE RINSE LINE 6000 WASHERS & DRYERS MACHINE RANGE RACKTYPE DISHWASHER COMPASS PRO CONTROL P. 2 2020 – the year in brief Electrolux Professional – Annual Report 2020 Contents Introduction Goals and strategies Our industry Our business Sustainability Corporate Financial GRI report Share and report governance reports supplement Shareholders Key figures Net sales by region Europe Net sales by segment Food & Beverage 70% Net sales, total Asia-pacific, Middle East, Africa 58% 16% SEK 7,263m Laundry Americas 42% 14% Operating cash flow Total net sales EBITA and EBITA margin after investments SEKm SEKm % SEKm 10,000 1,200 25 1,200 1,000 1,000 8,000 20 800 800 6,000 15 600 600 4,000 10 400 400 2,000 200 5 200 0 0 0 0 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 Key ratios SEKm 2020 2019 2018 2017 Net sales 7,263 9,281 8,666 7,723 EBITA 456 1,058 1,188 1,098 EBITA margin, % 6.3 11.4 13.7 14.2 EBITA excl. items affecting comparability¹ 533 1,090 1,188 1,098 Operating income 387 992 1,143 1,060 Operating margin, % 5.3 10.7 13.2 13.7 Income after financial items 363 978 1,134 1,052 Income for the period 278 663 952 786 Earnings per share, SEK2 0.97 2.31 3.31 2.74 Operating cash flow after investments 570 1,138 1,131 1,167 1) 2019 includes items affecting comparability of SEK –32m, and 2020 includes items affecting comparability of SEK –77m. 2) Basic number of outstanding shares. Electrolux Professional – Annual Report 2020 2020 – the year in brief P. 3 Contents Introduction Goals and strategies Our industry Our business Sustainability Corporate Financial GRI report Share and report governance reports supplement Shareholders CEO comments Strong and well positioned for the future 2020 was set to be the year when we once again could focus on strengthening and growing the company after the process of separation from Electrolux in 2019 and the listing on Nasdaq Stockholm in March. Instead, the listing occurred at an unprecedented time when the global coronavirus pandemic affected every part of society, with the hospitality industry, where we have many customers, being one of the most heavily impacted industries. This forced us to change our focus in the short term. Adapting to a new reality Our position, combined with both through preventive remote mainte- The pandemic has affected us all, in short-term and structural cost-saving nance. All this supports the operation both our professional and personal measures, together with the strong per- and fleet control of the appliances, lives – but difficult times can lead to formance of the less-affected Laundry reducing the environmental impact, adaptation and improvement, and segment, all helped us to remain rea- and enables more frequent changes that is what we have been able to do sonably profitable in 2020. To build for in menus and ways of serving, such as during the last year. the future we also decided to continue take-away or in-house eating, which Despite all the challenges that came to invest in the new plant in Thailand are a must nowadays. with the pandemic, we managed and the digitalization of our products to avoid both major interruptions in and organization. Strategic direction remains valid production and customer delivery dis- Although both sales and profitability turbances. This is no small achievement Long-term favorable declined substantially during 2020 due given that a new plant was also being underlying trends to the pandemic, for several years we built in Thailand and investments in the Looking beyond the pandemic, sev- have demonstrated that under normal digital transformation of our company eral global trends favor the growth of circumstances we can grow the busi- were accelerated. At the same time, our business. The increase in out-of- ness with a healthy margin. Between we were able to ensure a successful home spending, especially in emerging 2013 and 2018 our business grew by transition from office to remote working markets, means people are spending approximately 50%, driven by both ac- for almost all office staff during the more money on dining out and less time quisitions and organic growth. During lock-downs that affected most coun- on household chores such as cleaning. 2017-2019 profitability doubled to an tries and that forced many to work Many businesses are broadening their average EBITA margin of 13%. from home. offerings and are becoming multi-func- During 2019 and 2020 Electrolux It was not only our internal meetings tion assets, for example, coffee shops Professional was clearly impacted by that went digital.