SEBYY - SEB SA (SEBYF) H1 2023 Earnings Call Transcript
2023-07-30 07:59:07 ET
SEB SA (SEBYF)
H1 2023 Earnings Conference Call
July 27 2023 4:00 AM ET
Company Participants
Stanislas de Gramont - CEO
Nathalie Lomon - Chief Financial Officer
Conference Call Participants
Charles-Louis Scotti - Kepler Cheuvreux
Alessandro Cecchini - Equita Sim
Sarah Thirion - TP ICAP
Presentation
Stanislas de Gramont
Bonjour. Good morning, everyone. Welcome to the Groupe SEB First Half 2023 Sales and Results Presentation. Welcome first, and thank you for being with us. I know that it's a very busy day and week for all of you. I will be taking you through this presentation together with Nathalie Lomon, our Senior Vice President in charge of Finance.
As you know, we'll have first a presentation and then we will move on to questions either through phone or webcast. Let me take my -- that's all right. We'll cover four points in this presentation. We'll start with a review of the business trends in the first half of the year, an analysis of our financial results, we'll look at our balance sheet and financial structure, and then we'll share with you our conclusions and outlook after this first half.
Maybe the first comment on the first half is that we've seen a marked improvement in our business trends versus what we've been experiencing not only in Q1, but in the previous fourth quarter. And starting with the context, we can qualify the environment as being challenging. We see that the overall economic -- macroeconomic, geopolitical context is tense. We see interest rates still rising. We see inflation still biting into consumer demand. We see a pretty unstable state of economic growth through the globe.
The second element that may be a bit more specific or impacting our category is that we know that we had a surge of demand during the COVID period with the people staying at home for quite a while and spending more than usual on their equipment, be it home cleaning equipment or cooking equipment, that obviously benefited us substantially. And we see overall a normalization of the demand for small domestic appliance. Yet this is uneven, we see that Europe is recovering a bit faster than the US. We see that China is probably a bit later down the road in that recovery. We see that Southeast Asia like China is a bit further down the road. And even within Europe, we see that Germany is kind of a couple of months behind France. So that impacts the reading of our numbers. But yet, we have a pretty good understanding and tracking of what's going on as much as we can plan for it.
The third element that we see, and that is a combination of sound financial management, it's also a consequence of rising interest rates. We see some retailers across the globe running some destocking or running their inventories below the historical levels. That happens in some US retailers, that happen in some European retailers, that also happens in some Southeast Asian retailers. And of course that impacts our short term sell-in retailers. So that's for the global economy context.
As far as the group is concerned, we have, as I said introduction, a very positive second quarter. We're expecting to be back to organic growth for the Consumer business in Q2, we've done better than we're expecting. So the recovery is a bit better a bit faster. We've been growing substantially in the Professional business since Q2, Q3 last year. And we said earlier on in the year that that momentum would carry on or even accelerate. And we see that in the first half of the year.
We also said in February that our margins will see a progressive improvement during the year. It does. And this is driven by three factors. A sales increase, of course, cost of goods sequential improvement with the easing of the freight cost and the components and materials cost. And we have some phasing in our cost drivers between the first half and the second half. Some of you may remember that last year we spent a bit more than we should have in the first half and we recovered that invest -- the level of investments and spent in the second half.
And better than words, I think those graphs -- this graph outlines best what we've meant by going through fourth quarter of consecutive growth and five quarter of no growth with Q1 2022. We see that Q2 2023 is 6.8% organic growth, like-for-like growth that's against Q2 last year of minus 5.1%. So what we've been saying since Q3 last year or Q4, about progressive improvement and recovery of our sales is actually happening as planned.
We will run through this presentation now looking at two time dimensions. We look at half one on one end, because this is of course, a half one review. We will also be looking specifically at the second quarter, because the second quarter is a very different picture from the first quarter. So it's important to understand, yes, what's going on in the first semester but also, what are the specifics on the second quarter. So bear with me, I will try and navigate you through this half one Q2, first half, first semester and second quarter starting with the organic growth in the first half of the year.
Well, the good news, the great news is that we are back to organic growth in this semester plus 1.3%. We have a currency effect that starts to pinch quite a lot at minus €121 million, minus 3.3%. And we see some positive perimeter effect with the acquisitions we've done in the second half of last year, and the first part of the semester leading to €3.612 billion sales reported in the first half.
Digging into currencies and maybe just to set the ground for what's going to come afterwards in the comments on currencies, which is a big element of our guidance and looking forward to the business, we see that the first half is split into two quarters [indiscernible]. The first quarter saw an impact, negative impact of €27 million on sales of currencies, whilst in the second quarter that impact rises to €94 million. So we see an acceleration of the impact on sales primarily driven by the Chinese yuan and then some what we call emerging market currencies, the Turkish lira, the Egyptian pound, the Colombian peso, the hryvnia from Ukraine, and also the Argentinean peso and the yen that is also weak versus the euro. We'll come back to that argument later on.
When we zoom into the second quarter sales, as I said, we are 6.8% above last year, in organic marked €119 million improvement that is above the negative currency impact of €93 million. We have a perimeter impact €14 million, that raise is in importance plus 0.8%, leading to a quarter at €1.790 billion. And I’ll dig into the details of those second quarter sales by business. Starting from the top, so 2.3% reported sales growth, 6.8% like-for-like growth.
Split into Professional business and Consumer business, in Professional, we had a very good first quarter while the second quarter is almost just as good as the first one with 29.6% growth in the semester and 21% like-for-like, whilst in Consumer we've seen a turnaround basically. Consumer posts almost flat sales minus 0.7% and plus 5.2% like-for-like sales, which is again, and I will say it again, it's expected but a bit better a bit faster than expected.
And we have -- this is the sales by regions, of course, so we'll dig into each region in the next forthcoming minutes. But I think you have two blocks of countries, you have those countries where that have turned back to become growth drivers. This is the Europe as a whole with the whole of Europe turning 12.8% like-for-like growth in the second quarter, both in Western Europe and in other countries. I'll come back to that.
And then the second block of countries, we have China, which after a slow start in the year that was expected, is posting a 5.5% organic growth in the second quarter. Again that is slightly better than expected. And then we have those countries which are still in the later stage of the recovery or in the earlier stage of the recovery post-COVID. With Americas which should turn positive from Q3 onwards and then we have some countries are lagging behind, but they are small, they are the Southeast Asian countries, other Asian countries. I'll come back to that.
So overall, the big pillars of the group, Europe and China are back into growth territory, organic growth territory solid. That's great news. And then we see Americas lagging slightly behind one or two quarters and we see other countries kind of a bit more behind. And of course Professional business, and has been so in the last four quarters, is really pumping up the growth of the group throughout.
Starting with -- talking about the Professional business, not much to say on this business except that, of course, it's an outstanding number when you grow business 31% on a business of this size, 31% year-on-year is the reflection of a sound strategy, sound execution, and basically a place where a lot of things if not everything works very well. In fact, we have outstanding growth against -- across our historical markets in professional coffee. Yes, China is the best performer but at the same time, Germany is posting double digit growth, US is close to it, UK is staggering over 40% growth in the semester. So we see that our product offering allows us to increase sales throughout all the regions or the major regions we're operate in. And that's because our products are basically answering and responding to a pretty fundamental needs of our customers in a better way than our competition.
The second thing that has -- that is confirming quarter after quarter is a very solid mix between large deals. You know, those deals where big customers 10,000, 5000, 2000 stores come and strike a deal with us across a period of time. These are what we call large deals contracts. And the core business and core business for us is machine sales on regular, call it, individual customers. That's what we have in big -- in large parts in Germany. And service, and service is a key part of it, about a third of the business. And services is a key part of the business because it's a way for us to make sure that the machines keep working day-in day-out but it's also a way to generate additional revenue and margin and to have a loyal and daily relationship with our customers.
Last but not least on Professional, we had two acquisitions in the first half. We acquired an Italian professional coffee traditional barista machine company in Italy called La San Marco and we acquired Pacojet. And I'll come back to that in a second. La San Marco is a company based in Northern Italy. It's a century old company, they have patents, they have a very strong and specific know how. And they are bringing a very nice and exciting complement to our range of professional coffee machines which are today essentially fully automatic coffee machines or filter coffee machines with Wilbur Curtis in the USA. So we continue developing and expanding our portfolio of products in professional coffee because we see that sector as one that has a very, very positive growth prospects.
Second acquisition we did which well known maybe for the [indiscernible] is Pacojet. Pacojet is a staple product, is a staple brand in quality restaurant kitchens to the point that Pacojet has even created and patented a word which in English is pacotising, which is transform a product through -- with the Pacojet machine to have brilliant quality emulsion. It's a staple in those restaurants and in those kitchens. We are really, really excited and positive about this acquisition. This will allow us to enter in restaurant kitchens in the right way.
Let me move on to the Consumer business and I will start with, again focusing on the second quarter, starting with that picture overall. Overall, we said that Consumer is growing 5.2% like-for-like in the second quarter with a reported growth of minus 0.7%, slight decline. Again Western Europe or Europe and China are driving that. In terms of product categories, we've been selling a lot of Ingenio stackable cookware products.
We have developed and expanded very substantially in our ceramic range with a range called Renew in cookware. We are developing fast in oil-less fryers. We have an oil-less fryer, dual role oil-less fryer here that is what we're seeing. In fact here you have the ceramic pans that we launched this year. We have a great product success in kettles. And also linen care, we have launched a new range of garment steamers, which you see on the screen called PurePop, a very, very exciting start for this new product.
And last in the Consumer business, we’ve acquired late in the semester Forge Adour. Forge Adour which I will talk about which is -- which makes us European leaders in the plancha business.
We talked back in February, we talked back -- we were talking about the sequential recovery of our business through the year. And in fact, this is what we observe. Yes, of course EMEA is leading the pack with Q1 minus 5%, Q2 plus 5.8%. It's always like-for-like sales. Asia is also showing a marked improvement, minus 6.0%, plus 2% and you will see that between China and the rest of APAC, it's a different picture. And even the Americas, which are still posting negative 6.6% in Q2, are coming from a minus 13.7%. So the sequential recovery is happening in all the regions.
If we dig into EMEA, a few comments, the first one is most countries in EMEA are back into positive territory. We have a couple of exceptions, but many stuff that we can explain for a very local specific reasons. We had two challenges in the -- from Q2 onwards last year, one was France, and the other one was Germany. France has delivered a very satisfactory double digit growth in the second quarter that is held by a strong recovery in linen care. We have strong solid performance in floor care. And in cookware, we've been helped by a strong loyalty program with one of our biggest retailers on [ARNO]. And this is of course helping, all these three combined make France delivering double digit growth in Q2 and we think that will continue certainly in Q3.
Germany still negative in the second quarter, you will remember then that last year, Germany started to kind of come down in around May/June, a bit later than France. And of course, that makes the comparative numbers still a bit high for April/May. Yet we see a sequential improvement in a context and that's also the case for France where the overall consumption for our products is still negative territory. It is still sluggish in France and Romania and in fact, a bit more sluggish in France and Germany than in the rest of Europe where we see some green sprouts of consumption.
And to the point, and that's the point other EMEA countries are stronger in the second quarter. We have markets which are in positive territory and we have market companies which are really delivering very strong and robust performance as they've been doing for many years now. You know that Central and Eastern Europe is a key contributor to the growth of the group in the last five to 10 years. And that is continuing and recovering and confirming. Turkey and Egypt are affected by the strong devaluations. And of course the organic growth is kind of impacted by -- in positive by our ability to pass price to compensate for these high inflation environments.
If we move into Americas, the number may look worrying. We are not concerned at all by the number. We've seen the second quarter improving sequentially in North America. And that is despite continued retail destocking and weak market demand. I mean that's I think in the newspapers, yet it is slightly ahead of our expectations. And we see going down the road and going against more favorable comps, we see that the second half of the year should be totally different from the first half of the year. That is also backed by the fact that we have consolidated our leadership position in cookware in the US. You know that, you know, no, you don’t know. Well, the US market is over 70% of cookware business for us, and we are leader in the market and in we are consolidating this leadership. So that combined with facing better comps and therefore better market conditions makes us pretty confident that we will turn the trend from now, basically.
We have sales that are up again double digit in the Mexico. You remember that Mexico, in one of our previous presentation, Mexico is one of those countries where we have a solid continued double digit growth based on a growing market, based on growing market shares. That continues, and that is becoming month after month, quarter after quarter another key pillar of the group.
Whilst in South America, we have a pretty different picture. Brazil is facing a very high competitive environment. And we are kind of managing, balancing between margins and growth. In Colombia, we have negative numbers but with no real concern. We had 40% growth in Q2 last year in Colombia year-on-year. And we had I think, one or two VAT Free Days organized by the government. So the business is very healthy. Our market position is stronger than ever, our market position is becoming stronger every quarter. And we're very confident that this performance in Q2 ’23 is only a seasonal hiccup.
I'll move into Asia with a pretty contrasted performance in the second quarter. You'll see China, and on the top right box, China plus 5.5% like-for-like sales in the second quarter, minus 2.7% reported. This is the effect of the renminbi devaluation, the Chinese yuan devaluation. And we see other Asian countries at minus 9.4% like-for-like, which are suffering. Let me explain to you what's going on. And I think there are really three, three blocks. The first one is, and this is the most important one and China is 75%, 70% of our Asian business. The first one is that China has returned to organic growth. China has returned to organic growth against a market that is sluggish. You know that consumption in China has not really recovered. And for that consumption that has recovered, it is more catering and hospitality and leisure that consumption than material goods, which is recovering. So that's what we have as a context.
What we have also is Supor that is continuing its premiumization strategy, that is multiplying new product launches, that is accelerating its innovation and its increase on its weight of the market, gaining market share on all product categories. And that backs the trend of a sluggish consumption. And we know that it stands, we know that it's competitive, yet we're confident in our ability to deliver that positive volume growth throughout the second half. And that's in the context of market. I will remind that we don't really know if and when consumption will recover on our products this year. That's China, so a sluggish market, a very strong continued strong performance from Supor on all categories.
We have a second block which is Japan and South Korea, South Korea is in recession state or mode and we are suffering from that. In Japan we see again a very soft market, we see very soft market conditions with the continuous devaluation of the Japanese yen, which is around 155 to a euro now. It was 135, 140 last year. So that has an impact on consumption that makes soft market conditions out there.
Then when it comes to the Southeast Asian markets, other in the markets in the regions which are 15% maybe of the region, they are still negative. They are impacted by weak sell out trends, weak demand and pretty high retailer destocking on the back of raising interest rates which obviously makes the cost of holding inventories everyday more heavy for retailers.
If we look at it, at this performance from a category standpoint, the first comment is that, as you can see all categories are improving and most of them are in positive territory. And this is the benefit of having several categories that there's always one that will grow faster than the others. The winner is, if I may, of this semester is, of course linen care.
Well of course linen care. Linen care is great news because as you know, it is a category where we have a very strong market position. And we've seen for the last few years the development of garment steamers, as an alternative to steam irons or steam generators. We're expanding in steam -- in the garment steamers. You've seen the PurePop launch and we are very, very happy to see that the linen care category is recovering.
Beverages is highlighting a strong recovery in our kettles business in Japan in particular. We are a market leader in kettle in Japan. We’ve I think over 50% market share and this is pulling the beverage segment. At the same time our food business is there and expanding.
Home care, home cleaning mainly, we had a difficult first quarter, the second quarter makes up for that difficult start of the year driven by versatile vacuum cleaners but also some canisters, the traditional canister vacuum cleaner that is recovering as well. And electrical cooking recovery reflects the expansion of the group into the oil-less fryer or the recovery of expansion into the oil-less fryer category that we invented 15 years ago with Actifry and we are gaining momentum and we're gaining space in that category.
To the last point on this, the events on the sales of this quarter, sales, the activity of this quarter is the acquisition of Forge Adour that will did in the latter part of the semester. Forge Adour is a French company based in Bayonne in the Southwest of France. They are doing enameled cast iron planchas, very complementary to our other premium plancha business called Krampouz. One is stainless steel, the other one is enameled cast iron. That gives us a very, very good coverage of planchas both electric and gas. And that allows us to expand into what is meant to be or bound to be a very, very promising market. So that acquisition was done in the latter part of the semester, and will be consolidated in our accounts as from the third quarter so we don't see it today.
We announced during the semester two initiatives in terms of logistics. In fact, we've created two new logistics platforms, one for Western Europe, small domestic small electric appliance, if you want and one for Western Europe. That is completed, sorry. And one in Western Europe, cookware products that we've announced and we'll start the construction now. That is -- these are substantial investments €80 million for Bully-Les-Mines in SDA, €30 million for Til-Châtel in cookware.
And I think it's a reflection of several things. The first one is, we believe that we have some gains to be had in the logistics and in the transportation of our products. We believe, the second one is that France with our production base with our customer base is an ideal place for localizing these warehouses. And we believe that consolidating distribution of our products within Western European countries makes a lot of sense from a financial standpoint.
So these are the news or the information I wanted to share with you on the semester in terms of activity. I will now hand it over to Natalie to take us through the financial results consecutive of all that. Thank you.
Nathalie Lomon
Thank you, Stanislas. So moving to the first the operating results from activity, so in this first half of the year, the group has delivered an operating result of €180 million with a sales totaling €3.6 billion. So this operating result in the second quarter, €115 million is almost a double of what has been delivered in the first quarter, so clearly showing the acceleration of the profitability improvement of the company. And if you look at the like-for-like performance, you can see that for the first half of the year the ORFA that we have delivered is almost in line with what has been delivered in the first half last year.
I will now move to the bridge to explain you what has happened in the course of this first six months for 2023. First starting with the volume, so we are now in a positive contribution in terms of volume with plus €12 million included in the improvement of the operating profit. The price mix as also increased by €35 million. And a part of that is coming from price increases that we're placing to cover for the negative effects impact in euro in emerging currencies devaluating versus the euro.
Cost of goods sold is still negative compared to last year, but it's improving when compared to the first quarter. Actually, what we see currently is our current production costs are actually lower when compared to what they were in 2022. But you know that there is always a time lag between the moment where we see cost production decreasing, and then when we see them flowing into cost of goods sold in the P&L. But anyway, that's very good news for the second half of the year.
Growth drivers are lower when compared to last year by €32 million. And you may recall that they were still very high in the second quarter 2022. Whereas we saw that at that time a start of the decrease in demand, so it's more here an effect of the comparison base. And administrative and commercial expensive are increasing by €49 million. A significant chunk of that is coming from labor cost inflation.
You may recall that we said that we would expect a labor cost increase from inflation throughout the group around 5% on a full year basis. So a significant part of that is here. And we're also investing on our DTC platforms, so from €199 million to €198 million. It's almost the same level of operating profit that we're delivering on the like-for-like basis in the first half. And then as Stanislas explained earlier, we are hit by a negative impact that is coming from the devaluation of some currencies, mostly in emerging countries against the euro. The plus €2 million from the scope effect is coming from the contribution of La San Marco and Zummo.
Looking into more details in our growth drivers, so I commented a decrease actually, it's an increase in our innovation costs. You know that’s innovation, and rent replenishment are from a long term perspective key drivers to the growth of the company. And so they keep on increasing almost 6% on like-for-like basis. Whereas as I said, we're facing a high comp base in 2022 regarding marketing and advertising and this is why you see here a decrease when compared to previous year.
Now moving from ORFA to the net profit, we have an expense related to employee profit sharing for €11 million. Other operating income and expenses are quite limited €9 million and they're mostly made of acquisition costs. Our financial expenses are decreasing when compared to last year. The main items explaining for this decrease is a reduction of our financing cost, both in euros and in some emerging countries.
And on the other hand, a technical item, which is the change in value of the options that we have set to hedge the price of the shares that we buy for our long term incentive plans. Tax expense is in line with what it was in 2022 and minority interest are a bit lower, the decrease from a lower activity in Supor when related to what they do with the rest of the group. So we’re closing the quarter with a net profit of €76 million which is a slight improvement when compared to 2022.
Now moving to the balance sheet and the financial structure, and I will first focus here on the balance sheets and maybe give a bit of a explanation on the change of the value of the equity, which is impacted, obviously by the positive net profit and on the flip side by dividend distribution and also lower currency reserves.
The other item worth commenting is the evolution of the operating working capital that you can see here on this slide. So, first thing when comparing to the first half of 2022, you see a significant decrease of our inventories almost €600 million that is massive. And when you see the impact on the overall working capital, again, when compared to H1 2022, it's a decrease of €400 million. This is clearly the proof of the effectiveness of all the action plans that we have implemented since the end of H1 2022 to reduce, at the same time, our inventories and outsourcing.
And then when comparing to the number that we had, at the end of December last year, there's a slight but very limited increase in working capital, you should keep in mind that the working capital level at the end of the first half is always the highest point for the company as we are preparing for the second half of the year, which has a strong seasonality pattern in our business.
I am now moving to the free cash flow generation. So from the operating results of €180 million, we have to take into account the profit sharing on the one hand and adjust for the non-cash items, which gives us an EBITDA of €308 million. That has been consumed by a limited change in working capital when compared to last December, as I just mentioned, some investments, the tax and the interest rate charged for the first half, and some positive impact on non-operating working capital that are mainly coming from fiscal and labor related taxes.
The group has delivered €132 million of free cash in the first half, which has helped us decrease the financial debt. On the other hand, financial debt has been impacted by the dividend distribution that took place at the end of the semester by acquisitions. So as a reminder, the €184 million here stands for the acquisition of La San Marco, of Pacojet, and of Forge Adour and by other items. The most significant of them is the share buybacks that we do, on Groupe SEB share and also on Supor share for long term investment plan. We also have some restructuring costs here. And another significant item is the cash out related to some litigation that were fully provisioned in [GMF and that were dated back prior to the acquisition of that business in 2017.
So that would be the last slide. First, the first graph pertains to the operating working capital as a percentage of sales. You can see that with what we are delivering at the end of June we are really back to a normative level from an historical standpoint. Gearing stands at 0.7 and the leverage is to towards 2.6 turn and 2.3 excluding the impact of the recent M&A and the IFRS 16.
So that's it for the financial results. Over to you Stanislas
Stanislas de Gramont
Merci Nathalie. Right, I'll share with you our conclusions and the outlook and comment on the outlook for the second half and the full year. Maybe if we step back from this first half, what do we see? We see that our Consumer business is back to organic growth. That's great news. We see an outstanding momentum in the Professional business and we see we’re expecting the Professional margin improvement. That's all what we're expecting, a bit faster a bit better.
Now, we believe that revenue and ORFA progression should continue in the second half of the year and we've been seeing that for -- very consistently over the past difficult four quarters. We are very confident in these industries long term growth prospects. We see that consumers really have a strong appetite for our products. And we see that in emerging markets, we see that in developed markets, we see that in our stronghold countries, China, Western Europe. And so we believe that this business has a very strong and positive long term potential.
Now looking and zooming into the second half of the year, I think it's important to share with you the way we see the currencies environment, obviously with a lot of disclaimers, and dots, and commas and because nobody knows what currencies are going to be like and how they will evolve in the forthcoming few months. Remember, a year ago, we are talking about dollar euro parity through 2023. Yet we have a scenario and I think it's important that we share with you that scenario that explains the evolution of our guidance.
The main scenario we see is that we will have a stronger euro expected in the second half and that has some adverse impacts on our business. Of course, on sales on reported sales, if the euro is stronger reported sales should be lower than organic sales. That's pretty direct and straightforward and mechanical. And we estimate at this stage with our hypothesis, again, of final of FX rates, we estimate that this could have an impact around 50% -- 5% of group sales on a full year basis. So what we see is a full year impact in negative 5% by currencies.
Then we have the impact of currencies on the ORFA. We say that this -- we believe that this impact will be neutralized not neutral, will be neutralized in part by price increase that compensate currency depreciation in emerging markets. We see that in Turkey, in Egypt, in Argentina, in Russia, in Ukraine, in Brazil, whenever we have a material devaluation of the currency that creates inflation, we’ll raise our price and give or take the facing FX there is a kind of pretty direct compensation between FX evolution and our ability to maintain our margins.
When it comes to more mature businesses, we are short in our -- in US dollar and the Chinese yuan and we have been covered and protected last year by a very positive hedging results. So yes, those currencies will be lower than the euro in the second half than they were last year. But the currency rate we see is not the market rate, it is the hedging rate. And this hedging result will be negative in the second half of the year versus the second half of 2022. And this will be offset by the tail winds we see, we all see on freight costs, on raw material costs, on component cost.
So in those -- in our mature business in the next six months, we see tailwinds in our cost base, we see negative hedging results that will offset those headwinds. This is what allows us to say that the FX will have an -- the FX negative impact on the ORFA will be neutralized in the full year. If there are some questions of course, I will answer that because it's -- it is not a straightforward or easy to understand.
That said, we are strengthening our guidance for the full year. We said that we would see a progressive recovery of sales in Consumer, we said that we will have a strong growth in the Professional, that stays. What we add is we expect a mid-single-digit like-for-like growth in the in the full year group performance. So that is a quantification of the guidance for sales. And when it comes to ORFA, we think with all those considerations that I've just shared with you that our ORFA for the year will grow by at least 10%.
I think this guidance reflects two things I think first the year is developing sequentially as we're expecting it to develop and we've seen an acceleration of the recovery in the second quarter that allows us to give more precise and quantitative indications on the outlook for the year.
Thank you very much for your attention. We will now take questions on the phone and on the webcast; I leave it up to the operator. Thank you.
Question-and-Answer Session
Operator
Thank you, sir. [Operator Instructions] I will now take our first question from [Bharat Lambini] from BNP. Please go ahead.
Unidentified Analyst
Yes, thank you very much and good morning. So I have three questions. The first one is about the price mix effect. Could you give us a sense of how much price, is pure price and how much mix has been driving the Q2? Second question is about the promotional activity from your competitors. Have you seen any pickup in these kind of promotions in the second quarter? And also comment maybe on how advanced are private labels compared to one year ago? And finally a question on ForEx, more specifically. So last time, you spoke to the market, you mentioned a number of €100 million negative ForEx on your EBIT. Could you could you maybe update that figure? Had it changed versus last time you spoke? Thank you.
Stanislas de Gramont
Thank you very much. I suggest Nathalie you take the first and third question on price and mix and ForEx. And I will take the second one on promotional intensity and private label.
Nathalie Lomon
Yes. So regarding price and mix, the number that we see here is a good combination of both impacts. We still have a positive price impact that is coming from the price increases that have been set throughout the year. And we have set also price increases in the second half of last year. So obviously that's a benefit that we get here. We have some price increases, as I mentioned, that have been placed since the beginning of the year, especially in emerging countries to offset the devaluation of those currencies against the euros. And there's also a third chunk of mix improvement, which is you know, what the group is usually relying on to adjust and maintain if not improve the level of its margin. So that would be a new products lounge, innovation or changes in the product range that allows us to increase our price because the feature of the mix are stronger when compared to the previous range. So that will be for the first for the first question.
When we commented during the annual result presentation and what we were expecting on FX and tailwinds headwinds, we said that globally, we thought that all of this would be awash, that there would be a negative impact from FX that would be offset by some tailwinds on energy, on cost of components, cost of raw mats, and very significantly on sea freight. What has changed since then is that we have seen significant devaluation in some currencies from emerging markets and also from the Chinese yuan.
Overall, what we are telling you is that there will be stronger negative impact on sales. But this negative impact on sales will be offset in emerging countries by price increases, as we always do. And the rest of the negative impact will be offset by positive news that we have on freight, on cost of components, and cost of raw mats. So that 's a bit different versus what we said in February. The difference is coming from some stronger devaluation that what we're expected at the beginning of the year but all together, what you should keep in mind is that that will be all the negative impact coming from FX will be offset either by price increases or by a good news on the cost side.
Stanislas de Gramont
Merci Nathalie. When it comes to your question on the promotional activity from our competitors, maybe the first part is that we don't answer on specific competitor’s activities. What we -- maybe we can share a couple of elements. The first one is, yes, there is moderate, more aggressivity in the market in terms of promotional activities. We see that in China, we see that in Europe. I think we're well positioned because we have a good management of our margin in the last four to five quarters that allow us to respond and to anticipate what may be a more intense promotional environment in the months to come.
Then the second part of your question is regarding the development, the presence or the weight of a private labels. Last year, we saw some increase in the private label or [V brands] business. And we said and I think it's still the case that private labels grow when there is a high inflation or recessionary context. While we see that inflation context easing out somewhat, I think, six months ago, we were talking about double digit inflation prospects in Europe or in the United States, we see that easing out. And as a consequence, we see that the pressure or the tension, or the development of privately labels or V brands is still positive, but coming to reduction sequentially. Okay? Next question.
Unidentified Analyst
Thank you very much.
Stanislas de Gramont
Thank you.
Operator
We'll now take our next question from Charles Scotti from Kepler Cheuvreux. Please go ahead.
Charles Scotti
Hi, good morning. And I have a couple of questions. The first one is on your 5% organic sales growth target. Is it possible to quantify how much of the upgrade is coming from the FX driven price increases versus an underlying improvement in volumes and price mix? The second question, and you mentioned that inventories are lower than historical even today. I'm just curious to know what is the mood of the retailers as we move into the peak season. And do you think they will go through this period with such low level stocks or can we expect some restocking at some point during the balance of the year?
Third question, sort of one on the competitive intensity, I guess price mix turn probably slightly negative. Or maybe from Q2, are you considering that you would maintain a positive price mix on the full year basis and did A&P contribute positively in H1? The cash rates that’s front-end loaded, so it's fair to assume the pickup of growth driver in H2. And last question on China, growth turned positive in Q2. And the government said earlier this week that they will boost consumption for its home products and household appliances. Do you know [indiscernible] which all categories were targeted by or put on hold in this measure? Thank you.
Stanislas de Gramont
Okay. And I will take question two and four on inventory and retailers perspective and on the China boost on consumption. Nathalie may be you can take the first one on the breakout of the -- breakdown on that like-for-like sales. I’m not sure we have very specific answer on that and on the price mix evolution and the A&P evolution. Right, thank you Charles-Louis. Right, and starting with the retailer moods for the going into the high season. Maybe the first thing is that our retailers, our customers have very reasonable if not low levels of inventory of our products. So when they have excess inventory, it's not our categories it’s other categories.
But obviously as they are managing their balance sheet they are looking at the entire inventory portfolio. What we see is that there is a more and more direct correlation between sell-out and sell-in. That means retailers are kind of on a tight stock management, which means the response or the reaction to good sell-out is faster coming into sell-in. All our retailers are observing the evolution of the consumption and the consumption context, which is full of questions, maybe more questions than answers in North America or in Western Europe. So they are all cautiously managing their inventories. And we have a very, very, very tight relationship with them to make sure that, yes, they managed tight inventories, but we don't lose sales opportunities because of inventories. Speaking to some of them recently, they see on our categories a better second half than the first half. But again, this is against easier comparative base.
The measures to boost consumption in China, we -- I mean, we are one of the staple consumer goods category. So we wouldn't be surprised if a set of broad measures to incentivize consumption wouldn't affect our categories. What we can say is that today there is the talks about giving some consumptions incentives in China, there is nothing firm and concrete yet. We do expect that if something comes out, our categories at large will benefit from that. We don't bet on that. Our forecast is based on our action plans on a pretty strong portfolio of product initiatives, brand developments, innovation, managing the right level of aggressiveness on the market so that we can get the right balance between being competitive and being forward looking and improve and raising our business in the Chinese business. Whatever comes from government incentives to stimulate consumption will be a bonus. Nathalie?
Nathalie Lomon
And so to give you a bit more of granularity on the organic growth for the second half of the year, so we are maintaining our prospects regarding the Professional business with the expectation of strong like-for-like growth, that's one thing. And now we expect a positive like-for-like growth in the Consumer segment comparing to minus one in the first half. If you look at the overall trend Q-on-Q, Q1 and Q2 in the major geographies of the group, you've seen that we have delivered very strong news in Europe. We're confident that we will still be able to deliver a nice growth in that area. We saw that Asia was on the positive side and we have no sign that the situation should be different in the second half.
And as Stanislas highlighted during the presentation, the first half in the Americas was impacted by a weak demand via destocking in the trade. We now think that this trend is behind us. And so we expect that the performance should significantly improve in the Americas. So I'm sorry, I cannot give you more of that. But I think that it's qualitative information that should help you understand how the growth would be delivered by geography in the second half.
And then coming to your question on price mix, yes, we still expect that we’ll have a positive price mix effect in the second half. We have a lot of innovation or product range that are now brought into the market that will help us sustain the improvement of the mix of the portfolio on the one hand and again as I said, as we think that there will be strong -- a euro versus emerging countries. The compensation for the negative FX impact will come into price increases that will reflect in the price mix as well.
Stanislas de Gramont
A&P phasing?
Nathalie Lomon
Sorry.
Stanislas de Gramont
A&P phasing
Nathalie Lomon
Well LP was more was more a story of the first quarter. We still had a bit of that in the second quarter but I think that the biggest chunk of what we have delivered when compared to the quarterly sales that was in the first quarter.
Stanislas de Gramont
I think he was referring to A&P, advertising and promotion, correct?
Nathalie Lomon
I’m sorry, you said LP or?
Stanislas de Gramont
A&P.
Charles Scotti
Sorry, A&P growth driver.
Nathalie Lomon
Okay. So sorry. No change, no change in the policy. As you know, we always adjust our growth drivers in line with what we expect in terms of sales. So, really, the -- what happened in the first half was really linked to the comparison base of 2022 when we spent full speed in the first and in the second quarter, but now we will be back into something that we consider being the right level of our growth driver to deliver the sale. So, you will not see the hiccups that we had in the -- in terms of difference between this first half and second -- and the first half of last year.
Charles Scotti
Thank you very much.
Nathalie Lomon
Welcome.
Stanislas de Gramont
Thank you.
Operator
We’ll now take our next question from Alessandro Cecchini from Equita. Please go ahead.
Alessandro Cecchini
Hello, everybody. And thank you for taking my questions. The first one is, again a follow up on promotional activity. If I am not wrong, you said that first half was not overall impacted by specific promotional activity, but you are expecting some, maybe some higher promotional activity in the second half but that you are confident to offset or to deal with, just if you could elaborate a little bit more, what are your tools to attack or to adjust this kind of promotional activity? This is my first question.
My second question is about the inventory levels for your main clients. Just to know, if you think that is more generalized, this kind of low level of inventories or you see some geographies in particular having this kind of approach? And when do you expect potentially to have them to pick up in orders? And finally, if you could elaborate a little bit more on the CapEx investment for the year given the new investment in logistics? Thank you.
Stanislas de Gramont
Okay, maybe you will take the third one Nathalie and will complete my answers on promotional activity and inventory levels. Maybe on promotional intensities, our markets are markets which are very dynamic and very intense in promotion. So there is no one period when there is no promotion and a period where there are huge promotions. What we see in the context of slower demand and the context of easing inflation, we see that the intensity of forces is increasing. And I'm saying we are confident for several reasons. The first one which I find already, which is our starting point is good in terms of the balance between margin pricing and competitiveness of offers. The second one is that we've always managed our business with a good balance between aggressive promotion on some items, and trading up on some other items.
Our business is made of very, very frequent and intense rhythm of innovations within every product range, in blenders, in toasters, in mixers, in kettles, in everything. And we don't manage one product or one range. We manage families, product families and product categories, with some products being more aggressive on promotion, and some other products trading up and allowing the consumers and retailers to have a better margin in relation for those products.
And this is what allows us to say that we are well equipped to face an intensification of the promotional activity because by nature and by construction, our business is very balanced, broad range of products, broad product families, broad range of retailers, broad geographical coverage that allows us to manage and balance an increase or a surge in promotional intensity in that region, that customer, that category, that product family, with others. So that's on the -- so if I have to give a very specific answer to what are the tools and drivers we use, we use innovation, we use product renovation, we use product line extension, and we use promotional price intensity to manage these promotional equation.
Your second question is the inventory level of retailers. There are two kinds of behaviors we have in the, I would say the Western -- well the first overall statement is that the raise of interest rates makes the cost of holding inventory higher. And that is strengthening or reinforcing that disciplined retailers in the Western world. US and Western Europe have been putting interest 12, 18 months on their inventory management, be tighter, be more demanding, be shorter in their inventory loading and that's a continuation of this trend. In emerging markets, that's a bit more crucial because interest rates are higher, they could reach as high as 40% in Egypt or in Turkey. And in that case, of course, holding inventory in store is a potentially very hefty financial burden for retailers.
The way we deal with it, you asked when do we see a pickup in orders. We are seeing a pickup in orders. I mean, when we do organic sales growth of 6.8% that means orders are over 5.2% in Consumers. That means orders are coming through. We don't see a material deterioration of the stockholding of our retailers. So when we explain we say that we expect like-for-like growth in the mid-single-digit overall, that includes, that integrates the ordering and inventory management behavior of our key customers. CapEx?
Nathalie Lomon
Yes. Yes to your question on CapEx and the impact of the other logistics platforms, actually the first one that Stanislas has commented and really has been, I would say, put in production at the end of year and first half. But most of the cash out has been done in 2021 and 2022. And the second one, it's a project that we have just launched, but the cash out will not impact significantly 2023. So for your model, you can still count on a CapEx and sales ratio of between 3.5% and 4%. That will not impact our cash out for this year.
Alessandro Cecchini
Many, many thanks for your answer.
Stanislas de Gramont
You're welcome.
Operator
[Operator Instructions] The next question comes from Sarah Thirion from TP ICAP. Please go ahead.
Sarah Thirion
Good morning. Thank you so much for taking my question and congrats for Q2 set. My question has nothing to do with the results but I was wondering two things. The first one is to understand, in a perfect world and in medium term what would be the size of income that you would like to make in Professional? The second one, even if I'm not a cooking expert, is to understand how much Ninja is a competitor for Cookeo, Cuisine Companion and maybe for the fryers and what answers, so which [answers] the group is about to bring to that competition?
Stanislas de Gramont
Thank you very much. Nice and -- nice questions. Well the first one is on the Professional business. We enter the Professional business back in 2016 with the acquisition of WMF. At the time, it was just over €600 million in sales. It will be close between WMF and the various acquisitions that have been made Wilbur CURTIS, Pacojet, La San Marco, Zummo. It will be, maybe I forget one or two -- it will be close to €1 billion this year. So in six, seven years and in spite of two and a half years of COVID that business has grown very substantially, that’s the first comment.
The second comment is, you will have observed that we are continuing acquiring businesses in this Professional arena. We acquire businesses which are, which have all in common of being of moderate size, with great abilities or opportunities for expansion. Moderate size, because there is not really big businesses to be acquired in this field, and be product expansion because we see that Professional business as one of the key drivers of growth and development of the group in the future, either via organic, and we see that those markets are very dynamic in terms of organic growth or via acquisition. So, we won't give you a number, but maybe what we can say is that we expect the growth of Professional to be significantly higher or faster than the growth of the Consumer business.
Second question is on Ninja competition. I will not comment on one competitor or another because we have and we've been having many, many, many, many competitors coming from all over the place, in all market segments, in all markets, in all product categories and families. What we can say is that Ninja is a very professional competitor. They are operating in categories of electrical cooking. We see that we are expanding our positions lately in Western Europe in oil-less fryers or in electric pressure cookers. And that is great. They've done much better than us in the US and UK. But as you know, US and UK are not particularly strong businesses in a small domestic appliance for us. We see them we observe them like any of our competition. We're pretty confident with our strategy of answering consumer needs, our strategy of providing relevant meaningful innovations and our strategy of carry those product categories in many markets at the same time. I think these are the right answers to Ninja development or any other competitor’s development. Did I answer your question?
Sarah Thirion
Thank you so much.
Stanislas de Gramont
You're welcome.
Operator
There are currently no for the questions in the phone queue. With this I'd like to hand it back over for any eventual web questions.
Stanislas de Gramont
Yes.
Operator
There are currently no further questions on phone queue.
Nathalie Lomon
Okay, so we have one question from [indiscernible] one of our bankers. Bonjour [indiscernible]. Regarding our M&A pipeline. So how is your M&A pipeline? Would you comment on that, Stanislas?
Stanislas de Gramont
Not really, because M&A is by nature a confidential business. We are, I mean, you've seen us very active in the last few months on M&A. M&A pipeline is driven by I think three factors. The first one is an appetite for M&A and this appetite is very strong. It’s driven by the ability to pay for the M&A and you've seen that the management of our cash flows and how that allows us to do M&A. And it’s driven also by the appetite of target companies to sell. And we are observing, or tracking every opportunity. We have a very clear set of priorities in what we are looking for when it comes to M&A. So, I will not comment on the pipeline, other than to say that M&A has been a very strong and dynamic contributor of the development of the group in the last, well since it exists basically or in the last 50 years, at least, and will carry on being so because we see that as a great complement to organic growth development, which we're also pursuing.
Nathalie Lomon
And then we have another question regarding our pricing policy in our emerging markets. So the question basically is, what is the impact of raising prices to counter devaluation on sales?
Stanislas de Gramont
It's a very appropriate question, of course. When you raise pricing in emerging markets, you always run the risk of being chucked out of the market because you're too expensive. And I think this is the talent. Maybe a couple of considerations, first, we are covering a broad range of price segments and price points in our product categories. So when we raise price it’s not that we take this product that is retailing at €60 and we put it to €80. We have a range of products starting from €35 going all the way to €150, and we manage a balanced price increase, depending on the appropriate price points that we want to keep or we're prepared to lose in those categories. So being broad in product categories, product families, being broad in price ranges we cover is a kind of a [indiscernible] to the risk of losing sales because of price increase.
The second consideration is that we raise price against inflation or hyperinflation context. And of course, salaries, in part follow these hyperinflation context. The third consideration is that hyperinflation context means that consumers tend to spend what they have rather than save it. And that is -- that plays in favor of our categories, because our categories, our products are there to stay. They have a long, a long life expectancy. And if you buy your kettle today, for €50, that you know, is going to be worth €100 tomorrow, or in six months from now. Then that creates some opportunities for us to develop our business. And this is why markets like Turkey or Ukraine see a positive consumption development in our categories. So there's always a risk of price taking us out of the market. But we see that as a risk that today we are managing well and we can manage well in the future.
Nathalie Lomon
Okay, then another set of questions regarding our channels, online/offline. Do we have a specific focus on one of them? Or how do you see that moving forward in terms of their contribution to the growth?
Stanislas de Gramont
I think that well online is now over 40% of our sales reaching over 70% or 70% in China or in the UK. And I think that question is behind us, I think what's important is to be where consumers are in their consumer purchasing in their purchasing journey. And that purchasing journey is online and is offline. And we see the place where they end up buying the product as not very consequential on the way we manage our business. We want to be there where consumers want to buy our products. Yesterday, it was mainly offline and we saw online grow and develop.
Now it's very balanced between online and offline. And within online, when they are in a click and mortar environment, they can be Inductie, they can be in MIDEMA, they can be in [Envelo] in Russia, they can be in Walmart in the US with walmart.com, that's right around the corner or next door. What matters for us is not so much where it's going to be sold is to be present at that moment of the consumer journey when they decide to buy. So we have a balanced development strategy between online and offline. And we see that this balance will stay and will continue moving with more and more offline customers being expanding into the online market.
Nathalie Lomon
Okay, and then we have a last question. And I think I can answer that one, which is related to the working capital trend for the year end, what do we expect there?
So we closed 2022 with working capital on, say at 17.5%. And we expect to decrease that number a bit. Obviously, the change in the various items in the working capital will be different. We still think that there's room to further decrease our inventory. But on the contrary, as you've understood that we expect growth in the second half, you should also expect that the part of the receivables in the working capital should be stronger when compared to the end of last year. So that would be my answer to that last question.
Stanislas de Gramont
Thank you, Natalie. Are there any more questions on the phone that we have skipped or that came late?
Nathalie Lomon
Well, I guess --
Operator
No sir, there are currently no further questions on the phone queue.
Stanislas de Gramont
And no more questions from the webcast. I just want to make sure that we cover all the questions that are being asked. Okay, right, maybe a word of conclusion, first, to thank you for your attention during this presentation. We end the cycle over post-COVID recovery of our markets in our categories. That cycle ends on a very positive note in the second quarter of 2023. It's a very good quarter, it is better than we were expecting. And that allows us to be optimistic for the year to go and for the prospects of development of our categories in our business.
Our business is based on now two pillars, we have the Professional business which we've covered in part and we see that business through organic or acquisitions as a very strong contributor to the sales and profit growth of the group. We see that our Consumer business confirms in spite of the seasonal or COVID type hiccups. It’s a very healthy business. It's a healthy business because it answers the pretty fundamental consumer needs. Consumers want to take better care of their home, a better care of their eating, a better care of their families and our products actually do that. So that makes us optimistic for the short term and the long term.
Next time we'll be in contact with each other in this format will be on the 26th of October for the nine month results of the group. And in the meantime, I wish you a great day and a great results and holiday season. Thank you very much.
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SEB SA (SEBYF) H1 2023 Earnings Call Transcript