Electrolux Professional

254900KI62Q46ZWD80842021-01-012021-12-31254900KI62Q46ZWD80842019-12-31ifrs-full:RetainedEarningsMemberifrs-full:FinancialEffectOfCorrectionsOfAccountingErrorsMember254900KI62Q46ZWD80842019-12-31ifrs-full:EquityAttributableToOwnersOfParentMemberifrs-full:FinancialEffectOfCorrectionsOfAccountingErrorsMember254900KI62Q46ZWD80842019-12-31ifrs-full:IssuedCapitalMember254900KI62Q46ZWD80842019-12-31ifrs-full:AdditionalPaidinCapitalMember254900KI62Q46ZWD80842019-12-31ifrs-full:OtherReservesMember254900KI62Q46ZWD80842019-12-31ifrs-full:RetainedEarningsMember254900KI62Q46ZWD80842019-12-31ifrs-full:EquityAttributableToOwnersOfParentMember254900KI62Q46ZWD80842020-01-012020-12-31ifrs-full:RetainedEarningsMember254900KI62Q46ZWD80842020-01-012020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember254900KI62Q46ZWD80842020-01-012020-12-31ifrs-full:OtherReservesMember254900KI62Q46ZWD80842020-01-012020-12-31254900KI62Q46ZWD80842020-01-012020-12-31ifrs-full:IssuedCapitalMember254900KI62Q46ZWD80842020-12-31ifrs-full:IssuedCapitalMember254900KI62Q46ZWD80842020-12-31ifrs-full:AdditionalPaidinCapitalMember254900KI62Q46ZWD80842020-12-31ifrs-full:OtherReservesMember254900KI62Q46ZWD80842020-12-31ifrs-full:RetainedEarningsMember254900KI62Q46ZWD80842020-12-31ifrs-full:EquityAttributableToOwnersOfParentMember254900KI62Q46ZWD80842021-01-012021-12-31ifrs-full:RetainedEarningsMember254900KI62Q46ZWD80842021-01-012021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember254900KI62Q46ZWD80842021-01-012021-12-31ifrs-full:OtherReservesMember254900KI62Q46ZWD80842021-12-31ifrs-full:IssuedCapitalMember254900KI62Q46ZWD80842021-12-31254900KI62Q46ZWD80842021-12-31ifrs-full:AdditionalPaidinCapitalMember254900KI62Q46ZWD80842021-12-31ifrs-full:OtherReservesMember254900KI62Q46ZWD80842021-12-31ifrs-full:RetainedEarningsMember254900KI62Q46ZWD80842021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember254900KI62Q46ZWD80842019-12-31254900KI62Q46ZWD80842020-12-31254900KI62Q46ZWD80842019-12-31ifrs-full:IssuedCapitalMemberifrs-full:PreviouslyStatedMember254900KI62Q46ZWD80842019-12-31ifrs-full:PreviouslyStatedMemberifrs-full:AdditionalPaidinCapitalMember254900KI62Q46ZWD80842019-12-31ifrs-full:PreviouslyStatedMemberifrs-full:OtherReservesMember254900KI62Q46ZWD80842019-12-31ifrs-full:PreviouslyStatedMemberifrs-full:RetainedEarningsMember254900KI62Q46ZWD80842019-12-31ifrs-full:PreviouslyStatedMemberifrs-full:EquityAttributableToOwnersOfParentMemberiso4217:SEKiso4217:SEKxbrli:sharesxbrli:shares Annual and sustainability report 2021 Electrolux Professional Food, beverage and laundry Making our customers’ work-life easier, more proﬁtable - and truly sustainable every day Our strategic foundation Global trends & markets Business segments Sustainability Governance & risk management Financial reports Other information Operations Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 IntroductionContents Contents The Annual Report for Electrolux Professional AB (publ) 556003-0354, consists of the Administration Report on pages 93–98 the Financial Statements and notes on pages 99–152, the Corporate Governance report on pages 73–85 and the Sustainability Report on pages 12, 55–70 and 159–166. The annual report is published in Swedish and English. The Swedish version is the original. The ESEF-report (European Single Electronic Format) is available on www.electroluxprofessional.com/corporate/annual-reports/ Electrolux Professional was part of Electrolux, founded in 1919, until March 23, 2020 when the shares in Electrolux Professional were distributed to the share holders of Electrolux, and listed on Nasdaq Stockholm. Introduction Our strategic foundation Global trends & markets Business segments Operations Sustainability Governance & risk management Financial reports Other information This is Electrolux Professional  The year in brief  Electrolux Professional in brief  2021 in ﬁgures  CEO comments  Our business model – how we create value  Targets Financial targets  Sustainability strategy and targets  Strategies  Global external trends  The Global professional equipment industry  Customers  Sales  Our markets  Marketing and brands  Food & Beverage  Sustainable solutions  Laundry  Sustainable solutions  Our production  Quality  Logistics  Purchasing  Our people  Our sustainability framework  Strategy and targets  Sustainable Development Goals  The climate challenge  Value chain impacts, risks & opportunities  Sustainable solutions  Sustainable operations  Ethics and relationships  Chairman’s comments  Corporate governance report  Board of Directors  Executive Management Team  Remuneration report 2021  Risk and risk management  Financial reports, contents  Administration report  Financial reports  Notes  Proposed distribution of earnings  Auditor’s report  Five years in summary  Deﬁnitions & glossary  Sustainability notes  Auditor’s report on the sustainability report  Share & shareholders  Our history  55 25 4533 1 7 71 91 156 P. 1Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 This is Electrolux Professional Introduction Our strategic foundation Global trends & markets Business segments Sustainability Governance & risk management Financial reports Other information OperationsContents 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. Introduction Our strategic foundation Global trends & markets Business segments Sustainability Governance & risk management Financial reports Other information Operations P. 2 Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021The year in brief Contents > Sales still heavily aﬀected by the pandemic. > The Line 6000 washer and dryer range upgraded with new connectivity functions and reduced consumption. > New Hygiene solution with UV light for the SP Ultra Beverage dispenser. > Electrolux Professional sponsors the Electrolux Food Foundation, an independent, non-proﬁt organization that supports initiatives to inspire more sustainable food choices among professionals and consumers. > Sales starts to recover after easing of pandemic restrictions. > Inauguration of the new state-of-the-art factory in Rayong, Thailand, with new Laundry and Beverage solutions manufacturing lines. > New connectivity features for SkyLine Ovens and BlastChiller. > LiberoPro - plug & play modular range, for indoor and outdoor cooking is launched. > Sales back or almost back to pre-pandemic levels in several countries. > Uniﬁed Brands, a leading US-based manufacturer of food service equipment, is acquired. The acquisition will signiﬁcantly strengthen Electrolux Professional’s presence in the US. > In the ﬁrst Carbon Disclosure Project (CDP) as a standalone company, Electrolux Professional receives a B rating on the A- to F- scale. > A EUR 60m sustainability-related loan agreement was signed with the Nordic Investment Bank. > “On Beat” was held, the ﬁrst on-line customer event focused on the future of the food service industry. > Launch of our own new digital meeting space for customers. > Decision to transfer production from the Beverage factory in Louisville, Kentucky, US to Thailand and Italy. > Investor Update Day, focused on Laundry, held in Ljungby, Sweden. > A new digital customer “The OnE platform” is launched. > Philippe Zavattiero is appointed Senior Vice President for the newly created Beverage and Food Preparation Division. > Paolo Schira is appointed Senior Vice President Commercial Organization Europe. > TrinityPro, a new range of vegetable slicers and cutter mixers is launched. The year in brief Headquarters in Stockholm, Sweden Approximately 4,000 employees Listed on NASDAQ Stockholm since 2020 Larger customers >3,000 Sales in approximately 110 countries 12 manufacturing units in seven countries Q2Q1 Q3 Q4 Electrolux Professional in brief P. 3Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 The year in brief Introduction Our strategic foundation Global trends & markets Business segments Sustainability Governance & risk management Financial reports Other information OperationsContents 2021 in ﬁgures Key ratios SEKm 2021 2020 2019 2018 2017 Net sales 7,862 7,263 9,281 8,666 7,723 EBITA 663 456 1,058 1,188 1,098 EBITA margin, % 8.4 6.3 11.4 13.7 14.2 EBITA excl. items aﬀecting comparability¹ 663 533 1,090 1,188 1,098 Operating income 592 387 992 1,143 1,060 Operating margin, % 7.5 5.3 10.7 13.2 13.7 Income after ﬁnancial items 587 363 978 1,134 1,052 Income for the period 487 278 663 952 786 Earnings per share, SEK 2 1.69 0.97 2.31 3.31 2.74 Operating cash ﬂow after investments 1,116 570 1,138 1,131 1,167 Operating working capital % of net sales 14.9 19.9 17.7 16.2 13.7 1) 2019 includes items aﬀecting comparability of SEK –32m, and 2020 includes items aﬀecting comparability of SEK –77m. 2) Basic number of outstanding shares. Operating cash ﬂow after investments 0 200 400 600 800 1,000 1,200 20212020201920182017 SEKm EBITA and EBITA margin 0 200 400 600 800 1,000 1,200 20212020201920182017 SEKm % EBITA EBITA margin 0 5 10 15 20 25 Total net sales 0 2,000 4,000 6,000 8,000 10,000 20212020201920182017 SEKm SEK 7,862 m Net sales, total Food & Beverage 60% Laundry 40% Net sales by segment Europe 69% Asia-Paciﬁc, Middle East, Africa 15% Americas 16% Net sales by region Introduction Our strategic foundation Global trends & markets Business segments Sustainability Governance & risk management Financial reports Other information Operations P. 4 Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021CEO comments Contents CEO comments Sales recovery and signiﬁcantly stronger position in the US Despite the pandemic, we have been able to strengthen Electrolux Professional during 2021. The recovery of the hospitality industry has been faster than anticipated with our sales growing by 10% and our proﬁt by 50%. We also became a larger and more relevant player in the US Food market through the acquisition of Uniﬁed Brands, and we introduced our new guiding principles that will support us in the delivery of our strategy. The new normality In 2020, we learned to adapt to a new reality and in 2021 the new reality became the new normality. We are now used to work both remotely and in the work-place, as well as being more ﬂex- ible as new pandemic outbreaks come and go. Although it is still very challeng- ing, we have also learnt to deal with the current shortage of components and reduced transportation capacity. In the beginning of the year, we were still heavily aﬀected by the pandemic but between March and April we saw a sales recovery, spearheaded by the US, that has continued throughout the year. Long-term favorable trends The trends driving the growth of our business are still valid and have in some cases even been reinforced by the pan- demic. Alongside the fast-growing take- away and home delivery segments, as restrictions have eased we have seen how quickly people have returned to restaurants and increased their spend- ing on dining. However, one aspect of the pandemic that has structurally changed our indus- try, at least in the medium term, is the decline in international business travel which aﬀects our customers in business restaurants, hotels, and travel catering. In addition to the already prominent sustainability trend, the pandemic has underlined the importance of hygiene. Customers are becoming more focused on the total cost of ownership instead of the upfront investment cost, and they are also looking more closely at the safe use of appliances and production out- put. Digitalization is driving the demand for technologically advanced equipment that enables greater uptime through preventive remote maintenance. All this supports the operation and ﬂeet control of the appliances, which also reduces their environmental impact. Delivering on our strategic priorities Our business strategy consists of four pillars, built on a foundation of oper- ational excellence to improve sales productivity and cost eﬃciency within the supply chain. • Grow the business by developing sustainable, innovative solutions that have a low running cost. • Expand in food service chains, espe- cially in North America, grow in bever- age and expand in emerging markets, with selective M&A acting as a further accelerator. • Boost Customer Care (aftermarket) sales by further developing the global service network and competence as a full-service provider. • Leverage the OnE approach which is our global product and service oﬀer- ing, with both single and full solutions and services across Food & Beverage and Laundry – under one brand – allowing customers to manage their operations through connectivity and a digital ecosystem. During the year, we have made signiﬁ- cant progress on our strategic priorities. These are in line with the trends in our industry, which were reinforced by the pandemic. The restructuring program that was announced in 2020 has been imple- mented, creating substantial yearly savings. Further savings will be generat- ed from the relocation of the production in Louisville, USA, to Thailand and Italy. The new state-of-the art Beverage and Laundry factory in Thailand provides higher business competitiveness, ad- vanced logistics, and the ability to scale up for future expansion. In order to sharpen our focus on, and proﬁtability of, beverage and food preparation, a separate division has been created within the Food & Bev- erage segment. It reﬂects the speciﬁc diﬀerences in the business model ex- empliﬁed by diﬀerent channel partners, lower sales values, and a faster-moving product cycle. Several important new products have been launched during the year, such as the new food preparation mixer and the new free-standing mobile work-station Libero Pro, that meet the market trends. I would also like to mention that the ma- jor product launches of 2020, Line 6000 washer and dryers and Skyline ovens and blast chillers, have all been further enhanced with improved functionality and connectivity. The acquisition of Uniﬁed Brands signiﬁcantly strengthens our presence in the US. Uniﬁed Brands has a very attractive portfolio of products and brands, as well as strong local market P. 5Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 CEO comments Introduction Our strategic foundation Global trends & markets Business segments Sustainability Governance & risk management Financial reports Other information OperationsContents recognition, customer relations, and presence in chains, which supports our strategy to grow in food service chains. After being hit harder by the pan- demic than product sales were, our Customer Care business has now started to grow faster than product sales thanks to a more focused sales approach. A new eco-certiﬁed range of cleaning solutions and detergents has been launched, completing our portfo- lio of accessories and consumables. The newly launched The OnE Dig- ital Platform is a seamless, one-stop, self-service way for customers to interact with us, enabling them to place or track an order in real time, search for product documentation, or see the status of connected appliances. The platform allows us to interact with our customers innovatively – not only with a single product but covering the entire laundry and kitchen ecosystems. Sustainability creates value Sustainability is a key part of our cul- ture, day-to-day operations, and strat- egy. Our sustainability targets center on climate, health & safety, and diversity. Electrolux Professional is a signatory of the UN Global Compact, and our sustainability work is based on the United Nations Sustainable Develop- ment Goals. Electrolux Professional is committed to continuing its support of the UN Global Compact and its ten principles. We recognize the importance of taking action to mitigate climate change and we support the ambitions of the Paris Agreement. Consequently, we have an ambitious overarching target to become climate neutral in our own operations by 2030. In 2021, carbon emissions related to our indus- trial operations were reduced by 31% (36) compared to 2015. See more on page 67. Clarity and transparency regarding our climate impact and our actions is a priority. We have therefore started to disclose our climate impact through the Carbon Disclosure Project (CDP) where we received a B rating, which is just below the highest rating. Since product use represents the ma- jority of our emissions impact, around 95%, we are determined to continue developing products with lower con- sumption of resources. In practice this means reducing the impact from prod- uct-use in respect of energy, water, and detergents. This is good for both our customers’ running costs as well as the environment. During 2021 we have also signed a sustainability-related loan agreement with the Nordic Investment Bank related to the reduction of CO2 emissions, product water eﬃciency, and the use of HFC gases. Sustainability is not only about the environment, it also encompasses our social impact. We therefore seek to earn the trust of everyone aﬀected by our operations, globally demonstrating our commitment to ethics and human rights. By managing the total impact of our business on people and the planet, we can create the conditions to exceed our customers’ expectations and remain an attractive employer, thereby deliver- ing long-term value creation. A new cultural journey Our mission is to make our customers’ work-life easier, more proﬁtable – and truly sustainable every day. This can only be accomplished by our greatest asset, our people. An important part of our cultural development journey as a stand-alone company has been the introduction of our new guiding principles. They are an important part of our identity and ex- press who we are and aim to be, what we stand for, and how we do things. Back to pre-pandemic levels As we enter 2022, our business in the hospitality industry is back or almost back to pre-pandemic levels in several countries, with the US being ahead. Un- derlying market trends remain support- ive, and we have experienced several months of sales recovery and strong order intake, despite still dealing with global supply disturbances. Fundamentally, we have the building blocks in place to continue to grow our business. We are at the forefront of our industry in innovation, sustainability, and connectivity and we have one of the largest single brands in our industry. This, combined with being a solid and proﬁtable company with dedicated em- ployees and high-performing customer solutions, makes me conﬁdent that we have all the right ingredients for the next phase of our company develop- ment. Alberto Zanata, President and CEO Despite the pandemic, we have been able to strengthen Electrolux Professional during 2021. ” Alberto Zanata, President and CEO P. 6 Our strategic foundation Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 P. 7Our strategic foundation Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Our strategic foundation Our business model – how we create value  Targets  Financial targets and dividend policy  Sustainability strategy and targets  Strategies  Grow through innovation  Expand in food service chains  Boost Customer Care and Aftermarket sales  Leverage “The OnE Approach”  Operational excellence  P. 8 How we create value Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 OUR MISSION Making our customers’ work-life easier, more proﬁtable – and truly sustainable every day WE ARE a global provider of professional food, beverage and laundry solutions, serving a wide range of customers globally 7 underlying trends > The post-pandemic new normal > Population growth > Increasing workforce participation > Climate change and resource shortfall > Urbanization > Digitalization > Growing disposable household income Read more on page 26. Our business model – how we create value Our business model > Product development and innovation of smart products oﬀering sustainable solutions. Read more on page 14. Customer > Marketing with a focus on making our customers’ work-life easier, more proﬁtable and truly sustainable. Read more on page 32. > Sales mainly through dealers and distributors. Read more on page 30. > Production world-class manufacturing with a focus on lower environ- mental impact and an excel- lent working environment. Read more on page 46. > Customer Care and Aftermarket Sales of chemicals, accessories, spareparts and consumables. Read more on page 20. Our resources > 4,000 committed employees, page 52. > 12 manufacturing sites, page 51. > More than 3,000 larger customers in 110 countries, page 28. > Long-term relations with stakeholders in our value chain, page 69. > Strong brand – known for innovative, sustainable solutions and the OnE oﬀering, page 22. P. 9How we create value Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Sustainable solutions Sustainable operations Read more on page 62. Laundry Read more on page 40. Customer value > Simpliﬁcation, improved speed and ﬂexibility of customer operations > Improved quality of the food, beverage or laundry service > Reduced energy consumption and carbon footprint > Lower total cost over the lifecycle of the equipment > Reliability of the overall equipment system > Ergonomic and human-centric design > Enhanced hygiene demands Read more on pages 28 and 62. Shareholders Electrolux Professional’s dividend target corresponds to a pay-out of approximately 30% of the net income for the year. Read more on page 168. Created value SEK 7,45 3 m Addressing customer needs Distributed value Employees SEK 1,854m Suppliers SEK 4,541m Society, tax SEK 571m Reinvested SEK 487m Food & Beverage Read more on page 34. P. 10 Targets Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Dividend policy Approximately 30% of the annual income of funds legally available for dividend payouts. The timing, declaration, and number of future dividends will depend on the company’s ﬁnancial situation, earnings, capital requirements, and debt service obligations. Proﬁtability EBITA margin of 15% Net sales growth Organic annual growth of more than 4% over time. Complemented by value-accretive acquisitions. Capital structure Net debt/EBITDA ratio below 2.5x Higher levels may be temporarily acceptable in the event of acquisitions, provided there is a clear path to de-leveraging. Asset eﬃciency Operating working capital below 15% of net sales. Comment on 2021 outcomes The Board proposes a dividend of SEK 0.50 per share which is in line with the dividend policy. Financial targets and dividend policy Electrolux Professional’s goal is to create value for its stakeholders through proﬁtable growth. The strategy focuses on four pillars, built on a foundation of operational excellence to improve sales productivity and cost eﬃciency within the supply chain. These four pillars are: grow via innovative sustainable solutions, grow in chain businesses, boost Customer Care for higher margins, and leverage “The OnE”-approach and drive digital transformation. OUTCOME: 2021: 10.6% (–21.0) Average 2017–2019: 3.1% Comment on 2021 outcome Although still aﬀected by the pandemic, the hospitality industry bounced back in 2021, sales in Food and Beverage increased by 14.3% while Laundry was almost back to pre-pandemic levels with a sales increase of 5.5%. OUTCOME: 2021: 8.4% (6.3) Average 2017–2019: 13.1% Comment on 2021 outcome The pandemic continued to have a negative impact on sales volumes and proﬁtability, but short-term and structural cost- saving measures mitigated part of the sales decline, thus EBITA improved substantially during 2021. OUTCOME: 2021: 14.9% (19.9) Average 2017–2019: 15.9% Comment on 2021 outcome Working capital as a percent of net sales improved during the year. This is due to improvements in inventory and the reduction of receivables in relation to net sales. OUTCOME: 2021: 1.9x (0.8) Comment on 2021 outcome The net debt/EBITDA ratio was 1.9 at the end of 2021 which means that we are better or in line with our target. Net debt/ EBITDA increased due to the acquisition of Uniﬁed Brands. In total, net debt increased from SEK 549m on December 31, 2020 to SEK 1.705m as of December 31, 2021. P. 11Targets Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Building blocks for achieving 15% EBITA margin Margin expansion will come from a combination of cost cuts and sales growth, both of which are equally important. Execution is in full swing with good progress being made. Volume expansion in high-margin areas (chains, Customer Care, new products) Continuous improvements, processes and digitalization 1% Factory and logistics optimization 1% Cost reduction from announced restruc- turing program 0.5% 3.5% 2021 Underlying EBITA margin 9.0% Medium-term expected EBITA margin 15% P. 12 Targets Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Sustainability strategy and targets Ethics and relationships Maintain strong and sustainable relationships with the stake holders impacted by our business and demonstrate our commitment through actions and procedures. Sustainable operations Improve sustainability performance within our operations through prop- er management and a systematic approach, with an emphasis on improving our environmental and social negative impact every day. Sustainable solutions Set the pace in the professional food, beverage, and laundry industries, through innovations in sustainability and energy eﬃciency, underpinned by a connected and digital platform to meet customer needs. To become climate neutral within our industrial operations by 2030. Our climate ambition for 2030 Climate targets for 2025 Health and safety target for 2025 Gender diversity target for 2030 Reduce CO emissions scope 1 and 2 emissions from our industrial sites > 50% by 2025 (base year 2015) Lost time injury rate (LTIR) as measured by work-related accidents per 200,000 work hours < 0.3 by 2025 Gender diversity Distribution men/women or women/men 40/60 Distribution across managerial positions by 2030 OUTCOME 2021: Number of accidents resulting in lost work time decreased in 2021 and the lost time injury rate improved to 0.7 (1.1). Comment on 2021 outcome The lost time injury rate improved by 34% compared with 2020. During the year we have continued to address root causes of accidents, and worked preventively with near misses, unsafe acts, and conditions inside our manufacturing sites OUTCOME 2021: The percentage of women in all managerial positions was 26% (26) in 2021. Comment on 2021 outcome Gender diversity across managerial positions was unchanged compared to 2020. During the year the company has performed activities related to diversity and inclusion as well as educating hiring managers. OUTCOME 2021: Scope 1 and 2 emissions in 2021 amounted to 3.4 (3.1) kton CO 2 , which is –31% compared to 2015. Comment on 2021 outcome CO 2 emissions increased in 2021. The increase was expected as volumes had decreased sharply in 2020 due to the pandemic. Outdoor temperatures impacted need of heating in manufacturing facilities. Electrolux Professional will continue to increase its share of renewable energy to further reduce emissions. P. 13Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 1 Strategy for growth built on a foundation of operational excellence OPERATIONAL EXCELLENCE TO IMPROVE SALES PRODUCTIVITY AND COST EFFICIENCY WITHIN THE SUPPLY CHAIN. In addition to the four strategic growth and expansion pillars, Electrolux Professional aims to drive operational excellence by further improving cost eﬃciency in production, to achieve world-class manufacturing and productivity. GROW the business by developing sustainable and innovative solutions that have low running costs. EXPAND in food service chains, especially in North America, grow in beverage and expand in emerging markets. BOOST Customer Care and aftermarket sales. LEVERAGE ”the OnE Approach” Our strategic targets Our strategy for growth focuses on four pillars, built on a foundation of operational excellence to improve sales, productivity and cost eﬃciency in the supply chain. In the following pages we describe the core activities within each pillar. Read more on page 14. Read more on page 18. Read more on page 20. Read more on page 22. Read more on page 24. 2 3 5 4 P. 14 Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 We want to set the pace of industry innovation in sustainability and energy eﬃciency, underpinned by a connected and digital platform.  through innovation Our aim is to cater to customer needs by continuously developing new and improved products and services, thereby adding value to customers. Part of our innovation strategy is to prioritize appliance digitalization. Our ambition is to address our customers’ increased requirements for ﬂexible machines with low running costs and reduced energy and water consumption. 1 Investments in R&D 2021 SEK 333m Yearly average R&D expenditure share of net sales 2017-2021 4.4% Sales revenue from products launched during the last 3 years 50% P. 15Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 One of Electrolux Professional’s key competitive advantages is our focus on developing new sustainable and innovative products that seek to cater to customers’ needs and increase customer productivity and eﬃciency. Research and development Customer interaction – value-adding process Our customers are actively involved in our product development strategies and participate in the development process to help Electrolux Professional create new market-focused products. In addition to the active involvement of customers, we endeavor to stay ahead of the curve with access to the latest technologies by diversifying our technology resources. Furthermore, we collaborate with strategic partners to support in-house research and devel- opment activities and ensure techno- logical diﬀerentiation. Signiﬁcant resources invested in R&D Approximately 50% of our sales come from products launched in the last three years. Electrolux Professional invests signiﬁcant resources into its global R&D activities. From 2017 to 2021 the company’s R&D expenditure was an average of approximately 4.4% of net sales per year. Current trends We focus our R&D eﬀorts on addressing several current market trends: • digitalization of appliances • appliance connectivity • versatile appliances • minimizing environmental impact • more energy-eﬃcient and resource- eﬃcient solutions. Environmental impact Product design inﬂuences or determines the environmental impact of the product in a number of ways throughout the product lifecycle. This includes materials used, production and distribution, prod- uct use, and end of life. As our main environmental impact occurs during the product-use phase (energy, water, detergents), low-con- suming and energy-eﬃcient products become key. Read more on page 16. Organization The R&D organization is specialized according to products and strategic priorities, aiming for less mechanical and more electronic and digitally en- abled appliance content. Our Compe- tence centers are located in France, Italy, Sweden, Thailand, and the United States. Innovation is carried out by 3 teams: • Innovation HUBs that gathers, orga- nizes and prioritizes all innovation ideas to maximize both customer and company value. • Open Innovation manages contacts with external stakeholders such as universities and start-ups. • The Research Hub by Electrolux Professional with up to 10 PhD stu- dents working with Electrolux Profes- sional’s Global R&D, to develop proj- ects with a low Technology (maturity) Readiness Level (TRL). Connected products In 2021, 85% of all Electrolux Professional products manufactured have been connectable to be able to provide their users with useful information. The main projects currently operating are: Share of connectable products manufactured, 2021 85% • Display of the status and main operat- ing information of the device • Operation and usage statistics • Alert management and trouble shooting • HACCP management of Hazard risk assessment • Create, store and share single or multiple cycles directly in multiple connect- ed appliances and across multiple locations, such as restaurant chains. Read more on page 23. Intellectual property rights Electrolux Professional’s research and design portfolio includes approximately 620 patents and 120 design rights. The patents are clustered into food, bev- erage, and laundry. Each category is responsible for its own patent portfo- lio, including further development and continuous market screening for existing patents. Each patent category en- compasses individual as well as family registrations. – examples of connected solutions 1 Cook&Chill Refrigeration SpeeDelight High Speed Cooking Dishwashing Washers and Dryers P. 16 Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Sustainable laundry Electrolux Professional’s advanced technology behind the new heat pump range brings up to 60% sav- ings in energy consumption, without impacting the drying time compared to a traditional dryer, thereby low- ering the laundry’s carbon footprint without impacting productivity. Read more on page 43. Growth through sustainable solutions Oﬀering our customers truly sustainable solutions is one of our key strategies for growth. We aim to be a sustainability role model in our industry and continually ﬁnd new, more energy and resource-eﬃcient methods for food, beverage and laundry. As a result, not only do we help our customers to reduce their operating costs, but we also have a large impact on their sustainability eﬀorts. In 2021 several sustainability focused development projects went into produc- tion, meaning that we can oﬀer more solutions that signiﬁcantly reduce ener- gy and water consumption compared to previous products. We are also replac- ing Hydroﬂuorocarbon greenhouse gases (HFC gases), such as refriger- ants in all refrigeration and beverage products, since they are deemed to be harmful to the environment. Lower climate footprint Our products make a diﬀerence to the environment. As an example, in com- parison to older products or the industry standard, the global sales of our Laun- dry products in 2021 led to a decrease in the world’s water consumption of approximately 20 million m³, which corresponds to all the water 2021 OUTCOME Many of the products launched during the year, such as the upgraded Line 6000 washers and dryers and Skyline Cook & Chill, have improved our sustainability oﬀering as well as our proﬁtability. Today, approx- imately 50% of sales come from products launched in the last three years. Smart cooking Responding to the needs of today’s kitchen, the Thermaline Pressure Braising Pan provides multi-function- ality and savings. Pressure cooking reduces cooking time by up to 70%. This means more vitamins and essen- tial nutrients are retained and food keeps its color. It also reduces the use of energy up to 77%. Read more on sustainable food solutions on page 38. consumed in Sweden over 14 days. Similarly, use of our Laundry products sold this year equated to a reduction in carbon dioxide of 500k tonnes, which amounts to two days’ worth of carbon dioxide emissions in Sweden. Improved working environment We want our products to help create a better work life for our customers’ employees. As part of this, we have gradually introduced ergonomic certiﬁ- cation of new products. We want to help reduce muscular fatigue and thereby injuries, as well as cut accidents for our customers’ employees. We welcome certiﬁcations Our strategy is based on the fact that, just like us, more and more customers want to contribute to a more sustainable future, reduce their climate footprint, and be a good employer. Diﬀerent types of sustainable certiﬁcations will be beneﬁcial to us and our products in this regard. Dishwashing with low running costs Green&clean’s innovative multi-rinse module uses fresh mains water for the ﬁnal rinse and removes detergent and sanitizes wares using just 0.4 liters of water per rack. The water is ﬁltered and recycled twice using a twin-tank conﬁguration with a six- rinse arms system. Our sustainable solutions deliver long-term value for our customers 1 Life cycle cost savings with Electrolux Professional innovation. 70% reduced cooking time and up to 77% less energy used Wash one rack with just one glass of water. 62% less detergent 34% less energy used 63% less water used Up to 60% energy savings 20% less running costs P. 17Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 The shift to green gases in refrigeration solutions Electrolux Professional is replacing Hydroﬂuorocarbon greenhouse gases (HFC gases), in 18 diﬀerent product families, oﬀering solutions with more natural, climate-friendly green gas alternatives. In May 2021, the ﬁrst products using the most climate-friendly CO 2 natural refrigerant were launched on the market. The CO 2 option is available for refrigerated cabinets, freezers, counters, Blast Chillers, and several other refrigerated products. These greener, more natural refrigerant gas alternatives are safer and oﬀer improved operational performance, as well as increased energy eﬃciency. This will contribute to a more sustainable range for customers as well as a reduced impact on the planet from greenhouse gas emissions. 1 & P. 18 Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 We have well-deﬁned growth priorities, which mainly include increasing sales to commercial restaurant and food chains – large companies with multiple outlets across several regions – in North America and emerging markets. In addition, we aim to accelerate growth through selective add-on acquisitions, primarily acquisition targets that clearly align with the company’s strategic road-map.  in food service chains Organic increase in sales to food service chains and potential M&A to support acceleration. 2021 OUTCOME During 2020 and the be- ginning of 2021 many roll-outs to chains were put on hold due to the pandemic. However, new roll-outs started during the year, especially in the US, and a larger roll out of dishwashers to an American chain in China, KFC, took place in 2021. In December, the acquisition of Uniﬁed Brands in the US substantially strengthened our position in chains in the US. 2 FOOD CHAINS  KFC CHINA From single solutions to a scalable business for KFC in China “The XL Hood Type dishwasher” The connected XL Hood Type dishwashing solu- tions for chains is a product that in 2021 was espe- cially developed and delivered for Yum China that operates KFC in China. Designed with a compact footprint, ﬂexible installation, and high cleaning performance, it enables KFC to maintain high standards of hygiene and manage large-scale volume regardless of the size of the store or kitchen. The IoT capabilities provide real-time data, used to ensure optimal operations. Market potential in Asia, speciﬁcally within Food chains, is very big. The core focus in these projects is initially on customization and delivery targets. The Electrolux Professional team managed the demanding delivery during the pandemic, with the global and local teams working closely together, delivering quickly for an advanced customer. The XL Hood Type dishwasher was exclusively developed according to the customer-speciﬁc demands and speciﬁcations. Manufacturing of the product was set up in Electrolux Professional’s manufacturing site in Shanghai in China. P. 19Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Acquisitions to accelerate growth Electrolux Professional aims to acceler- ate growth through selective add- on acquisitions, primarily acquisition targets that clearly align with the com- pany’s strategic roadmap. In December 2021, Electrolux Professional acquired Uniﬁed Brands, a leading US-based manufacturer of food-service equipment. The acquisition will signiﬁcantly strengthen Electrolux Professional’s presence in the US and supports our focus on growth in food service chains. Prior the acquisition, Uniﬁed Brands was part of the Refrigeration & Food Equipment division of the Dover Cor- poration industrial group – a diversiﬁed US-based global manufacturer and solutions provider. Previous acquisitions have primarily been in the beverage segment, including UNIC – a French producer of professional coﬀee solu- tions in 2019, Grindmaster-Cecilware – a North American coﬀee solutions producer in 2017, and in 2018 SPM Drink Systems, an Italian manufacturer of frozen beverage equipment. Uniﬁed Brands is a leading US-based manufacturer of food-service equip- ment. Uniﬁed Brands’ attractive portfolio of products and brands for the pro- fessional food service industry oﬀers cooking equipment, refrigeration, washing systems, ventilation, cook-chill, and meal distribution systems under the Groen, Randell, Avtec, Power Soak, and CapKold brands. This is Uniﬁed Brands The Americas sales support organi- zation works with dealers, consultants and end-users to promote Uniﬁed Brands’ food-service equipment. The Chain sales business is primarily conducted through dealers, with some direct relationships. Sales are primarily to chain and independent restaurants, schools, colleges and universities, health care, hospitality, accommoda- tion, and staﬀ restaurants. Uniﬁed Brands was founded in 1907, has approximately 600 employees, and has two manufacturing and R&D facilities, located in Weidman, Michigan and Vicksburg, Mississippi. For more information, visit www.uniﬁedbrands.net 2 Cooking Equipment Refrigeration & Custom Fabrication Ventilation and Air Handling Systems Warewashing systems Sous Vide and Cook-Chill Systems In 2021 Uniﬁed Brands had sales of SEK 1,134m P. 20 Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Essentia - the heart of Customer Care To maintain the highest customer experience throughout the ownership period of the Electrolux Professional equipment, Customer Care assists our customers with support services and products throughout the whole life- time of customer ownership. Electrolux Professional oﬀers Customer Care in over 110 countries via 2,200 service partners in a hybrid model of direct and indirect service technicians. Detergents In addition, performance-enhancing consumables, including eco-certiﬁed laundry detergents, are developed and sold under the Electrolux Professional 3 We will further develop our global service network and competence as a full-service provider while increasing sales of spare parts, accessories, and consumables.  Customer Care and Aftermarket Sales Electrolux Professional operates in a market characterized by the heavy use of machines, which requires us to have a reliable and geo- graphically well-distributed Customer Care service. We will support our customers throughout the life of the product via the global sales and service network. 2021 OUTCOME Sales of customer care increased by approximately 13% in 2021 and was negatively aﬀected, especially in the beginning of the year, when many countries were aﬀected by the pandemic which meant that service technicians could not access the sites. Sales of service contracts and detergents demonstrated good progress. Customer care 15% 85% Share of net sales 2021 brand. These provide a high level of quality, safety and eﬀectiveness. A low environmental impact is ensured through reduced water pollution, waste production, and energy consumption compared to standard products on the market. Spare parts and maintenance kits Spare parts kits are sets of spare parts for the most common repairs and maintenance needs, collated in one box. Spare parts is the largest part of Customer Care sales. The maintenance and spare parts kits contain all the preventive maintenance parts to service the equipment according to the mainte- nance schedule in the conditions of nor- mal usage. We also oﬀer refresher kits for longer service life of our equipment. Two pair of eyes Through Two Pairs of Eyes, we provide our customers remote guidance with a seamless connection between their Field Service Engineers and the Electrolux Professional technical experts. Essentia All these services are brought to market under a diﬀerentiated portfolio – Essentia. The Essentia service oﬀering is built on the basis that the Original Equipment Manufacturer is best suited to under- stand and handle requirements for sup- porting the eﬃciency and long life of its own equipment. By oﬀering sustainable upgrade solutions to the marketplace we also ensure the initial customer in- vestment in our products extends for a longer time. Sales of Customer Care 2021 +13% Electrolux Professional oﬀers Customer Care via 2,200 service partners P. 21Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Service Network 2,200 authorized service part- ners providing a unique service network to make our customers’ work-life easier, supported by a full range of genuine spare parts and digitally augmented tools to ensure faster troubleshooting and issue resolution. Service Agreements Choice of ﬂexible, tailor-made packages, based on the customer’s business needs, oﬀering a variety of maintenance and support services throughout the customer ownership lifetime. Original Accessories & Consumables Quick dispatch of original acces- sories and consumables rigorously tested by Electrolux Professional experts to ensure durability and performance of customer equip- ment. Post-service recommendations Spare parts Preventive maintenance Repairs End-of-life replacement Accessories and consumables Our new Certiﬁed program oﬀers an upgrade to washers and dryers that have spun some way into their life cycle, via new original parts. The life time of the machines thus becomes longer, at a low cost. At the same time, we oﬀer an extended machine warranty. This service is initially intended for washers and dryers that are a few years old and are provided in some of our markets in Europe. Certiﬁed program – a truly circular oﬀer 3 P. 22 Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 PROJECT CAPABILITIES Project capabilities Our The OnE oﬀering also includes man- agement of the entire value chain, from project planning and design to production, installation and Customer Care. GLOBAL CUSTOMER CARE Customer Care Our innovative service oﬀering, Essentia, address- es an increasing demand for subscription models and service agreements, tailored spare parts, and other Customer Care accessories and consum- ables. Read more on page 20–21. GLOBAL SERVICE OFFERING The OnE value proposition A global, comprehensive product and service oﬀer- ing with both single and full solutions and services for all Food, Beverage, and Laundry products under one brand. Read more on page 34–44. DIGITAL CONNECTIVITY  REMOTE CONTROL OF THE WHOLE BUSINESS Connectivity Customers are oﬀered better insights into their equipment and we can create an ongoing rela- tionship with customers throughout their equipment lifecycle, thereby creating the need for repurchases and additional services. Read more on next page. The OnE is Electrolux Professional’s global product and service oﬀering, with both single and full solutions and services across Food, Beverage and Laundry – under one brand – allowing customers to manage their operations through connectivity and a digital ecosystem. The OnE also includes manage- ment of the entire value chain, from project planning and design to production, installation, Customer Care and service. 4  ”The OnE approach” We want to strengthen our global product and service oﬀering. Our broad market presence in diﬀerent geographies can be further strength- ened, both in terms of customer relationships and the service network. Our ongoing relation- ships with customers throughout the equipment lifecycle, and our ability to add value, creates a need for repurchases and additional services. 2021 OUTCOME We are currently the only global player that oﬀers food, beverage, and laundry equipment under one brand. In 2021, this oﬀering has been further enhanced with the launch of “The OnE” Digital customer platform. Digital transformation investments have been initiated to improve customer experi- ence, data-driven sales activities, and operational excellence. In-house capabilities and cooperation with partners P. 23Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 For many years, Electrolux Professional has embraced digital technologies to enhance business eﬃciency including new ways of working and the develop- ment of product connectivity. E-commerce is rapidly developing, becoming the most important sales channel, further accelerated by the pandemic. At the same time, tradi- tional dealerships are changing and direct relationships are becoming more important. In addition, process optimi- zation and eﬃciency will be driven by new technologies. Also, the employee experience will be evolved through dig- ital collaboration and improved digital skills. Our vision is that 65% of all customer transactions are done completely digitally in 2024, which is why our digital transformation is imperative. We also aim to have 50% of all products con- nected. Today, the majority of the prod- ucts we sell are already connectable, but that does not always mean they are connected, at least not yet. Connected appliances of future installed base 50% Customer transactions, digital 65% Digital vision 2024 Digital transformation The digital transformation plan is being delivered within four strategic areas: 1 Customer experience – a new The OnE Platform The OnE Platform will provide our company and customers with one single platform for e-commerce, Customer care, IoT, and the performance and maintenance of appliances, as well a community platform for sharing insights and updates. In 2021 we have successfully piloted launches of The OnE Plat- form for dealers and the platform is live in the UK, Sweden, and Germany. In 2022 we will deploy the platform also in further markets. 2 Customer experience – The OnE Connected We want The OnE platform to be the one-stop-shop for our customers. By using the platform, customers can monitor and steer their connected products, thereby maximizing uptime, improving service and reducing the consumption of energy, water, and consumables. 3 Employee Experience A digital ambassador community was launched in 2020 to further drive knowledge sharing and learning in our organization. We now have a very lively digital ambassador community that has helped foster adoption of our digital workplace solutions and truly raise the bar in terms of digital competence. The next step is to strengthen our employees ability to use new data and AI tools. 4 Automation The automation of our plants continues with further roll-out of a new management system and supplier portal. This will provide a common IT system for procurement, planning, and production. During 2021 two more sites have been successfully implemented. Our very ﬁrst Robotics Process Automation solution (based on machine learning) was de- ployed in 2021 as a pilot in one factory, with the aim to fully automatize account payable processes. Connectivity solutions through the new The OnE Customer Portal Customer portal All tools in one place Ecommerce Easier, smarter, seamless Service digitalization Support when you need it Connectivity Save time, save money 4 P. 24 Strategies Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 5   We will improve agility and cost eﬃciency within production by driving world-class manufacturing best practices and productivity. We strive to reduce production costs, reduce our industrial footprint, and reinforce supplier excellence through a consolidated supplier base. Read more about our production on page 46. We want our operations to contribute to a more sustainable society and our ambition is to become climate neutral in our industrial operations by 2030. Read more about our sustainability focus on pages 55–70. 2021 OUTCOME The new state-of-the-art factory in Thailand was inaugurated, combining the two previous factories in Thailand. In addition, production of Beverage in Louisville, Kentucky, US has been trans- ferred to factories in Thailand and Italy, thereby creating savings. The shortage of components and shipping availabil- ity has created pressure and increased cost in the supply chain. Also raw ma- terial costs have increased towards the end of the year as global raw material prices have increased. P. 25Global trends and markets Introduction Our strategic foundation Global trends & markets Operations Financial reports Contents Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Global trends and markets Global trends  The global professional equipment industry  Customers  Sales  Our markets  Marketing and brands  P. 26 Global trends and markets Introduction Our strategic foundation Global trends & markets Operations Financial reports Contents Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Global trends aﬀecting our industry Urbanization Increased urbanization drives demand for out-of-home consumption, especially out-of-home dining. Urban- ization also increases the proportion of white-collar jobs, which means more people require external food, beverage, and laundry services to save time and space. In addition, urbanization leads to increased traﬃc in public places, such as shopping centers and train sta- tions, resulting in increased demand for fast-food and beverages. Population growth The growing population leads to an increased number of potential end-customers, demand for out-of-home food and beverage consumption, and other application areas for professional equipment. Increasing workforce participation The increase in workforce participation and the ex- tension of the working age means that the time for household chores, such as cooking and cleaning has decreased. Growing disposable household income A higher disposable income allows more people to spend more money on leisure activities such as out-of-home dining, and less time on household chores, creating an increased demand for out of home, professional services. The post-pandemic new normal • Health and hygiene are top-of-mind for consumers everywhere. • Greater ﬂexibility is required within the hotel and restaurant sector. • Drive-throughs, take-away, home-deliveries, and outdoor serving call for new digital tools. • More user-friendly equipment, machines that are easier to clean, hygienic surfaces, and new materials will be required. • There is a post-pandemic shortage of labor in the hos- pitality industry. This is accelerating the automatization and digitalization trend as there is a need to ensure high productivity with fewer employees. Climate change and eﬀective use of resources Climate change and a shortage of water, energy, and other resources creates a need for sustainability and energy eﬃciency in all parts of society. Since energy cost is a signiﬁcant part of the total cost of ownership, energy eﬃciency in professional solutions is central to any investment decision. Digitalization Global digitalization is aﬀecting the way we work and interact, and is changing the eco-system of our cus- tomers’ business. An increased demand for connected solutions, process optimization, and eﬃciency will be driven by new technologies, demanding future invest- ments, strategic focus, and knowledge. P. 27Global trends and markets Introduction Our strategic foundation Global trends & markets Operations Financial reports Contents Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 The global professional equipment industry Electrolux Professional operates in the global professional equipment industry, oﬀering food service, beverage, and laundry products and solutions to a wide range of customers, including companies in the global hospitality industry as well as other businesses and institutions. In 2021 1 , the food and beverage seg- ment accounted for approximately USD 23.5bn of the global market, and the professional laundry segment account- ed for USD 2.5bn. The industry is largely characterized by • Favorable general end-market trends with multiple catalysts for structural growth. • Product performance having a materi- al impact on customer productivity. • The requirement for reliable and technologically advanced products. • Signiﬁcant beneﬁts from local presence and collaboration with customers. • Ongoing Customer Care and support through the equipment lifecycle. Major factors for success include • Strong innovation capabilities. • Reliability and product quality. • Product design. • A well-developed distribution and service network. • Brand recognition. • Customer relationships as a key diﬀerentiating factor. Total cost of ownership Total cost of ownership is an addition- al factor that drives competition. This is because the initial equipment cost represents only a fraction of the total cost of ownership during the lifetime of the equipment; the majority of the costs are running costs for water, electricity, and chemicals, maintenance costs, and health and safety considerations. Competitive landscape Electrolux Professional is one of the leading global players in terms of sales, with a complete oﬀering for both the food and beverage sector and the global laundry equipment market. There are some large players in these markets but we also compete with a number of local players and companies focused on individual product lines. 1) Company estimates. Global market size based on total sales (including Customer Care services). Market and competition • Restaurants and chains • Hotels, bars, and cafés • Roasters and ingredient producers • Education, leisure, and sports • Public institutions • Business, transport, industry, and facility managers • Coin and apartment building laundries • Care facilities and hospitals • Retail and convenience stores • Food service applications: cooking, refrigeration, dishwashing, and dynamic food preparation • Beverage equipment for coﬀee, espresso, hot, cold and frozen beverages, and soft drink dispensing equipment • Laundry products: washers, tumble dryers, drying cabinets, and ironers • Specialty accessories and consumables Food & Beverage • Ali Group • Hoshizaki • ITW • Marmon Group • Middleby • Rational • Welbilt • Kingbetter KEY MARKET PLAYERSPRODUCTSEND CUSTOMERS Laundry • Alliance • Girbau • Jensen • Kannegiesser • Miele Pro • Sealion The SEVEN largest professional food and beverage equipment companies, incl. Electrolux Professional, represent 50% of the market in terms of sales The THREE largest laundry companies, incl. Electrolux Professional, represent 50% of the market in terms of sales Total market estimated 2021 USD 26bn P. 28 Customers Introduction Our strategic foundation Global trends & markets Operations Financial reports Contents Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Electrolux Professional’s end-customer base consists of large multinational, regional chain and independent restaurants, catering providers, leisure and accommodation facilities, healthcare facilities, customer-operated laundries, schools and universities, as well as small businesses and large industrial customers. Customers Staﬀ canteens Pubs & bars Gyms Manufacturing industry Fast-food restaurants Laundry rooms in apartment buildings Beauty salons Sports halls and sports clubs Cafés Train stations Elderly care homes School canteens Supermarkets Hotels Laundromats Gourmet restaurants Hospitals Swimming baths Fire stations Long-standing relationships R E P A I R & S E R V I C E R E P U R C H A S E I N S P I R A T I O N O N - B O A R D I N G O N G O I N G U S E P U R C H A S E S E L E C T I O N D I S C O V E R Y OWN SHOP As a food, beverage, and laundry equipment provider we generally main- tain long-standing relationships with our key customers and distributors in order to increase our wallet share and overall growth. Close customer relationships are particularly important for chains in the food and beverage businesses. Read more about Customer Care on pages 20-21. P. 29Customers Introduction Our strategic foundation Global trends & markets Operations Financial reports Contents Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Addressing customer needs > Simpliﬁcation, improved speed, and ﬂexibility of overall operations > Improved quality of the food, beverage, and laundry service > Reduced energy consumption and carbon footprint > Lower total cost throughout the lifecycle of the equipment > Handling labor shortages post covid-19 pandemic > Reliability of the equipment system > Ergonomic and human-centric design > Enhanced hygiene demands Customers Our customer base is diverse, from small independent owners to large chains. We also have many customers in elderly care homes, government and private healthcare facilities, multi-housing laun- dries, and coin-ops. Large chains contracts Even though we generally do not enter into long-term contracts, large food- service chains usually authorize spe- ciﬁc appliance manufacturers as their “preferred vendors” for speciﬁc equip- ment. Furthermore, many quick-service restaurant chains launch or refurbish a larger number of branches, or frequently change their menus, requiring signiﬁcant investments in new equipment over a relatively short period of time. Customers regularly require appli- ance upgrades. These allow them to increase productivity and food safety, reduce labor costs, and respond to hygiene, sustainability, and energy eﬃciency trends. These upgrades usually require customized equipment as customers additionally endeavor to diﬀerentiate their oﬀerings and services. Customer segment Examples of customers Restaurants & Chains Subway, Yum! Brands, Pret à Manger, Autogrill, Panda Express, Cracker Barrel Hotels Marriott, Hilton, Mandarin Oriental, Accor, Hyatt, Rezidor Bars, Cafés, Roasters & Ingredient producers Nestlé, Carlsberg, Illy, Cafés Richard Education-, Leisure- and Sports facilities Manchester City, Indiana Pacers, Union Berlin Football Club Retail & Convenience stores Walmart, OXXO, 7-Eleven, Eataly, ICA, COOP Care facilities Korian, Orpea, DomusVi, Peking Medical Hospital Business, Transport, Industry & Facility managers Sodexo, Elior, Carnival, Costa Cruises Public institutions Fraport, Italian Navy, British Army, Swiss Army Apartment Building Laundries, Launderettes Tide (Procter&Gamble), HBV (Purchasing for public housing companies) Caterers Sodexo, Compass, LSG Sky chef Distribution per customer segment Consumer operated laundries 22% Hospitals and elderly homes 13% Restaurants 12% Business, Industry and Transport 12% Public institutions 11% Restaurant chains 10% 3% Others Hotels 11% Bars and cafes 2% Retail and convenience stores 2% Laundry Commercial laundries 2% Figures are partially estimates since Electrolux Professional do not always have information about the end customer. Food & Beverage and Laundry Food & Beverage Individual needs and innovation Individualization and equipment inno- vation are primary purchase decision factors for the customer, making product innovation essential, and one of the key diﬀerentiators and competitive advan- tages of Electrolux Professional. Electrolux Professional’s substantial investments in research and develop- ment drive the production of innovative equipment and ensure the company is well positioned to serve its global customer base. Read more about R&D on page 15. P. 30 Marketing and Sales Introduction Our strategic foundation Global trends & markets Operations Financial reports Contents Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Sales The main diﬀerentiating factor of our sales network is its ability to serve customers as a single supplier with a broad portfolio of products and brands. This allows us to present one face to our customers representing multiple product categories. We provide relevant food service, beverage, and laundry equipment expertise and appropriate key account management for larger customers. Circular and ﬂexible business models A circular business model creates higher resource eﬃciency, generating opportu- nities for better proﬁtability and environ- mental beneﬁts. Electrolux Professional provides several options for circular business models in the diﬀerent markets. Our “The OnE Lease” model, a rental solution launched in some markets, oﬀers everything the customer needs for hassle-free operations – equipment, accessories, and cleaning products. Along with a service agreement, ﬁnanc- ing is included which gives the customer a ﬁxed monthly cost. In addition, the solutions are tailor-made according to the customer´s needs, and it is easy to change or upgrade the equipment. In addition to The OnE Lease model, we also oﬀer Schneidereit, which is our full-service rental professional laun- dry solution in Germany and Austria. Upgrading, adding service and support, individual adjustments for optimization, or even replacement of machines are all possible at any time thanks to the ﬂexible rental model. An active sales organization Our products are mainly sold through a global network of dealers and distribu- tors but sometimes also directly to end customers. The majority of the products sold are replacement products meaning the end customer only buys one or a few products to replace existing products. Project sales form the rest of our sales. These are full installations such as a launderette or a fully equipped restau- rant that needs a complete refurbish- ment as well as new builds. 1 A distributor or dealer buys our ready-made products without any spe- ciﬁc customer speciﬁcations. Normally we keep track of the products through the dealers or through our service-partners who perform installations, commissioning, warranty activation, service, and maintenance. The distributor/dealer sell the solutions to end customers (such as a restau- rant chain or a launderette). This sales process is referred to as “replacement” but it is also used in projects where the dealer acts as a consolidator. In this type of sales we do not have any direct interaction with the end customer. The end customer places the order with a distributor or dealer who in turn orders the products from us. This process is nor- mally used by chains that rely on kitchen contractors who act as consolidators. End customer Local distributor/ Dealer 3 We talk to the end customers and agree on speciﬁcations and pricing and we invoice the end customers. This sales process is used in speciﬁc countries, for some large customers or for large projects where the distribution infrastructure is not well developed. 2 The end customer deals directly with us regarding their product needs. If needed we customize their products and agree on pricing. This can be for single products or full projects. Our sales process Our products are normally sold in three diﬀerent ways: P. 31Our markets Introduction Our strategic foundation Global trends & markets Operations Financial reports Contents Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Electrolux Professional’s commercial activities focus on three geographical regions – Europe, Americas and APAC & MEA. Well-positioned in attractive markets Our markets Share of Group, 2021 Europe 69% Share of Group sales, 2021 Americas 16% Share of Group, 2021 Asia-Paciﬁc, Middle East, Africa 15% Americas Well-positioned in Food, Laundry and Cold Beverage in the US. Europe One of the leaders in both Food and Laundry, with strong brand recognition. APAC One of the leaders in Laun- dry and in Food in China/ South-east Asia with strong brand recognition in hotels and restaurant segments in the whole APAC region. Europe In Europe, we have approximately 840 employees in our commercial organi- zation, divided into 24 sales companies throughout the continent. The largest countries are Italy, France, Sweden, and Germany. 80% of sales are handled via distribu- tors and agents. 20% of sales are served by our own sales organizations, mainly via key accounts and large projects. Our business priority is to leverage our strong market presence in Europe, to continue to grow both in the markets where we are well positioned, and in the markets where we see additional opportunities for growth, such as in the UK and Germany. Asia-Paciﬁc, Middle East and Africa In the region, we have approximately 260 employees in our commercial orga- nization covering sales and marketing, Customer Care, order processing, and administration. The region is divided into 12 sales companies. The majority of sales are handled via an indirect distribution network, supplemented by some of our own sales activities when needed. Americas In the Americas, we currently have two diﬀerent organizations with the recent acquisition of Uniﬁed Brands completed in December 2021. The combined commercial team for the Food and Beverage business is made up of approximately 80 employ- ees. Large chain accounts are served through a direct sales team while the broad institutional markets such as schools, healthcare, institutions, and independent restaurants, are served through independent sales representa- tives working in partnership with dealers and consultants. Additionally there is a network of distributors across the Americas selling and stocking products locally for quick shipments. Middle East and Africa One of the leaders in Food with strong brand recognition in hotels and restaurant segments. P. 32 Our markets Introduction Our strategic foundation Global trends & markets Operations Financial reports Contents Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Brand overview All categories, Full solution The master brand is approximately 80% of the company sales within Food, Beverage and Laundry. High-end Cooking Specialty brand Luxury, food Cooking, Dishwashing, Refrigeration Specialty brand, food Cooking Specialty brand, food Cook/Chill Specialty brand, food Food Preparation Specialty brand, food Dishwashing Specialty brand, food Dishwashing Specialty brand, food Refrigeration/Preparation Specialty brand, food Refrigeration Specialty brand, food Refrigeration Specialty brand, food Ventilation systems, conveyors and utility distribution solutions Specialty brand, food Drip Coﬀee, Powder Instant Coﬀee Specialty brand, beverage Espresso, Bean-to-Cup Specialty brand, beverage Cold Beverage, Slush Ice, Ice Cream Specialty brand, beverage Cold Beverage, Slush Ice, Ice Cream Specialty brand, beverage Laundry Specialty brand, laundry Tailored marketing strategy backed by global strength Electrolux Professional’s marketing eﬀorts are tailored to each geography and distribution channel. Promoting and strengthening the Electrolux Professional brand and reputation through a tailored marketing strategy, complemented by a structured sales process and organiza- tion, is key to our success. Marketing initiatives include market- ing automation, performance and brand building via a 360-degree approach and omni-channel execution, collabora- tion with schools and industry associa- tions, cooperative distributor merchan- dising, digital marketing, and marketing at a variety of industry trade shows. Brands Our master brand Electrolux Professional includes all categories within Laundry, Food and Beverage. In addition to our master brand, we acquire specialty brands to gain access to speciﬁc markets. These are locally managed brands, which have high brand awareness and legacy amongst the customers in their markets and channels. The table below illustrates these “specialty brands”, as separated from the “master brand”, Electrolux Professional. Marketing and brands P. 33Business segments Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Business segments Food & Beverage  Sustainable solutions  Laundry  Sustainable solutions  P. 34 Food & Beverage Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Food & Beverage operates in the global professional equipment industry, oﬀering food service and beverage equipment and solutions to a wide range of customers, such as hotels, restaurants, retail points, schools, and hospitals. Food & Beverage 60% (58) Food & Beverage, share of Electrolux Professional’s net sales P. 35Food & Beverage Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Market size and growth The total market for Food & Bever- age equipment in 2021 is estimated at approximately USD 23.5bn. Accord- ing to our estimates, the food service and beverage segment experienced a compound annual growth rate of around 3–4% from 2015 to 2020 before the coronavirus pandemic, with growth in beverage being slightly stronger than food service. In 2021 the Food and Beverage mar- ket increased substantially after a de- cline of approximately 25% during 2020 due to the pandemic that heavily aﬀect the hospitality industry. The market is ex- pected to return to pre-pandemic levels during 2022. Growth has been aﬀected by the increase in food safety, environmental and food waste requirements, a focus on healthy products and menus, the drive for automation and workforce op- timization, product innovation, and the rising importance of data management and digitalization. Our sales of food and beverage equipment largely depend on the level of our customers’ capital expenditure for new equipment, as well as expendi- ture related to appliance maintenance, refurbishment, and overhaul. Food USD 19bn Beverage USD 4.5bn FOOD & BEVERAGE USD 23.5bn Food & Beverage equipment market 2021 Change in consumer food and delivery models Restaurant owners have gradually increased the variety of their menus in response to a change in consumer food habits, which demands a more versatile kitchen equip- ment. In addition, the take-away and delivery business models are heavy growth drivers. All our newly developed products signiﬁcantly reduce the total cost of ownership and usage of energy, water, and chemicals for the operator. This enables us to shorten the payback time of the investment for our customers. Food waste is a signiﬁcant cost factor, and thanks to the Thawing Cabinet and the Cook & Chill system, our customer produce only the food they consume. Key drivers in the professional food and beverage market Electrolux Professional’s response Total cost of ownership and environmental awareness There is a greater focus on the total cost of ownership as a purchase decision. The cost mainly includes energy, maintenance, and food-waste related costs, as well as labor costs for operating the equipment. Our The OnE Connected solution allows users to monitor their entire kitchen. It makes data available to our customers so that they can optimize the production ﬂow and reduce the cost of operation. New and innovative beverage trends Customers are moving towards healthier beverage options. In addition, new and innovative products are emerging. Particularly in mature markets, such as Europe and North America, customers are tending to shift toward customized ﬂavored beverages, with an increased de- mand for more versatile equipment. Our beverage solutions have many practical beneﬁts such as insulated bowls for visual slush machines, and easy cleaning and operation for the Bubblers range. Our equipment ensures energy savings, high performance and eﬃciency. Connectivity Product automation and connectivity will be able to help customers optimize their workforce and reduce labor costs, thus reducing total cost of ownership. We have a wide range of multi-functional products for Food service & Beverage which allows the operator to adapt easily to new trends. SpeeDelight, SkyLine Cook & Chill, SafeBox Hold, and LiberoPro are excellent examples of our solutions that meet the new demands for top performance, ﬂexibility, and mobility. Food The food market is seeing an increasing demand for more versatile food prepa- ration equipment that can prepare a larger variety of meals. This is mainly due to a reduction in kitchen space and an increase in menu variety. Also, restaurant owners are looking to reduce the number of pieces of equipment used for daily operations, requiring versatile machines. Beverage Growth rates are expected to be high in the beverage industry. This mainly stems from the impact of seasonal trends, stronger product diversiﬁcation, and smaller average equipment size creat- ing more space for multiple machines that are operated simultaneously. Within the beverage equipment sec- tor, the market for espresso equipment has the most attractive medium-term growth outlook, while the market for non-frozen dispensers represents the largest sub-segment of the industry. The hot and cold beverage segments are approximately equal in size. * Company estimates P. 36 Food & Beverage Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 2021 performance Markets and customers In Europe sales are particularly sig- niﬁcant in Southern Europe where we have a strong market position under the Electrolux Professional brand, in addition to other well-known histor- ical brands such as Zanussi, and the acquisitions in the coﬀee- and beverege segment with UNIC in France and SPM in Italy. In Asia-Paciﬁc & Middle East and Africa our strength is in the high-end project environment. This means we are involved in larger installations in hotels and restaurants, and projects play a more important role in this region compared to Europe or the Americas. Beverage in the Asia-Paciﬁc & Middle East and Africa region is focused on the QSR and Convenience Store segments – building on a strong history in cold beverages in South East Asia. In the Americas the focus within food and beverage has traditionally been on ﬁne dining, projects and schools, and major chains. During 2021 the region has seen a shift towards food retail, quick- serve, and e-commerce customers. Mid-size chains fueled the growth of the business. Sales development In 2021 Food & Beverage sales was SEK 4,704m (4,198), an increase of 12.0% compared to the same period last year when sales were heavily aﬀected by the coronavirus pandemic. Organically sales increased by 14.3% (–28.1) and currency had a negative eﬀect of -4,7% (–1.2). The acquisition of Uniﬁed Brands contributed by 2.5%. Earnings development Operating income excluding amor- tization of intangible assets (EBITA) amounted to SEK 299m (87), corre- sponding to an EBITA margin of 6.4% (2.1). Operating income amounted to SEK 244m (35), corresponding to an operating margin of 5.2% (0.8). New Beverage and Food Preparation division During the year, a new, separate division within the Food an Beverage segment, was created to encompassing Beverage and Food Preparation solu- tions. The purpose is to increase focus, speed, and agility in the markets. This business change will help us respond to the speciﬁc drivers of Bev- erage and Food Preparation, often op- erating in separate customer segments, with their own channels and brands and speciﬁc marketing fundamentals, com- pared to the general Food and Laundry businesses of the Electrolux Professional portfolio. The new division brings together the solutions from the Grindmaster, SPM, UNIC, Cratcho and Dito Sama brands. Acquisition of Uniﬁed Brands Inc In December we acquired Uniﬁed Brands Inc, a leading US-based man- ufacturer of food service equipment. Uniﬁed Brands’ attractive portfolio of products and brands, and strong local market recognition, customer relations, presence in chains, and local manu- facturing capabilities, will signiﬁcantly strengthen our position in the US. Read more about Uniﬁed Brands’ products on page 19. Sales and EBITA margin 0 300 600 900 1,200 1,500 Q4Q3Q2Q1Q4Q3Q2Q1 Sales EBITA margin SEKm % –10 –5 0 5 10 15 1) The third quarter 2020 includes items aﬀecting comparability of SEK –55m. 20212020¹ EBITA margin 6.4% (2.1) EBITA SEK 299 m (87) Net sales total, Food & Beverage SEK4,704m (4,198) P. 37Food & Beverage Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Products for food service & beverage The segment’s key food service applications are cooking, refrigeration, dishwashing, and dynamic food preparation. Our key products include ovens, blast chillers, cooking ranges, refrigerated cabinets and counters, freezers, cutters, mixers, dishwashing equipment, and specialty accessories and consumables. The segment’s key beverage applications consist of equipment for coﬀee, espresso, hot, cold and frozen beverages, and soft drink dispensing equipment. Our key products include, coﬀee machines for espresso, coﬀee brewing and grinders, hot beverage dispensers, cold beverage and juice dispensers, frozen drink and soft-serve products. • Coﬀee grinders • Coﬀee brewers • Espresso machines • Coﬀee urns • Hot beverage dispensers Hot • Cold beverage dispensers • Cold juice dispensers • Beer dispensing systems Cold • Frozen granita dispensers • Frozen ice cream dis- pensers Frozen • Soft serve • Soft ice cream dispensers Soft • Slicers & food processors • Vegetable washers • Spin dryers • Planetary mixers • Vacuum packers & sealers • Multi- purpose peeling machines Dynamic food preparations • Fryers • Boiling & braising pans • Grills & griddles • Ventilation equipment • Modular cooking ranges • Fry tops • Combi ovens • Convection ovens • Made2 Measure cooking suites Cooking • Refrigerated cabinets • Refrigerated counters • Saladettes • Cold rooms • Blast chillers Refrigeration • Dishwashers: • Under- counter • Hood type • Rack type • Flight type • Wast and dishware handling systems • Accessories Dishwashing • Cabinets and cup- boards • Work tables and shelves Stainless steel fabrication Products for food Products for beverage P. 38 Food & Beverage Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Read more about our Sustainable solutions on page 62. Decrease energy consumption by 35% Decrease gas consumption by 60% Decrease oil consumption by 50% Decrease consumption by 90% Fryers The integrated advanced ﬁlter- ing system cuts oil consumption by half. Flower- and Ecoﬂame Adjusts the hob ﬂame to ﬁt pans of any diameter. Heat is concentrated on the bottom of the pan, avoiding disper- sion into the kitchen. Ecoﬂame on gas burners ﬁtted with pot recognition sensors realize even higher savings, com- pared to traditional burners. Ecotop A special solid top coating prevents heat escaping into the working area and guarantees high eﬃciency and savings in energy costs. The built-in stand-by function automatically reduces the power whenever there are no pots on the hob. Induction – an energy champion Thanks to heat loss reduction the Induction cooking system, is an eﬃciency champion reducing energy consumption by 90% compared to tradi- tional electric tops. Electrolux Professional products include unique features that save energy while providing high performance and respecting the environment. Smart cooking Sustainable food solutions The bio-certiﬁed ﬂagship Hotel Landgut Stober in Brandenburg near Berlin is one of the top addresses for congresses and events of all sizes. Electrolux Professional’s cloud-based platform, The OnE Connected, is used in the hotel’s canteen kitchens and domestic laundry in answer to the hotel’s desire for both innovative equipment technology and intuitive as well as ‘transparent’ process management. The combination of the OnE Connected solution and Electrolux Professional’s range of sustainable products allows all devices to communicate with each other in real time, enabling a complete over- view and evaluation, and guaranteeing maximum sustainability and cost-eﬀec- tiveness. The platform collates all relevant process and safety data from all devices. Time-shifted – and thus energy- optimized – processes are forced, automated and promoted with the help of appropriate programming of the devices. In addition, the system can also avoid unforeseen repairs; all devices report themselves ‘forward-looking’ if maintenance is due, which guarantees the Stober estate the highest possible production reliability. Transparent process management at Landgut Stober Hotel, Germany P. 39Food & Beverage Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 FOOD TRENDS Ghost, Dark, Cloud, or Virtual kitchens The sudden shut-downs and lock-downs when the coronavirus rocked the world in 2020 and 2021 aﬀected the whole restaurant industry. Years’ worth of disruption to dining evolved in a matter of months as ghost kitchens helped put disheartened business owners back in business, despite not having in-house guests. Ghost kitchens – also known as dark, cloud or virtual – are delivery-only ‘restaurants’ that have no physical space for customers. Orders are placed online, through websites or apps, and food is delivered to the customer’s door, often through third-party companies. The severe indoor dining restrictions accelerated the existence of these kitchens and massive growth projections ensued. According to Euromonitor esti- mates, the industry could be worth USD 1 trillion by 2030. Still, the rise of ghost kitchens was simmering pre-pandemic, largely fueled by the start-up and take- up of food ordering and delivery apps. According to a 2021 McKinsey article, the global food delivery market has tripled since 2017 and is today a perma- nent ﬁxture in the dining landscape. A recipe for success The new apps radically change what it means to operate a restaurant. Food entrepreneurs no longer need to plough money into high-cost real-estate and huge overheads – essentially what they need is the access to a kitchen and to hook up with the likes of delivery com- panies. Food delivery – an ever-rising consumer trend Ghost kitchens are expected to remain an integral and growing part of the restaurant business. Many operators consider oﬀ-premise dining to be their best growth opportunity. The business beneﬁts are numerous; reduced over- head costs, maximized workﬂows, and ﬂexibility to keep up with consumer behavior and food trends. Convenience and speed are key factors to respond to demand for ubiquitous delivery – food anywhere, anytime – and the possibili- ties are inﬁnite. FOOD HOLDING SOLUTIONS SafeBox Hold from Electrolux Professional Launched in 2021, our unique holding solution for take-away and delivery, the SafeBox Hold, keeps multiple packaged meals ready for pickup. The product enables our customers to safely deliver hot and tasty food to their clients without needing to worry about bacteria proliferation. • Gives guests the same great taste as eating out, but in the comfort of their own home • Improves the ﬂexibility and productivity of the kitchen • Optimizes the preparation phase timing, balancing the orders received online and the on-place peak hours Ola Foods – the story One of Electrolux Professional’s customers, Ola Foods, is a compa- ny that began as a successful cab service app oﬀering ride-sharing and delivery in India. In 2017 it acquired Foodpanda India, to enter the online food delivery business, and launched Ola Foods. It has developed multiple cloud restaurant brands that today include kitchens specialized in pizza, biriyani, khichdi, and more. As the pandemic propelled food delivery habits in India, our partner- ship with Ola Foods has resulted in signiﬁcant product orders. Having visited our Center of Excellence in Gurgaon and seen product demos back in 2018, Ola Foods asked for design support to their ﬁrst ‘cloud kitchens’. Electrolux Professional´s compact fryers, induction cook tops, convection and pizza deck ovens, and cold rooms are now included in the more than 40 kitchens across 6 cities in India. Ola Food has ambitious expansion plans to open many more kitchens. P. 40 Laundry Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Laundry Laundry segment, share of Electrolux Professional’s net sales Laundry provides equipment designed for a range of professional users, from self-service coin-ops and the hospitality industry to health- care providers and commercial laundries. Customers include hospital and hotel laundries, laundries in apartment buildings and launderettes. 40% (42) P. 41Laundry Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 • Health care • Elderly care Care • Building service companies Facility management • Marines • Sport & Leisure • Public services • Factories • Prisons Special On-Premise Laundry • Hotels • Restaurants • Catering HoReCa (hotels, restau- rants, catering) • Small hotels/ B&B’s • Hairdressers • Beauty shops • Sport centers Small businesses Proﬁt center • Heavy duty • Commercial laundries B2B • Dry-cleaning shops (chains and privately owned) B2C • Coin-ops • Laundrettes • Camping/ Marinas Self service • Apartment housing laundry - route operations • Student houses • Dormitories Multi housing Market size and growth The total market for professional laun- dry equipment is estimated to be ap- proximately USD 2.5bn in 2021 (our own estimates). Prior to the Corona pandem- ic, the market for global professional laundry equipment experienced annual growth of 2–3%, and this is expected to continue over the medium term. At the end of 2021, the market was back to pre-pandemic levels. Market growth is mainly being driven by an increased focus on product sustainability and eﬃciency, labelling and certiﬁcation requirements, good ergonomics, and the demand for appliance innovation and connectivity for better control, ﬂexibility, and to be able to reduce the cost of labour. While these trends are evident worldwide, the importance of each varies from region to region. As more technologically-advanced equipment is introduced, major equip- ment replacement cycles are expected to take place. Customers are expected to demonstrate more price ﬂexibility as a result of lower ownership costs. Customer service and after-market support are key competitive factors. Two major market segments in Laundry The Laundry segment divides its market into two main areas; the ﬁrst is comprised of customers whose main business is professional laundry, and the second is made up of customers that consider laundry as a cost center. Cost center Main sub-segments per segment Reduced cost of ownership Customers are increasingly looking for equipment that reduces operating costs. They are focusing more on the total cost of ownership of equipment rather than the initial investment, for instance costs for labor, elec- tricity, water, and detergent. Greater environmental and climate awareness Many customers want to be able to meet environmen- tal standards and desire lower water consumption, more eﬃcient appliances, gentler detergents, and less impact from chemicals. Our innovation and development has long been focused on continuous improvement of our appliances to increase productivity and reduce the total cost of ownership. This means a reduced environmental impact through lower consumption of water, electricity, and detergents. We also oﬀer a detergent that is gentler on both the environ- ment and textiles. Read more about this on page 43. The ability to connect our machines in a digital eco- system also makes them more eﬃcient, and helps custom- ers gain a more ﬂexible and eﬃcient workﬂow. Key drivers in the professional laundry equipment market Electrolux Professional’s response Increased demand for ﬂexible business models Functional sales or equipment rentals are gaining traction in the market. Demand for equipment rental is rapidly accel- erating, particularly in Europe and especially from smaller companies. We provide rental solutions in some markets, oﬀering everything the customer needs for hassle-free operations – equipment, accessories, and cleaning products. Read more about this on page 30. Enhanced hygiene demands The global health situation has created new challenges and our priority is to give our customers and their per- sonnel conﬁdence that we put their health and safety ﬁrst. The ability to disinfect laundry is currently in demand in all types of laundry settings. In 2020 and 2021 we responded quickly to market needs and launched several products that further enhanced sanitization and hygiene capabilities. Read more about this on page 44. Main sub-segments per segment P. 42 Laundry Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Markets and customers In Europe we are one of the leading laundry equipment players with the most signiﬁcant sales being in Sweden, where the majority of customers are property owners with laundry rooms. During the pandemic we have been able to maintain a high level of sales in the region, in particular within elderly care homes and hospitals, as well as apartment buildings that wanted solu- tions to improve hygiene. In the Asia-Paciﬁc, Middle East and Africa Region, sales come from an equal mix of launderettes, hotels and recreation, and elderly care homes and hospitals. Our business in North America has traditionally been heavily weighted towards laundromats, with good growth also in the other segments. The Laundry market in the Americas generally recovered well in 2021 and increases in market shares enabled us to grow even further through our solutions for lower cost of ownership. We are one of the market leaders in the US. Sales development Net sales in Laundry was SEK 3,159m (3,065) in 2021, which is an increase of 3.0% compared to the previous year. Sales increased organically by 5.5% and currency had a negative eﬀect of –2.5%. Earnings development Operating income excluding amor- tization of intangible assets (EBITA) amounted to SEK 492m (467), corre- sponding to an EBITA margin of 15.6% (15.2). Operating income amounted to SEK 475m (452), corresponding to an operating margin of 15.0% (14.7). 2021 performance Sales and EBITA margin 0 200 400 600 800 1,000 Q4Q3Q2Q1Q4Q3Q2Q1 Sales EBITA margin SEKm % 2020¹ 2021 0 5 10 15 20 25 1) The third quarter 2020 includes items aﬀecting comparability of SEK –22m. EBITA-margin 15.6% (15.2) EBITA SEK 492m (467) Total net sales - Laundry SEK 3,159m (3,065) P. 43Laundry Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Lower cost of ownership and reduced environmental impact for customers We endeavor to provide the most eﬃ- cient laundry equipment on the market. Our prime reasoning is that an invest- ment in our products provides long-term savings by reducing the cost of own- ership and decreasing the customer’s climate footprint. New equipment also increases customer productivity and gives customers whose main business is laundry an opportunity to increase rev- enues. Our most productive heat pump dryers in the Line 6000 range provide energy savings of up to 60% and have the shortest drying time in the market. All new washing machines are equipped with the ability to have auto- matic dispensing for detergent, fabric softeners, and other chemicals. Com- bined with the Automatic Savings func- tionality this can reduce detergent con- sumption by up to 60%. We have also developed lagoon® Advanced Care, a water-based alternative to dry-cleaning for laundering sensitive garments such as leather and shoes. All product development expands on an existing intelligent and modular product range of appliances that can be connected together for real-time and important user and performance data provided to the end-user. High level of user friendliness and ergonomic certiﬁcation As washing equipment is an important component of the working environment and customer experience for many, ergonomically designed washing solu- tions with ergonomic certiﬁcation are an important part of our laundry product innovation eﬀorts. Professional opera- tors who work in commercial laundries, and in institutions and hotels with laun- derettes, load and unload thousands of kg of washing every day. The new, intuitive, user-friendly dis- play simpliﬁes the choice of washing program, needs no speciﬁc language skills, and facilitates smarter energy and water consumption, fully automatically. How Line 6000 Washer and Dryer range has improved since 2000 Washer Water reduction –50% Washer Energy reduction –30% Dryer Energy reduction –63% * Typical consumption data per kg/laundry, 60 degree full load. ** T3190 vs. TD6-10 consumption data per kg/laundry, full load. When purchasing a washing machine, the upfront investment cost is only a small part of the overall cost of ownership. Operating costs accumulate year on year and in they end they make up the majority of the customer’s costs. Over the long term our washing machines and tumble dryers cost less than most of our competitors’ products, which makes the initial investment more proﬁtable. Investment in equipment is a smaller portion of the overall ownership cost The most important products in the segment include equipment for laundry, drying, and ironing. Our major products are washers, tumble dryers, drying cabinets, ironers, and related specialty acces- sories and consumables. • Front-load washers • Eﬃcient dispensing systems • Barrier washers • Semi-profes- sional washers Laundry • Tumbler dryers • Drying cabinets • Semi-profes- sional dryers Drying • Ironers • Finishing machines Ironing Laundry products Sustainable laundry solutions Estimated total cost of ownership of a washing machine over its lifetime Washing detergent and other chemicals 55% Energy 20% Water 10% Equipment investment 15% Calculated is based a typical washer (20 kg) and typical prices within Europe. Note that the ﬁgures diﬀers depending on equipment, water, energy and detergent costs in diﬀerent markets. We have worked systematically to improve our products, and introduce new functionality (hardware and software) and intelligent monitoring. For instance the washer senses the weight of the load and can adapt the water, energy, and detergent used, and tumble dryers can sense the residual humidity in the garments and stop drying once the garment is dry. We have also developed heat pump dryers and more. P. 44 Laundry Introduction Our strategic foundation Business segments Operations Financial reports Contents Global trends & markets Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Ramunderstaden, in Söderköping Sweden Climate-smart laundry room Line 6000 equip- ment has an ERGO- CERT certiﬁcation, which means it has been third-party, human-centric- design certiﬁed. New products enhance hygiene in the ﬁght against invisible enemies Electrolux Professional oﬀers a com- plete process that includes machines, washing programs, detergent, and a traceability system to ensure the best possible disinfection results in all types of clothes, linens, and other textiles. The laundry room of the future We have developed a washing machine solution for apartment buildings that inactivates pathogenic microorgan- isms via the washing program. With the assistance of technical experts and virus researchers from the RISE research institute of Sweden, we have launched diﬀerent washing programs that can in- activate viruses such as Covid-19, SARS, MERS, and winter vomiting disease. Barrier washers Our new barrier washers prevent cross-contamination and guarantee maximum hygiene at every stage of the washing process, which protects both personnel and care assistants, for instance at hospitals. Mop washers Our mop washers for professional usage are equipped with a special heater, an inner drum and an electric drainage valve which ensures rapid, eﬃcient draining. The result is a ﬁrst-class wash combined with low costs and maximum protection against the spreading of microorganisms. The company wanted to modernize the laundry rooms and reduce electricity and water consumption. Improving tenant satisfaction was important as laundry rooms were an important topic in customer satisfaction surveys. Ramunderstaden selected an end-to-end solution from Electrolux Professional en- compassing the replacement of all equipment and a 10-year full-service agreement. The customer also chose our digital booking system and automatic dispensing of detergent and fabric softeners. Beyond getting more eﬃcient equipment that is more ergonomically adapted, the net savings over the 10-year period will amount to SEK 4.6m after the investment has been paid. A further positive outcome is that tenants have started to return to the laundry rooms. There are probably several reasons for this. Washing is cheaper, and faster washing pro- grams have increased laundry room availability. Shorter washing programs also increase the lifetime of clothing. We have calculated that three professional washing machines do the same job as 140 domestic machines. Simply climate smart laundry rooms provided by Electrolux Professional. Ramunderstaden, a housing company in Söderköping Sweden, decided to review and overhaul the 19 laundry rooms in its properties. Water savings, semiloaded 50% Detergent savings, semiloaded 50% Energy savings 60% Estimated reduction of the tenants’ climate footprints during 10 years: P. 45Operations Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Operations Our Production  Quality  Logistics  Purchasing  Our People  P. 46 Our production Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Electrolux Professional´s manufacturing units are organized mainly by product category to ensure proximity and agility to serve customers. Our three largest factories, Vallenoncello in Italy, Ljungby in Sweden, and Rayong in Thailand, produces for the global markets. The other plants mainly serve regional markets, some of them with solutions already adapted for the global markets, with a signiﬁcant potential to grow. Our production After the merger of the two factories in Thailand into one factory, the transfer of production from the factory in Lousiville, US to Thailand and Italy, and the acqui- sition of Uniﬁed Brands in the US with two factories, Electrolux Professional now has 12 factories. The manufactur- ing sites are committed to a systematic approach for the responsible use of resources, occupational health and safety, and a clear road map to become carbon neutral in their operations by 2030. First year of the new plant in Rayong, Thailand At the beginning of 2021, the construc- tion of the new factory in Thailand was complete and the two existing factories in Thailand were merged into one. Despite the challenges during the pandemic, we were able to meet targets in terms of cost and timing, and thus started production in June 2021. Thanks to excellent collaboration between local and global teams using digital tools for remote management, the consolidation of production of both laundry and bev- erage products started on time and in line with expected costs, creating zero disruption for the sales organizations. The new factory allows signiﬁcant cost optimization, creates a “state-of- the-art” working environment in line with the highest sustainability standards, and improves our capability to develop cus- tomized innovative solutions with new R&D laboratories for the cold and hot beverage center of excellence. P. 47Our production Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Louisville, US – Logistics hub for the US market To improve proﬁtability and reduce complexity in the Beverage portfolio, all production from the Beverage plant in Louisville, has been transferred to production sites in Thailand and Italy. In addition, the existing warehouse in Charlotte, US is being consolidated into a warehouse location in Louisville cre- ating a signiﬁcant logistics hub to serve the US market. Uniﬁed Brands – 2021 acquisition In December, 2021, Electrolux Professional acquired Uniﬁed Brands, a US-based manufacturer of food solutions. Uniﬁed Brands’ industrial footprint includes two production sites in North America. The factory in Vicksburg, Mississippi employs approximately 250 people and manufactures Groen and Power Soak products. The factory in Weidman, Michigan employs approximately 270 people and manufactures Randell Custom refriger- ated preparation tables. Globally organized manufacturing The purpose of the governance model for the global industrial approach is to ensure eﬀectiveness and eﬃciency. Global functions allow local structures to remain lean, while a common standard- ized production system, based on the World-Class Manufacturing framework, supports the distribution of standards and best practices across the diﬀerent sites. Operational excellence In recent years, there has been great focus on the agility of the supply chain, resulting in a shortening of the standard manufacturing lead time to three days from production to ready-to-deliver, for a signiﬁcant portion of the products. Our ability to adapt the production capacity and structure of the plants to customer demand, and establish network abilities between the sites, is key to maintaining control and generating cost savings. Our network is built on common standards and methods, based on a world-class manufacturing framework. Through this framework, we retain the tools and the logic from choosing the right priorities to creating tangible and measurable results with a focus on sustainability, customer satisfaction, and cost reduction. Optimized footprint We use a holistic approach to assess and optimize manufacturing processes based on diﬀerent criteria and align- ments such as: • Business strategies • Financial synergies • Eﬃciency of the assets • Identiﬁed risks to maintain resilience and address change • Managerial aspects to calibrate timing for performing required changes We continuously evaluate our manufac- turing footprint to ensure all processes meet the highest possible eﬃciency, ﬂexibility, and performance standards. Modular production Standardization and modularization are key factors for achieving the highest level of customization at the lowest cost and use of resources. Based on the experience from the production of laundry solutions, we have structured an innovative method to design new product platforms that also signiﬁcantly reduces complexity for food and beverage products. The modularization model is based on product design and creates a new set- up for the supply chain, which improves eﬃciency. Climate-neutral operations by 2030 Sustainability is a key part of the overall strategy and day-to-day operations of our company. We want our solutions and operations to contribute to a more sustainable society and our ambition is to become climate neutral in our indus- trial operations by 2030. All our manufacturing sites are pro- gressing with their sustainability eﬀorts. This includes a systematic approach for a responsible use of resources, occupational health and safety, and environmental management, leveraging a consolidated set of standard tools and methods, and also promoting the highest possible engagement from our employees. One important future prior- ity is to reduce our impact from waste within our manufacturing. ISO certiﬁed plants Our target for all of our logistics, man- ufacturing, and R&D operations is to be third-party certiﬁed according to ISO – International Organization for Standardization – standards ISO 9001 and ISO 14001. Some sites are also ISO 50001 and ISO 45001 certiﬁed. Read more in the Sustainability report. ISO 9001 100% ISO certiﬁcation – share of production volume covered by third-party certiﬁcation ISO 14001 96% ISO 50001 74 % ISO 45001 74 % The Northern Logistics Hub At Electrolux Professional’s logistics hub in Ljungby, Sweden, all activi- ties are now entirely digitally inte- grated, from the customer order to loading and invoicing. Shelves are placed on wheels and rails, that are remote-controlled by an operator. Most products are automatically picked from their shelves, increas- ing safety, productivity and capac- ity. As a result, storage capacity has increased by 70%. The hub is also equipped with a fully automat- ed warehouse and a crane, which ensures optimal storage. * Excluding Uniﬁed Brands production volumes. P. 48 Our production Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Our approach Electrolux Professional’s zero quality- defect product approach is part of the Electrolux Professional produc- tion system. It embodies a philosophy of defect-free, reliable, cost-eﬀective appliances that exceed customers’ quality expectations. According to our quality policy, we are committed to market products that are of such high quality that this alone would be a deﬁn- ing reason why customers choose our products over the competition, whether it’s a ﬁrst-time buy, recommendation, or repurchase. Quality improvement initiatives We believe that each employee in our organization is fully aware of quality issues, has a strong sense of ownership and accountability to solve them, strives for continuous improvement, and col- laborates closely with colleagues. We have built a corporate culture that focuses on addressing any quality is- sues, solving them quickly, and prevent- ing them permanently from reoccurring, resulting in total customer satisfaction. Quality assurance We strongly believe that quality is not a one-time act but a continuous sustain- able improvement every day. In our operations, quality assurance starts with design and covers the full supply chain, through delivery and commissioning at the customer site until the product’s end of life. We make sure that we do not only ﬁx the quality issues rapidly, but moreover, we proactively avoid them from day one, from the day we launch a new solution to our customers. Quality “Zero quality-defect measures” Logistics The aim of the logistics organization is to serve customers with the right products and parts, on time, at the lowest possible cost. This is delivered through eﬀective and prompt customer order management, an eﬃcient global planning organization, as well as a comprehensive global distribution network, including eﬃcient management of ﬁnished goods and spare part inventories. The outbound infrastructure is orga- nized into four logistics hubs that cur- rently serve 110 countries. The two main global logistics hubs, representing more than half of all products, are based in Europe, one in Italy for Food & Beverage and one in Sweden for Laundry. One regional hub is based in Singapore to cover the APAC region, while a second regional hub located in Louisville in the US serves the market in North America. A consolidation of former local warehouses into new central hubs has been the best way to improve product availability with a minimum of inventory levels as the target. New, innovative solutions and digital support have recently been deployed in order to improve warehouse processes, ensuring state-of-the-art performance for service level, costs, and resources. Our Quality framework The Quality framework is focused on having quality as an integrated part of the entire organization. It is about having a mindset that focuses on preventative and proactive activities – to the point of identi- fying unknown problems before they even happen, rather than a reactive approach. The Quality framework supports the use of standardized design tools and prac- tices as well as performing product and process audits. The Quality framework is built on the foundation of the “power of zero”, mean- ing zero quality defects, zero service call rate and zero safety issues. P. 49Our production Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Purchased materials represent about 60% of our product costs. Steel, both austenitic and carbon steel, and me- chanical components are traditionally the largest commodities, while elec- tronics have increased substantially in recent years. Mitigating risks In order to mitigate potential negative impacts due to price ﬂuctuations and to secure availability, we negotiate annual prices in contracts with the main pro- ducers for the most important raw ma- terial, such as steel. The vast majority of our purchases are direct materials such as mechanical, chemical, and electrical components. Electrolux Professional is strategically focused on sourcing raw materials from several suppliers in order to minimize supplier risk and dependency on certain suppliers. At the same time, there are cost-saving opportunities from the planned consolidation of our relatively large supplier base which has increased due to recent acquisitions. Suppliers are selected based on a set of predeﬁned criterias. The selection process for new suppliers is governed by a sourcing board. The ongoing eval- uation of suppliers is monitored through performance indicators and audits. Purchasing approach Our purchasing approach is a balance between eﬀectiveness, quality, and agility of deliveries and the capability to reduce cost. This is a core activity involving suppliers, R&D, and Industrial Operations. We evaluate our preferred suppliers not only on their capability to deliver today, but also on their ability to be partners in the journey of continuous innovation. Purchasing 2021 In 2021, expenditure on direct materials and products totaled approximately SEK 3bn, which amounts to approxi- mately 60% of total purchasing. Raw material costs have increased substan- tially during 2021 due to higher world market prices. In addition, the short- age of components has forced us to occasionally buy them at much higher spot-market prices. In 2021, the direct materials purchased were primarily mechanical materials such as steel, aluminum, and cast iron, amounting to approximately 50% of total direct mate- rial expenditure. Purchasing organization Purchasing is a “glocal” organization where buyers are as close as possible to the suppliers. We have long-term relationships and contracts with most of our suppliers. Purchase categories direct materials, 2021 Mechanical 51% Electronics 34% Chemical 15% Purchasing We purchase a wide range, and large volumes, of raw materials and components from external suppliers. We closely monitor the quality and reliability of these suppliers. In total, Electrolux Professional contracts around 3,300 suppliers. P. 50 Our production Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 The new state-of-the-art plant in Thailand – a green leap Electrolux Professional’s 18,000m 2 new factory in Rayong, Thailand, was completed during 2021. The state-of-the art factory provides new professional Laundry and Beverage solutions manufacturing with a better workplace for the employees, higher business competitiveness, advanced logistics, and the ability to scale up for future expansion. The project prioritized addressing the environmental implications of manufacturing, improving the safety and wellbeing of employees: Factory in Rayong People safety and wellbeing • Separation of ﬂows for people, incom- ing material, and outbound ﬁnished products • Eﬀective natural and forced ventilation (scalable for cooling/forced ventila- tion) • Canteen combined with recreational area in multi-purpose space • Reﬂective glass windows combined with white ceiling and 100% self-adjust- ing LED-ligths with 400 lux capacity. Water consumption • Rainwater for toilet ﬂushing and irriga- tion, provision for testing water closed loop Renewable energy and energy management • Roof for solar panels • Metering and control of main energy vectors using Building Management System Picture from tfe factory showing some- thing from Renewable energy and energy consumption below P. 51Our production Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Ljungby Troyes Aubusson Saint-Vallier Carros Sursee Vallenoncello Spilamberto Rayong Shanghai Vicksburg Weidman Manufacturing sites Location Primary product category Products produced Vallenoncello, Italy Food solutions • Refrigeration: counters, cabinets, blast chillers, roll-ins, saladettes • Oven range • Modular cooking: grills, fry tops, braising pans, fryers, pasta cookers, pans, neutral tops, solid tops, burners, open bases, induction, hobs • Dishwashers: hood types, rack types, under counters, glass washers Ljungby, Sweden Laundry • Washers • Dryers Rayong, Thailand Beverage Laundry • Coﬀee brewers • Cold beverage and juice dispensers • Washers • Dryers: single, stacked Carros, France Beverage • Espresso coﬀee machines Troyes, France Laundry • Washers, ironers Aubusson, France Food solutions • Dynamic preparation: planetary mixers, cutters, peelers, vegetable cutters, display cooking Saint Vallier, France Food solutions • Made to measure stoves Sursee, Switzerland Food solutions • Modular cooking: grills, fry tops, braising pans, fryers, pasta cookers, pans, neutral tops, solid tops, burners, open bases, induction, hobs • High-capacity cooking: tilting boiling and braising pans • Made to measure stoves Spilamberto, Italy Beverage • Hot and frozen beverage dispensers • Soft ice cream dispensers Shanghai, China Food solutions • Dishwashers: hood types, rack types, under counters, ﬂight types Vicksburg, Mississippi, United States Food solutions • Preparation, cooking and cleaning systems • Steamers, kettles and braising pans and cleaning system Weidman, Michigan, United States Food solutions • Refrigeration and preparation tables • Made to measure solutions P. 52 Our people Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Our people Our mission is to make our customers’ work-life easier, more proﬁtable – and truly sustainable every day. This can only be accomplished through our greatest asset - our people. P. 53Our people Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 An engaged workforce A talented and engaged workforce is essential for the execution of the company strategy. We strive to at- tract and develop committed, curious, passionate, and dedicated employees from diverse backgrounds in terms of nationality, gender, age, experience, and education. We are dedicated to being a responsible employer for our entire workforce. Employee surveys We run a company-wide extensive Employee Engagement Survey (EES) annually, as well as quarterly one-ques- tion engagement surveys, Employee Net Promoter Score surveys, (eNPS). The annual Employee Engagement Survey provides important insights for the organization. 2020 and 2021 were challenging years for the company and our employees, with the pandemic heavily aﬀecting our business and work- life. A new cultural journey Be customer obsessed At Electrolux Professional, our customers are at the heart of everything we do. We recognize our custom- ers as both our external end customers, as well as the colleagues that are impacted by our actions and that beneﬁt from our work – and we value both, equally. Our mission reﬂects our drive to continuously create better experiences for customers to elevate and enrich their everyday work-life. We take pride in knowing our customers’ needs ﬁrst-hand and are committed to always adopting a customer-ﬁrst approach to deliver value. Be bold At Electrolux Professional, everyone is empowered to take action to deliver better outcomes. We take risks with conﬁdence and support courageous decisionmaking that inspire progress and growth. We welcome new perspec- tives and ideas and approach them with an open mind. We appreciate and respect our cultural diﬀerences and embrace all people – irrespective of race, ethnicity, or gender. We recognize the strength in our diversity, strive for equal access, and seek greater inclusion. Build trust At Electrolux Professional, we believe that trust is an es- sential element both for the business and for our people to thrive. We welcome healthy debates and honest conver- sations in which everyone has a voice and is encouraged to use it, regardless of hierarchy. We are honest about our mistakes and learn from our setbacks. We seek commit- ment and accountability and value honesty, integrity, and ownership – both in ourselves and others. We understand the power of collectiveness to reach greater results and always strive to collaborate to enable others to deliver. Act sustainably At Electrolux Professional, we know how our day-to-day actions can have an impact in shaping a better society. We consider the development of our people to be as im- portant as preserving our environment and take decisions that reﬂect our eﬀorts to build a better future. We aim to reduce our environmental and social impact by improv- ing our sustainability performance within operations and developing innovative and sustainable solutions to enable future generations to live more sustainably. We always act ethically and will only work with partners that reﬂect values similar to our own. During 2021 we launched our Guiding Principles to support our mission and strategy by giving direction to our behaviors. It is important for us to clearly state the behaviors we want to see to drive the company identity and culture. Our actions and decisions throughout the company should reﬂect and be aligned with these principles. Our Guiding Principles are: 76% 0 20 40 60 80 100 2021201920182016 Employee satisfaction survey rate, satisﬁed or very satisﬁed % 76% 73% 71% P. 54 Our people Introduction Our strategic foundation Operations Financial reports Contents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 The survey participation rate in 2021 was 91% (88), and 71% (73) of the 3,256 (2,954) employees that participated were either satisﬁed or very satisﬁed. In 2021 we ran the eNPS survey in April and in July and saw some slight improvement between the two, indicat- ing that the action plans are moving us in the right direction. A new and more ﬂexible work-life As countries have opened up post covid-lockdowns we decided to take a stand on how ﬂexible we would be with regards to the choice of workplace (e.g. working from home). We decided to be bold and to show trust in our employ- ees. Those,whose work activities allow it, may choose where they work for up to 80% of their work time per month. We recommend and prefer that all employ- ees come to their workplace at least half of the time. We believe that this is important for team collaboration as well as for informal interactions. A diverse and inclusive organization We recognize and seek diversity in all its forms. It is paramount to our busi- ness success that we have a wide and diverse perspective on matters. We also believe that an open, fair, and inclusive work environment will drive higher en- gagement and better growth and devel- opment for our employees. We measure gender diversity and we have clear and cascaded objectives to increase gender diversity. All employees will be treated according to their abilities and quali- ﬁcations in any employment decision, including hiring, promotion, compensa- tion, training, and termination. Age distribution employees <30 >50 9% 37% 30–50 54% Gender distribution Women 31% Men 69% Worker distribution Production workers 38% Non-production workers 62% Employees by region Leadership diversity Women 26% Men 74 % EES Survey participation rate 2021 91% (88) As part of our commitment to having a diverse and inclusive workplace, we have zero tolerance for harassment and bullying. All employees must treat each one another with respect, dignity, and common courtesy. Our ethics framework has been designed to provide guidance to our employees in applying the Electrolux Professional’s Code of Conduct. Reporting misconduct All employees can report conduct that they believe, in good faith, to be a vio- lation of laws or our Code of Conduct to their manager or in accordance with locally established procedures. Mis- conduct and violations of the Code of Conduct or Group policies can also be reported through the third-party provider’s EthicsPoint web tool. Anyone reporting a violation shall, to the extent legally permissible, have the possibility to remain anonymous. A safe and healthy workplace Knowing that our employees are the single most important factor in achiev- ing long-term success, we are commit- ted to continuously developing a work environment that enables sustainable performance and development so that all employees can deliver their best. Our commitment to health and safety goes beyond ensuring compliance with rules and legislation. The Group Work- place Directive describes the minimum requirements for environmental and working conditions for all employees. Number of employees On December 31, 2021 Electrolux Professional had 4,015 employees in 33 countries (including Uniﬁed Brands). We have 12 manufacturing sites including R&D centers. The biggest countries in terms of number of employees are Italy, the US, and Sweden. The number of employees increased substantially in the US when Uniﬁed Brands was acquired in December 2021. Europe 67% Asia-Paciﬁc, Middle East, Africa 15% Americas 18% * Excluding Uniﬁed Brands P. 55Sustainability report Introduction Our strategic foundation SustainabilityOperations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Sustainability Report Mission, commitment, and framework  Strategy and targets  Sustainable Development Goals  The climate challenge  Value chain impacts, risks & opportunities  Sustainable solutions  Sustainable operations  Ethics and relationships  Sustainability is a key part of our strategy, culture, and day-to-day operations. We want our solutions and operations, today and tomorrow, to support a more sustainable world, and we use the UN’s Sustainable Development Goals (SDGs) as our compass for contributing to a better society. P. 56 Sustainability report Introduction Our strategic foundation Sustainability Operations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Our sustainability commitment We act according to our ethical principles. We constantly strive for improvement throughout our value chain. We act fairly and commit to the trust we are given by our stakeholders. Making our customers’ work-life easier, more proﬁtable – and truly sustainable every day Strategic framework and materiality We want to contribute to a better society and generate value for our stakeholders. We believe that the Agenda 2030 and the UN’s Sustainable Development Goals (SDG’s) are good indicators of the priorities and challeng- es that the world is facing. Electrolux Professional has identiﬁed six SDGs where we believe we have a greater impact and opportunity to make a diﬀerence. Read more on page 59. We also believe that commitment to, and application of, standardized frame- works such as the UN Global Compact, ILO Convention, GRI and ISO standards simpliﬁes the understanding and fulﬁll- ment of stakeholder expectations. Electrolux Professional's materiality assessment is based on the magnitude of our social, environmental, and eco- nomic impacts and value generation for our stakeholders We gain a deeper understanding of stakeholder expecta- tions through stakeholder dialog. Read more about our Stakeholder dialog on page 70. Our guiding principles Be customer obsessed Build trust Be bold Act sustainably Read more on page 53. Mission P. 57Sustainability report Introduction Our strategic foundation SustainabilityOperations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 The OnE Sustainable Partner Product performance and eﬃciency Grow the business by developing sustainable, innovative solutions that have low running costs. Sustainable solutions Material eﬃciency Customer health, safety, and wellbeing Responsible use of resources Operational excellence drives sustainability. Sustainable operations Occupational health and safety Environmental management Enabling business through trust and relationships. Ethics & relationships Ethical practices Stakeholder relationships Our Sustainability framework “The OnE Sustainable Partner” frames how we work with our material sustainability topics. We perform impact analysis and strategic assessments, which together with stakeholder expectations and dialog serve as the basis for our sustainability eﬀorts and materiality analyze. Read more about our material topics on pages 62–70. 1 2 3 Value generation for stakeholders • Build product and employee branding • Value generation for customers • Reduced or mitigated risks • Reduced costs through eﬃcient use of resources • Availability of ESG investments and green investments • Economic value, generated and distributed • Improved environment and social footprint within our value chain P. 58 Sustainability report Introduction Our strategic foundation Sustainability Operations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Sustainability strategy and targets Ethics and relationships Maintain strong and sustainable relationships with the stake holders impacted by our business and demonstrate our commitment through actions and procedures. Sustainable operations Improve sustainability performance within our operations through prop- er management and a systematic approach, with an emphasis on improving our environmental and social performance every day. Sustainable solutions Set the pace in the professional food, beverage, and laundry industries, through innovations in sustainability and energy eﬃciency, underpinned by a connected and digital platform to meet customer needs. To become climate neutral within our industrial operations by 2030 Our climate ambition for 2030 Climate targets for 2025 Health and safety target for 2025 Gender diversity target for 2030 Reduce CO emissions scope 1 and 2 emissions from our industrial sites > 50% by 2025 (base year 2015) Lost time injury rate (LTIR) as measured by work-related accidents per 200,000 work hours < 0.3 by 2025 Gender diversity Distribution men/women or women/men 40/60 Distribution across managerial positions by 2030 OUTCOME 2021: Scope 1 and 2 emissions in 2021 amounted to 3.4 (3.1) kton CO 2 , which is –31% compared to 2015. Comment on 2021 outcomes CO 2 emissions increased in 2021. The increase was expected as volumes had decreased sharply in 2020 due to the pandemic. Outdoor temperatures impacted heating need for manufac- turing facilities. Electrolux Professional will continue to increase its share of renewable energy to further reduce emissions. OUTCOME 2021: Number of accidents resulting in lost work time decreased in 2021 and the lost time injury rate improved to 0.7 (1.1). Comment on 2021 outcomes The lost time injury rate improved by 34% compared with 2020. During the year we have continued to address root causes of accidents, and worked preventively with near misses, unsafe acts, and conditions inside our manufacturing sites. OUTCOME 2021: The percentage of women in all managerial positions was 26% (26) in 2021. Comment on 2021 outcomes Gender diversity across managerial positions was unchanged compared to 2020. During the year the company has performed activities related to diversity and inclusion as well as educating hiring managers. P. 59Sustainability report Introduction Our strategic foundation SustainabilityOperations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 SDG 7 Clean and aﬀordable energy & SDG 13 Climate action We can make a diﬀerence throughout our value chain by de- veloping energy-eﬃcient products and working with energy eﬃciency in our operations. SDG 8 Decent work and economic growth Knowing that our employ- ees are the single most important factor in achieving long-term success, we are committed to con- tinuously developing a work envi- ronment that enables sustainable performance where all employees can deliver their best. SDG 12 Responsible consumption and production To reduce the environ- mental footprint related to our products and operations, we have a major focus on develop- ing sustainable products for our customers. SDG 5 Gender equality Electrolux Professional values diversity and inclusion and has zero tolerance for discrimination and harassment. We aim to increase the share of female leaders at all levels of the company. SDG 6 Clean water and sanitation As a number of our prod- ucts consume water, Electrolux Professional can make a diﬀer- ence by developing and oﬀering water-eﬃcient products. SDG 3 – Health and wellbeing SDG 11 – Sustainable cities and communities SDG 16 – Peace, Justice and Strong Institutions SDG 17 – Partnerships for the goals Sustainable Development Goals Electrolux Professional uses the SDGs as our compass to contribute to a better society. We have identiﬁed six SDGs where we believe we have a greater impact and opportunity to make a diﬀerence. We believe that the SDG’s are good indicators of the priorities and challenges that the world is facing. Other relevant SDG’s OUR MAIN ACTIONS • Energy-eﬃcient and low- consuming products • Identify alternatives to HFC (Hydroﬂuorocarbon) gases • Be proactive in the switch to renewable electricity OUR MAIN ACTIONS • Program for Occupational Health and Safety • User ergonomics and product safety integrated in product de- velopment, including third-party certiﬁcations • Drive employee engagement • Zero tolerance for slavery, traﬃcking, and child labor • Respect labor rights (ILO conventions) OUR MAIN ACTIONS • Environmental performance in operations (water, energy, waste etc.) • Eﬃcient use of materials • Sustainable innovations and product eﬃciency OUR MAIN ACTIONS • Provide more water-eﬃcient/ low-consuming products • Improve water eﬃciency in our own operations, with a special focus in water risk countries • Management of water discharge to control quality and destination OUR MAIN ACTIONS • Anti-discrimination policies • Actively promote diversity and inclusion The climate challenge Distribution of our carbon footprint (Scope 1, 2, 3), % Product use Purchased materials & services Other * Scope 3 emissions are estimated based on an inventory study for 2019. Electrolux Professional recognizes that actions related to climate change mitigation are highly important and we support the ambitions of the Paris Agreement. Our products and operations are part of the problem, as emissions are generated throughout our value chain. This is why we believe that we can make a diﬀerence by reducing emissions related to our operations and products. Read more on next page. P. 60 Sustainability report Introduction Our strategic foundation Sustainability Operations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Impacts and targets Scope 1 and 2 emissions In 2020 we communicated our ambition to become carbon neutral in our indus- trial operations by 2030 (as measured by scope 1 and 2 emissions). During 2020 we also set a scope 1 and 2 emis- sion target aimed at reducing emissions by 50% by 2025 (including contributions from acquisitions made in 2015–2019). Our scope 1 and 2 emissions constitute only a small portion, approximately 0.1%, of our total carbon emissions. Our carbon emissions mainly stem from en- ergy consumption, but some are related to the use of HFCs (Hydroﬂuorocarbons) gases. Our main challenge to achieving climate neutrality is related to natural gas use in some of our manufacturing facilities. Scope 3 emissions Product use During 2021 we have investigated the data from our greenhouse gas emissions within scope 3 (year 2019). It shows that our scope 3 constitutes ~99.9% of our total emissions. The data also highlights that our main climate impact occurs during the product use phase (~95%). The main contributor within the usage phase relates to the product’s energy consumption. For many years, we have had a clear strategy to develop and of- fer energy-eﬃcient and low-consuming products. Read more on page 64–65. As the energy cost often is a signiﬁ- cant part of the total cost of ownership for our customers, energy eﬃciency is also a core argument for the customer’s investment decision. As the company’s scope 3 emissions are highly signiﬁcant, our ambition is to develop a scope 3 reduction target connected to product use during 2022. During the year the company has devel- oped a sustainable portfolio KPI to fol- low the progress of solutions we believe contribute to climate change mitigation. Material use & End-of-life impact Other signiﬁcant scope 3 impacts relate to purchased materials and the end- of-life treatment of sold products. The company recognizes that using mate- rials more eﬃciently is important, and has integrated material eﬃciency in its strategic framework. We have a strong tradition of developing durable and reliable products for the sharing econ- omy (e.g. apartment house laundries, coin ops) or professional businesses (e.g. restaurants, hotels). The frequent use of products plus their long lifespans, along with a strong service network for maintenance and repair, is favourable for eﬃcient materials usage. During the year the company has also introduced or extended more circular business models so that more sustainable use can be achieved through material eﬃ- ciency. See page 63. As most materials used are related to steel or other metal parts, a large portion of the products can be recycled (normally between 85–95%). During the year we have analyzed several products from a circular perspective to identify further opportunities for recycling. HFCs are highly potent greenhouse gases. They are used as cooling agents in some of the applications. As these gases might leak (e.g. during product use or end-of-life treatment) and accu- mulate in the atmosphere, they increas- ingly contribute to climate change. During the year the company has set a target to reduce consumption of HFC gases by 70% by 2025 (base year 2019). In 2021 the company has completed sev- eral projects to decrease its use of HFC gases within the refrigeration category. Read more about impacts, risks and opportunities on page 61. A A– B– C C– D D– B Leadership level (A) Management level (B) Awareness level (C) Disclosure level (D) CDP questionnaire for climate change 2021 Along with 13,000 other com- panies globally, Electrolux Professional discloses its climate change impact through CDP, a global non-proﬁt organization that runs the world’s leading en- vironmental disclosure platform. Disclosure on climate- related topics Climate change is already impacting ev- ery region on earth and further warming continues to increase the risk of extreme weather events. The risk mitigation and transition to a low carbon economy might have an impact on all stakehold- ers in society and have political, legal, and technological impacts on organi- zations. During 2021 we did our ﬁrst CDP disclosure (Carbon Disclosure Project). The company is seeing an increased interest in climate-related disclosures in accordance with Task force on Climate-related Financial Disclosure (TCFD). Electrolux Professional will con- tinue to work towards better reporting on climate-related impacts, risks, and opportunities, and how these aﬀect our business and operations. Risks Fire, natural disasters, and extreme weather conditions could aﬀect the Group’s manufacturing capacity. All manufacturing sites are surveyed an- nually through a loss-prevention group standard which includes risk manage- ment, emergency procedures, business continuity, and security. Carbon taxes and/or borders might impact material, energy, and transpor- tation costs, due to the distribution of our carbon footprint. Increased costs for energy might further accelerate the demand for energy-eﬃcient and low consuming products. We have been in- vesting in developing such products for many years, and resource and material eﬃciency is an integrated part of our sustainability strategy. There are very few energy-labeling directives in the professional appliance industry. We welcome more energy standards or directives since they would improve transparency and give custom- ers an opportunities to make informed purchasing decisions. In areas where water availability and water supplies are becoming more unpredictable or scarce, requests for water-eﬃcient products can be expect- ed to increase. As some of Electrolux Professional's products consume water when operating, we have a clear strate- gy and targets to develop low-consum- ing and water-eﬃcient products. From 2022 professional refrigerators with HFC gases that have a global warming potential (GWP) of 150 or more can no longer be sold, according to the European F-gas (Flourinated gas) regu- lation. We have updated our refrigerant products to comply with this regulation and set further targets to reduce F-gas- es used in other product categories. CLIMATE CHALLENGE, continue P. 61Sustainability report Introduction Our strategic foundation SustainabilityOperations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Value chain impacts, risks & opportunities Electrolux Professional has assessed the impacts, risks, and opportunities within the value chain. The value chain perspective helps us to identify the impacts our business has on people and the planet, and where these occur. For more details regarding our approach see pages 56–57. IMPACTS RISKS OPPORTUNITIES APPROACH Product development • Product use (energy, water, detergent use, climate) • Material use • Customer health, safety, and wellbeing • Not meeting customer sustainability expectations • Product safety • Reduce impact from material use (natural resources, CO 2 , waste) • Reduce impact from product use (energy, water, CO 2 , deter- gents). • Reduce climate impact from HFC gases • Stakeholder dialog & materiality analysis • Eﬃcient use of materials (including restricted materials) • Develop eﬃcient and low- consuming products • User health & safety certiﬁcation & testing • Substitution of HFC gases Sourcing • Use of natural resources • Emissions to air, water, and soil • Generation of waste • Provide jobs and income • Labor, human rights, and environmental compliance at suppliers in emerging markets • Restricted materials • Corruption • Climate taxes or borders impacting material cost • Have a positive im- pact on our suppliers’ sustainability perfor- mance • Substances with an impact on people and the environment • Supplier Workplace Standard • Supplier due diligence (including signing of our Supplier Workplace standard) • Supplier audits • Material eﬃciency Operations • Provide jobs and income • Employee health and wellbeing • Impact environment through resource use, waste, and emissions • Serious accidents • Reduce CO 2 footprint in operations • Improve occupational health and safety • Reduce impact from waste • Eﬃcient use of resources and environmental management integrated in our production system • Health and safety integrated within our production system Transport • Emissions from trans- portation • Labor conditions • Climate taxes or car- bon pricing. • Reduce CO 2 impact from transportation • Eﬃcient logistics process • Encourage more sustainable transportation through supplier dialog, memberships and others Sales • Promotion of sustainable solutions • Corruption • Not meeting customer sustainability expec- tations • Promotion and sales of sustainable solutions • Encourage customers to act more sustain- ably • Anti-corruption policy and Code of Conduct training • Promotion of sustainable solutions • Focus on the product’s lifecycle cost Product use • User health and safety • Consumption of energy, water, and detergents • CO 2 emissions from energy use • Product safety • Leakage of HFC gases • Product eﬃciency (energy, water, detergents, CO 2 ) • User ergonomics • Long and extended product lifespans • Product performance and eﬃciency • User health and safety (certiﬁcation & testing) • Eﬃcient use of materials End of life • Landﬁll & hazardous substances • Carbon emissions • Use of hazardous or toxic substances • Products not recycled to the extent possible • Leakage of HFC gases • Design for greater material recovery • Take back systems or control of end-of-life treatment • Restricted materials list • Eﬃcient use of materials P. 62 Sustainability report Introduction Our strategic foundation Sustainability Operations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 We serve a wide range of customers globally, from restaurants, hotels and launderettes to healthcare and service facilities. Our solutions consume energy, water, and detergents and impact the users as well as the consumer of the service they provide. Sustainable solutions Eﬃcient and low-consuming products Our main environmental and climate impact occurs during the product-use phase. As products operate, they consume resources such as ener- gy, water, and detergents. These resources impact the product’s environmental footprint as well as the customer’s operating costs. Electrolux Professional invests signiﬁcant re- sources into its global R&D activities. During 2017–2021 the company’s R&D expenditure totaled an average of approximately 4.4% of net sales per year. Around 50% of sales comes from products developed during the last 3 years. Around 95% of the company’s cli- mate impact occurs as the products consume energy. For many years, Electrolux Professional has had a clear strategy to develop and oﬀer energy-eﬃcient and low-consuming products. This is positive both for the environment and the customers’ op- erating costs. Some of our products use innovations and technologies that help save energy and/or reduce carbon emissions. As some of our products con- sume water, we have set a target to increase water eﬃciency within our dishwashing and laundry product ranges (base year 2019). In 2021 we have improved water consumption eﬃciency by 2.3%. This corresponds to lifecycle water savings of around 2 billion litres of water (based on 2021 sales ﬁgures). Two billion litres of water equal around 1.4 days of consumption for the entire Swedish population (ten million people con- suming 140 l/day). Read more about our sustainable product oﬀering on pages 16, 38 and 43. We want to set the pace within the pro- fessional food, laundry, and beverage industry through innovation in sustain- ability and energy eﬃciency, and oﬀer connected and digital platforms that meet customer needs. Product design inﬂuences or deter- mines numerous environment and social impacts throughout the value chain. The choices made will have an impact on materials use, manufacturing, distribu- tion, product use, and end of life. As our main environmental impact occurs during the product-use phase, integration of sustainability into product development is essential to reduce our overall impact. Product performance and eﬃciency We have identiﬁed three priority areas within sustainable solutions: 1 96 97 98 99 100 202120202019 Product water consumption eﬃcency improvements Dishwashing and Laundry category Product water consumption Eﬃcency improvement since 2019 % P. 63Sustainability report Introduction Our strategic foundation SustainabilityOperations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Safety Safety is critically important to Electrolux Professional customers as the use of our products frequently involves a mixture of water, hot sur- faces, moving parts, and electricity. We aim to ensure customer safety and reduce risks by focusing on prod- uct safety starting from the product development phase, passing through a controlled production process, and providing a professional maintenance service. In order to improve the safety level of our appliances, we also use third-party laboratories to review products from a safety standpoint. Appliances are designed considering ergonomic principles around human functionality and according to the user’s natural workﬂow, to achieve maximum eﬃciency with minimum eﬀort. Electrolux Professional has also started to perform third-party ergonomic certiﬁcations on certain products (ERGOCERT). Food safety and hygiene Our businesses include professional laundry or food service operations in hospitality businesses and within community businesses such as elderly care homes or hospitals. As people in these environments can be more vulnerable, hygiene and food safety are critically important. We oﬀer solutions for control and monitoring with third-party certiﬁed disinfection performance. The majority of our material use is related to steel and other metals. As the materials used and waste gen- erated have a negative impact on the environment, more eﬃcient use is required to reduce our impact. An ef- ﬁcient approach means using mate- rials for as long as possible, working towards closing material loops, and reducing waste. Material eﬃciency is supported by a circular transition. See more about circular business models on pages 21 and 30. Our products are used frequently, either by professional businesses or user-operated within the sharing economy. By designing durable and long-lasting products, material eﬃ- ciency can be increased. Electrolux Professional is investing in lifetime testing and quality assurance to verify that our products meet durabil- ity and reliability requirements. See more about our approach to Zero defects on page 48. Service and maintenance During the product lifetime we oﬀer a wide range of spare parts, services, and customer support that can help to prolong the product lifespan. Maintenance and service can also help to ensure that eﬃciency and performance are maintained during the product lifetime. See more about our service oﬀering on page 20. End-of-life management and recovery We have developed a restricted material list (RML) to facilitate the use of non-hazardous and non-tox- ic substances in our materials and components. All components and materials used are RoHS (Restriction of Hazardous Substances Directive) compliant, meaning they do not contain any toxic substance prohibited under, or, if permissible, do not exceed certain levels set out in, the RoHS Direc- tive (2011/65/EU). We also meet the requirements of WEEE, the Waste Electrical and Electronic Equipment Directive (2012/19/EU). As most of our products are designed for easy disassembly, include restrictions on hazardous and toxic materials, and mainly contain recyclable materials, a large proportion of materials within our products (normally between 85–95%) can be recovered and used in new material loops. Our aim is to further improve on material recovery and thereby reduce our impact from waste generation. Eﬃcient use of material Customer health and safety Low-carbon refrigerant gases In May 2021, the ﬁrst refrigeration products using the low-carbon CO 2 natural refrigerant were launched on the market. "The CO 2 option" is available for refrigerated cabinets, freezers, Blast Chillers, and several other refrigerated products. Certiﬁed program for extended life time Our new Certiﬁed program oﬀers an upgrade to washers and dry- ers that have spun some way into their life cycle, with new original parts. The machines thus gain a longer lifetime. & 1 P. 64 Sustainability report Introduction Our strategic foundation Sustainability Operations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 PRODUCT SAVE S TECHNICAL FEATURE SAVINGS DESCRIPTION Stoves Energy Induction heating technology Induction heating can save ap- proximately 80% of energy compared to other heating alternatives. Induction heating is diﬀerent to other meth- ods as heat transfer does not occur. Power is consumed only when a susceptible metal (magnetic steel) is close to the RF inductor coil. Therefore if the pot is much smaller than the inductor coil, there is no heat loss from the sides. Also, if the pot is removed, power consumption drops to the “no load consumption”. Stoves Energy Flower and Ecoﬂame May save up to 60% of energy compared to traditional gas stoves. Adjusts the hob ﬂame to ﬁt pans of any diameter. Heat is concentrated on the bottom of the pan, avoiding dispersion into the kitchen. Ecoﬂame on gas burners ﬁtted with pot ecognition sensors ensures that power consumption drops to a minimum if the pan is removed. Cookers Energy Pressure- cooking technology Pressure cooking can reduce energy consumption by up to 80% compared to a traditional cooker. Energy might be saved as less steam escapes from a pressure cooker. Refrigerators Energy Energy eﬃciency Top Energy classifciation. Electrolux Professional appliances fall into the highest two classes of energy eﬃciency under Regulation (EU) 2015/1094, and are signiﬁcantly more eﬃcient than products with a lower classiﬁcation. Dishwashers Energy and water Filtering system, Energy- saving device (ESD) Up to 60% less energy consumption. A ﬁltering system with a wash pump that circulates the water reduces water and energy consumption as less water needs to be heated. The ESD provides a heat exchanger for the recovery of energy from the steam. Dishwashers Energy Heat pump technology Energy-saving of approximately 23% in addition to savings from the ESD & ﬁltrering systems described above. Heat pump technology is more energy eﬃcient than other heating alternatives. Only available for multi-rinse. Cold & frozen beverage products HFC gases Natural gases with low GWP Products using refrigerants with low GWP can contribute to a reduced carbon footprint. Beverage products create fewer overall carbon emissions within the product use phase. Products using refrigerants with low GWP can help reduce our carbon footprint. Electrolux Professional's Food & Beverage solutions Focus on developing innovative and sustainable solutions For most of our products the main cli- mate impact occurs during the prod- uct- use phase. As there are few energy directives and certiﬁcation schemes externally, Electrolux Professional has created an internal indicator to re- ﬂect technical solutions that can oﬀer opportunities for carbon reduction. The intention is to track products that can technically support carbon reduction. For the purpose of the indicators, we do not benchmark against our competition in the market as this might be precarious due to the lack of objective measure- ment methods. Further, we do not include technical solutions that support, but do not actually ensure, eﬃcient user behaviors. The table below shows embedded technologies or solutions that can be considered as signiﬁcantly more advanced, and can thereby reduce energy consumption and/or contribute to climate change mitigation. * Global warming potential 1 P. 65Sustainability report Introduction Our strategic foundation SustainabilityOperations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Electrolux Professional's Laundry solutions PRODUCT SAVE S TECHNICAL FEATURE SAVINGS DESCRIPTION Washers Energy Weight measurement system Up to 47% energy savings for a WH6-33 washer with a 50% workload. Partial load of washing machines causes addi- tional energy, water, and detergent consumption per kg laundry. Weight measurement and built-in intelligence may therefore result in a reduction of water and energy consumption, as less water has to be heated. The absolute saving potential de- pends on the diﬀerence between the machine’s capacity and real-life workload. Washers Energy Power balance for optimized extraction May save up to 30% energy in the subsequent drying process. The energy demand of the drying process de- pends on the residual moisture of the textiles. The more water that is removed through extraction in the washing machine the less energy is required for the subsequent drying process. Washers Detergents Automatic dosing technology May reduce detergent usage by approximately 30% Over-dosage directly increases the environmen- tal impact while under-dosage may lead to an unsatisfactory result with regard to the cleaning performance, resulting in an additional wash- ing cycle, which also leads to additional water, energy, and detergent consumption. Automatic dosing can reduce risks of maloperation related to the consumer behavior. Dryers and drying cabinets Energy Heat pump technology Approximately 60% of energy savings com- pared to a conventional condenser dryer. Dryers consume more energy than other appli- ances in a laundry. Heat pump technology is more energy eﬃcient than other heating alterna- tives. 1 P. 66 Sustainability report Introduction Our strategic foundation Sustainability Operations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Electrolux Professional has a global presence and applies the same high standards and principles of conduct globally: respect, diversity, integrity, ethics, safety, and environmental protection. We aim to improve sustainability performance in our operations through proper management and a systematic approach, focusing on improving our environmental and socially negative performance every day. We place great emphasis on reducing the environmental impact of our business activities. Our environmental management focuses on reducing impacts from resource use, emissions and waste. The material topics within our oper- ations are integrated into our Enterprise Production System . The system provides a method for minimizing all kinds of waste and losses in our processes. Using fewer re- sources is good for the environment and for the long-term proﬁtability of the company. Environmental management Our Group environmental commitment is outlined in our Code of Conduct, Group Work Policy, and Environmental Policy. The workplace directive stipulates minimum requirements regarding topics such as legal compliance, waste, and chemicals. ISO 14001 certiﬁcations Our target is that all of our logistics, man- ufacturing, and R&D operations should be third-party certiﬁed according to ISO 9001 and ISO 14001. The Shanghai manufactur- ing plant has yet to obtain an ISO 14001 certiﬁcation. The company is working to- wards having the site certiﬁed in 2022. Our three largest manufacturing sites, covering around two thirds of our production, are also ISO 50001 certiﬁed. The sites report their results and prog- ress to the Group’s central functions. Ad- herence to our central policies is controlled through internal and external audits. See the ISO table in the Manufacturing section on page 47. Sustainable operations 2 P. 67Sustainability report Introduction Our strategic foundation SustainabilityOperations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Energy Electrolux Professional places a strong emphasis on reducing energy consumption in our operations. We are constantly moni- toring our performance and have devel- oped reduction targets. Our improvement plan is based on continuous improvement activities, projects, and investments in energy-eﬃcient equipment. We are also active supporters of the switch to renew- able energy. Water We assess our water risks according to the World Wide Fund for nature´s water risk ﬁl- ter. According to the water risk assessment, we do not have high water risks related to our operations. We are implementing protective measures to reduce our water footprint from our operations. Materials Electrolux Professional has adopted a restricted materials list to restrict toxic and hazardous substances in our products and processes. Our plants also work to reduce material losses by improving the scrap rate and using materials eﬃciently. Read more on page 49. We prioritize the wellbeing of all employ- ees by providing a safe and healthy work environment. We work with a ’zero accident’ mindset, putting safety at the top of the agenda. Our Group health and safety guidelines are outlined in our Code of Conduct and Group Work Policy, and detailed require- ments are described in our Group Work- place Directive. Our industrial operations pose higher risks, and we have adopted a dedicated Health & Safety pillar to main- tain a safe work environment to protect our employees. Within the Health & Safety pillar we drive improvements, develop health and Eﬃcient use of resources Occupational health and safety 0,0 0,3 0,6 0,9 1,2 1,5 20212020201920182017 Lost Time Injury Rate After an increase in 2019 and early 2020, ﬁgures started to improve during the second half of 2020. Compared to 2020 the LTIR decreased by 34%. 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2021202020192018201720162015 Scope 1 and 2 CO emissions Reported emissions Recalculated baseline including acquisitions ton Carbon emissions Scope 1 and 2 emissions increased in 2021. The increase was expected since the vol- umes had decline heavily in 2020 due to the Covid-19 pandemic. For European sites carbon emissions are mainly driven by gas consumption used for heating. Change in emissions for these plants is related to heating of the manufacturing sites. The main increase compared to 2020 is related to our operations in Thailand. The Thailand plant’s total emissions of 29% of our total emissions was related to production volumes. For the Thailand operations we were also impacted by the reallocation of the two manufacturing sites into one (tests and concurrent manufacturing in new/ old sites). During the next coming years, one important focus will be on increasing the share of renewable energy at our sites outside of Europe. This will enable us to better decouple production volumes from carbon emissions. Using a recalculated baseline, reduc- tion since 2015 is 44%. Including acqui- sitions, emissions have declined by 31% since 2015. safety methods, and share best practices and risks. Each manufacturing site tracks and reports accidents and incidents. Each accident results in a root-cause analysis and corresponding action plan. Each acci- dent is followed up by the pillar team and learnings are shared between the diﬀerent sites. The manufacturing sites also work on identifying and eliminating causes of un- safe acts and conditions. Our three largest plants are third-party certiﬁed according to ISO 45001. Electrolux Professional also collaborates with International SOS to protect our people during business travel. * The recalculation is made by distributing the ﬁrst reported emission footprint back- wards to previous years. 2 P. 68 Sustainability report Introduction Our strategic foundation Sustainability Operations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Environmental KPIs Energy use Energy consumption has increased during the year. The increase is due to higher production volumes as well as the chang- 0 50,00,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 2021202020192018201720162015 Energy consumption Energy consumption as reported Recalculated baseline including acquisitions MWh 0 1,000 2,000 3,000 4,000 5,000 2021202020192018201720162015 Energy intensity (consumption (MWh) per reported MSEK net sales) SEKm Share of renewable energy Renewable Non renewable 47%53% Water use Water consumption has signiﬁcantly declined in recent years. This trend continued in 2021 and is mainly due to adjustments in our operations in Italy and Thailand. In Italy we have been able to avoid and ﬁx water leakages, while improvement in our new Rayong factory in Thailand contributes positively. 0 20,000 40,000 60,000 80,000 100,000 120,000 2021202020192018201720162015 Reported consumption Recalculated baseline including acquisitions m³ Water consumption Waste and hazardous waste During the year we have seen improvements in our waste KPIs. In particular, the total amount of waste reported declined by 9.5% compared to 2020. Further we have seen improvements in terms of increased material recovery and lower amounts of landﬁll. During the year 85% (84) of the non-hazard- ous waste generated was recovered while 10% (8) went to energy recovery and 4% (8) went to landﬁll or incineration without energy recovery. Electrolux Professional will increase its eﬀorts to reduce impacts related to waste over the coming years. 7% (10) of the waste generated is categorized as hazardous waste. Non-hazardous waste Waste-to-energy Recycling 11% 75% Landﬁll 3% Other recovery 10% Incineration (without energy recovery) 1% Share of hazardous waste Hazardous waste Non-hazardous waste 7% 93% 0 5 10 15 20 2021202020192018201720162015 Water intensity (consumption (m) per reported SEKm net sales) SEKm es made to the manufacturing footprint in Thailand (manufacturing has continued to some extent in new/old plants in parallel during the transfer period). Electrolux Professional will continue to prioritize energy reduction measures. We are currently operating with a 47% (48) share of renewable energy. During the year 100% of the electricity consump- tion in our manufacturing locations orig- ined from renewable sources. There are solar panels on our sites in Vallenochello, Modena and Rayong. We will continue to increase our share of renewable energy. Recalculation is made by distributing the ﬁrst reported emission footprint backwards to previous years. Note: the Introduction year of new ac- quisitions in the sustainability report and ﬁnancial report do not fully match. Recalculation is made by distributing the ﬁrst reported emission footprint backwards to previous years. Note: the Introduction year of new ac- quisitions in the sustainability report and ﬁnancial report do not fully match. * Excluding Uniﬁed Brands production sites or production volumes. 2 P. 69Sustainability report Introduction Our strategic foundation SustainabilityOperations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Code of Conduct The Code of Conduct is fundamental to the way we act. It serves as an introduc- tion to our most important policies and principles and guides our way of doing business. Code of Conduct training is mandatory for all employees. During 2021 around 1,300 employees partic- ipated in Code of Conduct training, which includes anti-corruption and human rights topics. Further, Electrolux Professional has adopted policies concerning the environment, workplace, and anti-cor- ruption. Policies for people, workplace, anti-corruption, the environment, and tax fall within the scope of the Code of Conduct. They are all based on funda- mental international treaties such as the International Bill of Human Rights, the conventions of the International Labor Organization and the OECD Guidelines for Multinational Enterprises. Human rights statement We are a signatory of the UN Global Compact; we support the OECD Guide- lines for Multinational Enterprises and we apply the UN Guiding Principles on Business & Human Rights in our work, to identify and remediate any negative impact on people that is a direct or indirect result of our operations. We do not tolerate child labor, forced labor, discrimination, harassment, or abuse. We are committed to decent working hours and compensation, freedom of association, and collective bargaining. The health and safety of our employees is a top priority and we work continuously to identify, manage, and mitigate any risks of accidents and illness. We aim to have an open and transparent dialog to engage with em- ployees directly and, when applicable, their representatives. This includes the freedom of association and the right to bargain collectively. Anti-corruption, bribery, and unethical business We do not tolerate corruption, bribery, or unethical business practices in any form. All operational units and suppli- ers, and their employees, must refrain from oﬀering, giving, demanding, or receiving bribes or any other improper beneﬁts. Tax policy Our Tax Policy outlines how we deal with tax-related matters. The goal is to always pay the correct amount of tax in the correct country, and to be fair and resolve diﬀerences in opinions with local tax authorities and other governmen- tal organizations in a constructive and positive manner. Reporting of misconduct Misconduct and violation of the Code of Conduct or Group Policies can be reported anonymously on-line via the whistleblowing web platform, or directly to a suitable person or function within the company. The supply chain Sustainability risks within our supply chain are mitigated by stipulating de- mands related to quality, product safety, chemical compliance, social responsi- bility, and the environment. We expect our suppliers to adhere to the principles in our Code of Conduct and Supplier Workplace Standard. These policies are aligned with requirements in frameworks such as the International Labor Orga- nization’s (ILO) core conventions and the OECD guidelines for multinational enterprises. Social and environmental require- ments of our suppliers are integrated into our Supplier Workplace Standard. Deﬁned due diligence activities are put in place based on speciﬁed risk levels. Electrolux Professional audits its existing supplier base. During 2020 we introduced Environmental and Health & Safety sections in addition to the quality sections in our audits. In 2021 our supplier quality assurance team has conducted human & labor rights training. During the year we have also tested integrating social screening as a part of the supplier audits. This integration will continue in 2022. A good, sustainable relationship with the stakeholders that are impacted by our business is key to the delivery of our strategy. We demonstrate our commitment, and seek stake- holder trust, through a number of actions and procedures. Electrolux Professional has signed the UN Global Compact and commits to its 10 principles regarding human rights, labor, anti-corruption, and the environment. Ethics and relationships 95 supplier audits conducted in 2021 72/95 audits included environment and health & safety 95/95 audits included quality 3 P. 70 Sustainability report Introduction Our strategic foundation Sustainability Operations Financial reports Contents Global trends & markets Business segments Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Our stakeholders Electrolux Professional recognizes the trust we are given by our stakeholders. Impact analysis and strategic assessments, together with stakeholder expectations, serve as the basis for our sustainability work. We monitor overall trends in society and collaborate with external partners to drive improvements. Electrolux Professional supports the Electrolux Food Foundation, an independent, non-proﬁt organization that supports initiatives to inspire more sustainable food choices by consumers and professionals, and to support people in need in the communities around us. Since food is a major battleground in the ﬁght against climate change, the foundation’s focus is well aligned with the Electrolux Professional sus- tainability commitment. Electrolux Food Foundation STAKEHOLDER FORM OF DIALOG IMPORTANT TOPICS GENERATED VALUE Customers and users • Ongoing dialog to collect require- ments. This dialog takes place during customer visits, requests for quotations, fairs etc. We also do more systematic studies and measure the Net Promotor Score (NPS) • Quality • Energy consumption and carbon footprint • Total cost of ownership • Reliability of the overall equipment system • Ergonomics and human-centric design • Enhanced hygiene requirements • Easier work-life, proﬁtability, low consumption, and environmental footprint. See more on pages 28–32. Employees • Ongoing dialog with employees and unions through management • Systematic dialog within our people performance process • Employee engagement surveys • Health and safety • Diversity and inclusion • People development • Competitive compensation, sustainable working environment, learning and development. See more on pages 9, 52–54. Investors and owners • We communicate through direct meetings, questions, ESG surveys, capital market days, and the Annual General Meeting where a dialog can take place. One of our investors also have an representa- tive in the Board of Directors • Ethical business practices • Diversity and inclusion • Health and safety • Climate action • Supply chain management • Reduced risks and long-term value generation. See more on pages 9, 168–171. Suppliers • Dialog with suppliers is mainly con- ducted through supplier meetings, negotiations, and discussions • Gather information about the suppliers during the RFQ phase • Signing of our supplier workplace standard • Labor conditions • Health and safety • Environmental management • Jobs, mutual beneﬁts, and reduced risks. See more on pages 9, 49, 69. Society and local communities • Contacts with local communities regarding local environmental requirements • Contacts to monitor the public opinion and changes in legislation • Environmental impact • Social impact • Contribution to local community • Taxes and reduced carbon footprint. See more on pages 9, 59-60. Academia and NGO's • Participate in networks, meetings, and partnerships • Sustainable innovation • Strategic partnerships • Mutual beneﬁts • Mutual beneﬁts and development of opportunities. See more on pages 15, 70. Sustainability governance and management, the GRI index, and our performance are described on pages 160–166. Food waste is a global issue that has been at the center of the Electrolux Professional community’s eﬀorts since 2016. The “Zero waste, all taste” concept was launched to show how even the most basic, inexpensive ingredients that so frequently go to waste can be used to create a gourmet menu. 3 P. 71Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Chairman’s comments  Corporate Governance report  Internal control  Board of Directors  Executive Management  Remuneration report 2021  Risk and risk management  As required by the Swedish Annual Accounts Act and the Swedish Code of Corporate Governance (the “Swedish Code”), this Corporate Governance Report describes the organizational bodies, rules, and other governance structures by which the Electrolux Professional Group is controlled and operated. The Group’s external auditors have reviewed this report and their opinion has been included in the Auditor’s Report. Corporate governance P. 72 Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Chairman’s comments From handling pandemic impact to strategy delivery During the year our focus has shifted from managing the pandemic to pursuing the strategic agenda. While the pandemic aﬀected the com- pany quite negatively during the begin- ning of the year, the hospitality industry gradually started to recover during spring. Naturally, the initial focus of the Board gravitated towards addressing the pandemic. However, from the sec- ond quarter onwards our focus shifted back to key growth and proﬁtability areas, as well as the strategic priorities. Several important decisions have been made during the year, including the creation of the new Beverage and Food Preparation division, the ﬁnaliza- tion of the new factory in Thailand with its related consequences on the Group footprint, as well as investments in digi- talization. Alongside actions regarding the structure, optimization, and capability development, the acquisition of Uniﬁed Brands was the single most important decision of the year. It signiﬁcantly strengthens Electrolux Professional’s presence in the US and supports the company’s strategy to grow in food ser- vice chains. Our strong balance sheet and cash generation accommodated this relatively large acquisition. As part of the ﬁnancing and in line with our sustainability strategy, a sustainability linked loan was signed with the Nordic Investment Bank. Other important items on the Board agenda this year have included talent management, cyber security, and sustainability. Although many Board meetings were held online or as hybrid meetings, we met physically a few times, including a visit to the main food equip- ment plant in Vallenoncello, Italy. 2021 clearly demonstrated the beneﬁts of the spin-oﬀ and listing of Electrolux Professional on the Nasdaq Stockholm in 2020. The strategic ratio- nale of that spin-oﬀ, to create better conditions for strong future value cre- ation in the company, was exempliﬁed by the acquisition of Uniﬁed Brands. After a challenging ﬁrst year, the company has demonstrated its ability to deliver operational execution and strategic development and also meet the expectations of our shareholders. This ﬁnancial year, the Board proposes a dividend of 0,50 SEK, in line with the dividend policy. The Board would like to express its gratitude to Electrolux Professional’s Executive Management and employees for their great contributions during the year. Kai Wärn Chairman of the Board Alongside actions regarding the structure, optimization, and capability development, the acquisition of Uniﬁed Brands was the single most important decision of the year. ” ” P. 73Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Corporate governance report Good corporate governance is about ensuring that Electrolux Professional is managed as responsibly and eﬃciently as possible to meet our obligations as a public company, and also to create value for shareholders in an eﬃcient, responsible, and sustainable manner. Corporate governance determines how rights and responsibilities are distributed among a company’s various bodies in accordance with internal processes and the laws and regulations in eﬀect. Corporate governance structure External and internal rules The governance of Electrolux Professional is deﬁned by external and internal rules. The external rules are the Swedish Companies Act, Nasdaq Stockholm’s Rule Book for Issuers, and the Swedish Code of Corporate Governance (the “Code”), as well as other relevant Swedish and foreign laws and regulations. The Code is available at www.corporategovernanceboard. se and describes good practices in the stock market. The internal rules consist of the Articles of Association, The Rules of Procedure of the Board of Direc- tors, the Electrolux Professional Code of Conduct, policies for information, ﬁnance, credit, internal control, risk management, anti-corruption and other group policies. Application of the Code Electrolux Professional applies the Code with no deviations. Electrolux Professional did not report any devi- ations from the Code in 2021. There have been no infringements by Electrolux Professional of applicable stock exchange rules and no breach of good practice on the securities market reported by the Disciplinary Committee of Nasdaq Stockholm or the Swedish Securities Council in 2021. This corpo- rate governance report has been drawn up as part of Electrolux Professional’s application of the Code. Nomination Committee Shareholders at the Annual General Meeting Executive Management Internal Audit External Audit Remuneration Committee Audit Committee Board of Directors 1 2 3 4 5 7 6 P. 74 Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Shares According to Electrolux Professional’s Articles of Association, the share capital shall not be less than SEK 20,000,000 and not be more than SEK 80,000,000, divided into not less than 200,000,000 shares and not more than 800,000,000 shares. The Electrolux Professional regis- tered share capital is SEK 28,739,745, represented by 287,397,450 shares of which 8,047,982 are Class A shares and 279,349,468 shares are Class B shares (as of December 31, 2021), each with a quota value of SEK 0.1. Each Electrolux Professional Class A share entitles the holder to one vote and each Electrolux Professional Class B share entitles the holder to a tenth of a vote at the Gener- al Meeting. The Class B shares of Electrolux Professional are listed on Nasdaq Stockholm and traded on the Large Cap list. Since September 2020, Class A shares are delisted from Trading on Nasdaq Stockholm. Holders of Electrolux Professional Class A shares have the right to require that Class A shares are converted to Class B shares. During 2021, 72,545 Class A shares have been converted to Class B shares. 1 Shareholders The number of registered shareholders at December 31, 2021 was 48,189. On December 31, 2021, Investor AB was the largest shareholder, with a holding corresponding to 32.4% of the votes and 20.5% of the share capital in the com- pany. For more information about the shares and shareholders, see page 168. Dividend Policy Electrolux Professional’s target is for the dividend to correspond to approximate- ly 30% of the income for the period. For the ﬁnancial year of 2021 the Board of Directors proposes a dividend to the shareholders of SEK 0.50 (-) per share, corresponding o around 30% of the proﬁt for the year. General Meeting of shareholders Pursuant to the Swedish Companies Act, the General Meeting is the supreme decision-making body in a Swedish lim- ited liability company, and sharehold- ers exercise their voting rights at such meetings. The Annual General Meeting (AGM) was held on April 28, 2021. Due to the coronavirus pandemic it was con- ducted without the physical presence of shareholders, representatives or third parties and the shareholders exercised their voting rights in advance by way of so-called postal voting. The AGM of Electrolux Professional is held annually before the end of June. In addition to the AGM, Extraordinary Gen- eral Meetings (EGM) can be convened when required. The General Meetings of Electrolux Professional will be held in the municipality of Stockholm, where the company’s registered oﬃce is located. The date and place of the AGM is com- municated on the company’s external website no later than the publication of the quarterly report for the third quarter. At the AGM, shareholders of Electrolux Professional resolve on several matters, including conﬁrmation of income state- ments and balance sheets, the dispo- sition of the company’s proﬁt or loss, discharge of liability for the members of the Board and the CEO, composition of the Nomination Committee, election of members of the Board (including the Chairman of the Board) and auditor, remuneration for the members of the Board and auditor, as well as guidelines for remuneration for the CEO and other senior executives. The shareholders of Electrolux Professional also resolve on other mat- ters that are important to the company, for example any changes to the Articles of Association, at the General Meeting. Shareholders who wish to have a matter dealt with must submit a written request to the Board to that eﬀect. The request must have been received by Electrolux Professional no later than sev- en weeks prior to the General Meeting. Right to attend the General Meeting All shareholders who are directly record- ed in the share register maintained by Euroclear Sweden ﬁve weekdays prior to the General Meeting, and who have notiﬁed the company of their intention to participate, are entitled to attend the General Meeting and vote proportional to the number of shares they hold. Shareholders whose shares are nom- inee registered through a bank or other nominee must request that their shares are temporarily registered in their own names in the register of shareholders maintained by Euroclear Sweden, in order to be entitled to participate in the General Meeting. The next AGM will be held on April 28, 2022, in Stockholm. 2 Nomination Committee At the Extraordinary General Meeting held on December 5, 2019, the current instruction for the Nomination Commit- tee was adopted to apply until further notice. No changes were proposed or adopted during 2021. The Nomination Committee shall com- prise ﬁve members. The members should be one representative of each of the four largest shareholders, in terms of voting rights, that wish to participate in the Committee, together with the Chairman of the Electrolux Professional Board. The composition of the Nomination Commit- tee shall be based on shareholder statis- tics from Euroclear Sweden as of the last banking day in August in the year prior to the AGM and on other reliable share- holder information which is provided at such time. The names of the representa- tives and the names of the shareholders they represent shall be announced as soon as they have been appointed. If the shareholder structure changes during the term of oﬃce of the Nomina- tion Committee, the composition of the Nomination Committee may be adjusted accordingly. Changes in the compo- sition of the Nomination Committee shall be published as soon as any such changes have been made. The Nomination Committee’s task includes preparing a proposal to the next AGM regarding: • The Chair of the AGM • The number of Board members • The nominees for election to the Board • The Chair of the Board • Remuneration for Board members including work on Board committees • Auditors and auditor’s fees • Amendments to instructions for the Nomination Committee The Company’s Audit Committee shall assist the Nomination Committee in pre- paring proposals for auditors, and the Nomination Committee’s proposal shall include the Audit Committee’s recom- mendation on the election of auditors. The Nomination Committee’s proposals are publicly announced no later than on the date of notiﬁcation of the AGM. Shareholders may submit proposals for nominees to the Nomination Committee. Nomination Committee ahead of 2022 AGM The Nomination Committee for the 2022 AGM is based on the ownership structure as of August 31, 2021, and was announced in a press release on Sep- tember 20, 2021. The Nomination Committee members are: • Petra Hedengran, Chairman, appointed by Investor AB • Joachim Spetz, appointed by Swedbank Robur Funds • Jesper Wilgodt, appointed by Alecta P. 75Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 • Suzanne Sandler, appointed by Handelsbanken Funds • Kai Wärn, Chairman of the Board of Electrolux Professional AB The Chairman of the Board conducts a yearly evaluation of the Board by way of a survey to the Board members and subsequent discussions to assess the Board’s composition, qualiﬁcation, eﬃciency, and work procedures. The conclusions are presented to the Nom- ination Committee. On this basis and if deemed appropriate after subsequent discussions and interviews, the Nomina- tion Committee determines whether the existing Board should be strengthened with additional expertise or if there are any other reasons to make changes to the composition of the Board. In making such determinations and (if applicable) evaluating potential new candidates for the Board, the Nomination Committee takes into consideration the objective to achieve a gender balance in the Board. The Nomination Committee applies rule 4.1 of the Swedish Code as its diversity policy. In addition, the Nomination Com- mittee takes into consideration the need to ensure that the independence requirements of the Swedish Code are met. These requirements stipulate that at least the majority of Board members must be independent from Electrolux Professional’s management, and that at least two (from such majority) are also independent of Electrolux Professional’s largest shareholders. The Nomination Committee also takes into account any proposals made to the Nomination Committee about the composition of the Board that may have been suggested by other shareholders. The Nomination Committee’s propos- als was announced in connection with the notice convening the AGM 2022. 3 Board of Directors The Board of Directors has the overall responsibility for Electrolux Profession- al’s organization and administration. The duties of the Board of Directors are set forth in the Swedish Companies Act, the company’s Articles of Association and the Code. In addition, the work of the Board of Directors is governed by the Rules of Procedure of the Board of Directors, adopted annually by the Board. The instructions for the Board of Directors govern, among other things, the division of work and responsibili- ty between the Board of Directors, its Chairman and the CEO, and specify ﬁnancial reporting procedures for the CEO. The Board of Directors also adopts instructions for the Board committees. Composition and Independence of the Board of Directors According to Electrolux Professional’s Articles of Association, the Board of Directors shall be comprised of no less than three and no more than nine mem- bers, with no more than three deputy members, elected by the shareholders at the AGM. In addition and by law, employee organizations are entitled to appoint employee representatives. The Board of Directors currently comprises seven members elected by the 2021 AGM for a term of oﬃce extending until the close of the 2022 AGM, with no dep- uties, as well as two ordinary members and one deputy appointed by Swedish employee organizations. The AGM elects the Chairman of the Board. Directly after the AGM, the Board holds a meeting for formal constitution at which the members of the committees of the Board are elected. The Chairman of the Board of Electrolux Professional is Kai Wärn. All current members of the Board are non-executive members. According to the Code, the majority of the Board members appointed by the General Meeting must be indepen- dent in relation to the company and its Executive Management Team. No more than one Board member elected by the General Meeting may be a member of the Executive Management Team of the company or a subsidiary. At least two of the Board members that are indepen- dent in relation to the company and the Executive Management Team must also be independent in relation to the major shareholders of the company. A major shareholder, according to the Code, is a shareholder that directly or indirectly controls 10% or more of the shares or votes in the company. The indepen- dence is to be assessed by the Nomina- tion Committee. The Board is considered to be in com- pliance with relevant requirements for independence. All Directors apart from Daniel Nodhäll are considered to be independent. Daniel Nodhäll is consid- ered to be independent in relation to the company and the Executive Manage- ment Team, but not in relation to major shareholders of Electrolux Professional. Management of the company’s aﬀairs The Board of Directors is responsible for the organization of Electrolux Professional and the management of the company’s aﬀairs. The Board’s tasks include adopting strategies, targets, business plans, budgets, interim reports, year-end ﬁnancial statements, and policies. The Board of Directors is also required to monitor the company’s ﬁnancial performance and ensure that the company has good internal controls, including formalized routines to ensure that approved principles for ﬁnancial reporting and internal controls are applied, and that ﬁnancial reports are produced in accordance with legisla- tion, applicable accounting standards, and other requirements for listed companies. Furthermore, the Board of Directors decides on major investments and changes in the organization and operations of the Group. The Board of Directors is responsible for regularly evaluating the work of the CEO. Moreover, the Board of Directors is to ensure that there is a satisfactory process for monitoring the company’s compliance with laws and other regula- tions relevant to operations, as well as the application of internal guidelines, and to evaluate operations on the basis of the objectives and policies set by the Board of Directors. The Board of Directors is also tasked with identifying how sustainability issues impact risks to, and business oppor- tunities for, the company and deﬁning appropriate guidelines to govern the company’s conduct in society with the aim of ensuring its long-term value cre- ation capability. Read more about the sustainability governance on page 160. The Chairman of the Board of Direc- tors leads and organizes the work of the Board, ensures that the Board fulﬁls its tasks, and ensures that the Board’s de- cisions are implemented. The Chairman of the Board of Directors shall, together with the CEO, monitor the company’s performance and prepare and chair Board meetings. The Chairman is also responsible for ensuring that the Board members evaluate their work each year and continuously receive the informa- tion necessary to eﬀectively perform their tasks. The Chairman represents the company in relation to its shareholders. The Group’s external auditors report to the Board as necessary, but at least once a year. A minimum of one such meeting is held without the presence of the President or any other member of Executive Management Team. The ex- ternal auditors also attend the meetings of the Audit Committee. The Audit Com- mittee reports to the Board after each of its meetings. Minutes are taken at all meetings and are made available to all Board members and to the auditors. Board meetings in 2021 In 2021, the Board held eleven meetings, ten of which were held either as physical meetings, web meetings, or a combina- tion of the two. One meeting was held per capsulam. All scheduled Board meetings during the year followed an agenda, which, P. 76 Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 together with the documentation for each item on the agenda, was sent to Board members in advance of the meet- ings. Ordinary Board Meetings usually last for half a day or one entire day in order to allow time for presentations and discussions. Electrolux Profes- sional’s Head of Legal serves as the secretary at the Board meetings. Each scheduled Board meeting includes a review of the Group’s results and ﬁnan- cial position, as well as the outlook for the forthcoming quarters, as presented by the CEO. The meetings also deal with investments, credit limits, and other matters that are to be submitted to the Board under the Rules of Procedure or the company’s policies. The Board decides on all investments exceeding SEK 25m and receives reports on all investments exceeding SEK 10m. Finally, at most scheduled Board meetings a business function or strategic item is presented and reviewed. The Board’s work continued to be im- pacted by the Coronavirus pandemic in 2021. As a consequence, it was not pos- sible for international Board members to travel to several of the Board meetings and instead attended via online confer- encing. Key focus areas for the Board during 2021 At the beginning of 2021, the business was still heavily aﬀected by the Corona- virus pandemic and a signiﬁcant focus continued to be addressing, monitoring and adapting operations, and adopt- ing streamlining measures to improve eﬃciency in the organization. A new di- vision, Beverage and Food Preparation, was created in the Food & Beverage segment. M&A activities resumed re- sulting in the decision to acquire Uniﬁed Brands Inc, which was announced on October 12 and closed on December 1. The board also decided to sign a sev- en-year EUR 60m sustainability-related loan from the Nordic Investment Bank (NIB) related to the reduction of CO emissions, water consumption, and the use of HFC-gases (Hydroﬂuorocarbons). Evaluation of the Board of Directors The Board evaluates its work annually with regard to working procedures, the working climate, and the focus of the Board work. This evaluation also focuses on access to, and requirements for, spe- cial competence on the Board. The eval- uation is a tool for the development of the Board work and also serves as input for the Nomination Committee’s work. Each year, the evaluation of the Board is initiated and led by the Chair- man of the Board. Evaluation tools include questionnaires and discussions. In 2021, Board members responded to written questionnaires. The evaluations were discussed at a Board meeting and the result of the evaluations was pre- sented to the Nomination Committee. Fees for Board Members The AGM determines the compensation for the Board of Directors for a period of one year until the next AGM. The compensation is distributed between the Chairman, other members of the Board, and remuneration for committee work. The AGM 2021 resolved that the Board fees for the period up until the next AGM should be SEK 1,560,000 for the Chair- man of the Board of Directors, and SEK 520,000 for each other Board member (not employed by the company) elected by the AGM. In addition, it was resolved that a fee of SEK 155,000 shall be paid to the Chairman of the Audit Committee and a fee of SEK 105,000 to each of the other committee members, while a fee of SEK 105,000 shall be paid to the Chairman of the Remuneration Commit- tee and SEK 80,000 to each of the other committee members. The compensation paid in 2021, shown in the table on page 78 refers to com- pensation until the AGM in 2020 and three quarters of the compensation authorized by the AGM in 2021, see also note 26. 4 Board committees According to the Swedish Companies Act and the Code, the Board of Direc- tors shall institute an audit committee and a remuneration committee. The ma- jority of each Committee’s members are independent in relation to the company and its executive management. For the Audit Committee, at least one of the members who is independent in relation to the company and its executive man- agement team is also to be indepen- dent in relation to the company’s major shareholders. The major tasks of these committees are preparatory and advisory, but the Board may delegate decision-making powers on speciﬁc issues to the commit- tees. The issues considered at committee meetings shall be recorded in minutes of the meetings and continuously reported to the Board of Directors. The members and Chairmen of the committees are ap- pointed at the statutory Board meeting following election of Board members. The Board has also determined that is- sues may be referred to ad hoc commit- tees dealing with speciﬁc matters. Board of Directors 2021 – AGM 2022 Name Position Board member in Electrolux Professional since Independent in relation to the company and the Executive Management Team Independent in relation to the company’s major share- holders Audit Committee Remuneration Committee Share- holding 1 Kai Wärn 2 Chairman 2019 Yes Yes – Member 104,000 Katharine Clark Member 2020 Yes Yes – – 9,000 Lorna Donatone Member 2019 Yes Yes Member – 9,000 Hans Ola Meyer Member 2019 Yes Yes Chairman – 9,000 Daniel Nodhäll Member 2019 Yes No Member Member 20,000 Martine Snels Member 2019 Yes Yes – Chairman 7,000 Carsten Voigtländer Member 2019 Yes Yes – – 10,000 Ulf Karlsson Member 1998 – – – – – Joachim Nord Member 2019 – – – – 130 Per Magnusson Deputy 1995 – – – – – ) Employee representative. 1) Own holdings and holdings of related persons and aﬃliated companies. The Board members’ respective shareholding in Electrolux Professional as per March 11, 2022. 2) Kai Wärn also has 778,816 call options issued by Investor AB entitling the right to purchase Electrolux Professional B shares P. 77Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 • Strategy • Move of Louisville Operations • New Division Audit Committee The main tasks of the Audit Committee are to oversee the process of Electrolux Professional’s ﬁnancial reporting, inter- nal control, and internal auditing in or- der to secure the quality of the Group’s external reporting. The Audit Committee is also tasked with supporting the Nom- ination Committee with proposals when electing external auditors. The Audit Committee consists of the following three Board members: Hans Ola Meyer (Chairman), Lorna Donatone, and Daniel Nodhäll. The external au- ditors report to the Committee at each ordinary meeting. The CEO, CFO, Head of Group internal audit, and Head of Legal have participated in all the audit committee meetings in 2021. During 2021 the Audit Committee held ﬁve meetings. All audit committee mem- bers attended all the meetings. Remuneration Committee One of the Remuneration Committee’s primary tasks is to propose guidelines for the remuneration of the members of the Executive Management Team. The Committee also proposes changes in remuneration of the President, for resolution by the Board, and reviews and resolves on changes in remunera- tion of other members of the Executive • Q1 quarterly ﬁnancial statements • AGM, statutory board meeting • Electrolux Professional Guiding Principles adoption • Q4 quarterly and Year- end ﬁnancial statements • Approval 2020 Annual Report • Q2 quarterly ﬁnancial statements • Budget • Board work evaluation • Acquisition of Uniﬁed Brands • Sustainability related loan Nordic Investment Bank • Q3 quarterly ﬁnancial statements • Visit Vallenoncello plant and Italian operations The work of the Board in 2021 J a n u a r y F e b r u a r y D e c e m b e r N o v e m b e r O c t o b e r M a r c h A p r i l M a y J u n e J u l y A u g u s t S e p t e m b e r Management Team as proposed by the CEO. The Remuneration committee consists of the following three Board members: Martine Snels (Chairman), Kai Wärn, and Daniel Nodhäll. The Chief Human Resources Oﬃcer participated in the meetings and was responsible for the meeting preparations. During 2021 the Remuneration Com- mittee held ﬁve meetings which were attended by all the remuneration com- mittee members. 5 Executive Management Team The Executive Management Team currently includes the CEO and twelve members. The CEO is appointed by, and receives instructions from, the Board of Directors. The CEO, in turn, appoints other members of the Executive Man- agement Team and is responsible for the ongoing management of the Group in accordance with the Board’s guide- lines and instructions. The Executive Management Team holds monthly meetings (shorter meet- ings via web and longer meetings lasting two or three days in person) to review the previous month’s results, update fore- casts and plans, and discuss strategic issues. During 2021 one of the planned longer meetings was replaced by web meetings and not all members were able to travel to the physical meetings as a result of pandemic related restrictions. Key focus areas for the Executive Management Team during 2021: • Addressing and adapting operations to improve eﬃciency in the organiza- tion through and beyond the pan demic • Investments in digital transformation • The creation of a new division, Beverage and Food Preparation, in the Food & Beverage segment • The completion of the new factory in Thailand • Transfer of production from the factory in Louisville to Thailand and Italy • Sustainability strategy • The acquisition of Uniﬁed Brands Most, but not all, Executive Manage- ment meetings are also attended by the Head of Legal, Vice President Global Marketing, Vice President Customer Care and Chief Technology Oﬃcer. To- gether with the Executive Management team they form the Extended Executive Management Team. Electrolux Professional has estab- lished procedures and internal bodies (“boards”) for the preparation and ex- ecution of key activities and processes, P. 78 Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 such as the Insider and Disclosure Com- mittee, the Finance Governance Board, the Code of Conduct Steering Group, the Audit Board, the Enterprise Risk Man- agement Board, and the Sourcing Board. Management changes Guilhem Senegas, Chief Information Oﬃcer and Head of Digital Transfor- mation, previously part of the Extended Executive Management Team reporting to the CEO, was appointed as member of the Executive Management Team. Philippe Zavattiero was appointed Senior Vice President Beverage and Food Preparation Division from Sep- tember 1, 2021. Paolo Schira, succeeded Philippe Zavattiero as Senior Vice Presi- dent Commercial Organization Europe. On October 1, Richard Flynn was ap- pointed Senior Vice President Commer- cial Organization Asia Paciﬁc & Middle East & Africa (APAC & MEA) succeeding Doug Walker who until his anticipated retirement is acting as SVP Business De- velopment until a successor is appointed. On December 1, Dave Herring, CEO of Uniﬁed Brands, was appointed as mem- ber of the Executive Management Team. 6 Auditors The 2021 AGM re-elected Deloitte AB for the period up and including the 2022 Board of Directors – remuneration and meeting attendance Total remuneration 2021, ’000 SEK Board meeting attendance Remuneration Committee attendance Audit Committee attendance Independence 1 Kai Wärn 1,630 11/11 5/5 Yes Katharine Clark 515 11/11 Yes Lorna Donatone 619 11/11 5/5 Yes Hans Ola Meyer 669 10/11 5/5 Yes Daniel Nodhäll 698 11/11 5/5 5/5 No Martine Snels 613 11/11 5/5 Yes Carsten Voigtländer 515 10/11 Yes 1) For further information about the independence assessment, see page 76. AGM. Jan Berntsson, authorized public accountant and a member of FAR (the professional institute for authorized public accountants in Sweden), is the auditor-in-charge. Deloitte provides an audit opinion regarding Electrolux Professional AB, the ﬁnancial statements of the majori- ty of its subsidiaries, the consolidated ﬁnancial statements for the Electrolux Professional Group, and the administra- tion of Electrolux Professional AB. The auditors also conduct a review of the in- terim report for the second quarter. The audit is conducted in accordance with the Swedish Companies Act, Interna- tional Standards on Auditing (ISA), and generally accepted auditing standards in Sweden. Audits of local statutory ﬁnancial statements for legal entities outside of Sweden are performed as required by law or applicable regula- tions in each country, including issuance of audit opinions for the various legal entities. 7 Internal Audit The Group Internal Audit function pro- vides independent, objective assurance designed to add value and improve Electrolux Professional’s operations. Group Internal Audit assists Electrolux Professional in accomplishing its objectives by bringing a systematic, disciplined approach to evaluating and improving the eﬀectiveness of the orga- nization’s governance, internal control, and risk management processes. Group Internal Audit assignments are conducted according to a risk-based plan developed annually and approved by the Audit Committee. The audit plan is derived from an independent risk assessment conducted by Group Internal Audit to identify and evaluate risks associated with the execution of the Company’s strategy, operations, and processes. The audits are execut- ed using a methodology for evaluat- ing the design and implementation of internal controls to ensure that risks are adequately addressed, and process- es operate eﬃciently. Opportunities for improving the eﬀectiveness of the governance, internal control, and risk management processes identiﬁed in the internal audits are reported to man- agement for action. A summary of audit results is provided to the Audit Commit- tee, as is the status of management’s implementation of agreed actions to address ﬁndings identiﬁed in the audits. The Head of Group Internal Audit reports to the Audit Committee and is managed administratively by the CEO. Our organization CEO Commercial organization APAC/MEA Commercial organization Americas Finance Communications & IR IT Human Resources Uniﬁed Brands Product & Marketing Business Development Operations and R&D Beverage & Food preparation division Commercial organization Europe P. 79Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Internal control over ﬁnancial reporting Electrolux Professional uses the COSO framework (Committee of Sponsoring Organizations of the Treadway Com- mission) as a basis for internal control over ﬁnancial reporting. The processes for internal control, risk assessment, control activities, information and com- munication, and monitoring regarding the ﬁnancial reporting are designed to ensure reliable overall ﬁnancial report- ing and external ﬁnancial statements in accordance with IFRS, applicable laws and regulations, and other require- ments. This process involves the Board of Directors, the Audit Committee, the Executive Management Team and all employees. Control environment The Board has overall responsibility for establishing an eﬀective system of inter- nal control. The Audit Committee regu- larly reviews and evaluates the adequa- cy of the internal control framework. It monitors control deﬁciencies identiﬁed within the Group’s internal control environment and oversees implemen- tation of action plans if applicable. The CEO and the Executive Management Team have the ultimate responsibility for internal controls within their areas of responsibility. All entities within the Group must maintain adequate internal controls. As a minimum requirement, control activ- ities should address key risks identiﬁed within the Group. Limits of responsi- bilities and authorities are given in the Delegation of Authority Policy, manuals, policies and procedures and codes, including the Code of Conduct, the Group Workplace Policy, and the Group Anti-Corruption Policy, as well as in policies for information, ﬁnance and in the ﬁnance manual. Together with laws and external regulations, these internal guidelines form the control environment and all Electrolux Professional employ- ees are held accountable for compli- ance. Risk assessment Risk assessment is the assessment of risks in the various processes and data points that feed into the Company’s ﬁnancial reports. This includes identify- ing risks of not fulﬁlling the fundamental criteria, i.e., completeness, valuation, existence and occurrence, rights and obligations, and presentation and disclosure of signiﬁcant accounts in the ﬁnancial reporting for the Group, as well as risk of loss or misappropriation of assets and potential fraud. Control activities Control activities aim to mitigate the risks identiﬁed and ensure accurate and reliable ﬁnancial reporting as well as process eﬃciency. Control activities in- clude ongoing evaluations, self-assess- ments, and internal audit to ascertain whether the components of internal control are present and functioning. Information and communication Information and communication within the Group regarding risks and controls helps to ensure that the right business decisions are made. Guidelines for ﬁnancial reporting are communicated to employees, for instance by ensuring that manuals and policies are published and accessible through the Group-wide intranet. Monitoring Monitoring and testing of control activities is performed periodically to ensure that risks are properly mitigated. The eﬀectiveness of control activities is monitored continuously at three levels: Group, legal unit, and process. Moni- toring involves both formal and informal procedures applied by management, process owners, and control operators, including reviews of results in compari- son with budgets and plans, analytical procedures and key-performance indi- cators, and self-assessment results. Internal audit independently evalu- ates the design and implementation of controls based on the audit scope, and proactively proposes improvement to the control environment. Controls that have failed must be remediated. Man- agement establishes and implements action plans to correct weaknesses. The audit committee reviews, evaluates and monitors the internal control process for ﬁnancial reporting. Responsible for internal control Board of Directors Review, evaluate and monitor the adequacy and coherence of the Internal control framework Audit Committee Provide leadership and direction to local management and review the internal control eﬀectiveness Executive Management Internal Control Function Local and Functional Management Internal audit Coordinate, provide support for internal con- trol self assessment process and reporting to Executive Management and Audit Committee Perform and manage internal controls Independently evaluate the eﬃciency and eﬀectiveness of internal control Internal control self assessment Support Audit P. 80 Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Board of Directors KAI WÄRN KATHARINE CLARK LORNA DONATONE HANS OLA MEYER DANIEL NODHÄLL Position & year elected Chairman of the Board of Directors and Board member since 2019. Member of the Remu- neration Committee. Board member since 2020. Board member since 2019. Member of the Audit Committee. Board member since 2019. Chairman of the Audit Committee. Board member since 2019. Member of the Remuneration Committee and the Audit Committee. Year of birth 1959 1979 1957 1955 1978 Nationality Swedish British American Swedish Swedish Education M.Sc. in Mechanical Engineering, KTH Royal Institute of Technology, Stockholm, Sweden. B.Sc. (Hons) Business Information Systems Management, Bour- nemouth University, UK. Professional Diploma in Marketing, Chartered Institute of Marketing, UK. MBA, Texas Christian University, USA. B.Sc. Tulane University, USA. B.Sc. in Economics and Business Administration from Stockholm School of Economics, Sweden. M.Sc. in Economics and Business Administration, Stockholm School of Economics, Sweden. Other board assignments Board member of Sand- vik AB, Mälarhamnar AB, Exandio Holding AB and Comparsio AB. – Board member of Dawn Food Products Inc., Sbarro, LLC and National Restaurant Association Educational Foundation, USA. Board member of Azelio AB. Board member of Husqvarna AB and Saab AB. Current and previous positions Previously CEO and President Husqvarna AB, Partner at IK Investment Partners Norden AB, President and CEO of Seco Tools AB, various positions within ABB. General Manager – EMEA and APAC at Elvie Chiaro Technology. Previously VP Com- mercial Development, ASSA ABLOY Opening Solutions EMEA. Previously various senior positions within the Sodexo Group Previously Senior Vice President Controlling and Finance at Atlas Copco AB. Head of Listed Companies at Investor AB. Independence Independent in relation to the company and the Executive Manage- ment Team as well as the company’s major shareholders. Independent in relation to the company and the Executive Manage- ment Team as well as the company’s major shareholders. Independent in relation to the company and the Executive Manage- ment Team as well as the company’s major shareholders. Independent in relation to the company and the Executive Manage- ment Team as well as the company’s major shareholders Independent in relation to the company and the Executive Management Team, but not in relation to the company’s major shareholders. Shareholding at March 11, 2022 104,000 Class B shares and 778,816 call options issued by Investor AB entitling the right to purchase Electrolux Professional B shares. 9,000 Class B shares. 9,000 Class B shares. 9,000 Class B shares. 20,000 Class B shares. P. 81Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 MARTINE SNELS CARSTEN VOIGTLÄNDER JOACHIM NORD ULF KARLSSON PER MAGNUSSON Position & year elected Board member since 2019. Chairman of the Remuneration Committee. Board member since 2019. Board member since 2019. Employee repre- sentative of the Council for Negotiation and Cooperation (PTK). Board member since 1998. Employee repre- sentative of the Swedish Confederation of Trade Unions (LO). Deputy board member since 1995. Employee representative of the Swedish Confederation of Trade Unions (LO). Year of birth 1969 1963 1966 1958 1964 Nationality Belgian German Swedish Swedish Swedish Education M.Sc. Agriculture, indus- trial engineering, Katho- lieke Universiteit Leuven campus Geel, Belgium, studies in mathematics, Universiteit Antwerpen, Belgium, Advanced Fi- nance, London Business School, England. Fi- nance for non-ﬁnancials, Singapore Institute of Management. B2B Mar- keting, Vlerick Business School, Belgium. Degree in Mechanical Engineering, Technical University of Braunsch- weig, Germany. Doc- toral Degree/Dr.-Ing., Process Engineering, Technical University of Braunschweig, Germany. Advanced Management Programme, INSEAD Other board assignments Member of the Board of Directors SIG Combi- block. Independent Non-Executive Director of Resilux. Independent Non Executive Director of Vion Food Group. Board member of Urus Group LLC. Board member of Arbo- nia AG and BBC Group AG. Non-Executive Director of INNIO Group and Star Deutschland GmbH. Member of the Foundation Board of Friedhelm Loh Stifung. Supervisory Board member of Testo Management SE. Current and previous positions CEO and owner of L’Advance B.V. Former member of the Executive Board of GEA Group, various positions within FrieslandCampina, in- cluding Chief Operating Oﬃcer and Executive Director Ingredients. CEO and owner of Voiglaender Board Advisory. Previously CEO of Vaillant Group. Independence Independent in relation to the company and the Executive Manage- ment Team as well as the company’s major shareholders. Independent in relation to the company and the Executive Manage- ment Team as well as the company’s major shareholders. Shareholding at March 11, 2022 7,000 Class B shares 10,000 Class B shares 130 Class B shares. – – P. 82 Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Executive Management Team ALBERTO ZANATA JACOB BROBERG CARLO MARIO CARONI JOHN EVANS Position President and Chief Executive Oﬃcer since 2009. SVP Investor Relations and Corporate Communications since 2019. COO (Operations & R&D) since 2014 (Operations) and 2019 (R&D) respectively. SVP & GM Commercial organization Americas since 2011. Year of birth 1960 1964 1968 1967 Nationality Italian Swedish Italian American Education Master’s degree in Electronic Engineering with Business Administration, Padua Univer- sity, Italy. B.A., Political Science and Economics, Lund University, Sweden. Master’s degree in Mechanical Engineering in Economics and Management, Politecnico di Torino, Italy. B.A. in Mass Communiction and Marketing, Kings College, Wilkes-Barre, PA, USA. Other assignments – Board member of Sveriges Kommunikatörer AB. – – Previous positions Head of Professional Products, Executive Vice President within the Electrolux Group SVP Corporate Communica- tions and Investor Relations, Cloetta AB. SVP Global Operations within the Professional Products business area of the Electrolux Group. Head of the Americas within the Professional Products business area of the Electrolux Group. Shareholding 114,803 Class B shares. 10,000 Class B shares. – 4,240 Class B shares. RICHARD FLYNN DAVE HERRING PIA HOVLAND GUILHEM SENEGAS Position SVP & GM Commercial Organization APAC & MEA since October, 2021. President Uniﬁed Brands, part of the Executive Management Team since Dec, 2021 Chief Human Resources Oﬃcer since 2020. Chief Information Oﬃcer and Head of Digital Transformation, since 2020 Year of birth 1980 1964 1965 1975 Nationality British American Swedish French Education Business management, Univer- sity of Gloucestershire, England. MBA, University of Southern New Hampshire, the USA. B.Sc in Me- chanical Engineering, University of Iowa, the USA. Bachelor’s degree in Computer Science, Stockholm University, Sweden. Master’s degree in engineering from CentraleSupelec, Paris and MBA from Le Collège des Ingénieurs, Paris. Other assignments – - – – Previous positions Most recently Sales Direc- tor Chains, APAC & MEA. Various roles within Electrolux Professional in both Europe and Asia. Several VP/GM positions at Avery Dennison Inc. Various senior HR positions in Britannia Airways, Eﬀnet Group and Electrolux including SVP HR, Communications & Contin- uous Improvement at Electrolux Business Area Europe. Various Senior IT roles for bioMérieux & Mérieux Nutrisciences, IT consultant for Capgemini. Shareholding – – 3,882 Class B shares. – * Shareholding at March 11, 2022 P. 83Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 * Shareholding at March 11, 2022 PAOLO SCHIRA TORSTEN URBAN DOUGLAS WALKER Position SVP & GM Commercial Organization Europe since September, 2021. SVP Product and Marketing since 2019. Acting SVP Business Development since September, 2021. Year of birth 1975 1970 1960 Nationality Italian German British Education Master’s Degree, Engineering, University of Trieste, Italy. Business Management with a focus on marketing, VWA Munich, Germany. Polymer Technology, Plastics and Polymer Engineering Technology, University of North London, England. Other assignments – Previous positions Various senior positions within the Professional Products business area of the Electrolux Group, including SVP Business Development and Vice Presi- dent Business Unit Laundry. Various senior positions within the Professional Products business area of the Electrolux Group, including SVP Product and Marketing and SVP Business Unit Food Service. Various senior positions within the Professional Products business area of the Electrolux Group, including SVP Commer- cial APAC and Head of Region UK. Shareholding 7,330 Class B shares. 5,214 Class B shares. 4,385 Class B shares. FABIO ZARPELLON PHILIPPE ZAVATTIERO Position CFO since 2009. SVP Beverage and Food Preparation Division since September, 2021. Year of birth 1967 1961 Nationality Italian French Education Degree, Business Administra- tion, Ca’ Foscari University of Venice, Italy. Master’s degree in Engineering, National Institute Polytechnique of Grenoble, France. Master’s degree ESSEC Business School Paris, France. Other assignments President, La Vela srl. – Previous positions CFO of Professional Products within the Electrolux Group. SVP & GM Europe Electrolux Professional, SVP of the Com- mercial Organization Europe within the Professional Products business area of the Electrolux Group. Shareholding 5,944 Class B shares 8,084 Class B shares. P. 84 Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Electrolux Professional remuneration report 2021 Introduction This report describes how the guide- lines for executive remuneration of Electrolux Professional AB, adopted by the Annual General Meeting 2020, were implemented in 2021. The report also provides information on remuneration for the President and CEO. The report has been prepared in accordance with the Swedish Companies Act and the Rules on Remuneration of the Board and Executive Management and on In- centive Programs issued by the Swedish Corporate Governance Board. Further information on executive remuneration is available in note 26 (Employees and personnel costs) on pages 144–148 of the 2021 Annual Report. Information on the work of the Remuneration Committee in 2021 is set out in the corporate governance report available on pages 76–77 of the 2021 Annual Report. Remuneration of the Board of Di- rectors is not covered by this report. Such remuneration is resolved annually by the Annual General Meeting and disclosed in note 26 on page 145–146 of the 2021 Annual Report. Key Developments in 2021 The President and CEO summarizes the company’s overall performance in his statement on pages 4–5 of the 2021 Annual Report. Table 1 – Total remuneration of the President and CEO in 2021 (kSEK) 1 Fixed compensation Variable compensation kSEK Fixed cash com- pensation 2 Other beneﬁts 3 One-year variable Multi-year variable 4 Extraordinary items Pension expense 5 Total remuneration Proportion of ﬁxed and variable remuneration Alberto Zanata (President and CEO) 5,566 318 4,912 1,197 – 460 12,453 51%/49% 1) Except for Multi-year variable compensation, the table reports remuneration earned in 2021 (irrespective of whether payments have been made the same year). Multi-year variable compensation is reported if vested in 2021 (settlement in Q1 the following year). In 2021 no multi-year variable compensation has been vested 2) The annual ﬁxed salary includes annual base salary, vacation salary, paid vacation days and ﬁxed non-compete components. 3) Company car and medical insurance. 4) Recognized cost of long-term incentive awards. The 2021 long-term incentive program currently running, vests in 2024. 5) Pension expense, consisting of deﬁned contributions according to collective bargaining agreement entitlements, has been counted entirely as ﬁxed remuneration. Group remuneration guidelines: scope, purpose and deviations A prerequisite for the successful im- plementation of the Group’s business strategy and safeguarding of its long- term interests, including its sustainability, is that the Group can recruit and retain qualiﬁed personnel. To this end, the Group must oﬀer competitive remuner- ation in relation to the country or region of employment of each Executive Man- agement member. The Group’s remu- neration guidelines enable the company to oﬀer executives a competitive total remuneration. Under the remuneration guidelines, executive remuneration shall be on market terms and may consist of the following components: ﬁxed cash compensation, variable compensation, pension beneﬁts, and other beneﬁts. Variable compensation consists of both short-term and long-term cash incentives. The guidelines are found in the ad- ministration report on pages 96–98 of the 2021 Annual Report. During 2021, the Group has complied with the applicable remuneration guidelines adopted by the Annual General Meeting. No deviations from the guidelines have been decided and no derogations from the procedure for implementation of the guidelines have been made. The auditor’s report regarding the Group’s compliance with the guidelines is available on www.electroluxprofes- sional.com/corporate. No remuneration has been reclaimed. Variable short-term cash compensation The short-term variable compensation for the President and CEO is based on ﬁxed ﬁnancial targets on a Group level. It is earned over a period of one year (2021) and can give a maximum of 100% of the annual base salary (as presented in table 2(a)). Variable long-term share program (LTI 2021) The company implemented a perfor- mance based long-term share incentive program in 2021 (LTI2021) for senior managers and key employees, including the President and CEO. Participants are oﬀered an allocation of Performance Shares, provided that the participant remains employed until January 1, 2024. The maximum performance value for the President and CEO was 100 per cent of the participant’s annual base salary for 2021, equivalent to 102 457 shares. The maximum value was converted into a maximum number of Perfor- mance Shares, based on the Volume Weighted Average Price (VWAP), paid for Electrolux Professional B shares on Nasdaq Stockholm during a period of 20 trading days before the day the participants are invited to participate in the program. The calculation of the number of Performance Shares was connected to performance targets for the Group established by the Board for (i) earnings per share and (ii) operating cash ﬂow after investments. The performance tar- P. 85Corporate governance Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 gets adopted by the Board will stipulate a minimum level and a maximum level, with the relative weight of the perfor- mance targets (i) and (ii) being 60 per cent and 40 per cent respectively. The performance period is the 2021 ﬁnancial year. If both performance con- ditions in the 2021 Share Program are met, allocation of Performance Shares will take place in the ﬁrst half of 2024. Allocation will be free of charge except for tax liabilities. In 2021, the maximum levels of the two performance targets were reached which means that 100% of granted awards under the LTI2021 program will be paid out after the end of the vesting period in 2024. Application of performance criteria The performance measures for the President and CEO’s variable compen- sation have been deﬁned to deliver the Group’s strategy and to encour- age behavior which is in the long-term interest of the Group. In the deﬁnition of performance measures, the strategic objectives and short-term and long- term business priorities for 2021 have been taken into account. Set out in Tables 2(a) and 2(b) below are descriptions of how the performance measures for payment of variable short-term and long-term com- pensation have been applied during the ﬁnancial year. Table 2(b) – Performance of the President and CEO in the reported ﬁnancial year: variable long-term cash compensation Name of plan (Performance period/ vesting date) Description of the perfor- mance criteria related to the remuneration component Relative weighting of the performance criteria a) Measured performance b) Actual award/remuneration outcome Alberto Zanata (President and CEO) LTI2021 Earnings per share¹ 60% a) 1.69 SEK b) 61 474 shares 3 Operating cash ﬂow after investments² 40% a) 1 116 mSEK b) 40 983 shares 3 1) Income for the period (attributable to equity holders of Electrolux Professional) shall be divided by the weighted average number of basic shares outstanding during the period. 2) Cash ﬂow from operations and investments shall be adjusted for ﬁnancial items paid, taxes paid and, acquisitions/divestments of operations. 3) Shares will vest after January 1, 2024 subject to continued employment. Table 2(a) – Performance of the President and CEO in the reported ﬁnancial year: variable short-term cash compensation Description of the performance criteria related to the remuneration component Relative weighting of the performance criteria a) Measured performance b) Actual award/remuneration outcome Alberto Zanata (President and CEO) EBITA Growth (%) 1 55% a) 38% b) 2,916 kSEK Net Sales Growth (%) 2 15% a) 10.6% b) 608 kSEK Operating Working Capital (%) 3 20% a) 15% b) 1,061 kSEK Customer Care Net Sales Growth (%) 10% a) 13.3% b) 327 kSEK 1) Year on year EBITA value growth %, adjusted to average rate 2021 in mSEK. EBITA = EBIT (absolute) plus amortization. Eﬀects of 2021 acquisitions and divestments excluded. 2) Year on year External Net Sales growth (%), adjusted to average rate 2021 in mSEK. Eﬀects of 2021 acquisitions and divestments excluded. 3) Operating Working Capital (OWC) % = OWC (excluding factoring contribution) divided by External Net Sales. OWC: 12 months average OWC (Acc. Receivables excluding factoring contribution+Inventory+Acc. Payable) adjusted to average rate 2021. External Net Sales: 12 months External Net sales adjusted to average rate 2021. Eﬀects of 2021 acquisitions and divestments excluded. Table 3 – Remuneration and company performance for the ﬁnancial years 2021-2020 1 2021 2020 President and CEO Remuneration (kSEK) 2 12,453 6,163 EBITA (mSEK) 665 533 Average remuneration on a full-time equivalent basis of employees of the parent company, Electrolux Professional AB (kSEK) 3 489 509 1) Electrolux Professional AB was listed on the NASDAQ Stockholm on March 23, 2020 and consequently comparative information for previous ﬁnancial years is not provided. 2) The increase in 2021 compared to 2020 is due to close to maximum outcome for 2021 incentive programs and zero outcome for 2020 programs. 3) Total remuneration, excluding Board members and members of the Group Executive Management Team, of Electrolux Professional AB. P. 86 Risk and risk management Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Electrolux Professional is an international group with a wide geographical presence, entailing exposure to various forms of strategic, operational, and ﬁnancial risks. Risks that are managed incorrectly can result in negative ﬁnancial consequences, whilst risks that are managed correctly can create opportunities and lead to value creation. It is therefore essential to have a systematic and eﬃcient risk assessment process and an enterprise-wide risk management framework that manage and mitigate risks so that the Group achieves its goals and objectives. Risk and risk management Enterprise Risk Management The purpose of Enterprise Risk Manage- ment (ERM) at Electrolux Professional is to proactively manage the portfolio of what leadership collectively believes are the most critical risks to the achieve- ment of Electrolux Professional’s mis- sion, strategy, and business objectives. ERM objectives aim to: Promote an enterprise-wide approach by integrating risk management pro- cesses with business strategy, project management processes, and decision making. Promote consistency and transpar- ency in methodology, assessment, and management processes. Provide appropriate, consistent, and transparent ownership and accountabil- ity for risk mitigation. The Electrolux Professional Group’s ERM process includes the following risk activities: context deﬁnition, risk assessment, risk treatment, monitoring and review, and communication and consultation of risks. Risks are assessed based on the probability of their occur- rence and the expected magnitude of their negative outcome. Risk analysis Risk identiﬁcation Risk evaluation Risk assessment Establishing the context Risk treatment Monitoring and review Communication and consultation P. 87Risk and risk management Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Risk Governance Risk Governance Electrolux Professional’s Board of Directors has the ultimate responsibility for risk oversight. The ERM governance structure is based on the three lines of defense model, which determines the roles, responsibilities, and relationships between risk management functions. The CEO, Executive Management, business, and Group functions form the ﬁrst line of defense with ownership of risks, ensuring monitoring of risks, and the responsibility for risk treatment. The role of the second line of de- fense, fulﬁlled by the ERM Board, is to provide risk management oversight, support, facilitation, and consultation. The ERM Board oversees and facilitates the Electrolux Professional Group’s ERM activities, ensuring that they are conducted in a holistic and proactive manner, to strengthen the development of integrated risk assessment processes, thus supporting the achievement of the Group’s strategic goals. The ERM Board consists of the President and Group CEO, the Group CFO, the Head of Legal, and the Group Risk Manager. Internal audit is the third line of de- fense. It provides independent assur- ance by evaluating the eﬀectiveness and eﬃciency of the Group’s risk gover- nance model and risk management pro- cesses, including the implementation of internal control and other risk treatment actions. Electrolux Professional trans- fers certain risks to commercial insur- ance markets, with a minimum ﬁnancial security equal to Standard & Poor’s A minus rating or equivalent to AM Best’s ratings. Further actions are also taken to reduce these insurable risks as part of the Group’s loss prevention strategy, to reduce the potential for signiﬁcant losses, and to ensure the Group’s ability to deliver to its customers without inter- ruptions. 3 rd line of defense Independent assurance 2 nd line of defense Risk Management oversight, support, facilitation, and consultation 1 st line of defense Ownership of risk taking and risk treatment Compliance/LegalRisk Management CEO and Executive Management Audit Committee Board of Directors ERM Board Business and Group functions Internal Audit P. 88 Risk and risk management Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Strategic risks Strategic risks are related to macro-economic factors and geopolitical conditions resulting in changes in the business environment with potential signiﬁcant eﬀects on operations and business objectives. Risk Management Demand for Electrolux Professional’s products depend on the general economic climate within the professional equipment industry, which in turn is aﬀected by macroeconomic factors in the countries and regions where the Group conducts oper- ations, including the rate of growth in the global and local economy. Strategic risks are managed through strategic plans and busi- ness decisions taken by the Board of Directors, the Executive Management Team, and management teams throughout the Group. Part of the Group’s strategy depends on accelerating growth through acquisitions. Mergers and acquisitions give risks re- lated to the ability to achieve expected growth synergies and proﬁtability and to retain key employees. There is a risk that due diligence reviews do not identify all relevant issues. Mergers and acquisitions are decided by the Board of Direc- tors, and managed and implemented by dedicated teams of senior executives and employees during the acquisition and integration process. External expert support and advice are obtained as required and according to customary practices. The eﬀect of the global outbreak of the coronavirus continues to aﬀect the general economic situation, and could impact the hospitality industry long-term, resulting in negatively impact- ed demand from the Group’s end markets and a permanent change in customer behaviors. During the pandemic, the Group has been able to partially mitigate the negative impact the decrease in demand by focus on cost saving measures, as well as focus on the less aﬀected Laundry business. The Group is closely monitoring the develop- ment of the pandemic and is, based on previous experience, prepared to take necessary measures to mitigate potential new impacts from the pandemic. Political instability in the markets in which Electrolux Professional operates can trigger an industry-wide decline in sales. Close monitoring of the geopolitical developments in countries with political risk exposure. Product stocks can be held outside production areas at risk, and there is a possibility to move production short-term. Other strategic risks include increased market competition, in- ability to adopt new technologies or new business models, and the inability to ﬁnd suitable targets for a merger or acquisition to leverage as an accelerator in line with market expectations. Electrolux Professional develops its technologies with contin- uous investments in research and development with a strong focus on development of products and services. Risks In this section the Group’s most signiﬁcant strategic, operational, ﬁnancial, and sustainability risks are described. Operational risks Operational risks are risks that stem from business operations with a potential impact on the ﬁnancial position and performance. These risks are mainly associated with the development, design, and manufac- turing of the Group’s products, the supply chain, and the sales of these products and services worldwide. Risk Management Manufacturing risks The Group has 12 manufacturing plants in seven countries. The manufacturing comprises a chain of processes. Geo- politically unfavorable developments, ﬁre, natural disasters, extreme weather conditions, epidemics, pandemics, systems failure, mechanical failure, or equipment failure could aﬀect the Group’s manufacturing capacity. Any extensive outages or disruptions due to such events could have an adverse eﬀect on the Group’s business and ﬁnancial position. Manufacturing units continuously monitor the production process, test the safety and quality of products, conduct risk assessments, and train employees. The Group works in a struc- tured manner to ensure the health and wellbeing of its em- ployees and by regularly assessing and managing safety and health risks in operations. Manufacturing sites are surveyed annually through a loss pre- vention common group standard which includes risk manage- ment, emergency procedures, business continuity, and security. The program ensures continuous improvement and sharing lessons learned between sites. The Group has transferred part of its property damage and business interruption risks to the direct insurance market. Read more about production and logistics on page 41. P. 89Risk and risk management Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Risk Management Supply chain risks Electrolux Professional’s manufacturing process depends on the availability and timely supply of components and raw materials, sourced and purchased primarily from third-party suppliers. A global general shortage of electronics and raw materials poses risks related to product costs and to timely delivery to customers. Some key parts and customized com- ponents are available only from a single supplier or a limited group of suppliers and there is a risk that the Group is unable to obtain these products for a certain period, which could have an adverse eﬀect on the Group’s ability to manufacture single types or categories of products within a reasonable time or at an acceptable cost. Proactive eﬀorts are made to establish a robust and ﬂexi- ble supply chain that follows laws and the Group´s business principles. Regular supplier audits, continued surveillance of supplier performance and ﬁnancial stability is carried out, and long-term agreements are in place with single-source suppliers. In addition, dual-sourcing is in place for key components and raw materials. Product-related risks Most of Electrolux Professional’s products and product lines are subject to regulations that set out basic health and safety requirements applicable to products released onto the market. Should any of the Group’s products have defects that lead to serious accidents or ill-health when used, there is a risk that competent authorities could decide to prohibit sales, require recall of the product from the market, or provide warning information. Such market interventions and any product liability claim from contracting parties or third parties could have an adverse eﬀect on the Group’s business, reputation, results of operations, and ﬁnancial position. The Group aims to ensure customer safety and reduce risks by focusing on product safety during the product development phase and the manufacturing of its products. Tests are per- formed on the products during the manufacturing process as well as through in-ﬁeld tests on customer sites. The Group also uses third-party laboratories to review products from a safety standpoint. In recent years, Electrolux Professional has also started to perform ergonomic certiﬁcations on certain products (ERGOCERT). The Group has transferred part of its product liability risk to the direct insurance market. Legal and compliance risks Electrolux Professional conducts its business in many jurisdic- tions with diﬀerent legislation, rules and regulations. Non-com- pliance with trade compliance rules, product certiﬁcation requirements, privacy rules, and so on could result in ﬁnes and penalties, trade restrictions and reputational impact. In addition to the Code of Conduct. the Group has issued pol- icies and procedures on legal compliance that are applicable to all employees worldwide. Regular training for relevant employees is conducted (face-to- face, via video or e-learning). IT systems and cyber security risks Other operational risks are dependencies on information technology and systems. Cyber security risks are increasing globally, and the risk of a cyber intrusion has increased signiﬁ- cantly during the Coronavirus pandemic with many employees working remotely. A cyber security breach could disrupt man- ufacturing processes and IT systems, which could impact the Group’s ﬁnancial position and result. The Group has an IT security strategy including information security policies and procedures, and IT General Controls (ITGC). There are diﬀerent levels of access controls for internal employ- ees and contractors, and regular vulnerability testing is carried out. Internet Security trainings are regularly conducted among employees. The system landscape is based on well-proven products and market-leading service providers. There is a desig- nated Chief Information Security Oﬃcer function at Group level. Human resources risks Electrolux Professional is dependent on technical experts and industry talent, mainly for its production facilities and research and development departments, but also dependent on key personnel for certain Group functions. Diﬃculties in recruiting and retaining qualiﬁed personnel could result in a loss of com- petitive edge and increased costs. Employee health and safety risks have increased in general because of the Coronavirus pandemic. Stress, remote working, and long recovery time after being aﬀected by the virus are risks that could impact the Group’s operations and the overall wellbeing of the Group’s employees. To oﬀer interesting positions, personal and professional development, a good working environment and competitive compensation and beneﬁts are prioritized ,within the Group. Salaries and other conditions are adapted to the market and linked to business priorities. The Group strives to maintain good relationships with unions. The Group’s crisis team was activated in early 2020 when the pandemic started in China and has implemented protocols for remote working, enhanced cleaning measures, and reporting procedures on positive cases, amongst other measures. Materi- al on how to manage teams remotely and how to stay healthy has been distributed. Operational risks, continued P. 90 Risk and risk management Introduction Our strategic foundation Governance & risk management Operations Financial reports Contents Global trends & markets Business segments Sustainability Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Sustainability risks Electrolux Professional’s global operations exposes the Group to risks related to sustainability factors such as environmental impact, human rights, employment conditions, and corruption. These risks could arise in several phases of the value chain, such as in purchasing and sales, but also in connection with third-party service partners providing preventive and correc- tive maintenance services to end-customers. Countries are increasingly adopting new rules and regulations aimed at imposing mandatory rules on sustainability related areas in particular in the areas of human rights and modern slavery. Failure to comply with standards and regulations on work en- vironment, anti-corruption, human rights, and business ethics could have an adverse eﬀect on the Group’s reputation, results of operations, and ﬁnancial position. The sustainability risks and mitigating activities are further described in the Value chain section on page 61. Financial risks The Group is exposed to several risks from liquid funds, trade receivables, borrowings, commodity prices, tax, foreign exchange etc. These risks are categorized as ﬁnancial risks, some of which are presented below. More information about ﬁnancial risks and management of the risks can be found in Note 1 Accounting Principles on page 107 , Note 2 Financial risks on page 111 and Note 17 Trade receivables on page 128. Foreign exchange risk Electrolux Professional’s solutions and products are manufac- tured in twelve facilities located in seven countries around the world and sold in approximately 110 countries. Accordingly, the Group is exposed to currency risks. Foreign exchange risk is deﬁned as the risk that ﬂuctuations in currency exchange rates have a negative impact on the Group’s ﬁnancial po- sition, proﬁtability or cash ﬂow and includes transaction expo- sure and translation exposure. Credit risk Credit risk on ﬁnancial transactions is the risk that the coun- terpart is not able to fulﬁll its contractual obligations related to the Group’s investments of liquid funds and derivatives. Credit risks also arise in connection with trade receivables. Electrolux Professional’s client base is characterized by a mix of recurring customers such as distributors and one-time cus- tomers, as well as multi-operator stores or spare-part custom- ers. If Electrolux Professional is unable to fully collect its trade receivables from major customers, the Group’s result would be adversely aﬀected. Interest-rate risk Interest-rate risk refers to the adverse eﬀects of changes in interest rates on the Group’s income. The main factors deter- mining this risk include the interest-ﬁxing period. In 2021, the Group’s average interest-ﬁxing period was 0.44 years. Tax risk The Group is comprised of subsidiaries that are subject to taxation in approximately 30 jurisdictions. There is a risk that Electrolux Professional’s understanding and interpretation of tax laws, tax treaties, and other provisions are not correct in all aspects. There is also a risk that tax authorities in the rele- vant jurisdictions make assessments and decisions that diﬀer from Electrolux Professional’s understanding and interpreta- tion, which could negatively impact the Group’s tax expense line and eﬀective tax rate. In addition, valuation of deferred taxes is based on projections of future taxable income and there is a risk that changes in assumptions or erroneous estimates result in signiﬁcant diﬀerences in the valuation of deferred taxes. Environmental impact and approach A systematic environmental approach is the basis for reducing Electrolux Professional’s environmental impact. The great- est direct environmental impact relates to water and energy consumption, wastewater, waste, and transportation. From a product life cycle perspective, the main environmental impact occurs in the product use phase at the customer’s location. The company complies with environmental legislation and is not involved in any environmental disputes. As of December 31, 2021, Electrolux Professional had manufacturing operations in seven countries. The Swedish factory in Ljungby conducts notiﬁable activi- ties according to Swedish legislation. There are no injunctions under the Swedish Environmental Legislation. The factories operate according to national legislation, apply for necessary permits, and report to local authorities in accordance with applicable legislation. All factories conduct systematic environmental work that includes action plans and monitoring of a number of environ- mental aspects. The environmental work is an integral part of our operations and environmental aspects are taken into account during decision making. Evaluation and follow-up on measures taken increases awareness of the impacts the business has on the environment. The Group’s environmental policy and environmental work are described in more detail on pages 59–60 and 67–68. The GRI index for the sustainability report can be found on page 165–166. P. 91Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Financial reports P. 92 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Administration report  Consolidated statement of total comprehensive income  Consolidated balance sheet  Change in consolidated equity  Consolidated cash ﬂow statement  Parent Company income statement  Parent Company balance sheet  Parent Company change in equity  Parent Company cash ﬂow statement  Notes  Auditor’s report  Five years in summary  Deﬁnitions and reconciliation of alternative performance measures  Notes to the ﬁnancial statements Note  Accounting principles  Note  Financial risk management  Note  Segment information  Note  Revenue recognition  Note  Operating expenses  Note  Other operating income and expenses  Note  Material proﬁt and loss items  Note  Leases  Note  Financial income and ﬁnancial expenses  Note  Taxes  Note  Other comprehensive income  Note  Property, plant and equipment  Note  Goodwill and other intangible assets  Note  Other non-current assets  Note  Inventories  Note  Other current assets  Note  Trade receivables  Note  Financial instruments  Note  Assets pledged for liabilities to credit institutions  Note  Share capital, number of shares, and earnings per share  Note  Post-employment beneﬁts  Note  Other provisions  Note  Other liabilities  Note  Contingent liabilities  Note  Acquired and divested operations  Note  Employees and remuneration  Note  Fees to auditors  Note  Transactions with related parties  Note  Untaxed reserves, Parent Company  Note  Shares and participations  Note  Events after the balance sheet date  Note  Proposed distribution of earnings  Financial reports, contents P. 93Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Administration report The Board of Directors and President and CEO of Electrolux Professional AB (publ), corporate identity number 556003-0354 and registered oﬃce in Stockholm, Sweden, hereby submit the annual report and consolidated accounts for the ﬁnancial year January 1, 2021 to December 31, 2021. Information on operations Electrolux Professional is one of the leading global providers of food ser- vice, beverage, and laundry equipment for professional users. Our innova- tive products and worldwide service network make our customers’ work-life easier, more proﬁtable and truly sus- tainable every day. The Group serves a wide range of customers globally, from restaurants and hotels to healthcare, educational, and other service facilities. Electrolux Professional has two seg- ments; Food & Beverage and Laundry. The segments are regularly reviewed by the President and CEO, who is the Group’s chief operating decision maker. • Food & Beverage oﬀers equipment to various professional users with- in the hospitality industry. Products within Food & Beverage are main- ly comprised of modular cooking, ovens, dishwashing and refrigeration, dispensers for hot beverages (e.g. coﬀee grinders, brewers, and coﬀee urns), cold beverages (beverage and juice dispensers), and frozen bever- ages (frozen drinks and ice cream dispensers), as well as equipment for soft serve. • Laundry oﬀers equipment designed to meet a diverse array of professional users, from self-service and the hospi- tality industry to healthcare providers and commercial laundries. Customers include hospital and hotel laundries, apartment-building laundries in Scan- dinavia, and launderettes. Products oﬀered within the laundry segment include washing machines, tumble dry- ers, ironers, and ﬁnishing equipment. In addition to product oﬀerings, each segment provides Customer Care services to customers throughout the equipment lifecycle. Markets Electrolux Professional’s solutions and products are sold in more than 110 coun- tries. Our commercial activities focus on three main geographical regions – Americas, Europe, and Asia Paciﬁc & Middle East and Africa (APAC & MEA). Our products are sold through a global network of dealers and distributors. Production On December 31, 2021, Electrolux Professional’s production units oper- ated through 13 manufacturing sites, organized mainly by product category to ensure proximity and agility to serve customer needs. All manufacturing sites commit to a systematic approach for the responsible use of resources, occupa- tional health and safety, and environ- mental management. Our factories are specialized by product categories, with food and laundry plants producing the majority of the appliances on order, while for the beverage plants there is a mix between make-to-order and make- to-stock. Signiﬁcant events during the ﬁnancial year Acquisition of Uniﬁed Brands On December 1, 2021, Electrolux Professional acquired Uniﬁed Brands Inc. and related assets, a leading US- based manufacturer of foodservice equipment. Electrolux Professional acquired Uniﬁed Brands for a total con- sideration of SEK 2,113m (USD 233m), from Dover Corporation, a US-based diversiﬁed global manufacturer and solutions provider. Uniﬁed Brands, founded in 1907, has approximately 600 employees. Uniﬁed Brands had sales of SEK 1,134m in 2021. The underlying EBITA-margin was ap- proximately 9% in 2021. The acquisition signiﬁcantly strengthens Electrolux Professional’s presence in the US and supports Electrolux Profes- sional’s focus on growth within the food service chains. Loan agreement with Nordic Investment Bank (NIB) On October 20, Electrolux Professional AB and the Nordic Investment Bank signed a seven-year EUR 60m sustain- ability-related loan agreement related to the reduction of CO emissions, water consumption, and the use of HFC gases. Conversion of shares According to Electrolux Profession- al´s Articles of Association, owners of A shares have the right to have such shares converted to B shares. Conver- sion reduces the total number of votes in the company. 72,545 shares were converted during 2021. The total number of registered shares in the company on December 31, 2021 amounted to 287,397,450 of which 8,047,982 are Series A and 279,349,468 are Series B. The total number of votes amounted to 35,982,928.8. Covid-19 The global Covid-19 pandemic contin- ued to aﬀect the hospitality industry, such as hotels, restaurants, and pubs which represents approximately 50% of our sales. However, during the second half of the year there has been a strong sales recovery and several, but not all, markets are now back to pre-pandemic levels. As a consequence of the Covid-19 outbreak, Electrolux Professional has assessed all potential impacts on the carrying value of assets and liabilities. See note 1 page 109 for more infor- mation. Financial targets Electrolux Professional’s ﬁnancial tar- gets are as follows: Organic sales growth Organic annual growth of more than 4% over time, complemented by value- accretive acquisitions. EBITA margin EBITA margin of 15%. Operating working capital Operating working capital below 15% of net sales. Net debt/EBITDA Leverage ratio below 2.5x Net debt/ EBITDA. Higher levels may be temporar- ily acceptable in the event of acquisi- tions, provided there is a clear path to deleveraging. Dividend policy Approximately 30% of net income. P. 94 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Key ratios Food & Beverage performance SEKm 2021 2020 Change Net sales 4,704 4,198 12.0 Organic growth, % 14.3 –28.1 – Acquisitions, % 2.5 –0.5 – Changes in exchange rates, % –4.7 –1.2 – EBITA 299 87 242.2 EBITA margin, % 6.4 2.1 – Operating income 244 35 602.5 Operating margin, % 5.2 0.8 – Key ratios Laundry performance SEKm 2021 2020 Change Net sales 3,159 3,065 3.0 Organic growth, % 5.5 –8.7 – Changes in exchange rates, % –2.5 –0.8 – EBITA 492 467 5.2 EBITA margin, % 15.6 15.2 – Operating income 475 452 5.2 Operating margin, % 15.0 14.7 – Operational and ﬁnancial review Net sales Net sales for 2021 amounted to SEK 7,862m (7,263), an increase of 8.2% compared to the last year. Organically, sales increased by 10.6% and currency contributed negatively by 3.7%. Acquisi- tion contributed by 1.4% (0.4). The sales increase was driven by increased demand as pandemic restrictions have been eased. Sales of Food & Beverage increased organically by 14.3%. Sales of Laundry increased organically by 5.5%. Sales in Europe increased organically by approximately 10%, in Americas by 20% and in Asia- Paciﬁc, Middle East and Africa by 2%. Changes in net sales % 2021 2020 Organic growth 10.6 –21.0 Acquisitions 1.4 0.4 Changes in exchange rates –3.7 –1.1 Total 8.2 –21.7 Operating income and EBITA Operating income excluding amor- tization of intangible assets (EBITA) amounted to SEK 663m (456), corre- sponding to a margin of 8.4% (6.3). Operating income amounted to SEK 592m (387), corresponding to a margin of 7.5% (5.3). The improved operating income is mainly due to higher sales volumes and beneﬁts from the 2020 restructuring program. EBITA includes acquisition and integration costs of SEK –56m related to Uniﬁed Brands. In 2020 items aﬀecting comparability of SEK –77m for restructuring, were included. Government support related to furlough of personnel of SEK 45m (95) together with beneﬁts from the 2020 restructuring program of approximately SEK 100m contributed to EBITA. Performance per segment The Group’s operations are reported in two operating segments. The segments have been identiﬁed on the basis of the monitoring and reporting structures to the President and CEO. Food & Beverage Sales for Food & Beverage were SEK 4,704m (4,198), an increase of 12.0% compared to last year. Organically sales increased by 14.3% (–28.1) and currency had a negative eﬀect of –4.7% (–1.2). The acquisition of Uniﬁed Brands contributed by 2.5%. Organically, sales increased by ap- proximately 30% in Europe, and by 30% in Americas, and by 3% in Asia-Paciﬁc, Middle East and Africa. Operating income excluding amor- tization of intangible assets (EBITA) amounted to SEK 299m (87), corre- sponding to a margin of 6.4% (2.1). EBITA includes acquisition and integra- tion related costs for Uniﬁed Brands of SEK –56m which means that the underlying EBITA margin was 7.5%. EBITA improved due to higher volumes. Operating income amounted to SEK 244m (35), corresponding to a margin of 5.2% (0.8). Laundry Sales for Laundry were SEK 3,159m (3,065), an increase of 3.0% compared to last year. Organically sales increased by 5.5% (–8.7) and currency had a neg- ative eﬀect of –2.5% (–0.8). Organically, sales increased by approximately 6% in Europe, by 8% in Americas and by 2% in Asia-Paciﬁc, Middle East and Africa. Operating income excluding amor- tization of intangible assets (EBITA) amounted to SEK 492m (467), corre- sponding to a margin of 15.6% (15.2). Operating income amounted to SEK 475m (452), corresponding to a margin of 15.0% (14.7). Seasonal variation No seasonal variations exist. Financial net Net ﬁnancial items was SEK –4m (–24). Income for the period Income for the year amounted to SEK 487m (278), corresponding to SEK 1.69 (0.97) in earnings per share. Income tax for the year amounted to SEK –101m (–85). The eﬀective tax rate was 17.1% (23.4) P. 95Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Group common cost Group common cost was SEK 128m (–100). Cash ﬂow Operating cash ﬂow after investments amounted to SEK 1,116m (570). Operating working capital Operating working capital as a percent of annualized net sales improved to 14.9% compared to 19.9% in 2020. The improvement is due to changes in inven- tory and the reduction of receivables and payables in relation to net sales. Financial position Net debt As of December 31, 2021, Electrolux Professional had a ﬁnancial net debt position (excluding lease liabilities and post-employment provisions) of SEK 1,418m compared to SEK 202m as of December 31, 2020. Lease liabilities amounted to SEK 326m and net pro- visions for post-employment beneﬁts amounted to SEK –39m. The increase in net debt is due to the acquisition of Uniﬁed Brands on December 1, 2021. In total, net debt amounted to SEK 1,705m as of December 31, 2021, com- pared to SEK 549m as of December 31, 2020. Long-term borrowings amounted to SEK 1,215m and short-term borrow- ings amounted to SEK 1,045m. Total borrowings amounted to SEK 2,268m compared to SEK 1,012m as of Decem- ber 31, 2020. Liquid funds as of December 31, 2021, amounted to SEK 849m compared to SEK 810m as of December 31, 2020. Credit facilities and loans Electrolux Professional AB has a term loan of SEK 600m with a tenure of seven years from 2020, a EUR 60m sustainabil- ity-related loan with a tenure of seven years from 2021 and a revolving credit facility of EUR 200m with a tenure until 2026. As of December 31, 2021, EUR 102m of the revolving credit facility was utilized. Related-party transactions, See Note 28 on page 149. Employees The number of employees at year-end was 3,973 (3,515). The increase is due to the acquisition of Uniﬁed Brands. Governance report Electrolux Professional has prepared the Corporate Governance report pre- sented on pages 73–83. Sustainability Report Electrolux Professional has prepared a Sustainability Report in accordance with the Global Reporting Initiative’s guide- lines (GRI Standards). The sustainability report has been prepared in accor- dance with disclosure requirements set out in the Swedish Annual Accounts Act, chapter 6 paragraph 11. The Sustain- ability Report is presented on page 55–70 and 159–167 of this report. Environmental impact and approach A systematic environmental approach is the basis for reducing Electrolux Professional’s environmental impact. The greatest direct environmental impact re- lates to water and energy consumption, wastewater, waste, and transportation. From a product lifecycle perspective, the main environmental impact occurs in the product-use phase at the custom- er’s location. The company complies with environmental legislation and is not involved in any environmental disputes. As of December 31, 2021, Electrolux Professional had manufacturing opera- tions at 13 sites in seven countries. The Swedish factory in Ljungby con- ducts notiﬁable activities according to Swedish legislation. There are no injunc- tions under the Swedish Environmental Legislation. The factories operate ac- cording to national legislation, apply for necessary permits, and report to local authorities in accordance with applica- ble legislation. All factories conduct systematic environmental work that includes action plans and monitoring of a number of environmental aspects. The environ- mental work is an integral part of our operations and environmental aspects are taken into account during decision making. Evaluation and follow-up of measures taken increases awareness of the impacts the business has on the environment. The Group’s environmen- tal policy and environmental work are described in more detail on pages 59–60, 67–67, and 90. 2019 includes items aﬀecting comparability of SEK -32m, and 2020 includes items aﬀecting comparability of SEK –77m. Operating cash ﬂow after investments 0 200 400 600 800 1,000 1,200 20212020201920182017 SEKm EBITA and EBITA margin 0 200 400 600 800 1,000 1,200 20212020201920182017 SEKm % EBITA EBITA margin 0 5 10 15 20 25 Total net sales 0 2,000 4,000 6,000 8,000 10,000 20212020201920182017 SEKm P. 96 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Other disclosures Risk and uncertainty factors The Group is exposed to several risks from liquid funds, trade receivables, borrowings, commodities, tax, foreign exchange, credit, and other ﬁnancial risks. Electrolux Professional’s Board of Directors has the ultimate responsibility for risk oversight. The ERM Governance Structure is based on the three-lines-of- defense model. Risk and risk manage- ment is described on pages 86–90 and note 2 on page 111–113. Research and development A key factor for Electrolux Profession- al’s success is its ability to develop new products that serve customer needs and increase their productivity. This is mainly driven by management decisions to make investments in product de- velopment and the right technologies, leading to a stronger and more com- petitive range of products, which makes it possible for Electrolux Professional to retain its competitiveness and pricing. The product development starts and ends with the customer in mind. The Group’s sales organization has contin- uous interaction with customers in order to understand their needs. Continued investments in research and develop- ment are paramount to the company’s future proﬁtability. Electrolux trademark license agreement Since the separation from the Electrolux group, the “Electrolux” component of the Electrolux brand and trademark (to be used exclusively in combina- tion with “Professional”, i.e. “Electrolux Professional”) and the “Zanussi” brand and trademark are licensed from AB Electrolux to Electrolux Professional pur- suant to a license granted to Electrolux Professional under a trademark license agreement. The trademark license agreement has an initial term of 50 years that can be automatically extend- ed by consecutive 10-year periods, on two occasions, unless terminated two years in advance by either party. For the ﬁrst 15 years of the term, the licenses will be royalty-free. Thereafter, Electrolux Professional will pay a royalty for the licenses amounting to 0.1% of the net sales of licensed products and services, subject to more detailed calculation principles set forth in the agreement. The trademark license agreement is subject to a change-of-control clause, which gives AB Electrolux a right to terminate the agreement or any licenses therein, with immediate eﬀect, in the event that Electrolux Professional is subject to change of control. Such change of control is deemed to occur if, for example, any sale or transfer of the ownership of a controlling interest or majority stake in Electrolux Professional (or a parent company), to another entity which has a substantial consumer ap- pliances business (meaning a consumer appliance business with an annual sales revenue of more than SEK 10bn) in the ﬁrst twelve-month period of the term of the agreement, and thereafter increas- ing annually in line with the Swedish Consumer Price Index (Sw. konsument- prisindex), decided at the sole reason- able discretion of AB Electrolux. The company’s expected future progress For the coming years, the company will remain focused on its strategic pillars to grow sales and proﬁt. Uniﬁed Brands that was acquired on December 1, 2021 is expected to contrib- ute to sales and proﬁt in 2022. In the short term, the company may still be aﬀected by the pandemic, but since large parts of the population in several of the key markets now are vaccinated, the business in the hospi- tality industry is expected to return to pre-pandemic levels in 2022. Remuneration Guidelines for Executive Management The guidelines set forth below were resolved by the Annual General Meeting 2020 and shall apply to the remuner- ation and other terms of employment for the President and CEO and other members of the Executive Management of Electrolux Professional (“Executive Management”). The Executive Manage- ment currently (2021) comprises thirteen executives, including the CEO. The principles shall be applied to employment agreements entered into after the Annual General Meeting in 2021 and to changes made to existing employment agreements thereafter. The guidelines shall be in force until new guidelines are adopted by the Gen- eral Meeting. These guidelines do not apply to any remuneration decided or approved by the General Meeting. Remuneration for the President and CEO is resolved upon by Electrolux Professional AB’s Board of Directors, based on the recommendation of the Remuneration Committee. Remuner- ation for other members of Executive Management is resolved upon by the Remuneration Committee and reported to the Board of Directors. The Remuner- ation Committee shall also monitor and evaluate programs for variable remu- neration for the Executive Management, the application of the guidelines for executive remuneration, as well as the current remuneration structures and compensation levels in the company. The Board of Directors shall, based on the recommendation from the Remu- neration Committee, prepare a pro- posal for new guidelines at least every fourth year and submit it to the Annual General Meeting. The President and CEO and other members of the Exec- utive Management do not participate in the Board of Directors’ processing of and resolutions regarding remunera- tion-related matters in so far as they are aﬀected by such matters. Electrolux Professional has a clear strategy to deliver proﬁtable growth and create shareholder value. A pre- requisite for the successful implementa- tion of the company’s business strategy and safeguarding of its long-term interests, including its sustainability, is that the company is able to recruit and retain qualiﬁed personnel. To this end, it is necessary that the company oﬀers competitive remuneration in relation to the country or region of employment of each Executive Management member. These guidelines enable the company to oﬀer the executive management a competitive total remuneration. More information on the company’s strategy can be found on the company’s website and in the Annual Report. The remuneration terms shall empha- size ‘pay for performance’, and vary with the performance of the individual and the Group. The total remuneration for the Executive Management shall be in line with market practice and may comprise the following components: ﬁxed compensation, variable com- pensation, pension beneﬁts, and other beneﬁts. Employment contracts governed by rules other than those in Sweden may be duly adjusted for compliance with mandatory rules or established local practice, taking into account, to the extent possible, the overall purpose of these guidelines. Fixed compensation The Annual Base Salary (“ABS”) shall be competitive relative to the relevant market and reﬂect the scope of the job responsibilities. Salary levels shall be re- viewed periodically (usually annually) to ensure continued competitiveness and to recognize individual performance. Variable compensation Variable compensation consists of both short-term and long-term incentives. Long-term incentives (“LTI program”) P. 97Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 can be cash based or share-related. Share-related LTI programs are re- solved upon by the General Meeting and are therefore excluded from these guidelines. Each year, the Board of Directors will evaluate whether or not an LTI program shall be adopted or, in case of a share-related LTI program, proposed to the General Meeting. LTI programs shall be distinctly linked to the business strategy and shall always be designed with the aim to further enhance the common interest of par- ticipating employees and Electrolux Professional shareholders of good long-term development for Electrolux Professional. Following the ‘pay for performance’ principle, variable compensation shall represent a signiﬁcant portion of the total compensation opportunity for Executive Management. Variable com- pensation shall always be measured against pre-deﬁned targets and have a maximum above which no payout shall be made. The extent to which the criteria for awarding variable cash remuneration has been satisﬁed shall be determined by the Remuneration Committee when the measurement period has ended. For ﬁnancial objectives, the evaluation shall be based on the annual ﬁnancial result in accordance with the most recent in- terim report for the fourth quarter made public by the company. Short Term Incentive (STI) Members of the Executive Management shall participate in an STI plan under which they may receive variable com- pensation. The objectives in the STI plan shall be ﬁnancial and the measurement period shall be one year. The objectives may consist of EBITA Growth and Net Sales Growth, for example. The maximum STI entitlements shall be dependent on job position and may amount to not more than 100% of ABS. Cash-based LTI programs Variable remuneration may also be paid as a part of cash-based LTI pro- grams. The objectives for cash-based LTI programs shall be ﬁnancial and aim to measure the company’s growth and proﬁtability. The objectives may consist of Earnings per Share and Operating Cash Flow, for example. The measure- ment period for the satisfaction of the objectives shall be one year, however, any payout under the program shall not be awarded until two years after the expiry of the measurement period provided that the conditions for payout are fulﬁlled. The payout, if any, shall be used by the participant to purchase shares in Electrolux Professional and the participant shall be required to hold such shares for a holding period of two years after the payout. The purpose of a cash based LTI program is thus for the participants to build up a shareholding in the company in order to create a common ownership interest between the participants and the shareholders. Cash based LTI programs shall always be de- signed with the aim to further enhance the common interest of participating employees and Electrolux Professional shareholders of good long-term devel- opment for Electrolux Professional. The maximum LTI entitlements shall be dependent on job position and may amount to not more than 100% of ABS. Extraordinary arrangements Additional variable compensation may be approved in extraordinary circum- stances under the conditions that such extraordinary arrangement is made for recruitment or retention purposes, is agreed on an individual basis, does not exceed three (3) times the ABS, and is earned and/or paid out in instalments over a minimum period of two (2) years. Such additional variable remuneration may also be paid on an individual level for extraordinary performance beyond the individual’s ordinary tasks and shall in these situations not exceed 30% of the ABS and be paid in one instalment. Right to reclaim variable remuneration Terms and conditions for variable remu- neration should be designed to enable the Board, under exceptional ﬁnancial circumstances, to limit or cancel pay- ments of variable remuneration provid- ed that such action is deemed reason- able (malus). The Board shall also have the possibility, under applicable law or contractual provisions and subject to the restrictions that may apply under law or contract, to in whole or in part reclaim variable remuneration paid on incorrect grounds (claw-back). Pension and Beneﬁts Old age and survivor’s pension, disabili- ty beneﬁts, and healthcare beneﬁts shall be designed to reﬂect home country practices and requirements. When pos- sible, pension plans shall be based on deﬁned contribution. In individual cases, depending on provisions in collective agreements, tax and/or social security legislation to which the individual is sub- ject, other schemes and mechanisms for pension beneﬁts may be approved. For the Executive Management the deﬁned pension contributions shall not exceed 40% of the ABS unless the entitlement is higher under applicable collective agreements. Other beneﬁts, such as company cars and housing, may be provided on an individual level or to the entire Executive Management. Costs relating to such beneﬁts may amount to not more than 20% of the ABS. Members of the Executive Management who are expatriates or relocated permanently to another country, may receive additional remuneration and other beneﬁts to the extent reasonable in light of the special circumstances associated with the relo- cation arrangement. Such beneﬁts shall be determined in line with the Group’s Directive on International Assignments or applicable local relocation policy, and may for example include relocation costs, housing, tuition fees, home travel, tax support, and tax equalization. Notice of Termination and Severance Pay The notice period for the President and CEO shall be twelve months if Electrolux Professional takes the initiative to termi- nate the employment and six months if the President and CEO takes the initia- tive to terminate the employment. For other members of the Executive Man- agement the notice period shall be be- tween six to twelve months if Electrolux Professional takes the initiative to terminate the employment and three to six months if the Executive Management member takes the initiative to terminate the employment. In individual cases, contractual sever- ance pay may be approved in addi- tion to the notice periods. Contractual severance pay may only be payable upon Electrolux Professional’s termina- tion of the employment arrangement or where an Executive Management member gives notice as the result of an important change in the working situa- tion, because of which he or she can no longer perform to standard. This may be the case for instance in the event of a substantial change in ownership of Electrolux Professional in combination with a change in reporting line and/or job scope. Contractual severance pay may for the individual include the continuation of the ABS for a period of up to twelve months following termination of the employment agreement; no other ben- eﬁts shall be included. These payments shall be reduced by the equivalent value of any income that the individual earns during that period of up to twelve months from other sources of income, either from employment or from other business activities. P. 98 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 In addition to the above, compensa- tion for any non-compete undertaking may be awarded. Such compensation shall be based on the ABS at the time of notice of termination of the em- ployment, unless otherwise stipulated by mandatory collective agreement provisions, and be awarded over the period for which the non-compete clause applies, which should not exceed twelve months after termination of the employment. Salary and employment conditions for employees In the preparation of the Board of Di- rectors’ proposal for these remuneration guidelines, salary and employment con- ditions for employees of the company have been taken into account by includ- ing information on the employees’ total income, the components of the remu- neration and increase and growth rate over time, in the Remuneration Commit- tee’s and the Board of Directors’ basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable. Deviations from the guidelines The Board of Directors may temporarily resolve to deviate from the guidelines, in whole or in part, if in a speciﬁc case there is special cause for the deviation and a deviation is necessary to serve the company’s long-term interests, including its sustainability, or to ensure the company’s ﬁnancial viability. The Remuneration Committee’s tasks include preparing the Board of Directors’ reso- lutions in remuneration-related matters. This includes any resolutions to deviate from the guidelines. Note 26 of the Annual Report includes a detailed description of existing remu- neration arrangements for the Executive Management Team. Variable long-term share program (LTI 2021) The company implemented a perfor- mance based long-term share incentive program in 2021 (LTI2021) for senior managers and key employees, com- prising up to 30 participants, following approval at the 2021 Annual General Meeting. Participants are oﬀered an allocation of Performance Shares, provided that the participant remains employed until January 1, 2024. Partici- pant’s are divided into four groups; CEO and President (”Group 1”); other mem- bers of Executive Management and Se- nior Managers (“Groups 2 & 3”); as well as certain other key employees (”Group 4”). The Performance Shares shall be based on maximum performance values for each participant category. The maximum performance value for the participants in Group 1 will be 100% of the participant’s annual base salary for 2021, for participants in Group 2, 80% of the participant’s annual base salary for 2021, for participants in Group 3, 60% of the participant’s annual base salary for 2021, and for participants in Group 4,40% of the participant’s annual base salary for 2021. The total sum of the maximum values of the Performance Shares thus deﬁned for all participants will not exceed SEK 34m excluding social security contributions. Each maximum value shall thereafter be converted into a maximum num- ber of Performance Shares , based on the Volume Weighted Average Price (VWAP), paid for Electrolux Professional B shares on Nasdaq Stockholm during a period of 20 trading days before the day the participants are invited to par- ticipate in the program. The calculation of the number of Performance Shares shall be connected to performance targets for the Group established by the Board for (i) earnings per share and (ii) operating cash ﬂow after investments. The performance tar- gets adopted by the Board will stipulate a minimum level and a maximum level, with the relative weight of the perfor- mance targets (i) and (ii) being 60% and 40% respectively. The performance period is the ﬁnan- cial year 2021. Performance outcome of the established performance targets will be determined by the Board after the expiry of the performance period. If both performance conditions in the Share Program 2021 are met, allocation of Performance Shares will take place in the ﬁrst half of 2024. Allocation will be free of charge except for tax liabilities. Proposed appropriation of proﬁt Electrolux Professional’s target is for the dividend to correspond to approximate- ly 30% of the income for the period. The Board of Directors proposes to pay a dividend of SEK 0.50 (0.00) per share, corresponding to around 30% of the income for the period, in total SEK 144m. SEK 6,119m to be carried forward. Parent Company The Parent Company’s activities include the head oﬃce as well as production and sales in and from Sweden. During 2021, Electrolux Professional AB opened a branch oﬃce in Pordenone, Italy. Net sales for the Parent Company, Electrolux Professional AB, for 2021 amounted to SEK 2,340m (2,266) of which SEK 884m (886) was sales to Group Companies and SEK 1,456m (1,380) sales to external customers. Income before tax was SEK 524m (–1,822). Income for the year amounted to SEK 489m (–1,886). Capital expenditure in tangible and intangible assets was SEK 42m (12). Liquid funds at the end of the period amounted to SEK 391m, compared to SEK 425m at the start of the year. Undistributed earnings in the Parent Company at the end of the year amounted to SEK 6,263m, compared to SEK 5,794m at the start of the year. The income statement and balance sheet for the Parent Company are pre- sented on pages 103–104. P. 99Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Consolidated statement of total comprehensive income SEKm Note 2021 2020 Net sales 3, 4 7 ,86 2 7,263 Cost of goods sold 5, 7 –5 ,210 –4,896 Gross operating income 2,653 2,367 Selling expenses 5, 7 –1,38 2 –1,355 Administrative expenses 5, 7 –652 –631 Other operating income/expenses 5, 6 –2 7 5 Operating income 592 387 Financial items, net 9 –4 –24 Income after ﬁnancial items 5 87 363 Taxes 10 –101 –85 Income for the period 4 87 278 Items that will not be reclassiﬁed to income for the period: Remeasurement of provisions for post-employment beneﬁts 21 141 83 Income tax relating to items that will not be reclassiﬁed –18 –8 Total 124 75 Items that may be reclassiﬁed subsequently to income for the period: Exchange-rate diﬀerences on translation of foreign operations 154 –263 Other comprehensive income, net of tax 11 278 –188 Total comprehensive income for the period 7 64 90 Income for the period attributable to: Equity holders of the Parent Company 4 87 278 Total 4 87 278 Total comprehensive income for the period attributable to: Equity holders of the Parent Company 7 64 90 Total 7 64 90 Earnings per share, SEK 20 For income attributable to the equity holders of the Parent Company: Basic, SEK 1.69 0.97 Diluted, SEK 1.69 0.97 Average number of shares 20 Basic, million 2 8 7. 4 287.4 Diluted, million 2 8 7. 7 287.4 P. 100 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Consolidated balance sheet SEKm Note December 31, 2021 December 31, 2020 ASSETS Non-current assets Property, plant and equipment, owned 12 1,486 1,254 Property, plant and equipment, right-of-use 8 318 211 Goodwill 13 3,068 1,690 Other intangible assets 13 999 305 Deferred tax assets 10 372 344 Pension plan assets 21 1 65 21 Other non-current assets 14 20 27 Total non-current assets 6,428 3,853 Current assets Inventories 15 1,416 1,086 Trade receivables 17, 18 1,625 1,265 Tax assets 80 53 Other current assets 16 225 244 Cash and cash equivalents 18 836 797 Total current assets 4,182 3,444 Total assets 10,609 7,297 EQUITY AND LIABILITIES Equity attributable to equity holders of the Parent Company Share capital 20 29 29 Other paid-in capital 20 5 5 Other reserves 20 1 5 7 3 Retained earnings 20 3 ,334 2,747 Equity attributable to equity holders of the Parent Company 3,525 2,784 Total equity 3,525 2,784 Non-current liabilities Long-term borrowings 18 1,215 601 Long-term lease liabilities 18 251 151 Deferred tax liabilities 10 135 135 Provisions for post-employment beneﬁts 21 125 152 Other provisions 22 270 243 Total non-current liabilities 1, 99 6 1,282 Current liabilities Trade payables 18 1,814 1,289 Tax liabilities 429 324 Other liabilities 23 1,59 7 988 Short-term borrowings 18 1,045 403 Short-term lease liabilities 18 75 65 Other provisions 22 130 162 Total current liabilities 5,088 3,232 Total equity and liabilities 10,609 7,297 P. 101Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Change in consolidated equity Attributable to equity holders of the Parent Company SEKm Note Share capital Other paid-in capital Other reserves Retained earnings Total equity Opening balance, January 1, 2020 25 5 266 2,415 2,711 Adjustment to opening balance 20 – – – –17 –17 Adjusted opening balance 25 5 266 2,398 2,69 4 Income for the period – – – 278 278 Remeasurement of provisions for post-employment beneﬁts – – – 83 83 Exchange diﬀerences on translation of foreign operations – – –263 – –263 Income tax relating to other comprehensive income – – – –8 –8 Other comprehensive income, net of tax – – –263 75 –188 Total comprehensive income for the period – – –263 353 90 Dividend – – – – – Bonus issue 4 – – –4 – Total transactions with equity holders 4 – – –4 – Closing balance, December 31, 2020 29 5 3 2,747 2,784 Opening balance, January 1, 2021 29 5 3 2,7 47 2,784 Income for the period – – – 4 87 4 87 Remeasurement of provisions for post-employment beneﬁts – – – 141 141 Exchange diﬀerences on translation of foreign operations – – 154 – 154 Income tax relating to other comprehensive income – – – –18 –18 Other comprehensive income, net of tax – – 154 124 2 78 Total comprehensive income for the period – – 154 610 7 64 Dividend – – – – – Share-based payments – – – –2 3 –23 Total transactions with equity holders – – – –2 3 –23 Closing balance, December 31, 2021 29 5 1 57 3,334 3,525 P. 102 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Consolidated cash ﬂow statement SEKm Note 2021 2020 Operations Operating income 592 387 Depreciation and amortization 295 297 Other non-cash items 4 91 Interest and similar items received 14 5 Interest and similar items paid –16 –27 Taxes paid –141 –66 Cash ﬂow from operations, excluding change in operating assets and liabilities 74 6 687 Change in operating assets and liabilities Change in inventories –139 113 Change in trade receivables –216 362 Change in accounts payable 398 –140 Change in other operating assets, liabilities and provisions 312 –293 Cash ﬂow from change in operating assets and liabilities 355 41 Cash ﬂow from operations 1,101 729 Investments Acquisition of operations 25 –2,103 – Capital expenditure in property, plant and equipment 12 –155 –267 Capital expenditure in product development 13 – –1 Capital expenditure in other intangibles 13 –4 –5 Other 31 26 Cash ﬂow from investments –2,231 –246 Cash ﬂow from operations and investments –1,130 483 Financing Change in short-term borrowings, net 18 6 56 413 New long-term borrowings 18 61 5 600 Amortization of long-term borrowings 18 –0 –1 Payment of lease liabilities 18 –74 –82 Share-based payments –30 – Change in ﬁnancial liabilities, Electrolux Group 18, 28 – –1,224 Cash ﬂow from ﬁnancing 1,166 –294 Total cash ﬂow 3 6 189 Cash and cash equivalents at beginning of period 79 7 651 Exchange-rate diﬀerences pertaining to cash and cash equivalents 3 –42 Cash and cash equivalents at end of period 836 797 P. 103Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Parent Company income statement SEKm Note 2021 2020 Net sales 4 2,364 2,266 Cost of goods sold –1,691 –1,566 Gross operating income 673 700 Selling expenses –349 –330 Administrative expenses –185 –135 Other operating income/expenses 6 11 –6 Operating income 150 229 Financial income/expenses 9 369 –7 Impairment of shares in subsidiaries – –2,039 Income after ﬁnancial items 519 –1,817 Appropriations 29 5 –5 Income before taxes 524 –1,822 Taxes 10 –35 –64 Income for the period 489 –1,886 * No statement of comprehensive income is presented for the Parent Company since the Parent Company does not have any transactions that should be recognized in other comprehensive income. P. 104 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Parent Company balance sheet SEKm Note December 31, 2021 December 31, 2020 ASSETS Non-current assets Property, plant and equipment, owned 12 225 211 Intangible assets 13 61 84 Deferred tax assets 10 13 10 Shares in subsidiaries 14, 30 6,422 6,147 Long term receivables from subsidiaries 14 2,560 – Total non-current assets 9,281 6,452 Current assets Inventories 15 209 194 Receivables from subsidiaries 584 969 Trade receivables 17 265 247 Tax assets 44 20 Other current assets 41 30 Cash and cash equivalents 18 391 425 Total current assets 1,534 1,885 Total assets 10,815 8,337 EQUITY AND LIABILITIES Restricted equity Share capital 20 29 29 Statutory reserve 5 5 Development reserve 10 13 44 47 Non-restricted equity Retained earnings 5,774 7,680 Income for the period 489 –1,886 6,263 5,794 Total equity 6,307 5,841 Untaxed reserves 29 108 114 Non-current liabilities Other provisions 22 95 92 Other non-current loans 18 1,215 600 Total non-current liabilities 1,310 692 Current liabilities Payables to subsidiaries 1,418 779 Trade payables 337 253 Tax liabilities 38 49 Other liabilities 23 253 201 Short-term borrowings 18 1,039 402 Other provisions 22 5 6 Total current liabilities 3,090 1,690 Total equity, untaxed reserves, and liabilities 10,815 8,337 P. 105Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Parent Company change in equity Restricted equity Non-restricted equity SEKm Note Share capital Statutory reserve Development reserve Fair value reserve Retained earnings Total equity Opening balance, January 1, 2020 25 5 16 – 7,681 7,727 Income for the period – – – – –1,886 –1,886 Total comprehensive income for the period – – – – –1,886 –1,886 Dividend – – – – – – Development reserve – – –3 – 3 – Bonus issue 4 – – – –4 – Total transactions with equity holders 4 – –3 – –1 – Closing balance, December 31, 2020 29 5 13 – 5,794 5,841 Income for the period – – – – 489 489 Total comprehensive income for the period – – – – 489 489 Dividend – – – – – – Share based payments – – – – –23 –23 Development reserve – – –3 – 3 – Bonus issue – – – – – – Total transactions with equity holders – – –3 – –20 –23 Closing balance, December 31, 2021 29 5 10 – 6,263 6,307 P. 106 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Parent Company cash ﬂow statement SEKm Note 2021 2020 Operations Operating income 150 229 Depreciation and amortization 12, 13 63 48 Financial items paid, net –4 –6 Taxes paid –74 –16 Cash ﬂow from operations, excluding change in operating assets and liabilities 135 255 Change in operating assets and liabilities Change in inventories –15 –19 Change in trade receivables –18 –6 Change in accounts payable 84 –66 Change in other operating assets, liabilities and provisions 13 –85 Cash ﬂow from change in operating assets and liabilities 64 –176 Cash ﬂow from operations 199 79 Investments Investments in shares and participations – – Capital expenditure in property, plant and equipment 12 –42 –15 Capital expenditure in other intangibles 13 – – Other – –10 Cash ﬂow from investments –42 –25 Cash ﬂow from operations and investments 157 54 Financing Change in internal lending and borrowing –1,515 382 Change in external short-term borrowing 18 635 396 New long-term borrowing 18 615 600 Share based payments –30 – Dividend to Electrolux Group – –222 Dividend from subsidiaries 104 – Change in ﬁnancial liabilities, Electrolux Group 18 – –990 Cash ﬂow from ﬁnancing –191 166 Total cash ﬂow –34 220 Cash and cash equivalents at beginning of period 425 205 Cash and cash equivalents at end of period 391 425 P. 107Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Notes This section describes the comprehensive basis of prepa- ration which has been applied in preparing the consolidat- ed ﬁnancial statements. Accounting principles for speciﬁc accounting areas and individual line items are described in the related notes. Electrolux Professional AB’s city of residence is Stockholm, Sweden. The address is Franzéngatan 6, 112 51 Stockholm. The consolidated ﬁnancial statements were authorized for issue by the Board of Directors on March 29, 2022. The bal- ance sheets and income statements are subject to approval by the Annual General Meeting of shareholders on April 28, 2022. The terms “Electrolux Professional”, the “Group” or the “Company” refers to, depending on the context, Electrolux Professional AB (publ) (corporate ID No. 556003-0354) or the Group in which Electrolux Professional AB (publ) is the Parent company and its subsidiaries. Enumerated amounts presented in tables and statements may not always agree with the calculated sum of the related line items due to rounding diﬀerences. The aim is for each line item to agree with its source and therefore there may be rounding diﬀer- ences aﬀecting the total when adding up the presented line items. Basis of preparation The consolidated ﬁnancial statements have been pre- pared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU). The consolidated ﬁnancial statements have been prepared under the historical cost convention, except for ﬁnancial instruments at fair value (including derivative ﬁnancial instruments). Some additional information is disclosed based on the requirements in standard ‘RFR 1’ issued by the Swedish Financial Reporting Board and the Swedish Annual Accounts Act. As required by IAS 1, Electrolux Professional companies apply uniform accounting rules, irrespective of national legislation, as deﬁned in the Electrolux Profession- al’s Finance Manual which is fully compliant with IFRS. The policies set out below have been consistently applied to all years presented except for new accounting standards where the application follows the rules in each particular standard. For information on new standards, see the section on new or amended accounting standards below. The Parent Company applies the same accounting principles as the Group, except in the cases speciﬁed in the section entitled ‘Parent Compa- ny accounting principles’. Principles applied for consolidation The consolidated ﬁnancial statements have been prepared by use of the acquisition method of accounting, whereby the assets and liabilities and contingent liabilities assumed in a subsidiary on the date of acquisition are recognized and measured to determine the acquisition value to the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange. The consid- eration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrange- ment. Costs directly attributable to the acquisition eﬀort are expensed as incurred. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. The excess of the consideration transferred over the fair value of the identiﬁable net assets acquired is recorded as goodwill. If the fair value of the acquired net assets exceeds the cost of the business combination, the identiﬁcation and measurement of the acquired assets must be reassessed. Any excess remaining after that reassessment represents a ‘bargain purchase’ and is recognized immediately in the statement of comprehensive income. The consolidated ﬁnancial statements for the Group include the ﬁnancial statements of the Parent Company, Electrolux Professional AB, and its directly and indirectly owned sub- sidiaries after: • elimination of intra-group transactions, balances and unrealized intragroup proﬁts, and • carrying values, depreciation and amortization of acquired surplus values. Deﬁnition of Group companies The consolidated ﬁnancial statements include Electrolux Professional AB and all companies over which the Parent Company (Electrolux Professional AB) has control, i.e., the power to direct the activities; exposure to variable return and the ability to use its power. When the Group ceases to have control or signiﬁcant inﬂuence, any retained interest in the entity is remeasured at its fair value, with the change in car- rying amount recognized in proﬁt or loss. At year-end 2021, the Group consisted of 47 companies. The following apply to acquisitions and divestments: • Companies acquired are included in the consolidated statement of comprehensive income as of the date when Electrolux Professional gains control. • Companies divested are included in the consolidated statement of comprehensive income up to and including the date when Electrolux Professional loses control. NOTE 1 ACCOUNTING PRINCIPLES P. 108 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Foreign currency translation Foreign currency transactions are translated into the func- tional currency using the exchange rate prevailing at the date of each transaction. Monetary assets and liabilities denominated in foreign currencies are valued at end of period exchange rates and any exchange-rate diﬀerences are included in income for the period. The consolidated ﬁnancial statements are presented in Swedish krona (SEK), which is the Electrolux Professional AB’s functional currency and the Group’s presentation currency according to IAS 21. The balance sheets of foreign subsidiaries are translated into SEK at end of period closing rates. The consolidated statement of comprehensive income is translated at the average rates for the year. Translation diﬀerences thus arising are included in other comprehensive income. 2021 2020 Currency Average End of period Average End of period CNY 1.33 1.42 1.33 1.25 CZK 0.3950 0.4111 0.3969 0.3831 DKK 1.36 1.38 1.41 1.35 EUR 10.15 10.24 10.48 10.06 GBP 11.78 12.21 11.83 11.14 JPY 0.0781 0.0785 0.0861 0.0795 NOK 1.00 1.03 0.98 0.95 RUB 0.1159 0.1207 0.1275 0.1095 THB 0.2685 0.2705 0.2938 0.2735 TRY 0.98 0.70 1.33 1.11 USD 8.57 9.04 9.18 8.19 New or amended accounting standards to be applied in 2021 The following new, amended or improved accounting stan- dards were applicable from January 1, 2021: IFRS 4 Insurance Contracts – deferral of IFRS 9 (issued on 25 June 2020), IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 (issued on 27 August 2020), IFRS 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021 (issued on 31 March 2021). The new, amended or improved standards mentioned above did not have any material impact on Electrolux Professional’s consolidated ﬁnancial statements. New or amended accounting standards to be applied after 2021 The following new, amended or improved accounting stan- dards have been published but are not mandatory for 2021 and have not been early adopted by Electrolux Professional; IFRS 3 Business Combinations, IAS 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, IFRS 17 Insurance Contracts (issued on 18 May 2017); including Amendments to IFRS 17 (issued on 25 June 2020 and Annual Improvements 2018–2020 (All issued 14 May 2020) endorsed by EU on June 28 2021. The following have not yet been endorsed by EU: IAS 1 Presentation of Financial Statements: Classiﬁcation of Liabilities as Current or Non-current and Classiﬁcation of Liabilities as Current or Non-current – Deferral of Eﬀective Date (issued on 23 January 2020 and 15 July 2020 respectively), IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclo- sure of Accounting policies (issued on 12 February 2021), IAS 8 Accounting policies, Changes in Accounting Estimates and Er- rors: Deﬁnition of Accounting Estimates (issued on 12 February 2021), IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (issued on 7 May 2021) and Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information (issued on 9 December 2021). The new, amended or improved standards mentioned above are not expected to have any material impact on Electrolux Professional’s consolidated ﬁnancial statements. New interpretations of accounting standards No new interpretations, with eﬀective date after 2021, have been issued by the International Financial Reporting Inter- pretation Committee (IFRIC). Critical accounting policies and key sources of estimation uncertainty Use of estimates Management has made a number of estimates and assump- tions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the consolidated ﬁnancial statements in conformity with IFRS. Actual results may diﬀer from these estimates under diﬀerent assumptions or conditions. Below, Electrolux Professional has summarized the accounting policies that require more sub- jective judgment by management in making assumptions or estimates regarding the eﬀects of matters that are inherently uncertain. Asset impairment and useful lives Non-current assets, including goodwill, are evaluated for impairment yearly or whenever events or changes in circum- stances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its recoverable amount, being the higher of fair value less costs of disposal and value in use. Impairment charges are record- ed when the information shows that the carrying amount of an asset is not recoverable. The fair value is estimated by using the discounted cash ﬂow method based on expected future cash ﬂows. Diﬀerences in the estimation of expected future cash ﬂows and the discount rates used may result in diﬀerent asset valuations. The yearly impairment testing of goodwill and other intan- gible assets with indeﬁnite useful lives, has not indicated any impairment. See Note 13 for more information. Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Use- ful lives for property, plant and equipment are estimated between 10 and 40 years for buildings and 15 years for land improvements and between 3 and 15 years for machinery, technical installations and other equipment. Management regularly reassesses the useful lives of all signiﬁcant assets. See Note 12 for more information. P. 109Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Deferred taxes In the preparation of the consolidated ﬁnancial statements, Electrolux Professional estimates the income taxes in each of the tax jurisdictions in which the Group operates as well as any deferred taxes based on temporary diﬀerences. Deferred tax assets relating to tax loss carry-forwards and temporary diﬀerences are recognized in those cases when future taxable income is expected to permit the recovery of those tax assets. Changes in assumptions in the projection of future taxable income as well as changes in tax rates could result in signiﬁcant diﬀerences in the valuation of deferred taxes. See Note 10 for more information. Current taxes Electrolux Professional’s provisions for uncertain outcome of tax audits and tax litigations are based on management’s best estimates and recorded in the balance sheet. The best estimate of the expected tax to be paid is based on a qualitative assessment of all relevant information. In assess- ing any appropriate provision requirements for uncertain tax items, the Group considers progress made in discussions with tax authorities, expert advice on the likely outcome and any recent developments in case law. The estimates might diﬀer from the actual outcome and the timing of the potential eﬀect on Electrolux Professional’s tax cost and cash ﬂow is normally not possible to predict. Any such variations will aﬀect the ﬁnancial results in the year in which such a determination is made. In recent years, tax authorities have been focusing on transfer pricing. Transfer-pricing matters are normally very complex, include high amounts and it might take several years to reach a conclusion. During 2020, Electrolux Professional has in the balance sheet reclassiﬁed provisions for uncertain tax positions from Other Provisions to Tax Liabilities. This reclassiﬁcation is made with a retroactive eﬀect on prior years. Trade receivables and calculation of loss allowance Receivables are reported net of provision for expected credit losses. The net value reﬂects the amounts that are expected to be collected, based on circumstances known at the bal- ance sheet date. When measuring expected credit loss the Group uses a model based on historical and forward looking information. The most important components of the model are historical credit losses and assumptions about various future market eﬀects such as GDP development and ability to pay for individual customers. Changes in circumstances such as higher than expected defaults or changes in the ﬁnancial situation of a signiﬁcant customer could lead to signiﬁcantly diﬀerent valuations. See Note 17 for more information. Post-employment beneﬁts Electrolux Professional sponsors a number of deﬁned contri- bution and deﬁned beneﬁt pension plans for its employees. The pension calculations, referring to deﬁned beneﬁt plans, are based on actuarial assumptions regarding, e.g., discount rate, mortality rates, future salary and pension increases. Changes in assumptions directly aﬀect the deﬁned beneﬁt obligation, service cost, interest income and expense. See Note 21 for more information. Restructuring The Group’s deﬁnition of restructuring charges include estimated costs for personnel reductions and other direct costs related to the termination of the activity, as well as re- quired write-downs of assets and other non-cash items. The charges are calculated based on detailed plans for activities that are expected to improve the Group’s cost structure and productivity. In general, the outcome of similar historical events in previous plans are used as a guideline to minimize these uncertainties. See Note 22 for more information. Warranties As is customary in the industry in which Electrolux Professional operates, some of the products sold are cov- ered by an original warranty, which is included in the price and which extends for a predetermined period of time. Provisions for this original warranty are estimated based on historical data regarding service rates, cost of repairs, etc. An epidemic failure can have a signiﬁcant eﬀect on the amount reported as warranty provision. See Note 22 for more information. Disputes Electrolux Professional is involved in disputes in the ordi- nary course of business. The disputes may concern, among other things, product liability, alleged defects in delivery of goods and services, patent rights and other rights and other issues on rights and obligations in connection with Electrolux Professional operations. Such disputes may prove costly and time consuming and may disrupt normal operations. In addition, the outcome of complicated disputes is diﬃcult to foresee. It cannot be ruled out that a disadvantageous outcome of a dispute may prove to have a material adverse eﬀect on the Group’s earnings and ﬁnancial position. Covid-19 The global Covid-19 pandemic continued to aﬀect the hos- pitality industry, such as hotels, restaurants, and pubs which represents approximately 50% of our sales. However, during the second half of the year there has been a strong sales recovery and several, but not all, markets are now back to pre-pandemic levels. As a consequence of the Covid-19 outbreak, Electrolux Professional has assessed all potential impacts on the carry- ing value of assets and liabilities. Trade receivables No material increase in actual credit losses has been ex- perienced. Expected credit loss provision has decreased to SEK 93m as at December 31, 2021 compared to SEK 100m on December 31, 2020. Credit insurance and other forms of collateral, for example letters of credit and bank guarantees, are used as a pro- tection against credit risk. In addition, some sales are also made to governmental institutions which are deemed as secure. Inventories During the year, no extraordinary material write-down of ﬁnished goods inventories or supplies have been recognized as a consequence of the Covid-19 situation. P. 110 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Impairment of assets No material impairment of assets has been recognized in the consolidated ﬁnancial statements as a direct consequence of Covid-19. Leases The Group has not received any reductions of oﬃce rent during the year. Government grants and government assistance Companies within the Group have received, or assume that they fulﬁll the requirements for, monetary help from govern- ments. For 2021 the amount recognized in proﬁt or loss is SEK 45m (95) and refers mainly to short-term furlough of personnel. Parent Company accounting principles Electrolux Professional AB is the parent company of the group with oﬃces in Stockholm, Ljungby, Malmö, and Partille. Stockholm is the base for the corporate functions whereas the operational part of the business is located in Ljungby, with factory and sales. The parent company is preparing the annual report in compliance with the Swedish Annual Accounts Act (1995:1554) and recommendation RFR2, Accounting for legal entities of the Swedish Financial Reporting Board. RFR2 pre- scribes the amendments and exceptions from IFRS applica- ble to the parent company. This means that all IFRS stan- dards and statements shall be applied when possible within the frame of the Annual Accounts Act with consideration taken to Swedish legislation in accounting and taxation. The ﬁnancial reports of the parent company are presented in Swedish krona (SEK), rounded in millions. The accounting principles are applicable for all periods unless stated other- wise. More detailed information on accounting principles can be found in the text above regarding the Group’s appli- cation of these. Shares in subsidiaries Holdings in subsidiaries are recognized according to the cost method of accounting. If there is an indication that the recognized value of shares has declined, they are tested for impairment according to IAS36. According to RFR2 trans- action costs are recognized as part of the acquisition value in the parent company, unlike the group where they are considered as costs. Anticipated dividends Dividends decided on each of the subsidiaries annual gen- eral meetings are recognized in the income statement. Antic- ipated dividends are recognized if the parent company has exclusive rights to decide about dividends from subsidiaries and has decided on amount before the parent company’s annual report or quarterly report has been published. Taxes In the parent company untaxed reserves are recognized including deferred tax liability. In the group’s statement it is divided between deferred tax liability and equity. Tax on group contribution is included in the parent company’s income statement. Appropriations and untaxed reserves According to Swedish tax legislation the parent company has the possibility to make depreciations in excess to plan. They are recognized as appropriations in the income state- ment and as untaxed reserves in the balance sheet. Group contribution and cash increase In Sweden, group contributions are deductible and when given by subsidiaries or the parent company they are rec- ognized as appropriations in the income statement. Cash increase is not deductible and if paid by the parent compa- ny it is recognized as shares in subsidiaries and is subject to impairment if needed. This is described more in detail above in “shares in subsidiaries”. Post-employment beneﬁts Electrolux Professional AB applies the simpliﬁed rule ac- cording to RFR2, for recognition of deﬁned beneﬁt plans. For further information see note 21. Intangible assets According to RFR2 the parent company amortizes goodwill and trademarks over 5 years. Reserve for development In the parent company, own developed intangible assets are recognized as a reserve for development. It is amortized, and the closing balance of the reserve is transferred from un- restricted to restricted equity in compliance with the Swedish Annual Accounts Act.. Leases Lease agreements for the parent company are reported as operational, where the cost is linear over the lease period. Financial guarantees Financial guarantees for the parent company in beneﬁt for subsidiaries are reported as contingent liabilities. A provision is booked if there is an indication that any of these may lead to a payment. Financial instruments The Parent company does not apply the simpliﬁcation rules for IFRS 9 Financial Instruments, allowed under RFR2. Expected credit loss The Parent company calculates an expected credit loss pro- vision for its trade receivable position and lending to each of its subsidiaries. The default probability of each subsidiary is based on a credit rating model per country. P. 111Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Financial risk management The Group is exposed to a number of risks from liquid funds, trade receivables, trade payables, borrowings, commodities and foreign exchange. The risks include: • Financing risk in relation to the Group’s capital requirements; • Foreign-exchange risk on commercial ﬂows and net investments in foreign subsidiaries; • Commodity-price risk aﬀecting the expenditure on raw materials and components; • Credit risk relating to ﬁnancial and commercial activities; and • Interest-rate risk on liquid funds and borrowings. The Board of Directors of Electrolux Professional AB has es- tablished several policies (hereinafter all policies are referred to as the Financial Policy) to monitor and manage the ﬁnan- cial risks relating to the operations of the Group. The primary responsibility for ensuring that these risks are managed in an eﬃcient and professional way lies within Group Treasury with the support of the management of each operational unit. Moreover, the commercial credit risk is managed at an operating level by the controlling department and is guided by the Group Credit Policy. The policies are adopted through a delegation of author- ity matrix, which deﬁnes roles and responsibilities within the Group management structure. Applications of the policies are monitored through internal controls and breaches managed according to pre-agreed procedures. The Board of Directors meets on a regular basis (at least quarterly) to discuss business, policies compliance as well as governance topics. Group Treasury in Stockholm provides services to the business, co-ordinates access to ﬁnancial markets, monitors and manages the ﬁnancial risks through internal risk reports, which analyze exposures by degree and magnitude of the risk. The Group’s Financial Policy governs the use of ﬁnancial derivatives. The internal auditors review on a continuous basis compliance with policies and exposure limits. Capital structure The Group deﬁnes its capital as equity stated in the balance sheet. The Group’s objective is to have a capital structure resulting in an eﬃcient weighted cost of capital and suﬃcient credit worthiness, where operating needs, and the needs for potential acquisitions are considered. Financing risk Financing risk refers to the risk that ﬁnancing of the Group’s capital requirements and reﬁnancing of existing borrowings could become more diﬃcult or more costly. This risk can be decreased by ensuring that maturity dates are evenly dis- tributed over time, and that total short-term borrowings do not exceed liquidity levels. According to the Financial Policy, Group Treasury shall assure that the remaining average cred- it duration of the total debt portfolio exceeds two years and at any given point in time liquidity reserves are monitored and kept in line with the Policy. Foreign exchange risk Foreign exchange risk is deﬁned as the risk that ﬂuctuations in currency exchange rates have a negative impact on the company’s ﬁnancial position, proﬁtability or cash ﬂow. In order to manage such eﬀects, the Group covers these risks within the framework of the Financial Policy and the Group’s overall currency exposure shall be managed centrally by Group Treasury. Financing shall as general rule be made in each compa- ny’s local currency and net foreign exchange exposures on ﬁnancial assets and liabilities be hedged by Group Treasury. After hedging, the foreign exchange exposure on ﬁnancial items is immaterial. Transaction exposure from commercial ﬂows Transaction exposure is deﬁned as the conﬁrmed future net of operational and ﬁnancial in- and outﬂows of curren- cies. The Financial Policy stipulates to what extent commer- cial ﬂows are to be hedged. The Group’s geographically widespread production reduc- es the eﬀects of changes in exchange-rates. The remaining transaction exposure is either related to internal sales from producing entities to sales companies or external exposures from purchasing of components and input material for the production paid in foreign currency. If the currency exposure, based on long term contracts in foreign currencies are signiﬁcant, Group Treasury shall be contacted for decisions on potential hedges. Group Treasury is the sole party to authorize execution of ﬁnancial hedge transactions and derivative contracts with external parties. Translation exposure from consolidation of entities outside Sweden Translation exposure is deﬁned as; the risk that ﬂuctuations in currency exchange rates have a negative impact on the balance sheet or consolidated equity. This occurs when a portion of consolidated equity, net assets or a ﬁnancial asset or liability are denominated in a foreign currency. Electrolux Professional does not hedge such exposure. The translation exposures arising from income statements of foreign subsid- iaries are included in the sensitivity analysis below. Foreign-exchange sensitivity from transaction and translation exposure The major net export currencies that Electrolux Professional is exposed to are the EUR, THB and the SEK. The major import currencies that Electrolux Professional is exposed to are the USD, GBP, JPY, DKK, NOK and CNY. These currencies represent the majority of the exposures of the Group. The currency exposure from foreign investments should, when possible, be mitigated by loans in local currency. The remaining foreign net investment should not generally be hedged by ﬁnancial derivatives. In exceptional cases the Group CFO may decide to use ﬁnancial derivatives to hedge equity. Hedge accounting shall apply to all ﬁnancial deriva- tives that are used to hedge equity. The sensitivity analysis below takes into consideration the net transaction ﬂow as disclosed in note 18 and operating income (EBIT – i.e. before tax) by functional currency as per NOTE 2 FINANCIAL RISK MANAGEMENT P. 112 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 end of each year. The table does not cover the equity eﬀect of changes in FX rates. The model assumes the distribution of earnings and costs eﬀective at year-end and does not include any dynamic eﬀects, such as changes in competi- tiveness or consumer behavior arising from such changes in exchange-rates. Sensitivity analysis of major currencies Currency Change Proﬁt or loss impact 2021 Proﬁt or loss impact 2020 USD/SEK –10% –53 –38 GBP/SEK –10% –20 –17 DKK/SEK –10% –10 –8 NOK/SEK –10% –8 –7 CNY/SEK –10% –7 –5 JPY/SEK –10% –7 –9 RUB/SEK –10% –5 –4 TRY/SEK –10% –5 –6 THB/SEK –10% 24 25 EUR/SEK –10% 24 17 Commodity-price risks The commodity risk exposure is deﬁned as; the risk that ﬂuc- tuations in the price of commodities result in an unexpected impact on the consolidated statement of comprehensive income or the consolidated balance sheet of the Group. The purchasing department is responsible for the overall commodity risk management and follow-up on commodity exposures. The purchasing department shall strive to reach a commercial hedge via matching of terms in sales contracts with terms in contracts with existing raw material suppliers. If a signiﬁcant exposure occurs without possibilities to ﬁx prices towards suppliers or pass on potential proﬁt and loss eﬀects to the customer, a ﬁnancial hedge should be considered. In this case Group Treasury shall be contacted for discussion on hedge strategy and hedge counterpart. The purchasing department is not allowed to enter into any ﬁnancial hedges or ﬁnancial contracts. Credit risk Credit risk in ﬁnancial activities Credit risk on ﬁnancial transactions is the risk that the coun- terpart is not able to fulﬁll its contractual obligations related to the Group’s investments of liquid funds, and derivatives. In order to limit exposure to credit risk, the Group has adopted a policy of that excess liquidity shall be deposited at bank accounts in the Group’s core banks, invested in securities is- sued by the core banks or invested in government securities. The Financial Policy states that: • Short term investments in the form of deposits should be done with the Revolving Credit Facility Banks (RCF Banks) or with Banks with a minimum rating of BBB- (investment grade) according to Standard & Poor. • Short term investments in the form of securities should have a minimum rating of A. The Group strives for master netting agreements (ISDA) with all counterparts for derivative transactions. Assets and liabilities will only be netted from a credit risk perspective for counterparts with valid ISDA-agreements. Further, deriva- tives should be spread between counterparties to reduce the credit risk. No ﬁnancial assets or liabilities are oﬀset in the balance sheet. At year-end 2021, derivative assets amount- ed to SEK 13m and derivative liabilities to SEK 5m, and after taken into account master netting agreements the net eﬀect is, derivative assets SEK 8m and derivative liabilities SEK 0m. Credit risk in trade receivables Electrolux Professional’s client base is characterized by a mix of recurring customers such as distributors and one-time customers, as well as multi-operator stores or spare-parts customers. Sales are made on the basis of normal delivery and pay- ment terms. The Financial Policy deﬁnes how credit manage- ment is to be performed in the Group to achieve competitive and professionally performed credit assessment, limited bad debts, and improved cash ﬂow and optimized proﬁt. Electrolux Professional has adopted a Rating Model (EPRM), which is managed by the Group Credit Manager. The purpose with EPRM is to have a common and objec- tive approach to credit risk assessment that enables more standardized and systematic credit evaluations to minimize inconsistencies in decisions. The EPRM is based on a risk/ reward approach and is the basis for the customer assess- ment. The risk of a customer is determined by the EPRM Risk Score in which customers are classiﬁed. EPRM calculates a Risk score that is translated to a Risk class: Low Risk (1), Mod- erate Risk (2), Medium Risk (3), Marked Risk (4), High Risk (5) and Default (6). The amount of information required for the assessment varies with the size of the credit limit and the risk. EPRM is the mandatory tool to use for credit assessment within the Group. External sources of information are used for basic and credit information on customers such as unique identiﬁer (DUNS number) and legal hierarchy. Required type and source of information is determined by Group Credit Management. EPRM must be used for customers with a cred- it limit of minimum SEK 750k unless a higher minimum amount is approved by the Group Credit Manager or the Group CFO. EPRM shall also be used for customers with full credit protec- tion since the credit decision is taken on the gross credit limit. As far as possible customers’ receivables are insured and are covered by a global insurance program. Under the exist- ing arrangements the trade credit insurance covers not only the risk of customer insolvency but also the risk of protracted default. Interest-rate risk on liquid funds and borrowings Interest-rate risk refers to the adverse eﬀects of changes in interest rates on the Group’s income. The main factors deter- mining this risk include the interest-ﬁxing period. NOTE 2 FINANCIAL RISK MANAGEMENT, CONTINUED P. 113Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Liquid funds Liquid funds as deﬁned by the Group consist of cash and cash equivalents, short-term investments, ﬁnancial derivative assets, prepaid interest expenses and accrued interest in- come. Electrolux Professional’s target is that the level of liquid reserve including cash and bank balances, short-term invest- ments and unutilized committed credit facilities shall not fall below SEK 500m. If that level is not maintained, the Board of Directors shall be immediately informed, and appropriate actions shall be taken to restore that preferred level. Interest-rate risk in liquid funds All liquidity is invested in interest bearing instruments, normally with maturities between 0 and 3 months. For more information, see note 18. The Financial Policy states that: • Surplus cash holdings shall be avoided. Excess liquidity shall be oﬀ-set against external debts. • Short term investments shall have a time to maturity that matches large disbursements, planned investments or dividend and may not exceed 12 months. Borrowings According to the Financial Policy, the debt ﬁnancing of the Group shall be managed by Group Treasury in order to en- sure eﬃciency and risk control. Debt shall primarily be raised at parent company level and transferred to subsidiaries through internal loans or capital injections. In this process, swap instruments might be used to convert the funds to the required currency. Short-term ﬁnancing might also be under- taken locally in subsidiaries where there are capital restric- tions. In 2021, the Electrolux Professional Group was primarily funded by a Revolving Credit Facility with its core-banking group, and two bilateral Term Loans with the Swedish Export Credit Corporation (AB Svensk Exportkredit) and the Nordic Investment Bank. For more information, see note 18. Interest-rate risk in borrowings The Financial Policy states that the average interest duration in the debt portfolio (including overdrafts, RCF, term loans and interest rate derivatives) shall be between 0 and 3 years and Group Treasury is responsible to manage the long-term debt portfolio and shall seek a balance between ﬂoating and ﬁxed interest rates in order to limit the negative impact that a rise in market rates may have. Derivatives, such as interest-rate swap agreements, might be used to manage the interest-rate risk by changing the interest from ﬁxed to ﬂoating or vice versa. Any binding of interest rates for a lon- ger time period than 5 years, may not be performed without the approval of the Board of Directors. On the basis of 2021 borrowings with an average interest ﬁxing period of 0.4 years and considering that the amount of loans outstanding as at December 31, 2021 was approx- imately SEK 2.3bn, a 1% point shift in interest rates would impact the Group’s interest expenses by approximately SEK 21m. This calculation is based on a parallel shift of all relevant yield curves (EUR and SEK) simultaneously by one percentage point. In this assessment Electrolux Professional acknowledges that the calculation is an approximation and does not take into consideration the fact that the interest rates on diﬀerent maturities and diﬀerent currencies might change diﬀerently. Electrolux Professional has two segments; • Food & Beverage, and • Laundry. The segments are regularly reviewed by the President and CEO, the Group’s chief operating decision maker. Food & Beverage oﬀers equipment for various profession- al users within the hospitality industry. Products within Food & Beverage comprise mainly of modular cooking, ovens, dish-washing and refrigeration, dispensers for hot (e.g. coﬀee grinders, brewers and coﬀee urns), cold (beverage and juice dispensers) and frozen beverage (frozen drinks and ice cream dispensers) and equipment for soft serve as well as Customer Care. Laundry oﬀers equipment designed to meet a diverse ar- ray of professional requirements, from self-service, hospitality industry to healthcare providers and commercial laundries. The customers include hospital and hotel laundries, apart- ment-building laundries in Scandinavia and launderettes. Products oﬀered within the laundry segment include washing machines, tumble dryers, ironers and ﬁnishing equipment. The segments are responsible for operating income before in- terest, tax and amortizations (EBITA) and operating income, whereas net assets, ﬁnancial items and taxes, as well as net debt and equity, are not reported per segment. The operat- ing income of the segments are consolidated using the same principles as for the Group. The segments consist of separate legal units as well as divisions in multi-segment legal units where some allocations of costs are made. Operating costs not included in the segments are shown under Group com- mon costs, which mainly are costs related to group manage- ment activities typically required to run a Group. Sales between segments are made on market conditions with arm’s-length principles if applicable. NOTE 3 SEGMENT INFORMATION NOTE 2 FINANCIAL RISK MANAGEMENT, CONTINUED P. 114 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Net sales and operating income per segment 2021 2020 SEKm Food & Beverage Laundry Group common costs Total Food & Beverage Laundry Group common costs Total Net sales 4,704 3,159 – 7,862 4,198 3,065 – 7,263 EBITA 299 492 –127 663 87 467 –99 456 Amortization intangible assets –55 –17 –1 –72 –53 –16 –1 –69 Operating income 244 475 –128 592 35 452 –100 387 Financial items, net –4 –24 Income after ﬁnancial items 587 363 Taxes –101 –85 Income for the period 487 278 Depreciation of tangibles asset including right-of-use assets 2021 2020 SEKm Food & Beverage Laundry Group common costs Total Food & Beverage Laundry Group common costs Total Depreciation –142 –77 –4 –223 –146 –77 –5 –228 Geographical information, net sales 1 SEKm 2021 2020 United States 1,167 899 Italy 999 793 Sweden 799 788 France 745 668 Germany 567 561 Great Britain 353 290 Finland 334 324 China 291 224 Japan 257 297 Denmark 247 242 Switzerland 227 241 Spain 165 190 Norway 137 124 Netherlands 117 120 Australia 100 65 Turkey 75 114 Other 1,279 1,323 Total 7,862 7,263 1) Net sales attributable to countries on the basis of customer location. Property, plant and equipment and intangible assets located in the Group’s country of domicile, Sweden, amounted to SEK 281m (240). Property, plant and equipment and intan- gible assets located in all other countries amounted to SEK 5,590m (3,220). Individually, material countries in this aspect are U.S. with SEK 3,093m (710), Italy with SEK 854m (874) and France with SEK 505m (517), respectively. No single customer of the Group represents 10% or more of the external revenue. NOTE 3 SEGMENT INFORMATION, CONTINUED P. 115Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Revenue recognition Electrolux Professional manufacture and sell a wide range of products for the hospitality industry, healthcare providers and commercial laundries. Sales are recorded net of value-added tax, speciﬁc sales taxes, returns, and trade discounts. Sale of ﬁnished products including spare parts and accessories Revenue from sales of products are recognized at a point in time when control of the products has been transferred to the customer. Depending on the contractual terms, trans- fer of control and thus revenue recognition occurs when Electrolux Professional has a present right to payment for the products, the customer has legal title of the products, the products have been delivered to the customer and/or the customer has the signiﬁcant risks and rewards of the owner- ship of the goods. Transaction price — Volume discounts The products are sometimes sold with volume discounts based on aggregate sales over a speciﬁc time period, normally 3–12 months. Revenue from these sales is recog- nized based on the price speciﬁed in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts using either the expected value method or an assessment of the most likely amount. Revenue is only recognized to the extent that it is highly probable that a signiﬁcant reversal will not occur. A contract liability is recognized for expected volume discounts payable to customers in relation to sales made until the end of the reporting period. The estimated volume discount is revised at each reporting date. Receivables, contract assets and contract liabilities A receivable is recognized when the control of the products has transferred as this is the point in time that the consider- ation is unconditional because only the passage of time is required before the payment is due. If the consideration is conditional to additional performance, a contract asset is recorded. If Electrolux Professional receive prepayment from custom- ers a contract liability is recorded. Sale of goods and services combined When contracts include both goods and services the sales value is split into separate performance obligations based on relative stand-alone selling prices, and revenue is recog- nized when each of the separate performance obligations are satisﬁed. In general, types of performance obligations that may occur are products, spare parts, installation, service and support. Sale of services in a separate contract Electrolux Professional recognizes revenue from services related to installation of products, repairs or maintenance service when control is transferred being over the time the service is provided. For service contracts revenue is recog- nized on a linear basis over the contract period. Payments from customers Payment terms are based on local market conditions and always shorter than one year. The Group has no signiﬁcant ﬁnancing component included in the payment terms. Payments to customers Agreements can, in a limited number of cases, be made with customers to compensate for various services or actions the customer takes. This relates to e.g. agreements under which Electrolux Professional agrees to compensate the custom- er for e.g. marketing activities undertaken by the customer. The main rule is that if the payment is related to a distinct service or product it shall be accounted for as a purchase of that service or product. If not, it shall be deducted from the related revenue stream. In practice, if the contract doesn’t include any requirement of follow up from Electrolux Professional side and/or reporting back from the customer that the service is performed, the payment shall be account- ed for as a reduction of revenue. Warranties The most common warranty for Electrolux Professional is to replace a faulty component under legal and common prac- tice warranty terms. In those cases warranty is recognized as a provision. Electrolux Professional also sells extended warranty where the revenue is recognized during the warran- ty period, which usually starts after the legal warranty period. Sometimes warranty oﬀered is including a service part and if it is not possible to separate the warranty from the service, the two are bundled together and revenue is recognized over the warranty period. Freight charges Freight charges can be included in the price of the product sold based on the contractual terms and conditions and revenue is recognized at the same time as for the product. NOTE 4 REVENUE RECOGNITION P. 116 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Revenue types and ﬂows The vast majority of the Group’s revenues of SEK 7,862m (7,263) during the year consisted of ﬁnished products, spare parts, services and accessories. The Group’s net sales in Sweden amounted to SEK 799m (788). Exports from Sweden during the year amounted to SEK 1,556m (1,496), of which SEK 884m (886) were to Group subsidiaries. The Group do not disclose information about the ag- gregate amount of the transaction price allocated to the performance obligations that are unsatisﬁed (or partially unsatisﬁed) as of the end of the reporting period since the major part of the Group’s performance obligations are relat- ed to contracts with original expected duration of less than one year. Disaggregation of revenue Electrolux Professional manufacture and sell a wide range of products for the hospitality industry. Sales of services are not material in relation to Electrolux Professional total net sales. Geography is an important attribute when disaggregating Electrolux Professional’s revenue. Therefore, the table below presents net sales per geographical region based on the location of the customer. Group Parent Company SEKm 2021 2020 2021 2020 Geographical region Europe 5,416 5,053 1,658 1,599 Asia Paciﬁc, Middle East and Africa 1,164 1,187 293 290 Americas 1,282 1,023 413 377 Total 7,862 7,263 2,364 2,266 The table below presents the opening and closing balances of contract liabilities as well as movements during the year. There are no contracts assets to report. Group Contract liabilities SEKm Advances from customers Customer bonuses/ incentives Prepaid in- come – service/ warranty Contract liabilities, total Opening balance, January 1, 2020 109 54 178 341 Gross increase during the period 69 79 41 189 Paid to/settled with customer – –85 – –85 Revenue recognized during the year –16 – –19 –35 Contracts canceled during the year –40 – – –40 Acquisition of operations – – – – Exchange-rate diﬀerences –7 –2 –6 –16 Closing balance, December 31, 2020 115 45 193 353 Opening balance, January 1, 2021 115 45 193 353 Gross increase during the period 339 85 63 487 Paid to/settled with customer – –74 – –74 Revenue recognized during the year –218 – –24 –242 Contracts canceled during the year –0 – – –0 Acquisition of operations – 32 19 51 Other – – 4 4 Exchange-rate diﬀerences 6 4 5 15 Closing balance, December 31, 2021 242 93 260 595 NOTE 4 REVENUE RECOGNITION, CONTINUED P. 117Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Parent Company Contract liabilities SEKm Advances from customers Customer bonuses/ in- centives Prepaid in- come – service/ warranty Contract liabilities, total Opening balance, January 1, 2020 21 20 36 77 Gross increase during the period – 49 13 62 Paid to/settled with customer – –47 – –47 Revenue recognized during the year 0 – –7 –7 Closing balance, December 31, 2020 21 22 41 85 Opening balance, January 1, 2021 21 22 41 85 Gross increase during the period 24 48 16 88 Paid to/settled with customer – –49 – –49 Revenue recognized during the year –15 – –7 –22 Closing balance, December 31, 2021 30 22 50 102 NOTE 4 REVENUE RECOGNITION, CONTINUED Cost of goods sold and additional information on costs by nature Cost of goods sold includes expenses for the following items: • Finished goods i.e. cost for production and sourced products • Warranty • Environmental fees • Warehousing and transportation • Exchange-rate changes on payables and receivables and the eﬀects from currency hedging SEKm 2021 2020 Operating expenses Direct material and components 1,932 1,838 Sourced products 1,343 1,132 Depreciation and amortization 295 297 Salaries, other renumeration and employer contribution 1 2,263 2,019 Other 1,438 1,591 Total 7,271 6,877 1) Includes government grants related to short-time furlough of personnel. Cost of goods sold includes direct material and compo- nents amounting to SEK 1,932m (1,838) and sourced prod- ucts amounting to SEK 1,343m (1,132). The depreciation and amortization charge for the year amounted to SEK 295m (297). Costs for research and development amounted to SEK 333m (300). The Group’s operating income includes net exchange- rate diﬀerences in the amount of SEK 9m (–3). Government grants and government assistance Government grants and government assistance are recog- nized in the ﬁnancial statements when there is reasonable assurance that the entity will comply with the conditions at- tached to them and the grants will be received. Grants which are dedicated to a speciﬁc and clearly identiﬁed expense item, is reported as a deduction of the speciﬁc expense. Grants of a more general character are reported as other operating income. Grants related to assets are reported as prepaid income in the balance sheet. The grant is amortized over the useful life of the asset for which it has been received. Government grants relating to furlough of personnel have been included in personnel cost by SEK 45m (95) and grants of a more general character of SEK 0m (1) is reported as other operating income. For the Parent company, the corresponding government grants for furlough of personnel amounts to SEK 0m (10). Selling and administration expenses Selling expenses include expenses for brand communica- tion, sales driving communication and costs for sales and marketing staﬀ. Selling expenses also include the cost for impairment of trade receivables. Administration expenses include expenses for general management, ﬁnance, human resources and IT expenses related to the named functions. Administration costs related to manufacturing are included in cost of goods sold. NOTE 5 OPERATING EXPENSES P. 118 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 7 MATERIAL PROFIT AND LOSS ITEMS This note summarizes events and transactions with signiﬁcant eﬀects, which are relevant for understanding the ﬁnancial performance when comparing income for the current period with previous periods, including items such as: • Capital gains and losses from divestments of product groups or major units • Close-down or signiﬁcant down-sizing of major units or activities • Larger cost saving programs • Signiﬁcant impairment • Other major cost or income items There were no material proﬁt and loss items in 2021. Mate- rial proﬁt and loss items in 2020 consists of a restructuring program in the third quarter. Material proﬁt and loss items SEKm 2021 2020 Restructuring charge – –77 Total – –77 Material proﬁt and loss items per function SEKm 2021 2020 Cost of goods sold – –29 Selling expenses – –23 Administration expenses – –24 Total – –77 Group Parent Company SEKm 2021 2020 2021 2020 Other operating income Gain on sale of property, plant and equipment 15 1 – – Government grant/subsidy 0 1 – – Other 13 11 12 – Total 28 13 12 – Other operating expenses Loss on sale of property, plant and equipment –1 –1 – – Transaction costs, acquired operations –50 – – – Other –5 –7 –1 –6 Total –55 –8 –1 –6 Other operating income and expenses –27 5 11 –6 NOTE 6 OTHER OPERATING INCOME AND EXPENSES P. 119Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 The major part of the Group’s lease arrangements are those under which the Group is a lessee. This applies to a number of assets such as warehouses, oﬃce premises, vehicles, and certain oﬃce equipment. The normal rental period for oﬃce- and warehouse premises ranges between 3–10 years and for vehicles 3–5 years. A few lease contracts includes extension option. The Group’s activities as a lessor are limited. A contract is, or contains, a lease if the contract conveys the right to control the use of an identiﬁed asset for a period of time in exchange for consideration. Such an assessment is performed at inception of a contract. An identiﬁed lease agreement is further categorized by the Group as either a short-term lease, a lease of a low-value asset or a standard lease. Short-term leases are deﬁned as leases with a lease term of 12 months or less. The Group’s deﬁnition of low-val- ue assets comprises all personal computers and laptops, phones, oﬃce equipment and furniture and all other assets of a value less than SEK 100k when new and are applied on a lease-by-lease basis. Lease payments related to short- term leases and leases of low value assets are recognized as operating expenses on a straight-line basis over the term of the lease. The Group applies the term ‘standard lease’ to all identiﬁed leases which are categorized as neither short-term leases nor leases of a low-value asset. Thus, a standard lease is a lease agreement for which a right-of-use asset and a corresponding lease liability are recognized at commencement of the lease, i.e. when the asset is available for use. The Group’s right-of-use assets and its long-term and short-term lease liabilities are presented as separate line items in the consolidated balance sheet. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease liability is determined as the present value of all future lease payments at the commencement date, discounted using the Group’s calculated incremental borrowing rate determined by coun- try and contract duration (>12–36 months, >37–72 months and >72 months). The following lease payments are included in the mea- surement of a lease liability: • ﬁxed payments, less any lease incentives, • variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date, • amounts expected to be payable under residual value guarantees, • the exercise price of a purchase option if reasonably certain to exercise that option, and • payments of penalties for terminating the lease, if the lease term reﬂects the exercise of that option. Variable lease fees that do not depend on an index or rate (including property tax related to leased buildings) are not included in the measurement the lease liability. The related variable payments are charged to the statement of compre- hensive income as incurred. The lease liability is subsequently measured by reducing the carrying amount to reﬂect the lease payments made and by increasing the carrying amount to reﬂect interest on the lease liability, using the eﬀective interest method. A right-of-use asset is measured at cost comprising the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement day, less any lease incentives received, and any initial direct costs, and restoration costs (unless incurred to produce in- ventories) with the corresponding obligation recognized and measured as a provision under IAS 37. The right-of-use asset is subsequently measured at cost less accumulated depreci- ation, any impairment losses as well as any remeasurement of the lease liability. A remeasurement of the lease liability, and a correspond- ing applicable adjustment to the related right-of-use asset, is performed when: • the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. • the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remea- sured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a ﬂoating interest rate, in which case a revised discount rate is used). • A lease contract is modiﬁed and the lease modiﬁcation is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. A right-of-use asset is normally depreciated on a straight- line basis over the shorter of the asset’s useful life and the lease term. However, if ownership of the asset is reasonably certain to be transferred at the end of the lease, the right- of-use asset is depreciated over its useful life. Depreciation of a right-of-use asset starts at the commencement date of the lease. Impairment of right-of-use asset is determined and accounted for in accordance with IAS 36. A lease payment related to a standard lease is accounted for partly as amortization of the lease liability and partly as interest expense in the statement of comprehensive income. When a lease contract for buildings include non-lease components they are separated, if possible, from lease components and are not part of the lease liability. For lease contracts regarding other asset classes (machinery, vehicles etc.) the lease components and any associated non-lease components are accounted for as a single arrangement. In determining the lease term, extension options are only included if it is determined as reasonably certain to extend. Periods after termination options are only included in the lease term if the lease is reasonably certain not to be ter- minated. A lease term is reviewed if a signiﬁcant event or a signiﬁcant change in circumstances occurs which aﬀects the assessment. NOTE 8 LEASES P. 120 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Lease expenses SEKm 2021 2020 Lease expenses Short-term leases –2 –1 Leases of low-value assets –0 –1 Depreciation –77 –83 Variable lease payments –1 –1 Total –80 –86 Lease liability, interest expense –7 –7 Total cash outﬂow from lease contracts for 2021 amounts to SEK 87m (93). Future payments for committed lease contracts for which the commencement date has not yet occurred amount to SEK 0m (15). For information on maturity proﬁle, see note 18. NOTE 8 LEASES, CONTINUED Property, plant and equipment, right-of-use SEKm Buildings Machinery Vehicles Other equipment Total Carrying amount Opening balance, January 1, 2020 182 12 41 2 238 Acquisitions of operations – – – – – Additions 59 – 36 2 97 Cancellations –27 –1 0 –1 –29 Depreciation –48 –2 –32 –1 –83 Reclassiﬁcation – –8 8 – – Exchange rate diﬀerences –10 0 –2 0 –12 Closing balance, December 31, 2020 156 2 51 2 211 Opening balance, January 1, 2021 156 2 51 2 211 Acquisitions of operations 95 – – – 95 Additions 56 0 24 1 81 Cancellations – – 0 0 0 Depreciation –47 –1 –28 –1 –77 Reclassiﬁcation – – – – – Exchange rate diﬀerences 7 0 1 0 8 Closing balance, December 31, 2021 267 1 48 2 318 P. 121Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Group Parent Company SEKm 2021 2020 2021 2020 Current taxes –135 –133 –38 –50 Deferred taxes 34 48 3 –14 Taxes included in in- come for the period –101 –85 –35 –64 Taxes related to OCI –18 –8 – – Taxes included in total comprehensive income –119 –93 –35 –64 Deferred taxes 2021 include an eﬀect of SEK 1m (2) due to changes in tax rates. Current taxes 2021 includes adjustments related to prior years of SEK –1m (–9). The consolidated accounts contain SEK 22m (25) in deferred tax liabilities attributable to untaxed reserves in the Parent Company. De- ferred tax is only recognized in subsidiaries where the group expects suﬃcient taxable income to utilize the tax beneﬁt. Theoretical and actual tax rates Group Parent Company SEKm 2021 2020 2021 2020 Theoretical tax rate 23.7 21.8 20.6 21.4 Non-taxable/ non-deductible income statement items, net 0.9 3.1 –14.8 –23.9 Non-recognized tax losses carried forward – – – – Utilized non-rec- ognized tax losses carried forward –1.0 –3.5 – – Other changes in estimates relating to deferred tax 0.0 –2.1 – –0.9 Withholding tax 0.3 0.4 0.5 –0.1 Other –6.8 3.7 0.5 – Actual tax rate 17.1 23.4 6.8 –3.5 The theoretical tax rate for the Group is calculated on the basis of the weighted income after ﬁnancial items multiplied by the statutory tax rates. NOTE 10 TAXES Group Parent Company SEKm 2021 2020 2021 2020 Financial income Interest income from subsidiaries – – 13 11 from others 2 4 – 2 Exchange-rate diﬀerences, gains 127 211 109 211 Dividends from subsidiaries – – 379 – Pension interest income 0 1 – – Other ﬁnancial income 0 0 – – Total ﬁnancial income 129 216 501 224 NOTE 9 FINANCIAL INCOME AND FINANCIAL EXPENSES Group Parent Company SEKm 2021 2020 2021 2020 Financial expenses Interest expenses to subsidiaries – – –2 –2 to Electrolux Group – –1 – –1 to others –9 –12 –8 –11 Exchange-rate diﬀerences, losses –110 –212 –109 –211 Pension interest expenses –1 –1 – – Lease liability interest expense –7 –7 – – Other ﬁnancial expenses –6 –6 –13 –6 Total ﬁnancial expenses –133 –240 –132 –231 Financial items, net –4 –24 369 –7 P. 122 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 SEKm 2021 2020 Items that will not be reclassiﬁed to income for the period: Remeasurement of provisions for post-employment beneﬁts Opening balance, January 1 37 –32 Adjustment to opening balance 1 – –6 Adjusted opening balance, January 1 37 –38 Gain/loss to other comprehensive income 141 83 Income tax relating to items that will not be reclassiﬁed –18 –8 Closing balance, December 31 161 37 NOTE 11 OTHER COMPREHENSIVE INCOME Non-recognized deductible temporary diﬀerences As of December 31, 2021, the Group had tax loss carry- forwards and other deductible temporary diﬀerences of SEK 28m (20), which have not been included in computation of deferred tax assets. The decision not to recognize certain deferred tax assets on temporary diﬀerences is based on an assessment where the likelihood of future utilization is evaluated for each of the temporary items. The Group typi- cally does not recognize deferred tax assets on temporary diﬀerences in situations where the ability to utilize these is considered to be limited. The non-recognized temporary diﬀerences will expire as follows: Non-recognized deductible temporary diﬀerences SEKm December 31, 2021 2022 – 2023 – 2024 – 2025 – 2026 – And thereafter – Without time limit 28 Total 28 Deferred tax assets for the Parent Company are related to Other provisions of SEK 16m (12) and unused tax losses carried forward SEK 0m (0). Deferred tax liabilities are mostly related to Property, plant and equipment of SEK 3m (2). The table below show deferred tax assets and liabilities for the group, at the end of each reporting period and the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are netted in the balance sheet in the case the Group has a right to it. Deferred tax assets and deferred tax liabilities SEKm 2021 2020 Deferred tax assets Property, plant and equipment 32 5 Provision for pension obligations 15 17 Provision for restructuring 1 10 Other provisions 39 59 Inventories 32 34 Accrued expenses and prepaid income 57 71 Unused tax losses carried forward 112 93 Other deferred tax assets 155 131 Deferred tax assets before netting of deferred tax assets and liabilities 443 420 Netting of deferred tax assets and liabilities –72 –59 Deferred tax assets net 371 361 Deferred tax liabilities Property, plant and equipment 26 48 Other provisions 6 11 Inventories 2 17 Intangible assets 59 83 Other taxable temporary diﬀerences 115 36 Deferred tax liabilities before netting of deferred tax assets and liabilities 208 195 Netting of deferred tax assets and liabilities –73 –60 Deferred tax liabilities net 135 135 NOTE 10 TAXES, CONTINUED SEKm 2021 2020 Items that may be reclassiﬁed subse- quently to income for the period: Exchange diﬀerences on translation of foreign operations Opening balance, January 1 2 266 Translation diﬀerences 154 –263 Closing balance, December 31 157 2 Other comprehensive income, net of tax 278 –188 1) Adjustment of deferred tax asset related to post-employment beneﬁts for the years 2017–2019 related to the Combined Financial Statement. P. 123Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 12 PROPERTY, PLANT AND EQUIPMENT Group SEKm Land and land improvements Buildings Machinery and technical installations Other equipment Plants under construction and advances Total Acquisition costs Opening balance, January 1, 2020 142 844 1,903 235 133 3,257 Acquired during the year 2 82 34 11 138 267 Acquisition of operations – – – – – – Transfer of work in progress and advances 14 –7 3 84 –94 – Sales, scrapping, etc. – –9 –50 –16 –1 –76 Exchange-rate diﬀerences –9 –32 –63 –15 –16 –135 Closing balance, December 31, 2020 149 878 1,827 299 160 3,313 Acquired during the year 0 4 51 9 91 155 Acquisition of operations 4 124 59 6 10 205 Transfer of work in progress and advances 0 139 37 24 –200 0 Sales, scrapping, etc. –2 –8 –31 –12 –2 –55 Exchange-rate diﬀerences 5 26 30 6 –2 63 Closing balance, December 31, 2021 156 1,163 1,973 331 60 3,683 Accumulated depreciation Opening balance, January 1, 2020 11 336 1,522 1 74 0 2,043 Depreciation for the year 2 29 19 95 – 145 Transfer of work in progress and advances 10 –10 – – – – Sales, scrapping, etc. –5 –6 –48 –10 – –69 Impairment – – 11 4 – 15 Exchange-rate diﬀerences – –12 –56 –7 – –75 Closing balance, December 31, 2020 18 337 1,448 256 0 2,059 Depreciation for the year 1 33 93 18 – 146 Transfer of work in progress and advances – –1 – –0 1 –0 Sales, scrapping, etc. –1 –1 –33 –12 – –47 Impairment –0 0 0 0 – 1 Exchange-rate diﬀerences 0 9 24 5 0 37 Closing balance, December 31, 2021 19 377 1,533 268 2 2,197 Net carrying amount, December 31, 2020 131 541 379 42 161 1,254 Net carrying amount, December 31, 2021 137 787 440 63 58 1,486 Property, plant, and equipment are stated at historical cost less straight-line accumulated depreciation, adjusted for any impairment charges. Parts of property, plant and equipment with a cost that is signiﬁcant in relation to the total cost of the item are depreciated separately. Land is not depreciated as it is considered to have an unlimited useful life. All other depreciation is calculated using the straight-line method and is based on the following estimated useful lives: Land improvements 15 years Buildings 10–40 years Machinery and technical installations 3–15 years Other equipment 3–10 years Total impairment in 2021 was SEK 0m (0) on buildings and land, and SEK 1m (15) on machinery and other equipment and SEK 0m (0) on plants under construction. No borrowing costs were capitalized during 2021 nor 2020. P. 124 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Parent company SEKm Land and land improvements Buildings Machinery and technical installations Other equipment Plants under construction and advances Total Acquisition costs Opening balance, January 1, 2020 8 86 415 77 70 656 Acquired during the year – – 9 3 3 15 Transfer of work in progress and advances – – 63 4 –67 – Closing balance, December 31, 2020 8 86 487 84 6 671 Acquired during the year – – – – 42 42 Transfer of work in progress and advances – – 7 4 –12 –1 Closing balance, December 31, 2021 8 86 494 88 36 712 Accumulated depreciation Opening balance, January 1, 2020 3 20 336 75 0 434 Depreciation for the year 1 2 20 3 – 26 Closing balance, December 31, 2020 4 22 356 78 0 460 Depreciation for the year – 2 21 4 – 27 Closing balance, December 31, 2021 4 24 377 82 0 487 Net carrying amount, December 31, 2020 4 64 131 6 6 211 Net carrying amount, December 31, 2021 4 62 117 6 36 225 NOTE 12 PROPERTY, PLANT AND EQUIPMENT, CONTINUED P. 125Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 13 GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill Goodwill is recognized as an indeﬁnite life intangible asset at cost less accumulated impairment losses. Product development Electrolux Professional capitalizes expenses for certain own development of new products provided that the level of certainty of their future economic beneﬁts and useful life is high. The intangible asset is only recognized if the product is sellable on existing markets and that resources exist to complete the development. Only expenditures which are directly attributable to the new product’s development are recognized. Capitalized development costs are amortized over their useful lives, between 3 and 5 years, using the straight-line method. Software Acquired software licenses and development expenses are capitalized on the basis of the costs incurred to acquire and bring to use the speciﬁc software. These costs are amortized over useful lives, between 3 and 5 years, using the straight- line method. Trademarks Trademarks are reported at historical cost less amortiza- tion and impairment. Trademarks are amortized over their useful lives, estimated to 5 to 10 years, using the straight-line method. Customer relationships Customer relationships are recognized at fair value in con- nection with acquisitions. The values of these relationships are amortized over the estimated useful lives, between 5 and 15 years, using the straight-line method. Intangible assets with indeﬁnite useful lives Goodwill as at December 31, 2021, had a total carrying value of SEK 3,068m (1,690). The allocation, for impairment- testing purposes, on cash-generating units is shown in the table below. All intangible assets with indeﬁnite useful lives are tested for impairment at least once every year to ensure that the value does not deviate negatively from the carrying value and hence if there is any indication of impairment. Single assets are tested more often in case there are indications of impairment. The recoverable amounts of the cash-generating units have been determined based on value in use calcula- tions. The cash-generating units equal the segments. Costs related to group services are carried by the cash-generating units and therefore included in the impairment testing of each cash-generating unit. Common group costs that cannot be allocated on a reasonable and consistent basis to any of the individual cash generating units are included in impair- ment testing on the total carrying amount of all cash-gener- ating units combined. Value in use is calculated using the discounted cash ﬂow model based on by Group management approved forecasts for the coming four years. The forecasts are built up from the estimate of the units within each segment for a individual cash generating unit. The preparation of the forecast requires a number of key assumptions such as volume, price, product mix, prices for raw material and components, which will cre- ate a basis for future growth and gross margin. These ﬁgures are set in relation to historic ﬁgures and external reports on market growth. The cash ﬂow for the last year of the four- year period is used as the base for the perpetuity calcu- lation. The discount rates are based on the pre-tax Group WACC (Weighted Average Cost of Capital) with adjustment for country speciﬁc risk premiums and inﬂation rates for each individual country. The individual country discount rates are used to calculate a weighted average discount rate for the cash-generating units. The cash-generating units are basi- cally operating in the same geographical areas, therefore the same discount rate is used. The pre-tax discount rate used in 2021 was 11.4% (11.4). For the calculation of the in-perpetuity value, Gordon’s growth model is used. According to Gordon’s model, the terminal value of a growing cash ﬂow is calculated as the starting cash ﬂow divided by cost of capital less the growth rate. Cost of capital less growth of 2% (2) is 9.4% (9.4). The impairment-testing for 2021 did not lead to any impairment. Group management has made the assessment that reasonable changes in key assumptions, including sensitivity analyses and worst case scenarios, will not lead to that respective cash-generating unit’s calculated recoverable amount being lower than their carrying amount. Goodwill and discount rates 2021 2020 SEKm Goodwill Discount rate, % Goodwill Discount rate, % Food & Beverage 2,771 11.4 1,398 11.4 Laundry 297 11.4 292 11.4 Total 3,068 1,690 P. 126 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Group Other intangible assets Parent company SEKm Goodwill Product development Customer relations Trademarks Other Total other intangible assets Total Intangible assets Acquisition costs Opening balance, January 1, 2020 1,821 107 292 90 83 572 115 Acquired during the year – 1 – – 5 6 – Acquisition of operations – – – – – – – Exchange-rate diﬀerences –131 –3 –20 –7 –8 –38 – Closing balance, December 31, 2020 1,690 105 272 84 80 540 115 Acquired during the year – – – – 4 4 – Acquisition of operations 1,284 – 398 118 237 753 – Exchange-rate diﬀerences 94 3 12 4 5 25 – Closing balance, December 31, 2021 3,068 108 682 206 326 1,321 115 Accumulated amortization Opening balance, January 1, 2020 – 60 64 15 45 184 9 Amortization for the year – 12 30 13 14 69 22 Exchange-rate diﬀerences – –3 –7 –2 –6 –18 – Closing balance, December 31, 2020 – 69 87 26 53 235 31 Amortization for the year – 13 31 10 18 72 23 Exchange-rate diﬀerences – 3 6 2 5 15 – Closing balance, December 31, 2021 – 85 123 38 76 322 54 Carrying amount, December 31, 2020 1,690 36 185 58 27 305 84 Carrying amount, December 31, 2021 3,068 22 559 168 251 999 61 NOTE 13 GOODWILL AND OTHER INTANGIBLE ASSETS, CONTINUED Amortization of intangible assets is included within Cost of goods sold with SEK 31m (25), Administrative expenses with SEK 1m (2) and Selling expenses with SEK 40m (42) in the consolidated statement of comprehensive income. No bor- rowing costs were capitalized during 2021 nor 2020. P. 127Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 14 OTHER NONCURRENT ASSETS Group Parent Company SEKm 2021 2020 2021 2020 Shares in subsidiaries – – 6,422 6,147 Long-term ﬁnancial receivables from subsidiaries – – 2,560 – Long-term opera- tional receivables 20 27 – – Total 20 27 8,982 6,147 Long-term operational receivables include for example deposits and other operating customer receivables. Parent Company Shares in subsidiaries SEKm 2021 2020 Accumulated cost Opening balance, January 1 8,186 8,175 Investments 275 – Shareholders’ contribution – 11 Closing balance, December 31 8,461 8,186 Accumulated impairment Opening balance, January 1 2,039 – Impairment – 2,039 Closing balance, December 31 2,039 2,039 Total 6,422 6,147 NOTE 15 INVENTORIES Group Parent Company SEKm 2021 2020 2021 2020 Raw materials 562 374 51 31 Work in progress 41 19 21 17 Finished products 810 692 137 146 Advances to suppliers 3 1 – – Total 1,416 1,086 209 194 Inventories and work in progress are valued at the lower of cost, at normal capacity utilization, and net realizable value. Net realizable value is deﬁned as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale at market value. The cost of ﬁnished goods and work in progress comprises development costs, direct materials, direct labor, tooling costs, other direct costs and related production overheads. The cost of inventories is assigned by using the weighted average cost formula. Provisions for obsolescence are included in the value for inventory. The cost of inventories recognized as expense and includ- ed in Cost of goods sold amounted to SEK 4,340m (4,105) for the Group. Write-downs due to obsolescence amounted to SEK 72m (140) and reversals, due to scrapping or sale, of previous write-downs amounted to SEK 67m (85) for the Group. The amounts have been included in the item Cost of goods sold in the statement of comprehensive income. NOTE 16 OTHER CURRENT ASSETS SEKm 2021 2020 VAT receivables 132 146 Prepaid expenses and accrued income 65 53 Prepaid interest expenses and accrued interest income 1 1 Derivatives 13 12 Miscellaneous short-term receivables 14 32 Total 225 244 Miscellaneous short-term receivables include for example, claims related to R&D tax credits and advances to employ- ees. P. 128 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 17 TRADE RECEIVABLES Group Parent Company SEKm 2021 2020 2021 2020 Trade receivables 1,718 1,365 276 257 Provisions for expected credit loss –93 –100 –11 –10 Trade receivables, net 1,625 1,265 265 247 Provisions in relation to trade receivables, % 5.4 7.3 4,0 3.9 Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the eﬀec- tive interest method, less provision for expected losses. The Group applies the simpliﬁed approach for trade receivables and uses a matrix to estimate the expected losses. The change in amount of the provision is recognized in the con- solidated statement of comprehensive income within selling expenses. The general expected credit loss calculation is based on the historical loss rate adjusted with forward look- ing country level GDP information. Moreover, speciﬁc factors such as customer credit rating, signs of bankruptcy, oﬃcially known insolvency etc. is taken into account and could form part of an individual assessment. The eﬀect from chang- es in the forward looking factors is insigniﬁcant. Electrolux Professional uses credit insurance as a mean of protection against credit risks. For accounts receivable that are not due and due up to 180 days, 1.7% is reserved. Accounts receiv- able that are due over 6 months but less than one year are reserved to 50% and accounts receivable that are due more than 12 months are reserved to 100%. The percentages refer to the end of the year. Based on historical experience, de- fault is not considered until after 180 days past due. Provisions for expected credit loss Group Parent Company SEKm 2021 2020 2021 2020 Provisions, January 1 –100 –66 –10 –1 Acquisition of operations –1 – – – Release of provision 2 –42 –1 –10 Actual credit losses 7 4 – 1 Exchange–rate diﬀerences and other changes –2 4 – – Provisions, December 31 –93 –100 –11 –10 The fair value of trade receivables equals their carrying amount, as the impact of discounting is not signiﬁcant. The creation and usage of provisions for expected losses and impaired receivables have been included in selling expenses in the consolidated statement of comprehensive income. Aging analysis of trade receivables past due Group Parent Company SEKm 2021 2020 2021 2020 Trade receivables not overdue 1,444 1,102 265 246 Past due 1–15 days 57 45 – 1 Past due 16–60 days 63 54 – – 2–6 months overdue 52 43 – – 6–12 months overdue 9 22 – – Total trade receivables 1,625 1,265 265 247 Trade receivables are disclosed net of expected credit loss in the above table. NOTE 18 FINANCIAL INSTRUMENTS Additional and complementary information is presented in the following notes: Note 2, Financial risk management, de- scribes the Group’s risk policies in general and regarding the principal ﬁnancial instruments of Electrolux Professional in more detail. Note 17, Trade receivables, describes the trade receivables and related credit risks. The information in this note highlights and describes the principal ﬁnancial instruments of the Group regarding spe- ciﬁc major terms and conditions when applicable, and the exposure to risk and the fair values at year end. Financial instruments Initial recognition and measurement Financial assets and ﬁnancial liabilities are recognized when the entity becomes party to the contractual provisions of the instrument. Regular way purchases and sales of ﬁnancial assets are recognized on trade-date, the date on which the Group commits to purchase or sell the asset. At initial recognition, the Group measures a ﬁnancial asset or ﬁnancial liability at its fair value plus or minus, in the case of a ﬁnancial asset or ﬁnancial liability not at fair value P. 129Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 18 FINANCIAL INSTRUMENTS, CONTINUED through proﬁt or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of the ﬁnancial asset or ﬁnancial liability, such as fees and com- missions. Transaction costs of ﬁnancial assets and ﬁnancial liabilities carried at fair value through proﬁt or loss are expensed in proﬁt or loss. Financial assets Classiﬁcation and subsequent measurement The Group classiﬁes its ﬁnancial assets in the following measurement categories: • Fair value through proﬁt or loss (FVPL); • Fair value through other comprehensive income (FVOCI); or • Amortized cost. The classiﬁcation requirements for debt and equity instru- ments are described below. Debt instruments are those instruments that meet the deﬁnition of a ﬁnancial liability from the issuer’s perspective, such as trade receivables, loan receivables as well as government bonds. The Group classiﬁes its debt instruments into one of the following two measurement categories: Amortized cost: Assets that are held for collection of con- tractual cash ﬂows where those cash ﬂows represent solely payments of principal and interest (SPPI), and are not desig- nated as FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognized (see “Impairment and expected losses” below). Interest income from these ﬁnancial assets is included in the ﬁnancial net using the eﬀective interest rate method. Fair value through proﬁt or loss (FVTPL): Assets that do not meet the criteria for amortized cost are measured at fair value through proﬁt and loss. A gain or loss on a ﬁnancial debt investment that is subsequently measured at fair value through proﬁt or loss and is not part of a hedging relation- ship is recognized in the ﬁnancial net in the period in which it arises. Interest income from these ﬁnancial assets is included in the ﬁnancial net using the eﬀective interest rate method. Trade receivables sold on non-recourse terms are catego- rized as ‘Hold to Sell’ with gain or loss reported in operating income. The Group reclassiﬁes debt investments when and only when its business model for managing those assets changes. Equity instruments are instruments that meet the deﬁnition of equity from the issuer’s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets. Gains and losses on equity investments at FVPL are included in the ﬁnancial net. The Group does not have any investments in equity instruments. Impairment and expected loss The Group assesses on a forward-looking basis expected credit losses (ECL) associated with its ﬁnancial assets not carried at fair value. Based on this, the Group recognizes a provision for such potential losses at each reporting date. The measurement of ECL reﬂects an unbiased and probabil- ity-weighted amount based on reasonable and supportable information available such as past events, current conditions and forecasts of future economic conditions. For receivables other than trade receivables a rating model is utilized to assign a probability of default to calcu- late the provision. For cash, a rating-based approach is used to estimate a probability of default for each counterparty. Due to the high ratings of the counterparties and the short maturity the impairment amounts are insigniﬁcant. For trade receivables, the Group applies the ‘simpliﬁed approach’. Derecognition Financial assets, or a portion thereof, are derecognized when the contractual rights to receive the cash ﬂows from the assets have expired, or when they have been transferred and either (i) the Group transfers substantially all the risks and rewards of ownership, or (ii) the Group neither transfers nor retains substantially all the risks and rewards of owner- ship and the Group has not retained control. Financial liabilities Classiﬁcation and subsequent measurement All of the Group’s ﬁnancial liabilities, excluding derivatives, are classiﬁed as subsequently measured at amortized cost. Derecognition A ﬁnancial liability is derecognized when it is extinguished, i.e. when the obligation speciﬁed in the contract is dis- charged, canceled or expires. Derivatives Derivatives are initially recognized at fair value on the date on which the derivative contract is entered into and are subsequently re-measured at fair value. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. Fair value gain or loss related to derivatives is recognized in proﬁt or loss. Hedge accounting is not applied. P. 130 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 18 FINANCIAL INSTRUMENTS, CONTINUED Net debt At year-end 2021, the Group’s net debt amounted to SEK 1,705m (549). The table below presents how the Group calcu- lates net debt and what it consists of. Net debt SEKm December 31, 2021 December 31, 2020 Short-term loans 1,045 403 Financial derivative liabilities 5 6 Accrued interest expenses and prepaid interest income 3 2 Total short-term borrowings 1,053 412 Long-term borrowings 1,215 601 Long-term borrowings 1,215 601 Total borrowings 1 2,268 1,012 Cash and cash equivalents 836 797 Financial derivative assets 13 12 Prepaid interest expenses and accrued interest income 1 1 Liquid funds 849 810 Financial net debt (total borrowings less liquid funds) 1,418 202 Lease liabilities 326 216 Net provisions for post-employment beneﬁts –39 131 Net debt 1,705 549 1) Whereof interest-bearing borrowings amounting to SEK 2,260m (1,004). Liquid funds Liquid funds as deﬁned by the Group consist of cash and cash equivalents, short-term investments, ﬁnancial derivative assets and prepaid interest expenses and accrued interest income. Cash and cash equivalents consist of cash on hand, bank deposits and other short-term highly liquid investments with a maturity of 3 months or less. The table below presents the key data of liquid funds. The carrying amount of liquid funds is approximately equal to fair value. Liquidity proﬁle SEKm December 31, 2021 December 31, 2020 Cash and cash equivalents 836 797 Financial derivative assets 13 12 Prepaid interest expenses and accrued interest income 1 1 Liquid funds 849 810 Less total short-term borrowings 1,053 412 Net liquidity –204 398 Interest-bearing liabilities Borrowings are initially recognized at fair value of the funds received net of transaction costs incurred. After initial recognition, borrowings are valued at amortized cost using the eﬀective interest rate method. At year-end 2021, the Group’s total interest-bearing borrowings amounted to SEK 2,260m, of which SEK 1,215m referred to long-term borrowings. Short-term borrowings consisted of SEK 1,045m. The majority of total borrowings is raised at parent company level. In 2020, Electrolux Professional AB entered into a EUR 250m multicurrency revolving credit facilities agreement and a bilateral term loan of SEK 600m with AB Svensk Export- kredit. On October 20, 2021 a bilateral sustainability-related loan of EUR 60m was entered in to with the Nordic Invest- ment Bank. The revolving credit facility had an original tenor of ﬁve years (with extension options), the ﬁrst one-year ex- tension option was executed in 2021. Electrolux Professional AB also elected to reduce the RCF capacity from EUR 250m to EUR 200m during 2021. EUR 102m equivalent of the re- volving credit facility was utilized on December 31, 2021. The term loan with AB Svensk Exportkredit has a tenor of seven years and the sustainability-related loan with the Nordic Investment Bank has a tenor of 7 years, with a grace period of 3 years, and a semi-annual repayment schedule starting in 2024. At year-end 2021, the average interest-ﬁxing period for long and short-term borrowings was 0.44 year. The calcula- tion of the average interest-ﬁxing period includes the eﬀect of interest-rate swaps used to manage the interest-rate risk of the debt portfolio. The fair value of the interest-bearing borrowings was SEK 2,258m. The fair value including swap transactions used to manage the interest ﬁxing was approxi- mately SEK 2,256m. The Group’s exposure to the reform of interbank rates (IBOR) is limited. At year-end 2021, the Group had one ﬂoat- ing rate loan and three derivative transactions denominated in USD, none maturing after the indicated USD LIBOR cessa- tion date. The carrying value of the ﬂoating interest rate loan was USD 115m or SEK 1 039m and the nominal amount of the derivative liabilities was USD 67.5m or SEK 610m. P. 131Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 18 FINANCIAL INSTRUMENTS, CONTINUED Changes in liabilities arising from ﬁnancing Group Cash ﬂow Non-cash ﬂow 2021 SEKm Opening balance Amorti- zation New debt Net cash change Change in ﬁnancial liabilities, Electrolux Group Reclas- siﬁca- tions Acquisi- tions Additions /cancel- lations Exchange rate diﬀerences Closing balance Long-term borrowings (including short-term part of long-term) 601 –0 615 – – – – – –0 1,215 Short-term borrowings (including factoring with recourse) 403 –661 1,317 – – – – –14 1,045 Lease liabilities 216 –75 – – – – 90 81 13 326 Total 1,219 –736 1,932 – – – 90 81 –1 2,585 Group Cash ﬂow Non-cash ﬂow 2020 SEKm Opening balance Amorti- zation New debt Net cash change Change in ﬁnancial liabilities, Electrolux Group Reclas- siﬁca- tions Acquisi- tions Additions /cancel- lations Exchange rate diﬀerences Closing balance Long-term borrowings (including short-term part of long-term) 3 –1 600 – – –1 – – 0 601 Short-term borrowings (including factoring with recourse) 994 –902 1,315 – –990 – – – –14 403 Lease liabilities 243 –82 – – – –1 – 68 –13 216 Total 1,240 –985 1,915 – –990 –2 – 68 –27 1,219 Parent Company Cash ﬂow Non-cash ﬂow 2021 SEKm Opening balance Amor- tization external debt New debt Net cash change Change in ﬁnancial liabilities, subsidiar- ies Change in ﬁnancial liabilities, Electrolux Group Reclas- siﬁca- tions Acquisi- tions Addi- tions / cancel- lations Exchange rate diﬀerences Closing balance Long-term borrowings (including short- term part of long-term) 600 – 598 – – – – – – 17 1,215 Short-term borrowings (in- cluding factoring with recourse) 592 –672 1,300 – 53 – – – – 15 1,288 1 Total 1,192 –672 1,898 – 53 – – – – 32 2,503 1) Of the SEK 1,288m, SEK 1,039m is presented as short-term borrowings in the balance sheet and SEK 249m is disclosed as part of payables to subsidiaries. P. 132 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 The table below sets out the carrying amount of the Group’s borrowings. Group Carrying amount SEKm December 31, 2021 December 31, 2020 Long-term borrowings Other bank loans 1,215 601 Total long-term loans 1,215 601 Short-term borrowings Other bank loans 1,045 403 Total short-term loans 1,045 403 Total borrowings 2,260 1,004 Lease liabilities Long-term lease liabilities 251 151 Short-term lease liabilities 75 65 Total lease liabilities 326 216 Parent Company Carrying amount SEKm December 31, 2021 December 31, 2020 Long-term borrowings Other bank loans 1,215 600 Total long-term loans 1,215 600 Short-term borrowings Other bank loans 1,039 402 Loan from subsidiaries 249 190 Total short-term loans 1,288 592 Total borrowings 2,503 1,192 Parent Company Cash ﬂow Non-cash ﬂow 2020 SEKm Opening balance Amorti- zation external debt New debt Net cash change Change in ﬁnancial liabilities, subsidiar- ies Change in ﬁnancial liabilities, Electrolux Group Reclas- siﬁca- tions Acquisi- tions Additions /cancel- lations Exchange rate diﬀerences Closing balance Long-term borrowings (including short- term part of long-term) – – 600 – – – – – – – 600 Short-term borrowings (including factoring with recourse) 1,164 –897 1,315 – 12 –990 – – – –12 592 1 Total 1,164 –897 1,915 – 12 –990 – – – –12 1,192 1) Of the SEK 592m, SEK 402m is presented as short-term borrowings in the balance sheet and SEK 190m is disclosed as part of payables to subsidiaries. NOTE 18 FINANCIAL INSTRUMENTS, CONTINUED P. 133Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 18 FINANCIAL INSTRUMENTS, CONTINUED Repayment schedule of long-term borrowings, December 31, 2021 SEKm 2022 2023 2024 2025 2026 2027– Total Bank and other loans – – 68 137 137 737 1,078 Total – – 68 137 137 737 1,078 Forecasted transaction ﬂows and hedges SEKm SEK EUR THB TRY CNY NOK DKK JPY GBP USD Other Total Inﬂow of currency, long position 886 1,159 90 38 49 63 85 77 177 728 211 3,563 Outﬂow of currency, short position –1,463 –1,442 –356 0 –1 0 –8 0 –1 –155 –136 –3,563 Net transaction ﬂow –577 –283 –266 38 47 63 77 77 176 574 75 0 Commercial ﬂows The Electrolux Professional Financial Policy states that: • Currency exposure in operational units could be hedged on a case by case basis. Forecasted ﬂows should normally not be hedged, as these exposures should be mitigated with natural hedges and price adjustments. • The Head of Group Treasury and M&A is authorized to ap- prove hedging of known ﬂows, such as internal dividends or M&A-related payments, that due to timing reasons cause a temporary exposure to the Group. The table below shows the forecasted transaction ﬂows, imports and exports, for the 12-month period of 2022, at year-end 2021. At year-end 2021 no hedges exist. Maturity proﬁle of ﬁnancial liabilities and derivatives The table below presents the undiscounted cash ﬂows of the Group’s contractual liabilities related to ﬁnancial instruments based on the remaining period at the balance sheet date to the contractual maturity date. Floating interest cash ﬂows with future ﬁxing dates are estimated using the forward- forward interest rates at year-end. Any cash ﬂow in foreign currency is converted to Swedish krona using the FX spot rates at year-end. The short-term liabilities from account payables are matched by positive cash ﬂow from trade re- ceivables. The loan maturities can be oﬀset by the available liquidity and/or a combination of existing credit facilities, new issued bonds, commercial papers or bank and bilateral loans. On top of the other sources, Electrolux Professional entered into a committed revolving credit facility and two bilateral loans as stated above (interest-bearing liabilities). Maturity proﬁle of ﬁnancial liabilities and derivatives – undiscounted cash ﬂows Group SEKm <= 0.5 year > 0.5 year < 1 year > 1 years < 2 years > 2 years < 5 years > 5 years Total Loans –1,050 –4 –12 –391 –880 –2,337 Lease liabilities –40 –40 –66 –113 –89 –349 Net settled derivatives 0 0 1 3 – 3 Gross settled derivatives –1 –4 – – – –5 whereof outﬂow –1,119 –5 –616 – – –1,740 whereof inﬂow 1,118 1 616 – – 1,735 Trade payables –1,814 – – – – –1,814 Total –2,905 –48 –78 –501 –969 –4,502 P. 134 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 18 FINANCIAL INSTRUMENTS, CONTINUED Net gain/loss, fair value and carrying amount of ﬁnancial instruments The tables below present net gain/loss of ﬁnancial instru- ments, the eﬀect in proﬁt or loss and other comprehensive income, and the fair value and carrying amount of ﬁnan- cial assets and liabilities. Net gain/loss can include both exchange-rate diﬀerences and gain/loss due to changes in interest-rate levels. Net gain/loss, income and expense of ﬁnancial instruments 2021 2020 Group SEKm Gain/loss in proﬁt or loss Interest income Interest expense Gain/loss in proﬁt or loss Interest income Interest expense Recognized in operating income Financial assets and liabilities at amortized cost 9 – – –3 – – Total net gain/loss, income and expense 9 – – –3 – – Recognized in ﬁnancial items Financial assets and liabilities at fair value through proﬁt or loss 12 4 –6 –6 – –1 Financial assets at amortized cost 20 2 – 2 4 – Other ﬁnancial liabilities at amortized cost –13 – –9 3 – –13 Total net gain/loss, income and expense 19 6 –15 –1 4 –14 Maturity proﬁle of ﬁnancial liabilities and derivatives – undiscounted cash ﬂows Parent Company SEKm <= 0.5 year > 0.5 year < 1 year > 1 years < 2 years > 2 years < 5 years > 5 years Total Loans –1,045 –4 –12 –391 –880 –2,332 Loans from subsidiaries –249 – – – – –249 Net settled derivatives – – 1 3 – 4 Gross settled derivatives –1 –4 – – – –5 whereof outﬂow –1,119 –5 –616 – – –1,740 whereof inﬂow 1,118 1 616 – – 1,735 Trade payables –476 – – – – –476 Other ﬁnancial liabilities, subsidiaries –1,026 – – – – –1,026 Total –2,797 –8 –11 –388 –880 –4,084 P. 135Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Net gain/loss, income and expense of ﬁnancial instruments 2021 2020 Parent Company SEKm Gain/loss in proﬁt or loss Interest income Interest expense Gain/loss in proﬁt or loss Interest income Interest expense Recognized in operating income Financial assets and liabilities at amortized cost 4 – – –6 – –8 Total net gain/loss, income and expense 4 – – –6 – –8 Recognized in ﬁnancial items Financial assets and liabilities at fair value through proﬁt or loss 11 4 –6 –4 – –1 Financial assets at amortized cost 14 13 – –32 11 – Other ﬁnancial liabilities at amortized cost –24 – –10 37 – –13 Total net gain/loss, income and expense 1 17 –16 1 11 –14 NOTE 18 FINANCIAL INSTRUMENTS, CONTINUED Fair value and carrying amount of ﬁnancial assets and liabilities 2021 1 2020 1 Group SEKm Hierarchy level Carrying amount Hierarchy level Carrying amount Financial assets 0 0 Financial assets at fair value through proﬁt or loss 3 0 3 0 Trade receivables 1,625 1,265 Financial assets at amortized cost 1,625 1,265 Derivatives 13 12 Financial assets at fair value through proﬁt or loss 2 13 2 12 Cash and cash equivalents 836 797 Financial assets at amortized cost 836 797 Total ﬁnancial assets 2,474 2,074 Financial liabilities Long-term borrowings 1,215 601 Financial liabilities at amortized cost 1,215 601 Trade payables 1,814 1,289 Financial liabilities at amortized cost 1,814 1,289 Short-term borrowings 1,045 403 Financial liabilities at amortized cost 1,045 403 Derivatives 5 6 Financial liabilities at fair value through proﬁt or loss 2 5 2 6 Total ﬁnancial liabilities 4,078 2,299 1) Carrying amount equals fair value except for long-term borrowings where the fair value is SEK 2m (5) lower than the carrying amount. The calculation of fair value on the Group’s borrowings is level 2 in the fair value hierarchy. P. 136 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Fair value and carrying amount of ﬁnancial assets and liabilities 2021 1 2020 1 Parent Company SEKm Hierarchy level Carrying amount Hierarchy level Carrying amount Trade receivables 387 353 Financial assets at amortized cost 265 247 Financial assets at amortized cost, subsidiaries 122 106 Derivatives 13 12 Financial assets at fair value through proﬁt or loss 2 13 2 12 Long-term ﬁnancial assets 2,560 – Financial assets at amortized cost, subsidiaries 2,560 – Short-term ﬁnancial assets 458 862 Financial assets at amortized cost, subsidiaries 458 862 Cash and cash equivalents 391 425 Financial assets at amortized cost 391 425 Total ﬁnancial assets 3,809 1,652 Financial liabilities Long-term borrowings 1,215 600 Financial liabilities at amortized cost 1,215 600 Trade payables 476 401 Financial liabilities at amortized cost 337 253 Financial liabilities at amortized cost, subsidiaries 139 148 Short-term borrowings² 2,315 1,031 Financial liabilities at amortized cost 1,039 402 Financial liabilities at amortized cost, subsidiaries 1,276 629 Derivatives 5 6 Financial liabilities at fair value through proﬁt or loss 2 5 2 6 Total ﬁnancial liabilities 4,011 2,038 1) Carrying amount equals fair value except for long-term borrowings where the fair value is SEK 2m (5) lower than the carrying amount. The calculation of fair value on the Parent Company’s borrowings is level 2 in the fair value hierarchy. 2) Of the SEK 2,315m (1,031), SEK 1,039m (402) is presented in the balance sheet as short-term borrowings and SEK 1,414m (777) is disclosed as part of payables to subsidiaries. Fair value estimation Valuation of ﬁnancial instruments at fair value is done at the most accurate market prices available. Instruments which are quoted on the market, e.g., the major bond and interest-rate future markets, are all marked-to-market with the current price. The foreign-exchange spot rate is used to convert the value into SEK. For instruments where no reliable price is available on the market, cash ﬂows are discounted using the deposit/swap curve of the cash ﬂow currency. If no proper cash ﬂow schedule is available, e.g., as in the case with forward-rate agreements, the underlying schedule is used for valuation purposes. To the extent option instruments are used, the valuation is based on the Black & Scholes formula. The carrying value, less impairment, of trade receivables and payables are assumed to approximate their fair values. The fair value of ﬁnancial liabilities is estimated by discount- ing the future contractual cash ﬂows at the current market- interest rate that is available to the Group for similar ﬁnancial instruments. The Group’s ﬁnancial assets and liabilities are measured at fair value according to the following hierarchy: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included in level 1 that are observable for assets or liabilities either directly or indirectly. Level 3: Inputs for the assets or liabilities that are not entirely based on observable market data. NOTE 18 FINANCIAL INSTRUMENTS, CONTINUED P. 137Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 19 ASSETS PLEDGED FOR LIABILITIES TO CREDIT INSTITUTIONS There are no pledged assets to be disclosed for 2021 nor for 2020. NOTE 20 SHARE CAPITAL, NUMBER OF SHARES AND EARNINGS PER SHARE The equity attributable to equity holders of the Parent Company consists of the following items. Share capital As per December 31, 2021, the share capital of Electrolux Professional AB consisted of 8,047,982 Class A shares with a quota value of SEK 0.1 per share and 279,349,468 Class B shares with a quota value of SEK 0.1. All shares are fully paid. All shares entitle the holder to the same proportion of assets and earnings, and carry equal rights in terms of dividends. Share capital SEKm Share capital Share capital, December 31, 2020 8,120,527 A-shares, with a quota value of SEK 0.1 1 279,276,923 B-shares, with a quota value of SEK 0.1 28 Total 29 Share capital, December 31, 2021 8,047,982 A-shares, with a quota value of SEK 0.1 1 279,349,468 B-shares, with a quota value of SEK 0.1 28 Total 29 Number of shares Owned by other shareh olders Shares, December 31, 2020 Class A shares 8,120,527 Class B shares 279,276,923 Total 287, 397,4 5 0 Conversion of Class A shares into Class B shares Class A shares –72,545 Class B shares 72,545 Shares, December 31, 2021 Class A shares 8,047,982 Class B shares 279,349,468 Total 287, 397,4 5 0 Other paid-in capital Other paid-in capital relates to statutory reserves in the Parent Company. Other reserves Other reserves includes exchange-rate diﬀerences on translation of foreign operations which refer to changes in exchange rates when net investments in foreign subsidiaries are translated to SEK. Retained earnings Retained earnings, including income for the period, include the income of the Parent Company and its share of income in subsidiaries. Retained earnings also include transactions with shareholders, remeasurement of provision for post- employment beneﬁts, cost for equity swap and reversal of the cost for share-based payments recognized in the income statement and the amount recognized for the common dividend. Adjustment to the opening balance in 2020 is related to an erroneous amount in the Combined Financial Statements prepared in connection with the listing of Electrolux Profes- sional AB. Deferred tax assets related to post-employment beneﬁts of SEK 17m has been adjusted in equity. P. 138 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 20 SHARE CAPITAL, NUMBER OF SHARES AND EARNINGS PER SHARE, CONTINUED Earnings per share SEKm 2021 2020 Income for the period 487 278 Earnings per share Basic, SEK 1.69 0.97 Diluted, SEK 1.69 0.97 Average number of shares, million Basic 287.4 287.4 Diluted 287.7 287.4 Basic and diluted earnings per share is calculated by di- viding the income for the period attributable to the equity holders of the Parent Company with the average number of shares. The average number of shares is the weighted aver- age number of shares outstanding during the year. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding with the esti- mated number of shares from the share programs. Share pro- grams are included in the dilutive potential ordinary shares as from the start of each program. The dilution in the Group is a consequence of the long-term incentive programs. The average number of shares during 2021 has been 287,397,450 (287,397,450) and the average number of diluted shares has been 287,665,954 (287,397,450). NOTE 21 POSTEMPLOYMENT BENEFITS Post-employment beneﬁts The Group sponsors pension plans in many of the countries in which it has activities. Pension plans can be deﬁned con- tribution or deﬁned beneﬁt plans or a combination of both. Under deﬁned contribution plans, the company’s commit- ment is to make periodic payments to independent author- ities or investment plans, and the level of beneﬁts depends on the actual return on those investments. Under deﬁned beneﬁt pension plans, the company enters into a commit- ment to provide post-employment beneﬁts based upon one or several parameters for which the outcome is not known at present. For example, beneﬁts can be based on ﬁnal salary, on career average salary, or on a ﬁxed amount of money per year of employment. The cost for pension is disaggregated into three compo- nents; service cost, ﬁnancing cost or income and remea- surement eﬀects. Service cost is reported within Operating income and classiﬁed as Cost of goods sold, Selling expens- es or Administrative expenses depending on the function of the employee. Financing cost or income is recognized in the Financial items and the remeasurement eﬀects in Other com- prehensive income. The Projected Unit Credit Method is used to measure the present value of the obligations and costs. Net provisions for post-employment beneﬁts in the balance sheet represent the present value of the Group’s obligations less market value of plan assets. The remeasure- ments of the obligations are made using actuarial assump- tions determined at the balance sheet date. Changes in the present value of the obligations due to revised actuarial assumptions and experience adjustments on the obligation are recorded in Other comprehensive income as remeasure- ments. The actual return less calculated interest income on plan assets is also recorded in Other comprehensive income as remeasurements. Past-service costs are recognized im- mediately in income for the period. The majority of the funded pension obligation is attrib- utable to the Swiss pension plan, where beneﬁts are career average in nature. Contributions are paid to a pension foundation and a recovery plan has to be set up if the plan is underfunded on a local funding basis. Swiss laws do not state any speciﬁc way of calculating an employer‘s addi- tional contribution and because of that there is normally no minimum funding requirement. Beneﬁts are paid from the plan assets. In France and Italy, Electrolux Professional makes provi- sions for compulsory severance payments, these provisions cover the Group’s commitment to pay employees a lump sum upon reaching retirement age, or upon the employees’ dismissal or resignation, these plans are unfunded. Unfunded pension plans also exist in other countries within the Group, such as Austria, Thailand and Japan. Commitments for retirement pension for salaried employ- ees in Sweden related to ITP2 are guaranteed through insur- ance with Alecta. According to a statement from the Swedish Financial Reporting Board, UFR10, this is a deﬁned beneﬁt multi-employer plan. For the 2021 ﬁnancial year, the compa- ny did not have access to information that would enable it to report its proportional share of the plan’s obligation, plan assets and costs, which means that the plan could not be reported as a deﬁned beneﬁt plan, therefore reported as a deﬁned contribution plan. On December 31, 2021, Alecta’s surplus, which can be distributed between the policy holder and/or the persons insured in the form of the collective con- solidation rate, amounted to 172% (148). The collective con- solidation rate comprises the market value of Alecta’s assets as a percentage of the insurance commitments produced in accordance with Alecta’s actuarial calculation assump- tions, which are not in agreement with IAS 19. The collective consolidation level is normally allowed to vary between 125 to 175%. If the collective consolidation level falls below 125%, P. 139Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 21 POSTEMPLOYMENT BENEFITS, CONTINUED one measure could be raising the contractual premiums for taking up new insurance and expanding existing beneﬁts. If collective consolidation exceeds 150%, one action could be to implement premium reductions. Expected fees for the next reporting period for ITP2 insurance with Alecta amount to SEK 13m. The discount rate used for the calculation of expenses during 2021 was 0.07% in average, which was the same rate used to estimate liabilities at the end of 2020. Explanation of amounts in the ﬁnancial statements relating to deﬁned beneﬁt obligations is presented in the following table. SEKm December 31, 2021 December 31, 2020 Amounts included in the balance sheet Funded plans Present value of funded obligations 816 849 Fair value of plan assets (after change in asset ceiling) –974 –861 Net amount (surplus)/deﬁcit, funded plans –158 –12 Average duration of the obligation, years 14 14.6 Unfunded plans Present value of unfunded obligations 119 143 Average duration of the obligation, years 8.7 8.7 Total net amount (surplus)/deﬁcit –39 131 Whereof reported as Pension plan assets 165 21 Provisions for post-employment beneﬁt plans 125 152 SEKm 2021 2020 Pension cost Service cost –13 –16 Interest income/expense, net –1 –1 Pension cost, deﬁned beneﬁt plans –14 –17 Pension cost, deﬁned contribution plans –52 –44 Pension cost included in income for the period –66 –61 Remeasurement gain/loss attrib- utable to deﬁned beneﬁt plans 141 83 Total pension cost included in other comprehensive income 75 22 Amounts included in the cash ﬂow statement Contributions by the employer 9 10 Reimbursement – –13 Beneﬁts paid by the employer 10 7 Major assumptions for the valuation of the liability Funded plans Longevity, years, 1 Male 21.7 22.6 Female 23.5 24.7 Inﬂation, % 2 1.0 1.0 Discount rate, % 0.2 0 Unfunded plans Inﬂation, % 2 1.9 1.6 Discount rate, % 0.8 0.4 1) Expressed as the average life expectancy of a 65 years old person in number of years. 2) General inﬂation impacting salary and pensions increase. P. 140 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 21 POSTEMPLOYMENT BENEFITS, CONTINUED Reconciliation of change in present value of funded and unfunded obligations SEKm 2021 2020 Opening balance, January 1 992 1,027 Current service cost 15 15 Special events –3 – Interest expense 1 1 Remeasurement arising from chang- es in ﬁnancial assumptions –20 11 Remeasurement from changes in demographic assumptions –46 – Remeasurement from experience 4 –6 Contributions by plan participants 9 10 Beneﬁts paid –54 –42 Exchange diﬀerences 53 –35 Settlements and other –16 11 Closing balance, December 31 935 992 Reconciliation of change in the fair value of plan assets SEKm 2021 2020 Opening balance, January 1 861 832 Interest income 1 0 1 Return on plan assets, excluding amounts included in interest 1 79 89 Net contribution by employer 9 –3 Contribution by plan participants 9 10 Beneﬁts paid –44 –35 Exchange diﬀerences 59 –33 Settlements and other 1 – Closing balance, December 31 974 861 1) The actual return on plan assets amounts to SEK 80m (90) Risks There are mainly three categories of risks related to deﬁned beneﬁt obligations and pension plans. Increased longev- ity and inﬂation of salary and pensions may increase the future pension payments and, hence, increase the pension obligation. Pension plan assets are invested in a variety of ﬁnancial instruments and are exposed to market ﬂuctuations. The discount rate used for measuring the present value of the obligation may ﬂuctuate which impacts the valuation of the Deﬁned Beneﬁt Obligation (DBO). The discount rate also impacts the size of the interest income and expense that is reported in the Financial items and the service cost. Expect- ed salary increase and mortality assumptions are based on local conditions in each country and changes in those assumptions aﬀect the measured obligation. Below is the sensitivity analysis for the main ﬁnancial as- sumptions and the potential impact on the present value of the deﬁned pension obligation. Note that the sensitivities are not meant to express any view by Electrolux Professional on the probability of a change. Sensitivity analysis on deﬁned beneﬁt obligation SEKm 2021 2020 Longevity +1 year 27 28 Inﬂation +0.5% 1 13 14 Discount rate +1% –102 –115 Discount rate –1% 140 161 1) The inﬂation change feeds through to other inﬂation-dependent assumptions, i.e., pension increases and salary growth. In 2022, the Group expects to pay a total of SEK 17m in con- tributions to the pension funds and as payments of beneﬁts directly to the employees. Market value of plan assets by category SEKm 2021 2020 Fixed income 265 260 Equity 315 291 Other alternative assets 109 83 Real estate 277 223 Cash 8 4 Total value of plan assets 974 861 Investment strategy and risk management The assets in the foundations are managed professionally by asset managers who propose portfolio allocations based on a framework decided by the foundation boards. Risk related to pension obligations, e.g., mortality and inﬂation, are monitored on an ongoing basis by the Group Finance Governance Board. Governance Deﬁned beneﬁt pensions and pension plan assets are governed by the Group Finance Governance Board, which resumes 3 to 4 times per year and has the following respon- sibilities: • Approve the ﬁnancial and actuarial assumptions to be used in the calculations of the Pension Funds’ assets and liabilities. • Initiate processes for new plans, changes to plans or termination of plans if such actions are found necessary. • Approve the election of company representatives in the local Board of Trustees (or equivalent). Parent Company Commitments for retirement pension for salaried employees in Sweden related to ITP2 are guaranteed through insurance with Alecta, hence reported as a deﬁned contribution plan, equal to ITP1. Total pension expense for the Parent Company amounted SEK 34m (15). Expected fees for the next reporting period for ITP2 insurance with Alecta amount to SEK 13m. P. 141Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 22 OTHER PROVISIONS Group Parent Company SEKm Provisions for re- structuring Warranty commit- ments Other Total Provisions for re- structuring Warranty commit- ments Other Total Opening balance, January 1, 2020 86 245 125 456 – 96 – 96 Acquisitions of operations – – – – – – – – Provisions made 72 37 17 126 – 6 – 6 Provisions used –59 –49 –12 –120 – –4 – –4 Unused amounts reversed –1 –28 –10 –39 – – – 0 Exchange-rate diﬀerences –3 –7 –8 –18 – – – 0 Closing balance, December 31, 2020 95 198 112 405 – 98 – 98 Of which current provisions 80 69 13 162 – 6 – 6 Of which non-current provisions 15 129 99 243 – 92 – 92 Opening balance, January 1, 2021 95 198 112 405 – 98 – 98 Acquisitions of operations – 27 25 52 – – – – Provisions made 0 38 23 61 – 2 1 3 Provisions used –73 –26 –18 –117 – –1 – –1 Unused amounts reversed –5 –5 –3 –13 – –1 – –1 Reclassiﬁcation – – 1 1 1 – – 1 Exchange-rate diﬀerences 1 4 5 10 – – – – Closing balance, December 31, 2021 18 237 145 399 1 98 1 100 Of which current provisions 18 98 14 130 1 5 – 6 Of which non-current provisions – 139 131 270 – 93 1 94 Provisions are recognized when the Group has a present obligation as a result of a past event, and it is probable that an outﬂow of resources will be required to settle the obliga- tion, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the expenditure required to settle the pres- ent obligation at the balance sheet date. Where the eﬀect of time value of money is material, the amount recognized is the present value of the estimated expenditures. Provisions for warranty are recognized at the date of sale of the products covered by the warranty and are calculated based on historical data for similar products. Provisions for warranty commitments are recognized as a consequence of the Group’s policy to cover the cost of repair of defective products. The warranty period is based on local market conditions. Restructuring provisions are recognized when the Group has both adopted a detailed formal plan for the restructuring and either started the plan implementation or communicated its main features to those aﬀected by the restructuring. Pro- visions for restructuring represent the expected costs to be incurred as a consequence of the Group’s decision to reduce personnel, both for newly acquired and since earlier owned companies. The amounts are based on management’s best estimates and are adjusted when changes to these esti- mates are known. Other provisions mainly include provisions for environmen- tal liabilities, litigations other than warranty related claims and employee related provisions. The timing of any resulting outﬂows for other provisions are uncertain. P. 142 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 23 OTHER LIABILITIES Group Parent Company SEKm 2021 2020 2021 2020 Accrued holiday pay 131 112 37 37 Other accrued payroll costs 345 100 56 24 Accrued interest expenses 3 2 2 – Other prepaid income 1 20 – – Government grants 18 – – – Other accrued expenses 183 112 25 23 Contract liabilities 1 595 353 102 85 VAT liabilities 113 101 – – Personnel related liabilities 149 127 26 26 Other operating liabilities 54 55 – – Derivatives 5 6 5 6 Total 1,597 988 253 201 1) Movement in contract liabilities 2021 and 2020 is presented in note 4. NOTE 24 CONTINGENT LIABILITIES Group Parent Company SEKm 2021 2020 2021 2020 Contingent liabilities 9 129 68 76 Total 9 129 68 76 The previously reported contingent liability related to a lawsuit by a supplier in Italy, claiming EUR 12.1m in alleged damages for wrongful termination of a supply agreement was settled out of court in February 2022. The settlement will have an insigniﬁcant eﬀect on Electrolux Professional’s operating result and cash-ﬂow. Parent Company The Parent company has issued guarantees on behalf of some of its subsidiaries. The nominal amount is SEK 68m (76) of which the majority is related to guarantees for leasing of vehicles and credit cards for employees. The likelihood for these guarantees to be utilized is considered low. P. 143Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 25 ACQUIRED AND DIVESTED OPERATIONS Acquired operations SEKm 2021 Consideration Cash paid for acquisitions made during the year 2,113 Total consideration 2,113 Recognized amounts of assets acquired and liabilities assumed Property plant and equipment, owned 205 Property plant and equipment, right-of-use 95 Intangible assets 753 Inventories 158 Trade receivables 1 115 Other current and non-current assets 4 Trade payables –114 Government grants –18 Other operating liabilities –284 Total identiﬁable net assets acquired 913 Cash and cash equivalents 10 Lease liabilities –95 Assumed net debt –85 Goodwill 1,284 Total 2,113 1) Trade receivables Trade receivables, gross 115 Provision for doubtful receivables –0 Total 115 SEKm 2021 Payments for acquisitions Cash paid for acquisitions made during the year 2,113 Cash and cash equivalents in acquired operations –10 Total paid 2,103 The purchase price allocation is preliminary and can be subject to changes. Acquisitions in 2021 Uniﬁed Brands On December 1, 2021 the acquisition of the US manufacturer of foodservice equipment Uniﬁed Brands was completed by acquiring 100% of the shares in a cash deal. The purchase price for the shares amounted to USD 233m corresponding to SEK 2,113m. Uniﬁed Brands, founded in 1907, has approximately 600 employees. It operates two manufacturing and R&D facilities, one in Weidman, Michigan and one in Vicksburg, Mississip- pi. The company and its Groen, Randell, Avtec, Power Soak and CapKold brands oﬀer cooking equipment, refrigeration, cleaning systems, ventilation, and meal distribution systems. The acquisition is a part of Electrolux Professional’s strat- egy to strengthen the presence in the US and supports the focus on growth with the food service chains. Goodwill represents the value of increasing Electrolux Pro- fessionals presence on the US market and especially with the food service chains. Goodwill is expected to be deductible for income tax. Uniﬁed Brands net sales and operating income from Janu- ary 1, 2021 up until the completion of the acquisition amount- ed to USD 121m and USD 10m, respectively, approximately SEK1,035m and SEK 82m, respectively. The Uniﬁed Brands is included in Electrolux Professional’s consolidated accounts from December 1, 2021. For the period from the acquisition date until the end of the reporting period the acquired business has contributed to net sales and operating income (including amortization of surplus values) by USD 12m and USD –1m respectively, approximately SEK 99m and SEK –11m respectively. The business is included in the segment Food & Beverage. Transaction costs Transaction costs related to the acquisition in 2021 amount to SEK 50m and have been expensed as incurred during the acquisition process in 2021. The costs have been reported in operating income within the segment Food & Beverage. Acquisitions in 2020 No acquisitions have been made in 2020. Divested operations No divestments have been made in 2021 nor 2020. P. 144 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 26 EMPLOYEES AND REMUNERATION Employees and employee beneﬁts As of December 31, 2021, the number of employees was 3,973 (3,515). Average number of employees, per country 2021 2020 Women Men Total Women Men Total Parent company Sweden 125 418 543 142 425 567 Subsidiaries Australia 2 15 17 2 12 14 Austria 4 25 29 4 25 29 Belgium – 4 4 – 2 2 Brazil – – – 2 2 4 China 39 137 175 41 137 178 Croatia 2 4 6 2 4 6 Czech Republic 2 6 8 2 6 8 Denmark 11 33 44 12 34 46 Finland 14 23 38 13 28 41 France 87 293 380 96 312 408 Germany 63 146 209 67 148 215 Greece 1 4 5 1 4 5 Hungary 1 2 3 1 2 3 India 2 10 12 2 12 14 Italy 436 641 1,077 444 675 1,119 Japan 16 42 58 20 37 57 Malaysia 9 7 16 7 7 14 Netherlands 4 14 18 4 17 21 New Zealand 2 2 4 1 2 3 Norway 6 12 18 5 13 18 Poland 2 1 3 2 1 3 Russia 14 12 26 13 13 26 Singapore 12 16 28 9 19 28 Slovak Republic 7 7 14 8 6 14 South Korea 2 1 3 1 2 3 Spain 12 18 31 10 21 31 Switzerland 29 131 160 28 139 167 Thailand 77 197 274 80 197 277 Turkey 10 13 22 10 14 24 United Arab Emirates 1 10 11 1 10 11 United Kingdom 42 21 63 42 21 63 USA 64 187 251 48 106 154 Total 1,096 2,452 3,548 1,120 2,453 3,573 P. 145Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Salaries, other remuneration and employer contributions 2021 2020 SEKm Salaries and remuneration 1, 2 Employer contributions 3 Total Salaries and remuneration 1, 2 Employer contributions 3 Total Parent Company 323 113 436 284 124 408 whereof pension costs – 34 34 – 30 30 Subsidiaries 1,468 359 1,827 1,255 356 1,611 whereof pension costs – 29 29 – 30 30 Total Group 1,791 472 2,263 1,539 480 2,019 whereof pension costs – 63 63 – 60 60 1) Includes government grants of SEK 45m (95) for the Group and SEK 0m (10) for the parent company. 2) For the parent company salaries and remuneration of SEK 49m (23) was paid by another legal entity in the group. 3) For the parent company social costs of SEK 9m (6) (whereof pension costs SEK 1m (1) was paid by another legal entity in the group. Salaries and remuneration for Board members, senior managers and other employees 2021 2020 SEKm Board members and senior managers Other employees Total Board members and senior managers Other employees Total Parent Company 62 261 323 31 253 284 Others 44 1,424 1,468 43 1,212 1,255 Total Group 1,685 1,791 74 1,465 1,539 Of the Board members in Group companies, 20 were men and 4 women, of whom 4 men and 3 women in the Parent Company, excluding 2 union members. According to the deﬁnition of Senior managers in the Swedish Annual Accounts Act, the number of Senior managers in the Group consisted of 13 men and 3 women, of whom 10 men and 1 women in the Parent Company. The total pension cost for Board members and senior managers in the Group amount- ed to SEK 4m. Compensation to Board members 2021 2020 SEK thousand Ordinary compensation Compensation for committee work Total compensation Ordinary compensation Compensation for committee work Total compensation Kai Wärn, Chairman 1,545 85 1,630 1,750 125 1,875 Lorna Donatone 515 104 619 542 100 642 Hans Ola Meyer 515 154 669 583 175 758 Daniel Nodhäll 515 183 698 583 190 773 Martine Snels 515 98 613 500 75 575 Carsten Voigtländer 515 – 515 500 – 500 Katharine Clark 515 – 515 417 – 417 Ulf Karlsson – – – – – – Joachim Nord – – – – – – Per Magnusson – – – – – – Total compensation 4,635 624 5,259 4,875 665 5,540 NOTE 26 EMPLOYEES AND REMUNERATION, CONTINUED Compensation to the Board of Directors The Annual General Meeting (AGM) determines the compen- sation to the Board of Directors for a period of one year until the next AGM, including the compensation for committee work. The compensation is distributed between the Chair- man and other Board Members and is paid out quarterly. The compensation paid in 2021 refers to one fourth of the compensation authorized by the AGM in 2020 and three fourths of the compensation authorized by the AGM in 2021. Total compensation paid in cash 2021 amounted to SEK 5,3m, of which SEK 4,6m referred to ordinary compensation and SEK 0.6m to committee work. P. 146 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 26 EMPLOYEES AND REMUNERATION, CONTINUED Remuneration guidelines for the Executive Management Team 2020 The guidelines for remuneration and other terms of employ- ment for the Electrolux Professional Executive Management Team have been approved by the Annual General Meeting in 2020. The Executive Management Team consists of the CEO and 12 other members (2021). The remuneration terms shall emphasize ‘pay for perfor- mance’ and vary with the performance of the individual and the Group. The total remuneration for the Executive Man- agement Team shall be tied strongly to the position held, be in line with market practice and may comprise the following components: annual ﬁxed compensation, variable compen- sation and other beneﬁts such as pension and insurance. The following describes the guidelines in determining the amount of remuneration (the detailed guidelines can be found on page 96): • Fixed compensation shall be competitive relative to the relevant country market and reﬂect the scope of the job re- sponsibilities. Fixed compensation consists of annual base salary and may, if locally stipulated by mandatory collec- tive agreement provisions, also include a ﬁxed non-com- petition component. Base salary levels shall be reviewed periodically (usually annually) to ensure continued compet- itiveness and to recognize individual performance. • Variable compensation may consist of both short term and long-term incentives. Following the ‘pay for performance’ principle, variable compensation shall represent a signiﬁ- cant portion of the total compensation opportunity for the Executive Management Team. Variable compensation shall always be measured against pre-deﬁned targets and have a maximum above which no payout shall be made. Both short-term incentives and long-term incentives entitlement shall be dependent on job level and the variable compen- sation may amount to not more than 100% of the annual base salary. • Pension and Beneﬁts such as old age- and survivor’s pen- sion, disability beneﬁts and healthcare beneﬁts shall be de- signed to reﬂect home country practices and requirements. When possible, pension plans shall be based on deﬁned contribution. In individual cases, depending on provisions in collective bargaining agreements, tax and/or social security legislation to which the individual is subject, other schemes and mechanisms for pension beneﬁts may be approved. Other beneﬁts may consist of company car, housing and private health insurance. • The notice period for the President and CEO shall be 12 months if Electrolux Professional takes the initiative to terminate the employment and 6 months if the President and CEO takes the initiative to terminate the employment. For other members of the Executive Management Team the notice period shall be between 6 to 12 months if Electrolux Professional takes the initiative to terminate the employ- ment and 3 to 6 months if the Executive Management Team member takes the initiative to terminate the employment. In individual cases, contractual severance pay may be approved in addition to the notice periods. The Board of Directors may temporarily resolve to deviate from the guidelines, in whole or in part, if in a speciﬁc case there is special cause for the deviation and a deviation is necessary to serve the Company’s long-term interests, including its sustainability, or to ensure the Company’s ﬁnan- cial viability. President and CEO The remuneration package for the President and CEO comprises ﬁxed cash compensation, variable compensation and other beneﬁts such as pension and insurance. For the President and CEO, the annualized base salary for 2021 has been set at SEK 5.3m. The variable compensation for the President and CEO consists of both short-term cash based incentives and long- term share based incentives and is based on ﬁxed ﬁnancial targets on Group level. Short term incentive can give a max- imum of 100% of annual base salary and long-term incentive can give a maximum of 100% of annual base salary. The notice period for the Company is 12 months and for the President and CEO 6 months. The President and CEO is entitled to severance pay of 12 months. The President and CEO is accruing pension entitlements in accordance with Italian social security legislation for pension. A voluntary deﬁned contribution pension scheme is oﬀered (Previndai) where the Company matches contri- butions up to EUR 7,200 per year. In addition, the company also contributes to the Italian statutory TFR. Healthcare beneﬁts are provided in accordance with the collectively agreed plan rules of FASI and Assidai designed for Executives (Dirigenti). Other Members of the Executive Management Team Like the President and CEO, other members of the Executive Management Team receive a remuneration package that comprises ﬁxed cash compensation, variable compensation and other beneﬁts such as pension and insurance. Base salary is reviewed annually per January 1. The variable compensation for other members of the Executive Management Team consists of both short-term cash based incentives and long-term share based incentives and is based on ﬁxed ﬁnancial targets on Group level and Regional and Group level for the Regional Heads. Short term incentive, as well as long-term incentive can give a max- imum of 60-80% of annual base salary depending on job level. The notice period for other members of the Executive Management Team is between 6 to 12 months if Electrolux Professional takes the initiative to terminate the employment and 3 to 6 months if the Executive Management Team mem- ber takes the initiative to terminate the employment. The Executive Management Team members employed in Italy are, in accordance with the President and CEO, also accruing pension entitlements in accordance with Italian so- cial security legislation for pension and eligible to participate in the voluntary deﬁned contribution pension scheme oﬀered (Previndai) where the Company matches contributions up to EUR 7,200 per year. In addition, the company also contrib- utes to the Italian statutory TFR. P. 147Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Healthcare beneﬁts are provided in accordance with the collectively agreed plan rules of FASI and Assidai designed for managers (Dirigenti). The Executive Management Team members employed in Sweden are covered by the collectively agreed ITP1, which is a deﬁned contribution plan or by the ITP2 and the Alternative ITP rule. The Alternative ITP plan is a deﬁned contribution plan where the contribution increases with age. The contribution is between 20 and 40% of pensionable salary, between 7.5 and 30 income base amounts and 20% of pensionable salary above 30 income base amounts. The pensionable salary under the alternative ITP plan is calculat- ed as the current ﬁxed salary including vacation pay plus the average variable salary for the last three years. For Executive Management Team members employed outside of Italy and Sweden, varying terms of employment, pension and other beneﬁts, such as company car, may apply depending upon the country of employment. Variable long-term share program (LTI 2021) The company implemented a performance based long-term share incentive program 2021 (LTI2021) for senior manag- ers and key employees, comprising up to 30 participants. Participants are oﬀered to be allocated Performance Shares, provided that the participant remains employed until January 1, 2024. Participants are divided into four groups; CEO and President (Group 1); other members of Executive Management and Senior Managers (Group 2 & 3); as well as certain other key employees (Group 4). The Performance Shares shall be based on maximum performance values for each participant category. The maximum performance value for the partici- pants in Group 1 will be 100% of the participant’s annual base salary for 2021, for participants in Group 2, 80% of the partici- pant’s annual base salary for 2021, for participants in Group 3, 60% of the participant’s annual base salary for 2021, and for participants in Group 4, 40% of the participant’s annual base salary for 2021. The total sum of the maximum values of the Performance Shares thus deﬁned for all participants will not exceed SEK 34m excluding social costs. Each maximum value shall thereafter be converted into a maximum number of Performance Shares, based on the Volume Weighted Average Price (VWAP), paid for Electrolux Professional B-shares on Nasdaq Stockholm during a period of 20 trading days before the day the participants are invited to participate in the program. The calculation of the number of Performance Shares shall be connected to performance targets for the Group estab- lished by the Board for (i) earnings per share and (ii) operating cash ﬂow after investments. The performance targets adopted by the Board will stipulate a minimum level and a maximum level, with the relative weight of the performance targets (i) and (ii) being 60% and 40% respectively. In 2021, the maximum levels of the two performance targets were reached which means that 100% of granted awards under the LTI2021 program will be paid out after the end of the vesting period in 2024. The share-based compensation program is classiﬁed as equity settled transactions, and the cost of the granted instrument’s fair value at grant date is recognized over the vesting period which is 2.6 years. At each balance sheet date, the Group revises the estimates to the number of shares that are expected to vest. The impact of the revision to orig- inal estimates, if any, is recognized in the income statement, with a corresponding adjustment to equity. In addition, the Group provides for social costs expected to be paid in con- nection with the share-based compensation programs. The costs are charged to the income statement over the vesting period. The provision is periodically revalued based on the fair value of the instruments at each closing date. NOTE 26 EMPLOYEES AND REMUNERATION, CONTINUED P. 148 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Remuneration to Executive Management 2021 SEK thousand Annual ﬁxed salary¹ Short term variable salary² Long term variable salary³ Pension contribution Other beneﬁts⁴ Social security contribution Total President & CEO 5,566 4,912 1,197 460 318 1,931 14,384 Other members of Executive Management⁵ 22,399 15,812 4,073 2,180 2,262 7,358 54,084 Total 27,96 5 20,724 5,270 2,640 2,580 9,289 68,468 2020 SEK thousand Annual ﬁxed salary¹ Short term variable salary² Long term variable salary³ Pension contribution Other beneﬁts⁴ Social security contribution Total President & CEO 5,392 – – 429 343 1,447 7,611 Other members of Executive Management⁵ 23,134 – – 1,650 2,614 5,185 32,583 Total 28,526 – – 2,079 2,957 6,632 40,194 1) The annual ﬁxed salary includes annual base salary, vacation salary, paid vacation days and ﬁxed non-compete components. 2) Variable salary earned 2021 and to be paid in 2022. 3) Cost incurred 2021 for the long term share based incentive program. 4) Includes allowances and other beneﬁts such as housing, company car and medical insurance. 5) Other members comprised of 12 people end of 2021. Remuneration for other members of Executive Management includes SVP APAC & MEA, Richard Flynn, as of October 2021 and President Uniﬁed Brands, Dave Herring, as of December 2021. NOTE 27 FEES TO AUDITORS At the 2020 Annual General Meeting Deloitte was appointed auditor for the period until the end of the 2021 Annual General Meeting. Group Parent Company SEKm 2021 2020 2021 2020 Deloitte Audit fees 1 16 13 6 5 Audit-related fees 2 0 0 – – Tax fees 3 – 0 – – All other fees 0 0 – – Total fees to Deloitte 16 14 6 5 Audit fees to other audit ﬁrms 0 1 – – Total fees to auditors 16 15 6 5 1) Audit fees consist of fees for the annual audit-services engagement and other audit services, which are those services that only the external auditors reasonably can provide, and includes the Group audit; statutory audits; comfort letters and consents; and attest services. 2) Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit of the accounts and annual reports of the Group and group companies traditionally performed by the external auditors, and include consultations concerning ﬁnancial accounting and reporting standards; internal control reviews; as well as review of interim reports. 3) Tax fees include for example tax compliance and tax consultation services. NOTE 26 EMPLOYEES AND REMUNERATION, CONTINUED P. 149Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 29 UNTAXED RESERVES, PARENT COMPANY SEKm December 31, 2021 Appropriations December 31, 2020 Accumulated depreciation in excess of plan Brands 11 –4 15 Licenses – – – Machinery and equipment 91 – 91 Buildings – – – Other 6 –1 8 Total 108 –5 114 Group contributions – Total appropriations –5 Transactions between Electrolux Professional AB and its subsidiaries have been eliminated in the Group and are not disclosed in this note. Remuneration to members of the Board of Directors and Group management are disclosed in note 26. Transactions related to post-employment plans are disclosed in note 21. Equity transactions with shareholders are disclosed in note 20. The Parent company’s largest shareholder, Investor AB, controls approximately 32.4% of the voting rights in Electrolux Professional AB. The Group has not had any transactions with Investor AB during the year, and there are no outstanding balances with Investor AB. Investor AB has controlling or signiﬁcant inﬂuence over companies with which Electrolux Professional may have transactions within the normal course of business. Commercial terms and market prices apply to any such transactions. From January 1 to March 23, 2020 the Group purchased products, IT and administrative services from the Electrolux Group which were based on generally accepted commercial terms and conditions. These transactions were seen as relat- ed party transactions during that period. In connection with the listing Electrolux Professional AB repaid loan and group contribution. NOTE 28 TRANSACTIONS WITH RELATED PARTIES Related party transactions, Electrolux Group Group Parent Company SEKm 2021 2020 2021 2020 Income for the period Purchases of goods – –15 – – Interest income – – – – Interest expense – –1 – –1 P. 150 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 30 SHARES AND PARTICIPATIONS Group companies The following table lists the companies included in the Electrolux Professional Group, split on direct and indirect shareholdings by the parent company. Carrying amount Parent Company Subsidiaries, direct shareholdings Corp. ID no. Country City of residence Holding, % Legal form 2021 2020 Electrolux Professional Australia Pty Ltd 634 149 250 Australia Scoresby 100% Limited Liability Company 22 22 Electrolux Professional Austria GmbH FN516160 i Austria Brunn Am Gebirge 100% Limited Liability Company 0 0 Electrolux Professional Belgium B.V. 0729.704.769 Belgium Brussels 100% Limited Liability Company 5 5 Electrolux Proﬁssional do Brasil 3563041087-8 Brazil São Paulo 100% Limited Liability Company 0 0 Electrolux (Shanghai) Professional Appli- ances Co., Ltd. 91310120332328256Q China Shanghai 100% Limited Liability Company 114 114 Electrolux Professional d.o.o 081259831 Croatia Zagreb 100% Limited Liability Company 0 0 Electrolux Professional Czech Republic s.r.o. 08340226 Czech Republic Prague 100% Limited Liability Company 1 1 Electrolux Professionals A/S 24622428 Denmark Hvidovre 100% Limited Liability Company 7 7 Electrolux Professional Oy 0816444-8 Finland Helsinki 100% Limited Liability Company 0 0 Electrolux Professionnel SAS 996750030 France Saint-Denis 100% Limited Liability Company 595 595 UNIC SAS 958 806 408 France Carros 100% Limited Liability Company 80 80 Electrolux Professional GmbH HRB20581 Germany Nürnberg 100% Limited Liability Company 252 252 Electrolux Professional Hellas S.A. AME 322157 Greece Athens 100% Limited Liability Company 0 0 Electrolux Professional Hungary Kft Cg.16-09-018699 Hungary Jászberény 100% Limited Liability Company 0 0 Electrolux Professional India Private Limited U31909HR2019- FTC082077 India Gurgaon 99% 1) Limited Liability Company 2 2 Electrolux Professional S.p.A. 00072220932 Italy Pordenone 100% Limited Liability Company 3,105 3,105 S.P.M Drink Systems S.p.A. 03195610369 Italy Spilamberto 100% Limited Liability Company 258 258 Electrolux Professional Japan Limited 01040103326 Japan Tokyo 100% Limited Liability Company 119 119 Electrolux Professional Korea Co., Ltd. 110111-7179248 Korea Seoul 100% Limited Liability Company 0 0 Electrolux Professional Sdn Bhd 147661P Malaysia Petalin Jaya 100% Limited Liability Company 3 3 Electrolux Professional B.V. 33269220 The Netherlands Rotterdam 100% Limited Liability Company 53 53 Electrolux Professional New Zealand Limited 7497977 New Zealand Wellington 100% Limited Liability Company 3 3 Electrolux Professional AS 923830197 Norway Oslo 100% Limited Liability Company 66 66 Electrolux Professional Poland Sp. z o.o. 0000786645 Poland Warsaw 100% Limited Liability Company 0 0 Limited Liability Company Electrolux Pro- fessional Rus 1197746476806 Russia Moscow 99% 1) Limited Liability Company 10 10 Electrolux Professional Singapore Pte. Ltd. 201919595D Singapore Singapore 100% Limited Liability Company 0 0 Electrolux Professional s.r.o. 31 358 446 Slovakia Bratislava 99% 1) Limited Liability Company 6 6 Electrolux Professional S.A. ESA28238947 Spain Madrid 100% Limited Liability Company 80 80 Electrolux Professional Sweden AB 556025-2081 Sweden Stockholm 100% Limited Liability Company 61 61 Electrolux Professional Holding AB 559006-2278 Sweden Stockholm 100% Limited Liability Company 0 0 Electrolux Professional AG CHE-105.957.638 Switzerland Sursee 100% Limited Liability Company 197 197 Crathco Ltd 105541040522 Thailand Rayong 100% Limited Liability Company 275 – Electrolux Professional (Thailand) Co., Ltd. 0105562090821 Thailand Bangkok 100% Limited Liability Company 65 65 Electrolux Professional Durable Consum- er Goods Industry and Trade Joint Stock Company 223730/5 Turkey Istanbul 100% Limited Liability Company 10 10 Electrolux Professional Middle East DMCC DMCC176056 United Arab Emirates Dubai 100% Limited Liability Company 0 0 Electrolux Professional Ltd. 00637383 United Kingdom Luton 100% Limited Liability Company 495 495 Electrolux Professional US Holdings, Inc. EIN 84-3103055 USA Wilmington, Delaware 100% Limited Liability Company 539 539 Carrying amount, December 31 6,423 6,148 1) Electrolux Professional Sweden AB holds 1%. P. 151Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Subsidiaries, indirect shareholdings Electrolux Professional Laundry Systems France SNC France Rosères- Près-Troyes 100% Exefem France Saint-Denis 100% Schneidereit GmbH Germany Solingen 100% UNIC Japan KK Japan Tokyo 100% GCS Mexico SA de CV Mexico Ciudad Juárez 100% Schneidereit UK Ltd. United Kingdom Luton 100% Electrolux Professional LLC USA Louisville 100% Grindmaster Corporation USA Louisville 100% Uniﬁed Brands USA Delaware 100% NOTE 30 SHARES AND PARTICIPATIONS, CONTINUED NOTE 31 EVENTS AFTER THE BALANCE SHEET DATE Russia’s invasion of Ukraine has created an uncertain global situation. Electrolux Professional is closely monitoring the developments as well as the compliance with the trade sanctions decided/adopted by among others the European Union, the United States and the United Kingdom. Electrolux Professional has limited sales to Russia, Belarus and Ukraine, representing less than 1% of total sales and total assets respectively, why the potential ﬁnancial eﬀect is insigniﬁcant. However, the invasion can potentially create supply chain disruptions including higher raw material prices which might have an eﬀect on the Group’s ﬁnancial position. Electrolux Professional has 26 employees in Russia and none in Ukraine nor Belarus. The previously reported contingent liability related to a lawsuit by a supplier in Italy, claiming EUR 12.1m in alleged damages for wrongful termination of a supply agreement was settled out of court in February 2022. The settlement will have an insigniﬁcant eﬀect on Electrolux Professional’s operating result and cash-ﬂow. P. 152 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 NOTE 32 PROPOSED DISTRIBUTION OF EARNINGS The Board of Directors propose that income for the year and retained earnings to be distributed as follows: ‘000 SEK Dividend to the shareholders 143,699 To be carried forward 6,119,954 Total 6,263,653 The Board of Directors give their assurance that the consolidated ﬁnancial statements and annual report have been prepared in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002, on the Application of International Accounting Standards and Generally Accepted Accounting Standards, and give a true and fair view of the ﬁnancial position and results of operations of the Group. The ﬁnancial statements of the Parent Company have been prepared in accordance with generally accepted accounting principles in Sweden and give a true and fair view of the Parent Company’s ﬁnancial position and results of operations. The administration report for the Group and the Parent Company gives a true and fair view of the business activities, ﬁnancial position and results of operations of the Group and the Parent Company, and describes the signiﬁcant risks and uncertainties to which the Parent Company and the Group companies are exposed. Stockholm March 29, 2022 Electrolux Professional AB (publ) 556003-0354 Kai Wärn Chairman of the Board Katharine Clark Board member Lorna Donatone Board member Hans Ola Meyer Board member Daniel Nodhäll Board member Martine Snels Board member Carsten Voigtländer Board member Ulf Karlsson Employee representative Joachim Nord Employee representative Alberto Zanata President and CEO The Auditor's report was issued on March 29, 2022 Deloitte AB Jan Berntsson Authorized Public Accountant The proﬁt and loss accounts and balance sheets of the Group and the Parent Company are subject to approval by the AGM on April 28, 2022. The information in this report is subject to the disclosure requirements of Electrolux Professional AB (publ) under the provisions in the Swedish Securities Market Act. The information was submitted to the media for publication on 31 March 2022, at 08:00 CET. P. 153Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Auditor’s report To the General Meeting of the Shareholders of Electrolux Professional AB (publ) corporate identity number 556003-0354 REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS Opinions We have audited the annual accounts and consolidated ac- counts of Electrolux Professional AB (publ) for the ﬁnancial year 2021-01-01 - 2021-12-31 except for the corporate governance report on pages 73-83. The annual accounts and consolidated accounts of the company are included on pages 93-152 in this document. In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the ﬁnancial position of the parent com- pany as of 31 December 2021 and its ﬁnancial performance and cash ﬂow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the ﬁnancial position of the group as of 31 December 2021 and their ﬁnancial performance and cash ﬂow for the year then ended in accordance with International Finan- cial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance report on pages 73-83. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts. We therefore recommend that the general meeting of share- holders adopts the income statement and balance sheet for the parent company and the group. Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent compa- ny’s Audit Committee in accordance with the Audit Regulation (537/2014) Article 11. Basis for Opinions We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accor- dance with professional ethics for accountants in Sweden and have otherwise fulﬁlled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU. We believe that the audit evidence we have obtained is suﬃ- cient and appropriate to provide a basis for our opinions. Key Audit Matters Key audit matters of the audit are those matters that, in our professional judgment, were of most signiﬁcance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters. Revenue Recognition Revenues in the Group amounts to 7,862 MSEK and consists of a large number of transactions that mainly comprises sales of ap- pliances and spare parts. Revenue recognition cut oﬀ constitutes a key audit matter in our audit. The Group’s accounting principles and disclosures related to revenue recognition can be found in note 4. Our audit procedures Our audit procedures included, but were not limited to: • evaluation of the group’s accounting principles for revenue recognition and its compliance with IFRS, • test of identiﬁed key controls, within the revenue process, in- cluding relevant IT controls • analytical procedures, and • detailed testing of sales transactions on a sample basis to conﬁrm proper revenue cut oﬀ. Valuation of trade receivables Trade receivables in the Group amounts to 1,625 MSEK split over a large number of customers within diﬀerent geographies. Proce- dures for recognizing appropriate provisions for expected credit losses and the evaluation of customers’ ability to pay constitutes a key audit matter in our audit. The group’s accounting principles and disclosures related to trade receivables can be found in note 1 and 17. Our audit procedures Our audit procedures included, but were not limited to: • evaluation of the Group’s accounting principles for recognizing expected credit losses to verify compliance with IFRS, • test of design and implementation of identiﬁed key controls, related to valuation of customer receivables, including relevant IT controls, • detailed testing on a sample basis of trade receivables against customer statements alternatively cash receipts or shipping documents, and • evaluation of management’s estimates for provisions related to expected credit losses. Valuation of inventory Inventory in the Group amounts to 1,416 MSEK and is held by several production and sales units in diﬀerent countries. Valuation of inventory requires clear policies among other things related to provisions for obsolescence which is subject to management’s estimates especially given large price variances related to raw material and components. Processes for valuation of inventory constitutes a key audit matter in our audit. The Group’s accounting principles and disclosures related to inventory can be found in note 15. Our audit procedures Our audit procedures included, but were not limited to: • evaluation of the Group’s accounting principles for inventory to verify compliance with IFRS, • evaluation of the internal control environment regarding val- uation of inventory and test of design and implementation of identiﬁed key controls including relevant IT controls, • attending physical inventory counts, • on sample basis testing for example purchase prices, and • evaluating management’s estimates related to provisions for obsolescence. Accounting for business combinations In the ﬁscal year 2021 Electrolux Professional made an acquisi- tion for a total consideration of 2,113 MSEK. The acquired assets and liabilities must be separately identiﬁed and valued at fair value at the date of the acquisition. For acquired assets and P. 154 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 liabilities for which there is no active market, management must apply valuation models and signiﬁcant estimates in order to determine the fair value. The signiﬁcant estimates required to account for business combinations combined with a signiﬁcant purchase price consti- tutes a key audit matter in our audit. The Group’s accounting principles and disclosures related to business combinations can be found in note 1 and 25. Our audit procedures Our audit procedures included, but were not limited to: • evaluation of the Group’s accounting principles for business combinations to verify compliance with IFRS, • review of purchase agreement and audit of purchase price allocation, and • evaluating the applied valuation model including signiﬁcant assumptions and estimates, supported by our internal valua- tion specialists. Other Information than the annual accounts and consolidated accounts This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-11, 13-54, 71-72, 84-90, 156-158, 168-173. The Board of Directors and the Managing Director are responsible for this other information. Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information. In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the infor- mation identiﬁed above and consider whether the information is materially inconsistent with the annual accounts and consoli- dated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated. If we, based on the work performed concerning this informa- tion, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are responsi- ble for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error. In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsi- ble for the assessment of the company’s and the group’s ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so. The Audit Committee shall, without prejudice to the Board of Director’s responsibilities and tasks in general, among other things oversee the company’s ﬁnancial reporting process. Auditor’s responsibility Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstate- ments can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts. An additional description of our responsibility for the audit of the annual accounts and the consolidated accounts is located at the Swedish Inspectorate of Auditors’ web page: www.revi- sorsinspektionen. se/revisornsansvar. This description is a part of the auditor’s report. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Opinions In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Electrolux Professional AB (publ) for the ﬁnancial year 2021-01-01 - 2021-12-31 and the proposed appropriations of the company’s proﬁt or loss. We recommend to the general meeting of shareholders that the proﬁt to be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the ﬁnancial year. Basis for Opinions We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulﬁlled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is suﬃ- cient and appropriate to provide a basis for our opinions. Responsibilities of the Board of Directors and the Managing Director The Board of Directors is responsible for the proposal for ap- propriations of the company’s proﬁt or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justiﬁable considering the requirements which the company’s and the group’s type of operations, size and risks place on the size of the parent company’s and the group’s equity, consolida- tion requirements, liquidity and position in general. The Board of Directors is responsible for the company’s organization and the administration of the company’s aﬀairs. This includes among other things continuous assessment of the company’s and the Group’s ﬁnancial situation and ensuring that the company’s organization is designed so that the account- ing, management of assets and the company’s ﬁnancial aﬀairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors’ guidelines and instructions and among other matters take measures that are necessary to fulﬁll the company’s accounting in accordance with law and handle the management of assets in a reassuring manner. Auditor’s responsibility Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect: • has undertaken any action or been guilty of any omission which can give rise to liability to the company, or • in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. Our objective concerning the audit of the proposed appropri- ations of the company’s proﬁt or loss, and thereby our opinion P. 155Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect ac- tions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s proﬁt or loss are not in accordance with the Companies Act. An additional description of our responsibilities for the audit of management’s administration is located at the Swedish Inspec- torate of Auditors website: www.revisorsinspektionen.se/revisor- sansvar. This description forms part of the auditor’s report. THE AUDITOR’S EXAMINATION OF THE ESEF REPORT Opinion In addition to our audit of the annual accounts and consolidated accounts, we have also examined that the Board of Directors and the Managing Director have prepared the annual accounts and consolidated accounts in a format that enables uniform electronic reporting (the Esef report) pursuant to Chapter 16, Section 4 a of the Swedish Securities Market Act (2007:528) for Electrolux Profes- sional AB (publ) for the ﬁnancial year 2021-01-01 – 2021-12-31. Our examination and our opinion relate only to the statutory requirements. In our opinion, the Esef report #checksum has been prepared in a format that, in all material respects, enables uniform elec- tronic reporting. Basis for opinion We have performed the examination in accordance with FAR’s recommendation RevR 18 Examination of the Esef report. Our re- sponsibility under this recommendation is described in more de- tail in the Auditors’ responsibility section. We are independent of Electrolux Professional AB (publ) in accordance with professional ethics for accountants in Sweden and have otherwise fulﬁlled our ethical responsibilities in accordance with these requirements. We believe that the evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinion. Responsibilities of the Board of Directors and the Managing Director The Board of Directors and the Managing Director are respon- sible for the preparation of the Esef report in accordance with the Chapter 16, Section 4 a of the Swedish Securities Market Act (2007:528), and for such internal control that the Board of Directors and the Managing Director determine is necessary to prepare the Esef report without material misstatements, whether due to fraud or error. Auditor’s responsibility Our responsibility is to obtain reasonable assurance whether the Esef report is in all material respects prepared in a format that meets the requirements of Chapter 16, Section 4(a) of the Swed- ish Securities Market Act (2007:528), based on the procedures performed. RevR 18 requires us to plan and execute procedures to achieve reasonable assurance that the Esef report is prepared in a format that meets these requirements. Reasonable assurance is a high level of assurance, but it is not a guarantee that an engagement carried out according to RevR 18 and generally accepted auditing standards in Swe- den will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of the Esef report. The audit ﬁrm applies ISQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and other Assurance and Related Services Engagements and accordingly maintains a comprehensive system of quality control, including documented policies and procedures regarding compliance with professional ethical requirements, professional standards and legal and regulatory requirements. The examination involves obtaining evidence, through various procedures, that the Esef report has been prepared in a format that enables uniform electronic reporting of the annual accounts and consolidated accounts. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement in the report, whether due to fraud or error. In carrying out this risk assessment, and in order to design audit procedures that are appropriate in the circumstances, the auditor considers those elements of internal control that are relevant to the preparation of the Esef report by the Board of Directors and the Managing Director, but not for the purpose of expressing an opinion on the eﬀectiveness of those internal controls. The examination also includes an evaluation of the appropriateness and reasonableness of assumptions made by the Board of Directors and the Managing Director. The procedures mainly include a technical validation of the Esef report, i.e., if the ﬁle containing the Esef report meets the technical speciﬁcation set out in the Commission’s Delegated Regulation (EU) 2019/815 and a reconciliation of the Esef report with the audited annual accounts and consolidated accounts. Furthermore, the procedures also include an assessment of whether the Esef report has been marked with iXBRL which enables a fair and complete machine-readable version of the consolidated statement of ﬁnancial performance, ﬁnancial posi- tion, changes in equity and cash ﬂow. THE AUDITOR’S EXAMINATION OF THE CORPORATE GOVERNANCE STATEMENT The Board of Directors is responsible for that the corporate governance report on pages 73-83 has been prepared in accor- dance with the Annual Accounts Act. Our examination of the corporate governance report is con- ducted in accordance with FAR’s standard RevR 16. The auditor’s examination of the corporate governance statement. This means that our examination of the corporate governance report is diﬀerent and substantially less in scope than an audit conduct- ed in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with suﬃcient basis for our opinions. A corporate governance report has been prepared. Dis- closures in accordance with chapter 6 section 6 the second paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act. Deloitte AB, was appointed auditor of Electrolux Professional AB (publ) by the general meeting of the shareholders on 28 April, 2021 and has been the company’s auditor since 1 June, 2018. Stockholm 29 March 2022 Deloitte AB Signature on Swedish original Jan Berntsson Authorized public accountant This is a translation of the Swedish language original. In the event of any diﬀerences between this translation and the Swedish language original, the latter shall prevail. P. 156 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 SEKm 2021 2020 2019 2018 2017 Food & Beverage Net sales 4,704 4,198 5,895 5,399 4,922 EBITA 299 87 568 629 607 EBITA, % 6.4 2.1 9.6 11.7 12.3 Operating income 244 35 522 599 572 Operating margin, % 5.2 0.8 8.9 11.1 11.6 Laundry Net sales 3,159 3,065 3,386 3,267 2,801 EBITA 492 467 507 573 502 EBITA, % 15.6 15.2 15.0 17.6 17.9 Operating income 475 452 488 558 499 Operating margin, % 15.0 14.7 14.4 17.1 17.8 Group common cost Operating income –128 –100 –18 –14 –11 Total Group Net sales 7,862 7,263 9,281 8,666 7,723 EBITA 663 456 1,058 1,188 1,098 EBITA, % 8.4 6.3 11.4 13.7 14.2 Operating income 592 387 992 1,143 1,060 Operating margin, % 7.5 5.3 10.7 13.2 13.7 Five years in summary SEKm, if not otherwise stated 2021 2020 2019 2018 2017 Net sales 7,862 7,263 9,281 8,666 7,723 Organic growth, % 10.6 –21.0 –0.3 4.1 5.6 EBITA 663 456 1,058 1,188 1,098 EBITA, % 8.4 6.3 11.4 13.7 14.2 Operating income 592 387 992 1,143 1,060 Operating margin, % 7.5 5.3 10.7 13.2 13.7 Income after ﬁnancial items 587 363 978 1,134 1,052 Income for the period 487 278 663 952 786 Items aﬀecting comparability – –77 –32 – – Capital expenditure –159 –273 –257 –169 –167 Operating cash ﬂow after investments 1,116 570 1,138 1,131 1,167 Operating working capital % of net sales ,4 14.9 19.9 17.7 16.3 13.8 Earnings per share, SEK¹ 1.69 0.97 2.31 3.31 2.74 Equity per share, SEK 1, 2 12.27 9.74 9.43 31.91 8.43 Dividend per share, SEK 1 – – – – – Net debt 1,705 549 1,025 –226 –481 EBITDA ,3 886 684 1,280 1,363 1,253 Net debt/EBITDA ratio 1.9 0.8 0.8 –0.2 –0.4 Average number of shares, million¹ 287.4 287.4 287.4 287.4 287.4 Number of employees, end of period 3,973 3,515 3,624 3,555 3,183 ) Alternative performance measure 1) Basic number of outstanding shares 2) Year 2020 is restated 3) Rolling four quarters 4) Last twelve months currency adjusted P. 157Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 APM Deﬁnition Reason for use Organic growth % Change in sales growth excluding net FX impact and acquisitions. The Group’s presentation currency is SEK while the Net sales are mainly in other currencies. Organic growth is dependent on ﬂuctuations in SEK versus other currencies and in addition acquired or di- vested business can have an impact on reported net sales. Organic growth adjusted for acquisi- tions and currency shows the underlying sales development without these parameters. Acquisitions % Change in net sales during the current period attributable to acquired operation in relation to prior year sales, following a period of 12 months commencing the acquisition date. See "Organic growth" above Operating income (EBIT) Earnings before interest and tax Used as an indicator that shows the Group's ability to make a proﬁt, regardless of the method of ﬁnancing (then determines the optimal use of debt versus equity). Operating margin (EBIT margin) Operating income expressed as a percentage of net sales. Operating margin shows the operating income in percentage of net sales. Operating margin is a key internal measure, as the Group believes that it provides users of the ﬁnancial statements with a better understanding of the Group’s ﬁnancial performance both short and long term. Items aﬀecting comparability Material proﬁt or loss items such as capital gains and losses from divestments of product groups or major units, close down or signiﬁcant down-sizing of major units or activities, signiﬁcant impairment, and other major costs or income items. Summarizes events and transactions with signiﬁ- cant eﬀects, which are relevant for understanding the ﬁnancial performance when comparing in- come for the current period with previous periods. Operating margin excluding items aﬀecting comparability Operating income less items aﬀecting compara- bility as a percentage of net sales Operating margin excluding items aﬀecting comparability shows the operating income in per- centage of net sales adjusted for items aﬀecting comparability deﬁned below. This is a key internal measure, as the Group believes that it provides users of the ﬁnancial statements with a better un- derstanding of the Group’s ﬁnancial performance both short and long term. Capital expenditure Investments in property, plant and equipment, product development and other intangible assets Used to ensure that cash spending is in line with Groups overall strategy for the use of cash. EBITA Operating income less amortization and write- down related to intangibles assets (excluding right of use assets). EBITA gives an indication of the operating income less amortization and write-down related to intangibles assets (excluding right of use assets), mainly used to follow-up operating income with- out the impact of amortization of surplus values related to acquisitions. Deﬁnitions and reconciliation of alternative performance measures Electrolux Professional presents certain measures that are not deﬁned under IFRS (alternative performance measures – “APMs”). These are used by management to assess the ﬁnancial and operational performance of the Group. Man- agement believes that these APMs provide useful information regarding the Group’s ﬁnancial and operating performance. Such measures may not be comparable to similar measures presented by other companies. Consequently, APMs have limitations as analytical tools and should not be considered in isolation or as a substitute for related ﬁnancial measures prepared in accordance with IFRS. The APMs have been derived from the Electrolux Professional’s internal reporting and are not audited. The APM reconciliations can be found on Electrolux Professional website www.electroluxprofessional.com/corporate/interim-reports/ P. 158 Financial reports Introduction Our strategic foundation Financial reports OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Other information Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 APM Deﬁnition Reason for use EBITA margin EBITA expressed as a percentage of net sales. Used to evaluate business performance in relation to net sales in order to measure the eﬃciency of the Company. EBITA excluding items aﬀecting comparability Operating income less amortization and write- down related to intangibles assets (excluding right of use assets) and less items aﬀecting compara- bility. Items aﬀecting comparability vary between years and periods and in order to analyze trends items aﬀecting comparability are excluded from EBITA. EBITA margin excluding items aﬀecting comparability EBITA excluding items aﬀecting comparability, expressed as a percentage of net sales. Items aﬀecting comparability vary between years and periods and in order to analyze trends, items aﬀecting comparability are excluded from EBITA margin. EBITDA EBITA less depreciation. This is an indicator for business' cash generating capacity in relation to sales. Operating cash ﬂow after investments Cash ﬂow from operations and investments ad- justed for ﬁnancial items paid net, taxes paid and acquisitions/divestments of operations. To monetarize the cash from core operation. Net debt Shows short-term borrowings (short-term loans and trade receivables with recourse), accrued interest expenses and prepaid interest income and long-term borrowings, lease liabilities, net provisions for post-employment beneﬁts less liquid funds (cash and cash equivalents, prepaid interest expenses and accrued interest income and cashpool accounts Electrolux Group). Net debt describes the Groups total debt ﬁnancing and is monitored by management. Net debt/EBITDA Net debt in relation to EBITDA (Net debt is based on the end of period balance. EBITDA is calculat- ed based on last four rolling quarters). A measurement of ﬁnancial risk, showing net debt in relation to cash generation. Operating working capital, % of net sales Sum of currency adjusted last twelve months’ av- erage of inventories, trade receivables and trade payables (Operating working capital) as per- centage of currency adjusted last twelve months’ average net sales. All months of the period are currency adjusted by applying the end of period average currency rate. Used to evaluate how eﬃcient the Group is generating cash in relation to net sales. Deﬁnitions and reconciliation of alternative performance measures, continued P. 159Sustainability notes Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Sustainability notes P. 160 Sustainability notes Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Sustainability management and governance The Board of Directors decides on the strategy, direction, and overall targets of the Group’s sustainability work. The Executive Management Team further deﬁnes and implements procedures. Each local management and business function has a delegated responsibility for the implementation of group policies and risk mitigation and performance. The group Sustainability function supports the business by identifying the prioritized and strategic sustainability issues and helps integrate them into the business. The group Sustainability function also monitors the overall per- formance through dialog, performance data, and audit results. Performance is reported to the Executive Management Team. Code of Conduct governance Business Ethics and Code of Conduct expectations of managers and em- ployees are published on the Group’s intranet. A Code of Conduct Steering Group has been established to meet regularly to follow up on the eﬀective- ness of the program and in particular our whistleblowing procedures. About this report Reporting framework This report has been prepared in accor- dance with the Swedish Annual Ac- counts Act related to statutory sustain- ability reporting. The main audience for the report are shareholders and other stakeholders. Electrolux Professional’s main stakeholders are identiﬁed by assessing the magnitude of the impacts from, or on, our business and opera- tions. Electrolux Professional’s Sustainability Report has been pre- pared in accordance with the Global Reporting Initiative (GRI), Core Option. See page 165–166 for the GRI Index. Electrolux Professional has performed a materiality analysis to determine the most relevant sustainability topics within our value chain. We have also estab- lished sustainability targets to highlight our ambitions in a number of signiﬁcant areas. As a signatory of the UN Global Compact, Electrolux Professional uses this report to highlight progress regard- ing the 10 principles. External assurance Our auditors, Deloitte, have performed a limited assurance of the sustainability report. See page 167 for the limited assurance report. Boundary of the report • The Sustainability Report is published annually. This report covers data that has been collected for the 2021 calen- dar year. • Uniﬁed Brands is excluded from the sustainability reporting. During 2022 we intend to assess how/when to inte- grate Uniﬁed Brands. • The environmental data in this report covers 11 (13) manufacturing sites and all R&D, logistic centers, and oﬃces where we have our manufacturing sites. New acquisitions have been made since 2015, which impacts var- ious indicators when operations are included in the reporting. • The people data disclosed relating to GRI topics 102-8, 102-9, and the 400 section covers the full scope of the company (Uniﬁed Brands excluded). As people data is collected from dif- ferent systems, minor variations in the total number of employees might exist at a speciﬁc point in time. • Performance indicators normally cover the last ﬁve years. Variations might occur, depending on relevance and/or data availability. Historical baselines for performance indicators are not fully comparable as acquired operations are integrated within the report. Assumptions and calculations Emission factors are based on the “Emission factors 2021 edition” provid- ed by the International Energy Agency (IEA). Values used in the report are oﬀset by a three-year period (2021 using ﬁgures for 2018). The company uses zero as the emission factor for use of renew- able energy. Electrolux Professional applies the Precautionary principle for its sustain- ability reporting and management, this means we are cautious wherever estimates are applied. Wherever esti- mations are made, this is indicated as footnotes. Omissions from GRI Standards GRI 201-1 Direct economic value generated and distributed: Direct economic value distributed is based on operating cost instead of actual value distributed (payments) during the period. 205-2 Communication and training about anti-corruption policy and procedures Only includes number of employees. GRI 301 Material: No topic-speciﬁc dis- closures are included in the report. The reason for exclusion is mainly related to low availability of data for part of the reporting scope. Information about spend per category is disclosed on page 49. GRI 303-4 Water discharge: Storm water that is not collected or used is not considered as water discharge if it goes into our storm drains. GRI 306 Waste: Only reporting on topic disclosure. 306-3 Waste generated: Topic man- agement disclosures excluded. GRI 401-1 New employee hires and em- ployee turnover: No disclosure on total numbers is provided, only percentages. GRI 403-9 Work-related injuries: In- cludes lost time due to injuries. Employ- ees and temporary hires are included. Employees working at manufacturing sites are included based on local se- lection. On some sites a minor portion of the white collar employees is not included, depending on local reporting practices. GRI 405-1 Diversity of governance bodies and employees: The average number of employees is used for gender distribution. Year-end data collected from local/regional HR systems is used for age distribution data. * During 2021 Electrolux Professional acquired Uniﬁed Brands. The company has around 600 employees and operates two manufacturing and R&D facilities. Uniﬁed Brands is excluded from the 2021 reporting Sustainability notes P. 161Sustainability notes Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Contextual information The Taxonomy should support a tran- sition to an economy that is consistent with the environmental objectives within European Union (EU). The Taxonomy includes deﬁnitions of economic activities that is considered eligible, as well as technical screening criteria for economic activities that are classiﬁed as environmentally sustainable. For 2021 Electrolux Professional there are no requirement to report on sustainable activities. Electrolux Professional providing pro- fessional food service, beverage, and laundry solutions, serving a wide range of customers globally, from restaurants and hotels to healthcare, educational and other service facilities. There are no speciﬁc screening criteria deﬁned for manufacturing of professional food, laundry and beverage appliances relat- ed to climate change mitigation and ad- aptation (including enabling economic activity within other sector). Electrolux Professional is recognizing that the EU Taxonomy framework is under develop- ment and that our reporting will evolve as more targets are adopted and more guidance/practices are established. The company recognizing that the European Commission are considering the introduction of additional technical screening criteria’s. At this point none of Electrolux Professionals product or service oﬀering are associated with economic activeties that are considered eligible according to the EU Taxonomy regulation. Electrolux Professional has created an internal indicator to reﬂect techni- cal solutions that we believe can oﬀer opportunities for carbon reduction. The intention is to track products, that from a more technical standpoint can support the reduction of carbon emissions. See pages 59–60, 64-65. Assessment of compliance with the regulation The Taxonomy includes deﬁnitions of economic activities that are considered eligible, as well as technical screening criteria for economic activities that are classiﬁed as environmentally sustain- able. Electrolux Professional has made a screening of activities that potentially can be considered environmentally sustainable, based on availability of technical screening criteria’s. Electrolux Professional consider economic ac- tivities where such technical screening criteria are available eligible. Turnover There are technical screening criteria’s available within the EU Taxonomy for household appliances with energy labeling requirement in accordance with Regulation (EU) 2017/1369. Electrolux Professional is selling products falling under this deﬁnition, but do not consider us the manufacturer in the context of the Taxonomy. Only products manufactured in house is considered eligible accord- ing to Electrolux Professionals interpre- tation of the EU Taxonomy. Electrolux Professional has not iden- tiﬁed any Taxonomy-aligned economic activities generating eligible turnover. CAPEX/OPEX As none of Electrolux Professionals turn- over are considered eligible, there are no CAPEX/OPEX related to assets or processes that are associated with Tax- onomy-aligned economic activities. Nor are there any CAPEX/OPEX to allow Taxonomy-eligible economic activities to become Taxonomy-aligned. There is opportunity to include CAPEX/OPEX that are related to the purchase of output from Taxonomy- aligned economic activities. The company has identiﬁed 0.8% CAPEX that can be assumed connected to buildings and listed in points 7.3, 7.5 and 7.6 of Annex I to the Climate Delegated Act. As there are no information avail- able from suppliers regarding eligibility, Electrolux Professional do not report any eligible CAPEX/OPEX for 2021. Accounting policy Turnover Turnover is deﬁned as net sales from products and services which equals the total net sales as disclosed in the Con- solidated statement of total comprehen- sive income. See page 99. Capital expenditures Capital expenditures are additions to tangible, intangible and right-of-use as- sets during the year including additions from business combination. Acquired goodwill is not included. See note 8, 12 and 13. Operation expenditures Operation expenditures includes direct non-capitalized costs related to R&D costs including variances; costs for renovating buildings/oﬃcesshort-term lease costs; cost for maintaining or repairing buildings/oﬃces/production equipment/forklifts/warehouse equip- ment etc. and costs for cleaning of facilities and testing of machines. Reporting in accordance with the EU Taxonomy regulation Key Performance Indicators 2021 Total (SEKm) Eligible economic activities (%) Non Eligible economic activities (%) Turnover 7,862 0 100 Capex 2,401 0 100 Opex 417 0 100 P. 162 Sustainability notes Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Environmental data Energy GRI 302-1 1 Energy use by type (MWh) Renewable energy use (MWh) Year Natural gas LPG District heating Electricity Total Renewable energy Non- renewable energy Total 2017 9,112 0 4,255 16,979 30,345 13,833 16,512 30,345 2018 9,044 0 4,391 18,453 31,888 15,563 16,325 31,888 2019 10,147 0 3,938 19,133 33,218 15,197 18,021 33,218 2020 8,777 0 3,550 16,484 28,811 13,777 15,033 28,811 2021 7,864 905 4,426 17,675 30,870 16,310 14,560 30,870 1) Use of on-site generated electricity is included in above numbers. Note: The baseline is not fully comparable as ﬁve acquired plants have been added to the reporting for 2018 and 2019. Recalculated baseline for 2017 is 34,709 MWh. This means a reduction of 11% since 2017 using the comparable baseline. Water GRI 303-3, 303-4 Total water withdrawal from all areas in megaliters 1, 2 2017 2018 2019 2020 2021 Municipal Water Supply – Purchased 82 96 94 83 67 Ground water 1 1 Surface water 1 Total 82 96 94 84 69 1) 1 megaliter equals 1,000 m³. 2) Electrolux Professional operations have no water withdrawal from areas with water risks. Note: The baseline is not fully comparable as ﬁve acquired plants have been added to the reporting for 2018 and 2019. Recalculated baseline for 2017 is 94,548 m³. This means a reduction of 27% since 2017 (using the comparable baseline). Own disclosure - Product water consumption 2019 2020 2021 Product water consumption eﬃciency compared to 2019 0% 1.5% 2.3% Only includes dishwashing and laundry. Target to improve eﬃciency by 8% by the end of 2025 (base year 2019). * Corresponds to savings of 2,017 million liters of water (based on annual sales ﬁgures, consumption data and the expected number of cycles during the product life time). Total water discharge to all areas in megaliters 1, 2 2017 2018 2019 2020 2021 Third-party destinations Untreated 45 48 50 42 36 Pre-treated 28 29 25 33 26 Fresh surface water Untreated 0 0 0 0 0 Pre-treated 0 0 0 0 0 Total 73 77 74 75 62 1) Figures are based on engineering estimates and data provided from the sites. 2) Electrolux Professional operations have no water discharge in water stressed areas. Note: Storm water that is not collected or used is not considered as water discharge if it goes into our storm drains. Note: The baseline in not fully comparable as ﬁve acquired plants have been added to the reporting for 2018 and 2019. P. 163Sustainability notes Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 GRI 306-3 1, 2, 3 2021 Metric kiloton % of Non- hazardous waste Recovery (%) Disposal (%) Non-hazardous waste Landﬁll 0.14 3% 3% Incineration (without energy recovery) 0.03 1% 1% Waste-to-Energy 0.46 11% 11% Recycling 3.20 75% 75% Other recovery 0.44 10% 10% Total non-hazardous waste 4.27 100% 85% 15% 2021 Metric kiloton % of Non- hazardous waste Recovery (%) Hazardous waste Disposal without energy recovery 0.11 36% Recycling 0.13 42% 42% Other/Unspeciﬁed 0.06 21% Total hazardous waste 0.30 100% 42% 2021 (metric kiloton) Non- hazardous waste Hazardous waste Total % of total Total Disposal without energy recovery 0.18 0.11 0.29 6% Waste-to-energy 0.46 0.46 10% Recovery 3.64 0.13 3.77 82% Other/unspeciﬁed 0.06 0.06 1% Total 4.27 0.30 4.58 100% Percentage of total 93% 7% 1) All waste is directed to and diverted from disposal oﬀ-site. 2) Only data for 2021 is disclosed in this report. 3) Data for Louisville is based on engineering estimations. Emissions & waste Metric kiloton 2017 2018 2019 2020 2021 GRI 305-1 Direct CO 2 eq emissions 1, 2 1.8 1.7 2.0 1.7 1.7 GRI 305-2 Energy indirect COeq emissions 2 1.0 1.7 1.9 1.4 1.7 Total CO 2 eq 2.7 3.5 3.8 3.1 3.4 Own disclosure Use of HFC/HFO gases (ton) 18.6 16.1 17.5 1) Includes contributions from energy use and refrigerants. 2) Natural gas emission factors deﬁned as combustion of gas with zero CO 2 content. Note: The baseline is not fully comparable as ﬁve acquired plants have been added to the reporting for 2018 and 2019. Recalculated baseline for 2017 is 4,269 ton CO 2 . This means a reduction of 20% since 2017 using the comparable baseline. P. 164 Sustainability notes Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 People data General people data Total number of employees¹ 2021 Gender balance Employees in production/ non-production Contract type Employment type Employees covered by col- lective bargain- ing agreements 2 Employee turnover and hiring 3 Number of employees Men Women Production Non- production Temporary Permanent Full time Part time Coverage Turnover Hiring 3,438 69% 31% 38% 62% 2% 98% 95% 5% 49% 10% 8% 1) GRI 102-7 2) GRI 102-41 3) GRI 401-1 Note: Data is based on year-end data collected from central, local or regional HR systems, excluding Uniﬁed Brands. Occupational health and safety GRI 403-9 Work-related injuries 2021 2020 2019 2018 2017 Number of work-related fatalities 0 0 0 0 0 Number of high consequence injures >6 months 0 0 1 0 0 Total number of work-related lost time injuries 14 19 25 16 12 Working hours (in thousands of hours) 4,062 3,453 3,569 3,770 2,537 Rate of fatalities as a result of work-related injury 0 0 0 0 0 Rate of high-consequence work-related injuries (excluding fatalities) 0 0 0,1 0 0 Lost Time Injury rate 1 0.69 1.10 1.40 0.85 0.95 1) Lost time injuries per 200,000 hours worked. Note: The most common injures are lacerations and contusions (8 of 14). The most commonly injured body part was the hand or arm (8/14). More severe risks relate to forklift traﬃc and machines. Most lost time injuries in 2021 occurred in our assembly areas. Reactive, preventive, and proactive measures are managed within our health and safety pillar (page 67). Training and development GRI 404-1, GRI 404-3, GRI 205-2 Average hours of training per year per employee in 2021 Percentage of employees receiving performance and career development reviews in 2021 Employees participating in Code of Conduct training in 2021 2021 Average hours of training, men 1 Average hours of training, women 1 Total average training hours 1 Men as a % of total employees 1, 2 Women as a % of total employees 1, 2 Total % receiving performance review 1, 2 Number of employees participating in Code of Conduct training 3 Number of training hours 4 % of employees participating in Code of Conduct training 5 Employees 7.7 6.6 7.4 63% 65% 64% 1,313 1,326 38% 1) Total number of employees according to GRI 102-7. 2) Including production and non-production employees. Ratio of performance and career development reviews is signiﬁcantly higher for non-production employees. 3) Training including anti-corruption and human rights topics. 4) Number of hours is to some extent based on engineering estimates. 5) Total number of employees according to GRI 102-7. Diversity and equal opportunities GRI 405-1 Diversity of governance bodies and employees Gender distribution Age distribution 2021 Men Women <30 years 30–50 years >50 years Board of Directors 1 57% 43% 29% 71% Executive Management Team 92% 8% 23% 77% Including extended Executive Management members 82% 18% 18% 82% Employees² 69% 31% 9% 54% 37% Managerial positions 74% 26% 2% 57% 41% 1) Does not include employee representatives. 2) Age distribution data is based on year-end data collected from central or local/regional HR systems. P. 165Sustainability notes Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 GRI index The Global Reporting Initiative (GRI) index provides guidance on where information within this report is disclosed. Organizational proﬁle Page/Information GRI 102-1 Name of the organization 93 GRI 102-2 Activities, brands, products, and services 26–44 GRI 102-3 Location of headquarters 93 GRI 102-4 Location of operations 31, 51 GRI 102-5 Ownership and legal form 93, 168–170 GRI 102-6 Markets served 31 GRI 102-7 Scale of the organization 3, 31, 36, 42, 51, 54, 99–101 GRI 102-8 Information on employees and other workers 54 GRI 102-9 Supply chain 48, 61, 69–70 GRI 102-10 Signiﬁcant changes to the organization and its supply chain 19, 36, 93, 143, 160 GRI 102-11 Precautionary Principle or approach 160 GRI 102-12 External initiatives UN Global compact GRI 102-13 Membership of associations Not tracked at Group level STRATEGY GRI 102-14 Statement from senior decision-maker 4–5 ETHICS AND INTEGRITY GRI 102-16 Values, principles, standards, and norms of behavior 69 GOVERNANCE GRI 102-18 Governance structure 73–83 GRI 102-40 List of stakeholder groups 70 GRI 102-41 Collective bargaining agreements 164 GRI 102-42 Identifying and selecting stakeholders 160 GRI 102-43 Approach to stakeholder engagement 70 GRI 102-44 Key topics and concerns raised 70 REPORTING PRACTICE GRI 102-45 Entities included in the consolidated ﬁnancial statements 150–151 GRI 102-46 Deﬁning report content and topic boundaries 56–57, 61, 70 GRI 102-47 List of material topics 56–57 GRI 102-48 Restatements of information 160 GRI 102-49 Changes in reporting 160 GRI 102-50 Reporting period 160 GRI 102-51 Date of most recent report 160 GRI 102-52 Reporting cycle 160 GRI 102-53 Contact point for questions regarding the report Niklas Lindsköld, Head of Sustainability ([email protected]) GRI 102-54 Statements of reporting in accordance with the GRI Standards 160 GRI 102-55 GRI content index 165–166 GRI 102-56 External assurance 167 General information (2016) P. 166 Sustainability notes Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Page/Information GRI 201 Economic performance (2016) GRI 103 1/2/3 Management approach 3, 8–9, 168 GRI 201-1 Direct economic value generated and distributed 3, 9 GRI 205 Anti-corruption (2016) GRI 103 1/2/3 Management approach 53–54, 69, 73, 79 GRI 205-2 Communication and training on anti- corruption policies 69, 164 GRI 302 Energy (2016) GRI 103 1/2/3 Explanation and boundary, Management approach and evaluation 56–68, 70, 95 GRI 302-1 Energy consumption within the organiza- tion Included from 2019: Spilamberto, Carros and Louisville Included from 2018: Rayong (beverage) and Shanghai Other sites included from 2015 or before 162 GRI 303 Water and eﬄuents (2018) GRI 103 1/2/3 Management approach 56–57, 59, 61–68, 70, 95 GRI 303-3 Water withdrawal Included from 2019: Spilamberto, Carros and Louisville Included from 2018: Rayong (beverage) and Shanghai Other sites included from 2015 or before 162 GRI 303-4 Water discharge 162 GRI 305 Emissions (2016) GRI 103 1/2/3 Management approach 56–68, 70, 95 GRI 305-1 Direct (Scope 1) GHG emissions Included from 2019: Spilamberto, Carros and Louisville Included from 2018: Rayong (bevarage) and Shanghai Other sites included from 2016 or prior 163 GRI 305-2 Energy indirect (Scope 2) GHG emissions 163 GRI 306 Waste (2020) GRI 103 1/2/3 Management approach 56–57, 59, 61–68, 70, 95 GRI 306-3 Waste generated Only data for 2021 disclosed GRI 306: Waste 2020. 163 GRI 401 Employment (2016) GRI 103 1/2/3 Management approach 52–54, 56–59, 61, 66–70 GRI 401-1 New employee hires and employee turnover 164 GRI 403 Occupational health and safety (2018) GRI 103 1/2/3 Management approach 52–54, 56–59, 61, 66–70 GRI 403-9 Work-related injuries 164 GRI 404 Training and education (2016) GRI 103 1/2/3 Management approach 52–54, 56–58, 61, 69–70 GRI 404-1 Average hours of training per year per employee 164 GRI 404-3 Percentage of employees receiving regular performance and career development reviews 164 GRI 405 Diversity and equal opportunity (2016) GRI 103 1/2/3 Management approach 52–54, 56–59, 61, 69–70 GRI 405-1 Diversity of governance bodies and employees 164 Gender distribution 164 GRI - topic speciﬁc indicators P. 167Sustainability notes Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Auditor’s Limited Assurance Report on Sustainability Report and statement regarding the Statutory Sustainability Report To Electrolux Professional AB (publ), corporate identity number 556003-0354 Introduction We have been engaged by the Board of Directors and Executive Management of Electrolux Professional AB (publ) to undertake a limited assurance engage- ment of the Electrolux Professional Sustainability Report for the year 2021. The Company has deﬁned the scope of the Sustainability Report in connection to the table of content in the Annual Report and the Statutory Sustainability Report on page 95. Responsibilities of the Board of Directors and the Executive Management The Board of Directors and the Exec- utive Management are responsible for the preparation of the Sustainability Report including the Statutory Sustain- ability Report in accordance with the applicable criteria and the Annual Ac- counts Act respectively. The criteria are deﬁned on page 160 in the Sustainability Report and are part of the Sustainabil- ity Reporting Guidelines published by GRI (Global Reporting Initiative), which are applicable to the Sustainability Report, as well as the accounting and calculation principles that the Company has developed. This responsibility also includes the internal control relevant to the preparation of a Sustainability Re- port that is free from material misstate- ments, whether due to fraud or error. Responsibilities of the auditor Our responsibility is to express a conclu- sion on the Sustainability Report based on the limited assurance procedures we have performed and to express an opin- ion regarding the Statutory Sustainabil- ity Report. Our engagement is limited to historical information presented and does therefore not cover future-oriented information. We conducted our limited assurance engagement in accordance with ISAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Fi- nancial Information. A limited assurance engagement consists of making inqui- ries, primarily of persons responsible for the preparation of the Sustainability Report and applying analytical and other limited assurance procedures. Our examination regarding the Statutory Sustainability Report has been conduct- ed in accordance with FAR’s accounting standard RevR 12 The auditor’s opinion regarding the Statutory Sustainability Report. A limited assurance engage- ment and an examination according to RevR 12 is diﬀerent and substantially less in scope than an audit conducted in ac- cordance with International Standards on Auditing and generally accepted auditing standards in Sweden. The ﬁrm applies ISQC 1 (Internation- al Standard on Quality Control) and accordingly maintains a comprehen- sive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We are independent of Electrolux Professional AB in ac- cordance with professional ethics for accountants in Sweden and have other- wise fulﬁlled our ethical responsibilities in accordance with these requirements. The limited assurance procedures performed and the examination ac- cording to RevR 12 do not enable us to obtain assurance that we would become aware of all signiﬁcant matters that might be identiﬁed in an audit. The conclusion based on a limited assur- ance engagement and an examination according to RevR 12 does not provide the same level of assurance as a con- clusion based on an audit. Our procedures are based on the criteria deﬁned by the Board of Direc- tors and the Executive Management as described above. We consider these criteria suitable for the preparation of the Sustainability Report. We believe that the evidence we have obtained is suﬃcient and appropriate to provide a basis for our conclusion below. Conclusion Based on the limited assurance proce- dures we have performed, nothing has come to our attention that causes us to believe that the Sustainability Report, is not prepared, in all material respects, in accordance with the criteria deﬁned by the Board of Directors and Executive Management. A Statutory Sustainability Report has been prepared. Stockholm 29 March 2022 Deloitte AB Signatures on Swedish original Jan Berntsson Authorized Public Accountant Adrian Fintling Expert Member of FAR This is a translation of the Swedish language original. In the event of any diﬀerences between this translation and the Swedish language original, the latter shall prevail. P. 168 Share and shareholders Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Share price and trading Between January 1, 2021 and December 31, 2021 a total of 120 million Electrolux Professional shares were traded, amounting to a value of SEK 6,763m. This corresponds to a daily volume of 475,000 shares. Trading on Nasdaq Stockholm accounted for 75%, Cboe Europe for 23% and Turquoise Europe for 2%. The highest bid price (last price paid) during 2021 was SEK70.40 on Septem- ber 16, 2021. The lowest last price paid was registered on February 3, 2021 at SEK 42.88. During the period the Electrolux Professional B share price increased by 34.71%, while Nasdaq OMX Stockholm PI increased by 34.98%. Share ownership structure At December 31, 2021 Electrolux Professional AB had 48,190 registered shareholders. At December 31, 2021, Investor AB was the largest shareholder with a holding representing 32.4% of the votes and 20.5% of the capital in the compa- ny. The second largest shareholder was Swedbank Robur with 8.7% of the votes and 10.9% of the capital. Alecta Pension was the third largest shareholder with 7.4% of the votes and 7.8% of the share capital. Share information According to Electrolux Professional’s Articles of Association, the share capital shall not be less than SEK 20,000,000 and not be more than SEK 80,000,000, divided into not less than 200,000,000 Class A shares and not more than 800,000,000 Class B shares. There are two classes of shares issued in the com- pany, Class A and Class B shares. As of December 31, 2021, the compa- ny’s registered share capital amounted to SEK28,739,745, represented by 287,397,450 shares of which 8,047,982 were Class A shares and 279,349,468 were Class B shares, each with a quota value of SEK 0.1. The total number of votes amounted to 35,982,928.8. The shares in Electrolux Professional were issued in accordance with Swedish law, are fully paid and denominated in SEK. The shares are not subject to any restrictions on transferability. The rights of the shareholders may only be changed pursuant to the procedures set out in the Swedish Companies Act or the Articles of Association. Dividend policy and history Electrolux Professional’s target is for the dividend to correspond to approx- imately 30% of the income for the year. Any dividend is normally resolved upon by the Annual General Meeting. The Annual General Meeting of Electrolux Professional will be held on April 28, 2022. The Board of Directors proposes to distribute a dividend to the sharehold- ers of SEK 0.50 (–) per share for the 2021 ﬁnancial year corresponding to approximately 30% of the proﬁt for the year. This is in line with the policy to pay approximately 30% of net income in dividends. The proposed record date is May 2, 2022 and payment is expected to be made on May 5, 2022. Delisting of Class A shares In September 2020, the Company’s se- ries A shares were delisted from Nasdaq Stockholm. Conversion of Class A shares Shareholders who hold Class A shares are entitled to convert their shares to Class B shares. In 2021 72,545 Class A shares were converted to Class B shares. Share and shareholders Share price performance 0 10,000 20,000 30,000 40,000 50,000 60,000 DecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMar Closing price, SEK 10 20 30 40 50 60 70 80 Electrolux Professional No. of shares traded, thousands per weekOMX Stockholm_PI 2020 2021 Source: WebﬁnacialGroup P. 169Share and shareholders Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Central securities depository The Company’s shares are book-en- try registered in a securities register in accordance with the Swedish Central Securities Depository and Financial Instruments Accounts Act (Sw. lagen (1998:1479) om värdepapperscentraler och kontoföring av ﬁnansiella instru- ment). The register is operated by Euroclear Sweden (Euroclear Sweden AB, P.O. Box 191, SE-101 23 Stockholm, Sweden). The shares are registered by person. No share certiﬁcates have been issued for the shares or will be issued for the new shares. Ownership structure On December 31, 2021, Electrolux Professional had 48,190 registered shareholders. The table below shows Electrolux Professional’s ownership structure on December 31, 2021. Holder/nominee/custodian Number of Class A shares Number of Class B shares Total number of shares Capital, % Votes, % Investor 6,420,771 52,520,883 58,941,654 20.5 32.4 Swedbank Robur Funds 31,280,461 31,280,461 10.9 8.7 Alecta Pension Insurance 453,900 22,025,098 22,478,998 7.8 7.4 Handelsbanken Funds 18,739,663 18,739,663 6.5 5.2 ODIN Funds 12,945,879 12,945,879 4.5 3.6 Nordea Funds 11,533,039 11,533,039 4.0 3.2 Second Swedish National Pension Fund 11,175,502 11,175,502 3.9 3.1 C WorldWide Asset Management 7,500,000 7,500,000 2.6 2.1 Vanguard 7,348,906 7,348,906 2.6 2.0 JP Morgan Asset Management 6,553,439 6,553,439 2.3 1.8 AMF Pension & Funds 1,000,000 4,153,377 5,153,377 1.8 3.9 Norges Bank 5,093,654 5,093,654 1.8 1.4 First Swedish National Pension Fund 4,713,232 4,713,232 1.6 1.3 Investering & Tryghed A/S 4,299,133 4,299,133 1.5 1.2 Cliens Funds 4,050,000 4,050,000 1.4 1.1 Total, 15 largest shareholders 7,874,671 203,932,266 211,806,937 73.7 78.6 Other shareholders 173,311 75,417,202 75,590,513 26.3 21.4 Total 8,047,982 279,349,468 287,397,450 100.0 100.0 Source: Monitor by Modular Finance AB and Euroclear Sweden. Owner distribution by country On December 31, 2021 Number of shares Capital, % Votes, % Numbers of owners Share of known owners, % Sweden 199,772,014 69.5 75.6 46,331 96.1 United States 24,913,701 8.7 6.9 159 0.3 Norway 18,196,924 6.3 5.1 299 0.6 Finland 12,180,644 4.2 3.4 165 0.3 Denmark 12,127,400 4.2 3.4 458 1.0 Others 5,726,242 2.0 1.6 778 1.6 Anonymous ownership 14,480,525 5.0 4.0 Total 287,397,450 100.0 100.0 48,190 100.0 Source: Monitor by Modular Finance AB and Euroclear Sweden. Owner distribution, % of capital Swedish Institutional Owners 60.9 % Foreign Institutional Owners 25.0% Swedish Private Individuals 7.7 % Other 1.4% Anonymous ownership 5.0% P. 170 Share and shareholders Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Contact IR contact Jacob Broberg Senior Vice President Investor Relations & Communications M: +46 70 190 00 33 [email protected] Other information Ticker Class B share: EPRO B ISIN code Class A share: SE0013720018 ISIN code Class B share: SE0013747870 LEI code: 254900KI62Q46ZWD8084 Analyst coverage At the end of 2021, the following analysts had active coverage of Electrolux Professional: DnB NOR Markets, Mattias Holmberg Handelsbanken Capital Markets, Karri Rinta Morgan Stanley, William Macauly Nordea, Stefan Stjernholm Carnegie, Henrik Christiansson SEB, Gustav Hagéus Kepler Cheuvreux, Johan Eliason Pareto Securities, Fredrik Moregård Owner distribution by holdings On December 31, 2021 Size class Number of shares Capital, % Votes, % Number of known owners Share of known owners, % 1 – 1,000 9,278,304 3.2 2.7 43,798 90.9 1,001 – 10,000 10,579,140 3.7 3.0 4,113 8.5 10,001 – 20,000 1,578,146 0.5 0.5 113 0.2 20,001 + 251,481,335 87.5 89.8 166 0.3 Anonymous ownership 14,480,525 5.0 4.0 Total 287,397,450 100.0 100.0 48,190 100.0 Source: Monitor by Modular Finance AB and Euroclear Sweden. Share capital development The table below shows the development of the company’s share capital since January 1, 2017. Change in number of shares Total number of shares Year Event Class A shares Class B shares Change in share capital, SEK Class A shares Class B shares Total number of shares Total share capital, SEK Quota value, SEK Input value – – – 25,000 – 25,000 25,000,000 1,000 2020 Bonus issue 1 8,167,539 279,204,911 3,739,745 8,192,539 279,204,911 287,397,450 28,739,745 0.1 30 Sep– 31 Dec 2020 Conversion -70,012 +70,012 8,120,527 279,276,923 287,397,45 0 1 Jan– 31 Dec 2021 Conversion –72,545 +72,545 8,047,982 279,349,468 287,397,450 1) On February 18, 2020, the Annual General Meeting resolved on a bonus issue. The purpose of the bonus issue was to increase the share capital as well as the number of shares to reﬂect the share capital structure of Electrolux ahead of the separation of Electrolux Professional from Electrolux. Source: Monitor by Modular Finance AB and Euroclear Sweden. P. 171Share and shareholders Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Reasons to invest in Electrolux Professional Several key strengths and competitive advantages contribute to our development and performance, and they all provide a strong foundation for us to execute our strategy. These strengths and competitive advantages include: Strong position in structurally growing underlying end-markets (before and after the coronavirus pandemic). Well positioned to meet customer needs. Diﬀerentiated market position as a full-solution provider. Innovation-focused with attractive pipeline of product launches. Global manufacturing base and local salesforce to support customers. Further upside to ﬁnancial proﬁle from growth in restaurant chains. Financial calendar 2022 Date Interim report, January–March 2022 April 27, 2022 Annual General Meeting April 28, 2022 Interim report, April–June 2022 July 22, 2022 Interim report, July–September 2022 October 27, 2022 Interim report, October–December 2022 January 31, 2023 Annual General Meeting The Annual General Meeting of Electrolux Professional will be held on April 28, 2022,at 3pm, at hotel Courtyard by Marriot, Rålambshovsleden 50, Stockholm. To order a printed annual report To order a printed version, please send us a mail to: [email protected] and note in your mail; full name and address details, together with the preferred language version, Swedish or English. P. 172 History Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Electrolux Professional’s history Electrolux Professional’s heritage dates back more than 100 years to the period when companies such as Wascator, Zanussi, and Cecilware were formed (subsequently acquired by Electrolux). Until March 23 2020, Electrolux Professional was part of the Electrolux Group. Electro Helios in 1962 The kitchen operations were created as a result of the merger with Swedish Elektro-Helios in 1962. Elektro-Helios was estab- lished in Sweden in 1919. Acquisitions Wascator in 1972 Wascator was founded in Stockholm in 1902 as a heating sys- tem and washing machine specialist. Zanussi in 1984 Zanussi was established in 1916 producing wood burning stoves and grew into an important player in products for homes and professional establishments. A greater fo- cus on professional activities followed in 1967 through the creation of a dedicated division. In 1968, Zanussi bought F. Zoppas. Alpeninox in 1988 Alpeninox, one of the leading Italian producers of refrig- eration equipment for hotels and restaurants. Corporate history Entered Professional food equipment Entered Professional laundry equipment The business grew signiﬁcantly Business area streamlined A value creation phase began in 1996 when Electrolux Professional was streamlined and approximately 20 smaller plants were closed. In addition, several other operations, were divested. Operational headquarters in Pordenone, Italy In 1999, an operational headquarter for the profes- sional business area was established in Pordenone, Italy. The business area focused on two main product lines, food service and laundry systems The international expansion took oﬀ In 2004, Electrolux Professional began to focus once more on international expansion, establishing and incorporating operational oﬃces in North America and, in 2005, the industrial facility in Thailand, where the production of laundry equipment would cater to the Asia-Paciﬁc region and other regions. Additional commercial operations was opened in other parts of the world such as India, Brazil, and Dubai, UAE. P. 173History Introduction Our strategic foundation Financial reports Other information OperationsContents Global trends & markets Business segments Sustainability Governance & risk management Electrolux Professional – ANNUAL AND SUSTAINABILITY REPORT 2021 Shanghai Veetsan Commercial Machinery in 2015 Shanghai Veet- san Commercial is a manufactur- er of profession- al dish washers in China. Grindmaster- Cecilware in 2017 Grindmaster- Cecilware was a US-based manufacturer of hot, cold, and frozen bever- age dispensing equipment, including coﬀee machines. Schneidereit in 2018 Schneidereit, a supplier of laundry rental solutions for professional customers in Germany and Austria. Unic in 2019 A French manufacturer of automat- ic as well as traditional espresso coﬀee machines. SPM in 2018 SPM, an Italian manufacturer of frozen bever- age equipment. A stronger position in China and the Asia-Paciﬁc region. Entered Professional beverage equipment and a stronger position in the US market. An independent company In 2020 Electrolux Professional was listed on Nasdaq Stockholm as an independent company. Expansion in beverage equipment. PRODUCTION: Electrolux Professional in collaboration with Addira. PHOTOS: Boegly Grazia and Arte Charpentier, Ecole Ducasse pictures. Per-Erik Berglund, Znapshot page 29 and 159. PRINTING: åtta45 TRANSLATION: Lisa Cockette, Anything English Uniﬁed Brands in 2021 A leading US-based manufacturer of foodservice equipment. A stronger position in the US. Electrolux Professional AB (publ), 556003-0354 Postal and visiting address: Franzéngatan 6, SE-112 51 Stockholm, Sweden Telephone: +46 8 41056450 Webbsite: www.electroluxprofessional.com/corporate

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