SEB SA

PAR:SK

Q1-2025 Earnings Call

[Operator]

Hello, and welcome to SEB 2025 First Quarter Sales and Financial Data hosted by Stanislas de Gramont, Chief Executive Officer; and Olivier Casanova, Chief Financial Officer. My name is Melissa, and I will be your coordinator for today's event. Please note this conference is being recorded.

[Operator Instructions]

I'd now like to turn the call over to Mr. de Gramont to begin today's conference. Please go ahead.

[Stanislas De Gramont, executive]

Good afternoon, everyone. Welcome to this conference. I will be managing this presentation and the questions and answers together with Olivier Casanova, our Chief Financial Officer. You've received the press release, I think, a couple of -- half an hour ago. So I'll take you through the key highlights of this quarter, starting with the executive summary, which is on the highlights of the activity, which is basically a good start to the consumer business in the first quarter and a key element, which is the return to growth in China, which is, as you know, 1/4 of the group's business.

What you see overall is broadly stable sales. We see markets which are in most regions, mainly well oriented overall, and this is driven by innovation. We'll come back to that. Good dynamics, as I said, in consumer, return to growth in China. As expected, we have a comparison base that is still high in the Professional Coffee business, and that weighs on the Professional Coffee professional number and the total number in the quarter. We have a negative of our evolution that reflects the lower contribution in Professional and some one-off negative effects of currencies. But you will see and you know that Q1 is really not representative at all. So I will not spend too much time on that topic.

And last, the first quarter saw the consolidation of La Brigade de Buyer, which is a premium and professional cookware French company that we acquired back in January this year.

Getting into the numbers. So like-for-like sales, which are essentially flat, minus 0.6% versus Q1 last year, profit at EUR 50 million, 54% below last year and an operating margin, again, not really representative of the full year. If we go into the sales analysis and what happens by regions, as I said, broadly flat sales, organic minus 0.6%. We have a very minor currency effect, minus 0.4%, some scope effect linked to the integration of La Brigade de Buyer and the last quarter of integration of Sofilac that started in April last year, that gives a 0.7% growth year-on-year in reported.

When we look at the currency impact in the first quarter, this is a pretty unusual picture for what we've seen in the last 3, 4 years with a pretty minor currency impact, minus EUR 7 million in first quarter. Just as a reference, last year first quarter, the negative currency impact on sales was minus EUR 75 million. And what we see is Chinese yuan and USD, which are a positive contribution in this quarter when actually the euro is much stronger than it was in the average of the quarter. I think we'll have questions on that later on in the call.

When we go into the split of business between Professional and Consumer, we were all expecting negative professional sales. And we see that Professional is down 21%, 21.7% like-for-like and 9.2% in reported. Of course, the main perimeter effects are on the Professional side. When the Consumer business actually posts a 2.2% sales growth, 2.8% like-for-like. And if we were to exclude the loyalty programs, 3.3%.

Now if we go into a more detailed analysis of the 2 segments, as I said, we have a very high base of comparison last year. Last year in Q1, our sales were growing 18.5% versus a year ago. That base effect is focused on China in Professional Coffee. And we already expect a sequential improvement -- a substantial sequential improvement from the second quarter onwards towards a normalization in the second half of the year. Normalization means towards more regular growth patterns we see and we expect on this activity.

On the rest of the activity, what we call the core business, it's near stable in Q1. We see a gradual ramp-up of new customers, particularly in Asia, where we see some good dynamics. We have continued through the quarter to build our business in China. We are continuing the construction of our new hub in Shaoxing, which is a production development and manufacturing hub. That's an expected investment of EUR 60 million. We should start production first quarter in 2026. And we've made a small acquisition on -- a small bolt-on acquisition in services, which -- in China still -- always in China that is offering complementarity in our maintenance, repairs, spare parts and refurbishment services to our Chinese customers.

And lastly, as I said, in Professional, we've integrated and consolidated for the first time La Brigade de Buyer. Consumer business was much more dynamic than the Professional business. And so as I said, 2.2% growth, 2.8% like-for-like, 3.3%, excluding loyalty programs, and that stems from several facts. The first one is our small domestic equipment markets are still well oriented overall, and we'll see there are some couple of hiccups that are well identified and I will explain.

We see some very promising product launches and encouraging success for the upcoming quarters. We see a strong dynamic in versatile vacuum cleaners, in washers, vacuum cleaners, in blenders, in spot cleaners, in garment steamers. So we see a lot of positive start of the innovations that are planned and pegging this year, and that's great.

And last, but very importantly, a noteworthy return to growth in Asia and more particularly in China, which is showing, as you will see, a 3.5% like-for-like growth, 5.5% reported.

Now the next slide gives you a hint or an indication of how sales have been evolving half 1, half 2 last year and Q1 this year. So if I start top left with North America, we are posting 4.9% growth in this quarter, always organic sales growth against 5.6% growth in half 1 last year. South America, minus 8.3% plus -- against the plus 29% last year. So here, the base was very high, and I'll comment that a bit further.

In Western Europe, excluding loyalty programs, 1.5% half 1 last year, 1.7% Q1 this year. I'll come back to that. Other EMEA is 7.2%. The base is plus 30.5%. So a very, very high comparison base again. On China, we post 3.5% growth on a flat base last year, which is great. And other Asian countries, which is the other great news of the quarter, 7.7% growth against flat last year.

Now if we go into more details and analyze it by regions, starting with EMEA. Our core business is growing in Western Europe, and we see a solid performance in other EMEA countries. Starting with Western Europe, our sales, excluding loyalty programs are up 1.7%. We have more positive sell-out in all countries in the region, in particular, in France, where we see a negative sell-in this quarter, but a positive sell-out, and that's great, and that's in a positive market conditions.

We see double-digit growth for key categories such as cookware, floor care, blenders, oil-less fryers. All these categories are showing strong growth and contributing very positively to our growth. Southern Europe has been since the second half of last year, posting remarkable growth performance. And DACH region which, as you remember, we started a new market company back in January last year, is now posting close to 5% growth if we exclude some loyalty program in a big German customer.

In the other EMEA countries, we have good growth, and that's on a demanding comparison base. The sole performance is very solid in Eastern Europe in markets which are still very buoyant. And we again see double-digit growth in our key categories, oil-less fryers, versatiles, full-auto coffee machines. And even in Turkey, where currency has been hard, especially in the second -- or the latter part of the quarter, sales are still well oriented, and that's beyond currency compensations.

Moving west to the Americas. As I said, North America shows a positive performance despite -- and that's euphemism an uncertain context. We see well-oriented sellout in the U.S. and growth in our key categories, cookware and linen care. You will remember that the bulk of our U.S. business in consumer is cookware and linen care. Continued sales growth in Mexico, again, fueled by our traditional categories, cookware and linen care, but also product line expansions, full auto coffee machine in particular, our strong line growing in Mexico.

And Canada shows good numbers this quarter based on a pretty favorable or easy comps base. Latin America saw a different evolution. Of course, we had an exceptional Q1 2024. You remember that our Q1 in LatAm was up 29% or 30%, I think, let me check. I think it was how much? 27%, Merci beaucoup, Raphael. It was 27% growth last year in Q1. So that minus 8% is against the plus 27%. Of course, majority of our SDA sales in Latin America is made of fans. And you remember that last year, we did explain that the surge of fan sales growth in LatAm was due to the El Nino weather phenomenon, very hot weather, high consumption of fans.

This year, we are more in a La Niña year, which means a colder weather, more humid weather and therefore, lower fan consumption. So it's a slightly negative trend against a very positive trend, and that explains the bulk of our business. We're not concerned about that because when you look at the rest of the business in Colombia, for instance, excluding fans, our organic sales are growing 20% year-on-year. So that tells us that the business is and stays very healthy. Of course, Brazil remains a highly competitive environment, but we see some good performance in key categories like blending.

Now moving on to the very positive news of that publication in that quarter, it's Asia. And in Asia, with 2 great news. The first one is China back to growth and the acceleration of growth in other Asian countries. China's return to growth is due to, first, a slightly more supportive macroeconomic and consumer environment. On that context, that is slightly more favorable, we see that Supor is confirming its ability to gain market shares. It's continuously outperforming the market in a market that is now stabilizing after several quarters of decline.

We see to anticipate the question, some positive yet limited impact of the authorities stimulus program. So we are not dependent. We don't see ourselves dependent of such and such or such or such support program. And we are pretty positive for the outlook for the full year in terms of China being able to post a positive sales growth number.

The other good news is that the other Asian countries, where we see a sequential improvement in growth, we also already saw some signs of improvement in the second half of last year, which was already positive, but we confirm that with the first half at 7.7% growth organic, driven first by Japan and primarily in cookware, which is the bulk of our business in Japan. Yes, we have a favorable comparable basis, but we still take it. That's good news. We see some slight sales growth in South Korea, yet the market is still very challenging. So we are less optimistic, if you want about South Korea.

And we see good sales growth in the rest of the region, both in sell-in and in sell-out, and that's driven by the 3 star countries of the quarter, which are Australia, Vietnam and Malaysia.

I'll spend one slide talking about the ORFA. Maybe starting to say that the first quarter is traditionally a weak quarter for the consumer business, both in terms of volume and in terms of value. And there, the profit of the first quarter on the consumer is traditionally fairly low. And to that extent, then the decline of the Professional business sales and therefore, contribution is more impactful and more visible on the ORFA evolution year-on-year. But as I said, we expect Professional to substantially improve sequentially as of second quarter and later on in the year positive. So we expect that situation to course correct by itself.

And we've had -- I mean we've seen a lot of variations of currencies. We started the year with a U.S. dollar around 102, 103. It touched 115, 116. So a lot of variations which have had some negative one-off effects on these highly volatile currencies. Olivier Casanova will be able to explain that much better than I would ever be able to do that for you guys.

Now the outlook for 2025. You will remember that at the end of February, when we presented the financial results, we indicated that we would see another year of sales and profit growth for 2025. And we have decided to confirm that sales and profit growth. We have decided to quantify our full year organic sales growth target to be around 5% and an increase in ORFA as reported.

Now what's behind that guidance, that quantitative guidance is the following things. First, we have a median estimate of the impact linked to the tariffs known to date. And within that, we've identified several positive levers. The first one is we see market resilience in EMEA. We confirm our growth prospects in Asia and particularly in China for the full year. We see a good ability to compensate most of the tariff increases in the United States. We see a good performance of our new product innovations in the Consumer.

On the Professional, we see a gradual exit from that demanding comparison base that we've been "suffering" in the last 3, 4 quarters from Q2 with a sequential improvement and the normalization of growth in the second half. All this, of course, in a very volatile and uncertain environment. We are, as you would expect, monitoring daily the development of tariffs, the potential consequences on tariffs, including currencies, including raw materials, including why not economic demand. So that scenario is based on no drama on the worldwide economy status and on the worldwide economic conditions.

Now this is what we wanted to share with you. Thank you very much for your attention. And Olivier and myself are now ready to take all your questions. Thank you.

[Operator]

[Operator Instructions]

Our first question comes from Louise Wiseur with UBS.

[Louise Wiseur, analyst]

So since you last reported, there's been a lot of news flow on tariffs. Maybe could you comment on this? And what are the measures that you can take to mitigate some of that impact? And also, you said in the past that you may want to shift some of the production of the products that get sold in the U.S. from China to Vietnam. How do you think about that now?

With regards to China, very positive news with the return to growth and the 3.5% like-for-like. Can you give some more color on this kind of -- do you expect this trend to continue or even potentially kind of like improve during the year?

And the last one is with regards to Professional. Obviously, faced very high comps in Q1. I think you said that you expect improvement from Q2. Do you have any visibility from potentially large contracts into this year?

[Stanislas De Gramont, executive]

Please, can you repeat your second question, please? Sorry.

[Louise Wiseur, analyst]

Yes, sorry. So just with regards to China, so we were -- I mean, you delivered 3.5% like-for-like for this year. Do you think it's achievable to kind of like maintain that level during the year or potentially even keep seeing improvements there based on maybe innovations you're making or a little bit of help from the government subsidies?

[Stanislas De Gramont, executive]

Perfect. Merci, Louise. I suggest Olivier takes the first one, I'll take the next 2. I've spoken -- Olivier, I've spoken a lot, right?

[Olivier Casanova, executive]

Okay. So let me just first, let's say, give you the key messages, and then I'll come back on the mitigation, let's say, measures that we're taking.

The first thing to say is that, of course, the environment remains very volatile and fluid. I think everyone is aware of that. We know what has been announced, but we also read and understand that there are negotiations ongoing that might change the picture in the future. But of course, our comments will be based on what we know today. As you would expect, of course, the tariffs will represent, let's say, a material amount, even though, of course, the U.S. is only 9% of our total group sales, around EUR 700 million. And of course, the COGS is a fraction of that, around 50% to 60%.

We -- what is important to note is that we are confident in our ability to deploy mitigation strategies. And as I said, I will come back on that. We have weathered many crisis in the past. As you know, the group has a long history, and we are confident to -- in our capacity to face this one successfully. The bottom line is that with the tariffs as we know them today and in the absence of, let's say, a major negative development or impact on the world economy, we expect to be able to offset the vast majority of this negative impact. And it is in that context that we are, let's say, happy to guide towards a 5% organic growth for the full year and to grow our ROPA this year again.

Now let me come back on the mitigation plan for -- with regards to U.S. tariffs. So as I said, we see several levers. The first one is, of course, the relocation or the adaptation of our own production setup. We have already, in fact, taken steps many years ago to transfer part of our cookware capacity -- production capacity from China to Vietnam. And we had, in fact, taken already at the back end of last year, the decision to increase further this capacity. And therefore, we are confident in our ability to move, let's say, the bulk of our own production of cookware from China to Vietnam.

Secondly, as you know, we are, let's say, fortunate to have local U.S. cookware production with our Canonsburg facility for All-Clad. And we had also already taken the decision to invest more in expanding the capacity. And the reason is that All-Clad is actually very successful. It's growing fast, and it's benefiting from its very strong image and of course, strong demand also for stainless steel equipment and in particular, premium. So this warranted already an expansion of our capacity. And of course, this is putting us in a good position with regards to the tariffs.

The second lever is sourcing optimization. Of course, we are, as you would expect, negotiating, renegotiating with our external suppliers to obtain some price reductions. We are also discussing with them, let's say, possible relocation of some production outside of China. And I think, as you know, a number of, let's say, Chinese suppliers had already, for some time, started to expand their capacity in Southeast Asia. And we are also, of course, negotiating with new or investigating new alternative suppliers.

Thirdly, of course, there is the commercial aspects. There will be some repercussion on prices. We are, therefore, confident in our ability to pass some of this price to our customers because of our strong market positions. As you know, we are a leader both in cookware and linen care, which are our 2 biggest product categories. We have very strong brands, and we are present in -- to some extent, on product categories or segments that are less, let's say, sensitive to price increases. And finally, we have a very strong relationship with historic U.S. distributors.

And finally, the final lever, so to speak, is that we have, let's say, significant local inventory, which can help us to weather, let's say, the impact for a couple of months, and this will certainly be useful to limit the impact certainly in the short term. So as you can see, it's a very comprehensive, let's say, mitigation plan.

[Stanislas De Gramont, executive]

And we feel very prepared for that. Thank you, Olivier. Your next 2 questions are related to China and Professional, and it's about the sales growth trend. The first thing I would say on China is that the good news is that the growth or the accelerated growth in the first quarter is against a base that is arguably less easy than the second half base. So that's a positive news. We don't know what the macros are going to be in China, but we're pretty confident that what we have today could be what we have through the year. Very early to say, Louise, whether that can go up to 5%. I think there's a lot of things going on out there nowadays.

So we are -- as much as we feel confident to say that this growth is a combination of a robust performance of Supor and a healthier market performance very -- and not dependent on government subsidies in a substantial material part, very early to say that, that could grow up.

On the Professional, I think, again, I mean, you felt probably some positiveness and optimism and you're right in my tone of voice. What do we see? We see that we've weathered the last 3 quarters with that difficult comparison base in a way that we were expecting to go through it. And we -- the same way as we were anticipating what happens in Q1, we see a substantial improvement, a substantial turnaround during second quarter. Early to say whether it's going to be positive or not, but it's certainly going to be in a single-digit territory one way or another, if you want to have an indication, single-digit territory one way or another. And certainly, we expect the second half to be back to positive growth year-on-year.

But maybe as a summary, I would say we have, as you know, 3 growth drivers in the group. We see that the first one, which is, call it, the core traditional business is already starting with -- on a good foot with 3% growth. That is, Consumer -- call it, consumer traditional. We see that China is back to growth. We see that professional [indiscernible] has eaten its bad or tough comps and is back to growth. And this is why we feel comfortable to give a quantitative guidance because, again, things may change and things may move. But as you know, the beauty of the group is that we have a balanced business.

We have a balanced business between growth drivers, China, Professional, core business. We have a balanced business, if I may, on our industrial footprint, on our commercial footprint, which allows us to look at those, call it, disturbing events like tariffs or others with a way to always find alternatives to compensate and to always find solutions or to always have more than one solution to the questions or the challenges we face. Did we answer your questions, Louise?

[Louise Wiseur, analyst]

Yes.

[Operator]

Our next question is from Geoffrey d'Halluin with BNP Paribas.

[Geoffrey d'Halluin, analyst]

I've got 2 questions, please. The first one is related to Western Europe. So you print flat like-for-like growth sales in Q1, much more close to 2%, excluding the loyalty program impact. So a bit of the same question that for China. What do you expect in terms of growth trends for the next coming quarters? And can we expect a kind of pickup in Western Europe?

And my second question relates to the EUR 50 million of EBIT in Q1. Would it be possible to quantify what -- how much is a one-off impact in terms of FX in Q1? And maybe if you can remind us your FX policy, especially in terms of hedging, please?

[Stanislas De Gramont, executive]

Thank you, Geoffrey, bonjour. So I'll take the first question, Olivier will take the second one. On Western Europe, we definitely see an improvement of the trend in the second quarter and the second half based on a few things. The first one, we see great start of our innovations. We see that our sell-out is already ahead of our sell-in, especially in France and Germany, and that should rebalance out anytime soon. And we see that the markets as of today still are showing very strong dynamics. So I wouldn't say we are bullish on Western Europe, but I would call that a slow start to a year that should be faster certainly in our own estimates and ambition. Olivier?

[Olivier Casanova, executive]

Okay. So on the ROPA, first, as we said the, let's say, last year in Q1, we had a very strong professional quarter and that contributed materially to the profit in the first quarter. And so that explains a big portion of the shortfall. The second element, as we mentioned, is FX. So I will come back on this and first comment on the Q1, and then I will give you also a few pointers on the rest of the year, which is looking very different.

So first on Q1, of course, we have seen currencies were all over the place. We've seen a lot of volatility. And this Q1 was marked by 2 things. First, strengthening of the U.S. dollar and the CNY in the first part of the quarter. And you know that we are short on these 2 currencies. And secondly, a weakening of various emerging market currencies, notably the Turkish lira, the Egyptian pound and the Mexican peso on which we are long. So in some ways, we had the worst of both worlds. Now the 2 effects are different on our P&L. It's important to understand.

On our short currencies, the U.S. dollar and the CNY, as you know, we have a very well-documented hedging strategy. The thing is though that there is a 3-month lag effect, which is due to our inventory. In other words, most of what we sold in the first quarter was already produced at the back end of last year and, let's say, benefited from the hedging of last year and not the positive hedging of this year. And therefore, there is a lag effect, which means that we were impacted in this quarter, but we will see the benefit of the hedging already starting in March and amplifying in the second quarter.

On the long currencies, it's a different story. As you know, we have a certain ability to increase local prices to offset generally a large portion of the currency devaluations. However, there is always a certain inertia or time lag. And this is particularly true and there is fast movement of currencies, which was the case for the 3 that I mentioned in particular. And this means that there is a short-term negative impact, which will, of course, be progressively offset as we, let's say, work on to increase prices in those countries to offset devaluations.

Now of course, the picture is very different today because the U.S. dollar and the CNY have substantially weakened, dramatically weakened, I would say. And even though we are very well hedged for the balance of the year, we can still expect, if they stay at the current level, a net positive effect from FX in the rest of the year. So this negative situation in Q1 should normally, if it stays the same, reverse in the back end of the year.

[Stanislas De Gramont, executive]

Merci, Olivier for this clear -- for me clear explanation of something that is extremely volatile. Next questions. Geoffrey, are you okay?

[Geoffrey d'Halluin, analyst]

Very clear..

[Operator]

Our next question is from Christophe Chaput with ODDO.

[Christophe Chaput, analyst]

I hope the sound is clear. I've got 3 questions, please. The first one is, again, sorry for that related to the tariff in U.S. You say that one of the layers you can have is let's say, increase the price. I just wonder when are you going to increase the price? Is it still the case? Is it going to be in Q2, H2? Any insight on that could be great.

And related to that, sorry for that, but are you going to increase only the price, let's say, in U.S. or in the other territories as well? I mean, everything else should be equal. Are you going to, again, pass the price hike only in U.S. or in other territories as well, let's say, trying to mitigate the U.S. impact?

And the last one is just a quick one on loyalty program. Do you know -- I mean, the timing of the loyalty program throughout the year? Is it going to be concentrated, let's say, in the, I don't know, Q4, Q2, Q3? That could be interesting. And more or less, is it going to be above last year or the same level?

[Stanislas De Gramont, executive]

I think I'll take the last one. I think loyalty programs will be around EUR 30 million below last year. Raphael looks at me and say you shouldn't give a number, but it's too late. Désolé, Raphael. Right. So -- but again, I mean, it's not -- it's part of our guidance, and we don't -- we know that, and we work with that, and we guide knowing that. Now on your question on tariff, the straight answer -- in the U.S., the straight answer is in Q2. So we won't wait until July or September to increase tariffs.

Now of course, when you increase your price, you have an intermediate body called a customer and there are intense negotiations going on with customers trying to preserve the business. The price increase is differentiated depending on the product category, the strength of the brand, the competitiveness of the environment, there's a lot of conditions. But the straight answer to your question when is Q2. And we don't plan at this stage to have any price activity or any U.S. tariff-related price activity in the other regions. We estimate that we can absorb most of the impact on our U.S. business.

Now again, this is based on an assumption that there is no major macroeconomic revolution or recession taking place in the aftermath of this tariff crisis. Does that answer your question?

[Christophe Chaput, analyst]

Yes, that's very clear.

[Stanislas De Gramont, executive]

Forget the EUR 30 million Raphael.

[Operator]

[Operator Instructions]

Our next question is from Alessandro Cecchini with Equita.

[Alessandro Cecchini, analyst]

The first one -- sorry, probably the last one on tariffs, but just to understand because from my knowledge, so you have, at the moment, 50% of your sourcing from China to the U.S. So basically 4.5% of total sales in-sourced from China. So just to understand, with your mitigating factors, are you expecting to have, I mean, a very limited amount of -- from China to the U.S. Because actually, with current tariff basically there is no -- so there is an embargo. So no stuff from China to the U.S.

So I was just wondering if you have incorporated in your model probably a decent amount of tariff that you can allow in maybe 4 quarter to ship something or you are basically assuming the current tariff. So -- because the current tariffs basically, you don't have the business at this tariff.

My second question is instead about your guidance for the year. So just to make some math. So basically, you are expecting top line -- reported top line to be plus 3%, plus 4%, including organic growth, plus 5%, some ForEx, negative ForEx, some M&A positive. And you said about ORFA to grow in absolute terms. So it's meaning that you expect to grow in absolute terms. So basically not in margin. So you expect to have broadly in line with the sales growth also your ORFA growth. So just to clarify on this.

[Stanislas De Gramont, executive]

Yes. Alessandro, good afternoon. Thank you very much. Very early to make any conclusions on the reported sales growth, organic sales growth. Why? Because if you have a dollar at 1.20, yuan at 8.50, you have a totally different top line picture and bottom line picture than if you have a dollar at 1.08 and yuan at 8.20. And even if it is hedged on profit, the sales number will be highly impacted. So frankly, I don't know if our sales number -- what will be the difference between our sales -- organic sales growth and our reported sales growth. And it's very early to say.

I mean, let's remember that back in January, the discussions in the banks were euro-dollar parity on the first quarter. Now we are at 1.16. So I understand your impatience, but I think you should take the positive of this guidance, which is we feel comfortable to say our profits will grow. We feel comfortable to guide on an organic sales growth, but don't push it too hard. We -- it's very early to say, and we're certainly not ready to commit.

On your point on tariff, I will just answer with Olivier. The bulk of our business in China made in the -- well, our China-made business for the U.S. is SDA and cookware. Now SDA today is at 145% tariff, but we have quite a few -- we have mitigation plans in terms of relocation for a lot of it, and we have only a fraction of it that stays in China. And as you say, would mean no shipments. But maybe, Olivier, you want to tell us what happens in cookware.

[Olivier Casanova, executive]

Yes, cookware, maybe it's not obvious to everyone, but cookware is, in fact, covered by -- it's not covered by the announcement of the 2nd of April. It's covered under Section 232. And therefore, it's under the steel and aluminum derivatives tariff regime, which means that it's subject to the initial 20% plus an additional 25%. So it's 45% increase in total, not 145%. So it's more limited. Of course, it's still very substantial, but it means it's also more manageable.

So first, as we indicated, we have some inventory in the U.S. already. Secondly, we have some local production already. With regards to imports from China, we have the plan to relocate the bulk of what we produce today in China to Vietnam, and that can be done, let's say, largely by the end of this year or early part of next year.

And secondly, we have the ability, of course, to pass some of that impact to the final customer through price increases. So that is the basis of our, let's say, conclusion that we feel, let's say, reasonably confident to offset the vast majority of the negative impact.

[Stanislas De Gramont, executive]

But again, Alessandro, it's a very, very, very moving target. And we had this call even 5 days ago before President Trump's announcement that the bulk of it will disappear. I think we would have a lot of different things in mind. So what we are trying to do is to look at what we know, what we think we can do that makes sense from a market point of view and from a margin protection point of view, and then we'll adjust and react to the evolution of the context.

[Alessandro Cecchini, analyst]

Very clear. And finally, my last is still on the U.S. business that you executed very well in the first quarter with organic growth that was mid-single digit. So what is your current feeling about what is happening now? Because March probably was a different story, at least I am talking about the U.S. market. So I'm curious in the market.

[Stanislas De Gramont, executive]

In fact, not really. I was earlier on today with our U.S. teams. And in fact, up until the middle of April, I mean, last week ending 30th of April, so it's pretty fresh information. We are more or less on the same trends, in fact, slightly better. Now the -- you don't know what's going to happen because you have today, of course, a lot of imports have been blocked because no one there send a ship from China to the U.S. running the risk of being taxed 145% when it lands in California or New York City or Long Island or wherever.

So a lot of things are in terms of imports and shipments on a standstill, we have pretty comfortable. We don't see yet any massive consumer movements. We have inventory, as Olivier says, that makes the next 2 or 3 months not impacted by any kind of tariff things. But the longer this uncertainty stays, the more difficult or the less predictable the situation will become. And I'm saying that, but a lot of CEOs and analysts and banks and everything are saying the same thing. I mean the uncertainty is probably what weighs more than on the tariffs.

So at this stage, no impact on the consumer demand on our product categories. Again, on our product categories, which are cookware and linen care, which are not the entire SDA business, which are not other SDA categories, but a lot of uncertainties in the U.S. in particular. But as you said also, U.S., yes, it's 7%, 8% of our consumer business. It's not 20% or 50%, right?

[Operator]

Thank you very much. As we have no further questions, I would like to turn the call back over to your host for any closing remarks.

[Stanislas De Gramont, executive]

Right. Thank you very much. Well, first of all, thank you very much for your attention. Thank you for your questions. I must say none of them was unexpected. I would say -- on the contrary, I would say, as a conclusion, we are facing stormy conditions. We've been well trained to the stormy conditions 3, 4 years ago during the COVID period. We see and observe that -- and that's quarter after quarter that the balance of our business between the various growth drivers, professional, China, the core business. We see the balance of our industrial footprint offering more solutions than less to those tariff challenges.

We see that the balance of our commercial operations between 5 continents also gives us some ability to either benefit from exceptional situations in the market or compensate some exceptional negative situation in the market. We see that, that is still at work. We see the year with a rather positive outlook. We give a quantitative guidance. And those of you who follow us regularly know that we usually don't do that before the month of July after the first half results. Yes, the year will be shaky. Yes, the year still has its own lot of uncertainties and challenges.

But what we see today gives us confidence that we can weather those uncertainties and those challenges and allow us to put another good growth year and convert that growth into profit growth.

Thank you very much for your attention. I look forward to seeing you all again probably in roadshows in -- through May, June and hopefully, certainly at the end of July. And I wish you a good first quarter results season. Thank you very much.

[Operator]

Thank you. Once again, that does conclude today's conference. We do appreciate your participation.