De Longhi Spa

Good afternoon. This is the Course Call Conference Operator. Welcome and thank you for joining the DeLonghi Full Year 2020 Consolidated Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Massimo Garavaglia, Chief Executive Officer of DeLonghi. Please go ahead, sir.

Ladies and gentlemen, good afternoon to everyone, and welcome to the DeLonghi Group's 2020 Full Year Resource Conference Call. Today, here in the room with me, we have Marco Cianci, our Chief Strategy and Control Officer. Stefano Biella, our CFO, Fabrizio Micheli, our Director for M&A and Investor Relations, and Samuele Chiudetto, our Investor Relator. First of all, let me start this presentation by thanking all the stakeholders that have enabled Elonghi to achieve outstanding results in 2020, facing the many challenges that this period has brought into our lives. In effect, the difficult times and unexpected developments that we went through required from all the people an extraordinary flexibility and responsiveness. All our employees all over the world have been showing an extraordinary commitment that supported the group in many ways witnessing resilience and dedication at all times. The pandemic crisis has put the supply chain during the year and the main distribution channel under heavy stress everywhere in our industry. And we had to work closely with our supplier, with our partners, with our customer and distributors in order to overcome the difficulties. From an industrial point of view, despite the complications and temporary closures encountered by our factories, especially at the beginning of the year, the group has shown great flexibility and resilience, allowing workers to operate safely and being able to deliver our products to the customer. In this regard, our industrial investment plan as continue and therefore help to expand our production capacity both on our Chinese and European platforms. On the commercial side, the lockdowns have inevitably favored an acceleration of the online world both as a distribution channel and as a new way to communicate with the end consumers. The action taken as a whole have allowed the group to take advantage of the trends underway in the market, which have shown an increased attention of the consumer toward the domestic environment, favoring purchasing choices toward products related to the home experience. Therefore, these positive trends already in place in the coffee makers and kitchen machine in the first quarter of 2020, therefore before the pandemic, with a substantial acceleration in the following months with growth rates higher than what we have initially foreseen. This positive effect found further support from our long-term investment strategy in marketing and communication as well as in the launch of new products in our core strategies. Now, let's take an overview of the full results of the year before opening then the floor for Q&A. Let me remind you, first of all, that in order to provide the two figures on a life-to-life basis with last year, we may now present also normalized value, which excludes the effects of some changes in accounting treatment of financial contribution and discounts. which have been applied since Q4 of the prior year. Let me also make you notice that consolidated balance sheet of December 31st 2020 includes the consolidation of Capital Brands Holdings whose acquisition was finalized on the 29th of December 2020. Looking at the full year, Revenues were up by 12.4% at the normalized level, which means 14.3% on an organic basis, sustained by a strong fourth quarter up 10.1% normalized and 13.6% organic. In the last 12 months, all the core product segments of the group grew, supported by the strong trend envisaged by the home appliances and by the investment of the De'Longhi Group in brand communication, product innovation, and digital strategy over the last two years. The coffee segment achieved a double-digit growth, driven by the expansion of the full automatic and manual machine. Cooking and food preparation was back to growth in the 12 months, thanks to the remarkable developments of the Kenwood kitchen machines. We also recorded a positive performance for the rest of the business, in particular with the significant expansion of the mobile air conditioning and floor care products. Looking at the geographies at the normalized level, all the macro regions witnessed a positive trend in revenues with the only exception of the Middle East media region. Southwest Europe grew by 17.4% driven by double-digit performance of Germany, France, Switzerland, Spain and Portugal. Double-digit growth also for the Northeast Europe supported by the very important development in the UK Russia, Ukraine and CIS countries, Scandinavia and including also Finland. The Asia-Pacific Americas region, our upper region, posted a double-digit growth expansion with a particular strong performance in China, Australia and New Zealand, and with an important growth in Japan, Korea and North America. Lastly, as I mentioned before, Middle East region, our mayor region, was in a negative territory in a year, although with a partial recovery in organic terms in the last two quarters. With regard to the profitability over the 12 months in normalized terms, The net industrial margin improved from 47.3% to 49.6% with a growth of 18%, thanks mainly to higher volume and the positive contribution of the price mix effect. Adjusted EBITDA amounted to $383.3 million, so with an increase of 27.6% with a significant improvement as marginal revenues from 14.3% to 16.2%, despite greater investment in marketing and communication, which reached an incidence on revenue at 12.4% compared to an 11.7% in 2019. Finally, the net profit amounted to $200.1 million, equal to 8.5% of revenues and up by 24.3%. The third quarter, we noticed a similar strong progression in both the net industrial margin, 49.6% of the revenue, and adjusted the BDA, 18% of the revenue. confirming the traditional relevance of the last quarter of the year in the generation of the annual margins. As to the balance sheet, the net financial position on December 31, 2020, landed at $232 million, including the financial effect of the acquisition of capital grants that amounted to $329.3 million. However, excluding the acquisition of capital grants and the payment of dividends for $80.8 million, the cash position improved by $364.3 million even after the investment in the year for $89.5 million. With regard to the net working capital, the closing value was significantly improved thanks to the reduction of trade receivable and an increase in trade payable falling and acceleration in purchases in the last quarter. With investor inventories substantially under control, the ratio of the net working capital to the 12-month revenue was down to an exceptional value of 4.1%. If we exclude the capital brands, we are at 3.9%. delivering a marked reduction from 15.2% at the end of 2019. Closing my introduction and before the Q&A, let me say that the 12 months of 2021 will be equally challenging on several fronts due to the still unstable macroeconomic scenario and to the business complexity brought in by this volatile environment. Despite such circumstances, the group will continue in person the path of increasing investment in brand communication and in new product launching, strengthening also our digital strategy with further investment. Moreover, the company will reinforce the organization and commercial structure in support of product innovation and sustainable medium-term growth. Having said that, The positive underlying trends in our core category are still in shape, and we sustain a positive performance of the group in the coming quarters. Based on the strong evidence provided by the first week of 2021, we estimate a growth in sales on a like-for-like basis in the first quarter at around 50%. which leads us to raise the previous guidance and for this reason to estimate the organic growth of revenues for 2021 including capital brands in the range of 22% to 26% while on a like-for-like basis between 12% and 15%. This important role together with the support of the price mix will be essential to fund Our increasing investment aimed at sustainable growth in the medium term, at the same time allowing us to achieve an adjusted report at the BDA for the new perimeter, substantially in line with 2020 as a percentage on revenues. And now I will open the floor to the Q&A session. Thank you very much for the time being.

Excuse me, this is the chorus call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove your question, please press star and two. Please pick up the receiver when asking questions. The first question is from Nicola Soder of Kepler. Please go ahead, sir.

Hello. Good afternoon. Good afternoon, everyone. I have two questions. The first one relates to your guidance. And so first on revenues, if you can comment on the countries or categories which are doing better or which have been doing better during this first part of 2021 compared to the trend seen in the last part of 2020. And on ABDA, if you can help us understanding a kind of bridge versus 2020, because clearly with such an improvement in turnover, one could probably expect something more than stability at margin levels. My second question is on working capital. You mentioned a strong improvement due to reduction in receivables and increasing payables, and I was wondering what should we expect going forward. Is something that will normalize, or do you expect to remain at such a low level?

Thank you. Thank you very much for the question.

For this first part of 2021, I have to say that we have seen progressively the orders coming in as of January, but we added more visibility during the month of February on this acceleration. And I have to say that this is spread across basically all our categories, especially where we are focusing our attention. I have to say what we consider to be our core categories being the coffee and all the segments of the coffee. and the food and the food preparation in the different segments being under the Cambodian brand and bone. That will include also, sorry, just maybe to complete, is including also the acceleration on the new product launches that we made at the end of 2020 and we are very happy to see that they encounter the favor of our customer. At the same time, in terms of geography is also there, I can say that it's spread across the world. Very happy to see that I mentioned it before, also in Middle East that is an interesting market for us. suffering also because of the political situation in 2020. Oil price is very low. But now we have seen progressively a return to growth at the end of the last year and now definitely an acceleration in this first part of 2021. Core countries for us being in Western Europe, are doing very well and very happy to see that also our focus on China, Asia and the US is starting to give very positive results. When we talk about the EBDA, We have to take into consideration several things. Some of them may be a bit more interesting for us, a bit more clear for us. Some others will have to be well evaluated in the course of the year. That's why we put the range in that direction. For sure we believe that we will have a positive volume effect. For sure, we believe that we will have a very probably positive price-mix effect, also thanks to the launches of the new product, the development of the growing category of coffee and food. But at the same time, as I mentioned already in the past and also in my introduction, we plan to invest in in reinforcing our organization and structure, including commercial structure around the world. We plan to reinforce our digital infrastructure and also we are, as a part of a medium long term plan, we plan to continue to invest in AP. And we believe we are a very strong brand that are reacting very well to the spending AP. We did it last year. We are continuing to do it now. And we are seeing the results of that. And we believe that on the medium-long run, we will have a very important benefit out of that. We are having a lot of activities, and we are considering also new activities in the area of the communication and brand communication, and some of them are visible now. Some others will come in the course of the year. So this is a bit, you know, our structure. Obviously, as you can imagine, today is extremely difficult with the visibility that we have to have a good understanding on the bottom line for the next month. But several things we know that will be positive. Some others obviously are related to investment that I mentioned. At the same time, there will be Some additional costs that we will have to manage in the course of the year. Some of them we already know how to manage it. I'm talking, for example, about the ocean freight from China. We have already planned a price increase that is going to be operational soon to cover that part. Some inflation and tension on the raw material prices. We are looking forward. We will assess it better. We have some ideas. on how we can offset that in a certain range considering also the significant increase in the efficiency of our plant thanks to the volume effect. Talking to the working capital, you mentioned the significant increase that we had. For sure one effect that you highlighted is very strong control of our payment term and condition and we want to continue to do that in the course of the year. A very good management of the condition with all our supplier base. Increased, I have to say, especially in the first quarter, there were increased purchases from the supplier as a component. Some better rotation also of our inventory, definitely. Overall, I have to say that the company has been putting in place a very strict monitoring of our working capital in all its components. And I can tell you that I would like that we maintain the same focus and same attention while on the inventory. I want to make sure that we handle well considering obviously financial part of that but at the same time my message is that we need also to make sure that we manage that having in mind that we want to further increase the level of service to all our customers. Anyhow, working capital remains for us a very important focus. We have the right tools in place to track very well all the different components. We have been investing on that and we have the right structure in place to monitor it. We brought it to a much lower level. But again, I want to make sure that we are not obsessed by certain things, especially on the inventory side, It has to be a good balance between maintaining high rotation, maintaining a low inventory, but also never forgetting that we need to provide the best possible service to our customer. I hope I answered. Sorry to be a bit long, but I hope I answered to your questions.

Thank you. Thank you. Maybe a very quick follow-up on receivable. I was wondering if you increased the level of factoring, which, if I'm not wrong, at the end of last year was in the 160 million region.

No, we didn't.

So we kept exactly the same level of last year, but at the same time we have been stricter on... on terms, on adherence of the customer to the payment term that we have contracted. And I was very, very happy to see that in the discipline that we had and that our team had in managing that. And I trust that we will continue to do that in the course of 2021. But we have not increased the level of factor in 2020. Thank you.

The next question is from Nicholas Langley of Exane BNP Paribas. Please go ahead.

Hello. Good afternoon, everyone. I've got three questions, please. The first one on capital brands, what has been the trend in Q4 and what have you seen since the beginning of the year for that asset? And what are the next steps in terms of integration? And when do you expect to see the first market synergies or collaboration between capital brands and Delonghi. Second question on A&P, can you tell us what was the level of A&P as percentage of sales in 2020? And looking forward, do you think you have now the optimal level of spending or you could potentially increase even more as percentage of sales, the A&P going forward? And finally, in terms of production, so you had this very strong performance in the last quarter, in the last nine months. Do you think you have now sufficient inventories and production capacity to match the consumer demand in the coming months? And also, should we expect any extra capex in the coming quarters or years, given the strength of the business recently?

Thanks.

Thank you, Nicholas, for the question. Capital Brands is obviously very fresh. The company has been performing nicely last year, also in the last quarter, in the last year, especially in the geographies where they are strong and market leader being US, Australia, and UK. we have now since they are with us we have seen that their growth is continuing and now obviously I want to be a bit prudent on commenting because we have been just just integrated consolidated with our company but we are putting together now some plans that will in a way exploit mainly commercial synergies very easy to understand they have a presence that is at the moment stronger but limited to some geographies as i mentioned in in US, North America, Australia and the UK, but I believe that there is a leverage with the commercial presence of De'Longhi in all the rest of the world that we have to exploit. We are preparing a plan, not rushing, because I would like that there is a smooth transition into our group. and therefore I think that this plan will be finalized in the first semester of this year and we will start the execution afterwards so that they have the opportunity to start to enter into the group, to start to understand a bit the way of working that is obviously very different than the way in which they were working with the previous owner. Therefore, the commercial, sorry, the geographical expansion is for capital brands a big opportunity. We are at the same time considering opportunities to leverage on the Delonghi product expertise and this is something that we put in the calendar for the end of this year. and eventually to be then deployed in the course of 2020. I would like to stress the fact that it's a bit also our style, the style of De'Longhi. We want to have the company well established, well integrated in our way of thinking, our culture, and progressively then prepare expansion plan. For what is concerning the AP, the 2020 reached 12.4% and the ambition, just to answer to your question, we believe that our brands are very strong. We believe that the Longhi, especially in the area of coffee especially in some geography, but in more and more geographies in all the segments of the coffee. And Kenwood for the specific segment in the food preparation, and Brown definitely as a mass producer in a larger number of categories, are very strong brands and they deserve good support in communication, being traditional media, being more and more social and digital marketing. As you could see we have significantly increased the support to our brands and they are responding very well and we see that the consumer are really responding very well also in the online world. Last year our IP represented 12.4% of our revenues, the plan for this year is to increase it further. I think we will aim at increasing to another percentage point probably around to go to around 13.4% in that area, but let's say an additional percentage point with a clear focus obviously on the core category that are responding very nicely and obviously with a lot of focus on the digital part. If we look at your question about the inventory, about having enough products, you know that De'Longhi made a very strategic choice a long time ago to have an important manufacturing network state-of-the-art plants with continuous investment to improve our efficiency and to manufacture a lot of the products that we are selling. Just to put a bit in perspective, we have been investing only in industrial in our industrial network, 89 million in 2020, compared to 76 million that were invested in 2019. Also this year, we are investing further in our plants to expand our capacity. There are investments ongoing, already decided to expand our plant in China. and to expand our plant in Romania and in Italy. So this is all ongoing. This expansion of capacity will happen in 2021 and also in 2022 and will be focused on the main category of the group. At the same time, talking about investment that is not industrial, but I would like to mention because it's very relevant for us, since De'Longhi is not only manufacturing most of the products that we are selling, but also designing and developing all the products that we are selling, we had, and we've been nearly finalized and concluded, an important investment to a new innovation center here in our headquarters in Italy. with new technology for the new product development area that we believe will be very instrumental to give us even more support to our R&D and product development. This is about the investments. To make maybe in short this comment, we have a plan of expanding capacity. We have realized that the capacity expansion in 2020, this is very important to mention, so we have been keeping our investment plan. We have executed it in 2020 despite all the difficult situation ongoing. We decided not to slow down in this investment and we believe that this is one of the reasons why we are now seeing a nice development of the business.

Okay, perfect. Thanks a lot. Maybe just one clarification on CapEx. So do you expect the CapEx in 2021 to be fairly in line with 2020 at around 90 million euros?

For this year, the total investment in Euros will be in line with what we have seen in 2020. It will be just probably the mix of the investment will be slightly different because there will be more investment that are going to the new lines and on the production network and we will not have, for example, this important investment that we made this year in the in the innovation center, the expansion of the office and innovation center here in Italy. So to answer to your question, same level of CapEx, but focused on expansion and new lines and new technologies in the plants. Perfect. Thanks for that. Very clear. Thank you. Thank you.

The next question is from Alessandro Cecchini of Equita. Please go ahead, sir.

Hello everybody and thank you for taking my questions. The first one is about other food categories in 2020 probably were down year on year. I don't have the perfect figures but considering that kitchen machines were up importantly probably other food categories were down. I would like to better understand why. And actually, what is your outlook for 2021, just to understand the category excluding kitchen machines? My second question is about your statement of plus 50% life-or-life growth in the first quarter. I would like to understand if this trend is following sell-out or, I mean... There are clients that are restocking. So just to understand this point. My third question is about price hikes. I would like to understand if you are executing price hikes, what kind of price environment you expect for this year. And finally, my last question is about your guidance for the full year in terms of top line. It seems very strong, 12% plus 15%, so very strong. So I would like to better understand what kind of internal drivers you have in order to set partially some tough comps in the third, fourth quarter. So just to understand that. if you have new products, new geographies to offset this kind of tough comparison that probably you could have in the second half of this year.

Thank you.

Thank you very much for the question. Talking about the food categories, as you mentioned correctly, kitchen machine, Kenwood, the zero of Kenwood, which we believe we have definitely a competitive advantage, was significantly up. At the same time, also, always basically under the food processor part, that is a very interesting business, was also up. Some other categories, including minor categories for us, including toaster and so on, have been increasing. But anyhow, let's say that the bulk, what is for us very core, kitchen machine, food processor, were performing really very nicely. Now I'm talking about Elonghi, I'm excluding obviously Capital Brand that has been performing very well with the personal blenders and blenders. Other areas were a bit down. We had, for instance, I see here Friars, Water Kettle were flattish or a bit softer. I have to say that this is an area where we would like to work more in the future, but it's an area that today is represented for the longer, rather limited business. So overall, if I may say, our products in the food space have been performing nicely. And also thanks to our new product launches, I would like to remind that we didn't slow down our plan on launches despite what happened in 2020. Really, our teams were fantastic in making sure that the product were launched as planned and we have seen a very strong response of the customer to that. Talking about the 50% guidance that we gave, as I said, where we got more evidence as of the month of February and so on, so we conclude that we believe that we will be able to deliver that. Maybe I would like to put it a bit in perspective. First of all, despite what you're asking, first of all, we have seen... a growth in the fourth quarter of 2020 and at the same time we have seen a good sell out in that quarter. It could be also that obviously there has been some phasing of customers that have been moving some quantities in general and so on. One important thing is that there was a good sell-out in the quarter, so our major partners and customers have been asking for new stock to restart in 2021. This sell-out has been definitely supported by our communication plan. We have seen a good reaction and elasticity positive in this case to investment that we have been made that I was mentioning before. At the same time for sure we have seen and we will see in this first quarter geographies that are picking up strongly and accelerating also thanks to an additional focus that we have been putting commercially. So there is an effect in the quarter coming also from geographies that are picking up and they're starting to grow nicely. And then I would like to mention also the fact that there is an underlying trend of growth for sure for the profit that is coming not from last year but even from the past year that is keeping this momentum and where we have been reinforcing it through launches in the different segments and where we have a very strong pipeline of launches also for 2021 so it's a mix of different things we have to recognize obviously that you know There could be also some phase in between the quarter. I will not be unhappy with that. I think it's business as usual. But definitely several of our actions that we have been putting in place, let me understand that also this data will bring us to what you mentioned before, that is our yearly guidance of 12-15%. As you know, not easy obviously to give a guidance because market remains very volatile, but we believe that the plan that we have in place, what we have seen now at the beginning of the pipeline and our investment in communication should bring us in that direction. Then, you know, the growth path per quarter can be different, but we are here in a long-term play And we believe that targeting the 12-15% will be, after the big increase of last year, will be a beautiful development for our business. Going to the prices, we believe that there is overall an industry problem in the sense that when we talk about ocean freight, The sharp increase of the ocean freight from China on the routes US and Europe is something that is affecting any players in the market and we took a very quick action to adjust our prices and I think there was a very good understanding from everybody that had to be done because it's just an additional cost coming from the ocean freight. While some other potential effect coming from the raw material components cost, we believe also considering our sourcing network and our manufacturing platform, we believe that we will have to well assess it now in the future. in the next month. At the moment we are in a good position. We are gaining a lot of efficiency in our plant that are offsetting some of these additional costs. But we remain very careful in looking at that part and we believe that we have the right action in place to manage that.

Okay, thank you. So just a follow up on your point. So basically when you guide about 12-15% organic growth, it seems to me, if I understood correctly, that a big chunk of this growth is based on your specific actions in terms of communication, in terms of new markets or better penetration. I mean you are expecting to perform the market considering this kind of action so internal action it's correct my my opinion about this yeah that's a good point but look you know we start from you know looking at the market evolution and we see

a market overall for SDA that is performing nicely. I have to say that De'Longhi, for choices made in the past, has been put, I would say, in the right strategic space. So we are playing two categories that we believe are strategically very well placed. Having said that, this growth means that through our actions we will be able to perform better than the market. We believe that the brands that we have are very strong and the combination of brand products is very strong and therefore they deserve to be very well supported through communication activities that proportionally start to take more importance in the digital world. All these concerned, starting from our position today, relative position, competitive position in the core market where we are playing in this year, in 2021, should allow us to do better than the market. Also, thank you, and you mentioned it, to possibly a geographical expansion in some areas where we are putting more focus than in the past and that they are starting to give nice results.

Okay. Thank you.

Thank you. Thank you very much.

Excuse me, sir. The next question is from Andrea Bonfa of Banca Acros. Please go ahead.

Hello. Good afternoon to everybody. My question has already been answered. Thank you very much. Thank you. Thank you very much.

The next question is from Lorenzo Margiotta of Bank of America. Please go ahead, sir.

Hiya. My question is actually also kind of an ask, but I'll ask it another way. In the first quarter, obviously 50% is very good. Can you just give us an idea how much of that is, you think, industry tailwinds and the overall market versus how much you think you take share, especially, I guess, especially within coffee, who you're taking share from?

yeah uh no thank you for the for the question the uh yeah we need to make now a bit an assessment because obviously we will be able to have a bit more evidence of the share when we look at the sellout uh sellout data because that's the way in which we are looking at the market share you know the What we can see at the moment, because of the size of this increase, is that we have a better penetration and we are gaining space and sharing the competitive environment. Of course, at the same time, the market is growing, so this is probably not at the same speed. What we get as a feedback also talking to our customer is that we are getting more shared space in a certain way. I cannot judge, obviously, from the competition. Obviously, we monitor them. We don't know exactly the way in which they are at the moment, in which they are at the moment in place, if there are difficulties of other nature and so on. We don't know. We are very focused on what we want to do and I believe that also thanks to the investment plan that we didn't touch what we have been executing in the last minute and the last year in 2020, we are seeing some benefit of that choices and the benefit of that strategy. And therefore, you know, the growth that we are experiencing now is a combination from the market, but also from an additional accelerated pace from the low yield.

Yeah, that's really clear. Well done. Good quarter, guys. Good results. Thanks.

Thank you. Thank you very much, Ryan.

The next question is from Francesco Brilli of Intermonte. Please go ahead.

Good evening. Thanks for taking my questions. I have a couple of questions. The first one is on the guidance. I see just making some calculations. Taking into account the organic growth at the midpoint of the range, it seems like the remaining part of the 2021, including the first quarter, which is growing 50%, is enjoying a single-digit growth of very I mean, it's low down compared to the first quarter. I was just wondering if this is due just for tough comparison basis, if we had some other factors to take into consideration for this cautious forecast for the outer quarter of the year. And then the second one is on the guidance on EBITDA. I was listening to the previous questions and I got it, but I wanted to know if there are some components from the online channel which is getting more and more important, I guess, for the business. Some components just mitigating the upside on the EBITDA. And just the last one is the guidance, considering also the potential consolidation of the Eversys turnover that you could have during these years.

Thank you.

Thank you for the question. Yeah, maybe on the guidance, obviously, you know, we see that we have a strong load. At the same time, we see that we have put the basis on what we believe will be a growing pattern in the rest of the year. At the same time, and it's not to be cautious, but at the same time, we see a macroeconomic scenario that remains extremely complex and volatile that we need to factor in somewhere. And also, you correctly mentioned it, a comp base, especially in the second part of the year, that needs to be taken into consideration and factored in. At the same time, I have to say that we are in on protecting our our results also in terms of profitability and therefore we will have also to factor in this play that we have to make on the pricing side wherever is needed to adjust for the extra cost. I made the example of the freight cost. So all these together is giving us a very, let's say positive in our opinion view for the future but also taking consideration that the pattern among the quarters will be different and also there will be scenarios that today are not so easy to be well understood and analyzed so we still in my opinion in the next months we will have a bit more clarity on other things where I can reassure you Since, as I said, we have a medium-term view of our business, we have a plan, we believe it's a strong plan, made of communication, investment on the brand, digital investment on the digital, and so on, that we want to execute in a very disciplined way in the course of the year, and hopefully will bring us to the numbers that we just gave you. considering that that will be on top of the very strong organic growth that we already had the last year. On the online channel, we have investment there to expand our presence, to do better the work that we do on social media and the digital. We are investing in reinforcing the structure in our digital marketing. So there is some costs that are going to be absorbed by that. At the same time, we see that there is a very good return and there is definitely an acceleration on that side that could contribute well this year, but also looking at the medium term, our investment that there will have a very good return. When I say online, I mean online with a pure online retailer, but also online with all our traditional customers and now they've opened up all digital and e-commerce platforms and with whom we are collaborating very closely. For the final question about overseas, the answer is no. This is not taken in consideration overseas. As you know, and we disclosed to the market, there is a food call option in place by June 2021 and there, you know, we are still at the moment at this stage. As soon as we will have more information, obviously, we will immediately give you evidence of that. But for the time being, it's not included in our guidance.

Your next question is from Isacco Brambilla of Mediobanca. Please go ahead.

Hi, good afternoon everybody. Thanks for taking my questions. I have three. The first one is on your outlook for food preparation. 2020 results have been impressive. 2021 results are likely, I guess, to be as strong as 2020. So I was wondering, do you see like this segment is at the beginning of a new cycle, such as the growth cycle we have seen at the beginning of the last decade, or do you feel like this exceptional growth is being mainly driven by the temporary COVID restrictions? Second question is on your capital allocation strategy. You have been generating a ton of cash this year. Again, 2021 will probably follow the same pattern. Which are in your view the best ways to redeploy this cash generation? I'm wondering mainly organic developments rather than inorganic developments. And the last question is on networking capital. Given the huge work done now, where do you feel networking capital in the States can stand on a long-term basis in terms of sustainable incidents on your turnover?

Thank you for the question.

Talking about the full preparation, obviously, I can answer in this way. For us, the core category, and I believe, I personally believe, we all believe that the Longhi has competitive advantage in some of the segments. And we believe that we can do even more in the future to capitalize on that know-how and competencies that have been developed by the group, be a manufacturer of products, designer, developer, manufacturer of his own product. We see a strong response from the customer to our product or to our new launches. We see that also the online customer responding very well. Obviously, what I can tell you, you mentioned it, 2020, we have seen it, 2021 started well. We'll be also up to us to make sure, and that's why I always talk about new product, innovation, communication, to maintain what we believe is the trend. Food in general. is a worldwide trend that is very interesting. It's a beautiful place to be. Food preparation is also a very nice place to be. We want to invest further to maintain the leadership in the segments where we are leader and to maintain the momentum and the growth also in the future. It's clearly part of of our long-term strategy. For the capital allocation, you mentioned it. We have given today a bit of clarity, even if it's a small part, a bit of clarity on what will be the remuneration of our shareholder in terms of dividend policy. So I hope it is appreciated because we show some consistency in the way in which we are using some of the, hopefully, cash that we continue to generate. Part of that will have to be used to sustain the growth because we have an investment ongoing and we believe a lot in our grants and in our products, so we want to play the game of the organic growth. At the same time, I have to say that Long Beach is always in a position to look outside without, you know, hurry, always in a very selective way. If there will be opportunity that will fit well with our strategic view of the future, we can also consider other alternatives to extend to external goals. So this is a bit, you know, an area in which, yeah, we want to allocate our capital and as you know Delonghi is a company that is always focused on, as you can see now, they're always focused on growth. There will be opportunity. It makes sense. We will consider that. Talking about the networking capital, there is a lot of work that we are doing. We have made a lot of investment also in systems and tools to monitor better this area. I personally believe it's very, very important. We had a very strong achievement this year. I don't want to say that we need to be obsessed to that, but we need to be very focused in maintaining the level that we have received in that area, let's say. Making sure, and I'm talking mainly about inventory, that that will not be jeopardizing the level of service to our customer. This is very clear, so it's not a trade-off. The service to our customer for the long-term play is very, very important, and therefore we need to have adequate level of inventory to make sure that we reach the target of service that we have put in our targets and that are in the targets of all the management of Delonghi. For what is concerned, the rest of the working capital, there is a lot of attention, both to the payment term, as I said, both on managing well our supplier. Therefore, if I can make a prediction, it will be that we will continue to try to be in the area of the big achievement that we made this year, obviously taking into consideration that we will need to support the growth.

Okay, thanks. Just a brief follow-up. You mentioned the ambition to remain close to the achievement of this year. If I look at net working capital on sales, you stand at 4%. This year maybe it would be a remarkable achievement, but maybe it is too distant from your average goal. level of 15% just wondering whether we should imagine the long remaining more in the region of 10% networking capital space or 15% going forward yeah your point is good as I said to me it should not be

an obsession because we want to grow so we want to build an event we want to be all our things obviously if you are growing also you need to manage the payment terms and so on i believe that if i look at the numbers today we are in the other four or five percent you know all all what is in our plan assuming that obviously we will continue our growth that is below the 10 percent i think it's a very good achievement should not be an obsession should be to be well managed Because also we know that obviously is helping for us to generate cash to free cash that we can invest further. So this is the way in which I do it. And why do I say that? Because I don't want that we do it impacting our customers. So especially when I talk about inventory, I want to have the right level of inventory to give the best possible service to our customers. So we need to work a lot on the rotation of the inventory. something that we are doing. So my promise is that there will be 100% focus on managing the networking capital in all its components. At the same time, if I can give you an indication, if you can help, in my view, considering the level of growth that we are seeking, whatever will be below the 10% will be, I would consider that a very good achievement for our group.

Okay. Many thanks and congratulations for the outstanding results.

The next question is from Luca Baccocoli of Intesa San Paolo. Please go ahead, sir.

Hello. Good afternoon, everyone. Can you hear me? Okay, good. So the first question is on the online channel. I was wondering if you can give us an idea of the growth delivered last year and what is waiting to the overall turnover? at year-end 2020, and if the strong growth of this channel has any correlation with the strong improvement we have seen at the net working capital level, together with the better control, better monitor of the key elements that you were mentioning before. And the other question is related to the tax rate. We saw some improvement in 2020, and I was wondering if you think this is a sustainable tax rate level. And finally, just a very simple clarification. on the EBITDA guidance. What is the starting point for the 2021 EBITDA guidance? Is the normalized EBITDA margin, or is the reported EBITDA margin, just to be sure about that?

Thank you. Yeah.

Thank you very much. On the online sales, if I look at the online, pure online with data and e-commerce, the growth on 2020 has been above the 20% versus the year before. We already had a good presence in the online, but we've been increasing more than 20% versus the year before. And for what is concerning the other question that you mentioned about the impact that the online has on the networking capital, I would tend to say yeah, in the sense that we have the different supply chain obviously on that and in a certain way we can get from that also a positive impact from that. Now to quantify, not easy. But yeah, on the effect on the supply chain and the rotation of the inventory related to that, it can have also positive impact. For what is concerning the tax rate, we are in the surrounding of 25% and that will remain So we remain in the range also for this year, 21. So the range that we have seen will not be very different in 21. For the EBITDA guidance, no, the EBITDA is reported level. And obviously include the full consolidation of capital buy-in, because we'll be consolidated, and you will see it also when we release the first quarter, we'll be totally consolidated in the long group as it has been, yeah, the acquisition has been finalized the 29th of December of last year.

Okay. Thank you very much, and congratulations on the strong results.

Thank you. Your welcome. Thank you.

The next question is from Alessandro Cecchini of Equita.

Follow-up, please go ahead, sir. Yes, just a very quick follow-up. So I would like to understand if this kind of growth in the online, so the online chunk of total distribution is growing importantly. So do you think that actually this kind of growth verification of online is opening up new customers okay that like happened with with the sub for instance support in China so the fact that food booming online so new people can buy your products so it's something that you think that this kind of online higher penetration can actually allow to your products to be bought by more people actually in the future, in new markets of course, so emerging markets in particular. Thank you.

Maybe a comment on that. We obviously see, as part of other categories, a strong development of the online, not only in terms of quantity, volume, business, and revenues and so on, but also we see a market that is, you know, opening up in several different channels. For what we are concerned, for example, we have activities to support our big online retailer, you know, names that you know, and, okay, are we not entering comment if there will be new players coming in, but you know probably better than me what is happening in this world and who are the biggest players that are operating that. At the same time, we see that there is a space also for property e-commerce and we have been renewing in record time all our De'Longhi, Brown and Kenwood websites. in order to be more compelling to the end user and we see, I mentioned it before, an important growth also partnering with our traditional customers that are developing their online, add a new channel for them, add a new channel of distribution. First, the online is different things. So I will not say probably this is new customer, but in another way, there are new customers. Because if you talk about all our traditional customers that are moving now to click more and expanding a lot their online platform, there are new kinds of distribution. At the same time, it's opening up to a lot of other opportunities. That's what I was mentioning about our digital investment and digital strategy and so on. that allow us to reach more consumers through the online, that obviously offer much more visibility for the consumer, but that can be reached in many different ways. Therefore, we have a strong plan on the online and if I may, the investment that they're doing on the AP are also to support the development of this new distribution platform. So where the recognition of the brand, the awareness is very relevant, and the awareness of the combination brand product is very important. And therefore, you know, the things are, the relation between the things that we are doing between the products mix, the communication plan, and the distribution channel that are going more and more toward the digital online platforms.

Okay. Thank you very much.

Thank you. Thank you. You're welcome.

As a reminder, if you wish to register for a question, please press star and 1 on your touchtone telephone. The next question is from Fraser Dunlong of Berenberg. Please go ahead.

Yes, good evening, everyone. Two questions for me. So the first, just on the margin guidance, do you feel like this is a little bit conservative or is that just a very fair estimate in terms of keeping the margin at the same level in 2021? Just because I guess, as I think of it, you might have a little bit of operating leverage in the business. at one point of margin in amp and so far it sounds like you're managing to pass through these kind of inflationary inputs in china and places like this so i wondered if there could be a little bit of upside to the margin um and the second question just on amp obviously i think it makes perfect sense to invest quite heavily in amp this year um you know 13.4 13.5 percent of sales but Should we consider that in future years as the market kind of normalizes a little bit that that could be the level, that's the 13.5% level, let's say, or should we kind of see this move back towards, say, 13% and the level of 2020 in the midterm?

Thank you. Thank you for the question.

On the margin guidance, I would tend to say for what we are seeing today, and of course there are opportunities that we see, but also clearly headwinds that we will have to face, I tend to believe that it's not cautious guidance, for sure it's not conservative guidance. of what we are seeing today because there are clear challenges ahead of us. As I told you also before, we have several investments going on, some of them that we have deliberately chosen to do to support our medium-long-term plan. It's not only MP but also investment in the organization, in commercial structure in the different parts of the world. Geographical expansion is one of our gold pillars so we require investment. We are very determined to do it. And then obviously you mentioned there will be some inflation component that we will have to offset. We are very committed to offset but then we require a lot of attention so in that sense I believe that the guidance that we have given, obviously considering what we are seeing today, is not at all a conservative guidance. For what is concerning the AP, I mentioned the 12.4% becoming 13.4%. My view is in the next two years we will maintain a well-sustained investment plan that's what we have in front of us that's what we are planning that's what we are starting now to plan also in details for 2022 when we will have more information in the next month so we will provide you this information because also we have for the next 24 months a very strong product pipeline with launches in different geographies that they need to be supported and we believe that we can get some very good return out of that. If I have to look in the future, so after these years, I can give you more a declaration in principle. I believe that the Longyear has very strong brands. I believe that the online We continue to grow and we require that our brand awareness always remain a clear focus for us and we deserve obviously to have located the necessary results. Obviously, we will have to consider then the situation in the future, adjust and eventually review. As a matter of fact, we are very convinced that digital marketing represents a big opportunity, investment on the brands to increase the awareness not only here in Europe but also in other parts of the world. It's definitely an opportunity on which we can build future growth for our business. I will not now mention beside the next couple of years what will be exactly the percentage that we will have. We will come back on that in due time. But our strategy, I think, is foreseeing the communication, digital marketing, definitely as an integrated part of what we want to do in the future.

Perfect. Thank you.

Thank you very much. You're welcome.

Mr. Garavaglia, there are no more questions registered, sir.

Thank you very much. Thank you to all. Thank you for attending to the call, and we will talk soon in the near future. Thank you very much again.