De Longhi Spa

Good afternoon. This is the Cori's Call Conference Operator. Welcome and thank you for joining the longest served half of 2021 Consolidated Results presentation. 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, let me signal an operator by pressing star and zero on the telephone. At this time, I would like to turn the conference over to Mr. Massimo Garavaglia, CEO. Please go ahead.

Good afternoon, ladies and gentlemen, and welcome to the Delonghi Group's quarter to 2021 results call. I hope you hear me well. Today, here in the room, we have Marco Cianchi, Chief Strategy and Control Officer, Stefano Biella, CFO, Fabrizio Micheli, Director of M&A and Investor Relations, and Samuel Accudetto, Investor Relator. I'm pleased to release this outstanding set of numbers that highlight the strength and the flexibility of the group in coping with many complexity arising over the last, latest months. First of all, Let me recognize the extraordinary effort made by all our people over the last quarters that allowed the company to serve customers and achieve great results in a still very complex and uncertain environment. The exceptional flexibility that the people and the organization have shown in the last period is an important signal that consolidated the group's ability to adapt promptly to the market changes and conditions. I move now to slide four and I would like just to start with the presentation that you see in the slide of some of the activities in the communication area. And this is to emphasize the commitment of the group in the last years in expanding the budget of communication in marketing activity to support our brands and our business. So you see here in the slide some activities that have been done to support the Longi brand. They're celebrating the 100 years of bone and a campaign, a very successful campaign to support our Kenwood range. Now moving to the slide eight, During the first half of the year, as you see in the slide, the group was able to consolidate and strengthen its position in the small domestic appliance market. The strong vote achieved both in Q1 and in Q2 was supported by continuous investment over the years in innovation, communication, digital marketing, and production excellence. These efforts have enabled the company to seize the opportunities offered by the acceleration of the consumption in the domestic environment and to successfully address the complexities that have emerged in the last few quarters overall in the supply chain. In this regard, it should be noted that despite several problems that have arisen in recent quarters, the production platform have worked at full speed and there has been no disruption effect in the manufacturing activities. Furthermore, thanks to the numerous measures implemented, like increased efficiency and a very careful pricing strategy, the group, we think, will be able to mitigate to a very large extent the effects of the cost increases. This strategy will allow us to achieve an adjustment BDA margin for 2010-01, improving versus last year, and I will come back on this point when I talk about our guidance. Now, let's take an overview of the half-year results before opening the floor to the session due to the questions. I would like to make you notice that the group scope of consolidation in the first half of 2021 has included for the entire half the American group headed by Capital Brands Holdings, and starting from April 1st, the Swiss group Eversys, that as you know is active in the segment of professional coffee machine, and whose entire share capital was acquired by De'Longhi. on May 3rd of this year. On slide 9, you see the consolidated revenue of the first quarter, of the first half, sorry, that amounted to 1.4 billion, a bit more than 1.4 billion, growing by 60%. Expansion of the group on a life-for-life basis would have been 46% with a turnover of slightly above 1.3 billion and up to 51% of cost and exchange rate versus last year. Now, going to slide 10 and on the geographies. Looking at the geographies on a life-for-life basis, I would like to highlight the areas that have achieved a strong double-digit growth both in the first and the second quarter of the year. Southwestern Europe showed a strong trend, growing by 52% of the cost of the exchange rate since the beginning of the year. In particular, we witnessed a remarkable expansion of the coffee business in Germany and France in both periods. Northwestern Europe grew by 53% of the cost of the exchange rate, with the whole area expanding the revenues at a double digit rate in H1. America achieved a significant growth, plus 38%, despite a negative currency effect of around 12%, and the area maintained a positive trend already achieved in quarter one. Then I would like to highlight also the strong recovery achieved in the Middle East region. with an increase of 142% of cost and exchange rate versus prior year. Finally, Asia Pacific maintained a double-digit growth in the first part of the year, increasing the sales by 40% over the cost and exchange rate. Going to the categories and therefore to slide 12, coffee was boosted by a remarkable expansion of all product families at a growth pace above the group's average in both quarters, driven in particular by the expansion of the full automatic coffee machines. Cooking and food preparation segments have closed the half-year with a significant double-digit growth with a substantial continuity between the first and second quarter. In particular, the increased attention of consumers for products related to the home experience supported the expansion of the business basically in all geographies. As of the rest of the business, the cleaning and ironing segment confirmed a solid double-digit expansion in the period analyzed, while the comfort segment recorded a high single-digit growth, also considering a delayed seasonal start of a portable air conditioning especially here in Europe. Going now to slide 15 talking about the margin. The net industrial margin equal in the first half to 721.4 million and improved in terms of percentage of the revenues from 48.7% to 50.4% Thanks above all to the higher volumes and the positive contribution of the five SMICs that we calculated at around 32 million for the first half. The adjusted EBDA amounted to 251.4 million, representing 17.6% of the value on a like-for-like basis. is stood at $230 million with a sharp improvement in the margin on the revenues from 12.5% to 17.5%. Such expansion was boosted by a strong volume effect and a positive price mix, which more than offset the increased investment in AMP has been slightly higher versus last year, and the negative impact of higher cost of transportation of raw material. Net profit amounted to 180.8 million, equal to 12.6% of the revenues, and a like-for-like basis would have been 140.4 million, equal to 10.7% of the revenues. Looking now at the balance sheet, at slide 17, Our net financial position at the end of June stood at $218 million, slightly declining from the beginning of the year due to a cash out for dividend at around $80 million and the acquisition of overseas for $129 million. However, the cash flow before dividend and acquisition was $196 million in the six months and $450 million in the 12 months rolling. The net working capital improved significantly compared to last year. The increase on inventories was widely offset in the six months by careful credit and trade payable management. bringing the ratio of net working capital to revenue to 2.2%, a marked reduction to last year's figure of 10.6%, but more consistent with the values that we have been seeing at the end of 2020. Therefore, I would like to make a short conclusion If we see the extraordinary set of results achieved in the first and second quarter of 2021, this is confirming the healthy and strong medium-term trends underway and allows us to look with positivity at the evolution of the business in the near future. Despite the numerous complexity and challenges that the industry is facing, such as increasing costs related to transport and raw materials, the group has demonstrated the resilience and flexibility that have allowed to maintain the production capacity at full speed, confirming our results and our targets and the margin at the NBDA level in the current year. We are experiencing a phase of strong business growth, and we believe that in order to be in line with our medium-term plan, it is necessary to continue to strengthen our investment in innovation, in expansion of the production capacity, and in communication to support our brands and products. In this regard, the second half of the year, we see the Group's focus on launching an important global communication campaign with the aim of further consolidating its positioning and boosting the business growth in the coming years in line with our medium-term plan. For this first part of 2021, we now see, sorry, for the rest of 2021, We now receive good revenues, including capital grants, low at the constant exchange rate in the upper end of the range previously communicated. Remind was between 28% and 33%. And then adjusted the BD8 improving versus last year, both in value and as a percentage of revenues. Furthermore, the consolidation of emphasis will bring about two percentage points of additional revenue growth and an EBA adjusted as a percentage of revenues in line with the rest of the group. I open now the floor to questions.

Excuse me, this is the Cori's Call Conference of Bridges. We will now begin the question and answer session. Anyone who wishes to ask a question may press the star and 1 on the touch-tone of the telephone. To remove yourself from the Q&A question queue, please press the star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press the star and 1 at this time. The first question is from Mr. Francesco Brilli with Intermonte. Please go ahead, Mr. Brilli.