De Longhi Spa

Good afternoon. This is the Chorus Call Conference Operator. Welcome and thank you for joining the De'Longhi First Quarter 2024 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. Fabio De Longhi, CEO. Please go ahead, sir.

Thank you. Good afternoon, ladies and gentlemen, and welcome to the De Longhi Group First Quarter 2024 Results Conference Hall. Today, together with me, are Nicola Serafin, Group General Manager, Marco Cianci, Chief Planning and Control Officer, Stefano Biella, CFO, and Samuele Chiodetto, investor relations, external communication director, and M&A manager. The group has expanded its turnover by close to 10% thanks to the strong organic growth realized in the recent months and the consolidation of one month of the business combination in professional coffee. The net normalization of the post-pandemic effects on consumption together with a restored level of normality of stocks at distribution level, have favored a considerable comeback in growth dynamics in the three-sec quarter. Specifically, the ongoing expansion of the coffee segment, as well as the recovery of the nutrition and food preparation sector, have enabled the group to achieve an organic increase in turnover at constant currency rates in the high single digits. for the third consecutive quarter. These dynamics of increasing volumes, together with the stabilization of some production costs compared to the previous years, have allowed the group to obtain a further margin improvement, quickly bringing it within the historical profitability range. These improvements have been accomplished while maintaining a high level of investment communication across the brands, particularly through the execution of the global coffee campaign with Brad Pitt as an ambassador. Now, let me focus on the results. In the first quarter, the group revenues reached €658.8 million, showing a 9.4% increase compared to the previous year. thanks to a like-for-like growth of 5.9%, which was 7.3% at constant exchange rates. The geographical expansion, in line with the previous quarters, displayed a steady growth trend in the European area, achieving organic growth at a low TIN rate. In more details, southwestern Europe experienced organic growth of roughly 10%, in line with the main patterns identified in the second half of 2023. Within this context, the main markets witnessed significant growth in turnover across all major product categories, with certain countries, like the Iberian Peninsula and Switzerland, showing accelerated growth in the double digits. Northeast Europe witnessed significant organic revenue growth for the fourth consecutive quarter, reinforced by the high team's performance in the early months of 2024. We observe the continuation of a favorable trend of the UK and Poland, with acceleration in the Czech Republic, Slovakia, and Hungary. The MIA region has gone through a declining turnover, which has been heavily influenced by complex economic and geopolitical context. The Americas area achieved an increase in turnover of around 10% thanks to the consolidation of La Marzocco and mid-single-digit organic growth, supported mainly by the performance of nutrition and food preparation, thanks to the expansion of Nutribullet products. Finally, the Asia-Pacific region, which was the only one to show growth in the first quarter of last year, maintains a turnover in line with 2023, highlighting a partial decline at an organic level. However, growth has been seen to be accelerating in countries like Australia and New Zealand. Regarding product segments, it's worth highlighting that there has been positive momentum across all macrocategories, allowing the group to achieve organic growth at constant exchange rates in the high single digits. Specifically, the coffee machine sector, both for domestic and professional use, which currently accounts for approximately 60% of total revenue, grew significantly in the quarter at a low tins rate, driven by an acceleration in the expansion of the household fully automatic machines, and a contribution from La Marzoc for one month. In the nutrition and food preparation category, personal blenders and hand blenders supported the sector performance in the quarter, which recorded low to mid-single-digit increase. Lastly, in the quarter, there was a worth-noting expansion of Brown-branded ironing products, with significant growth in many countries in the European region. Looking now at the evolution of operating margin, the net industrial margin stood at €335.4 million, equal to 50.9% of revenues. compared to 50.5% in 2023, benefiting from positive effect of the mix and an easing of inflationary pressures on product costs. The BDA adjusted was 93.8 million euro or 14.2% of revenues compared to 12.3% the previous year. Expansion of volumes A further partial easing of inflationary pressures on some industrial costs and an investment in media and communication in line with respect to 2023. APO revenues at 11.2% have supported an improvement in margins, despite an increase in labor costs and organizational structures. As to the balance sheet, the group ended the quarter with a positive net financial position of $307.6 after 326.8 million euros of net absorption in relation to the closing of the business combination between Tamar Zocco and Eversys. Free cash flow before dividends and acquisition amounted to 389.2 million euros in the 12 months, thanks to a significant contribution from current operations, while it was negative by 28.2 million euros in the quarter 2019. due to an increase in net working capital compared to the year-end value. Now, as a conclusion to my results overview, I would like to point out that over the last couple of quarters, we have been able to seize multiple growth opportunities, allowing the group to go back to mid-term growth path consistent with its business potential. The overall picture represents a consolidation and strengthening of results. following the gradual post-pandemic normalization phase in the recent years, despite being aware that the current microeconomic and geopolitical scenario remains uncertain and variable. The most recent positive developments in the growth dynamics have led us to confirm the forecast of a 9% to 11% increase in sales for 2024, including the enlargement of the perimeter through the business combination of La Marzocco and Ephesus. In terms of margins, the quarterly results reinforce the expectation of an adjusted EBITDA of around 500 to 530 million euros for the new perimeter. Now, we can open the floor to Q&A. Thank you.

Thank you. This is the Coral School Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Nicholas Kepler. Please go ahead.

Hello, thanks. Good afternoon and thanks Fabio for the presentation. I have a few questions. The first one is on coffee. If you can provide us with a breakdown of coffee turnover between professional and consumer so we can better analyze the result. The second one is on price mix, overall negative contribution, but in the press release you mentioned a positive mix, so implicit pricing is negative, so if you can comment on that and maybe quantify how much of the 1.4 million lost in the BTA is positive mix and how much is negative pricing. Third question is on AMP, which has been a driver to increase profitability in Q1. If you can remind us which is your expectation for the full year. And last one on Americas. Have you seen any softening patterns in consumption over the past weeks? I'm asking because we have been seeing several consumer-related companies warning in these days.

Thank you. Thank you, Nicola, for your questions. So the first one, if I'm not mistaken, is about coffee. Of course, coffee continues to be our strong growth driver for the group. In the quarter, we have reached $397.6 million for the totality, where professionals represent slightly more than professionals. Now, the contribution of La Marzocca, of course, is positive, and you can calculate for just one month. The difference is approximately around 20 million, and is in line with the budget. With regards to your second question, it's about price mix. The split of price mix in absolute value and negative pricing for approximately 3.5 million euro or around 0.7% on sales. And this is the combination brought down to minus 0.2 due to a positive mixed contribution for approximately 5 million. The price, we're not concerned about this price deterioration as an indicator. We said very loud also in the previous calls, we have increased prices last year, and now we are benefiting from some cost reduction. So our intention was to reinforce our commercial initiatives around some key products in key areas. I think the strategy has been pretty successful, and you can see it in our sales result. So we are very confident in being able to continue protecting our profitability. At the same time, continuing having very strong commercial initiatives around old categories in all the key markets and product lines. With regards to AMP, in actual value, slightly above last year, but in percentage, better than last year, lower than last year. And Nicola Serafin made it very clear during the last conference call that we are aiming to higher efficiencies in how we spend our monies. And we certainly are more effective in our campaigns. Brad Pitt is still very strong as an ambassador. And at the same time, on higher stage, of course, as a percentage of sales, the investment is now lower. Last question about USA, good question. We see Nutribullet performing very well. On the contrary, we see a softer market for our Nespresso capsule business. We think that this might be temporary. Nespresso has experienced a very strong growth in the past years, so it could be that there is a temporary slowdown, some also inventory adjustments. In fact, we are seeing now an improvement already in April. So probably it's a bit too early now to try to extrapolate. So we saw a weaker quarter in coffee due to this capsule market, but now we're seeing a better trend in April. So I think that I'm quite confident that we can continue exploiting the success of Nutribullet and also turn around this initial weakness on coffee, particularly on coffee. The weekend is not on coffee. It's in the capsule coffee makers, which we expect to turn around as also Nespresso has very ambitious plans for the second half of the year.

Thank you.

The next question is from Isacco Brambilla, Meteo Banca.

Please go ahead.

Hi. Good afternoon, everybody. Thanks for taking my questions. I have a Three, the first one is a follow-up on professional coffee. Could you just clarify if the 10% mentioned as an incidence was on total sales or just on the coffee maker's side? And connected to this, now that La Marzocco deal has been closed, if you can provide a bit more color on the growth prospects side. of La Marzocco or either the all B2B coffee makers business for the remainder of the year and beyond. Second question is on food preparation. This is now three quarters in a row with organic growth in ample positive territory, which is the same expectation for the remainder of the year, also considering that the division would be facing in the second part of the year a bit of a tougher comparison base. Last question is on net cash. If you can share any kind of target for net cash by the end of this year.

Okay, sorry. So maybe I wasn't clear on my... with regard to the split between professional household. When I said 10% of professional, it's 10% on total coffee sales, including also one month for La Mazzocco. With regard to professional, I think that both businesses are in line with our plans. and with the budget, so we expect Marzocco to, let's say, confirm also the budget for the remainder of the year. We see some softness now in Eversys. On the contrary, for the moment, we see also in current trading an acceleration with Marzocco. It's a bit too early. to extrapolate on this as we have only two months of visibility, March, and now we're seeing April in terms of top line. But we feel that numbers are coming in line with budget. With regards to food preparation, it's good news. All in all, it's good news. Maybe some softness around kitchen machines, which is a sterile product for Kenwood. The market has dramatically declined in two years. Now it's stabilizing, but it's still in the negative territory, unfortunately. On the contrary, strong growth in the quarter for NutriBullet, strong growth also with Brown, in particular with hand blenders, and I have to see positive signs also in other food preparation We came in particularly with the new MultiProGo, which has been a phenomenal success in many European markets and internationally. So we expect this trend to continue over the next nine months. With regards to net cash, I think that Delonghi has a strong cash-generating business model. We continue to generate a lot of cash. This could open opportunities for M&A or for the dividends eventually in the future. For the moment, we think as though we have the capable financial means to make acquisitions. And even if Solamar Zocco has an acquisition, it's not particularly complicated because it's a stronger commercial and organization which provides has delivered strong results on a standalone base and doesn't require the strong integration, we believe that it's important for the group for the moment to digest this integration, support it, and make sure that both the professional business continue to grow in the mid-term in line with our plans and expectations. I would say no expectation for short-term acquisitions for us.

Very clear, Armin. Thanks.

The next question is from Francesco Brilli in Termonte.

Please go ahead.

Good evening. Thanks for taking my question. A couple of questions from my side. In a follow-up in the nutrition and food preparation segment, And specifically, I saw then when commenting sales by region, you mentioned Nutribullet just in the Americas area. So I was just wondering how is developing the rollout of the brand outside the U.S. And we should expect a further acceleration due to the Nutribullet international expansion this year or somewhere next year. And the second one is if you can provide some color on the very first week of the second quarter, if you are seeing a continuation of the trends observed and achieved in the first quarter across segments. And then just a quick one on Lamarzocco. Should we consider any phasing or any seasonality for the revenues of Lamarzocco this year from one quarter to another?

Thank you. No.

Okay. Thank you, Francesco. So, first question about Nutribullet. I would say definitely positive news on North America. Our international expansion is rolling out. I have to say that the market, the blending market is not positive at the moment, so... We have delivered growth in Europe thanks to market shares gains. We expect to continue growing with Nutribullet, but probably in not a high growth environment. So we expect growth, probably not at a very high level, but positive results on the market. on NutriBullet the second question was about Q2 April fairly in line with what we have seen in the first quarter so we expect to have a quarter 2 in line with quarter 1 certainly in a positive quarter for us The third question for Lama Zocco, no, professional is more stable. It's less seasonal, and so you can expect quarters quite similar in revenue in the remainder of the year.

Perfect.

Thank you very much.

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

Hello, everybody, and thank you for taking my question. low-teens organic growth in the first quarter, so probably you are expecting a similar trend for the second quarter, given the size. I would like to better understand how much the performance is driven by new products, like Revalia, like the products that you launch. to understand if you are still gaining market share thanks to new products and the feedback around the Riveglia that has been launched in several new geographies during this year. So this is my first question. My second question is instead about still the professional business you stated about we know that you are working or co-working with Starbucks with overseas so just if you are confirming that this project is progressing and basically you expect to see some rollout potential rollout by year end or during the next year And finally, on the blender, on NutriBullet, we saw your competitor listed, the US competitor that is growing faster in blenders. You are saying that you are going well, probably in an environment that is not so good. Just to say that probably you and this player are gaining market share, I presume. So just if you can elaborate a little bit more your position, your current dynamics for your products. Thank you.

Yeah, coffee, yeah, I would say the trend is still positive too. As I said, no different angle on quarter two from our general view on the quarter. We expect to deliver as a group growth in quarter two, and we think that the coffee should continue at a similar growth rate that you have seen in quarter one, also in quarter two. Maybe some color around it. I think we see strong growth in super automatics, which are Yeah, our better product. You asked about how important innovation is. Yes, certainly it's very important. Certainly Rivelia is doing well. Happy about the launch. They've been launching selected markets like Italy, Spain. Now it's been launched also in Germany as an example. Pretty good results. I'm happy about that. But it's not just about Rivelia. I think that the growth is coming also from some products that were launched in the last 18 months that now are starting to have a strong momentum. I would like to highlight, let's explore in the high end, doing very well in pertaining the milk markets or automated milk markets in Germany as an example. but also with the Magnifica Evo range, which is performing the mid-tier of the market very well. We have also two new launches in this segment, which are happening now. So we think that we will continue to add new products, and we believe that this will enable us to grow and maintain our market share. And just a note... we have increased our market share further in the first quarter of 24. So pretty happy about commercial results and pretty happy about our ranging, particularly with the coffee makers and automatic coffee makers. With the professional, the question was about Starbucks. It has been... for a longer than expected project, but Starbucks made very clear that it is at most important for them this project, so very committed to the launch. The plan is to start deliveries in quarter three with a large, very large test, probably hundreds of units, and then to roll out fully in 2025, upon success of this, let's say, larger test in quarter four. But I would say, in track with, and Starbucks has already, has reiterated their commitment to the project. With regard to blending, you're referring to Ninja, I assume, and then performance, I think that, yes, probably they're performing well. We are performing well. We are happy about our commercial results, both in the United States and North America. So I don't know exactly if you were referring to the Ninja performance.

Yes, yes, yes, the Ninja.

In the blending or in the blending and the food preparation category where I think we have different parameters. Even in blending, we are more focusing on just on the single serve blending. They are more also in traditional blending. We are now launching more products also to enter the traditional space. And then also the blending category and preparation category is much wider where, I mean, other product lines might affect the company performances.

Okay, thank you. And finally, if I may, I'm fully aware that you are gaining market share. So my curiosity is driven by, do you see more demand in high-end products? So for high-end, I consider more than 700 euros, or in particular still gaining traction, the 400, 500, 500 range of your products.

Yeah, I mean there are different stages of maturity in the different markets. We certainly see attraction for higher end products, automated milk versus manual milk. I don't know if it's clear for you what automated milk versus manual milk means, but in automated milk, The consumer, thanks to, let's say, frosting devices, can make a cappuccino just a touch of the button. So this is growing as a category. They're more interested around espresso and automatization of making cappuccino. So this is a trend. At the same time, in other markets or in certain markets, the market is becoming more somehow more competitive, so there is also a need of promotional initiatives. But all in all, I think that it's a very healthy market where consumers are attracted by innovation and improved functionalities.

Okay. Thank you very much.

The next question is from Hela Zarouk, Adobe HF. Please go ahead.

Yes, good afternoon everyone and thank you for taking my questions. I have four questions please. My first question is on full year guidance. Could you please share with us your expectations in terms of growth at constant perimeter and constant currencies for the full year? My second question is on logistic and industrial costs. So what are your expectations for the upcoming quarters and should we continue to expect lower logistic and industrial costs to have a positive effect on profitability over the full year. My third question is on the price mix. So what should we expect going forward? Still a slight negative impact on the full year adjusted EBDA or maybe it should turn positive for the coming quarters. And my final question is on the guidance. So, what are the main factors that could, according to you, lead to an increase in the folio guidance? Thank you.

Well, we don't have an official guidance at constant perimeter, but it can be extrapolated. I think that it can be, let's say, low to mid at constant perimeter. For the moment, we see Little currency effect. The effect that was very negative last year now is fading. Actually, the month of April is close to zero. So we see very little impact on currency. And we said that the growth from 9% to 11% is thanks to the consolidation also of La Marzocco. So this La Marzocco consolidation in the next quarter is can represent about three points of growth on total year, so you can expect a mid-single-digit growth for the group as a support to make you understand what is the potential without adjusting our guidance. With regard to the logistic cost and also the price mix, Nicola, do you want to handle these two questions? And then maybe you can jump in for the last question.

In this moment, we are experiencing a favorable trend on the industrial and logistic cost Obviously, we are strictly monitoring because there are some setbacks still from the Red Sea crisis that on one side is affecting the cost of the inbound from Asia to Europe. but currently we have a low single-digit effect of favorable cost that we think can be a carryover along the year. Going on price mix, going back on the detail of the question before, we... In terms of a bit of price erosion, we have limited concern, as Fabio has mentioned before, because we have some repositioning of pricing that has been already happening in the second half of last year. So the carryover of this we are getting now, and it's probably more affecting the first half of this year, and then it will be more neutralized. So this... This effect of the combination of price mix is about 0.2% in this moment on the top line. It's something that can be even reduced along the year if we have this effect and we have a positive sentiment on the mix effect.

Okay, on guidance, I think it's probably too early to revise guidance. Honestly, it's a good quarter. It's a strong quarter. This could suggest optimism for our ability to deliver results for the year. So we're happy about that. We will monitor. I think that also we have to take into consideration two aspects. One is the overall complexity, macro and geopolitical complexity, and the second that we have a tougher comparison in any case in quarter two. I would remind you that last year quarter one was a weak one, not just for our decision to strategically exit the portable air conditioning, but there was softness in the SDA in coffee for the first time. So we're going to have this quarter one is an easy comp. Quarter two would be still not a difficult comp. But later on in the year, we're going to have more and more difficult quarters to compare with. So for the moment, very happy. As Nicola said, the markets are strong, strong Europe. Strong Eastern Europe, very strong Eastern Europe, great initiatives in North America, maybe some weakness in China and in some Asian markets, but we are confident about how we are faring, but too early to review guidance for us.

Okay, thank you very much. Very helpful. Thank you.

The next question is from Natasha Brilliant, UBS. Please go ahead.

Thank you very much for taking my questions. Three for me, please. Just to come back on your comments just now on Asia, obviously outside of Australia and New Zealand, if you could just give us a bit more color on what is driving that organic weakness and when you expect that might change. Second question is just on the Middle East, obviously challenging backdrop there at the moment. Is the impact on logistics and disruption there, or are you actually seeing changes in underlying demand, and could you see a catch-up on that later in the year? And then final question, if you could just remind us on expectations for CapEx, and working capital has swung around a little bit, what we should expect for the full year on those two. Thank you.

Okay.

Thank you, Natasha, for your question. I mean, Nicola, you want to handle... the commercial dynamics in Asia and in Australia.

In the very last information that Fabio added, okay, we have strong Europe, Asia, we had China a bit weak in this moment, overall it's a market that is that is suffering in terms of growth, while Australia and New Zealand, after a difficult 12 months of the past year, they are finally back on track with a growth of mid to high single digit, and that is really encouraging. So, overall, we see market strong. Obviously, China is... It's an important market, but it's not our largest market. So, overall, the effect on our revenue potential is limited. So, we have great, great potential overall from a high-performing market. In terms of logistics and finance, And disruption, we have reset a bit and we have rerouted all our supply already done. And so we are full on track of availability in this moment. So if any disruption could have been affecting the market results, it's happening. And I would say that MEIA in this moment is suffering a bit of the geopolitical situation more than product availability, because indeed the supply was at the same level of availability also through Europe, and definitely Europe is performing much differently than MEIA.

On CapEx, CapEx fell in line with the indication over last year.

A bit of less extraordinary investments that probably we have already done in the past few years. A couple of important investments in industrial infrastructure that we are... we are in this moment is activated and now it's time to capitalize at best the production capacity.

At constant perimeter. Of course, we now have to take into consideration some incremental capex to Lamazocco, which doesn't represent a major portion of our total investment. With regards to, last week it was about the working capital.

Yes, yes.

You mentioned the working capital. We have said that we might have a higher working capital progressively in the next months. We have reached record low levels last year, and before we have to manage to have the right products at the right time in the right markets.

We have a bit of increasing working capital compared with the year-end that it was last lowest ever and it was planned to and is a bit of stock due to the seasonality of the product but still our current working capital and stock level in particular is much lower than it was in the same period of last year. So we are working with even an optimized situation compared with the already optimal that it was at March 2023. Super.

Thank you.

The next question is from Francesco Brilli in Termonte. Please go ahead.

Yes, thank you. Just a quick follow-up and just more a curiosity. You mentioned before that you're seeing some, in the North American market, you're seeing some softness of the capsules product. And I was just wondering if you think it could be a signal of more interest from different kind of products, I mean, from espresso machines, fully auto, semi-auto, instead of capsules, or is it just a result of high assays in the past and then a normalization of the demand? Just a curiosity on this.

No need for normalization. I think it's normalization. I think that, again, we see there is a more and more interest around the coffee and cappuccino as well as on cold drinks, cold coffee drinks in North America. It could be just a temporary adjustment. Nespresso will have a very strong plan for also the second half of the year to support and go back to growth, and go back to growth, yes.

Okay, thank you.

The next question is from Luca Baccoccoli, Intesa San Paolo. Please, go ahead.

Hello. Good afternoon, everyone. Three questions from my side. The first one is a follow-up on the kitchen machines. You mentioned the drop in the last two years, so I was wondering if we are back to the pre-COVID level or we are just above or below that, let's say, threshold. And the other question is on the ironing. You mentioned a very strong growth in the first quarter. So is this due to new product launches or a temporary increase maybe due to easy comps? So just to better understand the trend that we have to expect for the rest of the year because this has been a very volatile business in the past. And finally, a question on the financial charges. So actually in financial income, the 4.1 million euros, if you can split between the effects, the currency effect and the pure financial income, just to have an idea of the yield that you get from the available cash in order to make a fair assumption for the full year. Thank you.

Okay, so about kitchen machine. Basically, before COVID, okay, during COVID, sales expanded, probably the market expanded maybe 30, even more, 30-plus percent. After COVID, there was a sharp reduction, and now we are still – below the pre-COVID levels. I would say about 20% below pre-COVID levels. The market is now stabilizing. But for the moment, we don't see clear signs of recovery. We expect it to be very weak also this year. So unfortunately, We believe in the long term. I mean, this market will really come back. But it's for the moment. I mean, there have been incredible growth during COVID. And I think for a few years, probably we're going to have to suffer a bit. And hopefully we're going to normalize this in the future. But I have to say that, on the contrary... we're doing very well with blending hand blending and personal blending and we have new initiatives around other Camberwood products that I mentioned before ironing we think that we have one stable market share for the future so you can expect ironing to deliver growth for the group in the near future and the growth is due to by combination of innovation from our side, new products. We had a very strong ironing and iron pipeline, which is translating in new market. Also some competition weakness. A few competitors are, we think, a new competitor is a bit defocused, and we are taking advantage of his weakness. With regard to the financial question, you want to handle this?

Financial income, the effect is coming from the careful liquidity investment, the strategy that we had in particular since the start of the year. Bear in mind that from now on, just the cash out related to the business combination, we should have a lower, slightly lower impact for the nine months.

Okay, thank you.

The next question is from Fraser Donilon Berenberg. Please go ahead.

Hi there, Fabio. It's Fraser here from Berenberg. Just two questions. So the first was, I keep thinking about the lower-end segments, let's say radiators, heaters, air conditioning. Do you see any change in competitive intensity vis-a-vis exports from China? You know, you obviously read about that country potentially pushing more products in this direction. So I just wondered if you see any change in the landscape with those lower kind of price points. And then the second question was, could you just give an update, please, on the pump market? business in terms of like how you could see your share evolving in Europe. I think on the last call, you mentioned some quite interesting product launches in the category. So I'll just be interested to kind of have an update there. Thank you very much.

Okay. I'll just see a bit of the, say the risk dash opportunity. Now, heating and air conditioning represent far less than 5% on total sales. It's like we're talking about really a smaller portion of our business. I think with the decision to exit the U.S. market in the portable air conditioning, now we're around 3%. But now, with the decision to exit North America in portable air conditioning, I have to say that we have really... a portfolio of high-end product dash markets. So we really, the effect of the low-end has already fully happened. We maintain the high-end of the market. We see the weakness more related to seasonality, or we are witnessing for this year a very unstable weather in the main markets, or an unfavorable weather condition in Japan, for instance. And this is resulting in the weakness. It's not really a positioning issue. It's not a product issue. It's not a China product aggression issue. It's more like a seasonality this year. I mean, what had to happen, happened already with the decision to exit North America. Actually, I have to say that today, heating and portable are profitable, high-end businesses for us. With regard to the second question on pump, we have significant investments around our pump and grinder range. And, Nicola, maybe you want to handle this question.

Pump in this moment is not, let's say, that different in terms of market trend and potential. Obviously, it's on a different scale than fully autox. We have a significant range launched in the market and also innovation is coming. We are introducing cold brew technology both in the pump with dry grinder and the traditional pumps. Also market is giving positive signal of recovery. and to be back positive as it is in fully auto. So definitely PAMP is for us a growth driver for the coming months, and we are very positive. Obviously, there's been a bit of going back also in one of the questions before, PAMP is coming from Asia for us, and there's been a bit of difficulties in realigning the supply through the Red Sea Canal. considering the lower stock that we had at the beginning of the year. But now, since April, we are back fully on track on availability for Europe in particular. So it's definitely something we're very optimistic about.

Thank you.

As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone.

The next question is a follow-up from Isacco Brambilla, Meteo Banca. Please go ahead.

Hi, a very quick follow-up on my side. In the past calls, you mentioned wage inflation has a potential headwind for 2024. EBDA doesn't look like you are suffering anymore. any burden in the first quarter. Can you comment a bit on this, if there is any marginal update worth to comment?

Thank you, Zacco.

Nicola, you can handle this. Obviously, wage inflation, there are two sides. There is the labor cost on the cost of goods, and definitely there we are... more than offsetting the labor cost that is mandatory and is affecting with the efficiency and the benefit of the reduction of the material cost and industrial cost, overall the industrial cost, as I mentioned before, is positive. So the industrial labor cost is offsetting for the time being and also looking forward. For more than no industrial cost, we have a carry over of the cost but we are working with optimizing the structure so it's limited to the carry over of the effect of the wages increase but we are leveraging the growth of the business to try to offset as much as possible this effect so this is why at EBITDA level The impact at this time is also looking forward for the year.

It should be very limited. Perfect. Thanks.

For any further questions, please press star and 1 on your telephone. Mr. DeLonghi, there are no more questions registered at this time. The floor is back to you for any closing remarks.

Okay, so thank you all for attending the Delonghi first quarterly results conference call. Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.