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.