De Longhi Spa

Good afternoon, this is the Coruscall conference operator. Welcome and thank you for joining the De'Longhi full year 2024 consolidated results. 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, Chief Executive Officer of De'Longhi. Please go ahead, sir.

Thank you very much. Good afternoon, ladies and gentlemen, and welcome to the De'Longhi Group Full Year 2024 Results Conference Call. Today, together with me, are Nicola Serafin, Group General Manager, Marco Cenci, Chief Planning and Control Officer, Stefano Biella, Chief Financial Officer, Samuele Chiodetto, Investor Relations Director and M&A Manager, and Sara Mazzucato, IR Specialist. I am extremely pleased with the Group 2024 results, which show a significant improvement in all the financial key performance indicators. These results reflect consistent organic growth combined with an acquisition-driven turnover expansion. A record EBITDA level, more than €200 million in free cash flow before dividends M&A. Establishment of a professional coffee hub and a straightened market position. As can be observed on slide 5, the group revenue growth has been consistent and solid throughout the year, with the household business experiencing robust organic expansion for the sixth consecutive quarter. thanks primarily to the structural trend in coffee and the renewed consumer focus on nutrition, driven by consumer changing habits. These trends, combined with Amarzocco consolidation, has supported a 14% turnover increase, which accelerated to 18% in the fourth quarter, equal to 11% on a life-for-life basis. We have sustained this upward trend over the years by investing continuously in innovation and communication, resulting in market leadership and growth. Specifically, in 2024, we spent more than €430 million in AMP, €40 million above previous year, backing new product launches and established brand awareness across regions and categories. Furthermore, in the recent months, we've been working on the new Perfetto campaign which will once again feature Brad Pitt as a coffee ambassador in the global advertising campaign. Looking ahead to 2025, these investments, combined with a new product introduced in recent years, are critical for driving categories expansion and capitalizing on market opportunities, giving us confidence in the growth year. In terms of profitability, as shown on slide six, We were able to significantly improve the level of EBITDA margin over the last two years thanks to volume growth, stabilization of production costs, and a positive product mix effect, indicating that consumers' interest in the premium segments of our product portfolio keeps increasing. In particular, we're considering in the last 12 months the light-for-light margin enhancement and the creative professional coffee consolidation has allowed the group to target a record EBITDA. Looking ahead to 2025, we believe that expected volume growth and improved product mix will offset the impact of current tariffs regarding goods produced for the U.S. market, as well as ordinary investments in organizational structure, resulting in an increase in EBITDA. Finally, slide 7, the group ended 2024 with a positive net financial position of more than $600 million, roughly equivalent to the previous year, but after funding approximately $100 million in dividends and more than $300 million for the business combination of Lamar Zocco and Edesis. This solid financial position enables us to maintain full flexibility on capital allocation for potential external growth opportunities, as well as shareholder remuneration as demonstrated by a substantial increase in the proposed dividend for 2025. The past 12 months have been extremely fruitful for us in terms of the accomplishments made. Consumer preferences and awards for distinctive design and innovation have been rewarded our products in the key areas, reinforcing our position as an industry leader in our core categories. Sustainability remains a fundamental element of our company's strategic vision, and in recent months we have been working on a number of initiatives, including pioneering eco-design guidelines for coffee makers, an original product refurbishment project, and commitment to science-based target initiatives. Lastly, let me remind you that the business combination between Landmark Zocco and Eversys has accelerated the group growth rate, straightened its margin profile and increase business diversification. This has reaffirmed the group capacity to identify successful companies in the market for innovation and brand, which is consistent with the strategy implemented in recent years. After less than a year, we began putting in place a stronger governance system with a goal of further leveraging the market leadership and superior technological innovation capabilities of Eversys and Lamarzo. This will be done by making the most of shared resources and exchanging best practices and knowledge to enhance value creation. Now, let me focus on the quarterly and full-year results. The group achieved a robust increase in turnover of 14% in the 12 months, due to a considerable 6.6% growth on a like-for-like basis, as well as the consolidation of Lamar's office. Specifically, in 2024, the group recorded a positive trend in all geographical areas, with Europe experiencing significant growth in all the quarters. Under analysis, and America accelerating the second part of the year in more details, in Western Europe, the turnover grew 10.4% over the year and 6.8% on a life-for-life basis. accelerating to 10.5% in the quarter, with countries such as Germany, the Viennese Peninsula, Austria, and Switzerland leading the pack. The solid expansion of Northeast Europe persists in the fourth quarter, recording an increase of 14.1% on a life-or-life basis, thanks to considerable contribution of markets such as United Kingdom and Czech Republic, Slovakia, Hungary, area with experienced like-for-like growth at around mid-teen rate. May achieved a significant recovery in the fourth quarter with a performance of 47.3%, 38.1% at Constantine Perimeter, resulting in a 12-month growth of 9.2%, despite geopolitical tensions and micro-economic The Americas recorded growth of 19.2% in the 12 months, equal to 5.9% at the consistent perimeter, accelerating to 14.3% in the fourth quarter, benefiting from the double-digit progression of fully automatic coffee machines and the new bullet personal blenders. Finally, the Asia-Pacific region benefited from the consolidation of Lamazoko, achieving a 10% increase of turnover compared to Q4 2023. However, like-for-like revenues showed a partial decline in both periods analyzed. In both periods, under analysis, all key categories except comfort showed a positive trend, with the nutrition and food preparation sector accelerating in the second half of the year in details At the end of 2024, the overall incidence of the coffee area on the group turnover was approximately 62%, also thanks to the consolidation of La Marzocco. The significant increase of the home coffee was driven by the growth of fully automatic coffee machines. Regarding the professional sector, we know the continuous progression of La Marzocco that consolidates the strength of its brand, both in the semi-automatic professional coffee machines and in the home premium segment. Nutrition and food preparation segment recorded a major acceleration in quarter four, at a rate higher than high teens. We emphasize the evolution of the blender category, personal blenders, hand blenders, and blenders, through the year, together with a return to growth of the more traditional products, such as kitchen machines. Concerning the home care sector, Let me highlight the significant expansion of brown brand ironing products, which experienced a double-digit growth in the 12 months. While unfavorable weather conditions in both summer and winter, as well as the tail end of the discontinuity of the mobile air conditioning in the American market, affected the comfort sector in 2024. Looking now at the evolution of the operating margins, the net operating Industrial margin stood at 50.6% of revenues compared to 48.9% in 2023, benefiting from volumes and mis-increase in the easing of inflationary pressures on product costs. The BDA adjusted was 559.8 million in the year, or 16% of revenues compared to last year, 14.4%, with a quarter Quarter 4 highlighting margin of 17.7 versus 16.6 in 2023. Aside from Lamazoco consolidation, profitability has been enhanced by a significant volume in effect, cost stabilization, and a positive prime mix contribution. I'd like to point out that the margin improvement occurred despite a 42% increase in investments in media and communication, AMP, which accelerated in the second half of the year to support the launch of the new products and neutral bullet geographical expansion in Europe. As to balance sheet, the group ended the quarter with a positive net financial position of 643 million, following the distribution of more than 100 million in dividend to shareholders and 327 million euro of net absorption in relation to the closing of the business combination between La Marzocca and Everest. Four, free cash flow before dividends and acquisitions amounted to €416 million for the year, demonstrated the group exceptional ability to maintain a high cash conversion rate, which in the last 12 months was around 74% unadjusted at BDA. This enables us to be more flexible in terms of capital allocation, resulting in a significant higher dividend proposal for 2025. The proposal implies a distribution of a dividend of 1.25 euro per share and an 87% increase over the previous year, resulting in a payout ratio of around 60% compared to the standard 40% defined by the dividend policy. Summary, we are extremely satisfied with the latest achievements, which underline the group's ability to deliver results. The SDA market has shown positive dynamics across the quarters, with our categories benefiting especially from the structural trend in coffee and a renewed focus on nutrition. These consistent growth trends combined with industrial cost stabilization and the mix improvement have enabled us to significantly improve the group profitability, which combined with expansion of the perimeter in professional coffee has resulted in a record EBITDA level. Thanks to these results, we were able to generate important cash flow, once again, allowing the group to maintain full flexibility on a capital allocation to promptly exploit potential external growth opportunities, as well as in terms of shareholder remuneration. Despite the increased volatility that characterizes the current geopolitical backdrop, we believe that the overall outlook for our key sectors and markets remains favorable. We expect a turnover increase between 5% and 7% for the new perimeter in 2025, based on the recent growth trends in the market and product launches supported by communication investments. In time of margins, we anticipate an adjusted EBITDA in the range of €550-600 million new perimeter, given the current situation with tariffs. on new products inbound for the American market. Now we can open the floor to Q&A. Thank you.

Thank you. This is the Corusco 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. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Nicola Storer Kepler. Please go ahead.