De Longhi Spa

Good afternoon, this is the Coruscant Conference Operator. Welcome and thank you for joining the De'Longhi First Half 2025 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 the 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. Good afternoon, ladies and gentlemen, and welcome to the De'Longhi Group Quarter 2 2025 Results Conference Call. Today, together with me, are Nicola Serafin, Group General Manager, Marco Cenci, Chief Planning and Control Officer, Stefano Biela, CFO, Samuele Chiodetto, Investor Relations Director and M&A Manager, and Sara Mazzucato, IR Specialist. I'm delighted to report that the first half of 2025 showed a continuation of the positive trends established over the past two years, with widespread revenue growth across all main categories. This performance, characterized by robust growth and top-tier margins in both the home and professional divisions, reaffirms the effectiveness of our strategy for delivering sustainable medium-term growth. With regard to the professional division, in detail, the professional division delivered outstanding results with pro forma growth over 20% in both quarter one and quarter two, and an adjusted BDA margin above 25%. These metrics position the business combination among the leading high-growth and high-margin companies in the mid-cap space. The division, now representing 14% of total revenues and 24% of the Group BDA, benefited from double-digit growth from both of its brands. This is mainly driven by the ongoing premiumization of the coffee quality and experience in and out of the market, where our portfolio leads. In addition, La Marzocco iconic home products are redefining the market with remarkable success, leveraging outstanding brand awareness and unique partnerships. About household division, the division grew over 7% at constant effects in the first half, notwithstanding a more challenging geopolitical and tariff environment. Our growth is driven by a portfolio of market-leading brands, consistently strengthening by award-winning product launches. Recently, we unveiled our exciting product pipeline, developed through the end-to-end made-by-delonghi approach, which integrates consumer insights, distinctive design, and proven manufacturing excellence. The strategy will be supported by a significant investment in marketing communications, across all brands and channels. Specifically, as recently disclosed, I'm quite excited about the upcoming launch of the third coffee global campaign starring Brad Pitt as an ambassador. Building on a proven track record, this will be the group's most extensive campaign to date in terms of consumer reach across traditional channels and social media. Leveraging these investments and considering the resilience and attractiveness Of our categories, we are confident in our ability to maintain strong consumer preference, even in case of challenging future scenarios. Lastly, on coffee visibility and engagement, in the first half of 2025, our brands boosted their global profile through high-impact activations of premier events like Milan Design Week, the London Coffee Festival, and the World of Coffee in Geneva. connecting with tens of thousands of consumers and professionals. Now, let me focus on the quarterly results. The group achieved a remarkable growth across both divisions in half one 2025, despite negative currency headwinds. On the constant currencies basis, growth would have been 11.8% in the first half and 10.3% in quarter two. The first half of the year saw positive performance across all areas, heightened by widespread geographic growth, a dynamic that continued into the second quarter with the Asia-Pacific region leading the pack. In more detail, Europe's positive momentum continues with a growth of 9.1% in the quarter, backed by the solid results of both divisions. The household division was up 7.2%, With Italy, the Big M Peninsula, the Nordics, Benelux, Czech Republic experiencing a double-digit growth, thanks to the strong sales of the home coffee and a positive contribution of nutrition. Led by Kenwood Kitchen Machine and the international expansion of Nutribullet, the professional division was up double-digit, supported by both brands. MIA was up by 3.6% despite significant FX headwinds in the quarter, plus 8.7% at constant FX. Household division was slightly positive, while the professional division recorded significant growth, with Saudi and UAE in the lead. The Americas grew by 6.3%, plus 11.1% organically in the second quarter, specifically in the U.S. only. The professional division and the home coffee categories recorded a strong performance, more than offsetting the weakness in the nutrition area and the negative currency effect. As the Pacific recorded another positive quarter, growing by 10%, respect to 2024. Despite the strong FX headwinds on a consistent constant currency basis, growth would have been plus 16%. The household division led this performance with a low teen's growth rate, driven by a strong double-digit increase in the Chinese market, up double-digit in both quarters, and solid results in Japan. As regards the division, the household division reported turnover of 1,364 million, a plus 6.5% increase over the previous year, while the professional division recorded revenues of 222 million, up plus 53.5% compared to 2024, corresponding to a pro forma growth of 23.5%. In detail concerning the household division, we highlight as follows. The home coffee segment continued to lead growth posting a mid-to-high single-digit increase. In the second quarter, this performance was driven by a strong sales of pump machines, boosted by recent product launches, and a continued robust performance of Nespresso products. The nutrition and food preparation segment was flat, a strong double-digit growth from air fryer and continued gains from Kenwood kitchen machines up from the fourth consecutive quarter, were offset by declines in the smaller categories and the U.S. nutrition market. Concerning the other categories, the Brown Iron in brand again achieved a double-digit growth, while the comfort categories' performance was flat during the quarter. The professional division delivered another quarter of remarkable growth, with revenues expanding by 25%. This performance was fueled by significant year-over-year rebound for Eversys, which was driven by strong growth in all major markets. Additionally, Lamarzocco maintained its robust positive momentum, expanding sales in both its out-of-home and home segments. Looking now at the evolution of profitability, in the first half of 2025, the group operating margin expanded significantly. driven by a greater contribution from the professional division and volume growth in the household. Specifically, the household division generated and adjusted the BDA margin of 13.3%, while the professional division achieved a margin of 26.4%. Regarding the total group, in the second quarter, the net industrial margin stood at 53.4% of revenues, compared to 51.2% in 2024, thanks to the increase in volumes, certain cost efficiencies, and a better mix. The adjusted VDA was equal to 124 million, 15% on revenues, improving by 50 basis points with respect to last year. This improvement was primarily driven by higher exposure to the professional division and operating leverage from the household division growth, which more than offset increased median investments, approximately €10 million, higher logistic costs and tariffs. Price-mix contribution was positive in the quarter and in the first half, while the currency effect was flattish. Regarding the tariff uncertainty, over the past months, our teams have been working on a comprehensive tariff mitigation strategy, focus on sourcing diversification, commercial actions, cost control to minimize the potential effect. As a result, we can now rely on sourcing from Europe, China, and Southeast Asia, and we have successfully fine-tuned commercial actions with retailers in the U.S. market. In the last conference, we disclosed the potential net impact of approximately 15 million euros for the full year 2025. Although the situation remains dynamic, the effectiveness of our actions and our current inventory level allow us to reaffirm the potential net impact of approximately 15 million euro for the year, even with potential scenario changes in the coming weeks. In June 25, the group net financial position was positive at 346 million euro. an improvement compared to $305 million in June 2024. With regards to the cash generation, the cash flow before dividends, buybacks, and acquisitions was positive for $296 million in the 12 months. In the first half, cash flow before dividends, buybacks, and acquisitions was negative for $46 million. mainly due to the effect of the cash absorption related to the increase in inventory absorbing 221 million euro due to inventory build-up in the US and the usual business seasonality. To summarize, we delivered again another period of strong growth in the first half of the year. Our proven diversification strategy and the power of our brand's portfolio allowed us to successfully navigate a dynamic consumer environment. As a result, we once again outperformed the market and maintained our industry-leading margins, extending our track record of delivering best-in-class results and preserving our financial flexibility. The household division posted excellent HealthONE growth, over 7% at constant currency, reflecting our effective approach of product innovation and targeted communication. The upcoming global campaign featuring Brad Pitt will further amplify this strategy. The professional division once again delivered outstanding results, posting over 20% in performer growth and adjusted the BDA margin above 26%. This performance confirms the value of our strategic hub in the professional segment and places us firmly amongst leading high growth and high margin companies. While uncertainty in tariffs and geopolitical landscape persist, we are upgrading our 2025 guidance on the strength of these solid results. With foreseen revenues, growth between 6% and 8% and an adjusted EBITDA of €590 million to €610 million for the new perimeter. We now welcome your questions. Thank you.

Thank you. 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 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. We kindly ask to use the handset when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Nicola Florer Kepler.