De Longhi Spa

Good afternoon, this is the Coral School Conference Operator. Welcome and thank you for joining the De'Longhi First Half 2026 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, Chief Executive Officer of de' Longhi. Please, go ahead, sir.

Thank you. Good afternoon, ladies and gentlemen, and thank you for joining the de' Longhi Group Conference Call for our first of 2026 results. With me on the call today are Nicola Serafin, Group General Manager, Stefano Bieda, CFO, Sandro Magnino, Group Planning and Control Director and Samuele Chiodetto, Investor Relations Director and M&A Manager. I'm really pleased with the strong set of results we delivered in the first half of 2026, driven by exceptional momentum in the professional division and consistent positive organic growth in the household division. Despite ongoing market and geopolitical uncertainties, we successfully overcame these headwinds delivering solid revenue growth and higher profitability. In light of these achievements, it was a great honor to celebrate our 25th anniversary as a public company. Last week, over the past quarter century, the group has built an extraordinary track record, scaling revenues from under 1 billion euro to an expected record near 4 billion in 2026 and expanding net profits tenfold. These long-standing achievements have been driven by sustained, robust organic growth combined with pivotal high-impact acquisitions. We have continuously adapted our strategy to meet evolving market dynamics and consumer needs, transforming the group into a global powerhouse with a unique portfolio of accounting lifestyle brands and broad international reach. We're truly grateful to the financial community as our ongoing dialogue constantly challenges us to deliver top-tier performance while staying ahead of strategic market trends. Now, back to quarterly results. Starting with the professional division, the integration of Lamar Zocco and Navasys is delivering exceptional results, unlocking remarkable growth opportunities and validating our original rationale. Our product lineup is uniquely positioned to capitalize on the structural shift toward specialty espresso and premium coffee experiences. Driven by the strategic positioning, the division has sustained its remarkable trajectory, delivering four straight quarters of top-line growth above 30% alongside industry-leading margins. Over recent months, Eversys strengthened its customer portfolio compared to half one 2025, driven by ongoing partnerships with the key accounts in the U.S., alongside the new customer wins in Europe and in Asia. At the same time, Lamar Zucker has continued to expand its presence, not only as a benchmark for sturdy, durable professional equipment, but also as an iconic lifestyle brand. These have been underlined by high-profile collaborations such as Capsule Lifestyle Collection with Fresco Ball Cagliocca at Pitti Uomo and the custom KB90 created by Officine Fratelli Biambi inspired by Mexico's football temple Estadio Azteca. Last but not least, I am proud to share that La Marzocco is the first manufacturing company in the espresso machine industry to achieve B Corp certification, joining a global community of businesses committed to supporting people and protecting the planet. Turning to the household division, the quarter marked a return to its historical mid-single-digit growth trajectory, navigating a microeconomic environment defined by ongoing uncertainty for consumers and retailers alike. This organic expansion was sustained by new product launches, expanded commercial reach, and increased media investment. Specifically, the group communication strategy has evolved into a full funnel approach that drives consideration, conversion, and long-term advocacy, powered by a holistic pay-plus-earn-plus-owned approach Media Ecosystem. Through our social officina, we are building a scalable network of influencers to drive a sustained earned media. This acts as a powerful multiplier for our paid campaigns, delivering a higher return on our marketing investment. This strategy drives year-round brand awareness while fostering distinct identity and deep customer engagement. driving top-line growth while significantly enhancing brand equity. This impact received a major vote of confidence at the 2026 Cannes Lyon International Festival of Creativity, where the brand won both the Grand Prix for Industry Craft and the Gold Lion in Outdoor for the Milan Design Week Activation, the world's smallest coffee shop. Now, let me focus on the results. In the second quarter of 2026, the group growth was broad-based across the main geographies, with a significant contribution from the European countries and America's area. In more details, growth accelerated in the second quarter, delivering a 9.4% revenue increase. The household division achieved a high single-digit expansion, driven by a marked improvement of the prior period across the UK and key continental markets, including Germany, France, and Benelux. This performance won the pin by a solid trend in coffee, stabilization in nutrition, and a strong recovery in comfort products boosted by favorable weather conditions. Meanwhile, the professional division maintained its robust growth momentum in line with Q1 levels further supported by new contract wins. Mayor revenue declined 12.2%, heavily impacted by a critical geopolitical and economic backdrop in the Gulf region. The solid performance of the professional division and the key markets, including South Africa, was not sufficient to offset this trend, leaving the healthier performance in negative territory at constant exchange rates. The region delivered strong top-line momentum, expanding 20.8% at constant exchange rates, partially offset by a 4% Forex drag, albeit lower than in the first quarter of the year. The household division contributed to the results with organic expansion at a low teens rate, driven by strong performance of coffee machines and a stabilization in nutrition. Professional Coffee maintained a double-digit growth momentum throughout the reporting period. As a Pacific, revenue grew 4% at constant exchange rates with a robust performance of the professional division across the region and a partial slowdown in the household division, which consolidates the excellent results of the previous year. Looking at divisional performance in detail, the professional division expanded significantly with half one 2026 revenues reaching 303 million up 36% plus 40% at constant exchange rates and quarter two revenues rising 33% plus 35% at constant exchange rates to 164 million. This outperformance was driven by broad-based organic growth across both brands and regions capitalizing on the expressive premiumization trend and prosumer growth. The House of Division accelerating its organic growth in the second quarter compared to the start of the year. First half revenues reached 1,379.8 million euro, up 1.2% year on year, plus 3.1% at constant exchange rates, while quarter two revenues rose 4.5%, plus 5.1% and constant exchange rates to 739 million euro. This marks a return to growth rates in line with historical trends overcoming early year traded stocking and broader market uncertainty. Coffee achieved mid single digit growth driven by solid expansion in automatic and manual machines alongside accelerating demand for coffee accessories. Christian, recorded a low single-digit decline at constant exchange rates due to personal blender headwinds, despite strong performance from brown-branded hand blenders. Homecare grew mid to high single-digit, propelled by browning ironing systems. Comfort, achieving strong double-digit growth, bolstered by high seasonal temperatures across continental Europe. The first half of 2026 delivered further margin expansion across the group, benefiting from volume growth and a favorable product mix driven by the professional division outstanding performance. By division, professional achieved an adjusted EBDA of 96.9 million euro, expanding its margin to 32%, up from 26.4% in half one 2025. Household delivered an adjusted EBDA of €186.8 million, representing 13.5% margin versus 13.3% in half one 2025. Second quarter profitability, adjusted EBDA reached €157.7 million, 17.6% of revenues. representing a 260 basis point increase year on year. Margin expansion was driven by the high margin professional division and accelerating household momentum. Quarter 2 results also reflect a 15 million euro net positive impact from custom duty refunds. Within the household division, price mix had a 12 million net negative impact following a selective repositioning of price lists. in certain geographies aimed at maximizing market support, media and communication investments rose by 15 million euros due to increased activities and campaign timing in the first half. On the positive side, industrial costs held steady through the quarter and volumes returned to positive territory. Net profit attributed to the group rose 34.5% year-on-year to €79.7 million, representing 8.9% of revenues. As of June 30, 2026, the group net financial position was €686.6 million, A significant improvement over the 346 million euro reported in the prior year period. Regarding cash generation, free cash flow before dividends, share buyback and acquisitions was positive at 78.3 million euro in the first half of the year. This result was achieved thanks to the excellent contribution from operating activities which have settled the usual seasonality of net working capital related to inventory rebuilding following fourth quarter sales. On a trailing 12-month basis, cash flow before dividends, share repurchases and acquisitions amounted to €508 million, a remarkable achievement that allows us to maintain a flexible and attractive capital allocation strategy. In summary, our first half performance reinforced our key financial KPIs, delivering 8% organic revenue growth, organic margin expansion, including and excluding duty effects, and exceptional trailing 12-month cash flow. We remain focused on rigorous cost control while preserving our strategic investment in product innovation and Brand Communication, ensuring we continue to fuel our future growth. These results and strategic measures lay a solid foundation for achieving our full-year targets while maintaining the flexible and value-driven capital allocation strategy demonstrated in recent years. Therefore, taking into account both our momentum and the current scenario, microeconomic scenario, We confirm our full year revenue growth expansion of mid single digit and raise our adjusted EBDA guidance to 670, 690 million euro, reflecting the immediate benefit of 15 million euro duty refunds and a strong professional growth while factoring in expected cost pressures. We now welcome your question, 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-Chevreux.