Fluidra Sa

Good morning and welcome to our first half 2024 results call. I am Clara Valera, Strategy, Investor Relations and M&A Senior Director. Joining me today on this call is our Executive Chairman Eloy Planas, our outgoing CEO Bruce Brooks, and Xavier Tintoret, our CFO. They will walk you through a few slides on our results and then they will be available to take your questions. I'm also pleased to have on the call Jaime Ramírez, Fluidra's new CEO, who joined us on 1st June. You can follow this presentation in its original English version or in Spanish. Please select your preferred option in the drop-down menu at the bottom right-hand side of your screen. If you would like to ask a question, please find the information and instructions in the Ask a Question tab on the webcast. Please register to receive dial-in details After the registration process, you will need to press star 5 on your telephone keypad to ask your question. The presentation is accessible via our website, fluidra.com, and has also been uploaded to the Stock Exchange Commission this morning. A replay of today's presentation will be made available on our website later today. With that, I hand over to our Executive Chairman, Eloy Planas.

Thanks, Clara. Good morning to you all, and thank you for taking the time to join us this morning and for your interest in Fluidra. Today we are presenting our second quarter and first half 2024 results. Bruce and Xavier will provide more detail shortly. But first, let me summarize the key points I want to convey this morning. Our first half performance was very strong and in line with our expectations for the year. Sales in the second quarter improved sequentially across all regions, with North America delivering a strong performance while Europe was affected by wet weather and sluggish macro environment. The simplification program continues to strengthen our business for the long term. This program, together with our actions on price, led a strong expansion on gross margin another quarter. Cash generation was excellent. We made outstanding progress in working capital management and reduced net debt levels in the first half of the year. Having six months of trading behind us, we are confident on delivering our full year 2024 guidance. Bruce will give more details later. Today's call is a special one for me. This is the last earnings call with Bruce as CEO, who has been instrumental to Fluidra's success over the past six years. I only have words of gratitude for him, and I look forward to his continued contribution as non-executive director. At the same time, I'm delighted to welcome Jaime as our new CEO. With his extensive experience in global consumer and industrial products, proven track record and strategic vision, he is the ideal leader to guide Fluidra in the next phase of development. Jaime.

Thank you, Eloy, and team, for your warm welcome. Hello, everybody. I'm really excited to be here and be part of the Fluidra family. I do believe there are plenty of opportunities for the group as a leading player in an industry with attractive fundamentals. I must say that my onboarding has been fantastic and the transition very smooth. I have had the opportunity to visit key operations, meet our teams, and some of our customers across a number of countries. Delivering shareholder value is top of mind for me on my list, and I look forward to working with you in the future. Now I'll let Bruce present results in more detail.

Buenos dias and good morning. And thank you all for participating today on this conference call. Moving to slide number five. Let me start with some highlights on our overall performance and then turn it over to Xavier to provide more details on the financial results. Revenues were up 1% in the second quarter, improving sequentially across all regions, with a remarkable performance in North America where sales were up 7% in the quarter. Our first half performance was strong in a normalized trading environment where we still see some demand weakness in new construction and remodel. In that context, sales declined by 1% to 1,171,000,000 euros. EBITDA was up 3% year-on-year to 296 million euros, or 25% margin. This reflects the strength of our business model and the actions we have been taking, with consistent improvement in gross margin, driven by the contribution of the simplification program, partially offset by inflation and OPEX. Javier will provide more color later. Going down the P&L, cash EPS was up 4% year on year. We managed working capital very well. Operating networking capital to sales in the last 12 months was around 24% compared to 30% at the same time last year, down more than 660 basis points. Cash generation in the period was excellent. placing the ratio of net debt to last 12-month EBITDA at the end of June at around 2.5 times. Moving to slide 6, let me share our progress on the simplification program, which is delivering long-term value and structurally strengthening our business. We have built the program around two areas. improving gross margin together with reducing organizational overlaps and streamlining our operations. Driving an agile and dynamic culture underpins these initiatives. In total, the simplification program delivers cost savings of around 100 million euros between 2023 and 2025, with total related one-off costs of approximately one time the annual ramped up savings. We have achieved to date 47 million euros of cumulative savings. And we are on track to finish 2024 delivering an annual run rate of over 60 million. 2024 incremental savings are driven by global strategic procurement efforts and product design to value initiatives. We remain confident on achieving the full-year target. We'll continue to provide you with regular updates. On slide number seven, I'd like to talk to you about our world-class commercial pool offering. Commercial pool sales in the first half were up 3% on constant FX and perimeter to around 100 million euros. We see this area as a growth opportunity for the business. We provide a range of pool, wellness, fountains, and lagoon solutions for a number of sectors, from sports clubs to hospitality. You can see here a few examples from highly technical competition pools to solutions for hotels, motels, and apartments and condominiums, or HMAC. On the left, you can see our project for the European Aquatic Championship in Belgrade this past June. We upgraded an existing Olympic pool and temporarily converted it into a three meter deep pool, deploying our SkyPool technology. SkyPool panels allow an easy, safe, and reliable installation with great accuracy, complying with the most stringent requirements. In the center, you can see a picture of the Miceyaf Lagoons project in Egypt. where we are delivering the water treatment solution for this real estate development. Artificial lakes and lagoons enhance the surroundings and can accommodate a wide range of leisure activities. On the right, you can see a project for a resort in Oklahoma. From standard to custom in a wide range of finishes, our deck equipment can add form, fun, and function to any pool. The cornerstones of our success in commercial pool are an unmatched complete product offering and turnkey project services. We have a broad product portfolio, which we have expanded with acquisitions in North America. In EMEA and APAC, our specialized team can support our customers from ideation to design and execution of commercial pool, wellness, fountains, and lagoon projects around the world. Moving to slide number eight, on the right side of the slide, you can see the positive contribution of price to sales performance in the first six months and the small volume decline, with FX and perimeter broadly offsetting each other. Notably, looking at Q2 performance standalone, sales were up around 1%, driven by North America, where we saw positive sell-through in line with sell-in. As mentioned, sales in the first half were in line with our expectations for the year. New construction demand has been at the lower end of our expectations, while aftermarket has been resilient as anticipated. By region, sales were stronger in North America, up 4%, with positive sell-through. This performance is testament to our easy-to-do-business-with, customer-centric approach. Our exposure to the Sun Belt and our mid- to high-end market positioning and continues to demonstrate we're gaining market share. Sales were also supported by the tailwind of not having a correction of inventory in the channel. In Europe, where we believe we are also outperforming the market. We saw unfavorable weather in some key countries, along with some macro uncertainty and weaker consumer confidence in France and Germany. We are confident on delivering our full year guidance, maintaining the midpoint while narrowing the range. This is based on our performance to date with continued sequential sales improvement, the positive trading we have seen in July, and our consistent margin expansion. With that, I'll turn it over to Javier to explain the financial results in more detail.

Thank you, Bruce. Let's turn to page 9 to start with the P&L. Sales of 1,171,000,000 euros in the first half represent a 1.2% decline year on year, of which FX is a negative impact of 40 basis points and acquisitions at 70 basis points of growth. Sales in the second quarter improved sequentially across all regions. Gross margin reached 55.9%, 340 basis points higher than in 2023, being the fifth consecutive quarter with gross margin higher than the prior year period. We have seen impact of the simplification program, favorable geographic mix, a positive pricing read-through despite declines in chemicals and deflation on raw materials with only limited impact from inflation in freight. Operating expenses reached 358 million, up 7%, with some increase in provisions, inflation on labor costs, and our continued investment in digitalization and R&D. EBITDA of 296 million was up 3%, driven by higher gross margin despite lower volumes. OPEX inflation, and some increased investments. EBITDA margin reached 25.3%, 100 basis points higher than 2023. If we look at margins of Q2 on a standalone basis, we have reached 27.6%, the second highest in fluid risk history. The business is well positioned for when volumes return. EBITDA of 250 million is up also 3% with a margin of 21.4, which is 80 bps above last year's. Below the EBITDA line, PPA amortization is down 6% to 32 million. Restructuring, stock-based compensation and other expenses of 28 million are flat year on year, with higher one-off costs from simplification and lower stock-based compensation. Net financial result amounts to 35 million, 2% lower than last year's, driven by lower debt. Tax rate was at 27% versus a 28% rate in the first half of 2023. Net profit reached 112 million compared to 104 million last year. As you know, we track cash net profit, a good indicator for Fluidra as we have a significant amortization charge entirely purchase accounting related that impacts our net profit and EPS calculation. Cash net profit amounted to 157 million, 4% higher than last year. Page 10 shows the free cash flow statement as well as the net debt evolution. Free cash flow in the period of 41 million, significantly better than last year's 13 million. Operating cash flow generation was 96 million versus 68 million last year, mainly driven by a 30 million one-off payment in 2023 related to the older long-term incentive plan. If we zoom into networking capital component, which you have in the appendix, you will see an excellent networking capital management with more than 660 basis points improvement, reaching networking capital to sales of 24%, driven by lower inventories and receivables and higher payables. On the investment front, we have used 31 million, slightly below the prior year. On the financing front, cash usage of 24 million, a bit higher than in 2023. Finally, net debt reached 1,151,000,000, down around 150 million compared to the prior year period. Our leverage ratio is 2.5 times versus a three times ratio last year. nicely trending towards our two times target. Just to remind you, we have a solid balance sheet. Our main funding facility is a 1.1 billion TLB in euros and US dollar that matures in 2029. 80% of the TLB has swapped interest rate until June 2026. Finally, I would like to take this opportunity to thank Bruce for his support and leadership over the last six years. It has been a pleasure working with you. And I look forward to partnering with Jaime to continue to drive the business forward and deliver value for all our stakeholders. And with that, I will give the floor to Eloy for closing comments.

Thanks, Xavier. Let's move to slide number 11, and I would like to summarize here a few key takeaways. We had a strong performance in the first half in line with our expectations in a more normalized trading environment with sequential sales improvement in the second quarter across all the regions. Creating value for our stakeholders remains our priority. We are the leader in an attractive industry, the global pool and wellness market, with long-term structural growth. Our position is further improving, driven by our customer-centric approach, innovative product offering, global leading footprint, and leadership in connected and sustainable pools which will define the future winners in our sector. We are structurally improving our group. We are executing our simplification program, which will continue to deliver value by expanding margins and improving efficiency sustainably. Earlier this year, we shared with you the full year 2024 outlook. Based on our performance to date, we are confident on delivering our guidance. We are excited about our future and remain focused on growing profitability and delivering improving returns on capital over the medium term in an industry with attractive structural growth. I would like to thank Bruce once more for his leadership all these years at the helm, his unwavering commitment and his dedication. The measure is far behind us. It has been seven years of constant evolution After the merger, more acquisitions were made to strengthen the company in North America, the pandemic and the simplification program. We have built shoulder to shoulder and day by day the global leader in the pool sector. The best platform to continue growing and evolving in an exceptional market. It has been a real pleasure to work together, to learn from you and build a deep friendship. I wish you, Bruce, nothing but the best in the next step of your journey. I certainly look forward to your contribution as non-executive director.

I want to thank you and certainly XT. I feel privileged to have led the company during these years. I'm very proud of our team and all that we have achieved together. I think you are in very good hands with Jaime. I'm sure that he will do an excellent job leading the company in this next phase of development. I'd like to sincerely thank the investors, analysts, customers, employees, suppliers, and all the incredible people I've met along the journey. Now we open the Q&A. Eloy, Xavier, and I are ready to take your questions. Thank you.

Many thanks Eloy, Bruce, and Xavier for your presentation. We now begin the Q&A session. As a reminder, if you would like to ask a question, please find the information and instructions in the Ask a Question tab on the webcast. You have to register to receive dialing details to ask your question. For those registered, if you would like to ask a question, please press star five on your telephone keypad. The first question comes from Chitrita at JP Morgan. Chitrita, please go ahead.

Good morning. Thank you for taking my questions. So firstly, on North America, where the organic growth in the quarter was clearly a very positive result, how do you see this developing in the second half? and maybe you could shed some light with regards to market trends, given some weaker commentary amongst payers and distributors.

Okay, I think there's a lot to unpack in that. All right, so we wanted to talk about second half. We wanted to talk about peers and distributors as well, right? Please. Okay, so I guess if I start with... If I start with, let's say, some of the distributors and retailers, I think the bottom line is we're super pleased to maintain our guidance, even if narrowing the range. Our sell-through in the H1 in the U.S. was positive. I think it's... Really encouraging to see. Bottom line is I feel like we're gaining market share. Our performance is supported by our easy-to-do business, customer-centric approach, and our mid-to-high market positioning. I think, in addition, you have to say we play in a little bit of a different part of the value chain. And as a manufacturer, I think we have tailwind of not having the inventory correction in the – in the channel, which certainly helps. And I think in particular in America, our product exposure varies slightly different from the folks that you're talking about. When I think about versus the competition, my feeling is from an overall perspective, I think we see the market in a pretty similar fashion. You know, if you think about demand trends as far as new build and aftermarket, there certainly can be some noise in the quarterly sales performance, depending on the timing of correction of inventory and those type of channel comparables. But for Fluidra, we're really pleased. I mean, we saw consistent growth. sequential quarterly sales improvement this year, and encouraged by positive trading again in July. So I think in comparing ourselves to our competitors, I think we see the market pretty similarly. But if you look at over a long timeframe, let's say three to five years, we're confident that we are gaining share. Does that give you what you need on that one?

Absolutely. Thank you. Very clear. I guess just to maybe delve a bit deeper in terms of what you're seeing in new build remodeling and, I guess, service developing for the full year, maybe if you can quantify that versus what you previously said. Sure.

So, you know, again, I'm going to say that I'm super pleased with seeing that sell through and sell out. or sell-in and sell-through was pretty much matched up in the U.S. for the first half. I think that's a sign that the inventory and the channel situation is really gone. We're confident on delivering the midpoint of the guidance. As you think about the building blocks, certainly we believe that we are getting a tailwind of the correction of the inventory and the channel situation. You know, I think that's a positive, again, showing that the market's clean. From a macro environment, I think it's still pretty mixed out there. We see new build at the lower end of our initial expectations. so still expecting around a 15% decline for the year, with high-end projects faring better than the low-to-mid price point that tends to be more financed, and that's certainly favorable for Fluidra. Remodel activity performing slightly better than new build, so we would expect it down up to 15%. Aftermarket, in particular, maintenance and repair performance, remaining super resilient, given their less discretionary nature. So let's call that flattish. We still see price holding up well. U.S., kind of in a 2% to 4% range. Rest of the world, more 0% to 1%, with moderate increases in equipment, but lower due to chemical prices. So overall for the group, let's call it 1% to 2%. Contribution of the simplification program, mostly in gross margin. Inflation in labor, in general costs. So our cost mix is slightly different than we were expected, with gross margin better than expected, but OPEX slightly higher. But bottom line, confident on delivering the EBITDA.

Perfect. My final question was on pricing, so that's answered. Thank you very much, Bruce. All the best.

Thank you. Thank you, Chitrita. The next question comes from Manuel Lorente at Santander. Manuel, please go ahead.

Hi. Good morning, everybody. My first question probably is related to trends in Europe, whether you can add up some color regarding the different behavior that we are seeing, what you are perceiving in the south versus the north of Europe, any particular region, area that is concerning you. I'm especially focusing on the minus 5% of the south in Europe.

Okay, so thanks for the question, Manuel. I think from a European perspective, we were pleased with the sequential improvement in the second quarter and also pleased with July, where it feels like the heat finally turned on and we're seeing positive results. Spain and France and France, France, we consider in southern Europe, were affected by wetter than average weather, along with some macro uncertainty, specifically in the case of France, which we think delayed the start of the pool season. In Europe, we continue to see weakness in Germany, while some other markets are doing a bit better, like Austria, UK, and Eastern Europe. And broadly, we still see weakness in above-ground pools where all the other categories have really stabilized.

Okay. Thanks. And my second question probably is on Bruce. You have perfectly detailed a number of issues pointing out the very favorable plus 7% growth in North America. You mentioned sample exposure on market share gains, no correction in the inventory channel, mid to high product positioning. I know that it's difficult to assess probably, but do you think that this very positive performance in the U.S., it's a contribution or a mildly contribution from all these factors, or do you believe that you will highlight one or two of them versus the others?

Yeah, I think that's... As you stated, I think that's a pretty hard one. I mean, we're really excited to see that the channel inventory is clean. I think that certainly helped. I think from my perspective, the validation of our customer-centric easy-to-do business, global leading platform is key. I think the team is executing really well with a combination of innovation, integrations, new business initiatives, kind of like our commercial initiative or our aftermarket 2.0. They're all working well, and therefore we're gaining share. So I just want to give a big recognition to the team.

Okay, thanks. And just my final one on pricing trends. Since we are perceiving, let's say, a very different evolution between you guys and all the distributor peers, do you perceive any, let's say, volatility in prices going forward?

No, I really don't. And remember, on the performance versus the distribution guys, we were in the exact opposite position last year. I think you're asking the question from the other side. I think... You know, it's too early to talk about price for 2025, but this industry has demonstrated over and over the ability to take price, and I would expect us to at least offset inflation, labor, transport, and some of the other components as we look forward. So no real change.

Okay, super helpful as usually, Bruce, and hope you the best. Thank you.

Thank you, Manuel. The next question comes from Jingyi at UBS. Jingyi, please go ahead. Let's give her a couple of seconds. We can't hear you, Jingyi.

Hi, sorry, hopefully you can hear me okay now?

Yes, we can.

Great, good morning all. Thanks for taking my question. I have two questions, if I may. So first one, I appreciate you don't got into 2025 at this stage, but some of your peers have indicated confidence in Newport construction in America's returning to growth in 2025. So I wonder, is that what you are seeing at the moment? And my second question is for the incoming CEO, Jaime. I hope you're doing well and great to hear the transition has been very smooth so far. I wonder if you'd be able to share what are the key priorities for the near-term, say, the first 100 days at Fluidra, and if and when we can expect a mid-term framework update. Thank you.

Okay. Xingzhi, I'll take the first part of that one. Okay. I'm encouraged for 2025. I think what we're seeing in the market with sell-through matching sell-in right now, particularly in North America, means that the channel inventory is clean. I think it demonstrates, again, that the aftermarket is – is resilient. You know, I mean, this is a Bruce opinion I should qualify, but I think it means that we're near the bottom on new construction in the cycle. Migration, healthy outdoor living, all those things are still in play for the long haul. So we expect 2025 to be positive. And as Xavier said in his remarks, I think we're super well positioned for when volume returns.

Okay, from my side, and nice to meet you. So my transition, my onboarding has been fantastic, as I mentioned before, and I'm very excited to be in Fluidra. Answering your specific question, in terms of priorities, first of all, I will continue working on what Eloy, Bruce, and the team have put together. It's a phenomenal platform. And when I joined the company, I mean, there is a clear direction on how we accelerate growth in Fluidra, number one. Number two, how we continue with the transformation of this business, the simplification program they put in place. That will continue to be an ongoing process for the company on how we become more agile, how we speed up a lot of how we do things in the business. At the same time, working on innovation, as Bruce mentioned, is a key priority. on how we can differentiate ourselves from our competitors. And last, the piece on digital and technology. It's a real need that that can make a critical difference for the business, can help the transformation of the business, and can make us way better. So growth is a key focus area for us. In terms of when you will be able to see more detail on this, That's going to be in the capital market day. That's going to happen in Q2 of 2025, and I will be working with the team on bringing all the information for all of you to give you a clear perspective on the future of fluid ramp going forward.

Great. Thank you very much. Looking forward to that.

Thank you, Gingy. The next question comes from Francisco Ruiz at BNP Paribas. Excellent. Paco, please go ahead.

Yeah, thank you. Well, first of all, I would like to thank Bruce for these fantastic seven years, all your patience. All we have learned with you, probably in my case, I will need another two or five years to learn a little bit more about this business. But thank you very much, and I hope to see you in one of the events for the company we organize in the future. So, most of my question has been already answered. I would like to insist a little bit on the inventory in the channel, because one of your, well, two of your competitors, Distributor, Lesley's, and Hive are commented on some headwinds or leaner inventory situation in this. And also, you could comment on the situation in Europe. My second question is on the free cash flow. It's a technical question. You have other operating cash flow last year of 60 million euros negative, this year only 20. Is this the 30 million euros payment that you have commented, Xavier, or is this that you have postponed some of the restructuring payments for the second half of the year? And last but not least on working capital, we have seen this reduction on the working capital versus sales. Last year, you did it extremely well in Q4. What's your expectation for the working capital to be at the end of the year? Thank you.

Thanks for the questions, Paco, and also thanks for the kind words. It's been a great experience for me. So happy that it's been good both directions. I think from an inventory perspective, I feel like I've said it a few times today. I don't want to overemphasize it, but at the same time, we work very hard to try to match our sell-in with sell-through. And when you start to see that matching after all the volatility that we've had over the last couple of years, With COVID and the supply chain, I think we're really pleased and convinced that the inventory in the channels is clean. And I think that's the best testament to it. If you remember, the inventory in the channel was a much more significant factor in North America than it was in Europe. With us being both the manufacturer and the leading distributor in Europe, you don't have that same amount of buildup. So we feel like from a European perspective, again, the inventory in the channel is pretty clean. We don't believe that we're building going into the future. We feel like we're in good position. I'll pass the free cash flow one to my friend XT.

Yeah, I'll take the next two. The free cash flow question, simple answer there, Paco. It does reflect the one-off tax payment related to the old long-term incentive plan that happened in H1 2023. It's around 30 million of the variance, so there's no delay in payments for restructuring or anything like that. It's just that one-off payment impacting the cash flow. And then in terms of networking capital, the teams have continued to do a fantastic job in managing networking capital. We have performed extremely well in Q2 as well, but we still target that 18% through sales by year end of 2024, the target that we share with you at the beginning of the year. So that's still a valid target.

Our next question comes from Alvaro Lencia at Alantra.

Hi, thanks for taking my questions, and also congratulations to Bruce on your achievements at Fluidra, and welcome, Jaime. We have seen a very different performance on these different messages between distributors and manufacturers here both. I just wanted to know if you could maybe make a theoretical exercise. If you were to split between manufacturing and selling products and the distribution, how those two businesses have performed. I don't know if that's a bigger driver of performance or your performance has been only impacted by the difference in the geographies. So I think that could be helpful. Thank you.

Okay. So thanks for the question, Alvaro, and thanks for the kind words. I think it's a really difficult question to answer. And I think that where I would start is just by going, the go-to-market strategy for us is very different in North America than it is in Europe. So in North America, we play as a traditional kind of branded manufacturer, where in Europe, we're both the manufacturer and the distributor. And I would also say the COVID pandemic surge, if you will, was much stronger impact in North America, and therefore the supply chain impacts were greater. So, again, I feel really good about how Fluidra is positioned in both of the markets and how we're performing versus our peers.

Thank you.

Thank you. The next question, we've got three more questions, so the next one comes from Tim Lee at Barclays. Tim, please go ahead.

Hi, thanks for taking my questions and congratulations to the exceptional results and for your future developments. Most of the questions have been answered, but I just want to understand a bit more about the Euro market developments. So as you mentioned, there were sequential improvements in the second quarter and also in July. So I'm not sure whether you have any sense about the Europe market can turn into positive sales developments. Is that something that you expect to happen this year or probably next year? So I would like to hear what you think about the market developments in Europe.

Yeah, I think, again, thanks for the question, Tim. I think Europe had a very difficult weather challenge in Q2. We usually say that weather is plus minus 1%. I have to say I believe it was more than 2% in the first half of the year. I'm super excited to see how hot it's been in July and that summer has finally come and to see the pace pick up. What exactly it will be in the back half, I think, is a difficult call. But in the end, I think we do see Europe returning to positive in 2025.

That's helpful. And my next question should be about the end market developments, especially on the new bills. I think you mentioned it's probably at the lower end of your expectation, around 15% decline for the full year. Can you differentiate a little bit like in Europe and in the U.S.? How do you see the relative developments respectively?

It's quite difficult to hear you, Tim. I think I heard the question, could you give more color on the new build expectation? Yeah, yeah. US versus Europe, let's say, on your expectations. Yeah.

I actually think it's going to end up being fairly similar in both the U.S. and Europe for this year at around down 15%. Again, it'll vary in Europe country by country. We see Germany and France a bit on the higher end and some of the other southern Iberian Peninsula in a little bit better shape. So It varies. You could say the same thing in the U.S. I mean, we see the Sun Belt performing better than we do the Snow Belt or the seasonal markets. And again, I think in all markets, we see the higher end, mid to higher end non-finance pool performing better. As far as the longer term outlook, It's always a difficult one to call. I'd be, say, too early to say what we think it will be for 2025. But I still believe in the long-term correlation or soft correlation that we've seen for, I don't know, 30, 40, 50 years in the industry, which is a link to new housing starts. And that link is about 10%. So Clearly, we are, you know, very low against what that runway would be, at least in North America. And I would expect over time that it would return towards that norm.

All right. Very clear. That's very helpful. Thank you very much.

Tim, the next question comes from Christoph at Berenberg. Christoph, please go ahead.

Good morning, and thank you for taking my questions. Yeah, it's three from my side, please. First one regarding the follow-up on the statement you made regarding the market share gains. Yeah, if you could just let us know if there was more pronouns for specific product categories and also in specific categories. yeah regions or states or if it's really quite similar across the board and then if you could also clarify who you're taking that market share from is it your large competitors or is it more from the the fragmented tail of the market okay so um you know there's not a great

industry statistics, and so we do this a number of different ways, Christoph, so interesting question, tough question. But I think that what I would point you to is don't get hung up on quarter over quarter, especially in a space like this, in a seasonal space where we've gone through something like COVID. I would just steer you back to the run rates over, let's call it a three year period or a five year period. And it's impossible for me to say exactly who or where they are coming from, but I think we've had good success with our innovation, specifically connected product where we are a leader. I love the expansion into some of the categories like commercial ladders and rails, white goods that some of our acquisitions have put us in place to do, and therefore being able to take advantage of our really broad global footprint. So I just feel again like the team is executing very well on our customer-centric approach, and I think it shows up in the numbers over time.

Great. And the next one would be regarding the commercial markets. You mentioned also briefly in the presentation as a growth area for the group for the years ahead. Just if I look at the appendix of the presentation, I mean, we see that in Q2, your commercial segment actually had an organic decline, a slide one of minus one. That came, I think, from a quite strong increase in Q1, around plus 10%. So just trying to understand what happened there and, yeah, what kind of trend you expect also in H2.

Yeah, sure. uh... we like the commercial space long term because uh... certainly we feel like we're under indexed to the market. H1 year-to-date commercial pool is still growing. In Q2, we saw a bit of a slowdown in EMEA, impacted by some timing, some macro uncertainty, specifically in France, and I think the unfavorable weather. On the other hand, North America continues to gain momentum with really strong growth. Commercial represents about 10% of our demand, and again, we're underrepresented. So I think it's a great growth opportunity for us long term.

And then the last one is just a brief technical one on the net financial results. It's probably one for Xavier. Yeah, just wondering what is the step up between Q1 and Q2 here? I think we went from 13 million in Q1 to 22 in Q2. Are there any extra one-off effects in there or what has driven the increase?

No, there's... There's nothing there than a little bit of higher debt, higher use of credit lines, and a little bit of a vaccine, but nothing more.

Great, yeah. Thanks a lot for the answers, and all the best to you, Cruz.

Thanks, Christoph.

Thank you, Christoph. The next question, it comes from Luis de Toledo from Odo. Luis, please go ahead.

Good morning. Thanks for taking my question. It refers to working capital improvement, but specifically to the improvement in trade payables. Also in other payables, I don't know if there's specific reasons to that. You have regulated your working capital target, but if you've noticed any structural improvement, is a seasonal factor or something you can comment on that front? Thanks.

Your question, could you repeat it? You mentioned the improvement in payables. I understood you meant is it returning to the structural level where it should be or is it seasonal? I think that was your question. Did I get it right?

Yes, thanks.

It's getting back to a normalized level. Remember that in late 2022 and early 2023, we had significant level of inventory that we were trying to work out, both ourselves as well as inventory in the channel. Therefore, our plans and our procurement teams were running at very low volumes. We are, as we said, since late last year back to normal. And therefore, you know, plans are running at normal speed. And therefore, you're seeing that volume on payable. We're going to see a little bit of help on payables. As you have seen in H1, you will see that also in H2. There's a little bit of a seasonal component as well. As you know, we tend to go up in working cap in especially Q1, Q2, and then we come down in Q3, Q4. Thank you.

Thank you, Luis. Thank you, Xavier. And the next question comes from Bank of America. I think from either Alex or Anna. I'm not quite sure.

Hi, this is Anna on for Alex. Just a quick one from me. We saw your comment on the July trading being positive and just wondering if you could give us a little more detail there. Is that across geographies? any key areas of strength to call out. Thanks for taking the question.

Yeah, no problem, Anna. Obviously, July is not closed on a book, and so we just wanted to give a little flavor. But we were super pleased to see that July was strong around the globe. So it was really in all our markets.

Great. Thank you.

Thank you. That marks the end of today's call. I'd like to thank our speakers and the participants for joining the call. And if you have any further questions, please contact the investor relations team. Thank you.