Interpump Gp Unsp/Adr

Good afternoon, this is the Coruscall Conference Operator. Welcome and thank you for joining the Interpump Q3 2025 Financial 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 N0 on their telephone. At this time, I would like to turn the conference over to Ms. Elisabetta Kunjaska, Group Head of IR. Please go ahead, Madam.

Thank you. Good afternoon or good morning, depending on your time zone, and welcome to this InterPAMP Third Quarter 2025 Financial Results Conference Call. As usual, I must draw your attention to the disclaimer inserted in the annex part of the presentation that I hope you were able to download from our website. Now I would like to leave the floor to Mr. Marazzi, Group Chief Executive Officer.

Thank you, Ms. Koniazka, and thanks to all of you for joining our call. We are here to speak about the third quarter 2025 results and 2025 expectations. Starting from the results of the third quarter 2025, I would like to underline two numbers, plus 3.4% and almost €87 million. Plus 3.4% is the organic growth recorded by the hydraulics division in the quarter, a long-awaited growth after seven consecutive quarters of organic decline. Eighty-seven million euro is the low generation of the quarter, the best achievement in one single quarter in Interpump Group's history. Moving to 2025 expectations, I have to underline that the acceleration in summer of hydraulics recovery signal is a strong support and allow us to increase both our sales and profitability guidance for the year to the highest part of the range already provided, that was minus five plus one and 22.5% regarding APDM margin. After this first overview of this quarter, let's focus with more details on most important third quarter 25 financial KPIs. and in particular, sales, EBITDA, and cash flow generation. Regarding sales, in the second quarter of 2025, after six consecutive quarters of declining sales, we recorded a revenue growth with a 1% organic increase. In the recently concluded quarter, not only we achieved growth again, but this growth accelerated from plus 1% to plus 2.3%. Same result, growth, but different drivers. While in the second quarter growth was driven by the water jetting division, in the third it was driven by the hydraulics one. And once again, this is the confirmation of the strength of the group, the diversification. I was very pleased with the 19% growth posted by the water jetting division in the second quarter, which led to the plus 1% consolidated. But I cannot deny that I am even happier with the plus 3.4% of the hydraulics division that contributed to this quarter's plus 2.3% consolidated. The normalization process for this division began exactly two years ago. following the first signs of slowdown in sectors applications such as agriculture and lift, which resulted in a 6% organic revenue decline in the last quarter of 2023. Finally, after seven consecutive quarters of decline, we have recorded the growth. We cannot deny, once again, the benefit of a favorable comparison, considering that in the third quarter of 2024, we had the toughest of the seven, with a revenue drop of nearly 17%. But the data is nonetheless encouraging. In the previous quarter, Agri was the only market application growing. Now, in a multi-phase scenario, other ones within the division are up, from generic dealers, more than 4%, to Lyft, more than 8%, to our moving machine, with a 15% growth. By the way, Agri is up by almost 18%, a very comforting number. Moreover, in the third quarter, sector applications, representing over 50% of division revenues, posted growth, and among the remaining ones, the most significant are showing only a low single-digit decline. Of course, we cannot yet say with certainty that we have reached the end of the normalization process that began two years ago, but we can certainly say that early signs of recovery seen in the previous quarters have strengthened and that all the conditions are in place for further improvement. Moving now to the water jetting division, I believe I am not mistaken in assuming that this result, in line with last year, could be the least appreciated figure of the entire quarter, especially considering the delightful plus 90% achieved in the second quarter. As we often emphasize when commenting on this division performance, this trend is less linear than that of hydraulics. because of the presence or absence of individual high-value contracts that can distort the comparison base. This is exactly what happened this quarter. In 2024, the division recorded organic growth of nearly 9%, thanks in particular to two orders invoiced in September 2024 for an accumulated value of €10 million, one contract in Turkey related to the marine market application and another in China related to the oil and gas sector. As clearly shown on slide 8, last year's strongest quarter was the third one. We hope that this volatility in the division results doesn't come as a surprise for those who know us for some time, but because of our frequent explanations, I always underline the group performances, and moreover what are just in Division 1s, should be judged and evaluated on a yearly and not a quarterly basis. and because of the evidence available in the annex of our financial results presentation for several years now. In this presentation, let's see slide 23. After discussing the results of the two divisions, let's analyze the performance of the main geographical areas in which we operate, naturally at constant exchange rates. The key regions in Europe, Italy, and Germany delivered the best results, with increases of more than 10%. While China, that has returned to account for almost 5% of organic revenues, for group revenues, grew by more than 20%. Our most important country, the United States, once again recorded a decline, around 5%. But this figure represents a clear improvement compared to the nearly double-digit or higher declines seen in previous quarters. Let's move to ABDI now. As with revenue, profitability in 2025 has also been marked by continuous improvement. In the first quarter, which was still affected by significant weakness in the hydrolysis division, with revenues declined organically by around 14%, thanks to the measures implemented to protect profitability and improvements in water jetting division, the drop in profitability was only slightly greater than the one of the revenue, less 12% compared with minus 8% in sales. Subsequently, in the second quarter, the first sign of recovery in the electronics division and the strength of the water jet in one led to a 1% increase in revenues, accompanied by an almost 7% rise in profitability. In the most recent quarter, a revenue increase of over 2% corresponded to a profitability improvement of more than 5%. Although numerically less striking than the previous quarter, this result is undoubtedly more significant. Indeed, the third quarter was not supported by the leverage effects of the major water jetting Chinese contracts. The achieved results reflect, on the one hand, the recovery in revenue of the hydraulics division, amplified by the Group's careful cost-adjustment strategy. And on the other, the ongoing improvements in production processes within the water jetting division, aimed at overcoming the inefficiencies that unfortunately accompanied the strong revenue growth in 2024. For the first time in several quarters, margin improvement has been driven by progress in both divisions, further supported by the absence of dilution effect from acquisitions. This quarter truly demonstrates the flexibility of our business model and Group's ability to continuously adapt its cost structure to evolving demand. Let's move on to the third quarter, to the third PPI, through which we do evaluate our work, cash generation and its components. From a flickish flow generation perspective, 2025 has also shown an improvement path. Compared to 24, the first quarter recorded a slight delay, more or less 5 million euro, due to the advanced payment mechanism linked to major contracts signed in China last year. In the second quarter, free cash flow amounted to over 46 million euro, in line with the corresponding period of the previous year. This result was by no means guaranteed, considering that revenue recovery naturally influenced working capital. and in particular, trade receivables. In the most recent quarter, despite a further strengthening of revenue growth, we achieved an even better performance, generating nearly 87 million euro. That is our historical record for free cash flow generation in a single quarter. At the beginning of the year, we set ourselves the goal of consolidating the record achieved in 2024, and we are well on track on this. Moving to CAPEX, on slide 10 of the presentation, we are pleased to present the actual photo of the new inter-pump hydraulics facility in Sala Bolognese, alongside historical rendering. The relocation process has been successfully completed, and the plant is now fully operational. We consider this a significant achievement, having maintained production throughout the construction and transfer phases. thereby minimizing the inefficiencies typically associated with such a complex process in an industrial setting. This accomplishment was the result of a joint effort, and we extend our sincere appreciation to both our colleagues and our suppliers for their continuous support and collaboration through every stage. Concluding with acquisition, as you know, Last August, we presented a series of slides outlining the criteria that make a company attractive to us, the internal process through which we turn that interest into concrete action, and finally, the integration approach should an acquisition be completed. To complement the theoretical framework, we provided a practical example, the acquisition of Padoan. We are now pleased to add two further examples, Tutto Hydraulico's and Borgia Sali. Both companies represent a perfect fit. They strengthen two of our verticals, cylinder and reduction gears respectively, expand our product range, and offer opportunities for revenue growth and margin improvement. Moreover, Tutto Hydraulico enables us to continue our geographical diversification process and exemplifies the proactive spirit of those joining our group. Less than one year ago, as you know, we acquired Hydrover in Brazil. Our new colleagues have actively identified opportunities that, in their view, would have reinforced our presence in the country, complemented our product offering, and leveraged mutual commercial relationship. Slide 11 provides a brief description of both acquired companies. Before moving to our next slide, Outlook for 2025, I would like to reiterate the key message I shared with you last August. The ultimate target of group growth and development strategy is diversification. It is diversification by division, by geographies and by market applications and not dimension that allows to properly manage business risk. It is diversification that allows to reduce volatility through different cycle exposures. and this diversification that allows to effectively react to unexpected swings. Now let's move on to the near and far future. October performance confirmed most recent trends with a positive evolution of hydraulics and the confirmation of water jetting strength. Regarding the latter division, let me refer to my earlier comments on revenues. For water jetting, it is and will remain essential not to be misled by comparisons with 2024 quarters. The robustness of our division is demonstrated by the fact that in recent months, August, September and October, we secured more orders than in the same month of 2024. The combination of the third quarter solid results and October trends allow us to reaffirm our full year guidance particularly pointing towards the upper end of the range. We believe this is a very reasonable assumption, which also factors in the two elements which must be considered to make an accurate forecast. A significant comparison effect of opposite nature between the two divisions and the risk of further cancellation or postponements. Regarding the first aspects, you will certainly recall that in the fourth quarter 24, The hydraulic division recorded a 14% decline, while the water jetting one posted an increase of more than 7%. As you can imagine, the magnitude of these variations make it challenging to identify the underlying real industrial trend. As for the second one, our customers, too, need to improve working capital. And one of the easiest way to achieve it at the year end is not to confirm previously placed order and move to the following year. As you may recall, in 2023, this phenomenon caught us by surprise and had an impact on EBITDA margin because we did not have time to adjust costs to a level of demand below our expectations. For cash flow generation, we remain committed to delivering the best possible outcome. As far as the near future is concerned, we understand there are expectations for the slightly more distant future as well, namely 2026. As you know, the budgeting process is taking place in these weeks, and therefore, for now, the only thing we can do is to share some insight, insight based also on what has happened so far in 2025. In terms of revenue, the two divisions will face completely opposite situations. For the hydraulic division, the first part of 2026 will have a more favorable comparison basis than 2025, during which organic revenues decline by almost 11%. We are confident that revenue growth will strengthen further thanks to the recovery of the market applications that are still soft. Conversely, For the WaterJet division, the first part of the year will be the most complex, considering that in the first six months of 2025, we grew by almost 14%. Nevertheless, we remain confident in continuing to secure new orders thanks to our technological advantage. Finally, to conclude on revenues, acquisitions completed so far in 2025, according to their consolidation periods, are expected to contribute about 1% to total revenues. As for profitability, we will continue to adjust the cost structure in line with demand trends to exploit the positive effect of improving sales. And finally, regarding CAPEX, further reduction could be expected following the completion of all projects related to the 21-23 investment plan, and this would support our cash generation ambition. Naturally, both for the near future and the slightly more distant one, we continue our search for the new perfect fit to integrate into our group. These are ongoing activities that cannot be scheduled, but we assure you our full commitment on this. Before opening the floor to your questions, let me remind you of the figures I started with. Last 3.4% organic growth in the hydraulics division and nearly 87 million euro in cash flow generation. These numbers demonstrate once again the strategic levers of our group, diversification and operational flexibility, levers we will use to achieve the goals we have set for 2025 and subsequently to successfully tackle 2026. Thank you.