Interpump Gp Unsp/Adr

Welcome and thank you for joining the Interpump Second Quarter 2026 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and 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. Federico Pavese, Head of Investor Relations of Interpump. Please go ahead, sir.

Thanks. I'm Federico Pavese, Head of Investor Relations of Interpump Group. Welcome to the Interpump 2026 Second Quarter Financial Results Conference Call. And thanks to all of you connected for joining us today. Please be aware of the cautionary language that is included in our forward-looking statements. included in the material that we have distributed today. For example, you can find it in the appendix of the presentation, slide 27. With that, I would like now to hand it over to Mr. Marasi, Interpump's CEO. Thank you, Mr. Pavese. It's my pleasure to welcome you again to Interpump Group and to wish you all the best for your future within the company. Let's start by looking at our consolidated financial results in slide 2 of the presentation. We should reflect our guidance and expectations. During the second quarter of 2026, Group sales were down by 0.7% on organic basis year over year, affected by the decrease in water jetting characterized, as you know, by a very challenging comparison basis with the first half of 2025. Hydraulics on the other end delivered the fourth consecutive quarter of organic improvement with a very meaningful plus 6.2%. I will come back soon with additional color on both divisions. Consolidated BDA margin stood at 22.9% in the quarter from 23.8% a year ago. As the combination of the stronger hydraulics and the weaker water jetting has negatively impacted the mix. Our colleagues in operation across both divisions were able to maintain a lean construction, although in two very different environments. On one end, in hydraulics, this is the fourth quarter of organic growth improvement after a couple of years of decline. On the other end, in water jetting, we are stabilizing production after some demand spikes experienced about a year ago. Despite the volatile macro environment, thanks to our diversification and operational flexibility, we keep demonstrating a very resilient margin profile that few industrial companies are able to match. Looking at APS result, plus 8.2%, is consistent with the trend of the operating performance we have discussed a few moments ago. A pretty stable tax rate, around 30%, and a lower share count, supported by the buyback we have been doing so far this year. Net debt at the end of June was €306 million, from almost €400 million a year ago. The solid year-on-year improvement was driven by our sound cash generation, €62 million in Q2, up 35% in comparison with the €46 million of the same quarter of last year. Let's now look at the details for both of our divisions. Let's start from hydraulics, which is summarized on slide 3. Segment recovery goes on, as this is the fourth consecutive quarter of organic growth. Among the most important applications, in machinery construction and air moving, both posting a double-digit sales increase, as machinery demand remains solid, supported by infrastructure and data center investments. Also, general industrial vehicles was positive, as the overall truck industry keeps showing some sign of stabilization. From a geographical standpoint, the improvement was mostly coming from developed markets. North America improved mid-teens in the quarter and remained one of the biggest contributors. Paris and Oceania was up high single digits, while Europe was up low single digits. Latin America, on the other hand, was significantly down, as volatility in the area remains elevated. Business profitability has improved, with an EBITDA margin increased by 30 basis points to 21.2%, supported by the operating leverage and the battery utilization rate of the manufacturing capacity across the division. This is an outstanding result as we have managed to improve margins despite consolidating the newly acquired companies in the year, and in particular Padoan, Tutto Hydraulicos, Borgia Sali and Pharma. Turning to the water jetting division on slide 4, we have made clear that the nature of the first half 2025 results was exceptional, mainly because of the big orders Hammelmann got in China in the first half 2025. So, the year-over-year sales decline takes into account that weak comparison base. Let's look at the applications in the water jetting. Starting from the weak spot, shipyard and marine was one of the most affected businesses, together with chemical, suffering mostly from the very positive results we had in the first half of 2025. The biggest contributor of the division remains food and beverage. which grew its sales high single digit in the quarter, in an industry characterized by trade uncertainty and distinct trend across each sub-segment. From a geographical standpoint, in the quarter APAC was not surprisingly the weakest region, while North America was down low single digit. On the positive side, we have recorded sales in Europe and Latin America up low single digit. Despite the strong sales drop, we managed to keep water jetting margins above 26%, in line with historical values. At a group level, I would like to emphasize once again the importance of the broad diversification we have in Interpump, which is probably the characteristic of our group that I love the most. The weak water jetting results were offset by the sound hydraulic performance. enabling us to maintain the excellent level of the EBITDA margin despite deadwinds coming from the mix and from a challenging market environment. Moving to the cash flow on slide 5, it's important to underline that the sound operating performance was the main driver of our €62 million of free cash flow in the second quarter of 2026, with a 35% increase in comparison with the same period of the previous year. Capital expenditures stands at 4% of our group sales, in line with our commitment and consistent with the production needs of our group. Trade working capital absorption was consistent with the revenue trend, and overall it remains a key element both in supporting growth and protecting profitability, especially during these periods of input cost inflation. Going forward, we reiterate our target of returning to what we consider the optimal level for our group, that is 35-36% of sales, from approximately 40% in 2025. In Q2, we have distributed over 57 million euros to shareholders, between 35 million of dividends and 22 million of share buyback. Let me spend a couple of minutes on M&A. At the end of July, we announced two small but meaningful acquisitions, MEVV and Tecno Ice, both in water jetting division. MEVV manufactures dosing gear pump for chemical and textile applications and will consolidate alpha-valvoless dosing pump business and expanding our product portfolio and market presence in developed markets. Techno Ice engineers and produce complete lines including pasteurization systems, freezers, extrusion and filling lines and wrapping machines for the ice cream companies. This food and beverage application allows us to leverage synergies with other products in our portfolio with a balanced exposure to developed and emerging geographies. On M&A, nothing has changed in our strategy. We continue to actively assess Many opportunities that can strengthen our portfolio and create shareholder value. Given the time remaining in the year, we believe there is still scope to complete further transactions, provided they meet our strategic and financial criteria. And most important, that they fit in our industrial portfolio and are priced correctly. We continue to see and process a healthy pipeline of opportunities. While we remain selective and disciplined in our approach, there is still sufficient time and capacity before year-end to pursue additional value-accretive transactions, should the right opportunities arise. More broadly, we remain fully committed to our long-term ambition of being a leading consolidator in our industry, bringing together complementary businesses across hydraulics, flow handling and flow processing. We believe our strong industrial footprint, know-how, global reach, and proven integration capabilities position us well to continue driving consolidation in these attractive applications. Moving now to 2026 outlook on slide six. We reiterate for our Group Sales our forecast of an organic growth rate range between minus 2% and plus 3%. As we have passed the half-year mark with a 0.7% organic growth in the most challenging part of the year, we are now much more confident on the positive part of this range. On top of that, you should also consider the contribution from the latest acquisitions that we are now estimated at around 2.5% of sales. ABDI margin is reiterated between 22 and 22.5% of sales. despite the dead wind coming from the divisions mix, with a stronger hydraulics and a weaker water jetting compared to 2025. As for free cash flow, we confirm the goal to consolidate and improve what we achieved in 2025 to a new record. Let me conclude now with some thoughts about the rest of the year. Extensions in the Middle East are still yet to be considered over, With a more definitive and stable solution, we are closely monitoring how the macroenvironment is being affected by it. Some projects, some business, some CAPEX is being postponed in the region and this has clearly a direct impact on interpump business. As for indirect impact, the cost of transportation and the cost of energy are probably the most affected and this is something that we are managing also thanks to our higher than normal level of inventories. To offset those higher input costs, in recent weeks we have been implementing price increases and or surcharges to our customers. US tariffs have transitioned from an acute issue to a chronic but manageable one, with firms adapting prices and supply chain strategies accordingly. In the second quarter, we experienced another 6 million euros of impact from tariffs, which has been completely transferred to our customers. Some markets or applications in hydraulics are recovering, most important trucks and construction machinery, while agriculture industry outlook has slightly deteriorated. We are accelerating sequentially, but we still have situations in which we are not utilizing at 100% our internal manufacturing capacity and in which we are very focused in optimizing the profitability. Overall, July sales trend is a clear support for our full year 2026 forecast, amid the uncertain geopolitical environment and volatile supply chain. After a first half characterized by a stronger hydraulics versus water jetting, as the latter was faced with a weak comparison base, The second part of the year should be characterized by a more balanced contribution between the two divisions. This keeps us in the right trajectory for our 2028 targets that are around 2.5 billion euros in sales, which includes some M&A consistent with what I discussed a few minutes ago, about 22.5% EBITDA margin, which represents a level of excellence that cannot be compromised, and a net financial position that will be close to zero, supported by the cash flow generation that we aim to deliver and considering the usual bolt-on M&As. This concludes our prepared remarks and we can now start the Q&A session.

Thank you. This is the Coruscall conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone To remove yourself from the question queue, please press star and 2. First question is from Matteo Bonizzoni, Kepler Chevrolet.