Biesse S.p.A. (BSS) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the conference call [indiscernible] Board of Directors. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Nicola Sautto, Group CFO of Biesse. Please go ahead, sir.

Thank you very much. Good afternoon, and thanks for your time. Here with me is Sandro Vitale, our Chief Strategy. Before moving to the number, I would like to present to you the worldwide presence of the group, Biesse. We have more than 4,300 employees around the world. The majority -- the roughly 50%, 51% is outside Italy. We are present in 22 countries with the 3 major regions with industrial manufacturing area, one in Italy, one in India and one in Thailand. Just a quick overview on the market situation. We experienced in the last 3 months, some difficulties in terms of order and revenues, and this is more or less in line on the performance of the market. We have some numbers from UCIMU that stated losses in terms of order in the first Q1, minus 20% compared to the previous quarter of 2023. And this loss is already embedded also in the number of 2023 in the last quarter of 2023. Generally speaking, our sector posted losses around 30%. In terms of orders, in the first Q1, the group Biesse -- so let me give a general statement before moving to the number. As you probably know, in January, we bought a group called GMM. The numbers that I will provide to you includes this group, starting from the 1st January of 2024. So in 2023, the numbers that I'm going to present to you are not included -- does not include the numbers of GMM. I will present to you in some specific moment, the breakdown between the asset -- all the asset, the previous structure before the acquisition and the new company called GMM. In terms of order, in Q1, we posted more or less EUR 300 million, significant less compared to the Q1 2023, where the number was EUR 341 million. But please consider that Q1 2023 was a very strange number because it was boosted from [indiscernible] in Italy and also from some relevant injection from the government worldwide. So if we consider that number as not in line because the numbers include this very unusual [indiscernible] from the government. The losses is less than the comparison. If we consider, for example, the Q1 -- the Q4 -- sorry, 2023, we had a total order of the last quarter in 2023 of a total EUR 278 million. So as you can see, we already experienced as the word mentioned before, a significant drop in order also in the last quarter of 2023. The number of the first quarter 2024 is EUR 297 million in terms of order divided between EUR 140 -- sorry, the backlog, this is about EUR 258 million from Biesse and EUR 39 million from GMM Group. In terms of revenues, we posted a total turnover of EUR 196 million, split in EUR 164 million revenues from Biesse and EUR 32 million from GMM. In this moment, there are very specific situation in the world. We noted some slowdown in European market. We noted some increasing difficulties in credit access and also the increase of interest rate for our clients. So we have the same problem in our client. For example, there is a KPI that we track every single month, called financial hold means the order put on hold only because the client did not pay the down payment. And this amount has increased significantly in the last quarter compared to the first quarter of 2023. And this is the picture that we noted all around the world. In terms of highlights, so the revenues was EUR 196 million compared to EUR 210 million of Q1 2023. But as I already mentioned, the Q1 2023 was a very particular quarter that benefited of all the significant injection from [indiscernible] and other grants from the states -- from the government. In terms of EBITDA, we posted EUR 16.8 million, 8.6% in terms of turnover. In terms of EBIT adjusted, EUR 7.6 million. And in terms of EBIT, EUR 6.6 million. The difference is EUR 1 million of nonrecurring costs incurred for the acquisition of GMM. In terms of net results, the final number was EUR 2.8 million, so 1.5% in terms of inside on the revenues. We had a significant drop in terms of net result compared to Q1 2023. But the reason is related to the sales, if we consider the normal level in terms of sales and considering that our costs are more or less fixed, it's easy to understand that with a significant increase in terms of sales with stable cost, more or less, the result is an increase in terms of EBITDA and net result. So the positive news is notwithstanding a very weak situation of the market worldwide. The Group Biesse has the ability to post a positive result also in this Q1, EUR 2.8 million and it's some more or less close to EUR 200 million. If we look to the reason of the significant losses between the net result of the Q1 '23 versus Q1 '24, there are some reasons. First of all, the significant drop in revenues, partially compensated from an increased gross margin. We have the capacity to increase our gross margin in the first Q1 '24 compared to the previous year. Then we posted a significant savings in OpEx, EUR 1.5 million, a significant reduction in terms of personnel costs, then we will have also a slide related to the headcount trend. But this significant reduction is related to the turnover started 24 months ago and also benefiting of the possibility the gain from the Italian government, [indiscernible]. Then we have a reduction in terms of D&A more related to minor provisions in terms of R&D capitalization. Then we have also a positive effect on the taxes only related to the lower pretax result. Obviously, in this number, it's not included GMM, because in 2023, as I mentioned at the beginning of the call, GMM was not part of the group. So in terms of EBITDA, GMM contribute with more or less EUR 4 million. And then in terms of net result, contributes for more or less EUR 1.2 million. In the period, so from Q1 '23 and Q1 '24, we also had a negative impact of roughly EUR 2 million of non-recurring item, because in 2023, we are paying a significant capital gain due to the sales of real estate complex in it. In terms of revenue by geography, the group has a worldwide presence, as I mentioned before, and the presence is in terms of turnover, 24% of our turnover is recorded in the Americas. The 63% in EMEA and the remaining part in APAC. So with this number, you can see easily that the group is focused especially in EMEA, but has a significant presence all around the world in 22 countries. In terms of headcount, this is a very significant number for us. We closed the Q1 '24 with more or less 4,300 people all around the world, in Italy, more or less 2200. With -- in this number is included, obviously, the person from GMM. The total amount from GMM Group is 440. So if we exclude this number from the total amount, so just to give the comparison of the headcount only related to the previous Biesse Group before the acquisition, the total amount is more or less 3,800. So with a significant reduction compared to 1 year ago of more or less 300 people. And this is a trend confirmed the decision from the board to start to reduce and to reduce the people in the headquarter and to increase the structure locally to be ready to face all the commercial issue locally. In terms of net working capital and net financial position, the net working capital at the end of March 2024 was EUR 84-plus million compared to EUR 36 million in Q1 '23. The significant increase was only due to the consolidation of GMM. In fact, if we compare the previous number only with the number of Biesse Group before the acquisition, we see that the final number in terms of net working capital was EUR 52 million. Obviously, there is an increase compared to last year. But if we look, for example, on December, the number of net working capital at the end of December '23 was 42%. So in Q1 '24, EUR 10 million plus compared to the end of the fiscal year. And the reason of this increase is only related to the down payment that we asked to the client before proceeding with the order and is related to the drop in terms of order. In terms of cash, the group closed the quarter with a positive net financial position. So cash, more or less, EUR 120 million and the financial debt EUR 116 million. So more or less, [ EUR 2.3 million ] in net financial position. There is a significant drop registered in the quarter, obviously, due to mainly to the payment of GMM, we already paid EUR 69 million in January 2024. We are just reviewing the final price. At the end of May, we will have the final price. We already know that we have to pay an additional amount of more or less EUR 3.5 million. So the difference is compared to December and end March was mainly due to the payment of GMM, then we have also working capital effect. Other payment made by GMM related to the acquisition, more or less EUR 1.5 million and also EUR 13 million in terms of taxes. In terms of dividend trends, as you already know, we present a proposal for the dividend of EUR 0.14 per share is significantly lower compared to last year related, obviously, to the performance of the group. I, more or less, I arrived to the end of the presentation. So I will leave the stage to your question in case you have.

[Operator Instructions] The first question is from Alberto Francese with Intesa Sanpaolo.

Good afternoon, everybody. First question is on the intake and looking at the Slide #6, where we have also the organic order intake for Biesse, which is a decrease year-on-year of about 12%, which is more or less aligned with the last quarter of '23, if I remember well. The question here is, if you can give us more -- some color on what's going on currently in the second quarter of the year, if you see as it has been stable in our fourth quarter versus the first quarter, if there is an improvement in order intake in the second quarter of '24? Second question regards the employees. There is an important reduction, as you already announced the end of the 2023. I was wondering if there will be other provisions in 2024 related to the layoff plan that we announced in October 2023. More in general, if on top of the EUR 1 million non-recurring that you mentioned for the GMM acquisition, if we may expect other non-recurring during the year for some other results.

Thanks, Alberto, for the question. Let me ask to the second and the third, and I leave the stage to Sandro. In terms of provision, we put all the provision at the end of 2023. As you may remember, we posted EUR 13 million of provision related to the employees because the plan was already public. So we posted all the provision in the last quarter of 2023. In fact, if you look at the Slide #8, where I present to you also the Q4 standalone, you will see a negative result of EUR 3.5 million, mainly due to the recognition of EUR 13 million of provisions. So we do not add any provision in the first quarter, and we are not expecting to post other provision in -- during the year. In terms of non-recurring, the non-recurring was a one-off in the first quarter only related to the payment to the adviser appointed by GMM during the due diligence. So we are not expecting to have other non-recurring items during the next month or so until the end of the fiscal year.

Okay. So we move to the first question on the Q1 '24 as compared with the Q1 '23, which was particularly higher in the [indiscernible]. So we have seen a stabilization [indiscernible] with the order intake in line with the budget and [indiscernible]. Overall, we look very closely at the overall intake situation as you've seen the numbers from the machine tools in industry from UCHIMU, which are very weak. So the first quarter of '24, the production and export of the Italian [indiscernible], which is very presentative in terms of production today with the [indiscernible] was almost minus 20%. So we see for sure a weak market condition, more in the [indiscernible] than in other market areas. But overall, we will very closely with the other intake.

[Operator Instructions] Mr. Sautto, gentlemen, there are no more questions registered at this time.

Thank you very much. Thank you for being here today with us. We remain at your disposal in case you will have additional questions in the next days. Thank you very much.

Thank you.

Ladies and gentleman, thank you for joining. The conference is now over. You may disconnect your telephones.