Elica S.p.A. (ELC) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Elica Fourth Quarter and Full Year 2024 Preliminary Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Giulio Cocci, CEO of Elica. Please go ahead, sir.

Thank you. Good afternoon, everyone, and thanks for joining our [indiscernible] call. Let's go quickly through the agenda. We will discuss the highlights of the quarter, the industry trend, which are our sales dynamics, the financial review, and then we will have some discussion about how we see 2025 and why we believe that the path that we are following are the right one. If you move to Slide 4, which are the highlights over the last 3 and 12 months. First of all, as a general comment, I would say that 2024 has been a key year, because it's been the first year in which we have, how can I say, changed dramatically our strategy. We moved to -- from a cost reduction mode to an investment, so a growth -- revenue growth mode. Now this, for sure, have changed the profile of our margins, but at the same time, has started to deliver some important signals that we will discuss at the end of the presentation that, again, make us believe that the direction is the right one. All of this in an overall situation in which both for Cooking division, but also for Motor division, we have been facing a negative market, a very weak market, in which we have done what was right to do. If we go through the numbers, quarter four net sales are around EUR 111 million, so slightly better than the expectation with an organic drop of almost 2% versus the same period of 2023. This brought us to a full year net sales of EUR 452 million with an organic drop of 4% -- 4.1%, sorry. What are the main comments and the main takeaway of this revenue trend? Again, negative market all over the year and all over the geographies we play our game. But encouraging dynamics coming, I would say, first of all, from North America, where we are seeing that the going direct strategy with Elica brand is paying off. So our distribution companies together with their standard sales of Elica brand in North America have been growing in the region of 30% in a market that Stefania will show you later on, remains -- remain negative all over the year. The extension of the range in North America, where we're not only selling Cooker [indiscernible] but also aspiration hobs, induction hobs, range cookers, wine cellars is the right strategy in that market. And as you know, will be a winning strategy also in Europe. OEM, I am in Elica since 2018. This is the first year despite the market, as we said, is critical, in which we see positive OEM dynamics. So it means that the product, the relation with customers -- sorry, the level of service and the competitiveness that we have gained also with the industrial operation and the cost activities that we have been doing between 2021 and 2023 are bringing us in the right direction. Motor division, again, a quarter in line with expectation, but moreover, a year in which despite a negative market, and the very negative market in Turkey, which is an important hub for all heating sectors, we have been growing our share in all the customers. And again, we will see this in the takeaways of the presentation. In terms of margin, adjusted EBIT for the full year, EUR 8.1 million, so 1.8% on the revenues with a very weak, I would say, from a margin perspective, quarter four, EUR 0.7 million. EUR 0.6 million on revenues, but this depends mainly on two things. The first one has been with us all over the year, I would say, all over the last 2 years. So negative price mix and very high promotional environment. This is the basic rule of the game now, and it will be also the basic rule of the game in 2025. Competition, pricing and positioning of the products are the things that we need to put -- to found the balance among while growing our brand. Quarter four, in particularly, was hit by an intensified investment in our transformation plan. It was the right moment to do it with the product range completed with Lhov, available on the market. So we have been increasing the media campaign. We have been on television. We have been closer to our customer, increasing our trade marketing activities and continuous cost management activities didn't fully balance the effect of this investment. With no effect on the other side on the debt profile and cash generation of the company. So our net financial position is EUR 47 million, so 1.5% on the EBITDA. Absolutely below our covenant, but moreover in line with the previous quarter and with no significant variation also versus the previous year, if we consider the strong buyback that we have been doing during 2025, and [indiscernible] the consistent investment in our [indiscernible]. To highlight our flexibility in terms of inventory management. So in July -- in August, having understood that the market for the ending part of the year would have been a weak market, we have strongly reduced our production capacity in order to have an inventory that was better than the previous year, remaining in line with our expectation and improving at the end of the operating cash flow for the full year. Stefania?

Good afternoon to everyone. Going forward to the presentation, Slide 6. We move to the Cooker Hoods market in the European country, starting from the Cooker Hoods allowed for the full year is almost minus 2% versus the previous year, with the last quarter without any signal of market recovery. The average of the minus 2% is affected by more negative performance for some strategic markets like France, minus 8% and Italy, minus 4%. If you go down in the trend of aspiration hobs, we closed the year with a progression versus the last year of 8%, but we are referring to a category that represent less than 10% of the Cooker Hoods market. Going forward to Slide 7. In term of average price, nothing has changed with respect to the last quarter. For Cooker Hoods, the average of the price erosion for the full year versus the previous year is minus 7%, and for aspiration hobs, the delta between the current year and the previous year is minus 10%, more affected by promotional activity to catch opportunity in this segment, considering the trend and the opportunity of the new product line. Moving forward to Slide 8. In term of North America market, also in this case, nothing has changes. If you look at the ventilation, the data, the sourcing data is showing an average decline versus the previous year, minus 2%. Since the coverage of this data source is lower for ventilation because the main data is coming from our data, it's important also with our brand because we are growing with our brand in America, it's important also to compare with the Cooking trend that is our segment of reference. And so if you look in the right side, the trend of the Cooking category that it has a full coverage of the market, is showing a drop of the market like minus 7%. Slide 9. In terms of industry related to the heating that is part of the market reference of our Motor Division, after an important drop in 2023 that was minus 14%. Also during the current year, and that is referring to the European heating industries with some internal estimation because the last quarter is still not available. So also, in 2024, we expected a market with a negative impact like around minus 8%. We are referring only to boilers. If you take in consideration the market for the heat pump, it's completely locked. In terms of sales dynamics, now we go through the trend -- the driver for the sales dynamics, Slide 11. Q1 result sales EUR 110 million with a drop versus the previous year of 1.8% organic drop. Full year sales in line with expectation, EUR 452 million with a gap versus last year, 4.1% in terms of the organic drop, almost aligned -- linked with the market trend, if you take in consideration not only the volume, but also that the value of the market is affected by a reduction of the value in terms of price mix due to the promotional activity. Slide 12. In terms of performance between our division, Motor performance minus 8% in full year performance. That is composed by minus 9% for the Heating segment and minus 6% on ventilation. If you exclude the negative impact of the Turkey market, the heating is recording a positive performance in the European country with plus 7%. And this allowed us to gain market share in this segment. In term of Cooking division, full year minus 3% organic. As I said before, more or less Cooking is aligned with the market trend. And basically, the last quarter is substantially flat versus the previous year. Going forward to the breakdown by region. In terms of the region, positive performance in North America at full year level that confirm the successful strategy for North America with a direct distribution. The Q4 for North America performance is negative, but is affected by the destocking of our OEM customer. And that is also confirmed by next slide, if we go in the next slide because Slide 14, we can see that in Q4, the OEM customer recorded a loss -- a drop versus the previous year of 6% organic. But if you look at the full year level, the OEM customer is positive with a progression of plus 1% -- plus 2% versus the previous year. For our brand, the full year performance is minus 5.5% with a reduction of the gap in the last quarter of the year because it was minus -- around 3%.

This will be a crucial year, if you move to the following slide in our transformation path. And for sure, Lhov, the innovative products that now is available on the stores is our [indiscernible] products now is what better represents the content of innovation, of design, of functionality, of [indiscernible] to what we believe are the benefits for the final consumer, but also for the trade, so for our customers that we have created. And that will be the front line of our full offer in terms of built-in appliances. It's a long project because it started in 2021, basically with a kickoff from an idea, from an intuition, to be then presented in June 2022 at Eurocucina, to become the core products we have been presenting, highlighting, promoting in 2024 Salone del Mobile up to November when we started the display sales in December, where we have even started the first installation in France, in Germany, in Italy. We are talking about a small amount of products, of course. In this moment, we have 200-250 products on display that are on the -- what we believe are the most relevant displays in Europe. And month after month, this amount will grow. It's important to be shown, it's quite important that the customers of our customers see the product to make their purchasing decision. It's important to know [indiscernible], so all of our customers, all of our partners, all of their sales people, shop people have been trained, are being trained, in order to better show the product in order to show the advantages of the product. It's a product you need to trust because it's three products in one. So a few years ago, when we were only Cooker Hoods, if a Cooker Hood is broken, you barely understand that is broken. If the oven or if the induction cook top is broken, you have to go to the restaurant. So the step is really important. This is why we have built up a dedicated after sales service. Our customers need to feel fully trusted on what we do and how we serve the products. We need and we are explaining to our customers, which are the trade benefits. And the more, the more, they will start to sell the product, the more they will see in terms of [ rotation ] and in terms of unit revenues and unit margin. It's a product that is more on the exclusivity side. Now so we consider ourselves a high range democratic company. So we are not super exclusive. We are not luxury. We don't want to be there because you don't pay 2,500 salaries with luxury in our sectors, but we want to be exclusive. And this, for sure, is a product that -- also for the feedback that we have from our customers is going and is bringing us in that direction. In the incoming quarters, in the incoming months, also using the road show, in which we will have the chance to update you on how it's going, we will have a better understanding, a better picture and also better information from your side on how this product is bringing the transformation with it.

Going forward to presentation, Slide 11, we arrive to the financial results. Profit Q4, sales minus 2.2%. Profitability, weaker profitability in Q4 versus the previous quarters, in line with our expectation, affected by the negative price mix. The raw material were essentially flat as we expected. Marketing and communication had a negative impact as we increased the investment in this quarter to sustain the launch of Lhov. Labor cost inflation was partially offset by the strong focus to offset this part of [indiscernible] inflation, that there are the same trends that affect the full year results in terms of profitability. But despite the negative profitability, we closed the quarter with a positive net profit to the Group. The net profit for [indiscernible] to the Group is EUR 1.6 million, thanks to the positive effect in Q4 of the valuation of the remaining stake that we have in India, 1.6%. And what was very important to bring this contribution was the success -- successful signature of the renewal of the Patent Box agreement for the period 2020 until 2024. In term of full year results, sales minus 4.5% EBITDA, EUR 51.4 million equal to 7% of revenue. Adjusted EBIT EUR 1.1 million, 1.8% of revenue. And in term on net profit, so despite lower profitability and also high financial cost because there are increase of financial cost versus the previous year of EUR 2 million, we closed the year with a net profit pertaining to the Group equal to EUR 7.9 million, almost quite close to the result of the previous year despite the negative impact of profitability for the full year. But not only going forward to Slide 18 with a very positive result in terms of net financial position because we closed our debt in line with the previous year and less the impact of the treasury share equal to EUR 5 million, but also better than the last quarter because even if with the increase of treasury share for the EUR 4 million related to the buyback, we closed better than the previous year -- previous quarter, sorry, without any one-off activity. Thank you to the optimization of our managerial working capital. And we will see also in the slide -- next slide, the level of inventory with a leverage ratio that is strongly below our covenant, 1.5. Slide 19, we did a very strong job in terms of inventory reduction, moving from EUR 94 million in Q3 in EUR 86 million in end of the year, so a reduction of EUR 8 million of inventory that helped us to reach the result in terms of financial position. I leave the stage to Giulio for the closing remarks.

Okay. So -- if you move to Slide 21, we have tried to summarize in pictures, in images, what happened in 2024, what was new in 2024. It's an exciting year of a long journey of transformation that start from the product. It always start from the product. So we are already a different company. But to talk about products means to talk about discussing with the customer, having these products more and more close to their customers. And this year, 2024, has been crucial because we moved from building up our range to starting proposing our range to our customers during second half of 2023 and first half of 2024. Then our products, our offer, became a leaflet. So something that the customers have on top of their catalogs to propose to their customers also to see if the products were good or not, if they were interesting, if they were making money on it, if they were rotating, which is the most important thing if you work in a kitchen distribution sector. But they show that it works. So we start 2025 with, I would say, important takeaway from this first block of product images. Now these products are in the catalog, are not anymore an idea, are not anymore a convention, are not anymore a -- how can I say, in leaflet. Are in the catalog of the kitchen makers, of the most important kitchen makers we work with. So when Giulio Cocci will go there, trying to build up this new kitchen, it will be a part, standard part, of the offer. This is an important step in terms of work, in terms of perspectives. And also we start 2025 with this achievement, which is very important and that we will continue to support like shown in the following images. So continuing the sponsoring with Ducati. Why? Why? Because now is the moment to work on the brand, on Elica Cooking, not only Elica has the best [ art ] experts, we are becoming something different. So show up, so make a different level of commitment in the customers of our customers. This means be more present on the territories. So it means to have a dedicated showroom in Germany. No? Germany is, I would say, half of the market in which we play our game. So you need to be there and you need to be there, I would say, with the proper dress, not just with the sales organization and joining some specific player. You need to be there always. You need to have the chance to bring your customers in a place where from the 1st of January till the 20 -- the 31st of December, they can see your product offer because when they will see, they will understand that there is something different. Same in France, the red, blue and black image, new way of showing the Group, the products, the offer, the advantages with an important media campaign that will start back also in 2025, because this is a stage in which we need to support. We have our products in the catalog. We need to support these products so that we help our customers to see that there is an opportunity and that we are investing ourselves in this opportunity. The rest of the game is their usual business. Of course, continuing to look at the distribution in America, in North America, so Southeast -- that covers the southern part of the U.S. International, which for us means Canada, [indiscernible], a small investment that we did at the very end of 2024, but that means now in the Netherlands, which is a small country, but which is the second market of aspiration hobs in Europe, we have our people, our presence, our strategy, our products. This means that despite we see a 2025, I mean to say, complicated. So we imagine an industry which will be flat now where from a side, there are good opportunities from a macroeconomic perspective. So we see the mortgage demand that are rising since October. And this is happening in Europe, but this is also happening in North America. We see the increasing interest rates, and we know that 100% of what we sell is related to new construction or renovation of the current houses. So this represents and will represent in the midterm an opportunity. This year, this year it may hit the very last quarter of the year. We do not expect to have any positive surprise before -- even if, to say the truth, we saw a very good January and a very promising February [indiscernible], but there are other things that need to be taken into consideration. I'm sure you will ask some more colors about it. Tariffs, what is happening with tariff, what this means for us, it's something that we need to take into consideration. We do not expect significant economic negative effect, because there are many factors because we see that there is a kind of poker game in this moment where I have something to have something different and because we also understand that there are huge differences in terms of cost between Mexico and the U.S. So it's not a tariff of, I don't know, 15% that make any company changing their mind on how to produce and where to produce. We are pretty sure about this, at least in our sector. So our strategy remains a continuity with more evidences of what we have been doing in the last 12 months. Cooking transformation, direct distribution expansion, North America, we are Southeast, why not to explore different areas considering that the growth comes immediately once we take the distribution in our end, and we also have the right partners in terms of who give us the range cookers, who give us other products. Our supply chain in Mexico, which is in any case ready, efficient and very high rated also in the U.S. where we are premium, we are not, I would say, demographical range. There we are [indiscernible]. Even with M&A, with more sustainable M&A or with M&A of other sizes that give us the geography or the product that wins. Motors, we see in the next slide, if I remember well, the presentation, here, we're doing well. Here, we are growing our share year after year. We have the right products. We have a slim organization. We are approaching also what are the opportunities coming from non-[indiscernible] markets. I was in Orlando yesterday -- till yesterday, yes, in a specific fair dedicated to the American heating sectors. Up to 2 years ago, we didn't have the products to play that game. Now we have. So we are approaching those customers that may bring us, let's say -- also some opportunities on the other side of the ocean. So again, flat market, investment that continues, means that we do not expect a huge upside in terms of revenues and margin. So we see a situation of profit and loss in line with 2024. This game will last at least for another year. We see instead the debt net financial position that may vary only in terms of improvement. Why? Because we have shown ourselves our flexibility, our reactiveness and also the fact that we really have now all of the levers to manage our DPOs, our DSO and our inventories in order to improve year after year the financial performance of the company, keeping the debt under control and improving further the net financial position. This plan, which is a long-term, mid-term investment plan is sustainable if it is financially sustainable. No? So this is together with the marketing strategy, the product priorities, the geography ambitions that we have, the financial sustainability of the plan is the rule number one of the game. No? So this, just to believe, if we move 2 seconds to Slide 22 that we still believe that the outlook in the mid-term of the company will bring us here. We have already shown and commented this slide, so I will not take any minutes of your time on this slide. But on the following one, Slide 23, yes, because this is those evidence that show us that we are going in the right path. So the strategy is based on enlargement -- enlarging the product range. What we have seen is that even if we are still talking about small number and we were just a leaflet, not a catalog products, we have doubled our sales in Europe of non-Cooker Hoods and aspirational products in the last year. No? And if we look worldwide, we are talking about almost EUR 7 million of products which are not, let's say, the core products of Elica, those products for which Elica was famous for. We are doing the same game in Japan, where in December, we have launched a new dishwasher. In Japan, we [indiscernible] with a joint venture in a very niche market, where we basically have 95% of the share of the very premium IKEA Cooker Hoods market. Now we start with the dishwasher developed with a top range Swiss producer because that's not a problem of price positioning in Japan. And we are sure that this will add another product to our leadership position in Japan. Wider distribution network, we have discussed many times, but North America sales reached EUR 20 million in 2024, plus 53% in a very negative market as Stefania has showed. Our new company started in September 2023 and December 2023 brought us EUR 6 million this year. So the kickoff was absolutely positive for us. This is why we want to continue this game. It pays back. Geography expansion, we have launched [indiscernible] base. Netherlands, I commented before, Australia, we are right there using [indiscernible], which is our partner with the production of oven, and which is a very well recognized brand in Australia. This partnership, so using their contact doubled our revenues in Australia. We're talking about really small money, about EUR 1.6 million. But again, [indiscernible] it's 2x. So we expect this progression to go on. I'm mentioning our growth in OEM for the first year, since [indiscernible] America opportunities here. We got the 50% of aspiration hobs of IKEA. The [indiscernible] start in quarter four, 2025. So this means EUR 1 million more in 2025 with a potential of EUR 5 million at full year range completion. LG. First order in November 2024. We have a turnover target of EUR 3 million in the current market environment. So this can only be better. And again, BSH, which is the brand, I would say, more strong in Europe, which has always been and will always be. We have increased our market share in terms of Cooker Hoods in the European and American portfolio. This has meant EUR 6 million more on BSH year-on-year. And again, there will be a carryover of the figures in the coming years. Together with an induction in North America is growing not as fast as Europe, but it's doubling every year. So from 2% that it was 5 years ago, now it's 12%. And despite the [ drill baby drill ], it's economic, it's better, it's good, it works well. And what we see because you need to look around also in very traditional American range cookers producer, their offer today is 50% induction range cooker, not anymore only gas range cooker. So again, there is and there will be a big opportunity here. Motors, two comments and then I shut up. Zero sales, but the project is ready. The good news is that we started -- we should have started in 2024 with [indiscernible]. We did really a minimal production. But in the meantime, [ five ] additional customers have started developing the solution, a [indiscernible] solution, for [indiscernible]. Some of them are big and very well-known names. So here the ratio is if only one of these guys start producing, we have opened another impressive opportunity for the Motor division and for Elica all together. But what is more in my point of view, important takeaway from our Motor business is that we have been through products and through a very optimized supply chain in Europe, growing shares year after year. You saw before the column of that graph -- sorry, the 1,000 units of the European market. So from 5.5 million units in 2021, the best year ever for who works in this sector up to the 4.6 million units of 2024, so with an important drop. In the same period, we have increased the number of premix motors that we have been selling. So it means that if we look just to Europe '21, so excluding [indiscernible], which have different dynamics, our market share has moved from below 30% to more than 44%. So our math -- the number of models that we've been shipping have been increasing independently from the market trend. Again, this is a strong signal that the direction is the right one. And then every economical cycle has a beginning and an end. Not sure when that will be, I would say, not even a [ jump ], but a normalization and growth of the sector, we will be the one that gets more. We are pretty sure that this is the direction. Thank you.

[Operator Instructions] The first question is from Alessandro Cecchini of Equita.

The first one is actually on the cost base. If you can elaborate a little bit more what is your expectation for 2025 at current volumes? So putting headwinds, tailwinds, all in all. So I would like to better understand what is your view on the cost base? My second question is that if you can elaborate a little bit more how do you serve the U.S. market, also considering, I mean, the potential threat of tariffs, et cetera? And finally, if you can share with us, I mean, the fact that probably you are expecting flattish market and flattish turnover. So I was wondering if you assume positive from new products on top of this and then probably still negative pricing -- price mix to arrive to a flattish more or less top line. So if I understood correct, this kind of mathematical calculation.

Thank you, Alessandro. Thanks. So I will go on the second and the third question, I will leave Stefania to discuss about the cost base. Despite I may anticipate that also, as I've seen in other peers, or supposed to be peers, presentation, we are not expecting any dip from the overall environment. What we see in terms of raw material cost, commodities basically being very in line with 2024. The big part of the effort will be our ability to negotiate better cost with our suppliers. By the way, U.S. market, how we will serve the U.S. market. We serve the U.S. market basically from Mexico with two different dynamics. So we are talking about in Mexico overall turnover versus, let's say, America in the region of EUR 60 million, of which EUR 50 million is what goes in the U.S. The rest is Canada or Central and South America. There are two different logistics agreements. This is important because it gives the responsibility of asking the prices increase or managing the additional cost. We serve our OEM -- We serve our OEM with an ex. works contract. OEM means of the EUR 50 million, let's say, that we sell to U.S. EUR 45 million - EUR 46 million. So in this case, it is our customers that go to the customs and pay the duties. So it will be Whirlpool, BSH, Electroloux and the other big customers that will pay the tariff increase in case there is a tariff increase. So the process is they will pay more, they will come to us and ask for a settlement in terms of price reduction. This gives us an advantage in terms of time. This gives us a lever for which we may negotiate to pay part on our margin but part on their margin. What we know because we have started some consultation with our customers is that for sure, in case of a tariff increase of 25%, they will pay a price increase of 15%. No way they can manage in a different way. And this is something that has been confirmed by, I would say, the 70% of the players. So it's consistent. Of course, 25% was something that we were being told at the beginning of the year. Now there has been a first delay in application and some settlement. So also discussing with some important OEMs, they expect something. They expect something temporarily. So it may last for 6 months and then settle to a lower value, but nobody is any more expecting 25%. To be in the middle means that we may have at the end an indirect effect that it's more, I would say, the potential volume decrease in case everybody increase the prices of 25% -- of 15% then the real margins of the company. Why I'm telling this and then please ask me if I'm not being clear because part -- a big part of our cost in Mexico are in Mexican pesos. So in case of -- and this we have also seen between the 31st of January and the 2nd of February. In case there is an increase in tariff versus Mexico, there will be a devaluation of the Mexican pesos. Between the 31st of January and the 2nd or 3rd of Feb, has been 4%. So this gives us also a competitive advantage. We may, I'm going to say, participate to sharing the margin hit of an eventual tariff without having a real effect on our marginality. For -- and this is for what concern the [indiscernible] B2B, the OEM customers. For the remaining EUR 12 million - EUR 13 million of brand sales in that case, the logistic agreement is duties. So we pay the duties in this case. Here, there are two things that we may do. The first one will be to change the conditions because our price today, let's say, EUR 100 already include a 15% of transport fee. So the first step is to reduce the price and have our customers paying the duties. Why? Because in any case, the cost will be less. Then for sure, since day one, we will apply price increase. What happens, happens. Here, we don't want to lose marginality. Again, the real impact that we see, together with the flexibility of the exchange rate, that will be the same, is a potential temporarily market drop because if all of the producer will play this game, the cost of appliances will write up at least of 15%. So there will be somebody that wanted to buy a new Cooker Hoods or a new French cooker that would say let's wait next year. We see a potential effect in the region of 10%, 10% on EUR 50 million very counted of sales is EUR 5 million of sales. That means, I would say, in terms of margin, EUR 1 million - EUR 2 million, also a magnitude that we can manage through cost management, through negotiation, through better mix or cutting costs. This is, let's say, what we see. Then just to give you a better picture, we're dealing with Samsung, which has been the first customer to approach this discussion, and they have made with us the clear decision to stay in Mexico because they see -- especially in a kind of product like ours, which doesn't have huge transformation time like the fridge, for example, the cost gap between a Mexican employee and an America employee even in the lowest paid region in America is the first one gets EUR 11,000 per year. The second one gets EUR 50,000 - EUR 60,000. No? So the effect on the product cost is a lot more than a 20% tariff increase, especially if this is a matter of time. So they are dealing with us in order to found the proper balance between exchange rate, margins, volumes and keep the business with us. Bosch is playing the same game. We will be meeting them next Monday in Queretaro, our Mexican factory because they want to give us more products because they see in any case that the cost balance between the two countries is huge. It's very difficult to imagine that the simple application of tariff will balance in the midterm. Your third question was on the sales dynamics. Again, we see two different [ fields ] during the year. We see a first half where, again, we see a market which is still weak. So we imagine an overall performance between, I would say, minus 2% and minus 3% versus last year. We expect in the second part, all coming from new products and distribution actions in the region of plus 3% - plus 4%. This to give you big numbers. We have seen a very good January, above our expectations. We are seeing. We are seeing a good February. We are seeing March being built on an order base. One thing that may have an effect mainly in America is some customers building up stock, considering the risk that in any case remains of tariff. And the second thing that we are taking into consideration before changing our expectation is the fact that the second -- the quarter four of 2024 was a destocking period for ourselves. You've seen from the inventory profile, but also from our customers that play the same game. No? So there is a seasonality effect that needs to be better understood in a market which is full, as I mentioned before, opportunities, but also of risk especially in common. So I would say that overall, second half of the year will be the part of the year in which we imagine the new business mainly on Cooking hitting the revenues, improving the revenues. New products for OEM, new products for B2C, so Cookers, Lhov and all the building range compression, also new products and here I am mentioning mainly the dishwasher for our joint venture in Japan. You had a point and then I leave the word to Stefania also on price mix. We expect the market scenario to be extremely competitive as it was in 2023 and 2024. I -- Maybe slightly aggressive, but I would say, in any case, very aggressive. Also reading [indiscernible] year-end reports, I have seen the expectations are similar all over the markets, the key markets, but I would say mainly in Europe. I don't know if you want to add some more color on the cost base.

I can add some color about the cost for 2025. As we said before, we definitely expect an improvement from the cost base. In terms of procurement, in terms of raw material, there will be a slightly positive effect that is coming from carbon steel packaging also from energy, but it's something that is around EUR 2 million, not more. But unfortunately, is offset negative from the copper because what we -- as you know, the level of the copper is now at a level of $9,000 per ton that is above the average of the last year. And this affects the Motor division for around EUR 2 million. So we have a negative impact from copper from EUR 2 million and a positive impact from raw material, slightly positive impact for raw material about EUR 2 million. So basically, we are flattish versus the current year. And in terms of cost, what is important to highlight that the inflation of labor cost, we expect to stay still high in 2025. Now there are 3 years that we are seeing a very high inflation for all our facilities, starting from Poland. Poland, also for the current year 2025, we expect an inflation around 10%; Italy, we expect 7% of inflation in labor cost and Mexico 8%. All of this [indiscernible] has a huge impact in terms of costs that we expect to offset with our cost management. So continue to do what we do till now, focus on cost containment, operational efficiency, R&D cost saving efficiency to offset the cost of the inflation of the labor. So I don't know if that's [indiscernible]. . .

The next question is from Emanuele Negri of Mediobanca.

I have a couple of questions. The first one is on market volumes. You provided some indication on quarterly trend in your presentation for the Cooking volumes market. I was wondering where we are now in terms of volumes compared to the pre-pandemic level and compared to the peak of 2021? And the second one is on your midterm targets. You outlined that you can achieve around 6% or over 6% adjusted EBIT margin with EUR 500 million revenues. What kind of time period do you outline for achieving this kind of target?

So if we look to the pre-pandemic volume is a difficult -- how can I say, because some has also changed in the market mix. If I think to Cooker Hoods, for example, part of the Cooker Hoods have now become aspiration hobs. But as probably we mentioned in a different situation in different call, we are strongly below in the famous 2019, so the pre-pandemic period. There was an increase of 15% between 2021 and 2020 that was partially just because of comparison here, where there were a couple of months of sales stop almost everywhere between Europe and U.S., and partially because there was a big jump. Jump in terms of demand, jumps in terms of order anticipation. Then 2023 - 2024 have been in the same second half of 2022 has been 2 years of negativity in terms of market, meaning that if I will remember the figures, we are talking about minus 7%, minus 10%, minus 7% and then another minus 4%, minus 5%. So let's say, the spike of 2021 have been fully digested by the market dimension. We did a simulation in the second half of 2024 to understand what was the number of Cooker Hoods sold in Europe through GFK data in the current year compared to the past. And what we discovered was that basically in terms of units sold, we were at the same level of 2014. So for sure, there are some changes in terms of market consideration, distribution consideration areas. But again, if I see 2023, the total units sold in Europe was 5.6 million,. In 2016 -- no, '15 it was 5.6 million. So looking at GSK just Cooker Hoods because aspiration hobs were formed late and it's different factors also in terms of magnitude. We are talking about less than 0.5 million units in Europe [indiscernible] the status of the moment. And if I look on the other side also to condensing boilers, 2023, which is the last official full year certified by EHI, which is a specific category association, 4.3 million boilers that is the same of 2017. So again, 2019 is not any more a reference. Here, same discussion, 5.5 million were sold in 2021. That was last year for whatever kind of appliances was, let's say, running around the house. So renovation anticipation and also at least for this specific segment, a lot of incentives throughout the main countries of Europe. So I hope this gives you a better picture. Mid-term. Mid-term we see the possibility to come back with lower volume, so improving, I would say, the real profitability, the real opportunity that we have the company through projects. So our view, I would say, is a 4 to 5 years view. Why? Because there are a lot of projects that need -- as I mentioned before, the progress between idea, leaflet, and catalog that needs time to be deployed. But at the same time, these 5 years do not take into account a market that changed the dynamic. We imagine a market that is exactly like it was last year. So not any [indiscernible], and we know that every economic cycle has a beginning, but also an end, especially when it is negative like the one we have been in the last 3 years. We are not taking into account any accretive M&A or geography expansion coming from, for example, what we are doing what we can do additionally in North America or in Europe. We are not taking into account any increase in the percentage of induction hobs or Cooker Hoods sold in the U.S. So we are imagining the U.S. we have 12% of electric versus gas till the end of the world. And we know that this is a, how can I say, alterative approach from our side. But as I say, we need the -- to act for the worst and be prepared for the best. Otherwise, you do wrong cost management decision. So we see this picture full opportunity. But again, we see this picture just deploying our projects absolutely, I would say, achievable, reliable and again, project-based more than intention-based or market-based.

The next question is from Carlo Maritano of Intermonte.

I just have three quick questions. The first one is on M&A. So given that your net financial position is well under control, I was wondering if your priorities in terms of M&A remains the same in next years in terms of special of targets? And the second question is on Patent Box. I was wondering if you could provide us the amount of the Patent Box registered in the fourth quarter? And finally, on 2025, I was wondering if we have to expect further restructuring costs or if the restructuring is almost over, so a small amount?

Thanks, Carlo. M&A, as I mentioned, it's geographies and products. Geography means a leap in the short term, small actions. No? So we want to take in control Netherlands, we buy a distributor. We want to take in control Canada because it's an opportunity we've always been looking at from too much distance. We buy a distributor. Investment EUR 200,000 [indiscernible] million, EUR 1 million. So this is what we have been doing, and these are the opportunities that we are currently also looking in North America, but also in some specific EU countries. Then if it comes either with something more interesting from product geography perspective, as you mentioned, we have space in our net financial position to do an investment of EUR 30 million - EUR 40 million without, let's say, starting the covenant recovery mode that doesn't mean making the wrong -- the right decisions. So in this perspective, again, what drives is the geography and what drives is especially for North America, the product. Why I'm saying the product for North America because it's important when you deploy boots on the ground distribution strategy, so you take control of the distribution, it's important to have an enlarged range of products. So if you do that and you just sell Cooker Hoods, you are going to fail. But if you sell Cooker Hoods, you sell induction and aspiration hobs, you sell some other specialties and you sell range cookers, then -- and you're good of course, then you have an opportunity. Range cookers represent, in terms of units, the 70% of what an American distributor, premium distributor, sell to its customers, which are the shop and the small chain. So it's important to have the control of a range cooker producer. We are doing very good numbers with [indiscernible], which we have a strong partnership because they produce our ovens for Europe, but we distribute their range cookers in the Southeast part of the U.S. We have a very good relation and very good partnership with [ Stihl ], which is another Italian company with a product positioned like [indiscernible], that is growing together with us in Canada. Of course, this, if I look to North America, which we still see as an important opportunity and which we still see in growth despite whatever will happen from a tariff perspective. That will be an important choice. So for sure first choice. So sustainable M&A, but in this two direction that we see strategic. The oven, no, may be an opportunity. But at the same time, what we have understood producing Lhov, which is an oven more and more and more and more complicated than a standard oven because it's three products with cross functionalities and full electronic control, connected and so on and so forth is that we already know how to produce, how to assemble, how can I say, an exclusive line of oven. No? So the next step, which we are focusing in is to developing not only the aesthetics, which is part of our, I would say, basic DNA, but the electronics in order to have the control of the new [ forward ] range, which will be deployed and showed in a couple of years, while we start, let's say, distributing and having more and more recognition of the current range, which is already a very good range and that we are producing in partnership with[indiscernible]. So if I would say product in this moment, I would say range cookers, geographies wherever there is an opportunity and we see that we can do better being there with our people. Restructuring costs, we are planning some cost reduction initiatives on SG&A. But in this moment, I would say that there are not material restructuring costs. So like they were in 2021 - 2022, when there was an industrial plan in terms of restructuring. So we were making decision on where to produce what. No? So we are optimizing our organization that I believe is a healthy process from a side to respond from a cost perspective to a market that from a pricing perspective [ is expecting a loss ]. But on the other side, also to have a better, quicker, faster and, I would say, leaner organization that always helps even when the market is going up. For what concern Patent Box, I leave the face to Stefania.

Okay. In terms of impact in Q4 for the tax benefit that is coming from the Patent Box is around EUR 3 million. You know that the calculation is coming from the benefit of sales and margin from products that are covered by patent. We are working now for the -- with the new patent box with the new rules that will affect the coming years. But for the moment, it's not clear timing that is required from tax authority. You know that we can take in account in our number only when there is the agreement signed by the tax authorities.

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

Okay. So thank you. Thanks for joining our call. Thanks for the questions, and have a good remaining part of the day. Bye-bye.

Thank you. Bye.

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