Elica S.p.A. ($ELC)

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Elica Group First Quarter 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Luca Barboni, CEO. Please go ahead, sir.

Good morning, everybody. I'm Luca Barboni, nice to speak with you, and welcome to the Q1 results call. I will start walking you through our agenda. We will first discuss about Q1 2026 highlights. Then we will analyze the industry trend, sales dynamics, financial review and then a section of closing remarks and outlook. So highlights of Q1. There are macro concerns still persisting, geopolitical issues, tensions and macroeconomic concerns, but margins remain resilient, still there despite the drop in the Q1 of EUR 7.6 million in terms of top line net sales. So we closed the Q1 at EUR 111.2 million with minus EUR 7.6 million versus last year, 6.4% minus. That's organic, without ex rate effect will be 4.8%. In this environment, very complex, we still see positive dynamics mainly related to our brand. We see good performance in Europe and Middle East of our brand sales, still growing brand sales in North America. America has 2 different behaviors in terms of market. Our brand is performing well. OEM business is facing strong headwinds due to the significant weak of market demand, emphasized by destocking activities from our customers. Concerning the Motors, the ventilation phase out planned related to Far East competition and in-sourcing activities of our specific -- some specific customers but neutral impact on margins. Despite the drop, the net sales, the minus 6.4% of net sales, as I said, EBIT adjusted is EUR 0.5 million. We partially we fought to offset the drop in volumes due to our OEM business in the U.S. -- in North America, sorry, and partially offset by recovering plan worldwide strong discipline in terms of cost control but -- and mainly specifically capacity utilization in our Mexican facility. So following the drop of sales, we made a clear plan to decrease the cost and as well as people workforce working in our Mexican facility in order to minimize the impact in the -- at the margin level. Saying that, we confirm obviously the project, the investments that spoke about Cooking transformation. So what I mean is new products, trade marketing activities, these activities are confirmed. Obviously, we will prioritize them according to the business results and according the short-term forecast that we have in front. So project names, they will not change. What they will change, may change is the priority and the timing as well. Net financial position. We closed the quarter at EUR 57.6 million, minus EUR 10.6 million versus last year. This is mainly due to 3 effects: EUR 5 million delta opening balance due to strategic projects and Stefania will explain later on, negative impact of net working capital. We catch -- we caught an opportunity in terms of cost last year. We bought a commodity, specifically copper at a very good price. And then now the entrance of the materials, so the delivery happened in Q1. That's why a seasonal impact in the net working capital that we are going to be solved by middle of the year. As I said, investments confirmed CapEx in the first quarter increased focused mainly on cost competitiveness and new projects, even in combination with the last week exhibition in Milan, where we presented our new product. I leave the stage to Stefania.

Good afternoon to everybody. Going forward to the presentation, we go into the industry trend, Slide #5. Here, we can have the trend of the cooker hoods market related to the Europe. As we can see, the trend in the Q1 is unchanged. It is slightly negative, minus 0.5%. But if you check -- if you detect this data's value, this data will be negative because in terms of value it is minus 5.6%. Both the region for the cooker hoods in terms of West and East Europe has been negative. For some example, some important markets like Germany is minus 5%, Italy is minus 3% and France is minus 4%. Going to the aspiration hobs trend is confirmed the positive trend that we saw to the last year, plus 10% in the first quarter with some specific market that is growing a lot like France that is performing plus 22%. And this trend is carried on by the shift of the demand from cooker hoods to the aspiration hobs. But it's still a market where there is an important promotional activity pressure, and we will see also later on with the slide, the specific slide about the trend of the medium price. But if we take this data in terms of value, this trend will be flat. It means that it's growing in terms of volume but it's not growing in terms of value. In fact, going to Slide #6, here you can have the trend of the medium price for the aspiration hoods. You can see that the declining is still minus 8% in the Q1. So I think that is one of the highest trend -- negative highest trend of this indicator. The same we can say about the cooker hoods because the medium price for the cookers hoods is minus 5%. That is confirmed that the consumer shift to the lower price point driven by the geopolitical and economic uncertainty. Going forward to Slide #7. Here, you have the trend of the market in North America, the industry shipment that we're gathering from the association of the home appliances manufacturer. Ventilation is minus 15%, so worsening with respect the last year. But what is important that all the other market that is a reference market for us that is the market -- the same market for the ventilation related to the cookers, the Cooking market is minus 5% but with a very negative trend in the last 2 months, February, minus 9%; March, minus 12%. So double-digit decline respect the previous year. Also in this case, the demand is mainly related to the replacement driven by the consumer that prefer to go to the lower price point. A very quick overview about the data related for the heating segment, Slide #8. This is the data that we are gathering from the European heating industry. Unfortunately, it's a little bit delay in terms of collecting the data. So we are showing you the trend of the last quarter of 2025. But as you can see, and it is referring only to the gas boiler related to the main market, Germany, Italy, Netherlands, U.K. is still negative, minus 9%. So not recovery of this market, and we will speak later on our performance in the Motor in this specific segment. Going forward to Slide #10, the sales dynamic. In terms of sales dynamic, as we said total turnover EUR 111 million. That means minus EUR 7.6 million versus the previous quarter, minus 6.4%, out of which with a negative organic sales for EUR 5.7 million, minus 4.8% and with also an important impact in terms of currency for EUR 2 million in the first quarter, mainly related to the U.S. dollar, around EUR 1.2 million and EUR 0.7 million related to the Japanese currency. In terms of performance between Motor and Cooking, Motor is affected, as Luca said before, by the ventilation phaseout, and we recorded in this quarter minus 10%. But we can see that ventilation is negative but the heating despite the market trend is slightly positive that is confirmed that we continue to gain market share in our customer. So what is concerning Cooking in terms of organic growth is negative 3.3%, minus EUR 3 million, as we can see later on, mainly relating to the OEM American customer and an important impact of the currency for EUR 2 million for U.S. dollar and Japanese currency, as I said before. Moving forward to Slide #11. Here, you have -- we can start from the performance between the region. America, minus 24% versus the previous quarter, out of which organic is minus 17.8%. OEM customer is affected by the important and significant market demand decline but also from destocking activity that they are feeling in the first quarter but we recorded a very important -- we continue to see important growth for organic growth for our brand in America. EMEA, positive, plus 1.5%, EUR 1 million more related to the Cooking both brand and also OEM customer. Asia, minus 7.3% that is mainly related by the business by the China discontinuity. As you know, we started in the second part of the last year to stop the sales with our brand, Puti brand because we transformed our commercial facility and strategic upsourcing in China. And the remaining negative impact is related to the currency. If you move to the breakdown for what is concerning the Cooking between OEM and brand, we repeat again OEM negative but as we said, more related to the OEM North America customer, minus 10%, equal to EUR 3 million less versus the previous quarter. Positive and resilient performance of brand that is positive for America performance and European performance, thanks to the contribution of the new products in Europe, thanks to the contribution of our direct strategic sales in North America. But in this number is negatively affected by the trend of the Puti brand due to the discontinuity and the stop of the sales of Putian. I spend just a few words on this chart for the breakdown between OEM and brands because as we also announced the last year, we decided to restate the number of these figures in order to be more properly close to the Elica brand organization. What this means that what you are seeing -- what we see in the OEM customer sales are related to the product sales where the project in terms of specification features are defined by the client, by the customer. They sold this product using their brands and the distribution, the commercial strategy are driven by them. In the brand figures, we are reporting all the sales related to products where the design and the feature are defined by the Elica Group with the full control of the distribution and the commercial strategy and also the go-to-market activity. That means the product that we are distributed through our catalogs. This number includes also the sales of the product that we are distributing through our direct distribution channel in North America. And so is embedded also the sales from our America distributor that is not belong to the Elica brand. This is the reason why you see a different percentage between OEM and brand because now brand is 68% and OEM is 52%. In the last part of the slide of the packaging, you will find also the total restatement related to the full year 2025 figures in order to have a more clear understanding. We will go through the next Slide #12. I leave the stage to Luca Barboni to go through this slide.

This slide represents at the end of the day, the brand Cooking company strategy. It's a comparison between Q1 2025, where we were at EUR 55 million and to Q1 2026 with the bridge representing 3 main effects. First is, as also Stefania said, according to market data, cookers hoods are struggling volumes and also in value as well as we are not an exception. But new products, including new aspiration hobs are recovering all the minus provided by cooker hoods in comparison with last year. So it means that the strategy to sell in bundle in some cases, products together in the Cooking sector instead of only ventilation is paying us in terms of net sales and then as well as margin and so on. One another note that is important as well, aspiration hobs. Here, you see EUR 0.5 million that doesn't reflect the true in terms of quantities because as Stefania said, market today is flat in value and growing quantities. We are growing quantities more than the market so that we provide also a plus in value. Obviously, we have the widest range in Europe of aspirations from premium to mass to low end. And mainly this number comes at the moment from mass market model. Making -- representing the percentage of what we call additional appliances, cooker hoods and aspiration hobs, as you see below in the diagram. Today, 7% of our sales come from something that is not strictly related to the ventilation. 23% comes from aspiration hobs and 70% comes from cooker hoods. This picture represents that our brand channels worldwide, excluding China because of this category project. It's not including OEM, this for clarity. Okay. We can move to the next slide. Let's make a deep dive in the U.S. and the North Americas in Americas as well but maybe in North America. The schematics below, you see which is the impact of brand versus last year, 2025, plus 3% performing with an ex rate headwind, strong headwind. And the OEM is minus 37% that together combined is minus 24%. That is very similar, by the way, to what was reported by Electrolux in the same division a few days ago. So market is negative for 2 effects, demand, customer waiting, spend less, housing market down and then the destocking phase. But there is a -- if we exclude the ex rate because last year, we were something like $1.05 per euros. This year, we are $1.19, something like that. If we look to the ex rate, the organic growth of our brand was plus 14%. That's quite strong, double digit. This is to confirm that what we are doing, this is our strategy, what we are doing in terms of distribution. So go direct is working and we are combining the sales of our cooker hoods with our new products that you see on the right because each one helps each other and to sell more. And this is the bundle benefit of going direct with a large range of products for Cooking sector in North America. We changed a lot our balance in North America, looking to this picture years ago. Today, we are 43% brand, the sales go through our brand network and in fact 57% through our OEM. This was strongly different a few years ago. We should push with our brand and do more in the future, obviously, while keeping our OEM, working with them, providing them the maximum support in order to have them winning in the market but in parallel, promote our brand, and we are now launching a new brand for a specific channel that is not only Elica, it's going to be Arietta in this case, where in order to play with our products in the mass segment of the market. Well, a few words last week, there was the [indiscernible], a few words but important ones for Elica. I would like to highlight 2 points, 2 topics. The most important is the new aspiration, induction aspiration hobs built with our ID technology, induction design technology, our technology that is under our project. It's owned by Elica. It's -- for the first time, Elica, together with the user experience, together with design, together with the function is a combined technology with a strong technology where we have a lot of patents as well in order to provide the best consumer experience in the product with the product. This new product was presented this exhibition is going to be launched in the market next year, not now. Sales are planning for first quarter 2027 is a niche premium positioning, benefits come from the display that is user-friendly, [indiscernible], as you can see from the aesthetics, where you can navigate, so high usability and plus also the specific performances of our new electronics and inductors where we reached the maximum efficiency in terms of power consumption, the maximum useful space on the top that is flexible way where you can move your pot and then the will follow your pot, that is unique in the market. Together with these new products, this new launch, I would like to highlight the concept that for the first time, Elica presented as a Cooking company providing -- showing a Cooking range that is many Cooking ranges, by the way, bundles for bundle sales, everything designed with a unique leitmotif, unique painting that is matte black finishing of the product. Well, we can go ahead.

Coming back to the results and going directly to the P&L, Slide #24. In terms of net sales, I think that we have already commented all the trend that affected the results. In terms of profitability, EBITDA EUR 6.2 million less EUR 0.8 million versus the previous quarter and adjusted EBIT EUR 0.5 million, EUR 0.6 million less the previous quarter. The gap is mainly affected by the volume drop and exchange rate. On top of this, there is also the impact of some investments and particularly in trade marketing activity that some activity was not really fully in place during the last quarter of the 2025. But we offset half -- more than half of this amount of the negative effect. Thanks to the resizing in terms of SG&A and also in terms of industrial capacity -- footprint capacity, mainly relating to the variable cost. If you go down in the P&L, we see a reported EBIT negative EUR 2 million affected by a total value of nonrecurring item of EUR 2.4 million. That includes also the impact of the former CEO agreement but also very important, other action that we put in place to resize the organization according the business evolution. Financial items are quite in line with the previous year, EUR 1.7 million. And going to the net profit, negative EUR 3.3 million. Group net profit without the Ariafina minority, negative EUR 3.6 million. Going to Slide #25. In terms of net financial position, the debt profile is affected by the delta of the opening balance and the operating cash flow seasonality weak. We can see that EUR 10 million higher in terms of net financial position -- negative net financial position are related to EUR 5 million of opening balance related to the project that we carried on during the last year, Steel, the Motor division, China, the activity done for the buyback. The remain EUR 6 million are related to the negative operating free cash flow due to the lower EBITDA but also an increase of CapEx, EUR 2.8 million of CapEx versus EUR 1.9 million in the previous year that is incremental for EUR 0.9 million to support the cost competitiveness project that we are carrying on also the Cooking transformation part. On top of this, as I said, there is also a negative impact of net working capital seasonality. You can see that the stock at March '26 is EUR 93 million versus the last year that was EUR 91 million. There are around EUR 2.5 million more of raw material inventory that are related to strategic raw material that we the opportunity to incoming this part of raw material to benefit of some, of course, lower than the market because we hedged for part of this raw material the level during 2025. We expect normalization during the second part of the year in terms of net working capital. There is also a positive effect, EUR 1.2 million of M&A impact because we closed the transaction or the final divestiture for the India joint venture, and we cashed in EUR 2.2 million for the remaining stake, and we finally paid the last tranche to acquire -- to buy the total control of the China facility for EUR 1 million. The leverage adjusted is 2.1, so below our covenant. I leave to Luca the stage for the closing remarks.

Thank you. Takeaways of Q1. Sure, a positive dynamic of our brand, either in EMEA or North America. Thank you to the new products as well as trade marketing activities, trade marketing mainly in Europe, still significant pressure on OEM in North America, double-digit decline together combined in the demand -- of negative demand combined with the strong destocking activities of our main customers. Margin still protected despite the big volume drop, thanks to our flexibility, the process of capacity resizing in -- mainly in Mexico and then our cost containment activities. Just to give you an idea, we offset 50% of our losses due to volume drop with flexibility capacity and cost containment activities. What we expect? Let's give a short-term view. We see a Q2 identical more or less very similar to the Q1. We still see new Cooking products and new direct distribution approach in Europe and North America delivering growth but geopolitical uncertainty affecting still the North American market, mainly OEM business, as I said, the weakness. Q2 more or less similar to Q1. Market is going to be negative. destocking is going to be still there. Then after Q2, we expect that this destocking phase will end -- will be over. This is what -- this is our expectation as well as our customer information coming through our commercial network. And so we could say that concerning the OEM business in North America, the H2 is going to be very similar to last year or at least recover versus this direction. There are -- we see in front of us some emerging phenomena like raw material, energy costs and tariffs in North America that obviously, we monitor them carefully. We know that some of them are happening today like tariffs. We reacted in North America with the price increase. So this is happening in April with our brand and then our OEM is under negotiation because of there was a quite important change in the calculation of the new tariff for steel and aluminum for finished products and deliveries in North America. And then due to Iran crisis but also some other regulations, we expect raw material cost increase, even though this year, we hedged basically all of our commodities as well as our energy. But sooner or later, this will happen. We have a plan. We have an action plan to implement once we see this cost increase reflected in our business. We are planning to implement some pricing adjustments with new catalogs that are going to be delivered starting from this year, September 2026. In case after the complete assessment of the raw material -- the cost of raw material components increase, in case something is going to affect us before, we will react before. The plan is ready. We developed in a way that we are very quick and reactive once we see a cost variation on cost of our product. So focus on margins, obviously, thanks to our flexibility and our strong negotiation attitude for the rest of the year, as said, projects strategic projects will not change. CapEx priority, yes. This will be driven by business as well as by forecast in the short term of the sales and strong management of net working capital because we should take care, obviously, about our debt profile. This is all from my side.

[Operator Instructions] The first question is from Emanuele Negri of Mediobanca.

I have a couple of questions. The first one is just a clarification. I think you mentioned during the presentation that you are basically hedged in terms of raw material and energy cost. Just a clarification, is this for the entire year or just for part of the year? And the second one is your selling price dynamics, given the fact that you are hedged in terms of raw materials but some inflationary pressure may at a certain point in time emerge. Are you kind of negotiating your selling prices with customers with both OEMs and also with your price list just to pass part of this inflationary pressure to your customer?

Okay. Thank you, Emanuele, for the question. I start from the first one relating to the raw material. Yes, during -- in terms of hedging of raw material, as usual, we covered the main and critical raw material relating to the steel, aluminum also for energy and gas for the -- almost the main part of the year. So we have covered unless there is some negotiation -- a strong negotiation with the suppliers. But more than 80% are covered. Regarding the other raw material that for us is very critical copper. We did -- related hedging activity last year. So also for this, we are almost covered for the whole year of according to the trend volume of Motor, we are almost safe for the 100%. That is clear, as Luca said, we now start to understand how it means in terms of the next year, the trend of the raw material that we are seeing now. But both for the current year, in particular for the Q1, there is no material impact. That is important to understand now also what we will have in terms of negotiation for logistic cost because energy and gas cost will affect also logistic costs, plastic, and we are working, but for the current year, we are almost covered. For the part related to the selling price and the action that we are carrying on, I leave to Luca at this stage.

Okay. Well, let's distinguish Motors business, if when we are going to hedge for the 2027, the copper, aluminum steel, if we are going to face a cost increase, we will deliver a price increase accordingly the same amount of the impact in terms of cost. This is how the Motors business works. Then let's speak about the Cooking business, so cooker hoods, aspiration hobs and all the rest. There are 2 different situation. One is North America, U.S., mainly in Canada. where the tariffs are today playing a role, steel tariffs. And so we decided to deliver a price increase to cover this cost, and this is happening today. So for brand sales in North America is happening today. We will start the negotiations with our OEM business from now to June, these 2 months, we will start to negotiate with them in order to deliver a price increase also to our OEM business in North America. Concerning Europe, we -- as I said, most of commodities are hedged. Still some potential cost -- additional cost can emerge from what Stefania said, oil, plastics negotiations, obviously, suppliers are pushing for price increase as well. We are negotiating strongly. In case we cannot manage, we will deliver a price increase in advance. Otherwise, everything will be reflected in our catalogs that is going to be delivered starting from September this year. So we will enter negotiation also in Europe from September on. In case it's necessary, we will anticipate some of negotiation or discussions for price.

The next question is from Carlo Maritano of Intermonte.

I just have a couple of questions. The first one is on Middle East. So I was wondering if you can remind us what is your -- what's the weight of this region on your revenues? And the second question is on CapEx. So in the first quarter, there was an increase in CapEx. What should we expect for the full year? So do you expect an increase or maybe there could be some investment can be postponed in the this?

Thank you, Carlo, for the question. I'm going to the first question related for the Middle East. For us, Middle East, the weight is a minor weight because it's the 1% on total revenue. It's around -- according the data of the last year for Cooking division are mainly EUR 3.5 million and for Motor division, it's EUR 1 million. In fact in the first quarter, the total impact is around EUR 1 million negative impact on the Q1 results versus the previous year but we were able in Cooking to offset thanks to the good performance of our EMEA and North America brand in terms of brand. For the second question related to the CapEx, yes, you are right. During the last call, we said that our guidance for CapEx for the current year will be higher to the previous year because we closed the previous year with EUR 14 million, EUR 15 million of CapEx. The current year, the guidance is around EUR 20 million of CapEx. And we saw during the first quarter that we increased the level of spending that is clear that according to the trend of the business, according to the dynamics of the market, the context, we are ready and we are flexible to modulate our spending over the time based on the cash generation. So we will monitor during the next months, the trend of the business, and we are able -- we are flexible to modulate to shift over the time, the level of CapEx without cutting what is a priority for us. I mean, cost competitiveness, mainly for motors and Cooking and the new products. So this is our approach.

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

Okay. Thank you. Thanks a lot, and bye-bye.

Have a good evening. Bye-bye.