Fluidra, S.A. (FDR) Earnings Call Transcript & Summary

Good morning, and welcome to our first half 2024 results call. I am Clara Valera, Strategy, Investor Relations and M&A Senior Director. Joining me today on this call is our Executive Chairman, Eloy Planes; our outgoing CEO, Bruce Brooks; and Xavier Tintore, our CFO. They will walk you through a few slides on our results and then they will be available to take your questions. I'm also pleased to have on the call Jaime Ramirez, Fluidra's new CEO, who joined us on first June. [Operator Instructions] The presentation is accessible via our website, fluidra.com, and has also been loaded to the Stock Exchange Commission this morning. A replay of today's presentation will be made available on our website later today. With that, I hand over to our Executive Chairman, Eloy Planes.

Thanks, Clara. Good morning to you all, and thank you for taking the time to join us this morning and for your interest in Fluidra. Today, we are presenting our second quarter and first half 2024 results. Bruce and Xavier will provide more detail shortly. But first, let me summarize the key points I want to convey this morning. Our first half performance was very strong and in line with our expectations for the year. Sales in the second quarter improved sequentially across all regions with North America delivering a strong performance while Europe was affected by wet weather and sluggish macro environment. The Simplification Program continues to strengthen our business for the long term. This program, together with our actions on price led a strong expansion on gross margin another quarter. Cash generation was excellent. We made outstanding progress in working capital management and reduced net debt levels in the first half of the year. Having six months of trading behind us, we are confident on delivering our full year 2024 guidance. Bruce will give more details later. Today's call is a special one for me. This is the last earnings call with Bruce as CEO, who has been instrumental to Fluidra's success over the past six years. I only have words of gratitude for him and I look forward to his continued contribution as Non-Executive Director. At the same time, I'm delighted to welcome Jaime as our new CEO. With his extensive experience in global consumer and industrial products, proven track record and strategic vision, he is the ideal leader to guide Fluidra in the next phase of development. Jaime?

Thank you, Eloy and team for your warm welcome. Hello, everybody. I'm really excited to be here and be part of the Fluidra family. I do believe there are plenty of opportunities for the group as a leading player in an industry with attractive fundamentals. I must say that my onboarding has been fantastic and the transition was very smooth. I have had the opportunity to visit key operations, meet our teams and some of our customers across a number of countries. Delivering shareholder value is top of mind for me on my list, and I look forward to working with you in the future. Now I'll let Bruce present results in more detail.

[Foreign Language], and good morning, and thank you all for participating today on this conference call. Moving to Slide #5. Let me give some highlights on our overall performance and then turn it over to Xavier to provide more details on the financial results. Revenues were up 1% in the second quarter improving sequentially across all regions. With a remarkable performance in North America, where sales were up 7% in the quarter. Our first half performance was strong in a normalized trading environment where we still see some demand weakness in new construction and remodel. In that context, sales declined by 1% to EUR 1.171 billion. EBITDA was up 3% year-on-year to EUR 296 million or 25% margin. This reflects the strength of our business model and the actions we have been taking with consistent improvement in gross margin, driven by the contribution of the Simplification Program, partially offset by inflation and OpEx. Xavier will provide more color later. Going down the P&L, cash EPS was up 4% year-on-year. We managed working capital very well. Operating net working capital to sales in the last 12 months was around 24% compared to 30% at the same time last year, down more than 660 basis points. Cash generation in the period was excellent, placing the ratio of net debt to last 12-month EBITDA at the end of June at around 2.5x. Moving to Slide 6. Let me share our progress on the Simplification Program, which is delivering long-term value and structurally strengthening our business. We have built the program around two areas: improving gross margin together with reducing organizational overlaps and streamlining our operations, driving an agile and dynamic culture underpins these initiatives. In total, the simplification program delivers cost savings of around EUR 100 million between 2023 and 2025. With total related one-off costs of approximately 1x the annual ramped-up savings. We have achieved to date EUR 47 million of cumulative savings. And we are on track to finish 2024 delivering an annual run rate of over EUR 60 million. 2024 incremental savings are driven by global strategic procurement efforts and product design to value initiatives. We remain confident on achieving the full year target. We'll continue to provide you with regular updates. On Slide #7, I'd like to talk to you about our world-class commercial pool offering. Commercial pool sales in the first half were up 3% on constant FX and perimeter to around EUR 100 million. We see this area as a growth opportunity for the business. We provide a range of pool, wellness, fountains and lagoon solutions for a number of sectors from sports clubs to hospitality. You can see here a few examples from highly technical competition pools to solutions for hotels, motels and apartments and condominiums or HMAC. On the left, you can see our project for the European Aquatic Championship in Belgrade this past June. We upgraded in an existing Olympic pool and temporarily converted it into a 3-meter deep pool deploying our Skypool technology. Skypool panels allow an easy, safe and reliable installation with great accuracy, complying with the most stringent requirements. In the center, you can see a picture of the Masyaf Lagoons project in Egypt, where we are delivering the water treatment solution for this real estate development. Artificial lakes and lagoons enhance the surroundings and can accommodate a wide range of leisure activities. On the right, you can see a project for a resort in Oklahoma. From standard custom in a wide range of finishes, our deck equipment can add form, fun and function to any pool. The cornerstones of our success in commercial pool are an unmatched complete product offering and turnkey project services. We have a broad product portfolio, which we have expanded with acquisitions in North America. In EMEA and APAC, our specialized team can support our customers from ideation to design and execution of commercial pool, wellness, fountains and lagoon projects around the world. Moving to Slide #8. On the right side of the slide, you can see the positive contribution of price to sales performance in the first six months and the small volume decline with FX and perimeter broadly offsetting each other. Notably, looking at Q2 performance stand-alone, sales were up around 1%, driven by North America, where we saw positive sell-through in line with sell-in. As mentioned, sales in the first half were in line with our expectations for the year. New construction demand has been at the lower end of our expectations, while aftermarket has been resilient as anticipated. By region, sales were stronger in North America, up 4% with positive sell-through. This performance is a testament to our easy to do business with customer-centric approach. Our exposure to the sun belt and our mid- to high-end market positioning and continues to demonstrate we're gaining market share. Sales were also supported by the tailwind of not having a correction of inventory in the channel. In Europe, where we believe we are also outperforming the market we saw unfavorable weather in some key countries, along with some macro uncertainty and weaker consumer confidence in France and Germany. We are confident on delivering our full year guidance, maintaining the midpoint while narrowing the range. This is based on our performance to date with continued sequential sales improvement, the positive trading we have seen in July and our consistent margin expansion. With that, I'll turn it over to Xavier to explain the financial results in more detail.

Thank you, Bruce. Let's turn to Page 9 to start with the P&L. Sales of EUR 1.171 billion in the first half represent a 1.2% decline year-on-year, of which FX is a negative impact of 40 basis points and acquisitions at 70 basis points of growth. Sales in the second quarter improved sequentially across all regions. Gross margin reached 55.9%, 340 basis points higher than in 2023 being the fifth consecutive quarter with gross margin higher than the prior year period. We have seen impact of the Simplification Program, favorable geographic mix, a positive pricing read through despite declines in chemicals and deflation on raw materials with only limited impact from inflation in freight. Operating expenses reached EUR 358 million, up 7%, with some increase in provisions, inflation on labor costs and our continued investment in digitalization and R&D. EBITDA of EUR 296 million was up 3%, driven by higher gross margin despite lower volumes, OpEx inflation and some increased investments. EBITDA margin reached 25.3%, a 100 basis points higher than 2023. If we look at margins, of Q2 on a stand-alone basis, we have reached 27.6%, the second highest in Fluidra's history. The business is well positioned for when volumes return. EBITA of EUR 250 million is up also 3% with a margin of 21.4%, which is 80 bps above last year's. Below the EBITA line, PPA amortization is down 6% to EUR 32 million. restructuring, stock-based compensation and other expenses of EUR 28 million are flat year-on-year with higher one-off costs from simplification and lower stock-based compensation. Net financial result amounts to EUR 35 million, 2% lower than last year's, driven by lower debt. Tax rate was at 27% versus a 28% rate in the first half of 2023. Net profit reached EUR 112 million compared to EUR 104 million last year. As you know, we track cash net profit, a good indicator for Fluidra as we have a significant amortization charge entirely purchase accounting related that impacts our net profit and EPS calculation. Cash net profit amounted to EUR 157 million, 4% higher than last year. Page 10 shows the free cash flow statement as well as the net debt evolution. Free cash flow in the period of EUR 41 million, significantly better than last year's EUR 13 million. Operating cash flow generation was EUR 96 million versus EUR 68 million last year, mainly driven by a EUR 30 million one-off payment in 2023 related to the older long-term incentive plan. If we zoom in to net working capital component, which you have in the appendix, you will see an excellent net working capital management with more than 660 basis points improvement, reaching net working capital to sales of 24% driven by lower inventories and receivables and higher payables. On the investment front, we have used EUR 31 million, slightly below the prior year. On the financing front, cash usage of EUR 24 million, a bit higher than in 2023. Finally, net debt reached EUR 1.151 billion, down around EUR 150 million compared to the prior year period. Our leverage ratio is 2.5x versus a 3x ratio last year, nicely trending towards our 2x target. Just to remind you, we have a solid balance sheet. Our main funding facility is EUR 1.1 billion TLB in euros and U.S. dollars that matures in 2029. 80% of the TLB has swapped interest rate until June 2026. Finally, I would like to take this opportunity to thank Bruce for his support and leadership over the last six years. It has been a pleasure working with you. And I look forward to partnering with Jaime to continue to drive the business forward and deliver value for our stakeholders. And with that, I will give the floor to Eloy for closing comments.

Thanks, Xavier. Let's move to Slide #11, and I would like to summarize here a few key takeaways. We had a strong performance in the first half, in line with our expectations in a more normalized trading environment, with sequential sales improvement in the second quarter across all the regions. Creating value for our stakeholders remains our priority. We have delivered in an attractive industry, the global pool and wellness market with long-term structural growth. Our position is further improving, driven by our customer-centric approach, innovative product offering, global leading footprint and leadership in connected and sustainable pools, which will define the future winners in our sector. We are structurally improving our group. We are executing our Simplification Program, which will continue to deliver value by expanding margins and improving efficiency sustainably. Earlier this year, we shared with you the full year 2024 outlook. Based on our performance to date, we are confident on delivering our guidance. We are excited about our future and remain focused on growing profitability and delivering improving returns on capital over the medium term in an industry with attractive structural growth. I would like to thank Bruce once more for his leadership all these years at the helm. His unwavering commitment and his dedication. The measure is far behind us. It has been seven years of constant evolution after the merger, more acquisitions were made to strengthen the company in North America, the pandemic and the Simplification Program. We have built shoulder to shoulder and day by day, the global leader in the pool sector, the best platform to continue growing and evolving in an exceptional market. It has been a real pleasure to work together, to learn from you and build a deep friendship. I wish you, Bruce, nothing but the best in the next step of your journey. I certainly look forward to your contribution as nonexecutive director.

I want to thank you and certainly XT. I feel privileged to have led the company during these years. I'm very proud of our team and all that we have achieved together. I think you are in very good hands with Jaime. I'm sure that he will do an excellent job leading the company in this next phase of development. I'd like to sincerely thank the investors, analysts, customers, employees, suppliers and all the incredible people I've met along the journey. Now we open the Q&A, Eloy, Xavier and I are ready to take your questions. Thank you.

[Operator Instructions] The first question comes from Chitrita at JPMorgan.

I have three please. So firstly, on North America, where the organic growth for the quarter was clearly a very positive result. How do you see this developing in the second half? And maybe you could shed some light with regards to market trends, given some weaker commentary amongst peers and distributors.

I think there's a lot to unpack in that. So we wanted to talk about second half. We wanted to talk about peers and distributors as well, right?

Please.

So I guess if I start with, let's say, some of the distributors and retailers, I think bottom line is we're super pleased to maintain our guidance even if narrowing the range. Our sell-through in the H1 in the U.S. was positive. I think it's really encouraging to see. Bottom line is I feel like we're gaining market share. Our performance is supported by our easy-to-do business, customer-centric approach and our mid- to high market positioning. I think in addition, you have to say we play in a little bit of a different part of the value chain. And as a manufacturer, I think we have tailwind of not having the inventory correction in the channel which certainly helps and I think in particular in America, our product exposure varies slightly different from the folks that you're talking about. When I think about versus the competition, my feeling is, from an overall perspective, I think we see the market in a pretty similar fashion. If you think about demand trends as far as new build and aftermarket, there certainly can be some noise in the quarterly sales performance depending on the timing of correction of inventory in those type of channel comparables. But for Fluidra, we're really pleased. I mean we saw consistent sequential quarterly sales improvement this year and encouraged by positive trading again in July. So I think comparing ourselves to our competitors, I think we see the market pretty similarly. But if you look at it over a long time frame, let's say, three to five years, we're confident that we are gaining share. Does that give you what you need on that one, Chitrita?

Absolutely, very clear. I guess just to maybe delve a bit deeper in terms of what you're seeing in new build remodeling and I guess, service developing for the full year. Maybe if you can quantify that versus what you previously said.

So again, I'm going to say that I'm super pleased with seeing that the sell-through and sell out or sell in and sell-through was pretty much matched up in the U.S. for the first half. I think that's a sign that the inventory and the channel situation is really gone. We're confident on delivering the midpoint of the guidance. As you think about the building blocks, certainly, we believe that we are getting a tailwind of the correction of the inventory in the channel. I think that's a positive, again, showing that the market is clean. From a macro environment, I think it's still pretty mixed out there. We see new build at the lower end of our initial expectations. So still expecting around a 15% decline for the year with high-end projects faring better than the low to mid-price point that tends to be more financed, and that's certainly favorable for Fluidra. Remodel activity performing slightly better than new build. So we would expect it down up to 15%. Aftermarket, in particular, maintenance and repair remaining super resilient given their less discretionary nature. So let's call that flattish. We still see price holding up well, U.S. kind of in the 2% to 4% range. Rest of the world, more 0% to 1% with moderate increases in equipment but lower due to chemical prices. So overall, for the group, let's call it, 1% to 2%. Contribution of the Simplification Program, mostly in gross margin, inflation in labor in general costs. So our cost mix is slightly different than we were expected with gross margin better than expected, but OpEx slightly higher, but bottom line, confident on delivering the EBITDA.

The next question comes from Manuel Lorente at Santander.

My first question probably is related to trends in Europe, whether you can add up some color regarding the different behavior that we are seeing or you are receiving in the South versus the north of Europe, in particular region, area that is concerning you and especially focused in the minus 5% of the Southern Europe.

I think from a European perspective, we were pleased with the sequential improvement in the second quarter and also pleased with July where it feels like the heat finally turned on, and we're seeing positive results. Spain and France, we consider in Southern Europe were affected by weather than average weather along with some macro uncertainties, specifically in the case of France, which we think delayed the start of the pool season. In Europe, we continue to see weakness in Germany while some other markets are doing a bit better, like Austria, U.K. and Eastern Europe. And broadly, we still see weakness in above ground pools where all the other categories have really stabilized.

And that's my second question probably is on Bruce. You have perfectly detailed a number of issues pointing out the very favorable plus 7% growth in North America. You mentioned sample exposure, market share gains, no correction in the inventory channel, mid to high product positioning. So I know that it's difficult to assess probably. But do you say that this very positive performance in the U.S., it's contribution or a mildly contribution from all these factors? Or do you believe that you will highlight one or two of them versus the other?

Yes. I think that's -- as you stated, I think that's a pretty hard one. I mean we're really -- we're excited to see that the channel inventory is clean. I think that certainly helped. I think from my perspective, the validation of our customer-centric easy to do business, global leading platform is key. I think the team is executing really well with a combination of innovation, integrations, new business initiatives, kind of like our commercial initiative or our aftermarket 2.0. They're all working well, and therefore, we're gaining share. So I just want to give a big recognition to the team.

And just my final one on pricing trends since we are perceiving, let's say, very different evolution between you guys and all the distributor peers? And do you perceive any, let's say, volatility in prices going forward?

No, I really don't. And remember, on the performance versus the distribution guys, we were in the exact opposite position last year. I think you were asking the question from the other side. I think it's too early to talk about price for 2025, but this industry has demonstrated over and over the ability to take price. And I would expect us to at least offset inflation, labor, transport and some of the other components as we look forward. So no real change.

The next question comes from Jingyi at UBS. Let's give her a couple of seconds. We can't hear you, Jingyi.

Hopefully, you can hear me okay now.

Yes. we can.

I have two questions, if I may. So first one, I appreciate you don't guide into 2025 at this stage, but some of your peers have indicated confidence in new pool construction in Americas returning to growth in 2025. So I wonder, is that what you're seeing at the moment? And my second question is for the incoming CEO, Jaime. Hope you're doing well and great to hear the transition has been very smooth so far. I wonder if you'd be able to share what are the key priorities for the near term, say, the first 100-day at Fluidra. And if and when we can expect a midterm framework update.

I'll take the first part of that one. I'm encouraged for 2025. I think what we're seeing in the market with sell-through matching sell-in right now, particularly in North America means that the channel inventory is clean. I think it demonstrates, again, that the aftermarket is resilient. I mean this is a Bruce opinion I should qualify, but I think it means that we're near the bottom on new construction in the cycle. Migration, healthy outdoor living, all those things are still in play for the long haul. So we expect 2025 to be positive. And as Xavier said in his remarks, I think we're super well positioned for when volume returns.

From my side and nice to meet you. So my transition, my onboarding has been fantastic, as I mentioned before and I'm very excited to be in Fluidra. Answering your specific question. In terms of priorities, first of all, I will continue working on what Eloy, Bruce and the team have put together. It's a phenomenal platform. And when I joined the company, I mean, there is a clear direction on how we accelerate growth in Fluidra, number one. Number two, how we continue with the transformation of this business, the simplification program they put in place that will continue to be an ongoing process for the company on how we become more agile, how we speed up a lot of how we do things in the business. At the same time, working on innovation, as Bruce mentioned, is a key priority on how we can differentiate ourselves from our competitors. And last, a piece on digital and technology. It's a real need that, that can make a critical difference for the business, can help the transformation of the business and can make us way better. So growth is a key focus area for us. In terms of when you will be able to see more detail on this, that's going to be in the Capital Market Day. That's going to happen in Q2 of 2025, and I will be working with the team on bringing all the information for all of you to give you a clear perspective on the future of Fluidra going forward.

The next question comes from Francisco Ruiz at BNP Paribas Exane.

Well, first of all, I would add to the thanks to Bruce for his fantastic seven years, all your vision. All we have learned with you probably in my case, I will need another two or five years to learn a little bit more about this business. But thank you very much, and I hope to see you in one of the events for the company were organized in the future. So most of my question has been already answered. I would like to insist a little bit on the inventory in the channel because one of your -- well, two of your competitors distributor Leslie's and Hayward commented on some headwinds or leaner inventory situation indeed. And also if you could comment with the situation in Europe. My second question is on the free cash flow. It's a technical question. You have other operating cash flow last year of EUR 60 million negative this year, only EUR 20 million. Is this the EUR 30 million payment that you have commented Xavier? Or is this started to have postpone some of the restructuring payments for the second half of the year? And last but not least, on working capital we have seen this reduction in the working capital versus sales. Last year, we did it extremely well in Q4. What's your expectation for the working capital to be at the end of the year?

Thanks for the kind words. It's been a great experience for me. So happy that it's been good both directions. I think from an inventory perspective, I feel like I've said it a few times today, I don't want to overemphasize it, but at the same time, we work very hard to try to match our sell-in with sell-through. And when you start to see that matching after all the volatility that we've had over the last couple of years, with COVID and the supply chain. I think we're really pleased and convinced that the inventory in the channels is clean. And I think that's the best testament to it. If you remember, the inventory in the channel was a much more significant factor in North America than it was in Europe with us being both the manufacturer and the leading distributor in Europe, you don't have that same amount of buildup. So we feel like from a European perspective, again, the inventory in the channel is pretty clean. We don't believe that we're building going into the future. So we feel like we're in a good position. I'll pass the free cash flow on to my friend XT.

Yes, I'll take the next two. The free cash flow question, simple answer there, Paco. It does reflect the one-off tax payment related to the old long-term incentive plan that happened in H1 2023. It's around EUR 30 million of the variance. So there's no delay in payments for restructuring or anything like that, it's just that one-off payment impacting the cash flow. And then in terms of net working capital, the teams have continued to do a fantastic job in managing net working capital. We have performed extremely well in Q2 as well, but we still target 30% sales by year-end of 2024, the target that we shared with you at the beginning of the year. So that's still a valid target.

Our next question comes from Alvaro Lenze at Alantra.

Also, congratulations to Bruce on your achievement and welcome, Jaime. Just we have seen a very different performance or are these different messages between distributors and manufacturers you're both. I just wanted to know if you could maybe make a theoretical exercise. If you were to speed Fluidra within manufacturing and selling products and the distribution. How those two businesses have performed? I don't know if that's a bigger driver of performance or is more -- or your performance has been more impacted by the difference in the geographies. So I think that could be helpful.

Thanks for the kind words. I think it's a really difficult question to answer. And I think where I would start is just by going the go-to-market strategy for us is very different in North America than it is in Europe. So in North America, we play as a traditional kind of branded manufacturer where in Europe, we're both the manufacturer and the distributor and I would also say the COVID surge, if you will, was much stronger impact in North America. And therefore, the supply chain impacts were greater. So again, I feel really good about how Fluidra is positioned in both of the markets and how we're performing versus our peers.

The next question, we've got three more questions. So the next one comes from Tim Lee at Barclays.

Congratulations to exceptionally well results and for the best [ puts ] for your future development. And I think most of the questions have been answered, but I just want to understand a bit more about the Europe market development. So as you mentioned, there were sequential improvement in the second quarter and also in July. So I'm not sure whether you have any sense about when the Europe market can turn into positive sales development. Is that something that you expect to happen this year or probably next year. So I would like to hear what you can about the market development in Europe.

I think Europe had a very difficult weather challenge in Q2. We usually say that weather is plus/minus 1%. I have to say I believe it was more than 2% in the first half of the year. I'm super excited to see how hot it's been in July, and that summer has finally come and to see the pace pick up. What exactly would be in the back half, I think, is a difficult call. But in the end, I think we do see Europe returning to positive in 2025.

And my next question would be about the end market developments, especially on the new builds you mentioned it's probably at the lower end of your expectation and decline for the full year. Can you differentiate a little bit like if you look at in the U.S., how do you see the -- what are the developments respectively?

It's quite difficult to hear you, Tim. I think I heard the question. Could you give more color on the new build expectation U.S. between -- U.S. versus Europe, let's say, on your expectations?

Yes. Correct.

I actually think it's going to end up being fairly similar in both the U.S. and Europe for this year at around down 15%. So again, it will vary in Europe country by country. We see Germany and France a bit on the higher end and then some of the other Southern like Iberia and Peninsula in a little bit better shape, so it varies. You could say the same thing in the U.S. I mean we see the sun belt performing better than we do, the snow belt or the seasonal markets. And again, I think in all markets, we see the higher end -- mid- to higher-end nonfinance pool performing better. As far as the longer-term outlook, it's always a difficult one to call. I'd be say, too early to say what we think it will be for 2025 but I still believe in the long-term correlation or soft correlation that we've seen for, I don't know, 30, 40, 50 years in the industry, which is a link to new housing starts and that link is about 10%. So clearly, we are very low against what that runway would be, at least in North America. And I would expect over time that it would return towards that norm.

The next question comes from Christoph at Berenberg.

It's three from my side, please. First one regarding the follow-up on the statements made regarding the market share gains. If you could just let us know if there was more pronounced for specific product categories and also in specific regions or states or if it's really quite similar across the board. And then if you could also clarify who you're taking that market share from? Is it your large competitors? Or is it more from the fragmented tail of the market?

So there's not great industry statistics. And so we do this in a number of different ways, Christoph. So interesting question, tough question. But I think what I would point you to is don't get hung up on quarter-over-quarter, especially in a space like this in a seasonal space where we've gone through something like COVID. I would just steer you back to the run rates over, let's call it, a 3-year period or a 5-year period. And it's impossible for me to say exactly who or where they are coming from. But I think we've had good success with our innovation, specifically connected product, where we are a leader. I love the expansion into some of the categories like commercial, ladders and rails, white goods that some of our acquisitions have put us in place to do, and therefore, being able to take advantage of our really broad global footprint. So I just feel, again, like the team is executing very well on our customer-centric approach, and I think it shows up in the numbers over time.

And the next one would be regarding the commercial market. So you mentioned also briefly in the presentation as growth area for the group for the years ahead. Just if I look at the appendix of the presentation, I mean we see that in Q2 or your commercial segment actually had an organic decline, a slight one-off of minus 1% that came, I think, from a quite strong increase in Q1, around plus 10%. So just trying to understand what happens there. And yes, if what kind of trend you expect also in H2?

So we like the commercial space long term because, certainly, we feel like we're under-indexed to the market. H1 year-to-date commercial pool is still growing. In Q2, we saw a bit of a slowdown in EMEA impacted by some timing, some macro uncertainty, specifically in France, and I think the unfavorable weather. On the other hand, North America continues to gain momentum with really strong growth. Commercial represents about 10% of our demand. And again, we're underrepresented. So I think it's a great growth opportunity for us long term.

And then the last one is just a brief technical one on the net financial results, so probably one for Xavier. Just wondering what is the stand up between Q1 and Q2 here. I think we went from EUR 13 million in Q1 EUR 22 million in Q2. Are there any extra one-off effects in there? Or what has driven the increase?

There's nothing there than a little bit of higher debt, higher use of credit lines and a little bit of ForEx impact nothing more.

The next question, it comes from Luis de Toledo from ODDO.

First to working capital improvement, but specific to the improvement in trade payables. Also in other payables, I don't know if there's situations to that, you have reiterated your working capital target. But if you've noticed any structural improvement, is a seasonal factor or something you can comment on that front?

It was difficult to hear your question. Could you repeat it? You mentioned the improvement in payables. I understood you meant, is it returning to the structural level where it should be? Or is it seasonal? I think that was your question. Did I get it right?

Yes.

It's getting back to a normalized level. Remember that in late 2022 and early 2023, we had a significant level of inventory that we were trying to work out, both ourselves as well as inventory in the channel. Therefore, our plans and our procurement teams were running at very low volumes. We are, as we said, since late last year, back to normal and therefore, plants are running at normal speed. And therefore, you're seeing that volume payable. So we are going to see a little bit of help on payables, as you have seen in H1, you will see that also in H2. There's a little bit of a seasonal component as well. As you know, we always tend to go up in working cap in especially Q1 and Q2, and then we come down in Q3, Q4.

And the next question comes from Bank of America, I think from either Alex or Anna, I'm not quite sure.

This is Anna on for Alex. Just a quick one from me. We saw your comment on the July trading being positive and just wondering if you could give us a little more detail there? Is that across geographies? Any key areas of strength to call out?

Obviously, July is not closed on a book. And so we just wanted to give a little flavor. But we were super pleased to see that July was strong around the globe. So it was really in all our markets.

That marks the end of today's call. I'd like to thank our speakers and participants for joining the call. And if you have any further questions, please contact the Investor Relations team. Thank you.