Interpump Group S.p.A. (IP) Earnings Call Transcript & Summary

Good afternoon. I'm the conference operator for Chorus Call. Welcome, and thanks for being with us on this call covering Interpump's first quarter 2026 financial results. Just a reminder that everyone is in listen-only mode, and following the presentation there will be a chance to ask questions. If anyone requires help at any point during the call, you can signal an operator by pressing * and 0 on your telephone. At this time, I'd like to hand the conference over to Mr. Fabio Marasi, CEO of Interpump. Please go ahead, sir.

Thank you. Thank you. I'm Fabio Marasi, Chief Executive Officer of Interpump Group. Good afternoon or good morning, depending on your time zone, and welcome to this conference call on Interpump's first quarter 2026 financial results. Before starting, I would like to inform you that Elisabetta Cugnasca, former Head of Investor Relations, recently left the company and that starting from June the 1st, the new Head of Investor Relations will be Mr. Federico Pavesi, joining us after a long experience in CNH and Pirelli, to whom I formulate my best wishes for his future within Interpump Group. As usual, I must draw your attention to the disclaimer slide inserted in the annex part of the presentation that I hope you are able to download from our website. I will start the Q1 2026 presentation, as always, with past and future numbers. Past numbers: on organic basis, in the first quarter 2026, we had a 2.2% organic growth, positive number for the fourth consecutive quarter, and a -2% EBITDA with a 60 basis point EBITDA margin dilution, mainly explain by the different contribution from the two divisions, with a stronger hydraulics and a weaker waterjetting performance. Future numbers: both the results of the first quarter 2026 and the sales evolution for the month of April are slightly better than our expectation.

Given the highly uncertain geopolitical situation, we would rather reaffirm our 2026 organic sales guidance, which sits between -2% and +3%, while hoping for greater visibility and an improved outlook over the coming months. On profitability, as is customary in May, we are also giving more precise indications, and notwithstanding the headwinds arising from a tougher product mix, we anticipate an EBITDA margin for the full year of between 22% and 22.5%, reaffirming once again our most important goal and focus, namely protecting our profitability in every market environment. I will provide more color on our 2026 expectation during the second part of my speech. Now, let us turn with greater detail to the most important first quarter financial KPIs: sales, EBITDA, and cash generation. Regarding sales, the first quarter 2026 confirms trends that have been underway for over a year. The hydraulic division is posting a sequential and very comforting acceleration in demand, whereas waterjetting is up against a very tough comparison base with the first part of 2025. This evolution is entirely consistent with our expectations as summarized in the 2026 budget, and once again, it is the clearest possible evidence of the beauty of the diversification that has always characterized Interpump Group's business.

To get into specifics, we believe the hydraulic division hit its lowest point at the close of 2024, and we should now anticipate that the sequential gains witnessed over the past four quarters will carry on through the rest of this year as well. Within the key categories, agriculture, earthmoving machinery, and construction are performing exceptionally well, posting double-digit expansion, while others—adaptors and industrial vehicles, for instance—were less favorable following a number of robust quarters. Over in the waterjetting division, food and beverage—by far the largest market application—along with chemical were hit hardest by the more demanding comparison against the equivalent period a year earlier that we already referenced. Cleaning, which ranks as the second-largest application field, did very well, achieving 14% organic growth during the quarter. Regarding geographies, the principal countries in which we operate—Europe and the US—delivered a strongly positive result, with 7% organic growth, whereas the weak showing across Asia, and especially China, stemmed from the initial portion of the large Hammelmann order supplied in that region during the first quarter of 2025. Rounding out the picture for the quarter, it's worth stressing the highly favorable commercial backdrop—both concerning projects being discussed within the waterjetting division and the robust order intake during the quarter, with a book-to-bill ratio exceeding 1.5 times.

Now turning to EBITDA, I'd like to circle back to a point I raised in my opening remarks. In the first quarter of 2026, we safeguarded profitability even with a significant headwind arising from the shift in business mix — one marked by a larger contribution from the comparatively less profitable division, hydraulics, relative to waterjetting. Favorable sales momentum in the pure mobile hydraulics application fields, the area that had been hit hardest previously, made it possible to realize solid operating leverage at companies such as Walvoil and White Drive, and to lift overall performance at the businesses most affected by the downturn of the past three years, while simultaneously offsetting the softer contribution from companies with a greater focus on adaptors of industrial vehicles. Turning to the waterjetting division, if we set aside the mega order that Hammelmann delivered in China during the first half of last year, the sales trend confirms the sound long-term patterns observed in recent years regarding the greater attention industrial operators are paying to the environmental impact of their economic activities. The quite compelling order intake in Q1 2026 and the quantity of projects currently under technical discussion in this area simply reinforce those patterns. Now moving to cash generation, free cash flow for the first quarter rose by 10%, from €29 million to €32 million, extending the solid improvement already achieved over the last couple of years.

So it's key to look at the individual pieces. Operating cash flow matched last year's figure, and the 45% drop in CapEx — from €35 million down to €19 million — more than made up for the higher trade working capital absorption that came from a stronger top line. In short, another quarter of reduced inventory absorption plus lower CapEx clearly shows the group is honoring its pledge to improve these KPIs following the extraordinary peak of 2021 and 2023. So we think the first quarter 2026 cash generation result is satisfactory and consistent with our aim to repeat, and perhaps surpass, the excellent free cash flow generation levels of 2025. To round out the EBITDA overview, it's worth stressing that the group managed to offset the US tariffs' impact by raising prices or passing them on to customers. The newly acquired companies had no dilutive effect at all. And to wrap up on profitability, I'd like to point you once more to how stable our EBITDA margin has been over the long term, which in my opinion is a perfect illustration of our group's strength. Through our diversification and operational flexibility, we've shown excellence and resilience in margins during years defined by extreme volatility — something few industrial companies can equal.

Turning now to acquisitions—as we typically do, here's a brief M&A update. We completed no new acquisitions during this quarter, though there are a number of interesting discussions and negotiations currently underway with potential counterparties. Regarding the integration of the three businesses we acquired in the fourth quarter of last year—Tudor Hydraulics, Borghesani, and FARMA—we are extremely pleased with how that process is going. These are excellent illustrations of the add-on opportunities we pursue, given how well they align with our industrial and commercial strategy, their financial profile, and their adherence to our M&A and financial criteria. Now, the customary look at the latest market trends and what we expect for 2026. April saw a further step-up in top-line growth, helped by an easier comparison base in waterjetting and by the positive trends in hydraulics continuing. Given both the nature of the projects currently being discussed and the strong order intake for the month—with book-to-bill once again near 1.1—we feel confident about the favorable development we anticipate in this second quarter. Having covered that necessary aside, let's return to our 2026 expectations. The first quarter results and April's sales performance clearly support the February guidance we are reaffirming today, notwithstanding the severe geopolitical tensions shaping the world right now and the extremely limited visibility concerning what lies ahead.

Looking at organic figures, we anticipate turnover moving somewhere between -2% and +3%, plus a positive perimeter effect of roughly 2%, and reported sales should be comparable to 2025, 2025, once you factor in the negative FX hit of about 3% during the first four months of the year. As we typically do, now that a quarter of reported data gives us better visibility, we're adding profitability guidance alongside the sales guidance: an EBITDA margin of 22% to 22.5%, even with headwinds arising from differing contributions between the two divisions — hydraulics stronger and waterjetting weaker, waterjetting being the most profitable division. On cash generation, as I said earlier, the first quarter results clearly demonstrate the group's commitment to moving forward with normalizing both trade working capital and CapEx. So we reaffirm our objective to consolidate and, we hope, improve upon the cash flow generation reached in 2025, setting a new record-high figure. Should we deliver these results in February 2027, we will be very proud once again, since they would confirm once more the two fundamental milestones of the group strategy: diversification and business model flexibility. We're now available for any questions you might have.

Thank you. This is the conference operator at Chorus Call. The question and answer portion starts now. If you'd like to pose a question, you can press * and 1 on your touchtone phone. Should you want to take yourself out of the queue, just press * and 2. When you ask your questions, please lift the receiver. At this point, anyone with a question can press * and 1. We'll take a brief pause while participants enter the queue. Our first question comes from Matteo Bonizzoni of Kepler Cheuvreux.

Thank you. Ciao, Fabio. To start, I have three questions, but I'll keep them very quick if I may. The first concerns hydraulics, where the margin was flat in Q1 even with 6.9% organic growth, and apparently there was no benefit from operating leverage. Could you mention any specific reason — in terms of mix, productivity, or something else — for that flat margin in hydraulic? Second, you mentioned a pretty solid book-to-bill. I don't know if you were referring — I probably wasn't paying attention — to 1.1 for both divisions, and the reason I ask is that Q2 will have a particularly challenging comparison in waterjetting. What is your expectation for Q2 in waterjetting organic, just a range? Last one is on the margin guidance: 22% to 22.5%, with Q1 at 21.9%, a touch below. We know that typically, not necessarily this year, the first half is better than the second half. If Q1 is 21.9%, I would say that 22% to 22.5% is something which requires some sort of explanation, or maybe more details on how you are going to catch up to this range. Thanks.

Thanks, Matteo. On the hydraulics margin being roughly flat, two separate points deserve a mention. The first, and the one I favor, is how much better the company that took the hardest hit from the downturn of the past 2 to 3 years has performed — Walvoil and White Drive in particular. That gain was counterbalanced by softer results and a softer top line at businesses tied to adaptors of industrial vehicles, especially the American firm Muncie Power Products, which historically showed higher profitability, plus the varying contribution of the American companies overall stemming from the US dollar's depreciation. In short, performance characteristics differ even inside the 2 divisions. In waterjetting, for instance, Hammelmann is considerably more profitable than the average, while other companies sit slightly below the average in profitability. The hydraulics division is the same. Setting aside this near-term pattern among the American companies, Muncie especially given its meaningful size and contribution, we are pleased with the improved utilization rate of internal manufacturing capacity at the companies that suffered most during the downturn.

On the book-to-bill I wanted to bring up, especially as it relates to waterjetting — because waterjetting sales are clearly down, given the comparison we knew would be very tough after the results we posted in the first two quarters of last year. What matters to underline is that we aren't seeing any meaningful slowdown in the market when it comes to new projects, when it comes to opportunities, and when it comes to order intake as well. In waterjetting alone, book-to-bill over the first three, four months came in above 1.1. In hydraulics, it was above 1, though below 1.1. Either way, very positive and very significant. It's clearly too early to say anything about the second quarter, but we'll see how things evolve — April was good, and the orders to be delivered in May and June are good too. Clearly, in June last year we had that mega order from Hammelmann, which will make for a tough comparison, but in any case we're very confident about the progress we're seeing in the market in terms of demand and order intake. One last question on the margin guidance: historically we've been criticized for being too conservative, and I believe we are conservative once again.

I wouldn't say we've taken an overly hopeful or pushy stance with that 22% to 22.5% margin. Given how we see turnover developing over the year, along with what the two divisions are expected to contribute, we think a figure within that range is attainable — even with the 21.9% posted in the first quarter of 2026.

Thank you. Appreciate it.

The next question comes from Domenico Ghilotti at Equita.

Good afternoon. I'd like to follow up on the waterjetting division, because you mentioned a book-to-bill of 1.1 for waterjetting. That suggests we can likely anticipate some sequential improvement in the second quarter, though well short of the 200 million, if I recall correctly, in the second quarter. My point is that the first quarter top line was also slightly down versus the second half of 2025. I'm trying to understand why it's decelerating if order intake during the second half was supportive. Then a broader question about cost inflation: what actions are you taking, and when should we expect some contribution from those actions, and are you seeing any supply chain disruption? This time, you mentioned the M&A pipeline without waiting for, let's say, a question specifically about it — if you could perhaps add some color on the potential size of that pipeline.

Okay, on waterjetting, it's fair to say we expect a sequential improvement, but given how strong the second quarter of 2025 was and then the tough comparison base, I'd say that sequential improvement can be seen, or will be seen, starting from the third and fourth quarter, also taking into account that the second part of last year was weaker than the first part, and so the visibility is on the second part of this year. Technically, I don't agree with your comment about top-line deceleration, because in reality it's simply a lower increase in the first quarter compared with the growth rate we had in the fourth quarter of 2025. For two reasons. The first one is that this is another quarter of growth. Second is that this is another quarter of growth despite the first part of the mega order in China. So the 2.2%, in my mind, in my way of reading it, is a very positive number, because we are still... Oh,

Apologies — I probably didn’t make that clear. What I meant was waterjetting by itself, the top line for waterjetting on its own, not at the group level, that deceleration.

Hold on a moment. Let me verify that. The drop to -6.something% in Q1 2026 is fully accounted for by the initial portion of the order that was delivered in China during the prior year.

Alright.

The second, and more significant, portion was delivered during June. It came in two tranches. On the subject of cost inflation, that is a highly important matter. My view is that we did not observe much impact in the first quarter of the year, yet it is turning into a very significant issue during this second quarter, especially following the geopolitical tensions and the Gulf crisis in Iran and the resulting surge in energy costs. So we are compelled, as is everyone else in the market, to pass these price increases on to our customers via price surcharges or through raising our price lists. That is what we are doing. We have already implemented this at some companies, but once again, we will proceed carefully and with no hesitation whatsoever, and that is how the whole market is acting, once again. On M&A, I have already spoken about the customary interesting activity that continues. We have a number of dossiers under review, mixed in size, mixed in terms of business, and mixed in terms of geographies. I confirm that conditions remain fairly positive, because given the uncertainties that increasingly characterize the economic environment, more and more operators are at least weighing, or beginning to talk about, potential opportunities of this kind and combining their activities with a larger, better balanced, more international group.

In this case, Interpump, in some way, is a safe harbor for smaller and more risky companies.

I appreciate that.

Thanks, Domenico.

Our next question comes from Alessandro Tortora at Mediobanca. Yes, hello.

Good afternoon, everyone. Hi, Fabio. Your question has to do with what you said about the book-to-bill. Actually, at first I had a figure of around 1.5. Maybe I was mistaken, okay, when gathering that data, because later you said, no, 1.1 — let's say roughly 1.1. Sorry, I just want clarification on that figure. Then my question is whether you could say a bit about how things are trending by region, right? You said previously, right, that there was some uncertainty or volatility in, let's say, the American market, and now you described, let's say, a positive performance. Just so we have, let's say, a picture, let's say, region by region, because I remember that, right, previously the original performance was volatile from quarter to quarter.

Yeah. I'm not sure how that 1.5 book-to-bill figure came about. Perhaps it's the absolute value of orders still to be delivered, which is roughly 1.1. During the first three, four months, order intake stood at about 1.1 relative to turnover — more so in waterjetting than in hydraulics.

Alright.

On the regional question, I’m with you. It’s a really interesting topic, because if I’m fully transparent and completely honest, the US market’s very positive performance is, in some ways, surprising to me too. Given everything that happened—both the depreciation of the US dollar against the euro and the tariffs being applied, which made costs in the US much higher than the prior year—I had expected softer market demand. Probably—and I’m referring especially to hydraulics or to some hydraulics market applications—the deceleration and destocking activity were so severe during the previous two years that the market is recovering anyway, despite geopolitical tensions and the short-term consequences of these cost factors.

All right, thank you. Then apologies, Fabio — regarding your first remark, which concerned, shall we say, the guidance, and which still, let's say, takes that negative sign as, so to speak, the bottom end of your range. Given what you said about, you know, the sequential improvement you're seeing, let's say, in April and so forth, is the reason you aren't raising it — or let's say, at minimum, aren't dropping, let's say, the more negative portion of your range — because of, I don't know, the geopolitical situation, and so you need, let's say, a few more months or quarters before you can reassess, let's say, the sales outlook? Is that your thinking? Absolutely.