NewPrinces S.p.A. (NWL) Earnings Call Transcript & Summary

Good morning, everyone. This is Benedetta Mastrolia. I'm the Investor Relator at Newlat Food, and thank you for joining Newlat Food's First Half 2023 Earnings Call. Joining me today to discuss our results are Angelo Mastrolia, our Chairman; Giuseppe Mastrolia, CEO and Chief Commercial Officer; Rocco Sergi, CFO; and Fabio Fazzari, Group Financial Director. Before commenting on our results, I would like to remind you that this presentation may contain specific statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on Newlat Food's current expectations and assumptions of future events and are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied by these statements. We're moving straight to Page 7, where we have our key financial highlights. Before commenting on our results, I would like to highlight that the 2022 and 2023 figures are presented on a consolidated basis. That means that EM Foods is included within the scope only starting from the 1 January 2023. So it's not included in the 2023 results. Moving to revenues. We recorded revenues of EUR 413.3 million, which is an increase of 23.2% versus the first half of 2022. If we look at organic revenue growth, however, we also had a very good growth of 19.1%. We had very good growth in all our business units, especially in Instant Foods, where we had an increase of 36.3%, in bakery of 35.1% and special products of 36.1%. Our main geographies recorded a very good growth, especially Germany, which grew by 24.3%; Italy, which grew by 21.5% and the U.K., which grew by 15.7%. Moving to EBITDA. We are looking at adjusted EBITDA, which was EUR 39.8 million versus EUR 20.3 million in the first half 2022. Looking at EBITDA margin, adjusted EBITDA margin, we had an overall margin of 9.6%, which is quite a good increase compared to last year's results, which was 8.4%. As can be seen here, we had further recovery of margins compared to the 2022 results as well as an improvement since the last first quarter results, which we published earlier this year. Moving on to EBIT. We had an increase of 197% versus the first half of 2022, which means that we went from EUR 7.7 million in EBIT to EUR 22.9 million in EBIT figure. This was achieved by a mix of different factors. As can be seen from the consolidated financial income statement, we had a basically no -- we did have an increase in the administrative and sales costs which helped us keep EBIT pretty high compared to last year results. Net income also grew particularly well [by 391%]. And we increased our EBIT by EUR 8.5 million. So we went from just EUR 2.2 million last year to over EUR 10.7 million this year. As can be seen in the results, we actually had a very strong operational leverage, which helped us to offset, more than offset the higher net financial costs that we incurred this year caused by the interest rate increase. Looking at free cash flow, we had a free cash flow of EUR 17.4 million. The result is pretty excellent, and this was achieved, again, thanks to a very good management of the operations. We had also an EBITDA free cash flow conversion of 76.1%, which is pretty in line with previous year results. And if you look in that financial position, we're looking at that debt excluding IFRS 16. In this period, we recorded EUR 23.1 million of net debt as opposed to EUR 63.1 million at the end of 2022. So we had a EUR 40 million improvement versus the end of the year 2022. If you look at the figures, including IFRS 16, we had pretty much the same improvement by EUR 40 million. And we were able to do this, again, thanks to the very good free cash flow generation that we had this year. Moving on to the next slide. We have wrapped up some of the results that we -- that our peers and competitors within the [water] market so in Europe and in the world have achieved in the last year. So we have actually been able to basically outperform the market as opposed to some of the most well-known players such as Unilever, Ebro and Nestle and Emmi and so on. And this was again achieved thanks to a very good performance of our volumes, so a very good commitment from our sales team to increase volumes as well as a very strategic mix and price contribution, which was -- which helped us place ourselves among the best in class in terms of organic revenue growth. Moving on to the next slide. We have some -- a summary of what we've done in the last few months in our major geographies in terms of sales and marketing. So we look at Italy right now in the Pasta and Instant Foods segment. We are currently in the process of launching NAKED ULTIMATE, which was launched last year in the U.K. Now it's being launched in the main retailers in Italy and is being very well received by retailers. We just recently -- had actually a couple of days ago when the tender to become Amazon sole pasta supplier in Europe. That means that we will produce the so called Pasta by Amazon, which will be sold all across Europe. And we have a very good project that will be enrolling in the next few months. Moving on to the Bakery segment. We are in the process of including the Crostino and Granfetta brands under the Delverde [indiscernible] brand. So we are working on this, which will be launched by end of autumn, beginning of winter this year. In terms of Pasta in Italy, we are also increasing our marketing spend and marketing activity for Delverde, the original Delverde range. So we've increased our outdoor and indoor ads as well as done some magazine ads, and we're also increasing our exposure on social media. Moving on to Milk & Dairy. We've launched different products in this segment. So MUKKI, we've launched lactose-free milks with other vitamins as well as the A2 milk, which was previously only produced in [Naturian] brand Tapporosso. And we're also relaunching the Optimus Mascarpone, so our very well-known Mascarpone in the Italian market. This new packaging will set us aside from competitors, which have a much more, I would say, dated/aged type of packaging. And this will help both join more customers as well as having a dedicated campaign and marketing -- digital marketing campaign as well. Moving on to another very exciting news is that just a few months ago, we were -- we won, let's say, the position as the only milk supplier for Starbucks in Italy with our brand, Polenghi. So we will be providing for the Starbucks with its milk with just the Polenghi brand. So this will be across all the Starbucks coffee shops in Italy. And in general, we've had a very good, let's say, 6 months in terms of communication and all Milk & Dairy segments. So we've increased our communication both online and offline. So in -- by hosting real events, one you can see here. And we've been hosting, for example, MUKKI Day just recently and we're really trying to cover both online and off-line presence within Milk & Dairy. Just a quick update on Naked. As we've talked about Naked in previous presentations, so this is just an update of what we've done in terms of online presence. We're really working on the social media presence of Naked so both on Instagram, TikTok, Facebook and so on. We have engaged in an influencer marketing campaign during the months of May and June. We've engaged with some very well-known TikTokers and influencers, and we've reached very good results in terms of views. So more than 5 million Instagram reviews, more than 4 million TikTok views, and we've reached more than 2 million with these influencers. We've also shown a campaign for Naked, for the original Naked range, which was which was online in -- again, in May, together with the influencer campaign, we've had very good reception with this campaign as well. So our ad was seen by some 9 million people, and the full video was watched by more than 400,000 people. Moving on to the U.K. So we have an update on Naked. So in the last year, the Naked brand increased its value by 5.3%. And in the last 2 years, it increased by 11%. This was supported by different launches, product launches as well as different commercial tactics. We just recently launched a very exciting product, which is the Naked Spicy Sriracha product, which is particularly let's say, on trend compared to especially the very, one on Asian players like [indiscernible], for example. This will drive more customers in. And this is also good product to use on social media to reactions, et cetera. So we expect to see very good performance of this product alone. We've seen very good performance as well in the Naked Ultimate product that was launched last year. And we are in process of relaunching the original Naked range. So we will have our best-ever product, which sees the reformulation of the original product with longer noodles, punchier flavors and a revised packaging, which will draw in more customers because we also run the panel test, and we made sure that this product is very well received and [ lagged ] more than our competitors and more than the original product. We've also rolled out a plan in terms of communication, both digital platforms as well as TV. So we will be on TV also on demand TV, with a dedicated Naked commercial that can be seen here. And we're also working on new products for 2024. Moving on to Mugshot. We have also some updates on Mugshot. So we've seen in a Nielsen study that Mugshot is the -- results as being the highest units per trip in the category. So that is very good achievement for us. We've launched two new pasta pots, and we're also focusing more on communication and we're launching our new TikTok channel for Mugshot as well. We also partnered with some influencers, and we've increased our presence in as we are approaching the colder months and being Mugshot as one of these products that you really buy during the winter and the colder months. We also have some new products in our pipeline. So the Limited Additional Carbonara, which will be launched in November and the New Pigs & Blanket Christmas flavor, which we launched before Christmas. We're also working on new products for the year 2024 as well. In the next slide, we have an overview of our private label business within Symington's, as it is well known that Symington's is a private label player as well as a branded player. We've outlined our performance within the market as opposed to the U.K. and new market. As can be seen in the charts, Symington's being the blue bar, we can see that in terms of sales, we increased 14%. And in terms of volume sales, we only decreased by 1% as opposed to the U.K. Ambient market not performing as fast, so both in terms of sales and volumes. And on label in the year 2023, so far is actually grown by 23% and volume has actually grown by 4%. We've launched into a number of different categories across own label, especially in home baking and colors and flavorings and Cornflour, which is being produced at our Leeds site. And we're also increasing our production within the content side with new products in the Wet Grain, Sauces & Soup Pouches segment. Moving on to Germany. Here we also have some good updates. So we had a total volume increase of 14% and a total value increase of 25%. In terms of -- can you hear me?

Yes, yes, yes.

So in terms of market share, we have an increasing importance within the Pasta segment. So we have increased our promotion within retailers. This has made us really competitive, both in terms of brand exposure and brand growth and also brand equity. So we've really been able to increase our exposure versus competitors. And in terms of instant products, we relaunched Minuto and we're in the process of launching these three products at Minuto. And we've also seen a very good performance in this segment as well. We're launching new products such as the Birkel spaghetti and [Mandriatoni]. We've seen very good performance in terms of ton growth. And we've also launched new products such as the oat pasta, which is using the trending ingredient of oats as opposed to wheat as the main ingredient for pasta, it can be seen an alternative in some cases. We will still launch a sort of done a test with cardboard boxes for the Delverde within German retailers, and it's been perceived very well by both retailers and consumers alike. We've launched some pasta kits within the Minuto range with [indiscernible] and different pasta kits. Moving on to the next slide here. We just have a picture of what we've done in terms of promotion. Bear in mind in Germany, it is very well received to have running promotion within retailers. That really helps grow brand value and bear recognition in the long term -- in the previous years as well. Moving on to Minuto. So I said earlier, we relaunched Minuto both in the series segment with new pasta and new sauces. And we also -- we are also in the process of launching the sweet products, especially that you can see here, which will be available very soon within German retailer stores. Now we move on to the sales breakdown and analysis. So on to the next slide, we see just the overview of our results. As I said earlier, we increased our sales by 23.2%. We saw, in general, an acceleration in sales growth and this was characterized by different things. One of them being, as I said earlier, an organic growth of over 19%. We had new launches and listings, which can be seen also -- which can be seen that in the previous slide as well. So we've had a very strong commercial commitment by our sales team to increase our exposure within retailers as well as other clients. We have had a very good operational results. So EBIT margin increased to 5.6% as opposed 2.3% in the first half of 2022. And we had an increase in net income of 391%, which was very significant, considering the higher interest cost. Moving on to the breakdown by business unit. As can be seen on the right-hand side, we've had very positive results in all of the different business units. In particular, if we look at Pasta, we had an increase of 18%, which was probable mostly by an increase in sales in Italy and in Germany. We also saw an acceleration of sales growth in the Milk segment with an increase of 17.1%. And we have an increase of Instant Noodles and Bakery Mixes. Of course, this is also influenced by the EM Foods acquisition, but if we disregard that we also had a very good performance in this segment as well in terms of organic growth. of course. If we look at Bakery, Dairy and Special Products, we also had very good performances of 35.1%, 26.3% and 36.3% increase. We've worked mostly with -- working with new customers, adding new products within existing customers as well as gaining new business, both in B2B and private label businesses. Moving on to distribution channels. So also in this case, we've had a very good performance in all our distribution channels, with large retailers increasing almost 30%. This, again, was driven by new clients as well as new product launches within the different geographies. If you look at B2B partners, that's where we had the highest increase, which was 43%. This was driven by two factors, one of them being the acquisition of the EM Foods, of course, because it's mainly B2B business but also by an increase in B2B partnerships within Pasta and other products as well. Moving on to geographies. As I said earlier, we have very good performance in all our geographies. In particular, if you look at Italy, we had an increase in bakery, milk and dairy and instant noodles as well as pasta, which impacted our sales very positively. And in Germany, we had an increase in pasta and instant noodles, instant food in general, which are -- which drove our performance. In terms of U.K., we had an increase in sales as well, which is attributable both to the new launches of different products within Symington's, as well as new business within the home baking, private label business in the last year. In terms of other countries, this again, is impacted by the EM Foods acquisition. However, if we disregard that, we also have very good performance. We've been able to increase our exposure into different export markets in the last year, and we've also, of course, an increase in average selling price overall in our different markets. Moving on to EBITDA. We had an adjusted EBITDA of EUR 39.8 million in the first half of 2023, which is an increase of 40.7%, and EBITDA margin was 9.6%. Overall, we had a very good performance, especially in the pasta business. So we had an increase of EBITDA of almost 200%, and EBITDA margin of pasta jumped from just 4.5% to 11.4%. So we went from just below 5% to even having a double-digit margin in pasta, which is a very good result, especially looking back at previous years. Bakery's EBITDA also increased significantly. We had an increase of 65%. And we also kept a very good margin of 13.5% as opposed to 11% last year. Overall, we saw an increase of most margins and EBITDA figures. The only one which was negatively impacted in this period was the Instant Noodles and Bakery Mixes because this includes the EM Foods business. And EM Foods at the moment has a lower EBITDA than our Instant Noodles existing segments. So we're working on actually improving margin in this period and really -- we are in the process of running different operational and, I would say, production improvements to really work on increasing our EBITDA by next year. In general, we can say that our results are especially good if we look at all the other segments. And overall, on an average base, we actually had an improvement versus last year, but also compared to 2021 levels. So we've been able to really work on the margin that was lost in 2022. Moving on to the next slide. We have an overview of our free cash flow generation as well as an overview of the last quarter's performance both in EBITDA and free cash flow generation. So if we look at the -- at the table, we can see that we had an underlying free cash flow, which exclude operating cash -- which is operating cash flow minus CapEx of EUR 17.4 million. This was thanks to a very good performance of cash flow from operations. As can be seen, we have EUR 33 million. And this really helped us to offset the higher interest costs, which were recorded this year. As can be seen in the bar chart on the right-hand side, we have had an improvement in our -- in all these factors both in terms of EBITDA, underlying free cash flow and EBITDA margin. So we went from 7.13% of EBITDA margin in the second quarter of 2022 to having over 9.86% in EBITDA margin in the second quarter of 2023. So that's a very steady important improvement in margin. And we've also had a very good performance in free cash flow, as can be seen in the second quarter of 2022, we had a negative free cash flow of minus EUR 3 million, and we've been able to work it up to EUR 7 million in the third quarter 2022 to working it up to EUR 10.2 million in the second quarter of 2023. So a very good result compared to last year and in general, having an EBITDA, which went up to EUR 20.3 million in the second quarter of 2020. So an exceptional results. Again, thanks to operational leverage. Moving on to the next slide. We have an overview of net working capital and cash conversion cycle. So some may remember that last year, we had sort of invest in net working capital in order to offset the very unfavorable input costs that we were incurring. So this -- in this first half of 2023, we were able to actually, let's say, improve net working capital once again. So we went from almost minus EUR 21 million to almost EUR 20.3 million in the first half of 2023. In general, we can see we have higher inventory levels. We've been able to actually stock up on some launch of life products to take advantage of some lower purchase prices compared to 2022. And we've also had lower receivables, which is thanks to the progression to more levels of raw material input costs. So we've been able to actually work on both sides in terms of commercial sales. In terms of cash conversion cycle, we've had an improvement. Last year, we had minus 9 days. Now we're back to minus 73 days. So we're actually able to taking cash before we give it to our client -- over to our -- sorry, suppliers. And this, again, is very good results compared to 2022. Moving on to next slide. We have the M&A overview. So this year, as said in previous presentations, we're still working on the M&A -- on our M&A strategy. So we find that this figure is particularly advantage, advantageous for Newlat Food because of different factors, being interest rate increase, having less product equities being part into M&A activity, the current credit market environment, which helped us having lower opportunity for heavy leverage structures and having financial investors looking for targets with a clear growth profile. In this environment, we're still working on our transformational acquisition of over EUR 1 billion turnover and turnover. We're in quite an advanced stage, and we have some clear synergies that will be immediately visible if we close this acquisition. But on the side, we're also working on different opportunities. So we have a lot of opportunities coming in every day, and we're looking at other deals between EUR 50 million and EUR 20 million in revenues. And we're also still working on the acquisition that we announced last year in Europe, in different segments with a multinational operation. However, it is currently on hold because of an internal reorganization of the seller. So we're still in the process, but we're not actually seeing too much progress at the moment goes to end. Moving on to the last slide. We have our outlook for the year 2023. So we are, as a management committed to achieving double-digit growth in terms of revenues. We expect to have an adjusted EBITDA margin of at least 9%, so pretty in line with what we've seen today. And we expect to surpass EUR 30 million in free cash flow, with a free cash flow yield of 14%. And as just said, we have a very strategic focus on M&A, and we are hopeful that we can close an acquisition relatively soon. So this is the presentation. And now we can move directly to the Q&A.

Okay. So we have a question from Arianna Terazzi. So you can go on, please.

Arianna Terazzi from Intesa Sanpaulo. Thank you for the presentation, and congratulations for the results. I have a couple of questions. First, with reference to the top line performance, maybe I lost it during the speech. But as usual, could you share a resplit between price and volume effect? Then just to better understand your expectation on margins, I would appreciate a comment on selling prices, namely, if you are seeing any lower pressure? And given the slight increase in cost...

Arianna, I can't hear you. I'm not sure.

I'm speaking, yes. Can you hear me?

Yes, we are hearing Arianna.

Okay. I'm going forward, so I just was -- I was wondering if you could comment on selling prices, if you're seeing any type of pressure? And given the slight increase in the cost of goods sold, if you could elaborate on the raw material cost environment? And then a third question on the production capacity. If you could comment on the spare capacity also considering all the launches and contracts you have been awarded in 2023? And lastly, on the dairy performance, which was strong for several quarters in a row, could you comment on that? And what are you seeing for the next quarters, if possible?

So starting with the top line also in the second quarter, and this was also the average for the first half of the year. We got a contribution from the volume that the 30% of the reported growth, while the price contribution price/mix was around 70% of the reported growth. At the moment, we are not experiencing particular pressure on the selling price. And this is related also to the fact that the general environment, especially thinking about raw material is not defined and homogeneous picture in the sense that there are different trends for different products, different areas. And I think that in current environment, we do not expect to have soon particular pressure on selling price. This doesn't mean that we cannot enter in particular, our promotion activities, especially thinking about the last quarter of the year that usually is full of promotional activities from the retailer due to the particular period of the year. In this case, if we will have the opportunity under the right conditions, we will try to also to get maybe this opportunity, and this could have a bit of reduction in terms of growth rate. But this is more opportunistic and decided from our side not linked to a particular pressure coming from the retailer or in general from the market. At the moment, the situation is quite stable. And I think that already answering that is summary about the question that you mentioned on raw material. The scenario is not linear, is not defined. There are different situations for different raw materials, different markets, but nothing that will put enough serious pressure on the price level. As a general statement...

Sorry, Fabio. I want to join -- in any case that our view for the end of the year is more stable for the cost of the raw material because we have a good products for these next 4 years. Sorry, Fabio, just to give the information from this raw material.

Yes. Thank you. And as a final statement on this point, I would like also to highlight that our underlying profitability level is between 9% and 10%. This means that if we are going in the future to face particular pressure from the retailer on prices because there is a real reduction of all the raw materials is -- will not impact our profitability. So our first objective when we made in the past 2 years, this strong policy on the pricing was to protect our profitability and to continue to improve margin with structural improvement, not just because we can manage with maybe still approach particular situations that may happen into the market. This means that the visibility that we have on our profitability and the sustainability of our profitability is [very very high]. About the latest question linked to the dairy performance, the performance is linked to several things. In particular, we made an investment for a new line in Mascarpone with a decrease of our production capacity. This obviously allow us to create additional volume and to try and to get -- to have the opportunity to get the strong demand that we found into the market. And the consequence of this new line, a new capacity was the acquisition of new clients, and this was a positive both on volume and on the possibility also to manage the business with better prices and better profitability.

I'll go ahead with a couple of questions as well. So I would like an update on the integration process for EM Foods? And also if possible, a bit more detail on the contribution we saw in H1 in terms of revenue and profitability? And what we can expect in particular in terms of commercial initiatives and integration going forward? Then I will come back on what Ms. Mastrolia was just highlighting for raw materials, since that you have differentiated thanks to the stock you have for doing that, for example. So wondering if you can share with us how much visibility do you have in this respect? So for how long are you covered? And so what is the visibility to having this side? And further question, sorry, is on volume. As you mentioned right now that you have gained clients on Mascarpone. In general, I am not quite impressed by the volume growth you are confirming in spite of strong inflationary environment. Can you help us understand to what extent is this volume growth driven by new lists, new accounts? And also in terms of geography and capitalists coming from? And to what extent do you expect this new lists to be confirmed, to be maintained?

Paola, in terms of EM Foods, as we explained last year after the acquisition, EM Foods is an integration phase that is based on the integration on our structure, especially considering the commercial platform of news that could help EM Foods to find new volumes and new business. And this was visible in the presentation when Benedetta shared the slide that presented the new products linked to the brand Minuto. We have also additional opportunity coming from U.K. branded and linked to the private label business because our colleagues in the U.K. are also developing new business for EM Foods. This means that we are absolutely in line with our expectation of the integrations and development of EM Foods. It's clear that this year is a year in which we don't expect any kind of contribution from EM Foods but the goal of the year so to create the base of new volumes, new business for the next year, in this case. So we are absolutely in line with our plan.

I have maybe Giuseppe to [indiscernible] in Germany, and we started last next days with a very important range on the EDEKA in Germany with the biggest retail in Germany, maybe Giuseppe to give a summary.

Paola, so what even Mr. Mastrolia would like to underline is that we are already -- we already listed products produced in EM Foods, and we start delivering week 40 in EDEKA is the biggest account on the German market. It represents roughly between 35% and 40% of market share in Germany. So this will be a really good start. And now we will launch the first five items that represent for us a really good opportunity. Then we are starting -- we already started discussing with the other retailers in Germany. We have a good talk even in France where we are present with our biggest retailer in France already know our capability because the plant of [indiscernible] is really well known in France since many years for the quality of the products. We have -- so first, the first launch will be done in Germany from week 40, so beginning of October. We start delivering from beginning of October. We will present everything in the Trade Show Fair in Anuga and Cologne first week of October as well. There is a lot of excitement. We had request from European territories. So like Netherlands, like Italy, Germany, France and the U.K., as Fabio mentioned. But we get interest even from overseas, we made offers to big retailers such as Walmart and Aldi in the U.S. as well for products produced in EM Foods. And what I can tell you is that we have a really strong R&D team that can develop different kind of recipe. And we have a team of chefs in the plant that support the R&D to create all the new recipes demanded from the for the products, both in pasturies and in savory businesses. But we are trying to dig into savory products, not only sweet dishes.

Giuseppe, if you remember so in these weeks, we have moved some technology in France for to [driving] capacity maker in Europe. We start also in factory in ones because this factory is a very biggest factory. We start probably with Naked eluded because we needed to improve the capacity. And in any case, we would have best platform for distribution in Europe because it's very important to have the best rates on the transportation and logistics. The [ Louvre ] is a fantastic place for Europe logistics and distribution. We started this week to buy the new technology to improve the new planned in the Louvre also produce the Naked brand. This is a very, very good opportunity for the development, the Naked brand in Europe.

Yes. So as Mr. Mastrolia said, as we are developing really good, our brands Naked Germany and all across Europe -- we will now start with this new line in Louvre that will produce and back all the cups under Naked and Minuto products using our own pasta to make the finished goods. And this will create an immediate interaction between [indiscernible], U.K. and Germany and Italy altogether. What I would like to underline as another -- this will be seen maybe in the first quarter 2024, is that we are starting even a collaboration with our milk and dairy plants. So we were able, thanks to the know-how of [need] to produce in the Firenze plant, panna cotta using panna cota in tiramisu, so ready to bake. So we are trying to develop all the synergies possible between -- with long shelf life. We mean a UHT product based tiramisu and panna cotta. These are two new products that will be launched -- will be presented and launched I think end of the beginning of next year. Maybe Paola, I can even answer your question concerning dairy. So concerning dairy, we are talking about new customers, so we mean new accounts and is mainly driven by new markets, new markets and new listings in both. So we are developing much in new countries because we extended the shelf life of our mascarpone, thanks to the new technology. So we are able to export in foreign countries. So it's real far away. Now we are in a record shelf life for a fresh product that is 5 months. And we develop even the UHT, that means a long shelf life mascarpone that we will launched in the next period. This is not yet in the numbers of this first 6 months. So we have all new accounts and the new accounts are all are developed in new countries and the listing will be I hope for a long term. We have a contract at least for 6 to 9 months with all the new accounts.

Yes. The last point was on the stock of raw material and the ability you might have in respect as possible?

We don't expect to our [indiscernible] said before, we are well covered on the raw materials side, and we're going to expect on the basis of current scenario to have a material swing by the end of the year. As I said before, the scenario is not linear and [indiscernible] is well diversified product by product and country by country. But we are, I think, in a good position with high visibility for the end of the year.

I would like to underline one point on this matter that when we talk about stock, we don't talk about on the physical stock. We make good contracts. So not -- we don't have physical in the raw material, let's say, in our plan. So this is a small detail that I want to underline. So it's contract with a good price for medium, long term.

We have a question in the chart coming from [ Ivan Perez ]. First one -- the first point is related to the administrative cost if we expect a big increase in the future. In reality, not in the sense that we have an internal plan also to try to manage as best as possible administrative and general cost. And I think that the results that we achieved in this period are also showing the benefit that we are getting from this internal plan that to maintain always high the attention in this topic. So on this basis, honestly, we don't think that in the future, we have to manage higher cost from this side. The other question was related to the increase in the interest paid -- how we can forecast and we plan to manage in the future this item. So it's clear that the increase of the interest paid is related to the movement of the interest rate in the monetary market. We also made on the other side, since as you know, we have a lot of cash because our increase of gross debt is related to the fact that to be able to be very flexible in our M&A strategy. We try to get in the past lot of opportunities in terms of financing. What is important to highlight is that our average interest rate that we are paying is considering the current market condition, really good because you have to take into account that we have EUR 200 million of debt that are linked to the bond. And the bond is a fixed rate of 2.6%. This is obviously materially below the current level of the monetary market. And the other important point is that in the past, our company made always very good agreement with the banks due to the high financial flexibility that we show and the very low level of debt. This means that the spread, the average spread that we have in our floating financing is around the 200 bps, 210. This obviously help us to mitigate the impact of the variable part linked to the rebar also the floating part of the interest rate. Having said that, we also manage the cash with a very basic instrument like time deposits to try to get mitigation, thanks to the increase also of the active part of the interest rate. For the future, we expect situations that should be similar like this one for the remaining part of the year. According to the forward rate in 2024, we should see a starting of reduction of the interest rate. But obviously, this is something that we cannot manage directly. We have to see what will happen into the market. It's clear that we are now sitting at the table and try to complete a very big acquisition this thanks to the cash and the liquidity that we have that obviously is key to support us in this acquisition without the premium strategy that we put in place in financing probably in the current environment been impossible for us to take -- to sit on the table and to discuss about this thing. Just to highlight also the positive side to have this level of gross debt inside of our balance sheet. And if we will be able to successfully close this acquisition, as we hope, obviously, we will use a part of the cash available also to finance this acquisition.

Yes. So other questions? No. Nobody -- Okay. I believe we can close the conference because...

Yes. So thank you, everyone, for joining today's call. And we remain at your disposal should you have any follow-up questions. Have a nice day. Thank you.

Thank you very much.

Bye. Thank you.