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

Good morning, everyone, and thank you for joining today's call on the Newlat Food 2024 Half Year Results. My name is Benedetta Mastrolia. I'm the Investor Relations Manager of Newlat Food. And 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 starting, I would like to remind you that this presentation -- apologies. I would like to remind you that this presentation might contain certain forward-looking statements that reflect the company's management's current views with respect to future events and financial and operational performance of the company and its subsidiaries. These forward-looking statements are based on Newlat Food S.p.A. current expectations and projections about future events, and any reference to past performance of Newlat Food shall not be taken as a presentation or indications that such performance will continue in the future. And this presentation does not constitute an offer to sell or solicitation of an offer to buy Newlat's securities. We can go directly to Page 7 of the presentation where we have our key financial highlights for the period as usual. We can say that the first half of 2024 was impacted by a deflationary environment, which resulted in lower sales as opposed to last year. So we had EUR 370.1 million sales as opposed to EUR 413.3 million in the first half of 2023. This was, of course, the result of lower average selling price in all the main business units. However, we still had some positive performance. For example, in dairy, where we had an increase of 13.4%, which was split by a 10% increase in volumes and a 3% increase in pricing. Where we are gaining the most in this period is definitely our margins, where we had an increase, for example, in EBITDA, which was EUR 39.3 million, as opposed to EUR 38.5 million in the first half of 2023. In terms of margins as well, of course, we had an increase in EBITDA margin, which was double digit, and it was 10.6% as opposed to 9.3% last year. This is, of course, thanks to better purchasing conditions of raw materials because of the lowering prices and also better management of our resources overall. In terms of EBIT, we also had quite a good result. If we look at EBIT on an adjusted basis for 2023, which excludes the EUR 1.67 million of income from business combination, which was recorded in 2023, we had just a slight decrease of EUR 600,000. But overall, we had a very good performance in EBIT as well. Net income was particularly good in terms of performance. We had an increase of 11%. If we look again at the adjusted figure for 2023. So we had a EUR 10 million net income as opposed to a EUR 9 million net income in 2023. In general, we also had a very good free cash flow generation, which was EUR 20.5 million. Last year, we had roughly EUR 17 million. So we can say that we had a really good performance in cash generation, also thanks to our very good performance in terms of operational results. And we also had an EBITDA free cash flow conversion of 74%. In terms of net debt, we also had a fantastic result, which ended in an almost neutral position of net debt, which was EUR 1.5 million as opposed to EUR 29.5 million. And this is on an IFRS 16 excluded basis. So we're excluding IFRS 16 in this counting. However, the result for net debt, including IFRS 16 lease liabilities was still positive, and it was EUR 42.6 million as opposed to EUR 74.3 million at the end of 2023. On the next slide, we have sort of a water picture of what happened in the period. So in terms of revenues, as we said, we had a decrease. However, we would like to remind that last year, our results were, let's say, inflated by a very good performance, both in terms of volumes, but also in terms of an increase in the average selling price, which resulted in an organic increase of 19.3%. If we include the inputs, it was even higher at 23.2%. So overall, despite the fact that we had a decrease, we can say it wasn't as bad as we might expect if we look at the comparison base. In terms of KPIs, we've already looked at EBITDA. So we had an increase in all the EBITDA margin and EBITDA in general, with a 2% increase. And we also had a very good performance in other KPIs, such as return on sales and return on investment, which increased as opposed to the first half of 2023. We also had a very good double-digit performance in the return on capital employed, which confirms the sort of the number we found at the end of 2023 for return on capital employed. 2024 was still -- the first half of 2024 was still a very investment heavy period where we finalized -- we're still finalizing the investments within the Special Products segment specifically. We also had the investment in Germany but the most significant one is in the Special Products segment. But this will hopefully drive efficiency, which -- this will definitely drive efficiency in the future, and we can expect to see some volume coming back in the second half of 2024 for Special Products specifically. For Germany, we will see more results in the next years or so. Cash generation, as we already said, was 74%. So very good performance. Net debt again, a very good performance. We have to keep in mind that we had an extraordinary, say, deleveraging processed in the last couple of years. If we keep in mind the position that within new CLI when we acquired this will the bond issuance. So we've had a very good result in that sense as well. Now we go straight into some marketing and commercial activities that we've done in our main markets. Now we're looking at Italy. So for Italy, we focus on 2 main areas, specifically. So on one hand, we focus on the Pasta and Instant foods, in particular, with Naked. We just launched the Naked Best Ever range in September. So we were working on the launch since the beginning of the year. And at the same time, we also try to integrate as much as possible to deliver the brand into the f Crostino and Granfetta world. And by doing so, we also just launched in June a new website for Delverde, which includes but Crostino and Delverde. So unifying basically the brand finally and making just one big brand that covers both Pasta and Bakery Products. In general, we've also worked a lot on social media and on marketing activities. We've done a 360 campaign for Naked, for example, also for other brands. We've just recently, at the end of last year, signed a contract with a counterpart, which is able to give us 2 platform basically, which helps us find and scout influencers and people online, and it's an AI aided or boosted platform, which is very helpful in giving relationship with these influencers. So we've been increasing our exposure to events and marketing online, both for Naked as a first trial, let's say, but now we've branched out, for example, Optimus, which is our mascarpone brand. We started working with some influencers and some -- specially some chefs as well. So that's really helpful. And sort of very useful tool for our market and for our brand presence online. In terms of Milk and Dairy, as I said, we are investing more on Optimus. We're really trying to relaunch the brand, which is possible and to keep the brand as say, as well perceived in our customers eyes as possible. We also focused a lot on Mukki. We did some co-marketing activities, for example, for the Inside Out 2 movie. And we also just launched again in June, the Mukki Bimbo e-commerce, which has been doing really well. So we've been selling all of our baby milks with powder and liquid online, and it's been a very successful new channel for us. We've also been working on community engagement with our milk as usual. Going to the U.K., we're looking at Naked. So with Naked, we've had a very good period in terms of marketing activities. We launched a new creative concept, which has helped us be consistent in communication to be more memorable in the customer size as well as with the 360 campaigns, we were able to sort of target all our customers. And the ad you see here was particularly humorous. So it really helped us gain some brand awareness, which increased by 7% as well as the purchase intent, which also increased by 7% as opposed to last year. For the second half of 2024, we have some more activities in mind and our new campaign goes live in the next couple of days as well. We also launched some 3 new products, and 3 SKUs. So one Sri Lankan style curry and 2 ramens under the ultimate sub-brand. And we are working on a new brand planning, but also on a completely new brand with Naked, which we are really excited about, and we've been working on for a few months and hopefully, we will be able to review what it is soon. In terms of Mug Shot, on the other hand, again, in the U.K., we've had a very good performance as well. We've been able to increase our brand penetration as well as a number of buyers. So we had an increase in those compared to last year as well as an increase in our sales units, especially in the last 12 weeks as opposed to last year. We've been working again on some marketing activities and the 360 campaign, which reached millions of customers in the U.K. as well as a -- some in-person activities such as the Mug-to-Mug tournament. And we have some more to come in the second half of the year with Mug Shot we also worked on NPD with some new products such as Salt & Pepper Chilli Beef Noodles, and we also launched the Mug Shot Max, which is a bigger portion of Mug Shot, which has been performing were since we launched it in June. For Mug Shot, again, we're working on a pipeline of new projects and brand planning for 2025. We put this here to kind of show what's been going on in the U.K. for the past year or so. So we've had a very steep decline in the average price index, and that means that this impacted also the cost and the pricing of commodity products, which impacted a lot also the, say, the instant noodle market, but also the fast-food chains and fast-food restaurants as well as just normal restaurants. You can see here an example. So this, of course, was particularly detrimental to the performance. But nevertheless, we were able to still gain some positions in terms of marketing. So hopefully, we will see some -- a more positive results in the next months. And now we jump to Germany, where we had a good performance in terms of branded pasta specifically. If we look at the performance for the last year in Pasta, in Germany, we had just a slight decrease of overall branded pasta of 270 tonnes with, however, a very good margin improvement of 5.3% year-on-year. If we look at Delverde specifically, we actually had a growth of just 1%, not too much, but still growth. If we think that last year, we hit a record high in terms of volume, which was over 42,000 tonnes of just Italian pasta in Germany, we can say that this is still a very good result. And especially if we look at some competition as we've had our number one competitor has been losing 8% in the last 6 -- in the last year and in the first 6 months of the year. So definitely a good result if we look at the bigger picture. Now we -- just some updates briefly on Minuto. So Minuto was launched just last year after we acquired EM Foods, and it's been doing pretty well. We had again a campaign with Minuto both in social and in person with billboards and sampling and it's been doing pretty well. The products is very well liked by customers, and we already launched 13 new SKUs this year. We launched 23 in the first year when we launched it, but now we will still have 13 more. So many, many exciting recipes to come, thanks to the EM Foods NPD and sort of chef's background. So I'm really, really happy with the results so far. Now we go directly to the sales breakdown and analysis. So in general, as we announced the period has seen a decrease in most of the segments, excluding Dairy. Pasta was impacted by a combination of a lower sales price, which was across all categories, of course, but also as a result of a decrease in the Pasta volumes in Germany and also in B2B and private label. Milk and ready meals as well had just -- were mostly impacted by the lower prices, both so by the loss of some volumes in Italy and the U.K. In Bakery, we had a decrease of 9.6%, which was the combination of different factors. One is the fact that we had to shift some promotional activity to July and August instead of June. So we lost some volume there. But also, we had a decrease in price, which impacted by -- which impacted roughly 7% of the 9.6% total, so quite a lot was due to pricing effect. In terms of Dairy...

I want to add something concerning the revenue breakdown. So concerning the revenue reduction, I want to emphasize that strategically, during this period of price reduction, we choose to prioritize our margin preservation over an aggressive promotional prices as this would impact our margin. And then now from July onwards, we restarted all the promotion activity with our retail customers and partners. So we prefer to prioritize the margin over the turnover and the revenues. Thanks, Benedetta.

Thank you. Yes. So as Giuseppe said, we try to prioritize as much as possible our margins and -- however, we still had some growth in there, as I was saying. And we had an increase of 10% in volumes and 3% in value in Dairy. And Special Products, we had the impact of the current investments at our Ozzano Taro plant, which were not finished by end of June. However, we will see some improvement in the next months and definitely by end of year where we'll be reintroducing some production. Now we move to distribution channels. So again, in general, we had a decrease mostly in our large retailers and B2B partners which are 2 main channels. We had some decreases as well in the other channels, but not as important, let's say. But this was mainly due to the decrease in average selling price and also some shifts in promotional activities through July and August, as Giuseppe was saying. And really, there was a comment there. In terms of geographies, we also had a deflationary environment in all the geographies, which saw sort of a normalization as opposed to last year's results. So in Italy, we had a contraction, which was mostly due to a decrease in the Pasta, Milk and Bakery sectors. In Germany, it was mostly a decrease of the Pasta, which was, however, slightly countered off by the increase in dairy U.K. was impacted mainly by Instant noodles and other countries was just impacted overall by a different number of categories. In terms of EBITDA, it's where I was saying we had some of the best growth. So we grew 2%, as we said. And this is the result of overall better COGS as well as a better mix of contribution of sales. In general, we had a very good performance in Pasta, where we had a double-digit margin. If some of you may remember, we used to not have a double-digit margin in Pasta. So in the last years, we've really worked hard to increase our margin in Pasta and we reached 12.7% in the first 6 months of 2024, which is quite notable. In terms of Instant Noodles, we also had a very good result as we went from 5.2% margin to an 8.1% margin. And we also had quite a good increase in EBITDA, which increased by 13.7%. So overall, despite the decrease in sales, we still performed really well in this segment as well. For Bakery, we had always a good performance in terms of EBITDA, which was 16% as opposed to 13.5% last year. And is it worth mentioning that even Special Products, despite the decrease in sales ---- the decrease in sales, still had a margin increase from 10.5% to 12.2%. Now we look at just some more key metrics. So in terms of free cash flow, as we said, we had a very good performance, which was EUR 28.5 million. This was, of course, thanks to a higher EBITDA and also an improvement in the working capital which resulted in a much higher free cash flow as opposed to last year. In terms of net working capital, we also had a very good management of product trade payables and our liabilities, which resulted in an improvement in working capital of almost EUR 13 million. And in general, if we look at some other financial indicators such as net debt-to-EBITDA ratio as well as the gearing ratio, we can see that we went from still already good positions at the end of 2023, which were 1.03 for net debt-to-EBITDA ratio and 0.43 for the gearing ratio, respectively, to 0.59 for net debt-to-EBITDA and 0.22 for gearing ratio. So definitely below what's an acceptable -- below as in, better than the acceptable ranges. So really good performance there as well as a testament to the group's financial stability as well. Now some updates on the Princes acquisition, which was completed just in late July. So it's been a month and 10 days since we acquired it. We had from day 1, a very big focus on some areas that you can see here, some of which had more of an immediate focus, such as the infrastructure in the U.K., for example, with the harmonization of the IT within the U.K. sites, as well as some other activities for synergy, for example, in warehousing. In terms of PIA, so Princes Industrie Alimentari in Italy, we also had some volume and operating benefits, thanks to a focus on major volumes, especially through our existing European customers and the relationship that Newlat has in Europe. We also explore some Pasta growth, especially through our channels, also thanks to our operating facilities in Italy. And the EU commercial opportunities, which we will see more on in the next slide, have been explored from day 1. So we still -- we already have some projects and some projects that are launching soon. We also had some broader synergies in terms of innovation, brand reputation, cross-selling and procurement. These also, we have some more information on the next slide. So from day 1, as we said, we've been focusing on different areas, one of which was the better management of working capital as we are a company that's always been very attentive to working capital and to improving its position as well as its relations with customers and with suppliers, especially, so improving the conditions we had with them was key for us from day 1. And in that sense, we've already recorded some very good improvement in -- we had several days improvement in trade creditor days, for example, and we've been aligning all the supplier payments terms from day 1. So we are slowly reaching a level which could be considered good for Newlat. So we're still working on this, of course. It's not something that's done in a couple of days, but we are at a good -- we're doing good progress on this. In terms of procurement, we are also analyzing some sourcing opportunities within the group, especially for Pasta, and we're also exploring the launch of new products such as premium Pasta in the U.K., thanks to the existing Newlat facilities and the ability to produce as many SKUs as you could ever imagined. So that's really something we're working on. And we're also looking at what are the group purchasing synergies because, of course, there are a lot of raw materials there are mutual within the group's comments that we are looking at realigning all the purchasing and trying to get better conditions with suppliers as much as possible. And then in terms of sales, as I was mentioning, we are really working on launching tomatoes and also tuna in Italy and Germany as these 2 markets are pretty big in both countries. And we are also looking at some other opportunities, for example, in the U.K. as Symingtons has a lot of unexplored potential in terms of production, which could be passed on to -- which could be working for a Princes in terms of its products as well. So we're really working on exploring all the opportunities, we've been working every day on this. And hopefully, we can see some results in the next month or so. On to the next slide, we just have a picture what it looks like right now in terms of net debt. So this is the figure at the end of August 2024. We had a net debt, which excludes the EUR 200 million shareholder loan for Newlat Group of EUR 444.2 million. If we exclude IFRS 16, net debt would have been EUR 354.2 million. So we are already working on our deleveraging process, thanks to these actions that have been putting in place in terms of improved -- net working capital improved cash positions. So -- and thanks to the better management of our resources, we expect to start working on deleveraging the position as quickly as possible. And lastly, we have our 2024 outlook. So we've given some guidance of what we expect in terms of areas that can be explored in the next months or so and what we can expect in terms of just a general picture, combining the 2 groups together. So in terms of sales, we expect stable sales, but we still expect some growth coming from new products and new launches of products such as, for example, tuna and tomato in Italy, as we said, but other products that are being currently analyzed and potential opportunities there are in the mutual markets of Newlat and Princes. On the other hand, we expect to have improved margins. As we said, we have been working from day 1 to improve our conditions. So definitely, we expect see an improvement in EBITDA margin, especially by the end of 2024 for the combined group. As we said earlier, we have some innovation and investment going on, not only in Special Foods segment, but mostly there. And we have more opportunities coming from the post-closing, so with Princes, which could be bringing some more positive contribution in the second half of the year or starting next year as well. In terms of procurement and production synergies, as we said, we will see some results in the second half of the year, but we will see some more considerable gains coming in 2025. And lastly, we expect to see an increase exposure to international markets -- we combined network of both Newlat and Princes as well as the new opening up for us with the new products coming into the market. Just a quick news. We're going to the first trade show in less -- in 1 month, specifically in Paris, one of the biggest trade shows, we're going there with Princes as well. So we really see enhanced opportunities for our overall group and portfolio to grow and to gain more customers, which weren't necessarily our customers before because of the different category they would be working in. So definitely really excited to be working with the wider team and to exploring the opportunities when new clients abroad in the next months. So that is the end of the presentation. Now we're on to the Q&A. [Operator Instructions].

I think Arianna has a question already. So go ahead.

My first question is a clarification on the guidance on Newlat's standalone in terms of assumption behind it. So for example, what are you assuming in terms of price lease dynamics? And what kind of contribution are you seeing regarding the Ozzano Taro plant since I understood you are going to conclude the investments there? Then in the second question is put some more flavor on Princes' performance so far in addition to the qualitative indication you provided? And the third, lastly, the combined entity cash generation was sound so far. I was wondering if we are missing something? Is there any catch-up we have to be aware of in the coming months or seasonality effect just to help us in adjusting our net debt projection?

Thank you, Arianna. About the Newlat standalone, we don't have, at the moment, any particular comment in terms of guidance in the sense that our focus is, also Giuseppe explained before, was to try to maintain the profitability that we gained in the past years. And it is important also to highlight that we reach in this semester in terms of EBITDA margin 9.65, if we calculate a rolling picture for the 12 months. And this is a number that we didn't get before, neither before nor after the COVID year that was amazing in terms of volumes. And the message of this number must be that since the top line could be volatile because there are several elements that we cannot control directly because we cannot have a direct control on the inflation, we cannot have a direct control on the general market trends. Our focus is to continue to create value in terms of profitability improvement and cash flow generation despite the movement that we can see on the top line. If the strategy may be different, probably, as Giuseppe said, we may intensify the promotional activity in the past months, and we may have a different result in terms of top line, but for sure also a different result in terms of EBITDA margin and cash flow generation. I think that for the next months, we will continue to add the first focus on the profitability and the cash flow but with obviously, the attention and to be ready to get also into the market with the new promotion also additional opportunity for the volume.

Yes. So if I may add something. So I want to underline once again, the concept that I really shared before. So the drop of volumes is not -- so in terms of customer base, we are keeping our customer base tied to our -- so we didn't lose any customer. All the volumes that you don't see here that then impacted the revenues as well, as I mentioned, we're strategic and chosen to do not participate in this unuseful promotional activity in a period in which we prefer to maintain the stability of margin for the first 6 months. . So what I can tell, and what Fabio as well mentioned is that, now that we have a better opportunity even in terms of cost, and so we can we keep this level of marginality. We look forward and we reactivate in a stronger way the promotional activity with all our retailers. So -- but what I want to tell and let everybody be comfortable about is that in terms of business development and business management, we are keeping in a really good way, our customer base, looking for a long term and result, once again, is the best ever in terms of marginality. Thanks Fabio.

Yes. Thank you, Giuseppe. And on top of that, we have also to say that approach in the second half. If you remember, last year, the second half -- so the first half was the strongest in terms of the top line performance. This means that also the comparable base in the second half will be substantially less challenging and will allow us to mitigate this first half performance in terms of revenue growth. Flavor on Princes performance. I have to say that in these first months, we start a lot of projects and a lot of activity. The underlying performance is in line with substantially our expectation. It's clear that the general market trend is impacting all the players. But for sure, Princes is not getting -- just to give you an indication, our performance in terms of top line, like the one that we presented today for Newlat. On the other side, what we expect in these first, I would say, 4 months of managing Princes is more than other aspect of the business is to optimize the net working capital situation of the company because we believe that this is the first area of value creations that we want to -- substantially to manage and to get value added for the group. And I think that the data that we share, and we decided to share this data because as we mentioned in the presentation, after the acquisitions, we believe that this is the first important area of actions. Already in the first months, we achieved a very strong result in terms of working capital improvement. On the other side, the data that you saw in terms of net financial position at the end of August is the right one. There are no particular adjustments or particular cash out that you have to expect in the next months. So this means that for the end of the fiscal year, we expect to improve further this position. And this means that considering what we announced in terms of deleveraging and the data of the announcement of the acquisitions, we are absolutely in line with our plan.

So just a follow-up. First of all, for the sake of clarity on the guidance, it was not very clear to me whether the outlook for stable revenue was referred to the organic performance or to the combined group. So if you can elaborate on this. And then coming back to your comments about volume prices and the shift in the promotional activity. I was wondering whether this was referring to a specific segment. Actually, in the press release, you refer to this only about one segment. Sorry, I don't have the press release in front of me at the moment, but just to understand whether it was a more general reason for this slowdown especially we saw in volume in the second quarter? And what are you seeing in this respect in the very last few months like July and August for your organic business, meaning Newlat standalone?

Thank you, Paola. In general, for the end of the year, we expected to see an improvement versus the performance that we reported today in terms of general volume trends for Newlat standalone. This -- because the comparison base in the second half will be less challenging and also because we experienced, so the main impact of the deflation in the first half, we do not expect to have a similar trend also in the second half and also because the second half is also a period in which we can also have maybe more promotional activities that, as of today, what I can tell you is that there is a general focus where we find the opportunity, we are ready to get it with maintaining the focus on the profitability that, for us, is the most important part of the story together with the cash flow. It's not possible today to give you the granularity to say that we will have the 3 promotions on Pasta and Bakery and where the others, we generally say that we expect an improvement about the revenue trends in the second half.

Maybe Fabio, I want to add something just to give a bit more clarity. So now the point is that we are trying to manage the promotion in a really careful way. What does it mean? That we want to participate to promotion, which we can see the real effect in terms of price on the shelf going to the final customer. Because, as you can imagine, retail chains are trying to retain the margin for themselves. So we are trying to participate in a way where we see the real opportunity or real big volumes by the end of the year. So not giving so much. So we reduced the amount of discount that we give to the retailer and to have more effective promotional activity within the end of the year. What I can say is that we look to the end of the year concerning, for example, Pasta. So once again, with a really good level of volume and so we forecast a really good end of the year. And so we expect that volume-wise, we can achieve really good volumes. As you have seen on Dairy, despite everything, we continue the growth. This is mainly due to strategic and organic growth in which we are continue to work because, as you know, as you've seen in the last year, our business development entity is always keeping a really strong organic growth. So we think that the second half, seen all together, I want to anticipate that because, of course, then you have to look the end of the year as a really important moment for us, for the seasonality of many, many categories. So in the 6 months, we expect to have really good results by the end of the year in terms of volume, revenue, despite, of course, the deflation and marginality as a main focus for the company.

And a follow-up, if I may. Can you give us a bit more indication on the performance of Princes so far in terms of revenues? You were saying not the same weakness we have seen for Newlat standalone. And also in terms of profitability because as far as I remember, Princes already had a few initiatives ready in pipeline, to improve its profitability. So I was wondering whether there has been execution in this respect before your closing date, let's say? So what's the situation starting point today for Princes? And last point, sorry, I don't know if you have now a better idea about possible integration cost, one-off, which you might be aware of?

I didn't understand the last question, Paola, sorry.

Yes, it was about possible integration costs. You might have a one-off for this year in case we should be aware of anything in this respect.

Between Newlat and Princes, you mean?

Yes, for the integration. I mean, any layoff, consultancy, anything like this.

So Fabio, I give the floor to you for Princes.

About the financial performance highlight once again, that we shared the net financial position because for us, at this stage, the most important point to share is the fact that the deleverage plan that we presented, and I remember some skeptical comment is absolutely achievable. And it's clear that if companies continue to generate cash, obviously, the operating performance that there is underlying is going also well. At the moment, we are inside business since 1 month. We decided not to share any data, but be able to prepare the right pro forma basis, the comparable base to share during the 9 months, the result in substantially, roughly, 1 month. At the moment, what we can tell you is that all the main strategic goal that we have in mind by the end of this fiscal year are going on well. We are putting in place a lot of actions everywhere in terms of cost, in terms of working capital, in terms -- also in terms of the integration, commercial activity. There are a lot of things to do. Probably it's too early to see, I would say, a full result for all these actions, but the first step are absolutely in line with our plan. About extraordinary cost to share. We don't have, at the moment, a precise idea for the end of the year in the sense that every week, we implement the strategy with the new actions. We have new discussion. I think that at the end, this is not from our point of view, a material item in the sense that it will be an extraordinary cost. What we believe, it is important is to drive the business to step by step, match the leverage that we have in mind and also the margin improvement because it's clear that the opportunity that we saw in Princes was also the fact that a company with this position -- this leading market position in different segments could substantially run at a different margin than the 5.5%. This substantially is our idea and despite exceptional cost that we may find during the aggregation or also during the reorganization of the Princes standalone.

[Operator Instructions]

May I have a follow-up, sorry, if there's a no more question. I was wondering whether in terms of outlook for raw materials, also including the categories covered by Princes. Is there anything, which we should monitor specifically in this moment, which might be an issue for you and although related to main news flow will be on synergies and on the integration, but looking to the underlying context for raw material, is there anything which might be a critical...

No. At the moment, we don't have a material area of, I would say, alert or of weakness in terms of raw material. What I can tell you, generally speaking about the procurement, we have there a very interesting opportunity to have cost decrease, a material benefit more than some challenges that we can experience also into the market. At the moment, we don't have this situation. So everything is in line with the expectations and without particularly swinging into the market.

So if there are no more questions, we might end the call. Otherwise anyone has a last better question? Otherwise, we remain at your disposal for any questions. You can send us an e-mail and you can call us, and we will be happy to answer all your questions. Thank you.

Thanks a lot to everyone.

Thank you. Bye-bye.