Orsero S.p.A. (ORS) Earnings Call Transcript & Summary

Good morning. This is the conference operator. Welcome, and thank you for joining the Orsero Group First Half 2026 Results Web Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Paolo Prudenziati, Chairman of Orsero. Please go ahead, sir.

Hi. Good morning, everybody. First of all, I would like to address a few points before I pass the word to Matteo talking about numbers. We are saying in our press release that we are satisfied I just would like to stress a little bit at this point why we are rationally satisfied. There's a few points. First of all, in despite of the market substances, specifically for the banana and pine business, we are able to confirm at the middle of the year our year guidelines, which is not rather unique. If you think what happened in the Banana business this year, which looks like a perfect storm, most of other competition morely influenced by Banana business are showing as of the profits or sometime even losses. Now for our case, with our strategy we are able to confirm our company guidelines overall. Second, the point of our growth strategy. We've always been saying that our growth strategy is based on 2 pillars. One is organic growth and then a second one in M&A. Talking about organic growth between the lines, we already say that we want to strive the growth of value-added products. And this year, again, we have something new like the leaching importation of Madagascar within the end of the year, which we think is a clear point of correspondence and deciding our strategy on organic growth and what we do. Second is the most important investment this year the acquisition of an important factor in the U.S. market of the company, as you know. This is particularly important. It's particularly point of satisfaction for us because we really believe that in a few years, U.S. market will become for us an important pillar of our business on the top of the South European markets. And this is a particular factor of satisfaction for us, having found the right company, the right guy in the right position for this. Third, the company is giving and probably it goes between the lines, but I think it's important since a few years, consistent growing results. if you imagine what happened in the last 5, 6 years, overall worldwide from any point of view, and this company has been growing and growing and growing. So this is another point of rational satisfaction. Last but not least, we are also happy to confirm that there is always correspondence in what we communicate in what we say and what we execute. And I think this is important for the market. Now I pass the word to Matteo to follow up.

Thank you, Paolo, and good morning, everybody. Thanks for joining the call. So I will give you some context about the business, the corporate happening of the first half. the main figures, and then I will leave the rest of the space for the Q&A section. So as Paolo said, the market context in the first 6 months of the year, specifically beginning from February, was pretty complicated, mainly due to the external factor affecting all the condition of the market in Europe, and we're talking about mainly the Middle East conflict that is still running where we do not see a quick solution to the actual situation. So in this context, the inflection rate, mainly driven by the main factor like oil price is still running. Our company and our business model is capable to adjust to the situation. So we are able to increase our pricing considering the market context and the external factor. But the most important thing is that our strategy is very strong on the product mix. It's very important to say that in this first 6 months, we grew 10% on the value-added product, while the staple goods like bananas, Platina Canari and Pineapple are struggling due to mainly what is related to the confusion and the oversupply of the European market, driven by the fact that many volumes that were historically allocated to the Middle East coming from our same origin, so Central America basically are diverted to Europe. And so what happened during spring and what happened during the summer is that normally the business is able to increase the pricing and the value specifically during the spring period, -- but this year, the oversupply related to the Middle East conflict created a stress in the demand situation of the market, supply-demand situation of the market. And so we were not able to transfer, let's say, the value to the category, and this is happening for everybody. It's a situation that is continuing during the summer and we hope that the market now is going to be adjusted and the supply/demand dynamic will go back to a pretty normal situation. On the shipping business, we see a resilience, thanks to our integration. So we were able to keep the pace on the shipping business and the results are well in line with our expectations and with last year, actually, is slightly over our expectations. So we're happy about that. Going to the main corporate issues of the first half as Paolo said, we have to remark the strategic investment we made in Truco Group. We acquired 45% of the company. We're still waiting for some authorization to complete the deal on a smaller part of the group, but the main part of the group is already an investment for us. The total investment was around USD 46.5 million. And we are very keen and already working on developing the strategy on the U.S. market. The other CapEx of the period, the operative CapEx are broadly in line with our expectation. But during the first half, we had some opportunity to expand our business in the future. So we decided to invest something more mainly related to a development of the platform in the north of Spain and other operative investment among the group infrastructure. the interest rate situation at the moment see us in a very good position because our long-term debt is covered by its edge by 75%. Now it's 60%, but it's going to be -- is already covered for a percentage of 75% beginning from December 2026. And this is a very good news, given the situation of the interest rate cures in the medium, long term. Going to the main figures, our sales grew by 1.8%, reaching EUR 86.5 million, adjusted EBITDA decreased by almost 5.8% reaching EUR 45.6 million. That is still a very good result in terms of profitability, given our business, our sector, our competitors and our -- and the market context -- adjusted EBITDA stands to EUR 26.5 million. And the adjusted net profit reached EUR 18.6 million decreasing by 11% comparing with last year. Net financial position grew to EUR 142.4 million, starting from EUR 116.1 million end of last year. This is mainly due to the impact of the Trop acquisition that we -- the deal was closed on the 30th of June. So all the impact is already considered within the figures of this first half. Drilling down a bit the EBITDA, as we said, in terms of sales, the sales and EBITDA, as we said, in terms of sales the distribution grew by 1.6%. So it's EUR 12.6 million, and the shipping grew by EUR 1.4 million. All the rest is negligible. And this is mainly driven by the added value product mix that grew by 10% during the period, but we have some challenges, as we said, on the Banana Pineapple and the Platinum Canari business. On the EBITDA, shipping is in line with last year, holding the services as a slightly higher cost base by EUR 0.9 million. And the main impact is driven by distribution that decreased by EUR 2.2 million compared with last year. And the main reason of this situation business-wise is the performance of the staple goods. And we saw an increase of operative and SG&A and operative costs and SG&A, and this is mainly related to the fact that the company now is structured for the growth and the performance of some products did not allow us to cover the increase of cost, but it's something that we knew we forecasted it's under control and is going to be resulting in growth over the next years. going to the net profit, the adjusted net profit H1 2025 reached EUR 20.9 million. And now we are reaching EUR 18.6 million. The main variance is related to the decrease of the adjusted EBITDA by EUR 2.8 million we had more amortization provision D&A due to the investment we performed in the past. We have a better performance of the financial and share of profit of our nonconsolidated companies. Just for your memory and your guidance, we are not considering end of June any value of Truco within our figures. So it will be considered in the second half of the year and on. And those are the main, let's say, items reaching the adjusted net profit with the reported one. This year, we are having a slightly more nonrecurring cost. Main ones are the costs related to all the legal and due diligence costs for the acquisition of Truco slightly over $600,000, a tax assessment litigation that we had in Italy that comes in with almost EUR 940,000 and other items, around EUR 1 million mainly related to nonrecurring cost of chartering of additional vessels on our CAM service at the beginning of the year. If we look at the net equity variance, the net equity reached EUR 278.6 million and the main variance compared with the end of last year are the net profit of the period EUR 14.6 million. The dividend paid to our seashareholder in May that comes in with 10.4 million third-party dividends payout that is mainly related to the Banten family share of Banten in France and the rest is quite negligible. Going to the net financial position, the main impact of the period is related to the TruCor acquisition that comes in with EUR 38.2 million -- we had a strong cash flow generation by EUR 26.5 million, a good working capital released by EUR 5 million. Operating CapEx for EUR 6.5 million. Expansion CapEx for EUR 6.8 million. The cash dividend paid to the -- or seashareholder million and the effect of the mark-to-market change on the hedging instrument. So net financial position, excluding IFRS 16, reached EUR 77.2 million. And then we have the IFRS 16 effect accounting for EUR 65.1 million. last words before leaving you the stage for the Q&A session are related to the guidance. We decided to confirm the economic metrics of the guidance. So net sales, adjusted EBITDA and adjusted net profit are confirmed. So no variance on that. We don't have at this moment, the insights to increase our guidance. So we think that the guidance we released in February is still solid given the context we're playing in. What we obviously decided to do is to update the CapEx and the net financial position, increasing the CapEx that we forecasted between EUR 14 million and EUR 16 million at the beginning of the year. Now we see a range between EUR 19 million and EUR 20 million, and then we will see why in the next in the next minutes. And then obviously, the net financial position considers the investment of C. the increase in CapEx that we are seeing by the end of the year and a working capital impact related to the new leach importation campaign from Madagascar. So drilling down the net financial position of our new guidance, we used, let's say, the lower end of our range. So at the beginning of the year, we saw -- we forecasted the net financial position, excluding IFRS 16 impact between EUR 37 million and EUR 42 million. So we are bridging from 3. We're adding EUR 38.2 million related to the Trop acquisition. We have additional CapEx by $4.8 million, of which EUR 4 million related to new expansion initiatives -- we are considering prudentially EUR 10 million impact of working capital related to the Madagascar Lich campaign. This is let's say, a very unique campaign. Normally, the campaign is developed during -- mainly during the month of December in terms of sales -- so the cash in of the campaign will be visible in the first quarter, January, February, beginning of February 2027. And this campaign works with relevant advances to the growers. So the reason why we're seeing this working capital effect by the end of this year, is very simple. We are advancing payment to the growers to support the campaign during December, let's say, between end of October and December, we will receive the fruit beginning of December, we will perform sales over December and during the first 2 weeks of January and then obviously the client would pay us on average between 30 and 40 days. So that's the reason why we're seeing an impact in terms of advances, but still at the end of the year, we don't see the cash impact of the sales. The rest -- the other impact is EUR 5 million that we consider comprising total working capital change, excluding the lease that we already drilled down and some nonrecurring costs we already spoke about. So acquisition-related costs, tax litigation in Italy and the nonrecurring vessel hiring. So our new guidance on the net financial position, excluding IFRS 16, is between EUR 95 million and EUR 100 million. And considering IFRS 16 is passing by EUR 102 million and EUR 107 million that we released in February 2026 and now we forecast a range between EUR 160 million and EUR 165 million. So now I will leave you the rest of the time for the Q&A session. Thank you very much.

[Operator Instructions] The first question is from Gabriele Berti in Tero Sanpaulo.

I'll start with a few questions on -- could you help us understand the historical growth profile of the group cash generation profile and expected contribution in terms of share of profit then what do you expect in terms of potential commercial synergies, if any, I'm referring to efficiency on sourcing, for instance, -- and in particular, should we expect there to be directly involved in sourcing, commercial strategy, investment decision? Or will the business remain highly autonomous -- and lastly, I was wondering if the EUR 38 million M&A impact on net financial position already include the AJ Truco transaction as well.

hank you, Gabriel, for your questions. So true Tropo is a company that grew over the past 3, 4 years by what we observed during the due diligence process, I would say, massively thanks to the product mix, they are trading. They are very strong in the key importation. They're very strong in blueberries. They are very strong in Chesnut and they have some good business line with would see through [indiscernible]. So U.S. market is quite different compared to the 1 we had in the south of Europe. So Normally, the companies are more category killer compared to us. In Italy, we are more generalists, we trade many, many different products. in United States is more similar to market like France or Germany, where you have, let's say, big retailers, so the market is wide and enormous. But the concentration of the retailers is pretty high there as well. Still, there are some regional one, but the main ones are, let's say, national or class. So driven by the structure of the market, the most extent companies are the ones that are able to be super expert and category killer on 2, 3, 4 business lines and through the strategy of Truco was dedicated to some products that now is booming -- are booming in the U.S. market. So surely, in the past few years, the growth was very good. the company, we see the company growing a lot organically the next few years, but the strategy and the reason why we made the investment is to replicate our strategy in Europe -- so to mix an organic growth that we see stronger than the ones that we can have in Europe now together with an M&A growth as well selected because we -- United States is a big country East Coast, West Coast are 2 different words. So now we -- the company is focused on the East Coast that is reaching 55%, 54%, 55% and of the population in U.S. from the warehouse that Truco operates in New Jersey. So is a very good coverage. But if you want to grow and to reach, let's say, 80% of the population, we will have to decide to go west or to expand our distribution capacity over the next year. So the idea there is to obviously support and take advantage of the organic growth, the strong organic growth that we are already seeing in the company, but to mix it with some external growth as well as we did over the past year in Europe. And this is even the reason why this acquisition is really a partnership because the will of the 2 shareholders despite the fact that now we are a minority on and intra-year, so we will become a majority one. But anyway, the goal of the 2 shareholder is very clear and the word to use is growth and sustainable and financially healthy growth. So the company, as you imagine, profit-wise performed well in the past and is performing well and has all the elements to continue to perform well. So the company is more profitable in our vision potentially compare with the mix of our group, and this is a strategy that we follow every time that we decide to strike a deal. We did it in France, Banten and CapEx are more profitable than the group in the mix of the strategy. on the value-added products and on the prospect market is very clear. We want to buy a company that has more potential to grow organically where we see the market as a core potential market for the group and where the mix of the product is very healthy and more profitable with the mix that we have now. This is the only receipt we can use to drive a fast growth and a very profitable one. In terms of financials, Truco has no, let's say, net financial position, as we said in our press release. So it's always cash positive, it's generating a very good cash yield. The cash yield is very comparable with our distribution performance. So the dynamic of the business is quite the same, obviously, being more profitable, the amount of cash generated can be higher. But the dynamic of the business is really comparable with our distribution with our distribution business. So that's a bit what I can say at the moment about you were asking me if you are active basically in the true cogovernance and management, the response is Yes, we are -- we joined the Borello selling myself. We joined the Board of the company. But a part, let's say, the Board, we are working closely with Lipaciaandhis team with the Board to develop the business. It's very clear that it's a partnership so we are continuing working together in finding opportunity and to support with our structure, strength and know how the growth of the company. And what we are seeing is that Obviously, we have some, let's say, partner in Comum together with Truco. We have some opportunity because some of our partners in production in Central South America are wishing to collaborate with the group and we took as well in the North American territory. So all in all, we see big opportunities. We're working very well together with Truco and we are active in the governance, but it's very clear that we are keen to maintain the TrueCar leadership as it is, the steel will remain shortly Nitasha because we are not seeing a better CEO for us in the U.S. market for the next year. So that's a bit the situation. .

The next question is from Mathias Paladino, ICAP.

Just 1 question on the distribution. So you highlighted strong momentum in premium categories. and such as wafer Barisan exotic fruits. And so how do you see this contribution of these categories evolving in the H2 relative to the more traditional food categories? And maybe this is 1 of the main reason for your confidence in achieving the guidance.

Yes, you are right. As we clearly stated and as it's unfortunately, very visible as well in the result of our, let's say, main worldwide competitors, banana business, mainly and pineapple business is not going to support, let's say, the year result and the performance is weaker compared with what we forecast at the beginning of the year. due to the, let's say, Middle East conflict indirect impact. So that's the situation. The good thing, just a week 2 words on bananas and pineapples. The good things about Banana and the good things and the bad things about those kind of products is that the world is moving faster and you can have, let's say, 6 months of very good results, then you can pass through a very difficult period. But is not a structural situation. So in terms of strategy, we push on the added value categories because we think that the staple goods can be worse or better during the season during the year, but we cannot count on, let's say, a continuing growth and profits coming from those category. So we decided to keep a stand position. We manage at best the operation and the sales, but the strategy is elsewhere. So our confidence in the guidance is thanks to what we are seeing in terms of performance of the added value mix and obviously, the support that we will have in terms of profit on the new campaign related to the leaches. So the mix -- the actual mix plus what we developed during this year, during this first 6 months give us confidence in reaching our targets despite, as we said, a very complex situation on the staple good categories.