Orsero S.p.A. (WRG.F) Q2 FY2025 Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Orsero First Half 2025 Results Conference 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.

Good afternoon to everybody. Just one word before I pass the word to Raffaella. Just to think about that, the good economics we had in the first 6 months, combined with the fact that the consumption has been showing for the first time a kind of volume recovery, we think this is giving confidence to end the year well, but also to work for the future of growth. Now I pass the word to Raffaella.

Thank you, Paolo. Welcome everybody, and thank you for joining us today. The first half of 2025 saw excellent results driven by the very strong performance of distribution, which saw an increase in revenues and margin in all countries. Net revenue increased 13.6% up to EUR 845.2 million, adjusted EBITDA increased 18.4% to EUR 40.9 (sic) [ 48.4 ] million, adjusted net profit increased 30.9% to EUR 20.9 million, and net financial position stands at EUR 111.3 million. The second quarter was particularly positive with revenues exceeding expectations due to both volumes and higher prices. We are very pleased because all the countries, all the sales channel and the whole product range did great. And this is exactly the outcome we are looking for with the strategy we have been implementing over the past few years. Of course, some products such as platano canario, pineapples and grapes really stood out with truly exceptional results that will be difficult to repeat in the second half of the year. Also, the shipping did well with both revenue and margin up compared to the first half of 2024, thanks to a strong loading factor on both segments, dry and reefer cargo. On the investment side, everything pretty much in line with the expectation. We are keeping up with the improvement in all our warehouses, and we have completed the dry docking of one of the two vessels. Given these results, we have updated our guidance upwards. And we are more confident than ever that we are in the right position to make the strategic investments we need to support our growth. Now I hand over to Matteo for a deeper dive into the half year results.

Thank you, Raffaella. Good morning, everybody. So we're going to drill down a bit net sales, adjusted EBITDA and the key economics KPI and then I will leave the rest of the time for a Q&A session. So net sales, H1 2025 post an overall progress of over EUR 100 million, mainly -- or 13.6% up, mainly driven by the distribution performance accounting with EUR 97.2 million increase or 13.7%. The increased sales in H1 2025, we thank the sustained selling price among all the product mix and a bit of inflationary effect mixed with the higher volumes on some categories. This is a very good news because as a whole, the consumption of the whole market, not only the Orsero performance, is seeing a growth in volumes sold and this is very healthy for the segment as a whole. The Shipping increases by EUR 2 million or 3.5%, driven by a strong dry cargo and a record loading factor on both segments. Freight rates are not high like it used to be in the past year, mainly 2022 and 2023. But we are able to keep a very decent profitability of the activity, thanks to the operational excellence and the loading factor. Holding & Services are unchanged, and the intersegment elimination is down by EUR 1.8 million. Going to the EBITDA variance. Actually, the H1 adjusted EBITDA is up by EUR 7.5 million or 18.4% versus last year, and margin is 5.7% versus 5.5% in H1 2024. This is a really remarkable result because last year was already a good one. Distribution improved by 17.3% versus last year. And again, the improvement in terms of product mix is very appreciable and is driven by high value-added categories. And in particular, naming Kiwi Fruit, all the exotic fruit gamma, pineapple, table grapes and fresh-cut. All the mix is performing very well. But obviously, given by our wide mix, we always have the best items in the portfolio to highlight. The Shipping increases by EUR 2.2 million. The reefer segment is more or less stable in terms of freight rates, as we said, but the dry docking is higher. And we have to highlight the fact that we had higher cost in H1 2024 (sic) [ 2025 ] compared to last year because 2025 is performing the dry docking of the 2 last vessels. And last year, the 2 vessels already dry docked were counted in second half. And this year, one vessel is counted in the first half and the second one is counted in the second half. Holding & Services is not relevant. Adjusted EBITDA, excluding IFRS 16 effect is EUR 38.8 million versus EUR 32.1 million marking 4.6% of net sales versus 4.3% of last year. Going to the net profit. Net profit 2025, the adjusted one, stands at almost EUR 21 million, thanks mainly to the increased adjusted EBITDA, slightly higher D&A and provision mainly driven by past investment that we're starting to amortize and tax effect. Going to the main KPI on the net equity and net financial position, the net equity variance, net equity H1 2025 comes in with almost EUR 259 million, mainly thanks to the reported net profit 2025. Then we have to take into account the dividend paid in May to the shareholders of Orsero. The portion of the dividend paid mainly to the [indiscernible] remaining shareholder, so minority third-party dividend payout. And then we had a negative effect due to the hedging reserves, mainly related to the hedging made on the U.S. dollar to cover our contract with retailers at the beginning of the year when the situation of the exchange rate euro-dollar was totally different compared to now. In terms of net financial position, last year, we were excluding IFRS 16 effect, we had a full 2024 result of EUR 54.8 million, and the net financial position end of June 2025 is EUR 58 million. This is coming in with a cash flow of EUR 26 million, very limited variance in net working capital change, slightly over EUR 1 million, EUR 10.6 million operating CapEx, EUR 8.4 million, again, dividend paid to Orsero shareholder, and a different variance in mark-to-market of the hedging instrument of EUR 9.1 million. Then we have to take into consideration EUR 53.3 million of IFRS 16 effect that comes with a total net financial position of EUR 111.3 million. Regarding the guidance, as Raffaella said, we decided within the Board of this morning to upgrade the guidance that we released in February. And the new guidance is net sales between EUR 1,650 million and EUR 1,690 million. So plus 6.3% compared to the previous guidance of plus 2.5%. Adjusted EBITDA, EUR 82 million to EUR 86 million range compared to EUR 77 million to EUR 82 million. Adjusted net profit current with the EBITDA increased EUR 30 million to EUR 32 million. The net financial position remain unchanged because we have slightly increased forecast on the CapEx, mainly driven by an additional investment in Spain related to the Cupalma long-term agreement and an additional cost related to dry docking that was not possible to be forecasted at the time of the budget and the first guidance. So that's in a nutshell our figures in the first half, and I will leave the rest of the time for the Q&A session.

[Operator Instructions] The first question is from Gabriele Berti of Intesa Sanpaolo.

Congratulations for the results. A few questions from my side. First one, could you please provide some color on the dynamics behind the increase in average selling prices, specifically how much is attributable to market inflation and how much to improve the product mix? Then if you can share additional insights by geography. If I understood correctly, Italy and Spain have been particularly strong, while France was more stable. Could you elaborate a little bit further on that? And lastly, if you are seeing any impact from U.S. tariffs either on your operation or on your ongoing M&A scouting activity in North America?

Thank you, Gabriele. So we start from the price effect. So it's not that easy to answer to your question and be very precise, but in general terms, more or less the average inflection on the, let's say, the basket of the fresh produce can be estimated around 3%. So it's slightly over the basic inflation that we know that is now around 2%. The rest is driven by the mix. So the increase in sales, a portion of the increase is related to volumes. So something like 2% is related to volumes, that is something very important because we're not pushing on the big commodity lines. We're just pushing on the added value product lines. A portion of the inflection of the price increase, something like 3% can be related to inflationary -- the inflationary situation and all the rest is driven by the product mix. The product mix is not exactly the same, and I go to the geography question, is not exactly the same in each country. So we have countries like Italy and France, where the product mix is higher in terms of value because the banana way that we have is not that high. And then we have countries like Spain and Portugal, where the banana comes in with a higher percentage of share -- higher share within our product mix. So it's not really -- organically speaking, it's not exactly the same in each country. But what is -- what happened this year is that in Spain, we had a very good season, a very good first half with the platano canario, as Raffaella said at the beginning of the call. Platano canario must not be considered a banana itself. It's a premium product within the banana basket. So when the platano canario goes very well in terms of pricing, it normally means that the production is shrinking a bit because of weather condition, winds or whatever in Canary Islands. And normally, it tells, again, the dollar banana to have a better selling price condition because the premium price is driving a bit as well the entry price product on the market. Pineapple, in general, in Spain and in Italy mainly were -- was very well performing. Again, thanks to our positioning on the product line, and thanks to the fact that the market is not oversupplied since a couple of years. And when the market is short, normally the prices goes up. The Exotic product, the berries and the kiwis that are the most valuable, let's say, item together with fresh-cut in Italy of our portfolio are growing rapidly. And fresh-cut as well is growing very well this year, the market is growing again. So we have the perception that the investment that we made in terms of relationship with suppliers, a relationship with our clients and our warehouses investment are the right one to drive the growth over the next years because the product lines that we are pushing on are the most performing in the market. Going to your last question on the -- let's say, on the geopolitical tariff situation, at the moment, we have no exposure -- direct exposure, let's say, to the tariffs because we do not export to the states. And the avocados that we grow and pack in Mexico, and we ship to U.S. are protected by now so far from the TMAC agreement. So avocados from Mexico are not touched by the tariffs by now. So the actual situation has no direct impact. It's difficult to forecast any indirect impact because the goods that won't be shipped to U.S. just in case could be possibly be shipped to Europe. So creating some moment of oversupply of the market, but this is theory. So we have no sign of any impact at the moment of the tariffs. I don't know if I answered to your all questions.

The next question is from Andrea Bonfa of Banca Akros.

Can you hear me?

Yes, Andrea. Not very well, but I can hear you.

I do apologize. I'm traveling. Very quickly, I'm wondering if you can elaborate how much does your guidance take into consideration of the fact that the Q3 of last year was very strong, was at the peak of the profitability together with Q3 '23? And the second, how much the weaker dollar helped your, let's say, banana trading in Q2 and how much is going to help also in H2 '25, if I may? And the last one, if Matteo can remind me the impact of dry docking, let's say, in H2 this year because last year, Q3 profitability of shipping was virtually almost 0 because of the dry docking and how we'll perform that division this year in light of your maintenance schedule?

Okay. Thank you, Andrea. I just ask you -- okay, you can mute. So on the first point, you're right. Q3 of last year was super strong. What we are seeing that still the summer was okay this year was -- so far was a good one. But we will compare the results of Q3 with a very strong Q3 of 2024. So the guidance takes into consideration the performance of last year, because obviously, the first half of 2024 was not as strong as 2025. But as you perfectly know, the campaign, they don't follow and they origin in a different, let's say, moment of the year, they don't perfectly fit into the financial calendar. So when we -- than we forecast and we reforecast our figures, we have to take into consideration as well some effect that is sliding from one quarter to the other compared to the previous season because we have an external element that is the weather and the campaign and the production. So -- and we trade so many groups that we have to take into consideration some prudency when we release an estimation. But yes, one of the reason why H2 is not seen as strong as the H1 is the fact that Q3 of last year was very good. Going to the dollar -- banana and dollar effect, actually, what we did, and this is why we have a negative hedging mark-to-market impact on our net financial position and net equity is because at the beginning of this year, everybody, I think, or mostly everybody, we're seeing an equality or something like that between U.S. dollar and euro. And given the fact that we stroke some agreements with retailers at the end of last year with really tiny margin forecasted between our cost and selling price, we decided to cover almost all the dollars that we will need by the end of the year. So Q1, the situation was more or less equivalent than in Q2, the dollar started to weaken. And in Q2, we had some, let's say, advantages but not really massive. In the second half, we won't have any particular positive effect because we won't need to buy on the market any dollar. Actually, this is not a very good news because we are -- we took a low risk attitude. And so the, let's say, the contribution of the actual exchange rate between euro and dollar won't be that good. But on the other side, a result driven by the exchange rate contribution is not an industrial one. So at the end of the day, it's not a bad news for our, let's say, forecast and stability. We lost some opportunity on the, let's say, finance side but the performance is strong because of the industrial and commercial performance. Going to the Shipping, Q3 of last year, one of the reasons of the low profitability was the fact that we had all the costs related to the dry docking in the third quarter. And the other one was that normally during summer, the loading factor goes down because the consumption of banana in Europe is lower. But this year, we were able to work with some of our clients in order to increase our loading factor during the summer. So we expect something better on the third quarter, thanks to the shipping performance.

[Operator Instructions] The next question is a follow-up from Andrea Bonfa of Banca Akros.

Sorry, Matteo, I exploit the fact that there are no other questions. But -- your guidance is not assuming an improvement, I mean, compared with the existing one on the net financial position. Is that an element of prudence because, I mean, with your size is -- I mean my opinion is quite differ to estimate precisely the net financial position by year-end. We know that EUR 10 million, EUR 20 million can shift easily from one month to the other. So I mean, just your comments on that, if there are elements of prudence in that forecast or what shall we assume?

Okay. Actually, the technical reason why we did not review the net financial position by the end of the year is that the cash generated by the additional forecasted EBITDA is going to be almost used to cover the additional CapEx that we forecast. So we did not decide to review our guidance on the net financial position for EUR 1 million or EUR 2 million. I don't think it's something reasonable. This is the technical reason why comparing the 2 guidance, you don't see any major change. But surely, as you said, given our size and the shifting of the cash flow from one month to the other, normally, we've taken a prudent attitude on the net financial position because EUR 5 million range is very easy to be challenged by the reality, so that's the explanation.

The next question is from [ Thomas Justen of Gallo Funds ]

Maybe two questions on my side. One is a follow-up on the hedging of the euro-dollar. Should we understand that this is part of your strategy for the future to hedge the euro-dollar? Or is it something that you will do on an ad-hoc basis given the situation? And maybe... [Technical Difficulty] Anyways, my second question. Are you having discussions with your insurance company for the ships? Are they raising concerns regarding the fact that they may not be able to insure the ship as they are aging?

Thanks for your question. Please, can you just mute the mic because otherwise, it's very difficult to speak. Starting from the hedging euro and U.S. dollar, we normally, our strategy and policy is always to hedge a portion of our net exposure to the American dollar. The reason why we do that is that a part of our sales on bananas on some retailers are made with yearly tenders. So normally, we buy fixed price in dollar, and then we have already settled fixed selling price in Europe. So on that portion of the business, that is normally something around EUR 80 million to EUR 90 million per year that is a risky position to take without any hedging. We cover and we buy the necessary dollars to be able to, let's say, to define a margin on those contracts without speculating on the exchange rate. What happened this year is that at the beginning of the year in order to be able to, let's say, confirm the exchange rate that we use for the budget and that we use for the tenders, we decided to buy something more and to make some structure with some leverage in side. So always with the limit of the total dollars that we will need during the year. So this year, the percentage of the hedging is slightly higher compared to a normal year, and the strategy won't be that one every year. We -- the strategy is to hedge the dollar because of the fixed price in euros with some contracts with retailers. But then we adjust the strategy year-on-year based on our, let's say, sensibility and the situation. But we do not play with the exchange rate. We like to cover our risk and to confirm the budget because we make the business selling bananas, not speculating on the exchange rate. So this is the first question. On the second one, the answer is no. We have no issues.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

Okay. Thank you. So thank you, everybody, for listening to us during the conference call. It is always a pleasure and hope to be able to release a satisfactory result again for the next quarter. Have a nice day.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.