SEVEN S.p.a. (FILA) Earnings Call Transcript & Summary

Good evening. This is the Chorus Call operator. Welcome to the F.I.L.A. conference call on the acquisition of Seven. [Operator Instructions]. The conference call is being translated into English. To listen to the translation, just click on the globe icon on the control bar. The floor goes now to Massimo Candela, CEO of F.I.L.A., please.

Good afternoon, ladies and gentlemen. Thank you so much for being here with us into this conference call, where we'll be talking about the F.I.L.A. and Seven acquisition project. So we decided to reorganize the call in the following way. Also, thanks to the presence of Aldo Di Stasio, CEO of Seven, with a short presentation of the company. So there will be a short presentation of Seven. I would then take the floor. I would talk basically about the rationale of this operation, together with the potential of this transaction. The floor will go to Cristian Nicoletti. Cristian will give you insights on numbers and financials. So I would like to thank Aldo Di Stasio. Thank you so much for joining us. And may I ask you to give us insights about Seven. This is your company, the company you have incorporated. Aldo?

Thank you so much. Good afternoon, everyone. My name is Aldo Di Stasio. I'm one of the brothers who have founded Seven back in 1973. So now the name is Seven because we were, we still are seven brothers. So this is the reason why the name of the company is Seven, once again, seven brothers. Now the company was a very small company. But by the way, I mean, the seven brothers and members and shareholders, we wanted to do innovation. We just wanted to innovate all of our product ranges so as to take opportunities of the market changing every single year. This means we managed to grow year after year and get to the leadership in the market. Even if back in the 1980s, we had Invicta, that was our biggest competitor. So we've been able, I mean, to manage to create innovative products. As you can see here, we managed, I mean, to capture the distribution network of around 2,000. We became the undisputed leader indeed back-to-school universe. Now we became leaders, but the willingness to grow is still here. So starting once again in 2000, we start thinking about new possibilities to make sure the group will grow within an area or the market whose name is back-to-school, that we were very much familiar with. So once again in 2000, we segmented the market. And we also took into account the, once again, different areas and some areas of back-to-school. In 2006, something very important was done. I mean, we managed to take over the previous leader, so Invicta S.p.A, with two major targets. Another one was to grow by taking over the Invicta's market share. But once again, we also started with the diversification in terms of the back-to-school market. We know that the backpack is used as they go to school. Now the school, if you will, is a game changer for us. But we can see that because of mobility, the backpack is used to move around, to move in the city. For example, just like me. I mean, I'm on two wheels. So this means for us a freedom of movement. Once again, this is a new plan that we have today. So I'm not talking about the back-to-school target. It's professionals or even travelers. When I say traveling, I'm not talking about adventure, I'm really talking about light business travel, but also what youngsters do today. So this is what we needed, I mean, we start to diversify the business. So once again, we moved out of back-to-school only philosophy. This is what we have identified. I mean, we are starting with the so-called first time at school market, which is very interesting. So all those children who go to school for the first time, so necessary they have to buy this product. So we have created our own brand, SJ Gang. So it has just taken a few years to completely, let's say, replaced in the market. So it was the license market earlier that was a big value-add for us because, once again, we've been able to take over quite a good part of the target. Today, we account for more than 50% of the market. I think these are the first points. But then we also started working on the new perspectives to have it with birth rate. So we don't want to wait for event. We analyzed the number of births, last projection. So we investigated on new possible market shares and how to diversify in order to compensate for possible reduction of the number of backpacks numbers, once again, only due to school. We took over a company, the name is Incall, I-N-C-A-L-L. They have an interesting brand, Mitama. They say that their market share was also back-to-school but positioning level was lower. So this means that we have split the target by age brackets but also by price positioning. So then we can give the market many different products, so a satisfactory, if you will, offer in terms of having a complete range of products. This is what we've done in the past years. We have a major distribution capacity. In Seven, we work on all channels. And so we're working directly. We have 4,000 stationery shops. This means we've been able to remove the big number of intermediaries or middlemen, so to say. So we have involved directly those selling of our product. This is still one of the key strengths of the company. So again, we manage directly 4,000 points of sale or stationery stores in Italy. In terms of larger retailers, well, in this case, we have different brands sold in the super and hypermarkets. So this is a difference versus the retail market because, of course, we want the big two markets to go hand in hand. But of course, the distribution channels are different. This means that within the retail market, we have a strong distribution network, thanks to our big network of agents. We have 60 agents on the market visiting our customers at 5 times a year. So why 5 times? Well, because meanwhile, we said that we have very strong brands. And the question was, do we have other opportunities to make sure the company can flourish? And in this case, once again, we worked a lot in terms of diversification. For example, students, not considering back-to-school, they also have leisure, free time. They practice sports and they go to birthday parties. Well, 2020 was a bad year because of COVID. But this is a comparison I'd like to share with you. We have strong brands, highly recognized by our target customers. This is the strategy that Ferrero is implemented. Nutella, you recognize it because of the pot. Now they also do ice creams and biscuits. So thanks to our brands, we have widened the offer. This means that we have deseasonized our business. So we don't depend on the season, that we have new business opportunities. We are doing the same thing with Invicta. And we started accelerating in 2025. So free time, leisure and work and travel, which is what I said before. So this is what we did. We've made many other steps forward in terms of distribution with Incall. We control the 1,500 points of sale in larger retailers. So with the 50 merchandisers, this is what they do. They offer this service to the large retailers of the system, big value-added because now the large retailers are streamlining their cost. So we can manage the shelves of the large retailers with a high level of investments and a high level of focus. So this is a big, big value-add and a unique opportunity in the Italian market, which is what the Seven growth is like. We also have other channels that we have taken into account carefully. Of course, we have a multichannel. This is absolutely crucial for us, including online sales. So for us, this is a major source of because the space we can reach in our consumers directly with direct communication, with our consumers and, in general, with our target. So all these, let's say, same time network or multi-channel system is done directly by the company. So nothing else, let's say, outsourced because we want to keep going on like this. So we know the market. Of course, we have good relationships with B2B and B2C, especially in terms of developing strategies having to do with the future. So what we do today is creating with our own customers, not just the fact of supply or offering, leading products. But we would like to create partnerships. For example, we are now working to also help small retailers, small stores and shops are made today. They need to change. So we're doing something very important in terms of engagement and involving small stores in new communication channels, including social networks. We have introduced a new digital structure in our company so as to manage relationships with our customers and the name of the platform is Salesforce. So we speed up all the management without the presence of one of our agents. But once again, we are speeding up the relationships with customers. Of course, our objective is to sell, but we don't forget the fact that we're offering service to customers. And we are also implementing AI systems so that we can gather better information inside our company. We know the market changes quickly. So we want to always be updated. We want to know what is going to change. This is crucial because we want to keep growing, and we want to have the right visibility on our future projects.

Thank you so much, Aldo. May I have your attention on the rationale of this transaction? Now this is a snapshot of the general economic situation around us today. The Italian market, especially the school or back-to-school market, has the problem of demographics. The number of children going down. So in our more opinion, so in the opinion of F.I.L.A's. management, we decided to create something different. Otherwise, the pie is always the same -- well, actually, the pie, if you will, is shrinking. So we just don't want to manage a soft landing. We believe that thanks to this transaction, once again, taking over Seven, well, we'll be able to solve this topic which is, well, a big issue that we have not only the Italian market but also on other European markets because Seven offers, if you will, additional products, so complementary products. So this is not an acquisition where, of course, we only have to work on cost, but we will be work in terms of income. So you can see here that this is all of our offer. You can see here the combination with F.I.L.A. Group. On the one side, there's Seven on the other. All of this will translate into a competitive advantage versus our traditional competitors. So if you consider the macroeconomic situation, you can also see the growing competition of Chinese products. And so this happens in the school sector, but this happens unfortunately in every same category. Chinese companies are so aggressive -- I should say, Chinese government is so aggressive and this behavior has to be managed. So we think that we are putting together two leading companies, that this is absolutely essential to keep growth in the future but also to keep the profitability level we have today. This is another important element in our opinion. With the use of products and kits from Seven, Seven is the Italian leader also in pencil cases and then school stationery and the rest. So we will have the Giotto, G-I-O-T-T-O, products. And thanks to Giotto, we will increase our visibility versus our competitors. This is another major synergy, which is represented by the channel from the past or historical point of view, F.I.L.A. is really stronger in the wholesale channel while it is a little bit less present, if you will, versus Seven on the large retailers network. Again, it goes without saying that Seven is very well distributed in the retail market while F.I.L.A. is very well distributed in the wholesale centers. So this means we will have important choices and decisions to make in the future for the sustainability of the product and controlling and monitoring stores and we will be stronger versus competition. In this very case, competitors are also our own customers because maybe in China, they find a full complete service on our product. So they are developing the brand and sometimes our customers is sometimes are also our competitors. This is another important a synergistic action in terms of sales, which is represented by business and consumers, so B2C. Unfortunately, the type of our products means that the unit value is a little too small. In some cases, the logistics cost or the transportation costs are too high. So B2C, now when I say B2C, I mean the business is managed directly by the company. So I'm not talking about Amazon, for example. So we haven't developed this, including our competitors. While here, we have a huge opportunity to do so with Seven because in terms of B2C, Seven is really booming because of the unit value of their products. So backpacks cost of EUR 45, even more than EUR 50. In this case, there's an immediate synergy, especially in terms of back-to-school season. So that you have the crayons and then you have the pencils and then you have the erasers and then you have all these stationery items together with the backpacks, once again, we can see in this market a major growth. Now there's another area in terms of growth. This would be done thanks to our European agencies, especially around the Mediterranean basin, Spain, Portugal and Greece. Now we think that the kind of distribution that we have there, plus the possibility to take advantage of Seven's know-how, patents and quality, well, this means we will give our local offices the same answers that we are giving to the end market. So for Seven, we see the possibility to enjoy interesting growth. Now last but not least at all, we have the India project. Some days before announcing the signing, we have met our Indian partner, DOMS. And some months ago, they've taken over the company from India, making backpacks because he told us that this is a booming business in India. And basically, with, DOMS, D-O-M-S, this Indian company, we just wanted to get into these markets and get some experience and getting it to know the market, discovering the logics of the market and, as a consequence, taking advantage of the natural development of the India market. Now with Seven, he told us that, that would be a complete change because DOMS, D-O-M-S, will take advantage so much new knowledge, the know-how, of the Di Stasios, so the founder, the company, the patent. So they will take advantage of this. So we agreed that DOMS and Seven, very briefly, will create a joint venture. Now the joint venture will be created not just to operate in the Indian market. So we'll be able to sell these products in India. But at the same time, this defines another objective. Now the time window would be more or less 3 years. So we will in-source the supply chain. Seven has kind of a specific diversified value chain around the world. Bangladesh, Vietnam, for example, they also purchase products from India. And I'm sure that this is the primary objective that we agreed on with Aldo. So we would be spending plenty of time on DOMS because, of course, we want to get as much know-how as possible. In this case, the supply chain would be even more effective. And I'm sure DOMS will react very quickly, thus introducing the right range of products on the India market. And this kind of presentation and new products have a strong foundation. So over the 5 to 7 years, I'm sure India will become a very big market, bigger than the Italian one for Seven. Now okay, this is the rationale, so the foundation. And I give the floor now to Cristian. Cristian will summarize very briefly the main elements or factors of this transaction, and he will tell you how F.I.L.A. wishes to fund this transaction. So this is what we expect for 2026. Cristian, back to you.

Thank you. Good evening, everyone, and thank you so much for being with us. So Slide 11, we have the financial structure of the operation. So the acquisition of Seven will be done from '26 to '28. So you can see here the value, which is 31%, EUR 6.8 million final value end of December 2021 that you can see here. This operation doesn't include any earnout. This is the total value, EUR 53.7 million. You can see the financial structure, the stakes that we'll have to take over stakes of the company. You can see here end of December 2026, 4%, with the increase of the F.I.L.A. shares you can see here what happens in mid-2027, end of 2027 and end 2028. The only part of debt, well, the debt in commerce. This is the initial disbursement, closer between EUR 7 million to EUR 8 million. All of the other disbursements or cost will be funded by the operations of Seven. Do not forget that Seven has a free cash flow to equity, which is up to 50% of its EBITDA. From the financial point of view, and this is Slide #12, so it represents and confirms the willingness of F.I.L.A.. So we highlight the key words, which are financial efficiency, financial effectiveness and sustainability. As for DOMS ABB, now when F.I.L.A. reached EUR 80 million, so this is 4.57% of DOMS ABB, in this case, we decided to have a list of main factors, working capital efficiency of ratio. We have around EUR 12 million. So there's a strong reduction of interest. As for dividends, around EUR 40 million in 2025. And then the remaining financial, well, availability of cash is also represented by the takeover. In financial terms, F.I.L.A. will close with EUR 50 million of the American shares, we will say, 6% in terms of interest. At the same time, we will use our credit lines for this transaction only for USD 30 million and bank credit lines and the cost will be 3.5% average cost. So approximately the EUR 2 million interest we'll be saved in 2026 and EUR 1 million in 2027. Now we need to highlight that the reduction, EUR 50 million units in the U.S. means we will pay back our debt in 2027, so about EUR 40 million. So F.I.L.A. won't have any other obligation in the U.S. So the only obligation will be on the SPA. So financial support to the U.S. we won't to have any problem on 2026 financial year. There will be a continuous reduction of interest. So may we go to the next slide, where you can see pro forma adjusted the 2024 figures, where the stand-alone numbers of F.I.L.A. Group in 2024 and the Seven stand-alone data 2024 are absolutely consistent in terms of margins but also the financial leverage. But you see better at Seven if you consider the EUR 10 million dividends included into this value. They combined the pro forma adjusted 2024 figure, represents the fact of maintaining our margin. So it is in compliance with our pillars in terms of M&A. And the leverage is below the values of the objective of the group. Last but not least, there will be an improvement of the financial efficiency level. So these are the main rationales and this is basically the current financial structure of the transaction. So this is it. If you have questions, we will have a short final Q&A session.

[Operator Instructions] Question number one, Niccolò Storer, Kepler Cheuvreux.

I hope you can hear me.

Yes, please, Niccolò.

I have some questions for you. The first question is on the numbers of Seven. So you've shown us 2024 and then how 2025 is developing. Should we think about something very different versus 2024 or not so that we can have some future perspectives of 2026? The second question is the following, maybe you have partly answered. So your idea is to modify a little better the supply chain of Seven so that we can work a little bit more with India. I guess that price is so much lower than the Italian price. So how should we interpret this? So you said in 5, 7 years, India will become the most important market for Seven. It means you will sell so many backpacks of lower price at higher margins in terms of volumes. Or what else? Okay. So I need some color on this. I also need some color, please, on the fact that you said that the effect of this acquisition, you will face the problem of low birth rate and, well, this means you will increase market shares. So is this the right interpretation for what you said? The last question for Cristian is the following. So together with the closing, I mean, $50 million fund, do we have some one-off costs in order to do the closing of this cost?

Thank you so much, Niccolò. Well, the first question is for Aldo. I'm sure he will be able to give us the current sentiment on the closing of the year. But I have to say that 2025 is aligned to the budget.

Yes, It is very similar to 2024.

Okay. Aldo, thank you. As for your second question, the Indian business, okay, I will start answering but I'm sure Aldo will tell you more. So when you ask me this kind of question, Niccolò, please just read the numbers of the DOMS-F.I.L.A. situation. I mean retail price in India is around 1/3, even 1/4 of the same products sold in Italy. So how can DOMS have the same profitability that F.I.L.A. has? Well, they are able to do so because the Indian costs are not comparable with Italian cost and their volumes do not compare to Italian volumes. And so Seven has a P&L which is very similar to F.I.L.A. This collateralized the best companies in our industry. Well, we think we are able to replicate the P&L or the financial statements of Seven in India based on the same foundation, the same ingredients with which we would build the success of F.I.L.A. to think about this. So even before the meeting, we started assessing this operation. So India, in our opinion, was the right place where to move our supply chain, too. So it was important for us to look for low labor, but also the raw materials in India so as to improve the product which is distributed in India today. And what I have to say there, from the point of view of the positioning of the Indian market, but also considering the costs, that we double checked that. So this is a product that has to characterize the brand, the recognizability, the innovation and the quality of the brand. So this is what we are able to align, to bring this product of the market having a different positioning, but staying the margin level. So I do confirm that this analysis has been done. There was a question on the low birth rate. Yes, I have to say that as for 2025, this is what I said before. The diversification process out of the back-to-school market represent now for the company something like 20%, so the current turnover. So 1/5 of our turnover. Now this is something that we started there 3 years ago and it's delivering very positively today. We have further growth areas or areas for development. Now once again, I know the low birth rate means we can recover some market share. Diversification is what guarantees our possibilities for growth. Now this is a diversification that, if you will, target the young people. So it's adult Seven backpack for school you can buy it for travel or the professionals for youngsters or for families traveling together. So this means so we can really widen the target. And today, we are also working on the preschool targets. Now this is a very interesting target because, for example, in the age bracket of 3 to 6, initially, we now have a 1.5 million children going to Kindergarten. And in this case, we are creating the right products that previously were not included into the Seven range. Cristian, for the last question?

Now as for the extra repair costs, no, this is not included. So this is a calculation we will have at the end of 2025. So it will be done together with the ordinary payment. So no additional cost will be taken into account, only ordinary costs.

We also have another question from Isacco Brambilla from Mediobanca.

I have three questions. Question number one is the following. Can you -- well, as far as you can, can you give us some color on how the process would manage debt? Of course, in this space, the question is for the Invicta management. So why did you think that F.I.L.A. was the right partner? Because we know that there were more than one player being interested, and this doesn't seem to be the difficult in auction prices. I'd like to know the drivers of this transaction. You partly answered the question but, anyway, could you please elaborate more? Second question, back on the turnover. You've given us selective information. But if I'm not mistaken, there's no geographical breakdown of sales. In the past most of the now from Seven, Invicta is not in Italy. Can you confirm this? And how was it possible to enjoy growth because in Italy, but also in the rest of Europe, the numbers are stable, flat or going down? The last question is, what about Seven and Invicta growth profile in terms of turnover and EBITDA versus F.I.L.A.? So are you going to do the same thing, so single digit? Or can this be a trade excluding synergies? If you have some follow-on the midterm synergies, this would be very helpful.

Okay. Aldo, first question on the transaction process.

Well, as you know, Seven started in 2018 is controlled by fund capital. And on the one side, we have paid some of the brothers because of the age they left the company. But on the other side, we also wanted to manage the family, the roles and the functions that we have in the family, okay, which also have a direct repercussion on the company. Of course, we have had some interest from other companies and other funds. But I think that from one specific point of view, the value add that we've got in this transaction, first of all, is that the company will be Italian. So in our opinion, it is fundamental because this is a typical Italian company. There have been different generations working. So this has a big value for us. And I have to say that these points is still important, for example. Once again, we want to work with a specific entrepreneur, this company, they know our market and the market sentiment. Once again, this was a very important element that we've taken into account. And it was also a unique opportunity in with the company, creating complementary assets. So in the future, we won't have or layoffs or redundancies. So this opportunity for us and was more interesting of than other transactions. So I'm not talking about money. But we've been managing the company for more than 50 years, and we want to respect that the human resources working in the company and the value-add that these people bring the company thanks to their skills. So we thought this was crucial, fundamental. The most important thing today is the kind of mix we now have. So we have opportunities everywhere because we don't have overlapping products. In my opinion, there's a big value-add in terms of the distribution networks, being able to work together. So this will bring out the value-add, but this is also a source of pride because these companies have created important in our organizations here in Italy. And I'm sure they can do better. They will do better in the rest of the world as well. So this was very important for us.

The turnover per geography, well, have to say that once again Seven has grown a lot, so they focus a lot on the Italian the market. Today, the turnover is really small when it comes to international markets. But this is what we see today. So we have distributors, international distributors. Of course, they position the product themselves. As the previous question said, how can you position this product in India where the cost is much lower than the Italian market? Well, today, we are building in the main European markets the premium positioning philosophy for our brand. I have to say that the best result not comes from online sales through Amazon. So right now, difficult markets, for example, Germany, well, Germany is growing quickly. Now when I say growing quickly, of course, there are so many things to do. I mean there's a long way to go. In Italy, we have a dominating position, not yet in Germany. So this means that also, overall, that with clear strategies and specific group synergies in terms of distribution network, I'm sure we could replicate, say, the Italian success in many other countries as well. I haven't actually understood question number three. Question number four was on the next year, so the expectations we have. This was the third one. Okay. Sorry, The answer, we have already given. Well, I think we can both answer it. Now as for me, as F.I.L.A., so let me tell you about the positive expectations we have. I can say that the F.I.L.A. product is purchased basically almost every week. So for logistics reasons, F.I.L.A. has the need, let's say, to be brought at the point of sale via the wholesale market, Then F.I.L.A. has direct contact with the large retailers. They use a service platform to be sold in the large retailers. With Seven, there are clear synergies possible because -- so our brands are leading brands, so with huge market shares. But the trend that we see today in the wholesale market, they would like to create their own brand, once again, because China is helping them to do this business. They make everything at every price. So let's say that we are focusing on not losing the control of the presence of our product in terms of quality but also in terms of quantities. While Seven is now controlling, if you will, directly 4,200 points of sale. So I am sure there will be an improvement in terms of numbers, quality and the presence of our products on the Italian market. And the same happens with large retailers. Seven has taken over one service company. We already have two, by the way, in Italy. And I'm sure this would give us the opportunity. You have a service company and they work with 50 merchandisers, exactly about 50 merchandisers. They have now the counter service, I mean how you present the counter, this can really make the difference. So this is why we use the word complementary. So this is additional on top of what Seven does. F.I.L.A. today will have a travel companion that had worked so well so much on product distribution. As a consequence, F.I.L.A. will take advantage of this. Plus what I said before, the growth in it, it's difficult to quantify this growth. But based on experience, we now have a wonderful positive feedback from India. As for the growth in the foreign market, well, this would be a combination of online growth plus growth coming from our subsidiaries. As of today, they don't have the products as Seven regularly sells in Italy. I think that is also another very important point for F.I.L.A.. Today, Seven is an important customer. So they purchase blend of items from the Far East. Many such products that may be made in our plants. Okay, this is it with F.I.L.A.

As for Seven, well, what about expectations for the next year or so? Okay. I don't want to repeat what Massimo set far anyway. Expectations are the following. We would like to broaden our presence in international markets. This is the India project which, again, in our opinion, this is really very important and fundamental because of two key reasons, getting into our new market first and then it's definitely a fact of reducing processes and products and also distributed on the European market and, as a consequence, we will go improve our margin level. We're working on many different steps, then we will have to manage. So we are making a sort of a list of priorities. I'm sure that all of these elements will what bring about positive results. Now today, we look at teams. We look at people. They know me well know that the current changes on the market, not just in terms of distribution, I mean, the way people have changed. So we do surveys on the changes going on today because we view all our forecasts, and we would be ready to take our future challenges. This is important. I haven't said this before, Seven has worked a lot on sustainability, I'm not just talking about the community. Today, many of our products are made with fabrics, which in turn, are made with recycled PET. For us, sustainability is not just, let's say, going green, but we also care about our stakeholders. 1.5 years ago, Seven turned into a benefit. 2 months ago, they became an equal company. I'm sure that there is a very important value today to face international targets. Isacco, thank you so much. Have we settled all of your questions? Okay. Well, we need [indiscernible] the numbers.

Next question is from Alessandro Cecchini from Equita.

So my first question is you talked about the production, which has really been back-to-school and many others. So as we have made in products -- so my understanding is that sort of some any forecast in terms of costs that we have, some color about this relationship that the F.I.L.A. Group has so as to understand whether or not this will be a competitive advantage, outsourcing to DOMS, into India one part of your production.

Now Alessandro, I do not know Seven's costs and Aldo doesn't know DOMS costs. So it's difficult to give you an answer. But as we said, I can tell you that it's something very important. When you outsource the kits, the future -- so we thought we had a production of the past, but also the crayons, the pencils, the sharpeners and the rubbers. Today, we have 5, 6, maybe 7 different supply, same with F.I.L.A. All of it has to be a standalone. So you need to add the standalone costs, transportation costs. If DOMS does it all, well, I'm sure there should be a significant advantage. Please not forget that DOMS just like today will produce for the domestic markets in the India market, but also for the European market. I can't tell you more than this. So now have the backpack and then we have kits, the school kits, typical of Seven. So this means that the synergy expected will be quite important.

So in the future, you mean that one part of the production and also the turnover of Seven, which is around very shy of 27%, which is, [indiscernible] made in European plant -- or any way, F.I.L.A.'s plant. The remaining portion maybe outsourced to DOMS. Is this a feasible scenario?

Yes, I can also give you the name. Seven and Incall, together with its Mitama brand, Seven with its own brand, they sell crayons. And we are already making sure we may transfer the production of this product in our Florence plant, which is very effective. We are not producing this in China or in India. So once again, even Seven that we've taken a issue on the fact we'll start producing the product here. And the numbers are quite bad beside our plant. This means we won't be able to optimize the product. So there will be other products. But of course, they will be made in other plants, basically in Mexico and India.

Now the question is I suppose a follow-up on the previous question is not the market. We try to do some quick calculations. You can see that F.I.L.A. generates around EUR 60 million, I mean, 10% external in Italy, while I guess that Seven is EUR 85 million. So basically we are talking about EUR 150 million turnover on the Italian market. So we can say that thanks to this transaction, you would expect Italy to again potentially and organically will go back to growth based on the opportunity in terms of increasing the competitiveness of the group or taking more market shares. So is this one of your ambitions, apart the fact of reducing costs?

Let me answer and then Aldo will also answer this question. It's not just getting market share of these new companies because, of course, they do have market shares. And both are coming more than 50% of the market. But I would say, realigning our distribution network in Italy, now this is very important because, in our trend, I think the two companies once again have great market share. I can say that we should be thinking that the widening, the broadening that we manage today, first of all, we do optimize and streamline because, in some cases, we have some overlapping. In terms of type of products or a of consumer, we have a close control of the distribution network. So this is absolutely feasible, realistic. We are positive on the fact that the top line in Italy can grow. If I analyze the behavior about direct competitor, competitor today is now association of wholesalers. So I don't want to have any name. But we have American, Spanish, French and German competitors. So now our turnover is -- the group of wholesalers, their turnover is EUR 30 million. And the other competitive is another group of wholesalers. Their turnover is less than EUR 20 million. So the combination of these two leaders is so important, very well recognized. Well actually, when you have to deal with large retailers, so they have high costs. So when they have to manage suppliers and the most again, management costs for them are very high, sky high. So I think we will be able to sort of do some cleaning enough of the market. We will be able to grow, especially also through innovation. Now if you consider our long channel in the traditional market but, at the same time, you do innovation. If you have the control of the retail but also the large retailers, innovation is also much quicker. So it is fast paced. One of the scenarios that we have built includes the fact that pushing so much on product innovation.

I have a little point which is, again, the development in India in this category, which is backpack. So while your statement, you told us that you want to increase your turnover over the years. For the marketing action, when will it take place initially? Is it the 2027 budget? So we'll say in 2026 you'll just do the first steps?

This is not a marketing project. This is a sort of a copy and paste of the F.I.L.A. DOMS project. It is absolutely -- it is possible to have the collaboration from Aldo. And we got immediately to an agreement about this. This is a company. This is a JV. As I said before, it will be incorporated in a few days. So basically. it's perfect, I mean Seven and DOMS. So once again, this joint venture will take advantage of all of the know-how in Seven in the designs, in terms of patents, in terms of licensees, in terms of the experiences of Aldo, the knowhow on the materials. So we know how to technically build the brand better. All of this know-how is included into this JV. And the distribution of products will take advantage 130,000 specialty stores at DOMS directly. And we think that just DOMS, in 5 to 7 years, we have in our minds our new projects. So I have a reverse merger with DOMS or going listed because this company is a JV. It's not DOMS. It will be basically controlled by DOMS or Seven. DOMS will put in the Indian market know-how plus production, while Seven will inject know-how in the JV.

So when do you think this joint venture will start producing turnover?

I have to state any sense looking for our materials on directly on the Indian market. Well, we did this even before talking to F.I.L.A.. So we have some elements, basically, feasibility is current. Now we have to all sit around the same table to really understand how to build the brands and where to produce this. We have the plant in February. We will officially open the plants we talked about the last year. So 45,000 square meters expansion will be officially open in February. One area will be used for the Seven-DOMS project. And as for the start-up time for 2027.

So the presence of Aldo, his team and the know-how, so in the past years, they have put all of this package together and it is essential to DOMS. So this is essential. We saw what we can find in India on the market today, and this is the situation that F.I.L.A. found about 15 years ago, low-quality products, but very essential products, very cheap, with old fashioned vintage units we used to have in DOMS. So we have completely reengineered the graphics of their products, I'm sure you remember. I guess the process will be the same.

Very clear. Last question. As for CapEx of Seven will be almost down to 0 or very limited because, I guess, everything will be outsourced to third parties.

Yes. I mean, as you said, I mean, we have outsourced with our partners. Still the business assessment, the investments made by our partners. But we let's say, we develop our programs in-house in terms of technology. As for production, of course, we cooperate with our partners. Once again, we don't purchase and finish the product. I mean, we completely manage production. For example, we have built our materials to be open with every single cost, every single item, every single raw material and based on the bill of materials, and we build the cost of the product. All of this is injected into the ...

Well, ladies and gentlemen, this was the last question. The floor goes back to you to draw conclusions.

I'd like to take advantage of this opportunity to thank all of you. I would like to thank Aldo. Cristian, thank so much for your collaboration. We will share the results of Q3 in one week. Thank you so much. It was nice for me to be here. And I have to say that, I mean, part of the transaction, I have to say that I feel energized by this project. I mean, I've been working for 50 years. But for me, the big, big challenge that I would like to take up with so much dedication with my partners. Thank you. Thank you so much, enjoy the rest of the year. Thank you. Bye-bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]