Thermador Groupe SA (THEP) Earnings Call Transcript & Summary

Good evening. Welcome to all. Welcome to this webinar. We'll be commenting on the publication of our results. And as usual, we're going to talk, first of all, about our wonderful employees. Some of them are still here. A lot of them are on holiday. In terms of staffing levels, we're slightly up, 6.5% increase in volumes, and that reflects the Groupe's need to work on productivity today and the future. Milestones, geopolitics, of course, with -- for the moment, not much visible impact on Thermador Groupe. But however, things to talk about, a price impact. We've already talked about that with the impact in terms of price rises that we've already passed on to our customers. No impact for the moment on the inflationary effect, but an impact in the future. And to remind you, the main impact is on polyethylene and aluminum. So maritime transport costs well controlled. And the transport situation is not particularly affected because around 30% of our supplies are coming around the Cape of Good Hope. And so no major change because of these geopolitical events. Prices then, the measurement that we did at the end of half year is a negative impact of 0.9%. It was minus 0.4% at the end of the first quarter. We see that the second quarter was minus 0.4%, and we'll see for the outlook whether we change our annual forecast. A word about secondary markets for the construction and 3 dynamic segments in this rather desperate market, air-to-air heat pumps and air-to-water heat pumps and ventilation. Three of our subsidiaries are impacted in a positive way, Thermador and Isocel, which are on these markets for air-to-water in the terms of providing accessories to the manufacturers. And Axelair, which is on the air-to-air heat pumps because Axelair sells accessories to that market. So Axelair also specialized in ventilation and therefore, benefits too from these 2 positive market trends. And it's a pleasure for us to see that Axelair has gone into a breakeven situation, which is great news. New builds, new housing, I said, unfortunately, we still got a slight -- well, a slight improvement on building starts. And I say, unfortunately, it's not going very quick, and you'll see the prospects are not great. Weather, like every year now, a lot of rain in the spring and heat waves quite remarkable levels of heat wave in June -- May, June and July, and that has slightly helped Axelair, which sells mobile compact air conditioning units. It's a very small part of their turnover, but it's substantial in terms of its size. However, for water -- the watering market, poor levels of sales compared to what we've known in the past. For Jet -- Jetly slightly positive. but at a very -- very low level historically. A word about Aello, which continues to win market share in the swimming pool market and good news on the legal front also because we have had the verdict from the arbitral court because the former employer of Jerome Chabaudie, who's the CEO of Aello has been attacking us and him for the grant of his appointment with us, and we've won that case. So DPI management, things are changing. We saw the arrival of new sales director. and very soon, the arrival of the future CEO of DPI, Alexandra Stajura, and she will be there full time from September the 1st. She has got a long history with Thermador Groupe. She arrived as a young woman. She's very young, of course, but she arrived a few years ago at Jetly. She was Administrative Director and Financial Director at Odrea. And now she's taking on the challenge of DPI starting in September. I think she joined in 2008. So a quite normal length of service in Thermador Groupe. So for the DIY market, Mecafer sold a lot of generators, which is a positive effect on their turnover for the first part of the year. However, for Odrea, continue to have difficulties with pretty brutal delisting from its customers. So Odrea is currently working on diversifying its product range in Spain and also in e-commerce to try and find solutions. And we've already seen progress in that area. Look at the price and volume effects. And you see this on this slide, slightly negative in terms of the price, 0.9% 5.6% in organic sales growth. And if we add the 2, we get to 6.5% of increase in volumes. If we compare these figures to the last 6 years, we've seen that the current trend is to go towards a positive impact in terms of price and volumes. So that's encouraging. Patricia, over to you for the figures.

In terms of turnover for the retail channel, turnover down 4.1% and negative price effect of minus 4.3%. So that leads to a diversity between Odrea, Mecafer [indiscernible] the same similar levels, Odrea has seen a negative situation in terms of its turnover. Concerning the Pro channel, so there, we have the impact of our 2 new subsidiaries in 2025, and that's C2AI and Quilinox. And there we see the EUR 232 million compared to EUR 247 million. So we've got an increase -- 14.3% increase in turnover and to constant scope, that will be 7.6%. So there, we have a price effect as well, which is less. So we've got increases in volume with the exception of 2 subsidiaries, Syveco and Sectoriel, who have drops in volumes of sales, not too worried about them, but we did comment that on the letter to the shareholders. So it's consolidated turnover of 11.3% up compared to 5.6% to constant scope. And that's the same trend that we had at the end of the first quarter. Now moving on to results, profit. What does that give in terms of operating and net profit? In terms of operating profit, we are on 7.3% growth, which is greater than the increase in turnover. And we see the same trend on the net profit of 17.6% of profit. Some explanations for that concerning the trend changes to our profitability. It's important to see that the -- we've got in 17.2% we've got an increase in turnover. So we're above 12%, 12.8% with the main element to explain that, the improvement in our margin. We've got a price effect as well, but we were able to manage these price effects, and we benefited over the first half year of the euro-dollar exchange rate. I remind you that more than 30% of our purchases are in dollars. So that helps our margin. In terms of charges, when we look at those, they have increased 11.8%. That's in line with the increase in turnover. And the main items are, of course, headcount, personnel. And if we look '25 -- 2025 compared to 2026, we got 13.1% compared to 12.8% in 2025 last year. But if we take into account for the first half of 2026, we've got the new -- 2 new subsidiaries. And when we reprocess that data, that gives us a more or less stable situation of 12.7% compared to 12.8% last year. Also, we did increase salaries, and we will continue to -- we will need to continue to improve our productivity in order to maintain this momentum. So then as we continue the analysis, we look at net profit has increased in terms of a percentage of turnover, we've got 9.09%, so that's up compared to last year -- compared to last year. So we've got -- our tax rate has decreased slightly. And we've also got a positive situation with our financial result through the dollar effect and also the investment of our cash, which we invested, and I will comment on the level of cash -- the cash situation a little later. And we continue on this graph, which gives us the operating profit as a percentage of turnover between 2009 and 2026. I say we're 12.2%, as I mentioned earlier. And if we compare that to 2019, 2020, which are pre-COVID years, we're not quite back to those levels, but we're close to the levels because we were at 12.8% in 2019 and 2020. And the introduction of our 2 new subsidiaries have affected that slightly in a downward direction. In terms of profitability, Axelair was created in 2013, which for the first half of 2026 has for the first time, published positive results, partly because of the weather effect, and they continue to have with their mobile air conditioning units and its traditional market of ventilation, they continue to have good performance. So we saw that in the first quarter, and that's continued in the second quarter. So we looked at the evolution and we saw the business plan for Axelair, and we expect this level of profitability to continue to the end of the year. I will focus on the companies that last year were losing money at the end of June 2025, strongly, the DPI first was affected by the amortization of goodwill relating to customer relationships, and that showed a negative result. This year to the end of 2026, that's not the case. So DPA -- DPI is slightly positive in terms of profit. And then Thermacome work primarily on products in connection with new builds. So we've got a company which continues to be negative in 2026 with also the consolidated effect with the goodwill relating to customer relationships, which also has a negative impact, of course. Profitability of our new -- 2 new subsidiaries, so C2AI, which is Fluid Information and Control. They've got 4.2% level of profitability compared -- when we talk about that level of 0.2%, we're not quite in line with what we expected in terms of the -- we've lost 4% compared to the business plan. So that's something that they need to work on. And we're hoping for their level of profitability to be improved in the second half year. For Quilinox, they're up exactly where we expect them to be in the business plan at 8.2%. Our financial structure, so equity, the EUR 414 million, which can be compared to the capitalization of the value of the company of Thermador Groupe's shares, which is favorable. The value of our stock, and this is something that we already observed in March and which is still a question at the end of June with a drop in value in Europe in euros and the drop in 5.6%. And in the number of days of consumption, we have a drop of 28 days from 209 days and we're now at 181 days compared to 209 days last year. So can we just come back with that on. Okay. for cash. So with stock turning on a downward trend and that has an impact on our working capital requirement, so that has an impact on cash capital. So we've got a cash position of EUR 104 million. So the variation compared to June 2025, we've got an increase in our loans in connection with the loan taken out to purchase Quilinox and that was started at the end of September 2025, that loan repayments. We also mentioned at the end of December, we had an exceptional level of cash, which was 96.9%, but that continues because we're EUR 104.2 million. So that remains at a high level. In terms of net cash flow variation, we've got cash flow from operations of EUR 32.1 million, change in working capital requirement with an increase in customer payables, receivables, excuse me, plus [indiscernible] and that gives us WCR of EUR 1.8 million. Drop in stock also on that slightly balances the customer payables. And in terms of investment flows, that's obviously connected to our constructions that we started in the first half of 2026. We've already spent EUR 4 million on our CapEx investments. And that gives us a free cash flow level of nearly EUR 30 million. And our financing flows, which include dividends and loans, the loan linked to the purchase of DPI of EUR 22.6 million. So the working capital requirement, which is given in our distribution companies, the value of stock is important, is high, of course. So we have operating working capital to net turnover. We were at 44% at the end of June 2025, and we're at 38.5% at the end of June 2026. So we've got less stock. Customer payables have increased, but compared to June 2025, we had an increase as well. So that's pretty stable. So that -- and in terms of payables to suppliers, we've also got stock in transit because we've got EUR 33 million of stock on the boats. And we've also got orders that have made orders early to protect themselves against the price -- future price rises. And we've also had negotiations with major purchases to reduce this negative effect. And there's also, I think, the effect of our good sales. And of course, that means we have to rebuild our stock levels for the second part of the year. And I didn't mention it, but Mecafer and Domac is one of the companies, which had to rebuild its stock levels because they had very high sales during the first half year. So we see that impact on our supplier debt. I will continue now with the investments. So we started the year with an estimation at EUR 12.3 million, which we reduced because we thought that some of the projects were going to be -- going to be behind schedule. But then we reviewed the situation with our property company and our subsidiaries. And in fact, the level of investment will be at 11.6% or EUR 11.5 million, sorry, for the second half of the year. For property, I remember that we've got 3 major projects this year. We've got Sferaco with the construction of an extension to the company to the building, and that's on target in terms of timing. That's EUR 2.9 million for the property and EUR 5 million for the automated system. That's over a period of 2 years. So a lot of that is being spent in 2026. Then we've got C2AI. They were renting a building in Decines, and we decided to bring them closer to us to work in better synergy with our other companies with C2AI in particular. And so that's planned for August that they will come to Saint-Quentin-Fallavier in August. And that's another refurb of a building. And the third is Distrilabo. We've launched an acquisition through -- on building from purchasing on plans, and that will be -- that will have more of an impact on the second half of 2026. In terms of our subsidiaries, we're working on the digitalization of our logistics. And this is one of the biggest impact. So I think that's all. I'm going to hand over to Guillaume to talk about our reinvested dividends.

A little quick look at our share price over a period of 12 years, which is available on our website in real time, which compare to the CAC 40 listed companies for approximately a month now, we've seen a rebound in the Thermador share price. But I would ask you to check our analysts, as many as there are 5 of them who follow our share price, and that will give you a better insight into the prospects -- the future prospects for the Thermador Groupe share. So let's talk about outlook. So in terms of new homes on the following curve, you'll see slightly positive trend in spite of ups and downs in terms of building starts, but it's pretty slow. However, that's the orange line. And on the blue line, you see that building permits are stabilized. And again, it's pretty chaotic and there's no net upward trend. And unfortunately, the increase in interest rates won't help that market. A little word about summer comfort because as you can imagine, something important. I talked about it a little earlier on. exceptional month of June, and we'll see this in practical terms on 2 curves. CODIS, the chart for CODIS, who monitor the distribution of sanitation heating and also of wholesalers in France. And you see this peak in activity in June, which is primarily due to this very high level of activity on air-to-air heat pumps and ventilation and air conditioning. Now we mustn't expect that level to be maintained, of course, because it's linked to the situation and the stocks are low. So it's very probable that this level will go down sharply in the months ahead. There's a similar but lesser impact in the retail sector, and that's the chart of INOHA, which we see on the screen. And you see this peak in June of 5.4%, also helped by air conditioning demand. And again, we have to be prudent because this is really linked to the current situation with the climate. Okay. The water cycle. I talk about this every quarter because I think it's a future market for Thermador Groupe. The water and rarity of water will increase water prices in France -- for water in France, and that's inevitable. And in Jetly, we have all the solutions. You might need to process, redistribute DPI for networks. for drinking water, and we're talking about that reuse of water of gray water. And when we look at the different activities at Jetly, we see that the reuse of water is the most dynamic part of their business with a second quarter, which is better than the first for Jetly. I'd also like to underline how we saw earlier with Aello, but also Sferaco, who have L'Essor for example, with the specialist of water distribution in France, and they continue to take market share. A little word on another activity, which is parallel in terms of the product, but not in terms of the water cycle. And that subject is the electrification in France and Europe. When we talk about electrification, that means electrical networks and dry networks, and those are polyethylene networks. And those the same producers for the wet and dry networks, and that could help DPI. And they are one of those companies that were involved in the water cycle market in the Thermador Groupe. Industry next, a quick focus on the general context. as the PMI index gives the general situation in France on the left and in Europe on the right. So we see it slightly above 50%. So it's slightly in progression, but also a few points also for the industry sector linked to geopolitics, the public authorities, whether European or France or indeed throughout the world, they're increasing their storage of strategic storage of hydrocarbons, and that can present interesting opportunities for the Groupe. Valves, for example, there are products destined for oil and gas industries. We also have opportunities in the field of climate engineering. You might say we're talking about industry, but [indiscernible] in climate engineering, and I give the example of deep geothermals. We have industrial valves for that market. And that means having this dual use of these valves is an opportunity for the Groupe. A little look at staff now. We're going to -- we're going to focus on the holdings staff and their IT team. Just to tell you, we are planning to increase the -- strengthen this team to answer the demands of our subsidiaries. There were 9 people in the IT department in 2021. I hope that there'll be 2024 and 2026. And by 2030, there will be 33 employees working for the Groupe and also to increase cybersecurity, of course, in the Groupe. A word about prices. So it's going to be a difficult forecasting exercise at the beginning of the year, I said there will be a 2% positive price impact. But given what we've seen in the first half of the year, I think that for the third quarter will be better, will be more positive in terms of price. But I would review -- revise my forecast downwards with a price impact of between 1% and 2%. A few words about international, the international sector with diverse fortunes. There what's most difficult is for Odrea in Spain and as well as the delisting of certain clients from some of their clients. They have -- they're trying to identify new channels and also new product ranges and developing e-commerce in Spain, and that's one of the projects that started in the first half, and that will continue in the second half. Thank you, Patricia, for that bit of information about Spain. In Europe -- sorry, still in Spain, Quilinox is following good momentum since the beginning of the year. These are activities, which are buoyant, particularly the agro-food sector. Good dynamic in Europe generally with excellent first half year of Sferaco. It's celebrated its 20th anniversary and we'll be finishing this year with a record turnover. And also, it would be worth underlining their profitability rate, which has increased by 2%. But they're -- not only are they increasing turnover, but they're also increasing their profit margin. Sodeco in Belgium, a slight decline in the first quarter in terms of turnover. But there's a number of projects, which could allow them to get back to more positive fortunes. And I would remind you, on the 1st September, we've got the arrival of a person who is 100% dedicated to searching for new companies for potential purchase acquisition in Europe to accelerate our external growth in Europe. A word about geopolitics. Unfortunately, the global wars currently going on having an impact on the international economy and of course, on the French economy, too. And there's no real signs of an end to these conflicts. And we are imagining long-term effects, especially on interest rates, in particular, in terms of the price of polyethylene and the price of aluminum and of course, later on transport costs, the maritime transport costs. So we have a level of hedging, which allows us to take us through to the beginning of 2027. But if the situation continues, these wars continue, we will have to pass on increases in prices on these maritime shipping costs. So in terms of the outlook, there's a question which has come in concerning DPI. Can you give us a color -- and the trend for DPI for the future. Can we help -- hope for a sustainable return to growth and 2023's turnover rate of EUR 42 million. Yes, potential is certainly there to get to that level, even though there have been ups and downs, it's quite possible for DPI to get back to that level. This is -- we're going through a transition, of course, a change in the general management and the sales department. And some of the teams have been renewed. It will take time for things to settle down, but we're very confident that they will return to those levels. Given that, as I said to you earlier, DPI is on certain markets, in particular, electrification, which are buoyant and promising markets for the future. Polyethylene prices will have an impact. I hardly dare to talk about the price impact, but it will obviously increase our turnover. And the increase in price of polyethylene are up to 45%, but it goes up so quickly because it's linked to the oil price. So I'm pretty cautious about talking about that. If the prices of polyethylene increase too high, then that will block the market. So it's not necessarily always a positive thing. But when we had the EUR 43 million turnover, there was a more positive effect of price increases at the time. And subsequently, there were the reverse effect, where the prices went down and therefore, a drop in price in turnover. So the last graph to look over the last 6 years in terms of organic growth per quarter. You see the first 2 quarters, the base effect of the second part of the year will be less favorable because in terms of organic growth, we were plus 2.2% on the third quarter of 2025 and minus 1.7% in the fourth quarter of 2025. So second part of the year will certainly be more complicated than the first half of the year for Thermador Groupe. So I finished. We're now going to answer your questions. And I'm going to go immediately to see if there are any questions up for us already. So no questions on the English side.

You talked about the drop in price, but do you have a drop in raw material prices? Yes, of course, we do have. I talked about polyethylene. It goes up and goes down very quickly. At the moment, the drop that we've recorded since the moment when the Hormuz Strait opened temporarily and the prices dropped, well, it's going up again now. In terms of metals, there's a long-term upward trend, and we don't see except occasional drops in prices, we don't see any possibility of reduced -- reductions in raw material prices and [indiscernible]. And we have no hedging for that. And that's the question we get asked. We have hedging for the dollars, but not for raw materials because the manufacturers who [ organize themselves ] to cover that risk. So for the dollar and the impact of the dollar on Thermador Groupe, and I will comment, even though it's extremely difficult to predict anything in this field. You can see that the Fed who was supposed to be having a more aggressive position and at least that was Mr. Trump's wishes. We see that the new governor of the Fed is very cautious because of inflation in the U.S. So interest rates, at least the long-term American interest rate is not going down because inflation is present. And so that can have an impact on the dollar, not necessarily favorable to the dollar, but also an effect on interest rates in a more general sense. So we have to keep a close eye on that, even though it's very difficult to predict what's going to happen. Maybe, Patricia, you can give us a reminder of how we treat this euro-dollar exchange rate.

Yes, we do long term -- we work to the IFRS accounting rules. So we do long-term purchasing on $25 million in our portfolio to pay for the supply debts that we have in the second half of the year. That won't cover all of them, but we are looking at repurchasing these forward rate -- at these forward rates because we think that the rate will be less favorable. It will be beyond 1.15 at the rate of 1.15. So we do forward purchasing up to 6-month rates for the moment. We [ don't go ] further than 6 months.

I see no new questions in the chat. Two hypothesis, either we've been very, very clear in everything we've said and you've got no questions or you're all exhausted by this first part of the year and ready to get off on holiday. I've got on the English side, we've got a question, England -- [ Anglo-Saxon ] waking up. So [indiscernible] who asks, could you discuss the outlook for additional acquisitions a bit more, particularly on the international side? It's true that when we look at our turnover internationally, we're still around 18.9% because we've got the arrival of Quilinox. As we specified in our strategy, our objective is to rebalance France and internationally and to focus acquisitions on industry and water cycle because when we see the capitalization of the companies, we see that we've got more added value and maybe more synergy with companies in the water cycle and valves. So for the moment, we have no new news to tell you -- to talk to you about. We've got no projects internationally, which are sufficiently advanced or sufficiently detailed to be able to talk to you about that now. But that's why we decided to appoint this person who will work on that full time in order to have -- to permanently have ideas, possibilities, opportunities and be able to react to these potential operations at the level of the Groupe. We did have one opportunity at the beginning of the year, but the company in question is going to be sold much more expensively, much more -- at a much higher level than we had proposed because we need to ensure a good return on investment and in particular for our shareholders. So of course, we will remain active, but not just any price. We, of course, as usual, are prudent with your money. Okay. So for the moment, I don't have any other questions. You know that Patricia and I, you know we are having holidays in August. We are always happy to answer your questions. If you want to -- from sector onwards, if you want to talk to us, we are available to speak to you, webinar or video or whatever, whatever. And if we have no more questions, we'll wind up this webinar. Thanking you all very much for your attention and wishing you all a very lovely summer. Thank you for joining us today, and have a great summer. Bye-bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]