Good afternoon, ladies and gentlemen. This is the Chorus Call conference operator. Welcome, and thank you for joining the Amplifon second quarter and first half 2023 results conference call and webcast. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Francesca Rambaudi, Investor Relations Director of Amplifon. Please go ahead, madam.
Thank you. Good afternoon, welcome to Amplifon's conference call on second quarter and first half of 2023 results. Before we start, few logistic comments. Earlier today, we issued a press release related to our results, and this presentation is hosted on our website in the investor section. The call can be accessed also via webcast, and dial-in details are on Amplifon's website as well as on our press release. I have to bring your attention to the disclaimer on slide two, as some of the statements made during this call may be considered forward-looking statements. With that, I'm now pleased to turn the call over to Amplifon CEO, Enrico Vita.
Thank you, Francesca, good afternoon, everyone, and thank you for joining us for our Q2 results conference call. Let's start commenting on our revenue growth for the quarter in a market which was softer than we expected only a few months ago, confirming that some volatility still persists in the market. In fact, we estimate our reference market in Q2 was slightly positive by circa 1%, with still a solid growth in the US at circa 5% in APAC, but with negative development in Europe. We estimate that the European market in Q2 contracted by circa 2%-3%. Nevertheless, in Q2, our growth was very strong in absolute terms and also compared to the market environment that I just described. In fact, despite this, our revenues increased by circa 9% at constant Forex and by 6% at current exchange rate.
I wanted to highlight the organic component of the growth that was very strong at circa 7%. Revenues for from M&A continued to develop strongly as well, according to our plans. In fact, the contribution from acquisitions was above two percentage points. In such a context, I cannot avoid highlighting our performance in the Americas, and in particular in the US, where our growth, led by Miracle-Ear direct network and Amplifon Hearing Health Care, was again very strong, well above the growth of the market from only a pure organic viewpoint. Another performance that confirms that our strategy in the US continues to work very well. In the region, we reported growth of more than 23% at constant ForEx and 15% at current exchange rates, thanks also to an excellent contribution from Latin America.
Finally, on a global level, we estimate that also during this quarter, our revenues have led us to market share gains in all core markets. Passing to profitability, EBITDA was up circa 4%, while the percentage margin was 60%, 60 basis points below Q2 of last year, when we posted record profitability. On top of a very challenging comparison base, this decrease was mainly due to some temporary adverse factors. First, as you know, EMEA is our most profitable region. As EMEA grew less than other regions, this geographic mix had a negative effect on total group profitability. EMEA itself reported a lower profitability due to the lower-than-expected growth, all this above markets, and therefore lower operating leverage.
Finally, regarding Asia Pacific, we just appointed a new leader for the region, and the cost related to this leadership transition impacted the profitability of the region as one-off. With this, I now hand over to Gabriele to give you more colors about our financial performance.
Thanks, Enrico, and good afternoon to everybody. Moving to slide number 4, we have a look at the group financial performance in Q2, which, as already commented by Enrico, posted a very strong revenue growth at 8.8% at constant Forex, with an above-market organic growth at 6.6%, despite a softer-than-expected global market demand, mainly due to a lower level of returning customer in EMEA. A US market growing at a healthy 5%, though at a slower pace than Q1, 130 days less, which accounts for around 1.6% growth. The organic performance was driven by share gains and positive pricing development. M&A contribution from bolt-on acquisition in France, Germany, US, Canada, and China was at a remarkable 2.2%, strongly accelerating since October 2022.
Forex had a significant negative impact, accounting for -2.8% due to the depreciation of the US dollar, Australian dollar, and Argentine peso. EBITDA recurring came in at EUR 152.5 million, with margin at 26.6% after strong reinvestment in the business, versus the extremely challenging comparison base in Q2 2022, which posted, as you may remember, a record profitability with an EBITDA margin of 27.2%, plus 40 basis points versus 2021. Profitability was affected by some temporary adverse factors already mentioned by Enrico. A less favorable geographic and business mix due to the slower growth in EMEA and the fast-growing direct retail business in the US.
The lower operating leverage in EMEA, due to the lower than expected growth, could buy above market and the shift to more costly new customers, the one-time cost related to the change in leadership in Asia Pac. Moving to slide 5, we have a look to our financial performance in H1. Revenues were up at 9% at constant Forex versus 2022, with a very strong and above market organic growth at 7%, M&A contribution at 2%, a negative Forex impact at 1.6%. EBITDA recurring amounted to EUR 276 million, up around 6% versus H1 2021, with margin at 24.8%, down 30 basis points versus 2022 record profitability, in light of the previously mentioned reasons. Moving to slide 6, we have a look at the EMEA performance.
Revenue growth at constant Forex was at 3.2% versus 2022, with an above market organic growth at 2.2%, achieved also thanks to a positive pricing development in a still negative market due to returning customer and with a negative impact of one trading day less, corresponding to around 1.6 percentage point growth. M&A contribution in France and Germany was positive by 1%. EBITDA amounted to EUR 117.4 million, up around 1% versus 2022, with margin at 31.2%, down 70 basis points versus an exceptionally challenging comparison base in 2022, which posted a record EBITDA margin at 32%, +90 basis points versus 2021.
The result was driven by reduced operating leverage following the lower organic performance, but without compromising on investment to enlarge the competitive advantage versus other players. In H1, revenue growth was 4.4%, with an above market at 3.5% organic growth and 1% contribution coming from M&A. EBITDA amounted to circa EUR 217 million, up at 3.6% versus H1 2022, with margin at 29.6%. Moving to chart number 7, we have a look at another outstanding performance of Americas, despite the very challenging comparison base in 2022, which fostered a revenue growth of over 21% versus Q2 2021.
Revenue growth was 23.5% at constant Forex, with an excellent organic growth of 16.6%, driven by a very strong performance in the US of both Miracle-Ear direct retail and Amplifon Hearing Health Care, together with a double-digit organic growth in Latin America. M&A contribution, primarily related to US and Canada, was almost 7%. Forex had a negative impact of 8%, driven by the strong euro appreciation versus the US dollar and the hyperinflationary environment in Argentina.
EBITDA amounted to EUR 32.3 million, with margin at 28.9%, increasing 10 basis points versus the remarkable comparison base of Q2 2022, when the group delivered 100 basis point margin expansion versus 2021. In H1, revenues were up at 21.6% at constant Forex, driven by an excellent organic growth of around 15%, despite the 2022 remarkable comparison days, when the region grew by 25% versus 2021. EBITDA amounted to EUR 57.1 million, up 17.6% versus H1 2022, with the margin stable at 26.9%, despite the strong acceleration of Miracle-Ear retail business. Moving to slide 8, we have a look at Asia Pac performance, where we posted an excellent revenue growth, further accelerating in Q2.
Revenues were up over 16% at constant Forex, mainly driven by the outstanding organic growth across all countries, boosted by the double digit organic growth in Australia and the outstanding performance in China. M&A contribution was 1.5%, related to China expansion plan, and the Forex headwind was minus 8.9%. EBITDA was EUR 20.9 million, with margin at 24.3% versus 25.7% in 2022. The 140 basis point contraction is entirely due to the one time cost related to the change in leadership in the region. In H1, revenues were up around 15% at constant Forex and around 9% at current Forex, driven by an excellent organic growth of around 14%.
EBITDA amounted to EUR 42.6 million, up circa 7% versus H1 2022, with margin at 25.8%, with a contraction of 50 basis points due to the change of leadership commented before. Moving to slide number 9, we appreciate the Q2 profit and loss. In the quarter, total revenue increased by 6% to EUR 574 million, with an excellent 6.6% organic growth versus Q2 2022. EBITDA recurring came in at EUR 152.5 million, with margin at 26.6% versus 27.2%, 2022 record level, when we implemented some cost containment measures related to non-strategic investments.
As previously mentioned, the profitability reflected the less favorable geographic and business mix, and the one-time cost related to the change in leadership in Asia Pac, and was achieved even after very strong reinvestment in the business. EBITDA reported was around EUR 149 million, up around EUR 4 million versus 2022, after EUR 3.4 million one-off cost, primarily related to the application of IFRS 2 accounting principle for the share assignment previously communicated. D&A, including PPA, increased by EUR 6 million versus last year, in light of the increased investment in network, IT infrastructure, and innovation, leading the recurring EBIT to EUR 86 million versus EUR 87 million in Q2 2022.
Net financial expenses amounted to EUR 11.8 million versus EUR 8.9 million last year, due to the non-monetary negative impact of inflation accounting on the Argentine subsidiary. The higher figurative interest expenses on network leases following the application of IFRS 16, some exchange differences in America, and some slightly higher interest rate on short-term credit lines, even if, as you know, most of our debt is at fixed rate. Tax rate posted a 10 basis point reduction versus 22, leading recurring net profit at around EUR 54.5 million, versus EUR 57 million in Q2 last year. Moving to slide number 10, we see the H1 profit and loss evolution. Total revenues increased by 9% at constant Forex and 7.4% of current Forex to EUR 1,114 million.
Recurring EBITDA increased by 6.1% to EUR 276 million, with margin at 24.8%, down 30 basis points versus H1 2022 for the previously mentioned reasons. D&A, including PPA, increased by around EUR 11 million, leading the recurring EBIT to around EUR 148 million, with a growth of around 3.7% or EUR 5 million versus H1 last year. Net financial expenses accounted for EUR 23.7 billion, in light of the previously mentioned reasons, leading profit before tax to around EUR 124 million, from EUR 125 million in H1 last year. Tax rate ended at 27.8%, leading recurring net profit to EUR 89.3 million, in line with H1 2022. Moving to slide 11, we appreciate the cash flow evolution.
Operating cash flow after lease liabilities was in the period equal to EUR 138 million, EUR 18 million below the EUR 156 million outstanding level achieved in 2022, when the group implemented several action, delivering a considerable improvement in the working capital. Net CapEx increased by almost EUR 14 million to circa EUR 62 million, leading free cash flow to over EUR 76 million. Net cash out from our M&A posted a significant increase to almost EUR 60 million versus EUR 31 million last year, following the significant acceleration with 140 shops acquired in the first half of 2022.
NFP ended at EUR 884 million, posting a seasonal increase versus December 2022, after strong investment for over EUR 185 million in CapEx, M&A, and dividends, and posted a reduction of around EUR 11 million versus June 2022 comparison period. Moving to slide 12, we have a look at the debt profile and key financial ratios. As mentioned, the net financial debt closed at EUR 884 million, with liquidity accounting for EUR 215 million, short-term debt accounting for around EUR 432 million, and the medium long-term debt accounting for around EUR 667 million. Following the IFRS 16 application, lease liability amounted to around EUR 482 million, leading the sum of net financial debt and lease liability to EUR 1.37 billion.
Equity ended up at around EUR 1 billion. Looking at financial ratios, net debt over EBITDA ended at 1.57 times, slightly increasing versus 1.52 times at December last year, after strong investment in CapEx, M&A, and dividends, while posting 10 basis point decrease versus the 1.67 times in June 2022. Debt over equity ended at 4.85 times. Moving to chart 13, we have a look at the additional finance of up to EUR 650 million secured during the first semester. In June, we signed the new sustainability-linked revolving credit facility with a pool of banks for a total amount of EUR 300 million. This facility has a 3-year term and an extension option for additional two years at the company's discretion.
In July, we signed a EUR 300 million loan agreement with the European Investment Bank to further accelerate our innovation and digitalization process. This loan, part of the EUR 350 million financing approved by the European Investment Bank, may be drawn in several tranches over the next 24 months, and have then a further 9-year maturity, with very favorable financial conditions compared to those currently available in the market. These two facilities allow the group to further optimize the group's financial structure, both in terms of cost of funding and extension of average maturity, and confirm the very strong financial profile of the group with a financial headroom of over EUR 800 million, including available liquidity and undrawn committed RCF. I would now hand over to Enrico for the outlook and the closing remarks.
Thank you, Gabriele. Some key messages to conclude today's presentation. No doubt, some volatility still persists in the current external environment for all the very well-known reasons. In this context, our growth in H1 was strong, above market, and overall in line with our plans. A couple of comments looking ahead to the second half of the year. First, the comparison base will ease in H2, and particularly in Q4. Q3 started positively, with revenues showing a strong growth also in July, at around 10% at constant exchange rates. In any case, we, as usual, expect to continue to grow faster than the market also in H2. All that said, and assuming, as already shared, a market back to growth in 2023, in the region of +2-3%, we can today confirm our overall guidance for the year.
With this, I return the floor to Francesca for the Q&A session.
Thanks, Enrico. I kindly ask operator to open today's Q&A session. Please kindly limit your question to maximum two initially, in order to give everybody the opportunity to ask questions. Now I turn the call over to Pierpaolo, please, to open for Q&A. Thanks.
Thank you. This is the Chorus Call conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. We kindly ask to use handsets when asking questions. Anyone who has a question may press star and one. At this time, that's star and one. We will pause for a moment while questioners join the queue. The first question is from Hassan Al-Wakeel with Barclays. Please go ahead.
Good afternoon, and thank you for taking my questions.
Good afternoon.
I have two, please. firstly, just on guidance, I, I know that you've reiterated it, but not provided the sales and EBITDA ranges that you gave us in Q1, which were based on FX rates at the time. Since then, rates have worsened slightly.
We started 2023 winter in a stronger position, but the situation remained volatile, and we will need to up the party on strengthening the energy system for the long term. The Europe and Italian policies continue to support our strategies. The REPowerEU response to that further key security of supply, while improving affordability and the EUR 2 million for the recognition of the green gases. Despite that, the organic growth of the EMEA was +2.2%, which also was taking into account the fact that we had one trading day less, which accounts for about 1.6 percentage points of growth.
I think that the performance of the EMEA region in the second quarter, in the current market scenario, and in consideration of the fact that we had also one trading day less, I think it was quite a good performance. Going forward, of course, I expect also a better performance from the EMEA region. Also, in consideration of the fact that in the second half, the comparison base will ease, and the Q4 in particular, you know very well that Q4 is by far our biggest quarter. Definitely I expect a good contribution also to the growth of the group coming from the EMEA region. In fact, this is also what we are seeing in July.
We see EMEA performing better than in Q2. Definitely, of course, EMEA, we expect EMEA to give a good contribution to our growth also in the second half. With regards to your first question, I would leave that to Gabriele. Yeah. Thank you. When releasing the guidance, of course, we gave absolute numbers, both in terms of revenues and in terms of EBITDA. The numbers were, I mean, EUR 2.3 billion-EUR 2.35 billion in terms of revenues, and EUR 570 million-EUR 585 million in terms of absolute EBITDA.
Of course, since there could have been variation compared to the Forex that we were estimated at that time, we clearly pointed out some exchange rate, namely it was the dollar at $1.07, Australian dollar at AUD 1.57, and also the Argentine peso at ARS 227. Of course, these changes, may, this Forex may change, especially, I mean, as we already saw, the Argentine peso changed a lot. The kind of number we are targeting is not a fixed number, but it is a number which is gonna be function of the average, expected exchange rate at the end of the year. Of course, we can commit to absolute value in local currency, but we cannot commit in absolute value to EUR.
I guess, Gabriele, at constant, at current spot rates, I mean, what does that imply? Does that imply that the lower end of the range is more reasonable?
No, I mean, of course, we don't want. I mean, it's very easy to calculate, so we don't want to give a number at the spot rate. The spot rate today is $1.11 for the dollar, AUD 1.64 for the Australian dollar, ARS 300 for Argentine. The calculation can be done, and of course, it can change every day. Again, I don't give a number today. The number we gave in the guidance is still there, as Enrico confirmed, at the Forex that were stated in the page of the guidance.
That's really helpful. Enrico, if I can just follow up on your commentary around returning customers. Is that a margin drag? How are you thinking about these factors into the second half? The reason I ask is because the H1 margin was down 30 bps, and the implied margin guidance that was provided at the Q1 stage, you know, really does imply some meaningful margin expansion in the second half.
Yeah, well, of course, returning customers are more costly to acquire than the new customers. Sorry, new customers are more costly than returning customers. This has some impact in terms of profitability, but I wouldn't say that this was the main reason for the profitability in Q2. I think that the main reasons for the profitability in Q2 was, from one side, that the comparison base was very challenging, for sure. On the other side, the mix of between the different regions, being EMEA still the most profitable one, and being EMEA is lower in terms, in terms of growth. Although, I would like also to remind that the EMEA region also in Q2 posted the profitability above, well above actually 30%.
We are speaking about best-in-class profitability. Also, I think that Gabriele mentioned about a one-off effect that we had for the leadership change in Asia Pacific. I wouldn't say that the mix shift between the new and returning customers was the main reason for the profitability of Q2.
Very helpful. Thank you.
The next question is from Niccolò Storer with Kepler. Please go ahead.
Good afternoon. Thanks for taking my two questions. The first one is on price effect. If you can confirm that also in Q2, the impact from pricing was similar to that of Q1. Maybe implying also negative volumes in key EMEA region. The second question, very predictable. If you have any thoughts about, if you can share with us any thoughts about EssilorLuxottica announcement to start addressing the hearing aid market.
If you have ever come across the Israeli startup they bought, and if you can imagine something invisibly embedded in frames, having any chance to compete with a fully-fledged hearing aid? Thank you.
Thank you, Niccolò. With regards to the price for Q2, yes, I can confirm that our pricing is holding very well. Of course, it was also a good contributor to the growth of the group and also to the growth of the EMEA region. With regards to the second question, look, very early days. We don't have today any concrete element to comment. Nevertheless, I would say that we welcome anyone who can help reduce the stigma that is associated with our sector.
Of course, a company like EssilorLuxottica, with its technological capabilities, its brands, could certainly play a role for people with mild to moderate hearing loss. Anyway, I don't have any concrete element to comment properly on, on, on this today.
Okay. Thank you. Thank you. Maybe as a brief follow-up, on what you mentioned about the strength in the Americas of the +60, 16.6 performance reported in Q2, how much was US alone? If you can share with us this.
No. As you know, we don't give growth by market.
Okay.
As I said, U.S. definitely was very strong, and was very strong, in particular, in our direct operated store network and also in Amplifon Hearing Health Care. Which, let me say once again, confirm the positive strategy that we decided actually to implement a few years ago, and I think that the team there is doing a great job. Very happy about the performance that we had in the U.S. All the region was very good, very strong. Also Canada, also Latin America was also excellent. That part of the world is definitely having a very good performance at the moment.
The next question is from Veronika Dubajova with Citi. Please go ahead.
Hi, guys. Good afternoon, and thank you for taking my questions. I will keep it to two, please. Just the first thing, I want to follow up on the commentary around July and how you're thinking about the phasing of growth, third quarter versus the fourth quarter. I mean, I think obviously July last year had some pretty easy comparables. I don't know, Gabriele Galli, if you can quantify that, you know, +10% that you're talking about against what comparison base that is. Just higher level, would you expect that growth acceleration that's embedded in the guidance to come mostly in the fourth quarter? Do you think that you're already going to see some growth acceleration versus the first half in Q3? That's my first question.
Yeah.
My second question, just given the performance on margins year-to-date, do you see any scenario whereby margins could be up year-on-year? Or is the more reasonable expectation to be thinking about flat margins or maybe margins even marginally down? Those would be my two questions. Thank you.
Thank you, Veronica, I will not give you guidance by quarter. I'm sorry. I think that we are already very transparent in giving the guidance by, by, for, for the full year. Let me say that for sure, in Q4, we will have a much easier comparison base, both in terms of growth, but also in terms of profitability. You might remember that last year in Q4 was the only quarter, as far as I remember, in which we posted lower profitability versus previous year, around 70%. I think it's quite natural that we expect a better, let's say, higher, let me say, acceleration in Q4. I think this is also what you would expect.
In July, I commented about the fact that we started well. We started with a double digit growth so far, but July still is not finished, of course, let's say our forecast for the month at the moment is something in the region of 10%, I can confirm that. With regards to the second question, profitability, let me stick to our guidance, which is about EBITDA in the region of EUR 570 million, EUR 585 million, this is what we confirm today.
Thank you for that, Enrico. Maybe I can ask the question differently. I just want to get some clarity because I think we had this issue, you know, last quarter. You gave us a number for a month, and then it turned out that the full quarter wasn't as good as the month. When you talk about the 10% growth in July.
Yeah.
is there anything unusual in the baseline, that when you think about Q3, we should maybe temper our expectations and then?
Right.
expect a bigger... I just want to make sure, because I think.
Uh.
we've kind of gotten caught up in this before, and I want to give you an opportunity-
Uh.
to clarify that, if you can.
Right. Not as of my memory, to be honest with you. I don't think that there was anything particular last July. I would say no. No.
Okay. At this point in time, you wouldn't say, obviously, caveating it with the usual volatility, you wouldn't say that the 10% you're talking about is, for whatever reason, unusual as you think about the remainder of Q3?
Well, as I said, Veronica, we are speaking. I think that it was important for you to get a sense of how the quarter started. To clearly, I did this despite of the fact that July is not finished yet. I think it was good to say that July and the quarter started well. If August and September will be stronger, of course, this will be welcome. As I said, I don't want to give you now the guidance for the quarter by month, because it's too much. It's too early. It's too much, and it's too early, let me say, because the quarter just started.
Okay. Understood. I thought I tried. Thank you, guys.
No, thank you. Thank you.
The next question is from Domenico Ghilotti with Equita. Please go ahead.
Good afternoon. Couple of questions. The first is related to the guidance that you gave. If I remember well, it was basically built on, say, a couple of percentage point of bolt-on M&A contribution, and then a couple of effects headwinds. On effects, okay, it's up to us to calculate, to update the number. Any reason to expect, let's say, different contribution from a bolt-on M&A? Given the softness that you have seen on the second quarter, should we temper also a little bit the expectation on the organic performance?
Yeah, thank you. Thank you, Domenico, for the question. Our guidance last time was built in the following way. The assumption was of a market growth in the region of 2-3%. Also we said that on this, you should add up our usual overperformance in the region of 1-2%. Also, you should add up the price effect in the region of 3-4%, and then the contribution from M&A something in the region of 2%. I can tell you today that this is still our assumption for the year. Nothing really material has changed since then, apart, of course, the Forex, as Gabriele said, changes every single day.
I think that the underlying assumptions are absolutely confirmed today.
Okay. My second question is on the APAC region. Well, I would try to understand why did you change leadership? What is the reason? And if I understood properly, you are saying that basically, that's the main reason for the drop in margins. I would have expected, say, that without this, it would have been flattish, and you are not putting this into a one-off, let's say, the one-off contribution.
Yeah, yeah, absolutely. I can tell you that the change in leadership cost both are the only reason for the drop in profitability in the Asia Pacific. Of course, we are happy about the job done by the previous leader, but we also expect the new leader actually to give his contribution. Let's say that everything is a normal change in leadership, which can happen time to time.
no specific, let's say, task in which you, you think they can deliver more with the, with the new leadership, on, say, profitability or time or?
Of course, of course. Of course, our ambition is to do always better, definitely.
Okay. Thank you.
The next question is from Hugo Solvet with BNP Paribas. Please go ahead.
Hi. Hello. Thanks for taking my questions. I have a couple follow-up. First, in the US, can you maybe talk to the difference in performance between Miracle-Ear and Amplifon hearing Health Care, and on the pace.
Sorry. Sorry, the audio was not good. Can you say again, please?
Sorry, sure. Is that better now?
Yeah.
Can you talk to the difference of growth between Miracle-Ear and AHHC in the US? Should we expect the pace for M&A and the shift to direct retail to continue at that pace? Second, on margin, can you maybe discuss any annualization in labor cost, in the investments that we should think about as we move into H2, and that will help the margin profile as we progress throughout the year? Third, in terms of price effect, you reiterate the 3%-4% pricing, yet I think at the beginning of the year, you mentioned that this should increase gradually, and you were already trading above that or at the top end. How should we think about pricing in H2? Thank you.
Thank you. Thank you for the questions. With regards to the US, as I said, of course, we do not give details about the different growth between the different business lines. What I can tell you is that in terms of units, Amplifon Hearing Health Care was the fastest growing, but we reported a very strong growth also in our network of direct operated stores, whilst the slowest was the franchising business line. With regards to the second part of the question related to the US and therefore, to M&A in the US, definitely, you know, that is part of our strategy actually, to increase the number of store directly operated from us.
This was a strategic decision that we have taken some years ago with clear benefits, first of all, in terms of direct relationship with end customers, but also in terms of absolute revenue growth and also absolute EBITDA. You know also that instead in terms of percentage margin, of course, direct operated stores are lower than franchising. The strategy, in my opinion, is proving to be very, very right. In fact, we are growing at fast pace in our store network directly operated from us. With regards to labor cost, I can confirm what we said also, I think at the beginning of the year. Clearly this year, inflation on labor cost is gonna be higher than in the past years.
This year will be more in the region of 6% versus 5%-6%, versus the usual 2%-3%. Something, let's say double than in the past. This is absolutely confirmed. With regards to the third question and therefore the price effect, I think that at the beginning of the year, we said that we were expecting a pricing effect in the region of 2%-3%. And then, we said during our Q1 conference call that that was going to be maybe even more than that, in the region of 3%-4%.
As I said, also, answering a previous question from Niccolò, this price effect is holding, is going very well, is definitely a good, very good contributor also to our growth.
Thank you very much.
Thank you.
The next question is from Susanna Ludwig with Berenberg. Please go ahead.
Thanks. Good afternoon, and thanks for taking my questions. I have two, please. First, could you provide a bit more color on sort of both the market and your performance in Europe? Are you seeing softer performance across the board, or is this driven by any specific countries? Second, on Amplifon Hearing Health Care, could you just talk about how your growth compares to the market, given that it's probably the fastest growing channel in the U.S.? To what extent is growth being driven by your more recent entrance into the Medicare Advantage segment of the managed care channel?
Absolutely. Thank you. Thank you for the question. In Europe, we saw softness, I would say, across all the main markets. In Germany, but also in France, also in Italy. I would say that the softness was across all the main markets. With regards to the second question and therefore Amplifon Hearing Health Care, I think that we are gaining share even in the insurance segment. The reason why we are taking share in the insurance segment is that we are winning some contracts. Not big contracts, but we are winning a few small and medium-sized contracts with different insurances, also including some Medicare Advantage contracts.
Great. Thanks so much.
Thank you.
The next question is from Anchal Verma with JP Morgan. Please go ahead.
Hi, good afternoon. Thanks for taking my questions. I have a few, please. The first one would be on the financial items. They were a bit higher than expected. Could you please share what your guidance is for the full year? The second one would be just to perhaps get a bit more color on the initial demand trends that you're seeing in Q3 so far and across the regions. Any color you can provide us on how they've been trending across the different regions? Finally, if I could please follow up from Hassan's question on the FX. I appreciate it's difficult to forecast FX, and it's been changing every day.
Could you just help us understand that despite the changes in FX, where they are currently or what you have guided in, you are confident for the revenue guidance range you've provided to us for the full year?
I will answer to the 2nd and the 3rd question, and I will give the word to Gabriele for the financial items. With regards to July, I can't tell you anything about the growth of the market by region. Our growth in terms of relative and qualitative terms is replicating what happened in the 1st half and therefore US leading the way in terms of growth. A very strong performance also in Asia Pacific, and a little lower performance, of course, in the EMEA region. Let's say the shape of the growth between the three regions is the same. With regards to the guidance, please let me stick to what we said, and therefore our guidance in absolute term is quite clear.
I think in Euro terms, this guidance was having the assumption clear assumptions in terms of Forex. Forex change every single day, we do not want to update guidance every single day according to the Forex fluctuations. This is not this is not possible. With regards to the first question and therefore to the financial items, I will leave the word to Gabriele.
Yeah, thank you. I mean, as we were commenting, there are different items. Starting from the financial interest or the proper cost of financing, which is, I mean, the one that we explained also during the last conference call. What we expect there is that, I mean, we have a very slight increase compared to what we are seeing in the market in terms of increase of interest rate versus last year. This may account for something in the range of EUR 1 million per quarter, and this was commented also during the last conference call. As you can have seen, we also have a larger network. The larger network, following the application of IFRS 16, is generating a higher financial expense, which is a figurative one, of course, because in terms of cash out, is achieved on a monthly basis, paying the rents.
This can be another EUR 1 million per quarter versus last year. There are another couple of elements which are very much related to Forex. The first one is the inflation accounting on Argentine peso, on which of course, we do not give estimates, because it depends a lot on the valuation of the Forex versus Euro. This is non-monetary, so at least I really do not worry about it because it's just a translation effect about assets and liability, but it's not affecting our, let's say, cash out. The other item is about some Forex differences. As you know, we are very well balanced in terms of cost and revenues in local currency.
We may have some unrealized losses, for example, that happened this quarter, about some recapitalization of some currencies, where the Euro went on the opposite direction compared to what it was expected. For example, for Colombian peso and the Mexican peso. This is gonna revert, I think, moving forward, because really, Latin currencies are expected to revert compared to what we saw during the last month. Again, it doesn't worry me. I would take into consideration the two first item, which more or less may be worth EUR 1 million per quarter compared to last year. Each one.
That's clear. Thank you.
Thank you.
The next question is from Robert Davies with Morgan Stanley. Please go ahead.
Yeah, thank you. Most of my questions have actually been covered, but one I did have left is just on, I guess, the margin trajectory in the APAC region. We've seen that margin come down 34, 28, 26, and obviously now I know there's a severance cost or leadership change cost in the numbers, but the margins are sort of lower again in 2Q. Just wondered what the sort of medium-term margin expectations on the APAC business is specifically, because it's been quite volatile in the last few years. Thank you.
You are. Thank you for the question. You are absolutely right. I think that our goal definitely is to improve the profitability of the Asia Pacific region also in this second half. Definitely you should see going forward improving profitability. I need to reiterate the fact that in this quarter we had a one-time effect related to this change in leadership. That's that was the reason. Otherwise, we would have been, we would been at least on par. The goal is in the second half, definitely to improve profitability in comparison with the previous year
That's great. Actually, maybe one other one I had was just on the progression of your growth margins. You've obviously made significant progress there over the last sort of four or five years. Just how is that dynamic given current, I guess, the hearing aid market itself is sort of at a pretty choppy nine, 12 months? Just be kind of interested there. The discussion with the manufacturers themselves, are you seeing kind of more pushback? I mean, I know you sort of mentioned pricing was still sort of constructive. How is that conversation going between you and the actual manufacturers on pricing and getting through this, you know, kind of ongoing progress on your growth margin line?
Yeah. Well, to be honest with you, I can tell you that nothing has changed in a material way in our relationship with all the different manufacturers. As you know, we work with all the five main global manufacturers. I can tell you that we have a very, very good relationship with all of them. I would say nothing really new, and nothing has changed in the recent months in terms of relationship with our manufacturers.
The next question is from Sezgi Oezener, with HSBC.
Hi, thanks for taking my questions. Most of mine also have been answered, but one, it would be great to get some more color on not just the leadership change that we've seen in Asia, but how that changes the strategy going forward. Does it imply any differences from what's been done until now? Thanks.
No, no, I do not expect any change in strategy in the Asia Pacific region because of the leadership change. The leadership change was absolutely something very smooth and mutually agreed. Nothing, I'm very happy also about the work done by the previous leader. I mean, when there is a change, of course, you expect to do even better in the future. This is the goal, the usual goal. Nothing really will change also because of the work done by the previous leader was definitely very satisfying. Nothing to be worried, nothing to be concerned, and nothing, no real changes also in terms of strategy.
The next question is from Niels Granholm-Leth with Carnegie. Please go ahead.
Thank you. Good afternoon. two questions from my side. First question, could you just confirm that the July growth number that you mentioned earlier in this call, includes the effect from acquisitions? Secondly, can you talk about the investments that you announced in combination with the European Investment Bank loan facility that you announced earlier? You're mentioning a number of IT investments. Would this lead to higher CapEx ratio in the next couple of years? Thank you.
Okay. With regards to our growth, I think that in all our tables, of course, it is quite well specified, which is the contribution coming from the M&A. You can see clearly that, of course, with regards to the, the last 10% for for July, also, this includes the usual, let's say, 2%, around 2% M&A contribution. With regards to the second question, and therefore, our work done with the European Investment Bank, I would perhaps give you some colors from Gabriele.
Absolutely. Starting, I mean, from your question, of course, I mean, moving forward, the size of the company goes up. I mean, CapEx and also OpEx are increasing. What we took, I mean, is the plan of OpEx and CapEx that we had. We found some very interesting project in terms of innovation, digitalization. We shared the project with them, and the projects were in scope with their ability to finance them. We didn't increase the CapEx or OpEx on purpose. It's very much driven by the growth of the company, and it's very much in line with our long-term projection of OpEx and CapEx. What they are financing, just to be clear, is not only the accounting CapEx, but is also the accounting OpEx component of projects which are in scope.
That's, I mean, on the general part of your question, in terms of financing, of course, it was a very interesting finance. It was a way for us to, I mean, broaden the portfolio of investors in our debt apart, the banks and the debt capital market, but also a very strong institution such as European Investment Bank. It's very interesting by, I mean, a maturity point of view, because the two plus nine year kind of financing with very interesting opportunity also in terms of cost of the debt, because as you can imagine, the spread they apply is significantly lower compared to the spread you can find on a similar transaction in the market.
We are super happy about their decision to come with us.
Thank you. I think we have run out of time, so this concludes today's call. Thank you all for your interest and attendance. We kindly ask operators to disconnect.
Thank you. Thank you, everyone.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.