This is the Chorus Call conference operator. Welcome, thank you for joining Ariston 's Second Quarter and First Half 2025 Results conference call. 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 the telephone. At this time, I would like to turn the conference over to the company manager. Please go ahead.
Good afternoon and welcome to Ariston Group 's Second Quarter and First Half 2025 Results call. I'm Albert Pozzi, Chief Marketing, Sustainability, and Investor Relations Officer. Joining me today are Maurizio Brusadelli, our Chief Executive Officer, and Riccardo Gini, our Chief Financial Officer. This presentation will last about 25 minutes, after which we will open the floor for questions. As a reminder, for those joining by phone, the slide deck is available on our Investor Relations website. I will now hand the call over to Maurizio.
Thank you, Albert, and good afternoon, everyone. Let's begin with a brief overview of our second quarter results on page three. In Q2, we continued to deliver a positive trend year-on-year in line with our plans. Our top line grew 3.6% organically. Heating showed signs of improvement, particularly thanks to the continued momentum in heat pumps, while water heating remained stable. We improved margin year-on-year by 50 basis points in quarter two, thanks to the operating leverage and the Fit-2-Win program, which we had previously communicated to the market. The Fit-2-Win program is enhancing the effectiveness of our organization. At the same time, we accelerated investment in go-to-market digital R&D initiatives to continuously improve our offering and level of service to support organic growth. Once again, we maintained a strong focus on working capital management, resulting in a stable net working capital incidence on revenues at constant perimeter.
This is reversing the typical quarter two upward trend of a normal year. Thanks to this disciplined approach, we improved H1 free cash flow generation year-on-year despite a higher level of CapEx investments. I look forward to commenting on the next slide about the signing of the JV with Lennox. This is a unique opportunity to accelerate our penetration in North America water heating markets in the next years. We continue to pursue our inorganic agenda from transformational to bolt-on deals, and I will also comment about the two bolt-on acquisitions completed in H1 to support the development of the components division. To conclude the introduction, we are happy with the development of the business in H1, even though some core markets are still stabilizing and the global geographical landscape remains complex.
For these reasons, we confirmed our net revenue guidelines with a narrower range, and we continue to confirm our mid-term outlook. If I now move to slide four, as you know, in May, we signed a strategic partnership with Lennox. Let me share a little bit of the rationale behind the JV. The U.S. is the largest water heating market globally, with a very rich product mix. Based on the current regulation framework starting in 2029, there will be a progressive transition of electric water heaters above 35 gal toward water heating heat pumps technology. Ariston Group and Lennox, a very complementary asset on both companies, stand to benefit from this partnership. For us, we are a global leader in water heating, offering a distinctive range of high-quality electric, gas, and water heating heat pump technologies.
Lennox is a leading HVAC player with a high reputation for innovation, quality, and its extensive network of distributors and dealers will complement its portfolio and accelerate Ariston's ability to reach new installers across North America. The products will be manufactured in our plant in Mexico, improving the facility's utilization. We are currently preparing the product lineup for a launch in 2026, and obviously, it will take one more year to start seeing meaningful developments. Now, on page five, as you know, we had some new news. Inorganic growth continues to be a top priority for us. We work on a wide range of opportunities from transformational deals, such as the acquisition of Wolf- Brink completed in 2023, to smaller bolt-on acquisitions, provided they offer a strong strategic rationale.
Here, you can see the example of two bolt-on acquisitions completed in H1, with a strong strategic rationale to support the growth of our components division. In the first quarter of 2025, we signed the acquisition of DDR Heating, which provides access to the U.S. component market. DDR specializes in tubular electric heaters for both professional and industrial applications. In the second quarter, we completed the acquisition of Z.R.E. in Italy. Z.R.E. gives access to new industrial component market verticals: plastics, packaging, and medical sectors. Now, on slide six, a quick reminder on who we are. Ariston Group offers thermal comfort solutions with a balanced exposure to water heating and climate comfort. Water heating on the right is a resilient business and our main business outside Europe. It benefits from our presence in markets with growing population and still low, but rising penetration of water heating solutions.
On the left, you see climate comfort, which includes heating, service and parts, ventilation, and air handling. In the heating business, our portfolio covers a wide range of technologies from gas boilers to heat pumps, hybrids, and other heating systems. We offer a comprehensive range of high-efficiency and renewable solutions to enable the energy transition. Finally, our components and burners division completes our business lines, each accounting for 3% of total group turnover. On slide seven, we provide our regular update of the German heating market. Our largest market, accounting for around 20% of group revenues in 2024. Historically, the German heating market grew by 4% in volume over the 10-year period from 2013 to 2022, with an enriching product mix toward high efficiency and renewable solutions. 2023 was an exceptional year, driven by incentives and concerns over a potential gas boiler ban in 2024, which ultimately did not materialize.
The 2024 market was affected by demand normalization, coupled with channel destocking and some regulatory uncertainty. In 2025, the market is stabilizing but remains in negative territory year to date. Heat pumps have returned to strong growth, supported by a good incentive scheme with quarterly average application of approximately 20,000 per month. The boiler market is still weak. Now, let's pass to Riccardo, who will walk you through our Q2 financial performance.
Thank you, Maurizio. Let's begin with slide number nine, which shows the year-on-year evolution on net revenues. Please note that Russia was excluded from the 2024 consolidation perimeter and was reconsolidated as of end of March 2025. For reporting purposes, the impact is treated as an M&A contribution. In Q2, revenues increased by 5.2% year-on-year, reaching EUR 644 million. This growth was primarily fueled by the organic expansion of 3.6%, underpinned by the steady recovery of the heating market. Notably, Europe returned to growth, while the Americas sustained a positive momentum that began in Q1. Meanwhile, the water heating segment maintained a stable performance across all regions, providing a solid foundation as we continue to capitalize on market opportunities across all our geographies. Our service and parts division continued its growth trajectory in line with the pace seen in Q1.
As expected, given the current geopolitical context, global currency volatility had a significant impact this quarter, with foreign exchange effects playing a meaningful role in our results. - 1.6% compared to - 0.3% in Q1, with major headwinds from the Mexican peso, the U.S. dollar, and several Asia-Pacific currencies. Final comment on the perimeter variation, which contributed 3.2 percentage points to our growth in the quarter. The main driver was the reconsolidation of the Russian business, along with the two bolt-on acquisitions in our components division, which Maurizio covered earlier in the presentation. Summing up Q1 and Q2, in the first half of the year, we achieved organic growth of 3% in line with our guidance. Foreign exchange had a negative impact of 0.9%, while the Russia business and the two bolt-on acquisitions contributed 1.6 percentage points for a total growth of 3.7%. Moving on to slide number 10.
Here, you can see the evolution of our net revenues by geography, which continues the trend observed in the first quarter. Let me remind you that in 2024 figures, Russia was excluded starting from end April, while in 2025, it was reincluded starting from end March. We are pleased to report organic growth across all three regions, with Asia-Pacific and Middle East Africa and the Americas growing at a mid-single-digit rate in the second quarter. In addition, our business divisions delivered solid performances in Q2, as detailed in the appendix, with the burners and components divisions combined together, achieving a +2% organic year-on-year increase. In Europe, net revenues reached EUR 471 million, marking a 3.2% year-on-year increase when excluding Russia. This performance reflects the ongoing market stabilization in our top three countries, coupled with solid growth across several other geographies.
Notably, demand for heating heat pumps continued to rise steadily throughout the quarter, further supporting the region's overall positive trajectory. In both Asia-Pacific, Middle East Africa, and the Americas, revenue trends followed a similar pattern. Reported figures were slightly down year-on-year, primarily due to unfavorable foreign exchange movements. When adjusted for these currency effects, both regions would have delivered a solid mid-single-digit growth, reflecting healthy underlying business performance. Moving further ahead into the P&L, slide number 11 highlights our adjusted EBIT performance. In the second quarter, adjusted EBIT rose by 13.9% year-on-year to EUR 31 million, accompanied by a 50 basis point improvement in margin, which reached 4.8%. This performance was primarily driven by the continued execution of our efficiency initiatives and supported by moderate operating leverage. These positive effects were partially offset by an acceleration of strategic investments in go-to-market initiatives, digital transformation, and R&D.
For context, reported EBIT in Q2 was EUR 61 million. The main adjustments, totaling a net negative impact towards the adjusted EBIT, included EUR 40 million from the reconsolidation of the Russian subsidiary and EUR 5 million related to the purchase price allocation amortization from past acquisitions. As a result, reported EBIT is higher than adjusted EBIT, which excludes these one-off and non-operational items. As a reminder, our adjusted EBIT historically shows a seasonal pattern with an average distribution of approximately 30% in the first half and 70% in the second half of the year, as shown in the chart at the bottom right. Turning to slide number 12, let's take a look at our free cash flow performance. In the second quarter, free cash flow was +EUR 3 million, although lower than the EUR 27 million recorded in the same quarter last year.
This represents a clear improvement in the first half performance, with cash absorption narrowing to EUR 14 million compared to EUR 24 million in the first half of 2024. As a reminder, as shown in the appendix on slide number 33, Q1 and Q2 are typically the weakest quarters for cash generation due to seasonal effects. This performance was mainly driven by our continued discipline in working capital management, with the working capital-to-sale ratio improving by 3 percentage points year- over- year and remaining stable quarter- on- quarter versus the end of Q1, a constant perimeter. The contribution from the Russian subsidiary and the two bolt-on acquisitions is highlighted on the chart on the right-hand side of the slide, marked by the gray bar. For more details on the main drivers, please refer to the last year cash flow statement in the appendix.
Further items affecting the second quarter include CapEx, which increased by EUR 4.5 million, reaching EUR 22.8 million in line with our guidance, a negative contribution of EUR 48 million from provision and other operating changes due to the Russia reconsolidation effect, and paid taxes which were flat year- over- year. On slide number 13, you'll find an overview of the movements in our adjusted net debt during the first half. As shown in the previous slide, free cash flow contributed negatively by EUR 14 million in the first half. We also recorded EUR 14 million cash outflow for acquisitions, primarily related to the DDR , the U.S. acquisition for components announced in March, the acquisition of an 80% stake in Z.R.E. in Italy, as well as some additional minority stake investments.
Other movements included EUR 16 million cash outflow for financial and effects charges, EUR 29 million for the distribution of payment to shareholders, and around EUR 1 million in non-cash positive adjustments. These non-cash items mainly consist of a -EUR 2 million mark-to-market derivatives impact, plus EUR 3.7 million in interest accruals, plus EUR 4.2 million from IFRS 16 lease liability adjustments, and minus EUR 6.8 million impact from effects variations on net financial indebtedness. The net debt increase in the first half of the year was lower than in the same period last year, so EUR 75 million compared to EUR 113 million in the first half of 2024. It's worth highlighting that, excluding EUR 43 million of cash outflows related to capital allocations, namely distribution to shareholders and M&A, the cash absorption from business operations and financial management was limited. Slide number 14 offers a detailed breakdown of our net financial indebtedness.
I can confirm that Q2 showed no significant developments compared to year-end 2024. The liquidity position decreased slightly to EUR 221 million, primarily due to early repayment of EUR 50 million of medium to long-term variable rate debt completed in the first quarter, a strategic move to optimize our debt structure and reduce interest rate exposure. Other key financial indicators remained largely stable compared to the first quarter, with the exception of a slight reduction in debt duration to 3.2 years from 4 years at the end of March 2025. Meanwhile, our maturity profile and the share of fixed-rate debt held steady, reflecting our continued commitment to discipline and prudent financial management. With that, I'll now hand the call over to Maurizio, who will conclude the presentation by sharing our guidance and outlook.
Thank you, Riccardo. We are on page 16. To summarize, we are happy with the development of the first two quarters, which marked a return to positive organic growth. We are focused on delivering our 2025 objectives while also building a more effective organization and investing where it matters most to maintain and strengthen our leading role in the future. We confirm our expectations for 2025, and given the progress of H1, we have decided to narrow our 2025 net revenue organic growth guidance from between 0% and 3% organic growth to between 1% and 3% organic growth. We observe that analyst consensus has already anticipated it, and we feel consensus is a good indication of full year expectations.
Turning to profitability, we reconfirm our expectation of an adjusted EBIT margin in the 7%+ range, supported by the Fit-2-Win efficiency program and additional direct cost-saving initiatives that are already well underway. We want to balance year-on-year profitability improvement with continued investment to sustain mid to long-term growth. Cash flow generation is typically concentrated in Q4, in line with our historical seasonality. Regarding CapEx, we confirm our guidance of 5%- 6% of net revenue for 2025, which is above the historical levels. As mentioned at the beginning of the call, we actively work on assessing strategic and bolt-on M&A opportunities with strong strategic rationale. As far as regards tariffs and the evolution of the geopolitical context, we are closely following the developments, as I'm sure you all are.
Our guideline reflects the current known situation and does not factor in second-order effects on GDP and demand that may arise from current or future tariff-related developments across our key markets. Thank you for your attention. Now to you, Albert, to manage Q&A.
Thank you, Maurizio. We are now available for questions. To make sure that everyone gets the chance to speak, we kindly ask to limit your questions to a maximum of two per turn. Operator, I give you the line.
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 the touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Vivek Midha from Citi. Please go ahead.
Thank you very much, everyone, and good afternoon. I have two questions, if I may. The first is around the guidance, in particular on margins. You're continuing to guide for 7%+ adjusted EBIT margin. Clearly, the business is very seasonal, but if we just look on the year-on-year trends, the business appears to slow somewhat in Q2, where 50 basis points are year-on-year. You need some acceleration in the margin momentum year-on-year to get towards that margin guidance. How should we think about how that's likely to progress over the course of this year? Thank you.
Thank you, Vivek, and good afternoon to you. Yes, as you rightly said, we need to accelerate our progression in Q3 and Q4. This is something that historically happened for the company, so we are confident about the ability to increase our profit in Q3 and Q4 to reach the guidance of 7%+, as said in the guidance.
Understood. Just to follow up on that, what is driving the faster year-on-year increase that you expect? Is it the impact of those investments gets diminished as you have the higher top line so you can accelerate more? What is it that gives you the confidence that the margins, you know, on a year-on-year basis, should start to improve by more in Q3 and Q4? Of course, there's a seasonal impact in general sequentially leading to that upswing, but in terms of year-on-year development, it's still interesting. Thank you.
Yes, I mean, there is a seasonality, as you said, and obviously, we have our cost-saving programs that are kicking in properly in H1. We invested also a little bit more in H1 since we stopped some of our investment in H2 last year, so we have a little bit of front-loading investments. Overall, all of this is, I repeat, we are confident on the 7%+ that we have to reach full year.
That's helpful. Thank you very much. My second question is around the German heating market, particularly on boilers. As we've seen the heat pump market recover, boilers remain very weak, reflecting that shadow effect from the strong growth report you highlighted. How do you think about the potential for any kind of upturn on the boiler side? Are there any data points that you're tracking on that? Thank you.
Yeah, I mean, obviously, we saw that the German heating market was very positive for heating heat pumps in H1, and we continue to remain bullish on the development of heat pumps in H2 as well. As far as gas and oil boilers, obviously, the dynamics are different because also last year, I mean, Q1 was stronger, and obviously, we are ready to capture any opportunity on the German market if we will see a more positive development of gas boilers. We are doing better than the market overall there, so it's difficult to predict what the market will do. I mean, you saw that in our slide, we put a plus-minus on the range of the total market in terms of volume, but I would say that we are well positioned. The team is doing a great job in Germany. We have a strong reputation.
We play in the mid to high part of the market with very strong equipment. Like you, I wish the market will do better, and if the market will do better, obviously, we will do better as well.
Understood. Thank you very much for your time.
The next question is from Cedar Ekblom from Morgan Stanley. Please go ahead.
Thanks very much. Hi, gentlemen. Just to follow up on your top-line outlook, I'm surprised that you're not more positive in terms of the organic growth potential, considering you're already delivering to the top end of the organic range in the first half, and the comps are definitely not getting harder in the second half of the year, particularly in some of the Northern European markets where we would have seen weak volumes and destocking in the second half of 2024. Could you just talk a little bit about why you are not more optimistic? Is this a case of you're very pessimistic on the outlook for gas boilers, or is it just being conservative for conservatism's sake? I don't really understand how we don't have a better H1 and H2. Can you just talk a little bit about the balance sheet?
I see that there were some changes to the sort of definition of net debt. Just talk a little bit about what has happened there and if those changes are cash-linked or simply a balance sheet impact. Thank you.
Thank you for your question. As you know, our H1 was very strong and positive in terms of organic growth. The context and the global market situation is not an easy one. We see a lot of volatility and uncertainty. We see the consumer confidence that is moving in different directions globally. We feel that keeping the range between 1% and 3% is correct, and we are confident to be within this range. Let's see month after month and quarter after quarter where we are, and we are ready to give a further update when we will discuss Q3 actuals. Now, maybe.
Can I just ask a follow-up? Would you be willing to comment on what organic growth looks like in July? Has it actually slowed relative to that 3% that you delivered in the first half and the 3.6% in the second quarter, or has it accelerated? I think that would also give us a little bit of help in terms of understanding the longevity of the cycle improvement that you're seeing.
Yeah, we don't comment normally on monthly development. What we can say is that what we can see in terms of orders and delivery is that July is in line with our expectation and continues to be a positive evolution as H1. We are okay on what we see in July versus what we expected. Maybe on your second question, I don't think, I mean, we didn't change anything on the balance sheet. Maybe I will ask Riccardo to give you some details, and maybe you can ask us what you think we did, but I don't think we changed anything.
Yeah, I mean, we only reconsolidated. The main difference compared to the end of Q1 from a balance sheet perspective is the reconsolidation of the Russian subsidiary. Other than that, there are no other significant changes. I mean, that's pretty much consistent with the P&L performance on our side. On the other end, with our net working capital management, as we indicated earlier, which continues to be, we believe, under control and with a good performance, keeping in mind that the additions that we got during the quarter, namely, again, the Russian subsidiary, as well as the two bolt-on acquisitions, are actually dilutive, as you might have seen during the presentation. Those three will likely represent an opportunity for the future, but other than that, there are no other major differences in the balance sheet compared to the end of the first quarter.
Great. Thank you so much. Appreciate the help.
You're welcome.
The next question is from Christian Hinderaker of Goldman Sachs. Please go ahead.
Yes, good afternoon, gentlemen. My first question is on dynamics across new build and refurbishment or replacement markets. I appreciate your majority in the replacement setting, but maybe you can talk a little bit about what you're seeing in the new build environment, particularly in Europe, and I guess the three key countries.
Thank you, Christian. As you said, we are mainly residential and replacement, and the majority of the market is in this way. I think from a new building perspective, obviously, the situation is different country by country. We see a slight recovery also on that part of the business. This will not change completely the situation, but as I said, I always say that the new buildings are the cherry on the cake, and the majority for us is the replacement business. Some recovery versus last year in new buildings, particularly in some geographies, but overall, nothing surprisingly positive.
Thank you. Maybe just on mix, you've talked of being in the mid to high range in terms of your premium positioning on products. If we think about the different specification levels across that range or within a given product category, should we think of there being a margin mix benefit as you sell higher specification ranges, or is your strategy to sell or rather price your items such that you have a consistent margin across that range?
Yeah, I mean, as I probably said many times in the past, we are pretty balanced between heating and water heating, and within heating across the different technologies in terms of percentage margin. Obviously, when you sell a heating heat pump, the absolute value is much higher of a water heater of 10L . Even if the percentage is the same, the absolute is higher. We are well positioned, happy, and we just need the market to continue to see and give us signs of recovery, and then the rest will come naturally.
Thank you.
The next question is from Alessandro Cecchini of Equita. Please go ahead.
Hello, everybody. First of all, actually, it's on the German market. Your competitor, I mean, a U.S. competitor with that big German player said the first half was, in terms of units, was minus 20% in Germany. A very strong decrease, largely due to, of course, gas boilers. Just to understand, in units, it's quite a material downturn. Do you think that is feasible? I mean, the German population are waiting to see mood and then to restart because actually, if you combine the two technologies, minus double digit, it's quite strong. Conversely, your performance was much better if we see your results. If you can elaborate a little bit more on this, this is my first question.
Thank you, Alessandro. Yes, obviously, as you rightly said, the data are public and the market of heating heat pumps is growing strongly, 55%, but the gas and oil are decreasing with an overall heating negative a little bit more than 20%. With the park that we see in Germany, this number is low. We would expect the market to continue to develop between the second half and obviously in 2026. This, to go back to the historical total volume level that we saw before, the famous kind of acceleration and deceleration of the last, let's say, three years. Yes, we are doing better than the market. We are happy about our performance in Germany. I said before that the team there is doing a great job. We have a strong sales and after-sales team.
Let's really hope altogether that the market will recover sooner rather than later, and we will continue to enjoy it. You're right. It's surprisingly low versus the historical level as well. Again, we know that the government is thinking of new solutions in the future, and maybe some consumers are waiting before changing the gas boiler to place another gas boiler or to place a heating heat pump when they will see something more from the government that will happen, hopefully, by the end of this year.
Okay. Thank you. According to your figures, the market is expected to be slightly down for the year in terms of units. This is association. Basically, the associate is expecting a little bit of pickup in the second half. Thank you. The second question is on the Lennox JV. It seems to me that it's just enough to gain a little bit of market share, so not a huge market share in the market, to add sizable business for you, of course, starting 2026 or 2027. Is it correct, is my assumption, that it's enough to keep a very, very low single-digit market share in the market to gain significant business for you, given the fact that in some markets, basically, you are present, but basically not present, given the size of your turnover, but lack, of course, distribution.
Yeah, I mean, as I said, we are very happy and positive about this partnership. As you know, the market is huge. I think there we will have two impacts. First is obviously what Lennox will say, and if they will gain market share, we are producing and delivering the products to them, and this will help us both in terms of revenue, if you want, and profitability. Secondly, obviously, our reputation in the market will gain because Ariston is starting to be known much more. I think this will give us as well the opportunity to reinforce our position, reminding that we are obviously the hydronic heating player since ever. We know the technology, we own the technology, while in the U.S., the market is still to develop in terms of hydronic, and this will happen probably with an acceleration in 2029 and 2030. We are bullish.
We are confident they have a great distribution system. When you do a JV, there are also other opportunities to partner and to leverage each other to continue to improve both company positions. Keep in mind the two effects, as I said. One is direct, meaning our reputation in the market and obviously our share of market in the market. The other one is indirect because it's Lennox developing. As we said, this will start during 2026. It will be just a start, and then we'll continue maturing and becoming bigger in 2027, 2028, and moving forward.
Okay. Finally, my last is on margins. Is it right that probably also, to be back to the first question by my colleague, that your margin improvement acceleration in the second half is potentially also driven by lower raw material or input cost? Is there something that you are expecting to support this improvement, or is, I mean, neutral not accounted so far? Thank you.
I will say that it's neutral. I mean, H1 and H2 also versus last year is neutral. Obviously, I explained before, there is seasonality. There is the fact that we had some front-load investment to continue to support growth and CapEx. We will see our margin go up in Q3 and Q4 as we did last year to the level that we need to reach. No impact from raw materials.
Okay, thank you.
To you.
The next question is from Alessandro Tortora of Mediobanca. Please go ahead.
Hi. Good afternoon to everybody. Three questions, sorry. These are brief questions. The first one is just a follow-up on Germany. We already understood because data from the association are available that we have this strong decrease into the gas boiler and this strong increase on the pump side. The question is, if you look at your product mix in Germany, and clearly, we look back at the first half sales in Germany, are they up or down, considering clearly the higher value attached to the pump? This is the first question. Thanks.
Yeah, I mean, obviously, when there are these market dynamics, we tend to follow the market dynamics. When, as I said, in terms of percentage growth margin, they are similar. We are happy with what we have. Obviously, the heating heat pump, both in revenue and absolute profit, are bringing more simply because, as you well know, the price and the cost of a gas boiler for a consumer is lower than a heating heat pump.
Okay, coming back to my question, today, first half sales in Germany are up year- on- year.
Yes, I mean, obviously, yeah.
Okay. Thanks. The second question is, clearly, we saw the consolidation of Russia. You had, let's say, more months in order to understand the status of production and every operating aspect around the start of the production in Russia. Are there any additional comments you can make on the profitability or maybe the situation in Russia? Thanks.
Yeah, I mean, as I said before, we didn't enter in our business for almost one year, and someone else managed the business for us. I think, as I always said, I don't think that we will come back soon to the level that we had before, simply because we had to fix a few things. The water heating market season is already over, and we didn't prepare it, and we didn't make it. Same on the heating market that is happening now. We didn't prepare. I think what you see here in terms of revenue development, don't take this as a guidance or a target, but I think you can consider this as a fair quarterly pace also for the remaining of the year.
In terms of profitability, Russia will be diluted to the group this year because, as I said, it's a business that we need a little bit of time to bring back to the level that we had before.
Okay. Thanks. The last question, if we look at, let's say, the trend of net working capital sales in, let's say, the first half, but also taking into account the results you achieved last year, now the around 13%, almost 13% of net working capital sales, considering clearly now Russia again into the perimeter, which kind of level we should assume for full year? A kind of, I don't know, last year level plus, let's say, the around 1% impact from Russia. Just to have an idea of which kind of level of working capital you project for this year. Thanks.
Yeah, maybe I start and I pass to Riccardo. Otherwise, he's here with me, but not talking and he's not happy. It will help you, Alessandro. Jokes aside, I mean, Russia, as Riccardo explained, is driving our net working capital in the wrong direction. There is something that we need to do as well to make sure that we all go back to the level of discipline, net working capital, ratio, and management. I think this, again, will take a little bit of time, as well as the new acquisition. They are small, but I mean, they're not as good as the rest of the group. I think full year, we have to expect net working capital overall for the company higher than last year. If we do like for like, probably the situation will be similar. Riccardo.
Yeah, I mean, you said everything. Just as a reminder, Alessandro, we closed the end of 2024 at 12.7%, and we were coming from the end of 2023 at 14.9%. Already last year, we think we achieved a significant improvement. This year will be a challenge to drive improvement in the working capital of the so-called M&A perimeter. That's what we are focused on and will be focused on in the next few months.
Okay, to sum up, it will be a kind of last year level plus all the factors you mentioned, let's say.
Yep.
Yeah.
Okay. [Foreign language] .
[Foreign language].
The next question is from Davide Rimini of Intesa Sanpaolo. Please go ahead.
Morning. Thank you for the presentation. I have questions. Just a follow-up. One is on the service and parts growth, which I do understand is the cap to pace of growth similar in Q1. I was wondering, if I'm not mistaken, you were talking about low single digits, and I was wondering whether you could give a little bit more color on that performance.
Yes, service and parts. The development is positive. It's an important part of our business with a very good profitability level. We continue to grow on this and continue to be one of our focus and a revenue stream that is important for us. We are happy to continue to see a positive development in the low to mid-single- digit and let's see what we can do enough to accelerate this part of the business.
Sorry, just to follow up on that, did I recall in the previous call, in the previous message, that it was a bit below this year's performance versus the historical performance of the company?
I mean, last year, service and parts grew a lot because people didn't replace. We see a continued evolution this year of service and parts. Maybe the year-on-year comparison is slightly below what we saw last year, but still very positive.
Okay. The second question was, again, on an additional follow-up on the country performance. I know that you don't disclose country by country, but since, again, if I'm not mistaken, last quarter, you normally sort of give up a bit of color on the top three countries, right? Germany and Italy have been normally well covered. I was wondering whether you might comment on France, which, if I'm not mistaken, was just flipping over to the fourth place at some instance over the last three quarters. My specific focus was on France and the potential negative effects of the stock in this renovation scheme over the summer that has been announced by the French government.
I think, as we said in our last conversation, France is the market where still the situation is not clear. The government is not formed properly. What they're in mind to do in terms of heating is not very clear. They have some incentives. As you said, they stopped the incentives, then they restarted the incentive. I think there is where we see that the market is still negative overall, both in heating, particularly on heating heat pump. In water heating, the situation is slightly better. In the water heating market in France, we are doing better than the market on a market that is, I would say, stable versus last year. Still some clarity from government incentives first that will give back confidence to consumers, particularly on heating heat pump, hopefully by year-end. I'm not sure when the government will do something.
Thank you.
To you.
The next question is from Uma Samlin of Bank of America. Please go ahead.
Hi. Good afternoon. Thank you so much for taking my question. My first one is just a follow-up on the heat pump growth. I guess you said you're sort of in line with the market growth. I think in Germany, the heat pump market grew around 75% year-on-year in Q2. Is that what we should assume that your growth was? Another question I have is that you talked about the potential boiler recovery going forward into next year. What do you think will be the driver of a boiler recovery? Do you see any sort of weakness in boiler that's a bit more structural than just a cyclical downturn? Thank you.
No, thank you. I mean, you know the market figure very well. Now, I wouldn't comment, but if I say that in Q2 and H1, we are doing better than the market, you can assume that obviously our growth is very solid as well in Germany. I'm talking now when I think the situation of gas boiler, I think the technologies of both fossil and renewables will continue to stay very relevant in the next many years. Obviously, how much heating heat pump will accelerate versus gas boiler, I think we need to see based also on what in Germany, and we just spoke about France, what the governments will do in terms of incentive scheme. Remember that there are millions and millions of equipment in Europe, and these equipments are breaking after 15 years or some year more, some year less, and people will have to replace those systems.
If they replace with a gas or with a heating heat pump, it's obviously subject to the choice that the different consumers are doing in the different countries. We know that replacement is not yet regulated with a mandatory change to heating heat pump, with the exception of Switzerland and the Nordics, where maybe we are not present. In the rest of the countries, as I said, the kind of development of mix between gas boiler and heating heat pump is subject to the regulation of incentives. In Germany, we say that overall this number is very low of total market. We are happy about the growth of heating heat pump, but we need to see a further development of a gas boiler, which cannot stand in such negative territory for long. This is what I would say.
That's super helpful. Thank you very much. My second question is on pricing. What kind of pricing dynamics have you seen in both heat pump and boiler segments? Do you see any sort of change in a competitive landscape there, or is there any change in terms of pricing?
I would say nothing new versus what we saw in the past. There are pricing dynamics which are happening. Obviously, the pricing and the discount are more pronounced for the technologies that are going out of law, meaning that if you cannot sell a heat pump with a refrigerant like the 410A, then obviously we and others tend to discount more on this kind of technology. Nothing new. It's something that we have to continue to pay attention on both pricing mix and price point, and we will continue to do that. As I said, we are playing in the upper mainstream of the market. We're Wolf and Elco in the mid to high, very high, Ariston upper mainstream. We don't play really in the entry level, and this is something that is helping us to continue to hold our position.
Okay, that's great. Thank you very much.
To you.
Gentlemen, there are no more questions registered at this time. Gentlemen, there are no more questions. Do you perhaps have any closing remarks?
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Happy holidays for the ones that will go on holidays, like the Italians. Thank you. Bye.
Thank you, everyone.
Bye.
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