Good afternoon, this is the conference operator. Welcome, and thank you for joining the Biesse first half 2023 results presentation. 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 Mr. Pierre La Tour, CFO of Biesse. Please go ahead, sir.
Thank you. Good afternoon, everyone. Welcome. I hope you've all had the opportunity to read our press release and go through the presentation. Both have been made available on the company's website. Let me just spend a couple of words going through the financial highlights regarding the first half. Now, if we look at our P&L, and we concentrate for a second on the top line and the bottom line, you will see that basically we have a situation which is virtually identical versus the first half of 2022. If we look at our consolidated net revenues, we closed the six months at EUR 418 million versus EUR 419 million in 2022.
And if we move on to the bottom of the P&L, so to the net profit line, we have a net profit of €19.5 million, which compares to €19.4 million in the previous year. So the situation is virtually identical. In fact, the scenario has, of course, changed significantly, and you can see this very clearly by looking at adjusted EBITDA, adjusted EBIT and EBIT. So if we look at EBITDA, of course, EBITDA is lower versus the first half of 2022. It is lower by 12.5%.
And of course, the main factors influencing this, let's say this lower performance are a negative impact on exchange rates, inflationary pressures on materials, and of course, this is impacting our cost of goods sold. And we have an increase as far as some of our overheads are concerned. Specifically, we've had an increase in our exhibition costs and in our travel expenses. So these are all factors that have contributed to the performance. Now, if we move from the adjusted EBITDA to adjusted EBIT, you can see that basically this is lower versus the first half of twenty twenty-two. It is lower by 14.6%.
And basically, this is a reflection of what I just mentioned. This has been partially offset by lower depreciation and lower accruals during the period. Now, looking at EBIT. Well, you can see that EBIT is actually slightly higher versus EBIT adjusted. And now this reflects a positive gain that we registered deriving from the sale of assets in northeastern Italy. This is an operation that was concluded in the first quarter, and it provided us with a net gain of EUR 1.9 million. And so this is the underlying reason for the difference between adjusted EBIT and EBIT.
Now, moving on, financial charges were lower versus the first half of last year, so we had lower costs in our financial transactions, especially for deriving from hedging on our FX, on the one hand, and on the other hand, we've had a slight improvement in our tax rate. So our tax rate has moved from 31% to 29% in this period. And hence, these are two factors contributing to the improvement in performance. And that brings us to €19.5 million overall net income in the first six months of the year. Now, a brief mention regarding our net financial position. So our net financial position, as you can see, continues to be a strong net financial position.
So, approximately EUR 92 million in cash at the end of the first six months. This compares with a net financial position in June 2022 of EUR 85 million, so there is a slight increase. However, I have to mention here that last year, so in 2022, we paid dividends for EUR 17 million. This year, we paid dividends for EUR 9 million. So if you actually deduct the delta between the dividends payment, you end up basically with more or less the same net financial position that we had last year. So basically, we continue to have a strong net financial position.
Of course, this is despite lower order entry, and so lower advances from customers, on the one hand, and on the other hand, of course, we have had a slight deterioration in other lines of our net working capital. During the period, our net working capital has absorbed cash for approximately EUR 40 million versus December 31, 2022. Now, regarding order entry, yes, we have seen during the first six months a slight deterioration. You can see on page 7 of the presentation basically order intake, overall order intake in the first half has been EUR 342 million. This compares with EUR 396 million in the first half of 2022.
And of course, considering the fact that revenues have been the same as in 2022, this leads to a partial erosion of our backlog. Now, I think I... So, if we look at our geographical breakdown of revenues, basically, we still have Europe, which accounts for approximately 52% of our revenues, Western Europe. Asia and Oceania account for approximately 11% of our revenues. Eastern Europe has seen a rebound, and so it currently accounts for approximately 18% of our revenues. North America is stable at approximately 17%, and then there is a rest of the world component, which accounts for approximately 2% of our revenues.
If we look at our revenues breakdown by cash-generating unit, the breakdown is pretty much stable, with machines and systems and service representing approximately 90% of our revenues, whereas mechatronics is below 10%. It is approximately 9%. Finally, a word on headcount. We closed the six months with a total headcount of just under 4,100 units. This is a decrease versus last year. Last year, we had a figure that was just in excess of 4,300 units. We are lower in terms of headcount versus last year by 238 units.
I think I will stop at this, and I will let you ask any questions or, and of course, I'm here, and I'm glad to answer any doubts you may have.
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. 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 Paola Saglietti with Banca Akros. Please go ahead.
Hello, everyone. Thanks for taking my question. Yeah, the first question is about the order intake. In May, you said to expect order portfolio at the end of this year in a range between €310 million and €340 million. Based on the current order intake decrease, that if I read correctly, the slide 7 is around 13%, you can confirm this target or or not?
Okay. Sorry, Paola, just one question: Can you please repeat the range?
Three hundred and-
Just to make sure I understood.
EUR 310 million and EUR 340 million.
I think that we will probably be slightly below that range. So we have reviewed our forecast, and so we are currently foreseeing to be in terms of backlog at the end of the year, we are currently foreseeing to be situated between, I would say, EUR 280 million and EUR 320 million.
Okay. Thank you. And about the geographical breakdown, if I read correctly, the slide thirteen, so, it has an increase, a recovery in the Eastern Europe of the business.
That's correct.
Okay. And a stable situation in North America?
Yes.
Oh.
North America is stable.
Okay. And for the coming years, during the H2, what do you expect?
Now we're expecting some further erosion as far as our domestic market is concerned, and so that is going to weigh on Western Europe. We are expecting Eastern Europe to continue its positive trend. And we're expecting North America to continue being stable versus slightly improving its performance versus the first half. These are the trends that we are currently foreseeing and expecting.
Based on this trend, we can continue to maintain a hypothesis of decreasing sales in high single digits?
Yes, absolutely. That's absolutely correct.
Okay. Thank you very much.
So overall, year-wise, I think you can, you know, we are expecting versus last year to be in the single digits around the mid-single digits in terms of net sales reduction versus 2022.
Okay, thank you very much.
As a reminder, if you wish to register for a question, please press star and one on your telephone. Once again, if you wish to ask a question, please press star and one on your telephone. The next question is from Andrea Bessone with UniCredit. Please go ahead. Mr. Bessone, your line is open. Maybe you're on mute.
Yes. Hi, good afternoon, everybody. I would ask if for the coming months, we can expect the Biesse of having a level of CapEx, more or less, in line with the previous months? I mean, with these changes on the income statement, can we assume more or less that the investment level is, however, confirmed?
Yes, Andrea. We are investing. We're not investing as much as we had originally foreseen. So basically, if I look at the level of investments during the first six months, it is below what we had anticipated at budget level. So of course, we are carefully evaluating our investments given the current scenario, and I think we can expect the second half to be in line with the first half in terms of investment level.
Okay. Thank you.
Once again, if you wish to ask a question, please press star and one on your telephone. The next question is from Alberto Francese with Intesa Sanpaolo. Please go ahead.
Good afternoon, everybody. Alberto Francese, Intesa Sanpaolo. I have a question on the order intake. Surely in the second part of twenty-three, the comparison of the first through the second part of twenty-two would be easier. But what can we expect in terms of order intake? When do you see there will be a turn to better shape for order intake? Something we can expect at the end of this year, next year? So what is your feeling about a recovery in order intake? Thank you.
You're asking me a very difficult question, Alberto. Unfortunately, we have a limited level of visibility for sure. The increase in interest rates is having an adverse impact on our order intake, and so certain geopolitical factors that are well beyond anybody's reach, so right now we have limited visibility for the time being, so it's difficult at this point in time to go beyond, let's say 2023, although, of course, we are starting to reason in terms of 2024.
And we will be reasoning when starting from the month of September. We will start seriously reasoning it in terms of 2024 to arrive at the, let's say, definition of the budget by, let's say, the end of November, beginning of December. Now, of course, we have had some markets that have fared worse than others. So of course, Italy has been very significantly affected. And so we've seen a very sharp downfall in order intake in our domestic market. We have had some other markets that have been particularly affected, the first being Russia, of course, the second being Turkey, given the very significant devaluation of the Turkish lira.
At this point in time, we believe that in twenty twenty-four, our order intake will, in all likelihood, be similar to what we have experienced in the course of the first six months of this year and to what we are expecting to foresee for the coming six months. For the time being, we are reasoning in terms of having an order intake that is pretty much along the same lines as this year. Unless, of course, we have a revision in central bank's policies that could lead to a relaxation of the current tight monetary policy.
Thank you very much. Another very short question is, how many months of the revenue are today in your backlog?
So, we started off with a very significant backlog, and the backlog was over seven months. We are currently at approximately five months, so we have eroded, as I was mentioning earlier on, we have partially eroded our portfolio, sorry, our backlog. And so we currently stand at approximately five months in terms of machines, machine production, in terms of backlog. We've come down from seven and a half to approximately five.
But it was also due to easier delivering, so the bottlenecks that you had in production, in procurement is softening, and there is also this impact other than the increasing order intake?
Yes, for sure. There has been a normalization of the supply chain, and, of course, the logistics chain. So yes, this has facilitated deliveries, and somewhat decreased delivery times. But on the other hand, you've seen it with our workforce. Of course, we have also, and we are in the process of also reducing our production outputs. So the two phenomena go hand in hand, actually.
Okay. Thank you.
Once again, if you wish to ask a question, please press Star and One on your telephone. The next question is from Roberto Calzoni with Otus Capital. Please go ahead. Mr. Calzoni, maybe your line is on mute?
Yes, yes, yes, was on mute. Sorry about that. Sorry. Yes, thank you for taking my question. Good afternoon, everyone. I have, unfortunately, I joined a bit later on this call, so apologize if I'm asking questions which have already been totally or partially answered. I wonder, I understand the difficult dynamic and market dynamic at the moment, but still, in H1, you collected around €340 million new orders. I understand Q2 was weaker than Q1. Can you give us a sense of where, which are the markets that are still relatively robust compared to others? Where do you see actually the first signs of a sort of recovery, if any?
Instead of talking about the markets that are currently weakening and are generating this double-digit drop in intake, which are the countries that are actually contributing more favorably than expected? Yeah.
Okay. Roberto, actually, for the time being, we're seeing North America-
Mm-hmm.
holding on well and performing well. So for sure, North America is actually a response to the criteria that you were describing.
Mm-hmm.
And altogether, Europe, so both Eastern as well as Western Europe, excluding the domestic market, are faring relatively well.
Mm-hmm
... given the context and given the scenario. So these areas are doing relatively well. Australia is doing well. So Australia and New Zealand are doing well.
Mm-hmm.
Of course, you know, unfortunately, we have a difficult situation for what concerns Turkey, for what concerns Russia, of course, and of course, our Italian market, which is not doing well at all. So-
Right.
This is the overall picture. I'm not mentioning Asia, simply because-
Mm.
Asia, unfortunately... Well, as you know, our presence in China is very limited.
Yeah.
And so, you know, whether it goes well or whether it doesn't go well, it doesn't make a difference on our results. And of course, we have a presence in Asia, but the rest of Asia is still relatively small, so again, the performances that we're having, which are, by the way, pretty fragmented, are not-
Mm-hmm.
really impacting our performances.
You're talking about India in particular, yeah?
Yes, indeed. India, but not only, also Southeast Asia.
Okay. I understand. The second question is more a dynamic in the contractual kind of dynamics with your clients. I mean, I'm just possibly extrapolating on what I see in your P&L, i.e., if I just compare Q1 and Q2, I see a drastic dilution in your margin on a sort of relatively equal revenue basis per quarter, so around two hundred and ten each quarter. I see that Q2 have seen a drastic dilution. Now, what are the main elements of this? Because eventually, what you basically delivered in Q2 were orders, as you were saying, that you took in at the end of last year.
Mm-hmm. Yep.
So, is this a kind of dilution regarding a sort of a negative mix, i.e., you've been selling machines with intrinsic lower margins, or-
Yeah, yeah.
What happened there?
Okay. No, no, very good question, and I'll try to answer as well as I can. Now, you are absolutely right. I mean, and I was saying this at the beginning of the call, I mean, if we look at our top line in our P&L and our bottom line, you will see that basically these are virtually identical to what they were last year, right?
Yeah.
So we have the same revenues and the same net result.
Yeah.
However, if you, in between, a lot has happened. Actually, going back to your, if we look at our margins-
Mm-hmm
... and we concentrate on our margins, in the first six months versus 2022, we've had some pretty significant impacts. Now, the most significant of these impacts have been a negative volume effect.
Mm-hmm.
So we have sold-
Less machines
... fewer volumes versus last year.
Mm.
This has impacted our margins by approximately EUR 10 million.
Mm-hmm.
And then we have another negative impact, which, in terms of margins, is worth approximately EUR 2 million, which is mix. So a negative mix for EUR 2 million.
Okay.
Now, these two-
Mm-hmm
... have been offset almost entirely by one positive impact, which is prices, pricing.
Yeah. Yeah.
Of course, you will recall that last year we had a series of price increases.
Yeah.
The last price increase that we had was at the end of October last year. So it's been-
Mm
... entirely reflected in our. It will be entirely reflected in 2023, of course.
Yeah.
The last price increase of last year, the end-of-October one, was 4.5% on average.
Yeah.
Anyway, so going back to the pricing, in terms of margin, we've had a positive price impact of approximately €11 million. So-
Okay.
So negative ten, negative two, positive eleven.
Yeah. Yeah.
Okay?
More or less, yeah.
Then we had negative exchange rate.
Yeah, Forex, yeah.
Forex, €4 million.
Yeah.
Then we've had negative travel and exhibitions, another €4 million.
Hmm.
And these have been compensated by a series of positive impacts, which are energy and logistics costs, positive by EUR 2 million. Cost of labor, positive due to higher turnover and lower assumption.
Mm-hmm
... lower-
Recruiting, yeah.
Recruit, recruit hirings. Exactly.
Yeah.
So again, an approximately €2 million positive.
Mm-hmm.
And then we've had, you know, a series of other positives-
More
... that are basically depreciation, lower depreciation, lower accruals, positive impact from-
This is extremely well detailed and extremely helpful. Thank you very much for that.
Okay.
If I move... This is a H1 versus H1, but if I compare-
Yeah
... Q1 2023 to Q2 2023, here again, we are moving on same top line-
Mm-hmm
... but a drastic dilution in the EBITDA margin, one quarter-
Mm-hmm
... compared to the other.
Mm-hmm.
Again, is there anything in the? Because, I mean, pricing should be, you know, should be the same. So I just, I'm just missing what is the reason between for such a drastic dilution in margins between Q1 2023 and Q2 2023?
So in Q2, we have borne the brunt of the exchange rate.
Okay.
-differences.
Okay, okay.
So the four million I was referring to are-
So, entirely basically on the-
Mostly came in, in Q2.
Mm-hmm.
And then of course, we have a little bit of, you know, the volumes and mix impact that I-
Right
... was referring to. But basically, that has been compensated by the pricing impact, so that's not relevant.
Mm-hmm.
And then of course, you have to consider that in terms of exhibitions that I was mentioning.
Mm-hmm.
So in Q2, we had the Hanover exhibition, which is the largest exhibition in the world.
Yeah
... for woodworking, and that takes place once every two years.
Right.
And that alone is EUR 2.4 million.
Right. Was your stand larger than HOMAG?
That's a good question. I don't know, because I didn't go.
Okay.
Unfortunately, I'm not the right person to ask.
No, whatever.
but I'm told our stand stood out, forgive me,
Right
... forgive the game, but basically, because we came out with a new concept, so-
Right
... with the new logo, the new design, the new visual identity.
Okay.
And so that is all.
Okay.
-Of course, part of the One Company project.
Yeah, so you made, you made a good effort. Yeah.
Yeah.
And the last question I have is regarding. Well, I know that we can't. We don't have a crystal ball and, you know. But just trying to understand what is your commercial team seeing when it comes to approach clients that are potentially interested in giving you an order? Are they pushing on continuously on price reduction or payment delays? Maybe this is another way of gaining new orders and getting market share from others. Do you see competition slashing prices, particularly from Turkey?
How would you describe at the moment how competitors are facing and are behaving in the current difficult kind of environment?
Okay. Yes, there is a tightening of conditions, and so of course, there is pressure on prices. There are certain competitors that are being more aggressive than others, of course.
Mm-hmm.
In particular, yes, you mentioned Turkey. I would also mention China, and of course, let's say, the competitive scenario is more complicated-
Yeah
... which is why we have not gone ahead with any price increases-
Mm-hmm
... so far this year.
Yeah.
And we're not planning to revise our price lists.
Mm-hmm
... for the remaining part of the year. So 2023-
Mm-hmm
... will be a, let's say, at constant prices.
Right
... as far as we are concerned. Yes, we are seeing a slight, let's say, slightly more discounts being given to customers.
Mm-hmm.
But so far, basically, this is the environment we are facing.
Right.
There are some few, unfortunately, positive notes.
Mm-hmm
... in our scenario. So the glass market that had basically completely come to a standstill in the course of twenty twenty-two is slowly starting to pick up again. And so we are, we're expecting a higher level of contribution from glass,
Okay
... in the coming months, which is good news, having acquired, of course, Forvet-
Yeah
... at the end of twenty twenty-one.
Yeah. Great. And last question, I promise, and then I will shut forever. Have you mentioned—I mean, you mentioned earlier that you're basically trying to present the company as a One Company... and with different specializations and different materials and blah, blah, blah.
Mm-hmm.
Is there anything you want to tell us in terms of synergies and cost synergies or revenue synergies that this effort might be leading to?
Now, this effort is. So the One Company projects, the aim of the project is, of course, to produce a higher level of flexibility.
Yeah.
Which, of course, should, let's say, translate in our ability to better adapt to a fast changing environment. Now, in terms of synergies, we are reviewing. So one of the major projects within the One Company project is the re-layout, the industrial, our manufacturing re-layout.
Mm-hmm.
Now, this so far has resulted in the closure of three small plants that we had in Northeastern Italy.
Yeah.
So the first one was Uniteam, and then it's been followed by the closure of Movetro and Montresor.
Mm-hmm.
And so Montresor, the production of Montresor has been shifted over here in Pesaro.
Mm-hmm.
The production of Moveetro has been shifted to Forvet.
Yeah
... to Turin. Yes.
So there are clear potential rationalization, and... But those didn't show up in the H1 numbers, I presume?
No, they didn't, simply because, basically-
That's true
... as far as Moveetro and Montresor are concerned, we have just completed,
Yeah
... the closure. Well, in fact, we're still in the process of completing the closure of the plants.
Yeah.
So far, for the time being, we have borne costs.
Yeah
... relating to these operations. And basically, yes, we are expecting savings, we're expecting synergies, we're expecting a higher level of efficiency, but of course, this will show in the coming months or years.
Yeah.
So it's a little bit too early to talk about, let's say the-
Yeah. I understand.
... the benefits deriving from these...
Measures, yeah
... these closures. Yeah.
Yeah. No, I understand. Okay, thank you very much.
Thank you.
The next question is from Gabriele Parenti with Algebris. Please go ahead.
Yes. Hi, thank you for taking my questions. Actually, one is sort of a follow-up from the question asked before regarding the EBITDA. I was wondering whether you can confirm at this stage that you will be able to defend the double-digit EBITDA margin for the end of this year, as you stated in previous occasions? And the second one is a more broad question, and is related to the market. I understand the difficulties that you were mentioning before, interest rates and so on. It's a qualitative question, is do you think that we are in front of sort of rebalancing of the market after a very sharp increase after COVID, or you think that this is an actual market downturn, so a more negative scenario, let's say? Thank you very much.
Okay. To answer your first question, yes, definitely. We are aiming to preserve a double digit with our EBITDA, and we will do. We are on that course. For sure, we will. We are foreseeing to close the year with a double digit EBITDA. There's no question about that. Now, looking at market dynamics, of course, we are mainly involved in the furniture business, and the furniture business is a cyclical business. Now, before the COVID, the market dynamics were pretty clear, and so basically, the cycle used to be a 5-7-year cycle. Then after that, there used to be a reassessment-...
Then that lasted generally for approximately two years, and then the market would restart. Now, of course, COVID came in the picture, and so everything was changed. Of course, we experienced two extremely positive years, 2021 and 2022, that have been, by all means, exceptional years. I personally think that, yes, we are in a—let's say—in a phase where basically the market is reassessing itself. Definitely, I think this is going on.
How long will this last for is very difficult to tell at this point in time, but for sure, for the foreseeable future, I think the market will perform as it has in the first six months of this year. Now, just one word regarding 2021 and 2022. If you look at our cash generation, so we've taken full opportunity from the positive cycle of the past two years to generate cash. And so fortunately, we're in a very solid position. And now, of course, it will be up to us to use as best as we can this cash in order to further strengthen and further develop our business.
Okay, thank you very much.
Thank you.
For any further questions, please press star and one on your telephone. Mr. La Tour, there are no more questions registered at this time.
Okay, well, so thank you everyone for attending this call. I am at your disposal in case you want to follow up, in case you have any additional questions or doubts, feel free to contact me, and thank you very much.
Ladies and gentlemen, the conference is now over, and thank you for joining. You may disconnect your telephone.