Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Carel Industries 2026 Q1 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 their telephone. At this time, I would like to turn the conference over to Mr. Francesco Nalini, Chief Executive Officer of the group. Please go ahead, sir.
Thank you. Good afternoon, and thanks for joining our call for the presentation of the first quarter 2026 results. I start as usual from page three of the presentation with the most relevant highlights. I'm very happy to report that 2026 started on a very strong note for the group. In the first quarter, revenues reached EUR 170.9 million, up 15.9% compared to the first quarter of 2025 or 19.7% organic at constant exchange rates. This performance was likely above the upper end of the guidance we provided in March. Revenues contributed positively, and both of our main end markets, HVAC and refrigeration, delivered solid organic growth. This confirms the quality of the performance and the balance of the group's business portfolio.
HVAC continued to be the main growth driver, with organic growth above 23% in the quarter. The strongest contribution came from data centers, which remain extremely dynamic, but we also saw very positive trends in heat pumps in Europe, early signs of recovery in industrial applications, and a positive contribution from commercial. In fact, all verticals in HVAC had a double-digit growth in the period. Refrigeration also delivered a solid performance with organic growth of approximately 11%, supported by continued positive momentum in Europe and by a particularly strong performance in North America, where refrigeration grew organically by more than 40%, driven by the adoption of solutions based on natural refrigerants and energy efficiency. Profitability was also very strong. EBITDA reached EUR 36.8 million, corresponding to a margin of 21.5%.
This margin expansion was supported by the excellent revenue performance and operating leverage, but also by a favorable gross margin trend and by the accretive contribution of digital services. As usual, we maintained R&D investments at our target level of above 5% of revenues. Finally, cash generation remained strong. At the end of March, we had the net cash position of approximately EUR 24 million. Excluding the IFRS 16 impact, our net cash would exceed EUR 50 million. This is particularly positive considering the usual seasonal absorption of working capital in the first quarter and the CapEx for the period. Moving now to page four, we can look at the main KPIs in more detail. As already mentioned, revenue reached EUR 170.9 million compared with EUR 147.4 million in Q1 2025.
At constant exchange rates, revenue would have been EUR 176.4 million, implying organic growth of close to 20%, 19.7%. The foreign exchange effect was therefore negative, with an impact of more than EUR 5 million, mainly due to the weakness of the U.S. dollar. This excellent organic growth was driven by double-digit performance across virtually all markets. North America was again the standout region with organic growth above 50%, but the performance was positive across the board. EBITDA increased by 38.3% to EUR 36.8 million in Q1 2026 from EUR 26.6 million in Q1 2025. This means that the strong revenue growth translated very effectively into profitability, with an EBITDA margin of 21.5%, up by more than 300 basis points, both compared to Q1 last year.
Net profit reached EUR 18.4 million, up 81.5% compared with the EUR 10.1 million recorded in Q1 2025. The tax rate last year and in line with our expectations. Let's now move to page five, where we show the revenue breakdown by region and by sector. Starting from the regional view, EMEA grew by 9% in the quarter. Growth was well balanced between HVAC and refrigeration. In HVAC, data centers grew double digits like heat pumps, but we also saw improvements in industrial applications. The regional performance would have been even higher if not for some temporary delay in projects in Eastern Europe. Asia Pacific delivered another very solid quarter. North America remained extremely strong, with reported growth of 37.4% and organic growth of 52.4%.
Data centers continued to be the key driver, with revenues substantially doubling compared to the same period last year. The performance was not limited to data centers. Commercial was also very strong. Likewise, refrigeration delivered another excellent quarter, with growth above 40%, supported by the transition towards natural refrigerants and high-efficiency solutions. South America also delivered positive growth above 20% at constant exchange rates. This performance was mainly driven by refrigeration, despite the still challenging economic environment in Brazil. Turning now to the breakdown by sector, HVAC grew by 18.8% reported or 23.3% at constant exchange rates. Growth was double digit across all main verticals. Data centers were the largest contributor, both in absolute terms and in percentage terms.
A significant part of this growth came from the U.S., we also recorded double-digit data center growth in all regions. Again, growth was very balanced since all verticals. Result was strongest in North America at above 40%. I now leave it to Nicola to comment the items below EBITDA and the cash flow evolution.
Thank you, Francesco. The slide number 6 details the group result from the EBITDA to the net profit. The increase of D&A cost is related to the relevant CapEx activities performed last year. Some average net financial position of the period. The evolution of the Forex result compared to last year was mainly impacted by the evolution of NOK against the EUR, originated by the put and call option of Kiona. The line companies consolidated with equity method reflects the result of the investment in Polska. The tax rate of the period was 23%, higher than the 20%-25% level due to a different country mix. The group net profit at the end of the quarter, 2026, was equal to EUR 18.4 million, in strong improvement compared to EUR 10.1 million of the same period of 2025.
Slide number seven shows the net financial position evolution of the first quarter of 2026. The funds from operation was strong and equal to EUR 29.3 million. Due to the seasonal effect, the net working capital of the period absorbed the cash for EUR 19.5 million. At the end of Q1 2026, the net financial position is positive of EUR 24.2 million. I leave Francesco to go on with the presentation.
Thank you, Nicola. Now on page eight. Let me briefly comment on Carel's product strategy for controls. Is to cover the entire value chain from the cloud layer to the edge, with intelligence also working in layers that mutually learn and reinforce. At the cloud level, we leverage platforms such as Kiona and RED optimise to transform operating data into actionable intelligence. These platforms allow us to provide customers with advanced analytics, performance optimization, and energy management capabilities. At the middleware level, Carel BOSS acts as the intelligent supervisory backbone. It connects cloud services and field devices, enabling the system to manage data and decisions across different levels of the architecture. At the edge level, our programmable controller applications are increasingly developed and orchestrated through the STone platform.
This is a key enabler because it allows intelligence to move closer to the equipment directly into controllers and devices, improving response time, system reliability, scalability, and computational costs. The strategic point is that by integrating AI across these layers, Carel maintains ownership of models and value creation, and this strengthen our ability to innovate over time, allowing us to progressively enhance the system performance in a way that is coherent across platforms and applications. In practical terms, this means better diagnostics, better optimization, more efficient commissioning, and increasingly intelligent products that can support customers in reducing energy consumption, improving reliability, reducing maintenance costs, and simplifying system management. Basically, AI, for us, is a natural evolution of what we have always done, combining control, sensing, supervision, and application know-how to improve the performance of HVAC and refrigeration systems.
Let me now move to page nine for the closing remarks. The first quarter confirms that the positive momentum we saw in the second half of 2025 has continued into the beginning of 2026. Revenues exceeded the expectations, reaching EUR 170.9 million with organic growth close to 20%. This was the fourth consecutive quarter of double-digit organic growth. Once again, the performance was broad-based across geographies and end markets. Profitability was also extremely strong, with EBITDA margin reaching 21.5% above our midterm guidance. This reflects the strength of the top line, good operating leverage, positive gross margin dynamics, and the continued contribution from digital services. Cash generation remains solid as well. The group comfortably covered the seasonal increase in working capital and the CapEx of the period, while further strengthening the balance sheet. At the same time, we remain cautious.
The macroeconomic and geopolitical environment is still volatile. Taking all this into account and based on the information currently available, we expect Q2 2026 consolidated revenues to be in the range of EUR 180 million-EUR 190 million, corresponding to a growth between 13% and 20% on Q2 2025. Thank you very much for your attention. We are now more than happy to answer any questions you might have.
Thank you, sir. The first question comes from Niccolò Storer of Kepler Cheuvreux.
Good afternoon, Francesco. Thanks for taking my three questions. The first one, I was wondering if you are witnessing any kind of product or component shortage, and if you think that the current strength in business you are experiencing is partially the result of clients piling up stocks in anticipation of possible issues. Second question is about ref in Europe. You commented about very solid North America performance. APAC, I think, also was up in the double digit, so probably Europe was performing decently below 10%. You talked about the slippage of some contracts in Eastern Europe, but don't you think that this business in Europe is a bit kind of struggling to take off?
In particular, as we are approaching the F-gas legislation deadlines. I wanted you maybe to share a few thoughts on that. The last question is a quick one. Is it fair to assume that in Q1, 50% of more of your performance was explained by data centers? Thank you.
Gentlemen, I'm not sure if you have your line on mute or you're just discussing. Okay.
No, no. Yeah. Okay. Niccolò, thanks for the questions. Concerning the shortage, we are not seeing any shortage situations. The most, let's say, the most critical items are, as well known, the memories. We have been increasing our safety stocks in memories for several months now because we anticipated possible criticalities. We have been purchasing well ahead for some time, also tactically to some extent, increasing our stock levels. For the time being, we are well covered, so we don't face shortages there.
Of course, this translates to cost increases in memories, but the impact overall, specifically for memories, is not huge, in any case, we are managing that through prices. Let's say no specific shortage situations that we're facing at this stage, we don't expect them in the near future either. As far as the market piling up, let's say that maybe there could be some very limited effect in some cases, in general, I would say no.
If we look at the fastest-growing verticals that, let's say, for example, we see very strong growth in North America that is due to data centers, is due to market share increase in commercial and in refrigeration. I don't see definitely there are customers piling up because of a possible shortage. Neither in Asia, because the market dynamics are definitely related to the end market and to our market share acquisition. Maybe to some extent in Europe, I think if there is such an effect, it would be pretty limited.
Also our growth in heat pumps, for example, in Europe is to a large extent reflecting the rebound of the end market, so I don't see big overstocking taking place. As far as refrigeration in Europe is concerned, the performance overall is in the high single digits range. It's been affected by some projects timing, especially in Turkey. Turkey is an important market for us in food retail. We had some delays in some projects also because the economy in Turkey is not so brilliant. The rest, in the rest of Europe, performance is definitely better.
I see that the investment level is definitely going to be supported by the F-gas, especially in Southern Europe, where they are behind in the adoption, the adoption of natural refrigerants. While in Northern Europe, CO2 is already well established, so it's mainly a renovation market. In general, the F-gas is definitely supporting. I think the fact that the performance in Europe is lower compared to other regions is to a significant extent related to the Turkish market in this very moment, where again, there is a general market situation which, in turn prompted some delays in some projects. This is a temporary effect that we expect to recover in the coming quarters.
As far as the data centers are concerned, definitely they are the fastest-growing, but it's definitely less than half of the growth is coming from data centers. Please consider that again, we have double-digit growth in all verticals in HVAC. Industrial, data centers globally. Of course, they account for more of that in North America, but globally, they account for definitely less than the total growth. It's I'm doing the calculation now off of my mind. It would be probably more 1/3 of the growth globally, in absolute terms.
Perfect. Thank you very much.
The next-
I have three questions, okay? The first one, You know, you commented on this very strong performance in North America, you know, broad-based. Can you comment a little bit about how Carel can cope, you know, with this very sustained growth? You mentioned in the first conference call that, you know, you're basically starting to build a new plant. Considering this very, you know, sustained growth, which kind, let's say, of investments you're planning to do, and if the new plant is enough, you know, to cope with this stronger demand. This is the first question. Thanks.
Thanks, Alessandro. [Non-English content] Yeah, of course, it's growing by more than 50% is challenging from a supply chain and operation standpoint. In the very short term, we are having, let's say, also other factories helping the North American market. In particular, we have Italy, Croatia, and China, which are supporting with this growth. While we established the third factory. Fortunately, tariffs have been diminished, let's say, have been reduced. It's more feasible to, let's say, to use the other plants outside the U.S. to support, which is something we're doing in the short term, in addition to the local manufacturing. As soon as possible, by the end of this year, beginning of next year.
Basically, in the very short term, we are supporting the U.S. with production made in China, Croatia, and Italy.
This plant, sorry, Francesco, the new one, will be, I don't know, able to cope for, let's say, with the, how can we say now, your medium-term growth expectation for U.S. or in theory you are already thinking about expanding more of this local capacity?
Well, we believe that this additional factory, in addition to the fact that we are going to add additional lines, of course, should be able to support the growth in North America for several quarters. If needed, we will expand the existing facilities. We have land in the plant in Pennsylvania available, and also expanding existing facilities is relatively easy and not so expensive in terms of investment because we would just, if necessary, expand the walls. We will add additional assembly lines as needed. With the new factory, we will free up also space in the Pennsylvania plant so that we be in a position to add additional lines there.
Let's say with the third factory plus the possibility to expand the existing facilities, we are in a position to support the growth for the medium term in the U.S., definitely.
Okay, thanks. The second question, if you can come back a little bit on the performance that you made on gross margin so far. It seems that now the raw material cost, the instance of sales is really low, okay, in Q1. Considering, you know, as you mentioned before, the current tension, but also the fact that you know, you are ready to pass through some of these cost increase, but also now considering the guidance you just provided on sales, are there any specific factor, okay, Carel on top of geopolitical that could prevent the company this year, at least, to stay above your medium-term guidance for profitability?
Okay. Let's say that we do have supporting elements for our profitability and reasons to be optimistic, which are, of course, first and foremost, the operating leverage. The fact that Kiona is close to 30% profitability and is consistently growing double digits, so digital services are also expanding. In terms of the gross profitability on the other end, probably this year we will have some headwinds compared to last year because as we said, there are some tensions on the cost of some categories of materials like the memories, for example, but also transportation costs because of the cost of energy, also the metals that we use for the heat exchangers.
Of course, we are going to manage these tensions on some categories of raw materials through prices, but nonetheless, we are going to face some additional headwinds compared to last year. Again, the visibility remains limited. Let's say that there are reasons to be optimistic in any case, in general, considering the growth trends that we are seeing.
Okay, thanks. If understood well, you mentioned that this year overall the expectation how to do and to achieve more than EUR 50 million free cash flow. In case this is correct, if you can tell us or you or Nicola, if you can tell us, let's say, the assumption behind on CapEx on sales, but also on trade working capital. Thanks.
With reference to the trade working capital specific for this year, we are last year, as you remember, at the end of the year, we closed below the 20% on the sales. This year, we are expecting the specific for this year to have something above this level because we want to be prudent in the amount of inventory and even to guarantee the service to the market. As Francesco said, we are increasing our safety stock, and so this is just a specific trend that we are forecasting for 2026. From the following year, we believe that we will come back to the same level of 2025 in term of net trade working capital.
With reference to the CapEx, we are confirming our trend of 5% on the net sales. As Francesco was saying, we are starting the new investment in the North America, and we are even thinking about a new plant in Europe. All these investment will drive us to have a higher level of CapEx from the second quarter of this year, and we will be something around 5% of the sales.
Okay. The second-
Yeah.
Tie-up is.
Sorry, Alessandro. No, I was just adding that for Q1, we are slightly below the 5% in terms of CapEx. That's just timing because of course, CapEx quarter by quarter, they follow the project timing. As Nicola said, on average, we should expect the 5% of sales.
Okay. Okay.
The next question is from Christian Hinderaker of Goldman Sachs.
Good afternoon, everyone, and thanks for the opportunity for the questions. I guess one of the questions which I appreciate you may not have full visibility on, but obviously the data center demand strength is very significant. I wonder the extent to which you see this as sort of sustainable in growth rate terms. Have you seen any as well shift in terms of the mix? I know you've got you're agnostic in terms of the cooling architectures, but are you seeing a move to liquid cooling? Any sort of color there would be useful.
Yeah. Hi, Christian. Thanks, thanks for the question. For data centers, how sustainable demand is, of course, depends on the end market. For what we see in this moment, it's really very, very strong. We don't see any sign of slowdown. Then, of course, it depends on how the market is going to evolve. We have to consider, though, that of course, we're having the highest growth in North America, but as expected, also Europe is picking up. In Q1, also Europe grew double digits in data center, so it is accelerating, and I expect the performance of Europe to accelerate moving forward. Europe is in absolute terms, is very close to the U.S. for data center.
As it accelerates, it's definitely an upside that we have to consider. Plus, we also have a very strong view on Asia for data centers. It's growing very well in China, India, Korea, and also other countries. As far as the mix, and the shift towards liquid cooling, that is being supportive to us because, in fact, liquid cooling is also growing very fast, especially controllers for CDUs. They're growing very, very fast, and that's normally on top of ventilation. It's, let's say, a center in addition to ventilation, there are also the CDUs and the sensors, because by the way, also Senva with their sensors is growing extremely well in liquid cooling. Liquid cooling in general is a supporting trend for us.
Thank you, Francesco. Customer, typical customer footprint or scale, i.e., I presume the data center that's being built in North America are larger. I just wonder what impact that dynamic may have for you.
Yeah. Let's say that we are seeing our customers in data centers in Europe are pretty widespread among Italy, Germany, but also U.K. In this moment, the fastest growth. Probably some of this business is being exported by the U.K., but that's where we see the fastest growth in Europe in this moment.
Thank you. Then maybe finally just on refrigeration, you may have seen the recent ATMOsphere reports. Seems to be that penetration of CO2 refrigerants in the supermarket chain has gone up about 10% year-on-year, now a third of the installed base. How do you think that outlook then looks going forward? Obviously the phase down, you know, we've got two-thirds of the installed base still to undergo those upgrades. Should we then expect an accelerated growth? When do you think what do you think we need to see for that to happen?
Well, I believe, Christian, that the F-gas transition is more than an acceleration, probably will reduce the volatility on the investment level. We don't, for example, the like the sharp slowdown we saw in 2023, 2024 in retail, we don't expect that to happen again in Europe in the next years, because the F-gas transition is going to support investment. Looking at the figures of the rollout of the natural refrigerants, we believe that the F-gas will be a supporter of a sustained investment level, reducing volatility, probably not really an accelerator.
Again, we also have to consider that there are some countries in Europe where we're having, as I said before, a temporary, absolutely temporary delay in some projects, but they are significant as a weight in specific situations. Definitely the growth in European refrigeration is pretty well sustained.
Very good. Thank you.
The next question is from Alessandro Cecchini of Equita.
Hello, everybody, thank you for taking my questions. I have just one question about, I mean, profitability in the first quarter. As you said, you have a very good profitability of 21.5%. Just to consider sequentially, of course, maybe higher visibility on these. Traditionally, you have some seasonality, positive seasonality in second quarter, while you, I don't know, you flagged some headwinds in some costs, et cetera. It's a reasoning that correct that we can expect broadly similar margins in second quarter versus first quarter. Thank you.
Okay. Alessandro. Again, it's not so easy to provide profitability on a quarterly profitability guidance on a quarterly basis because of course it depends on multiple factors that can affect the individual quarter. Let's say that at this stage, we don't see big elements that could affect our profitability compared to what we saw in the recent past. We can put it this way.
Okay. Thank you.
As a reminder, for any further question please press star and one on your touch-tone telephone. Mr. Nalini, sir, there are no more questions registered at this time.
Okay. Thank you. Thank you for your attention, and thank you for the questions. Looking forward to speaking with you again for the presentation of the first half 2026 results. Bye. [Non-English content]
Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.