Good afternoon. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the De'Longhi first half 2023 consolidated 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. Fabio De'Longhi, Chief Executive Officer of De'Longhi. Please go ahead, sir.
Thank you. Good afternoon, ladies and gentlemen, welcome to the De'Longhi Group second quarter 2023 results conference call. Today, together with me are Nicola Serafin, Group General Manager, Marco Cenci, Chief Strategy and Control Officer, Stefano Biella, CFO, Fabrizio Micheli, Director of M&A and IR, and Samuele Chiodetto, Investor Relator. We're very pleased with the quarter two results, which show the significant recovery of their profitability compared to last year, and a stabilization of the growth trend that has been steadily improving month after month since the beginning of the year. In terms of top line, as already mentioned in the recent months, a few exceptional and temporary factors had a significant impact on the first phase of the year.
However, if we exclude this discontinuity of air conditioning on the American market, the second quarter achieved a positive expansion with a coffee segment in positive territory and a NutriBullet business strongly performing. To complete the positive picture, the first six months of the year have displayed a nearly stable EBITDA margin, clearly improving the profitability profile in respect to last year. Specifically, this result was obtained despite the volume decline, thanks to careful pricing strategy and strict control on the investments, as well as a recovery of some of the production costs that turned into a tailwind in the quarter. Now let me focus on the quarterly results. Consolidated revenues for Q2 were down by 2.9%, reaching EUR 689 million, with a negative impact of 2% from the currency component.
The impact of the discontinuity of mobile air conditioning in North America was EUR 33 million in the three months, net of which the turnover in the quarter showed a positive trend of +1.8%. As already highlighted, over the last 12 months, the European region has been heavily affected more than other areas, by both the defects of the Russian-Ukrainian conflict and the weakening of consumer purchasing power. However, over the last few months, the region has shown signs of improvement compared to previous dynamics, returning to positive territory. In more details, Southwest Europe showed a turnover almost unchanged compared to last year, thanks to a strong recovery in France and Austria, while Italy and Germany still remained in negative territory. Northeast Europe recorded a double-digit growth, benefiting from an almost homogeneous recovery of the countries of the area.
The MEIA region saw its turnover fall, mainly due to the macroeconomic context and the weakness of food preparation. In the American area, sales performance was affected by the discontinuity relating to the exit from mobile air conditioning business, which impacted the turnover by EUR 33 million in the quarter. Net of the effect, the area grew 5.5%, thanks to the expansion of the coffee makers and the NutriBullet nutrition segments. Finally, the Asia Pacific region delivered a drop of -2% at constant exchange rates as an effect of the negative performance of Australia and New Zealand, slowing down compared to a particularly strong 2022, but with a strong growth in the other major markets of Greater China, South Korea, and Japan.
As regards the evolution of the product segments, the second quarter delivered a return to growth of coffee machines for households after the temporary decline in the first quarter , thanks to a brilliant performance of the fully automatic coffee maker segments. Regarding B2B, professional coffee machine sector, we highlight the outstanding growth in the quarter at around +60%, pushing the weight of this segment on group's total half-year revenues to 5.2%. Food preparation, although still suffering, saw some product families, food processors, personal blenders, spin juicers, and fryers back to positive territory, while the comfort segment was heavily penalized by the aforementioned discontinuity of the U.S. market.
It is worth noting that total coffee area, together with NutriBullet's position, now counting almost 65% of the total group turnover, are destined to represent the main engine of growth and profitability of the group in a medium term. Looking now at the evolution of operating margins in the quarter. The net industrial margin improved to 48.8% of revenues, from 45.2 in 2022. This performance was a result of the positive contributions of price mix, EUR 20 million in the quarter. The strict control investments and the recovery of some of the production costs, which turned into a tailwind in the recent months.
Specifically, the transportation costs delivered significant savings, along with a partial recovery of the extraordinary costs related to handling the high level of inventory of last year, while the raw material cost leveled off in the quarter. Adjusted EBITDA amounted to EUR 85.8 million, or 12.5% of revenues, delivering a marked improvement compared to 6.9% in the second quarter of 2022, and in line with the margin achieved in the first quarter. Advertising costs remained sustained, even though the weight on sales was slightly lower compared to last year. As to the balance sheet, net financial position as at 30 June 2023, stood at EUR 311.7 million, increasing by EUR 256 million in the twelve months rolling.
In particular, the free cash flow before dividends and acquisitions was EUR 66.5 million in the quarter, and EUR 85 million in the six months, and EUR 328 million in the 12 months. In the quarter, the group was able to generate EUR 120 million of cash flow from current operations and working capital movements, compared to the second quarter of 2022, in which there had been an absorption of EUR 62 million, thanks to the efficient management of the trade receivables and payables aggregate, only partially counterbalanced by the negative change in inventories, increasing from the start of the year because of the normal seasonality. Still, EUR 281 million lower than at the same date of last year.
It should also be noted that capital expenditures in the quarter were aligned to last year, while recording a marked decrease in the six months versus last year. Now, as a conclusion of our result overview, let me point out that we are very satisfied with the significant improvement of the margins and the cash generation in the first part of the year, along with the stabilization of the sales in the quarter. This set of results confirm our expectations of a progressive normalization of growth and profitability trends, even though the geopolitical and macroeconomic context remains difficult to read, especially as regards to dynamics of consumption. Nevertheless, the group is confident about the viability of our guidance for the year, supported by the prospect of a recovery of organic growth together with an improvement in margin.
In this context, therefore, we confirm the guidance for the full year of revenues, slightly declining and adjusted the EBITDA in the range of EUR 370 million-EUR 390 million. Now we can open the floor to Q&A. Thanks.
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 touch-tone telephone. To remove yourself from the question queue, please press star and two. We kindly ask you to use handsets when asking questions. Anyone who has a question may press star and one at this time. The first question is from Francesco Brilli of Intermonte. Please go ahead.
Good evening. Thanks for taking my question. Congratulations for the results. The first one, I have a couple of questions regarding coffee segment. The first one is on the B2C. The second quarter was back to positive, while first half growth remains since mid-single-digit negative. I was wondering, what are your expectation for the end of the year for this segment? Then the second one is on B2B. It seems that the market is booming. Also other peers are achieving very remarkable growth in this segment, and made acquisition to widen the exposure to this business.
On your side, Eversys is continuing to grow at fast pace and probably will continue to increase its importance, also based on the indications you provided on in the press release. In the past, you commented you were targeting to expand further in this business, also with, with the external opportunities, and is it still the case? If so, how urgent do you think it is in order not to lose this opportunity?... and then you have a, a very valuable asset in this space, let's say, close to the company, which is La Marzocco, which would be highly synergistic with Eversys. Are you planning to explore this opportunity? Any comment on this would be very helpful. Thank you.
Thank you for the compliments. Thank you for the questions. So question one about B2C performance. I, I would say that the market is recovering, but it is slightly negative in the first six months of the year. We think the total coffee market is maybe -1%, -2% at global level. However, it's still about 50% above the levels of 2019, before pandemic. So I think that this is a really very encouraging market trend, considering the really the strong growth that we experienced in the past years.
In this context, first quarter this year compares to a phenomenal first quarter in 2022, which cannot be a relevant comparison base, honestly. But also, similarly, the, our performance in quarter two, for instance, in fully automatic, which has been very strong, probably is... We have by far outperformed the market. We're still positive about the opportunity offered by household coffee makers in the long term and also in the short term, but I think both, let's say, both quarters don't give a right indication. Yeah. All in all, I would like to highlight that probably the year would be more or less flat versus last year, maybe progressively improving quarter by quarter.
We want to know that, we, we achieved, record market shares on the markets where we can, monitor on a constant basis. In, progressively improving from, Q1 2023 and achieving really record high in June 2023. This is also very encouraging. Going to B2B, you had a very specific questions. No clue that, De'Longhi, the De'Longhi success story, if we can say so, has, a lot to do with, the success of the coffee maker market and our ability, to be a leader in, in the segment. Eversys, is performing very well, and, we can say it's been a very accretive, acquisition for us. Certainly, we, we want to grow in, with M&A.
I think that the company has, has performed M&A on a regular basis, maybe every two or three years in the past, adding new brands and new products. Probably the next priority, the next, hopefully, will be in coffee, and hopefully, yeah, which is a segment that is very attractive. It is. On La Marzocco, I cannot comment on this, I cannot comment on this. I think that for sure, if we can perform acquisitions in the professional space, if it's a leader, and if it's a, yeah, a very profitable, sizable, successful company, it will certainly be active on that. Thank you.
Thank you. Thank, thank you very much for your question. If I may, a very quick one, follow-up.
Yes.
-on, on A&P, on second quarter, and costs slowed down significantly. I was wondering if, if it's just a, a matter of phasing of expenses or, we can project a lower, lower level for the full year. Thank you.
Yeah, no, as a percentage of sales, we are flat versus last year. I would like to remind. As I said, we're very happy with our performance in the quarter from a, in particular, a profitability standpoint. Obviously, when we enter the quarter three, we had to be somehow cautious after, lets say, the weak start to the year. I think we've been more courageous than most of our competition, and we have kept investing behind our coffee makers in particular. We have a minor, say, reduction in absolute value spend in the quarter and in the half, but we have significantly achieved growth in our advertising spending in the quarter and in the first half.
To give you an idea, according to our data, in fully automatic coffee maker has increased from 36% share of spending in the advertising market, in the markets we monitor, to approximately 57%, where our key competitor reduces spend, as I say, total investment from 31% to 24%. Let's say, I think we are continuing rolling out our strategy. We think that advertising will play an important role also in the remainder of the year. Yeah, we're happy also that we have assigned or renewed the contract with our brand ambassador, Brad Pitt, and we will continue with new campaigns in the near future.
Very helpful. Thank you very much.
The next question is from Alessandro Cecchini of Equita. Please go ahead.
Hello, everybody, and thank you for taking my questions. The first one, it's about, if you could elaborate a little bit more your performance with the new machinery in the U.S. We, we saw that the U.S. market was positive in the second quarter, +5%, roughly speaking, excluding the portable conditioning. Just your... I mean, if you have more feedbacks from your new coffee machine in the U.S., and if you are planning to launch new products, both in food preparation and coffee in the second half. I mean, not just updates, but if you are planning to launch something special, something new in the second half. This was my first question. My second question was about NutriBullet.
From what we know, probably, I mean, not as expected, so with some delays and so on. I, I would like to know, when do you expect actually to have a real entrance in the countries, and when you expect to do that? My final question, it's about your performance in margins. First half, you had 12.4% EBITDA margins for the year. The implicit guide, your guidance is more or less to have the same margin that we know that four quarter is much better in term of seasonality.
Just to know, it's a question of prudence, given the fourth quarter, just to, to have your feeling on this, because likely, I expect, we'll say, similar margins in, in the third quarter, given similar sales in the third quarter. Just if you could give us your perception, on this. Thank you.
The first question is about North America. North America continued to be a growing market for espresso and coffee in general. We are reinforcing our investments. We continue investing behind our capsule machines. I remind you that we have a very strong venture with Nestlé in Nespresso in North America, which is very successful. We are also pushing our bean-to-cup machines, and the market is growing, is expanding. We have just launched TrueBrew with the support of a specific advertising campaign with Brad Pitt. I have to say, the first, let's say, the first learnings, the first feedback and, let's say, takeaways from retailers is a pretty good success.
I mean, it's been a, a strong start to the project, so we're happy with that. We will continue supporting the product in the second half. We have a major launch with Nespresso. We're launching the first Vertuo capsule machine, incorporating a automatic froth frothing device and exclusive to De'Longhi, and we are really looking forward to the launch, which will take place in half of 2 2023. We are pretty on track with our development plan in North America. With regards to NPD, obviously, we have a quite a strong pipeline in different segments. I hand over to Nicola, to our General Manager, Nicola Serafin. Maybe, Nicola, you can.
Yeah.
-take on, the question about the new launches and then-
Yes.
the NutriBullet expansion plan that maybe I said it was a bit slow due to the COVID time, but now we are rolling out, and then comment on the margins.
About, good evening, good afternoon to everybody. About the new product launches, we have, indeed, quite a dense pipeline on new launches that are coming, starting from September for up to first quarter 2024, we have quite a few products in the pipeline of fully automatic coffee machine from a new innovative solution that we have, we have presented recently to our customers with being exchanging containers. We have other solutions of in the mid, mid to mid range segments that are coming, plus an entry-level milk solution for cappuccino.
We have a very wide range of products that is coming soon, and including innovative solution in cold brew coffee, integrated in our both fully automatic and pump espresso machines. About the NutriBullet launch, as Fabio mentioned, it was a bit slowed down, looking to the macroeconomic and food preparation context trends, but we are now ready to go. We think that this is the category, the blending category, and personal blending, in particular, is a is the category that within the food preparation range, is in this moment, giving signal of recovery, is in a positive in the positive space, and this is now time to boost and accelerate the expansion of NutriBullet.
About margins, as you have seen, we have kept quite a constant margin across the first, the first half. We have now some tailwinds that are expecting from one side, that are coming from the cooling down of the logistic and supply chain costs. Even raw materials are giving some signals of recovery, despite we have still in terms of labor cost, we are in the inflection space, so there is a pressure from labor cost point of view, and there is still a bit of uncertainty in the market in terms of trade terms and and pricing. We are keeping the carryover on pricing that we have.
In terms of, in terms of margin, we are expecting something that could stay with the plus and minus of tailwinds and some headwinds, more or less in the space where we are.
Okay, thank you. On the NutriBullet, I mean, when and do you expect to, to push on, on Europe? Is this question of for, for this winter or next year?
Yeah, we have, we have plan, we have a plan, we have a phase plan, but in some core European markets, we are already starting to shelving the products now, and more is to come in Italy, France, in Germany, and Poland and Spain. There are activities that are running this moment, so they should start to harvest some results already from the next quarters.
Okay, thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. Mr. De'Longhi, there are no more questions registered at this time.
Thank you. Thank you, so much for attending De'Longhi first half 2023 conference call. Bye-bye.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.