Good afternoon, this is the Chorus Call Conference Operator. Welcome, and thank you for joining the Industrie De Nora 9- Months 2024 Financial 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 Ms. Chiara Locati, Head of Investor Relations and ESG. Please go ahead, Madam.
Good afternoon, ladies and gentlemen, and welcome to our 9 -Months 2024 Financial Results Conference Call. I'm Chiara Locati, Head of Investor Relations and ESG at De Nora. With me on the call today, there are Paolo Dellachà, CEO of the Group, and Luca Oglialoro, our CFO. They will drive you through the main achievements and financial results for the first nine months, and then we will open up a Q&A session. I would like to remind you that the slides of this presentation have been made available in the Investor Relations section of our website. With that, I would like to hand it over to Paolo. Paolo, the floor is yours.
Thank you, Chiara. Good afternoon, everyone. Thank you, everybody, for joining us today. In Q3, De Nora continued its business development, pursuing the positive path already successfully undertaken in the second quarter, and confirming its commitment to build upon its technological leadership, manufacturing footprint, and execution excellence to lay the foundations for sustainable and profitable growth in the medium term. As expected, Q3 was a soft quarter in terms of revenues. This was due to the production planning of some projects in our backlog and to some one-off effects that are now over. Profitability was healthy at 17.8%, in line with our expectations. Q4 has started on the right track, and it's expected to be significantly positive, confirming our full year 2024 guidance. Our business model has proven to be resilient even in a complex and challenging scenario such as the one we are currently experiencing.
It maintains healthy profitability and solid cash flow generation, driven in particular by our traditional Electrode Technology business, which supported an operating cash flow of more than €80 million in the first nine months of the year. In the energy transition business, project execution was expected by a temporary slowdown in the supply chain, as anticipated during our first half of the results conference call, which has now been completely overcome. Despite this, we delivered more than 780 MW of green hydrogen technologies in nine months, generating approximately €70 million revenues, up about 2% year on year. The energy transition pipeline has grown to 88 MW, even in the development of the global hydrogen market, experiencing a temporary slowdown caused by delays in government regulation and partly by the macroeconomic scenario.
However, green hydrogen remains a crucial enabler for the decarbonization of our two big sectors, and the development path of this market will continue. It will develop significantly over the next decade, although not at the speed presumed less than a year ago. Sorry, the pipeline was 88 GW, not MW. Sorry about the mistake. That is why we are committed to develop our cutting-edge technologies, such as our small-scale electrolyzer, Dragonfly. We are also moving forward with this new strategic partnership, such as the one recently signed with Asahi Kasei, a Japanese very well-known player, to keep our leading position in such a critical market. The momentum in the water business continues to be positive.
Thanks to our strong brand recognition and technological excellence, the order intake for our water technology systems is growing faster than the market, driving the entire business unit backlog up about 11% compared to the end of 2023. The pools division is also pursuing its growth path, posting a 13% year-on-year increase in nine months revenues, or 32% in Q3 versus the same quarter of 2023, and supporting the profitability of the entire water technology business, which improved by approximately 300 basis points compared to the nine months of 2023. We are developing our manufacturing footprint in targeting readiness while monitoring market trends. In line with our plans, we are pursuing the realization of our Italian gigafactory, which will not only serve the energy transition business, but will also be used to optimize the Italian production setup, including traditional business.
Finally, we remain firmly committed to improving our sustainability through the implementation of our ESG plan. In particular, in September, we launched our new Global People Strategy 2024-2026. This innovative program is designed to unlock the potential of each employee and build an inclusive, wellness-oriented corporate culture. The plan aims to place people at the heart of the company's growth, making them key players in a sustainable future and shared success. In this slide, you can appreciate some of the KPIs of our 9- months 2024 financial performance that Luca will comment on later. Now, let's look at the performance of our three business units. The electrode technology business revenues sequentially grew in Q3, improving by 5% compared to the year's second quarter, thanks to the excellent execution of the project in our backlog.
As anticipated in the first half of the results conference call, we expect a particularly positive Q4 that will bring full year 2024 revenues in line with those of the previous year. Q4 revenues are already secured in our backlog, while the distribution of the production activities over the quarters has been driven by customer requests. Aftermarket revenues in the last three months accounted for 37%, down from the Q2 figure due to the acceleration of some projects related to new installations, such as, for example, OxyChem in the United States. Regarding the backlog evolution in the first nine months of 2024 compared to previous periods, it should be noted that in 2022 and 2023, we were awarded multiple year orders that boosted the portfolio value.
Nevertheless, historically, order volatility has been physiological in this business, and this is due to the fast in-and-out dynamics that characterize the orders, including aftermarket services, often executed in the same reporting period as they materialize. In addition, considering the lively commercial engagement we are having with our customers, we expect new sizable projects to be signed in different geographies in the coming months. Indeed, we have already signed significant contracts in the last week for a total amount of approximately EUR 35 million. Looking at the market opportunities in the chlor-alkali segment, we envisage the market for new build projects picking up again, driven by North America and the Middle East. Indeed, global projects equivalent to a capacity of five million tons per year of chlorine and caustic, in this case, are expected to reach the FID by 2025.
Given our strong market positioning, we expect to win a significant share of those projects. In that space, our JV, Thyssenkrupp Nucera, has been selected as a technology provider, awarding the basic engineering and design package for one of the world's largest chlor-alkali plants in the United Arab Emirates at the TA’ZIZ Industrial Chemicals Zone. It's a joint venture between ADNOC and ADQ. Furthermore, other feasibility studies are ongoing in Spain, South America, and the U.S. In addition to the new installation market, we see potential growing demand for aftermarket services in all geographies, including Asia, especially Japan and China, where we have already strengthened our manufacturing footprint. Finally, the electronics market, the stocking phase, is gradually coming to an end, and we expect a progressive market recovery in 2025. Overall, our retrofit technology business remains solid.
We expect to maintain a mid-term low single-digit growth and healthy profitability, relying on our unparalleled technologies and execution capacity. Now, let's look at slide number seven. Moving to our water technology business, the positive market momentum continues in both the so-called WTS water technology systems and the pools segments. I'm particularly pleased with the evolution of the entire business unit in backlog, which, as of September 2024, grew by 10.8% compared to December 2023. Thanks to over EUR 220 million orders, we're double-digit up year-on-year in both the WTS and pools segments. Revenues were broadly in line with 9-months 2023, with pools growing 13% and WTS slightly declining, mainly due to some one-off effects that Luca will describe later. The WTS segment reported around EUR 150 million new orders, up by about 10% year-on-year, with a well-balanced distribution between industrial and municipal projects.
57% of orders are related to new installations, while in terms of geographies, the growth was mainly driven by the United States market. Let me proudly underline that the double-digit expansion of our WTS backlog exceeds the market growth, improving our positioning thanks to the brand recognition of our products and our track record of excellent execution. The outlook for the WTS segment remains positive. We expect continuing order growth in the coming quarters, with attractive new opportunities in the Middle East and GCC countries, both in the industrial and municipal sectors. Indeed, these countries are developing their industrial structures and growing in population, increasing their need for clean water. The U.S. and China also continue to be high-potential markets due to the stringent regulations and the presence of water-stressed areas in both geographies.
Concerning the so-called PFAS in the United States, as explained during the last conference call, we must consider that the market has just started, as EPA issued the new regulation only in April 2024. That regulation requires municipalities with higher than allowable PFAS content in PPT to have specific treatment in place within five years. Until June 2026, the activities will primarily revolve around identifying locations with PFAS issues, securing funds to pilot and test the ideal solutions, properly sizing the technology, and finally placing the orders. De Nora has a solid track record in contaminants treatment. Our so-called SORB solutions have 25 years plus of demonstrated effectiveness in treating complex organic and inorganic contaminants, such as arsenic, iron, manganese, and many others, and are reliable references also for PFAS treatment. Our pipeline of identified opportunities is growing.
As of the end of September, we have 52 opportunities identified and five pilot units. We are very excited about the opportunities in this new market. We are well equipped and working to structure ourselves even better to exploit them. Finally, let me say a few words about our pool division performance. The positive evolution continues with 13% year-on-year revenue growth in the first nine months and 32% in the third quarter. The outlook for the segment remains unbeaten, and we confirm expectations of high single-digit growth in the full year 2024, with favorable impacts on the entire business unit profitability, which reported about a 16% EBITDA margin in the first nine months of 2024. Overall, the main market trends related to water technology business remain positive, and based on our positioning and technological advantages, we can confirm our positive mid-term growth expectation in the mid-single digits.
On this slide, you can appreciate some key projects that De Nora won in the last quarter. Let me start with our flagship project in the industrial segment. De Nora was awarded a significant contract by CCC Joint Venture, led by Technip Energies, in partnership with Consolidated Contractors Company. The scope of work entails supply of electrolytic chlorination units for the onshore LNG facilities in Ras Laffan, Qatar, for the second phase of North Field expansion projects. This project aims to extend the state of Qatar's overall liquefied natural gas (LNG) production capacity from 77 to 126 million tons per annum. It also features a sustainable profile thanks to the inclusion of, among other initiatives, carbon capture and sequestration facilities, which will lead to a 25% plus reduction of greenhouse gas emissions compared to similar plants.
De Nora has been selected to supply the electrochemical systems for the project, which will be executed by an experienced cross-functional and global project team, leveraging De Nora's large global footprint and excellence in electrochemistry. This project will include two CECHLO-MS 326 units producing a high-strength 12.5% sodium hypochlorite solution on site, which is a pretty unique technology in the market. The new system will supplement the units already awarded for phase one in 2021 and recently delivered. Once completed later this year, these units will be producing 11 tons per day of chlorine equivalent used to control biofouling, disinfect service water, and fire water, and manage brine from the desalination plant to the sea. We are particularly proud to be considered the partner of choice in such large industrial projects, where our execution track record and reliable technologies distinguish us from all the other players.
We won several other contracts in the municipal sector. In this slide, you can appreciate three projects in the U.S. and China based on different technologies provided by De Nora: TETRA Filtration, Ozone Technologies, and MIOX Oxidant Generators. Two of these projects relate to capacity expansion of existing wastewater treatment systems led by the increase in population in the U.S. and China. The project in the U.S., based on our TETRA Technologies, once completed, will support the treatment of over 120,000 cubic meters of water per day, while the project in China, based on our Capital Controls Ozone Generators, will purify over 600,000 cubic meters of water per day. On the other hand, the MIOX project in Texas will be dedicated to a new drinking water installation relying on our user-friendly MIOX generator.
This equipment exploits the electrochemical process and the features of our electrodes to produce a solution of effective different oxidants and radicals. The effectiveness of the process is further reinforced by the reduction of the unwanted byproducts, showing an advantage against the use of high-concentration bleach, presenting a smarter, cost-effective, and sustainable alternative. Finally, we are proud of the success of our water technology worldwide, and we expect to enhance our competitive position further. Now, let's turn to slide number nine for an overview of our energy transition business unit. In the first 9-months of 2024, we produced and delivered about 780 MW of green hydrogen technologies, up by 12% year-on-year. This brings the total number of technologies realized since 2022 to over 2 GW. New orders amounted to about EUR 88 million.
As expected, in Q3, production activities were impacted by the already mentioned slowdown in the supply chain. However, this slowdown has been fully resolved, and production has now resumed at its physiological capacity. We expect a volume acceleration in the fourth quarter, bringing revenues to a single-digit growth compared to full year 2023. Regarding the execution of the projects in our backlog, we are making over 60% progress of the NEOM project and expect to conclude it in the first half of 2025, while the over 700 MW project in Sweden is expected to start already in Q4 2024. We remain committed to enhancing our position in the green hydrogen space, and we are enlarging strategic partnerships to develop and market our technologies.
In particular, we are proud to announce that in September, we signed an agreement with the Japanese technology company Asahi Kasei to develop a market containerized electrolyzer system for small-scale green hydrogen production. This collaboration is an important step in De Nora's roadmap to secure a reliable partner for reaching the Asian market and increase the production volume of the Italian Gigafactory under construction. Working closely with a partner like Asahi Kasei will speed up the technological development of the electrolytic cells and other components involved in the electrolysis process and its adaptation to the off-taker's needs. Going beyond mere technical experience, both parties will benefit from building up a stronger and extended supply chain, enhanced know-how in operational technology, and a faster learning curve to achieve high-volume production, ensuring long-term plant operability and reliability and maintaining and supporting systems.
Regarding the small-scale electrolyzer market this year, we officially launched our proprietary Dragonfly system, a best-in-class technological solution that relies on the high performance of De Nora electrodes. Our system is designed to minimize the cost of ownership and the levelized cost of green hydrogen, reducing the footprint. We are witnessing an increasing interest in our Dragonfly solution, which is suitable for decarbonization projects and local needs of green hydrogen for industries and hydrogen valleys. Indeed, our solution avoids the transportation and storage of hydrogen provided by large plants. Today, we are involved in various projects, including a new contract signed with Maffei Sarda Silicati in October in Italy. The project is financed through PNRR funds and promoted by the local company Maffei Sarda Silicati, operating in the field of extraction, treatment, and marketing of raw materials mainly for the ceramic and hollow glass market.
De Nora is involved in supplying 1-MW Dragonfly system. The production site, located on a decommissioned industrial area in the municipality near Sassari in Sardinia, Italy, will generate around 50 tons of hydrogen per year, which will be used by the Sardinian company to power its industrial plant, partly replacing the natural gas currently used for thermal energy, with significant benefits in terms of decarbonization. In addition, the green hydrogen plant will itself be powered by a 1.5-MW photovoltaic park, thus ensuring an industrial process. We are excited to have been selected as a partner in this project, which will give a significant boost to the Sardinia green transition. In addition, you can see in the slide, we are involved in the Crete Aegean Hydrogen Valley CRAVE, so-called project, funded by the EU Commission.
In that case, our scope is to provide a 4 MW electrolyzer, and we expect to start installation next year. Within the strategic partnership, we are also working with Duferco, an Italian energy company, to develop government-funded projects in Italy and Europe. Now, going to the next slide, we are excited to announce that we delivered our first Dragonfly electrolyzer in September, which was provided to the De Nora facility in northern Italy. Slide 11 shows a picture of our 1 MW Dragonfly solution, which we delivered a few weeks ago at De Nora testing facility as part of the HyTech Heat project. As we announced in February 2024, De Nora is one of the partners in the European Horizon project, HyTech Heat, along with Snam and De Nora.
The project aims to exploit the hybrid heating technologies by evaluating the effects of the steel products on the refractories and on the combustion systems. We are particularly proud to have reached this first milestone of our Dragonfly development path, and we are fully committed to providing our partners with all the necessary support to complete the project successfully. We are now on slide number 12, which shows our energy transition pipeline, a chart that you're already familiar with since some time. At the end of September, the total pipeline amounted to 88 GW, well above the figure of 9-months 2023, as you can see in the bottom left-hand side of the slide.
Nevertheless, despite the expanding total commercial opportunities, testifying that the interest in our technology remains consistent, we have shifted the distribution of some projects within the different layers on the chart to show a more conservative view of the Hot Deals initiatives, as the FIDs of several projects are taking longer than initially expected. So the Hot Deals now represent the project expected to materialize within the next 12 to 18 months and generate revenues in 2026 and beyond. Regarding market development, as already mentioned, challenges due to the uncertainties in regulations and funding rules and the macroeconomic scenario are slowing down the growth of projects at different stages of the decision-making and startup processes, providing low short-term visibility.
For this reason, starting from different external sources, we refined estimates regarding installed capacity in 2030 by distinguishing between projects already committed or in advanced planning stages and those relying on policies. The first category accounts for approximately 35-40 GW, while another 55-60 GW depends on announced policies, such as upcoming electrolysis auctions, like in Europe. Therefore, future policies will be crucial in shaping the electrolyzer market this decade. After a peak of inflated expectations that involved the renewable hydrogen market in 2022, we are now facing a period of recalibration, or trough of disillusionment. This shift is also evident, by the way, in recent stock price trends. However, we expect the market to regain momentum in the midterm and enter a phase of sustainable growth. It is not a matter of if. It's just a matter of how fast.
We remain focused on enhancing our technological solutions, expanding strategic partnerships, and building appropriately scaled manufacturing capacity to maintain our global leadership in this space. Before leaving the floor to Luca for the financial results review, let me spend a few words about our manufacturing capacity expansion plan. We are committed to develop our production footprint, targeting readiness while monitoring market trends and leveraging our facilities' versatility. Let me remember that we expanded our capacity in China and Japan in the last eight to 12 months. This additional capacity has now been utilized to support projects in our backlog, mainly in the traditional business. In line with our plans, we are pursuing the realization of our Italian Gigafactory with a strong focus on innovation and positive environmental impacts.
The new site will serve the energy transition business, and will also be used to optimize the Italian production setup, including electrode technologies and water technology businesses. In the last months, after the groundbreaking ceremony, we have selected the general contractor and obtained all the expected bureaucratic approvals. These developments provide visibility on the Gigafactory realization timeline, assuming the achievement of further milestones in the first quarter of 2025. The facility is expected to start operating in 2026 and reach the full capacity of 2 GW equivalent by 2030. On the occasion of the business plan update, which will be communicated to the market in March 2025, we will also update our production capacity expansion plan. Finally, to wrap up, we expect to achieve a complete recovery of the revenues in full year 2024 with a strong balance sheet and significant operating cash flow generation.
We remain focused on investing in long-term growth and are confident in our resilient business model. With that, I leave the floor to Luca for the financial remarks.
Thank you, Paolo, and good afternoon, everyone. Q3 revenues were EUR 204 million, excluding the EUR 3 million negative effect due to the Japanese yen, in line with our full year 2024 guidance, since a soft performance in the quarter was expected and already anticipated during our first half conference call. The progression of revenues was mainly associated with the production scheduling requested by customers, delays in the supply chain that impacted the production of the energy transition business, and residual one-off effects in the WTS segment. The pool segment was strongly positive. The electrode technology business grew sequentially by about 5% compared to the year's second quarter, confirming that the recovery is progressing.
The performance is mainly attributable to the chlor-alkali division, which accounted for about 72% of the business unit revenues, with an increasing share of new installation projects. The electronics segment, on the other hand, maintained a weak performance following the post-COVID growth. We expect a progressive recovery of the segment revenues starting from the second half of 2025. In Q4, we expect an acceleration in production volumes that will bring the electrode technology full year results to a complete recovery in accordance with the schedule agreed with our customers. Revenues will be broadly in line with 2023, growing low single digits at constant exchange rate. Water technology business posted a slight performance, combining a slightly negative WTS quarter and still strong pools' growth.
During the quarter, the WTS revenues were impacted by residual effects of the marine business disposal and some project phasing, which we expect to recover in Q4, that usually represents the division's strongest quarter of the year. The pool's momentum remains strong. For the second quarter in a row, the segment posted over 30% growth, supported by bright market dynamics, as reflected in the substantial order intake achieved during the period. The full year guidance for the entire water technology business is confirmed at low single digit growth. Finally, as expected, the energy transition revenues were down in Q3 as a consequence of the supply chain's slowdown previously referenced. The situation has been fully resolved since August, with production activities returning to their normal pace.
We expect a significant recovery of revenues in Q4, underpinned by the execution of projects NEOM and H2 Green Steel, the latter planned to start in the last weeks of the year. I'm now on slide 16. The Adjusted EBITDA margin for Q3 was approximately 16%, lower than Q3 2023, but aligning with expectations. Let's now dive into the performance of each business unit. The electrode technologies business reported a healthy profitability that was in line with the second quarter of the year. The performance versus Q3 2023, as discussed in the first half results, continues to be marked by a different production and geographical mix and by setup optimization cost of production following the capacity expansion in Asia and Germany. We expect these effects will impact Q4 results as well.
The water technologies business reported a 3.8 percentage points improvement in profitability compared to Q3 2023, mainly driven by an increase in pool volumes, which accounted for 36% of the business unit revenues, up from 26% in Q3 2023. Finally, the EBITDA for the energy transition business was impacted by the previously noted soft volumes, cost associated with Gigafactory, and inefficiency related to the production optimization setup. The R&D costs were 18% of revenues. Please bear in mind that the EBITDA for the energy transition business is more representative on an yearly basis. Let's move to slide 17 to review the nine-month results. Consolidated revenues were EUR 601 million, in line with the full year guidance, down by 2.4% year-on-year, excluding the EUR 13.4 million negative impact of the Japanese currency. Revenues evolution reflects the decline in the electrode technology segment.
Recovery is expected in the last quarter of the year, partially set by the water technologies and energy transition performances. Regarding geographic breakdown, revenues are well distributed across the three regions. In particular, the APAC area announced its incidence on total revenues by two percentage points compared to the same period of 2023, primarily due to the electrode technology business. In the electrode technologies aftermarket, maintained a high incidence on revenues at 44%, up from approximately 42% in 9-months 2023. Within the water technology business, the 13% growth in the pool division led to a positive performance, more than offsetting the evolution of the WTS, which was impacted by some one-off effects that is expected to recover by the end of the year. Finally, the energy transition business reported 2.3% revenues growth, supported by the execution of projects in the portfolio, despite the aforementioned supply chain slowdowns.
In summary, considering the performance of the three business units, we reaffirm the full year 2024 guidance of low single digit growth, driven by strong fourth quarter, during which we anticipate increasing volumes from the projects already in our backlog. I'm now on page 18, where you can appreciate our backlog at the end of September 2024, which Paolo has already commented on. Order volatility has been physiological for the electrode technology due to the fast in-out dynamics that characterize the business, including aftermarket service, often executed in the same reporting period as they materialize. We are now on slide 19. The nine-month profitability was healthy at roughly 18%, in line with expected evolution and the full year 2024 guidance. As previously mentioned, the decrease in the electrode technologies EBITDA margin reflects lower volumes, a changing revenue mix, and optimization costs associated with capacity scale-up in Asia and Germany.
At the same time, the sound growth of the pool division boosted water technologies business profitability, which jumped to about 16%, improving by over three percentage points compared to the nine months of 2023. The energy transition EBITDA margin was at break-even despite the Gigafactory cost, some inefficiency due to the learning curve related to the announced manufacturing capacity, and increasing R&D costs, which were approximately 13% of the business unit revenues versus 10% in the same period of 2023. Profitability for the nine-month period aligns with our full year 2024 guidance and underpins strong operating cash flow generation, despite being affected by specific dynamics, such as costs associated with the production setup announcement, which we expect to progressively reduce in the coming quarter.
Moving on to page 20, we observe that EBIT changes for the nine months of 2024 primarily reflect the performance of the EBITDA, along with a slight increase in amortization and depreciation driven by capital expenditures. The financial costs amounted to EUR 6.5 million, broadly in line with the corresponding period of 2023. The share of our joint ventures result was approximately EUR 0.3 million, while in 2023 it was positive by about EUR 4 million. In addition, the 2023 figure benefited from EUR 133 million of non-recurring income due to the nucera's IPO.
The net income in the first nine months of this year was about EUR 52 million, with a circa 9% incidence on revenues. At the end of September, the net cash position was about EUR 30 million, up from EUR 14 million at the end of June, as the Q3 operating cash flow more than covered CapEx, interest, and taxes.
Over the first nine months, the operating cash flow was about EUR 80 million. Finally, considering the result achieved in the first nine months and the acceleration of the execution of the projects impacted in the Q4, we confirm the guidance for the full year 2024, with an Adjusted EBITDA margin expected at circa 17%, underpinned by low single digit group revenues growth, with electrode technologies broadly flat versus 2023, and low single digit growth in water technologies and energy transition businesses. With that, I leave the floor to Chiara for a quick update on our sustainability plan. Thank you.
Thank you, Luca. I will give you a quick update on our ESG journey. Over the last quarter, we have put a lot of effort in announcing our social initiatives.
Therefore, even if our projects regarding green innovation and climate action are moving forward, today I would like to focus on social aspects and spend a few words on our Gigafactory project. The Gigafactory will cover an area of about 40,000 square meters and will be an innovative and sustainable building, partially powered by photovoltaic panels, which will produce green electricity. The facility is designed to reduce CO2 emissions as much as possible. Reduced environmental impact will also be achieved through the control and monitoring of energy efficiency through intelligent systems and the encouragement of green mobility. Great attention is also paid to the issue of lighting, taking advantage of natural light as much as possible and adopting dynamic control systems. Finally, sustainable materials have been selected for construction, and sustainable urban drainage systems have been designed.
All these elements will contribute to the achievement of LEED certification for sustainable buildings and qualify the Gigafactory as a project that brings concrete benefits to the community and the urban space in which it fits. Moving to the pillar of our ESG plan, I would like to announce that we have approved and published a new parental leave policy. This policy is designed to be inclusive of all types of families and parents, ensuring greater equality and support for our workforce. Next, we have introduced a new leadership training program called INCLUDE, which stands for Inclusive and Cohesive Leaders Unlock De Nora's Potential. This initiative is aimed at fostering a more inclusive leadership culture through a training program addressed to all the group's managers. The Italian pilot will be completed in 2024 before we roll it out globally.
Focusing now on our employees' health and safety, we have health safety days in our sites in Italy and the United States. These events are fully dedicated to raising awareness about health, safety, and environmental issues. We are also pleased to announce that we have renewed our Great Place to Work certification for our Italian legal entities, securing a place among the best workplaces for blue-collar workers, achieving the impressive rank of seven nationwide. Finally, we have received the certification for gender equality, again for our Italian legal entities, marking a major milestone in our commitment to fairness and inclusion. All these efforts reflect our strong commitment to fostering a diverse, safe, and inclusive workplace and confirm that our people represent one of the core pillars in our ESG strategy. I now leave the floor to Paolo for final remarks.
Thank you, Chiara. Final remarks on our 9-month 2024 results.
Solid business model for sustainable growth. First point, Q3 soft revenues were expected, while Q4 is on the right path to achieve a complete recovery in the full year 2024, with healthy profitability. Full year guidance confirmed. The local market, new build projects are expected to pick up in the next quarters, boosting our electrode technology business. Water's positive momentum is still there, with solid growth in pool revenues and WTS orders increasing faster than the market. Energy transition, building up for future growth through enhancing technologies, tactical manufacturing capacity expansion, and strategic partnerships. With a strong balance sheet and a significant operating cash flow generation, we remain focused on investing in long-term growth and are confident in our resilient business model. Thank you very much. We leave now the space for Q&A.
Thank you. This is the Chorus Call Conference operator. We will now begin the question and answer session.
Anyone wishes to ask a question may press star and one on their 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 Matteo Bonizzoni of Kepler Cheuvreux.
Thank you. Good evening. I have three questions. The first one relates to the expected trend in the electrode technology division. In nine months, the revenues were down by 8.6%, but you confirmed that in full year they should be broadly flat. So this implies a significant recovery of the quarterly run rate of revenues in Q4 to around EUR 140 million, if I have done the right calculation, which is a lot.
On the other side, I was seeing that the backlog, also for a reason which you detailed, that last year there were some projects set to be executed over the long term, so the comparison was particularly challenging. But the backlog in this division at the end of the quarter is down 24% year on year. So I was trying to reconcile your expectation for flattish revenues in the full year versus minus 8.6 in nine months, and also this continuing negative evolution of the backlog. The second question relates to the pipeline and also the outlook, let's say, for the intake in energy transition. You have said that you have a large pipeline, 88 GW. Hot Deals are 1.3 GW, and there are also 20 GW of actively pursued projects.
My question is, can you provide an update on the intake opportunities and maybe also their approximate timing in terms of entry into your backlog, and also a preliminary expectation, if you want or if you can, on the revenue trend for energy transition next year in 2025? Last question is on CapEx. I think you said at some point that you are doing a sort of review of your CapEx plan. So the question is, given that the growth in energy transition is maybe slower than expected, and most of the CapEx in your plan, which was amounting, if I remember correctly, to close to EUR 100 million per year for some years, was related to the expansion of the capacity in energy transition, should you expect a lower CapEx budget for the next year? Thanks.
Yes, thank you for the question. So yeah, you run the right math.
So the electrode technology business has a concentration of sales in the last quarter, which is different from the past. You know that in the past we had a more regular distribution of the sales among the quarters. This year we have a high concentration of sales on the last quarter, which does not depend entirely from us, but also from the request of our customers, request of delivery. So we are concentrated to, I mean, to deliver this big execution in the last quarter of the year and therefore to reach the, let's say, a total amount of sales which is in line with the ones realized in 2023. With regard to the backlog, as you can see, the backlog is lower than the past compared to the last year.
But as Paolo said, and just said, we just received some important orders that will increase our pipeline in the coming months. And you know that the business of the electrode technology is a business that has a very quick delivery execution, differently from what happens, for instance, in the water. Therefore, we expect these orders. We are seeing these orders coming in the next quarters. Therefore, we are not worried at all with regard to the 2025 sales.
Okay, for the second question, Matteo, yes, we reviewed the old deals and all the lines of this pipeline, of course, to update the market, but also we moved some of the projects that were considered old deals back into the pursuit project because of the delay that had been well announced.
So the current amount of old deals is somehow covered by very well-known projects that have been already announced and by some others that have not been disclosed yet that we think, together with our partners, will be materialized in the next 12 to 18 months. In terms of 2025, the current backlog is going to be fully delivered within 2025. And of course, we have plenty of time with the Hot Deals to fill 2026.
And with regard to the CapEx, as you know, we are working now on the new CapEx plan for the next three years to update the old CapEx plan. For sure, we can modulate the intensity of the CapEx for the next quarter according to the demand of hydrogen. And I mean, this is something that will be done in the next business plan, and we will be communicated in March 2025.
The next question is from Michele Della Vigna of Goldman Sachs.
Thank you, Paolo, Luca, and Chiara. I wanted to ask you two questions on two businesses which are really going to be interesting in the coming years and which are relatively new. One is Dragonfly. You highlight the collaboration with Asahi Kasei. Is there any way to quantify how relevant, how material this could be from a revenue perspective in the coming years? And then the second one, you made a comment on the PFAS opportunity, which is only starting to materialize. There as well, I would be very interested to know how material you think that could be to your water business. Thank you.
Thank you, Michele. The alliance with Asahi Kasei on the Dragonfly, it's of course on small-sized electrolyzers.
Considering we are talking about electrolyzers that go from 1 MW to 7.5 MW, this, of course, is not comparable volume-wise in absolute terms with multi-hundred megawatt projects that we are currently running and we will run in the future. Nevertheless, it's a very strategic alliance because, of course, Dragonfly is a new technology with a very reputable Asahi Kasei player that I remind is one of the major players in the chlor-alkali plant business and now is entering, thanks to his huge chlor-alkali legacy and experience, into the green hydrogen space. We think we will have also a very good accelerated learning curve dealing with these guys and exchanging ideas on the technology evolution. On the PFAS, the regulation just started.
We are very happy to see this impressive growth in the pipeline of potential projects, and we are very also satisfied about five pilot units that have been deployed in the market or are going to be deployed very soon. We can expect order income in 2025, maybe for delivery in 2026. Volume-wise, we are talking about a few million projects. We estimate eight million projects of order income in 2025 for delivery in 2026.
Thank you.
Thank you.
The next question is from Isacco Brambilla of Mediobanca.
Hi, good afternoon, everybody. Three quick questions from my side. The first one is on the margin outlook for electrode technologies. When commenting about the third quarter, you mentioned negative mix, say, suboptimal scales, some optimization costs weighing on margins. Considering the reversal in top-line trends, how should we think about profitability in the final quarter?
Is the better scale enough to compensate for the revenue mix that the funding should continue to weigh a bit on margin? Second question is, again, on electrode technologies. You mentioned five million tons per year contracts equivalent available up to be taken in chlor-alkali next year. Could you help us have a sense of how this may turn in terms of revenue opportunity? Any kind of indication, say, more understandable for the financial community would be helpful. Last question is on energy transition. In August, with the first-half results, you commented current backlog is more than enough to ensure revenue growth in energy transition next year. Is it correct to assume this statement is still valid?
Thank you, Isacco. We start with the electrode technologies.
Yeah, we expect a substantial increase of sales in the last quarter compared to 2023 that will help us bring the business unit to a level of revenues that will be close, very similar to the ones of 2023, as we said. The marginality will not be different from the one that we recorded in the first nine months, but definitely the volume effect will help us reaching the target that we just communicated. So it will be more an effect of volume than increasing of marginality.
Okay. On the five million tons chlor-alkali, well, it's not easy to give you a straightforward answer because it depends a lot on the scope of supply we have for this kind of project. So sorry about the fact that I cannot provide you a very clear answer, but we can try to figure out a sort of range and provide it later.
On the ET backlog, yes, the current backlog that will not be executed in 2024 will be executed in 2025. It will be in a range of 1 GW, 1 GW plus kind of volumes. We still have room to accommodate something more, so we still have the potential to grow this trend in 2025. It will depend, once again, on the evolution of the projects and the timing that our customers will require for the project execution.
Okay, many thanks, both, for the answers.
The next question is from Christopher Leonard of UBS.
Hi, guys. Can you hear me? Yes, great. Hi. Hey, afternoon, thanks for taking questions. Maybe I could just ask three. So focusing on the midterm guidance for the water division, I think to 2026, you provided a CAGR of sort of mid-single-digit for the division.
But just focusing on guidance from Veolia, a peer of yours have said that they're sort of looking at 6%-10% revenue growth to 2027. And we've also got strong year-to-date nine-month growth in swimming pools of 13%. So do you think it's realistic to hold your guidance where it is at mid-single-digit to 2026, or do you think there's potential to outperform that? So that's the first question. And the second question also relates to water on EBITDA margins for 2024. Just thinking about what your expectation here is, looking into Q4, you said you expect a rebound in WTS, and you also have pools continuing to look like it will be strong. So is it possible that this will be your best quarter on margin with operational leverage coming through in Q4 for the water division as well?
And then last question from me is on green hydrogen and looking at that change in the Hot Deals pipeline that you've announced now at sort of 1.3 GW previously in June. I think it was closer to 3 GW. Some of those contracts that have slipped, is that related to Spain and commentary from guys at Repsol and Cepsa about their windfall tax on energy and what they might do with hydrogen projects? Any clarity there would be helpful. Thank you.
Thank you, Chris. So about the first question, of course, we will do our best to improve the CAGR on the water technology side. Actually, Veolia, we don't consider it a really good benchmark for us because Veolia is a multi-business company, very much focused on managing water utilities. So their technology part is a portion of their business and their business model.
So on our side, we are a purely technology company with systems on one side and pools on the other side. Though it's not fully comparable, nevertheless, we'll, of course, do our best, and we think we have also the tools in our hand to do as much better as possible in the next years in this business unit.
On the EBITDA side, Luca?
Yes, Chris. So with regard to the EBITDA, so the Q4, our guidance includes, let's say, Q4, which is, from a revenues point of view, stronger than the past year. So all in all, this will bring the water technology division to a growth compared to 2023. But margin in the Q4 won't be better than the previous quarter, or let's say slightly lower than the first nine months of 2024. So this is what we are considering today in our guidance.
Okay, on the Hot Deals, well, first of all, the Hot Deals revision has been a reality check that there was a very high activity that we had to provide you because, of course, it's a very well-known situation that there are some projects that are later than expected in terms of coming to FID. Spain is actually one of the most promising countries, or maybe the most promising countries in Europe, no doubt. In those Hot Deals, I confirm there are 300 MW of Cepsa that our joint venture is negotiating right now. I can go back to the question before about the five million tons in chlor-alkali. We made a quick check. It should be around EUR 200 million for the De Nora in terms of supply.
Thank you. I'd just follow up on the Hot Deals.
Just thinking about the Gigafactory ramp-up cost into 2025, I think for this year and 2024, you've guided that the headwind on the Gigafactory for green hydrogen was around maybe EUR 5-6 million on EBITDA. Is there anything you can do looking into 2025 if volumes at 2026 don't pick up materially to sort of reduce that headwind on the Gigafactory, or should we see that that cost is going to stay there into 2025 and 2026? Thanks.
Yes, Chris. So you probably know that we cannot reduce the amount of cost as these are planned according to the specific timeline agreed with the IPCEI. The impact on our P&L will depend on how the contribution of the IPCEI will be provided, let's say. And we might say that the negative impact on the P&L will go from EUR 5-10 million in 2025.
So it will be slightly probably higher than 2024.
So, I mean, looking into 2025, it's unlikely to see any margin progression then on the basis of the revenue guidance you've given, as in terms of green hydrogen shipments of electrolyzer electrodes?
Not from the Gigafactory point of view cost.
Exactly. Exactly. The Gigafactory is a timetable that cannot be changed in terms of construction of the factory and equipment to be installed.
Okay, thank you.
Then what has to be said, which is very important, is that in 2025, we expect to completely solve the majority of the issues related to the inefficiency of the production that we experienced in 2024, definitely. So this is something that will push up the marginality of the energy transition. We probably compensate, or more than compensate, the amount that we just told you with regard to the Gigafactory.
From this side, there will be definitely an improvement.
And then, sorry to be clear, the inefficiencies, you were talking to the supply chain issues that you had that slowed down production in the summer.
Yeah, I'm talking about the inefficiency regarding the announcement of the production capability in Germany that affected both the ET business and the electro-technology business, both, but more on the energy transition business, sorry. More on the energy transition business than the electro-technology business.
Okay, got it. Thank you.
Probably higher than the gigafactory impact in 2025.
The next question is from Alexander Virgo of Bank of America.
Thanks very much, Paolo, Luca, for squeezing me in. Just a couple of questions. I wonder if you could give us a sense of free cash flow expectations for the balance of the year, Luca.
Then on pools, just double-checking how much you think this strength of recovery is driven by restocking versus underlying demand.
Free cash flow.
Yeah, the free cash flow, we expect the total cash flow to be around EUR 35 million-EUR 40 million negative, including the buyback cash out that we had in the first part of the year, driven by the, let's say, positive, very positive operating cash flow, as you saw in the presentation. And a slightly negative variation of net working capital due to the acquisition, to the purchase of some noble metals that we plan to have at the end of the year.
So without the buyback, we would have been, let's say, more or less in, let's say, at break-even, considering the high capital expenditure compared to the historical amount of De Nora.
Okay, thank you. And on pools?
On pools, let's say that the overstocking that they made, it was due to the COVID situation. So looking at the fact that I think they learned a very, very tough lesson, and I think some people really suffered from this overstocking situation in the management of those companies, they've been very, very careful in managing the stock in the following times after this situation. So we see that what is happening in the market is mainly driven by replacement business, which is our aftermarket, considering that we have created an enormous additional installed base between 2020 and 2022. Now, of course, we are starting enjoying an additional aftermarket coming from that installed base, but also by the continuous conversion of existing traditional pools into modern, fully automatic chlorinated pools. So we think that this growth is very much healthy.
Okay. Great. Thank you.
You're welcome.
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Thanks, everyone.
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