Good afternoon or good morning to everyone, and welcome to EL.En.'s H1 2021 financial results conference call. Today's call will be recorded and so will be an opportunity for questions at the end of the conference call. With me on the call, Andrea Cangioli, EL.En.'s Managing Director, and Enrico Romagnoli, EL.En.'s Chief Financial Officer and Investor Relations Manager. Before we begin, please note that there are remarks management makes on the conference call about future expectations, plans, and prospects, and forward-looking statements. Certain statements in this call, including those addressing the company beliefs, plans, objectives, estimates, or expectations of a possible future results or events, are forward-looking statements. Forward-looking statements involve known or unknown risks, including general economic and business conditions, and conditions in the industry we operate, and may be affected should our assumptions turn out to be inaccurate.
Subsequently, no forward-looking statements can be guaranteed, and actual future results, performance, or achievements may vary materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation about the content, nor to update the forward-looking statements to reflect events or circumstances that may arise after the date hereof. At this time, I want to turn the call to Andrea Cangioli. Please go ahead, Andrea.
Thank you, Bianca. Thank you very much. Good afternoon, everybody. Thank you for attending this conference call. With Enrico Romagnoli, we will discuss and comment the financial results of the El.En. Group in the first six months of 2021. As we disclosed last Friday with our press release after the board of directors meeting, our financial results were very strong. Constant growth and good profitability have been El.En.'s business card over the last years. We have always shared with you our ambition to continue the run along our growth path for several years, based on the growth expectation of our markets and on our efforts and investments aimed at setting up an organization capable of seizing the market opportunities, and to create new opportunities through the continuous innovation of our product range.
When presenting the EUR 273 million in sales, the EBIT margin over 11%, and net profit over EUR 20 million for the six months, we are very pleased, not only for the record results itself, but also for how these results represent the materialization of our plans. They are based on our long-term planning with the infrastructural investments and the yearly expense aimed at progressively improving our capabilities in research and development, in clinical studies, in marketing, and in regulatory, just to mention some of the areas and the functions that were deeply strengthened in the last years. Grounds for the 2021 performance don't rest in one single product, or one single customer, or one single market, but are widespread in the capabilities that the various functions of the group reached, the knowledge actively cultivated and strategized over the years that allows us to continuously generate business opportunities.
At the same time, our market recognition is becoming wider and more solid. Our brands in the medical business, DEKA, Quanta, Asclepion, ASA, and Renaissance, are not anymore and not only seen as the brands of a smart, innovative organization challenging the market leaders, but are stable and reliable reference for our customers and benchmark for our competitors in several application segments. In the industrial business as well, Cutlite and Penta are acknowledged today of an interesting market recognition in Europe and in China, respectively. In China, our presence in the sheet metal cutting business is now roughly 15 years long, and the brand Penta is recognized as one of the leader with its hybrid Euro-Chinese technology offer.
Only in the very last years, Cutlite was able to gain in Italy and Europe the position and size that are making it an actual player on a market dominated by giants, where five years ago, our presence was negligible. When looking at the details of the financial results, comparison with the first semester of 2020 are not very meaningful this time. The first months of last year were severely impacted by the pandemic. Our business on the industrial market in China was halted from the middle of January to late March in Guangzhou and to April in Wuhan.
In Italy, we had to stop industrial business operation in March and April, and worldwide medical laser systems demand abruptly dropped at the end of March. It's more worthy to compare the current results with the first half of 2019, reporting the average growth from the last semester run by the group in a pre-pandemic condition, let's say in a normal environment. Average 2019/2021 growth for the first six months was 20.9% on a consolidated basis, and 14.4% and 29.1% respectively for the medical and the industrial sectors.
These numbers are telling us that over the last two years, despite the revenue slump of the acute pandemic phase, our growth was stable, strong, and well above the expected growth in our reference markets. Success in the medical business was driven in first place by aesthetics, where our solutions for hair removal, body contouring, tattoo removal, and rejuvenation led to solid growth.
Performances were strong for our publicly reporting peers, too. We do feel that we gained market shares in certain application segments, especially in hair removal. The negative effect of COVID was deeper and longer lasting in our surgical application, which are registering a slower recovery, especially in the system sales. Growth in the industrial business was twice as fast as in the medical. By the way, getting close to balancing the ways of our two sectors in terms of revenues. This was mainly due to the traction of the sheet metal cutting business in China and in Italy as well. The market size is continuing to enlarge.
The effects of the improvements in the technology, thus in the productivity and the effectiveness of our systems in their traditional application fields and in more applications that are being opened and made affordable or simply doable by the improved performances of our systems. Large infrastructural investments have been performed and are being carried on in order to adapt our production capacity in China and in Italy to the expanded market size. We are talking of a fairly large investment, which to date is totaling up EUR 30 million spent in new plants, about EUR 17.5 million in China and EUR 12.5 million in Prato for Cutlite Penta. As our results are testifying, the transition phase for the most acute phase of the pandemic is reserving us sustained demand levels in almost all of our businesses. Is it a rebound?
Is it driven by the optimism tied to the expensive policies that several countries outlined from last spring and are promising to sustain over the next year? It's very hard to tell. What we see is a very strong demand for our products, stronger than we had modeled. We shared with you how we were expecting strong growth, we were expecting the pandemic to be a parenthesis after which growth would have showed up again. In fact, the current sales and order bookings volume put us ahead of where we had planned to be today in our planning made prior to the beginning of the pandemic. The pandemic is still there, with the unpredictability of its effects, not only in terms of the spreading and mortality of the infection, but also with the complex rebounds on the markets.
The most evident negative effect that we currently are experiencing is the strain in the supply chain, suffering of the shortage of certain materials, ranging from electronic components to metals like aluminum and copper. The real effects on us are uncertainty in the delivery terms of certain supply, price increases of several components, and increase in our stock in order to cover the longer supply lead times. A few words on our cash position, which is becoming stronger as an effect of the increased profitability, which is covering the financial needs given by growth and investments. It is noteworthy to remember that after the suspension of 2020, EL.En. is back paying a dividend to its shareholder in May 2021. Finally, at the beginning of the summer, we performed our second one-to-four share split. The first one took place five years ago in 2016.
The goal is to keep our share price in the apparently more attractive range from EUR 10-EUR 40. Moreover, during the last weeks, for the first time, our market cap exceeded EUR 1 billion, a remarkable milestone, and we hope a further investor attraction enabler, consistently shifting the company towards the mid-cap area. At this point, I'm done with my general introduction. Please, Enrico, go ahead with your part of the presentation.
Thank you. Thank you, Andrea. As usual, I'm going to give you some details on our last financials. In the first half of 2021, in continuity with the end of 2020, the growth progression of the group continued after the parenthesis due to the effect of COVID. As you can see in the slide, we did a comparison not only with the 2020, but as already said by Andrea, with the 2019. In H1, the turnover increased of 68% and reached EUR 274 million. The gross margin stood at EUR 99.9 million, an increase of 66.9% compared to the first half of last year, thanks to the significant increase in turnover.
The gross margin percentage has slightly decreased, but it has actually improved both in the medical and industrial sectors, and the overall decrease is given by the increase in the weight of industrial sales, which structurally have a lower margin compared to the medical. On June, the gross margin of medical was 44%, when the industrial was 27%. Operating cost amounted to EUR 20.8 million, an increase compared to June 2020, but with a sharp decrease in the impact on turnover, which went from 9.9% on June 2020 to 7.6% on June 2021. For this cost aggregate, it's significant the comparison with 2019, when the total amount was higher than 2021. In this cost aggregate, we benefit from the lower commercial expenses, and we had significant savings for international travel and trade fair and congress activities, which particularly in the medical sector represent a significant cost.
The only trade fairs we were able to attend in this period were held in China for metal laser cutting sector, in Japan for beauty treatment sector equipment, in Italy and Europe, and in Dubai for specialized congress of various medical disciplines. In the coming months, participation to important and numerous events is expected. It will still take a long time before returning to the pre-COVID intensity of these activities. Staff costs equal to EUR 40 million are up compared to the EUR 29.3 million of June 2020, with a lower impact on turnover, decreasing from 18% in 2020 to 14.6% on June 2021, and lower than 2019 too. On June 2020, we had more than 1,800 staff. EBITDA was EUR 39.1 million, almost three times that 2020 and double than 2019. The sales increased at 14.3% compared to the 8.9% of last year.
Amortization and other accruals saw a marked increase, growing from EUR 5.2 million on June 2020 to EUR 8.3 million on June 2021, while their incidence on turnover remains substantially unchanged at 3%. The main increase was warranty provision to take into consideration the increase in sales volume and some extension of warranty period. In H1 2021, the total amount of fixed cost, operating cost, staff cost, and depreciation saw an increase of almost 36%, but the impact on sales reduced from 31%- 25%.
Thanks to the increasing gross margin and to the reduction of impact on fixed cost, operating result marks a positive balance near to the EUR 31 million, with a strong increase compared to the EUR 9.3 million for the first half 2020, and with an incidence on turnover increasing to 11.3% from 5.7% in the same period of last year and over 2019, when it was 8.9%. Pre-tax was EUR 32 million with a positive effect of Forex, mainly due to the U.S. dollar, which appreciated against the euro in the period. Net income was EUR 22.4 million compared to the EUR 6.4 million of H1 last year. The net financial position had an increase of approximately EUR 15 million in the period, from EUR 64.2 million on December 2020 to EUR 78.8 million of June 2021.
In accordance with the European Securities and Markets Authority requirement and adopted by Consob before the financial as of June 2021, the net financial position need to include the long-term payables, even if not referred to financial liabilities. The main long-term debt is towards the former minority shareholders of Penta Laser Wenzhou for RMB 40 million, approximately EUR 5 million, to be paid in accordance with an earn-out clause included in 2020 sales contract in case of an IPO of Penta Laser Wenzhou within five years from the date of purchase. In accordance with this new requirement, we restate also the financial position at the end of 2020. In the first six months, CapEx were EUR 11 million, when for the whole year 2020 were EUR 13 million. The main investment was the new building of Cutlite Penta in Prato for EUR 5 million, purchased with a leasing.
The cash generated by operating activity covered the needs arising from the increase in working capital physiological in this phase of rapid growth, those resulting from fixed investment and the payment of dividends to which EL.En. and the subsidiaries return after a one-year suspension. The graph shows a positive cash flow for the items of other current payables and receivable determined by the increase in advance received from customer, a practice that takes on a significant volume in China, and by that of tax payables as a result of our income and higher cost for direct taxes allocated in the period. The capital increase collected by the company due to the exercise of stock option assigned to employees amounting to EUR 4 million in the half year, and also contributed to the improvement of the net financial position.
Since the comparison with last year is not very significant, we also reported for the sales and the turnover, the comparison with 2019. In 2021, the medical sector was accounted for approximately 54 of the group turnover. The CAGR for medical sector 2019/2021 was 14%. The jump in sales of aesthetic segment has a very significant value, with the best growth rate since 2019 in medical sector. It is based on a solid growth, in particular in hair removal and body contouring application, thanks to an offer of a novelty system that are able to meet the needs of a demand, that after the pause of the first wave of the pandemic, is gradually returned to growth.
The lockdown restrictions have had more deleterious effect on the surgical segment than on the other one, due to the difficulties of accessing hospital and the focus of them on the COVID treatments. We hope to be able to recover in the coming quarters. Excellent is the recovery in physiotherapy, where ASA is back on the path of growth over the past year. The turnover of after-sale service was also good. It includes the technical assistance service and the sales for spare parts and consumable. The recovery could have been more important if external production difficulties had not limited us in the first month of the year in sales of optical fibers for urology. The critical issues has been resolved, and already in the second quarter, the volume of product and turnover was largely satisfactory.
For industrial, the industrial sector has a CAGR of 29%, higher than the medical sector, with an exceptional performance recorded by the cutting sector, which is working at a very high rate, +35%. These are the production and sales volume for which the production capacity has been prepared with important investment now used in an increasing manner, with a beneficial effect also on the income statement, thanks to the operating leverage. The trend was also very positive for the other main segments, such as marking and laser sources in rapid recovery from the last year. Excuse me. For what concern the breakdown by area, the growth is significant in all geographical areas in which the group operates for medical and industrial sector. Andrea, please go ahead for the guidance.
As we said, in the press release, we are updating and improving our 2021 guidance. The projected 2021 sales, of course, counting there won't be any material disturbed by the development of the pandemic and by the supply chain strains and shortages I mentioned before. The projected sales should exceed EUR 550 million. Driven by a further increase in revenues, EBIT in the second half should beat the results of the first half of the year. We are done at this point with our presentation. The Q&A session can begin.
Yes. Okay. Please, before asking your question, please introduce yourself. If someone need to ask a question, please book your question on the chat of Bianca Fersini. I will be pleased to follow the order. We have one question, Andrea, from François Digard. Please go ahead, François.
Hi, everyone. Thank you for taking my question. The first one is on the breakdown of the second half growth that you see between your medical and surgical segment. Can you give us a bit of color on what kind of growth rates you are expecting? I see that some of your U.S.-listed medical laser peers expect a top-line growth of approximately 20% in the second half, compared to the second half of 2020, which was rather strong. Do you expect the same for your division? For your industrial segment, the EUR 67 million of sales seen in the second quarter, is that your new baseline speed? Can we expect a similar amount in the coming quarters as well. Can you just please comment on that? On your new guidance for the full year 2021 EBIT, can you give us some more details on these expectations?
I saw that you booked a provision of EUR 2.8 million in the first half. How do you reflect this in your new guidance? Is it reasonable to expect an EBIT margin of 12%? Last question, going into 2022, do you have any visibility for growth for next year, and can you share with us your expectations? Thank you very much.
Thank you, François. Technically, I cannot answer any of your questions because though we have our guidance, and the guidance is what we gave, and so more than EUR 550 million and improved EBIT in the second half. Try to give you some color you wanted. What I can tell you is that we are experiencing sustained demand in medical and in industrial, and therefore we expect strong growth in both areas. In this moment, I can tell you that we are expecting a relative, not absolute, slowdown in the Chinese market for industrial laser application, but we are nevertheless expecting an overall growth, which should be able to reach the consolidated target we mentioned. Yes, you are right. In the first half EBIT, we had some extraordinary accrual, which probably is not to be replicated in the second half.
For this reason, we could expect an improvement of the EBIT, not only as an effect of the increased revenues, but also as an effect of the missing accrual that we shouldn't have, again, the accruals as we had in the first half. What we expect to be a little bit more expensive, and therefore to cause a cost in EBIT, is that we are slowly going back to congress and fair activity. At the end of this week, the anti-aging congress will take place in Monte Carlo, in Monaco. For the first time, we will be able to gather our distributor in a distributor event, something which had not taken place for the last two years.
We are attending in person this event, which is in the category of events which we hold abroad and which are quite expensive, which had been missing from our activities and from our P&L in the last 18 months. Slowly they are showing up again. Nevertheless, we can confirm that we expect EBIT to be higher in the second half than in the first half. Since we were above 11%, yes, we hope to be able to get closer to 12%, but we don't give any detailed guidance on that number.
On 2022, any first expectations you may share with us?
On 2022, in my presentation, I somehow mentioned how at this point we find ourselves well ahead in the growth path that we had. If I look at what we have now in orders, I believe I can tell you that we have a very solid position, and that some of our backlog will probably flow into 2022, because we ask the customers to plan deliveries in order to be able to set up the appropriate production capacity and to be able to meet their requests. Currently, what we see is a strong second half of 2021 with a good momentum into 2022. I'm not telling you anything new. Our market is a market in which orders are not placed with a financial collateral. We have seen, back in 2020, how quickly our huge backlog was basically canceled by our customers.
Therefore, even though we are extremely confident, it's not on an order book that we piled up today that we can count for 2022. What we can count for 2022 is the strength of the market, the good conditions of the market, and the good positioning that we still have and that we have today. For this reason, all I can tell you about 2022 is that we are very optimistic about what can be done in 2022 based on the current information. We are not committing, and we are not promising anything today, as usually trying to be very prudent, considering the nature of our markets and of our demands.
Well, Andrea, we have a question from Andrea Bonfà of Banca Akros.
Okay. Thank you very much, and good morning to everybody. I got especially, for the time being, two questions. One is related to the industrial performance in the second quarter. It seems that Italy and Europe perform extremely well, and almost accelerating from Q1. Is that again a trend that you are experiencing? What's your view on this specific geographical performance, if you can comment on that? Secondly, if you want, it's a provocative question. You are mentioning that you are returning to spending in conferences and likely marketing. You are growing at 70% year- on- year, or 60% if you look at H1 2019, and the question is, do you need these kinds of expenses? Because you are performing so well without them, that maybe they are not so necessary.
I understand it's a provocative question, and of course, you need to have some kind of marketing activities, but I would like to have your opinion on future budget on these kind of expenses. Thank you very much.
Thank you for your questions, Andrea. Starting from Italy and the industrial, we're doing very well. I believe that our facility in Italy has a very, very good strategy and has a very, very good positioning. The extraordinary results of Q2 2021 just demonstrate how strongly we were able to attack the markets, how we are gaining shares vis-a-vis our stronger and larger competitors, and the trend is currently still extremely positive. As I mentioned also in the first answer I gave, we are expecting a better performance of the Italian activities than the Chinese activities, of course, relatively speaking, in this second half of 2021. We have been extremely aggressive. We have products which are highly performing.
We offer them at a price which, of course, is not extremely lucrative for us, but it has a good industrial profit, which is allowing us to make good profits on one side, but also to rapidly increase our share, to rapidly increase our position in the market, and to have more visibility on the market. This is accruing in a virtuous process, which is making Cutlite Penta a very, very successful company in these months, in these quarters. Yes, your question is a good question, it's a very good question about marketing expense, we are always thinking about this. Excuse me. Of course, in these months, we are experiencing this very positive situation in which we have a large quantity of orders, but we have not spending the amounts of money we were spending before in order to generate those orders.
Logic would say, "Well, you have all these orders. Why are you spending money? Why do you continue spending money?" I believe that there was an overshoot in expenditure, which ended with the pandemic. In 2019, the marginal benefit of the monies spent in marketing was getting quite low. There has been an overshoot due to the pandemic, in which we couldn't do any international marketing activity. I believe that since we are in a competitive market, since marketing and marketing activity presence is part of the marketing mix, I believe all the companies will go back to some marketing in presence. All the company will start attending the main congresses. Probably, there will be less attendance to the secondary congresses. There will be less travel.
By the way, in this case unfortunately, we are not spending any money because these congresses is one of the various activities for which a ticket was given when the first congresses were canceled. If we didn't attend this time, we would lose the down payment we made at this point two years ago. We are not creating an additional expense by participating to this congress because if we wouldn't participate, we would have lost everything, down payments to hotels, down payments to the fair organization. For what I believe is going to go on in the next years, I believe there will be a slow return to the expenditure, and I believe that finally we will remain lower in expense than we were at the end of 2019.
Thank you very much, Andrea.
Andrea, we have one more question from Andrea Randone from Intermonte. Go ahead, Andrea.
Thank you, Bianca. Good afternoon to all of you. I have a couple of questions, if I may. The first one is about your aesthetic business. You already commented on top-performing applications. I wonder if you can provide additional comments on geographical trends, and more in general, on what is your perception about business performances of your customers in this segment. The second question is about your production capacity and, more in general, about your future CapEx plans, if you can provide us an update. Thank you.
You meant customers or competitors?
I meant customers in order to understand if the business is going very well for them, and they require new application, new machinery. For instance, we talked about the people going back to gyms, and they ask for new equipment, for this restart, and I wonder is this something similar in aesthetic centers, or what you see in terms of business trends for your customers?
I believe that you made a good point. Our customers in this moment are working at full rhythm. They are facing a very strong demand. This is what is giving us a very strong demand for systems. People have been willing to spend money in aesthetic treatments. This has been a psychological effect after the lockdowns. This has been also a disposable income effect, due to the fact that not many leisure expenditures have been allowed. Bottom line, demand has increased and we were in the position to be able to fulfill a high and growing level of demand. The geographic areas in which we have been particularly successful are, at first place, the United states. In the United States, we are encountering great success in aesthetic with two distribution channels.
One is the distributor for aesthetic application for the brand DEKA and for the brand Quanta, which is Cartessa, and the other one is our long-term partner, Cynosure, which is selling our hair removal laser in the U.S. and also worldwide. We have been extremely happy for the success on our professional aesthetics market in Italy and in Japan. It's not medical aesthetic, it's the spa and salon aesthetic, and it has been extremely successful, both in Italy, in Japan, and also in Germany. For what concern production capacity, you're right. We have been investing in production capacity from years, but the volume growth has been constant in years. We have to continue to invest in the further increase of our production capacity.
For what concerns industrial laser applications, we are building new facilities in 2021 in the city of Lianjiang and in the city of Wenzhou, which will bring to five, the available facilities. During the year of 2022, we might enlarge also our facility in Wuhan. Currently, we do not own a facility in Wuhan, we are on a rent. Also based on the opportunity to receive a significant support by the local authorities, we might be considering the further expansion of the Wuhan's production capacity, too. For what concerns medical business production capacity, we just ended a round of enlargements of the companies in Germany, in Quanta System, in ASA. We have enough room to expand capacity without large infrastructural investment.
Should the trend continue to be as strong as we have experienced it in the last months, we will need to redesign certain product line, not only by expanding our capacity, but also by allowing our partners to expand their capacity with us. Please keep in mind that we do not bear the full production cycle for each of our products, but for several products, we have third parties which perform a part of the production cycle. We will have to reinforce the network of third parties which are performing some of the manufacturing job for us. I don't see this as a significant problem. We have done this in the past, and the growth of EL.En. has also been the growth of our partners over the last years.
Thank you. Very useful.
Andrea, we haven't received any other question. I want to ask to investors if there are more questions. Some more question?
Yes, Bianca, if I may. I got a follow-up question.
Okay.
Okay, regarding the gross margin level. H1 2021, I see a nice recovery from actually the second half of 2020, where the medical had some problems. You are still below the level of H1 2019. Is that a reflection of the current inflationistic environment? Or what are the reason why, let's say, your gross margin cannot return to H1 of 2019 levels? Thank you.
It's an issue of mix. Also within each of the sector. Let's say, within the industrial sector, the weight of China and the weight of sheet metal has become larger and larger. Therefore, we know that in order to grow in this market, we have to run at lower margins. So, in this segment, we are growing, but the margin remains stable in general, but there's a higher weight on the lower margin sales. This is somehow something we have to stand, because it is very difficult to increase margins in the very competitive markets that we are working on. Moreover, it was a strategic decision to have low margins in order to gain market share and to become an entity with a decent revenue.
Don't forget that in the sheet metal cutting, the large competitors are competitors of the size of EUR 1 million, Bystronic, EUR 2 million and change, TRUMPF. EUR 2 million only, excuse me, EUR 1 million only in our segment, Pennsylvania. We need to increase dimension in order to be able to continue to be competitive against those giants. For what concerns medical, it's an issue of mix. Of course, we also have to consider that the large increase in revenue is due also in increase in the hair removal market, which is the most standardized of the markets. High volumes, we need to sacrifice some of our margins. If we go back in 2019, there was more room for newly released products, which were bearing higher margins.
Today, the prevalence of hair removal and of certain customers in which we make volumes and not very high margins, like the Cynosure customer that was mentioned before, allows us to have a larger business, allows us to have higher gross margin in terms of EUR. Does not allow us to expand the margin on sales in terms of percentage. I don't see under this point of view, great changes going forward this year, because structurally we will have more or less the same kind of revenues. What is going to improve, is improving at the current date. The U.S. dollar exchange rate is stronger now than it was at the beginning of the year. For this reason, we are going to get more margin in the quite large volumes of sales we have to the United States.
Last but not least, we are not yet experiencing a real effect from the cost increases that we had. Today we are maintaining more or less the same prices and the same margins, because even though we see cost increase in several components, those are not material in the total effect of our, let's say, bills of materials. There is a question mark here on how the raw material cost increase on the midterm will impact. The good news here is that they will impact on our cost as much as they will impact on the cost of our competitors. If we will be forced, in order to maintain margins to slightly increase prices, this will be something to which all our competitors will be exposed.
Thank you very much. Just two small follow-ups. If, let's suppose that Italy and Europe in industry will outperform China, and then urology in medical will resume its growth. Will normally gross margin improve?
Yes.
Okay. Thank you very much.
Yes. You made two assumptions. Based on these two assumptions which you made, we should have that effect.
Okay, thank you.
Andrea, we have one more question from Francois Robillard from Intermonte. Go ahead, Francois.
Thank you for having me again. Just a quick one on slide seven, on the working capital components. There's a trade working capital, has had a negative impact on your cash flow in this first half, but you have some positive effects from other receivables and payables. Can we expect these positive effects seen in the first half to reverse in the second half? Same question for the trade working capital components. Thank you.
The answer to the first question, if this effect should reverse, no, I don't believe so. Even though, the change in other receivables and payable or short-term payable is mainly made by two components. One is down payments from customers, and two is short-term liabilities for income taxes. Since I am telling you that income will increase, or we hope that income will increase in the second half, the short-term liability for taxes shouldn't be decreasing. For what concerns down payment for customers, this depends on the balance on the total backlog. Typically, a higher backlog means a higher payable versus customers for down payments. If the trends continue to increase, and if we continue to maintain the backlog that we have today, we won't see a reduction in the payables to customers for down payments.
Of course, at the moment that we will see a reduction in the payable to customers for down payment, we will have those down payments converted into sales, so we will have more revenues. Also it could mean a slowdown in order bookings. This could happen, but at the same time, we should also see a decrease in net working capital or at least in the inventory components of net working capital. Because typically, what the down payment from customers are used for, is to pay for the inventory increase that is needed in order to deliver the units to the customers.
Thank you very much.
Andrea, we have one more question from Katharina Raatz from Berenberg. Go ahead, Katharina.
Perfect. Thank you very much, Bianca. Hi, Andrea. Hi, Enrico. I hope you're doing fine. It would be helpful for me to have a better understanding on the current market environment that you see in China. First of all, it would be great to have a bit more context to what has been the growth contribution in H1 from China, and how does also the current market environment develop? It's helpful that you already elaborated a bit on your potential capacity expansion going into next year and also degree of competitive market share gains versus peers, but it would be very helpful for me to have a bit more detail on China.
Yes. The situation is that they were a very good contributor to our results in the first half. Enrico, you can show the geographic increase of sales by area. You see the column with EUR 81.3 million in the rest of the world? This is mainly China. It is mainly our Chinese business. You see they had a strong growth. Of course, not as fast as we had initially. It was 44%, but considering the size of the company, an average growth of 24% over two years is an outstanding result. What we have experienced in the very last months of this 2021, during the summer, is that the rhythm of order bookings has a little bit slowed down over the first months of the summer, which is something which has always taken place, with the exception of last year.
Typically, with the summer, there is a slowdown in order bookings. This had not taken place in 2020. There were obvious reasons for this not happening in 2020, because in 2020, we were getting out from the lockdown. We had a progressive increase of order booking from the spring to the summer and to the fall. The outlook that we have and that we see from our competitors today, I'm talking September 13, is that we are getting into a fall season, which is scheduled to be a good one after this small slowdown. We expect to progressively increase sales toward the end of the year, and we count on a good 2022. In general, we are running at very high speed.
The whole economy in these months of summer, the whole demand has been running a little bit lower than it had been running in the spring months. We will need to wait a few months to see if this slowdown effect, that from what we can see at the beginning of September is already over, will continue over the time, or if, as we count on, the run of the Chinese economy for our segment will continue very strong over the next months.
Great. Thank you very much.
Some other questions? If there are no more questions, we finish this conference. If you have some questions to investigate, please do not hesitate to contact Enrico Romagnoli. He will be happy to answer your question. Thank you for attending this conference, and we hope to have you all at the next occasion. Good afternoon to everybody.
Thank you. Thank you to everybody. See you soon, hopefully.
Bye.
Bye.
If you call us for any further questions, we're always available for explanation for all of you. Thank you, Bianca Fersini. Thank you, Enrico.
Bye. Goodbye.
Bye.