Good afternoon, this is the conference operator, Malcolm Hammond. Thank you for joining the FILA Group First Quarter 2025 Results Web Call. All participants are in listen-only mode, and after the presentation, there will be a Q&A session. The call is hosted by Mr. Luca Pelosin, COO, and Cristian Nicoletti, CFO. Mr. Nicoletti, please go ahead.
Good afternoon, everyone. I am Cristian Nicoletti, CFO of FILA Group. I am together with Luca Pelosin. We go through FILA Group's results for Q1 2025. We are very pleased with our performance in Q1 2025, as it marked a positive start to the, in a volatile environment, with increasing solid operating profit expansion and FILA stake in DOMS 26.01%, remaining close to all-time highs. Regarding DOMS, I am also happy to announce that in April, the DOMS shareholder meeting approved the new shareholder agreement between FILA and Indian majority shareholders. Diving into the details, the growth is in Q1 2025 stood at EUR 136.3 million, plus 3.4% versus Q1 2024, and plus 4% on comparable FAQs.
Thanks to the partial recovery of the one-off SAP AWM disruption of Dixon Ticonderoga US in Q1 2024 and continuous positive trend in Europe, adjusted EBITDA achieved EUR 22.6 million, + 7% versus Q1 2024, plus 5.2% without year-to-year 16 principal, with margin improvement to 16.6% versus 16% in Q1 2024, benefited from the favorable product mix coupled with ongoing FSC actions. Adjusted operating income came in at EUR 12.9 million in line Q1 2024. EUR 13 million financial results stood at negative EUR 9.9 million versus EUR 3.9 million in Q1 2024. These results were impacted by negative FX effect for EUR 1.6 million, of which EUR 4.4 million of financial assets held by FILA in US dollars using an exchange rate of 1.08. These non-cash and non-current assets led to a decrease in net to EUR 0.9 million.
Free cash flow to equity was equal to EUR 55.5 million versus EUR 40.6 million in Q1 2024, in line with the expectation as a result of the seasonality of the first quarter, with increasing working capital absorption driven by receivable. Net financial position was equal to negative EUR 230.8 million in Q1 2025, with EUR 132.2 million net reduction versus Q1 2024. Thanks to the strong cash flow generation, DOMS disposed for EUR 18.7 million. Net bank debt was EUR 176.7 million in Q1 2024 versus EUR 303 million in Q1 2024. As mentioned earlier, in April, DOMS shareholder meetings approved the new shareholder agreement. These agreements will regulate the strategic relationship between FILA and DOMS on governance, industrial and production assets, M&A transactions, and dividend distribution, with a clear and lasting framework.
Finally, as far as the outlook is concerned, the achievement of the 2025 guidance remains unchanged, albeit subject to potential adjustments during the year due to the uncertainty arising from tariffs and the related effects on the global macroeconomic situation, in particular on consumption in the U.S. Thank you all for your attention. Now, I'd like to open the floor for questions.
Thank you. We will now begin the question and answer session. To enter the queue for questions, please click on the Q&A icon on the left side of your screen. When announced, please click continue on the pop-up window. If you are connected in audio only, please press star and one on your telephone. The first question is from Niccolò Storer of Kepler Cheuvreux.
Thank you. Thank you for taking my questions. I have a couple. The first one is on the U.S. market. Basically, you have not recovered the ground lost last year with your system disruptions in March. I was wondering what's been happening there, where you see weakness. Is it more related to finance or school products? I mean, don't you see the opportunity to benefit from the current tariff environment to gain market share from competition in the coming months? I mean, if the situation remains as it is today, do you think that the potential negative volume effect is going to be stronger than potential gain in market share because some of your competition basically is no longer profitable given the tariffs? The second question is a clarification on your corporate governance. Basically, it seems that the relevant threshold for your partnership with DOMS is 20%.
Is it fair to say that you might go down to that level if you wish so? Can you remind us if you have at the moment a lock-up after the latest placement? Thank you.
Thanks, Nicolas. To reply to your first question, we did not fully recover the revenues we lost last year for the WM implementation. You should remember, 2023 decided to bring this subsidiary with better profitability and better EBITDA ratio. Indeed, this is in the numbers we achieved starting from end 2023. This happened also in 2024 because not all the lines have been, let's say, continued or the vision of the business. What we presented in 2024, and it is also for 2025, is a company with a more solid and sustainable business, mainly in terms of portfolio and EBITDA ratio. In addition, you know very well this market is made by a few large customers. Any decision from our side or from their side could impact in one way or in another, in one direction or in another, the revenues.
I can confirm the majority of the changes have been driven by us to, let's say, get the achievement of the targets that we fixed. Another point to consider is the uncertainties on the tariff. It was something in discussion since the new president was in charge, but the disruption to the market arrived in late February. All of these disruptions are manageable from our side. We already told many times, but there is a market effect because all customers we are dealing with are now waiting to understand what strategies they will put in place to face this different environment. What we see in this moment, despite we have a good order portfolio for the replenishment, for the daily replenishment, they are buying just what they need, or more than this. They are also reducing the stock and controlling better their working capital.
We already told the U.S. market is a little bit soft since the beginning of March. This situation stands until a few days ago when finally it seems for the time being the tariff structure is not final, but at least is fixed for a period of time. It's true we can have benefit from this tariff implementation if it will be final, but it is something we can discover only late in the year or better next year because the majority of our customers have a long supply chain and they plan purchases well in advance compared to the BTS. At the moment, the fulfillment for the BTS requirement, mainly for private label, but not just for private label, has been already defined before this, let's say, tariff disruption.
At the moment, what we see in the market, our customer lost and waiting to understand what to do also because more than customers, also from our view, US consumers are also very attentive in purchasing goods because also they do not know what will happen in terms of cost increase. Whenever in the market there is something uncertain, the natural reaction is to wait. For the second question, I leave it for the corporate governance.
Thanks for the question. Related to minimum threshold, as we see during the STAR conference, we confirm at the moment to maintain this 26.01% of ownership. We confirm that is the threshold of 20%, but at the moment we have no idea and future problem to reduce our stake in DOMS at the moment. Because as the agreement confirms, we see the relation with DOMS as a very important point for commercial M&A and strategic operation in the future. Related to lock-up, we have defined in EBITDA that the lock-up is after three months of the EBITDA, and at the moment it's expired if we sold the other part of this mistake.
Thank you.
The next question is from Alessandro Cecchini of Equita.
Hello everybody, and thank you for taking my questions. This one actually is on, I mean, Central and South America. So basically it was -2% down. What is your main expectation for the rest of the year now that the situation in Mexico has been, I mean, confirmed versus U.S.? Is this offering to you, I mean, a sort of pickup? You see some improvement in the business. My second question is instead about still North America. From my understanding, basically your order book is expected if you consider it positive. Do you expect a positive performance in the U.S. in the second quarter? You are, I mean, waiting for more visibility for the rest of the year given sellout, etc. Just to understand if this is the right way to analyze the North American performance. My last question.
You confirm, I mean, the outlook, but with some, I would say, wait-and-see mode in terms of we will see about probably second half how it's going. Current consensus is already below your guidance in terms of EBITDA. Do you think that this more prudent approach by consensus is the right one at the moment considering your expectation or your current backlog, etc.? Thank you.
Thanks, Alessandro, for your reply to your first question. Central and South America is slightly below last year, but we need to analyze better the composition of this number. Of course, we have Mexico exactly in line with our expectation. Mexico for us is a company that after COVID was managed much better, and we do not see any issue for this market. On the contrary, we have other subsidiaries in South America like Brazil, which is not performing like last year. At the moment, what we can say is probably a switch of sales compared to one year to one quarter to another quarter. For U.S., we confirm the order book for the BTS is in line with our expectation. It is difficult to say what will happen in the second quarter because what will drive U.S. is mainly consumption from the end consumer.
As I said, at the moment, what we see is consumer very attentive in buying stuff and customers a little bit lost and also them waiting to understand what will happen to the market. To predict what will be the second quarter at the moment is pretty impossible. We will see in the next month. We will start shipping from late May and June the first BTS orders, and we will see. I confirm replenishment are softer than this year, and talking to customer, it is something they are driving. It is their decision to have their working capital really under control. None of our customers at the moment are building stock as usual. The key point will be the end consumer consumption for the Q2 and in the forward. For the outlook, I need to.
Just another point related to Mexico. As Luca said, we confirm that is in line, but take care also that is for our point of view in a positive result considering the impact of the communication of the tariff. Because when Trump announced the tariff, the main impact of the tariff was in Canada and Mexico. Has happened in Mexico also in the U.S., sorry, also in Mexico as an effect on the consumption. Maintaining the same trend of the good trend of 2024, let me say that is a positive result. We have to take this point considering the evaluation of the DOMS performance. Related to outlook, as Luca mentioned, we are in a moment that we confirm that our target is the guidance, let me say, but at the moment there are very volatile uncertainty, and we prefer to take further information in the future.
Okay. Many thanks.
As a reminder, if you wish to ask a question, please click on the Q&A icon on the left side of your screen or press star and one on your telephone. 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 pricing strategy for the U.S. market. During the last call, you mentioned that they are introducing a pricing base starting from April. Just wanted an update on that. Second question is on Europe. If you can elaborate a bit more on the commercial initiatives that are driving growth in the first quarter in the area, and if you have any early indication on current trading or Back to School in Europe, you may share with us. Last question is more on the CFO side. If there is anything on the agenda in terms of, say, refinancing for this year, considering that last transaction was, I guess, in 2021.
Thanks for your questions. For the US, we already implemented the first price increase some weeks ago, and this price increase was fully implemented with the customers. By the way, the new prices will take effect starting from July 1. Just in these days, after the announcement from the US president of the new agreement with China, we are defining the additional pricing fees which will be applied. It will be different for the family by the family. We will take a look at our inventory because, as we said, we bought a lot in advance to prevent this impact from tariff. We are analyzing year by year what is our inventory and when it will be the best time to implement an additional pricing fees. Clearly, the target is to fully recover the cost increase, product by product.
In Europe, the market is, I can say, stable, not flourishing, but not declining. Luckily, it's a different environment. We implemented a lot of initiatives, and also we restructured the commercial in France. From these subsidiaries, at the moment, we see a very nice return on our projects, and the subsidiaries are really going in the right direction. There are other markets which are stable compared to last year. I can say Spain or Germany, we do not see any trend that is different from what we expect. For Italy and the U.K., there is a little delay in order entry. At the moment, it's not alarming. We are trying to understand better when this gap is not important. Clearly, we will have other initiatives also in these markets to better result as we are experiencing in France this year. For the refinancing question.
Thanks, Isacco, for your question. As you know, the speeding date for our actual senior facility agreement will be in 2027. At the moment, we are evaluating the opportunity to renegotiate, considering also that FILA at the moment has a 1.3 leverage ratio. It is very appreciated at the bank. Also, the interests at the moment are favorable to do it, in particular about Euroribor. Between the end of 2025 and the middle of 2026, could be a window to renegotiate our financing. Also, evaluating the opportunity that FILA will take in the future in case we have to increase or not the amount of the bonds. We are discussing at the moment.
I would like to add something to your question related to Europe. When we approved the strategic plan, one of our pillars was to create value in a different market, in a market that is changing very fast, very quickly. Creating value in a market, in a different market, in our view, concerns also restructurations that we have in our business plan. We announced the closing of one of our Chinese subsidiaries, the one which is supplying school items. This subsidiary is mainly supplying products for Europe. The closing means moving production to other plants within the group. Clearly, we will have a very nice advantage in terms of competitiveness because we reduced the break-even point, and we have now more opportunities to have also commercial initiatives for Europe where the market is stable, but not clearly bright.
Probably, not probably, more will come in the next month.
Okay. Clear. Many thanks.
For any further questions, please click on the Q&A icon on the left side of your screen or star and one on your telephone. Gentlemen, there are no more questions registered at this time. I'll turn the call back to you for any closing remarks.
If there are any more questions, thanks for attending this call. We are available to reply to your email or call our investor relator or CFO, and we will be pleased to reply to you. Good afternoon, everybody.
Thanks for all.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices. Thank you.