Earnings Call: Q2 2021

Aug 5, 2021

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Interpump Second Quarter and First Half twenty twenty one Results Conference Call. As a reminder, all participants are in a listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Luca Mirabendi, Head of Investor Relations. Please go ahead, sir. Thank you. Good afternoon, everybody, and good morning to those connecting from The States, and thank you for dialing in. We have a set of amazing results to commence today, and I will do it in the company of Executive Board member, Fabio Marazzi. The results registered in the second quarter of the year show the continuation and the acceleration, if you want, of the post crisis recovery, which was already visible in Q1. And to say that the recovery is full and that we are back to pre crisis levels, however, would be an understatement. First, because in many cases, sales are well above those of 2019. Second, because this would not do justice to the importance of acquisitions, which gave a significant contribution on top of the organic growth in the past two years third, because profitability was not only unharmed and preserved, but even increased. So let's review the numbers. Sales for the quarter grew nicely, reaching EUR405.5 million, first quarter ever above EUR400 million. The comparison with the corresponding quarter last year, which included the worst effect of lockdowns around the world, comes to an impressive plus 37.2%. This is the result of a plus 39.4% organic increase, a negative 2.9% effect from currency exchange and a very modest 0.7 from acquisitions of the past twelve months. In a comparison with two years ago, which again can be useful in this very particular circumstances, sales are up 12.8% compared to Q2 twenty nineteen. Water jetting sales grew 21.3% to 122,400,000 The organic performance would have been 24.1% with minus 4% from FX and plus 1.2% from the perimeter extension. Hydraulics sales at €283,100,000 corresponds to a growth of plus 45.4%, resulting from a 47.2% organic increase, a 2.2% negative currency effect and a 0.4% increase in perimeter. A note to those of you who were expecting a slightly higher contribution from acquisitions, our latest acquisition, BZeta Transuncioni, acquired last December, was merged with TransTechno in May. So since May, their sales of approximately €500,000 per month are booked under TransTechno and hence appear as organic. I'm sure you understand that this is because of the size of this business did not justify setting up a separate accounting system. Moving on to the half year, total sales registered at EUR781.1 million, 22.1% higher than the corresponding period of last year. The organic increase was 24.4% with a minus 3.1% drag from the currency exchange and a 0.8% help from acquisitions. Water jetting was up 12.5% organically year to date, with a minus 3.9% adverse effect from currencies and a plus 1.5% from the perimeter extension. Putting all together, this means that sales in the half year were EUR231 million or a reported growth of plus 10.1% in the six months. Hydraulics performed better, also in light of the easier comparison days, with an organic plus 30.2%, a negative 2.8 currency effect and a plus 0.6% from acquisitions. This allowed our sales in Hydraulics for the first half of the year to reach €550,000,000 with a reported growth of 28%. As we anticipated, getting the flow of sales back to pre COVID level took slightly longer in water jetting, but we can say we are finally there at last. It is very reassuring to notice that the organic increase seen in the half year plus 24.4% more than compensates for the minus 18.7% organic decrease registered one year before. This is a compelling indication that the recovery of our top line is now full, although it doesn't appear to be over yet. The same effect can be seen across nearly all geographic areas. Since changes versus last year are heavily affected by a weak comparison base, I would say a crazy comparison base, let me quote them side by side and remind you of the corresponding figure of one year ago. Let's start with the Euro Area. Italy is up 59%, which even combined with minus 35% of 2020 means that sales are now in better health than in Q2 twenty nineteen. Remember that this comparison does not include M and A. Same goes for the rest of Europe, which compensated the minus 26% of 2020 with a plus 40% this year. Let's now look at North America. Last year's minus 26% does not appear to be fully balanced by this year's performance of plus 27.5%. However, when factoring in the losses in exchange rates, the comparison becomes slightly favorable. Asia Pacific because the exchange rates are included in this comparison as a reminder. Asia Pacific, which had lost only 5% in Q2 twenty twenty, is up 13.5%. China, our biggest market in this area, is flat over Q2 last year. But let me remind you that by then, it was the only positive figure at plus 8%. The rest of the world sports an impressive growth of 53%, which is still not enough to compensate last year's minus 37%, although exchange rates must probably be blamed also here. India is a good example with minus 75% last year Please let this sink in for a second, minus 75%, a plus 248% this year and a 13% loss in exchange. Everything combined, this means a positive performance despite the extreme shock. Please allow me to point out that in mathematical terms, it might just be a combination of percentages. But in real life, we are talking about the market that has shrunk to one quarter of its previous size and regained everything in one year without destroying any value and even generating revenues along the way. I cannot think of a better demonstration of the resilience of Intercom's model than the case of India. Let's take a quick look by sector. And in this case, we're commenting the results for the half year, year to date. Earth moving, construction and agriculture are the best performing application sector, all very near to or above 40% increase. Listing is up 31%, steel and aluminum plus 27%, Food Processing, plus 17% Industrial Applications are up 15%. All these sectors are above or significantly above the level registered in 2019 in organic terms, even when factoring in the negative currency effect. On the other hand, trucks are the most visible laggards with a year to date plus 21%, which does not yet compensate entirely last year's minus 27%. In terms of profitability, the very favorable combination seen in the first quarter, the combination of a very optimized cost structure and an increase in production volumes and most of all, regularity is still showing its positive effect. Coupled with the seasonal margin increase from Q1 to Q2, it resulted in the first quarter ever with EBITDA above EUR 100,000,000, 101,800,000.0 to be precise and an EBITDA margin of 25.1%, knowing to say that both are record figures. And both divisions contributed with a progressive improvement compared to the first quarter to this outstanding result. Water Jetting registered a 29% margin, raising the year to date margin to 28.6% and the year to date absolute figure to EUR66.9 million. Hydraulics broke yet another record by registering a 23.2% margin, pushing up the year to date one to almost exactly 23%, which means generating a total of EUR 126,400,000.0 in the first half of the year. Total EBITDA for the half year came up to EUR 193,300,000.0 or 24.7% of sales. As we celebrate these results, which was unthinkable just a few years ago, let me remind you that we expect slightly less impressive numbers for the second half of the year due to the reintroduction of the sales and marketing costs related to business travel and trade shows, finger crossed, the gradual incorporation of 2021 raw material prices in our cost mix along with some seasonal factors. However, there is no denying that in terms of EBITDA margin, 2021 looks like a very fierce competitor to 2019, which was our best year so far with a margin of 23.2. And good news are now over. Net income for the quarter came to EUR74.5 million. The reason for this unusually high figure is that some of the Italian companies in the group proceeded with a step up of trademarks for tax purposes pursuant to the applicable laws passed in Italy last year. This resulted in a one off benefit worth 20,100,000.0 in lower future taxes, which was entirely booked in the quarter. The figure for the net income for the half year was EUR 128,300,000.0, with a nominal tax rate of 14.8% that actually corresponds to a normalized 28.1% when adjusting for the tax benefit. Cash flow from operations was 84,900,000.0, almost exactly the same as Q1. Sales net working capital absorbed EUR 13,400,000.0. This may look modest in comparison to the acceleration seen in the top line because it's significantly less than in Q1. But this can be explained by a couple of very simple observations. It is difficult to build up inventory when you're working around the clock to satisfy the demand from the market. And the second reason is that this is perhaps not the right time to build large stocks of raw materials, given the price that we are seeing around. CapEx in the quarter amounted to EUR 19,600,000.0, bringing the half year total to EUR 34,200,000.0, which represents about 4.4% on sales. As a result of the contained increase in net working capital, free cash flow amounted to CHF 56,500,000.0 in the quarter, bringing the total year to date to EUR 97,300,000.0, almost the same level seen last year despite a completely different, I would say, opposite market environment. Dividends paid amounted to EUR 28,400,000.0 and a further EUR 5,800,000.0 were spent in share buyback, while no significant expenses were made for acquisitions in the quarter. This brought our net financial position at the mid year point down to €206,700,000 Additional commitments for the purchase of subsidiaries, which are periodically reassessed following the performance of the companies involved, were worth an additional EUR65.6 million with a small increase compared to three months before. This picture perfect set of results is the certification that while the world is still struggling to get rid of COVID related social limitations and worries, Interpump is bigger and stronger than before the pandemics already today. Other portfolios, especially in hydraulics, are unusually large for some companies at record levels and allow for some optimism about the top line for the rest of the year and possibly beyond that. On the M and A side, the closing of white drive motors and steering is expected in early to mid Q4, following the end of a complex carve out process, which is being carried out by Danfoss. Their on time closing of the acquisition of Ethan Hydraulics is very welcome news because some assets from Ethan must be conveyed to white drive before it changes hands to Intercom. By the September, on our side, we expect all antitrust filings will have completed their course. In short, everything is running according to our best expectations. Of course, we don't need to wait for that closing before we can work hard on other acquisitions, although maybe on a smaller scale. The cash generation may slow down a bit compared to the amazing levels seen in 2020 and H1 twenty twenty one as the recovery goes on, but we are certainly and we will certainly be not short of resources. I hope that by now you share our enthusiasm for the positive momentum that our business is enjoying. We will now open the lines to your questions and hopefully to our answers. Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Mathieu Bonizzoni with Kepler. Please go ahead, sir. Thank you. Good afternoon. I have two questions. The first one is related to the cash generation and working capital ratio. I was calculating, depending on how you calculate it, that the net working capital on revenue ratio in the second quarter of this year dropped by between five percent and ten percent points compared to the second quarter of the last year, mostly due to a reduction of inventory. So you commented that this was also due to the fact that you prefer to stay low with the raw material inventories. So my question is simply to understand if this very positive working capital performance is mostly temporary and so we should imagine a return to previous level? Or are you confident to remain, in any case, lower than in the past? And the second question is related to the recovery which you are experiencing, particularly, I would say, in Metrolics. So it's clear that the overall economy has not yet returned to the same level of 2019. Maybe your sector has performed better than the overall economy. But my question is from what you are also assessing with regard to the performance of your competitors, Synidrolytics, you believe that we have also gained market share over this period in organic terms, let's say, excluding acquisition? Okay. Let's go in order. The ratio of net working capital on sales, I agree with your calculation. In seeing from another point of view, our total sales net working capital has gone up to just 2% in compared to one year ago. Of course, this compares to a strong double digit organic increase, about 20% for the half year, about 30% for the quarter. So there is no doubt that we have squeezed it down in relative terms compared to our usual numbers. Now your question whether this is temporary or for good would be attached to my question to you. Do you think that the current spike in raw materials is going to be is going to last a long or a short time? And of course, you may have your expectations, but no one has a certain answer. We certainly didn't change our strategy, and we are still buying raw materials, mind you. It's just not the right time where, as it happened in the past, maybe you decide to build a stock worth more than one year of your needs of one particular metal just because you bump into a very cheap offer and you want to take advantage of that. Cheap offers are simply not available. So that's not happening. We still keep our strategy of being flexible, which means having in house everything we might possibly need, but this is not the right time to build long term stocks. In terms of the recovery in hydraulics, I would leave this answer, if you can hear me because we are connecting from different places to Fabio Marazzi, who is involved much more than I am in the real life management of companies. So he is much better aware of the situation of a competitive situation. However, the logical basis of your observation, the fact that our recovery is certainly much stronger than the numbers that are can be associated to the market is already an answer. Fabio, can you can you hear us? Yes. Absolutely. I have a couple of comments on the question posed by mister Bogutani. And the first one was related to the net working capital on sales. And then it is true that we have really optimized the net working capital on sales. It is also true that the very good numbers and figures regarding this important KPI has to be considered together with the difficulties in finding the and and sourcing the the right quantities of raw materials. And to be honest, I would be very happy as a manager of the for important group company to have more cast iron and more networking capital on our on our inventories because the difficulty of today is to keep running our our manufacturing production and our factories. And, and also, it's very important to follow the demand and the the real request that we are receiving from the markets and from our customers. So far, we have managed very well with a lot of flexibility and with a lot of focus on servicing the customers. But, anyway, I will not be concerned or worried to have one percentage point in net working capital yet on sales It will be able in the second part of the year to source more components and more raw materials from the the suppliers. Regarding the recovery that we are experiencing and that, of course, is super strong, we believe and we have the visibility considering that also the discussion that we have had with the most important customer and the OEMs that are representing an important part of our turnover and our customer base that also the visibility for the next year is very positive. And we are negotiating the increase that the customers are demanding us in terms of manufacturing capability for next year as well. But then for us, it's not a bubble. It's something that is strong. It's a strong recovery. Of course, in comparison with what happened last year, but it's also a recovery that we believe that will last for several quarters at minimum. Okay. Thank you. Thank you, Fabio. Next question please. The next question is from Domenico Giolosti with Equita. Please go ahead, sir. Afternoon. I have three questions. The first is related to margins, to your comment that second half will be, let's say, tougher to keep up with the performance in the first half. So I was looking at second half twenty nineteen, you were at 23.4%. So what I wanted to check is if you are saying that the level of margin expansion that you have seen is not sustainable? Or if you are saying that the absolute level of margin that we have seen in 2019 is difficult to be repeated? That's the first question. The second is on the investments. If I'm not wrong, you said €34,000,000 in the first half. I had something more much more, let's say, for the full year. So if you can give us or confirm the guidance for the full year. And the third question is related to the M and A. In particular, we had announcements by SP Xflow that they are considering review options for their activities. And we had your so the previous experience coming from Danfoss where you were able to get some opportunities out of there. So I wonder if this you think or you are in talks, are there are opportunities that you can see from the possible discussion or transaction that could happen on these assets. Okay. I will start by addressing your questions with very general observation, and then Fabio will kick in with maybe more depth. In terms of the margins, yes, by mentioning the EBITDA margin of the 2019, you're actually putting us in a corner and forcing us to sound optimistic because clearly, there is no reason to expect a situation which is, I mean, significantly worse than the 2019 in practical terms. How this is going to translate into margins? Well, this is yet to be seen. And again, we have a missing number here, which is the impact of the price increase of raw materials that will gradually show a bit more of their effect on our accounts. Clearly, this is going to depend on how efficient we are in passing them on to customers. So far, we have been incredibly efficient to the point that I would safely exclude rule out the fact that we have had any negative impact at all. But this doesn't mean that we can take for granted that we can do it for the rest of the year as well. And this is basically the only reason for our apparent prudence in terms of margins because clearly, the situation has even improved compared to Q1. And of course, the longer we go into the year and the more likely it is that we are going to beat the result of 2019. However, from an official corporate point of view, I wouldn't feel entitled to promise that to the market because there is still something that doesn't depend entirely on us. About CapEx, Fabio will certainly have more to say. I will just remind you that CapEx announced the number we are commenting today, €34,000,000 is CapEx paid. So there might not be exactly a one to one correspondence with our CapEx plan announced at the beginning of the year, but I'm sure that Fabio will add more depth to this. And so he will do SPX flow. We've seen that yesterday, they are not ruling out accepting the offer from Ingersoll. But, Marcelo, I want to be very clear with you. It would take an incredible set of unfortunate circumstances who which would not deploy anyway, in the very short term because the the the logical step would be they would have to accept the offer, and, antitrust investigation would have to be opened. It would take probably many, many months before they identify any danger of an illegally dominant position resulting from the merger. The first circumstance that should turn real would be that this dominant position would need to be in a sector that we are interested in and which is not something I could say for the entire activity of FTF Flow or Ingersoll. And the second point is that, as a reminder, the second lucky point with Danfoss and Eaton was that Interpant did not have any activity with those product lines, which ensured to Danfoss the speediest possible execution of the deal. And of course, we have no idea whether this might be the case with this possible forced sale of the two. So we still have too many things. We don't know. It's way too early to think of any capability like this. Of course, we keep our ears open. Now, Fabio, if you want to add anything on the two points, the CapEx and the SPX flow opportunity? Yes, Luca. Regarding CapEx, of course, you have to consider that we have always said that our range of CapEx on sales incidents is between 3% to 5%. And of course, the CapEx number that we are seeing for the 2021 is also a consequence of the prudent approach that we have taken in 2020 due to the pandemic situation. And then, today, we are adjusting our manufacturing capability and our production output considering the strength of the market. And then we are pursuing and following the market growth with the growth on our manufacturing capability in several of our companies. And then I believe that we will stay within the usual range of 3% to 5%. Of course, if some important real estate investment will happen, we have already commented several times about the real estate developments that we have, in particular in The United States with new plants in Marseille and in L And B. But in any case, the technical CapEx will stay in the usual range, we will see a normalization in the next few quarters. Regarding M and A, of course, the market remains very hot and very, very positive. And also, in the past, it's very hot in respect of M and A. Apart of the closing of the white drive transaction that, of course, is our main focus in these weeks and in these months, We are very active in following and pursuing other dossier and we are very focusing in continuing our growth strategy and consolidation strategy in many of the sector in which we are already present. And we see an important rebound of opportunities and important rebound of discussion and negotiation that has been stopped in 2020 for the pandemic situation and the worsening of the economic results. But of course, we have the improvement of the economic situation that is characterizing these months of 2021 is in some way overpass. And we believe that we will have the opportunity in the few quarters to closing and to finalizing other transaction that are interesting for us or has been under discussion for for years so far. Regarding the specific question of STLIC's Ingersoll opportunity, of course, as Luca mentioned, we are keeping our eyes open, but we will see. It's too early to say, it's too early to comment. And we keep our opportunistic approach like we did with the Danfossil transaction. Next question From Alessandro Portora with Mediobanca. Please go ahead, sir. Yes. Two questions from my side, if I may. The first one is if you can come back to the comment on, let's say, order backlog, if understood well, you mentioned that on the Hydraulics side, the company is building visibility already for another positive year in 2022. So first of all, a confirmation of this this trend and if there are any specific, let's say, end reference markets, I don't know, agricultural, some other sector where disease, let's say, the situation that, you you see. On the water jetting side, if you can also, let's say, elaborate a comment on the order backlog for this division. The other question is on free cash flow. If, let's say, we consider all the aspects we discussed starting from, let's say, the free cash flow you got in this first half, is it reasonable to assume, let's say, maybe a touch lower free cash flow for the second part of the year? Thanks. Okay. Thanks for the question. In terms of backlog, Fabio, do you feel like answering the question on backlog since you do have a backlog and I don't? Or Yes. No. Regarding the backlog, it is always risky to comment with a general part of looking at the work group in Japan. We have different situation and different end markets. But if we look at particular at the backlog in the average division, we see how booming and how hot is the market. We are having meetings, meetings in these weeks with the major and the most important OEMs that are increasing their request and that are increasing their also their allocated manufacturing capability also with the 2,022 visibility. And then I don't want to share precise numbers because our partial and I'm not referring to the whole group, but I can confirm that the backlog is at a record level is very, very strong in particular for companies for which backlog means something and then referring to the ones, in particular in the hydraulics division. But considering the discussion that we are having with the major OEMs, this very odd situation in the market is due to last also for at least the first half of next year. Yes. And regarding the difference with water jetting, clearly, this the results in the backlog data for hydraulic companies is much more impressive. In water jetting, of course, every company is above the level of one year ago in terms of backlog, but we know that one year ago is too easy comparison days. Let's say that whereas many companies in hydraulics have backlogs on a sufficient size to cover the entire rest of the year. In the water jetting sector, this is not the case at many companies. I would still look at this in the right perspective. This is a situation that is gradually improving. And as we said, we've been saying this for a year, nearly this improvement is going to be gradual and slower compared to hydraulics. So what we are seeing now is actually the backlog representation of the same dynamics of a slower pickup in water jetting compared to hydraulics. But given the overall positive mood of the economies, given the push to public infrastructure spending that we are hearing about all over the world, I would regard this as opportunities more than problems. I mean, I do not expect the situation to become critical or deteriorate or become a problem in any way. As to your first question, the free cash flow, I totally agree with your general remark that the second half of the year should be less impressive than H1, although we've seen that in H1 we did have some kind of a contradictory acceleration in free cash flow. However, I would point out that we are in the past, we have always seen with a good level of reliability, inverse correlation between organic growth and free cash flow, which manifests itself with a six month delay. At least this is the best approximation that we can apply to this, which means that now that we are more than six months into the recovery phase, I would say even statistics, even this statistic rule that has been quite accurate for the past is supporting your view. Now I do not have anything precise to offer about where we expect the free cash flow to actually land at the end of the year. But I trust that you will share my idea that this is not going to have a material impact on the company, on the strategy and on our decision. So it's something that we can, let's say, almost stay at the window and wait for. Okay. Thanks. Thank you. Do we have I don't know if Fabio has anything to add about this topic. I'm probably stealing the scene. No. You can go ahead. Okay. So do we have any further question? The next question is from Fraser Donlon with Berenberg. Please go ahead, sir. Hi, Luca and Fabio Fraser here from Berenberg. Just two questions from my side. The first is just, is there anything interesting to learn, particularly in hydraulics, as regards the kind of mix of the order book as regards products, valves versus hoses, for example? And then the second question would be just on the kind of it sounds like you're managing pricing very well so far. What makes you a bit more cautious on that front into H2, if anything, relative to the cost? Do you think you're reaching more of a limit with your customers as regards to increasing the prices? Thank very much. Okay. Thank you. Let me start from your second question. The way we manage especially the way we typically pass on any price increase to our customers. There is I mean, this is something which has been going on all over the place. We are also a victim of this. And they Sometimes this is a hard time for buyers as price increases are happen almost every day. Historically speaking, Interpump has always demonstrated a very good capability due to a mix of pricing power and, let's say, and smart management of purchases to pass them on to our customers. There is no doubt that this is going to happen again. The point is that we don't know how fast it will happen. We don't know how efficiently it will happen, although we are quite optimistic on that. But most of all, we cannot rule out that we are having some benefit from these dynamics in the past couple of quarters, which means that due to the very large size of our stocks of some raw materials, I'm thinking brass or aluminum, for example, we may have benefited from price increases even before we started suffering from the price increases in the raw materials. This is why we always refer to the rest of the year as a normalization, not a deterioration of our margins. We believe that our margins are a bit built by the lack of marketing costs, trade shows, travel costs and possibly also by this advanced effect of price increases while we wait for the negative effect because of our very large stocks. Basically, this is what we can say about your question. And hopefully, I'm not sounding pessimistic or scary about what we expect for the rest of the year. We are simply expecting a back to normal in to this extent. In terms of the development of order book in terms of product lines, again, Fabio might have a closer to reality answer than I might come up with. Fabio? Yes. Of course, we are very strong and we have an important visibility on many companies in the earnings world that are really exposed to the OEMs. We have had, as mentioned before, an important discussion with the major OEMs, Dusan Bobcat, John D, Terex or CNH in the last few weeks. And every single customer is mentioning that are experiencing a boom of demand from final customers and are commenting very positively with their visibility on the next few quarters. And that are meeting us and demanding us an increase in support and an increase in the output and the manufacturing capabilities dedicated to them. Considering how widespread this is approach and this situation, we believe that this situation will be consolidated sooner or later, but the final market demand will remain very strong in the next few quarters and also in the 2022 at least. And if I may close this answer, I believe that Fraser was also inquiring about any shift in the product mix, in the component mix. And I'm personally not aware of any change in shape of the market demand. So there would be nothing I would have to comment about. Correct. I confirm, Luka. Okay, perfect. Thank you very much both. Thank you, Fraser. Next question please. The next question is a follow-up from Domenico Hiroste with Equita. Please go ahead, sir. I have a follow-up on the previous question. So I'm trying I wonder if you had any change in the commercial relation with the OEM. So I mean, maybe they are ready today to put some, say, firm orders that cannot be withdrawn or back to normal. So just a relation where they are saying, okay, you can go for, say, additional capacity because we have a lot of demand, but it's just normal relation. And second is a comment on the outlook that you're providing. If I understand well, you are, say, very confident about the top line. So I understand that you should expect some kind of acceleration in the organic performance compared to 2019 while you are a bit more, say, prudent on the profitability side. I can take the answer, Luca. Regarding the commercial relationship development with OEMs, you have to consider that we have a sort of long term partnership with the major OEMs, And this is true for the most important companies in the hydraulics division in our group, but not only. Considering the very dramatic increase of the end market demand that they are experiencing and the stress that has been put on the whole supply chain, we are working for answer very closely with them in order to follow them and to give to them the possibility to increase their output. In order to do that, of course, we are committing to increase our manufacturing capability to make investment dedicated to them, but also we are asking to them to make a longer term commitments, placing orders with longer terms visibility in comparison with what we have done in the past. And I would say that I'm really comforted about the discussion that we have had in recent months regarding the availabilities of the OEMs and the needs of the OEMs to strengthen this relationship. We are ready to do our part, but also the OEMs and the major customer are really prepared to commit themselves in order to have a secure the the sourcing and the increasing sourcing for for the next twelve months or six months. Then I'm very positive about the development of the commercial relationship with these customers. The the profitability, of course, we have noted that we are as confident regarding the top line evolution. Regarding the profitability, of course, the first half and the second quarter results are very strong and very positive. And we will see in the future, but we are very confident that we will be able to transfer any further increase in the prices of raw materials to the end customers. Also because this approach is the one that is taken by our major, major players in the market, the major competitors we have in the market. And then no doubt or no problems are to be expected from the transfer of the raw material price increase that may happen in the future to their customer. Because market or this market is prepared to pay the right prices in order to get the right materials and the right quantities. Okay, thanks. Next question is a follow-up from Mathieu Bonizzoni with Kepler. Please go ahead, sir. Thank you. Just a quick follow-up on the management and board composition. So what we have seen from your last announcement is that Mr. Gottardi, who was the CEO of Alvaro, one of your the most important part of the hydraulic business, left the company. And Fabio Meraldi has been appointed, we have read, CEO of, of the valves business, I think, of of Al Voila. And so I think that Savio Meraldi is also, CEO of some other parts of the business. So, and also, we have seen that in in in so as regards the board, in place of mister Vostabi, who was also recently appointed, let's say, member. Mister Perezki has been appointed coming from Tambourri, which is one of your reference shareholders. Just can you add more color on what has happened so far and also what could happen potentially in the future as regards to management, board composition and so on? Thanks. Okay. Thank you, Matteo, for this question. Of course, I'm in in a little conflict of interest to comment on this. But regarding the first part, the board composition, the board decided to hire and to appoint and we said that I see that he's an experienced finance guy. He's the managing director of Stambord Investment Partner as a part of the board of Interpump as a further signal of the commitment that we have on the M and A and further development. On a managerial point of view, it is true that Mr. Gottardi was the CEO of Avoil, and it is also true, course, that I've taken over his position as the CEO of Alboil. We have had an internal reorganization, and I passed over my responsibility as a previous CEO of GS Hydro to a colleague of mine because GS Hydro turnaround can be considered completed in these three years. The company is performing very well, and from now on, will be managed under the homes and systems division that is supervised by a colleague of mine. And at the May, early July, I've been appointed CEO of Valoil. And in these two months, I have taken over the responsibilities of mister Cotale. Balboil is the largest company that we have and one of the most performing one. And also one of the companies that is characterized by this booming demand from end markets and the OEMs. I can also say that the company is very strong, is very structured considering that it is a $300,000,000 plus company in terms of management. And then I do not expect any problem or any turmoil in this shift. Any comments, Luka? No, of course, I don't have anything better to say. You already underlined how solid Movoy was. This is also should be credited, of course, to Mr. Gottardi, who managed the integration with the other companies that we put together, most important, Hydro Control, but also Galtech, and created what those oil is today, realizing at the same time a 10 percentage point EBITDA improvement compared to the original companies. Now the job of Mr. Gustave in this integration is completed. He I think he passed on to you. And of course, you can tell us if you agree, very autonomous and very well working company, certainly not a work in progress. And he will move on to a new kind of employment. He will be he will have a significant entrepreneurial component in his new job. So he is certainly not leaving Valvoy because it was a bad company, probably exactly the opposite. Fabio has demonstrated to be a very versatile manager. He was able to turn around the soon to be dying GS Hydro into a double digit margin company in a little more than one year. He also has a key role in a lot of our biggest M and A operations. He was heavily involved in the negotiation and in all the procedures related to white driver. So Javier is certainly up to the task that he has been given. And again, as he mentioned, he's been driving valve oil and which is the same as saying the valves division for a couple of months and the business is still booming. So this is we are beginning to have also practical demonstrations of the value of this choice. Okay. Thank you, Luca. You are very kind of me. Thank you so much. Thank you. Thank you. Let's see if we have any further questions coming up. Mirabeli, Mr. Marazzi, there are no more questions registered at this time. Okay. Very well. I hope that the reason for this is that we answer to everyone. On behalf of Interpump, thanks again for being with us today. The next scheduled appointment is for November 10 for the presentation of Q3 results. Wherever you are, stay safe and enjoy the rest of the summer. Goodbye, everybody. Thank you, everybody. Bye bye. Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.