Earnings Call: Q1 2021

May 14, 2021

Good afternoon. This is the Karasco conference operator. Welcome, and thank you for joining the Interpol's First Quarter 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 Miravelli, Head of Investor Relations of Interpump. Please go ahead, sir. Thank you. Good afternoon to everyone on the line. Thank you for dialing in and for dedicating your time and attention to Intercom. Today, we are here to briefly comment on the results for Q1 twenty twenty one. As usual, it's the company of Fabio Marazzi, Executive Board member and with the precious support of our CFO, Carlo Banchi. Today's set of numbers is very reassuring, to say the least, with some amazing aspects. Let's start, of course, from the top line. Sales for the quarter registered an organic increase of 11.6% compared to one year ago. If you allow me a bit of approximation, this means that organic business is roughly back to the same levels of the 2019. Foreign exchange this time worked against us, shaving off 3.4%. However, this was not a surprise. Lastly, the perimeter expansion accounted for 1%, resulting in a reported increase in sales of 9.2% to EUR 375,600,000.0. Going by division, we are seeing what I would define to be the expected development of the situation already seen in Q4. Hydraulics is in a full recovery swing. First of all, from the slowdown brought about by COVID-nineteen and related lockdowns. But there is some evidence that what we are seeing is more than just pent up demand. The accelerating trend of orders and and the time horizon of the order portfolio both point to a more structural recovery of our destination markets. Sales in Hydraulics are up 16.2% organically, with a minus 3.3% negative effect from currency exchange and an eligible plus 0.7% due to acquisitions. The final reported figure is 2 and 66,900,000.0, up 13.6% compared to one year ago. Order checking is somewhat lagging, with sales in the quarter for EUR 108,700,000.0, almost in line with one year ago. The underlying organic trend is positive at plus 1.8%, but it gets reversed by the strong minus 3.8% currency headwind and gets to its final reported minus 0.3%, thanks to the addition of Servis Industriale. The reasons for this different behavior are the same we have outlined in our last presentation. First, the comparables were easier in hydraulics, which had appeared an exciting trend as early as Q4 twenty nineteen. Second, many application sectors of high pressure pumps and even more so of flow handling components kept working as normal throughout the pandemics, which contributed to a better result for the year, but also means no significant contribution or expectation of pent up demand. Third, and perhaps more important, even those industries which kept their operations going have to postpone some of their most ambitious CapEx projects, were particularly difficult to coordinate during the pandemic, while they were busy enough with their day by day activities. There is no doubt that the situation is going towards a normalization, and we are seeing some evidence here and there in the order portfolio. Comparables will be easier from now on, and it will take another quarter or so before the flow of sales related to large projects is back to pre COVID levels. As a reminder, large projects for our customers does not necessarily correspond to large order sizes for us because we are largely a component supplier who do provide complete solutions. As we move on to the speed of sales by geography and sector, please be advised that during the first three months of the year, the situation developed so fast and so erratically that figures for the entire quarter have even less importance than usual. However, I'm happy to report that Europe is up nearly 10% compared to one year ago. As a reminder, a lot of our plants were affected by lockdowns in the March 2020, especially in Italy, which, accordingly, is underperforming with a plus 17%, while the rest of the continent is expressing a healthy plus 6%. North America raised its head half of the turn of the year. However, due to the very unfavorable exchange rate, it took us to the end of the quarter before we could see a positive sales performance in Europe. This is why the reported figure for the entire period is still negative, but the exit speed of the quarter tells a different and much better story. Asia Pacific is up 26%. The performance clearly driven by China, which is up 40% versus the Q1 that represented its worst quarter of last year. The rest of the world area is showing somewhat surprising, plus 18%, with India finally back to a very vigorous growth of nearly 50%, which fully compensates us for the drop seen last year. Unfortunately, I have to add that the situation in India is still developing and that the government has introduced new lockdown measures. So it is fair to expect a bit of a roller coaster for India for the rest of the year. In terms of sector, outperforming application sector for the quarter is agriculture with a very positive plus 33%. Maybe it's useful to add we one thing, we always make comparisons at unchanged perimeter, of course, but perhaps we need to point out that this sector, agriculture machinery, nearly doubled its weight in the last three years, also thanks to our acquisition in reduction gears. Other noteworthy performances, trucks are up 23%, earthmoving is up 14%. Food, cosmetics and pharma has finally turned positive at plus 3%. But let's now move on to the best surprise of the quarter, profitability, which was positively affected by a combination of favorable circumstances. The first, of course, is the increase in production volumes, but even more importantly, in regularity of operations. Then as you can imagine, our cost structure at the beginning of the year was very, very optimized, no fat on the bone. And this is especially valid for sales and marketing as business travel and trade shows with all related expenses like advertising and interim personnel are not back yet. At the same time, thanks to a mix of pricing power and careful sourcing policies, we are well protected from the negative effect of inflation in raw materials, which, of course, we are seeing like anyone else. At this time, what we can call the cost of flexibility of our production capacity, I'm referring to over time extra shifts and interim personnel, has just begun to reappear, but it's still very limited. We have been totally transparent throughout the year last year about the buffer provided by the welfare systems in Italy and abroad. I think it is very important to underline that there is no meaningful contribution for this quarter. This means that all our plants are back to regular operations, and hopefully, this is the last time that we will need to comment about this. In terms of divisions both divisions performed well in terms of profitability. Water jetting registered a very satisfactory 28.2% EBITDA margin. I'm happy to point out that this is the highest margin ever for Q1 in water jetting, corresponding to EUR 31,000,000. However, it is Hydraulics that really shows the positive effect of the current situation. For the first time ever, EBITDA margin in Hydraulics broke the barrier of 22%, jumping to 22.6%, equivalent to more than EUR 60,000,000 in just one quarter. Putting the two divisions together, EBITDA for the quarter amounted to EUR 91,500,000.0 or 24.4% of sales, an amount and a margin which were never seen before at a consolidated level. Net income for the quarter came to a very encouraging EUR 53,800,000.0 with a tax rate of 26%. Cash flow from operations was 84,900,000.0. After shrinking for the entire past year, net working capital finally started to increase as typical of the first quarter and even more typical in the presence of organic growth. Net working capital absorbed 27,800,000.0, which is quite moderate compared to what we have seen in some quarters in the past. I truly believe that by now, everyone knows that the increase of net working capital in Admiralty is a sign of good health. CapEx for the quarter amounted to EUR 14,700,000.0, roughly 5% on sales, beginning the year at the highest end of our customary range. As a result, free cash flow amounted to EUR 40,800,000.0, slowing down if we may say so from the exit speed of 2020, but still very healthy considering it already incorporates an investment in working capital. No further shares were purchased in the quarter due to the appreciation shown by the market, which brought price above the authorized maximum. And the expense for acquisitions was 5,300,000.0, almost entirely related to the Zeta firm's facility. All this brought our net financial position at the end of the quarter to EUR 2 and 29,800,000.0, the lowest seen in a long time. Additional commitments for the purchase of subsidiaries stand almost unchanged compared to the beginning of the year at EUR 62,000,000. And this was really the last number I had to tell you for our quarterly results. However, I'm sure that you are much more interested in knowing what's coming up. There is one thing that is impossible to notice looking at simply as quarterly results, but it's incredibly evident to anyone working inside one of our companies. And I'm talking about the monthly trend, which showed an acceleration going from a slow January to a fair February to an outstanding month of March. And this applies more or less to every aspect of our activity, sales, order income, backlog size, even margins. Well, margins are admittedly benefiting from the fact that we are passing an inflection point. In other words, we are benefiting from the recovery that's not yet experiencing part of its cost. Therefore, I wouldn't encourage a naive and simple linear projection that would incorrectly assume that this golden combination of favorable factors could last for the entire year. However, our past statement that there is no reason why 2021 could not reach the same record profitability of 2019 still stands, and its credibility is certainly reinforced by today's results. As to all the other KPIs, the month of April was, to put it in short, as exciting as March. I'm not even commenting about the ridiculous percent of growth versus a tragic April 2020, But also in terms of the outlook figure, those figures bode well for a very satisfactory performance in the second quarter. As mentioned earlier, those companies in the water jetting sector, which suffered from a weak order intake, are picking up pace. And even the currency headwinds are expected to come down as the year progresses. A final note about M and A. As usual, we are not allowed to comment on the stakes or the timing of our next acquisitions, although I can certainly report in an appropriately tired tone of voice that our M and A meetings are frequent, longer and bustling with activity at an even higher level than usual. At this time, we are quite confident that 2021, on top of the expected healthy organic recovery, will bring new additions to our family. And now this would be the appropriate time to do our best to answer any questions that you might have for us. So operator, please open the lines for the Q and A session. Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Maceo Bonizzoni of Kepler. Please go ahead. Thank you. I have two questions. The first one is regarding the margin plan, which was clearly strong, increased 24.4% EBITDA margin in the quarter. This is not only higher than '21, but also higher than Q1 twenty nineteen, which was I looked in a model of 22.9%. So from 22.9% to 24.4%. You have just, say, Luca that you are confident to repeat the same margin of the full year 2019. It seems that there could be some margin to exceed that margin, which in the full year was 22.2%. Can you comment a little bit on the fact that this margin of Q1 could contain some, let's say, positive factors like the lack of commercial spending or any cost impact, which we should expect as the year progresses? The second and last question is with regards to your acquisition pipeline, which clearly remains, it's obvious, enough topic for the case. I have the feeling that over the last month that your M and A strategy, and you also commented that actually in the full year twenty twenty conference call last February, you are maybe looking at larger than usual acquisition opportunities. So can you provide any comments which could be useful for us with regards to the evolution of your M and A pipeline and in the future? Thanks. Okay. Thank you for the questions. I will take the first one, while Fabio will probably want to say something about M and A, which is most occupied most of his life. So in terms of margin expectations, we chose to be prudent in our comment of Q1 because clearly, Q1 margin is uncharted territory, especially for some of our subsidiaries. So we want to be a little bit cautious before we can assume that this performance might going on. And indeed, we do have a couple of indications that some extra expenses are going to be to appear as the year goes by. Namely, you name the travel and the trade show expenses. I would also add all the extra cost that are usually associated with our additional production in times of growth. Have come to this many times. In our model, there is no advanced preparation for growth in terms of setting up additional capacity. So in the immediate in the first quarters of growth, and we've seen this in 2018 and many other cases in the past, we resort to borrowed or stretched or extended production capacity, which tends to come at a cost which is higher than the regular production capacity. So clearly, being at the inflection point, Q1 was the perfect situation where we were already benefiting from growth, but we are still working to increase a little bit some of the associated costs. And this is what the main reason why we are sounding more prudent than what your own expectations might bring you. Certainly, exceeding the margin of 2019 is a possibility, and we are definitely not ruling out that possibility. However, it also depends on a number of factors that are, I would say, beyond our control. They are related to the trends in the market. They are related to what is going to happen in India, for example, which is still a developing situation and so on. And this is why, as I would say, as often happens, tend to be a little bit more cautious than what someone in the sell side estimates. So time will tell who is right. Okay. Moving to M and A. I absolutely can confirm that M and A remain a major focus for Interpol in these days, in these weeks. And I can also confirm that we are seeing a significant rebound of M and A activity after a more difficult year in 2020 because of two main factors. One is the recovery of the activities or of the business in many of the industries that we make possible to bet on a better set of numbers for the full year 2021 for many of the companies that we are discussing with. And as a consequence, it will make, in some way, easier and more appropriate to be closer to the expectation of the sales of these companies. And this is the first aspect. The second aspect is, of course, the logistics because now it's a way easier to organize meetings to visit companies and to restart the discussion that or maybe discussion that was put on hold in the last year. And the availability of Interpump to discuss and to look at bigger transaction or bigger acquisition. Bigger doesn't mean transformational, but bigger in comparison with what we have done historically as average size and in terms of turnover in particular. We have many dossier on the table. We are progressing, and I'm very will deliver some very positive news during the course of the year. If I may add just a comment, something that Fabio, of course, takes for granted. This does not mean that we are neglecting our more frequent and unusual targets because, of course, we don't want to be left without any possibility if in case the large ones do not reach the expected outcome. So we are playing on both tables. Question. Thank you. The next question is from Alessandro Torcora of Mediobanca. Please go ahead. Yes. Good afternoon to Rizavi. I have a few questions. The first one is related to CapEx. If you can confirm, let's say, to us the indication you gave during the previous conference call that the company at least is going to invest €81,000,000 this year because we saw, let's say, a low amount of CapEx in this first quarter? The second question is just a clarification on what you mentioned before Luca on the profitability progression over the next quarter. So basically you are telling the other that this was a very good outstanding result of the company profitability in the first quarter, but we should see a normalization, okay, considering also the return of some normal cost in your P and L? And the third question is on again on the M and A. Clearly, you are telling us that the company is going to target bigger size deal. First of all, considering the initial size, which is fifty-sixty, let's say, maximum €100,000,000 When you say bigger mean, I don't know, 200,000,000 instance, euros 100,000,000 of sales company target for you? And then does the approach to integrate this company, this approach will change it in the sense that for the integration would be, I can say, considering the size will be a bit more complex or challenging. So what's your views on this point? Thanks. Okay. I can take the first point regarding CapEx and M and A, the last one. Regarding CapEx, I can confirm the expectation of stay in the 4% to 5% range and going to something around €80,000,000 even if in the first quarter, we have not increased so much in comparison with first quarter of last year, the level of CapEx. But it's important for you to take note and to take the comment that the reported CapEx are for paid investments. And of course, we are paying now or we are paying in the first quarter investments made during the second part of last year. And then with all the problems related to pandemic, we were not a regime. We and then we can expect stronger increase in the next two quarters of the year, confirming the target of approximately EUR 18,000,000. Payout, Regarding your last question, about M and A and about the size and what does it mean a bigger size, it is true that we have historically acquired companies that on average had sales of 50,000,060 million or up to €100,000,000 And I can say, yes, that is true that bigger means, let's say, 200,000,000. But what is important to note is that we maintain our opportunistic approach to M and A. We are maintaining our opportunistic approach without giving to ourselves specific targets of size, of profitability or market exposition and so on. But what we are seeing now is that we have on our table, on our pipeline, we'll see an opportunity that are really interesting to us for us that are bigger in comparison with what we have seen in the past. And then we comment and we have in mind that we will have an aggregate possibility to close transaction that will be larger in size than in the past. Regarding your concern and your comment about the potential difficulties in integrating these companies, I'm not completely in accordance with you because I believe that it depends on the characteristics of this company because even if we acquire larger companies, we will always go ahead in maintaining and preserving the independence of these companies. And then we may face the case in which these companies will be even more autonomous than the smaller companies that we are usually acquiring because a larger company is normally more structured than the smaller one in terms of management, in terms of IT systems, controls of the numbers and so on. Then I will not be worried so much about the possibility to integrate this company in a successful way. Pablo, just if I may follow-up on this. Can you confirm to us that from a valuation standpoint, and well you mentioned in the past some inflation in terms of transaction multiple, Interpolanta, let's say, will not pay a multiple or the multiple will still stay in a single digit on the page pace? I will not define inflation. I would say that, as commented in previous meetings, that we are ready to pay slightly more than in the past. Slightly means one point in terms of multiple or something like that. We are not prepared to pay 10 times EBITDA or double digit EBITDA multiples. Okay, okay. Yes. So in terms of expectations for the rest of the year, well, indeed, the in terms of EBITDA margin, I don't know exactly what I should add compared to what I said before. I think I said everything that I had to comment about the fact that taking a linear projection of the active speed of the quarter. Remember my initial comment is the active speed of the quarter was higher than the average on everything. So the EBITDA margin of March was higher than the 24% that you see in the results. And clearly, projecting that margin for the rest of the year would be impractical for a number of reasons, including that I have no idea of what might happen in the world if that was the case. However, projecting the margin for the first quarter or the average margin for the first quarter, which already incorporates a mix of better and worse months, will probably be nearer to a realistic expectation. And then, of course, there is the caution that needs to come with any statement that we might do might make regarding the expectations for EBITDA. EBITDA is something that we always fight for, but the actual outcome in terms of the decimal numbers is something that we find out at the end of the quarter, just slightly earlier than you do, but not in a very different way. So I don't know if you have any more any specific question about what we expect for the rest of the year, but I believe that most aspects have already been covered. No, Luca. It's let's say it's okay. Thanks. Okay. The next question is from Domenico Gilosti of Equitaz. Please go ahead. Good afternoon. I have a few follow-up comments, a question on the margin. I'm starting from raw materials. Clearly, I saw that in Q1 you have even declined the impact on the incidence of raw material on sales. And I would expect to see, let's say, a situation probably from the next quarter in which the price increases are matching fully matching or partially matching the increase in raw materials. I'm trying to understand if this is an area where you see some potential reason for your more cautious approach on the margins. The second, still on the margin side, in particular on water jetting, they had a very strong start and it's particularly remarkable considering that the top line was basically flattish compared to Q1 twenty twenty and also 2019. So I also saw the €3,000,000 capital gain. So I'm trying to understand if this is an area where these capital gains were contributing to the boost in profitability that is not reasonable to project also for the following quarters. And that's okay for the margin. And on top of that, just to know if you have any issue to mention about supply chain disruptions, something like that, that could prevent us to exploit in full the demand? And my last question is on your comment regarding the pent up demand. So you commented that in your view from the signals that you have is not just pent up demand that is boosting in the first quarter. I wanted to have some more color also what is behind your reasoning and your comment on this. Okay. First, the raw materials. Clearly, we do not have a crystal ball that will tell us what to expect on raw material. Clearly, time doesn't work in anyone's favor. So the longer this stretch of increases goes on and clearly, least effective our stocks made in advance will be. On top of this, in times of very strong growth, our lead time, of course, increases, and this creates even more delay before any price increases can actually show their benefit on our accounts. So there is no alarming situation. There is nothing that we think we cannot handle, but maybe not with the outstanding results on the same level on the first quarter. However, I would classify this under the file of general caution without any more specific observation. In terms of water jetting, you correctly mentioned the EUR 3,000,000 of capital gains that were referring mostly to the sale of equipment previously used for rental. This is something that we have already seen a while ago and especially has to do with NLD, our U. S. Subsidiary working with high pressure constant systems. They have quite, I would say, significant, certainly more significant than at other subsidiaries in the group, business of rental business. This means that now and then, they are asked to sell the equipment which is being rented out. And this results, if the equipment is older than six months, results in a capital gain. The increase seen in Q1 You spotted it very correctly. We know that, at least in part, this is related to an increase in rental activities, which have been reported by NLT. So this is not expected to be a one off. It's not a capital gain that we got on a, I don't know, on real estate or on something that we only had one piece of. This is at least in part connected to a small change in the business model, which saw the share of rental increasing. So it is fair to expect that certainly for the next quarter, not possibly throughout the rest of the year, that we will see more a continuation of this apparently abnormal or apparently one off item. In terms of disruption in supply chain, and I would also add transportation, I would say I'm happy to work at a company which is not registering any major disruption from this. Clearly, there might be an increase in cost here and there, which, of course, fall under the category of inflation same category as inflation in raw materials. So they would be passed on to customers. However, due to our business model, we manufacture from scratch, from the raw materials or from general purpose components, which are very unlikely to be in short supply. And also due to our local for local, generally speaking, business model, which requires much less shipping around the world than some of our competitors, I would say that we feel quite protected, quite out of these dynamics that have influenced very heavily the account and the expectations of some other players. Last your last question in terms of pent up demand, I know it's a designation that I use very sparingly. And now you just told me why I should not use it. However, in my view, a pent up demand is a rapid fire, which might happen after a time of crisis or a stop of the market, basically representing the catch up of the business for the for what was missed during the closures. But this kind of dynamics would not come with an extension in the time horizon of orders. They would be all orders for yesterday, not the planned orders for the entire rest of the year. So the timing and the order income, the quality of the order income is showing that this is more than just customers or retailers trying to rebuild their inventories. But it represents an increase in activity with expectations for this increase in activity, at least as far as our customers are expecting it. Their orders expect they're expected to go on until well within the rest of the year. And this is what I meant by saying this is not just pent up demand by a structural recovery. So feel free to interpret that or replace my wording with your favorite one if you don't believe that my description of pent up demand is correct. That's top. Okay. Well, fine. Just trying to understand what was driving Basically, the timing the order timing. When orders are placed with a longer timing, it means that our customer is to signal to us that our customers are expecting growth to last for an extended period of time, not to be a more intense situation as the catch up for a lot of business. And maybe just a follow-up on the profitability, in particular, on the water jetting. Have you seen, let's say, profitability growing across the board in the different companies? Or is it more a matter of different mix in terms of sales mix, let's say? No, I would say that pricing of course, I'm talking very generally here WMA wants to integrate with some specific observations. But a lot of companies have had their margins, let's say, disrupted by the irregularity of work in seen during the pandemic. So as the operations resumed normally with no interruptions and no surprises, even a little bit of planning, I'm referring to weekly planning or maybe monthly planning that was possible again. Most of them showed significant improvement per se. So this time, I don't expect the mix factor to be playing a major role. No, I would add to that, confirming what Luca just said, that the rebound in profitability is really, really well spread between the different companies and the different sectors and segments. And it is really, really consulting area sharing. Okay. Thank you. Thank you. The next question is from Michele Bantelli of Exane BNP Paribas. Please go ahead. Hi. Good afternoon to everybody. I have a curiosity about the trends in Q1 in North America. In the sense that we think about the FX in the oil division, I didn't see that much growth. And I'm also wondering why given that the underlying market should have been pretty strong. Well, we might wonder the same. I mean, we do not necessarily have an answer to everything we might ask ourselves. You know that we basically follow the market and pay a lot of attention in listening to customers, and we certainly cannot force them to order. Arguably, the usual stop and go, which is connected to the election, time around was longer than in the past. And we saw this clearly in the monthly sequence of reports. I don't know. It may be related, and again, this is a bigger hypothetical sentence. It may be related to the transition between the two administrations that was a little bit less smoother than usual. Apart from that, there is no particular indication that I might be able to offer. I don't know if Fabio from The U. S. Subsidiaries of the company we manage has received any hint about other reasons that might justify the, let's say, less than expected worse than expected performance of North America in Q1. But again, I would like to reiterate that the Q1 average number doesn't do justice to the exit speed of March, which is, of course, what might drive the expectations for the quarter to come. Fabio, do you have anything to add? No, nothing more to mention. Okay. Thank you very much. Thank you. The next question is a follow-up from Alessandro Dortora of Mediobanca. Please go ahead. Yes. The first question related to the question made before on the proceeds from the disposal of these tangible assets. What is the reason why we should consider this a one off in the sense that I can understand that availability of product could, let's say, shift a little bit to a sale. This is clear. But why you should consider this trend maybe visible also in the next, let's say, three quarters quarters as, say, recurring trend? Well, we took a look at the sizes involved and especially with respect to the management, and they refer that they are actually actively increasing their share of their business, which means that the EUR 3,000,000 that we see for Q1 do not represent the exhausting of an inventory of machinery that was used for rental and is disappearing. It is just an increase in their regular activity. And as we speak, new machines are being built and manufactured for future rentals. So this is an ongoing thing. It's not the a one off thing in terms that it is actually the result of action from management. Can you still hear me? I hear a beep on the line. Yes, sir. Yes, Luca. I see a beep, but it's not line beep. Okay? Please go ahead. The line of the speakers are on. Okay. Thank you for holding. Sorry about the technical inconvenience. Clearly, we spent too little on telecommunication budget, and this is part of the reason for our outstanding EBITDA margin. However, let me finish what I was saying. This €3,000,000 apparently are not a one off, but they refer to an active an affirmative action from management, let's say, turns the wheel a little bit more towards rental as opposed to sales. This is sometimes a management driven operation, sometimes it's a market driven operation. So it's not entirely under our control, but we have received the confirmation by management of NLD that this is not going it's not over with the 3,000,000 that you see here. So at least in part, we'll see it there. And this is what I meant when I say not a one off. It's not like we sold a piece of real estate. It's part of the regular activity. Okay. Thanks. Thank you. The next question is a follow-up from Matteo Bonizzoni of Kepler. Please go ahead. Yes. Just a quick follow-up on this issue of the capital gain. I was looking at your press release. So do you confirm that the only way to detect is to look at the cash flow statement You on Page 27 of your Q1 accounts, in which in the free cash flow, there is €3,000,000 capital gain because I do not see a mention about that in the tax, but maybe I'm wrong. So this is the first question. First, regarding also with the potential size of this capital gain going forward, I was looking that also in the free cash flow of 2020, 2019, there were capital gains respectively €2,300,000 in 2020 and €2,700,000 in 2019. So are also these capital gains related to the same kind of activity? And can you provide a rough indication of what could be the amount going forward, for example, for the full year? Well, just to put things in perspective, if you go back one more year, they were higher than that because this tends to change from year to year according to the demand and even perhaps the financial health of customers. In our from our point of view, please don't be fooled optically by the fact that, that part of our earnings is reported as a capital gain because to NLP, it is actually a very similar thing if they sell a pump or if they rent a pump and it's sold during the rental. This is actually there are two dynamics which are very similar from a marketing point of view. However, they result they come up differently in the account. In the first case, you will just simply see the income from sales. In this other case, if the sale happens not more than six months after the beginning of the rental, it gets registered as a capital gain. But it's the same amount that is jumping from one item to the other. It's not something that would increase or decrease the margins. As a matter of fact, this kind of compound dynamics of rental plus sales is actually a bit more favorable in terms of total EBIT impact on the EBITDA because it comes with higher margins. This is something that we have already seen. I think it was the 2016. Anyway, we've seen it in the past. It might the top line might look a little bit less exciting because the revenues are spread over a longer time. But the total profit that we get from that particular pump are higher than with compared with a normal sale. However, it's not a matter of that kind of contribution being there or missing. It's more like that contribution being there or being in revenues from sales, if you see what I mean. So I wouldn't be overly upset with trying to preview and to forecast the future how much they are going to increase. What I saw in I confirm that the relevant items were the ones that you mentioned in our statements, I would also see I think I saw also an increase in investments into new equipment due to rental purposes, which should be the line after the one you checked. And maybe it will be worth to keep an eye on that line as well. I'm playing by memory, it went from EUR 2,000,000 to EUR 2,900,000.0 or so. And I'm referring to the investments into systems that are due to be that are planned to be rented. Okay. Any indication for the full year after this 3,000,000 or is it possible? Well, I believe that it would really be throwing a dice because I have not a lot of visibility on what our customers' preferences will be. Maybe we will have other talks with the management of NOB, and maybe they can provide some more visibility. But again, for the sake of financial modeling, those are revenues that may be registered as capital gain or registered as proper revenues from sales, but this is not going to make a world of a difference. Is that okay? The next question is from Bruno Vermuti of Intesa Compaolo. Please go ahead. Yes. Good afternoon. I have a few questions. The first one relates to India. And if you can update us on what's going on there and in terms of your activity. And so give out activity even if you know that India accounts for 5%, so it's a little bit impact on your account, but let's understand exactly what you see there and also in relation to supply chain? And the second one relates to the net working capital. I'd like to understand if the increase we have seen in the first quarter is something that will continue in the next few months in relation to the pickup of the activity. And in relation also to this, if you can give us a sense of what is going on in at present. So if you continue to see a potential increase in your monthly revenues, can you give us Okay. I think I missed your third last question. If you could please repeat it, please. Yes. It was related to the sequential increase in the top line you saw in the first three months. It is continuing right now. Okay. Well, first of all, maybe Fabio wants to comment about the net working capital. Yes, I was trying to see the specific numbers. But in reality, the net working capital increased 2020, we have seen and demonstrated how solid and how fresh with our net working capital. That means that we are able to reduce whenever some major change happens in the market like COVID-nineteen. And now it's normalizing back considering the strong recovery in October. It's also important to maintain on our mind and on our actions this kind of flexibility. Also, in order to be able to catch the opportunity to the market in terms of pricing of raw materials in a moment in which raw materials prices are increasing and in order to be sure to be able to answer to the arising demand in a moment in which for some raw material, there are scarcity or delivery issues. And then we have always maintained this industrial approach, not looking at the last not looking at squeezing the last percentage point in net working capital, but maintaining our strategy flexible and adaptable to what's happening to the market and what are our expectations. In this period, we have seen a strong increase in raw material prices in some of the raw materials that we use. And this is combined with the increase in business activities and the turnover that we are seeing that this continues also for the next quarters. And then we are not absolutely worried to put some extra million euros on our inventory because of this. And in terms of In terms of India, the situation, as I said before, is developing as we speak. So the government, I'm referring especially to the state of Karnataka, issues new regulations and changes on almost a daily basis regarding what is allowed and not allowed to do. I'm not aware whether today our plants are working. What last thing I saw, I heard is that they were still working but have an obligation to close from the next day. And then, of course, as you can imagine, we were quite busy in preparing the information pack for the results presentation, and I was not able to have full daily updates. But I expect really daily development. What counts more for us is that India has shown that it was still in good shape and is able to jump up again as soon as the situation allows for it. And this was seen quite clearly in the Q1 number. So that's the most important and reassuring part. In terms of what to expect, well, this is a bit up in the air. I don't think that India will make the same mistakes that draw to the current new wave of contagion. So hopefully, the current lockdown, which was scheduled to last for two weeks, will be reasonably the last one or the last major one. However, I'm no expert in, of course, in Indian matters. And so we largely wait and see what happens. What we know and what we can assure you of is that the state of health of our production facilities and to what we know of our closest suppliers is good enough to restart immediately without wasting time as soon as the external circumstances allow for it. Okay. Thank you. And the last one was on the sequential monthly increase that you saw in the first quarter, if you are continuing to see in that trend? Well, what we can see, remember that at this point in the calendar, we do not see monthly EBITDA margin for April. So I'm not aware of that. But every other indicator shows that April was a very, very good month, just like pretty much on the same level as March. So I believe that by the time we publish our Q2 results, we will need or you will need to probably catch up with estimate for the year. However, I wouldn't have any hard numbers to spend at this precise time also because it was just onethree of the quarter, and we'll still have to see how May and June will develop. However, quarterly numbers were quite good per se, but are even more exciting considering that they were all on an increasing trend from January to March. But sorry, I would get killed if I tried to attach any numbers to this statement. Thank you. Thank you. The next question is a follow-up from Domenico Vilovsky of Equita. Please go ahead. Yes. Just to be clear on so when you refer to acceleration, you mean month on month. So month after month, you see that top line is picking up and is growing. So it's not clearly something compared to 2020. Do we see or to 2019 is a sequential growth? Correct. Thanks. The sequential growth has to do with absolute figures because this is a year when relative comparison compared to one year ago are not going to make much sense in a good way. Okay. Thanks. Thank you. You. Mr. Mirabeli, there are no more questions registered at this time. Okay. So thanks for attending. Our next results presentation is scheduled for August 6 with the half year results. We wish you a nice rest of the day and an even nicer weekend. And thanks again for attending, and take care. Bye bye. Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.