Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Sabaf first quarter 2026 results conference call. As a reminder, all participants are in listen- only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and then zero on their telephone. At this time, I would like to turn the conference over to Mr. Gianluca Beschi, CEO of Sabaf. Please go ahead, sir.
Good afternoon, everybody, and thank you for attending this call. We are commenting the results of the first quarter that have been approved by our board during the morning. The first quarter of 2026 has proved in general for the macroeconomic picture, a time of uncertainty and of new challenges, even due to the uncertainty that we have seen on the geopolitical scenario and the new tensions and the conflicts, especially in the area of Middle East and Iran specifically. These tensions have had also causes consequences on the industry, on the appliance industry. We have seen that our major customers have reported the results which have suffered of this difficult time. The areas which have been impacted more are the ones next to the area of conflict, so Middle East and North Africa and Turkey.
Even because, in the second part of March, logistics has been interrupted, deliveries have stopped for some weeks. Even if Sabaf has not a direct exposure to the Middle East market, we do not have direct sales. Some of our customers in Turkey and Egypt, especially export to Middle East, this is the indirect consequence that we had. Another market that suffered of this general picture is the one of U.S., both because the lack of confidence due to the conflict itself, the risk of price pressure, inflation, and so on, due to the fact that the situation of duties is still unclear. This causes a general situation of confusion that does not help the market itself.
In this context, our group has delivered results that we deem as satisfactory, even if we also had the impact of the macroeconomic picture. More specifically, we talk of a postponement of deliveries for around EUR 2 million from March to April. We had around EUR 2 million sales less than expected. The other impact compared to the first quarter of last year is a weaker US dollar, and this also impacts on sales and on margins. Overall, let's say that results, as I mentioned, are satisfactory for us with sales at EUR 70 million or - 6.2% compared to the same quarter of the previous year, which was by far the stronger quarter of 2025.
At constant exchange rate, the drop is 3.3% substantially all linked to the postponement of deliveries in North Africa and Middle East in late March. This has been already recovered with April sales. On margins. The margin dropped from 14% or EUR 10.4 million that was in Q1 2025 to 13.6% or EUR 9.5 million in the first quarter of 2026. The drop in margin was caused mainly by the impact of the weak US dollar, because part of our sales in US dollars are for products which are manufactured in Europe, so with costs in euros. In Brazil, with costs in the local currency, in Brazilian reals or in Mexico, where also local costs are in Mexican pesos.
All these currencies are now stronger than the US dollar. It's not good for our export. As regards instead the impact of lower volumes that we also had, we have been able to manage it so not to impact on profitability. Low volumes have not impacted on profitability, thanks to the fact that we have been able to reduce the fixed costs, and also we have a slightly positive effect on sales prices, raw material price, and energy price on the same quarter of last year. Below the line of EBITDA, we do not have major impacts. Depreciation is the same amount of last year at EUR 5 million.
The substantially similar are also the part of financial charges and the forex impact which is positive. We close our income statement for the first quarter with an adjusted net income of EUR 2.6 million compared to EUR 3.5 million that we had in Q1 2025. The difference in the bottom line is exactly the same as the difference at the EBITDA level. Let's say that commenting the different areas, we reported positive results in Europe with 8% growth. This comes from gaining shares on new projects and new market share inside our stable relationships with the major European customers.
We reported also a positive performance in Latin America, where the market, especially in Brazil, continue to perform well. This is a constant, at least for the third year, that we see a good growth in the Brazilian market, with a quite stable trend. As regards North America, we had sales translated in euro, which are down by 7.6%. If we talk about sales at constant forex, sales will be up nearly 2%. Let's say that we have also in U.S. and Mexico have performed much better than the market that instead was particularly weak during Q1.
This once again is due to the fact that we are gaining share in the North American market, thanks to the synergies we have in MEC and thanks to the ramp-up of the Mexican plant. Sales dropped in Turkey and significantly dropped in North Africa and the Middle East. The cause is mainly the conflict. As regards Turkey, also the internal demand continues to be weak. In Turkey, we had sales down by 16%. We compare this figure with the figure of production of major appliances, major domestic appliances in Turkey in the first quarter, which is down 21%. Even in this case, in a picture specifically really challenging, we have been able to have overperformed the market. Also in Turkey, we can say that we are gaining share.
As regards Egypt and Middle East instead, sales are down 2% from EUR 4 million to EUR 2 million sales. As regards the different divisions, we had a similar trend for gas, hinges, and electronics . All are down mid-single-digit, and all keep profitability levels substantially in line with Q1 2025. Going on and talking about the financial position, I'd comment that we had an increase in net working capital, and the net working capital on sales reached 29.5% compared to 27.6% at the end of 2025. The increase is mainly linked to a higher level of stock.
This involves both raw materials, where we anticipated some purchase and some stocks in order to grant both prices and availability of raw materials in a moment in which there have been some disruption on the supply chain and high volatility in raw material prices. Partly also we had an impact on the stock of finished products for those goods that we have not been able to deliver at the end of March, and for which sales have occurred instead during April. Mainly for this reason, the financial position has passed from net debt has passed from EUR 75+ million at the end of 2025 to EUR 79.2 million at the end of March.
Investments during the first quarter have been EUR 3.4 million, in line with our budget, which is of around EUR 14 million, between EUR 14 million and EUR 15 million for the full year. During the quarter, we have made a buyback of stock of own stocks of our shares for around EUR 1.1 million. If we look for a moment to the current trading, let's say the most recent figures that we are available, let's say that both sales and the order intake in April and May is good and better than during the first quarter. Overall, we expect a second quarter with sales above the level that we have reached in the first quarter and above the level that we had in the second quarter of last year.
That should allow us to recover the first quarter, the first quarter growth, during the second quarter. As you can imagine, we are experienced important rise in raw material prices, both aluminum, brass, and steel, which are the main raw materials for our group, as well as the cost of energy, gas and power are rising. Is mostly hedged for the second quarter, but we have an exposure for the second part of the year, for which we might have an impact that we are managing by passing through this increase into selling prices.
We are in a phase in which we are adjusting our price lists, or immediately or at least starting from Q3 2026 in order to avoid the impact of the important increase in the price of raw materials and energy. As regards our development plans, let's say that we go on with our organic expansions. Both the new plants in Mexico and in India are ramping up following our expectations. We are satisfied of what we are seeing from these areas that represent some of the areas in which we see long-term, long-term growth.
We are also refocusing our project on induction, and we have stated that during this period, the priorities on which we should develop our presence in the induction segment, and we hope to be able in a, in the short-term to also deliver some results in this new division that has not performed as expected so far. This is, let's say in a, in a few words, a comment on the quarter and on the current outlook. Then I stay available for the Q&A section for further details or questions that you could have. Thank you.
Excuse me. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on their touch- tone telephone. To remove yourself from the question queue, please press star two . We kindly ask to use handsets when asking a question. Anyone who has questions, press star one at this time. The first question is from Emanuele Negri with Mediobanca. Please go ahead.
Yes. Good afternoon, everybody. Thanks for the presentation and for taking my question. I have a couple. The first one is on the outlook. You provided an overall constructive message for the second quarter related to order intake. Could you give us an idea on the geographical distribution of this positive intake, so where it is going better and where worse? The second one is on the potential price increases you mentioned. Which kind of feedback are you receiving from preliminary negotiation with customers, also considering that some relevant U.S. players mentioned potential price increase to come in the second quarter?
Yes. Let's say that as regards the geographical background of market trend improvements is quite distributed. We are continuing to see a good demand in Europe, an improvement in Turkey compared to the first quarter, even because some of the customers are overcoming a period of financial difficulties. We expect to improve, but also because we are further working on increasing share in Turkey. Middle East continues to be a question mark. We have some orders, but up to the last minute, we are not sure that we will be able to deliver everything we have in order, even if in some cases, we have already received advanced payments. In U.S., we continue to see an over-performance compared to the market.
I would say there is no specific area where we are improving. Apart from what is the ramp-up in Mexico and in India, that this is due to our specific new initiative. Overall, let's say, even if in a context that, as I comment, remains challenging, Sabaf expects a second quarter which is going better than the first in terms of sales. As regards price increase, on one side, it's evident to everybody what the commodity prices are doing, that's true for every player in the market.
There is no too much to discuss about the necessity that these price increases have to be pushed to the end, to the end user, in order to avoid the impact on the margins on the industry, which is already suffering. Our customers are in line with this message. As you can imagine, with customers which have their troubles in this stage, it's not often it's not automatic to pass through the sales increase. In some cases, we have contracts that allow to do that. In some cases, we have to negotiate. Let's say, all the industry is in the same pot.
It's a matter of fact that prices have to increase to keep a minimal level of viability for the players in the industry.
Okay, thanks a lot.
Thank you.
The next question comes from Domenico Ghilotti with Equita. Please go ahead.
Good afternoon. A follow-up on the previous question, in the sense that I'm trying to understand if the North American situation, in your view, is, say, company specific. If you have such a market share gain that really is offsetting a weakness that you are seeing from the clients or in general on the market, or if you think that so far, at least in your segment, you haven't seen the kind of negative message that we have read from your clients. Second, a comment on the Indian market. We are reading from a macro perspective, sensitivity to the oil spike that is higher than in other areas. If you can give us any color on this market specifically.
Yes. As regards to the U.S., let's say that, as, of course, not all the appliances are performing the same way and not all the players are performing in the same way. More specifically, we see that the high-end market is over-performing the trend. We have part of our sales that are for the high-end market, which are growing fast. In other, to other customers which are more in the middle market, also in this case is the idea that we have is that we are gaining share. Also the figures for April that we have seen are on the positive side.
Let's say that I think partly is due to the fact that we are not exposed to all the appliances. We are not in the industry of washing machines. We are not in the industry of refrigerators. Most of our sales are for cooking appliances and partly dishwashers. This may be a difference. The other difference is that there are players in the high-end market, where the market continues to be particularly well-performing. As regards India, instead, let's say that, as maybe we have partly commented during our previous conferences and meetings with the financial community, we are now facing a phase in which we started to have the correct product and the correct industrial footprint.
With the latest developments we had in terms of product developed for the Indian market, and in terms of Indianization of our production, both of which are processes which are not from one day to the other. We are in the stage where we are very close to, let's say, start to see the effect of the work done in the past years and in recent months. We will not expect in India an immediate big jump, but because the figures from where we start are still relatively small. In relative terms and, as regards the visibility we have, we are very, very positive and confident that we have the key to be successful also in this market, where we've been working for a couple of years without seeing the results.
That was partly already in the initial, let's say, plan. It took time. Now, this time is next to the end. To give you just one figure more in detail and to talk about, we had sales which were double in Q1 2026 compared to Q1 2025. We are talking of sales of slightly less than EUR 1 million. We are talking on the general figures of Sabaf group are not material, but doubling the sales is started to be something that sounds, let's say, encouraging for what the work that we have done so far.
Maybe a follow-up. I don't know if it is too early to comment, but I'm trying to understand if you still see the sustainability of last year level of sales, that was something you had in mind after Q 4.
Can you repeat? So sorry, the last question.
No.
I couldn't quite catch the question.
Yeah, yeah. If you are still, if you can comment on the full year outlook. If you think that reaching the level of last year, so fully recovering the miss, let's say, in Q1 is something that you consider achievable at this stage.
Yes. Let's say yes. On one side, we consider it achievable because the current trend for the second quarter is positive, and because of the new projects and the ramp-ups that we see for that will contribute more in Q3 and Q4, go in this direction. On the other side, as you can imagine, we have not order in place, and we do not know what will be the market demand in the second half. This is a level for which, on one side, we are confident, on the other, we have not figures in hand that for which we can grant that to reach that. At the best of our forecast, my answer is yes, we will.
Okay. Thank you.
Once again, if you wish to ask a question, please press star and one on your telephone. As a reminder, if you wish to register for a question, please press star and one. Mr. Beschi, there are no more questions registered at this time.
Okay. I thank you all the attendants, and goodbye, and to the next next call. Thank you. Bye.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone.