Interpump S p A : Transcrizione conference call I Trimestre 2023 (versione solo in inglese)

Interpump Group S.p.A.

1Q2023 Results Conference Call

Monday 15th May 2023

OPERATOR:Good afternoon. This is the Chorus Call Conference operator. Welcome and thank you for joining the Interpump First Quarter 2023 Financial 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 "*" and "0" on their telephone.

At this time, I would like to turn the conference over to Ms. Elisabetta Cugnasca, Group Head of Investor Relations of Interpump. Please go ahead, madam.

ELISABETTA CUGNASCA: Thank you. I am Elisabetta Cugnasca, Head of Investor Relation of Interpump Group. Good afternoon or good morning according to your time zone, and welcome to Interpump's first quarter 2022 financial results conference call. As usual, I have to bring your attention to the disclaimer slide inserted in the annex part of the presentation. I hope you were able to download from our website. Afterwards, it's my pleasure to leave the stage to Mr. Marasi, who today, I am introducing you as new group Chief Executive Officer. As a matter of fact, last 20th of April, the newly nominated Board split Chairman and CEO role, and Mr. Marasi was appointed as Group CEO.

FABIO MARASI: Thanks, Ms. Cugnasca, and thanks to all of you for the attendance. Due to the share conferences, please allow me to take a couple of minutes for some personal remarks. As some of you probably remember, I joined Interpump in 2016 with the double act of M&A responsible and Head of Hoses & Fittings Division.

During these years, following the growth of the group and the expansion of this businesses, I had the opportunity to add different businesses roles and as to, among them of course, the one that I appreciated the most has been the leadership of Walvoil Group in the last couple of years.

Since last 28th of April, I am wearing an additional hat, the one of Interpump Group, Chief Executive Officer, for sure, the most important and demanding of my entire professional life.

I feel mandatory to express now my deep gratitude to many people. I would like to thank Mr. Montipò first for his trust and mentorship, my colleagues who helped me and support me in this time and the financial market too, because discussion with analyst and investor has been an important step in my growth path, that allow me to understand topics which have to be clear in mind of…for one who has the responsibility to lead a listed company.

Having said that, let's have an overview on the first quarter '23 and consequently on the entire 2023. The results of the first quarter 2023 was significantly better than our rosiest expectations. Speaking about top line, despite an unprecedented growth achieved in 2021 and in 2022, and some fear of a softening market demand, we enjoyed a further acceleration from the fourth quarter '22, and this resulted in an organic growth higher than 18%.

Moving to profitability and margins, the very strong organic growth and the full deployment of the countermeasures adopted in 2022 to face inflationary trend resulted in an EBITDA margin of 25.3%, a number that is unprecedented in Interpump Group history.

In addition to this, and despite the impressive organic growth, the cyclicality that characterized first part of the year and the peaking CAPEX, we have been able to improve the cash flow generation from €6 million to €14 million in the quarter, stabilizing the inventories level, thanks to a less critical situation regarding supply chain and logistics in comparison to the situation of the last 2 years.

We expect to improve significantly the cash flow generation in the following quarters, in line with our promises of last summer but we are already did the first steps. Furthermore, we maintained our focus on M&A growth path, going on with the implementation of our risk management approach through

direct specification and this resulted in Indoshell Mold and I.Mec acquisitions.

Finally, we started to implement the first actions of our 2023-2024, '25 ESG journey, and this resulted in the approval of the new code of ethics and the creation of the Sustainability Committee, moreover with the concrete and practical approach that you know distinguishes the group, we took the opportunity given by the appointment of the new board to anticipate the most important step related to the formalization of succession plan action that is the separation between the Chairman and CEOs.

And this result, what does it mean for the remaining part of the year? It means that we are expecting for the full 2023 an higher than expected organic growth rate and in particular we believe that our mid-single-digit organic growth rate anticipated last February 2023 will become a nice single-digit organic growth rate. On top of this, we expect to consolidate further, the record high profitability results achieved in the last 2 years, to improve the cash flow generation and to continue with our external growth strategy. This always…always keeping an eye open on what is going on around us. The milestone of our medium long-term growing strategy is profitability excellence, and we are ready to promptly adapt ourselves, and our industrial footprint and structure in case of market changes.

After this first snapshot, let's deep dive on the first quarter '23 figures. Regarding sales with an organic growth of 18.7%, as I said before, 18.7% is the best result of the last 3 years, excluding COVID rebound of the second quarter '21. Considering performance drivers, we mentioned a 14% volume growth and 4% price growth. Both division performed very well with a well- balanced growth rate, and in particular Water-Jetting performance was supported by complete solution products.

Some colors on sales evolution by geography. USA were up by close to 19%, Italy by around 20%, Germany by close to 30%, France by more than 20%, and Canada by close to 25%. For updating partnerships among second

countries, China, which last year was [indiscernible] in this quarter grew double-digit by more than 11%.

Sector application, industrial vehicles adapter up by almost 14%, agriculture and forestry up by 20%, earth moving machines up by more than 30%, lift by 25%, construction by more than 30%, food and beverage up more than 20%, and so on. Another important point is White Drive. The investment done to increase manufacturing capacity and to reduce bottlenecks are bearing fruits. And in the quarter sales were up by almost 28%.

Moving to profitability. The EBITDA margin of 25.3% is a record not only for the first quarter, but this is also an historical record. For a general point of view for Interpump Group. Across the group, we are fully benefiting of the very strong and balanced organic growth, and the full deployment of the countermeasures adopted in 2022 to face inflationary trends.

Regarding White Drive, for the second quarter in a row, EBITDA margin stood at 21%, driven by improvements on both sides of the world. In Europe, the rationalization between Poland and Germany is going on, and finally, efforts done last year in U.S. are bearing fruits. Last week I spent 3 days in the Polish plant of White Drive, and I'm very proud to say that our colleagues fully embraced Interpump managerial approach.

On a final remark, please do not let you misled by the last part of the insurance reimbursement, regarding Romanian fire that accounted €3.6 million that we received in the quarter. With our usual transparency, we underline it to you, but please keep in mind that this is not a gift. This is the compensation of all the activities, and losses and expenses we are doing to make the factory working again. And hopefully next summer the production in our Romanian plant will be back again.

Moving to CAPEX, as you know, we are going on with the post-COVID production expansion plan. And gradually we are rolling out the equipment phase after the land and building one. I would like to remind you annual