• Revenue: EUR765 million in Q2, an 11% increase year-over-year.
• Net Industrial Margin: EUR391.5 million, 51.2% of revenues, up from 48.8% in 2023.
• EBITDA Adjusted: EUR110.9 million, 14.5% of revenues, compared to 12.5% in the previous year.
• Free Cash Flow: EUR425.2 million in the last 12 months, EUR74.3 million in the quarter.
• Positive Financial Position: EUR305.3 million at the end of the quarter.
• Dividend Distribution: EUR104.8 million distributed to shareholders.
• Core Business Growth: Coffee machines account for approximately 62% of total revenues, with significant growth in household fully automatic machines and Nespresso capsule systems.
• Ironing Products Growth: 35% growth rate in the second quarter.

• Warning! GuruFocus has detected 4 Warning Signs with DELHF.

Release Date: July 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• De'Longhi SpA (DELHF) reported a significant revenue increase of 11% in the second quarter, reaching EUR765 million, driven by strong performance in key geographies and product segments.
• The company achieved a notable improvement in profitability, with the net industrial margin rising to 51.2% of revenues, benefiting from a positive product mix and easing inflationary pressures.
• The coffee machine sector, which accounts for approximately 62% of total revenues, expanded significantly, supported by the consolidation of La Marzocco and double-digit growth in household fully automatic machines and Nespresso capsule systems.
• De'Longhi SpA (DELHF) maintained robust cash generation, with approximately EUR425 million of free cash flow before dividends and M&A over the last 12 months.
• The company confirmed its guidance for a 9% to 11% increase in sales for 2024, with expectations of reaching the upper end of the adjusted EBITDA range of EUR500 million to EUR530 million.

Negative Points

• The comfort segment experienced weakness due to unfavorable climate conditions and the discontinuation of the American Mobile Air Conditioning business, impacting overall growth.
• The Americas region showed a slowdown in organic growth, attributed to the discontinuation of the mobile air conditioning business and weakness in the comfort segment.
• Eversys, part of the professional coffee business, faced challenges with negative performance, particularly in Asia, due to high comparison bases and weak demand in certain countries.
• The company noted a slight negative impact from pricing, as they gave back some savings from cost reductions to support market position and sales.
• The comfort segment, which represents 4% to 5% of total business, is expected to continue having a negative impact in the second half of the year.

Q & A Highlights

Q: Can you clarify the food preparation trend in Q2, as it seems to be negative by 1%? Also, what are your margin expectations for the second half of the year? A: Food preparation was actually positive in Q2 with a 1.4% growth. Regarding margins, we are encouraged by the Q2 results and expect them to remain strong in the second half. We are maintaining our guidance but are optimistic about achieving the upper end of our EBITDA expectations.

Q: Could you provide more details on the performance of the coffee makers division, particularly Eversys, and the Americas segment excluding La Marzocco? A: Eversys experienced a slowdown, particularly in Asia, due to high comps and a negative market in China. In the Americas, excluding La Marzocco, the segment was negative due to the discontinuation of the comfort segment, but coffee and nutrition products showed positive growth.

Q: What are the current market trends and competition levels, and how is your working capital developing? A: July is performing in line with expectations, and competition remains stable. Our working capital is developing as planned, with higher inventory levels to support market growth opportunities.

Q: Can you update us on the Starbucks project for cold brew coffee machines and the outlook for the comfort segment? A: The Starbucks project is slightly delayed, with delivery now expected in Q1 2025. The comfort segment, which is 4% to 5% of our business, is expected to continue having a negative impact, but it will be minimal in the second half.

Q: How is La Marzocco performing, and what is your outlook for the consumer and professional coffee markets? A: La Marzocco is performing in line with expectations, contributing positively to our guidance. Historically, De' Longhi has been anti-cyclical, and we expect to continue performing well even in a challenging consumer environment. The professional market is stable outside of China, with La Marzocco growing nicely.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.