Fila Aktie

Good afternoon. This is the conference operator. Welcome, and thank you for joining the FILA First Half 2026 Results Web Call. [Operator Instructions]

Today's speaker are Massimo Candela, Group CEO; Luca Pelosin, Group COO; Cristian Nicoletti, Group CFO; Steven Boyea, CEO USA, Dixon Ticonderoga.

At this time, I would like to turn the conference over to Cristian Nicoletti, CFO of FILA Group. Please go ahead, sir.

Good afternoon, ladies and gentlemen. I am Cristian Nicoletti, CFO of FRA Group. Let's start with a brief overview of our financial performance for the first half of 2026. First, I would like to highlight that H1 2026 confirms the indication provided during the first quarter results, specifically a sustained growth in operational performance, particularly in Q2 following the consolidation of Seven Group and the progressive shift of the business seasonality towards the center quarter of the year.

On an organic basis, excluding negative FX impact, group EBITDA increased, delivering very satisfactory profitability levels. It is worth noting that the net impact of tariff was only EUR 2.7 million at the EBITDA level in the first half of the year, while considering that 2025, 2026 period, the economic and financial impact of the tariff will be 0, completely neutral.

Moreover, FILA Group also increased its financial flexibility following the successful completion of the debt refinancing and the ABB for 7% stake in bonds without compromising the company governance structure. We're also pleased with our free cash flow to equity performance. Excluding the cash absorption for the Seven Group of around negative EUR 70 million, free cash flow to equity stood at negative EUR 43 million, showing an improvement of EUR 27 million compared to H1 2025.

Regarding the net bank debt, the decrease at the end of June reflects the strong cash flow generation and the disposal of the stake in DOMS for EUR 73.8 million. This more than offset the acquisition of Seven Group, its bank debt, dividends and buyback.

Finally, today, the Board of FILA agreed the distribution of an extraordinary dividend of EUR 0.46 per share which will be approved in September and paid in October. On top that our share-based share buyback program continues with around 468,000 treasury shares purchased today out of the total 1.3 million shares authorized by shareholders' meeting.

Moving on the Slide 8, where we look at the core business sales. In H1 2026, core business sales reached EUR 343 million, up 12% on a constant FX basis and including EUR 44.3 million of Seven Group contribution. The organic growth was positive in Q2 for 2.1% on a comparable FX, reflecting the shift of the order towards in Q2 in North America and in Europe, the latter as a result of the new commercial strategy. Meanwhile, Center South America were down 11.9% at a constant FX, still suffering from the weak economic environment in Mexico, further impacted by competition from illegally imported school products.

Let's now turn the group profitability on Slide 9. Adjusted EBITDA came in at EUR 75.9 million, up 20.4%, which includes at EUR 8.6 million positive contribution from Seven Group. recovering from the negative 3.4% recorded in Q1 2025, driven by its Q2 seasonality. Importantly, excluding Seven Group, H1 2026 adjusted EBITDA grew by plus 2.9% on a constant FX basis. EBITDA margin reached 22.1%, expanding from H1 2025, thanks to ongoing operational efficiency and the net tariff impact EUR 2.7 million, which is the result of the tariff refund for EUR 8.2 million and the reversal of inventory sold for EUR 5.5 million.

Please turn to Slide 11 for adjusted net profit. Similarly, adjusted net profit, including Seven Group rose to EUR 37.9 million, improving from EUR 22.5 million in H1 2025, driven by better operating performance and lower net financial expenses, mainly thanks to the positive FX impact, EUR 13.5 million between H1 2026, H1 2025. Reported net group profit increased to EUR 59.3 million versus EUR 9 million in H1 2025, including the capital gain of disposal of 7% stake in DOMS.

On Slide 12, we detail our free cash flow generation. Free cash flow to equity stood at negative EUR 60.3 million, consistent with the standard H1 seasonality and improving versus the negative EUR 70 million H1 2025. It is worth noting that excluded the nearly EUR 17 million negative contribution for Seven Group. Free cash flow to equity improved year-on-year by around EUR 27 million, affirming the strong cash generation profile of FILA core operations.

Let's move to Slide 13. As of June 2026, the net debt stood at EUR 209 million, a decrease of EUR 35 million compared to June 2025. This change was primarily driven by the positive cash flow generation of the period and the disposal of the stake in DOMS.

In conclusion, turning our full year outlook. We confirm our full year guidance. We expect double-digit growth in both revenue and adjusted EBITDA alongside positive organic growth. Free cash flow to equity is projected between EUR 40 million and EUR 50 million with a target dividend payout ratio of 20% to 40% under normal business conditions.

Thank you for your time and attention. We are now happy to take your questions.

The first question is from Isacco Brambilla of Mediobanca.

Two questions from my side. The first one is on current trading. The second quarter showed positive organic growth both in North America and in Europe. Just wondering if you can share any data on the first part of the third quarter, whether these supportive underlying trends are continuing as we approach the back-to-school campaign?

Second question is on Seven just a clarification. You mentioned, Cristian, the EUR 17 million negative impact from Seven. Is it free cash flow or net working capital absorption? And final question is on full year outlook for free cash flow. Just wondering which are the underlying assumptions on CapEx and net working capital backing your guidance on free cash flow?

Thank you, Isacco, Massimo Candela. So concerning the first question, we have in this call, we are happy to have the presence of the CEO of North America. So I will answer for Europe and rest of the world. He will answer for North America for the third quarter. Concerning the 2 remaining questions, Cristian can answer to you. So Steve, would you like to start talking about North America, please?

Certainly. Again, this is Steve Boyea, the CEO of Dixon Ticonderoga. So we had a very good shipping month in July comparing to prior year. Both U.S. and Canada shipped double-digit increases in gross sales. The sell-through that we are seeing, basically, we see customer sell-through through the third week of July, which is still not the peak of back-to-school shipping. The last week of July and the first 3 weeks of August are the key weeks.

Overall, the industry is starting off a little slow on sell-through, but our performance is better than the industry. For example, one of our largest retail customers, the sell-through of our product through the first 3 weeks of July are up 5%, and they are very happy with that. So a real good start to the third quarter.

Yes. Thank you. Concerning Europe, Europe is a little bit behind United States as our back-to-school start generally at the end of August, so a little bit premature. I think that the improvement trend that we have seen in the second quarter should be confirmed. Of course, we were a bit concerned due to the situation in Hormuz, but the second quarter is showing very good resilience, very good cost control that we have been able to apply. So I do expect a third quarter in line with expectation, thus positive. Cristian, can you answer the other 2 questions, please?

Yes. Of course. Thanks, Isacco, for your questions. Related to the absorption of the group, the EUR 70 million is related to free cash flow to equity. Consequently, you called the EUR 60 million that is absorption in H1 2026, will have an improvement of this amounts.

Related to the guidance, we confirm our guidance of free cash flow to equity at the end of the year between EUR 40 million and EUR 50 million. But of course, at the moment, we are reasonable to be in upper guidance at the moment for the information at the moment available. Related to CapEx, we confirm the initial evaluation of EUR 20 million for the full year 2026 and the change in net working capital in a general assumption for EUR 10 million as discussed in the previous call.

The next question is from Alessandro Cecchini of Equita.

The first one, actually, it's on capital allocation. You had an extra dividend for about EUR 23 million, but I will say you had a very positive cash coming from DOMS at EUR 74 million. So just to understand what is your view about the delta in terms of capital allocation priority. So this is my first, then I make the others, but I will start with this.

So thanks. In terms of capital allocation, we are living in a very unstable moment. It will be interesting to see what will happen in the macroeconomic situation. So as of now, we want to be -- we want to deleverage FILA Group as much as possible because we have the perception that in 2, 3 years, some transformational project can become reality.

So in short term, we have 2 main priorities to reduce as much as possible debt in United States. Apart that the CEO is doing an extremely good job. Interest rates are pretty high. And even more in Mexico, the cost of debt is extremely high. They have a very high peak season. So we want to reduce as much as possible the cost -- the cost of debt we have in that area.

Okay. Very clear. My second question is about Seven. So of course, for us is new the seasonality of the business. So we need to better understand the trends, in particular in terms of EBITDA. But if -- so looking at the second quarter, so for the year, for instance, I was just wondering in the past was around EUR 14 million -- EUR 14 million of EBITDA for the year. So looking at this second quarter, we are ahead of these targets or we are in line given the seasonality of the company?

Thanks. First of all, I think we made a mistake not being very clear starting from the first quarter because the seasonality of Seven is definitely different because they go directly to retailers. And I remember you that this will be something that characterize also FILA in the future, both in Italy and in Mexico. So our seasonality is going to go more towards the second quarter.

The performance of Seven as of now is slightly better than June '25, but it's very much important to see the sell-through. And I explained 5 minutes ago, our back-to-school is starting the last week of August. So as of now -- Yes. We have some very first positive signs from customers that are telling us they are reordering because they have a nice sell-through. But frankly speaking, this cannot be considered an average. It's just a first sign. So we are positive to say that Seven despite the difficult market in Italy is going to have a pretty good year in '26 comparable to '25.

Okay. Very helpful. And back to the previous questions about -- so the trend in third quarter. So probably I missed your view about Mexico, I mean, the Central South America because, I mean, second quarter was very tough, minus EUR 90 million with a very relevant loss in terms of EBITDA in terms of year-on-year. So second half is easier comparison because I mean the crisis started, if I'm not wrong, in the second half of last year. So just to understand which is the current dynamics that we are seeing in the market? And finally, just to recap on the U.S., it is possible to see U.S. to be mid- high single digit in the third quarter or I understood wrongly the messages.

Steve, can you please answer the question about U.S.A.?

Yes. So the third quarter, I think July will be stronger than our August. So I think that is going to normalize between those 2 months. But I would say mid-single-digit increase in revenue over last year is definitely attainable.

So for Mexico, the answer is a little bit more elaborate. I would like to remember you that last year, this period, we have shut down Chinese operation for the reason that we have shared many times. As every extraordinary project, especially when you touch production, there are some unforeseeable problem, and we have absolutely fallen in this situation, there has been a strong delay in implementing all the equipment, all the machines in our plant in Mexico for different reasons.

This has generated, number one, extra costs. Number two, important delays in production that has affected also domestic sales because Mexico should have been forced by us to respect deliveries to Europe, which, by the way, anyway have been delayed by 4, 6 weeks. So Mexico is going to make up some difference in domestic market because now they have the production in place and they can supply orders that they couldn't supply by the second quarter.

We have had also big problems of learning curve. This was more predictable because in the past, when we moved to China, we had exactly the same experience. So very high level of waste, quality problems. The learning curve is going to become flat in the near future, I would say, for next back-to-school. This year, we have paid consequences. So if you put together, delay in deliveries in domestic market, delay in shipping to Europe, very high level of defective product. Learning curve is still very steep. Difficult market due to illegal import. Of course, we really hope that Trump will be able to put all the pressure to Mexican government to stop illegal imports because they feed this illegal import, clearly for economical reason. Mexico is still a difficult country in which we operate. But definitely, the worst is behind because the production now is showing important improvement.

And lastly, if I understood correctly, so basically, the net tariff of the current 2026, if I understood correctly, so excluding, of course, reimbursement or previous is close to 0 or 0, I understood correctly.

Yes. I mean when we say 0, it means that if you start from the tariff when they have been applied last year, I would say, around April '25. And if you consider the reimbursement that we have been able to get, the impact will be close to 0. This year, 2026, the positive impact of the reimbursement is around, Cristian, EUR 2.5 million, correct?

EUR 2.7 million.

So this year, the positive impact has been EUR 2.7 million.

Okay. So just to understand because the EUR 5.5 million, if I am correct, is due to tariff applied to inventories linked to 2025 and the reimbursement is due to 2025. So if we exclude this, basically, we are -- so the message that you are basically not paying tariff now, so in your current business or very, very limited.

Yes, very -- we are paying an average of 10% or slightly above.

[indiscernible] confirmed what you said about the value of the tariff in inventory.

[Operator Instructions]

The next question is from Arturo Lòpez, Clear Value Advisors.

I have a couple of questions. The first one is actually on the free cash flow. It's my understanding that EUR 50 million from the transaction of DOMS is going to go against that, plus the organic free cash flow generation, which is, as you mentioned, on the higher part. So that would be approximately EUR 100 million less of deleverage on a back of the envelope very quickly. That should be correct? That's the first question.

And the second question, if I may, should we adjust the EBITDA margin for the reimbursement of the U.S. tariff, what would be the adjusted margin? Or in other words, the gross margin of first half 2026 to be compared with the first half of 2025, please? Just to understand also the impact of the inefficiencies that you just Massimo mentioned that we should expect to recover. That the second question.

Cristian, I think you have all the elements.

Related to the free cash flow to equity, if we go at Page 12, the proceeds from sales DOMS are excluded our free cash flow to equity. EUR 60 million negative is without sales DOMS as maintaining the same approach of the liability related to Seven Group is core business.

Okay.

Relating to impact of the tariff as did in 2025 we are considered ordinary business, the tariff. In our EBITDA, we have the impact negative in 2025 for the amount that we have reversed in inventory and sales. And in 2026, we have only this EUR 20.7 million in EBITDA, but are considered ordinary business. As Massimo said, starting 1st July 2027, we have 0 impact for other reimbursement roughly, of course, material.

Okay. So basically, it is accounted above the EBITDA level for both years, correct?

The next question is from Niccolò Storer of Kepler Cheuvreux.

Actually, just a clarification on the accounting of the sale of the 7% stake in DOMS. I was wondering which was at the end of the day the, let's say, net impact post tax, the net cash in post tax of the disposal, I guess that the EUR 70-plus million you mentioned in the cash flow statement is gross of tax. And also, which is the capital gain linked to the transaction, which we should see on the P&L.

Niccolò, for your question. The net proceeds are EUR 73.8 million, net proceeds. The capital gain related investments due to the sales of value of respect to the initial booking is EUR 46 million. Okay? The impact of the net income is roughly EUR 33 million. Considering that we have EUR 46 million of gain, EUR 13 million of tax between Indian tax, Italian tax, then that is the difference.

[Operator Instructions]

The next question is a follow-up of Alessandro Cecchini.

Just a quick on financial expenses because basically, all in, excluding, of course, ForEx this year, we can run around EUR 13 million, EUR 14 million, if I am not wrong. So given the sort of restructuring or renegotiation of the debt package, which is a reasonable assumption for savings for 2027 in terms of financial expenses?

Ales, thanks for your question, 2027, 2026?

2027. So this year probably will be double the first half. So just to understand the net savings year-on-year in 2027.

Okay. Roughly, let me say that is the normal decalage that we have considered in the beginning of the evaluation because we have confirmed the actual margin and the value of the structured interest. Let me say 2 million more or less, but it's important to understand where the Euribor will arrive at the end of the year, of course. But the condition of the interest is absolutely better of the previous one, let me say, EUR 1 million, EUR 2 million related the like-for-like bank condition.

Management, there are no more questions registered at this time.

Then thanks, everyone. Thanks for attending this call, and we are going to meet soon at the first opportunity. Enjoy holidays.

Thanks a lot.

Thank you.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices.

Good afternoon, this is the conference operator. Welcome, and thank you for joining the F.I.L.A First Quarter 2026 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Cristian Nicoletti, CFO. Please go ahead, sir.

Ladies and gentlemen, good afternoon. I am Cristian Nicoletti, CFO of F.I.L.A. Group. The group CEO, Massimo Candela; and the group COO, Luca Pelosin, will also participate in today's conference call.

Let's start with a brief overview on our financial results for the first quarter of 2026. I would like to underline that Q1 2026, in line with budget expectation, reflects progressive shift in F.I.L.A. business seasonality to meet the quarters of the year. Also considering the consolidation of Seven Group, which has low revenue seasonality and a negative EBITDA contribution in Q1.

Reported results also reflect the weakness of the euro versus the U.S. dollar. On organic basis, excluding the negative tariff impacts, the group EBITDA increased, delivering a very satisfactory level of profitability.

We are pleased with the free cash flow to equity performance, which excluding the Seven Group cash absorption, stood at negative EUR 40.9 million (sic) [ EUR 48.9 million ], improving versus the EUR 55.5 million in Q1 2025.

Regarding the net bank debt, the increase at the end of March reflects the full consolidation of Seven Group, its debt and dividend distributed over the last 12 months. Our leverage ratio remains comfortable.

I will now draw your attention to Slide #8, where we illustrate the core business sales. In Q1 2026, core business sales, excluding Seven Group, were EUR 120 million, down 7% on comparable FX basis. This primarily reflects a shift of order in Q2 in North America and Europe, the latter influenced by our new commercial strategy. Central and South America were down 1.7% on comparable FX basis, showing stabilization after a weak H2 2025.

Let's move to group profitability on Slide 9. Adjusted EBITDA at EUR 16.7 million includes EUR 3.4 million of negative contribution for Seven Group, in line with Q1 2025, which is characterized by low revenue seasonality in Q1. It's important to underline that adjusted EBITDA, excluding Seven Group in Q1 2026, increased by 3.1% on comparable FX and tariff basis. Margins stood at 16.8%, improving from Q1 2025, driven by ongoing operational efficiency and better sales mix.

Please to the Slide 11 on adjusted net profit. In the same way, adjusted net profit excluding Seven Group stood at EUR 7.4 million, improving from EUR 0.9 million in Q1 2025, driven by lower net financial expenses, which mainly reflects a positive financial impact from FX. Let me remind you that the net profit does not include the contribution for DOMS in line Q1 2025. These will be made available once DOMS will have reported Q1 2026 results.

On Slide 12, we highlight the development of free cash flow. Free cash flow to equity was equal to negative EUR 56.7 million, in line with Q1 2025, as a result of seasonality of the first quarter. It is worth mentioning that excluding the almost negative EUR 8 million contribution for Seven, free cash flow to equity improved versus previous year, reaffirming F.I.L.A. cash generation capacity.

Let's move on Slide 13. As March 2026, the net financial position increased to EUR 252.9 million, increasing by EUR 76.2 million compared to end March 2025. As a result of acquisition of Seven Group, negative EUR 54.9 million of total consideration, Seven Group net bank debt negative EUR 11.2 million, and dividend distributed for EUR 42 million.

In conclusion, the outlook for full year end. We confirm the our guidance provided. F.I.L.A. expect double digit growth in both revenue and adjusted EBITDA, including the contribution from Seven, alongside positive organic growth. Free cash flow to equity is expected between EUR 40 million and EUR 50 million, with a dividend payout ratio of 20%-40% in ordinary course.

Thank you all for your attention. We are now ready to answer your questions.

[Operator Instructions] The first question is from Isacco Brambilla, Mediobanca.

Three questions from my side. The first one is on the underlying trends in Europe and the United States. So overall, in terms of demand on the market, what you are seeing beyond the, say, the shift in the commercial strategy that is impacting the seasonality of your business?

Second question is on current trading. If you can comment a bit more on April and beginning of May performance. In the press release you mention orders year-to-date recovering. Just if you can give a bit more color on that.

Last question is on cost inflation, what you are seeing since the -- say, since the Gulf conflict, and which are the levers you can activate to compensate growing pressure on costs?

Thanks, Isacco. Massimo Candela speaking. Concerning the first question, as we announced in the previous call, we do see 2026 as a better year compared to 2025, and as of now, we confirm. The seasonality is going to impact even more our sales in the future because we have acquired Seven. Seven, 96% of the turnover goes to retailers and F.I.L.A. creating synergies on this is going to have an overlap seasonality. Of course, this year the trend is not yet completely reached, but we will see a full effect in 2027.

In Europe, the market is stable except in Italy that is showing a very weak trend in terms of sales and consumption, I think also affected by the rate of birth. This does not mean that we have a negative view on Italian market because with the synergies with Seven for the moment are giving us lot of satisfaction in light even better than what we expected when we finalized the acquisition.

I don't recall exactly the second question. I think you refer a little bit to the sales of the second quarter. I can confirm that April is showing a complete recovery of the delay we have accumulated in the first quarter and is anticipating a very good second quarter in line with our outlook for the year.

For the problem related to Hormuz, yes, we are experiencing some cost inflation, but we have decided for the moment to keep prices stable. We are enjoying some improvement in our profitability due to reorganization of the last 12, 18 months. We have launched a lot of new product, very well received in the market. So we think in this moment we need to show resilience and I would say kind of aggressive commercial strategy.

This for the moment should not have any impact on our outlook. Of course, if the Hormuz crisis will continue in August, September, we will have to analyze better the consequences. For the moment, we have decided to keep our commercial strategy stable.

[Operator Instructions] The next question is from Alessandro Cecchini, Equita.

The first one actually is on the North America. I don't know you already discussed about this, but I would like to better understand your view on the current budget school. So last year, we saw due to Trump budget cuts, so I would like to understand if it's moving something in the positive way.

My second question is about Mexico. First quarter, we saw stabilization. Basically asking you if you expect, I mean, to see a, I would say, a recovery on top line to be back on track to previous levels that were pretty good.

And finally, just to better understand this, you saw that the Italian market is sluggish, but you see a better outlook due to your own initiatives. So just to understand, is something more on 2027, or you expect maybe something in the third quarter this year, that is still seasonally important?

Ale, thanks. Concerning United States and the federal budget, we have to be more precise. So in terms of federal budget, there has not been an improvement for 2026, but at the local state level, they are fulfilling the difference. The problem is that as we are referring to 50 states, we need to analyze state by state. But I would say as a general comment, the situation is improving, and this is shown by our top line sales that are looking positive at least until August, and Of course, we need to understand what will happen with inflation and the Hormuz price. But as of now, we are definitely matching our best expectation for 2026.

For Mexico, more or less the same comment, so the situation is going back to normal. Also in Mexico, we are applying the same strategy that we are applying in Southern Europe, so we're going down to retailers in cooperation with some top wholesalers. And we are going to expect a good second quarter thanks to the level order we can see today.

In Italy, the full effect of our strategy will be seen in 2027. Unfortunately, we finalized the acquisition sale at the end of January. So as of now, we are just smelling a little bit of the synergies. The market is reacting pretty well. We have already announced our strategy. We see already positive impact, but the full impact positive in terms of margin and top line, we are going to see in 2027.

The next question is from Francesco Taddei, Banca Akros.

So I have 2. First on Seven and DOMS. Could you give us a bit more color on the progress of the partnership and on the medium-term opportunities for cross-selling or distribution of certain products through the DOMS' platform in India?

Maybe second one on valuation, considering the current mark-to-market value of the DOMS stake, relative to F.I.L.A.'s market capitalization. Do you have any reflections from the current conglomerate discount embedded in the stock?

So in terms of the partnership, I have a very positive feeling on the just born Seven DOMS JV. There is a lot of enthusiasm coming from the CEO of Seven and the CEO of Skido, which is the DOMS controlled company for backpacks. We are already anticipating some new product already in 2027, so we are trying to run as quick as possible. And this will be interesting to understand the impact on DOMS.

For what DOMS is concerned, I would say the partnership is not at all related to the amount of participation, but they are very much dependent on our know-how, on our, let's say, know-how of the distribution worldwide, innovation of new products, innovation in quality, in design. We would rather consider the value of the participation strategic, but in line of our financial stability and in case, in the future, F.I.L.A. will need to dispose some of the shares, in order to, maybe make some M&A strategy, let's say that we will be free to take our own decision without having any impact, on DOMS, relationship for the future.

The next question is from Niccolo Storer, Kepler.

I have a question. Maybe I missed it because I connected just 5 minutes ago. The question is about the performance in Europe. I understand the change in strategy, but of the minus 10%, let's say, before Seven consolidation, how much of the performance was linked to what you say in the press release, which is basically some weakness in the market? And how much is linked on the other end to your strategy to go direct to retailers and then having some delays? So how much of this turnover lost, which is about EUR 8 million, is going to be recovered in Q2 or Q3?

Thanks, Niccolo. As of now, we think that in Q2 we are going to recover everything because 100% of the delay is related to our strategy and a bit some important customer in Central Europe that has postponed order to April and May for their own decision. Of course, we need to understand from one side, the message is positive because you are going to see in the second quarter a very nice recovery. Already in April, I don't know if Cristian already gave you the figures. In consolidated numbers, I know, we went from minus 7% at the end of March, plus 8% at the end of April. So a dramatic change.

Of course, the impact of Hormuz case, if the situation will not be solved, we have to analyze more in September. So when the school will open and the sell-out has to be measured carefully. As of now, we do expect the customer trust a lot on us. We see a very nice trend, very well received of our new products. We do expect a very good second quarter.

Massimo, the 8% of April you mentioned is just for April or is ...

No, no.

Cumulated?

Year-on-year cumulated. So this give you the magnitude of the improvement, starting in the second quarter.

Including Seven or not?

Including Seven. Cristian, can you please confirm? I don't like to make mistakes.

Of course, Massimo, I confirm that April to year-to-date 2026, the revenues, including Seven of, and FX comparable, were up 8% versus the same period of 2025.

[Operator Instructions] Gentlemen, there are no more questions registered at this time. Excuse me, there is one more question, follow-up from Isacco Brambilla, Mediobanca.

Yes. A very quick follow-up on Seven seasonality. We are not yet familiar with this. Should we expect EBITDA and free cash flow generation of Seven to be even more skewed to second and third quarter, in particular, than the rest of the group? So should we expect that, roughly speaking, [ EUR 50 million ] EBITDA we have as a base for Seven to basically come exclusively in second and third quarter? Or is there a tail also in the final quarter of the year to keep in mind?

Yes. Yes, Isacco, you are right. Maybe we was not clear at the time of the acquisition. Seven makes 96% of their turnover with the retailers, mass, food, drugs. So really their seasonality is fully concentrated in second and third quarter with very small activity in fourth quarter and in the first quarter of the year. Even more with a -- even higher peak than F.I.L.A. Group, for the simple reason that we sell consumable products, so we have a kind of regular purchase or regular needs of our product while they sell backpacks and trays for pencils and fiber pens. So generally speaking, the consumer buy once per year, and really the purchases are concentrated during the back to school. So their seasonality is even higher than our.

Gentlemen, there are no more questions registered at this time. Oh, excuse me, there is one more question from Alessandro Cecchini, Equita.

Sorry for this last mile question. So just, maybe I didn't understand correctly. So in the first quarter, you had organic, I mean, performance, excluding forex, excluding Seven, that was a minus 7%. Including April, so year-to-date, which kind of -- because a plus 8% is of course including Seven. So I would like just to match Apple with Apple, so minus 7% organic, how much is with the performance of April.

Cristian, can you please explain better the top line EBITDA? Thank you.

Related to, of course, Alessandro -- thanks for your question. Of course, Alessandro, speaking about revenue, no? The up -- of course, the up 80% is related to minus 2.4% on first quarter 2026. Relating the results excluding Seven on FX comparable were flat year-to-date, showing a full recovery the first quarter, considering that the first quarter we are negative for 7%.

At the moment, we don't have any other questions. I'll turn the call back to you for any closing remarks.

I thank everyone for attending this call, and I think we are going to meet soon. Thank you. Thank you, everyone.

Bye.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices. Thank you.

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the FILA Full Year 2025 Results Conference Call. [Operator Instructions] Today, hosts are Mr. Massimo Candela, Chief Executive Officer; Mr. Luca Pelosin, COO; and Mr. Cristian Nicoletti, CFO. Mr. Candela, please go ahead.

Thank you. Good afternoon, everyone. I think that 2025 has been from our point of view, a satisfactory year as we have to face a lot of unprecedented and unforeseen challenges. I'm referring mainly to Central and North American market. As you know, U.S. and Mexico account for almost 60% of the FILA Group balance sheet.

And as you know, many American companies has had very difficult time last year to manage the strategy of the Trump administration with the tariffs. And so despite this, I think that we have been able to achieve a very good result. Let me remember the challenges we have faced in 2025. There are three main challenges. The number one is the duties that has imposed without notice period. That has impacted sometimes our supply chain even when vessels were shipping our products.

Then the cut in the school budget that is unprecedented. And this year seems to go back to normal, but was not possible to budget such a cut that has been almost compensated by a very good performance of the retailers. So consumers have shown loyalty to our brands, to our products. Mexico, we have fight the illegal imports after the government has imposed duties especially to Chinese product.

We have experienced three, four months, unfortunately, during back-to-school period of heavy legal imports that started to be controlled after the months of November. And in fact, in the first quarter 2026, we see Mexico going back to almost a normal situation. So three challenges altogether that during the course of the year could have driven to a very unsatisfactory performance, which has not been the case at all. We have been able to guarantee a good cash generation. We have shown once more that even with a weak dollar, we are able to maintain the profitability.

Once more, I want to repeat, our turnover in dollar is compensated by our costs in dollar. Europe has performed pretty well despite in Europe, we have to face the reduction of the rate of birth that is very well known, especially in Mediterranean countries. We are proceeding with the reorganization in U.K. that will start showing positive effect during 2026.

Last, but not least, we have made what I think a brilliant acquisition in Italian market that will allow us to compensate this negative rate of birth and will probably bring back Italy to the -- our average profitability. Let me remember, we always have in mind to reach between 17% and 18% EBITDA on sales. Last, but not least, our Indian assets continue performing extremely well. We grow also in this financial year, we have a substantial growth.

The last quarter, they have approved that the company has grown the top line more than 20%, reaching an EBITDA that is very comparable to FILA, which show a very efficient and sustainable business in India that will continue growing for the next following year. The cash generation at the end, from our point of view has been more than satisfactory. Let me remember that we have to face two extraordinary cash absorption. Number one, the reorganization in China, we shut down the production for the reason that we have explained several times.

And the duties. The duties have absorbed just a little bit less than $10 million. As you know, there are today discussions on the possibility that we are going to get -- to receive back these duties. We really have not much more to say than what we read in the newspaper. It's something that is going on, but it's unclear what the government will do.

For 2025, the duties have absorbed almost $10 million that if you want to normalize the cash generation of FILA, you just have to add to the free cash flow that we have announced today in the press release. So a very difficult year. We think that for these reasons, despite the very complicated situation in Iran, '26 seems to be a better year than '25. Just a couple of information in the history, FILA business has shown to be resilient to a recession situation.

Again, our business is more related to rate of birth than strong economy or weak economy. Second element, we are not a company that consume too much energy. And I would like to remember that in France, where we have the company where we produce paper, so where we need more energy, we have implemented an alternative use of energy. So we don't use any more gas. And so the impact of the Iran crisis should be minimal, at least if the crisis will be solved within the next 8 to 12 weeks. If not, we will have to analyze the situation and understand the impact. So please now Mr. Nicoletti introduce us to the numbers -- comment of numbers, and we will be ready to answer your questions. Thanks.

Good afternoon. I will now draw your attention to Slide #7, where we illustrate the core businesses. In 2025, core businesses decreased by 3.1% on a comparable FX basis, mainly to the lower consumer demand and reduced government funding for schools in USA and U.K.

The main currency effect goes to the USA dollar and Mexican peso weakness. Europe was flat in full year 2025 and up plus 4.9% in Q4 2025, confirming the positive trend already seen during the year, simply in France, which benefited from commercial reorganization. Central South America posted a decline in Q4 to the negative performance in Mexico, which suffered the stronger competition from illegal imported school products now under further restriction from Mexican authority.

Let's move to group profitability on Slide 8. Adjusted EBITDA at EUR 105.2 million declined by 4.6% on a comparable FX and tariff basis, mainly reflecting lower revenues. That said, it's important to underline EBITDA margin stood at 18.4%, not far from the 2024 figures, supported by ongoing operational efficiencies.

Please go to the Slide 10 on adjusted net profit. In the same way, adjusted group net profit stood at EUR 33.0 million, down from EUR 40.9 million in 2024. Let me remind you that the net profit results includes the contribution for participation in advanced [indiscernible]. The decrease in adjusted net income was a result of EUR 6.8 million of ForEx losses. Please keep in mind that these are mainly noncash items.

On Slide 11, we highlight the development of free cash flow. Free cash flow to equity stood at EUR 35.6 million, significantly impacted by temporary cash absorption rate [indiscernible] tariff and China reorganization, which over the course of the year totaled approximately EUR 11 million -- it is worth mentioning that excluding these extraordinary items, free cash flow to equity amounted to approximately EUR 47 million. So at the high end and EUR 40 million and EUR 50 million guidance range provided at the beginning of the year.

Looking at the performance of the fourth quarter alone, the free cash flow to equity stood at EUR 67.9 million in the line with the figure for the Q4 2024. This is an important factor because it confirms the ability to generate EUR 40 million, EUR 50 million in cash flow annually and to meet the guidance provided, excluding one-off bad debts. Let's move on Slide 12.

At December 2025, the net financial position stood at EUR 138.2 million, increasing by EUR 14 million compared to end of 2024, mainly to the EUR 42 million of dividend distribution. In terms of shareholder remuneration, we decided to propose a dividend of 12.2 million, which corresponds to 37% payout ratio, at the high end of our guidance.

We also proposed the authorization for a buyback program on 1.3 million [indiscernible] or ordinary shares. In conclusion there are some insight into outlook for year-end. FILA points to double-digit growth both in revenue and adjusted EBITDA, taking into account the contribution of Seven coupled with positive organic growth, assuming constant tariffs and US Dollar 1.16. Free cash flow to equity is expected to between EUR 40 million, EUR 50 million in ordinary growth.

Thank you for your attention, and we are now ready to answer your questions.

We will now begin the question-and-answer session. [Operator Instructions] First question is from Isacco Brambilla, Mediobanca.

I have 3 questions. I go one by one. Maybe so it's easier for everybody. First question is on Europe. Performance has been very supportive in the second semester of last year. Just if you can elaborate more on the drivers behind such rebound. Also I was wondering whether there is already evidence of some contribution from the plan of increasing DOMS penetration in Europe in the results posted last year.

Massimo Please.

Yes, sorry. So concerning DOMS, the contribution is 0, because, as you know, DOMS is running very fast in domestic market. And despite we started selling, the company was not able to deliver on time. So we should start to see some first impact on European market in 2026. Even if we think that to see some relevant numbers, we will need two, three years.

The rebound in Europe. I think it's just a better coverage, a better new commercial strategy that we started implementing in the last two years. We will start seeing also some positive results in Italy starting from next year. I would say, a better and more efficient commercial strategy. So in a few words, we are taking market share from the competition.

Second question is on Mexico. During the opening remarks, I heard signs of stabilization in the market. Is it fair to expect top line trends in Central Latin America to at least stabilize in 2026 after the weak performance of last year?

Yes, at least to stabilize or even make up little bit of the delay that we had. It's a difficult market because when we talk about corruption, in the custom, it's I mean even Trump complain about the corruption in Mexican government. You really never know what you are dealing with.

For sure, the population is large. We have almost 32 million kits. So theoretically, it's a very interesting market. There is a very good sign just happened recently, the all the -- sorry, the previous Minister of Education resigned, and it was a minister that was -- that had a strategy against the school investment.

It was a kind of more communistic approach. Now the new minister, which has been nominated in the last three weeks, or even more recently has decided to go back and restart a positive process in the school environment. So what I would like to say is that the influence of United States to Mexico, is creating a better environment for private initiative for private schools, for legal versus illegal. It's a process.

So if we are not going to be disturbed like last year from heavy illegal imports, I think Mexico will go back to be a very interesting market. Again, as we cannot control the situation, the first semester, the first quarter is looking positive because it seems that the business is back to normal. So we are realistically confident to go back to a normal situation.

Last question on my side is on Seven. Is it fine to consider as a starting point for the 12-month contribution in 2026, the EUR 90 million revenues and EUR 40 million EBITDA disclosed at the moment of the acquisition?

Yes, I think these numbers -- so are consistent. Seven is a little bit more exposed to let's say, Iran unstable situation because they import almost 100% of their business. from Far East. So as of now, there has been no repercussions. But in the second half, we have to see what will happen with Iran crisis.

The budget is a consistent budget with 2025. The weak dollar helped Seven even to increase their margins because they are net importers. FILA will definitely see experience strong improvement in terms of profitability market coverage presence, thanks to the synergies with Seven.

Of course, as we finalize the acquisition. In January, we will not see anything in 2026, but we will see a very important positive effect in 2027. Just last -- one last point, please do not divide by 4 the quarter of Seven because they have an important seasonality.

Their peak is even higher than FILA. So their first quarter is extremely low, while they have a very important and strong second and third quarter.

[Operator Instructions] Next question is from Alessandro Cecchini, Equita.

[Foreign Language]

[Foreign Language]

I make it in English. So my first question is about the North American business. So in the last two years, we lost around 10% of sales at constant currency. So just wanted to have your view for this year 2026, what are the current situation and your initiatives to -- I mean, to support a return to top line growth in North America? This is my first question. Sorry for Italian.

Let me remember one important information I gave you two years ago because you Alessandro are mainly referring to top line. While I remember that a couple of years ago under a strong inflation period, we have clearly targeted cash generation and margins -- average margins also because we needed to reorganize the company in a more efficient way.

So I would not talk about lost top line. I would like to talk about new health, efficient and profitable top line after we have cleaned partially some businesses that we didn't like, that we did not consider core. And in fact, if you analyze the profitability of North America is really significant, is even higher than the average of FILA Group, which is pretty unusual because it's a tough market.

It's a very competitive market. Still we can confirm that the healthiest business in FILA Group will remain in North America. So I don't like the year to focus on top line. We have cleaned the business now. So we do expect to restart the growth in 2026, again, in a very controlled manner.

Last year, we ended the year with some reduction, but that was not really the market. In fact, we have had a very strong last part of the year because the customers that were extremely confused by Trump tariffs were destocking like crazy.

The result is that we have a very empty supply chain to the consumers. And we see a very good start of 2026 in North America. So I would not stress too much the situation of top line because when you have a seasonal business like our and you started a strategy of cleaning the low-performing part of the business, you need a couple of years to reach that.

But I would like to focus more on cash generation and profitability.

Very, very clear, Massimo. My second question is about the U.K. that was I mean, in 2025 was hit by budget cuts. And then I mean, in the meantime, you have decided, I mean, to refurbish, to restructure the business. So just to -- if you can highlight us what are the main things that you are doing in order to -- I mean to support the business regardless I would say, a potential return or not of budgets, school budget for 2026.

Yes, it's a good question. U.K. is a difficult market, especially after Brexit. And I think we have not done a good job -- what we have done, we have identified the main problems. And I think we are going to go back to satisfactory results in the next couple of years.

Number one, the government has started to impose heavy salary increase, and this is imposed by -- as a low -- so we have had the dynamic of salaries much, much higher than what we have experienced in Europe, which has put our production our operations in 3 years from a situation of being competitive to not being competitive anymore.

Number two, there has been a reduction in school expenses. This -- we have not been able to manage in advance. So we have to change a little bit our approach to the market. So all in all, what we have decided is that if this is a strategic decision of the government to create so much inflation in their domestic market, we have decided to reorganize the company. So we are going to reduce substantially the overhead in England.

We are going to absorb the production in Europe from U.K. Now Europe has become more competitive and in India for entry-level range of sales. And we're going to reorganize the market as we are doing in Europe with a more centralized approach, because we have seen that the positive experience we have just occurred in Europe is giving us positive results.

We are going to start from January '26, with the same strategy for U.K., so a more centralized approach, more attention to margins, less attention to top line, more attention to cash generation, payments and profitability by customer.

Okay. Very clear. My third question is that about Mexico. So Mexico was I mean, negative in terms of top line, but making calculation in 2025, we lost EUR 5 million of EBITDA more or less. So regardless of top line, you expect I mean this kind of decrease to be recovered due to more normal environment, lower, I would say, illegal products, because probably you need to follow us, I would say, the market with the price cash, I don't know, but margins were probably had an impact higher than the top line.

So just to understand if a normal situation is popping up. So basically, you can recover part of this.

So Alessandro, the analysis is correct, but there are several reasons why Mexico has been affected and what we think is that the worst is behind us. Number one, domestic market, Mexico, for Mexican subsidiary, domestic market is extremely important. And the onetime effect we have already discussed definitely hurt us. We are a leader in the market in colors. And clearly, we have been heavily affected by this legal imports. There has been a couple of other effects.

Number one, the down trend of sales of United States and the problems with the tariffs. United States have been able to manage the overhead accordingly. Mexico being a plant, a very sophisticated and have organized plant have not reacted properly to compensate the sales they have also less view on direct view on the market.

Last, but not least is the exchange rate. As you probably know, Mexican peso has been extraordinary and record high, the government to keep inflation under control, keep interest rates extremely high. They have a policy to protect the local power of the workers. So they impose especially in the last three, four years, imposed strong salary increase and at the same time, keeping the interest rate so high, they have guaranteed a very strong power of the peso.

So making the domestic production less competitive, not really against the United States. In fact, Mexico is still the best place to be for United States, but we lost a lot of competitiveness against Indonesia, Taiwan, Thailand, Vietnam, Cambodia and illegal China. So the combination of these effects has clearly complicated our life.

Now the duties that have been imposed following Trump's indication, are protecting our domestic market and if the duties will be forced, so will be respected by custom, we should go back to normal situation.

Okay. And my last is on buyback. So you approved EUR 1.3 million. So is something that we need to expect to start shortly. So like a buyback or depending on other factors. So just to remind this.

I think Cristian can better answer you. Cristian, can you please answer to Alessandro.

Alessandro, thanks for your question. Of course, we start considering the technical timing for this and the lockup period considering the closing the next closing, but the program is to start considering the medium average exchange of the shares in respect to the regulation. But we start probably between the end of the beginning of the April currently the lockup period

Next question is from Niccolo Storer, Kepler.

Okay. I have a question on your guidance. You are targeting a cash flow of EUR 40 million to EUR 50 million in 2026, which was basically the previous indication. But today, you have Seven. So I understand that probably you will still have some impact from tariffs. But at the same time, in 2026, you will no longer have I guess, the China headwinds? And maybe on the other hand, the impact of duties could be a bit lower than it was in 2025, because, let's say, things are now probably much clearer than they were in 2025. So can you give an explanation to that.

Cristian, would you like to answer or?

Thanks a lot for your question, Niccolo. Rating the expectation for 2026, we have considering an absorption of inventory for the next year, more or less we consider EUR 10 million and plus roughly EUR 20 million of the CapEx to increase the automatization capability of production and plus an increase of tax payment considering the expectation of the growth and the incorporation of the Seven. At the same time, we consider stable the interest due to the M&A fund needed to buy Seven. Let me say EUR 40 million and EUR 50 million is a reasonable range for 2026.

And the impact you expect from tariffs is, let's say, comparable to the EUR 7 million of 2025. And maybe, sorry, another question, which is leading to your guidance on revenues and EBITDA. You are targeting double-digit growth for both. Is it reasonable to assume that is EBITDA is going to grow more than proportionally than revenues?

Related to sales EBITDA without Seven, we consider roughly mid-single digits. And related to EBITDA, we -- our estimation is slightly lower than 2025. Mainly for the increase of the OpEx for the market in sales promotion to support our strategy in Europe and in USA. And on the end, the impact of the tariffs that we have included in our inventory value at the end of 2025.

Of course, when we sell in 2026, we have full impact in EBITDA margin. But we confirmed a good margin also for 2026.

[Operator Instructions] Next question is from Alessandro Cecchini, Equita.

Just a couple, if I may. The first one, just to maybe making the math on your expectation, just to be clear, I see that consensus on adjusted EBITDA for 2026 ex-IFRS 16 is EUR 110 million, more or less. So just to understand if it is what you are, I mean, targeting or you are considering reasonable. And my second is instead about -- still about Europe. So maybe I missed the first part of the first question. But I mean, this positive momentum, you think that could be supported also over the next months or quarters? Just to understand if this kind of plus something that was very good. It's something -- it's a good starting point, but I mean, you see a continuous momentum in market share gains in the market.

Related EUR 110 million, let me say that it's reasonable at the information available to be, of course, Alessandro because -- we estimate at the beginning of this month is EBITDA. And related to Europe, I'll give to Massimo to explain better.

Yes. Let me point out something that is very obvious. EUR 110 million is absolutely reasonable. Let me remember that more than 50% come from United States. So we have adopted the exchange rate more or less where dollar is today. So we do not expect any substantial change in the future.

If this will happen, we will be forced to reanalyze our numbers. So we are considering the dollar in the area of [ 115 ] with euro. Concerning Europe, as I said during my analysis, we are very happy because we have reorganized our sales organization, our strategy, as you can imagine, we have not attached Italy because we had the acquisition of Seven that will dramatically change, and we really think in a positive way, Italian market and the same.

We have not touched the U.K. yet because we are under reorganization process, and it's very difficult to apply a new commercial strategy when you are shutting down plant and you incur in problem of service. So we really think we are doing a very good job in Continental Europe. We do expect a strong improvement in Italy and in U.K. in the next 12 months.

So yes, we remain positive. I don't know if you have time to analyze the situation of our competition. We are positive also because we see our competition struggling, struggling for several reasons, but I think the reason why we are taking market share is because we have started two, three years ago, this organization and we started to see positive results, including fine art.

So yes, we can confirm, generally speaking, if the outlook of 2026 looks better than 2025, I would say, it's in our outlook, the confirmation of our positive view on the market.

Yes. Because actually, I made some analysis in the past. It was in 2016 that you you did this number. So excluding 2021 of the rebound of the market in Europe, so 10 years to see this kind of growth.

Okay.

[Operator Instructions]. Gentlemen, Mr. Candela, there are no more questions registered at this time.

Then I thank you for attending this meeting. And I suppose with the majority of you, we are going to meet in the next two, three days in Milan. Thank you. Looking forward to see you.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices.

Good afternoon. This is the conference operator. Welcome, and thank you for joining the FILA Group 9 Months 2025 Results Web Call. [Operator Instructions] At this time, I would like to turn the conference over to Massimo Candela, CEO. Please go ahead, sir.

Good afternoon, and welcome to F.I.L.A. call. So the year-to-date results as of the end of September, in absolute value, they are not brilliant. While in relative value, I have to say that we are pretty satisfied of the way we have managed the storm that we have experienced starting February 2025. Unfortunately, we can talk only a little bit about business and a lot about the macro-economical situation. But let me remind you that when we started the year, we had an exchange rate euro-dollar around $1.03, $1.04. And suddenly, we experienced the strong devaluation of the dollar until December not one single bank was expecting such a devaluation.

No need to mention the problem of the tariffs. We will enter into details later. But for a company that is exposed -- for a group that is exposed for more than 50% of its business in the United States, the way tariffs have been managed and the unpredictable way, I would add because every week, every month, the tariffs have changed has created unbelievable instability in our supply chain.

The situation in Mexico. Mexico have been strongly influenced by U.S. trade policy, forcing Mexico to increase substantially the tariffs with the Chinese product, also in our business. This has generated an uncontrolled unprecedented amount of illegal products, unfortunately, during our back-to-school. So if you recall, probably you remember that until June, so until the first half, Mexico was running ahead last year. And then the market has been flooded by illegal imports. This situation has been discovered by the government just recently, I would say, during the month of October. And finally, the government is stopping these illegal imports, but the damage on the third quarter of Mexican company has been great.

Fortunately, in Europe, the situation is more stable and slightly better than what we were expecting. Last but not least, India just announced an extremely strong first half because for them, the end of September is -- represent the first half of the year because they closed the balance sheet at the end of March, showing another growth of -- in the magnitude of 25%.

So despite this incredible difficult situation, in which let me remember that all our supply chain has been dismounted and recreated and dismounted again for several times with the tariffs coming back and forth from Mexico, March, April and then from India back and forth and then up in August to 50% and then with Canada back and forth. So this situation has generated so far up to $9 million unbudgeted cost. Just this should explain the difference versus the forecast. And tariff means cash, cash deposited in the custom as soon as the product arrived touch United States. Also, this explains the magnitude of our cash generation that now still we consider very good, but in the low end of the band that we have anticipated for the year 2025.

So I'm not hesitant saying that we have the miracle to reach these results. And before moving to numbers, I have to confirm that we have different sources telling us the situation is little by little going back to ordinary course of business. So we do expect not in 2025, the last quarter will be in line with the rest of the year. We are quite optimistic to -- for the year 2026 because we see the things little by little going back to a normal situation.

So I ask Cristian to anticipate some the main numbers of our first 9 months, and then I will wait the questions. Thank you, Cristian.

Thanks, Massimo. Welcome. Let's start with a brief overview of our main financial KPI for the first 9 months of 2025. I will now draw your attention to Slide #7, where we illustrate the core business sales. In the first 9 months of 2025, core businesses decreased by 3.6% on comparable ForEx basis. The main currency effect was due to U.S.A. dollar and Mexican peso weakness. This results from lower consumer demand and reduced government funding for SKUs in U.S. and U.K. Central and South America posted a decline in Q3 due to the negative performance in Mexico, which suffered the stronger competition from illegal imported school products now under further restriction from Mexican authority. In this quarter, the positive news is Europe, up 2.4% Q3 2025. with a positive performance in France, which benefited from commercial reorganization.

Let's move to group profitability in Slide 8. Adjusted EBITDA at EUR 94.2 million declined by 4% on comparable FX and tariff basis. That said, it is important to underline EBITDA margin was broadly in line with 2024 at 24%, supported by ongoing operational efficiencies.

On Slide 11, we highlight the development of free cash flow. Free cash flow to equity stood at negative EUR 32.3 million versus EUR 0.1 million in 9 months 2024. This reflects the working capital, including EUR 8 million of tariff-related effect and EUR 3.1 million for the closure of production site in China. Free cash flow to equity reflects also EUR 12 million of CapEx and EUR 3.9 million negative ForEx impact.

On the other hand, we underlined a significant reduction in net interest expenses of EUR 6.2 million, which reflect the net debt reduction and better working capital management. I will take the opportunity to make a couple of comments on our outlook for year-end. Firstly, we expect a free cash flow to equity in the region of EUR 40 million as for year-end. This is remarkable given the continued macroeconomic instability with respect to the currency tariff and government fund reduction for this group, especially in US, which is expected to recover in 2026. Looking ahead, the new tariff policy in US present positive tailwinds, thanks to the significant geographical diversification of F.I.L.A. production footprint and less competition from the other [ US ] players whose products are mainly made in countries strongly affected by tariff increases. Thank you for your attention, and we are ready to take your questions.

[Operator Instructions] the first question is from Isacco Brambilla, Mediobanca.

I have three questions. Maybe I go one by one so that everything is more clear. First one is on Latin America and Mexico. So this year has been challenging reading from the press release and from your statement, Massimo looks like probably the worst is behind, which is the timing we should keep in mind for seeing an improvement in the performance of the region, hopefully coming back to positive growth. Is 2026 already a year which you see growth from this area?

The answer is simple and not simple. I mean, we have now seen that the custom started to completely block the legal imports which is creating clearly on the ground, on the floor, we see these products start to ending. They are not -- little by little, they are not anymore available to the final consumer. So if government will keep their promises because we are in regular contact, all the association represented by all Mexican manufacturers plus the main distributor in Mexico have met with the ministry in Mexico. They guaranteed us they will watch carefully the border situation because this regards many other businesses. As you know, China is flooding the entire world, not only Mexico. This is a problem for Europe and for many other countries. But in Mexico, this has become illegal because they don't pay the duty.

So we think that based on the actual situation, we are going to see a normal 2026 because the effect of this product little by little is going to expire. So this is what we see today. We are dealing with Mexico. So it's a very interesting country from the business point of view. We talk about 34 million kids entering the school every year. We see -- we can see a regular rate of birth, which is very important. The government seems to go along with Trump policies and Trump has been very clear if you want to have a trade deal with the United States, you have to stop China entry.

Let me remember you that in Mexico, as F.I.L.A. in Mexico represent -- sorry, respect completely the USMCA deal agreement is compliant. So we do not pay tariffs when we export into United States. So we are -- hopefully, we are not going to experience the same problem that we have experienced in 2025. So the expectation for 2026 are positive.

Fine. Okay. Moving a bit north. Looking at the U.S., can you give us a sense of how inventories are at your customers? And generally speaking, how the market has taken price increases that you have adopted and I guess also some of your competitors in the past month?

So the inventory is at the lowest historical level because customers have so much uncertainty that they have so much uncertainty from a different point of view. We are seeing unemployment rate growing. It's unclear the full effect of the inflation and the impact this will have. You know that statistic has not been available in the last 40-plus days due to the shutdown. And so many customers due to unpredictable tariffs have decided to reduce the investment in our business. So the inventory is low.

We are receiving in the last, let's say, 2 weeks, some good news. So we have seen that a new trade deal has been signed with China. We have seen -- we have confirmation from official sources that a trade deal with India is ready to be announced even if it will be effective for the sources I have from February. So it will not be immediate. With Mexico, the situation seems stable, thanks to the war Mexico is building up against Chinese imports. And last but not least, the school business.

If we analyze in detail our business, 100% of the negative numbers we have in United States, which is something around 8%, 9% versus last year, 100% is related to school supplies. What happened is that after COVID, the budget for schools have been increased, was more generous. And unfortunately, schools have invested a lot in overhead, in salaries, in consultancies and so on. This has been suddenly cut overnight by Trump in the month of February, March. So the situation has been extremely unstable, while we have clear information that for our product, the situation will go back to normal. So next year, we will see normal consumption, while this cut in budget will be dedicated more to overhead, again, to salaries that was born during the post-COVID period.

So all in all, plus the normalization with India that for us represent now the most important source of products and this kind of normalization of tariff because you can see except China, the rest of the world is affected by 15% more or less. We think that we will go back to normal course of business. Thus we are positive for 2026.

Okay. Perfect. Last question is on India. Last week, you were anticipating some interesting projects also on the side -- on the future Seven side of the business. In the meanwhile, we have seen some articles out on speculating a bit on the future of F.I.L.A. and DOMS. So generally speaking, just wanted to hear your thoughts on the, say, partnership between the two companies and the structures of the two listed [ vehicles ].

So yes, I also read the article because I was not involved. I think that the timing, it's really a bit nonsense because just a couple of days before, we announced a very important project in India with the agreement of DOMS, so the CEO of DOMS. We all consider the JV in India for backpacks and for wallets extremely promising. The market is strongly growing, strongly demanding backpack. We are going to come in the market in the same way we came with DOMS, with innovative range, innovative material, innovative design, innovative patent. And so we are all extremely positive in the future results of DOMS and Seven combination in India.

So in order to give you a more precise answer, DOMS for F.I.L.A. is an asset. The family that represent 44% in DOMS and myself that I represent 40% interest in F.I.L.A. and a little bit more in voting rights. We have a very industrial soul. We have -- we always act with medium, long-term strategy. The moment in which we see the strategy to lose ground for whatever reason, of course, we will enjoy and we will liquidate DOMS participation. But as of now, I think the news that came out are a counter sense because we just announced a new joint venture with really great hopes of being successful. we are just enjoying because if it's true what we read on the newspaper that the new tariff agreement with -- between U.S.A. and India will be 15%. This will make India extremely competitive against China, which will allow us to become more aggressive in U.S. market. I think that to dispose the share of DOMS is a counter sense. But -- so the day that the strategy will not be any more consistent, for sure, we will dispose the share of DOMS.

The next question is from Niccolò Storer of Kepler.

The first one is on cost savings measures that you've been implementing. I see that EBITDA margin in both the U.S. and Europe has remained overall stable in Q3, in particular. So focusing on Q3, if you can explain which actions you have undertaken or if you have had any other sort of tailwind supporting margin stability.

The second one is on what to expect in Q4, in particular for North America in relation to pricing? Are you going to -- are we going to see price increases to counter tariffs? Are we going to see any impact from shutdown on demand? And looking ahead to 2026, did I understand well that you are expecting cut to federal budget to shift from, let's say, stationary item to other items. And so you can have more, let's say, or people could have more funds available to purchase your products?

And last question is on below EBIT items, in particular, all the financial cost that we see between EBIT and pretax profit. The implied figure for Q3 is extremely low. If my math is right, we are talking about EUR 3 million versus cumulated EUR 25 million in H1. And so if you can detail a little bit more on how this number comes out, putting together all the different items which are forming it. So interest expenses, the contribution from DOMS, FX and whatever is in this line.

Luca, can you answer question number one, please? Cristian?

The reorganizations within the group in this period of time, we have closed already some plants and downsize others. So these are the major projects that we accomplished there, whether slimmer group in terms of the structure, in terms of fixed cost. And in addition, there are many other minor projects both in terms of reorganization or in terms of constant OpEx cost reduction. You can see in these first 9 months, CapEx, where have been higher compared to last year, and there are half of the CapEx, which are related to machine or to bumping orders are intended to insert some productions or ever more efficient machine that we have a lower cost. It's a combination of that between an extraordinary reorganization and ongoing projects because it's never ending story to have a result as low as possible [indiscernible] to stay at the level we targeted.

Thanks for your question related to financial impact. Okay. As you said correctly, the main items that impacted this line are dividend that happened in Q3 and that appear in the before closing. The FX are stable. The net amount in Q2 is more or less the same in Q3, we have not an impact. We have an increase of the net results of roughly EUR 0.5 million more or less. The lower impact of the interest between Q3 and Q2. And the other one, the positive interest on deposit of US. They are the main effect that realized the good results for our financial -- net financial expenses in...

Sorry, how big was the dividend from DMS?

0.5 million.

Concerning question number 2, Niccolò. So let me repeat, as per our sources, the trade deal with India is a deal done. It's just a matter of time. So we are building up our budget based on a 15% tariff. So if we put together the situation with Mexico, with India and with China for 2026 in North America, we are not going to increase prices, which is a good news. Our supply chain show once more to be extremely efficient.

Concerning 2025, in order to partially compensate the tariffs, we have increased prices. We have announced the prices as of month of July, but those price increases took into effect around the month of September. So the year has a limited positive effect. But this allows you to understand how we have been able to keep in percentage the EBITDA, which I think has been a tremendous achievement with this instability, with this weak dollar and with the tariffs in place. So for 2026, we do not expect price increase.

Last part of your question, what do we expect from the fourth quarter? We don't expect anything special. As of now, the year is going towards the end in a very normal way. I don't expect any surprise compared to the other -- to the actual 9 months. it's a very normal fourth quarter.

The next question is from Alessandro Cecchini of Equita.

So my first question, actually, it's still on the North American market. It seems to me that you are performing over the year well in terms of school products like pencils, like these products, but probably construction paper is not so great this year. So what I would like to understand is assuming -- by assuming 15% of tariff between -- in the U.S. I would like to understand what is your strategy in terms of maybe new products in the market in the U.S., new categories. So in order to revamp the business, maybe to add some new merchandise, some new stuff in order to mean to prop up to support the top line growth in 2026. So if you can elaborate a little bit more on this. This is my first question.

Thank you, Alessandro. The problem of being entrepreneur with a President like Trump is that unfortunately, this -- the way he managed the trade deal create unfortunately, so much instability that it's difficult to perform business. In this case, I have to tell you that 2026, as every year since the beginning of stationary business, you finalize the great majority of the agreement with customers during the month of September. So the shelf is mainly decided by customers during the month of September, where the situation was 100% tariffs with China and 50% tariffs with India.

So what we did, and I was trying to explain to you why we were under serious difficulties is that we have submersed Mexico with new products, with working capital, with new machines in order to offset the 100% from China and the 50% from India. So we have not budgeted almost anything from India because we could not bet and then work with negative margins with India. So we have postponed to 2027, the launch of DOMS range that looks very promising, but with 15%, very promising, but with 50% cannot be sold in a profitable way.

While all our supply chain branded F.I.L.A. or Dixon, doesn't matter, United States Dixon, the supply chain will restart to work as soon as we are going to have confirmation that the tariffs will go back to 50%. Again, we know for sure that the deal is done, but it will not be in place until February. This is the reason why we took the decision to calculate our cost based on the trade agreement found, but we cannot launch new products. We cannot launch DOMS range because there is no visibility on the future with this precedent.

And I was mentioning the problem of Mexico because the absorption we are having in working capital is because we are moving raw material, work in process, cardboard boxes and machines around the world, depending on the announcement of one tariff or the other tariff. And as we have a peak season that starts from the end of April and end by the end of June, the time that we have available is very limited. So we need to take decision now because December will be already too late.

And as of now, now we have some certainty related to China tariffs. We have some certainty related to Mexican tariffs. In India, we are going to stop except we have parked some product in Canada waiting for new tariffs from India. But we are going to keep off the production in India until the announcement of the new tariff. So 2026, we cannot expect a strong growth in top line, except that school will go back to normal business. Retailer, even this year has given us a very good contribution, Amazon too. So we go back to a normal year, waiting 2027 for a stronger growth due to new product introduction.

Okay. And actually, maybe I didn't understand well the move of between stationary to other stuff in terms of budget cuts. Can you maybe rephrase a little bit on this just okay.

Yes, it works like this. After COVID, there was very generous budget for school, you probably recall. The reason mainly was that for COVID, there was a school shutdown for almost 12 months, if not more. And this have accrued extra budget for the schools. The schools with this extra budget start spending a lot. And from statistics we have available, they spend a lot with salaries, and with consultancies and with overhead. So with this cut, of course, they couldn't switch off all these contracts, all these salaries. And so school has to adapt their spending to the new budget.

This has hurt heavily our range of products dedicated to school, you were mentioning construction paper, it's correct. So this temporary has impacted our range of products until school will adjust their spending. We know from the information we get from teachers, from school suppliers, the situation will go back to normal for our products in 2026.

As of now, they had to adjust their cost structure to the new budget. And this unfortunately happened with the decision of Trump administration in March when he suddenly cut $11 billion of funding. And unfortunately, they needed time to adjust their cost structure. This has temporarily impacted our year 2025.

Very, very clear. Another question is about still your relationship with DOMS. I presume that -- so the Bloomberg article was, in some cases, misleading. But are you potentially open to see maybe DOMS shareholders to be part of your group, so in order to, I will say, to further strengthen the cooperation between you and DOMS. So you have a stake of 26% in DOMS, but I mean, DOMS has not a stake in F.I.L.A.. So it could be an opportunity in the future to this to strengthen the relationship. So just thinking about this option.

Yes. This question is interesting. I think you are right because I fully respect what Bloomberg has written because, of course, it's meaningful when you have such a great value. It's normal to analyze different options. What is -- the facts are that, number one, in Trump administration in the future, if there is an interest of an American company, in an Indian company or vice versa, there will be an exemption from tariffs. In this moment, only F.I.L.A. is invested in DOMS, but United States and India has no cross participation. This is one element that can influence extraordinary decisions.

Number two, DOMS owed to F.I.L.A. 90% of their export and owed to F.I.L.A. also what is considered an extremely interesting project with Seven. So they explained to me that they definitely wanted to reinforce the strategic alliance between F.I.L.A. and DOMS and not to be limited only to the 26%. This opened many scenarios.

Frankly speaking, when the newspaper, the company you mentioned was saying that we were selling DOM's stake, frankly speaking, as of now, it is not absolutely an option, while it's definitely an option, the reinforcement of the relationship, the strategic relationship between the two companies, I underline, also influenced by this new trend that this new, let's say, decision taken by Trump administration that when there is an interest of an American company with India, there will be exemption in tariffs. So there are many moving parts. And what I can tell you is that our Indian partner is happy to consider different options.

Okay. Massimo, just to understand on this point. So basically, American company is Dixon. So basically, if DOMS has a stake directly in F.I.L.A., but indirectly to Dixon, they don't pay tariffs is something that I understood correctly or I'm missing.

No, you understood correctly. The problem is that we are working with lawyers. So again, with Trump administration, nothing is completely clear, but what is happening is that in other businesses, there are American companies. There is one example that you know perfectly, Apple and their phones. They produce in India, they are exempted. So based on this example, he cannot make a law for Apple. Based on this example, we are -- with our lawyer, we are working to understand under what conditions be exempted from tariffs in the United States. So indirectly via F.I.L.A., yes, maybe. Directly DOMS investing in Dixon, maybe. So there are several points that are under analysis. And -- but as I wanted to respond to your question, the answer is yes, we are studying different scenario to increase the strategic participation between F.I.L.A. and DOMS, it doesn't matter what direction.

Okay. It's very clear. And my last is on Europe that, I mean, your performance -- organic performance in third quarter was, I mean, considering the environment, very good with plus 2.4%. Last year in the fourth quarter was very weak Europe. So you consider that this kind of trend is sustainable, I mean, also given the easier comparison that you have in the last quarter in Europe.

I have to tell you that Europe is doing okay and this trend continue. So we are a little bit more relaxed since we have seen Europe responding pretty well to our new commercial approach. Last but not least, the acquisition of Seven is in Europe, will have a positive impact in Europe. With all the negative points we can discuss for hours about Europe, at least stability this kind of warranty that we have. Seven will add our strength in this new commercial approach. So to answer your question, yes, we do expect Europe with a fair good fourth quarter.

The next question is from Niccolò Beretta Zanoni, Banca Akros.

I have just a follow-up on 2026. And you've been very clear in terms of volume, but what can we expect in terms of margin and EBITDA, I can say. Thank you.

In terms of margin, as Massimo said, thanks to our supply chain and the [ geographical ] acquisition of the different [ legs ]. We have been able there to keep already the cost under control for 2025. And he already [indiscernible] for our price increase, [indiscernible] also in 2026. So the expectation is that we have a stability in margin unless volumes will grow as we are planning the weigh this case, the [indiscernible] options will be better and margin will be better. But in terms of outlook, we have to say at the moment, we have not bid the budget next year. So just talking about macro-economical forecast. We expect stability on the margins side.

Gentlemen, there are no more questions registered at this time. I'll turn the call back to you for any closing remarks.

Thanks, everybody, for attending this call and being a Friday. Enjoy the weekend. See you next time. Thank you all.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices. Thank you.

Good evening. This is the Chorus Call operator. Welcome to the F.I.L.A. conference call on the acquisition of Seven. [Operator Instructions]. The conference call is being translated into English. To listen to the translation, just click on the globe icon on the control bar.

The floor goes now to Massimo Candela, CEO of F.I.L.A., please.

Good afternoon, ladies and gentlemen. Thank you so much for being here with us into this conference call, where we'll be talking about the F.I.L.A. and Seven acquisition project. So we decided to reorganize the call in the following way.

Also, thanks to the presence of Aldo Di Stasio, CEO of Seven, with a short presentation of the company. So there will be a short presentation of Seven. I would then take the floor. I would talk basically about the rationale of this operation, together with the potential of this transaction. The floor will go to Cristian Nicoletti. Cristian will give you insights on numbers and financials.

So I would like to thank Aldo Di Stasio. Thank you so much for joining us. And may I ask you to give us insights about Seven. This is your company, the company you have incorporated. Aldo?

Thank you so much. Good afternoon, everyone. My name is Aldo Di Stasio. I'm one of the brothers who have founded Seven back in 1973. So now the name is Seven because we were, we still are seven brothers. So this is the reason why the name of the company is Seven, once again, seven brothers. Now the company was a very small company. But by the way, I mean, the seven brothers and members and shareholders, we wanted to do innovation. We just wanted to innovate all of our product ranges so as to take opportunities of the market changing every single year.

This means we managed to grow year after year and get to the leadership in the market. Even if back in the 1980s, we had Invicta, that was our biggest competitor. So we've been able, I mean, to manage to create innovative products. As you can see here, we managed, I mean, to capture the distribution network of around 2,000. We became the undisputed leader indeed back-to-school universe. Now we became leaders, but the willingness to grow is still here. So starting once again in 2000, we start thinking about new possibilities to make sure the group will grow within an area or the market whose name is back-to-school, that we were very much familiar with. So once again in 2000, we segmented the market. And we also took into account the, once again, different areas and some areas of back-to-school.

In 2006, something very important was done. I mean, we managed to take over the previous leader, so Invicta S.p.A, with two major targets. Another one was to grow by taking over the Invicta's market share. But once again, we also started with the diversification in terms of the back-to-school market. We know that the backpack is used as they go to school. Now the school, if you will, is a game changer for us. But we can see that because of mobility, the backpack is used to move around, to move in the city. For example, just like me. I mean, I'm on two wheels. So this means for us a freedom of movement.

Once again, this is a new plan that we have today. So I'm not talking about the back-to-school target. It's professionals or even travelers. When I say traveling, I'm not talking about adventure, I'm really talking about light business travel, but also what youngsters do today. So this is what we needed, I mean, we start to diversify the business. So once again, we moved out of back-to-school only philosophy. This is what we have identified. I mean, we are starting with the so-called first time at school market, which is very interesting. So all those children who go to school for the first time, so necessary they have to buy this product.

So we have created our own brand, SJ Gang. So it has just taken a few years to completely, let's say, replaced in the market. So it was the license market earlier that was a big value-add for us because, once again, we've been able to take over quite a good part of the target. Today, we account for more than 50% of the market. I think these are the first points.

But then we also started working on the new perspectives to have it with birth rate. So we don't want to wait for event. We analyzed the number of births, last projection. So we investigated on new possible market shares and how to diversify in order to compensate for possible reduction of the number of backpacks numbers, once again, only due to school. We took over a company, the name is Incall, I-N-C-A-L-L. They have an interesting brand, Mitama. They say that their market share was also back-to-school but positioning level was lower.

So this means that we have split the target by age brackets but also by price positioning. So then we can give the market many different products, so a satisfactory, if you will, offer in terms of having a complete range of products. This is what we've done in the past years. We have a major distribution capacity. In Seven, we work on all channels. And so we're working directly. We have 4,000 stationery shops. This means we've been able to remove the big number of intermediaries or middlemen, so to say. So we have involved directly those selling of our product. This is still one of the key strengths of the company. So again, we manage directly 4,000 points of sale or stationery stores in Italy.

In terms of larger retailers, well, in this case, we have different brands sold in the super and hypermarkets. So this is a difference versus the retail market because, of course, we want the big two markets to go hand in hand. But of course, the distribution channels are different. This means that within the retail market, we have a strong distribution network, thanks to our big network of agents. We have 60 agents on the market visiting our customers at 5 times a year.

So why 5 times? Well, because meanwhile, we said that we have very strong brands. And the question was, do we have other opportunities to make sure the company can flourish? And in this case, once again, we worked a lot in terms of diversification. For example, students, not considering back-to-school, they also have leisure, free time. They practice sports and they go to birthday parties. Well, 2020 was a bad year because of COVID. But this is a comparison I'd like to share with you. We have strong brands, highly recognized by our target customers. This is the strategy that Ferrero is implemented. Nutella, you recognize it because of the pot. Now they also do ice creams and biscuits.

So thanks to our brands, we have widened the offer. This means that we have deseasonized our business. So we don't depend on the season, that we have new business opportunities. We are doing the same thing with Invicta. And we started accelerating in 2025. So free time, leisure and work and travel, which is what I said before. So this is what we did. We've made many other steps forward in terms of distribution with Incall. We control the 1,500 points of sale in larger retailers. So with the 50 merchandisers, this is what they do. They offer this service to the large retailers of the system, big value-added because now the large retailers are streamlining their cost.

So we can manage the shelves of the large retailers with a high level of investments and a high level of focus. So this is a big, big value-add and a unique opportunity in the Italian market, which is what the Seven growth is like. We also have other channels that we have taken into account carefully. Of course, we have a multichannel. This is absolutely crucial for us, including online sales. So for us, this is a major source of because the space we can reach in our consumers directly with direct communication, with our consumers and, in general, with our target.

So all these, let's say, same time network or multi-channel system is done directly by the company. So nothing else, let's say, outsourced because we want to keep going on like this. So we know the market. Of course, we have good relationships with B2B and B2C, especially in terms of developing strategies having to do with the future. So what we do today is creating with our own customers, not just the fact of supply or offering, leading products. But we would like to create partnerships. For example, we are now working to also help small retailers, small stores and shops are made today. They need to change. So we're doing something very important in terms of engagement and involving small stores in new communication channels, including social networks.

We have introduced a new digital structure in our company so as to manage relationships with our customers and the name of the platform is Salesforce. So we speed up all the management without the presence of one of our agents. But once again, we are speeding up the relationships with customers. Of course, our objective is to sell, but we don't forget the fact that we're offering service to customers. And we are also implementing AI systems so that we can gather better information inside our company. We know the market changes quickly. So we want to always be updated. We want to know what is going to change. This is crucial because we want to keep growing, and we want to have the right visibility on our future projects.

Thank you so much, Aldo. May I have your attention on the rationale of this transaction? Now this is a snapshot of the general economic situation around us today. The Italian market, especially the school or back-to-school market, has the problem of demographics. The number of children going down. So in our more opinion, so in the opinion of F.I.L.A's. management, we decided to create something different. Otherwise, the pie is always the same -- well, actually, the pie, if you will, is shrinking. So we just don't want to manage a soft landing.

We believe that thanks to this transaction, once again, taking over Seven, well, we'll be able to solve this topic which is, well, a big issue that we have not only the Italian market but also on other European markets because Seven offers, if you will, additional products, so complementary products. So this is not an acquisition where, of course, we only have to work on cost, but we will be work in terms of income. So you can see here that this is all of our offer. You can see here the combination with F.I.L.A. Group. On the one side, there's Seven on the other. All of this will translate into a competitive advantage versus our traditional competitors.

So if you consider the macroeconomic situation, you can also see the growing competition of Chinese products. And so this happens in the school sector, but this happens unfortunately in every same category. Chinese companies are so aggressive -- I should say, Chinese government is so aggressive and this behavior has to be managed. So we think that we are putting together two leading companies, that this is absolutely essential to keep growth in the future but also to keep the profitability level we have today.

This is another important element in our opinion. With the use of products and kits from Seven, Seven is the Italian leader also in pencil cases and then school stationery and the rest. So we will have the Giotto, G-I-O-T-T-O, products. And thanks to Giotto, we will increase our visibility versus our competitors.

This is another major synergy, which is represented by the channel from the past or historical point of view, F.I.L.A. is really stronger in the wholesale channel while it is a little bit less present, if you will, versus Seven on the large retailers network. Again, it goes without saying that Seven is very well distributed in the retail market while F.I.L.A. is very well distributed in the wholesale centers. So this means we will have important choices and decisions to make in the future for the sustainability of the product and controlling and monitoring stores and we will be stronger versus competition. In this very case, competitors are also our own customers because maybe in China, they find a full complete service on our product. So they are developing the brand and sometimes our customers is sometimes are also our competitors.

This is another important a synergistic action in terms of sales, which is represented by business and consumers, so B2C. Unfortunately, the type of our products means that the unit value is a little too small. In some cases, the logistics cost or the transportation costs are too high. So B2C, now when I say B2C, I mean the business is managed directly by the company. So I'm not talking about Amazon, for example. So we haven't developed this, including our competitors.

While here, we have a huge opportunity to do so with Seven because in terms of B2C, Seven is really booming because of the unit value of their products. So backpacks cost of EUR 45, even more than EUR 50. In this case, there's an immediate synergy, especially in terms of back-to-school season. So that you have the crayons and then you have the pencils and then you have the erasers and then you have all these stationery items together with the backpacks, once again, we can see in this market a major growth.

Now there's another area in terms of growth. This would be done thanks to our European agencies, especially around the Mediterranean basin, Spain, Portugal and Greece. Now we think that the kind of distribution that we have there, plus the possibility to take advantage of Seven's know-how, patents and quality, well, this means we will give our local offices the same answers that we are giving to the end market. So for Seven, we see the possibility to enjoy interesting growth.

Now last but not least at all, we have the India project. Some days before announcing the signing, we have met our Indian partner, DOMS. And some months ago, they've taken over the company from India, making backpacks because he told us that this is a booming business in India. And basically, with, DOMS, D-O-M-S, this Indian company, we just wanted to get into these markets and get some experience and getting it to know the market, discovering the logics of the market and, as a consequence, taking advantage of the natural development of the India market.

Now with Seven, he told us that, that would be a complete change because DOMS, D-O-M-S, will take advantage so much new knowledge, the know-how, of the Di Stasios, so the founder, the company, the patent. So they will take advantage of this. So we agreed that DOMS and Seven, very briefly, will create a joint venture. Now the joint venture will be created not just to operate in the Indian market. So we'll be able to sell these products in India. But at the same time, this defines another objective. Now the time window would be more or less 3 years. So we will in-source the supply chain.

Seven has kind of a specific diversified value chain around the world. Bangladesh, Vietnam, for example, they also purchase products from India. And I'm sure that this is the primary objective that we agreed on with Aldo. So we would be spending plenty of time on DOMS because, of course, we want to get as much know-how as possible. In this case, the supply chain would be even more effective. And I'm sure DOMS will react very quickly, thus introducing the right range of products on the India market. And this kind of presentation and new products have a strong foundation. So over the 5 to 7 years, I'm sure India will become a very big market, bigger than the Italian one for Seven.

Now okay, this is the rationale, so the foundation. And I give the floor now to Cristian. Cristian will summarize very briefly the main elements or factors of this transaction, and he will tell you how F.I.L.A. wishes to fund this transaction. So this is what we expect for 2026. Cristian, back to you.

Thank you. Good evening, everyone, and thank you so much for being with us. So Slide 11, we have the financial structure of the operation. So the acquisition of Seven will be done from '26 to '28. So you can see here the value, which is 31%, EUR 6.8 million final value end of December 2021 that you can see here. This operation doesn't include any earnout. This is the total value, EUR 53.7 million. You can see the financial structure, the stakes that we'll have to take over stakes of the company. You can see here end of December 2026, 4%, with the increase of the F.I.L.A. shares you can see here what happens in mid-2027, end of 2027 and end 2028.

The only part of debt, well, the debt in commerce. This is the initial disbursement, closer between EUR 7 million to EUR 8 million. All of the other disbursements or cost will be funded by the operations of Seven. Do not forget that Seven has a free cash flow to equity, which is up to 50% of its EBITDA.

From the financial point of view, and this is Slide #12, so it represents and confirms the willingness of F.I.L.A.. So we highlight the key words, which are financial efficiency, financial effectiveness and sustainability. As for DOMS ABB, now when F.I.L.A. reached EUR 80 million, so this is 4.57% of DOMS ABB, in this case, we decided to have a list of main factors, working capital efficiency of ratio. We have around EUR 12 million. So there's a strong reduction of interest. As for dividends, around EUR 40 million in 2025. And then the remaining financial, well, availability of cash is also represented by the takeover. In financial terms, F.I.L.A. will close with EUR 50 million of the American shares, we will say, 6% in terms of interest. At the same time, we will use our credit lines for this transaction only for USD 30 million and bank credit lines and the cost will be 3.5% average cost.

So approximately the EUR 2 million interest we'll be saved in 2026 and EUR 1 million in 2027. Now we need to highlight that the reduction, EUR 50 million units in the U.S. means we will pay back our debt in 2027, so about EUR 40 million. So F.I.L.A. won't have any other obligation in the U.S. So the only obligation will be on the SPA. So financial support to the U.S. we won't to have any problem on 2026 financial year. There will be a continuous reduction of interest.

So may we go to the next slide, where you can see pro forma adjusted the 2024 figures, where the stand-alone numbers of F.I.L.A. Group in 2024 and the Seven stand-alone data 2024 are absolutely consistent in terms of margins but also the financial leverage. But you see better at Seven if you consider the EUR 10 million dividends included into this value. They combined the pro forma adjusted 2024 figure, represents the fact of maintaining our margin. So it is in compliance with our pillars in terms of M&A. And the leverage is below the values of the objective of the group. Last but not least, there will be an improvement of the financial efficiency level.

So these are the main rationales and this is basically the current financial structure of the transaction. So this is it. If you have questions, we will have a short final Q&A session.

[Operator Instructions] Question number one, Niccolò Storer, Kepler Cheuvreux.

I hope you can hear me.

Yes, please, Niccolò.

I have some questions for you. The first question is on the numbers of Seven. So you've shown us 2024 and then how 2025 is developing. Should we think about something very different versus 2024 or not so that we can have some future perspectives of 2026?

The second question is the following, maybe you have partly answered. So your idea is to modify a little better the supply chain of Seven so that we can work a little bit more with India. I guess that price is so much lower than the Italian price. So how should we interpret this? So you said in 5, 7 years, India will become the most important market for Seven. It means you will sell so many backpacks of lower price at higher margins in terms of volumes. Or what else? Okay. So I need some color on this.

I also need some color, please, on the fact that you said that the effect of this acquisition, you will face the problem of low birth rate and, well, this means you will increase market shares. So is this the right interpretation for what you said?

The last question for Cristian is the following. So together with the closing, I mean, $50 million fund, do we have some one-off costs in order to do the closing of this cost?

Thank you so much, Niccolò. Well, the first question is for Aldo. I'm sure he will be able to give us the current sentiment on the closing of the year. But I have to say that 2025 is aligned to the budget.

Yes, It is very similar to 2024.

Okay. Aldo, thank you. As for your second question, the Indian business, okay, I will start answering but I'm sure Aldo will tell you more. So when you ask me this kind of question, Niccolò, please just read the numbers of the DOMS-F.I.L.A. situation. I mean retail price in India is around 1/3, even 1/4 of the same products sold in Italy. So how can DOMS have the same profitability that F.I.L.A. has? Well, they are able to do so because the Indian costs are not comparable with Italian cost and their volumes do not compare to Italian volumes.

And so Seven has a P&L which is very similar to F.I.L.A. This collateralized the best companies in our industry. Well, we think we are able to replicate the P&L or the financial statements of Seven in India based on the same foundation, the same ingredients with which we would build the success of F.I.L.A. to think about this. So even before the meeting, we started assessing this operation. So India, in our opinion, was the right place where to move our supply chain, too. So it was important for us to look for low labor, but also the raw materials in India so as to improve the product which is distributed in India today.

And what I have to say there, from the point of view of the positioning of the Indian market, but also considering the costs, that we double checked that. So this is a product that has to characterize the brand, the recognizability, the innovation and the quality of the brand. So this is what we are able to align, to bring this product of the market having a different positioning, but staying the margin level. So I do confirm that this analysis has been done.

There was a question on the low birth rate. Yes, I have to say that as for 2025, this is what I said before. The diversification process out of the back-to-school market represent now for the company something like 20%, so the current turnover. So 1/5 of our turnover. Now this is something that we started there 3 years ago and it's delivering very positively today. We have further growth areas or areas for development. Now once again, I know the low birth rate means we can recover some market share. Diversification is what guarantees our possibilities for growth.

Now this is a diversification that, if you will, target the young people. So it's adult Seven backpack for school you can buy it for travel or the professionals for youngsters or for families traveling together. So this means so we can really widen the target. And today, we are also working on the preschool targets. Now this is a very interesting target because, for example, in the age bracket of 3 to 6, initially, we now have a 1.5 million children going to Kindergarten. And in this case, we are creating the right products that previously were not included into the Seven range.

Cristian, for the last question?

Now as for the extra repair costs, no, this is not included. So this is a calculation we will have at the end of 2025. So it will be done together with the ordinary payment. So no additional cost will be taken into account, only ordinary costs.

We also have another question from Isacco Brambilla from Mediobanca.

I have three questions. Question number one is the following. Can you -- well, as far as you can, can you give us some color on how the process would manage debt? Of course, in this space, the question is for the Invicta management. So why did you think that F.I.L.A. was the right partner? Because we know that there were more than one player being interested, and this doesn't seem to be the difficult in auction prices. I'd like to know the drivers of this transaction. You partly answered the question but, anyway, could you please elaborate more?

Second question, back on the turnover. You've given us selective information. But if I'm not mistaken, there's no geographical breakdown of sales. In the past most of the now from Seven, Invicta is not in Italy. Can you confirm this? And how was it possible to enjoy growth because in Italy, but also in the rest of Europe, the numbers are stable, flat or going down?

The last question is, what about Seven and Invicta growth profile in terms of turnover and EBITDA versus F.I.L.A.? So are you going to do the same thing, so single digit? Or can this be a trade excluding synergies? If you have some follow-on the midterm synergies, this would be very helpful.

Okay. Aldo, first question on the transaction process.

Well, as you know, Seven started in 2018 is controlled by fund capital. And on the one side, we have paid some of the brothers because of the age they left the company. But on the other side, we also wanted to manage the family, the roles and the functions that we have in the family, okay, which also have a direct repercussion on the company. Of course, we have had some interest from other companies and other funds.

But I think that from one specific point of view, the value add that we've got in this transaction, first of all, is that the company will be Italian. So in our opinion, it is fundamental because this is a typical Italian company. There have been different generations working. So this has a big value for us. And I have to say that these points is still important, for example. Once again, we want to work with a specific entrepreneur, this company, they know our market and the market sentiment. Once again, this was a very important element that we've taken into account. And it was also a unique opportunity in with the company, creating complementary assets.

So in the future, we won't have or layoffs or redundancies. So this opportunity for us and was more interesting of than other transactions. So I'm not talking about money. But we've been managing the company for more than 50 years, and we want to respect that the human resources working in the company and the value-add that these people bring the company thanks to their skills. So we thought this was crucial, fundamental. The most important thing today is the kind of mix we now have. So we have opportunities everywhere because we don't have overlapping products.

In my opinion, there's a big value-add in terms of the distribution networks, being able to work together. So this will bring out the value-add, but this is also a source of pride because these companies have created important in our organizations here in Italy. And I'm sure they can do better. They will do better in the rest of the world as well. So this was very important for us.

The turnover per geography, well, have to say that once again Seven has grown a lot, so they focus a lot on the Italian the market. Today, the turnover is really small when it comes to international markets. But this is what we see today. So we have distributors, international distributors. Of course, they position the product themselves. As the previous question said, how can you position this product in India where the cost is much lower than the Italian market? Well, today, we are building in the main European markets the premium positioning philosophy for our brand.

I have to say that the best result not comes from online sales through Amazon. So right now, difficult markets, for example, Germany, well, Germany is growing quickly. Now when I say growing quickly, of course, there are so many things to do. I mean there's a long way to go. In Italy, we have a dominating position, not yet in Germany. So this means that also, overall, that with clear strategies and specific group synergies in terms of distribution network, I'm sure we could replicate, say, the Italian success in many other countries as well.

I haven't actually understood question number three. Question number four was on the next year, so the expectations we have. This was the third one. Okay. Sorry, The answer, we have already given. Well, I think we can both answer it. Now as for me, as F.I.L.A., so let me tell you about the positive expectations we have. I can say that the F.I.L.A. product is purchased basically almost every week. So for logistics reasons, F.I.L.A. has the need, let's say, to be brought at the point of sale via the wholesale market, Then F.I.L.A. has direct contact with the large retailers. They use a service platform to be sold in the large retailers.

With Seven, there are clear synergies possible because -- so our brands are leading brands, so with huge market shares. But the trend that we see today in the wholesale market, they would like to create their own brand, once again, because China is helping them to do this business. They make everything at every price. So let's say that we are focusing on not losing the control of the presence of our product in terms of quality but also in terms of quantities. While Seven is now controlling, if you will, directly 4,200 points of sale. So I am sure there will be an improvement in terms of numbers, quality and the presence of our products on the Italian market. And the same happens with large retailers.

Seven has taken over one service company. We already have two, by the way, in Italy. And I'm sure this would give us the opportunity. You have a service company and they work with 50 merchandisers, exactly about 50 merchandisers. They have now the counter service, I mean how you present the counter, this can really make the difference. So this is why we use the word complementary. So this is additional on top of what Seven does. F.I.L.A. today will have a travel companion that had worked so well so much on product distribution. As a consequence, F.I.L.A. will take advantage of this.

Plus what I said before, the growth in it, it's difficult to quantify this growth. But based on experience, we now have a wonderful positive feedback from India. As for the growth in the foreign market, well, this would be a combination of online growth plus growth coming from our subsidiaries. As of today, they don't have the products as Seven regularly sells in Italy. I think that is also another very important point for F.I.L.A.. Today, Seven is an important customer. So they purchase blend of items from the Far East. Many such products that may be made in our plants. Okay, this is it with F.I.L.A.

As for Seven, well, what about expectations for the next year or so? Okay. I don't want to repeat what Massimo set far anyway. Expectations are the following. We would like to broaden our presence in international markets. This is the India project which, again, in our opinion, this is really very important and fundamental because of two key reasons, getting into our new market first and then it's definitely a fact of reducing processes and products and also distributed on the European market and, as a consequence, we will go improve our margin level. We're working on many different steps, then we will have to manage. So we are making a sort of a list of priorities. I'm sure that all of these elements will what bring about positive results.

Now today, we look at teams. We look at people. They know me well know that the current changes on the market, not just in terms of distribution, I mean, the way people have changed. So we do surveys on the changes going on today because we view all our forecasts, and we would be ready to take our future challenges. This is important. I haven't said this before, Seven has worked a lot on sustainability, I'm not just talking about the community. Today, many of our products are made with fabrics, which in turn, are made with recycled PET. For us, sustainability is not just, let's say, going green, but we also care about our stakeholders. 1.5 years ago, Seven turned into a benefit. 2 months ago, they became an equal company. I'm sure that there is a very important value today to face international targets.

Isacco, thank you so much. Have we settled all of your questions? Okay. Well, we need [indiscernible] the numbers.

Next question is from Alessandro Cecchini from Equita.

So my first question is you talked about the production, which has really been back-to-school and many others. So as we have made in products -- so my understanding is that sort of some any forecast in terms of costs that we have, some color about this relationship that the F.I.L.A. Group has so as to understand whether or not this will be a competitive advantage, outsourcing to DOMS, into India one part of your production.

Now Alessandro, I do not know Seven's costs and Aldo doesn't know DOMS costs. So it's difficult to give you an answer. But as we said, I can tell you that it's something very important. When you outsource the kits, the future -- so we thought we had a production of the past, but also the crayons, the pencils, the sharpeners and the rubbers. Today, we have 5, 6, maybe 7 different supply, same with F.I.L.A. All of it has to be a standalone. So you need to add the standalone costs, transportation costs.

If DOMS does it all, well, I'm sure there should be a significant advantage. Please not forget that DOMS just like today will produce for the domestic markets in the India market, but also for the European market. I can't tell you more than this. So now have the backpack and then we have kits, the school kits, typical of Seven. So this means that the synergy expected will be quite important.

So in the future, you mean that one part of the production and also the turnover of Seven, which is around very shy of 27%, which is, [indiscernible] made in European plant -- or any way, F.I.L.A.'s plant. The remaining portion maybe outsourced to DOMS. Is this a feasible scenario?

Yes, I can also give you the name. Seven and Incall, together with its Mitama brand, Seven with its own brand, they sell crayons. And we are already making sure we may transfer the production of this product in our Florence plant, which is very effective. We are not producing this in China or in India. So once again, even Seven that we've taken a issue on the fact we'll start producing the product here. And the numbers are quite bad beside our plant. This means we won't be able to optimize the product. So there will be other products. But of course, they will be made in other plants, basically in Mexico and India.

Now the question is I suppose a follow-up on the previous question is not the market. We try to do some quick calculations. You can see that F.I.L.A. generates around EUR 60 million, I mean, 10% external in Italy, while I guess that Seven is EUR 85 million. So basically we are talking about EUR 150 million turnover on the Italian market. So we can say that thanks to this transaction, you would expect Italy to again potentially and organically will go back to growth based on the opportunity in terms of increasing the competitiveness of the group or taking more market shares. So is this one of your ambitions, apart the fact of reducing costs?

Let me answer and then Aldo will also answer this question. It's not just getting market share of these new companies because, of course, they do have market shares. And both are coming more than 50% of the market. But I would say, realigning our distribution network in Italy, now this is very important because, in our trend, I think the two companies once again have great market share. I can say that we should be thinking that the widening, the broadening that we manage today, first of all, we do optimize and streamline because, in some cases, we have some overlapping. In terms of type of products or a of consumer, we have a close control of the distribution network. So this is absolutely feasible, realistic. We are positive on the fact that the top line in Italy can grow.

If I analyze the behavior about direct competitor, competitor today is now association of wholesalers. So I don't want to have any name. But we have American, Spanish, French and German competitors. So now our turnover is -- the group of wholesalers, their turnover is EUR 30 million. And the other competitive is another group of wholesalers. Their turnover is less than EUR 20 million. So the combination of these two leaders is so important, very well recognized. Well actually, when you have to deal with large retailers, so they have high costs. So when they have to manage suppliers and the most again, management costs for them are very high, sky high.

So I think we will be able to sort of do some cleaning enough of the market. We will be able to grow, especially also through innovation. Now if you consider our long channel in the traditional market but, at the same time, you do innovation. If you have the control of the retail but also the large retailers, innovation is also much quicker. So it is fast paced. One of the scenarios that we have built includes the fact that pushing so much on product innovation.

I have a little point which is, again, the development in India in this category, which is backpack. So while your statement, you told us that you want to increase your turnover over the years. For the marketing action, when will it take place initially? Is it the 2027 budget? So we'll say in 2026 you'll just do the first steps?

This is not a marketing project. This is a sort of a copy and paste of the F.I.L.A. DOMS project. It is absolutely -- it is possible to have the collaboration from Aldo. And we got immediately to an agreement about this. This is a company. This is a JV. As I said before, it will be incorporated in a few days. So basically. it's perfect, I mean Seven and DOMS. So once again, this joint venture will take advantage of all of the know-how in Seven in the designs, in terms of patents, in terms of licensees, in terms of the experiences of Aldo, the knowhow on the materials. So we know how to technically build the brand better. All of this know-how is included into this JV. And the distribution of products will take advantage 130,000 specialty stores at DOMS directly.

And we think that just DOMS, in 5 to 7 years, we have in our minds our new projects. So I have a reverse merger with DOMS or going listed because this company is a JV. It's not DOMS. It will be basically controlled by DOMS or Seven. DOMS will put in the Indian market know-how plus production, while Seven will inject know-how in the JV.

So when do you think this joint venture will start producing turnover?

I have to state any sense looking for our materials on directly on the Indian market. Well, we did this even before talking to F.I.L.A.. So we have some elements, basically, feasibility is current. Now we have to all sit around the same table to really understand how to build the brands and where to produce this. We have the plant in February. We will officially open the plants we talked about the last year. So 45,000 square meters expansion will be officially open in February. One area will be used for the Seven-DOMS project. And as for the start-up time for 2027.

So the presence of Aldo, his team and the know-how, so in the past years, they have put all of this package together and it is essential to DOMS. So this is essential. We saw what we can find in India on the market today, and this is the situation that F.I.L.A. found about 15 years ago, low-quality products, but very essential products, very cheap, with old fashioned vintage units we used to have in DOMS. So we have completely reengineered the graphics of their products, I'm sure you remember. I guess the process will be the same.

Very clear. Last question. As for CapEx of Seven will be almost down to 0 or very limited because, I guess, everything will be outsourced to third parties.

Yes. I mean, as you said, I mean, we have outsourced with our partners. Still the business assessment, the investments made by our partners. But we let's say, we develop our programs in-house in terms of technology. As for production, of course, we cooperate with our partners. Once again, we don't purchase and finish the product. I mean, we completely manage production. For example, we have built our materials to be open with every single cost, every single item, every single raw material and based on the bill of materials, and we build the cost of the product. All of this is injected into the ...

Well, ladies and gentlemen, this was the last question. The floor goes back to you to draw conclusions.

I'd like to take advantage of this opportunity to thank all of you. I would like to thank Aldo. Cristian, thank so much for your collaboration. We will share the results of Q3 in one week. Thank you so much. It was nice for me to be here. And I have to say that, I mean, part of the transaction, I have to say that I feel energized by this project. I mean, I've been working for 50 years. But for me, the big, big challenge that I would like to take up with so much dedication with my partners. Thank you. Thank you so much, enjoy the rest of the year. Thank you. Bye-bye.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]