Interpump Group Aktie

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Interpump First Quarter 2026 Financial Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Fabio Marasi, CEO of Interpump. Please go ahead, sir.

Thank you. I'm Fabio Marasi, Interpump Group Chief Executive Officer. Good afternoon or good morning, depending on your time zone, and welcome to this Interpump First Quarter 2026 Financial Results Conference Call.

Before starting, I would like to inform you that Elisabetta Cugnasca, former Head of Investor Relations, recently left the company and that starting from June 1, the new Head of Investor Relations will be Mr. Federico Pavesi joining us after a long experience in CNH and Carli to whom I formulate my best wishes for his future within Interpump Group.

As usual, I must draw your attention to the disclaimer slide inserted in the next part of the presentation, that I hope, you were able to download from our website. I will start the Q1 '26 presentation, as always, with past and future numbers. Past numbers on an organic basis in the first quarter 2026, we had a 2.2% organic growth, positive number for the fourth consecutive quarter and the minus 2 EBITDA, with a 60 basis point EBITDA margin dilution, mainly explained by the different contribution from the two divisions with a strong hydraulics and a weaker Water-Jetting performance.

On future numbers, both the results of the first quarter '26 and the sales evolution for the month of April are slightly better than our expectation, but considering the very uncertain geopolitical scenario, we prefer to confirm our 2026 organic sales guidance that is between minus 2% and plus 3%, hoping for more visibility and a better outlook in the future months.

In terms of profitability, as usual in May, we are also providing more precise indications, and despite the headwinds coming from a tougher product mix, we are expecting an EBITDA margin for the full year between 22% and 22.5%, confirming once again our most important goal and focus that is to protect our profitability in every market environment.

I will add more color on our 2026 expectation in the second part of my speech. Now let's focus in more details on most important first quarter financial KPIs, sales, EBITDA and cash generation. On sales, the first quarter '26 confirm trends that have been ongoing for more than a year. The Hydraulic division is recording a sequential and very comforting acceleration in demand, while Water-Jetting is facing a very tough comparison base, with the first part of 2025. This evolution is absolutely consistent, with our expectations, summarized in '26 budget.

And once again, it is the clearest possible evidence of the beauty of the diversification that has always characterized Interpump Group's business. Going into detail, we feel that Hydraulics division touched the bottom at the end of 2024 and that we should now expect a continuation of the sequential improvement that we have seen in the last 4 quarters, also during the remaining part of this year.

Among the most important categories, agriculture, air moving machine and construction are on fire, with a double-digit growth, with others, for example, adaptors, industrial vehicles after several strong quarters were less positive. In the Water-Jetting division, Food and Beverage, by far the most important market application and chemical were the most affected by the tougher comparison basis, with the same period of last year that we have already mentioned.

Cleaning, the second most important application field, performed very well with a 14% organic growth in the quarter. In terms of geographies, the most important countries where we operate, Europe and U.S., recorded a very positive performance with a 7% organic growth. While the poor performance in Asia and in China, in particular, was driven by the first part of the mega order that Hammelmann delivered in this area in the first quarter '25. Complementing the view for the quarter, it's important to underline that very good commercial environment -- the very good commercial environment, both in terms of projects under discussion in the Water-Jetting division and the strong order intake in the quarter with a book-to-bill ratio above 1.5x.

Moving to EBITDA, I would like to come back to what I mentioned in my introduction. First quarter '26, we protect profitability despite the important headwind coming from the different business mix, which was characterized by the stronger contribution from the relatively less profitable division, Hydraulics, in comparison with the Water-Jetting one. The good sales evolution in the pure mobile electronics application fields, the one that suffered the most in the past, allowed to achieve good operating leverage in companies like WALVOIL and White Drive and to improve overall performance in the companies that were hit the most during the past 3 years downturn.

Offsetting in the meantime, the weaker contribution of companies more focused on adaptors of industrial vehicles. Switching to Water-Jetting division, sales evolution, excluding the mega order delivered in the first half last year by Hammelmann in China is confirming the good long-term trend seen in recent years, concerning the higher attention paid by the industrial operators towards the environmental impact of their economic activities. The very interesting order intake in Q1 2026 and the number of projects under technical discussion in this field are just confirming these trends.

Moving to cash generation now. Free cash flow in the first quarter went up by 10% from EUR 29 million to EUR 32 million, continuing the good improvement already reached in the last couple of years. Therefore, it's important to focus on the different components. Cash flow from operating activities was aligned with the one of last year, while the 45% CapEx decrease from EUR 35 million to EUR 19 million more than compensated the trade working capital increased absorption, explained by a stronger top line. Summarizing another quarter of inventories, lower absorption and CapEx reduction is a clear evidence that group is delivering its commitment to improve these KPIs after the extraordinary peak of '21 and '23.

We believe, therefore, that the first quarter '26 cash generation result is satisfying and in line with our goal to repeat, and possibly exceed the excellent levels of free cash flow generation of 2025.

To complete EBITDA overview, it's important to highlight that the group was able to offset the impact of U.S. tariffs having increased prices or having recharged them to customers. And the newly acquired companies did not have any dilutive effect. To conclude the discussion on profitability, I would like to draw your attention once again to the long-term stability of our EBITDA margin, which, in my view, perfectly exemplifies the strength of our group.

Thanks to our diversification and operational flexibility, we have demonstrated an excellence and resilience in margins in U.S. market by extreme volatility. The few industrial companies can match.

Moving now to acquisition. As usual, we would like to provide a short updating on M&A. No new acquisitions in this quarter, but several interesting ongoing discussions and negotiations with potential counterparties. We are very satisfied of the integration process of the 3 companies acquired in the fourth quarter of last year, namely Tutto Hidraulicos, Borghi Assali and F.A.R.M.A., which are perfect examples of the add-ons opportunities that we are looking for, considering the perfect match between our industrial and commercial strategy, the financial profile of these companies, and respect of our M&A and financial criteria.

Now the usual overview on most recent market trends and 2026 expectations. April was characterized by a further acceleration of the top line growth, thanks to the less tough comparison basis in Water-Jetting and the continuation of the positive trends recently seen in Hydraulics. Both the features of the projects under discussion and the very good order intake for the month with a book-to-bill ratio, once again, close to 1.1, make us confident regarding the good evolution to be expected for this second quarter of the year.

After this necessary digression, let's go back to 2026 expectations. First quarter results and the April sales evolution are a clear support for our February guidance that we are confirming today despite the severe geopolitical tensions that are characterizing this world and the very low visibility regarding the foreseeable future. On an organic basis, we are expecting a turnover variation between minus 2% and plus 3% and the positive perimeter change impact of around 2% with reported sales in line with 2025, considering the negative FX impact that was around 3% in the first 4 months of the year.

As usual, with higher visibility given by a quarter of reported data, we are adding the profitability guidance to the sales guidance, an EBITDA margin between 22% and 22.5%, despite the headwinds coming from a different contribution from the two divisions with a strong Hydraulics and a weaker Water-Jetting that is, as you know, the most profitable division.

In terms of cash generation, as explained before, first quarter results are clear evidence of the group's commitment to proceed in the normalization process of both trade working capital and CapEx. Therefore, we confirm the goal to consolidate and hopefully improve the cash flow generation achieved in '25 to a new record high number.

If we are able to deliver these results in February 2027, we will be, once again, very proud as they would once again confirm the two fundamental milestones of the group strategy, diversification and business model flexibility. We are now at your disposal for any questions you may ask.

[Operator Instructions] First question is from Matteo Bonizzoni, Kepler Cheuvreux.

Fabio, first 3 questions, but very quick, if I may. First one is Hydraulics, flat margin in Q1 despite 6.9% organic. So apparently no benefit from the operating leverage. Can you mention any specific reason in terms of mix, productivity or other reasons for this flat margin in Hydraulics?

Second is, you are mentioning a pretty solid book-to-bill. I don't know if you are referring because I was not paying attention probably the 1.1 is for both division? And because the question is Q2 will have a particular comparison -- challenging comparison in Water-Jetting. So what is your expectation for in Water-Jetting organic just range. And last one is on the margin guidance. 22%, 22.5%. Q1, 21.9%, so a touch below. We know that typically, not necessarily this year, first half is better than the second half. So if Q1 is 21.9%, I would say that 22%, 22.5% is something, which require sort of explanation or maybe more details on how you are going to catch up to this range?

Matteo, regarding the flattish margin in Hydraulics, it's important to comment on 2 different aspects. The first one is the one that I like the most is the significant improvement in the performance of the company that suffered the most, the downturn of the last 2 to 3 years, and in particular, WALVOIL and White Drive. This positive evolution was offset by weaker results and weaker top line performance of companies working with adaptors of industrial vehicles. And in particular, the American company Muncie Power Products. That historically was characterized by a higher profitability, and also by the different contribution from the American companies in general due to the depreciation of the U.S. dollar, long story short. There is some different performance characteristics, also within the two divisions. As you know, for example, in Water-Jetting, Hammelmann is way more profitable than the average and that the companies are slightly less profitable than the average, is the same in the Hydraulics division.

But apart this short-term trend in the American companies and in particular, Muncie that is pretty significant in terms of size and contribution. We are satisfied of the better utilization rate of the internal manufacturing capacity in the companies that suffered the most in the downturn.

Regarding the book-to-bill that I wanted to mention, in particular, with reference to Water-Jetting because clearly, Water-Jetting is down in terms of sales, because of the comparison that we were expecting very tough, considering the results that we had in the first two quarters of last year. But what is important to underline is that we are not seeing any significant slowdown in the market in terms of new projects, in terms of opportunities and those in terms of order intake.

And in the Water-Jetting division only, the book-to-bill in the first 3, 4 months was above 1.1, in Hydraulics was above 1, but below 1.1. In any case, very positive and very significant. It is clearly too early to comment on second quarter, but we will see how it will evolve, but April was good and the order to be delivered in May and June are good as well. Clearly, in June last year, we had that mega order from Hammelmann that will be a tough comparison. But in any case, we are very confident of the progresses that we are seeing in the market in terms of demand and order intake.

Last question regarding the guidance on margin, we historically have been criticized for being too conservative. And I believe that we are conservative once again. I don't believe that we have been optimistic or aggressive in this 22% to 22.5% margin. I believe that considering how we expect that the turnover, and also the contribution from the two divisions will evolve during the year, we believe that our number in this range is something achievable despite the 21.9% of the first quarter '26.

Next question is from Domenico Ghilotti, Equita.

On follow-up on the Water-Jetting division. I'm trying to understand because you have mentioned the 1.1 book-to-bill for Water-Jetting. So this means that we can expect probably some sequential improvement in place in the second quarter, but not far away from the EUR 200 million, if I remember well, in the second quarter. So what I say is that the first quarter top line has been slightly down, also compared to the second half of 2025. So I'm trying to understand why is it accelerating the order intake during the second half was supported.

And then a more general question, on the cost inflation, what kind of actions are you taking? And when should we expect to see some contribution from this action? And if you are seeing any supply chain Disruption, and for this time, you were mentioning the M&A pipeline without waiting for, let's say, a question specifically on that. So if you can maybe add some color on what is the potential size of the pipeline?

Okay. Regarding Water-Jetting, it is correct to say that we are expecting a sequential improvement, but considering the very strong second quarter '25, and then the tough comparison base. I would say that the sequential improvement can be seen or will be seen from the third and fourth quarter, considering also that the second part of last year was weaker than the first part. And then the visibility is on the second part of this year.

I don't agree technically on your comment regarding the top line deceleration because in reality, it's just a lower increase in the first quarter in comparison with the growth rate that we had in the fourth quarter 2025. And for two reasons, the first one is that is another quarter of growth. And second is that it's another quarter of growth despite the first part of the mega order in China, then the 2.2% is in my mind, in my way of reading a very positive number because we...

Sorry, probably I wasn't clear, sorry. I was referring to the Water-Jetting alone or the top line of Water-Jetting alone, not at the group level. So the deceleration.

Yes. The decrease to minus 6-point-something percent in the first quarter 2026 is explained entirely by the first part of the order delivered in China last year. And then the second and the more important part was delivered in June that was made in two tranches. Regarding cost inflation, it's a very important topic. I don't believe that we saw many effects on the first quarter of the year. But this is becoming a very important topic in this second quarter, in particular, after the geopolitical attentions and the gas crisis in Iran and the consequent boom in energy cost. And then we are obliged, like everyone else in the market to transfer to our customer, these price increases through price surcharges or a price list increase.

This is something that we are doing. We have already done in some company, but once again, we will do it carefully and without any hesitation. And this is the way in which the entire market is behaving once again. Regarding M&A, I've commented regarding the usual interesting ongoing activity. We have several dossiers on under analysis, mix in size, mix in terms of business and mix in terms of geographies. I confirm that the environment is still pretty positive because considering the uncertainties that are characterizing more and more the economic environment, more and more operators are at least considering or starting to discuss potential opportunities of this size and merging their activities with a larger, more balanced and more international group. And in this case, Interpump, in some ways, is a safe harbor for smaller and more risky companies.

Next question is from Alessandro Tortora, Mediobanca.

The question is related to the -- your comment on the book-to-bill. So I got initially a level like 1.5. Maybe I was wrong, okay, collecting this data because then you mentioned 1.1 for, let's say, above 1.1. So sorry, just a clarification on this data. And then the question is -- can you comment a little bit about the trend by region? You mentioned in the past some uncertainty or volatility in the, let's say, American market, and now you commented, let's say, positive performance? So just to, let's say, picture, let's say, by region because I recall it that in the past, the regional performance was volatile quarter-over-quarter.

Yes. I don't know how this 1.5 in terms of book-to-bill come out, maybe the absolute value of the orders to be delivered that is above 1.1. But the order intake in the first 3, 4 months was around 1.1 in comparison with the turnover, more in Water-Jetting and Hydraulics. In terms of region, I agree with you. This is a very interesting topic because to be fully transparent and completely honest, the very positive performance of the U.S. market is, in some ways, surprising to me as well.

Considering all that happened and considering the depreciation of the U.S. dollar against the euro on one side and the application of the tariffs on the other side that made the cost in U.S. much higher than the previous year, I was expecting a softer market demand. But probably, and I'm referring in particular to Hydraulics or to some applications of the Hydraulics market, the deceleration and the destocking activity was so severe in the previous 2 years, that the market is recovering anyhow, despite these geopolitical tensions and the short-term consequences on these cost factors.

Okay. And then sorry, Fabio, your initial comment was, let's say, on the guidance, which still, let's say, assume on this negative sign, let's say, in the lower end of your range. Considering your comment on this sequential improvement you see in April and so on, the reason why you are not upgrading or at least excluding, the most negative -- the more negative part of your range is due to, I don't know, geopolitical context and therefore, you need some more months or quarters in order to reassess, let's say, the sales outlook, that's the overall reasoning?

This is absolutely correct. This is absolutely correct. Today, we are slightly more optimistic than a few months ago in terms of top line evolution and market demand trends. But considering all that is happening every day and considering the huge uncertainty that is characterizing this world, we believe that it's too early to remove the lower side of the range. But to be honest, as commented, we are slightly above our expectation for the first several months of the year. Let's discuss on August 5.

Next question is from Natasha Brilliant, UBS.

I've got 3. The first, just coming back to your comments on pricing. You said that you put some pricing through in the first quarter. So I just wondered if you could quantify that and what you think pricing will be for the full year? Second question is just on capacity utilization. If you could give us the rates that you saw through Q1 and if that changed through the quarter as well?

And then lastly, on Water-Jetting, obviously, we're cycling against a very big one-off project from last year. Do you have any visibility as to whether other such projects could be in the pipeline? I realize by nature, they're one-off that whether you've been having any discussions, if you're seeing any demand for similar types of projects that could come through let's say through FY '26?

Thank you, Natasha. Regarding pricing, considering the size and the magnitude of the price increase and surcharges that we are applying or we are considering to apply. I believe that at the end of the year, the price effect will be between 1% and 2%, let's say, 1.5%. It is too early to make definitive conclusion, but I believe that we will have more than 1% in terms of top line contribution.

Regarding capacity utilization, considering the very fragmented picture and situation in our group. I believe that it is very important to say that the capacity utilization in the companies that suffered the most, I've mentioned WALVOIL and White Drive, and also some other minor companies, increased in a very significant way in the last 2 to 3 quarters. And I believe that focusing on the drug division being the Water-Jetting more flexible and more reliant also on outsourcing, I would say that in Hydraulics division, today, the capacity utilization is something like 95% with some companies that is in better shape and some others is still suffering a bit, waiting for some further quarter of recovery to join the 100% utilization that, of course, will be very beneficial in terms of profitability.

Regarding Water-Jetting big projects, I mentioned the positive environment and the positive long-term trend of demand in this world in this business. What I can confirm is that we have many different projects underway and under discussion. Number one, so big and so important, such as the one-off last year in China, but many projects in the millions, many projects that are relevant.

What is important to say is that the long-term trend of higher attention and higher sensitivity of the industrial world operator toward a more sustainable industrial approach is continuing, and we believe it will be -- it is today and will be beneficial to our technologies and our projects within the long-term perspective.

Next question is from Michele Baldelli, BNP Paribas.

I have three questions. The first one relates to the Section 232 of the United States Tariff Duties, the one changed on the 6th of April. If you can give us some color on what kind of impact that can have on your business? The second relates to the trend of the Water-Jetting division, specifically concerning the Far East and Oceania, you've seen in Q1 a strong drop. So I was wondering if last year also in Q1, you had specific big contracts, because as far as I remember, the Chinese contract was impacting Q2, but I may be wrong. So if you can give us some color also on this.

And finally, impacts from the Middle East, did you suffer from some deliveries that could not happen because it was not possible to send certain pumps in the Middle East. What has been the impact from this crisis there, given that I imagine some projects in the petrochemical needed also probably some process plants and so on.

Thank you, Michele. Regarding the Section 232 of the tariffs, I would like to say that we have had around EUR 6 million impact in the first quarter of the year that has been completely transferred to our customers. There is a huge debate in this day regarding the reimbursement of the tariffs and how this will be managed by the U.S. administration where the companies that paid as importer of goods, and the customers that have been paying passing through this amount.

And it will be a very important topic, I believe, on the second part of this year, the way in which this reimbursement will be managed there. And the consequence on everybody P&L. I believe that it will be very clear that we can reimburse on like everybody else can reimburse only the amount of money that will be received back by the U.S. administration. But today, what we have paid is what we have transferred to the customers.

Regarding the Chinese mega order that we have been debating a lot these orders, these mega projects were delivered in two moments. The first one, the smallest one was delivered in March last year and the second in June last year. And then the impact or the tougher comparison base, we characterize the first and the second quarter of this year.

Middle East crisis and the impact. Clearly, we had several impacts, direct and indirect. Some projects, some business, some CapEx is being postponed in the region, and this is a direct impact. On an indirect point of view, clearly, the effect are tougher and more important because the delivery time from Asia to Europe has increased.

The cost of transportation has increased a lot. And then this is something that we are managing, also thanks to our higher-than-normal level of inventories, but it's something that is affecting or has affected the day-by-day management of the business and the protection of the profitability.

And one of the reason why we are obliged to increase price or to apply energy cost surcharges is also because of this Middle East crisis that is affecting the transportation of growth from Asia to Europe and vice versa.

Next question is a follow-up from Domenico Ghilotti, Equita.

I have a clarification and then a question. So the clarification is just to be sure that on -- I understood properly on the Water-Jetting trend. So you said around 1.1 book-to-bill for Q1, and you were mentioning that in April, sales were positive, and Water-Jetting, clearly, we will have the very tough comp in June. So we have to consider that for the quarter, clearly you have this comparison.

And then the question is on your view on the opportunity of the share buyback, you have started. We have seen already some share buyback programs, with the stock down also today and your mood and your speech are quite more constructive. I wonder if you are more willing to use this lever as an opportunity.

Regarding Water-Jetting, the book-to-bill to 11 was in April, and the positive organic growth in April is very comforting because it's, in some way, a like-for-like comparison, then it's very comforting to us as well. But clearly, we have this June a very positive amount -- we had this June '25, very positive amount. But in any case, without concentrating too much on short-term or monthly results and performance, what really matters is the continuation of the long-term trends of better penetration of our technologies and long-term higher retention to a more sustainable industrial activity world in terms of efficiency, in terms of water consumption, energy consumption, and we are very, very well positioned, with our products, our components and our systems to have positive demand and positive evolution of top line coming from these trends.

Regarding buyback, you note and you mentioned what we have already done. We have bought in the last couple of months, 1.3 million shares, investing EUR 45 million, EUR 47 million. And clearly, something that considering also the very depressed level of the share price, we are considering to do again in the short term. Clearly, our primary as commented many times, way of investing our cash flow is acquisition and M&A in order to grow our top line and to grow the size and the meaningful of our group, but we can do clearly, both considering how strong is our balance sheet and how strong is and will be our cash flow in 2026.

Next question is from Michele Baldelli, BNP Paribas.

Yes. Sorry, we could not end the call without asking a question about M&A. Can you give us some more color? Or is it something steady state compared to the last messages you gave just to have an update?

I would say that steady state is a good way of describing. We are very focused. We understand the opportunity because in uncertain time, strong companies and strong groups such as Interpump may find a very good and interesting opportunity at the right prices, and then we are positive on the outlook for the remaining part of the year, but also with a midterm perspective.

[Operator Instructions] The next question is from Fraser Donlon, Berenberg.

Fraser Donlon from Berenberg. I'm sorry to ask a question which has been asked in different ways already. But I wrote down that you said the book-to-bill in Water-Jetting was in Q1 was 1.5x. So if it was EUR 160 million of revenue, that would imply orders around EUR 240 million. Did I just mishear that?

Probably I said 1.15.

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

Thank you. Thank you, everybody, for participating today. We will update, and we will meet again on August 5 for the second quarter and first half results. Thank you so much.

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

Good afternoon. This is the Chorus Call conference operator.

Welcome, and thank you for joining the Interpump Group Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Elisabetta Cugnasca, Head of Investor Relations. Please go ahead, madam.

Thank you. I am Elisabetta Cugnasca, Head of Investor Relations of Interpump Group. Good afternoon or good morning, depending on your time zone, and welcome to this Interpump Fourth Quarter 2025 Financial Results Conference Call. As usual, I must draw your attention to the disclaimer slides in the annex part of the presentation that I hope you were able to download from our website.

Now I would like to leave the floor to Mr. Marasi, Group Chief Executive Officer.

Thank you, Ms. Cugnasca, and thanks to all of you for joining our call. We are here to speak about fourth quarter '25 results, 2023 expectations and group path to 2028. It has now become my habit to open our regular meeting by highlighting the most important numbers, and I will do the same today. First, the fourth quarter 2025 results. Plus 4.8%, the growth rate of the Hydraulics division in the quarter. The division recovery is not simply going on, it's accelerating. EUR 220 million of free cash flow. This is a splendor, a number to be very proud of. This is the best result in our history, surpassing the previous record of EUR 205 million achieved in 2024. As some of you may recall, in August 2022, we committed to improve our cash flow generation. We have achieved this goal for two consecutive years, and all conditions are in place to deliver a third consecutive record this year.

Moving to 2026 guidance. An organic growth rate range between minus 2% and plus 3%, to which we had the contribution from the businesses acquired in 2025, estimated in approximately 2% of revenue. As we will see shortly, both the full year '25 figures and the early 2026 trends are fully aligned with our most recent performances, a steady and increasing recovery in the Hydraulic division and the weakening only apparent of the waterjet division. The deterioration of the current geopolitical context represents a risk that cannot be disregarded. And this explains why the guidance range starts from a number that is still negative. Third, the path to 2028. We aim to reach EUR 2.5 billion in revenue through a combination of organic growth and small to midsized acquisition, maintaining an excellent profitability and zeroing our net financial position. The understanding of our short- and medium-term expectations begins with reviewing our 2025 closing figures.

Therefore, I would like to take a closer look at the results of the quarter just ended in terms of revenue, EBITDA and cash generation. Starting from sales, the recovery continues with the third consecutive quarter of group's revenue growth of plus 2.5%, driven by the further strengthening of the Hydraulics division which accelerated the increase of more than 3% achieved in the third quarter, reaching almost a 5% growth rate in the fourth one. The underlying trends behind this growth are noteworthy. While in the previous quarter, roughly half of the division revenue was still declining, low single digit, but still declining. In the most recent quarter, over 80% of the business returned to growth with only one meaningful application market that is still decreasing that is lifting. The best performing application were agriculture and construction, both posting increases of around 40%, a real explosion.

However, if we look not only at growth rates, but also at weight within the division, specifically adaptors industrial vehicles and generic dealers, which together represent 40% of the division. Their single-digit growth is even more reassuring. From a geopolitical standpoint, the picture is less clear. Among key countries, the only one that appears to be consolidating its recovery trend is Italy. The United States finally delivered its first quarter on growth, approximately 5% after 6 consecutive quarters of decline, but it is clearly far too early to speak of a genuine recovery. Let me remind you that this is our most important region, accounting for 20% of the division's revenue. Moving to the Water Jetting division. I hope the roughly minus 2% result did not come as a surprise, considering that fourth quarter 2024 was the second best quarter of last year with organic growth of more than 7%. I would like to reiterate my recommendation regarding this division.

Quarterly comparison can be extremely misleading due to the impact of a single contract, more or less significant, and the results should be assessed on a full year basis. In fact, 2025 was yet another year, I would say, the fifth consecutive of outstanding performance. As shown on Slide 42 of our presentation, since 2021, we have been reporting organic growth rates in the double-digit or high single-digit range. And the least satisfactory year was 2024 with only 5% growth rate. At the application market level, Food and Beverage, the most important segment of the division, accounting for approximately 25% of its revenues grew by more than 15%. On this point, let me highlight an important evolution, especially for those who have been following us for a long time. We entered this market less than 10 years ago with the acquisitions of Inoxpa and Mariotti & Pecini.

And in this period, it has not only become the division's most important application, but as you can see on Slide 38, it now represents 10% of total group's revenue. It has, therefore, surpassed agriculture, construction and cleaning, our traditional applications historically associated with us, which, however, have become far less prominent, thanks to our diversification strategy. I would like to conclude this revenue overview by emphasizing again the importance of the diversification goal, perhaps the most important of our group. The beginning of 2025 was still very challenging for the Hydraulics division with a minus -- with a 14% revenue decline in the first quarter.

Gradually, things improved, minus 7% in the second, then plus 3% in the third and now nearly plus 5%, resulting in a full year decline of around 4%. This weakness was counterbalanced by more than 6% growth in the Water Jetting division, following an opposite trend, a strong start of the extraordinary second quarter and then a gradual normalization. The strength of Water Jetting once again offset the weakness of Hydraulics and our diversification enabled us to reach the upper end of the growth range announced in February 2025. Moving to EBITDA. In the fourth quarter, the 4.8% organic increase of the Hydraulics division resulted in an improvement of more than 18% of profitability. Consequently, over the full year, the division's profitability declined slightly from 19.8% to 19.6%. In other words, a decrease close to 4% in revenue resulted in a 5% decrease in EBITDA.

And when adjusting both figures for the effects of perimeter changes and currency movements, a 4% decline in revenue corresponded to an EBITDA slightly lower decline of a bit more than 3%, a fantastic result that is once again the proof of the resiliency of our business. As for the Water Jetting division in fourth quarter, the slight decrease in revenue had no impact on profitability, which remained stable at 25.7%, allowing us to close the full year with a margin that improved from 26.2% to 27.2%. During the year, on one hand, we did not see a repetition of the event that negatively affected the second quarter '24, the relocation of [ Inoxp ] operation in India to the new facility. On the other hand, the work on improving production processes to manage demand peaks continue successfully.

As a result, at group level, our colleagues in operation across both divisions were able to continuously adjust the cost structure, even though in radically different revenue environment. In the Hydraulics division, group transition from actions aimed at mitigating declining revenue to a phase of constant adaptation in line with an initial improvement and then to a return to growth. In the Water Jetting division, the efforts were initially focused on reducing the impact of production inefficiencies linked to the demand spikes experienced in the previous year and subsequently on adapting to stabilizing revenue levels. To complete EBITDA overview, it's important to highlight that group was able to offset the impact of U.S. tariffs having increased prices or having recharged them to customers.

The newly acquired companies did not have any dilutive effects. To conclude the discussion on profitability, I would like to draw your attention to Slide 11, which, in my view, exemplifies the strength of our group. Thanks to our diversification and operational flexibility, in years marked by extreme volatility, we have demonstrated an excellence and resilience in margins that few industrial companies can match. Cash generation. I have already mentioned the new record we achieved and the fact that we are working to deliver a third one. And now I would like to explain why in more details. The commitment we made in August '22 to improve cash generation has been implemented by working on 2 fronts: trade working capital and CapEx. With CapEx at 4.4% of revenue, we can undoubtedly say that we have fulfilled our commitment. Equally undoubtedly, from a working capital perspective, we still have a work to do.

The progress made in 2025 represents only one step in a broader journey that must continue. Going into details, trade working capital. As many of you who have known us for a long time are aware, trade working capital is a key element, both in supporting growth and in protecting profitability. In 2021 and 2022, the post-COVID rebound years, characterized by extraordinary demand, but also major issues in logistics and supply chains, we were able to achieve organic revenue growth above 20%, partly thanks to our inventory level. But trade working capital is not only inventory. It also includes trade receivables, which naturally increased significantly alongside the strong revenue growth previously mentioned.

In addition to this organic evolution, 2022 also saw the consolidation of White Drive, a perimeter change that had a very significant impact from this standpoint. Improvement efforts we undertook yielded immediate results. In 2023, the trade working capital to sales ratio improved from 39.5% to 38.2%. Unfortunately, in '24, the significant revenue decline, minus 14% organic, naturally led to an improvement in trade receivable and payables. But given the magnitude of this change, we were unable to perform equally well in terms of inventory and the ratio exceeded 41%. This year, we have moved back below 41%, but this improvement is clearly not sufficient. Therefore, we confirm our objective of returning to what we consider the optimal level for our group that is 35%, 36% of sales.

CapEx, again, with capital expenditure equal to 4.4% of revenue, we have finally reached our goal of returning to a CapEx level consistent with the future production needs of our group. We made this commitment in August 2022, and we can now say that we have delivered on it. I would also like to underline that our satisfaction in reaching this milestone is matched by the positive result of the '21-'23 investment plan. In Slide 16, 17 and 18, we have included images of the group most important facilities that were expanded or entirely rebuilt as well as the machinery purchase to further increase the level of automation that characterizes us. We launched a project that involved the entire group across all major geographies and in both divisions. Between '21 and '22, a significant portion of resources was allocated to land acquisition and facility construction.

And let me remind those less familiar with our industry that owning our production site is a major strategic advantage. In more recent years, instead, our focus has shifted to production assets. As a result, we believe we now have best-in-class factories, increased capacity and above all, higher production efficiency. All these elements contribute to securing a competitive advantage for the years ahead. Those of you who have visited us in recent years have been able to appreciate this progress firsthand, and we wish to reiterate our full availability to welcome you again. Consequently, to summarize, the process of normalizing our investments has been completed, where we still have considerable work to do on trade working capital. This means that there is indeed room for further improvement, allowing us to achieve new records.

Moving to acquisitions. I have to underline that this year, all acquisitions were concentrated mainly in the last part of the year. We have already discussed two hydraulic in Brazil. Now I would like to briefly talk about Borghi Assali and Farma, which enable us to push the same strategic objective, product diversification. Borghi Assali axles are complementary products to gearboxes, in particular to [indiscernible] products, while Farma tanks component fit with Padoan products, the acquisition finalized last June and therefore, with Interpump Hydraulics complete kits. I hope my explanations regarding 2025 closing have been satisfactory. Let us now move on 2026, which began with the month of January that confirmed trends already visible in previous months, continued growth in the Hydraulics division and an apparent weakness in the Water Jetting division. But as we do every year to better explain our expectations, let us focus on the evolution of the backlog, which you can see on Slide 21.

The process of consolidating the backlog at levels significantly above those seen pre-COVID has not simply continued. The backlog is growing, stabilizing between EUR 600 million and EUR 700 million. The backlog of the Hydraulics division is increasing, while that of the Water Jetting division naturally reflects the extraordinary contracts recorded in the first part of the previous year. Therefore, as we did last November, we should think in terms of order intake. As you can see, at the end of December, the order intake of the Water Jetting division was not only growing compared to December ' 24, but was growing more than it was in 2024 compared to 2023. We felt it was important to provide visibility on this KPI to reassure you. Our Water Jetting division is solid. And in the first part of '26, you do not see revenue growth. It's only because the comparison base is exceptionally strong, the 14% growth shown on Slide 22.

It's equally clear that the evolution of the Hydraulics division will be the exact opposite as it faced a relatively easy comparison base. In the first part of 2025, its revenue declined by almost 11%. As a result, I don't think there is much need to explain the likely evolution of the 2 divisions within the organic growth range of 2026, which, as I mentioned earlier, is between minus 2% and plus 3%. What is important is to explain why the starting point of this range is still a negative number. As highlighted earlier when discussing geographic trends of the oil division in the fourth quarter '25, these trends are not yet stable. Italy confirmed the recovery seen in third quarter, but Germany did not and the United States showed growth, but only after 6 quarters of decline, some of them were double-digit decline. This pattern is reflected at group level. These key countries ended 2025 in difficulty with the U.S. down almost 7% Germany down nearly 5% and France down 3%.

This makes the situation particularly complex to read and understandably worries on, especially for the United States, our most important market and unfortunately, the one currently facing perhaps the highest level of political and macroeconomic uncertainty. The minus 2% reflects the risk of further deterioration in these important countries, risks that our geographic diversification can certainly mitigate but not eliminate. As for EBITDA, as you know, it's our practice to provide precise guidance in May based on early year data. With regard to cash generation, I believe I have already indicated the objective we will be working towards this year. Let us now move to the final part of our meeting, our medium- to long-term expectations, namely our target of reaching EUR 2.5 billion in revenues by 2028.

Before doing so or better to do so, we believe it's important to reflect on why it was not possible to reach the EUR 2.5 billion target this year and to share with you the highlights and low lights of the 3-year period just ended, which we have summarized on Slide 25. The most significant downside was certainly a post-COVID normalization that proved to be much longer and much more intense than we had anticipated. We had faced 7 consecutive quarters of declining revenues, and these declines were substantial with an average reduction of around 12%. Our expectations were for a phenomenon roughly half that size. Another negative factor was that in the years immediately preceding this downturn, the results of the companies within the Hydraulics division have been so strong that sellers' price expectations reached levels that were quite extraordinary, even for companies that were not true perfect fit for us.

This situation changed dramatically in the second half of 2024 due to the ongoing normalization. And indeed, in just over a year, we acquired companies that are unquestionably perfect fits, Hidrover, Borghi Assali, Tutto Hydraulics, and Farma. As a result, while the normalization in the Hydraulics division deprived us of the important support of organic growth in our overall expectations, it has more recently brought seller expectation and valuations back to levels consistent with industrial fundamentals. A second positive aspect, chronologically proceeding, the one I have just described was the identical phenomenon observed starting in the second half of 2022 in the Water Jetting division, driven by a significant reduction in private equity and financial sponsor activity due to rising interest rates. This allowed us to resume building the flow processing vertical within the Water Jetting division.

The first step was taken in 2017 with the double acquisition of Inoxpa and Mariotti & Pecini but these were not followed by further move precisely because the interest from these players extended even to smaller companies that normally would not fall within their typical scope. Finally, starting in April 2023, our development path in this highly attractive vertical resumed, and we completed 5 acquisitions in less than 2 years, I.MEC, Waikato, PP China, YRP Flow Technology, and Alfa Valvole. Again, companies that can undoubtedly be defined as a perfect fit. In years marked by unprecedented operational volatility, I can assure you that we evaluated every opportunity we considered interesting. What we did not do and as a group CEO, I'm proud of not having done was starting acquiring companies that were not perfect fit or accepted valuation that not correspond to the true value of the businesses simply to offset the revenue decline.

Speaking also on behalf of my colleagues who work with me every day on potential deals, we regret not having reached the target we had set for ourselves, but we do not regret having refused compromises or easy shortcuts that may have been yielded short-term benefits, but could have turned out to be detrimental to the group in the long term. Acquisitions must be priced correctly, but above all, they must be the right ones because companies cannot be bought and sold like shares. The fact that our integration model can be described as soft does not mean neither that integration does not take place nor that we do not begin working alongside with companies joining our group to help ensure the improvement of their performance. And on these topics, allow me to brief digressions that may appear to deviate from the subject we are addressing, namely our expectations for the future.

These 2 digressions are called Waikato and White Drive, 2 acquisitions that for reasons that are not entirely clear to us are unfortunately not perceived as perfect fits or as successful acquisitions. They were and still are absolutely perfect fit because they enable us to continue our diversification journey, both in terms of product and geography; however, the timing was extremely unfortunate. We acquired Waikato just a few months before the collapsed in global milk price, which forced us to carry out rationalization activities that have not been planned. Instead of working solely on the international network, we had to intervene significantly in the activities of the New Zealand parent company as well. As for the White Drive, I assume you will remember that our integration process aimed to bring the group to a 21% EBITDA margin.

And I hope you also remember how in February '24, we announced the completion of the integration process and the achievement of the 21% margin in the fourth quarter '22, a result achieved again in the first quarter '23. Unfortunately, the normalization of the agriculture sector started in the third quarter affected this company more than any other in our group. And indeed, revenues in '24 fell by almost 40%. In Slides 29 and 30, we have shown what happened and what is happening now, namely the gradual exit from this difficult situation. Waikato and White Drive Poland are certainly on the right track, while White Drive U.S. is, to be fully honest, still behind, although improving. The year '26 will still require significant work in this company. The new CEO appointed roughly one year ago after an initial assessment phase has set in motion the organizational changes still needed.

And together with our Polish colleagues is working to achieve the most efficient allocation of certain production processes between the U.S. and Poland. The fact that these two companies are recovering so quickly after two severe crisis in their respective reference markets demonstrates two things: first, that they were and remain perfect fit. And second, that while we may not be fond of restructuring story, we know how to execute them when necessary. After so many words, here are the numbers. We aim to achieve revenues of EUR 2.5 billion in 2028, assuming positive organic growth with the only concern being 2026, as previously mentioned, and the execution of small to midsized acquisitions consistent with our historical track record. In that same year, we expect to bring our net financial position to 0, thanks to the cash generation we aim to deliver. These objectives will be pursued while adhering to our profitability guideline.

The 22.5% margin represents a level of excellence that cannot be compromised. I hope I have managed to have illustrated the 3 topics discussed today. And of course, we are here to answer your questions. Before handing over to you, I would like to conclude with a clear message. We are an industrial group with an industrial approach. In recent years, we have demonstrated an excellent ability both to protect margins and to generate cash. Our growth path over the past 3 years did not materialize as we hope, but growth remains the direction we intend to pursue with determination and discipline. In recent years, our group has successfully faced truly challenging situations and has emerged stronger. And this strength may be used just as our Chairman indicated a few months ago to pursue growth options that are broader and more ambitious than ever.

Thank you. We are at your disposal for any questions.

[Operator Instructions] The first question is from Matteo Bonizzoni of Kepler Cheuvreu.

I have 3 questions. I would start from the 2025 clause. There is EUR 8 million EBITDA miss in Q4, which is around 8% compared to consensus minus. And as it was also last year, it is driven by hydraulic. Because in Hydraulic, I was seeing that the margin is 16.7%, which is around 400 basis points below the 9 months. It's true that in Q4, typically, if I look back in my model for the last 10 years, the margin is slightly softer, but 400 basis points is a lot. So I would like to ask you if also there has been some sort of one-off factor to mention. And if yes, if you can refer it to any subsidiary like write-down of inventory or any kind of this impact?

Second question is on the guidance, organic -- minus 2 plus 3. There is no guidance on the margin. Can you disclose a little bit an approximate range, if you want or maybe it's early, I don't know, for both segments? And then, okay, there is no margin guidance, but you consider the 22.3% of 2025 sort of flow or given that the mix is going to be negative because hydraulic is up and water jetting is going to be probably down, this is going to play a negative role also on the consolidated margin compared to the 2025 starting base. Last one is on this statement which you have put in the press release on potentially larger than expected -- not than expected, larger than usual M&A. Can you help us understanding the rationale and what's next basically?

Thank you, Matteo. Clearly, the miss is based on the comparison with the consensus that you mentioned. Clearly, we are an industrial group, and we have to manage a very large growth and complicated organization. I -- in order to comment this not brilliant result in the fourth quarter in Hydraulics, I will not refer to any significant one-off factor. Clearly, every year at the end of the year, we are discussing with auditors and we are adjusting the level of inventories, but there is nothing really meaningful in this. What is still meaningful is the weakness or the less than expected strength in the market that prevent us in utilizing fully or adequately the manufacturing capacity that we have. And then we had to manage some extra day of shutdown of our factory in order to manage the production rates and production efficiency in the proper way.

Then I will not mention any one-off or any exceptional cost that is penalizing these numbers, just the consequence of the weakness in some markets or in some company or the slower-than-expected recovery. Markets, particularly in hydraulics are recovering as we have seen in the comments made before. We are accelerating quarter-by-quarter. But clearly, we still have situations in which we are not utilizing at 100% rate our internal manufacturing capacity, creating some inefficiency in the utilization and amortization of the cost base. Then this is the real reason. Regarding the guidance, minus 2%, plus 3%. Clearly, we didn't make a particular comment on the division, but considering also how 2025 evolved, we are expecting, and it is clear in the performance of the recent quarter that we expect a stronger hydraulics and a weaker water jetting, in particular in the first half of the year, in particular for the -- or based on the comparison base that we will face.

Regarding profitability, as you know, it is our tradition to deliver and to share with the market our guidance on margins after the first quarter results then in the month of May. And regarding your question on the 22.3% level of '25, if this may be considered as a floor or it may be a risk, I believe that it's too early to comment on this. Clearly, we are more profitable in the water jetting than in the Hydraulics division. But clearly, as stated one minute ago, we are not utilizing in the best possible way the manufacturing capacity in some company in Hydraulics. And then the organic growth that we expect in Hydraulics will represent a significant benefit also in the efficiency and also in the expected profitability of the division. And clearly, the hope and the most important goal, not only the hope that we have is to protect the profitability once again despite the headwind consequent to the more difficult mix between water jetting and Hydraulics.

Regarding the M&A activities and numbers that are factored in this plan, we have stated that we are factoring in this 3-year plan our buyback as the usual small to midsized acquisitions. But as stated several times, we are prepared and we are open to evaluate and to consider larger and more challenging transactions, considering also the excellent level of our balance sheet and considering expected cash flow generation for '26 and beyond.

The next question is from Domenico Ghilotti of Equita.

First question is a follow-up on the water jetting outlook in the sense that you suggest looking at the full year. So I'm looking at the full year 2025. So the growth has been 6.3% organic. I understood from your previous calls that the extraordinary contribution could have been in the range of 2%, 3%. So actually, what I mean is if there is an underlying growth as you suggested in previous calls and also looking at your comments on the order intake that is rebuilding the backlog. So I'm a bit -- say, a bit strange for me to look at negative for the full year '26 top line. So 2%, 3% is not changing too much on a full year basis for 2026. So do you think that the flattish on a full year basis is something achievable?

Or do you see really a totally different situation compared to the past? Then I have a follow-up on the hydraulic margin. If I'm not mistaken, last year, a normalized level would have been, let's say, more in the region of 17%, 18%. So a bit strange for me to see the decline compared to a normalized level of last year. And last, on profitability and cash generation, I wonder if you can consider given the very low leverage and strong cash flow generation, a more aggressive buyback for '26, waiting for maybe some disposals -- some acquisitions, sorry.

Domenico, I'm not sure if I got entirely your question. Regarding the flattish scenario in a moment in which we are rebuilding the order intake and the order backlog, I believe that is not contradictory because clearly, we have commented during '24 and '25, how the order backlog evolved and how was penalized by the normalization in the level of inventory of our customers. We are seeing today, in particular in Hydraulics, clearly. We are seeing today a better or a higher level of order intake and order backlog, in particular in Hydraulics that combined with a tougher comparison base in water jetting made us conclude on a minus 2%, plus 3% organic growth rate for 2026, flattish scenario as you described.

Regarding hydraulics...

Sorry, maybe just to clarify, maybe I was referring to is -- to make it simple, is flattish for water jetting for the full year too aggressive, so too bullish given the fact that you will face some tough comps on a full year basis, I'm looking at full year because actually on a quarterly basis is really not meaningful as you...

Okay. No, no, okay. Now it's clear. Considering the comparison base, I believe that flattish today is quite aggressive. It is too early to conclude on the full year, considering that the mega order that we delivered last year in June, July was not in our backlog when we started the year, then the delivery is quite short -- the lead time is quite short. Then it may happen again, but it is too early or too aggressive to conclude on a flattish scenario. And then with our usual prudent approach in our estimates, we are considering a flattish scenario on a consolidated level that is factoring a growth in Hydraulics and a slight decline in water jetting just because of the comparison base. Regarding margins, you were mentioning 17%, 18%. But if my data are correct, last -- in '25, we closed at 19.6%. In '24, we closed at 19.8%...

I was referring to Q4 because last year, you were providing some elements suggesting that the underlying, so apart from the inventory write-down was more in the...

Yes, it's clear. It's clear. Yes, apart the one-off that we commented last year, in the Q4, we were close to 17%. That is the level that we reached in Q4 2025. Not an optimal one. But clearly, once again, I'm always inviting to comment the full year. The full year is close to 20% in both years. Regarding the buyback -- regarding the buyback it is something that, as always, we will certainly consider and we will certainly do. The magnitude of the buyback will depend also on the opportunity that we will find, considering that our first and most important focus will remain M&A and consolidation. But clearly, in particular, if we think about the 3-year period and if we consider the sum of the cash flow that we expect for the 3 year and the zeroing of the net financial position, if we will not be able to make significant transaction, clearly it is reasonable to assume a higher level of buyback.

The next question is from Alessandro Tortora of Mediobanca.

Let's say the first question, Fabio is, let's say, if you can come back a little bit on your, let's say, medium-term guidance of EUR 2.5 billion and therefore, this cumulative 20% sales growth. So in terms of, let's say, capital allocation, M&A, the assumption you are making is, let's say, this -- let's say, slightly organic growth with this 2026, let's say, close to stable and basically bolt-on M&A. And therefore, we are excluding, let's say, from that any, let's say, large size transaction. So just to have the confirmation that this is the assumption you made on that. And the -- let's say, the second question is on the profitability of Water Jetting.

Clearly, we saw this year in 2025, this slightly above 27% level independent from the mix you mentioned before and considering also the exceptional sales level, thanks to the, let's say, exceptional order in China. Do you consider this 27% something sustainable or, let's say, the Chinese order helped in this case to, how can I say, not support a profitability level, let's say, in an exceptional and nonrecurring way?

Okay. Regarding your first question on the assumption on the 3-year plan, I confirm that the EUR 2.5 billion target is the combination between an organic growth that is close to 0 or flattish on the medium point in 2026, but we expect and we are factoring better numbers for '27 and '28, combined with the so-called bolt-on or add-on M&A, then EUR 50 million, EUR 70 million, EUR 80 million per year. Then it's a combination of the two factors.

Regarding the profitability of the Water Jetting, I believe and I confirm that the current level that is aligned with the level -- the historical level of profitability of this division is sustainable even if -- we will not have in 2026, the mega order that we got in China with Hammelmann is a level that is based on a very consolidated profitability across the board in the Water Jetting division between the different companies.

Okay. And sorry, Fabio, just a follow-up on your comment on the U.S. performance that was positive in Q4 after several negative quarters. Are you referring, let's say, to a specific division and therefore, you see, let's say, a differentiated trend, let's say, between hydraulics and water jet in the U.S. let's say, just have more color on this reversal in the U.S.

Okay. I'm taking this question. The 5% growth that was mentioned for Hydraulics is the growth rate of U.S. -- sorry, of the group. This number has been driven more by hydraulic than water jetting in terms of recovery. And this is a positive signal because, again, in the last -- in the previous 6 quarters, U.S. hydraulic was down and was down high single digit or double digit. So the fourth quarter increase of the Hydraulics make us quite pleased. But unfortunately, due to the past trend, it's not easy to understand if it is only -- it is really a recovery or are simply easy comp.

The next question is from Natasha Brilliant of UBS.

I've got a few questions. I just wanted to come back on the margin, just to make sure it's very clear. So this time last year, we had a negative impact on the margin because of the inventory write-down. And I think you said at the time, excluding that, it would have been 22.4% versus the 22% that you reported. As I understand it, that impaired inventory could be sold, so there should be a positive impact on the FY '25 margin. So compared to the 22.3% you've reported today, ex that impact, what would the margin have been just so that we can compare like-for-like?

And then my second question is just on the M&A. I think the comments are pretty consistent with what you've said in recent quarters. But given the market dynamics, has the pipeline improved at all? Or are you seeing any more interesting assets? Or is it still quite tough to find interesting things? And then finally, just within the guidance for 2026, can you help us understand how that split between pricing and volume? Is it still predominantly volume? Or is there a pricing component in there as well?

Natasha, can you kindly repeat the first question? I'm not sure to have understood that.

Yes. Okay. So -- as I understand it, last year, when you reported your margin, that reflected an impact from the inventory write-down. So you reported 22%. But I think if we excluded that impact, it would have been 22.4%. In 2025, if that inventory has been sold, that should have a positive impact on the margin because it's been sold at a lower cost. So I'm just trying to understand what the positive impact was on the FY '25 margin from the reversal of that inventory effect, if that makes sense.

Okay. I understand now. I understand your point. Clearly, it's not mechanics considering also that the cost of goods sold is an average. And then it is difficult for me to give precise numbers on the effect of the reversal or partial reversal of last year accrual. Also because it was partially an accrual, partially, let's say, the analysis performed by the auditors that evidenced in one company, some missing, but is a progression in this. The utilization of the depreciated value is something that will happen over time considering also the average cost of the inventory that we use in the cost of goods sold. Then I'm not able to comment, but I do not expect that this is significant.

Regarding M&A and M&A dilution, considering the size of the acquisitions that we made or we are making, we are not expecting any significant change on the structural level of profitability, considering -- in particular, if we are excluding any significant acquisition because the bolt-on acquisition that we are commenting and we are factoring in the 3-year plan, it is difficult that we contribute with 22.5% or 23% EBITDA margin on average. But even if on average, these companies will be at 20%, the dilutive effect will be minimal. And our expectation is to repeat what we have done historically, I mean, to maintain the excellent level of EBITDA margin despite the dilution, usually light or low dilution of the acquired companies, thanks to the synergies and thanks to the optimization that we have historically performed.

Regarding pricing and volumes, I believe that in 2026, we will have a flattish scenario on the two factors. We are benefiting from slight reduction in the cost of some raw material that is offset by the increase in the cost of labor in some geography. Regarding volumes, we are improving volumes in Hydraulics, not in water jetting. If we take a comment on a consensus level, I would assume a flattish scenario on both aspects.

Okay. Great. And just -- sorry, my question on M&A was more just what the pipeline looks like, whether there are interesting assets available or whether the market is still quite slow in terms of M&A.

Yes. Like we have commented in my speech before, considering the uncertainties and the difficulties that characterize the market in 2024 and 2025, we see a positive market environment because small to midsized entrepreneurs, small to midsized companies are more and more aware of how important it is to act or to have the possibility to operate with a global perspective. The uncertainties, the tariffs, the geopolitical tensions are worrying significantly small to midsized companies and entrepreneurs. And I believe that for companies with our strategy, with our global footprint and with our resources, there will be a lot of opportunities in '26 and beyond. Our pipeline is solid in both divisions, and we are actively pursuing and working on this.

The next question is from Andrea [indiscernible].

I have a very simple question that you gave to previous questions. You said prudent approach. So basically, the question is what is the level of prudence that you have in this guidance also considering what was your experience in the past, in the last two years where there was a disappointment. So basically, the minus 2% plus 3% in your guidance can be seen as a very prudent floor that you are giving to the market considering I repeat the previous experiences in guidance that were not attended.

Andrea, this is a tough question, clearly. And clearly, the experience of the last 2 years, but much more important, the uncertainty that is characterizing the global economies and the global geopolitical situation make us prudent in approaching short-term or midterm targets. I don't believe and I don't agree that we have missed 2025 guidance because last year, we gave a plus 1%, minus 5% range in terms of organic growth, and we reached this goal. But despite -- and without pointing on 0-point something, I believe that the last couple of years have been pretty tough in some of our reference market, but the company demonstrated once again how stable, how strong and how reliable our assets are. And I believe that these uncertainties are not over yet, are not over yet in some geography or in some business.

And this is the reason why considering also the very good performance of the water jetting last year and the previous 4 years, is very important for the company to share prudent guidance with the market, but even more important to define with a prudent approach, the manufacturing capacity and the CapEx and the workforce and so on for its activities. Then it's clear to me that I have not answered regarding how prudent is this guidance. I believe that it is a serious one.

Okay. Understood. Sorry, if I come back again, but it's quite surprising in my view, considering the underlying business, in particular on the agriculture business that is giving much more constructive, if I'm not wrong, messages from these companies. So I suppose that your clients are back in a CapEx mode, and this should support, in particular, the Hydraulic division. But this is my personal view. I understand your point.

No, clear, Andrea. Clearly, we are finally seeing very good performances, like I have commented before in agriculture and construction, but please remind that agriculture represents less than 10% of our sales or construction more or less the same. Clearly, it will be more than welcome if this trend will continue towards 2026. We are discussing on a weekly basis with large OEMs that are our customers. And the good news is that they are, in these days, reviewing upwards their estimates and their manufacturing plans for the year. But it's too early to consider that double-digit growth rate for these application fields will be possible to be assumed for the whole year. And in any case, we are a broadly diversified group, thanks God. And this is the reason why we have been able to protect our profitability and our top line in the last couple of years in which agriculture and construction were very, very tough market.

Clearly, this year, we will see double-digit growth in these markets. We will have a significant support in particularly in Hydraulics. But clearly, we have to consider other markets or other application fields that performed very well last year, such as the water jetting as a whole. Our prudence is because of the severe uncertainties and geopolitical tension all across the board and across the world. And then I'm not even commenting the positive or the booming demand that we can expect if someday the Russian-Ukrainian war will end. We cannot factor this clearly. And then we should look at what we are seeing today, and we are factoring the level of uncertainties that is characterizing the market as a whole in these days.

The next question is from Michele Baldelli of BNP Paribas...

I have a question on the net financial charges that you may expect for this year, given that you are deleveraging. I was wondering, could you give us a sort of guidance on it or a range, please? And the second question relates to the -- adjusted for the water jetting division. Sorry if I missed it. But just to understand on a quarter-on-quarter basis or a year-on-year basis, where it is evolving, is flat, down, up?

Okay. In terms of interest charge, please remind that you have all the information related to the rates that we pay on the private placement. But please consider always that we do not cover in terms of ForEx. So there could be some negative and positive impact that we cannot predict on the interest charge because we cannot predict the ForEx.

And finally, keep in mind that in every fourth quarter, we make the adjustment of the liabilities that we have for the call put. And therefore, this element that is really calculated in a precise way on the fourth quarter can match. So give you a guidance of the amount of the overall interest charge, it's very difficult because we cannot predict the ForEx movement and we cannot predict at the end of the year, the valuation and therefore, the net debt calculation correlated to the possible exercise of the call option. Can you please repeat the second question?

The second question was relating to the backlog in the Water Jetting division because I may have missed -- and sorry if I missed it, but if you can give the flavor on the quarter-on-quarter growth decline or year-on-year?

Okay. In terms of the backlog, as we mentioned, as it is written down in the presentation on Slide 11. And as Mr. Marasi mentioned, the backlog of the water Jetting is down. What is up is the order intake. And this is the KPI to be watched in 2026 because the backlog evolution is distorted by the Chinese order of the second quarter. So the order intake is growing. And I show a prepared graph for you on Page 21, where there is the growth rate of the order intake in 2024 versus 2023. And there is a second column that show you the growth rate of 2025 versus 2024. You see that today, as of the end of December, the order intake is growing almost close to double compared the growth of the order intake in 2024. And the growth of 2024 has not the Chinese order. So this comparable is quite fair.

The next question is a follow-up from Domenico Ghilotti of Equita.

A follow-up on the Hydraulic division. I'm trying to understand if you have seen any relevant deterioration in some verticals, so specifically for hydraulic at the end of 2025.

No. I mean, as we mentioned during the call, 80% of -- in the fourth quarter, 80% of the sales of the hydraulic are growing. You probably remember that in the third quarter, we were 50% growing and 50% still declining even if only low digit. Today, the only market -- today, I mean, at the fourth quarter, the only market application that is going down among the most important one is lift that lift means 8% of our sales and lift is going down still high single digit.

Okay. And just a clarification on the number that you gave previously on France, Germany and the U.S. still declining. Are you referring to the full year or Q4?

No, we quote both in the sense that if we take into account U.S., U.S. has been growing in the fourth quarter, okay, in hydraulic. Italy was growing in the fourth quarter in Hydraulic. Germany was down in the fourth quarter, always in hydraulic, okay? Then if we move from hydraulic to the group level, we have U.S. still down, Germany still down and Italy flat, okay? Because fourth quarter variation change do not -- we're not able to change this entire situation at group level.

The next question is from Bruno Permutti of Intesa Sanpaolo.

I wanted to ask about the customer attitude. So in the past conference, if I will remember, you told that you were selling for production and not for stock. So is this -- so you sell exactly what the client needs. Is this still the case? What you are seeing in terms of stock at the client level? And a second question concerns, I guess, on the cash outflow for M&A in the plan. It could be reasonable to assume that you are considering more or less EUR 250 million cash out related to possible M&A by 2028 is something reasonable. And last, very maintenance model questions. So if you can confirm that the CapEx level will remain very, very controlled on the next 2, 3 years and the tax rate level considering that it was quite higher perhaps than expected in 2025. So what do you expect going forward?

Starting from the CapEx, yes, absolutely. We are expecting the CapEx to remain at the level of this year. That means you know that our guidance is around 4%. This year, we were at 4.4%. So 4% for the next year is a fair assumption. I give the word for Mr. Marasi for the industrial question.

Regarding the customer attitude, regarding the end of the destocking that I have commented before, I believe that this is a scenario. I'm not -- I don't invite you to consider that the customers are building back their stock. We are not seeing extra demand driven by stock rebuilding activity. I'm still thinking or the feeling that I have, the comments of the information that I have are for an end of destocking mood or situation in which customers are still ordering what they really need to assemble their machines without taking the components from the stock that have been emptied in the last couple of years.

Regarding the cash out for M&A, you consider EUR 250 million for the 3 years. I believe that in our assumption, clearly, it's a range. It's not a precise number, but between EUR 200 million and EUR 250 million in 3 years is something that is reasonable. Regarding the tax rate, I leave to Elisabetta the stage.

Okay. Thank you. The tax rate, we are assuming something in line with this of this year, so something between 27% and 29%.

Ms. Cugnasca, there are no more questions registered at this time.

Okay. Thank you very much and have a nice evening.

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

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Interpump Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Elisabetta Cugnasca, Group Head of IR. Please go ahead, madam.

Thank you. Good afternoon or good morning, depending on your time zone, and welcome to this Interpump Third Quarter 2025 Financial Results Conference Call. As usual, I must draw your attention to the disclaimer answered in the annex part of the presentation that I hope you were able to download from our website. Now I would like to leave the floor to Mr. Marasi, Group Chief Executive Officer.

Thank you, Ms. Cugnasca, and thanks to all of you for joining our call. We are here to speak about the third quarter '25 results and 2025 expectations. Starting from the results of the third quarter 2025, I would like to underline 2 numbers, plus 3.4% and almost EUR 87 million. Plus 3.4% is the organic growth recorded by the Hydraulics division in the quarter, a long-awaited growth after 7 consecutive quarters of organic decline. EUR 87 million is the free cash flow generation of the quarter, the best achievement in one single quarter in Interpump Group's history.

Moving to 2025 expectations. I have to underline that the acceleration in summer of Hydraulics recovery signal is a strong support and allow us to increase both our sales and profitability guidance for the year to the highest part of the range already provided that was minus 5%, plus 1% and 22.5% regarding EBITDA margin. After this first overview of this quarter, let's focus with more details on most important third quarter '25 financial KPIs and in particular, sales, EBITDA and cash flow generation.

Regarding sales, in the second quarter of 2025, after 6 consecutive quarters of declining sales, we recorded a revenue growth with a 1% organic increase.

In the recently concluded quarter, not only we achieved growth again, but this growth accelerated from plus 1% to plus 2.3%. Same result growth, but different drivers. While in the second quarter, growth was driven by the Water Jetting division, in the third, it was driven by the Hydraulics one. And once again, this is the confirmation of the strength of the group, the diversification. I was very pleased with the 19% growth posted by the Water Jetting division in the second quarter, which led to the plus 1% consolidated, but I cannot deny that I'm even happier with the plus 3.4% of the Hydraulics division that contributed to this quarter plus 2.3% consolidated.

The normalization process for this division began exactly 2 years ago, following the first signs of slowdown in sectors applications such as agriculture and lift, which resulted in a 6% organic revenue decline in the last quarter of 2023. Finally, after 7 consecutive quarters of decline, we have recorded growth. We cannot deny once again the benefit of a favorable comparison, considering that in the third quarter of 2024, we had the toughest of the 7 with a revenue drop of nearly 17%, but the data is nonetheless encouraging.

In the previous quarter, agri was the only market application growing.

Now in a multiphased scenario, other ones within the division are up from generic dealers, more than 4% to lift more than 8% to air moving machine with a 15% growth. By the way, agri is up by almost 18%, a very comforting number. Moreover, in the third quarter, sector applications, representing over 50% of division revenues posted growth. And among the remaining ones, the most significant are showing only a low single-digit decline.

Of course, we cannot yet say with certainty that we have reached the end of the normalization process that began 2 years ago, but we can certainly say that early sign of recovery seen in the previous quarters have strengthened and that all the conditions are in place for further improvements.

Moving now to the Water Jetting division. I believe I'm not mistaken in assuming that this result in line with last year could be the least appreciated figure of the entire quarter, especially considering the delightful plus 19% achieved in the second quarter. As we often emphasize when commenting on this division performance, this trend is less linear than that of Hydraulics because of the presence or absence of individual high-value contracts that can distort the comparison base. This is exactly what happened this quarter.

In 2024, the division recorded organic growth of nearly 9%, thanks in particular to 2 orders invoiced in September '24 for an accumulated value of EUR 10 million, one contract in Turkey related to the marine market application and another in China related to the oil and gas sector. As clearly shown on Slide 8, last year's strongest quarter was the third one. We hope that this volatility in the division results doesn't come as a surprise for those who know us for some time, both because of our frequent explanations, I always underline the group performances and moreover, Water Jetting division once should be judged and evaluated on a yearly and not a quarterly basis.

And because of the evidence available in the annex of our financial results presentation for several years now in this presentation, let's see, Slide 23. After discussing the results of the 2 divisions, let's analyze the performance of the main geographical areas in which we operate, naturally at constant exchange rates. The key regions in Europe, Italy and Germany delivered the best results with increases of more than 10% while China has returned to account for almost 5% of organic revenues for group revenues grew by more than 20%.

Our most important country, the United States, once again recorded a decline around 5%, but this figure represents a clear improvement compared to the nearly double-digit or higher declines seen in previous quarters. Let's move to EBITDA now. As with revenue, profitability in 2025 has also been marked by continuous improvement. In the first quarter, which was still affected by significant weakness in the Hydraulics division with revenues declined organically by around 14%.

Thanks to the measures implemented to protect profitability and improvements in Water Jetting division, the drop in profitability was only slightly greater than the one of the revenue, less 12% compared with minus 8% in sales. Subsequently, in the second quarter, the first sign of recovery in Hydraulics division and the strength of the Water Jetting one led to a 1% increase in revenues accompanied by an almost 7% rise in profitability.

In the most recent quarter, a revenue increase of over 2% corresponded to a profitability improvement of more than 5%. Although numerically less striking than the previous quarter, this result is undoubtedly more significant. Indeed, the third quarter was not supported by the leverage effect of the major Water Jetting Chinese contracts. The achieved results reflect, on the one hand, the recovery in revenue of the Hydraulics division, amplified by the group's careful cost adjustment strategy. And on the other, the ongoing improvements in production processes within the Water Jetting division, aimed at overcoming the inefficiencies that unfortunately accompanied the strong revenue growth in 2024.

For the first time in several quarters, margin improvement has been driven by progress in both divisions, further supported by the absence of dilution effect from acquisitions. This quarter truly demonstrates the flexibility of our business model and group's ability to continuously adapt its cost structure to evolving demand.

Let's move on to the first quarter to the third KPI through which we do evaluate our work, cash generation and these components. From a free cash flow generation perspective, 2025 has also shown an improvement path. Compared to '24, the first quarter recorded a slight delay, more or less EUR 5 million due to the advanced payment mechanism linked to major contracts signed in China last year.

In the second quarter, free cash flow amounted to over EUR 46 million, in line with the corresponding period of the previous year. This result was by no means guaranteed, considering that revenue recovery naturally influences working capital and in particular, trade receivables. In the most recent quarter, despite a further strengthening of revenue growth, we achieved an even better performance, generating nearly EUR 87 million. That is our historical record for free cash flow generation in a single quarter. At the beginning of the year, we set ourselves the goal of consolidating the record achieved in '24, and we are well on track on this.

Moving to CapEx. On Slide 10 of the presentation, we are pleased to present the actual photo of the New Interpump Hydraulics facility in Sala Bolognese alongside [indiscernible] rendering. The relocation process has been successfully completed and the plant is now fully operational. We consider this a significant achievement, having maintained production throughout the construction and transfer phases. Thereby minimizing the inefficiencies typically associated with such a complex process in an industrial setting.

This accomplishment was the result of a joint effort, and we extend our sincere appreciation to both our colleagues and our suppliers for their continued support and collaboration through every stage. Concluding with acquisition, as you know, last August, we presented a series of slides outlining the criteria that make a company attractive to us, the internal process through which we turn that interest into concrete action. And finally, the integration approach should an acquisition be completed.

To complement the theoretical framework, we provided a practical example, the acquisition of Padoan. We are now pleased to add 2 further examples, Tutto Hidraulicos and Borghi Assali. Both companies represent a perfect fit. They strengthen 2 of our verticals, cylinder and reduction gears, respectively, expand our product range and offer opportunities for revenue growth and margin improvement.

Moreover, Tutto Hidraulicos enable us to continue our geographical diversification process and exemplifies the attractive spirit of those joining our group. Less than 1 year ago, as you know, we acquired Hidrover in Brazil. Our new colleagues have actively identified opportunities that in their view would have reinforced our presence in the country, complemented our product offering and leveraged mutual commercial relationships.

Slide 11 provides a brief description of both acquired companies. Before moving to our outlook for 2025, I would like to reiterate the key message I shared with you last August. The ultimate target of group growth and development strategy is diversification. It's diversification by division, by geographies and by market applications and not a dimension that allows to proper manage business risk. Its diversification that allows to reduce volatility through different cycle exposure and this diversification that allow us to effectively react to unexpected swings.

Now let's move on to the near and far future. October performance confirms most recent trends with a positive evolution of hydraulics and the confirmation of Water Jetting strength. Regarding the latter division, let me refer to my earlier comments on revenues.

For Water Jetting, it is and will remain essential not to be misled by comparisons with 2024 quarters. The robustness of our division is demonstrated by the fact that in recent months, August, September and October, we secured more orders than in the same month of 2024. The combination of the third quarter solid results and October trends allow us to reaffirm our full year guidance, particularly pointing towards the upper end of the range.

We believe this is a very reasonable assumption, which also factors in the 2 elements which must be considered to make an accurate forecast, a significant comparison effect of opposite nature between the 2 divisions and the risk of order cancellation or postponements. Regarding the first assets, you will certainly recall that in the fourth quarter '24, the Hydraulics division recorded a 14% decline, while the Water Jetting one posted an increase of more than 7%.

As you can imagine, the magnitude of these variations make it challenging to identify the underlying real industrial trend. As for the second one, our customers too need to improve working capital and one of the easiest way to achieve it at the year-end is not to confirm previously placed order and move to the following year. As you may recall, in 2023, this phenomenon caught us by surprise and had an impact on EBITDA margin because we did not have time to adjust costs to a level of demand below our expectations.

For cash flow generation, we remain committed to delivering the best possible outcome. As far as the near future is concerned, we understand there are expectations for the slightly more distant future as well, namely 2026. As you know, the budgeting process is taking place in these weeks. And therefore, for now, the only thing we can do is to share some insight, insight based also on what has happened so far in 2025.

In terms of revenue, the 2 divisions will face completely opposite situations. For the Hydraulics division, the first part of 2026 will have a more favorable comparison basis than 2025, during which organic revenues declined by almost 11%. We are confident that revenue growth will strengthen further, thanks to the recovery of the market applications that are still soft.

Conversely, for the Water Jetting division, the first part of the year will be the most complex, considering that in the first 6 months of 2025, we grew by almost 14%. Nevertheless, we remain confident in continuing to secure new orders, thanks to our technological advantage.

Finally, to conclude on revenues, acquisitions completed so far in 2025 according to their consolidation periods are expected to contribute about 1% to total revenues. As for profitability, we will continue to adjust the cost structure in line with demand trends to exploit the positive effect of improving sales.

And finally, regarding CapEx, further reduction could be expected following the completion of all projects related to the '21-'23 investment plan, and this would support our cash generation ambition. Naturally, both for the near future and the slightly more distant one, we continue our search for the new perfect fit to integrate into our group.

These are ongoing activities that cannot be scheduled, but we assure you our full commitment on this. Before opening the floor to your questions, let me remind you of the figures I started with, plus 3.4% organic growth in the Hydraulics division and nearly EUR 87 million in cash flow generation. These numbers demonstrate once again the strategic levers of our group, diversification and operational flexibility, levers we will use to achieve the goals we have set for 2025 and subsequently to successfully take on 2026.

Are you ready for questions?

Absolutely.

[Operator Instructions] First question is from Matteo Bonizzoni, Kepler Cheuvreux.

Two questions on the 2 divisions, on the 2 segments. As regards Hydraulic, you flagged this more than 10% sequential improvement of the organic growth because in Q2, it was minus 7%, and now it's plus 3.4%, so a significant improvement. It seems to understand from your words, Fabio, that your expectation, correct me if I'm wrong, for Q4 could be to have an organic trend, let's say, not below this 3% year-on-year, but maybe can you add a little bit more flavor on that? And for Water Jetting, simply speaking, there was on the contrary, a sharp slowdown because from an exceptionally strong plus 19%, we flattened basically.

Also in this case, I would like to know better your expectation is to recover let's say, a little bit stronger organic growth in the last part of the year. And back on Hydraulic, I was forgetting what's your feeling, let's say, now that you are mid-November on the production rates of your customer in the month of December? Do you have any flavor? You were mentioning before that clearly December is a particularly crucial month because it's end of the year and maybe there could be swing or maybe changes in the production rate of your OEM customer in Hydraulic, particular. Do you have any kind of feeling on their willingness to slow down activity or on the contrary, to keep a decent pace of production rate?

Matteo, thank you for this very strong start in the Q&A session. Now clearly, very interesting questions. And clearly, I will not give you this kind of granularity simply because it's very difficult to say and to comment precisely what should be expected for the quarter now. Clearly, what we said, commenting the post third quarter and in particular, the results of October is what you have to take into account.

What we have seen in October and what we are seeing now is a confirmation of this trend. Confirmation of this trend by division means that we see Hydraulics in the short term, I mean in this quarter in a better shape in comparison with what we're projecting, certainly for the easier comparison base. You know very well that last year, Hydraulics was significantly affected by the postponement and cancellation of orders by our customers, in particular in December.

This year, I'm not saying that we will not see any kind of this phenomenon, but I'm expecting a far lower impact and also the comparison base is not so challenging considering what we have seen last year.

In Water Jetting, as I already disclosed in my speech, and I've already commented so many times, I usually stay away from commenting months or quarters because one single order, in particular for companies working on projects, Hammelmann or Inoxpa that falls in September or October may vary dramatically the results of the quarter.

I'm much, much more pleased to see the results and the continuous strength of the Water Jetting division, both in terms of sales and in terms of order intake. And then the strength of the market, the underlying support that we are seeing by the new application and the new markets in which we are operating with our system is what is comforting me the most.

I have to remind you and to everybody that Water Jetting is concluding the fifth consecutive quarters of growth. And almost apart minus 0.2% in the quarter, we had 20 consecutive quarters of growth. some of them with a very significant growth such as the one recorded in the second half -- in the second quarter '25.

Then to be honest with you, I don't care too much if in the third quarter, we grew only by 0.2% is the scenario that matters. And the scenario remains positive and remains characterized by a long-term development driven by the new application, driven by the demand from our customer and for new potential customers and application fields. This is what matters the most on an industrial and on a commercial point of view.

Next question is from Natasha Brilliant, UBS.

I've got a few. Firstly, if you could just comment on the pricing environment, particularly in Hydraulics, is the growth all volume-led? Or has there been some pricing as well given the recovery that you've seen?

Secondly, just on the U.S., do you think that, that could get back to growth in Q4? And then lastly, on White Drive, it sounds like agri is continuing to improve. So is White Drive also starting to see some improvement and tracking alongside those trends? Anything else you can say on that would be very helpful.

Yes. Thank you, Natasha. Regarding pricing, we are not seeing any variation in price, and we haven't seen it through the year. Then the variation that we are seeing, in particular in Hydraulics are driven by volumes entirely. And this is slightly positive because with more or less a 0% price effect, we are getting some benefit from the reduction of cost of raw material, and this gap is important in order to absorb the increase in labor cost.

Regarding U.S., as stated in my previous speech, clearly, U.S. is between the large market, the environment that is suffering the most in this period, even with lower impact. Moving to agriculture. We have seen a significant improvement in comparison with the status in which we were living 1 year ago or only a few quarters ago. And clearly, this is benefiting several of our companies and in particular, the ones that suffer the most.

White Drive is benefiting from this, in particular in Poland because if we look at the production of the 2 companies or the 2 business that we have, the 2 production facilities that we have in White Drive in Poland and in the U.S., the European facility based in Rosolów, Poland is the one that is the most exposed to agriculture, and it is performing very well, also thanks to this increase in demand and developments in volumes.

The Hopkinsville, Kentucky plant instead is more focused on construction application and construction application is not improving, it's not growing at all in any similar part in comparison with agriculture. And considering also what's happening in U.S., the improvement is way lower than the one that we are seeing in Europe. But we have completed the restructuring.

The new CEO is well in place, and we are confident that also in U.S., we will be able to achieve the targets that we have set in our mind. What is important is that the consolidated results of White Drive are moving into the right direction. I have to make one further comment on U.S. because I forgot to mention tariffs impact.

And clearly, what we have done in these 2 last quarters in which we have seen the effects of tariffs has been to adjust prices accordingly or to invoice the customers separately, the amount of tariffs that we had to face into our operation in U.S. then the net effect on our P&L on our EBIT is 0 because we pass through the increase related to the tariff application.

And just to follow up on the -- so my question was really, are you seeing any signs of improvement into Q4 in the U.S.

It's too early to say. If I had to say now, I wouldn't say so.

Next question is from Michele Baldelli, BNP Paribas.

I have a couple of questions. The first one relates to your statement when you said the execution of orders in Water Jetting in Q3 were higher, it means basically, given your sales trend that the mix was, let's say, more single equipment rather than systems or you wanted to say that you collected more orders in the last 3 months, if you can clarify on this? And the second question relates still to Water Jetting division, if you can provide some color on the trend of the backlog, please?

Yes. No, starting from Water Jetting, I mean that we collected more orders in the last 3 months. in Water Jetting in comparison with the same period of last year. And I believe this is important to demonstrate once again the reliability and the strength of the underlying market.

And this order intake comment is made independently on delivery dates of these orders. But we believe that this is a positive evolution. Regarding the evolution of the order backlog and the order intake, this improvement is clearly characterizing also Hydraulics because as you know very well, we started the year in Hydraulics with a strong decline.

In the first quarter, we went down by 14% in Hydraulics, in the second, minus 7%; and in the third, plus 3.4%. Considering also the very short -- the short lead time that we have in Hydraulics that generally is around 3 months, Clearly, this dramatic improvement in sales is a consequence of a very strong improvement or a change in the wind in the order intake.

Next question is from Domenico Ghilotti, Equita.

I have 3 or 4 questions, if I may. The first is on the recovery in the Hydraulics division. So I'm trying to understand if you think that this is also mainly driven by restocking or if it is actually more the underlying demand because your clients are not so positive so far, in particular in the U.S., but in general.

So the outlook is still a bit controversial. Second, a follow-up on the orders on Water Jetting. So orders are up year-on-year in Water Jetting. Can you say the same for the backlog at the end of September or not? And third, I have a question on your exposure to the data center is, let's say, topic these days. But actually, I've seen some industrial companies like Gates or Dover are not typically a data center suppliers that are presenting products for this application.

So just to check if you have any significant exposures. And last, I'm curious if you can share so where are you on the White Drive profitability for the full year in 2025 because probably it's an area of potential upside in margin if there is a clear recovery in Hydraulic.

Okay. Starting from this last question, I will tell you in February because 2025 is not finished yet, but we are on the right track. And I'm pleased to see these developments month after month. Regarding data center exposure, I don't care too much. I understand how sexy is this topic for the market, but we are much more interested in maintaining the diversification in maintaining the exposure to as many application fields as possible.

Clearly, we are having some businesses in this world, but I don't believe that it would be serious to comment on one single project, one single order, one product development specifically for this application field. It seems to me excessive, to be honest. Then I will not follow up on this.

Regarding the orders in Water Jetting, we improved the order intake, but the order backlog at the end of September is not yet higher than it is lower than the one of last year because we have to consider that in between, we achieved a very important growth.

And in particular, we executed and we delivered the giant order in China with Hammelmann in the second quarter. The first question was on the recovery of hydraulics and how this can be explained if this is partially explained by restocking. In reality, I would say that it's not restocking, but it's the end of the destocking that is contributing positively.

It seems playing with worth, but it's a different topics because until several months ago, the consumption of our components or the demand for our components was artificially reduced by the consumption of stock by our customers. I agree with you that our customers are not performing spectacularly.

I've just seen CNH third quarter results or other companies' results, and they are not in reality growing or improving so much their output, but they have consumed their stock, and this is particularly true for OEMs. And then removing the destocking possibility, they have to buy accordingly with their needs. Until a few months ago, they were buying below their needs because they were consuming their stock. And I would define precisely not as a restocking, but end of destocking.

Next question is from Alessandro Tortora, Mediobanca.

I have 2 questions. The first one, Fabio, if you can comment also a little bit about the performance on 2, let's say, countries for you. The first one is India because I got now the data on China up double digit, but if you can help us understand what are, let's say, the major -- what is the major performance in India also considering, let's say, now that the other countries experiencing a strong growth?

And then also on Germany, if you can comment a little bit if your subsidiaries are, let's say, feeling maybe any change in the spending targets for Germany. This is the first question. And the second one is on the profitability of Water Jetting. You already explained during the presentation that you were able to overcome the inefficiencies of last year.

Can you give us, let's say, an idea of this profitability going forward? If you see this, let's say, 27% as sustainable also considering the mix you had today in this division between systems and, let's say, single products?

Okay. I will take the first question. In terms of Germany, Germany of course is -- if we focus among the most important countries, Germany and Italy are the best one in this last third quarter. It's very difficult to understand the reason why in the sense. It's very difficult to understand if there is a correlation with the infrastructure fund that has been at the beginning of the year launched by the German authorities.

So at this stage, we prefer to say that is our business that is going very well without any kind of correlation to the infrastructure fund. In terms of India, if we focus, it is going very well since a few years. If we focus only on this specific quarter, India was going not so well as China, but it's something that is correlated to the third quarter. So we don't see any kind of structural variation in the growth trend of this country.

Regarding the second question on the sustainability of the EBITDA margin of water, I believe that this is sustainable because clearly, the margin protection is our first and most important goal. And we have commented extensively the inefficiencies that penalized 2024 results in Water Jetting when we had to manage a significant growth. These manufacturing inefficiencies were addressed properly. And I do not see any reason why this very good and outstanding margin level would not be sustainable in the future.

Okay, Fabio. And then sorry, a follow-up, let's say, on the mix between, let's say, systems and, let's call it, single products. Can you remind me, let's say, your exposure, let's say, not to the secondary market to replacement market for the Water Jetting, considering that you are going to have and you already had a different mix?

Yes. Today, the breakdown between components and systems is more or less 70-30. That is a breakdown or a balance that is satisfying for us. It is satisfying for us, and we are not looking for something different. Clearly, we were super pleased to the giant order delivered in China in the second quarter that moved a little bit this breakdown and this balance, but we are not looking for a structural change of this mix. because of the consequences in terms of diversification, in terms of execution risk, in terms of utilization of manufacturing footprint and capability.

Next question is from Michele Baldelli, BNP Paribas.

Sorry, just a quick one to follow up. On the CapEx side, given that you are in a budgeting phase, can you provide some color on the reduction expected next year?

It's too early to comment on next year. But as we have commented many times, we had to face an extraordinary 3-year plan in order to face the needs of sustaining the growth of the group after COVID that brought us well above the usual 3% to 5% range. We believe that having completed this extraordinary investment plan, now we are well on track to be back to the usual range and in particular in the midpoint of this range. Around 4%, I believe, is a number that should be sustainable and achievable in a normal year.

Next question is from Domenico Ghilotti, Equita.

Just a follow-up. On the CapEx side for 2025, I assume that you are confirming so the EUR 100 million. And then -- well, the M&A pipeline, you have completed 2 small acquisitions. What is in the pipeline now?

Okay. Regarding CapEx for 2025, I would say that we will be below EUR 100 million. And I -- and then when I had in mind around 4% and then staying well within the range, I was referring also to 2025. And considering M&A, of course, we are very pleased to have executed the 2 acquisitions, different characteristics, different markets and different purposes.

And we still have a very populated deal flow. And we are seeing that this very uncertain market and fast changing and all the uncertainties that are correlated to the tariffs and the geopolitical tensions that are characterizing the world in these days. This is a significant contribution. It's a significant support to the number of opportunities that are coming to the market and in particular, are coming to our pipeline because one thing is the market.

We have seen a very, very important acquisition in this week with Parker Hannifin doing a mega deal in filtration, but it's even more important to see a very strong intake of new opportunity for our proprietary pipeline.

And considering the uncertainties in the world in which we are living, we are seeing that more and more entrepreneurs are realizing that it is more and more challenging to be alone in a fast-changing and demanding world like this. Then we are very positive also for 2026 in this respect.

[Operator Instructions] Next question is from Fraser Donlon, Berenberg.

I had 2 questions on Water Jetting. So the first was to ask which kind of new applications are you most excited about looking into 2026 in that division? And then the second question, when you look at your backlog, do you see any kind of major changes in the geographical composition of that in Water Jetting looking forward because I kind of have the sense that U.S. has been a bit weaker over the last couple of years and then Asia is very strong. So I wondered if that's something you kind of see continuing or whether there's some changes starting to show.

Yes. Discussing about geographies, clearly, we did spectacularly well in China and then in the order backlog, today, Asia is less relevant than a few quarters ago or less relevant than the start of the year, but this is just because we executed that order.

But anyhow, and with a long-term view, Asia and China, in particular, is a very, very interesting market, in particular for some niche or for some application that are flagship applications in our Water Jetting division. Regarding new application, I'm very curious to attend the budget shortly and to understand and to discover what our R&D guys are working on.

But as you know, we have commented many times that new applications are being developed and discovered year after year accordingly with the customer needs. then let's see. There is nothing spectacular that I want to anticipate or I want to share. We are much more interested in having many different projects or many different application fields to work on month after month.

[Operator Instructions] Ms. Cugnasca, there are no more questions registered at this time.

Okay. Thank you very much. Thanks to everybody for listening to us and speak to you soon in February. Bye.

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

Good afternoon. This is the Chorus Call conference operator. Welcome. Thank you for joining the Interpump Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Elisabetta Cugnasca, Head of Investor relations. Please go ahead, madam.

Thank you. Good afternoon. I am Elisabetta Cugnasca, Head of Investor Relations of Interpump Group. Good afternoon or good morning, depending on your time zone, and welcome to the Interpump Second Quarter 2025 Financial Results Conference Call.

As usual, I must draw your attention to the disclaimer slide inserted in the Annex part of the presentation that I hope you were able to download from our website. Now I would like to leave the floor to Mr. Marasi, Group Chief Executive Officer.

Thank you, Mr. Cugnasca, and thank to all of you for joining our call. Once again, reported and future number first. Reported numbers, plus 1% of sales growth on an organic basis. Finally, after 6 consecutive quarters of decline, we are very pleased to commence a quarter with an organic revenue growth.

1 may be a small number compared to the double-digit figures of 2021, 2022, but it's a number that reflects the technological excellence of our products, particularly those in Water-Jetting division, and the importance of diversification, which, as you know, represents probably the most significant characteristic of our growth journey and the strategy of our group.

On the other hand, it also reflects what we hope are the first signs of a return to normalcy for Hydraulics sector as a whole. This small but meaningful plus 1 is accompanied by another encouraging figures, a large one.

Our organic EBITDA grew by almost 7% in the quarter. In previous quarters, as you know, the flexibility of our business model and our relentless focus on cost optimization in line with the revenue trends allow us to minimize the gap between the revenue decline and profitability decline. Now, that same approach has enabled us to fully benefit from the revenue growth.

Future number. We confirm 2025 guidance with organic sales evolution between minus 5% and plus 1% and an EBITDA margin between 22% and 22.5%. It's clear that second quarter performed better than our expectations at the beginning of the year, thanks to the revenue peak recorded by the Water-Jetting division.

However, recovery signals from the Hydraulics division still need to consolidate, especially considering the ongoing challenges posed by tariffs and the continued shifts in the geopolitical scenario since April. For these reasons, we believe it is more responsible and prudent to confirm the current ranges of our guidance and to eventually provide more precise update based on the business evolution after the summer break.

After the first overview on the most important topics of this quarter, let's focus with more details and color and most important second quarter '25 financial KPIs, sales, EBITDA and cash generation.

Starting with sales, I cannot help but return to the organic growth figures of plus 1%. It may seem odd to be so pleased with such a small number, but seeing a positive sign in front of every number after 6 consecutive quarters of negative figures clearly offer support and confidence.

I'm sure the results that stand out most from an external perspective is the 19% organic growth in the Water-Jetting division, and I will soon provide some color on this remarkable result. However, before doing so, I would like to touch on the Hydraulics division, where signs of a slowdown in the [ normalization ] process that began in summer 2023 seem to be emerging.

In fact, although we are now in the seventh consecutive quarter of decline with an average drop of minus 12%, we are finally seeing a single digit decline, minus 7% following 2 quarter of minus 14% and even one at minus 16%.

Focusing on the main application markets, we are seeing either stabilization such as the decline in the industrial vehicle adapters, around 5% or improvement, even if figures are still negative. Lift, for example, has gone from a decline of over 20% to minus 8% or construction from minus 25% to minus 14%.

Remarkably, the agriculture segment is showing finally growth with sales that are up high single digits in the quarter. As a result, it is possible to hypothesize that we are entering the final phase of the normalization process that has been underway for nearly 2 consecutive years. However, extreme caution is necessary as many factors could interrupt this process, tariffs consequences above all.

Switching now to Water-Jetting, it's important to underline that for several quarters now, the business has been delivering results well above its historical average. And we have already explained that this is due to different features in comparison with the ones of the Hydraulics business.

The activities of the latter division quickly recovered from the approved halt caused by the pandemic and were supported through 2021 and 2022 by issues in the supply chain processes, both in terms of sourcing and logistics. On the other hand, the post-pandemic recovery in the Water-Jetting division clearly took more time, also because many customers suspended important investments in that period. But today, it's much more stable and consolidated.

In the quarter just ended, the very good result of the project business were compounded by a peak in the more traditional Water-Jetting activities and together, are explaining the nearly 19% organic growth recorded.

In fact, in Spring 2024, please see Slide 8 of the presentation, Hammelmann, thanks to its unique technology, secured an order in China for pumps to be used in the production process of low-density polyethylene, a material used in everyday life.

This again demonstrated the group's ability to successfully transfer its water-related know-how to other fluids, laying the groundwork for further future technological and business development. This was a brief but meaningful example of the project within the flow processing vertical.

Now I would like to add an example related to the more traditional vertical of our division, high-pressure pumps. And in particular, an important contract secured last April and completed in a record time in less than 2 months and contributing to the revenue of June and July just ended.

And I'm referring to the Slide 9 of the presentation. This is a very well-known example to many of you. It refers to ultra-high pressure waterjet system and ship cleaning equipments. In fact, at second quarter start, the group signed an agreement with one of China's leading private shipyards for nearly 100 Water-Jetting ship cleaning equipments.

We already discussed the advantages of Water-Jetting technologies compared to the traditional sand blasting ones: efficiency enhancement, energy consumption reduction and support to green position. After this detailed overview of revenue by division, let's take a closer look from a geographical perspective at group level, focusing on most relevant areas to us and of course, at constant exchange rate.

Thanks to development previously described, it's easy to see that China is a country that delivered the strongest results, more than doubling its revenue and thus delivering and driving the entire region. The weakness observed in previous months in the North America region was [ confirmed ] with the United States, recording a decline of over 12% in the quarter.

Europe could be described at stabilizing. And to anticipate a possible question, we are still not seeing any benefit from Germany infrastructure funds.

Switching now to EBITDA, the second quarter figures are even more meaningful than revenue figures. In the second quarter, a 1% organic growth in revenues was accompanied by a profitability increase of over 6%, with a margin improvement of 100 basis points. This led to a half year basis to a decline in profitability that was smaller than the drop in sales, minus 1% versus minus 1.7% in sales.

There are several aspects I will never tire to emphasize and to help fully appreciate this number. We are an industrial group, and we manufacture. We are organizationally decentralized, but many of our key companies are highly integrated at the production level. And finally, we have been experiencing revenue declines for over a year, specifically for 6 consecutive quarters.

The combination of these conditions would typically lead to far greater drops in profitability than in revenue. This situation did not occur, thanks to the flexibility of our business model and the continuous, consistent effort we put into adjusting our cost structure in line with the demand trends. This allowed us in the second quarter, not only to minimize for the Hydraulics division, the negative flow-through effect, but also to benefit from sequential revenue improvement.

Revenue decline of over 7% resulted in a limited profitability reduction of 9%. In the Water-Jetting division, on the opposite, to fully capitalize on the significant revenue increase with an EBITDA growth nearly double the revenue growth, plus 34% versus plus 19%. And third and finally, to manage the tariff issue in such a way that its impact was ultimately negligible.

The plus 1% revenue growth in second quarter is a very positive figure. But I would argue, it is not as impressive or satisfying as the over 6% organic growth in EBITDA. The former is partly due to a context that appears to be coming more favorable, while the latter is the result of our work and capabilities.

Let's move now on the last important KPI, through which we do not evaluate -- we evaluate our work, cash generation and these components.

In the first quarter of this year, due to the mechanisms of advanced payment, specifically those related to the Chinese customers, which we explained in May, a slight delay emerged compared to the same period of the previous year, amounting to approximately EUR 5 million. One quarter later, this delay remain unchanged despite an opposite trend in sales.

In the first quarter, organic revenue declined by around 8%. In the second quarter, we had sales growth by 1%, thanks to the doubling of growth in Water-Jetting, 19% compared to 8%, and [ dialing ] in the Hydraulics division from minus 14% to minus 7%.

As you can easily imagine, this phenomenon had an impact on trade working capital and in particular, in terms of customer receivables. Nevertheless, if we focus on the cash generation result for the second quarter, we can see that it amounted to EUR 46 million, the same as in the second quarter 2024. Therefore, despite the evolution in revenue during the quarter, the group was able to manage the impact on cash generation.

And as of June 30, a slight delay in cash generation compared to the first half 2024 is entirely attributable to the first quarter '25, and this confirms our commitment to delivering on the goal we set at the beginning of the year and in particular, to consolidate the record cash flow generation achieved in 2024.

Moving to CapEx. In Slide 12, there is the usual update on the last important project of Group 2021-2024 CapEx plan.

The new Interpump Hydraulics headquarter in Sala Bolognese, close to Bologna, the transfer process is almost completed. And following the registered office relocation a few days ago, Interpump Hydraulics will be fully operational in the new site as of September. The timeline was respected, and we managed to minimize the inefficiencies that an event of this kind causes in the life of an industrial company.

As you know, we are very proud of the significant improvements we made to many production facilities over the past few years, and we are pleased to welcome interested investors. Despite the ongoing work, we have already hosted several investors in Sala Bolognese in July, and we'll be truly delighted to welcome more.

Acquisitions. In last May, we briefly outlined the characteristics that make a company a potential acquisition target for us, the traits of a perfect fit, technological excellence, consistency with group strategy, respect of our M&A criteria.

After the theoretical explanation, there is an empirical example, Padoan. Our a company specialized in the production and sales of tanks for industrial vehicles and machinery that in 2024, generated approximately EUR 15 million in sales with more than 17% EBITDA margin, a company that allow us to extend our product range to exploit synergies with other group and portfolio, companies with the completion of the Wet-KIT that is composed by pump, tank, tipping valve, front-end cylinder and hoses and fittings and finally, the construction of our presence in Europe as strong as the one that we have in the North America region.

While discussing acquisitions,and expanding the perspective, we would like to take the opportunity offered by the financial quarterly results regular communication to revisit and delve deeper into theoretical aspect of our acquisition strategy.

In fact, what happened at the end of last April with some speculation regarding the acquisition of a major player in the transmission world made us realize that we had taken for granted that our acquisition strategy was clear and well understood by the market and especially by those who have known us and followed us for a very long time.

That being the case, no one would have questioned whether we might be interested in something that is clearly not a perfect fit for us. And therefore, we feel it is our duty to dedicate a few minutes during this communication to reiterate the purpose of our acquisition strategy and the characteristics of a perfect fit, how our acquisition and post-acquisition process are structured and implemented and finally, to recall some example, the construction, the flow processing and the reduction gears verticals in the last few several years.

However, since it is August 6, we prefer to condense and summarize this extensive recap into a few slides from the result presentation. And in particular, you might find that these slides from Page 16 to Page 31 in the presentation, in the group approach to M&A section, from which we will highlight just one point here, one single but fundamental point.

The ultimate target of group growth and development strategy is diversification. It is diversification by division, by geographies, by market application and not dimension that allow to proper manage business risks. It is diversification that allow us to reduce volatility through different cycle exposures and this diversification that allow us to effectively react to unexpected swings in market conditions.

Until now, we have talked about the past. Now let's move on to the future.

The month of July was consistent with the trend observed in the previous month, confirming the strong performance of Water-Jetting and the steady recovery of Hydraulics division. This allow us to reaffirm the current range of our guidance, both in terms of organic sales evolution and total EBITDA margin.

It is true that the Chinese contract in the high-pressure pump vertical has placed us in a slightly more favorable position than originally anticipated back in February, but the volatility of the global environment remains very high. And therefore, at this stage, we prefer to confirm the current ranges of our guidance.

The recent tariff agreement between U.S. and Europe, regardless of the specific figures reached, should theoretically help reduce uncertainty. But since last April, there have been so many shifts on this key issue that we prefer to maintain a cautious approach. This is also because, as you know, our guidance is not something developed for our financial stakeholders. It's an internally generated estimate based on our backlog and forecast used to align our cost structure.

We are fully focused not only on achieving our revenue target, but above all, our profitability one, an EBITDA margin between 22% and 22.5%. At this stage, we believe it is essential to maintain the prudent and rational operational approach that has enabled us to achieve an outstanding industrial results with 1% decrease in EBITDA corresponding to 1.7% drop in revenue in the first half, nearly twice as much.

Now it is appropriate to keep space to your request for further insights. But before doing so, I would like to briefly highlight once again the two key figures from the second quarter's results that summarize the remarkable work we have been doing over the past 2 years to face one of the most challenging periods in the Hydraulic sector, an organic revenue growth of 1% and an EBITDA margin increase of 7% in the second quarter. Thank you.

[Operator Instructions] The first question is from Matteo Bonizzoni from Kepler Cheuvreux.

I have three questions. The first one is related to this particularly good performance for Water-Jetting in China, which you have explained well. My question is, is this boost over? Or do we expect something also in the second half of the year? And also more importantly, it was a spot opportunity or do you see more potential opportunities for Hammelmann of this kind going forward?

Second question is on the margin. Clearly, the margin in the first half was very, very strong, also due to a divisional mix effect, given the very strong growth in Water-Jetting. 23.2% is the margin in the first half, doing some preliminary calculation, but we analysts can always be mistaken. I would say that to do at least the top of your guidance range, so at least 22.5% could be doable.

So my question is, is there any particular reason of prudence why you didn't want maybe to fine-tune up your, let's say, guidance on the margin?

And the last question is on tariffs. We know that broadly 30% of our U.S. revenues are not produced in the U.S., now are coming mostly from, I would say, Italy and Germany. So 7% more or less of your total revenues, I think, are subject to tariff, probably, if you want to maybe confirm or not or correct this percentage. What's the possibility for you to pass down the tariff impact or maybe you are going to suffer some impact in your P&L?

Thank you, Matteo. Very, very important questions. Regarding the remarkable performance achieved in China with, I mean, in the Water-Jetting division, clearly, we are super happy of the business development and the orders that we received and we executed in the first part of the year.

These orders or this business clearly is not an everyday business, but it's a development trend that we have been commenting several times regarding the more developed and higher attention paid also by emerging countries, if we can define China an emerging country, towards sustainability and environmental impact.

Several years ago, large shipyards in China were not at all interested or were not paying any care on the impact on the environment, and they were doing their activities. And for this reason, they were utilizing alternative technologies and in particular, sand blasting technology that we have explained many times being much more impacting and polluting of the environment.

Today, dealing with international customers and working with the top- and high-end technologies is very important for them to show and to pay high attention to the environment. And for this reason, they are switching to this technology proposed by Hammelmann, even if it is much, much more expensive.

And for this reason, I do not invite you to factor in your estimates that every month, we will have these fantastic orders or fantastic projects to be delivered. But I'm very confident that we will see other businesses, other projects and a significant long-term development because of this switch in technology and switch in attention paid by the customer to this way of doing business.

And then we have been commenting many times about these trends, and these orders and these results is the most significant proof of what we were commenting.

Regarding your second question, that is the toughest one, is the 22.5% EBITDA margin easily reachable? Nothing is easy in this environment. And as you know, we are, in general, very prudent. And for this reason, we have been discussing internally. But after this discussion, we are confirming the guidance, both in terms of sales and in terms of EBITDA margin for the year.

We will see what will be the results of the second half, considering how many uncertainties and how many factors are giving us headache in these areas. But clearly, second half results make us very confident in the possibility to reach the target that we have shared with the market.

Third question, tariffs impact, your calculation, your numbers are correct. Around 7% of consolidated sales are represented by goods that are manufactured outside U.S. and exported or sold in the U.S. And for this part of the business, we have promptly adapted our price list or applied price surcharges to the customers in order to transfer to the American customers this price increase.

Of course, some negotiation happened, but it is clearly something that is outside our control. And luckily, many other competitors are in the same position. Then I would say that like as I have commented before, no negative impact so far has been recorded due to the tariffs impact.

The next question is from Alessandro Tortora of Mediobanca.

Let's say, I have three questions. The first one is, Fabio, if you can come back, sorry, to the Chinese order you mentioned before. So if you can help us understand, just to have an idea of the size of this order and this would be important, okay, in order to -- as you mentioned before, this is a kind -- this is not a one-off, but we cannot assume and project perpetually this kind of order of this size into our model. So this is the first question. I don't know if you want to go one by one or I will...

Lets go ahead.

Okay. Okay. Then the second question is on the backlog for the Hydraulics business. You mentioned, let's say, kind of sequential improvement, also ag, but also the other subsegments. So can you give me an idea of the order backlog level compared to the beginning of the year, if we have -- if you're having, let's say, some minor improvement into this item?

And then the third one is linked to the agricultural business. You mentioned finally, this sales up into this end market. I remember that White Drive suffered a lot, okay, from this exposure, exposure to agriculture. Can you give me idea of what is going on there in terms of profitability? Because I remember last year, a very, let's say, negative data on profitability for White Drive.

Thank you, Alessandro. Regarding Chinese order, we have given all the details that we believe are appropriate in terms of customer project, project size and so on. And like I said before, clearly, I do not invite you to factor a plus 19% organic growth in every quarter in the future.

And this is some sort of extraordinary in the magnitude, but I believe it is much more important on a business point of view, what I have commented before in terms of technological trend and technological switch and shift toward our technology that are maybe more expensive, but are cleaner, more sustainable and more efficient in terms of energy consumption, in terms of water consumption and in terms of long-term payback.

And also in terms of marketing for our customers because if we are staying on this example, large Chinese shipyards are presenting this kind of investment as a sort of marketing tools towards their customers because they are investing for the top-quality European-level technology with better efficiency and a better attention and the impact towards the environment.

And this is very, very important and everybody is moving towards this direction. And this is the reason why I'm very positive regarding the mid- to long-term opportunity development for this division and these technologies without place factoring plus 19% growth every year.

Regarding backlog in Hydraulics, we are seeing some recovery here and there. And in comparison with the order backlog at the end of 2024, we have numbers that are at similar level. We have similar level also because we have significantly reduced the order delivery time, and this is usually very important in determining the order that our customers are placing.

The lead time is what drives usually together with the demand, the real demand, the order backlog. And seeing stability in the orders level after having reduced the lead time is comforting, let's say, is comforting.

The third question was related to agriculture. I was very, very pleased to notice finally that agriculture had a positive organic growth in the quarter. And as you know, agriculture is important for White Drive, but for [ Volvo ] or for many other companies in Hydraulics.

And agriculture was the first application field to be impacted already in the first and in the second quarter of 2023. Then being optimistic, I would take the agriculture recovery as a first sign of the business recovery in some way anticipating positive effect also on other application fields. But after more than 2 years of negative numbers in this very particular and very important application field, this is the reason why I was so comforted in seeing a plus 7%, 8%.

Okay, Fabio. And the question was also related, I remember, to the implication for White Drive because I remember that the company was having a very high exposure to [ ACA ]. So in order to understand if you are already seeing an improvement in profitability in this company.

Yes, because last year, the company's results were really impacted by the very negative top line evolution and also by the one-off related to the inventory adjustment and inventory evaluation. And then considering the completion of the restructuring that we have put in place and considering the sequential improvement in some application field and in the level of business, we are seeing an improvement in the performance in comparison with last year in 2024 results.

The next question is from Domenico Ghilotti of Equita.

A couple of questions. The first is on the hydraulic market. It sounds like quite different scenario, if I look at North America and Europe. And I would like to get your comments. I don't know if the minus 12% that you were giving before for North America -- for the U.S. actually is organic, but trying to understand if we should expect maybe a period of sluggishness in North America, while in Europe, you are seeing a much different trend.

Second is on getting back to Water-Jetting. Maybe if you can help us understanding, so what's the underlying trend? And so if you can give us the sense of the backlog or maybe -- so apart from the big order, what kind of order intake are you seeing in the division?

Regarding the Hydraulics market, clearly, U.S. today is the weakest spot. It's the weakest spot because probably U.S. shows a very good performance and strength for a longer period. I mean, when Europe or Asia started to slowdown. U.S. was still very strong and consistent in demand income. This is the first reason.

Second, the impact of this geopolitical situation, the tariffs, the depreciation of the exchange rate, I mean, the dollar against euro is impacting the willingness of the American market to invest. And this is the reason why I'm not really positive for remaining part -- for the second part of the year regarding a recovery of the demand in the American market. I'm a little bit more positive for Asia and also for Europe, not really for U.S. from what we are seeing today.

Regarding Water-Jetting, I would leave Elisabetta Cugnasca, to give you some more color on this.

So if we forget for one moment the second quarter but we look at the previous quarter, you see that the recovery of the Water-Jetting after the COVID made us grow around 8%, 7%, then again, 8%. I'm referring to Slide 41 of the presentation.

So this is a number that are -- even this number's a bit higher compared to the historical or trend of the Water-Jetting. The historical normal trend of the Water-Jetting is more like between 4% and 6%, okay, in the medium and long term. Now we are speaking more recently of 7% or 8%, exactly because we are in the recovering after pandemic due to the reason that Mr. Marasi as explained before.

So what we are suggesting you now is for the next few quarters to go on with the most recent performance, the one between 7%, 8%, not the 19% one and not the 4% or 5% of the historical one because we are still having some benefit of the growth coming from the recovery post-pandemic.

Okay. The key question clearly is on 2026, if you can keep on growing on a very tough basis...

Yes, we will see next year.

[Operator Instructions] The next question is a follow-up of Alessandro Tortora of Mediobanca.

Just a quick, let's say, follow-up on the comment just on the -- sorry, Water-Jetting growth. Can you help to understand if the Chinese order -- the impact of this Chinese order will be visible also in Q3 or we basically saw the impact totally into the second quarter?

The most important piece of the impact would be in the second quarter. We will have some small impact in also in July because as we described in both the press release and in the presentation, the order has been delivered between June and July, part in June. So you will have a support also in the third quarter. But then in the fourth quarter, we will go back to the high normal level of the Water-Jetting.

The next question is from Michele Baldelli from BNP Paribas.

I have one on White Drive. Given the difficulties that experience, I don't know if you can share with us, let's say, given that I expect that the margins are probably below, let's say, the normalized level and also below probably the Hydraulics divisions one; when do you expect them to recover? How long it will take then to recover, if you can share some of your probably planning about it?

Second question relates to the backlog of [ Hammelmann ] today. So post the Chinese order, if you can share with us the year-on-year growth for the ultra-high pressure pumps business? And lastly, if you can share some color on the expected net debt or free cash flow generation by the year-end that you expect?

Okay. Regarding White Drive, clearly, the very negative top line evolution of the last 5 or 6 quarters and the consequent restructuring activities that we have put through, together with completion of the integration of the production lines that were transferred as a part of the carve-out process; significantly impacted the results of the company.

And today, White Drive results are still below the average of the Hydraulics division, but are improving and are not so bad, are very good, I mean, in Europe. Europe was restructured first and addressed first the significant decline of the top line. And today, the profitability, despite the very low level of business in Europe, is very positive and already aligned with the average of the group and satisfactory.

More work in terms of restructuring and in terms of stabilization, completing the restructuring activities and facing the further slowdown of the business demand is to be made in United States, and this is the focus of the group. Clearly, the normalization or achieving the expected level of profitability is -- also depends on the timing of the recovery of the top line and then the marketing.

Regarding Water-Jetting backlog, even after the spectacular results of the first half of the year, I'm not giving you any number regarding the backlog by company, but I can say that the level of the backlog of the Water-Jetting division today is aligned with the level of the backlog that we have recorded at the year-end 2024.

And finally, as already commented before, the free cash flow expected for the year is confirmed to be close or to repeat the very, very good results achieved in 2024.

The next question is from Bruno Permutti from Intesa Sanpaolo.

Mr. Permutti, we are -- unfortunately, we are not hearing you.

The next question is a follow-up of Domenico Ghilotti from Equita.

Given the many slides on the M&A strategy, the usual question on the M&A pipeline, what are you seeing in the pipeline?

Yes. We have spent so much space in our presentation and also in the comments because what we have underlined before. We believe that after recent discussions, some misperception need to be corrected. And for this reason, we dedicated so much space, 15 slides, I believe; in the presentation in detailing and underlining how we approach M&A and what we believe is the correct structure and correct strategy in this fundamental aspect of our long-term growth record.

And you have seen that we have closed the acquisition of Padoan, like we have commented before, that is a perfect fit and a perfect target. The pipeline remains very good. We have many discussions and many opportunities on the table, and we are very confident to be able to close some other deal and some other acquisition before the year-end.

The next question is from Chiara Tomesani of UBS.

The question was already answered. Thank you.

The next question is from Bruno Permutti from Intesa Sanpaolo.

Yes, can you hear me? I try again.

Yes. We can hear you. Please go ahead.

Okay. Sorry. Yes. The first one relates to profitability of the Water-Jetting division, which was quite strong in the second quarter. Could you elaborate a little bit on -- it was operating leverage. It was the kind of products that you delivered. So what we can expect going forward?

I mean, I remember that there was an issue with the systems that you delivered that had a lower profitability than the single product. So I was wondering if you can elaborate a little bit on the dynamics you expect for -- going forward for the profitability of the division.

And the second one was related to the Hydraulics business. Do you have any visibility if your customers are restocking or are already utilizing in manufacturing your deliveries? So could you have an idea of that from what you can see?

Okay. In terms of Water-Jetting, obviously, you correct an important element that is the operating leverage because obviously, a huge increase of the sales had by definition, a positive impact in terms of profitability.

You also correctly remind that last year, the organic evolution of the Water-Jetting profitability gave us some trouble correlated to, I would say, two main important elements. The first one was the transfer of the headquarter of INOXPA India because today, after construction of the headquarter of INOXPA India, we have worldwide 2 excellence industrial centers, INOXPA, one in Spain and one in India.

Unfortunately, if we would make a comparison, the transfer of the headquarter of INOXPA last year was not as good and as successful as the transfer of Sala Bolognese this year. So this had an impact, especially in the second quarter of 2024.

Then overall, you correctly remember some -- the backlog, the order that we had was so big that we had some, say, inefficiency due to the dimension of the order. This is also correlated to the fact that the Water-Jetting market is smaller, and therefore, we do not have the same chance to find a partner to which we can externalize some production phases, especially for the high technology that we use in some company of the group.

But if you remember, quarter after quarter last year, we get an improvement from this point of view. The last quarter of last year was the second quarter, then we closed the gap, except in the first quarter of 2025, so -- where there was no dilution in terms of organic.

So also the contract done, it was a massive contract, was built perfectly because, by the way, we have been able to find local partner in China. So we hope that this problem should be managed probably. We cannot guarantee you 100%, although we'll be as efficient as we could, but for any case, we will do our best.

Yes, regarding the visibility of the restocking by our customers in Hydraulic, clearly, we have a mixed situation. We have customers in agriculture that have completed the destocking. We have customers in other sectors that are still underway. And the visibility, generally speaking, is very low. It's very low. And the uncertainty is what is characterizing this period, in particular in the market, like I said before.

Then everything that we have said so far and in particular, the reiteration of the guidance for the year; is the consequence of all these elements that have to be taken into very good consideration.

The next question is from Fraser Donlon of Berenberg.

Fraser here from Berenberg. I have three questions. So the first, could you maybe quantify what's your exposure to steel and aluminum tariffs in the U.S. on the imported metal?

The second is just on Hydraulics in the U.S. in Q2. Did you see any significant gap between your orders and shipments in Q2 on the back of tariffs in the U.S.?

And then the final question, do you see quite a stable pricing environment still in Europe in Hydraulics? How are the competitive dynamics going? If you could maybe give a comment there, that would be great.

Thank you, Fraser. Regarding steel and aluminum, I don't believe that we will have a significant impact, being our products much more complex than just selling raw material or products with a very, very significant impact or presence of raw material.

Then, I don't have information regarding tariffs to be applied based on rules that determined for steel and aluminum with a very, very high tariffs related. Then so far, it doesn't seem that we are entering into this bucket.

Second, regarding the Hydraulics in U.S. in the second quarter, I do not see particular changes in comparison with the first quarter. Then already the first quarter was weak, and this weakness has been confirmed in the second quarter. We are not seeing so far any sign of further deterioration due to the tariffs.

Third and more comforting, the level of pricing in the market in this moment is still stable and consistent, in particular in water -- in Hydraulics. As you know, in Water-Jetting, we have a much stronger market positioning, we are the market leader, we are enjoying premium price, and it is, let's say, easier to apply price increase and so on.

Hydraulics is a much more competitive environment, it's a much more competitive and consolidated industry. But the beauty is that well-disciplined and profit-oriented market. And also, the most important competitors are not really compromising on their margins and on their price. And for this reason, despite a weak level of demand and despite all the uncertainties, we are not really seeing a higher-than-normal pressure on pricing.

The next question is the follow-up of Michele Baldelli from BNP Paribas.

Yes. Sorry, just a question if you feel confident to give such a question. Q3 or H2 2025, can we have certain confidence that the business will not decline year-on-year organically? Can we state anything about it?

Third quarter is ongoing. And no, it is too early to comment. We are not using to comment more. We have given some color also regarding July. And also based on July results, we are confirming the guidance. But we are not commenting or anticipating any results or any further number on the third quarter.

And like I said many, many times, I really believe that in particular, in such an uncertain environment is much more important to focus on yearly results instead of quarterly or monthly results because if you are strict to match the time horizon, the information that you get are much more volatile and much more inefficient in commenting or determine [indiscernible]. Then my invitation to you and to everybody once again is to look at the full-year results.

[Operator Instructions]

Okay. Thank you to everybody and even more, happy vacation, happy holiday to everybody.

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