Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- De'Longhi SpA (DELHF, Financial) reported a 14% increase in group revenue for the third quarter, driven by the consolidation of La Marzocco and strong performance in the Household business.
- The company has successfully increased operating results at a double rate of sales growth, attributed to perimeter expansion and stabilization of industrial costs.
- De'Longhi SpA (DELHF) has launched several innovative products, including the Rivelia and Magnifica Evo Next, which have received design awards and are expected to drive further growth.
- The company ended the quarter with a positive net financial position of EUR266 million, indicating strong cash flow management.
- De'Longhi SpA (DELHF) has revised its full-year guidance, raising expected topline growth to 11% to 12%, reflecting confidence in continued business expansion.
Negative Points
- The comfort sector experienced a negative performance in the quarter, although it had a limited impact on overall group performance.
- Eversys, part of the professional coffee segment, showed a double-digit decline due to a challenging market environment in China.
- Logistics costs remain higher than last year, although they are easing compared to the first half of the year.
- The geopolitical context poses challenges, particularly in the MEIA region, which could impact future growth.
- The company faces potential tariff risks in the US market, which could affect products sourced from China, although contingency plans are in place.
Q & A Highlights
Q: Can you provide insights on the expected margin evolution for Q4, particularly regarding advertising and promotion (A&P) expenses and gross margin? Also, how is Eversys performing, and what is the status of the project with Starbucks?
A: We expect strong margins in Q4, similar to Q3, benefiting from cost reductions and improved mix. A&P investments will continue to be higher than last year, but at a lower rate than Q3. La Marzocco contributes positively to margins. Eversys has been weak, with a double-digit decline expected to continue, but we remain optimistic about future developments and the Starbucks project, which is expected to roll out approximately 500 units in the second half of next year.
Q: What is driving the recent strong performance in the US market, and what are your expectations for the coffee segment in Europe and potential new agreements with Nespresso?
A: The US market saw a good quarter, partly due to overcoming past challenges like overstocking. We are focused on growth in nutrition and espresso segments. In Europe, we expect continued market growth and aim to expand market share with new product launches. We are confident about announcing four new markets with Nespresso soon.
Q: Could you elaborate on the strategic focus for capital brands like Nutribullet in Europe versus the US, and the drivers behind increased A&P expenses?
A: About 75% of capital brand sales are in the US, with the rest in Europe. We are capturing specific market opportunities, which has led to increased A&P expenses. This includes campaigns for new product launches across various brands and regions.
Q: How is the professional coffee segment performing, particularly La Marzocco, and what are your expectations for full-year organic growth?
A: La Marzocco posted mid- to high single-digit growth in Q3, driven by strong US and European markets and successful product launches. We expect Q4 organic growth to be in line with Q3, supported by major sales events like Black Friday and Christmas, despite a negative outlook for the comfort segment.
Q: What are your plans regarding potential tariffs on US imports from China, and how might this affect your production and pricing strategy?
A: Approximately 7-8% of our revenues are impacted by Chinese imports. We have contingency plans to relocate production from Asia to Europe or within Asia. We aim to avoid price increases by sourcing alternatives rather than passing costs to consumers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
