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Good afternoon. This is the conference operator. Welcome, and thank you for joining the Biesse First Half 2023 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pierre La Tour, CFO of Biesse. Please go ahead, sir.
Thank you. Good afternoon, everyone. So welcome. I hope you've all had the opportunity to read our press release and go through the presentation. Both have been made available on the company's website. Let me just spend a couple of words going through the financial highlights regarding the first half. Now if we look at our P&L and we concentrate for a second on the top line and the bottom line, you will see that basically, we have a situation which is virtually identical versus the first half of 2022. So if we look at our consolidated net revenues, we closed the 6 months at EUR 418 million versus EUR 419 million in 2022.
And if we move on to the bottom of the P&L, so to the net profit line, we have a net profit of EUR 19.5 million which compares to EUR 19.4 million in the previous year. So the situation is virtually identical. In fact, we -- the scenario is -- has, of course, changed significantly. And you can see this very clearly by looking at adjusted EBITDA, adjusted EBIT and EBIT. So if we look at EBITDA, of course, EBITDA is lower versus the first half of 2022, it is lower by 12.5%. And of course, the main factors influencing this, let's say, this lower performance are a negative impact on exchange rates, inflationary pressures on materials and of course, this is impacting our cost of goods sold.
And we have an increase as far as some of our overheads are concerned. Specifically, we've had an increase in our exhibition costs and in our travel expenses. So this -- these are all factors that have contributed to the performance. Now if we move from the adjusted EBITDA to adjusted EBIT, you can see that basically, this is lower versus the first half of 2022. It is lower by 14.6% and basically, this is a reflection of what I just mentioned. This has been partially offset by lower depreciation and lower accruals during the period.
Now looking at EBIT, well, you can see that EBIT is actually slightly higher versus EBIT adjusted. And now this is -- this reflects a positive gain that we registered deriving from the sale of assets in Northeastern Italy. This is an operation that was concluded in the first quarter, and it provided us with a net gain of EUR 1.9 million. And so this is the underlying reason for the difference between adjusted EBIT and EBIT.
Now moving on financial charges were lower versus the first half of last year. So we had lower costs in our financial transactions, especially for deriving from hedging on our effect on the one hand. And on the other hand, we've had a slight improvement in our tax rate, our tax rate has moved from 31% to 29% in this period. And hence, these are 2 factors contributing to the improvement in performance, and that brings us to EUR 19.5 million overall net income in the first 6 months of the year.
Now a brief mention regarding our net financial position. So our net financial position, as you can see, continues to be a strong net financial position. So approximately EUR 92 million cash in the -- at the end of the first 6 months. This compares with a net financial position in June 2022 of EUR 85 million. So there is a slight increase. However, I have to mention here that last year, so in 2022, we paid dividends for EUR 17 million. This year, we paid dividends for EUR 9 million. So if you actually deduct the delta between the dividends payment, you end up basically with more or less the same financial -- net financial position that we had last year.
So basically, we continue to have a strong net financial position. And of course, this is despite lower order entry so lower advances from customers on the one hand. And on the other hand, of course, we have had a slight deterioration in other lines of our net working capital. So during the period, our net working capital has absorbed cash for approximately $40 million versus December 31, 2022.
Now regarding order entry, yes, we have seen during the first 6 months, a slight deterioration. So you can see on Page 7 of the presentation, you can see basically order intake overall, order intake in the first half has been EUR 342 million. This compares with EUR 396 million in the first half of 2022. And of course, considering the fact that revenues have been the same as in 2022 this leads to a partial erosion of our backlog.
Now I think -- so if we look at our geographical breakdown of revenues. Basically, we still have Europe, which is -- which accounts for approximately 52% of our revenues, Western Europe. Asia and Oceania account for approximately 11% of our revenues. Eastern Europe has seen a rebound and so it currently accounts for approximately 18% of our revenues. North America is stable at approximately 17%, and then there is a rest of the world component which accounts for approximately 2% of our revenues.
If we look at our revenues breakdown by cash-generating unit. The breakdown is pretty much stable with machines and systems and service representing approximately 90% of our revenues, whereas Mechatronics is below 10% is at approximately 9%. Finally, a word on head count. So we closed the 6 months with total head count of just under 4,100 units. This is a decrease versus last year. So last year, we had a figure that was just in excess of 4,300 units. So we are nowhere in terms of head count versus last year of -- by 238 units. I think I will stop at this, and I will let you ask any questions or -- and of course, I'm here and I'm glad to answer any doubts you may have. Thank you.
[Operator Instructions] The first question is from Paola Saglietti with Banca Akros.
Yes, the first question is about the order intake. In May, you said to expect order portfolio at the end of this year in a range between EUR 310 million and EUR 340 million. Based on the current order intake decrease that if I read correctly the Slide 7 is around 13%, you can confirm these targets or not?
Okay. Sorry, Paola. Just one question. What -- can you please repeat the range just to make sure I understood.
EUR 310 million and EUR 340 million.
I think that we will probably be slightly below that range. So we have reviewed our forecast -- and so we are currently foreseeing to be in terms of backlog at the end of the year, we're currently foreseen to be situated between, I would say, EUR 280 million and EUR 320 million.
Okay. Thank you. And about the geographical breakdown, if I read correctly the Slide 13. So it had an increase in recovery in the Eastern Europe of business.
That's correct.
Okay. And a stable situation in North America.
Yes. North America is stable.
Okay. And for the coming years in H2, what do you expect?
Now... Okay. Now, we're expecting some further erosion as far as our domestic market is concerned. And so that is going to weigh on Western Europe. We are expecting Eastern Europe to continue its positive trend. And we're expecting North America to continue being stable versus slightly improved -- improving its performance versus the first half. These are the trends that we are currently foreseeing and expecting.
So based on this trend, we can continue to maintain an hypothesis of decreasing sales in high single digits?
Yes, absolutely. That's absolutely correct. So overall, year wise, I think you can -- we are expecting versus last year to be in the single-digit in the -- around the mid-single digits in terms of net sales reduction versus 2022.
[Operator Instructions] The next question is from [ Andrea Besson with UniCredit ].
I would ask if for the coming months, we can expect Biesse of having a level of CapEx more or less in line with the previous month. I mean, with these changes on the income statement, can we assume more or less that the investment level is by -- is, however, confirmed?
Yes, Andrea, we can. We are investing. We are not investing as much as we had originally foreseen. So basically, if I look at the level of investments during the first 6 months, it is below what we had anticipated at budget level. So of course, we are carefully evaluating our investments given the current scenario. And I think we can expect the second half to be in line with the first half in terms of investment level.
[Operator Instructions] The next question is from Alberto Francese with Intesa Sanpaolo.
I am Alberto Francese from Intesa Sanpaolo. I have a question on the order intake. Surely in the second parrt of '23, the comparison with first -- with the second half of '22 will be easier. But what can we expect in terms of order intake? When do you see there will be turn to better shape for order intake on can expect at the end of this year, next year. So what is your feeling about a recovery in order intake?
You're asking me a very difficult question, Alberto. Unfortunately, we have a limited level of visibility for sure. The -- let's say, the increase in interest rates is having an adverse impact on our order intake. And so our certain geopolitical factors that are well beyond anybody's reach. So right now, we have we have limited visibility for the time being.
And so it's difficult at this point in time to go beyond, let's say, 2023, although, of course, we are starting to reason in terms of 2024. And we will be reasoning when -- starting from the month of September, we will be -- we will start seriously reasoning in terms of 2024 to arrive at the, let's say, definition of the budget by, let's say, the end of November, beginning of December.
Now of course, we have had some markets that have fared worse than others. So of course, Italy has been very significantly affected. And so we've seen a very sharp downfall in order intake in our domestic market. We have had some other markets that have said -- that have been particularly affected and the first being Russia, of course. The second being Turkey, given the very significant devaluation of the Turkish lira. And so at this point in time, we believe that in 2024, our order intake will, in all likelihood, be similar to what we have experienced in the course of the first 6 months of this year and to what we are expecting to foresee for the coming 6 months.
So for the time being, we are reasoning in terms of having an order intake that is pretty much along the same lines as this year, unless, of course, we have a revision in Central Bank's policies that could lead to a relaxation of the current tight monetary policy.
Another very short question is how many months of the revenue are today in your ?
So we started off with a very significant backlog. And the backlog was over 7 months. We are currently at approximately 5 months. So we have eroded as I was mentioning earlier on, we have partially eroded our portfolio, our -- sorry, our backlog. And so we currently stand at approximately 5 months in terms of machine production in terms of our backlog. We will come down from 7.5 to approximately 5.
It was also due to either delivering or the bottlenecks that we have in production, in procurement, softening and there is also this impact other tha the decrease in order intake.
Yes, for sure. There has been a normalization of the supply chain and, of course, the logistics change. So yes, this is -- this has facilitated deliveries and somewhat decreased delivery times. But on the other hand, you've seen it with our workforce, of course, we have also, and we are in the process of also reducing our production outputs. So the 2 go -- the 2 phenomena go hand-in-hand actually.
[Operator Instructions] The next question is from Roberto Casoni with Otus Capital.
Yes, yes, was on mute. Sorry about that. I have, unfortunately, I joined a bit later on this call. So I apologize if I'm asking questions which have already been totally or partially answered. I wonder -- I understand the difficult dynamic and market that I like at the moment, but still in H1, you collected around EUR 340 million new orders. I understand Q2 was weaker than Q1. Can you give us a sense of where -- which are the markets that are still relatively robust compared to others? And where do you see actually the first signs of a sort of recovery, if any? Instead of talking about the markets that are currently weakening and are generating this double-digit drop in intake, which are the countries that are actually contributing more favorably than expected, yes?
Okay. Roberto actually, for the time being, we're seeing North America holding on well and performing well. So for sure, North America is actually a response to the criteria that you were describing and altogether, Europe, so both Eastern as well as Western Europe, excluding the domestic market, are faring relatively well given the context and given the scenario. So these areas are doing relatively well. Australia is doing well, so Australia and New Zealand are doing well. And of course, unfortunately, we have a difficult situation for what concerns Turkey for what concerns Russia, of course, and of course, our Italian market, which is not doing well at all. So this is the overall picture.
I'm not mentioning Asia simply because of Asia, unfortunately, well, as you know, our presence in China is very limited. And so whether it goes well or whether it doesn't go well, it doesn't make a difference on our results. And of course, we have a presence in Asia, but the rest of Asia is still relatively small. So again, the performances that we're having, which are, by the way, pretty fragmented are not really impacting our performances.
You're talking about India, in particular, yes?
Yes, indeed. India, but not only also Southeast Asia.
Okay. I understand. The second question is more a dynamic in the contractual kind of dynamics with your clients. I mean I'm just -- possibly, I'm just extrapolating on what I see in your P&L, i.e., if I just compare Q1 and Q2, I see a drastic dilution in your margin on a sort of relatively equal revenue basis per quarter, so around EUR 210 million each in each quarter. I see that Q2 has seen a drastic dilution. Now what are the main elements of this? Because eventually, what you basically delivered in Q2 were orders, as you were saying that you took at the end of last year, and so is this a kind of dilution regarding sort of a negative mix, i.e., you have been selling machines with intrinsic lower margins? Or what happened there?
Okay. Now, very good question. And I'll try to answer it as well as I can. Now you are absolutely right. I mean -- and I was saying this at the beginning of the call, I mean, if we look at our top line in our P&L and our bottom line, you will see that basically, these are virtually identical to what they were last year, right? So we have the same revenues and the same net result. However, in between, a lot has happened. And actually, so going back to your -- so if we look at our margins and we concentrate on our margins in the first 6 months versus 2022, we've had some pretty significant impacts. Now the most significant of these impacts have been a volume -- a negative volume effect. So we have sold...
Less machine.
fewer volumes versus last year. And this has impacted our margins by approximately EUR 10 million. And then we have another negative impact, which is in terms of margins, it's worth approximately EUR 2 million, which is mix. So a negative mix for EUR 2 million. Now these 2 have been offset almost entirely by one positive impact, which is prices -- pricing. And of course, you will recall that last year, we had a series of price increases. The last price increase that we had was at the end of October last year. So it's been entirely reflected in our -- it will be entirely reflected in 2023, of course, and the last price increase of last year at the end of October 1 was 4.5% on average. Anyway, so going back to the pricing, in terms of margin, we've had a positive price impact of approximately EUR 11 million, so negative EUR 10 million negative 2% positive 11%, okay?
More or less.
Then we had a negative exchange rate...
ForEx, yes.
ForEx, EUR 4 million.
Yes.
Then we've had negative travel and exhibitions, another EUR 4 million. And these have been compensated by a series of positive impacts, which are energy and logistics costs, positive by EUR 2 million. Cost of labor positive due to higher turnover and lower some few on these. lower...
Recruiting...
Recruit hirings, exactly. So again, approximately EUR 2 million positive. And then we've had a series of other positives that are basically depreciation, lower depreciation, lower accruals, a positive impact...
This is extremely well detailed and extremely helpful. And if I move -- this is H1 versus H1. But if I compare Q1 '23 to Q2 '23. Here, again, we are moving on same top line was a drastic dilution in the EBITDA margin one quarter compared to the other. Again, is there anything in the -- I mean, pricing should be the same -- so I'm just missing what is the reason between -- for such a drastic dilution in margins between Q1 '22 and '23.
So in Q2, we have borne the brunt of the exchange rate for different sales. So the EUR 4 million I was referring to...
Entirely basically on the...
Mostly coming in -- mostly came in Q2. And then, of course, we have a little bit of the volumes and mix impact that I was referring to. But basically, that has been compensated by the pricing impact. So that's not relevant. And then, of course, you have to consider that in terms of exhibitions that I was mentioning. So in Q2, we had the Hannover exhibition, which is the largest exhibition in the world for woodworking and that takes place once every 2 years. And that alone is EUR 2.4 million.
Was your stand larger than HOMAG?
That's a good question. I don't know because I didn't go. So unfortunately, I'm not the right person to ask, but I'm told our stand was -- our stand stood out, forgive the game, but basically because we came out with a new concept. So with the new logo, the new design, the new visual identity, and so that is [indiscernible] a one company project.
Yes. So you made a good effort yes. And the last question I have is regarding well, I know that it's -- we can't -- we don't have a crystal ball. And -- but just trying to understand what is your commercial team see when it comes to approach clients that are potentially interested in giving you an order. Are they pushing on continuously on price reduction or payment delays? Maybe this is another way of gaining new orders and gaining market share from others. Do you see competition slashing prices, particularly from Turkey. So how would you describe at the moment how competitors are facing and are behaving in the current difficult kind of environment?
Okay. Yes, there is a tightening of conditions. And so, of course, there is pressure on prices. There are certain competitors that have been more aggressive than others, of course. In particular, yes, you mentioned Turkey. I would also mention China. And of course, the -- let's say, the competitive scenario is more complicated, which is why we have not gone ahead with any price increases so far this year, and we're not planning to revise our price lists for the remaining part of the year.
So 2023 will be a, let's say, at constant prices as far as we are concerned. Yes, we are seeing a slight, let's say, slightly more discounts being given to customers but so far, basically, this is the environment we are facing. There are some few, unfortunately, positive notes in our scenario. So the glass market that had basically completely come to a standstill in the course of 2022 is slowly starting to pick up again. And so we're expecting a higher level of contribution from glass in the coming months, which is good news, having acquired, of course, 4 of it at the end of 2021.
Yes. Great. And last question, I promise, and then I will shut forever. Have you mentioned -- I mean, you mentioned earlier that you're basically trying to present the company as a one company and with different specializations, and different materials and blah, blah, blah. Is there anything you want to tell us in terms of synergies, cost synergies or revenue synergies that this effort might be leading to?
Now this effort is -- so the one company project that the aim of the project is, of course, to produce a higher level of flexibility, which, of course, should, let's say, translate in our ability to better adapt to the -- to a fast-changing environment. Now in terms of synergies we are reviewing -- so one of the major projects within the One Company project is the relay out the industrial -- our manufacturing relay out. Now this so far has resulted in the closure of 3 small plants that we had in Northeastern Italy. So the first one was [indiscernible], and then it's been followed by the closure of Movetro and Montresor. And so Montresor the production of Montresor has been shifted over here in Pesaro and the production of Movetro has been shifted to 4 of its so to cure in. Yes...
There are clear potential rationalization but those didn't show up in the H1 numbers, I assume.
No, they didn't simply because basically, as far as Movetro and Montresor are concerned, we have just completed the closure. Well, in fact, we're still in the process of completing the closure of the plant. So so far, so for the time being, we have bond costs relating to these operations. And basically, yes, we are expecting savings. We are expecting synergies. We're expecting a higher level of efficiency. But of course, this will show in the coming months/years. So it's a little bit too early to talk about, let's say, the benefits deriving from these...
Measurements.
Closures.
Yes, no I understand.
The next question is from Gabriele Parenti with Algebris.
Actually, one is sort of a follow-up from the question asked before regarding the EBITDA. I was wondering whether you can confirm at this stage that you will be able to defend the double-digit EBITDA margin for the end of this year as you stated in previous occasions. And the second one is a more growth question and as related to the market. I understand the difficulties that you were mentioning before interest rates and so on. It's a qualitative question is, do you think that we are in front of a sort of a rebalancing of the market after a very sharp increase after COVID? Or do you think that this is an actual market downturn, so more negative scenario, let's say?
Okay. So to answer your first question, yes, definitely. So we are aiming to preserve a double digit with our EBITDA and we will do -- and we are on that course. So in order -- and so for sure, we will -- we are foreseeing to close the year with a double-digit EBITDA. So there's no question about that. Now looking at market dynamics, of course, we are mainly involved in the furniture business and the furniture business is a cyclical business. Now before the COVID the market dynamics were pretty, pretty clear. And so basically, the cycle used to be a 5- to 7-year cycle. And then after that, there used to be a reassessment and then that lasted generally lasted for approximately 2 years and then the market would restart. Now of course, COVID came in the picture, and so everything was changed. And of course, we experienced 2 extremely positive years, 2021 and 2022 that are -- that have been, by all means, exceptional years. I personally think that, yes, we are in a let's say, in a phase where basically the market is in -- is reassessing itself. So definitely, I think this is going on. How long will this last for is very difficult to tell at this point in time. But for sure, for the foreseeable future, I think the market will perform as it has in the first 6 months of this year.
Now just one word regarding 2021 and 2022. If you look at our cash generation, so we've taken full opportunity from the positive cycle of the past 2 years to generate cash. And so fortunately, we're in a very solid position. And now, of course, it will be up to us to use as best as we can this cash in order to further strengthen and further develop our business...
[Operator Instructions] Mr. La Tour, there are no more questions registered at this time.
Okay. Well, so thank you, everyone, for attending this call. I am at your disposal in case you want to follow up in case you have any additional questions or doubts, feel free to contact me. And thank you very much.
Ladies and gentlemen, the confrence is now over and thank you for joining. You may disconnect your telephones.