De' Longhi SpA

MIL:DLG

Q3-2025 Earnings Call

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the De'Longhi Third Quarter 2025 Consolidated Results Conference Call.

[Operator Instructions]

At this time, I would like to turn the conference over to Fabio de' Longhi, CEO of De'Longhi. Please go ahead, sir.

[Fabio De’Longhi, executive]

Good afternoon, ladies and gentlemen, and thank you for joining the De'Longhi Group conference call for our third quarter 2025 results. With me on the call today are Nicola Serafin, Group General Manager; Marco Cenci, Chief Planning and Control Officer; Stefano Biella, Chief Financial Officer; Samuele Chiodetto, Investor Relations Director and M&A Manager; and Sara Mazzocato, IR Specialist.

Very pleased once again with a strong set of quarterly results delivered by the group, confirming the positive momentum of the recent periods and strengthening of our position as an industry leader. The solid performance in the quarter is evidenced by robust 11.5% growth at constant ForEx and a record adjusted EBITDA margin of 16%.

The Household division continued its strong trajectory, achieving 7.6% growth at constant FX and outperforming the market, while the Professional division further accelerated its expansion across both its brands. Providing a detailed breakdown, the Professional division again posted solid results with remarkable organic growth of over 40%. This was sustained by strong market dynamics for the business combination, reinforcing the position for both La Marzocco and Eversys as leading high-growth, high-margin companies in the mid-cap space.

The solid pace of growth seen over the recent quarters is the result of the ongoing premiumization of coffee quality and experience in the out-of-home market, where our portfolio leads along with the [indiscernible] and unique connection our brands have built within the coffee community over the years. This was clearly demonstrated by our enthusiastic reception for Eversys versatile innovations launched at Host, particularly the next-generation legacy machine capable of brewing cold coffee, tea and matcha.

Further evidence was the outstanding success of La Marzocco iconic event out of the box, a celebration of coffee culture, design and innovation, which over the years has become an international and meeting point for the coffee community. The event was also an opportunity to celebrate key collaborations with partners like Porsche, Rimova and Aimé Leon Dore and featured new ones like the Victorinox for La Marzocco Barista tool.

The Household division maintained its strong momentum, growing 7.6% at constant FX in the quarter, consistent with the previous performance and outperforming the market despite a challenging environment. This positive performance was mainly driven by the coffee category, which is benefiting from resilient trends, including the growing penetration of espresso at home, expanding drinks variety and the continued premiumization of the range. These factors continue to foster growth in the market that, however, remains underpenetrated and underrepresented globally.

We are thrilled with the early results from our third Perfetto campaign. In just 2 months, we have seen a significant increase in social media mentions and search interest for the De'Longhi brand. This campaign marks the next step in our strategic evolution toward a full funnel marketing strategy, which manages the entire consumer life cycle from inspiration to post-purchase engagement. The campaign launch was supported by both activations over the last months at high-profile events, including Milan Design Week, the F1 movie Premiere in New York and the Venice Film Festival.

The objective is to generate a multiplier effect capable of balancing the weight of paid and earned media. The strategy is designed to move beyond simple audience reach, but inspires them to talk, share and create content themselves. These efforts are strategically aimed at accelerating market expansion while cementing De'Longhi reputation at the high-end quality benchmark in the coffee industry.

Now let me focus on the quarterly results. The group delivered an excellent performance in both divisions during the first 9 months and the last quarter with widespread growth across geographies. In more detail for the third quarter, the Europe area confirmed the positive momentum, growing 9.3%, plus 9.2% at constant currency, driven by both Home and Professional Coffee. Spain and Portugal, Belgium, Hungary and the Nordic continue [indiscernible] area achieved a mid-teen growth rate. MEIA was up 24.8% at constant currency in the quarter, supported by both divisions with Professional Coffee achieving sound results and Home Coffee and home care categories driving the growth for the Household business.

The Americas recorded an 8.2% increase in revenues at constant currency, led by the strong Professional and the Home Coffee performance with a negative currency impact from the weak dollar. Finally, Asia Pacific region achieved another positive quarter, growing by 20.2% at constant currency. Both divisions contributed positively to the growth with the Chinese market driving the region performance.

Regarding the divisions, we're very satisfied with the performance of both as they have realized a solid and resilient pace of growth in the recent quarters. Concerning the Household division, we highlight what follows. The Home Coffee segment confirmed once again its leading role in the division growth, posting a high single-digit increase, in particular, thanks to the contribution of pump machines and special products that reiterate the positive performance recorded in the first half.

The Nutrition and Food Preparation segment was down by a mid- to high single-digit percentage in the third quarter. This contraction is mainly due to negative currency effect and a challenging year-over-year comparison for personal blenders in the U.S. market, which had achieved significant double-digit growth last year. Regarding to the other categories, products in this group achieved a mid-teen expansion driven by Brown Ironing segment, which once again grew at a mid-teen rate, continuing its solid expansion over the last 2 years and the accessory category, a business mainly linked to coffee machines, which posted significant growth compared to last year. The Professional division delivered another strong quarter with revenue growth of over 40%.

These results bring the pro forma expansion for the 9 months to approximately 30%. The solid performance was widespread across regions and is driven by the continued premiumization of coffee quality and experience in the out-of-home market. The brand's high-quality positioning allows La Marzocco and Eversys to capitalize on the growing opportunities in this segment.

Looking now at the evolution of profitability. The group margin improved in the first 9 months of 2025, mainly supported by the growth of the Professional division and margins above group average. In details, in the third quarter, the adjusted EBITDA was equal to EUR 148.8 million, 17% on revenues, improving by 70 basis points with respect to last year, supported by increased volumes in both divisions and the better Household product mix.

Price/mix contribution was slightly positive in both the 9-month period and the quarter, while the currency effect was neutral. Investment in the Media and Communication increased in absolute terms but remained stable as a percentage of turnover for both the quarter and the 9-month period. In the quarter, we faced higher logistic costs and the negative impact stemming from the additional tariffs in the U.S. market.

As regards to tariffs, we displayed on Slide 6, we were able to manage this situation and minimize the potential net impact, thanks to our mitigation plan, which was based on inventory buildup, price increases and supply chain reorganization. We confirm our expectation of an approximate EUR 15 million net impact on adjusted EBITDA in full year '25, which is already incorporated in our full year guidance.

In September 2025, the group net financial position was positive at EUR 309 million, an improvement compared to EUR 266 million in September 2024. With regard to cash generation, the cash flow before dividends, buybacks and acquisition was positive for EUR 298 million in the 12 months. In the 9 months, cash flow before dividends, buybacks, acquisitions was negative EUR 482 million, mainly driven by a planned increase in inventory stemming from 2 factors: ordinary business seasonality and strategic buildup in the U.S. earlier this year to mitigate duty impacts.

The inventory level is expected to normalize during the next months as per usual seasonality, generating cash in quarter 4 as it did last year, in line with our expectations.

In summary, the third quarter continued on positive trajectory. We again confirmed and outperformed the market and sustained our industry-leading margins, delivering best-in-class results. Crucially, we also preserved our financial flexibility potentially -- for potential external growth or to optimize shareholder remuneration. The Household division continues to deliver on its medium-term goal, consistently achieving mid- to high single-digit growth.

As shown on Slide 5, we expect positive contribution from the division to continue in the fourth quarter despite a challenging comparison. This will be driven by structural trends, robust product launches and media investments, where our third Perfetto campaign marks a strategic shift towards a full funnel marketing approach. The Professional division was a key driver, delivering significant organic growth in the recent quarter. The performance was supported by strong market dynamics for both La Marzocco and Eversys as they capitalize on the premiumization of out-of-home coffee and a strong engagement of the coffee community as clearly demonstrated by the success of the brand's event participation.

Given our strong performance, we are raising our full year guidance even as we continue to closely monitor geopolitical uncertainties. We now project revenue growth for the new scope of operations to be between 7.5% and 8.5%, reflecting positive contribution from both divisions. Accordingly, we are raising our adjusted EBITDA guidance to a range of EUR 610 million to EUR 620 million, which is inclusive of the tariff effects and increase in average investment to support growth.

Now welcome your questions. Thank you.

[Operator]

[Operator Instructions]

The first question is from Niccolò Storer from Kepler.

[Niccolò Guido Storer, analyst]

Congratulations on results. The first one is on your new guidance, in particular on EBITDA. It seems implying a quite weak fourth quarter. So is there any reason why we could see margins decline in Q4? Are you planning to step up significantly your advertising and promotion? Or do you expect a mix which is very much different from year-to-date, in particular, related to, of course, Professional because we have seen this very strong performance, maybe a business which goes more in base and so we should expect or could expect deceleration in Q4?

Second question is on growth in the Americas. 8% in Q3. Could you tell us which is the price effect and the volume effect of this high single-digit growth? And more in general, which is the sentiment in the region?

[Fabio De’Longhi, executive]

Thank you, Niccolò. The new guidance -- I don't think it's a weak guidance on quarter 4. We don't look at quarterly results. We look at long-term sustainability, long-term sustainable growth. I would highlight a very tough comparison with last year. Last year was up 12% Second, I would remind that we're going to have a major tariff impact in the quarter. We had anticipated of EUR 15 million full year impact. We expect EUR 10 million alone to impact quarter 4. Number three, advertising phasing will be such that most of the Perfetto campaign will kick in, in the last quarter.

Also, I would like to say that the markets are probably even further participated from quarter 3 to quarter 4 advertising. So we're going to have a negative, let's say, comparison for the advertising growth. All in all, we have raised our guidance, which is suggesting that we are more confident than we were, although we raise already before their guidance for the year. We keep seeing a positive development of the De'Longhi growth, the success of our products, our market share expansion in general.

So I would say that I don't consider under all these circumstances, a weak quarter at all, just a final of the year in which we focus more on investing in the long-term growth pillars rather in watching to the short-term margin performance, which in the end is already above the initial plan and the former guidances.

And your second question was about United States, price/mix. Maybe I go into your question about the sentiment. The sentiment is not negative in North America. I would say that the consumer keeps buying. Probably we are witnessing more price pressure than we would have expected. I mean, we have all increased prices. But at the moment, this is a strong promotional initiative to maintain volumes, which is offsetting the positive effects of the price increases in the short term.

We've also seen 2 different dynamics in let's say, the traditional products where we also include the NutriBullet range and blending. We see consumers are more concerned, aiming more to lower prices and bargains and promotions. While on coffee, we still see a strong momentum, which is also suggesting the opportunity in the long term for the group to grow our presence in North America. Having said this, I would say there is a positive mix effect with coffee growing faster, positive price effect in coffee, probably neutral more was initially positive, is now going to neutral in full preparation to try to boost sales and support volume growth.

[Operator]

The next question is from Isacco Brambilla of Mediobanca.

[Isacco Brambilla, analyst]

I have 2. The first one is on Food Preparation and Nutrition. So without looking at the simple, say, quarterly performance, how should we -- how do you see directionally speaking, this division contributing to growth next year? So in 2026, just on a qualitative basis, should be possible for the division to come back to growth next year?

Second question is on Professional Coffee. Performance has been amazing, I guess, above any more optimistic expectation for this year. Can you walk us through the levers to deliver growth next year on top of this very strong performance of 2025?

[Fabio De’Longhi, executive]

Thank you, Isacco, for your questions. Absolutely, food can go back to growth next year. I think that we are witnessing unexpected or maybe an extraordinary event, which is major tariffs in the U.S. U.S. is a major market for NutriBullet. The tariffs have been really changing the market trends and the growth rate of nutrition. And therefore, has resulted in a negative year and in a strong sudden stop to our growth plans. However, we believe that next year, things will stabilize.

Once that United States will go back to normal, maybe even a weaker context, I think that we'll be able to fully exploit the international growth of our NutriBullet products. We're also seeing some positive signs from Kenwood with a return to growth for our kitchen machines. And we are also accelerating our acceleration plan with Brown in both hand blenders, which will probably materialize next year and continued growth in Ironing.

So we are a bit disappointed all in all, by our performance in food preparation after a positive year 2024. However, it's obvious that the magnitude of the tariff impact in the U.S. has been such that resulted in a major game changer in the U.S. market. But we are now more confident that once that this will be absorbed probably in the next quarter -- and next year, we'll maybe stabilize that and we'll be able to show our growth potential internationally.

Second question on Professional Coffee. Yes, it's going strong. Tremendous performance for La Marzocco in the coffee bar segment across all geographies. Incredible success with the home line also across the markets, super visibility, very successful partnerships is resulting in an amazing opportunity in the future. So on that, I wouldn't be surprised if in the long run, Home and Professional Coffee machines will enormously surpass the results of -- the really good result of our coffee machines for professionals in the bar.

So well, all well at La Marzocco. We understand that the compare will be tougher, but we are very confident about the prospects for the brand, which is also very strong. We have a great pipeline of products, and we think that the performance will continue in positive results will continue to be shown in quarter 4 and beyond. China, we have good prospects. United States is not slowing down and we see traction with the major distributors. So we don't see why we should continue with a double-digit growth with this Professional segment.

[Isacco Brambilla, analyst]

That's very helpful. Maybe just one follow-up on my side. Can you remind us even a broad split between house Professional Coffee and bar coffee machines as of now?

[Fabio De’Longhi, executive]

Value -- okay, La Marzocco is approximately 2/3 of the Professional division. We obviously representing 1/3 of the Professional division. Of the 2/3, the majority is still the bar machines. So probably, I would say, all in all, it's less than 1/3 of total Professional sales.

[Operator]

The next question is from Natasha Brilliant from UBS.

[Natasha Brilliant, analyst]

I've got 3. So my first one is just on current trading. If you can give us any color on how the business is performing into Q4, given the important holiday period and anything on sell-in versus sell-out rates?

My second question is just coming back to the upgraded guidance and particularly on the margins. Is it just better revenues that's kind of driving those better margins or anything on the costs as well that's coming down? Just help us understand that.

And then just on NutriBullet, if you can give us a bit more color or quantify the performance in the U.S. versus ex U.S. in Q3, so just so we can see the different performance there.

[Fabio De’Longhi, executive]

Okay. Yes. On the current quarter, I think October has been a positive month from a sales perspective, in line guiding -- to achieving the year-end guidance. I would also underline that we have negative ForEx, which now is getting closer to 3% probably for quarter 4. And then we have this tough comparison with last year where we grew about 12%. But happy about sell-in.

Sell-out, I would say that, yes, we're still confident to -- again, we're very confident in achieving the guidance for the year. It's a bit too early to -- I think the fall will -- we can get more visibility after probably November. But we feel comfortable about achieving the quarter 4 guidance.

In terms of margins, Nicola, you want to handle this?

[Nicola Serafin, executive]

I would say that this quarter -- okay, in terms of growth, obviously, it has a strong comparison with the high growth that we had last year. So in terms of margin, what is mainly affecting and incorporating the guidance is a bit of extra advertising investments compared with last year as we are pushing a bit of investments on the Perfetto 3.0 campaign. Obviously, it's incorporated in the guidance a bit of the effect of the tariffs in the U.S. because as Fabio has mentioned before, there is a bit of price pressure on the promo, in particular on NutriBullet coming also to your third question, Natasha.

And so there -- we are expecting a bit of more net effect of tariffs in the fourth quarter than it has been in the third quarter. And about NutriBullet, definitely, the international growth of NutriBullet is progressing, but it's not enough to offset the negative impact as of today in the U.S. NutriBullet was sitting on a great growth, robust double-digit growth last year. And we are -- let's say, we are a bit going back on this growth this year. And mostly, this has been driven by the segment softening of the market impacted by the initial price increase that most of players have put in the market. But now it has been pulled away from -- in particular, from the promotion of the Black Friday. So let's see in the next weeks how the market will react also to this situation.

[Operator]

Next question is from Gianluca Pediconi from MOMentum Alternative Investments.

[Gianluca Pediconi, analyst]

I have just a quick question, which comes from how confident and happy Fabio was about the performance of Professional Coffee. And the question is, have you come up with any further thought that obviously you can share with us on how and when to unlock the true value of this business?

[Fabio De’Longhi, executive]

Gianluca, thank you for the questions. No, very happy about the performance of the Professional division. We've been working very hard for -- in the last years to create this division. I'm super proud of the quality of our brands and the superiority of our products. And this year is putting really under the spotlight the incredible potential of the division. So really super happy. I think that in a way, also this exceeded our expectations.

But then rationally, I think that looking into the opportunity offered by the Home segment for La Marzocco and the opportunity that we have with Eversys, which through -- its range and its products can really elevate the quality of espresso and cappuccino and capture also opportunities in the cold segment will offer many chains, the opportunity to upgrade their equipment. We see the penetration in the U.S. despite all the concerns about the U.S. market and the weakness that we've seen in the U.S., the result is brilliant. And therefore, we think that we will continue to perform well with our division. And the visibility for the remainder of the year also is suggesting this.

The second question, thank you for the tricky question. But it's an incredible opportunity. When we combine the businesses with De'Longhi, it is because we like to be global players. At the same time, there was an agreement with the partners and shareholders to have an exit for them. And that was clearly stated also in our PR and in our communication that going public was an opportunity. We think that at the moment, that's the plan. It's not in the short term. But also, we have to really consider from a holistic point of view, what's best for all the shareholders.

And for the moment, it's a bit too early to say. We can be open to several options. I would say that the important is that both divisions performed very well for the moment. I'm very glad with this. And fundamentals and the business perspectives are more important than, let's say, financial aspects. However, we think that we certainly have an opportunity to exploit better the potential -- thanks -- the fact that the Professional division tend to have a much higher multiple and La Marzocco and Eversys due to their margin profile and growth profile should also have premium multiples compared to the Professional peers. And I would like really to -- I mean, the shareholders of the group to benefit from -- fully benefit from the potential offered by our businesses.

[Gianluca Pediconi, analyst]

I have just a quick follow-up because I know there were some M&A deal -- private deal in the Professional Coffee business. Can you just confirm if you heard that they were in the mid-teens in terms of EV to EBITDA, so say, 15, 17 and even more times?

[Fabio De’Longhi, executive]

Marzocco acquisitions.

[Nicola Serafin, executive]

No, no, no. Other deal in the industry, yes, in the Professional Coffee business.

[Fabio De’Longhi, executive]

Yes, yes. Yes. If we look back, probably the largest M&A transaction was WMF, which also was including a major portion of cookware and that was a deal that, yes, probably a multiple which was above 15% for the Professional business and a low single multiple for the cookware division. But -- and very often, yes, I think also Wilbur Curtis for SEB was in that range and many other deals. Yes. Also Lelit was acquired by Braville at a similar multiple.

[Nicola Serafin, executive]

Yes, I can confirm it.

[Operator]

The next question is from Alessandro Cecchini of Equita.

[Alessandro Cecchini, analyst]

The first one is on Nutrition business. So you expect for 2026 to return to growth of the division. Can you elaborate a little bit more on potential new products, new categories, new activation in order to support, I mean, the return to growth. So I know that personal blender, you are leaders, et cetera, kitchen machines. But maybe just if you can share if you are planning to broad or to enlarge the category also from a product point of view? This is my first question.

The second question is instead on logistic costs. This year, you are highlighting that there is some headwinds, I believe, also due to some negotiation that at the beginning of the year. So just if you can elaborate a little bit more if you can spend for the next year, I mean, some costs to -- maybe to slow down a little bit, also consider plastic, et cetera, could be helpful.

And finally, my understanding is that in this context, M&A activity is so not sparkling. So targets -- like the targets that you follow probably are not for sale or it's not the right moment to buy. So you made already extra dividend. So I go to the point. So why not buyback are you considering given the valuation of the stock?

[Fabio De’Longhi, executive]

Okay. So maybe I can handle the third question first. And then I -- yes, I give the word to Nicola. We'll get back to you on Nutrition U.S. and the cost and the logistic costs. No. On M&A, yes, we are always chasing opportunities. For the moment, there is nothing that will be announced shortly. And so our priority will go to improve our capital allocation through buybacks and extra dividends. Yes, so I don't rule out that you might see in the future more buybacks.

I think that there will be -- first of all, it's the cheapest acquisition we can make, maybe with no synergy, but definitely a cheap acquisition. At the same time, has been highly appreciated in the -- from the market because helps creating more liquidity, can be counterintuitive because we are just slightly reducing our free float, which now is around 46%, but it's creating more volumes traded on a daily basis. So that might potentially bring us to new indexes.

Indexation is becoming a very important element for fund managers, and we think that we have to take this in consideration and try to more relevant as a company under that perspective. Alternatively, yes, paying back dividends to our shareholders will continue to be a tool that will be used. But as I said, no M&A in the short term, but you can trust that we keep working on M&A opportunities, and that is strategically our first option always. I think...

[Nicola Serafin, executive]

Something about the Nutrition business and why we are confident on 2026 to be back on growth. So definitely, we are -- we have a robust plan of -- on the international expansion of NutriBullet. So this is definitely a growth driver that will continue on 2026. But obviously, this year, as I mentioned before, it was a bit offset by the declining in the U.S., where we are confident that the pipeline of products that we have just launched or in the launch phase in the next few months will reboost growth also in the U.S.

We have just launched -- we had an important launch of portable blenders that has happened just this month and next year will be there for all year is an important segment still growing where we were not fully present with a full range. And then we have also a launch on full-size blenders, where that is still an underrated segment for NutriBullet where definitely in blending NutriBullet has a ring potential.

So this is -- and on top of this, we have also a product that will come along next year, probably in the second part of the year in frozen preparation ice cream making. So this is a bit of the plan for Nutrition in the U.S. and beyond. And on top of this, another growth driver that is there, and we do not mention as much is the performance of Ironing where we have a robust double-digit growth for the second year in a row, and this is something that will progress also next year as we have a robust pipeline of innovation coming in the market.

About logistic costs, there is softening a bit the freight, but what we are experiencing now is the road transportation is definitely increasing, warehousing costs are increasing. There is a lot of pressure also because of, in general, retailer behavior, there is a bit of concentration of orders along the promotional events where, let's say, distribution is becoming a bit crowded and there is an extra cost that is going there, and we are experiencing a bit of logistic cost headwinds. I wouldn't say that in raw materials, I see headwinds. It's too early to say if there will be tailwinds, but something can be there.

[Alessandro Cecchini, analyst]

Okay. And finally, it's on -- just to go to historical performance of the -- it's a small business, but air conditioning is probably second year, 2 years of negative business. So it's -- the rule of thumb is 2 negative, 1 good. So next year could be some, I mean, restocking by clients. It's correct my interpretation that given the bad weather condition on 2024.

[Nicola Serafin, executive]

I would say that last year was negative. This year was still low, let's say, not positive. We are ready to capture opportunity. Are we ready to overinvest because it's a seasonal product that can have also a lot of inventory risks, but we are ready to capture opportunities if they will be there.

[Operator]

The next question is from Andrea Bonfa of Banca Akros.

[Andrea Bonfa, analyst]

Most of my questions have been already answered. So I got a curiosity on the Professional. Will -- sorry, when the new products that you presented to us with Eversys will contribute to your revenues? Is that from Q4 or from '26?

And the second one, if you can give us some more color on the top line performance of the 2 brands, Eversys and La Marzocco.

[Fabio De’Longhi, executive]

Sorry, what do you mean by color on the 2 brands? I mean, more on the sales side or on the marketing?

[Andrea Bonfa, analyst]

On the sales side, and if you can remind us what's the EBITDA margin combined. You mentioned 26% in the first half, but with a 40% like-for-like increase might be higher now, I don't know.

[Fabio De’Longhi, executive]

Okay. So with regard to the Professional, the launch, it will be legacy. Legacy is a product that will allow the group to enter in a price band where the group is not playing yet at the moment. So this is highly potential. I think that you will probably see that we will fully exploit this product probably in 3 years. I think that also given the experience we had in the past, all new product introductions must be done very, very slowly and carefully. These are high performance products, which need to properly work if any issue may arise may result in a major drawback from customers. Therefore, next year would be just the beginning, I would say, in 3 years, we will reach full potential.

It can become potentially even the most meaningful product line for Eversys because it's entering a segment where we are not present. We'll probably open the doors also to Germany, which is a market where Eversys is underperforming and which is probably -- is the largest fully automatic coffee machine -- Professional Coffee machine market and also the most aggressive in terms of price positioning. So we opened the door in a new segment in potentially new markets, and this can, in the midterm become the most relevant, most important product line for La Marzocco -- for Eversys.

I would also highlight that this product is also aimed to have more versatility. We mentioned cold and matcha. So you will see that we are starting from -- capitalize from the results of the developments of the venture with [indiscernible], which in the end didn't result in a product extension, active product extension, but is resulting in know-how that we can now start capitalizing on our existing products.

For La Marzocco, La Marzocco, I would say that the incredible opportunity with the existing range. We're going to launch also extension in the grinding business, which is small to us, but it is new. And then also innovation will be with the extension of the Strada and upper-end Professional equipment. Major, major business growth to capture with the Home line, although you don't have to expect new launches in the short term, but just capitalizing on the existing range, which is performing extremely well. For margins, margins above 25%. So given the volumes, slightly above 25% very, very healthy margins.

[Operator]

The next question is from Luca Bacoccoli from Intesa Sanpaolo.

[Luca Bacoccoli, analyst]

Can you hear me?

[Nicola Serafin, executive]

Yes.

[Luca Bacoccoli, analyst]

Okay. Good. So a few questions from my side. The first one is a follow-up on the profitability of the Professional and the Household. You said that the EBITDA margin is very healthy, above 25%. So I was wondering what is the EBITDA margin trending in the third quarter for the Household division on a stand-alone basis?

Then the other question is on tariffs. If you can please refresh your guidance on what should we expect the headwind from tariffs in 2026?

And then on the nutrition in the U.S., it seems that there's a strong elasticity to the pricing in this category and you are promoting the products in order to sustain the volume. So what should we expect in 2026 on this side? I mean, can the carryover effect of the price increase this year being fully offset by the promotional activity?

And finally, on the free cash flow generation last year in the fourth quarter, the free cash flow generation was really amazing, close to EUR 400 million. You mentioned in the press release some normalization of the inventory level in that part of this year. So the straight question is, can the EUR 400 million free cash flow generation in last year being replicated in 2025?

[Fabio De’Longhi, executive]

Okay. Okay. Luca. So the first question is about the Professional division.

[Luca Bacoccoli, analyst]

Right.

[Fabio De’Longhi, executive]

Yes. The Household, I would say that you should expect for the remainder of the year, the profitability to fairly in line with last year for the Household division.

With regards to Professional, we said before, it would be north of 25%. So very strong contribution from the Professional division.

With regard to the tariffs, EUR 15 million for this year, maybe I would say we gave a guidance of 0 for next year. Maybe there is some carryover, but would be very, very small. The issue is probably what you mentioned is about the promotional initiatives. I would say that probably we will have some margin compression due to the tariff impact on the lower pricing, but we're going to have probably positive volumes. So all in all, I don't expect a major change in the absolute term contribution. But we will probably be more keen on having more volumes and maybe at a slightly lower margin, but still with accretive margins for the group.

First question on free cash flow. We expect a strong -- I'm not sure we had a EUR 400 million cash flow next year. Maybe Samuele can check it. But I think that we should expect between EUR 250 million and EUR 300 million cash flow for the year, which will materialize almost entirely in the last 3 months. Why? Why? Because if you recall, we had excess inventory in 2022. And basically, that absorbed the cash and the normalization of the inventories resulted in creating -- generating extra cash in the following 2 years.

So last year was still benefiting from this normalization of inventories. This year, we had a different curve. The curve went higher. We had more inventories also to anticipation to the U.S. in the peak. So we expect to -- probably this has pushed back a bit the cash generation to the last quarter. And we expect to have a generation not dissimilar from the one that you have seen in the last quarter of the year -- of last year.

[Operator]

The next question is from Francesco Brilli of Intermonte.

[Francesco Brilli, analyst]

Can you hear me?

[Fabio De’Longhi, executive]

Yes, we can.

[Francesco Brilli, analyst]

A lot of answered already made. Just a quick one on -- going back to the answer and the efforts on the valorization of Professional business. Within this context, you mentioned that the Home and Professional on La Marzocco has a huge potential and wide room to grow. In the case of valorization of the Professional, should we imagine this segment still within the Professional perimeter or should be -- should flow within the Household?

[Fabio De’Longhi, executive]

Yes. I mean it's part of the core range of La Marzocco. Those are products that are sold directly from La Marzocco going the homes, but our Professional equipment to the full extent. And in some cases, those products also are used by the Professionals. In particular, Linea Mini goes in restaurants, small restaurants, small cars, small coffee bars across the world.

[Operator]

[Operator Instructions]

Fabio de' Longhi, there are no more questions registered at this time.

[Fabio De’Longhi, executive]

So as there are no more questions, I want to thank you all for attending the third quarterly De'Longhi results. Thank you.

[Operator]

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