Earnings call transcript: Ariston Holding NV sees EPS growth in Q2 2025

Ariston Holding NV reported its second-quarter financial results for 2025, showcasing a solid performance with revenues reaching €644 million, a 5.2% increase year-over-year. The company also achieved an earnings per share (EPS) of €0.0431, aligning with market expectations. According to InvestingPro data, the company maintains a "GOOD" overall financial health score of 2.57, with particularly strong marks in growth and profitability. Despite the positive earnings report, Ariston’s stock experienced a decline of 4.12% in the open market, closing at €4.75, though current analysis suggests the stock may be undervalued based on InvestingPro’s Fair Value model.

Key Takeaways

• Ariston’s Q2 revenue grew by 5.2% year-over-year, driven by organic growth and strategic acquisitions.
• The company’s adjusted EBIT margin improved by 50 basis points, reaching 4.8%.
• Despite positive earnings, Ariston’s stock fell by 4.12% post-earnings.
• Strategic joint ventures and acquisitions continue to bolster Ariston’s market position.

Company Performance

Ariston Holding NV demonstrated robust performance in the second quarter of 2025, with revenues increasing by 5.2% year-over-year to €644 million. The company’s organic growth was recorded at 3.6% for the quarter and 3% for the first half of 2025. Ariston’s strategic focus on innovation and market expansion, particularly in the North American water heating market, contributed to its positive performance.

Financial Highlights

• Revenue: €644 million, up 5.2% year-over-year
• Adjusted EBIT: €31 million, up 13.9% year-over-year
• Adjusted EBIT Margin: 4.8%, an increase of 50 basis points
• Free Cash Flow: €3 million, compared to €27 million in the previous year

Market Reaction

Despite meeting earnings expectations, Ariston’s stock price declined by 4.12% following the earnings announcement, closing at €4.75. This movement places the stock closer to its 52-week low of €3.09, indicating a cautious market sentiment. The decline may be attributed to the company’s increased net debt and lower free cash flow compared to the previous year.

Outlook & Guidance

Ariston maintains a positive outlook for the remainder of 2025, with a net revenue organic growth guidance of 1-3% and an adjusted EBIT margin expected to exceed 7%. The company plans to continue its strategic focus on bolt-on acquisitions and market expansion, particularly in North America. Ariston is also preparing for the launch of its product lineup through the Lennox joint venture in 2026.

Executive Commentary

CEO Maurizio Bruzzalelli expressed satisfaction with the company’s progress, stating, "We are happy with the development of the first two quarters, which marked a return to positive organic growth." He emphasized the relevance of both fossil and renewable technologies in the company’s strategy, adding, "The technologies of both fossil and renewables will continue to stay very relevant in the next many years."

Risks and Challenges

• Increased net debt: Ariston’s net debt rose by €75 million in the first half of 2025, which could impact financial flexibility.
• Volatility in the German heating market: While the heat pump market is growing, the decline in the gas/oil boiler market may pose challenges.
• Free cash flow reduction: A significant drop in free cash flow compared to the previous year may concern investors.

Q&A

During the earnings call, analysts inquired about the expected margin improvement in the upcoming quarters and the impact of raw material costs. The management highlighted margin acceleration in Q2 and Q3 and noted a neutral impact from raw material costs. Concerns about market recovery in France were also addressed, with the company remaining cautious yet optimistic.

Ariston’s strategic initiatives and market expansion efforts continue to position the company as a leader in the heating and water heating sectors, despite facing some financial and market challenges.

Full transcript - Ariston Holding NV (ARIS) Q2 2025:

Conference Operator: afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining Houston’s Second Quarter and First Half twenty twenty five Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.

At this time, I would like to turn the conference over to the company manager. Please go ahead.

Albert Pozzi, Chief Marketing, Sustainability and Investor Relations Officer, Ariston Group: Good afternoon, and welcome to Hariston Group’s second quarter and first half twenty twenty five results call. I’m Albert Pozzi, Chief Marketing, Sustainability and Investor Relations Officer. Joining me today are Maurizio Bruzzalelli, our Chief Executive Officer and Riccardo Gini, our Chief Financial Officer. This presentation will last about twenty five minutes, after which we will open the floor for

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: questions. As a reminder, for those joining by phone, the slide deck is available on our Investor Relations website. I will now hand the call over to Maurizio. Thank you, Albert, and good afternoon, everyone. So let’s begin with a brief overview of our second quarter results on Page three.

In Q2, we continued to deliver a positive trend year on year, in line with our plans. Our top line grew 3.6% organically. Heating showed signs of improvement, particularly thanks to the continued momentum in heat pumps, while water heating remained stable. We improved margin year on year by 50 basis points in quarter two, thanks to the operating leverage and the Fit to Win program, which we had previously communicated to the market. The Fit to Win program is enhancing the effectiveness of our organization.

At the same time, we accelerated investment in go to market, digital, R and D initiatives to continuously improve our offering and level of service to support organic growth. Once again, we maintained a strong focus on working capital management, resulting in a stable net working capital incidence on revenues at constant perimeter. This is reversing the typical quarter two upward trend of a normal year. Thanks to this disciplined approach, we improved F1 free cash flow generation year on year despite higher level of CapEx investments. I look forward to commenting on the next slide about the signing of the JV with Lennox.

This is a unique opportunity to accelerate our penetration in North America, water heating markets in the next years. We continue to pursue our inorganic agenda from transformational to bolt on deals. And I will also comment about the two bolt on acquisitions completed in F1 to support the development of the Components division. To conclude the introduction, we are happy with the development of the business if enough one. Even so, some core markets are still stabilizing and the global geographical landscape remains complex.

For these reasons, we confirm our net revenue guidelines with a narrowed range, and we continue to confirm our mid term outlook. If I now move to Slide four. As you know, in May, we signed a strategic partnership with Lennox. So let me share a little bit the rationale behind the JV. U.

S. Is the largest water heating market globally with a very rich product mix. Based on the current regulation framework starting in 2029, there will be a progressive transition of electric water heaters above 35 gallons toward water heating heat pumps technology. Ariston Group and Lennox have very complementary assets, both companies stand to benefit from this partnership. For us, we are a global leader in water heating, offering a distinctive range of high quality electric, gas and water heating heat pump technologies.

Lennox is a leading HVAC player with high reputation for innovation, quality and its extensive network of distributors and dealers will complement its portfolio and accelerate Ariston’s ability to reach new installers across North America. The products will be manufactured in our plant in Mexico, improving the facility’s utilization. We are currently preparing the product lineup for a launch in 2026, and obviously, it will take one more year to start seeing meaningful developments. Now on Page five, as you know, we had some new news. Inorganic growth continues to be a top priority for us.

We work on a wide range of opportunities from transformational deals such as the acquisition of Wolf Brink completed in 2023, to smaller bolt on acquisition, provided they offer a strong strategic rationale. Here, you can see the example of two bolt on acquisition completed in F1, with a strong strategic rationale to support the growth of our components division. In the 2025, we signed the acquisition of DDR Heating, which provides access to The U. S. Component market.

TDR specializes in tubular electric heater for both professional and industrial application. In the second quarter, we completed the acquisition of ZRE in Italy. ZRE gives access to new industrial component market verticals, plastics, packaging and medical sectors. Now on Slide six. A quick reminder on who we are.

Ariston Group offers thermal comfort solution with a balanced exposure to water heating and climate comfort. Water heating on the right is a resilient business and our main business outside Europe. It benefits from our presence in markets with growing population and still low but rising penetration of water heating solutions. On the left, you see climate comfort, which includes heating, service and parts, ventilation and handling. In the heating business, our portfolio covers a wide range of technologies, from gas boiler to heat pumps, hybrids and other heating systems.

We offer a comprehensive range of high efficiency and renewable solution to enable the energy transition. Finally, our Components and Burners division complete our business lines, each accounting for 3% of total group turnover. On Slide seven, we provide our regular update of the German heating market, our largest market counting for around 20% of group revenues in 2024. Historically, the German heating market grew by 4% in volume over the ten year period from 2013 to 2022, with an enriching product mix toward high efficiency and renewable solutions. 2023 was an exceptional year, driven by incentives and concerns over a potential gas boiler ban in 2024, which ultimately did not materialize.

2024 market was affected by demand normalization, coupled with channel destocking and some regulatory uncertainty. In 2025, the market is stabilizing but remains in a negative territory year to date. Heat pumps have returned to strong growth, supported by a good incentive scheme with quarterly average application of approximately 20,000 per month. Poland market is still weak. Now let’s pass to Ricardo that will walk you through our Q2 financial performance.

Riccardo Gini, Chief Financial Officer, Ariston Group: Thank you, Maurizio. Let’s begin with Slide nine, which shows the year on year evolution on net revenues. Please excluded from the 2024 consolidation perimeter and was reconsolidated as of March 2025. For reporting purposes, the impact is treated as an M and A contribution. In Q2, revenues increased by 5.2% year on year, reaching €644,000,000 This growth was primarily fueled by the organic expansion of 3.6%, underpinned by the steady recovery of the heating market.

Notably, Europe returned to growth, while The Americas sustained the positive momentum that began in Q1. Meanwhile, the water heating segment maintained a stable performance across all regions, providing a solid foundation as we continue to capitalize on market opportunities across all our geographies. Our Service and Parts division continued its growth trajectory, in line with the pace seen in Q1. As expected, given the current geopolitical context, global currency volatility had a significant impact this quarter with foreign exchange effects playing a meaningful role in our results, minus 1.6% compared to minus 0.3% in Q1, with major headwinds from the Mexican peso, The U. S.

Dollar and several Asia Pacific currencies. Final comment on the perimeter variation, which contributed 3.2 percentage points to our growth in the quarter. The main driver was the reconsolidation of the Russian business, along with the two bolt on acquisitions in our Components division, which Maurizio covered earlier in the presentation. Summing up Q1 and Q2. In the first half of the year, we achieved organic growth of 3%, in line with our guidance.

Foreign exchange had a negative impact of 0.9%, while the Russia business and the two bolt on acquisitions contributed 1.6 percentage point for a total growth of 3.7%. Moving on to Slide 10. Here, you can see the evolution of our net revenues by geography, which continues the trend observed in the first quarter. Let me remind you that in 2024 figures, Russia was excluded starting from end April, while in 2025, was reincluded starting from end March. We are pleased to report organic growth across all three regions, with Asia Pacific and Middle East, Africa and The Americas growing at a mid single digit rate in the second quarter.

In addition, our business divisions delivered solid performances in Q2, as detailed in the appendix, with the partners and components divisions combined together achieving a plus 2% organic year on year increase. In Europe, net revenues reached EUR $471,000,000, marking a 3.2% year on year increase when excluding Russia. This performance reflects the ongoing market stabilization in our top three countries, coupled with solid growth across several other geographies. Notably, demand for heating heat pumps continued to rise steadily throughout the quarter, further supporting the region’s overall positive trajectory. In both Asia Pacific, Middle East, Africa and The Americas, revenue trends followed a similar pattern.

Reported figures were slightly down year on year, primarily due to unfavorable foreign exchange movements. When adjusted for these currency effects, both regions would have delivered solid mid single digit growth, reflecting healthy underlying business performance. Moving further ahead into the P and L. The Slide 11 highlights our adjusted EBIT performance. In the second quarter, adjusted EBIT rose by 13.9% year on year to €31,000,000 accompanied by a 50 basis point improvement in margin, which reached 4.8%.

This performance was primarily driven by initiatives and supported by moderate operating leverage. These positive effects were partially offset by an acceleration of strategic investments in go to market initiatives, digital transformation and R and D. For context, reported EBIT in Q2 was EUR 61,000,000. The main adjustments totaling a net negative impact towards the adjusted EBITDA included EUR 40,000,000 from the reconsolidation of the Russian subsidiary and EUR 5,000,000 related to the purchase price allocation amortization from past acquisitions. As a result, reported EBIT is higher than adjusted EBIT, which excludes these one off and nonoperational items.

As a reminder, our adjusted EBIT historically shows a seasonal pattern with an average distribution of approximately 30% in the first half and 70% in the second half of the year, as shown in the chart at the bottom right. Turning to Slide 12. Let’s take a look at our free cash flow performance. In the second quarter, free cash flow was positive at EUR 3,000,000. Although lower than the EUR 27,000,000 recorded in the same quarter last year, this represents a clear improvement in the first half performance with cash absorption narrowing to EUR 40,000,000 compared to EUR 24,000,000 in the 2024.

As a reminder, as shown in the appendix on Slide 33, Q1 and Q2 are typically the weakest quarters for cash generation due to seasonal effects. This performance was mainly driven by our continued discipline in working capital management, with the working capital to sale ratio improving by three percentage points year over year and remaining stable quarter on quarter versus the end of Q1 at constant perimeter. The contribution from the Russian subsidiary and the two bolt on acquisitions is highlighted on the chart on the right hand side of the slide, marked by the gray bar. For more details on the main drivers, please refer to the rough year cash flow statement in the appendix. Further items affecting the second quarter include CapEx, which increased by €4,500,000 reaching €22,800,000 in line with our guidance a negative contribution of €48,000,000 from provision and other operating changes due to the Russia reconsolidation effect and paid taxes, which were flat year over year.

On Slide number 13, you’ll find an overview of the movements in our adjusted net debt during the first half. As shown in the previous slide, free cash flow contributed negatively by EUR 14,000,000 in the first half. We also recorded EUR 14,000,000 cash outflow for acquisitions, primarily related to the DDR, The U. S. Acquisition for components announced in March, the acquisition of an 80% stake in ZRE in Italy as well as some additional minority stake investments.

Other movements included EUR 16,000,000 cash outflow for financial and FX charges, euros 29,000,000 for the distribution of payment to shareholders and around €1,000,000 in noncash positive adjustments. These noncash items mainly consist of negative 2,000,000 mark to market derivatives impact, plus €3,700,000 in interest accruals, plus €4,200,000 from IFRS 16 lease liability adjustments and minus €6,800,000 impact from FX variations on net financial indebtedness. The net debt increase in the first half of the year was lower than in the same period last year. So EUR 75,000,000 compared to EUR 113,000,000, 130,000,000 in the 2024. It’s worth highlighting that excluding 43,000,000 of cash outflows related to capital allocations, namely distribution to shareholders and M and A, the cash absorption from business operations and financial management was limited.

Slide number 14 offers a detailed breakdown of our net financial indebtedness. I can confirm that Q2 showed no significant developments compared to year end twenty twenty four. The liquidity position decreased slightly to €221,000,000 primarily due to early repayment of 50,000,000 of medium to long term variable rate debt completed in the first quarter, a strategic move to optimize our debt structure and reduce interest rate exposure. Other key financial indicators remained largely stable compared to the first quarter with the exception of a slight reduction in debt duration to three point two years from four years at the March 2025. Meanwhile, our maturity profile and the share of fixed rate debt held steady, reflecting our continued commitment to discipline and prudent financial management.

With that, I’ll now hand the call over to Maurizio, who will conclude the presentation by sharing our guidance and outlook. Thank you, Ricardo. So we

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: are on Page 16. To summarize, we are happy with the development of the first two quarters, which marked a return to positive organic growth. We are focused on delivering our twenty twenty five objectives while also building a more effective organization and investing where it matters most to maintain and strengthen our leading role in the future. We confirm our expectation for 2025. And given the progress of half one, we have decided to narrow our 2025 net revenue organic growth guidance from between 03% organic growth to between 13% organic growth.

We observed that analyst consensus has already anticipated it, and we feel consensus is a good indication of full year expectations. Turning to profitability. Expectation of an adjusted EBIT margin in the seven plus percent range, supported by the Fit to Win efficiency program and additional direct cost saving initiatives that are already well underway. We want to balance year on year profitability improvement with continued investment to sustain mid- to long term growth. Cash flow generation is typically concentrated in Q4, in line with our historical seasonality.

And regarding CapEx, we confirm our guidance of 56% of net revenue for 2025, which is above the historical levels. As mentioned at the beginning of the call, we actively work on assessing strategic bolt on M and A opportunity with strong strategic rationale. As far as regards tariffs and evolution of the geopolitical context, we are closely following the developments, as I’m sure you all are. Our guideline reflects the current known situation and does not factor in second order effects on GDP and demand that may arise from current or future tariff related developments across our key markets. Thank you for your attention now to you, Albert, to manage Q and A.

Albert Pozzi, Chief Marketing, Sustainability and Investor Relations Officer, Ariston Group: Thank you, Maurizio. We are now available for questions. To make sure that everyone gets the chance to speak, we kindly ask to limit your question to maximum two per turn. Operator, I give you the line.

Conference Operator: This is the Carskor conference operator. We will now begin the question and answer session. The first question is from Vivek Murda from Citi. Please go ahead.

Vivek Murda, Analyst, Citi: Thank you very much everyone and good afternoon. I have two questions, if I may. The first is around the guidance in particular on margins. You’re continuing to guide for 7% plus adjusted EBIT margin. Clearly, the business is very seasonal.

But if we just look on the year on year trends, this appears to slow somewhat in Q2 with 50 bps up year on year. So you need some acceleration in the margin momentum year on year to get towards that margin guidance. How should we think about how that’s likely to progress over the course of this year?

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: You, Vivek, and good afternoon to you. Yes, I mean, as you rightly said, we need to accelerate our progression in Q3 and Q4. This is something that historically happened for the company. So we are confident about the ability to increase our profit in Q3 and Q4 to reach the guidance of 7% plus, as said in the guidance.

Vivek Murda, Analyst, Citi: Understood. Just to follow-up on that then. So what is driving the faster year on year increase that you expect? Is it that those the impact of those investments gets diminished as you have the higher top line, so you can accelerate more. But what is it that gives you the confidence that the margins on a year on year basis should start to improve by more in Q3, Q4?

Of course, there’s a seasonal impact in general sequentially leading to that upturn. But in terms of year on year development, still interesting. Yes.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: I mean there is a seasonality, as you said. And obviously, we have our cost saving programs that are kicking in properly in F1. We invested also a little bit more in F1 since we stopped some of our investment in F2 last year. So we have a little bit of front loading investments. Overall, all of this is I repeat, we are confident on the seven plus that we have to reach full year.

Vivek Murda, Analyst, Citi: That’s helpful. Thank you very much. And my second question is around the German heating market particularly on boilers. As we’ve seen the heat pump market recover, boilers remain very weak reflecting that shadow effect from the strong growth before you highlighted. So how do you think about the potential for any kind of upturn on the boiler side?

Are there any data points that you’re tracking on that? Yes.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: I mean, obviously, we saw that the German heating market was very positive for heating heat pump in half ’1, and we continue to remain bullish

Sedar Ekblom, Analyst, Morgan Stanley: on

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: the development of heat pumps in half two as well. As far as gas and oil boilers, obviously, the dynamics are different because also last year, I mean, Q1 was stronger. And obviously, we are ready to capture any opportunity on the German market if we will see a more positive development of gas boiler. We are doing better than the market overall there. So it’s difficult to predict what the market will do.

I mean you saw that in our slide, we put a plusminus on the range of the total market in terms of volume. But I will say that we are well positioned. The team is doing a great job in Germany. We have a strong reputation. We play in the mid to high part of the market with very strong equipment.

So like you, I wish the market will do better. And if the market will do better, obviously, we will do better as well.

Vivek Murda, Analyst, Citi: Understood. Thank you very much for your time.

Conference Operator: The next question is from Sedar Ekblom from Morgan Stanley. Please go ahead.

Sedar Ekblom, Analyst, Morgan Stanley: Thanks very much. Hi, gentlemen. Just a follow-up on your top line outlook. I’m surprised that you’re not more positive in terms of the organic growth potential considering you’re already delivering to the top end of the organic range in the first half and the comps are definitely not getting harder in the second half of the year, particularly in some of the Northern European markets where we would have seen weak volumes and destocking in the 2024. So could you just talk a little bit about why you are not more optimistic?

Is this a case of you’re very pessimistic on the outlook for gas boilers? Or is it just being conservative for conservatism sake? I don’t really understand how we don’t have a better H1 and H2. And then can you just talk a little bit about the balance sheet? I see that there were some changes to the sort of definition of net debt.

Just talk a little bit about what has happened there and if those changes are cash linked or simply a balance sheet impact. Thank

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: you for your question. I mean, as you know, our half one was very strong and positive in terms of organic growth. Now the context and the global market situation is not an easy one. We see a lot of volatility, uncertainty. We see the consumer confidence that is moving in different directions globally.

So we feel that keeping the range between one and three is correct, and we are confident to be within this range. And then let’s see month after month and quarter after quarter where we are, and we are ready to give a further update when we will discuss Q3 actuals. Now

Conference Operator: Can I maybe just

Sedar Ekblom, Analyst, Morgan Stanley: ask a Sorry? Would you be willing to comment on what organic growth looks like in July? Has it actually slowed relative to that three percent that you delivered in the first half and the 3.6% in the second quarter? Or has it accelerated? Because I think that would also give us a little bit of help in terms of understanding the longevity of the cycle improvement that you’re seeing.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: Yes. We don’t comment normally monthly development. I mean what we can say that what we can see in terms of orders and delivery is that July is in line with our expectation and continue to be a positive evolution as F1. So we are okay on what we see in July versus what we expected. Maybe on your second question, I don’t I mean, we didn’t change anything on balance sheet.

Maybe I will ask Ricardo to give you some details and maybe you can ask us what you think we did, but I don’t think we changed anything.

Riccardo Gini, Chief Financial Officer, Ariston Group: Yes. I mean the we only reconsolidated the main difference compared to the end of Q1 from a balance sheet perspective is the reconsolidation of the Russian subsidiary. Other than that, there are no other significant changes. I mean that’s pretty much consistent with the P and L performance on our side. And on the other hand, with our net working capital management, as we indicated earlier, which continue to be, we believe, under control and with a good performance, keeping in mind that the additions that we got during the quarter, namely, again, the Russian subsidiary as well as the two bolt on acquisitions, are actually dilutive, as you might have seen during the presentation.

So those three will likely represent an opportunity for the future. But other than that, there are no other major differences in the balance sheet compared to the end of the first quarter.

Conference Operator: The next question is from Christian Hinderacker of Goldman Sachs. Please go ahead.

Christian Hinderacker, Analyst, Goldman Sachs: Yes, good afternoon, gentlemen. My first question is on dynamics across new building and refurbishment or replacement markets. I appreciate your majority in the replacement setting. But maybe you can talk a little bit about what you’re seeing in the new build environment, particularly in Europe and, I guess, the three key countries.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: Yes. Thank you, Christian. As you said, we are mainly residential and replacement and the majority of the market is in this way. I think from a newbuilding perspective, obviously, the situation is different country by country. We see a slightly recover also on that part of the business.

This will not change completely the situation. But as I said, always said that the new buildings are the cherry on the cake and the majority for us is the replacement business. So some recovery versus last year in new buildings, particularly in some geographies, but overall, nothing surprisingly positive.

Christian Hinderacker, Analyst, Goldman Sachs: Thank you. And maybe just on mix. You’ve talked to being in the mid to high range in terms of your premium positioning on products. If we think about the different specification levels across that range or within a given product category, should we think of there being a margin mix benefit as you sell higher specification ranges? Or is your strategy to sell or rather price your items such that you have a consistent margin across that range?

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: Yes. I mean, as I probably said many times in the past, we are pretty balanced between heating and water heating. And within heating across the different technologies in terms of percentage margin. Obviously, when you sell heating heat pump, the absolute value is much higher of a water heater of 10 liters. So even if the percentage is the same, the absolute is higher.

So we are well positioned, happy, and we just need the market to continue to see and give us signs of recovery, and then the rest will come naturally.

Christian Hinderacker, Analyst, Goldman Sachs: The

Conference Operator: next question is from Alessandro Cecchini of Equita. First

Alessandro Cecchini, Analyst, Equita: of all, actually, it’s on the German market. Your competitor, I mean, U. S. Competitors are with that both German player said that the first half was in term of units was minus 20%, so in Germany. So a very strong decrease largely due to, of course, gas boilers.

So just to understand, it’s quite in units, it’s quite a material downturn. So do you think that is feasible? Or I mean, the German population are wait and see mood and then to restart because actually if you combine the two technologies minus double digit, it’s quite strong. And conversely, your performance was much better if we see your results. So if you can elaborate a little bit more on these, this is my first question.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: Thank you, Alessandro. Yes, obviously, as you rightly said, I mean, the data are public and the market of heating heat pump is growing strongly, 55%, but the gas and oil are decreasing with an overall heating negative a little bit more than 20%. So, with the park that we see in Germany, this number is low. So we would expect the market to continue to develop between the second half and obviously in 2026. And this to go back to the historical total volume level that we saw before the famous kind of acceleration and deceleration of the last, let’s say, three years.

Yes, we are doing better than the market. So we are happy about our performance in Germany. I said before that the team there is doing a great job. We have a strong sales and after sales team. So let’s really hope altogether that the market will recover sooner rather than later and then we will continue to enjoy it.

But you are right, it’s surprisingly low or versus the historical level as well. And again, we know that the government is thinking to new solution in the future and maybe some consumers are waiting before changing the gas boiler to place another gas boiler or to place a heating heat pump when they will see something more from the government that will happen hopefully by the end of this year.

Alessandro Cecchini, Analyst, Equita: Okay. Also because according to your figures, internal market is expected to be slightly down, I mean, for the year internal units, so this is association. So basically, associate is expecting a little bit of pickup in second half, okay? Thanks. The second question is on the Lennox JV.

It seems to me that it’s just enough to gain a little bit of market share, so not a huge market share in the market, to add sizable business for you, of course, starting 2026, 2027. Is it correct, this is my assumption, that it’s enough, I mean, to keep a very, very low single digit market share in the market to gain significant business for you given the fact that in some market, basically, you are present, but basically not present given the size of your turnover, but lack of course distribution?

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: Yes. As I said, we are very happy and positive about this partnership. As you know, the market is huge And I think there, we will have two impacts. First is obviously what Lennox will say. And if they will gain market share, we are producing and delivering the products to them, and this will help us both in terms of revenue, if you want, and profitability.

Secondly, I mean, obviously, our reputation in the market will gain because Ariston is starting to be known much more. And I think this will give us as well the opportunity to reinforce our position, reminding that we are obviously hydronic heating player since ever, and we know the technology. We own that technology. While in U. S, the market is still to develop in terms of hydronic, and this will happen probably with an acceleration in 2029 and 02/1930.

So we are bullish. We are confident they have a great distribution system. And when you do a JV, there are also other opportunities to partner and to leverage each other to continue to improve both company positions. So keep in mind the two effects, as I said. One is direct, meaning our reputation in the market and obviously our share of market in the market.

And the other one is indirect because it’s Lenox developing. As we said, this will start during 2026. It will be just a start and then we’ll see maturing and becoming bigger in 2027, 2028 and moving forward.

Alessandro Cecchini, Analyst, Equita: Okay. And finally, my last is on margins. Is it right that probably also your to be back to the first question by my colleague that your margin improvement acceleration in the second half is potentially also driven by lower raw material or input cost. Is it something that you are expecting to support this improvement? Or is, I mean, neutral not accounted so far?

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: I would say that it’s neutral. I mean, half one and half two also versus last year is neutral. But obviously, we I mean, I explained before, there is seasonality. There is the fact that we had some front load investment to continue to support growth and CapEx. So we will see our margin to go up in Q3 and Q4 as we did last year to the level that we need to reach, but no impact from raw materials.

The

Conference Operator: next question is from Alessandro Surtora of Mediobanca. Please go ahead.

Alessandro Surtora, Analyst, Mediobanca: Hi. Good afternoon to everybody. Three questions, sorry, okay. These are brief questions, okay. The first one is just a follow-up on Germany.

So we already understood because data from the association are available that we have these strong decrease into the non gas boiler and this strong increase on the pump side. The question is, if you look at your product mix in Germany and clearly, we look back at the cathalt sales in Germany, are they up or down, considering clearly the higher value attached to the heat pump? So this is the first question. Yes.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: I mean, obviously, when there are these market dynamics, we tend to follow the market dynamics. When as I said, in terms of percentage gross margin, they are similar, so we are happy with what we have. Obviously, the heating heat pump, both in revenue and absolute profit, are bringing more simply because, as you well know, the price and the cost of a gas boiler for a consumer is lower than a heating heat pump.

Alessandro Surtora, Analyst, Mediobanca: Okay. So basically, so coming back to my question. Today, the start phase in Germany are up year on year?

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: Yes. I mean, Okay. Obviously,

Alessandro Surtora, Analyst, Mediobanca: Then the second question is, clearly, we saw deconsolidation of Russia. Now you had, let’s say, more months in order to understand the status of production and every operating aspects around restart of the production in Russia. Are there any additional comment you can make on the profitability or maybe the situation in Russia? Yes.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: I mean, as I said before, I mean, we didn’t enter in our business for almost one year. And someone else managed the business for us. I think, as I always said, don’t think that we will come back soon to the level that we had before simply because we had to fix a few things. I mean, the water heating market season is already over and we didn’t prepare it and we didn’t make it. Same on the heating market that is happening now, we didn’t prepare.

So I think what you see here in terms of revenue development, I mean, don’t take this as a guidance or a target, but I think you can consider this as a fair quarterly pace also for the remaining of the year. In terms of profitability, I mean Russia will be dilutive to the group this year because, as I said, it’s a business that we need a little bit of time to bring back to the level that we had before.

Alessandro Surtora, Analyst, Mediobanca: Okay. Okay. And the last question. If we look at, let’s say, the trend of net working capital on sales in, let’s say, the first half, but also taking into account the results that you achieved last year, now the around 13%, almost 13% of net working capital on sales. Considering clearly now Russia, again, into the perimeter, which kind of level we should assume for the full year?

Like kind of last year level plus, let’s say, around 1% impact from Russia? So just to have an idea of which kind of level of working capital you project for this year? Yes.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: Maybe I start, then I pass to Ricardo while he’s here with me, but not talking and he’s not happy. So it will help you, Alessandro. But jokes aside, I mean, as Ricardo explained, is driving our net working capital in the wrong direction. So there is something that we need to do as well to make sure that we all go back to the level of disciplined net working capital ratio and management. And I think this, again, will take a little bit of time as well as the new acquisition.

They are small, but I mean they are not as good as the rest of the group. So I think full year, we have to expect the net working capital overall for the company higher than last year. If we do like for like, probably the situation will be similar. Ricardo?

Riccardo Gini, Chief Financial Officer, Ariston Group: Yes. I mean, you said everything. Just as a reminder, Alessandro, we closed the 2024 at 12.7%, and we were coming from 2023 at 14.9%. So already last year, we think we achieved significant improvement. This year will be a challenge to drive improvement in the working capital of the so called M and A perimeter.

So that’s what we are focused on and we’ll be focused on in the next few months.

Alessandro Surtora, Analyst, Mediobanca: Okay. So to sum up, will be a kind of last year level plus all the factor you mentioned, let’s say?

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: Yes. Yes.

Conference Operator: The next question is from David Rimini of Fintaso Sao Paulo. Please go ahead.

David Rimini, Analyst, Fintaso Sao Paulo: Good morning. Thank you for the presentation. I have questions. Just a follow-up. One is on the service and pass growth, which I do understand is that at the pace of growth similar in Q1.

I was wondering, if I’m not mistaken, you were talking about low single digit, and I was wondering whether you could give a little bit more color on that performance.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: Yes, Service and Parts, I mean, the development is positive. I mean, we said that it’s an important part of our business with a very good profitability level. So we continue to grow on this and continue to be one of our focus and a revenue stream that is important for us. So we are happy to continue to see a positive development in the low to mid single digit, and let’s see what we can do enough to accelerate this part of the business.

David Rimini, Analyst, Fintaso Sao Paulo: And sorry, just to follow-up on that. I recall in the previous call, in the previous message that it was a bit below this year performance versus historical performance of the company?

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: I mean last year, service and parts grew a lot because people didn’t replace. And we see a continued evolution this year of service and parts. Maybe the year on year comparison is slightly below what we saw last year, but still positive, very positive.

David Rimini, Analyst, Fintaso Sao Paulo: Okay. And the second question was again on an additional follow-up on the country performance. I know that you don’t disclose country by country, but since again, if I’m not mistaken, last quarter, was you normally sort of gave up a bit of a color on the top three countries, right? Sort of German and Italy have been normally well covered. I was wondering whether you might comment on France, which, if I’m not mistaken, was just flipping over to the fourth place, some instance over the last few quarters.

And my specific focus was on France and the potential negative effect of the stop in this renovation scheme over the summer that has been announced by the French government?

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: Yes. I think, I mean, as we said in our last conversation, France is the market where still the situation is not clear. I mean, the government is not formed properly. What they have in mind to do in terms of heating is not very clear. They have some incentives.

As you said, they stopped the incentives, then they restarted the incentive. So I think there is where we see that the market is still negative overall, both in heating, particularly on heating heat pump. In water heating, the situation is slightly better. And again, in water heating market in France, we are doing better than the market on a market that is, I would say, stable versus last year. So still some clarity from, again, government incentives first that will give back confidence to consumers, particularly on heating heat pump, hopefully, by year end.

I’m not sure when the government will do something.

Conference Operator: The next question is from Uma Samlina of Bank of America. Please go ahead.

Albert Pozzi, Chief Marketing, Sustainability and Investor Relations Officer, Ariston Group0: Hi, good afternoon. Thank you so much for taking my question. So my first one is on the just a follow-up on the heat pump growth. I guess you said you’re sort of in line with the market growth. And I think in Germany that the heat pump market grow around 75% year on year in Q2.

Is that what we should assume that your growth was? Another question I have is that you talked about the potential boiler recovery going forward into next year. What do you think will be the driver of a boiler recovery? Do you see any sort of weakness in boiler that’s a bit more structural than just cyclical downturn? Thank you.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: No, thank you. I mean, you know the market figure very well. I wouldn’t comment, but if I say that in Q2 and F1, we are doing better than the market, you can assume that obviously, our growth is very solid as well in Germany. I’m talking now. When I think the situation of gas boiler, I think the technologies of both fossil and renewables will continue to stay very relevant in the next many years.

Obviously, how much heating heat pump will accelerate versus gas boiler, I think we need to see based also on what in Germany, and we just spoke about France, what the government will do in terms of incentive scheme. Remember that there are millions and millions of equipment in Europe and these equipments are breaking after fifteen years or some year more, some year less, and people will have to replace those systems. If they replace with a gas or with a heating heat pump, it’s obviously subject to the choice that the different consumers are doing in the different country. We know that replacement is not yet regulated with a mandatory change to heating heat pump with the exception of Switzerland and The Nordics where maybe we are not present. In the rest of the countries, as I said, the kind of development of mix between gas boiler and heating heat pump is subject to the regulation of incentives.

So in Germany, we say that overall, this number is very low of total market. We are happy about the growth of heating heat pump, but we need to see a further development of a gas boiler, which cannot stand in such negative territory for long. So this is what we I would say.

Albert Pozzi, Chief Marketing, Sustainability and Investor Relations Officer, Ariston Group0: That’s super helpful. Thank you very much. My second question is on pricing. What kind of pricing dynamics have you seen in both heat pump and boiler segments? Do you see any sort of changing in competitive landscape there?

Or is there any change in terms of pricing?

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: I mean, I would say nothing new versus what we saw in the past. There are pricing dynamics which are happening. Obviously, the pricing and the discount are more pronounced for the technologies that are going out of law, meaning that if you cannot sell a heat pump with a refrigerant like the four ten ten A, A, then obviously, we and others tend to discount more on this kind of technology. So nothing new. It’s something that we have to continue to pay attention on both pricing mix and price point, and we will continue to do that.

As I said, I mean, we are playing in the upper mainstream of the market, I mean, with Wolf and Elko in the mid to high, very high. Is on upper mainstream. So we don’t play really in the entry level, and this is something that is helping us to continue to hold our position.

Albert Pozzi, Chief Marketing, Sustainability and Investor Relations Officer, Ariston Group0: Okay. That’s great. Thank you very much.

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: To you.

Conference Operator: Gentlemen, there are no more questions registered at this time. So gentlemen, there are no more questions. Do you perhaps have any closing remarks?

Albert Pozzi, Chief Marketing, Sustainability and Investor Relations Officer, Ariston Group: Yes. We thank you for your participation to the call, Ben. And if you have any follow-up questions, we’re happy to answer. You can contact us at our email address. And have a

Maurizio Bruzzalelli, Chief Executive Officer, Ariston Group: great afternoon. And happy holidays for the one that will go on holidays, like the Italians. Thank you. Bye. Thank you, everyone.

Bye.

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

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