Earnings call transcript: OVS SPA reports strong Q2 2025 performance

OVS SPA reported robust financial results for the second quarter of 2025, highlighted by a notable increase in net income and EBITDA. The company’s stock saw a modest rise of 1.27%, closing at 4.10. According to InvestingPro data, OVS maintains impressive gross profit margins of 59.64% and demonstrates good overall financial health with a score of 2.78. Despite inflationary pressures, OVS achieved a gross margin of 60%, contributing to investor confidence.

Key Takeaways

• Net income surged by nearly 32%, reflecting strong profitability.
• EBITDA increased by 14%, underscoring operational efficiency.
• Gross margin reached an impressive 60%, despite inflationary challenges.
• The beauty segment doubled its sales contribution to 8%.
• OVS expanded internationally, opening new corners in Japan and Mexico.

Company Performance

OVS SPA demonstrated strong performance in Q2 2025, with total sales increasing by 4.1%, of which 2.2% was organic growth. The company’s strategic focus on expanding its product lines, such as the introduction of the Le Coppin brand, and enhancing its beauty segment, has paid off. The international expansion into markets like Japan and Mexico further solidifies its competitive position.

Financial Highlights

• Revenue: 439 million euros, contributing to overall sales growth.
• Net income: Increased by almost 32% year-over-year.
• EBITDA: Rose by 14%, indicating strong operational performance.
• Gross margin: Achieved 60%, a testament to effective cost management.

Outlook & Guidance

OVS SPA remains optimistic about its future, projecting mid-single-digit revenue growth and targeting a 70 million euro free cash flow. The company plans to allocate between 70 to 75 million euros for capital expenditures. Additionally, OVS is exploring a potential M&A opportunity with Casanova, which could further enhance its market position.

Executive Commentary

Stefano Beraldo, CEO of OVS, expressed confidence in maintaining the gross margin advantage due to favorable USD exchange rates. He emphasized the potential growth from the new UPM Gallery store format and the strategic international expansion. Beraldo highlighted, "If the store will work well, there will be a big potential of growth obviously, but let’s operate step by step with limited risk."

Risks and Challenges

• Inflationary pressures could impact future cost control measures.
• Inventory challenges, exacerbated by disruptions like the Suez Canal blockage, pose risks.
• The success of international expansion efforts in new markets remains uncertain.
• The company’s ability to sustain high gross margins amid currency fluctuations will be crucial.

Q&A

During the Q&A session, analysts inquired about the sustainability of the gross margin and the company’s international expansion strategy. Concerns were raised about inventory management challenges and the effectiveness of OVS’s hedging strategy, which is 80-85% hedged for the first half and 40-50% for the second half.

Full transcript - OVS SPA (OVS) Q2 2026:

Conference Operator, Chorus Call: Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the OBS 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 Mr. Stefano Beraldo, CEO of OBS. Please go ahead, sir.

Stefano Beraldo, CEO, OBS: Good afternoon and thank you for being with us for this six month conference meeting. So first of all, very good result for the first half in general, in spite of a normal but basically not supported by not particularly supported by good weather. I cannot say weather has been adverse, but weather has been normal dash negative particularly during the month of April during which we have lost much more sales compared to what we expected and compared to last year because of a very rainy and cold month. Driver of the growth has been the like for like. And within the like for like once again the women’s segment is the best performing one.

I think in the three year in a row for three year in a row women is generating sales at a higher rate compared to Men and Kids driven by Pyeongbo, but even mostly this time by the new entry which is Le Coppin. During the first half Le Coven entered for the first time in our collections. And the good news is that Le Coven didn’t replace even partially the sales of Pyombo, but generated additional sales with the style and the product talking to a kind of a different taste in women compared to the one that appreciate Piombon normally. So I think it’s important to notice that with Le Coeur d’Alene we introduced a second real brand in our portfolio of brand. The price of Le Co Pen is a bit higher as it happens also for Pyeongbo compared to the average of the collection generating also higher margins.

And this is one of the reasons for the higher margin in the first six half. So good, very good at women, very good all the brand, Cleombo, Le Copern, even B Angel performed very well. And once again very good performance of the perfumery of the beauty segment. By the way, Milan yesterday, today and tomorrow there are thousands of people in and outside our store where we have a master class and hostess presenting and attending the Milan Beauty Week with a lot of buzz around our three Milan store namely VIA Torino, Via Dante and Via Garibaldi. Very well also the other brand Stefanielle recovered compared to last year and OPIM confirmed the very good result achieved last year.

Last year was kind of exceptional, the performance of UPI with a plus 7% in the first half. And this year basically UPIMA coupled turnover result of last year establishing a new basement for the future growth. Good international, very good gross margin partially thanks to the what I said about Le Cotem, but also in general because of a better sourcing. As usual I would say strong attention to cost control in spite of some inflationary component and the third year of adjustment in the labor cost due to the agreement of two years ago, the general contract agreement. Good results in all the refurbishment with an average of plus 10% in the refurbished store.

The first month of Golden Point, which we consolidated for the month of July, July is a particular month very favorable for Golden Point with higher sales and the highest profitability in twelve months. So impossible to replicate for twelve months the good performance of July. But we are happy because we believe that the time spent in understanding the organization of the company will allow now to start looking at good performance also in this newly acquired company. The contribution of Golden Point to the turnover is €15,000,000 So for the one of you that want to have a complete idea of the growth in the six months, we grew more or less 2% organically and another 2% has been achieved by adding the performance of Golden Point. So we are happy with these results, which confirm what is happening in the last several years.

I don’t remember anymore. So every year we are improving top line, some operating leverage, gross margin. As we said, we started well the second half. August has been a very good. September will be a bit more difficult because last year September generated a very strong increase in sales due to unusually cold weather.

But all in all, we believe that we have all the correct instruments and activities in order to continue to deliver well also in the second part of the year. So thank you for this and I hand the word to Francesco as usual.

Francesco, CFO, OBS: Thank you, Stefano. I will drive you through the presentation starting with Page number four, where we have the P and L reported that has already described by Stefano sees an increase in sales of 4.1%, 2.2% excluding the impact of Golden Point. And looking to the last column, the change percentage, we can easily see the progression in the operating leverage effect with gross margin growing 6%, EBITDA 14% and then net income plus almost 32%. So a situation in which the growth in sales drove a healthy growth in profitability at whole level. Also the consolidation of Golden Point gave an additional boost to a semester that even in the organic Q was very strong.

On Page number five, we can see in fact the split with the addition of these pro form a values that are the results of the semester excluding Golden Point. So we can see the growth in terms of sales of 2.2%. And the EBITDA sales was much more robust with plus nine from 89 last year to 97 and then with the addition of that €4,000,000 provided by Golden Point. In terms of business units, OBS is growing both in terms of sales and in terms of EBITDA with an EBITDA margin that in our main business unit reaches 14%, which is in line with the best standard of the industry. On the other side, OPIM that had a much more difficult comparison given the last year excellent performance in the first quarter and the first semester is matching in terms of sales, but then is absorbing the inflation on costs.

But it’s worth mentioning that the EBITDA of this semester is nonetheless €2,000,000 higher 12% higher than the one in 2023. So it’s a long term growth trajectory that is confirmed also now. Now I move to Page number six with some more details on the working capital, which is basically flat versus last year with an improvement in trade receivables. On one side, there is some accounting effect. Last July, there were still some receivable versus Quinn than was written off in the second part of the year, but in general, with an improved profile of cash in versus our franchising business.

Inventory on the other side is growing. And this was because last year, we were still in the process of anticipating purchases due to the longer shipment time. And we now completed or we completed this anticipation by October, but this is the last moment in which we see in the comparison the increased duties to this anticipation. It’s worth mentioning that now we have between 40,000,000 and €50,000,000 of structural additional goods at sea. So structural higher inventory that will be released as soon as the Suez Canal would open again.

And of course, this is uncertainly the future, but it is something that we expect to take place with a material positive benefit on cash generation. Trade payables are in line with last year driven by business growth a little bit. Page number seven, I have the view on on capital expenditures. That’s starting from the bottom line, the total are declining. As said in the previous year, so we had some exceptional investments.

And we can see these on the two blocks of IT and logistics that are normalizing, let me say, to a standard level. While we did not stop our investments on openings and especially refurbishments, also thanks to the fact that the return is important, The newly refurbished store this year are increasing their sales by more than 10 versus previous year. On the right side, you can see now a picture of a newly opened store of Tupim in Merano. And we will come back on that later because the result of this new format, Tupim Gallery, is extremely promising. On Page number eight, there is a summary of cash flow that first of all is cash absorption, but this is due to the normal seasonality.

That is a high absorption in Q1, some cash positive in the second and globally, a result which is slightly worse than last year. But as said, we are completing this building up of the stock in transit and this is the reason. And by the way, the Q2, single Q2 results showed an improvement versus 2024. So we are closing the gap and we are confident that the full year cash generation will be in line at least in line with the consensus. Page number nine reflects the picture of the net financial position as of July 31 with leverage ratio of 1.4 at single point level, 1.3, 1.26 on the average twelve months.

And this includes about 10,000,000 or 4% of the share capital retained as treasury share. I then move to Page 11, sorry, to quickly comment or refresh what was already said by Stefano. In terms of the current trading, August sales grew double digit, thanks to always stronger performance in the second half of in the second month of the sales. And now September, which is, of course, just the start of the fallwinter season that is impacted on one side by weather fluctuations. But looking to the average of the results of the past year is shows a significant growth.

So again, a well start of the good start of the season. We also highlighted at this point on these three stores, Leche, Merano and Biela that were recently opened by UPM under this UPM Gallery new format. And they are delivering excellent results, about €15,000 per day in terms of income per store. All in all, are more than confident that we will achieve at least the consensus in terms of profitability and cash generation. And then I leave the words to the questions you may have.

Conference Operator, Chorus Call: Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Andrea Bonsa of Bank of Acros.

Andrea Bonsa, Analyst, Bank of Acros: Hello. Good morning to or good afternoon to everybody. I got a couple of, let’s say, small questions. One is related to the impact of openings, it was material in H1. And the second one, for what I remember anyway on this point, opening should have been more relevant in H2, but please correct me if I’m wrong.

And the second one, you mentioned that the first half results were helped by lower purchases cost. And I’m wondering if this lower cost lower purchases costs are an anticipation of what you mentioned for ’26, thanks to the U. S. Dollar and let’s say, the difficulties of your traditional Far Eastern supplier? Or how shall we, let’s say, interpret these aspects?

Thank you very much.

Stefano Beraldo, CEO, OBS: Thank you, Andrea. No, the opening effect is not material. So the real like for like is about 2%. So basically, combination of the lost sales due to the refurbishing period and the increase of sales generated in the first weeks is about equal to zero. So basically no material effect on this number from the refurbishing.

And even we do not expect material effect in the second half from the refurbishment activity. The good news is that all the refurbishments are in any case generating a new kind of perception of the branding of our customer base located nearby the stores. It’s kind of a good maintenance activity that is necessary to continue keeping fresh and interesting the image of the store. But we made many, many important refurbishments during the last two years in Milan and Rome. So in this moment, we will continue dedicating some CapEx to rejuvenating the network even because mostly because the new image is more in line with the higher quality of the merchandising that we are introducing from time to time in our stores.

Regarding the question about the cost reduction, the answer is no. The cost reduction is not generated by anticipated effect of The U. S. Dollar that we will entirely benefit in year 2026.

Andrea Bonsa, Analyst, Bank of Acros: That’s clear. Thank you very much, Stefano. If I may, is it possible to quantify let’s say, the amount of shops maybe in square meters or in percentage wise that you are, let’s say, refurbishing on a rolling basis or in particular this year versus last year? So is that 5% to your surface? Is 10% just No. Over a

Stefano Beraldo, CEO, OBS: We’ll be less than 1%. We’ll be between 0.51% of our total surface.

Andrea Bonsa, Analyst, Bank of Acros: Okay. Thank you very much.

Stefano Beraldo, CEO, OBS: Thank you.

Conference Operator, Chorus Call: The next question is from Francesco Brilli of Intermonte.

Francesco Brilli, Analyst, Intermonte: Yes. Good evening. Thanks for taking my A couple of questions from my side. First of all, if you can describe the movement in the change in net debt compared to the end of last year, I mean, the operating free cash flow and the what we should expect going forward for the second half of the year? And the second one is more on the international sales you mentioned, which are performing well.

If you can add some color on the performance by geography and the plans you have at Saudi outside Italy going forward? Thank you.

Stefano Beraldo, CEO, OBS: Okay. I hand over to Francesco to the first question. Francesco?

Francesco, CFO, OBS: Yes. Below the reported cash flow are, of course the dividend distribution more or less €27,000,000 and the buyback that took place in the period. And the last element on which we have a nondisclosure agreement is the consolidation of Golden Point. That, of course, is bringing the last element to the movement from the, if I’m not wrong, 145,000,000 at the end of the year last year and €293,000,000 As of now, as said, most of it coming from seasonality. And we expect full year cash generation to be above last year that was €69,000,000 and so in line with the consensus.

Stefano Beraldo, CEO, OBS: Okay. On international sales, I said good because we

Luca Ursini Baroni, Analyst, Orsacel: are

Stefano Beraldo, CEO, OBS: basically generating a small increase in profitability at EBITDA level. But also we are planting new seats for international growth out of Italy with promising results. In two countries, Japan and Mexico, we are about in Japan we already opened more than 10 corner on a wholesale agreement base. So without taking any risk with the biggest shopping mall chain in the country or the I forget the name now. Okay, I forget the name now.

I will come back later with the name EON, EON, A EON. The corner performing well and it is the first presence in the market. We opened just kid corner inside this department inside a big chain of department store with more than 200 department store. We opened in ten, twelve of those 200. If the result on a yearly basis will be good, there is a good potential for further growth.

Similarly, we are about to open our first fifty, sixty corner, men, women and kids inside department store in Mexico, basically replacing the Benetton corner that we’re selling in this format. Also in this case we are talking about franchise agreements or wholesale basically. The name of the chain is Sears. Sears is an important brand which in The United States is suffering. But in Mexico the brand of SEER is in very good shape and the owner of this brand is the slim family, the richest and most successful business family in the country.

So it’s a promising activity. If the comment will do well, there is another stream of revenues without risk to be taken in that country. So these are the two most important initiatives. We are about to open the press reported also the news that we will open our first store in Delhi. In this case, we will open in a country that we believe is the most promising for our positioning.

Indian population is changing habits. They dress the western style more and more, particularly the big city like Delhi and Mumbai. We believe that our prices and our range of items and our being Italian are success factors that we hope we’ll be able to leverage in order to perform in this market according to the potential of our brand. If the store will work well, there will be a big potential of growth obviously, but let’s operate step by step with limited risk only one store. Probably we will open a second store and then we will learn about the market in order to understand if there will be the possibility to leverage also this country.

Francesco Brilli, Analyst, Intermonte: Thank you. Thank you.

Conference Operator, Chorus Call: The next question is from Luca Ursini Baroni of Orsacel.

Luca Ursini Baroni, Analyst, Orsacel: Hello, Stefano. One question. You have made a fantastic 60% gross margin in this first part of the year. Do you think that this 60% gross margin is a level that you can sustain for the entire year and also in 2026 because it’s very high?

Stefano Beraldo, CEO, OBS: So Luca and probably in the second half the gross margin will be a bit lower as a normal part of our seasonality. But we believe that in the full year compared to last year, the gross margin will be a little bit higher all in all. So it will remain higher. And most importantly, with reference to the second part of your question, we are confident that by the next year, we will be able to retain in the gross margin at least part of the advantage that the more favorable dollar exchange rate will imply.

Luca Ursini Baroni, Analyst, Orsacel: Okay. Then I have a second question on the business. You have highlighted these three new shops of UPM. Can you just tell us a bit more what you’re trying to achieve with what is the difference and what are you trying to achieve with these new shops? Basically, What makes them

Stefano Beraldo, CEO, OBS: UPM is already affordable price department store with perfumery, with home decoration and apparel. We are introducing in OPIM some external brand to provide the OPIM customers other opportunities beside the house brand generated by Hopin. And in this moment where there is a lot of brand which are struggling to find traffic And I mean, bridge brand and not luxury brand obviously. OPIM is demonstrating that is very interesting for mid market brand, which customers are still looking for as a right place to be present. So in the three store instead of in the three store that Francisco mentioned which are bigger between 1,502,000 square meter Instead of offering 100% of house brand in the apparel segment, we are opening like 80% of house brand and we are introducing another 20% of external brand.

And the result has been extremely favorable. Besides that, we increased the attention to the beauty, to the perfumery in open and this is again generating excellent results. So basically the idea is that in the prime location in Downtown UPIM, we became more similar to affordable price department store than to a purely apparel format.

Luca Ursini Baroni, Analyst, Orsacel: Okay. That’s very interesting. And keep up with the good work and that’s all for me.

Stefano Beraldo, CEO, OBS: Thank you.

Conference Operator, Chorus Call: The next question is from Gian Marco Gaddini of Kepler Cheuvreux.

Gian Marco Gaddini, Analyst, Kepler Cheuvreux: Hi, everyone. Thank you for taking my questions. I have a quick follow-up on the gross margin again, particularly the gain you booked in the first half. So we understand that nearly 70 basis points out of the 100 basis points gain were linked to the like for like performance. And with a ballpark estimate, if I’m not mistaken, the we can infer a channel impact derived from the OS performance compared with franchising that is impacting, I think, around twenty fifty basis points that I cannot explain.

You mentioned before the pricing of Le Coppin and Piombo. Is this the main reason behind this gain? So and this or there is more behind that? And if so, if you can maintain this pricing power going forward? Thanks.

Stefano Beraldo, CEO, OBS: Not easy for me to enter such in a deep dive analysis that you are requiring. So I cannot say if 70 or 60 this is too small for me to be able to give you a precise answer in terms of differences. But all in all, you’re right in assuming that the element that doesn’t match with your matter are the contribution of Lecopen. Lecopen has been generated entirely by our internal team with a lot of synergies. So compared to the collections that we sold before introducing Lecopen, have been able to command a higher price, thanks to the Lecopen brand at a very affordable cost due to the synergies.

So because the company generated about €20,000,000 €25,000,000 of sales, those €20,000,000 of sales are impacted by a higher gross margin. So I don’t know if this accounts for ’20 basis points or 25 basis I don’t know. Then also we lowered the markdown in July compared to last year, which is another element that maybe you didn’t keep into account. We also this year, we started with a higher quantity of new merchandising compared to last year where we reported some leftover of the year before with a lower margin. So these other two elements maybe can help you to build up the entire reason for the gross margin increase.

Gian Marco Gaddini, Analyst, Kepler Cheuvreux: Yes. That was super helpful. And if I may tell us how was the impact of the Beauty sales as a percentage of the total sales?

Stefano Beraldo, CEO, OBS: Yes, you can, but I don’t have the answer immediately. Also eight No, no. Francisco is writing to me the number. So Francisco, All right. Tell the

Francesco, CFO, OBS: All 8% in OBS and about 10% in OPM, which has a longer history as department store, while in OBS it increased in the doubled basically from 4% in 2021 to 8% nowadays. And it’s still growing double digit versus last year. Of course, no more 30%, but still a plus double digit versus 2024.

Gian Marco Gaddini, Analyst, Kepler Cheuvreux: All right. Many thanks.

Stefano Beraldo, CEO, OBS: Thank you.

Conference Operator, Chorus Call: The next question is from Domenico Gilotti of Equita.

Paola Carboni, Analyst, Equita: Hello. Hi. Good afternoon. Actually, I’m a colleague of Domenico. It’s Paola Carboni still from Equita.

Going with a few questions. My first one is about revenue growth. If you can share with us your growth target for revenues excluding Golden Point for the year and where are you now versus your expectation, your budget? And at the same time, what we should expect as a contribution from Golden Point from July onwards? Is it maybe some €70,000,000 reasonable amount?

So I don’t know where do you see kind of a pro form a, let’s say, amount of revenues for Golden Point for the full year 2025? Another question is about inventories. If you can come back on your comments at the beginning about the impact of the inventory still linked to the Suez Canal issue? And let’s say, how long should it take for this to normalize? And also whether do you see any risk of extra inventories more linked to the business?

And my third question, if you can comment or update us, let’s say, about the M and A opportunities that you see. There has been probably on the press the name of Casanova. So I don’t know if you have any specific comment on that or a more general comment on the opportunities for you in the future. Thank you.

Stefano Beraldo, CEO, OBS: Okay. The first question regarding the sales, the revenue growth for the group, we will continue. We expect our mid single digit growth. So basically what is incorporated in most of the consensus analysis, I think we are confirming. This is without and also with Golden Point.

So I know that in the in some results already Golden Point effect has been included. So regarding profitability, as of today, the consensus expects to generate €13,000,000 increase of EBITDA compared to 2024. We achieved €8,000,000 of EBITDA increase today. We believe that the remaining five which the consensus expect the company to be able to generate are solid. So we confirm what we have seen to be the level of consensus.

Regarding the contribution of Golden Point from July onwards, in terms of sales maybe €60,000,000 in terms of EBITDA maybe one, maybe zero, because July is by far the most important month for the profitability. And maybe more this depends from the success of our actions in the product development, which has been undertaken months ago and the visibility of which will be taking effect starting from October this year with a new collection, which has been 50% of them has been already made by our team. In term of inventory, no, we don’t see any risk of further building up of inventory vice versa. The Suez effect, which is also another part of your question is somebody that nobody can say can predict when it will be over. What I can tell you is that when it will be over there will be from 40,000,000 to €50,000,000 cash generated to the company because this is the amount of the merchandising in transit in excess of the normal traffic time.

M and A, yes, we are considering to we are looking at Casanova as some press described. This is not a secret, but we are still working. Maybe it’s worth spending one minute telling you why in case we will take over Casanova we are considering to do it. So first because they have an excellent network of stores, small stores mostly good shopping mall and downtown. So prime location mostly and we have so many format now from Stefano to Golden Point, from Kraft to Pionbo, from OBSE Holiday to other OBSE Kids or Open Kids.

So we have such a number of formats that can benefit from existing location that we might take over for basically for not for free, but for a very reasonable amount. Second reason, we have about €30,000,000 of turnover generated by Croffer, which is a format which is still too small to generate appropriate level of sourcing efficiency and which is mostly exposed to textile. Vice versa, Casanova is mostly it is very strong in hard goods and kitchen goods. So there is a clear combination of know how between the two companies that one merger might generate good synergies to the advantage of UPM with the hard goods and to the advantage of Casanova with the textile know how that we have. So this is why we are looking at this company which is struggling.

And obviously in case we should go ahead, it will be only because there will be a massive debt reduction in order to take over a company. I’m not saying debt free, but almost debt free.

Paola Carboni, Analyst, Equita: Very clear. Thank you very much.

Conference Operator, Chorus Call: The next question is from Luca Bacoccioli of Intesa Sanpaolo.

Luca Bacoccioli, Analyst, Intesa Sanpaolo: Hi, good evening everyone. Can you hear me?

Stefano Beraldo, CEO, OBS: Yes.

Luca Bacoccioli, Analyst, Intesa Sanpaolo: Okay, good. So few questions from my side. The first one is a follow-up on the free cash flow. You said that this year should be above last year’s EUR9 million. I was wondering if this target includes Golden Point or not?

And what should we expect from Golden Point on a standalone basis in terms of free cash flow generation? The second question is the guidance CapEx because it seems that you’re still investing as you explained on refurbishment of the network. So what is the guidance for the full year for the total CapEx because we were expecting to see a quite sharp drop starting from 2026. The other one is on hedging. If you can provide us an update on the hedging strategy as of today and based on what you already done, what lower cost should we expect in 2026 falling through the gross margin?

Thank you.

Stefano Beraldo, CEO, OBS: Free cash flow will be about €70,000,000 This is what we expect. The contribution from Golden Point will be nil basically. The CapEx will be between 70,000,000 and $75,000,000 And the hedging has been made 80%, 85% of the first half has been hedged. 40%, 50% of the second half has been hedged. So there is still room to hedge another 25% more or less.

The exchange rate is obviously much favorable. The total advantage might be very big. How much of it we will keep in order to increase gross margin and how much of it will be given to the customer still not disclosable because still we didn’t take all the decisions. So we want to see how the market evolves particularly in the second half. Some benefit will remain in the gross margin.

How much of it must be seen in the future?

Luca Bacoccioli, Analyst, Intesa Sanpaolo: Okay. Thank you.

Stefano Beraldo, CEO, OBS: Thank you.

Conference Operator, Chorus Call: The next question is a follow-up from Luca Ursini Baroni, Orsini, SRL.

Luca Ursini Baroni, Analyst, Orsacel: Hello, Ostini and Farno. On the buyback, what is your target for this year and next? And when are you going to cancel the shares again?

Stefano Beraldo, CEO, OBS: Yes, difficult question. The second part of your question, Luca, is very difficult because we just canceled the share a few months ago. So but we want to continue. It will depend on the cash generation. It will depend from acquisitions.

So we will continue to keep a balance sheet properly balanced between debt and assets. So we believe that the present structure is appropriate and the cash generation will continue to enable us to continue distribute dividends and also sustaining the buyback program.

Luca Ursini Baroni, Analyst, Orsacel: Okay, perfect. Thank you.

Stefano Beraldo, CEO, OBS: Thank you.

Conference Operator, Chorus Call: The next question is from Francesco Brilli of Intermonte.

Francesco Brilli, Analyst, Intermonte: Yes, thank you. Just a follow-up on the gross margin mainly for the next year. So on top of the benefits you just mentioned and we will see from the hedging on ForEx, what’s the scenario? What are you seeing on raw materials and so on the sourcing side? So should are you seeing some opportunities and already and you already had the possibility to tackle some of these in terms of lower costs of raw materials and if there are some lower some raw materials, which the price is getting lower and lower.

So we will see, excluding ForEx, some additional advantage from the cost of inventory next year?

Stefano Beraldo, CEO, OBS: There is some advantage on the linen as a raw material. But all in all, I would say that we expect a steady behavior from the raw material side. More interestingly, we are noticing some opportunity from countries which are penalized by the heavy duty imposed by the U. S. Government, which are disadvantaging areas of the countries from which we source, which are looking for new customers or for alternative customers.

So more than a raw material opportunity, I see an opportunity to take advantage from this unusual problem created to vendors by the U. S. Government. So vendors are looking for new customer and are coming and sitting to the negotiations with an attitude which is clearly weaker than the one that they had one year ago. So some advantage from this behavior we believe will be achieved.

Francesco Brilli, Analyst, Intermonte: Okay. Very clear. Thanks.

Stefano Beraldo, CEO, OBS: Thank you.

Conference Operator, Chorus Call: Okay.

Stefano Beraldo, CEO, OBS: So given that I think it has been there was something more sorry.

Conference Operator, Chorus Call: No, I confirm there are no more questions.

Stefano Beraldo, CEO, OBS: Okay. Thank you. And thank you all of you for attending this meeting and for your question. And I hope to see or meet you soon or at least during next conference. Thank you and good afternoon.

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