Half Year 2026 Carel Industries SpA Earnings Call

August 4, 2026

Speaker #2: So the story goes.

Speaker #1: Good afternoon, this is the chorus call conference operator. Welcome, and thank you for joining the Cattle Industries 2026 H1 results conference call. As a reminder, all participants are in listen-only mode.

Speaker #1: Hold around a lonely heart.

Speaker #2: Hold around a lonely heart.

Speaker #1: Hold around a broken heart.

Speaker #1: After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and 0 on their telephone.

Speaker #2: Hold around a lonely heart.

Speaker #1: Say you don't want to chance it.

Speaker #1: At this time, I would like to turn the conference over to Mr. Francesco Nalini, Chief Executive Officer of the group. Please go ahead, sir.

Speaker #2: You've been hurt so before.

Speaker #1: Watch it now.

Speaker #2: Evil in the sky.

Speaker #1: How are we doing, one and only?

Speaker #2: Thank you. Good afternoon, and welcome to our call for the presentation of the first half 2026 results. Thank you for attending, and I'll go directly to page 3 for the main highlights of the period.

Speaker #2: You lose yourself.

Speaker #1: No, not for pity's sake.

Speaker #2: There's no real reason to be lonely.

Speaker #1: See for yourself; give your free will a chance.

[Analyst]: Give your free will a try. You've got to want it to succeed. Owner of a lonely heart. Owner of a lonely heart. Owner of a broken heart. Owner of a lonely heart. Owner of a lonely heart. After my own endless system, they can use me up only. Owner of a lonely heart. Never ask of no one else. In the end, you gotta go. Lonely for your company. Owner of a lonely heart. Don't you hesitate at all, you know. Owner of a lonely heart. Owner of a lonely heart. Owner of a broken heart. Owner of a lonely heart. Owner of a lonely heart. Owner of a lonely heart. Owner of a broken heart. Owner of a lonely heart. Owner of a lonely heart. You and me, just the two of us alone. Owner of a lonely heart.

Speaker #2: You've got to want to succeed.

Speaker #2: So, on page 3: we're very pleased to report that Q2 has been another good quarter, with revenues approaching $200 million. Once again, I really want to underline that the quality and mix of the growth has been outstanding, with both HVAC and refrigeration growing in excess of 20% in the first half, and likewise all geographies growing double digits.

Speaker #1: Hold around a lonely heart.

Speaker #2: Hold around a lonely heart.

Speaker #1: Hold around a broken heart.

Speaker #2: Hold around a lonely heart.

Speaker #1: Hold around a lonely heart.

Speaker #2: Something my own indecision may confuse me so slowly.

Speaker #2: In this first half, reported revenues reached $370.1 million up 20.9% on the first half 2025, or up 23% at constant exchange rates. We saw a further acceleration in the second quarter, and what really makes us very happy is the balance of the performance, which is completely broad-based in terms of markets and geographies, thus highlighting the resiliency and balance of our portfolio.

Speaker #1: It never turns out to go well at all.

Speaker #2: In the end, you gotta go.

Speaker #1: Look before you leave me.

Speaker #2: Don't you hesitate at all.

Speaker #1: No, no.

Speaker #2: In fact, HVAC Group, by approximately 24% organically, supported by data centers, residential, and a very good improvement in industrial, but also refrigeration grew by approximately 21% organic, with a strong acceleration driven by the expected recovery of some projects that were temporarily delayed in EMEA and by strong market share gains in North America.

Speaker #2: EBITDA margin in the 6-month was 22.5% of sales, with an expansion of 350 basis points on the same period last year, improving over an already very good Q1.

Speaker #2: Hold around a lonely heart.

Speaker #1: Hold around a lonely heart.

Speaker #2: That's better than not.

Speaker #2: This was mainly driven by operating leverage, more than offsetting some inflationary headwinds. Also, digital services continue to provide expansionary support, with Kiona profitability close to 30%.

Speaker #1: Hold around a broken heart.

Speaker #2: Hold around a lonely heart.

Speaker #1: Hold around a lonely heart.

Speaker #2: Hold around a lonely heart.

Speaker #1: That's better than not.

Speaker #2: In spite of the fast upline growth, R&D investments remain at approximately 5%, so at our target level, and finally, we close the period with a positive net cash position of $7.1 million after capex, dividends for more than $21 million, the Samba earn-out payment for $17.4 million, and seasonal and tactical working capital absorption.

Speaker #2: Hold around a broken heart.

Speaker #1: Hold around a lonely heart.

[Analyst]: It's really starting to be like the owner of a lonely heart.

Speaker #2: Hold around a lonely heart.

Speaker #1: Lonely is the confusion of a lonely heart.

Speaker #2: It's really kind of to be like this confusion of a.

Speaker #2: Now to page 4, with some additional figures. Top line is the first half was $370.1 million up 20.9% from the $306.2 million of the same period last year.

Speaker #3: Good afternoon. This is the conference call operator. Welcome, and thank you for joining the Carel Industries 2026 H1 Results Conference Call. As a reminder, all participants are in listen-only mode.

Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Carel Industries 2026 H1 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Francesco Nalini, Chief Executive Officer of the group. Please go ahead, sir.

Speaker #2: We lost approximately $7 million here due to the exchange rates, so organic growth was 23%, marking a significant acceleration, and in spite of a sequentially more challenging comparison base.

Speaker #3: After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone.

Speaker #3: At this time, I would like to turn the conference over to Mr. Francesco Nalini, Chief Executive Officer of the group. Please go ahead, sir.

Speaker #2: As in the previous quarters, this growth is predominantly volume-based, with price changes representing a very minor effect. EBITDA at $83.1 million grew by 42.7% over the 58.2 million of last year, and represented 22.5% of sales, up 350 basis points over the 19% of the first half 2025.

Speaker #4: Thank you. Good afternoon and welcome to our call for the presentation of the first half 2026 results. Thank you for attending and I go directly to page three for the main highlights of the period.

Francesco Nalini: Thank you. Good afternoon, and welcome to our call for the presentation of the H1 2026 results. Thank you for attending, and I go directly to page three for the main highlights of the period. On page three, we are very pleased to report that Q2 has been another very good quarter, with revenues approaching EUR 200 million. Once again, I really want to underline that the quality and mix of the growth has been outstanding, with both HVAC and refrigeration growing in excess of 20% in the H1, and likewise, all geographies growing double digits. In this H1, reported revenues reached EUR 370.1 million, up 20.9% on the H1 2025, or up 23% at constant exchange rates. We saw a further acceleration in the Q2.

Speaker #4: So on page three, we're very pleased to report that Q2 has been another very good quarter with revenues approaching 200 million. Once again, I really want to underline that the quality and mix of the growth has been outstanding with both HVAC and refrigeration growing in excess of 20% in the first half.

Speaker #2: In the second quarter, in particular, profitability was in excess of $23%, this acceleration being mainly driven by operating leverage, and by the expansionary effect of digital services, with, again, Kiona having an EBITDA close to 30% of sales.

Speaker #2: We do have some inflationary headwinds, but the top profit may remain stable thanks to purchasing and pricing discipline, and again, thanks to digital services.

Speaker #4: And likewise, all geographies grew double digits. In this first half, reported revenues reached €370.1 million, up 20.9% on the first half of 2025, or up 23% at constant exchange rates.

Speaker #2: Net profit at $45.7 million was up 72.5% from the 26.5 million of the first half 2025, basically thanks to the operating performers, with a stable tax rate at 23.1%.

Speaker #4: We saw a further acceleration in the second quarter, and what really makes us very happy is the balance of the performance, which is completely broad-based in terms of markets and geographies, plus highlighting the resiliency and balance of our portfolio.

Francesco Nalini: What really makes us very happy is the balance of the performance, which is completely broad-based in terms of markets and geographies, thus highlighting the resiliency and balance of our portfolio. In fact, HVAC grew by approximately 24% organically, supported by data centers, residential, and a very good improvement in industrial. Refrigeration grew by approximately 21% organic, with a strong acceleration driven by the expected recovery of some projects that were temporarily delayed in EMEA, and by strong market share gains in North America. EBITDA margin in the H1 was 22.5% of sales, with an expansion of 350 basis points on the same period last year, improving over an already very good Q1. This was mainly driven by operating leverage, more than offsetting some inflationary headwinds. Also, digital services continue to provide expansionary support, with Kiona profitability close to 30%.

Speaker #2: Finally, capex in the period were $9.5 million, with a slight $7.1% increase over last year, and they also involve investments in production capacity in Europe and North America, not yet the new facility that we will start building very, very soon in the US, where the capex will be seen mainly in the second half of the year.

Speaker #4: In fact, HVAC group by approximately 24% organically supported by data centers residential and a very good improvement in industrial but also refrigeration grew by approximately 21% organic with a strong acceleration driven by the expected recovery of some projects that were temporarily delayed in EMEA and by strong market share gains in North America.

Speaker #2: I now move to page 5, to describe some additional market elements. A key message here which, again, in my opinion, is very important is that our growth is very well balanced in terms of geographies and in terms of markets.

Speaker #2: On the left, we see that all regions grew double digits, EMEA accelerated to an 11.8% organic growth thanks to the expected acceleration in the data center market, as well as in refrigeration.

Speaker #4: EBITDA margin in the six months was 22.5% of sales, with an expansion of 350 basis points on the same period last year, improving over an already very good Q1.

Speaker #2: Here, as anticipated during the Q1 presentation, a number of customer projects had experienced timing delays and most of these were effectively recovered in Q2.

Speaker #4: This was mainly driven by operating leverage, more than offsetting some inflationary headwinds. Also, digital services continue to provide expansionary support, with Kiona profitability close to 30%.

Speaker #2: More broadly, the European refrigeration market continues to benefit from the transition towards natural refrigerants, supported by the FGAS regulation and by the group's strong technological positioning.

Speaker #4: In spite of the fast upline growth, R&D investments remain at approximately 5% so at our target level and finally, we close the period with a positive net cash position of 7.1 million euros after CAPEX, dividends for more than 21 million the Samba are now payment for 17.4 million and seasonal and tactical working capital absorption.

Francesco Nalini: In spite of the fast top-line growth, R&D investments remain at approximately 5%, so at our target level. We close the period with a positive net cash position of EUR 7.1 million after CapEx, dividends for more than EUR 21 million, December earn-out payment for EUR 17.4 million, and seasonal and tactical working capital absorption. Now to page four, with some additional figures. Top line in the H1 was EUR 370.1 million, up 20.9% from the EUR 306.2 million of the same period last year. We lost approximately EUR 7 million here due to the exchange rate. Organic growth was 23%, marking a significant acceleration, and in spite of a sequentially more challenging comparison base. As in previous quarters, this growth is predominantly volume-based, with price changes representing a very minor effect.

Speaker #2: Asia-Pacific continues with an excellent performance and an organic growth of 31.6%, with a very broad base and distributed results across the different verticals. North America saw a sequential acceleration both in HVAC and in refrigeration to a growth at constant foreign exchange of 55.7%.

Speaker #4: Now to page four, with some additional figures. Top line in the first half was €370.1 million, up 20.9% from the €306.2 million of the same period last year.

Speaker #2: HVAC was mainly driven by data centers, but also commercial and industrial grew double digits. And we're very excited about the results we're having in refrigeration, that in the first half was essentially doubling the results of the same period 2025, thanks to the technological transition taking place in the market that sees the group leveraging its technological leadership and fast gain in market share.

Speaker #4: We lost approximately 7 million here due to the exchange rates so organic growth was 23% marking a significant acceleration and in spite of a sequentially more challenging comparison base.

Speaker #2: Finally, also South America improved in spite of the economic uncertainty in Brazil, with an organic growth in excess of 20% in the 6-month. All of this is reflected in the performance by market, as we can see on the right.

Speaker #4: As in the previous quarters, this growth is predominantly volume-based, with price changes representing a very minor effect. EBITDA at €83.1 million grew by 42.7% over the €58.2 million of last year, and represented 22.5% of sales, up 350 basis points over the 19% of the first half 2025.

Francesco Nalini: EBITDA at EUR 83.1 million grew by 42.7% over the EUR 58.2 million of last year, and represented 22.5% of sales, up 350 basis points over the 19% of the H1 2025. In the Q2, in particular, profitability was in excess of 23%. This acceleration being mainly driven by operating leverage and by the expansionary effect of digital services, with, again, Kiona having an EBITDA close to 30% of sales. We do have some inflationary headwinds, but the gross profit remains pretty stable thanks to purchasing and pricing discipline, and again, thanks to digital services. Net profit at EUR 45.7 million was up 72.5% from the EUR 26.5 million of the H1 2025, basically thanks to the operating performance, with a stable tax rate at 23.1%.

Speaker #2: HVAC grew by 23.7% net of the foreign exchange, with very strong growth in data centers, but actually with all the verticals reporting double-digit growth in the 6-month.

Speaker #2: At the same time, refrigeration grew in excess of 20%, as I said, we had in EMEA the expected deployment of some projects that were delayed by 1 day also, consistent acceleration in North America, as we gained market share, but rolling out our most advanced solutions in a context of technological transition that we expected to be structural and long-lasting.

Speaker #4: In the second quarter in particular, profitability was in excess of 23%. This acceleration being mainly driven by operating leverage and by the expansionary effect of digital services with again Kiona having an EBITDA close to 30% of sales.

Speaker #4: We do have some inflationary headwinds, but the gross profit remains pretty stable, thanks to purchasing and pricing discipline and, again, thanks to digital services.

Speaker #2: Let me now please briefly present the quotes acquisition on page 6. This transaction follows our direction of growth through Bolson M&As in complementary technologies.

Speaker #4: Net profit at €45.7 million was up 72.5% from the €26.5 million of the first half 2025, basically thanks to the operating performance, with a stable tax rate at 23.1%.

Speaker #2: In fact, we have been looking to add this specific technology to our portfolio for some time, and we're very happy to have found an agreement with an outstanding company like Coates.

Speaker #2: As you know, very well, we provide a number of solutions for increasing humidity in industrial as well as in indoor air quality applications. And we were basically missing the reverse to complete our humidity control offering that is dehumidification.

Speaker #4: Finally, CAPEX in the period were 9.5 million with a slight 7.1% increase over last year and they also involve investments in production capacity in Europe and North America not yet the new facility that we will start building very, very soon in the US where the CAPEX will be seen mainly in the second half of the year.

Francesco Nalini: CapEx in the period were EUR 9.5 million, with a slight 7.1% increase over last year, and they also involve investments in production capacity in Europe and North America. Not yet the new facility that we will start building very, very soon in the US, where the CapEx will be seen mainly in the H2 of the year. I now move to page five to describe some additional market elements. The key message here, which again, in my opinion is very important, is that our growth is very well-balanced in terms of geographies and in terms of markets. On the left, we see that all regions grew double digits. EMEA accelerated to an 11.8% organic growth, thanks to the expected acceleration in the data center market as well as in refrigeration.

Speaker #2: The technology of Coates absorption dehumidification uses a specific material to absorb moisture from the air, and compared to alternative solutions like using a refrigeration circuit, it's much more precise and can work also with very low temperatures.

Speaker #4: I now move to page five to describe some additional market elements. The key message here which again in my opinion is very important is that our growth is very well balanced in terms of geographies and in terms of markets.

Speaker #2: It's therefore particularly suitable for many industrial processes, which is where we'll have very strong cross-selling synergies to begin with, having had for a long time customers asking for a complete solution and not just humidification.

Speaker #4: On the left, we see that all regions grew double digits. EMEA accelerated to an 11.8% organic growth, thanks to the expected acceleration in the data center market as well as in refrigeration.

Speaker #2: Many industrial processes require not only precise temperature control, but also strict humidity management to ensure product quality process reliability, energy efficiency, and regulatory compliance.

Speaker #4: As anticipated during the Q1 presentation, a number of customer projects experienced timing delays, and most of these were effectively recovered in Q2.

Francesco Nalini: Here, as anticipated during the Q1 presentation, a number of customer projects had experienced timing delays, and most of these were effectively recovered in Q2. More broadly, the European refrigeration market continues to benefit from the transition towards natural refrigerants, supported by the F-Gas Regulation and by the group's strong technological positioning. Asia Pacific continues with an excellent performance and an organic growth of 31.6%, with a very broad base and distributed results across the different verticals. North America saw a sequential acceleration both in HVAC and in refrigeration to a growth at constant foreign exchange of 55.7%. HVAC was mainly driven by data centers, but also commercial and industrial grew double digits. We're very excited about the results we're having in refrigeration. That in the H1 was essentially doubling the results of the same period, 2025.

Speaker #2: Examples include pharmaceutical, food processing, cold storage facilities, battery manufacturing, and other critical industrial environments requiring variable deployment conditions. And these are all areas where Coates has already developed proven expertise.

Speaker #4: More broadly, the European refrigeration market continues to benefit from the transition towards natural refrigerants, supported by the gas regulation and by the group's strong technological positioning.

Speaker #2: But Coates is also the European leader in dehumidification for offshore wind turbines, thanks to proprietary technology that can remove salt in addition to water.

Speaker #4: Asia-Pacific continues with an excellent performance and an organic growth of 31.6% with a very broad base and distributed results across the different verticals. North America saw a sequential acceleration both in HVAC and in refrigeration to a growth at constant foreign exchange of 55.7%.

Speaker #2: We have therefore now access to the offshore wind sector, a market where Carrel had very limited exposure before the transaction, and where we see attractive long-term fundamentals driven by the global energy transition and the necessity for Europe to develop strategic energy independence.

Speaker #2: We believe this specific proprietary technology from Coates is also very interesting in order to explore a number of other applications like marine and defense.

Speaker #4: HVAC was mainly driven by data centers, but also commercial and industrial grew double digits. And we're very excited about the results we're having in refrigeration, that in the first half was essentially doubling the result of the same period in 2025, thanks to the technological transition taking place in the market that sees the group leveraging its technological leadership and fast gain in market share.

Speaker #2: The company itself was founded in 1986 and is headquartered in Denmark, with a manufacturing facility in Poland. The expected revenues for 2026 are approximately 31.5 million euros, with approximately 6.5 million EBITDA and 120 employees.

Francesco Nalini: Thanks to the technological transition taking place in the market that sees the group leveraging its technological leadership and fast gaining market share. Finally, also South America improved in spite of the economic uncertainty in Brazil, with an organic growth in excess of 20% in H1. All of this is reflected in the performance by market, as we can see on the right. HVAC grew by 23.7% net of the foreign exchange, with very strong growth in data centers, but actually with all the verticals reporting double-digit growth in the H1. At the same time, refrigeration grew in excess of 20%.

Speaker #4: Finally, also South America improved, in spite of the economic uncertainty in Brazil, with an organic growth in excess of 20% in the six months.

Speaker #2: The enterprise value for the transaction is 56 million euros, corresponding to approximately 9 times 2026 EBITDA. The closing is expected during Q3, after the clearance of some customary regulatory approvals.

Speaker #4: All of this is reflected in the performance by market, as we can see on the right. HVAC grew by 23.7% net of foreign exchange, with very strong growth in data centers, but actually with all the verticals reporting double-digit growth in the six months.

Speaker #2: And I'll move to page 7 and leave the stage to Nicola for the items below EBITDA.

Speaker #4: At the same time, refrigeration grew in excess of 20%. As I said, we had in EMEA the expected deployment of some projects that were delayed in Q1, and also a consistent acceleration in North America as we gained market share by rolling out our most advanced solutions in a context of technological transition that we expect to be structural and long lasting.

Francesco Nalini: As I said, we had in EMEA the expected deployment of some projects that were delayed in Q1, and also a consistent acceleration in North America as we gain market share by rolling out our most advanced solutions in a context of technological transition that we expect to be structural and long-lasting. Let me now please briefly present the Cotes acquisition on page six. This transaction follows our direction of growth through bolts-on M&As and complementary technologies. In fact, we have been looking to add this specific technology to our portfolio for some time, and we're very happy to have found an agreement with an outstanding company like Cotes. As you know very well, we provide a number of solutions for increasing humidity in industrial as well as in indoor quality applications. We were basically missing the reverse to complete our humidity control offering, that is dehumidification.

Speaker #1: Thank you, Francesco. Slide 7 provides a bridge from the group's EBITDA to net profit. DNA was broadly in line with previous year. The amount includes 5.6 million of depreciation amortization arising from purchase price allocations.

Speaker #4: Let me now please briefly present the Quotes acquisition on page six. This transaction follows our direction of growth through bolt-on M&As in complementary technologies.

Speaker #1: Net functionality simply compared with last year mainly thanks to the improvement in the average net financial position over the period. The year-on-year change in foreign exchange result was mainly driven by the movement of the Norwegian krone against the euro and its impact on the valuation of the put and call option relating to Kiona.

Speaker #4: In fact, we have been looking to add this specific technology to our portfolio for some time, and we're very happy to have found an agreement with an outstanding company like Coates.

Speaker #4: As you know, very well, we provide a number of solutions for increasing humidity in industrial as well as in indoor quality applications. And we were basically missing the reverse to complete our humidity control offering that is dehumidification.

Speaker #1: The line companies consolidated under the equity method, mainly reflects the group's shares of the result of pre-Polska. The effective tax rate of the period was 23.1%, broadly in line with last year.

Speaker #4: The technology of Coates absorption dehumidification uses a specific material to absorb moisture from the air, and compared to alternative solutions like using a refrigeration circuit, it is much more precise and can also work at very low temperatures.

Francesco Nalini: The technology of Cotes, absorption dehumidification, uses a specific material to absorb moisture from the air. Compared to alternative solutions, like using a refrigeration circuit, it's much more precise and can work also with very low temperatures. It's therefore particularly suitable for many industrial processes, which is where we'll have very strong cross-selling synergies to begin with, having had for a long time customers asking for a complete solution and not just humidification. Many industrial processes require not only precise temperature control, but also strict humidity management to ensure product quality, process reliability, energy efficiency, and regulatory compliance. Examples include pharmaceutical, food processing, cold storage facilities, battery manufacturing, and other critical industrial environments requiring very low dew point conditions. These are all areas where Cotes has already developed proven expertise.

Speaker #1: Overall, the group reported a net profit of 45.7 million, for the first half of 2026, a significant increase compared with 25.5 million of the same period of 2025.

Speaker #4: It's therefore particularly suitable for many industrial processes, which is where we'll have very strong cross-selling synergies to begin with, having had for a long time customers asking for a complete solution and not just humidification.

Speaker #1: Moving to slide 8, this shows the evolution of the group net financial position during the first half of 2026. Funds from operation was strong, amounting to 67.4 million, compared with 48 million in the same period of last year.

Speaker #4: Many industrial processes require not only precise temperature control but also strict humidity management to ensure product quality process reliability energy efficiency and regulatory compliance.

Speaker #4: Examples include pharmaceutical, food processing, cold storage facilities, battery manufacturing, and other critical industrial environments requiring very low dew point conditions. These are all areas where Carel has already developed proven expertise.

Speaker #1: Net working capital absorbed 32.2 million of cash. This was due to a combination of seasonal trends strong business growth and the temporary increase in safety stock of certain components in response to market supply tensions.

Speaker #4: But Coates is also the European leader in dehumidification for offshore wind turbines, thanks to proprietary technology that can remove salt in addition to water.

Francesco Nalini: Cotes is also the European leader in dehumidification for offshore wind turbines, thanks to proprietary technology that can remove salt in addition to water. We have therefore now access to the offshore wind sector, a market where Carel had very limited exposure before the transaction, and where we see attractive long-term fundamentals driven by the global energy transition and the necessity for Europe to develop strategic energy independence. We believe this specific proprietary technology from Cotes is also very interesting in order to explore a number of other applications like marine and defense. The company itself was founded in 1986 and is headquartered in Denmark with a manufacturing facility in Poland. The expected revenues for 2026 are approximately EUR 31.5 million, with approximately EUR 6.5 million EBITDA and 120 employees. The enterprise value for the transaction is EUR 56 million, corresponding to approximately 9 times 2026 EBITDA.

Speaker #1: During the second quarter, the group paid dividend of approximately 21 million, and 17.4 million earned out relating to SEB. Despite this cash outflow, the group closed first half of 2026 with a net cash position of 7.1 million.

Speaker #4: We have therefore now access to the offshore wind sector, a market where Carel had very limited exposure before the transaction and where we see attractive long-term fundamentals, driven by the global energy transition and the necessity for Europe to develop strategic energy independence.

Speaker #1: I will now hand back to Francesco to continue with the presentation.

Speaker #4: We believe this specific proprietary technology from Coates is also very interesting to explore for a number of other applications, like marine and defense.

Speaker #2: Thank you, Nicola. So here on page 9 for the closing remarks, with almost 200 million in revenues, this has been a record quarter after an already very strong Q1.

Speaker #4: The company itself was founded in 1986 and is at quarter in Denmark with a manufacturing facility in Poland. The expected revenues for 2026 are approximately 31.5 million euros with approximately 6.5 million EBITDA and 120 employees.

Speaker #2: In the first half, we grew organically by 23% with a great balance in the portfolio since all business verticals and all regions grew double digits.

Speaker #2: In particular, in the second quarter, we had an expected acceleration in refrigeration driven also by our capability to ride the structural technological transition taking place in the US.

Speaker #4: The enterprise value for the transaction is 56 million euros corresponding to approximately nine times 2026 EBITDA. The closing is expected during Q3 after the clearance of some customary regulatory approvals.

Francesco Nalini: The closing is expected during Q3 after the clearance of some customary regulatory approvals. I move to page seven and leave the stage to Nicola for the items below EBITDA.

Speaker #2: This led to strong operating leverage with an EBITDA margin in the six months of 22.5%, up 350 basis points over the first half of 2025.

Speaker #4: And I move to page seven and leave the stage to Nicola for the items below EBITDA.

Speaker #2: In this quarter, we signed the acquisition of Coates, adding a very complementary missing technology to our value proposition, and we continue to look for additional value-creating opportunities.

Speaker #1: Thank you, Francesco. Slide seven provides a bridge from the group's EBITDA to net profit. DNA was broadly in line with previous year. The amount includes 5.6 million of depreciation amortization arising from purchase price allocations.

[Company Representative] (Carel Industries): Thank you, Francesco. Slide seven provides a bridge from the group's EBITDA to net profit. D&A was broadly in line with previous year. The amount includes EUR 5.6 million of depreciation amortization arising from purchase price allocation. Net financial charges decreased compared with last year, mainly thanks to the improvement in the average net financial position over the period. The year-on-year change in foreign exchange result was mainly driven by the movement of the Norwegian krone against the euro and its impact on the valuation of the put and call option relating to Kiona. The line companies consolidated under the equity method mainly reflects the group's shares of the result of Kriposca. The effective tax rate of the period was 23.1%, broadly in line with last year.

Nicola Biondo: Thank you, Francesco. Slide seven provides a bridge from the group's EBITDA to net profit. D&A was broadly in line with previous year. The amount includes EUR 5.6 million of depreciation amortization arising from purchase price allocation. Net financial charges decreased compared with last year, mainly thanks to the improvement in the average net financial position over the period. The year-on-year change in foreign exchange result was mainly driven by the movement of the Norwegian krone against the euro and its impact on the valuation of the put and call option relating to Kiona. The line companies consolidated under the equity method mainly reflects the group's shares of the result of Kriposca. The effective tax rate of the period was 23.1%, broadly in line with last year.

Speaker #2: In terms of scenario, we continue to see on the market similar trends to those observed in the last few quarters with a robust order intake, even if we must be mindful that, as you know, the visibility in our business model is structurally very limited, also because the external environment remains challenging with geopolitical tensions and macro volatility.

Speaker #1: Net financial charges decreased compared with last year, mainly thanks to the improvement in the average net financial position over the period. The year-on-year change in the foreign exchange result was mainly driven by the movement of the Norwegian krone against the euro and its impact on the valuation of the put and call option relating to Kiona.

Speaker #2: To conclude, all things considered, we expect another very positive performance in Q3 2026, with consolidated revenues close to 190 million euros, without including any possible contribution from Coates.

Speaker #1: The line 'companies consolidated under the equity method' mainly reflects the Group's share of the result of pre-Polska. The effective tax rate for the period was 23.1%, broadly in line with last year.

Speaker #2: And corresponding to a growth of approximately 20% over Q3 2025. Thank you very much for your attention. We are now at your disposal for any questions you might have.

Speaker #3: Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone.

[Company Representative] (Carel Industries): Overall, the group reported a net profit of EUR 45.7 million for H1 2026, a significant increase compared with EUR 25.5 million in the same period of 2025. Moving to slide eight, this shows the evolution of the group net financial position during H1 2026. Funds from operation was strong, amounting to EUR 67.4 million, compared with EUR 48 million in the same period of last year. Net working capital absorbed EUR 32.2 million of cash. This was due to a combination of seasonal trends, strong business growth, and the temporary increase in safety stock of certain components in response to market supply tensions. During Q2, the group paid dividend of approximately EUR 21 million and EUR 17.4 million earnout relating to Senva. Despite this cash outflow, the group closed H1 2026 with a net cash position of EUR 7.1 million.

Speaker #1: Overall, the group reported a net profit of €45.7 million for the first half of 2026, a significant increase compared with €25.5 million in the same period of 2025.

Speaker #3: To remove your question, please press star and two. Please pick up the receiver when asking questions. The first question comes from Niccolò Storer of Kepler Chevaux.

Speaker #4: Yeah. Good afternoon. Thanks for taking my question. Ciao, Francesco, and congratulations on this very strong startup and great questions. I made the first one is linked to refrigeration.

Speaker #1: Moving to slide eight, this shows the evolution of the Group net financial position during the first half of 2026. Funds from operations were strong, amounting to €67.4 million compared with €48 million in the same period last year.

Speaker #4: I was trying to quantify which was in Q2 the growth excluding the very strong performance of North America, and ending up in something in between 15 and 20 percent.

Speaker #1: Net working capital absorbed €32.2 million of cash. This was due to a combination of seasonal trends, strong business growth, and the temporary increase in safety stock of certain components in response to market supply intentions.

Speaker #4: Could this be a correct number? Second question is about your and maybe, sorry, linked to this question on refrigeration I was wondering if the strength that you have shown you have been showing in the US is linked to specific projects with just a few counterparties or if it is more, let's say, broad-based.

Speaker #1: During the second quarter, the group paid a dividend of approximately €21 million and a €17.4 million earn-out relating to SEB. Despite this cash outflow, the group closed the first half of 2026 with a net cash position of €7.1 million.

Speaker #4: Second question is about your guidance in the press release about strengthening of certain verticals. If you can elaborate on that. And my last question is about the commercial business.

Speaker #1: I will now hand back to Francesco to continue with the presentation.

[Company Representative] (Carel Industries): I will now hand back to Francesco to continue with the presentation.

Speaker #2: Thank you, Nicola. So, here on page nine, for the closing remarks: with almost €200 million in revenues, this has been a record quarter after an already very strong Q1.

Francesco Nalini: Thank you, Nicola. Here on page nine for the closing remarks. With almost EUR 200 million in revenues, this has been a record quarter after an already very strong Q1. In the H1, we grew organically by 23% with a great balance in the portfolio since all business verticals in all regions grew double digits. In particular, in the Q2, we had an expected acceleration in refrigeration, driven also by our capability to ride the structural technological transition taking place in the US. It led to strong operating leverage with an EBITDA margin in the H1 of 22.5%, up 350 basis points over the H1 of 2025. In this quarter, we signed the acquisition of Cotes, adding a very complementary missing technology to our value proposition, and we continue to look for additional value-creating opportunities.

Speaker #4: I'm kind of reading through the lines that this portion of the business could be somewhat softening. Is this a right interpretation? In particular, I'm thinking about the EMEA region, and if yes, why do you think so?

Speaker #2: In the first half, we grew organically by 23% with a great balance in the portfolio since all business verticals and all regions grew double digits.

Speaker #4: Thank you.

Speaker #2: In particular, in the second quarter, we had an expected acceleration in refrigeration, driven also by our capability to ride the structural technological transition taking place in the U.S.

Speaker #2: Okay. Thank you. Thank you, Niccolò. Ciao. So concerning refrigeration, growth, if you if we exclude North America, growth in refrigeration would have been in the high teens.

Speaker #2: This led to strong operating leverage with an EBITDA margin in the six months of 22.5% up 350 basis points over the first half of 2025.

Speaker #2: Let's say. Then again, if we look if we look at North America, we are let's say, we are having a very important success in the execution of our strategy for refrigeration because in the last few years, we have been strengthening very much our organization for promotion and support of this technologies in the retail space in North America.

Speaker #2: In terms of scenario, we continue to see on the market similar trends to those observed in the last few quarters, with a robust order intake. Even if we must be mindful that, as you know, the visibility in our business model is structurally very limited, also because the external environment remains challenging with geopolitical tensions and macro volatility.

Francesco Nalini: In terms of scenario, we continue to see on the market similar trends to those observed in the last few quarters with a robust order intake, even if we must be mindful that, as you know, the visibility in our business model is structurally very limited also because the external environment remains challenging with geopolitical tensions and macro volatility. To conclude, all things considered, we expect another very positive performance in Q3 2026, with consolidated revenues close to EUR 190 million without including any possible contribution from Cotes, and corresponding to a growth of approximately 20% over Q3 2025. Thank you very much for your attention. We are now at your disposal for any questions you might have.

Speaker #2: And this and this is coupled with the fact that finally the market seems ready for a number of reasons to introduce our technologies. We are working with several supermarket chains.

Speaker #2: To conclude, all things considered, we expect another very positive performance in Q3 2026 with consolidated revenues close to €190 million, without including any possible contribution from Coates.

Speaker #2: Of course, some project weights are bigger than others, but we passed the let's say, the trial phase with some significant supermarket chains, and now we are starting the rollout, which is why we see the materialization of significant growth figures.

Speaker #2: And corresponding to a growth of approximately 20% over Q3 2025. Thank you very much for your attention. We are now at your disposal for any questions you might have.

Speaker #2: But we have several others in the pipeline. So it's not I mean, of course, it starts from a few, then we have others which are smaller, but we have a pipeline, and we're very optimistic about this technology.

Speaker #3: Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone.

Operator: Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove your question, please press star and two. Please pick up the receiver when asking questions. The first question comes from Niccolò Storer of Kepler Cheuvreux.

Speaker #2: And one thing which is very interesting, in my opinion, is that, for example, we're having a very good success with the introduction of variable speed compressors on board refrigerated cabinets, which is what we call the decentralized architecture.

Speaker #3: To remove your question, please press star and two. Please pick up the receiver when asking questions. The first question comes from Niccolò Storer of Kepler Cheuvreux.

Speaker #2: This technology is in the rest of the world, it's typically confined to convenience stores because typically, of course, by having a compressor on board each cabinet, it tends to be more expensive, when the number of cabinets grows.

Speaker #2: Yeah, good afternoon. Thanks for taking my question. Ciao, Francesco, and congratulations on this very strong set of results. I have three questions, if I may.

Niccolò Storer: Good afternoon. Thanks for taking my question. Ciao, Francesco, and congratulations on this very strong set of results. I have three questions, if I may. The first one is linked to refrigeration. I was trying to quantify, which was in Q2, the growth, excluding the very strong performance of North America. I'm ending up in something in between 15% and 20%. Could this be a correct number? Second question is about your linked to this question on refrigeration, I was wondering if the strength that you have been showing in the US is linked to specific projects with just a few counterparties, or if it is more let's say, book based. Second question is about your guidance. In the press release, you talk about further strengthening of certain verticals, if you can elaborate on that. My last question is about the commercial business.

Speaker #2: The first one is linked to refrigeration. I was trying to quantify what was, in Q2, the growth excluding the very strong performance of North America, and ending up with something in between 15% and 20%.

Speaker #2: But in America, this technology is extremely attractive, beyond many other technological benefits, also because it allows for redundancy and continuity of operations in the store, which is particularly important in that region.

Speaker #2: Could this be a correct number? Second question is about—your, and maybe, sorry, linked to this question on refrigeration—I was wondering if the strength that you have shown, you have been showing in the US, is linked to specific projects with just a few counterparties, or if it is more, let's say, broad-based.

Speaker #2: Because, of course, with the decentralized architecture, it's possible to refurbish or move or I mean, operate on individual cabinets without shutting down the entire store.

Speaker #2: And there is, of course, much higher redundancy in terms of installation. And so this is very, very appreciated in the US. And this goes over the fact that this technology is more expensive as the number of cabinets grows.

Speaker #2: Second question is about your guidance in the press release you you talk about farther strengthening of certain verticals if you can elaborate on that.

Speaker #2: And for us, of course, this is a very big opportunity because the value that we sell, per store, is much higher. At the same time, this is also a very good opportunity to introduce the CO2 technology because by having this modules, using CO2 already installed in the manufactured in the factory, they require less technological competence from the installers on the field, which is good in an area where the competence and the level of know-how on CO2 tends to be let's say, less widespread than in Europe.

Speaker #2: And my last question is about the commercial business. I'm kind of reading between the lines that this portion of the business could be somewhat softening.

Niccolò Storer: I'm kind of reading through the lines that this portion of the business could be somewhat softening. Is this a right interpretation? In particular, I'm thinking about the EMEA region, and if yes, why you think is so? Thank you.

Speaker #2: Is this a right interpretation in particular and thinking about the EMEA region and if yes why you think so? Thank you.

Speaker #2: So sorry, I took the opportunity to emphasize the benefits that we are providing with this technology and the reason why it's also providing a lot of value.

Speaker #1: Okay. Thank you. Thank you, Niccolò. Ciao. So, concerning refrigeration growth, if we exclude North America, growth in refrigeration would have been in the high teens.

Francesco Nalini: Thank you, Nicolo. Ciao. Concerning refrigeration growth, if we exclude North America, growth in refrigeration would have been in the high teens, let's say. Again, if we look in North America, let's say we are having a very important success in the execution of our strategy for refrigeration, because in the last few years, we have been strengthening very much our organization for promotion and support of these technologies in the retail space in North America. This is coupled with the fact that finally the market seems ready for a number of reasons to introduce our technologies. We are working with several supermarket chains. Of course, some project waves are bigger than others, but we passed the, let's say, the trial phase with some significant supermarket chains, and now we are starting the rollout, which is why we see the materialization of significant growth figures.

Speaker #2: Of course, we have a number of projects and many projects in the pipeline. So we believe this is a very good opportunity and could be pretty long-lasting.

Speaker #1: Let's say then again if we look if we look at North America we are let's say we are having a very important success in the execution of our strategy for refrigeration because in the last few years we have been strengthening very much our organization for promotion and support of this of this technologies in in in the retail space in North America and this and and this is coupled with the fact that finally the market seems ready for a number of reasons to introduce our technologies.

Speaker #2: Concerning commercial, actually, it's not slowing down. It's slightly accelerating globally. And it's very strong. For example, in North America as well. And that's also related to the inventorization.

Speaker #2: So to the introduction of the variable speed compressor technology in commercial. So commercial in the US is performing particularly well, but it's going very well also in Asia-Pacific.

Speaker #2: The in EMEA, it's softer. It's in the low single-digit range, but it's not at the accelerating compared to Q1. On the other hand, it's slightly accelerating.

Speaker #1: We are working with several supermarket chains. Of course, some project waves are bigger than others. But we passed, let's say, the trial phase with some significant supermarket chains, and now we are starting the rollout, which is why we see the materialization of significant growth figures.

Speaker #2: So we don't see a softening of commercial.

Speaker #4: And sorry, about the guidance and the vertical strengthening.

Speaker #2: Sorry. Could you repeat the question, please, Niccolò? Sorry.

Speaker #1: But we have several others in the pipeline. So it's not—I mean, of course it starts from a few, then we have others which are smaller, but we have a pipeline and we're very optimistic about this technology.

Francesco Nalini: We have several others in the pipeline. I mean, of course it starts from a few, then we have others which are smaller, but we have a pipeline, and we're very optimistic about this technology. One thing which is very interesting, in my opinion, is that, for example, we're having a very good success with the introduction of variable speed compressors onboard refrigerated cabinets, which is what we call the decentralized architecture.

Speaker #4: I mean, in the press release, you're writing that you see signals of further strengthening in certain verticals if you can. Elaborate that on refer to Q3 guidance.

Speaker #1: One thing which is very interesting, in my opinion, is that, for example, we're having very good success with the introduction of variable speed compressors on board refrigerated cabinets, which is what we call the decentralized architecture.

Speaker #2: Well, in we see let's say, a strengthening continuous strengthening in refrigeration in the US. And we also which is the structural trend the structural trend I mentioned, we also see in the US, in particular, the introduction of the variable speed compressor.

Speaker #1: This technology is, in the rest of the world, typically confined to convenience stores because, typically, of course, by having a compressor on board each cabinet, it tends to be more expensive when the number of cabinets grows. But in America, this technology is extremely attractive, beyond many other technological benefits.

Francesco Nalini: This technology, in the rest of the world, is typically confined to convenience stores because typically, of course, by having a compressor onboard each cabinet, it tends to be more expensive when the number of cabinets grows. In America, this technology is extremely attractive, beyond the many other technological benefits, also because it allows for redundancy and continuity of operations in the store, which is particularly important in that region. Of course, with a decentralized architecture, it's possible to refurbish or move or operate on individual cabinets without shutting down the entire store. There is, of course, much higher redundancy in terms of installation. This is very appreciated in the US. This goes over the fact that this technology is more expensive as the number of cabinets grows.

Speaker #2: And then in these are more structural trends rather than short-term trends. And then in Europe, we are seeing the strengthening of data centers. It's picking up.

Speaker #1: Also because it allows for redundancy and continuity of operations in the store, which is particularly important in that region. Because, of course, with the decentralized architecture, it's possible to refurbish or move or, I mean, operate on individual cabinets without shutting down the entire store.

Speaker #2: And also of industrials. Also the industrial application is strengthening in Europe, in EMEA.

Speaker #4: Perfect. Thank you, Francesco.

Speaker #2: Thank you.

Speaker #1: The next question is from Christian Hinderaker of Goldman Sachs.

Speaker #1: And there is, of course, much higher redundancy in terms of installation. So this is very, very appreciated in the US, and this goes over the fact that this technology is more expensive as the number of cabinets grows.

Speaker #5: Good afternoon, everyone, and thanks for the time. I want to start on supply chain dynamics, if I may. Vertiv and some others have flagged some issues in revenue phasing related to congestion in the supply chain.

Speaker #5: And particularly in the data center vertical. And I guess curious to hear what you're seeing in terms of the supply side dynamics. I recall maybe last half that you were stocking up on some products ahead of a growth spurt.

Speaker #1: Growth. For us, of course, this is a very big opportunity because the value that we sell per store is much higher. At the same time, this is also a very good opportunity to introduce the CO2 technology, because by having these modules using CO2 already installed—already, let's say, manufactured in the factory—they require less technological competence from the installers in the field, which is good in an area where the competence and the level of know-how on CO2 tends to be, let's say, less widespread than in Europe.

Francesco Nalini: For us, of course, this is a very big opportunity because the value that we sell per store is much higher. At the same time, this is also a very good opportunity to introduce the CO2 technology, because by having these modules Using CO2 already installed, already let's say, manufactured in the factory, they require less technological competence from the installers on the field, which is good in an area where the competence and the level of know-how on CO2 tends to be, let's say, less widespread than in Europe. Sorry, I took the opportunity to emphasize the benefits we are providing with this technology, and the reason why it's also providing a lot of value. Of course, we have a number of projects and many projects in the pipeline. We believe this is a very good opportunity and could be pretty long-lasting.

Speaker #5: So yeah, interested in the latest there.

Speaker #2: Yeah, sure. Hi, Christian. So the definitely there are some tensions on some categories of raw materials like memories in particular and relays. And that is related, of course, to the data center supply chain.

Speaker #1: So, sorry. I took the opportunity to emphasize the benefits that we're providing with this technology, and the reason why it's also providing a lot of value.

Speaker #2: Even because we use chips of memories of industrial category, but of course, the capacity of the manufacturer is moving towards the more sophisticated memories used for data centers.

Speaker #1: Of course we have a number of projects and and and many projects in the in the in the pipeline so we believe this is a very good opportunity and could be pretty long lasting.

Speaker #2: We have been seen coming this risk for several quarters now. And we have been stocking up and increasing our stock of memories, but also relays.

Speaker #1: Concerning commercial, actually it's not slowing down; it's slightly accelerating globally. And it's very strong, for example, in North America as well. And that's also related to the inverterization.

Francesco Nalini: Concerning commercial, actually, it's not slowing down. It's slightly accelerating globally. It's very strong, for example, in North America as well, and that's also related to the inverterization, so to the introduction of the variable speed compressor technology in commercial. Commercial in the US is performing particularly well, but it's going very well also in Asia Pacific. In EMEA, it's softer. It's in the low single digits range, but it's not decelerating compared to Q1. On the other end, it's slightly accelerating. We don't see a softening of commercial.

Speaker #2: For several quarters now. You can see that also reflected in the working capital, which is going up. And that's specifically because we are increasing the strategic stock levels of some components, in particular, memories.

Speaker #1: So, to the introduction of the variable speed compressor technology in commercial. Commercial in the US is performing particularly well, but it's going very well also in Asia Pacific.

Speaker #2: So for this reason, considering that we have been stocking up and placing long-term orders now for almost one year, we do not face any significant bottlenecks or constraints in terms of production capability.

Speaker #1: In EMEA, it's softer. It's in the low single digits range, but it's not accelerating compared to Q1. On the other hand, it's slightly accelerating.

Speaker #1: So we don't see a softening of commercial.

Speaker #2: We do see cost increases. So we have some headwinds in terms of the cost that we are, of course, managing through cost discipline, through price selective price adjustments, where the cost increase the most.

Speaker #2: And sorry about the guidance and the vertical strengthening.

Niccolò Storer: Sorry, about the guidance and the vertical strengthening.

Speaker #1: Sorry, could you repeat the question, please, Niccolò? Sorry.

Francesco Nalini: Sorry, could you repeat the question, please, Niccolò? Sorry, I missed that.

Speaker #2: I mean, in the press release you're writing that you see signals of further strengthening in certain verticals. If you can elaborate on that and refer to Q3 guidance.

Niccolò Storer: In the press release, you are writing that you see signals of further strengthening in certain verticals. If you can elaborate that on, refer to Q3 guidance.

Speaker #2: But we do not face any bottlenecks in terms of production. And one of the reasons again is that we have been preparing for this for almost one year by stocking up.

Speaker #1: Well in in we see we see let's say a strengthening a continuous strengthening in in refrigeration in the US. And we also which is which is the structural trend the structural trend I mentioned.

Francesco Nalini: Well, we see, let's say, a strengthening, a continuous strengthening in refrigeration in the US, which is the structural trend I mentioned. We also see in the US in particular, the introduction of the variable speed compressor. These are more structural trends rather than short-term trends. In Europe, we are seeing the strengthening of data centers. The level of investment in data centers in Europe is picking up, and also the industrial application is strengthening in Europe, in EMEA.

Speaker #2: And that is basically the reason why working capital has been increasing in the last few quarters.

Speaker #5: Thank you, Francesco. Maybe sticking with the stocking theme, I guess curious in terms of the residential HVAC market where you're supplying components into OEMs, whether you think demand there is reflecting a sort of end demand profile, i.e., one-for-one or whether the OEMs themselves are looking to stock up on components that they receive from you.

Speaker #1: We also see in the US in particular the introduction of the the variable speed compressor. And then in these are more structural trends rather than short term short term trends.

Speaker #1: And then, in Europe, we are seeing the strengthening of data centers. So the level of investment in data centers in Europe is picking up, and also that of industrials.

Speaker #2: Well, no. We believe that there has been some restocking, let's say, probably a couple of quarters ago, mainly when the market probably in the second half of last year, there has been some restocking effect because the OEMs had to recreate the stock that was basically very much reduced during 2024.

Speaker #1: Also, the industrial application is strengthening in Europe, in EMEA.

Speaker #2: Perfect. Thank you Francesco.

Niccolò Storer: Perfect. Thank you, Francesco.

Speaker #1: Thank you.

Francesco Nalini: Thank you.

Speaker #3: The next question is from Christian Hinderaker of Goldman Sachs.

Operator: The next question is from Christian Hinderaker of Goldman Sachs.

Speaker #2: But since two, three quarters, in my opinion, now we are very closely training end demand. The stock levels are pretty normalized now. And I don't see in this moment there are significantly stocking up.

Speaker #4: Good afternoon, everyone, and thanks for your time. I want to start on supply chain dynamics, if I may. Vertiv and some others have flagged some issues in revenue phasing related to congestion in the supply chain, and particularly in the data center vertical.

Christian Hinderaker: Good afternoon, everyone. Thanks for the time. I want to start on supply chain dynamics, if I may. Vertiv and some others have flagged some issues in revenue phasing related to congestion in the supply chain, particularly in the data center vertical. I guess, curious to hear what you are seeing in terms of the supply side dynamics. I recall maybe last half that you were stocking up on some products ahead of a growth spurt. Yeah, interested in the latest there.

Speaker #2: So they have been stocking up, I would say, last year to some extent, but now we are following the end demand.

Speaker #4: And I guess I'm curious to hear what you're seeing in terms of the supply side dynamics. I recall maybe last half that you were stocking up on some products ahead of a growth spurt.

Speaker #5: Thank you. And then third and finally, obviously, you had a very strong operating leverage in the quarter with the 23.2% margin. On a very strong growth rate, you're applying a slightly slower growth rate in the guidance for Q3, but still 20%.

Speaker #4: So, yeah, interested in the latest there.

Speaker #1: Yeah, sure. Hi Christian. So, definitely there are some tensions on some categories of raw materials, like memories in particular, and relays.

Francesco Nalini: Yeah, sure. Hi, Christian. Definitely, there are some tensions on some categories of raw materials like memories in particular and relays. That is related, of course, to the data center supply chain, because we use chips of memories of industrial category. Of course, the capacity of the manufacturer is moving towards the more sophisticated memories used for data centers. We have been seeing coming this risk for several quarters now, and we have been stocking up and increasing our safety stocks of, in particular, memories, but also relays for several quarters now. You can see that also reflected in the working capital, which is going up, and that's specifically because we are increasing the strategic stock levels of some components, in particular, memories.

Speaker #5: I guess we should take from that that it should be a quarter strong margin. Is that fair?

Speaker #2: Okay. Well, yeah, the guidance for Q3 is still pretty strong. It's 20%, which is slightly less than Q2, but please consider that we have a seasonal effect because we have August where many customers close in Europe.

Speaker #1: And that is related of course to the to the data center supply chain even because we use chips of indust memories of industrial category but of course the the the the capacity of the manufacturer is moving towards the more more sophisticated memories used for for data centers.

Speaker #2: So that's the reason why in absolute terms, let's say, the turnover for Q3 is expected to be slightly lower than Q2. So that's a seasonal effect.

Speaker #1: We have been seeing this risk coming for several quarters now, and we have been stocking up and increasing our safety stocks of, in particular, memories, but also relays for several quarters now.

Speaker #2: The in terms of profitability, it's profitability always depends on the real level of growth that we achieve. Of course, with the 20% growth, we are above our mid-cycle guidance.

Speaker #1: You can see that also reflected in the working capital, which is going up, and that's specifically because we are increasing the strategic stock levels of some, some components—in particular, memories.

Speaker #2: So that is definitely supportive for the new level of profitability. At the same time, we do have some headwinds on the raw materials that are manageable because, I mean, we're talking about some categories of raw materials.

Speaker #1: So for this reason considering that we have been stocking up and and and placing long term orders now for almost one year we do not face any significant bottlenecks or constraints in terms of production capability.

Francesco Nalini: For this reason, considering that we have been stocking up and placing long-term orders now for almost one year, we do not face any significant bottlenecks or constraints in terms of production capability. We do see cost increases. We have some headwinds in terms of the cost that we are, of course, managing through cost discipline and through price selective price adjustments, where the cost increase the most. We do not face any bottlenecks in terms of production. One of the reasons, again, is that we have been preparing for this for almost one year by stocking up, and that is basically the reason why working capital has been increasing in the last few quarters.

Speaker #2: And overall, they also have let's say, a not huge weight on the bill of materials of our products. So we're going to manage those.

Speaker #2: So in general, yes, there is reason to be optimistic about a good profitability level also for the next quarter, I would say.

Speaker #1: We do see cost increases so we we have some headwinds in terms of the cost that we are of course managing through through cost discipline and through price selective price adjustments where where the cost increase the most.

Speaker #5: Thank you very much.

Speaker #1: The next question is from Alessandro Tortora, Mediobanca.

Speaker #2: Yes, hi. Good afternoon. So Francesco, I have, let's say, three questions. Okay. The first one is you mentioned or you briefly described the acquisition of Cortes.

Speaker #1: But we do not face any bottlenecks in terms of production, and one of the reasons, again, is that we have been preparing for this for almost one year by stocking up, and that is basically the reason why working capital has been increasing in the last few quarters.

Speaker #2: Considering that Cortes is a kind of market leader into the wind of shore business and probably the bulk of their sales they may make are related to these vertical.

Speaker #4: Thank you, Francesco. Maybe sticking with the stocking theme, I guess I'm curious in terms of the residential HVAC market, where you're supplying components into OEMs, whether you think demand there is reflecting.

Christian Hinderaker: Thank you, Francesco. Maybe sticking with the stocking theme, I guess curious in terms of the residential HVAC market where you are supplying components into OEMs, whether you think demand there is reflecting a sort of end demand profile, i.e., one for one, or whether the OEMs themselves are looking to stock up on components that they receive from you?

Speaker #2: Can you share with us, let's say, your expectation? You mentioned these strong potential in terms of commercial synergies now that you have also this technology, the dehumidification.

Speaker #4: Sort of end demand profile i.e. one for one or or whether the OEMs themselves are looking to to stock up on components that they receive from you.

Speaker #2: Can you give us a sense of which kind of reasonable target you see in 5 to 10 years for this company? Because in my understanding.

Speaker #1: Well no we believe that there has been some restocking let's say probably a couple of quarters ago mainly when when the market probably in the second half of last year there there has been some restocking effect because the the OEMs had to recreate the stock that was basically very much reduced during 2024.

Francesco Nalini: Well, no. We believe that there has been some restocking, let's say, probably a couple of quarters ago, mainly when the market. Probably in the H2 of last year, there has been some restocking effect because the OEMs had to recreate the stock that was basically very much reduced during 2024. Since two, three quarters, in my opinion now, we are very closely trailing end the demand. The stock levels are pretty normalized now, I don't see in this moment they are significantly stocking up. They have been stocking up, I would say last year to some extent, but now we're following the end demand.

Speaker #2: The industrial application for them. So this is the first question. Thanks.

Speaker #5: Ciao Alessandro. Yes, absolutely. The company has under

Speaker #2: exploited the industrial vertical for a number of reasons. Mainly because it was very much focused on the offshore wind sector. They have been in the last few years, they went through a period when they were extremely strong in battery manufacturing, which is an industrial application.

Speaker #1: But since two, three quarters, in my opinion now we are very closely tracking end demand. The stock levels are pretty normalized now, and I don't see at this moment that there is significant restocking.

Speaker #1: So they have been stocking up I would say last year to some extent but now we are we're following following the end demand.

Speaker #2: Then there was a downturn strong downturn in that market specifically in Europe in 2024. And at the same time, they didn't create a proprietary sales.

Speaker #4: Thank you. And then third and and finally obviously you had a very strong operating leverage in in the quarter with the 23.2% margin. On a very strong growth rate you know you're applying a slightly slower growth rate in the guidance for Q3 but still 20%.

Christian Hinderaker: Thank you. Third and finally, obviously, you had a very strong operating leverage in the quarter with the 23.2% margin on a very strong growth rate. You're applying a slightly slower growth rate in the guidance for Q3, still 20%. I guess we should take from that it should be another quarter for strong margins. Is that fair?

Speaker #2: So definitely there is a huge potential there because we can leverage our sales network, which is already in the very same niches where this product can go.

Speaker #4: I guess we should take from that that it should be another quarter of strong margins. Is that fair?

Speaker #2: And selling very complementary products. So there is a very good potential for us to help Cortes grow very much this market. At the same time, they have a number of growth initiatives which are at an early stage, but are very promising in terms of exploration of new niches for the usage of this technology.

Speaker #1: Okay. Well yeah the guidance for Q3 is still pretty strong. It's it's 20% which is slightly less than Q2 but please consider that we have a seasonal effect because we have August where many many customers close in Europe.

Francesco Nalini: Well, the guidance for Q3 is still pretty strong. It's 20%, which is slightly less than Q2. Please consider that we have a seasonal effect because we have August where many customers close in Europe. That's the reason why, in absolute terms, let's say the turnover for Q3 is expected to be slightly lower than Q2. That's a seasonal effect. In terms of profitability always depends on the real level of growth that we achieve. Of course, with the 20% growth, we are above our mid-cycle guidance, so that is definitely supportive for a good level of profitability.

Speaker #1: So that's that's the reason why in in absolute terms let's say the turnover for Q3 is expected to be slightly lower than than Q2.

Speaker #2: In terms of the wind, the offshore wind sector, we believe that it's also been suffering in the last few years, but probably it will it has quite a good potential for the years to come.

Speaker #1: So that's a seasonal effect. The in terms of profitability you know it's it's profitability always depends on the real level of of growth that we achieve.

Speaker #2: And here we are going to explore how we can on the other hand, find the technological synergies with the rest of the Carrel offering because we believe that there is that potential.

Speaker #1: Of course with the 20% growth we are above our mid cycle guidance. So that is definitely supporting for a good level of profitability. At the same time we do have some some headwinds on the on the raw materials that are manageable because I mean we're talking about some categories of raw materials and overall they also have let's say a not huge weight on the bill of materials of our product.

Speaker #2: And the proprietary know-how, they have desalinization is extremely interesting from some applications in terms of coastal applications, marine defense, and so on. So they're really, really a number of potential very good opportunities that we look for with Cortes.

Francesco Nalini: At the same time, we do have some headwinds on the raw materials that are manageable because we're talking about some categories of raw materials, and overall, they also have, let's say, a not huge weight on the bill of materials of a product, we're going to manage those. In general, yes, there is a reason to be optimistic about a good profitability level also for the next quarter, I would say.

Speaker #2: Okay. Okay. Thanks. Understood. Then the second question is you mentioned several times the fact that you managed to keep the gross margin stable despite the tension you mentioned on the cost inflation side.

Speaker #1: So we're going to manage those. So, in general, yes, there is reason to be optimistic about a good profitability level also for the next quarter, I would say.

Speaker #4: Thank you very much.

Speaker #2: Also thanks to the mix and the contribution of digital services. Now, can you give us, let's say, a strategic update on Kiona? Because in my I recall that in the past, you mentioned yes, this 30% EBITDA margin, but also the company now going, let's say, outside Europe, probably also entering the US market, also linked to the refrigeration.

Christian Hinderaker: Thank you very much.

Speaker #3: The next question is from Alessandro Tortora of Mediobanca.

Operator: The next question is from Alessandro Tortora of Mediobanca.

Speaker #5: Yes hi good afternoon. So Francesco I have let's say three questions. Okay. The first one is you you mentioned or you briefly described the the acquisition of Cortes.

Alessandro Tortora: Yes. Hi, good afternoon. Ciao, Francesco. I have, let's say, three questions. The first one is, you mentioned or you briefly described the acquisition of Cotes. Considering that Cotes is a kind of now market leader into the wind offshore business and probably the bulk of their sales now, they make related to this vertical. Can you share with us, let's say, your expectation? You mentioned this strong potential in terms of commercial synergies now that you have also this technology, the dehumidification. Can you give us a sense of which kind of reasonable target you see in five to 10 years for this company? Because in my understanding, this is a company that has underexploited the industrial application for them. This is the first question. Thanks.

Speaker #5: Considering that Cortes is a is a kind of no market leader into the wind of shore business and probably the bulk of their sales no they they may they they make are related to these not these vertical.

Speaker #2: You mentioned before. So just to have an update on this because Kiona has the potential probably not to grow much more than what we saw in the past.

Speaker #5: Can you, can you, can you share with us, let's say, your expectation? Now, you mentioned these strong potentials in terms of commercial synergies, now that you also have this technology, the dehumidification.

Speaker #5: Yes, definitely. Well, Kiona is definitely is having a very good performance because it's growing double digits with, again, 30% EBITDA margin. So we're definitely happy about the result.

Speaker #5: Can you give us a sense of what kind of reasonable target you see in five to ten years for this company? Because, in my understanding, this is a company that has underexploited, you know, the industrial application for them.

Speaker #5: In terms of the strategy, as you correctly recall, we are finalizing the development of the specific solution for North America. Which will be starting to be deployed in towards the end of the year.

Speaker #5: So this is the first question. Thanks.

Speaker #1: Ciao Alessandro. Yes absolutely. The company has has under under exploited the industrial the industrial vertical for for for a number of reasons. Mainly because it was very much focused on the on the offshore wind sector.

Francesco Nalini: Ciao, Alessandro. Yes, absolutely. The company has underexploited the industrial vertical for a number of reasons. Mainly because it was very much focused on the offshore wind sector. In the last few years, they went through a period when they were extremely strong in battery manufacturing, which is an industrial application. There was a strong downturn in that market, specifically in Europe in 2024. At the same time, they didn't create a proprietary sales network because they rely on partners for those applications. Definitely there is a huge potential there because we can leverage our sales network, which is already in the very same niches where this product can go, and selling very complementary products. There is a very good potential for us to help Cotes grow very much this market.

Speaker #5: So it's still not visible in the revenues, but there is a very big potential because it's tightly linked to our hardware and, let's say, to the rest of the offering growth in the US.

Speaker #5: In the US in particular, it's absolutely expected by the food retail chains to have also a digital services provision connected to the sale of the equipment.

Speaker #1: They have been in the last few years they went through a period when they were extremely strong in battery manufacturing which is an industrial application.

Speaker #1: Then there was a downturn, a strong downturn, in that market, specifically in Europe, in 2024. And at the same time, they didn't create a proprietary sales network because they rely on partners for those applications.

Speaker #5: And that's why I mean, having Kiona has been is a boon for us because we can definitely adjust the offering, which is what we are doing now, and then start rolling out starting from the end of the year.

Speaker #1: So definitely there is a huge potential there because we can leverage our sales network which is already in the very same niches where this product can go.

Speaker #5: At the same time, from a commercial standpoint, we are in the process of staffing up some selected European subsidiaries to sales and growth of Kiona services.

Speaker #1: And selling very complementary products. So there is a very good potential for us to help Cortes grow very much in this market. At the same time, they have a number of growth initiatives which are at an early stage but are very promising in terms of exploration of new niches for the usage of this technology.

Speaker #5: And this is, let's say, as far as the commercial strategy is concerned. But then there is a very key technological strategy because Kiona is becoming a key part of our vision for software and algorithms looking forward.

Francesco Nalini: At the same time, they have a number of growth initiatives which are at an early stage, but are very promising in terms of exploration of new niches for the usage of this technology. In terms of the offshore wind sector, we believe that it's also been suffering in the last few years, but probably it has quite a good potential for the years to come. Here we are going to explore how we can, on the other hand, find the technological synergies with the rest of the Carel offering, because we believe that there is that potential. The proprietary know-how they have on desalination is extremely interesting from some applications in terms of coastal applications, marine, defense, and so on. There are really a number of potential very good opportunities that we look for with Cotes.

Speaker #1: In terms of the wind the offshore wind sector we believe that it's also been suffering in the last few years but probably it will it has quite a good potential for the years to come.

Speaker #5: If you recall, we basically our vision is to have algorithms that run in different layers. So from the cloud at the plant level and also on the edge inside the controllers within the pieces of equipment with the different layers that learn and reinforce each other.

Speaker #1: And here we are going to explore how we can on the other hand find the technological synergies with the rest of the Carel offering because we believe that there is that potential.

Speaker #5: And Kiona is definitely a key part of this. Of course, especially on the cloud side. And we're making very, very, very promising progresses on this front.

Speaker #1: And the proprietary know-how they have in desalination is extremely interesting for some applications, in terms of coastal applications, marine defense, and so on.

Speaker #5: We are discovering ways to extract a lot of value for our customers from these algorithms. And Kiona is definitely a key part of this.

Speaker #1: So they're really really a number of potential very good opportunities that that we look look for with with Cortes.

Speaker #5: So besides the commercial, let's say, deployment, which is of course very important, we are also integrating the Kiona platform inside our roadmap for developing the algorithms and the services.

Speaker #5: Okay. Okay. Thanks. Understood. Then the second question is you mentioned several times the fact that you you managed let's say to keep the gross margin stable despite not the tension you mentioned the on the cost inflation side.

Alessandro Tortora: Okay, thanks. Understood. The second question is, you mentioned several times the fact that you mentioned to keep the gross margin stable, despite all the inflation you mentioned on the cost inflation side. Also, thanks to this mix, and the contribution of digital services. Now, can you give us, let's say, a strategic update on Kiona? Because I recall that in the past you mentioned, yes, this 30% EBITDA margin, but also the company now going, let's say outside Europe, probably also entering the US market, also linked not only refrigeration growth potential, you mentioned before. Just have an update on this because really Kiona has the potential probably now to grow much more than what we saw in the past.

Speaker #5: So Kiona is definitely being from a technological standpoint, a key addition to our portfolio, both for the US, but also for our general vision for the technological roadmap.

Speaker #5: Also thanks to this mix and the contribution of digital services. Now can you give us let's say a strategic update on on Kiona because in my in no I I recall that in the past you mentioned yes this 30% EBITDA margin but also the company now going let's say outside Europe probably also entering the US market also linked no to the refrigeration growth potential.

Speaker #2: Okay. Last question. It's for Nicola. It may relate to the working capital comment and the strategic stock. You made before. So if we take, let's say, the first half absorption do you see that basically this is enough in terms of working capital absorption or considering, let's say, the sales performance of the group?

Speaker #5: No you mentioned before. So just to have an update on this because really Kiona has the potential probably not to grow much more than what we saw in the past.

Speaker #2: We may see, let's say, this year working capital level, let's say, going a little bit higher also in the coming quarters. And secondly, I recall it in the past that you were exporting many products, let's say, from Europe to the US, considering the huge demand.

Speaker #1: Yes, definitely. Well, Kiona is definitely having a very good performance because it's growing double digits with, again, 30% EBITDA margin. So we're definitely happy about the result.

Francesco Nalini: Well, Kiona is definitely having a very good performance because it's growing double digits with, again, 30% EBITDA margin. We're definitely happy about the result. In terms of the strategy, as you correctly recall, we are finalizing the development of the specific solution for North America, which will be starting to be deployed towards the end of the year. It's still not visible in the revenues, but there is a very big potential because it's tightly linked to our hardware and, let's say, to the rest of the offering growth in the US. In the US in particular, it's absolutely expected by the food retail chains to have also a digital services provision connected to the sale of the equipment.

Speaker #1: In terms of the strategy as you as you correctly recall we are finalizing the development of the specific solution for North America which will be starting to be deployed in towards the end of the year.

Speaker #2: Did you apply for any reimbursement of tariffs in the US? Thanks.

Speaker #5: Charlie Sandrin. So with reference to the networking capital. And so in terms of trade working capital, we are targeting to have for this year something around the 21% on sales.

Speaker #1: So it's it's still not visible in the revenues but there is a very big potential because it's tightly linked to our hardware and and let's say to the rest of the offering growth.

Speaker #1: In in in the US in the US in particular it's absolutely expected by the food retail chains to have also a digital services provision connected to the sale of the equipment.

Speaker #5: And so that is higher than last year level. It is something that we see not permanent, but just for this period of tension. And so in this moment, we are something around 21 and the expect to have the similar ratio for the end of the year.

Speaker #1: And and that's why I mean having Kiona has been is a boon for us because we can definitely adjust the offering which is what we are doing now and then start rolling out starting from the end of the year.

Francesco Nalini: That's why, having Kiona is a boom for us because we can definitely adjust the offering, which is what we are doing now, and then start rolling out starting from the end of the year. At the same time, from a commercial standpoint, we are in the process of starting up some selected European subsidiaries with people dedicated to the sales and growth of Kiona services. This is, let's say, as far as the commercial strategy is concerned. There is a very key technological strategy because Kiona is becoming a key part of our vision for software and algorithms looking forward. If you recall, basically our vision is to have algorithms that run in different layers.

Speaker #5: With improvement again when the situation will be more stable in the future. In terms of United States, we apply to have the reimbursement of part of the duties that we have paid the tariffs that we have paid to the US administration.

Speaker #1: At the same time, from a commercial standpoint, we are in the process of staffing up some selected European subsidiaries with people dedicated to the sales and growth of Kiona services.

Speaker #5: This amount was already collected by our subsidiary in the United States. For the moment, it was not already reflected in the profit and loss.

Speaker #1: And this is let's say as far as the commercial strategy is concerned but then there is a very key technological strategy because Kiona is becoming a key part of our vision for software and algorithms looking forward.

Speaker #5: We decided to have just a prudent approach, keeping it in as a balance sheet amount in order to understand the approach to have with this with the customer and even with mainly with the customer and the accounting treatment related.

Speaker #1: If you recall, basically our vision is to have algorithms that run in different layers: from the cloud, at the plant level, and also on the edge inside the controllers within the pieces of equipment. These are different layers that learn and reinforce each other.

Francesco Nalini: From the cloud at the plant level and also on the edge inside the controllers within the pieces of equipment, with the different layers that learn and reinforce each other. Kiona is definitely a key part of this, of course, especially on the cloud side. We're making very promising progresses on this front. We are discovering ways to extract a lot of value for our customers from these algorithms. Kiona is definitely a key part of this. Besides the commercial, let's say deployment, which is of course very important, we are also integrating the Kiona platform inside our roadmap for developing the algorithms and the services. Kiona is definitely being, from a technological standpoint, a key addition to our portfolio, both for the US but also for our general vision for the technological roadmap.

Speaker #2: Okay. Thanks.

Speaker #3: The next question comes from Natasha Brilliant of UBS.

Speaker #1: And Kiona is definitely a key part of this of course especially on the cloud side. And we're making very very very promising progresses on this on this front.

Speaker #4: Good afternoon. And thank you very much for taking my questions. I have three as well. So my first question is when we think about refrigeration in the EU and thinking about the regulations that come in by 2030, as we sit today, halfway through 2026, how far along do you think the industry is in meeting those regulations?

Speaker #1: We are discovering ways to extract a lot of value for our customers from these algorithms, and Kiona is definitely a key part of this.

Speaker #4: So in other words, do you think demand will remain at this sort of run rate in the coming years, or could it accelerate or even decelerate?

Speaker #1: So, besides the commercial deployment, which is of course very important, we are also integrating the Kiona platform into our roadmap for developing the algorithms and the services.

Speaker #4: That's my first question. The second question is just around the new facility in the US. So it comes online at the beginning of next year.

Speaker #1: So Kiona is definitely being a a from a technological standpoint a key addition to our to our portfolio both for the US but also for our general vision for the technological roadmap.

Speaker #4: And how much more capacity will that bring on board? And then my last question is on M&A that you said is back on the agenda.

Speaker #4: Can you just give us a sense of the pipeline? Are there lots of interesting assets? Any particular areas of focus? That would be very helpful.

Speaker #5: Okay, okay, thanks. And the last question—it's for Nicola. It may relate to the working capital comment and the strategic stock.

Alessandro Tortora: Thanks. The last question is for Nicola. It may relate to the working capital comment and the strategic stock you made before. If we take, let's say the H1 absorption, do you see that basically this is enough in terms of working capital absorption or considering, let's say the sales performance of the group? We may see, let's say this year, working capital level, let's say, going a little bit higher also in the coming quarters. Secondly, I recall it in the past that now you are exporting many products, let's say from Europe to the US, considering the huge demand. Did you apply for any reimbursement of tariffs in the US? Thanks.

Speaker #4: Thank you.

Speaker #5: Now you made you made before so if we take let's say the the first half no absorption do you see that basically this is enough in terms of working capital absorption or considering let's say the sales performance of the group we may see let's say this year working capital level let's say going a little bit higher also in the coming quarters.

Speaker #5: Okay. Good afternoon, Natasha. Thanks for the questions. So refrigeration in Europe, currently, the last figures report that the adoption or let's say the deployment of natural refrigerants in the stall base is around 35%.

Speaker #5: So there is still, let's say, 65% to go. In our opinion, what this regulation is bringing at this stage on the market is not necessarily an acceleration, but more a sustainment of the investment rates.

Speaker #5: And secondly I recall it in the past that no you you you were exporting many products let's say from Europe to the US considering the huge demand did you did you apply for any reimbursement of tariff in the US?

Speaker #5: So a stabilization of the investment rate. That we believe should continue for at least for a few years because again, we are just at 35% of the rollout.

Speaker #5: Thanks.

[Company Representative] (Carel Industries): Hi, Alessandro. With reference to the net working capital. In term of trade working capital, we are targeting to have, for this year, something around 21% of sales. That is higher than last year level. It is something that we see not permanent, but just for this period of tension. In this moment, we are something around 21, and expect to have the similar ratio for the end of the year with improvement again when the situation will be more stable in the future. In term of United States, we applied to have the reimbursement of part of the duties that were paid, the tariffs that were paid to the US administration. This amount was already collected by our subsidiary in the United States. For the moment, it was not already reflected in the profit and loss.

Speaker #1: Charlie Sandlin. So with reference to the network networking capital and so in term of trade working capital we are targeting to have for this year something around the 21% on sales.

Speaker #5: At the same time, of course, refrigeration is very much driven by a number of technological improvements that we are continuously developing and bringing to the market.

Speaker #5: For example, the last one, I just mentioned a few minutes ago, concerning algorithms that we are developing. That will be embedded in our newer generations of edge controllers, which will be extremely powerful and bring huge benefits to the market.

Speaker #1: And so that is higher than last year's level. It is something that we see as not permanent, but just for this period of tension. And so, at this moment, we are somewhere around 21, and we expect to have a similar ratio at the end of the year, with improvement again when the situation will be more stable in the future.

Speaker #5: So let's say there is for sure the momentum driven by the FGAS, but more in terms of stabilization rather than acceleration, it should continue for a few years because there's still the majority of the stores to go.

Speaker #1: In term of United States we applied to have the reimbursement of part of the duties that we have paid the tariffs that we have paid to the US administration.

Speaker #5: But then the refrigeration market is a market that is very much driven by performance improvements because the energy cost for supermarket chains is very relevant because also there's an issue of continuity of operations, of service, and there's the temperature going higher and higher.

Speaker #1: This amount was already collected by our subsidiary in the United States. For the moment, it was not yet reflected in the profit and loss.

Speaker #1: It we decided to have just a prudent approach keeping it in as a as a balance sheet balance sheet amount in order to understand the the approach to have with these with these with the customer and even with mainly with the customer in the in the accounting treatment related.

Speaker #5: So there are a number and there's also the fact that skilled technicians are very hard to come by. So number of technological innovations will sustain this market for many, many, many years to come around the world.

[Company Representative] (Carel Industries): We decided to have just a prudent approach, keeping it in as a balance sheet amount in order to understand the approach to have with the customer. Mainly with the customer, it's accounted with net related.

Speaker #5: New facility in the US. So yeah, we just finally decided the location. So it will be in North Carolina. Yeah, the it will be it will start to be operational at the beginning of 2027.

Speaker #5: Okay. Thanks. Yes.

Alessandro Tortora: Okay, thanks. That's it.

Speaker #2: The next question comes from Natasha Brilliant of UBS.

Operator: The next question comes from Natasha Brilliant of UBS.

Speaker #4: Good afternoon and thank you very much for taking my questions. I have three as well. So my first question is when we think about refrigeration in the EU and thinking about the regulations that come in by 2030 as we sit today halfway through 2026 how far you know how far along do you think the industry is in meeting those regulations?

Natasha Brilliant: Good afternoon, and thank you very much for taking my questions. I have three as well. My first question is, when we think about refrigeration in the EU and thinking about the regulations that come in by 2030. As we sit today, halfway through 2026, how far along do you think the industry is in meeting those regulations? In other words, do you think demand will remain at this sort of run rate in the coming years, or could it accelerate or even decelerate? That's my first question. The second question is just around the new facility in the US. I think you said you'll build that in the H2. Does that mean it comes online at the beginning of next year? How much more capacity will that bring on board?

Speaker #5: And it will more or less if we exclude the Samba sensors, so if we take out sensors, which are made in Portland, then it will roughly double the capacity, basically, that we have in our current plant in Pennsylvania.

Speaker #4: So in other words do you think demand will remain at this sort of run rate in the coming years or could it accelerate or or even decelerate?

Speaker #5: CAPEX in any case should remain within our usual level of around 5% of sales. It should not exceed this threshold. In terms of M&A, we continue to look for to scout for complementary technologies.

Speaker #4: That's my first question. The second question is just around the new facility in the US. So I think you said you'll build that in the second half.

Speaker #4: Does that mean it comes online at the beginning of next year? And how much more capacity will that bring on board? And then my last question is on M&A that you said is back on the agenda.

Speaker #5: First and foremost, like coats. Around the world. So it's now a research we're doing around the world because there are many developments around the world in technology.

Natasha Brilliant: My last question is on M&A, that you said is back on the agenda. Can you just give us a sense of the pipeline? Are there lots of interesting assets? Any particular areas of focus? That would be very helpful. Thank you.

Speaker #4: Can you just give us a sense of the pipeline? Are there lots of interesting assets? Any particular areas of focus? That would be very helpful.

Speaker #5: And also to channel strengthening because we have a deliberate strategy of diversifying our channels, developing channels, let's say, beyond the OEM channel. So also acquisitions related to channel development are something that is in our consideration.

Speaker #4: Thank you.

Speaker #1: Okay. Good afternoon Natasha. Thanks for the questions. So refrigeration in Europe currently the the the last figures report that the adoption or or let's say the deployment of natural refrigerants in the stall base is around 35%.

Francesco Nalini: Good afternoon, Natasha. Thanks for the questions. Refrigeration in Europe. Currently, the last figures report that the adoption, or let's say the deployment of natural refrigerants in the store base is around 35%. There is still, let's say, 65% to go. In our opinion, what this regulation is bringing at this stage of the market is not necessarily an acceleration, but more a sustainment of the investment rate, a stabilization of the investment rate, that we believe should continue at least for a few years, because again, we're just at 35% of the rollout. At the same time, of course, refrigeration is very much driven by a number of technological improvements that we are continuously developing and bringing to the market.

Speaker #5: As you know, we're very selective with our acquisitions because we do them only when there is a very strong strategic rationale. But we do have some very interesting directions of development.

Speaker #1: So there is still let's say 65% to go. In our opinion what this regulation is bringing at this stage on the market is not necessarily an acceleration but more a a sustainment of the investment rates.

Speaker #4: Perfect. Thank you very much indeed.

Speaker #3: The next question comes from Alessandro Cecchini of Equita.

Speaker #1: So a stabilization of the investment rate. That we believe should continue for for for for at least for a few years because again we're just at 35% of the of the rollout.

Speaker #5: Hello everybody. Thank you for taking my questions. The first one, it's on pricing. So basically, you said that in the second quarter, you didn't have so much pricing.

Speaker #1: At the same time, of course, refrigeration is very much driven by a number of technological improvements that we are continuously developing and bringing to the market.

Speaker #5: So just wondering if you expect a much more important impact in the second half given the some price adjustments. This is my first question.

Speaker #1: For example the last one I just mentioned a few minutes ago concerning algorithms that we are developing that will be embedded in our newer generations of edge controllers which will be extremely powerful and bring huge benefits to to the market.

Francesco Nalini: For example, the last one I just mentioned a few minutes ago concerning algorithms that we are developing, that will be embedded in our newer generations of edge controllers, which will be extremely powerful and bring huge benefits to the market. Let's say there is for sure the momentum driven by the F-Gas, but more in terms of stabilization rather than acceleration. It should continue for a few years because there's still the majority of the stores to go. The refrigeration market is a market that is very much driven by performance improvements because the energy cost for supermarket chains is very relevant, because also there's an issue of continuity of operations, of service, and there's the temperature going higher and higher. There's also the fact that skilled technicians are harder and harder to come by.

Speaker #5: The second one, actually, it's really still, sorry, about the refrigeration. It seems to me that the underlying market in Europe or in the US, it's not growing like this.

Speaker #1: So, let's say that there is, for sure, the momentum driven by the FCAS, but more in terms of stabilization rather than acceleration. It should continue for a few years, because there's still the majority of the stores to go.

Speaker #5: So it's growing by at least low single-digit to mid-single-digit at the best. So just wondering if this, of course, is driven by your solutions, but if you can elaborate a little bit more or maybe other your solutions that you see that they are gaining market share because I don't think that it's only variable speed technology that is moving you your performance from low mid-single-digit to 30%.

Speaker #1: But then the refrigeration market is a market that is very much driven by performance improvements because the energy cost for supermarket chains is is is very relevant because also there there's an issue of continuity of operations of service and and there's the temperature going higher and higher.

Speaker #1: So there are a number and there's also the fact that skilled technicians are harder and harder to come by. So number of technological innovations will sustain this market for many many many years to to come around the world.

Speaker #5: So just if you can elaborate a little bit more on this. And finally, considering no specific questions on data center, just asking about data center growth in the second quarter.

Francesco Nalini: Number of technological innovations will sustain this market for many years to come around the world. New facility in the US. We just finally decided the location. It will be in North Carolina. It will start to be operational at the beginning of 2027, and it will more or less If we exclude the Senva sensors, if we take out sensors which are made in Portland, then it will roughly double the capacity basically that we have in our current plant in Pennsylvania. CapEx, in any case, should remain within our usual level of around 5% of sales. It should not exceed this threshold. In terms of M&A, we continue to look for, to scout for complementary technologies, first and foremost, like Cotes, around the world.

Speaker #1: New facility in the US. So yeah we just finally decided the location. So it will be in North Carolina. Yeah the the it will be it will start to be operational at the beginning of 2027.

Speaker #5: And I mean, if you can elaborate a little bit more on the growth of the European perimeter that you stated that it's improving. Thank you.

Speaker #1: And it will more or less, if we exclude the Samba sensor—so if we take out sensors which are made in Portland—then it will roughly double the capacity, basically, that we have in our current plant in Pennsylvania.

Speaker #5: Yeah. It's Alessandro. Thank you for the questions. Okay. In terms of pricing, you know that our approach is always to is always oriented towards partnership with our customers and long-term relations, which means that we as much as possible try to avoid speculative approaches on pricing.

Speaker #1: Capex in any case should remain within our usual level of around 5% of sales it should not exceed this threshold. In terms of M&A we continue to look for to scout for complementary technologies.

Speaker #5: The cost that we are facing as I said are relatively selected. So we have been applying some price increases, which are relatively selected to those products that are mainly affected by this categories.

Speaker #5: And also, basically, reflecting the actual cost increase. So we do not want to be speculative on the price increases. We do we did some in any case price adjustments in the last few months.

Speaker #5: So we believe that we will see a stronger price effect in the second half of the year, not huge, but let's say for sure stronger than what we have seen in the first half.

Speaker #5: And then as always, we will follow what happens on the raw material cost front. And we will be reactive and adjust and adjust the adjust the pricing accordingly also in the coming month.

Speaker #5: What to expect for the second half, probably something in the low single-digit range for pricing, just for the second half. Again, the approach we have is reactive and basically aimed at covering any extra cost, but again, not speculative there.

Speaker #5: In terms of refrigeration, so the very speed compressor technology is very attractive in the US for the reasons I mentioned. We're gaining market share.

Speaker #5: So it's evident, especially in America, but also in Europe and also in other parts of the world. So absolutely. Let's say that we have a very strong know-how in natural refrigerants because this is one of the strengths that we have.

Speaker #5: So we have specific solutions for natural refrigerants and for transcritical CO2 in terms systems that include, of course, the controls, include the software, and include also some mechanical components like some special kinds of valves that can be used for transcritical CO2.

Speaker #5: I would mention that I was probably mentioning that also a few minutes ago that in also the algorithm and software part for refrigeration is extremely important.

Speaker #5: We have just deployed a few months ago, and it's having a huge success. Our new generation of the local supervisory system for supermarket, which is supermarkets, which is the boss.

Speaker #5: And which has very strong and very powerful algorithms. And it's enabled also to use more and more AI. So in general, I would summarize saying that the advantage of our technology for refrigeration is the complete system and complete know-how in terms of electronics, but also mechanics and software for natural refrigerants.

Speaker #5: We have some solutions which are specific to us. Please world capable of providing complete solutions for especially transcritical CO2. We are one of them and we have some we believe we are the best, of course, but there which, of course, are very appreciated by the market, especially as the transition towards natural refrigerants takes place.

Speaker #5: Plus, we have a very strong software content. Plus, I would not underestimate the fact that we are the only player that is strong on the refrigeration side, but also on the HVAC side.

Speaker #5: So in several instances, we are capable of providing what we call the total solution basically combining the refrigeration control with the HVAC control in the same store, which is an advantage that we only are able to provide because we are the only player that is strong both in refrigeration and in HVAC.

Speaker #5: So the variable speed compressor technology on board the cabinet that the so-called distributed technology is, of course, a key technology that we have, which is it's not the main driver in Europe.

Speaker #5: It's one of the drivers in the US, not in Europe. In Europe, it's the complete system and the know-how that we are continuously developing as the transition towards natural refrigerants takes place.

Speaker #5: By the way, we also have just very recently introduced not only the new boss, but also the new core controller for supermarkets for refrigerated cabinets.

Speaker #5: It's called MTX Pro. We just introduced a new generation, which has several unique features in terms of preventive maintenance. For example, in sensing capabilities on the performance of the cabinet, just to mention another piece of technology unique to us.

Speaker #5: Moving then to data centers in Europe, yeah. So data centers overall, yeah, it's been growing pretty well. I underline that the absolute growth coming from data centers for the group, it's slightly more than one-third.

Speaker #5: So it's just one-third of the growth all in all. And as far as Europe, is concerned, it's definitely accelerating. So it's let's say it's about 20% in Europe.

Speaker #5: In terms of growth. For sure, part of it is going to the US. So there are some of our customers which have done export to the US.

Speaker #5: But at the same time, we do see a pickup in investment made in Europe, which is what we expect for the future.

Speaker #1: Okay. Thanks, Becca, on your point on pricing. So basically, what you are saying that because in the second quarter, we saw very light erosion in the gross margin.

Speaker #1: So basically, with this pricing, probably I'll bet limited plus low single digits. So you expect to maintain the second half of the gross margin year on year.

Speaker #5: Yeah, Alessandro. It's that's our goal. You know that there are some factors to consider. First of all, there is a lag between because when you apply pricing, it takes some it takes some time to be really visible.

Speaker #5: So there is a lagging effect. At the same time, we also have to see where the let's say the trend of this raw material cost goes.

Speaker #5: Of course, our goal is to manage the gross margin and not that's for sure. But yeah, of course, in terms of that depends also on the mix, on the specific product mix.

Speaker #5: So I mean, there can be quarterly fluctuations. Overall, we don't expect to have significant problems on the gross margin. That's the key message for sure.

Speaker #1: Okay. Thank you. Thank you very much.

Speaker #6: Gentlemen, Mr. Nalini, there are no questions registered at this time.

Speaker #5: Thank you. Thank you all for your attention and for your questions. Looking forward to speaking with you for the presentation of the nine months results.