Q2 2026 FILA Fabbrica Italiana Lapis ed Affini SpA Earnings Call

August 6, 2026

Speaker #2: Yeah, ooh, sometimes it's a broken heart that decide. Ooh, sometimes the truth is harder than the pain inside. Ooh, sometimes it's a broken heart, but decide.

Speaker #2: Ooh, sometimes I don't drink coffee, I take tea, my dear. I like my toast on the one side. You can hear it in my accent when I talk.

David Brown: I don't drink coffee, I take tea, my dear. I like my toast done on one side. You can hear it in my accent when I talk. I'm an Englishman in New York.

Speaker #2: I'm an Englishman in New York.

Speaker #1: Good afternoon, this is the Conference Operator. Welcome, and thank you for joining the FILA Q4 2026 Results Web Call. All participants are in listen-only mode. After the presentation, there will be a Q&A session.

Operator 2: Good afternoon. This is the conference operator. Welcome, and thank you for joining the FILA H1 2026 results web call. All participants are in listen-only mode, and after the presentation, there will be a Q&A section. Today's speakers are Massimo Candela, Group CEO, Luca Pelosin, Group COO, Cristian Nicoletti, Group CFO, STYEA CEO USA, Dixon Ticonderoga. At this time, I would like to turn the conference over to Cristian Nicoletti, CFO of FILA Group. Please go ahead, sir.

Operator: Good afternoon. This is the conference operator. Welcome, and thank you for joining the FILA H1 2026 results web call. All participants are in listen-only mode, and after the presentation, there will be a Q&A section. Today's speakers are Massimo Candela, Group CEO, Luca Pelosin, Group COO, Cristian Nicoletti, Group CFO, STYEA CEO USA, Dixon Ticonderoga. At this time, I would like to turn the conference over to Cristian Nicoletti, CFO of FILA Group. Please go ahead, sir.

Speaker #1: Today's speakers are Massimo Candela, Group CEO; Luca Pelosin, Group COO; Cristian Nicoletti, Group CFO; Steve Ojea, CEO USA; Dixon Tingo de Roga; at this time, I would like to turn the conference over to Cristian Nicoletti, CFO of FILA Group.

Speaker #1: Please go ahead, sir.

Speaker #2: Good afternoon, ladies and gentlemen. I am Cristian Nicoletti, CFO of FILA Group. Let's start with a brief overview of our financial performance for the first half of 2026.

Cristian Nicoletti: Good afternoon, ladies and gentlemen. I am Cristian Nicoletti, CFO of FILA Group. Let's start with a brief overview of our financial performance for H1 2026. First, I would like to highlight that H1 2026 confirms the indication provided during the Q1 results, specifically a sustained growth in operational performance, particularly in Q2, following the consolidation of Seven Group and the progressive shift of the business seasonality toward the center quarter of the year. On an organic basis, excluding negative FX impact, group EBITDA increased, delivering very satisfactory profitability levels. It is worth noting that the net impact of tariff was only EUR 2.7 million at EBITDA level in H1, while considering that 2025-2026 period, the economic and financial impact of the tariff will be 0, completely neutral.

Speaker #2: First, I would like to highlight that each one in 2026 confirms the indication provided during the first quarter results. Specifically, a sustained growth in operational performance, particularly in Q2, following the consolidation of Seven Group and the progressive shift of the business seasonality toward the center quarter of the year.

Speaker #2: On organic basis, excluding negative FAX impact, Group EBITDA increased delivering very satisfactory profitability levels. In this warp, nothing that the net impact of tariff was only 2.7 million at a DBDA level in the first half of the year.

Cristian Nicoletti: It is worth noting that the net impact of tariff was only EUR 2.7 million at EBITDA level in H1, while considering that 2025-2026 period, the economic and financial impact of the tariff will be 0, completely neutral. Moreover, FILA Group also increased its financial flexibility following the successful completion of the debt refinancing and the ADB for 87% stake in DOMS, without compromising the company governance structure. We are also pleased with our free cash flow to equity performance.

Speaker #2: While considering that 2025-2026 period, the economic and financial impact of the tariff will be zero, completely neutral. Moreover, FILA Group also increased its financial flexibility following the successful completion of the debit refinancing and the ABB for 87% stake in DOMS, without compromising the company governance structure.

Cristian Nicoletti: Moreover, FILA Group also increased its financial flexibility following the successful completion of the debt refinancing and the ADB for 87% stake in DOMS, without compromising the company governance structure. We are also pleased with our free cash flow to equity performance. Excluding the cash absorption for the Seven Group of around -$70 million, free cash flow to equity stood at -$43 million, showing an improvement of $27 million compared to H1 2025. Regarding the net bank debt, the decrease at the end of June reflects the strong cash flow generation. The disposal for the stake in DOMS for EUR 73.8 million more than offset the acquisition Seven Group, its bank debt, dividends, and buyback. Finally, today, the board of FILA agreed the distribution of an extraordinary dividend of EUR 0.46 per share, which will be approved in September and paid in October.

Speaker #2: We also pleased with our free cash flow to equity performance. Excluding the cash absorption for the Seven Group of around negative 70 million, free cash flow to equity stood at negative 43 million, showing an improvement of 27 million compared to each one 2025.

Cristian Nicoletti: Excluding the cash absorption for the Seven Group of around -$70 million, free cash flow to equity stood at -$43 million, showing an improvement of $27 million compared to H1 2025. Regarding the net bank debt, the decrease at the end of June reflects the strong cash flow generation. The disposal for the stake in DOMS for EUR 73.8 million more than offset the acquisition Seven Group, its bank debt, dividends, and buyback. Finally, today, the board of F.I.L.A agreed the distribution of an extraordinary dividend of EUR 0.46 per share, which will be approved in September and paid in October.

Speaker #2: Regarding the net bank debit, the decrease at the end of June reflects the strong cash flow generation and the disposal of the stake in DOMS for 73.8 million, or euro, is more than offset the acquisition Seven Group, its bank debt, dividends, and buyback.

Speaker #2: Finally, today the board of FILA agreed the distribution of an extraordinary dividend of 0.46 per share euro. Which will be approved in September and paid in October.

Speaker #2: On top, that our share buyback program continues with around 468,000 treasury shares purchased today. Out of the total 1.3 million shares, authorized by shareholders meeting.

Cristian Nicoletti: On top, that our share buyback program continues with around 468,000 treasury shares purchased today, out of the total 1.3 million shares authorized by shareholders meeting. Moving on to slide eight, where we look at the core business sales. In H1 2026, core business sales reached EUR 343 million, up 12% on a constant FX basis, and including EUR 44.3 million of Seven Group contribution. The organic growth was positive in Q2 for 2.1% on a comparable FX, reflecting the shift of the order towards the Q2 in North America and Europe, the latter as a result of the new commercial strategy. Meanwhile, Central South America were down 11.9% at a constant FX, still suffering from the weak economic environment in Mexico, further impacted by competition from illegally imported school products. Let's now turn the group profitability on slide nine.

Speaker #2: Moving on the slide eight, where we look at the core business sales. In each one 2026, core business sales reached 343 million, up 12% on a constant FAX basis, and including 44.3 million of Seven Group contribution.

Speaker #2: The organic growth was positive in Q2 for 2.1% and a comparable FAX. Reflecting the shift of the order towards Q2, in North America and Europe, the latter as a result of the new commercial strategy.

Speaker #2: Meanwhile, center South America were down 11.9% at a constant FAX, still suffering from the weak economic environment in Mexico, further impacted by competition from illegally imported school products.

Cristian Nicoletti: Meanwhile, Central South America were down 11.9% at a constant FX, still suffering from the weak economic environment in Mexico, further impacted by competition from illegally imported school products. Let's now turn the group profitability on slide nine. Adjusted EBITDA coming at EUR 75.9 million, up 20.4%, which includes that EUR +8.6 million positive contribution from Seven Group, recovering from the EUR -3.4 recorded in Q1 2025, driven by H2 seasonality.

Speaker #2: Let's now turn to the group profitability on slide nine. Adjusted EBITDA came in at €75.9 million, up 20.4%, which includes an €8.6 million positive contribution from Seven Group.

Cristian Nicoletti: Adjusted EBITDA coming at EUR 75.9 million, up 20.4%, which includes that EUR +8.6 million positive contribution from Seven Group, recovering from the EUR -3.4 recorded in Q1 2025, driven by H2 seasonality. Importantly, excluding Seven Group, H1 2026 adjusted EBITDA grew by +2.9% on constant FX basis. EBITDA margins reached 22.1%, expanding from H1 2025, thanks to ongoing operational efficiency and the net tariff impact, EUR 2.7 million, which is the result of the tariff refund for EUR 8.2 million and the reversal of inventory sold for EUR 5.5 million. Please turn to slide 11 for adjusted net profit. Similarly, adjusted net profit, including Seven Group, rose to EUR 37.9 million, improving from EUR 22.5 million in H1 2025, driven by better operating performance and lower net financial expenses, mainly thanks to the positive FX impact, EUR +13.5 million between H1 2026 and H1 2025.

Speaker #2: Recovering from the negative 3.4 recorded in Q1 2025, driven by its Q2 seasonality. Importantly, excluding Seven Group, each one 2026 adjusted EBITDA grew by plus 2.9% on constant FAX basis.

Cristian Nicoletti: Importantly, excluding Seven Group, H1 2026 adjusted EBITDA grew by +2.9% on constant FX basis. EBITDA margins reached 22.1%, expanding from H1 2025, thanks to ongoing operational efficiency and the net tariff impact, EUR 2.7 million, which is the result of the tariff refund for EUR 8.2 million and the reversal of inventory sold for EUR 5.5 million. Please turn to slide 11 for adjusted net profit. Similarly, adjusted net profit, including Seven Group, rose to EUR 37.9 million, improving from EUR 22.5 million in H1 2025, driven by better operating performance and lower net financial expenses, mainly thanks to the positive FX impact, EUR +13.5 million between H1 2026 and H1 2025.

Speaker #2: EBITDA margin reached 22.1%, expanding from each one 2025, thanks to ongoing operational efficiency and the net tariff impact 2.7 million, which is the result of the tariff refound for 8.2 million and the reversal of inventory sold for 5.5 million.

Speaker #2: Please do turn the slide 11 for adjusted net profit. Similarly, adjusted net profit including Seven Group rose to 37.9 million, improving from 2022.5 million in each one 2025.

Speaker #2: Driven by better operating performance and lower net financial expenses, many thanks to the positive FAX impacts. €30.5 million and €13.5 million between each one, 2026 and each one, 2025.

Speaker #2: Reported net group profit increased to 59.3 million versus 9 million each one 2025, including the capital gain or disposal of 7% stake in DOMS.

Cristian Nicoletti: Reported net group profit increased to EUR 59.3 million versus EUR 9 million H1 2025, including the capital gain of disposal of 7% stake in DOMS. On slide 12, we detail our free cash flow generation. Free cash flow to equity stood at EUR -60.3 million, consistent with the standard H1 seasonality, and improving versus the $-70 million H1 2025. It is worth noting that excluded a nearly EUR -17 million negative contribution for Seven Group. Free cash flow to equity improved year on year by around EUR 27 million, reaffirming the strong cash generation profile of FILA core operations. Let's move to slide 13. As of June 2026, the net debt stood at EUR 209 million, a decrease of EUR 35 million compared to June 2025. This change was primarily driven by the positive cash flow generation of the period and the disposal of the stake in DOMS.

Speaker #2: On slide 12, we detail our free cash flow generation. Free cash flow to equity stood at negative 60.3 million, consistent with the standard each one seasonality.

Speaker #2: And improving versus the negative 70 million each one 2025. In this warp, nothing that excluded the nearly 17 million negative contribution for Seven Group.

Speaker #2: Free cash flow to equity improved year on year by around 27 million, reforming the strong cash generation profile of FILA core operations. Let's move to slide 13.

Cristian Nicoletti: Free cash flow to equity improved year on year by around EUR 27 million, reaffirming the strong cash generation profile of FILA core operations. Let's move to slide 13. As of June 2026, the net debt stood at EUR 209 million, a decrease of EUR 35 million compared to June 2025. This change was primarily driven by the positive cash flow generation of the period and the disposal of the stake in DOMS.

Speaker #2: As of June 2026, the net back stood at 209 million, and decrease of 30.5 million compared to June 2025. This change was primarily by driven by the positive cash flow generation of the period and the disposal of the stake in DOMS.

Speaker #2: In conclusion, turning our full year outlook. We confirm our full year guidance. FILA expects double digit growth in both revenue and adjusted EBITDA. Alongside positive organic growth.

Cristian Nicoletti: In conclusion, turning to our full-year outlook, we confirm our full-year guidance. FILA expects double-digit growth in both revenue and adjusted EBITDA, alongside positive organic growth. Free cash flow to equity is projected between EUR 40 and 50 million, with a target dividend payout ratio 20% to 40% under normal business conditions. Thank you for your time and attention. We are now happy to take your questions.

Speaker #2: Free cash flow to equity is projected between 40 and 50 million, with a target dividend payout ratio 20% to 40% under normal business condition.

Speaker #2: Thank you for your time and attention. We are now happy to take your questions.

Speaker #1: We will now begin the question-answer section. To enter the Q4 questions, please click on the Q&A icon on the left side of your screen.

Operator 2: We will now begin the question and answer section. To enter the queue for questions, please click on the Q&A icon on the left side of your screen. When announced, please click continue on pop-up window. If you are connected on audio only, please press star and one on your telephone. The first question is from Isacco Brambilla of Mediobanca. Please go ahead.

Operator: We will now begin the question and answer section. To enter the queue for questions, please click on the Q&A icon on the left side of your screen. When announced, please click continue on pop-up window. If you are connected on audio only, please press star and one on your telephone. The first question is from Isacco Brambilla of Mediobanca. Please go ahead.

Speaker #1: When announced, please click "Continue" on pop-up window. If you are connected on audio only, please press "Start" and "One" on your telephone. The first question is from Isacco Brambilla of Mediobanca.

Speaker #1: Please go ahead.

Isacco Brambilla: Hi. Good afternoon, everybody. Two questions from my side. The first one is on current trading. Q2 showed positive organic growth both in North America and in Europe. Just wondering if you can share any data on the first part of Q3, whether these supportive underlying trends are continuing as we approach the back-to-school campaign. Second question is on Seven Group. Just a clarification. You mentioned, Cristian, EUR -17 million negative impact from Seven Group. Is it free cash flow or net working capital absorption? Final question is on full year outlook for free cash flow. Just wondering, which are the underlying assumptions on CapEx and net working capital backing your guidance on free cash flow?

Speaker #3: Hi, good afternoon. Everybody. Two questions from my side. The first one is on current trading. The second quarter showed positive organic growth both in North America and in Europe.

Speaker #3: Just wondering if you can share any data on the first part of the third quarter, whether these supportive underlying trends are continuing as we approach the back-to-school campaign.

Speaker #3: Second question is on Seven. Just a clarification—you mentioned, Cristian, Seven: €17 million negative impact from Seven. Is it free cash flow or net working capital?

Speaker #3: Absorption and final question is on full year outlook. For free cash flow, just wondering which are the underlying assumptions on capex and networking capital.

Speaker #3: Backing your guidance on free cash flow.

Speaker #4: Thank you, Isacco. Massimo Candela. So concerning the first question, we have in this call, we are happy to have the presence of the CEO of Nord America.

Massimo Candela: Thank you, Isacco. Massimo Candela. Concerning the first question, we have in this call, we are happy to have the presence of the CEO of North America. I will answer for Europe and rest of the world. He will answer for North America, for Q3. Concerning the two remaining question, Cristian can answer to you. Steve, would you like to start talking about North America, please?

Speaker #4: So I will answer for Europe and rest of the world. He will answer for North America for the third quarter. Concerning the two remaining questions, Christian can answer to you.

Speaker #4: So Steve, would you like to start talking about North America, please?

Speaker #5: Certainly. Again, this is Steve Boye, the CEO of Dixon Ticonderoga. So we had a very good shipping month in July, comparing to prior year, both US and Canada.

Steve Boye: Certainly. Again, this is Steve Boye, the CEO of Dixon Ticonderoga. We had a very good shipping month in July comparing to prior year, both US and Canada shipped double-digit increases in gross sales. The sell-through that we are seeing, basically we see customer sell-through through the third week of July, which is still not the peak of back-to-school shipping. The last week of July and the first 3 weeks of August are the key weeks. Overall, the industry is starting off a little slow on sell-through, our performance is better than the industry. For example, one of our largest retail customers, the sell-through of our products through the first 3 weeks of July are up 5%, and they are very happy with that. A real good start to Q3.

Steven Boyea: Certainly. Again, this is Steve Boye, the CEO of Dixon Ticonderoga. We had a very good shipping month in July comparing to prior year, both US and Canada shipped double-digit increases in gross sales. The sell-through that we are seeing, basically we see customer sell-through through the third week of July, which is still not the peak of back-to-school shipping. The last week of July and the first 3 weeks of August are the key weeks. Overall, the industry is starting off a little slow on sell-through, our performance is better than the industry. For example, one of our largest retail customers, the sell-through of our products through the first 3 weeks of July are up 5%, and they are very happy with that. A real good start to Q3.

Speaker #5: Shipped double digit increases and gross sales. The sell-through that we are seeing basically we see customer sell-through through the third week of July, which is still not the peak of back-to-school shipping.

Speaker #5: The last week of July and the first three weeks of August are the key weeks. Overall, the industry is starting off a little slow on sell-through, but our performance is better than the industry.

Speaker #5: For example, one of our largest retail customers the sell-through of our product through the first three weeks of July are up 5%. And they are very happy with that.

Speaker #5: So a real good start to the third quarter.

Massimo Candela: Thank you. Yes. Thank you. Concerning Europe is a little bit behind US as our back to school start generally, the end of August, so a little bit premature. I think that the improvement trend that we have seen in Q2 should be confirmed. Of course, we were a bit concerned due to the situation in Hormuz, Q2 is showing very good resilience, very good cost control that we have been able to apply. I do expect a Q3 in line with expectation, thus, positive. Cristian, can you answer the other two questions, please?

Speaker #3: Thank you. Yes, thank you.

Speaker #4: Concerning Europe, Europe is a little bit behind United States, as our back-to-school start generally the end of August. So a little bit premature. I think that the improvement trend that we have seen in the second quarter should be confirmed.

Speaker #4: Of course, we were a bit concerned due to the situation in Ormuz, but the second quarter is showing very good resilience, very good cost control, that we have been able to apply.

Speaker #4: So, I do expect a third quarter in line with expectations, thus positive. Cristian, can you answer the other two questions, please?

Speaker #2: Yes. Of course. Thanks, Isacco, for your questions. Related to the absorption of the Seven Group, the 70 million is related to free cash flow to equity.

Cristian Nicoletti: Yes, of course. Thanks, Isacco, for your questions. Related the absorption of the Seven Group, the $70 million is related to free cash flow to equity. Consequently, you call this the EUR 60 million that is an absorption H1 2026 will have an improvement of this amount. Related the guidance, we confirm our guidance of free cash flow to equity at the end of the year between EUR 40 million and EUR 50 million. Of course, at the moment, we are reasonable to be in upper guidance at the moment for the information at the moment available. Related to CapEx, we confirm the initial evaluation of EUR 20 million for the full year 2026 and the change in net working capital in a general assumption for EUR 10 million as discussed in the previous call.

Speaker #2: Consequently, you called the peak the 60 million that is an absorption each one 2026. You'll have an improvement of this amount. Related to the guidance, we confirm our guidance of free cash flow to equity at the end of the year between 40 and 50 million, but of course at the moment we are reasonable to be in upper guidance at the moment.

Speaker #2: For the information at the moment available. Related to the capex, we confirm the initial evaluation of 20 million for the full year 2026 and the change in networking capital in a general absorption for 10 million as discussed in the previous call.

Speaker #3: Fantastic. My thanks to everybody for the answers.

Isacco Brambilla: Fantastic. My thanks everybody for the answers.

Speaker #1: The next question is from Alessandro Cecchini of Equita. Please go ahead.

Operator 2: The next question is from Alessandro Cecchini of Equita. Please go ahead.

Operator: The next question is from Alessandro Cecchini of Equita. Please go ahead.

Alessandro Cecchini: Hello, everybody, and thank you for taking my questions. The first one actually is on capital allocation. You had an extra dividend, for about EUR 23 million. I would say you had a very positive cash in coming from DOMS at EUR 74 million. Just to understand what is your view about the delta in terms of capital allocation priority. This is my first, then I make the others, I will start with this.

Speaker #4: Hello, everybody. And thank you for taking my questions. The first one, actually, it's on capital allocation. You had an extra dividend for about 23 million.

Speaker #4: But I will say you had a very positive cash-in coming from Doms at 74 million. So just to understand what is your view about the delta in terms of capital allocation priority.

Speaker #4: So this is my first then I make the others. But I will start with this. So thanks. The in terms of capital allocation, we are leaving in a very unstable moment.

Massimo Candela: Ciao. Ciao, Ale. Thanks. In terms of capital allocation, we are living in a very unstable moment. It will be interesting to see what will happen at the macroeconomic situation. As of now, we want to deleverage FILA Group as much as possible because we have the perception that, in 2, 3 years, some transformational project can become reality. In short term, we have two main priorities, to reduce as much as possible debt in United States. Apart that the CEO is doing an extremely good job. Interest rates are pretty high, and even more in Mexico, the cost of debt is extremely high. They have a very high peak season. We want to reduce as much as possible the cost of debt that we have in that area.

Speaker #4: It will be interesting to see what will happen at the macroeconomical situation. So as of now, we want to be we want to deleverage FILA Group as much as possible because we have the perception that in two, three years, some transformational project can become reality.

Speaker #4: So, in the short term, we have two main priorities: to reduce as much as possible the debts in the United States; apart from that, the CEO is doing an extremely good job.

Speaker #4: Interest rates are pretty high. And even more in Mexico, the cost of debt is extremely high. They have a very high peak season. So we want to reduce as much as possible the cost of debt that we have in that area.

Speaker #4: Okay, very clear. My second question is about Seven. Of course, for us, it's a new decision for the business, so we need to better understand the trends, particularly in terms of EBITDA.

Alessandro Cecchini: Okay. Very clear. My second question is instead about Seven. Of course for us it's new, the seasonality of the business, we need to better understand the trends, in particular in term of EBITDA. Looking at the Q2, for the year, for instance, I was just wondering, in the past was around EUR 40 million, EUR 1.4 million of EBITDA for the year. Looking at this Q2, we are ahead of these targets or we are in line given the seasonality of the company?

Speaker #4: But if so looking at the second quarter, so for the year, for instance, I was just wondering in the past, was around 40 million, 1.4 million of EBITDA for the year.

Speaker #4: So looking at this second quarter, we are ahead of this targets or we are in line given the decision of the company?

Speaker #3: Thanks, Ale. But first of all, I think we made a mistake by not being very clear starting from the first quarter, because the seasonality of Seven is definitely different, as they go directly to retailers.

Massimo Candela: Thanks, Ale. First of all, I think we made a mistake not being very clear, starting from the Q1, because the seasonality of Seven is definitely different because they go directly to retailers. I remember you that this will be something that characterize also FILA in the future, both in Italy and in Mexico. Our seasonality is going to go more towards the Q2. The performance of Seven as of now is slightly better than June 2025. It's very much important to see the sell-through. I explained 5 minutes ago, our back to school is starting the last week of August. As of now, yes, we have some very first positive signs from customers that are telling us they are reordering because they have a nice sell-through. Frankly speaking, this cannot be considered an average. It's just a first sign.

Speaker #3: And I remember you that this will be something that characterize also FILA in the future, both in Italy and in Mexico. So our seasonality is going to go more towards the second quarter.

Speaker #3: The performance of Seven as of now is slightly better than June 25, but it's very much important to see the sell-through and I explained five minutes ago our back-to-school is starting the last week of August.

Massimo Candela: I explained 5 minutes ago, our back to school is starting the last week of August. As of now, yes, we have some very first positive signs from customers that are telling us they are reordering because they have a nice sell-through. Frankly speaking, this cannot be considered an average. It's just a first sign. We are positive to say that Seven, despite the difficult market in Italy, is going to have a pretty good year in 2026 comparable to 2025.

Speaker #3: So as of now, yes, we have some very first positive signs from customers that are telling us they are reordering. Because they have a nice sell-through, but frankly speaking, this cannot be considered an average.

Speaker #3: It's just a first sign. So we are positive to say that Seven, despite the difficult market in Italy, is going to have a pretty good year in 2026 comparable to

Massimo Candela: We are positive to say that Seven, despite the difficult market in Italy, is going to have a pretty good year in 2026 comparable to 2025.

Speaker #4: Okay. Very helpful. And back to the previous questions about so the trend in third probably I missed your view about Mexico. I mean, Sandra's South America because I mean, second quarter was very tough.

Alessandro Cecchini: Okay. Very helpful. Back to the previous questions about the trend in Q3. Probably missed your view about Mexico, I mean, the Central and South America, because Q2 was very tough, EUR -19 million with very relevant loss in term of EBITDA, in term of year-on-year. H2 is easier comparison because the crisis started, if I am not wrong, in the H2 of last year. Just to understand which is the current dynamics that you are seeing in the market. Finally, just to recap on the US, it is possible to see US to be mid high single digit in Q3, or I understood wrongly the messages? Thank you.

Speaker #4: Manos 19 million with very relevant loss in terms of EBITDA. In terms of year on year. So second half is easier comparison because they mean the crisis started if I am not wrong in the second half of last year.

Speaker #4: So, just to understand, what are the current dynamics that you are seeing in the market? And finally, just to wrap up on the US, is it possible to see the US be mid-high single digits in the third quarter, or did I understand the message incorrectly?

Speaker #4: Thank you.

Speaker #3: Steve, can you please answer the question about USA?

Massimo Candela: Steve, can you please answer the question about US?

Speaker #2: Yes. So the third quarter, I think July will be stronger than our August. So I think that is going to normalize between those two months.

Steve Boye: Yes. The Q3, I think July will be stronger than our August. I think that is going to normalize between those two months. I would say mid single digit increase in revenue over last year is definitely attainable.

Steven Boyea: Yes. The Q3, I think July will be stronger than our August. I think that is going to normalize between those two months. I would say mid single digit increase in revenue over last year is definitely attainable.

Speaker #2: But I would say mid single digit increase in revenue over last year is definitely attainable.

Speaker #4: Okay. Thank you.

Alessandro Cecchini: Okay. Thank you.

Speaker #3: So for Mexico, the answer is a little bit more elaborate. I would like to remember you that last year, this period, we have shut down Chinese operation for the reason that we have shared many times.

Massimo Candela: For Mexico, the answer is a little bit more elaborate. I would like to remember you that last year, this period, we have shut down Chinese operation for the reason that we have shared many times. As every extraordinary project, especially when you touch production, there are some unforeseeable problem, and we have absolutely fallen in this situation. There has been a strong delay in implementing all the equipment, all the machines in our plant in Mexico for different reasons. This has generated, number one, extra costs. Number two, important delays in production that has affected also domestic sales, because Mexico should have been forced by us to respect deliveries to Europe, which by the way anyway have been delayed by 4, 6 weeks.

Speaker #3: As with every extraordinary project, especially when you touch production, there are some unforeseeable problems. And we have absolutely fallen into this situation. There has been a strong delay in implementing all the equipment, all the machines in our plant in Mexico, for different reasons.

Massimo Candela: This has generated, number one, extra costs. Number two, important delays in production that has affected also domestic sales, because Mexico should have been forced by us to respect deliveries to Europe, which by the way anyway have been delayed by 4, 6 weeks. Mexico is going to make up some difference in domestic market because now they have the production in place and they can supply orders they couldn't supply by Q2.

Speaker #3: This has generated, number one, extra costs. Number two, important delays in production that has affected also domestic sales. Because Mexico should have been forced by us to respect deliveries to Europe.

Speaker #3: Which, by the way, anyway, have been delayed by four, six weeks. So Mexico is going to make up some difference in domestic market because now they have the production in place, and they can supply orders.

Massimo Candela: Mexico is going to make up some difference in domestic market because now they have the production in place and they can supply orders they couldn't supply by Q2. We have had also big problems of learning curve. This was more predictable because in the past when we moved to China, we had exactly the same experience, very high level of waste, quality problems. The learning curve is going to become flat in the near future, I would say for next back to school. This year, we have paid consequences. If you put together delay in deliveries in domestic market, delay in shipping to Europe, very high level of defective product, learning curve still very steep. Difficult market due to illegal import.

Speaker #3: They couldn't supply by the second quarter. We have had also big problems of learning curve. This was more predictable because in the past, when we moved to China, we had exactly the same experience.

Massimo Candela: We have had also big problems of learning curve. This was more predictable because in the past when we moved to China, we had exactly the same experience, very high level of waste, quality problems. The learning curve is going to become flat in the near future, I would say for next back to school. This year, we have paid consequences. If you put together delay in deliveries in domestic market, delay in shipping to Europe, very high level of defective product, learning curve still very steep. Difficult market due to illegal import.

Speaker #3: So very high level of waste. Quality problems. The learning curve is going to become flat in the near future, I would say, for next back-to-school.

Speaker #3: This year, we have paid consequences. So if you put together delay in deliveries in domestic market, delay in shipping to Europe, very high level of defective product.

Speaker #3: Learning curve still very steep. Difficult market due to illegal import, of course, we really hope that Trump will be able to put all the pressure to Mexican government to stop illegal import because they feed this illegal import clearly.

Massimo Candela: Of course, we really hope that Trump will be able to put all the pressure to Mexican government to stop illegal imports, because they feed this illegal import clearly for economic reason. Mexico is still a difficult country in which we operate, but definitely the worst is behind, because the production now is showing important improvements.

Speaker #3: For economical reason. Mexico is difficult country in which we operate, but definitely the worst is behind because the production now is showing important improvement.

Alessandro Cecchini: Thank you. The last, if I understood correctly, basically the net tariff of the current 2026, if I understood correctly, excluding, of course, reimbursement or previous, is close to 0 or 0. I understood correctly.

Speaker #4: Thank you. And the last, if I understood correctly, so basically the net tariff of the current 2026, if I understood correctly, so excluding, of course, reimbursement or previous is close to zero or zero.

Speaker #4: I understood correctly.

Speaker #3: Yeah. I mean, when we say zero, it means that if you start from the tariffs when they were applied last year, I would say around April, April 25.

Massimo Candela: Yeah. When we say zero, it means that if you start from the tariff when they have been applied last year, I would say around April 25. If you consider the reimbursement we have been able to get, the impact will be close to zero. This year, 2026, the positive impact of the reimbursement is around, Cristian, EUR +2.5 million, correct?

Speaker #3: And if you consider the reimbursement we have been able to get, the impact will be close to zero. This year, 2026, the positive impact of the reimbursement is around, Cristian, €2.5 million, correct?

Speaker #5: 2.7 million euros.

Cristian Nicoletti: EUR 2.7 million.

Speaker #3: 2.7. Okay. So this year, the positive impact has been 2.7 million.

Massimo Candela: EUR 2.7. This year, the positive impact has been EUR 2.7 million.

Alessandro Cecchini: Okay. Just to understand, because of the EUR 5.5, if I am correct, is due to tariff applied to inventories linked to 2025, the reimbursement is due to 2025. If we exclude this, the message that you are basically not paying tariff now in your current business or very, very limited.

Speaker #4: Okay. So just to understand, because the 5.5, if I am correct, is due to the tariff applied to inventories linked to 2025, and the reimbursement is due in 2025.

Speaker #4: So if I exclude this, basically we are so the message that you are basically not paying tariff now. So in your current business or very, very limited.

Speaker #3: Yeah, very we are paying an average of 10% or slightly above. Yeah.

Massimo Candela: Yeah. We are paying an average of 10% or slightly above. Yeah.

Speaker #4: Okay.

Alessandro Cecchini: Okay.

Speaker #5: Your Alex confirmed what you said about the value of the tariff in inventory.

Cristian Nicoletti: Here, Ale confirmed what you said about the value of the tariff inventory.

Speaker #4: Okay. Thank you.

Alessandro Cecchini: Okay. Thank you.

Speaker #1: Once again, if you wish to ask a question, please click on the Q&A icon on the left side of your screen or press the star one on your telephone.

Operator 2: Once again, if you wish to ask a question, please click on the Q&A icon on the left side of your screen or press star one on your telephone. The next question is from Arturo Lopez, Clue Value Advisor. Please go ahead.

Operator: Once again, if you wish to ask a question, please click on the Q&A icon on the left side of your screen or press star one on your telephone. The next question is from [Arturo Lopez, Clue Value Advisor]. Please go ahead.

Speaker #1: The next question is from Arturo Lopez, Clue Value Advisor. Please go ahead.

Speaker #4: Good evening, I hope you're hearing well. I have a couple of questions. The first one is actually on the free cash flow. It's my understanding that 50 million from the transaction of DOMS is going to go against debt.

Arturo Lopez: Good evening. I hope you're hearing well. I have a couple of questions. The first one is actually on the free cash flow. It's my understanding that EUR 50 million from the transaction of DOMS is going to go against debt, plus the organic free cash flow generation, which is, as you mentioned, on the higher part. That would be approximately EUR 100 million less of the leverage on a back of the envelope very quickly. That should be correct. That was the first question. The second question, if I may. Should we adjust the EBITDA margin for the reimbursement of the US tariff? What would be the adjusted margin, or in other words, the gross margin of H1 2026 to be compared with the H1 2025, please?

[Analyst]: Good evening. I hope you're hearing well. I have a couple of questions. The first one is actually on the free cash flow. It's my understanding that EUR 50 million from the transaction of DOMS is going to go against debt, plus the organic free cash flow generation, which is, as you mentioned, on the higher part. That would be approximately EUR 100 million less of the leverage on a back of the envelope very quickly.

Speaker #4: Plus, the organic free cash flow generation, which is, as you mentioned, on the higher part. So, that would be approximately €100 million less of leverage on a back-of-the-envelope, very quickly.

[Analyst]: That should be correct. That was the first question. The second question, if I may. Should we adjust the EBITDA margin for the reimbursement of the US tariff? What would be the adjusted margin, or in other words, the gross margin of H1 2026 to be compared with the H1 2025, please? Just to understand also the impact of these inefficiencies that you just, Massimo, mentioned that we should expect to recover. Thank you very much. That was the second question.

Speaker #4: That should be correct. That's the first question. And the second question, if I may, should we adjust the EBITDA margin for the reimbursement of the US tariff?

Speaker #4: What would be the adjusted margin? Or, in other words, the gross margin for the first half of 2026 to be compared with the first half of 2025, please?

Speaker #4: Just to understand also the impact of this inefficiencies that you just, Massimo, mentioned that we should expect to recover. Thank you very much. That was the second question.

Arturo Lopez: Just to understand also the impact of these inefficiencies that you just, Massimo, mentioned that we should expect to recover. Thank you very much. That was the second question.

Speaker #3: Christian, I think you have all the elements.

Massimo Candela: Cristian, I think you have all the elements.

Speaker #5: Related to the free cash flow to equity, if we go page 12, the proceed from sales of DOMS are excluded our free cash flow to equity.

Cristian Nicoletti: Related to the free cash flow to equity, if we go back page 12, the proceed from sales of DOMS are excluded our free cash flow to equity. EUR -60 is without sales DOMS as this maintain the same approach also the liability related to Seven Group is pure core business. Okay?

Speaker #5: 60 negative is without sales DOMS as this maintain the same approach of the liability-related saving group is pure core business. Okay?

Speaker #4: Okay.

Arturo Lopez: Okay.

[Analyst]: Okay.

Speaker #5: Relating to impact of the tariff as did in 2025, we are considered ordinary business, the tariff. In our EBITDA, we have the impact negative in 2025 for the amount that we are reversed in inventory and sales and in 2026, we are only 20.7 million in EBITDA.

Cristian Nicoletti: Relating to impact of the tariff as did in 2025, we are considered ordinary business, the tariff. In our EBITDA, we have the impact negative in 2025 for the amount that we are reversed in the inventory, in the sales. In 2026, we have only the EUR 20.7 million in EBITDA, but are considered ordinary business. As Massimo said, starting 1 July 2027, we are zero impact for other reimbursement, roughly, of course, material.

Speaker #5: But are considered ordinary business. As Massimo said, starting 1st July 2027, we are zero impact for other reimbursement roughly, of course, material.

Speaker #4: Okay. So basically, it's accounted above the EBITDA level. For both years, correct?

Massimo Candela: Okay. Basically, it's accounted above the EBITDA level for both years, correct?

[Analyst]: Okay. Basically, it's accounted above the EBITDA level for both years, correct?

Speaker #5: Yes.

Cristian Nicoletti: Yes.

Speaker #4: Thanks, Christian.

Massimo Candela: Thanks, Cristian.

Speaker #1: The next question is from Niccolò Storer of Capret Chevron. Please go ahead.

Operator 2: The next question is from Nicolò Storer of Cheuvreux. Please go ahead.

Operator: The next question is from Nicolò Storer of Cheuvreux. Please go ahead.

Speaker #2: Yeah. Good afternoon. Thanks for taking my question. Actually, just a clarification on the accounting of the sale of the 7th percent stake in DOMS.

Nicolò Storer: Yeah. Good afternoon, and thanks for taking my question. Actually, just a clarification on the accounting of the sale of the 7% stake in DOMS. I was wondering which was, at the end of the day, let's say, net impact post-tax, the net cash in post-tax of the disposal. I guess that the EUR 70 million plus you mentioned in the cash flow statement is gross of tax. Which is the capital gain linked to the transaction which we should see on the P&L? Thank you.

Niccolo' Storer: Yeah. Good afternoon, and thanks for taking my question. Actually, just a clarification on the accounting of the sale of the 7% stake in DOMS. I was wondering which was, at the end of the day, let's say, net impact post-tax, the net cash in post-tax of the disposal. I guess that the EUR 70 million plus you mentioned in the cash flow statement is gross of tax. Which is the capital gain linked to the transaction which we should see on the P&L? Thank you.

Speaker #2: I was wondering which was at the end of the day the, let's say, net impact post-tax? The net cash in post-tax of the disposal, I guess that the 70 plus million, you mentioned in the cash flow statement is gross of tax.

Speaker #2: And also, which is the capital gain linked to the transaction that we should see on the P&L? Thank you.

Speaker #5: Niccolò, for your question, the net proceeds are 73.8 million of euro. Net proceeds. The capital gain related investments due to the sales of value of DOMS respect the initial booking is 46 million of euro.

Cristian Nicoletti: Nicolò, for your question, the net proceeds are EUR 73.8 million. Net proceeds.

Nicolò Storer: Okay.

Niccolo' Storer: Okay.

Cristian Nicoletti: The capital gain related to investments due to the sales value of DOMS, respect to the initial booking, is EUR 46 million. Okay?

Speaker #5: Okay? The impact of the net income is roughly 33 million of euro considering that we have 46 million of gain 13 million of tax between Indian tax and Italian tax the net is the difference.

Nicolò Storer: Okay.

Niccolo' Storer: Okay.

Cristian Nicoletti: The impact of the net income is roughly EUR 33 million, considering that we have EUR 46 million of gain, EUR 13 million of tax between Indian tax, Italian tax, the net is the difference.

Speaker #2: Okay. Thank you.

Nicolò Storer: Okay. Thank you.

Niccolo' Storer: Okay. Thank you.

Speaker #5: Welcome.

Cristian Nicoletti: Welcome.

Speaker #1: For any further questions, please click on the Q&A icon on the left side of your screen star one on your telephone. The next question is a follow-up of Alessandro Cecchini.

Operator 2: For any further questions, please click on the Q&A icon on the left side of your screen. Star one on your telephone. The next question is a follow-up of Alessandro Cecchini. Please go ahead.

Operator: For any further questions, please click on the Q&A icon on the left side of your screen. Star one on your telephone. The next question is a follow-up of Alessandro Cecchini. Please go ahead.

Speaker #1: Please go ahead.

Speaker #3: Hello, everybody. Just a quick on financial expenses because basically all in excluding, of course, Forex, this year we can run around 13, 14 million if I am not wrong.

Alessandro Cecchini: Hello, everybody. Just a quick on financial expenses, because basically all in, excluding, of course, Forex this year, we can run around EUR 13, 14 million, if I am not wrong. Given the sort of restructuring or renegotiation of the debt package, which is a reasonable assumption for savings for 2027 in term of financial expenses? Thank you.

Speaker #3: So given the sort of restructuring or renegotiation of the debt package, which is a reliable assumption for savings for 2027 in term of financial expenses.

Speaker #3: Thank you.

Cristian Nicoletti: Ale, thanks for your question. It's 2027 or 2026?

Speaker #5: Valid. Thanks for your question. 2027, 2026.

Speaker #3: 2027. So this year probably will be double the first half. So, just to understand the net savings year on year in 2027.

Alessandro Cecchini: 2027. This year probably will be double the H1. Just to understand the net savings in year-on-year in 2027.

Speaker #5: Okay. Roughly will let me see that is the normal decalage that we have considered in the beginning of the evaluation because we are confirmed the actual margin and value of the stock interest.

Cristian Nicoletti: Okay. Roughly, let me say that is the normal decollage that we have considered on the beginning of the evaluation, because we have confirmed the actual margin, the value of the structured interest. Let me say EUR 2 million, more or less. It's important to understand where the Euribor will arrive in the end of the year, of course. The condition of the interest is absolutely better of the previous one. Let me say EUR 1 million, EUR 2 million, related to like-for-like bank condition.

Speaker #5: Let me see if €2 million more or less, but it's important to understand where the Euroribo will arrive at the end of the year, of course.

Speaker #5: But the condition of the interest is absolutely better of the previous one. Let me say 1 million, 2 million. Related like for like bank condition.

Speaker #4: Okay. Thank you.

Alessandro Cecchini: Okay. Thank you.

Speaker #1: Management, there are no more questions. Register at this time.

Operator 2: Management, there are no more questions registered at this time.

Operator: Management, there are no more questions registered at this time.

Massimo Candela: Thanks, everyone. Thanks for attending this call. We're going to meet soon at the first opportunity. Enjoy holidays.

Speaker #3: Thank you, everyone. Thanks for attending this call, and we're going to meet soon at the first opportunity. Enjoy the holidays.

Massimo Candela: Thanks, everyone. Thanks for attending this call. We're going to meet soon at the first opportunity. Enjoy holidays.

Speaker #5: Thanks a lot.

Cristian Nicoletti: Thanks a lot.

Speaker #6: Thank you.

Nicolò Storer: Thank you.

Steven Boyea: Thank you.

Operator 2: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices.

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

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Q2 2026 FILA Fabbrica Italiana Lapis ed Affini SpA Earnings Call

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