Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fluidra SA (FLUIF, Financial) reported a strong first half performance, in line with expectations, with sequential sales improvement across all regions.
- North America delivered a remarkable performance with a 7% increase in sales in the second quarter.
- The Simplification Program contributed to a strong expansion in gross margin and excellent cash generation.
- Net debt levels were reduced, and the company achieved significant progress in working capital management.
- Fluidra SA (FLUIF) remains confident in delivering its full-year 2024 guidance, maintaining the midpoint while narrowing the range.
Negative Points
- Sales in Europe were affected by wet weather and a sluggish macro environment, leading to a decline in some key countries.
- Operating expenses increased by 7%, driven by inflation in labor costs and continued investment in digitalization and R&D.
- Sales declined by 1% year-on-year to EUR 1,171 million in the first half, reflecting some demand weakness in new construction and remodel.
- The commercial pool segment saw a slight organic decline of 1% in Q2, impacted by timing and macro uncertainties in EMEA.
- The company faces ongoing inflationary pressures in OpEx, which partially offset the improvements in gross margin.
Q & A Highlights
Q: How do you see the North American market developing in the second half, given the positive organic growth in the quarter?
A: We are pleased to maintain our guidance, even if narrowing the range. Our sell-through in H1 in the US was positive, indicating we are gaining market share. Our performance is supported by our customer-centric approach and mid to high market positioning. We also benefit from not having an inventory correction in the channel. We see consistent sequential quarterly sales improvement and positive trading in July. (Bruce Brooks, Non-Executive Director)
Q: Can you provide more details on new build and remodeling trends for the full year?
A: We expect new build demand to be at the lower end of our initial expectations, around a 15% decline for the year, with high-end projects faring better. Remodel activity is performing slightly better than new build, expected to be down up to 15%. Aftermarket maintenance and repair remain resilient, expected to be flat. We see price holding up well, with the US in a 2% to 4% range and the rest of the world at 0% to 1%. (Bruce Brooks, Non-Executive Director)
Q: Can you add some color regarding trends in Europe, especially the differing behaviors in the south versus the north?
A: In Europe, we saw sequential improvement in Q2 and positive results in July. Spain and France were affected by unfavorable weather and macro uncertainties, particularly in France. We continue to see weakness in Germany, while markets like Austria, the UK, and Eastern Europe are doing better. Above-ground pools remain weak, but other categories have stabilized. (Bruce Brooks, Non-Executive Director)
Q: What are the key priorities for the new CEO, Jaime Ramirez, in the near term?
A: My priorities include continuing the growth acceleration and transformation of Fluidra, focusing on the Simplification Program, innovation, and digital and technology advancements. We aim to differentiate ourselves from competitors and enhance our agility. More details will be shared at the Capital Market Day in Q2 2025. (Jaime Ramirez, Chief Executive Officer)
Q: Can you provide more details on the commercial market performance and expectations for H2?
A: The commercial pool segment is a growth area for us. H1 year-to-date, commercial pool is still growing. In Q2, we saw a slowdown in EMEA due to timing, macro uncertainty, and unfavorable weather, while North America continues to gain momentum. Commercial represents about 10% of our demand, and we see it as a great long-term growth opportunity. (Bruce Brooks, Non-Executive Director)
Q: What is your outlook for the European market turning to positive sales development?
A: Europe faced weather challenges in Q2, but we are pleased with the positive results in July. We expect Europe to return to positive sales development in 2025. (Bruce Brooks, Non-Executive Director)
Q: Can you provide more color on the new build expectations in the US versus Europe?
A: We expect new build demand to decline around 15% in both the US and Europe for this year. In Europe, Germany and France are on the higher end of the decline, while the Iberian Peninsula is in better shape. In the US, the Sunbelt performs better than the snowbelt, with higher-end non-financed pools faring better. Long-term, we expect new build demand to correlate with new housing starts, around 10%. (Bruce Brooks, Non-Executive Director)
Q: Can you explain the improvement in trade payables and other payables?
A: The improvement reflects a return to normalized levels. In late 2022 and early 2023, we had significant inventory levels, but we are now back to normal, with plants running at normal speed. This results in higher payables, which will continue in H2. (Xavier Tintore Segura, Chief Financial, Sustainability & Transformation Officer)
Q: Can you provide more detail on the positive trading in July?
A: July trading was strong globally, indicating positive performance across all our markets. (Bruce Brooks, Non-Executive Director)
Q: What drove the step-up in net financial results between Q1 and Q2?
A: The increase was due to higher use of credit lines and some FX impact, with no significant one-offs. (Xavier Tintore Segura, Chief Financial, Sustainability & Transformation Officer)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
