Thank you. Good afternoon, everyone, and welcome to Ariston Group first quarter 2026 results conference call.

I'm Ilaria Candotti, Head of Investor Relations. With me today are Maurizio Brusadelli, our Chief Executive Officer, and Riccardo Gini, our Chief Financial Officer.

Today's presentation will last approximately 20-25 minutes, after which we will open the floor for questions. As a reminder for those joining us by phone, the slide deck is available on our Investor Relations website.

I will now hand the call over to Maurizio.

Thank you, Ilaria, and good morning, afternoon, evening, everyone. Let me start with slide 3 with a brief overview of the quarter.

The first three months of 2026 marked a solid start to the year, in line with our expectation for the period and supporting the full-year growth trajectory, despite headwinds arising from the conflict in the Middle East. Performance in the quarter was driven by the continuous trend of renewables, with heat pumps once again confirming the structural trend towards electrification across Europe.

Germany, in particular, continued to show positive signs in line with the growth trend observed over the recent months. Key highlights for the period are net revenue at €656 million, stable on organic basis, supported by a favorable product mix driven by heat pump growth in Europe.

The European gas boiler market remained weak, with the exception of Germany, where it started to show early signs of recovery. Water heating market also faced a soft start, particularly in North America.

Our performance was affected in March by the Middle East conflict, which impacted sales in the area and also some cost. Starting mid-March, our water heaters began to be sold through Lennox stores, showing a good start, and as we always said, significant sales are expected from 2027 onwards.

Adjusted EBIT margin showed strong resilience and remained stable year-on-year, despite an increase on logistic cost in the month of March, due, as said before, to the disruption of supply chain in the Middle East. Free cash flow reflected a more normal seasonal trend if compared to the one observed in Q1 of 2025 and some temporary effects in net working capital, which we will cover in more details later.

We confirm our full-year 2026 guidance. Regarding the impacts of the conflict in the Middle East, we believe that at the current level of intensity, they are well under control thanks to the measures that we already put in place to mitigate the effects on top and bottom line.

We see a positive start to quarter 2 and remain focused on execution to beat the market and accelerate growth over the course of the year. Moving to slide 4, as always during the quarter, we continued to make progress across our strategic priorities.

In North America, as we said, the joint venture with Lennox reached an important milestone. The sales of Lennox-branded water heaters has started mid-March.

A wide range of tank-type residential water heating products like electric, gas, and heat pump products are now available to Lennox dealers across the US and Canada. This partnership combines Lennox trusted dealer network with Ariston's global leadership in water heating technology.

US is the largest global water heater market, about $10 billion, and represents a meaningful growth opportunity. 2026 will be focused on setting up organization, products, training, and services, with an increasing contribution expected from 2027 onwards.

Late January, we inaugurated the Wolf Campus in Mainburg, Germany, to further strengthen our relationship with key partners and enhance installer engagement. The campus serves as a state-of-the-art training and research hub dedicated to HVAC renewable solutions, system configuration, and digital application.

In addition, the Wolf Campus hosts an entire floor dedicated to research and technology transfer, serving a new partnership with Deggendorf Institute of Technology, focused on sustainable building solution and next generation heating technologies. Finally, on sustainability, the implementation of the Road to 100 strategy continues to deliver measurable results, with MSCI recently upgrading Ariston Group to an A rating in April, placing us among the top performers in our sector.

With this last achievement, all four main ESG ratings have improved over the past year. Moving to slide 5, as always, let's review the German heating market, our first market representing around 20% of group revenues, and this market continued to be central to the energy transition.

As we have described multiple times in the past, the German market had a strong acceleration in 2023 followed by a correction in 2024, largely driven by destocking and regulatory uncertainty. In Q1 this year, renewable market continued to grow with an increase of 35% year-on-year.

A positive sign came also from the gas market, which showed a positive trend. Looking at incentives, since the beginning of 2025 approvals have gradually resumed, and in Q1 2026, approved incentives for heat pumps averaged around 27,000 units per month, up approximately 28% year-on-year, confirming the recovery trend already visible in the second half of last year.

The incentive scheme has been confirmed to remain in place through 2029, continuing to support demand for heat pumps. At the same time, the reform of the Building Energy Act, which points to a more gradual and technology-neutral transition pathway with the proposed removal of the mandatory 65% renewables energy requirement, is currently under review as part of the new GMODG, also called GMG or Building Modernization Act, of which a first draft has just being published.

With that, I will hand over to you, Riccardo, and Riccardo will help us and go through the financial performance of Q1 in detail. Thank you.

Thank you, Maurizio. Let's begin with slide number 7, where we present the year-on-year evolution of net revenues, with the Russian entity reconsolidated since the end of March 2025, and as such, represented as a perimeter variation.

In the first quarter, net revenues amounted to €656 million. Looking at the walk year-over-year, organic net revenues were substantially flat, reflecting weak market conditions.

In particular, climate comfort benefited from continued growth in heat pumps, while gas-related products remained under pressure. Water heating was broadly stable, with solid performance in Europe, a slowdown in the Americas in line with market trends, and Asia-Pacific and Middle East impacted by the Gulf conflict in March, affecting overall organic growth.

Services and parts once again delivered solid performance. Forex had a negative impact of around 1%, mainly due to the US dollar and selected Asia-Pacific currencies as the Indian rupee and Vietnamese dong.

Compared to Q1 2025, the quarter also included a contribution from the reconsolidation of Russia and other minor acquisitions. Turning to revenues by region on slide number 8, you can see how our top-line performance varied across various geographies.

Europe delivered a strong quarter with revenues up by 5.6% year-on-year, supported primarily by renewables, with Germany performing particularly well on the back of the recovery in heat pumps discussed earlier, followed by France, while gas-related categories remained under pressure. Ariston once again delivered performance above the European heating market.

As already mentioned, the year-on-year revenue change includes the contribution from the Russian business and other minor acquisitions, which were not part of the group perimeter in Q1 2025. In Asia-Pacific and Middle East, water heating delivered positive organic growth.

Vietnam and India recorded strong volume growth, while Middle East performance was also very positive ahead of the March escalation. Please note that in 2025, the exposure to the most affected markets, Emirates, Saudi Arabia, and Israel, represented no more than a mid-single-digit percentage of our group revenues.

The performance in the region was also impacted by adverse FX movements, which reduced revenue growth by 4.3%. In the Americas, revenues declined, reflecting the slowdown of water heating in line with market dynamics.

For example, as of February year-to-date, the US water heater market, based on AHRI data, was down about 9% year-over-year, mainly driven by declines in residential gas and also in residential electric. With AHRI, I'm referring to the North American trade association.

By contrast, the heating business showed a positive performance, delivering organic growth. Regional performance was also negatively impacted by unfavorable foreign exchange effects, which reduced regional revenues by more than 3%.

Moving forward to slide number 9, adjusted EBIT amounted to €34 million in the quarter, corresponding to a 5.2% margin at reported perimeter and 5.3% margin on a like-for-like basis. Margins were substantially stable year-on-year, despite higher logistics costs related to the Middle East situation and ongoing investments in go-to-market, digital initiatives, and R&D, as we continue to execute and complete initiatives that began in 2025.

Reported EBIT was €28.1 million, with adjustment primarily related to the purchase price allocation amortization and also right-sizing actions consistent with what we discussed in the prior quarters. As a reminder, profitability remains highly seasonal for our business, with around 2/3 of adjusted EBIT historically generated in the second half of the year.

On slide number 10, free cash flow was negative at €69 million in the first quarter. This reflects the usual seasonality of our cash generation.

Q1 is historically the quarter with the highest cash absorption, mainly driven by working capital dynamics. It is also worth noting that Q1 2025 was not representative from this perspective, as net working capital absorption was around €36 million, well below the historically higher absorption typically recorded in the first quarter.

As a point of reference, it was €72 million in 2024 and about €100 million in 2023. In addition, Q1 2026 reflects the timing effect from high capital expenditures incurred in Q4 2025 and paid in early 2026, with no underlying deterioration in performance.

Inventory levels remain well under control, with net working capital at 15.6% of rolling net revenues, consistent with historical first quarter patterns, and 0.5 points higher compared to the end of 2025 on a like-for-like basis. As a reminder, the group's cash generation is heavily weighted towards the second half of the year, with the fourth quarter representing the largest contribution in line with our historical patterns.

Moving forward to slide number 11, adjusted net debt increased up to €631 million at the end of March compared to €542 million at year-end '25, mainly reflecting the seasonal free cash outflow in the first quarter, which we have just discussed. Leverage stood at around 2x, remaining fully under control and in line with our expectations, and comfortably within our acceptable range.

The group's financial structure remains solid, supported by a well-balanced debt maturity profile and a high proportion of fixed rate or hedged debt. On slide number 12, you can see that our financial structure remains solid.

Average debt duration is around 3 years, with nearly 90% of maturities falling between 2027 and 2031. Approximately 60% of long-term debt is fixed rate or hedged, and in addition, we benefit from around €1.4 billion of committed, unused credit lines, ensuring ample financial flexibility.

I'll now hand the call back to Maurizio to conclude with the outlook for the full year.

Thank you, Riccardo. Let's move to slide 14 to discuss our guidance for 2026, which we confirm.

The market reflects ongoing recovery in renewables, and we believe that the actions that we are implementing across the group will increasingly support growth performance over the course of the year. We observe a progressively improving trend with a positive start to Q2.

In addition, the European heating market is largely replacement driven and currently at historical low levels, which supports our confidence in a gradual normalization of demand over time. We remain focused on execution and on investing in strategic initiatives to support growth and our medium-term roadmap.

On the top line, we expect organic revenue growth between +1% and +4% year-on-year on a like-for-like basis and at constant forex. On profitability, we expect an adjusted EBIT margin between 7% and 8%, supported by ongoing cost efficiencies and operating leverage, while at the same time increasing investments in go-to-market capabilities, new products, digitalization, and R&D, as part of the initiatives launched in 2025 and progressing through 2026.

As regards the Middle East, we have quickly adopted a series of measures to mitigate the impact of the conflict on top line and profitability. We believe that at the current level of intensities, these effects are well under control, while we continue to actively monitor the situation.

On cash flow, we confirm CapEx between 5% and 5.5% of revenue, aimed at supporting growth, with cash generation concentrated in the fourth quarter in line with historical seasonality of our business. Finally, on M&A, we confirm positive progress on the Riello acquisition, following constructive interaction with the relevant authorities, with closing by the end of the first half of 2026 confirmed.

At the same time, we continue to actively assess strategic M&A and bolt-on opportunities in a disciplined manner. To close, we remain committed to execute our guidance for 2026, balancing growth, investment, and profitability.

Thank you, Maurizio. Before opening the Q&A, we remind that since April this year, we have published the analyst consensus in the IR section of our website.

As you can see, some analysts already include Riello in their estimates, while other analysts do not. On our website, you can find either the consensus from the analyst including Riello and the one with analyst estimates without Riello.

We aim to maintain transparent communication with the market, ensuring full visibility for everyone. Please note that our guidance refers to the group perimeter at the beginning of the year, without Riello.

The closing of the acquisition, as already mentioned, is expected in the second quarter this year. We have now completed our presentation, and we are available to take your questions.

To make sure that everyone gets the chance to speak, we kindly ask you to limit your questions to a maximum of two. Operator, please open the line.

Thank you.

Good afternoon, everyone, and thanks for the opportunity for the questions. I want to start on the mix dynamics if I can, particularly within thermal comfort.

I guess when we think about your German business, I wonder how much more exposed that region is for you to heat pumps than the rest of Europe. Then also in the Americas, how do we think about the split there in terms of hot water versus heating?

Hi Christian, and thank you. I think in Germany, we are similar to the market, so that's what I would say.

Obviously, we mentioned before, the market in renewables are doing very well, and we are doing better than the market. We are happy to see that also the gas boiler finally were positive as well in Q1.

I think the split is following the market. Sometimes is 50-50, sometimes is different based on the sell-out.

I think on the Americas, what we can say that we are, again, pretty balanced. In US, we are a little bit more water heating than heating.

In North America, US and Canada, we are, I would say, balanced between heating and water heating, and in Mexico, as we are only water heating.

Thank you, Maurizio. Maybe turning to the P&L, you talk about some of the cost inflation on logistics.

I wonder if you can just touch on any cost inflation you're seeing elsewhere, perhaps in raw materials, and then when we think about the logistics pressures, are those confined to distribution within the Middle East, or is the impact being felt more broadly?

Maybe let's start with raw material. As there is an inflation effect on steel, copper, and aluminum, which are obviously going up for many different reasons.

The steel is expected to increase also due to the CBAM that Europe decided to start, while in China, for example, the steel is down, but in general, overall, the raw material trend is on an increasing trend. We always say that we cover, and we use to cover the material, we see this year manageable and in line with the guidance that we are giving to you.

Then, obviously, there are also other inflation related to the crude oil, for example, that is impacting not only logistic, but also shipping and also other materials. On this one, we started the day with a crude oil level at $110, now is more on $100, and we'll all hope that this will go down.

There is a specific impact on logistic cost, which we already had in March due to the Gulf situation, because as you might imaging, many ships were displaced and some could arrive, some didn't arrive, so that one I think has been managed and is the only one within the region. All of these costs that I mentioned are well under control for two kind of actions that we are doing.

Mitigating actions that we are taking at group level in terms of cost containment and decision as well on what to prioritize and not to prioritize. Secondly, as we already said, the majority of this inflations are common to market.

We are pricing in the market, and we will continue to price as needed, balancing obviously the effect on demand, making sure that we protect our profitability.

Thank you, Maurizio.

Hi. Thank you for taking my question.

Firstly, is it possible just to give some more color on some of the moving parts of organic growth in the margin for Q1? If possible to understand the pricing and volume trends would be really useful, and if you could talk about some numbers around traditional products and heat pumps, that would be great.

My second question is just a follow-up just to the raw mats. Is it possible to help us understand some of the price/cost spread expectations for the full year?

It'd be useful to get some color on maybe some price increases you may have realized for Q1 and if you've announced any price increases since March. Thank you.

Thank you. I think on organic growth, maybe we don't split more than what we said between regions and divisions.

Obviously, I can give you a little bit of flavor. In terms of performance, Europe, 70% of our business, is solid and strong, with growth organically above 2%.

Asia-Pacific and the Middle East, the organic was negative low single-digit, also because we had the effect of the Gulf, as we said before, and also in some geographies the market of water heating was a little bit weak, as we expected, but obviously a little bit weaker. In the Americas, the organic is negative, I would say close to double-digit, which is in line with the market evolution that we are seeing there.

In the Americas, you have to remember that Q1 last year was exceptionally high, because between tariffs and incentives, there was a strong push of selling and sell-out in Q1. That's why we are confident on the full-year guidance.

That's why I think we said last time that March was already doing better, we see April doing better as well. That's why we are calling a positive start of quarter 2.

To the second part of your question, which is related to raw material and pricing, I would say that you will see sequentially improvement across the quarters. Obviously, the benefit of pricing will have to come in the following quarters, partly because some of the costs were new news in the recent months and weeks, but also because, as I said, when we gave our guidance and we manage our price increase, we were obviously covering some of these increases through hedging, and therefore all the prices increases will work for end of this year and, more importantly, to protect 2027.

That's great. Thank you.

Thank you very much. Everyone, good afternoon.

My first question is actually taking a step back on Lennox. Could you maybe give us some sort of high-level views on what sort of contribution that could be?

You said sort of significant contribution in '27, but is there any further color you can give us on targets on market share and so on, which you're hoping to achieve in 2027 or in the longer term? Thank you.

Thank you, Vivek. I know all the time you are asking us how big is big, but Lennox is a listed company as well, I would wait for them to give you the numbers.

As we said, they started mid-March. I think it is a good start.

We are only a couple of months in, but I think the collaboration, the cooperation, and I think also the market acceptance is good. Let's wait for them.

As we said, this year is a building phase year, especially for them, since they are entering in a segment they don't know, but so far so good. Ask Lennox and then we comment again.

Fair enough. My second question is a follow-up on your comments around the positive start to Q2, and the improvement you saw through March and April.

I was wondering if you could give us as much color as you can as to what exactly you're seeing. Are you referring to order intake, or is it through organic revenue growth?

What is driving that? Is it largely driven by the European market, as in Germany and so on, seeing a step-up in heat pump demand after the release?

Is it other factors that are driving that? Any more color would be very helpful.

Thank you.

I will try to give color without a lot of colors, but as I said, Q1 in Europe was good, and I think we have to expect that Q2 will be good as well, because the markets, you heard about the number in Germany and in the rest of Europe for renewables and also gas heating systems that are recovering a bit as well. Secondly, I said that in North America, the market evolution that is so negative in Q1 is a kind of exception, because last year was very strong.

I think in the Middle East as well, the first month of the crisis is the worst, because obviously everything was blocked, and then we saw already some positive recovery in April. I think it's a continuation of market recovery.

We said this at the beginning of the year, that we would have expected a gradual acceleration of 2026, because the market, especially in heating, would recover. This is what we are seeing, and we are confident that we will continue to see.

Therefore, we are reinforcing our guidance. March gradually, January, February, March was an improvement, April is a confirmation of this improvement, and our expectation are obviously to see this sequential improvement in the next three quarters.

Very helpful. Thank you.

Hi, good afternoon to everybody. I have a couple of questions.

The first one relates to the organic growth for heat pumps. Can you confirm that the numbers that also the association disclosed are the numbers that may apply also to you, these mid-teens growth for the heat pump volumes for you?

The second question relates to the Section 232 and the revision that happened early April. Just wanted to have your view on what shall we expect from these, given that you are importing also some water heaters from Mexico, and also on your partnership with Lennox, what is the agreement about these kind of possible changes in tariffs in general also?

Thank you.

Maybe first of all on heat pump, please remember that the association is always giving the number of let's call air-to-air, which we call air conditioning to simplify your life, while when we speak heat pump, we mainly think to heating heat pump hydronic. That number is the sum of the two.

If I would have to say to you, what we see in the heating heat pump market in Europe is around 10%, a little bit less, around that number in terms of growth. Read the numbers carefully, because the notion of heat pumps are different.

Secondly, on your question on the tariffs, obviously there is always something new. I think we proved last year that we managed very well the situation with pricing.

Just to make sure that is clear to all of you, the famous new tariffs introduced this quarter in 2026 are not impacting water heaters, while they are impacting a little bit heating gas boiler that everyone is producing or exporting from Canada to US, and I think on this one, we covered already with a price increase.

Thank you very much.

Yes, hi. Good afternoon to everybody.

Let's say I have two questions. The first one, if you can come back a little bit, on your sequential improvement expected.

Considering let's say no, this 0 0% organic growth you got let's say in Q1. Basically what you are telling us is that you got let's say a positive organic growth in April, and as you mentioned before, considering the regional mix, positive performance Europe, negative performance in both Middle East and North America, if we are assuming let's say still good contribution for Europe, it means that you are assuming let's say in the coming quarters a less negative let's say contribution or even positive from the other two regions.

Just to understand if this is let's say some kind of contribution by region that we should expect in the coming quarters. This is the first question.

Thanks.

I think, Alessandro, you're right, obviously. Q1 Europe was strong, the other two regions were not.

The divisions were strong as well. I think what we are seeing is obviously a contribution from the other regions coming on a positive side and not on a negative sides, and a continued evolution of the market recovery in Europe.

North America will improve, Middle East and Africa and Asia will improve.

Okay. Thanks.

Then, can you comment a little bit, I know it's a small division for you, but considering then that you are going to integrate also Riello, can you comment a little bit on the performance of burner, which was even clearly from a small base, but was let's say up 30%? If there are some specific reason behind this not very strong performance of burners.

Thanks. Or combustion technology, as you mentioned also thanks.

I think obviously we never speak about the combustion technology business, but it's a business that is doing fine. I think we started to talk a little bit more since we started to speak about Riello.

The market is big, is more stable. We are a solid and strong player.

What we see there is that the majority of the European market are growing, that obviously we did some minor acquisitions there are doing well, and also there is the low NOx and ultra-low NOx solutions that are helping us to build the momentum for our commercial and industrial application. I think this technology will continue to be more and more important in the future.

We are very well placed. We are one of the first players to introduce this, and I think it is a very good sign with as we said combustion technology has also a good profitability.

Positive on that one.

Thanks. Sorry, just a follow-up on my let's say initial question when you mentioned and explained the contribution by area.

Is it possible to have an idea of the underlying performance of APAC excluding let's say the disruption you had in Middle East? Because clearly we saw these minus 8% including FX, including also this Middle East disruption.

Can you help us let's say to have some kind of, no, clean number on the underlying trend there in that region? Thanks.

No, maybe we don't give you all the detail, but if we exclude Middle East, that as we said is around mid-single-digit of our revenue, the majority of the countries where we play, we are leader. They are having solid performance.

In a couple of countries in water heating in Africa, there was a market slowdown that we expected to be recovery in the rest of the year.

Okay. Sorry, Maurizio, maybe I made the let's say the wrong question.

Let me revert a little bit. If you look at April, for instance, in a situation that at least consolidate a little bit, let's say consolidate, okay, Middle East or APAC and MEA, do you see that region turning positive?

Yes, I think we can say that excluding the impact of Middle East, the region is performing well in April.

Okay. Grazie.

Hello everybody and thank you for taking my questions. The first one, make it one by one.

The first one is about the European market that in the first quarter was a plus. You said about organic growth slightly above 2%.

Making the math, probably Germany contributed by more than this, considering that the market was in volumes double-digit. You stated that you are at least going as a market.

Probably the rest of the market is flat or slightly negative. It's a right consideration looking at Europe?

Basically the entire growth of Europe is driven by the performance was driven by Germany, is correct?

Maybe let me put in this way. Obviously Germany, which is also our first market overall for the group, being positive is positive for us, and we outperformed the market.

You are right on your first statement. As we said maybe during some of the interaction we had in the past, we still see France a little bit under construction, because the government is not very clear in supporting and not supporting heating and renewables, or actually they say they support, but maybe there is not the funding.

We said as well that in Italy, the gas boiler were under pressure, and I think in Q1 we saw this under pressure as well. I think in the rest of the geography, which are obviously smaller for us, Switzerland did well, which is not small, but is one of the top five.

On all the others, the performance was I would say flat to positive. I think the one where we need to see still a positive turnaround are France, Italy heating, which are the key one, and obviously we have UK in Europe, but we are doing well, but we are very small, not meaningful for you.

I hope I gave you a lot of information which also competitors will enjoy, but which I shouldn't say.

Your competitors probably call your competitor, know your numbers. Anyway, about, you spoke about confirmation of the guidance, the consensus in this moment that you collected excluding Riello is in the midpoint of your guidance.

Are you still considering this reachable considering the step-up in organic growth that you expect over the next quarters?

As we said, we are giving a range, which is 1 to 4, and then we said that we'll eventually correct the range quarter after quarter as we did last year. Now, obviously, we see a positive start to Q2, but let's see also how the Middle East and the volatility, the macro environment will change.

If we wouldn't be confident on the guidance, we would have said, but I think we are, and we are so giving you the message that Q2 started well. Far so good.

Be patient and bear with us. We will continue to do our best to accelerate quarter after quarter in a profitable way to be as good as we can.

Thank you.

Yes, hi Maurizio. Sorry, because you are so kind to give some general granularity, I wanted to ask, on April, do you see a sort of let's say better performance compared to Q1 of these let's say heating heat pumps?

Is basically the war leading to this increasing interest, because basically the war in Q1 just impacted March, and probably the decisions from consumers would have taken some days or weeks, it could be interesting to see what you see in the recent weeks in April on this product category.

I think obviously when we comment, first of all, we don't give details by technology. I think it's better to wait everyone the market.

When we said April, it was a positive message overall. I don't like maybe to give you more details.

Okay. Perfect.

Thank you.

Good afternoon and thank you for the presentation and for taking my question. Actually most of the questions that I had have already been answered.

Just one, and whether you might add some color on what you might share on Riello performance during this year. Thank you.

I wish I could say, but as we are competitor, and we don't have information on their performance. We try to understand from the Carrier comments how they are doing, but we don't have visibility.

We have to wait the official closure to make sure that we understand how they are doing. As we said, we expect to receive all the green lights within a couple of months, by the end of June.

Thank you.

If there are no more questions, thank you everyone for joining and enjoy the rest of your day. Bye.