Welcome to De Nora's quarter three consolidated results presentation. Presenting today are Paolo Dellachà, Chief Executive Officer, and Matteo Lodrini, Chief Financial Officer. My name is Caroline, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand over the call to your host, Mr. Paolo Dellachà, to begin today's conference. Thank you. Good afternoon, everybody. I'm gonna give you some key highlights about our consolidated results of quarter three, and then I will leave the word to my colleague, Matteo Lodrini, to go much deeper in the presentation. The results for the first nine months of 2022 consolidate a very strong growth across all business segments and geographical areas in which the group operates. We have achieved EUR 660 million revenues in the first nine months of 2022, consolidating almost 52% increase versus the same period of one year ago. The profitability has also given us a very satisfactory result with EUR 145.9 million EBITDA. Again, an impressive growth compared to previous years of 400 basis points. At the same time, 23% almost 24% percentage-wise in margin. We have the all-time record in backlog, numbering up to EUR 646 million, as of September 2022, 18.2% higher than the full year backlog of last year, 2021. I have to say that October has been another impressive month where we have accumulated an impressive amount of orders, driving our backlog very close at the end of October, very close to EUR 800 million. We have a very solid capital structure with almost zero debt. We are totally cash neutral, which is giving us an additional advantage in considering the macroeconomic environment and the rise in interest rates. Of course, this is giving us an additional advantage. Going a little bit more in the details of our three business units. The Electrode Technologies, we are continuing a very good project execution in all the segments that we are serving with, of course, and a profitability improvement, thanks to operating leverage effect and tight cost control. On the Water Technologies, we have a very robust growth despite the normalization of the pool demand trend. We have a superior profitability preserved with a focus on project execution, supply chain optimization, and strategic sourcing. Last but not least, Energy Transition. Projects are on track and an increasing backlog supported by new orders that we are receiving. Well on track on profitability target too. If we go to the next page, that is highlighting specifically on Energy Transition, our backlog and our trajectory in terms of project execution. We have once again the best in class backlog and an evolving pipeline of opportunities. We are working right now in full execution of 400 MW of orders that are in production. Out of these 400 MW orders, we think we are gonna end the year with slightly above 250 MW, which is already a phenomenal result. Especially in our scale-up process of our production capacity, we are positioning ourselves to the so-called gigawatt scale expected for next year, 2023. Our partners have already secured orders that are giving us further visibility beyond what we have to deliver next year. Sorry, this year and the beginning of next year. This is gonna keep us busy in manufacturing all across 2024. Of course, you see on the right side the potential values of this backlog. Of course, numbers in absolute terms, Euro values in absolute terms are slightly changing from time to time because of course, they are following the trend of the raw materials. As the raw materials, especially noble metal, are having a positive trend, meaning that they are costing less and that their price has gone down in the last months, these numbers are kept under revision based on this trend. What is important for us is that independently from the trend of the cost of the raw materials, we keep protecting and even enhancing our profitability. Matteo, you want to Thank you. Thank you, Paolo. Let me go through some key financial highlight of our quarter three results. As Paolo said. We continue to see robust growth in the three dimensions. In the traditional electrode business, versus last year, we almost grow 50%, which is an exceptional growth, driven by volume mostly. Some projects, especially in the chlor-alkali, this was also happening in quarter one. Also we were benefited from a price increase and the indexation to our noble metals in the course of the first three quarters. In the water segment, we also enjoy a significant growth versus last year. This was mostly led by pools business, which grew exceptionally high starting from the first half of the year and is continue at the lower pace in quarter three. We see that the pools are growing. Both in volume, but also in price, which is linked to the indexation to noble metals. For what is related to Energy Transition, again, we see the increase in demand that is leading to an additional milestone in our delivery for quarter three. We have additional revenues that we achieved, and what is more important, we are heading towards another important quarter for the Energy Transition, where we expect to see the real ramp up and to more than double the result that we achieve in the whole previous quarter. As you also see, our balance in terms of geographical split will be very well maintained. U.S. and Asia almost equal 35%, and EMEA, which is hitting very well, by the way, in terms of growth, despite the recessionary environment, weighing 30% overall. When it comes to backlog, I want to recall Paolo first underlined the importance of our backlog, which is signed orders. As you can see, our backlog is very healthy, and at the end of September, we hit all-time high record of backlog with a major increase versus last year. Not to say that we are improving the backlog in the energy, in the electro business, thanks to the strong demand and the aftermarket, which is for us a very important, strong, and resilient source of revenues. We also see the backlog that is increasing in the Energy Transition, and that is another important achievement in the build-up of the stream of revenue for the next months. We are seeing also a positive level in the Water Technologies considering what we have been seeing in the last quarter in terms of slowdown in the pool business as we were expecting since the very high demand that we saw in the first half of the year. I will stress again, even though it's not in the numbers, the order intake that we achieve in October and gives us a clear indication of the positive trend in revenues beyond 2022, and the backlog at the end of October reached around EUR 800 million, which is extremely solid and important. If I touch our cost control, we see continuous focus on our cost control. Our cost of goods sold is very much in line with the last year, underlying the ability of De Nora to keep the pass-through of raw material increase to our customer. At the same time, the SG&A costs are hitting well, and we are even below last year numbers, despite the fact that there are some headcount increase and especially T&E and other expense related to our strong business demand. If I also comment on corporate cost, we are very much in line with the previous year. No major change in our corporate cost structure for 2022. For what it comes to at the end, our exceptional premium profitability, we have seen the profitability to remain very strong and solid across the product line. More we go into the year, more we are keeping up a profitability which is very much in line with our historical result. Especially in the Water Technologies, we are confirming our target of achieving around 20% for the full year, and quarter three is confirming this trend. In the Electrode Technologies business, the profitability is definitely especially strong and, in terms of outlook for the year-end, we are even beyond our initial target of 24%. Extremely positive. I want to underline the result in the Energy Transition because I can announce that, even in quarter three, for the first time at the EBITDA level, we are at breakeven. We are basically anticipating of one quarter the guidance on 2023 to be EBITDA positive, which I think is a very solid and brilliant result that we can show in the Energy Transition as well. When it comes to our net working capital, we have seen an increase in inventory, and this is mainly due to the slowdown in the stocking for pools. Pools have been slowing down in the course of quarter three, and they will continue to remain at a lower pace also in quarter four. The buildup in stock for pools is decreasing, but not at the pace that we were expecting at the beginning. We should wait a little bit more time to destock this inventory, but we can confirm our expectation that the inventory ratio will be achieving 36% by the end of the year, and we are confident to improve in the course of 2023. Not much to mention on DSO or DPO for the time being. In relation to our net financial position, the good news about Industrie De Nora is that we have. First of all, we don't have a debt, so there is no, for us, implication on the rise of interest rate. Overall, we are on track in terms of cash generation according to our guidance. We are expected to maintain a positive flows of funds and cash also in quarter four till the end of the year. Looking at our guidance, 2022 guidance, we can finally confirm that, for the revenues, we are heading towards the low part of the range. For the margin, the profitability that we see, year to date and on our backlog allow us to say that we are well on track in the mid-range of our guidance for 2022. Thank you, we can open to Q&A. Thank you. As a reminder, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. We will take the first question from line Alexander Virgo from Bank of America. The line is open now. Please go ahead. Oh, thanks very much and good afternoon to everybody. I trust you're well. I wondered if we could dig into water tech a little bit, please. Firstly, a couple of clarifications. Would it be fair to assume that the increase in revenue in pool disinfection takes that business to closer to 55% of revenue on a trailing twelve months basis? And the 70% of growth that you talked to or referred to as price, that's divisional level, is it? Or is that at pool disinfection? Those are the first sort of clarification questions. I have a couple of follow-ups on trends, if I may. Yes. It's basically on pool and the effect on the growth on pools is mostly on price. The EUR 70-odd million increase is mostly price as well. Yes. 70% is price. Yes. 70% of the 72 is price? Yes. Yeah. Okay. That's fine. Thank you. Sorry. Thank you. I just wanted to make sure I was. Yes. I understood it correctly. For sure. Then in terms of the dynamics here, I guess the backlog that you have at the moment, you called out how much that covers of FY 2022 and the balance of the year. I understand that. My question is really about the sort of visibility you have with respect to the distributors and the destocking that you referred to. Mm-hmm. It sounds very or particularly severe if I listen to the likes of PoolCorp or some of the other companies in the space. I'm just wondering how you see that playing out and affecting your business as you move forward into 2023. In particular, as you comment that your inventory levels in division are higher than you expected them to be, does that mean that we need to think about under absorption of costs? Mm-hmm as presumably you'll have to underproduce to manage that inventory down? Thank you. Thank you for the question. I think it's very, very important. I will answer immediately to the under absorption. We don't see any under absorption. The way we see the pool business is, after a super first half year, we noticed since August, a slowdown in the orders. You see in the quarter three, the pace of growth in revenue, which is lower than the previous quarter. Mm-hmm. What we see in terms of visibility for quarter four is that the slowdown will continue. My comment on the destocking lower than what we expect is because of that, because the market is clearly indeed difficult to grow. The way we see, first of all on a full year basis is together an extremely positive growth that we can achieve in terms of revenues associated with and higher profitability. Now, we have not yet completed the 2023 budgeting, but I will be very pleased to give you the outlook. The outlook for pool business based on what we see and hear from our customer and is that the low sales volume that we are seeing in quarter three will probably persist in quarter one. Meanwhile, we expect the improvement overall in the course of the remaining quarter with an acceleration in the second part of the year. If I look broadly about how we project the growth of the pool business in this year count starting from 2022 and looking beyond 2022, meaning in 2023, I see that from 2021- 2023, still in our expectation, we will achieve the double digit growth that we gave in our mid-term guidance. This will consider 2022, especially first half of the year, a quite an exceptional condition of the market, which was driven by staycation, COVID effect, and a huge inflation on noble metals. Of course, the slowdown in the last quarter is considered, but we have a moderate positive group view on 2023, and we are confident that our guidance, midterm guidance in terms of growth compared to 2021 will be maintained and achieved. That's very clear. Thank you very much. Final clarification, one on just that before I get back in the queue is can you give us an indication of what you see as new construction versus aftermarket in the pool business in terms of demand? Yeah. That's actually one of the advantages of De Nora, right? Because historically, even though you can imagine that by serving everybody, the pool makers are not so keen on disclosing to us precise numbers about what they do in new installations versus what they do in replacement and service. In general, our assumption that has been matured over the years was that 70% of our revenues were related to replacement, so to after sales. Of course, we account everything new just because of what I said, meaning that we are not able to have precise numbers dedicated with the precise allocation of what is new, what is after sale. Everything is accounted as new. That's because we have millions of pools as an installed base. This trend will continue. Thanks to the impressive new installed base that has been done in 2021 and 2022, we are gonna enjoy a huge portion, again of our growing revenues in the pools coming from the replacement business. All right. If I may add on pools so we close the cycle. In pools, quarter three is showing a good price overall in terms of margins. Our margins are pretty strong despite the slowdown, which allows me to say that for the outlook 2023, we are confident that the growth that we want we will expect to achieve will be associated with good profitability for pools, thanks to the contract indexation with our pool customers. Very good. Thank you, gentlemen. Welcome. Thank you very much. We will take the next question from line Chris Leonard. The line is open now. Chris, go ahead. Hi there. Thanks for taking a few questions. If I could actually just follow on the pool business or at least on Water Technologies and just get a bit of clarification there. I may be wrong on this, but I think that the Q3 EBITDA margin was around 16%. Just to get your level of comfort looking into Q4 to see that margin increase to enable you to hit that sort of long-term or your guidance level at around 20% EBITDA margin for the year, which you've given. Could you start with that one, please? Yes, I can confirm the 60%, but I want to absolutely confirm our confidence for our guidance to the year-end to achieve 20%. Is that? I mean, is there anything in the mix that's changing there that you could help us with just to speak to that, you know, difference. Yes. From the specific quarter? No, it is. I mean, it's the contribution also from the WT systems. I mean, in the WT system, quarter four is a key contributor for the profitability. I just want to recall to everyone that, in the water system business, almost 40% of the result are achieved in the last quarter. That's the reason why we expect good result in quarter four on this specific aspect, and our confidence in achieving our guidance for the full year on the water segment. Great. Then just to be clear, when you speak to 2023, the outlook, you know, confident there and further growth associated with good profitability. I mean, what do we class as good profitability? Is that the exit rate in Q4 2022 at like a 20% EBITDA margin, or we're looking more at where we've just been in Q3 at 16%? Like, you know, where do you see that kind of range, or if you can give any early indication on that? Let me say that first of all, if you ask me an outlook for the whole WT for 2023 is definitely what we have seen in the pool business as potential slowdown in quarter one and pick up in the second part of the year, will be counterbalanced by a significant growth in volume in the WT system. This is evidenced by our backlog. The backlog in the water system platform is a record high, and that is a strong sign of a healthy order intake, which give us a clear indication and confidence that the business will continue to grow in the water system at the higher pace. This will be associated with the profitability that we expect to be relatively positive also for 2023. I'm not expecting a major change in the profitability outcome, but we have to acknowledge that the 2023 is in a recessionary environment. We have a good confidence to maintain the level of this year or something close to. Again, it's just an outlook. It's not our guidance because it's too early for us. We have not complete our process of budgeting 2023 yet. Sure. Super clear. Thank you for that. Just quickly turning to the Energy Transition segment and green hydrogen if we can. You know, order momentum there is looking good. Can you just speak to where you guys see the average order size going in terms of megawatts? Then I think you also commented on the improvement that you think you'll see in Q4, and I think you mentioned a doubling of revenue. Just to be clear, was that versus Q3 or was that versus the nine months to date? Sure. I can be precise. Our expectation for year-end, considering the production schedule, is to achieve between EUR 40 million and EUR 50 million in revenues. Considering what we have been already factored until September, you can see that there is a significant ramp up, which is, by the way, what Paolo was just mentioning before, just the more ordinary course of production that you will see for 2023. We are very confident for that, and I hope that we will continue in with this pace of delivery. In terms of profitability for ATR, as I said, we are anticipating the good result that we were expecting in 2023. Our gross margin is improved and higher than what was at the beginning our expectation and the guidance that we gave to the market. This prove, to be honest, that we have a very solid cost structure and knowledge of the price. In our expectation, this will give us even further upside in specific profitability for 2023 in the Energy Transition if we consider the relative performance in percentage. Okay, that's it from me. Thank you. I'll come back in the queue. Thanks. Welcome. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We will take our next question from line Alexander Virgo from Bank of America. The line is open now. Please go ahead. Thanks very much. I thought I might come back on Energy Transition, if I may. Just thinking about how you envisage the phasing of business over the next few quarters on the revenue side, I guess. Your comments there, I guess, on October backlog of close to EUR 800 million implies EUR 150 million order intake in the last five or six weeks, I think. I'm just wondering where that is coming from and whether or not the Energy Transition side of things is something we need to think about as being a little bit more 2023 weighted from here. The part of the order intake of October is, of course, related to Energy Transition. Yes. It's the partial transformation of those so-called secured orders that are transforming to backlog for us. Capacity-wise, production-wise, we are in a ramp-up mode. What we anticipated that in the last quarter we're gonna make a significant growth is absolutely the result of this ramp-up process. Backlog is sustaining us beyond 2023, and we are gonna be busy in 2024 as well, thanks to these orders that we have either in a backlog or has been already secured by our partners. On the other side, the ramp-up phase is growing every month to coming to a level in December that should be maintained on a monthly basis all across 2023. That's why I said that 2023 is gonna be the first year for De Nora, where we are gonna work on a gigawatt scale production-wise. Which is a very important step, fully covered, so it's just a matter of us to deliver, execute and deliver. Then, of course, is one of the important steps we are having in growing our capacity to the level that we expect beyond 2023 with the expansion of Asia and all the activities we have in place running in parallel right now. Very helpful. Thank you. You're welcome. Thank you. We will take the next question from line Isacco Brambilla from Mediobanca. The line is open now. Please go ahead. Hi. Good afternoon, everybody. One quick question from my side, on Electrode Technologies. If I got correctly, your information on volumes and prices in the division growth in the third quarter was almost exclusively driven by volumes. Can you please confirm this, and also help us understand how we should look at 2023 for this division, given such strong trends in volumes? Well, it was not only volumes, it was also price. We gave our commentary about the 60/40 split between volume and price. The growth is also a typical characteristic of De Nora being a resilient company, and the aftermarket is one of the bulk of our consistent revenue stream across the quarters. In our core business, electrochemical business, the demand seems extremely positive and strong. You see quarter by quarter continues eating up in terms of revenues. Backlog is growing. It's no doubt in a very healthy condition, and this is also something that we try to present to the investor in terms of anti-cyclicality of De Nora. This will continue in our expectation in the course of the next quarters. Also the outlook for 2023, if I may add this comment, for core electrode is, in our view, positive and supported by the increased backlog. Okay. Thank you. Welcome. Thank you. We will take the next question from line Chris Leonard. The line is open now. Please go ahead. Hi, guys. Back into the question stream, please. Following up on electrodes, I mean, the margin was very good in Q3 at sort of, I think, 26%. Looking into Q4, it doesn't look very difficult for you guys to achieve that sort of 25% potential EBITDA margin. You know, should we expect that now with, you know, greater demand coming through for upgrades, as, you know, chlor-alkali systems go to the newer membrane technology, do you think you can Sustain that level of margin into 2023 and beyond? To get a feel for where we should, you know, benchmark that business at for the coming years. Thanks. Yes. In terms of EBITDA level and profitability level, the answer is yes, we see stability. We have to consider that there has been also a big swing in noble metals, and quarter by quarter, we are going to release our inventory. There will be some impact in the profitability if I look at the quarter-by-quarter basis. If I take my full year, I again can confirm overall a stronger price levers from our side and stability in terms of overall profitability. We are confident heading towards 2023 in terms of outlook that profitability in the core business will remain stable. We have also to consider that in this business we have a leadership position, and we have also a geographical presence that we can maintain very good control over our market, customers, and pricing. Thank you. Going back to the Energy Transition segment as well, and just trying to get a feel for that run rate of production. I think on the call you mentioned 250 MW of production in this year, and then, you know, probably spoke to going above a gigawatt next year. Should we see that as, you know, delivered volumes to customers for, you know, Energy Transition, you know, electrodes? And sort of alongside that different question, but what sort of, you know, footprint will you be running with in terms of manufacturing capacity, and do you have that available today, you know, a gigawatt for 2023 production capacity? Just talk us through where you are today and where you'll be by the end of 2023. Thanks. We are, yes, we do have what we need to fulfill our production scheduling for 2023. In the meanwhile, started already this year and going very much ahead, during the course of 2023, we are increasing the production, the existing production capacity in Germany, where a big portion of these products is currently made. We are in parallel running the expansion with the specific technologies for alkaline water electrolysis, both in China and in Japan at the same time. That will give us, by the end of 2023, beginning of 2024, additional capacity to be able to ramp up of an additional quantum leap in 2024 our production schedule. Beyond, of course. Yeah. No, thank you for that. Just to go back to an earlier question as well, the average order size you guys are seeing, I mean, is there any indication you can give for megawatt size of maybe in the U.S. or across Europe, what you see right now and where you think it will be next year? Yeah. The pipeline of projects that through our partners, in particular our joint venture, we are serving, we're following, is impressive. It's all across the world, I have to say. It's not only Europe. It's in the United States, in South America, in Middle East, in Asia, in Australia. There is a very good point in saying that, we are in connection and driving, projects, all across the world. For sure, there are huge expectation from United States, thanks to the Inflation Reduction Act, but we don't expect it tomorrow. I mean, the two orders we have in full execution right now for the United States, they happened, before the Inflation Reduction Act, because of course there are a number of activities going on in green ammonia, in green hydrogen for mobility and other applications. Will the IRA speed up and make a revolution in the country? Absolutely, yes. Will it take some time to be deployed in projects? Yes. Yes, as well. Going to the size, I can tell you that the selected projects that are the most credible ones that, for example, our JV is working on, they are, a very important number despite it's just a selection, just to be able to focus the people and to concentrate the people on the most credible one. We have to say that because of our nature, because of the strong skills we have in delivering large scale electrolysis plants, first for chlor-alkali, now for green hydrogen. I have to say that the average size of this project is pretty huge. We are talking about hundreds of megawatts each as average. Going up to the gigawatt scale in few cases. That is our nature, our DNA, and that's what the market is recognizing us. Thank you for those answers. I'll jump back into the queue. Thank you, guys. Thank you. Sure. It appears there's no further question at this time. Thank you. Okay. Thank you to everyone. Thank you, everybody. Thank you. you. Have a great day. Bye. Thank you for joining today's call. You may now disconnect.