Industrie De Nora S.p.A. (DNR) Earnings Call Transcript

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Industrie De Nora 9 Months 2025 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Chiara Locati, Head of Investor Relations and ESG. Please go ahead, madam.

Good afternoon, everyone. Welcome to our first 9 months financial results presentation, and thank you for joining us. I'm Chiara Locati, Investor Relations and ESG Executive Director at De Nora. With me on the call today are Paolo Dellacha, CEO of the Group; and Luca Oglialoro, our CFO. They will guide you through the financial and business performance for the first 9 months of the year. Following the presentation, there will be a Q&A session. The presentation slides can be found in the Investor Relations section of our website. With that, I would like to hand it over to Paolo. Paolo, the floor is yours.

Thank you, Chiara. Good afternoon, ladies and gentlemen, and a warm welcome from my side as well. The third quarter proved to be another very strong period, enabling us to close the first 9 months of 2025 with growth across all major financial indicators despite foreign exchange headwinds and a volatile macroeconomic environment. As shown in the slide, we delivered solid performance across revenues, adjusted EBITDA and net income, all of which increased. Notably, the adjusted net results rose by 22% year-on-year. These robust results were reflected across all divisions, each reporting revenue growth in line with guidance. The core business, Water and Electrode Technologies, recorded an increase in both order intake and total backlog compared to the same period in 2024. In the Energy Transition segment, we successfully completed the NEOM project and continued executing other contracts, delivering over 800 megawatts of green hydrogen technology. We are also advancing the development of cutting-edge solutions and strengthening strategic partnerships to maintain a leading role in a market expected to grow significantly over the medium term. In the first 9 months, the favorable revenue mix, combined with strong operational efficiency led to profitability exceeding expectations. This enabled the second consecutive upward revision of our adjusted EBITDA margin guidance, now projected at approximately 19% for the full year 2025. Our financial structure remains solid, allowing us to stay focused on business growth opportunities, both organically and through potential acquisitions, particularly in the Water segment. To support this, we continue to optimize our treasury processes and medium-term debt structure, aiming to enhance cost efficiency and financial flexibility. Lastly, our commitment to sustainability remains unchanged as we execute our 2030 plan with a concrete and measurable approach that integrates sound financial principles and robust risk management practices. This slide shows some key KPIs from our 9 months 2025 financial performance, which Luca will discuss in more detail later. Reviewing the performance of our business units, let's begin with our Electrode Technologies business that achieved EUR 310 million new orders, marking a growth over 20% compared to the same period of 2024. Order intake accelerated significantly in the third quarter with a year-on-year increase of around 60%. Growth was well balanced between aftermarket projects and new installations. From a geographical standpoint, approximately 50% of new orders came from Asia, 26% from EMEIA region and 22% from the Americas. Order development involved both the chlor-alkali and the electronics segments, with the latter benefiting from the positive momentum driven by artificial intelligence. By the end of September, the backlog was broadly in line with last year level and higher than in June 2025. Let me note once again that the backlog here isn't a solid predictor of future revenues since project cycles turn over quickly and can be affected by a few large multiyear contracts. Overall, the business showed, in the first 9 months, robust commercial dynamics across markets and geographies. Taking a wider view, the international macroeconomic environment remains volatile and complex, shaped by evolving trade relationships among countries, which continue to impact the global economic growth. The scenario is further compounded by persistent geopolitical uncertainty. These factors may influence the timing of investment decision by certain clients, and we are strictly monitoring the business evolution. We are now on Slide #7. The Water segment continues to benefit from a supportive market environment. The increase in order intake and the resulting growth in backlog enhances our business visibility for the coming quarters and confirms both the strength of our market position and the sector's solid growth outlook. As shown on the slide, the backlog at the end of September rose by more than 20% compared to -- with the year-end 2024, leading to a stronger book to revenue ratio for 2026 than at the same time last year. Order intake continued to grow in the third quarter, bringing the 9 months total to a 16% increase. In terms of geographical distribution, North America accounted for more than 50% of new contracts with approximately 29% linked to the pools line. Remaining orders were well balanced across Asia, particularly in China, the Middle East, Europe and South America. Looking at the Water Technologies Systems segment, we recorded an 8% increase in orders, split between new equipment and aftermarket services. Growth was especially strong in Asia and South America. The pools line reported order growth of over 30%, with further acceleration in the third quarter. While North America remains the core market, 2025 has also seen particularly strong momentum in Europe. We're very pleased with these results. They not only reflect the positive market dynamics, but also the efforts we have made over the past few years to strengthen our commercial capabilities and reinforce our commitment to customer satisfaction through a portfolio of advanced technologies tailored to meet specific client needs. Finally, the market outlook remains positive across both the pools and the WTS segments, supporting our confidence in continued growth. On this slide, we highlight some of the key projects awarded during the third quarter, spanning multiple geographies and covering both industrial and municipal. Let's start with our flagship initiative in Brazil. This project is being developed in partnership with Chlorum Solutions, which will build, own and operate water treatment systems for 2 municipalities in Brazil. De Nora will supply 2 CECHLO systems, enabling access to clean water for approximately 10 million people. The initiative eliminates the transport of liquefied chlorine gas, improving safety and cutting environmental risk. Now, moving to the bottom of the slide, we see 3 additional key projects. The first 2 are filtration initiative using our DE NORA TETRA technologies, located in Qatar and in the United States. In Qatar, the project is owned by Qatar Electricity & Water Company and focuses on desalination. It will add 2,300 megawatts of power generation and produce around 16,000 cubic meters of potable water per day. This large-scale effort is designed with energy efficiency in mind, addressing the country's growing demand for reliable freshwater resources. In the U.S., we are supporting a municipal upgrade in the City of Rock Hall's wastewater treatment plant in Maryland. The system will help protect the Chesapeake Bay from nutrient pollution, contributing to long-term environmental preservation. The third project is located in British Guiana, where our SEACLOR electrochlorination technology will safeguard water systems in one of the South America's most significant offshore energy developments, owned by ExxonMobil. Before we move to the Energy Transition business, I'd like to give you a brief update on our entry into PFAS market started in 2025. In 2025, we secured our first 3 full-scale projects in the United States, focused on PFAS removal from drinking water. These projects build on our multiyear expertise in contaminant removal. The first 2 are located in Pennsylvania, Massachusetts. They were presented already during our May and July conferences. The third project was awarded only a few weeks ago in Washington State. This achievement represents an important milestone in our growth within the PFAS market, firmly establishing the De Nora position among the leading players in the sector. In parallel, we are continuing to expand our piloting activities with 12 initiatives currently underway across the U.S., Italy and Saudi. Additionally, De Nora is actively participating in 2 EU-funded projects, aimed at advancing PFAS treatment technologies, where we are contributing our proprietary solutions. We're also proud to highlight the expansion of our well-established SORB product line through the launch of the so-called SORB FX pack, an affordable and compact contaminant removal system, designed specifically to support small and rural communities, particularly across the U.S., in achieving their PFAS removal goals. This represents a niche market with strong potential for both development and profitability. Looking ahead, we anticipate steady growth in this segment, driven by regulatory developments, increased funding availability, including government support, and continued innovation in contaminant removal technologies. Let's now move on the Energy Transition segment. We are pleased to announce the successful completion of our contribution to the NEOM green hydrogen project, a global flagship initiative for green hydrogen production. As of August, De Nora has delivered the final components for this groundbreaking project. From early 2023 to today, we manufactured and supplied approximately 2.2-gigawatt best-in-class alkaline water electrolysis technologies, totaling around 33,000 individual cells, which form the heart of the engine of NEOM green hydrogen project. The project now continues on site where our partners, NEOM Green Hydrogen, will install and commission around 110 electrolyzers of 20 megawatts each. Once fully operational, these systems will produce up to 600 tons of green hydrogen per day, powered entirely by renewable energy, specifically 2.2 gigawatts of solar and 1.6 gigawatts of wind. The green hydrogen produced will be converted into green ammonia, which will be distributed globally, supporting the decarbonization of hard-to-abate sectors and enabling clean energy trade across countries and continents. This means avoiding about 5 million tons of CO2 emission each year, a major step in advancing global decarbonization. We take great pride in contributing to this transformative initiative. Our contribution centers on producing the core elements of the electrolyzers, supported by over a century of experience in high-performance coated electrode technology. This positions De Nora as a key player in the green hydrogen industry. This project also lets us make a real difference in reducing global CO2 emissions, perfectly aligned with our sustainability values. In the first 9 months of 2025, we made significant strides in our green hydrogen portfolio, delivering over 820 megawatts of technologies, including 300 megawatts in Q3, in line with the production schedules agreed with customers and confirming our strong execution capabilities. Looking ahead to Q4, we expect to finalize the Stegra project, completing all hydrogen-related contracts currently in our backlog. As previously shared, our backlog also includes approximately 10 million lithium recovery initiative from end-of-life batteries, scheduled for completion in 2026, further expanding our presence in sustainable and circular technologies. From a pipeline perspective, commercial dynamics are promising, although uncertainty persists around the timing of final investment decisions. Our joint venture is actively involved in front-end engineering design projects and has been selected as the preferred supplier for multiple contracts across Europe and Australia, totaling approximately 3 gigawatts. We anticipate that several key European projects will materialize in short term, reinforcing our market position and providing visibility of future revenues. As shown in the chart at the bottom left of the slide, since 2022, we have developed and delivered approximately 3.2 gigawatts of green hydrogen technologies. This track record confirms our role as a key player in a rapidly emerging industry with strong medium and long-term growth potential. From a market standpoint, low-emissions hydrogen production is expected to grow robustly through 2030 as the sector continues to evolve and mature. Key enablers for market acceleration include the regulatory certainty and balanced public financial support, but also long-term offtake agreements and demand stimulation, which are now essential to ensure bankability and build a sustainable ecosystem. In the short term, market volatility is driving a wave of consolidation already underway since last year. This will likely result in a new landscape, dominated by a few large solid industrial players, able to offer advanced technical solutions and support fair, stable pricing. De Nora is well positioned in this evolving scenario, thanks to a strong financial structure, versatile global footprint and unparalleled cutting-edge technological offering. With that, I'll hand over to Luca for the financial review.

Thank you, Paolo, and good afternoon, everyone. The third quarter marked another period of strong performance, building on the solid results achieved in the second quarter. As shown in the top-left chart, revenues grew year-on-year despite the negative impact of certain currencies, particularly the U.S. dollar and Japanese yen. At constant exchange rates, revenue growth would have been close to 12%. Top line expansion was matched by an increase in EBITDA margin, which reached approximately 20%, the highest level in the last 4 quarters. Looking at the individual business units. As shown in the top-right chart, the Electrode Technologies business reported a decline in revenues as anticipated in our production plans and consistent with full year guidance. The business unit revenue evolution should not be viewed as a quarterly trend, but rather assessed over the fiscal year as quarterly fluctuations are driven by production schedules agreed with customers. Furthermore, as previously noted, the overall revenue performance in 2025 versus 2024 reflects the interruption of business with our Russian customer, following the sanction packages issued in Q3 2024. From a profitability standpoint, the adjusted EBITDA margin, while remaining solid, has experienced fluctuations, primarily due to changes in volume and product mix. The Water business in the bottom-left chart posted revenue growth above 15%, and nearly 22% at constant exchange rate. This performance was primarily driven by the pools line, which posted a record year-on-year increase of 40%, while the WTS line recorded low-single-digit growth, partly impacted by a change in scope, following the disposal of the Marine business. Profitability in the Water business remained particularly strong with margins at approximately 22%. This positive -- this performance was driven by the expansion of the pool division, which accounted for 44% of the business unit revenues, up from 36% in the third quarter of 2024. Lastly, the Energy Transition business reported strong revenue growth, in line with production plans agreed with clients. The year-on-year comparison also benefits from the temporary production slowdown recorded in Q3 2024 due to supply chain issues. From a profitability standpoint, the increase in volumes, combined with notably strong operational efficiency, resulted in an EBITDA margin of 15.7%. Let's now move on to the 9 months results. Revenues grew by 5%, reaching EUR 631 million. The result was negatively impacted by around EUR 12 million due to the evolution of the currencies, mainly the U.S. dollar and Japanese yen. Excluding this effect, growth would have been 7%. The geographical breakdown is perfectly balanced. Compared to the same period in 2025, we recorded a 15% increase in the Americas, mainly driven by pools and chlor-alkali lines. Growth in EMEIA and APAC was around 1%, reflecting a combination of differing dynamics across the 3 business units. The Electrode Technologies business grew by 1.4% year-on-year. The performance was primarily driven by the chlor-alkali and electronics lines, both posting high-single-digit growth. As expected, the electrowinning line recorded a 30% decline, mainly due to the interruption of business with the Russian customer. Additionally, currency headwinds negatively impacted revenues by around EUR 6 million. At constant exchange rates, revenue growth would have been close to 3%. Aftermarket revenues accounted for approximately 45% of the segment's total sales. The business unit's 9-month performance is in line with guidance, which anticipates a slight revenue decrease for the full year 2025. The Water business posted overall growth of more than 8%, which would rise to above 11% at constant exchange rates. This performance was led by the pools line, which grew by 30% year-on-year, driven by both volume and price increase. The WTS segment recorded a decline of around 4%, mainly attributable to the already mentioned change in scope, following the disposal of the Marine business in 2024, which impacted the comparison by approximately EUR 4 million. Adjusting for this effect and excluding a roughly EUR 3 million negative impact from the U.S. dollar exchange rate, the performance would have been positive by approximately 2%. A particularly positive note comes from the aftermarket services, which represents more than 43% of the WTS revenues in the first 9 months, up 9% year-on-year with a positive impact on the business profitability. Finally, in the Energy Transition business, project execution is progressing as planned. Revenues accelerated in the third quarter as expected and are projected to remain strong in the final quarter of the fiscal year. Overall, the 9-month revenue dynamics confirm the full year 2025 guidance across the business unit. On Page 15, you can appreciate our backlog at the end of September 2025 that Paolo has already commented on by business unit. Let me just highlight that the core business has shown a steady, albeit moderate growth over the past few quarters, primarily driven by the strong expansion of the Water segment and the stability of the Electrode Technologies business at the end of September 2025 compared to September 2024. We are now on Slide 16, which presents an overview of our operating cost structure. [ Consistently ] with the comments previously shared during the half year results, at the end of September, the increase in G&A and corporate costs reflects inflationary dynamics and the carryover impact of corporate structure announcement implemented in 2024. R&D expenses remained broadly stable as a percentage of revenues compared to 9 months 2024, averaging around 2%, including the R&D cost in the Energy Transition segment, eligible for the IPCEI grant that, as from 2025, have been accounted as nonrecurring. I'm pleased to highlight that we have added over 20 new researchers to our laboratories, reinforcing our investment in the development of cutting-edge technological solutions in the sector. Let's move on to Slide 17. Adjusted EBITDA for the first 9 months recorded a year-on-year growth of approximately 15%, reaching 19.7% of revenues, about 200 basis points higher compared to 2024. Profitability is in line with what was already reported in the first half of the year and reflects a particularly strong performance in the pools line and the Energy Transition business. Looking at individual business units, the Electrode Technologies business reported a healthy 20.9% profitability, reflecting, compared to the same period of 2024, a different mix of product lines and geographies and especially a lower contribution from the electrowinning revenues. This trend is expected to be confirmed in the fourth quarter of this year, in line with the projected revenue evolution. The Water Technologies business achieved a strong 50% growth in adjusted EBITDA with a revenue margin close to 22%, approximately 6 percentage points higher than in the first 9 months of 2024. The improvement in profitability compared to both 2024 and the guidance was primarily driven by a stronger-than-expected expansion of the pools line. Its contribution to total business unit revenues increased to 43%, up from 36% in 2024, resulting in a significant margin uplift. It is also worth noting that the WTS line reported an improvement in operating profitability, supported by the expansion of aftermarket revenues, which accounted for 45% of total sales over the 9-month period and by operational efficiencies, following the disposal of the Marine business. For the final quarter of the year, we expect the positive revenue trend in the pools to continue with stable profitability in WTS, keeping the full year adjusted EBITDA margin in the region of 20%. Finally, the Energy Transition business reported a high-single-digit margin, supported by solid volume growth and excellent operational efficiency. This result is particularly positive when considering, as previously noted in earlier calls, the impact of one-off costs related to a customer's financial difficulties, approximately EUR 2 million, as well as R&D expenses amounting to around 8% of revenues. Now, on Slide 18, let's take a look at the evolution of the net financial position. In the third quarter of the fiscal year, operating cash flow exceeded EUR 45 million, supported by the typical seasonal trend in the net working capital, which tends to generate cash in the final 2 quarters of the year. In the fourth quarter 2025, we expect a further strengthening of the net cash position, driven by operating cash flow, despite an anticipated increase in quarterly CapEx. We are consistently committed to optimizing treasury processes and the medium-term debt structure. In this context, the recent voluntary early partial repayment of our senior facility reflects our strategic goal to reduce the cost of debt and maximize financial flexibility. Further actions in this direction are expected to continue over the coming quarters. Additionally, we aim to continue maximizing operating cash flow through the effective management and optimization of the net working capital. Finally, in terms of capital allocation, we are carrying out an in-depth analysis of potential targets in the WTS segment, while maintaining our strict economic and technological discipline. We are now on Slide 19, where we will give an update on our 2025 outlook. We confirm our revenues guidance, which points to low-single-digit growth for the full year. While 9 months revenues performance slightly exceeded this target, there is a potential risk that the continued strengthening of the euro against the U.S. dollar could partially erode the volume gains achieved year-to-date. Regarding the adjusted EBITDA margin, given the solid and better-than-expected profitability achieved so far this year, especially in the Water and Energy Transition businesses, we are raising our guidance for the second time in a row, now targeting approximately 19%. With that, I leave the floor to Chiara for the update on our ESG journey. Chiara?

Thank you, Luca. I'm happy to give you a quick update on how our sustainability plan is progressing. We are consistently monitoring, measuring and improving the environmental impact of our technologies. At the top left, this slide showcases our contribution to 3 selected SDGs during the first 9 months of the year: emission avoided through the delivery of green hydrogen technologies; sustainable water management and treatment, enabled by new orders in our Water Technologies Systems line; and circular economy through the reuse and recoating of electrode surfaces. On carbon footprint reduction, in 2025, we installed and activated new photovoltaic systems across all our plants worldwide, reaching an installed capacity of about 5.1 gigawatt hours. The largest systems, each above 1 gigawatt hours, are located in Brazil, Sorocaba; U.S., Mentor; and Germany, Rodenbach. This capacity covered approximately 15% of our 2024 energy needs. And we are evaluating additional solutions to meet our renewable energy targets, while improving safety, cost efficiency and sustainability of our energy sources. On the people front, initiatives to enhance well-being and engagement continue globally. This year, we earned Great Place to Work certification in 6 countries: Italy, U.S., China, India, Singapore and Saudi Arabia. We also strengthened our affinity network. Notable initiatives include Empower Her, hosted at our headquarters in Milan in collaboration with Valore Donna, which brought together women directors, managers and emerging talent for a transformative journey in female empowerment, leadership and collective group. In addition, we have initiated a new partnership in U.S. with the Society of Women Engineers. Finally, ESG supplier assessment now cover 40% of active suppliers, up from 21% at the end of 2024. In addition, in Q4, we will conduct our first ESG audits on 2 critical suppliers. Our sustainability journey remains focused on delivering measurable impact across the value chain with a concrete and financially sound approach to risk management. Before closing, I'm excited to announce that on November 20, we will host our first in-person stakeholder engagement event, gathering insights and perspectives on sustainability topics. With that, I hand the floor to Paolo for the closing remarks.

Thank you, Chiara. To wrap up, this slide presents our final remarks. So let's go through them. We had a solid operating and financial performance with revenues to net income and robust free cash flow generation in Q3. Core business is growing in volumes and profitability with double-digit increase in order intake. Energy Transition projects are on time. NEOM project has been completed. We are ready to seize the near future opportunities and continue to advance our technologies. Financial structure is strong. The optimization of treasury and financial management activities continues to strengthen free cash flow and lower debt costs. Focus on external growth by leveraging M&A opportunities in the Water sector to strengthen vertical integration and expand into new markets. So I would like to reiterate our strong and ongoing commitment to the group growth with a particular focus on external expansion initiatives within the Water segment. In this area, we are carefully assessing a number of potential targets with the aim of strengthening vertical integration and expanding our presence into new markets and industries. So we are now happy to take your questions.

[Operator Instructions] The first question is from Isacco Brambilla of Mediobanca.

A couple of questions on my side. The first one is on Water Technologies. So results, specifically in pools, continue to be quite impressive, exceeding again expectations in the third quarter. Looking ahead, maybe even beyond 2025, is it reasonable to take current margins as a reliable starting point for next year? Or should we model a reversal towards 2024-2023 level? I know it's a bit early for 2026 guidance, but any directional indication would be helpful. Second question is a follow-up on Electrode Technologies. Considering your statement on international market environment, how should we read this? Should we think about 2026 that this maybe a bit back-end loaded in the second part of the year in this segment, Electrode Technologies, hoping that in the second half, maybe macro uncertainty may fade?

I'll take the first one. Thank you, Isacco. So, as you said, the water margins in the first 3 quarters of the year have been at 22% level. And as I said, we expect to have, for the full year, a margin more in the region of the 20%, so slightly lower due to a soft Q4 compared to the first 3 quarters of the year. The improved EBITDA margin compared to the past was due to the Water slightly -- performance that was slightly above our targets due to higher aftermarket than the past versus original equipment and also a good geo mix, geographical mix. The pools have been higher than expected, both for volumes and price. So it is today -- it's soon now to anticipate 2026 level of profitability of Water because it really depends on the mix of pools versus Water Technologies, the geo mix and aftermarket versus OE. So we are assessing and we are calculating now the next plan and budget economics. So I cannot anticipate anything, but I hope I gave you some information to assess by yourself the right level of profitability.

Yes. Isacco, on the second question, for sure, we are in continuous, of course, daily contact with our customers. But these uncertainties on the geopolitical level might delay some projects, no doubt. So we are monitoring that. We have a strong backlog, as you have seen. But for sure, this situation might create some delays in the decisions of customers. So we are collecting all the data and the numbers to be able to have enough visibility in short.

The next question is from Chris Leonard of UBS.

Could I maybe ask 2? And maybe following on from the Water Technologies side on the pools business, how much more of an opportunity do you think there is for the aftermarket replacement wave looking into '26 and 2027? Presumably, a lot of this growth for this year, like 40% in Q3, has been from the replacement after the adoption during COVID-19 and the staycation effect in the U.S. market refurbing pools. So do you have any indication of how much is left to do there for the replacement cycle? That could maybe help us out modeling past '26 and '27? And then, the second question is following on -- from the comments on the call on the PFAS technology and opportunities you have here. Is there any update as to how material you think this can be for the Water business in 2026 and '27 for revenue? And equally, do you still need an acquisition or similar in the U.S. to really push your commercial offering further for the PFAS market?

Yes. With regard to pools, we expect -- so we do not have, let's say, a clear view of this growth being essentially, let's say, characterized by a replacement cycle. So we think this is a healthy level of sales for the pools. I mean, it's soon, again, to anticipate what we see for 2026, but it's not entirely due to the replacement cycle after COVID. For the PFAS, Paolo?

Yes. On PFAS, Chris, the 3 orders we already received are around a couple of million dollars, and we do have a number of interesting projects in the pipeline. So maybe not yet so material for 2026, but no doubt, we are talking about a few million dollars that we foresee for '26 and probably even better for 2027, considering the level of increasing activities we have around this business. On the acquisition side, well, we have, for sure, in our pipeline of potential [ project of ] acquisition, there is also PFAS to some extent. On the other side, we have also made some decisions to develop internally some specific technologies around PFAS. Instead of spending equity on M&A, we are going to do also some internal R&D projects. So it's going to be a combination of organic growth, but also potentially some inorganic growth there.

And just following up on the water pool business, in the U.S. in particular, I mean, do you have a view on how much new pool installations have been driving volumes for this year to date? I mean, residential markets are pretty weak in the U.S. in 2025. Would you anticipate if we see a buildup again in residential markets if interest rates drop that you could be in for more new-build activity? Just interesting to hear how much new-build you think has been present so far in 2025.

Yes. Well, our customers are not so generous in disclosing this kind of numbers and breakdowns because they know that we serve everybody, and we don't want to disappoint anybody in asking or to be too intrusive in this. For sure, it's well known that the real estate market in 2025 didn't perform well -- particularly well, but we are also conscious that the potential decrease of interest rate might give a boost over the next years to that part. Let's keep in mind that the biggest drivers for us in terms of growth in pools are: first one, replacement; second one, conversion from traditional pools treated with chemicals to the automatic disinfection system that we can provide. So those are the 2 main drivers. We are not so much influenced by new-build pools connected to the real estate.

The next question is from Matteo Bonizzoni of Kepler Cheuvreux.

I have 2 questions. The first one is on your post-2025 guidance, which you provided last March. Clearly, as you have said, you have upgraded guidance for this year twice, 2 percentage points, more or less, from 17% to 19%. So I would like to know -- it's a little bit early clearly to have the 2026 guidance, but the range, 15% to 17%, if you are starting from 19%, could also seem a little bit low even if we know that next year, the Energy Transition business should decline pretty significantly, and this should have an impact on the consolidated margin. So do you have any commentary on this 15% to 17% guidance range, which we provided last March, is still reasonable or it's becoming also too low? And the second question is, as we approach the end of the year, do you have an indication of the revenue decline, which we should expect in Energy Transition for next year? I was looking at the consensus in Visible Alpha is for about [ half, so revenues to half ]. I have an estimate which is likely more prudent, around minus 60%. Do you have maybe some sensitivity color in relation also to the upcoming intake in the last part of the year? And also, related to margin for this specific division for next year, what we -- what is the number to imagine?

Okay. Thank you. So again, not easy to anticipate what we see for 2026 after 2025 that has been characterized by pools above expectation, clearly, both in terms of volume and in terms of margin, a positive mix from both geographical point of view and product mix, except for [ ET ], where the mix was not favorable, and also strong discipline in industrial and corporate costs. So 2026 will really depend on the product mix and volumes, definitely. But I mean, also important to refer what we said in the Q3 press release, where we anticipated that the complex macroeconomic and geopolitical scenario could have an impact on investment decision of some of our clients in both Electrode and [ ETR ] business. So we are now assessing this new scenario within the new 2026-2028 plan. Therefore, I cannot provide any additional insight now, Matteo. With regards to the Energy Transition, you know that the backlog at the end of the year will be -- with regards to hydrogen, will be close to 0. In order to be able to invoice something in -- let's say, a measurable and important amount in 2026, we need to receive orders within the next couple of months. Otherwise, it will be almost impossible to industrialize the new business. So, for the moment, the backlog is 0. As Paolo said, we are positive on certain possible orders to come in the next quarters. But for the moment, we do not have anything signed. And therefore, I mean, it's very difficult for the moment to predict what will be the 2026 evolution of this business, while we remain obviously positive for the medium term. [indiscernible], as you know, is the most important and probable order that could come in the next couple of weeks or months. So it's the most concrete, let's say, possibility to have something to invoice in 2026.