Elica SpA

MIL:ELC

Earnings Call Transcript 2021-Q3

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Elica's 9 months 2021 Results Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Giulio Cocci, CEO. Please go ahead, sir.

[Giulio Cocci, executive]

Thank you. Good afternoon, everyone. Thanks for joining our results update. I will go very quick on the executive summary, Slide #4. And then I will leave the word to Stefania, our CFO, to describe you more in details the quarter and the figures so far during this year.

Highlights of the third quarter. First of all, we see an industry that is still alive despite slowing down a bit in Europe, but remaining strong, especially in North America. Our revenues also in the third quarter are growing above the market, scoring a 10% growth versus the same quarter of last year. That means a 5% organic, but moreover, means a 12% organic growth versus the same period of 2019, let's say, the last normal year we lived.

In terms of margins, we are persisting in our path of consolidating a 6% operating margin despite a very difficult raw material scenario, both in terms of cost, in terms of availability, but fighting in terms of pricing, pushing the best mix of our production and keeping the cost under control as we did during the peak of the pandemic. In this way, our operating margin is EUR 8.2 million, and moreover in the first 3 quarters of 2021, we arrived to EUR 25 million almost of adjusted EBIT. That is EUR 5 million more than we did in the whole of 2019.

We already discussed and communicated the successful closure of the India transaction with Whirlpool, and we will have some insight about this operation in the presentation. Net financial position to close the first snapshot of the quarter, we arrived to EUR 32 million, EUR 32 million against EUR 67 million we were last year. And if I remember well, EUR 51 million at the beginning of the year, delivering a leverage that is perfect to start planning some profitable strategic growth in those geographies where we're doing well, but we are not enough big, and moreover, delivering an operating cash flow generation that is ensuring we can keep going in this direction and making this number lower -- the lowest we can by the end of the year.

Now I leave the word with Stefania to discuss about the drill down of the presentation.

[Stefania Santarelli, executive]

Good morning to everybody. I'm going to ahead with the presentation, Slide #6, Cooker Hoods industry unit shipments. Q3 demand was slightly positive, plus 1.5%, with a different dynamic across region. EMEA, largely negative, minus 0.6%, but compared with our quarter 3, where the demand already started to rebound post-lockdown COVID. The last year, the trend of the EMEA region in the Q3 was plus 6%. North America continues to be positive, but in any case, the quarter 3 is compared to the quarter of the 2020, less brilliant than the EMEA trend. Asia overall flat, plus 1.1%, with a stable trend, carried on by the India dynamics that came out from the second lockdown that we -- they had during the Q2.

Moving ahead to Slide #8, sales key drivers. Quickly, with our net sales results of EUR 137.4 million, equals to a progression versus the last year of 10%. But inorganic growth is at plus 5.2% with a persisting positive performance versus the 2019, plus 17% and organic plus 12%. The part related to the acquisition had a contribution in terms of net sales for EUR 6.9 million equal to 5.5%. And the currency effect improving in respect -- in terms of negative impact, improving versus the previous half because they remain still negative, but with a less impacted. In terms of year-to-date data, the result in term net sales is plus 31.7%, organic growth of 31.9%. As I previously said that the impact of the currencies is EUR 7.4 million, but fully offset in terms of EBITDA margin.

Going to Slide #9, regional sales distribution and dynamic. EMEA growing plus 9% and organically plus 1.3% versus the last year in a negative market scenario. America substantially aligned to the last year. But the performance -- this performance is due to the 2 reasons. The comparison of the last year -- this data is compared to the last year, where the result of the America was plus 18.7%. This is a fact that in the quarter 2 of 2020, the America was affected by the lockdown in the quarter 3 of 2020 to recover the quarter 2. So they had a strong result in terms of performance, plus 18.7%.

So the performance of the current tier is considered positive because compared also to the 2019 is plus 18.7%. In additional, this has been done in a scenario with constrain in terms of raw material and component availability. And we took a decision to invest in this factory in terms of capacity increase to catch opportunity that we are looking for the American region.

Asia double-digit growth, mainly relating to the fact that last year was negative because it was around minus 10%. And the currency, as I said, is carried on by the India performance.

Going ahead to Slide #10, sales by business and brand. Division -- Cooking division recorded a growth of plus 4.3% versus last year, with an important performance in terms of Own brand because persisting our results above the market trend, plus 7.1% versus the last year, net of FX 8.1%. While the [ UM ] trend is substantially in line with the last year, but linked partially to the America trend that I just explained because the 90% of the America factory is relating to the [ UM part ]. In term of Motor division, growth plus 52% versus the last year, and organic growth plus 8%, driven by Cooking and Ventilation segments.

Going ahead to Slide #11. In terms of price mix, we are performing well and persisting growth in all strategic product family. NikolaTesla reached the 12% of the Cooking sales, with NikolaTesla Fit that reached the 10% of the total family revenue of the aspiration hob. Aspiration hob is growing 55% versus the last year. We reached the 9-month EUR 40 million of net sales compared to the last year, that was around EUR 22 million net sales. Also in the other categories, like ceiling and built-in high-end, performance are above the market trend.

Moving ahead to Slide #15. We arrived to the P&L. Q3 confirmed the EBIT margin equal to 6% in continuity with the last 2 quarters of the current year and in progression of 50 basis points versus the last year. We moved from 5.5% of the last year to 6% of the current year, in a competition scenario of raw material and inflation and availability problems. And even positive, we compare this result with some industries peer that is -- they are losing compared to the previous quarter, but they are losing also compared to the quarter of the previous year. Elica is confirming the trend of the last quarter and is growing also compared to the previous year.

During the current quarter, we create a provision to support the execution of the industrial plan. And we'll come back later with a specific chart, the restructuring costs. That did impact the recurring items, that is EUR 16.5 million, out of which for the industrial plan is EUR 15 million, are completely offset and neutralized by the extraordinary positive income that is coming from the sales of the controlling participation of Elica PB India. In fact, if we look at our net profit, that is EUR 4.7 million is the double of results in respect to the last year compared to EUR 2.1 million of the last year, and also is the double of the result of the minority. So I still confirm as was the previous quarter that the result of the group net profit is above the result of the minorities.

Looking the result of the first 9 months, as also our CEO, as already anticipated, the total EBIT is around EUR 15 million -- EUR 5 million more than the total full year of the 2019 of the pre-COVID period, with EUR 70 million net sales less than 2019 because we closed the 2019 with EUR 480 million, now with only EUR 400 million of net sales, we overcome the result in term of EBIT in respect to the 2019. And also in terms of group net profit, we recorded a result of EUR 10.4 million of group net profit, respect to the EUR 3 million recorded in the full year 2019.

Going ahead with Slide #14 with the deep dive of the nonrecurring costs and the minorities, starting from the restructuring costs. In terms of restructuring costs, we said that the total for the quarter is EUR 16.5 million, out of which EUR 0.7 million are relating to people restructuring across some region like America, but also in corporate part. Cost for EUR 0.8 million are related to the extraordinary cost for the M&A activity, like India, and Motor acquisition and [ FIME ]. And the EUR 15 million for the industrial plants. For the EMEA, new footprint transition. Part of this value around EUR 5 million is not financial, but is related to assets to be disposal. And the payback in terms of [indiscernible] around 2 years, considering only the financial part.

In terms of minority results, we have already saw in the P&L that the impact is EUR 2 million, out of which EUR 1.6 million coming from the Elica PB India, increasing versus the last year to the fact that there was spike of the sales in the Q3 after the lockdown of the Q2 in the current year. Ariafina and Airforce, the other 2 joint ventures, are substantially in line with the last year.

Moving to Slide #15 -- sorry, 18, net financial position. We already saw that before that we reached a result of EUR 32 million net financial position, improving versus the last -- improving versus the quarter 2020 of EUR 65 million, slightly carried on by operating cash flow due to strong result in terms of EBITDA, but also positive trend of our net working capital, our managerial working capital and also thanks to a good work in some of CapEx prioritization in terms of the return of the investment of our target.

In terms of the M&A impact, we can see that the impact is neutral. So the progression of the net financial position is exclusive due to the generation of the operating cash flow. Because if you look at the M&A impact, it's 0.2%, and the breakdown is due to EUR 22 million of positive cash in that is coming from the India sales. Another item of positive impact that is EUR 1.5 million to the reimbursement of the Elica loan anticipated plus the impact of the deconsolidation of the Elica PB India in our net financial position that was -- is around EUR 10 million. So they contributed positive. And our next financial position for EUR 10 million now with deconsolidation, we lost 1 million of net financial position and the cash out for the acquisition of M&A for Motor equals to EUR 30 million, EUR 4 million paid for the -- during the signing in June and the EUR 9 million paid in the first tranche during the July month.

So overall, the impact of the M&As is neutral. And I repeat again, the improving of the net financial position is mainly due to the operating cash flow. And with this data, we reach a leverage of 0.6% in terms of relation between EBITDA and the net financial position.

Moving to Slide #17. For -- we would like to give you an overview about the M&A that's affected the quarter 3. So we start with the deal will India JV and then we go ahead with the EMC status. Around India, we share the highlights, on 27 September, we announced the signing of the agreement with Whirlpool India, the 19% of our capital share, and we remain with a participation that is around 6%. The net cash in, as I said before, is around EUR 22 million, calculated as an equity value as a multiplier of 16.5 of the EBITDA of the last 2 financial year of the Elica PB India plus the net financial position at last day of March 2021.

Following this agreement, we signed a new shareholder agreement that we have -- we end of March 2024, according to which Whirlpool may request to Elica to sell the last part of its share with the same dynamic in terms of equity value. So 16.5 multiplied for the average of the last 2 financial years of the EBITDA, plus the net financial position at March 2024. And as counterpart of this, we give -- we grant to Elica India to be the exclusive licensee for the Elica brand product for the next 10 years, 3 plus 10 (sic) [ 7 ]. And as counterpart, Elica will receive royalties for this brand license with a minimum floor granted for the next 10 years, which are the benefit for this deal for Elica.

First, the cashing of 2020 -- EUR 22 million to be used to catch additional opportunities in terms of organic growth, increase the earnings per share of the group because if you look at the contribution of the group net profit of the Elica, the average of the last 3 years is around EUR 1.2 million. With the royalties, we will get more value in terms of group net profit. We confirm we remain partnership, one of the important manufacturer and distributor of the domestic appliance is one of the -- our most important customers in terms of [ UM ] product. And we still be present in Elica PB India controlling the Elica brand in India. I move -- I give this part to Giulio Cocci for the part related to the next talk.

[Giulio Cocci, executive]

Yes, we wanted to give you also a flavor of how it's going, the integration between our FIME brand, Motor division and the recently acquired EMC. So the first thing we focused was to take control of the new company. So from a procedural -- from a process perspective, in order to allow immediately to control the business, from a cash management perspective, of course, from a full control of the customers and all of the commercial initiatives, including also what concern the management of the pricing in a period like this one, where the raw materials, the components are changing value week after week. We set up already the new organization to be lean, to be clear, to understand who reports to what and who is accountable for what kind of process and to avoid also any kind of delay and any kind of miscommunication with our customers and with our suppliers.

Second step is the business integration. Now that is a longer process, but that is already absolutely ongoing. So the first thing was to meet the main customers of EMC in order to start discussing what is the group -- the new group strategy in terms of modern business. We met [ Faber France ]. We met Electrolux. And we are discussing with them together with other important customers of FIME that now we are approaching also the EMC opportunities, long-term agreements in terms of products, in terms of growth, in terms of investments, in terms of opportunities that before we were not able to catch, now we have the proper product mix to push on.

Brand and products. We are building a new company. And we are focusing also our brands in order to maximize the value that the market, that our customers relate to a specific brand. So FIME will be our brand for the heating business. EMC will be our brand for the ventilation, so mainly for cooking, where we're already putting together what we had with FIME and what we have now with EMC, we become the European leader in the segment. We have completed the product range integration, and we have already created an offer that is for sure the best main offer in the ventilation business. And in this moment with the logistics, with the price increase is also very well defended by any non-European influence. We have started intelligent value-oriented and sustainable path in terms of innovation. So we have obtained the certification for using the hydrogen in the pre-mixer.

In terms of synergies, of course, this is an opportunity to catch. This is the way we can also maximize the return on the investment. So we have already launched, I was discussing with them before talking about [ Faber ], talking about the Electrolux. The first cross-selling initiative to introduce the FIME Motors in EMC customers and EMC Motors in our old customers. We have completed and we are ready to start the verticalization of FIME of the EMC processes into FIME that is more optimized and efficient in terms of verticalization. And of course, we are already rationalizing the investment initiatives because in this case, 1 plus 1 must remain closer to 1.

Moving to Slide #20. So closing remarks and our guidance. This would be a record year for our company. A record year in terms of net sales, a record year in terms of operating margin, a record year in terms of cash generation and also finally, a year that we delivered a net profit pertaining to the group that will be absolutely more than what we were getting before from the minorities. So it will be, let me say, real. We maintain our commitment in creating a durable value, that means achieving our midterm target despite what is happening and whatever will happen in the raw material scenario both in terms of availability, but also in terms of inflation.

We are currently approaching the third, in some cases, the fourth round of increasing our prices in order to sustain our margins, whatever will be the cost of the raw materials and the components in the 1st of January. We are optimizing, keeping on optimizing our SG&A. We made already our organization slimmer than it was at the beginning of the year. And slimmer doesn't only mean that is cost less, but it means, in my perspective, more quick, more effective, more oriented to the business.

We have revised improving also on the base of the quarter 3 results and what we see happening in the days, our expectation in terms of net sales. So we foresee an expected growth in the region of 17% -- between 17% and 18% versus last year, meaning more close to EUR 530 million than to EUR 520 million. We see that the operating margin, again, should be closer to 6% before we were imagining a range between 5.5% and 6%. This means that, let's say, we want to consolidate this 6% despite we foresee a very difficult quarter for -- difficult not only for the market, but again, for the availability of raw materials.

We have been good so far because we never stopped our production facilities. I met German customers, I met French customers, and the message I got from them is that we were excellent in terms of maintaining our level of service in this, let's say, very difficult to manage scenario. Of course, with this margin, with the sales, with the focus on cost, with an intelligent management of CapEx, we expect our net financial position to additionally improve versus what we've just seen in -- during this presentation. I believe we finished our presentation, so we're open and we're happy to answer your questions.

[Operator]

[Operator Instructions]. The first question is from François Robillard from Intermonte.

[François Robillard, analyst]

I've got three questions. So the first one is, if you can give us some more details on the raw material cost increase impact on your third quarter financials? Just if you can give us more color on how such price increases impacted your margins in the third quarter? Second question is about your view on 2022? What are your expectations in terms of market? Then about margins. You talked about consolidating the 6% for 2021. Is it something -- can we expect something north of 6% in 2022, given you booked this EUR 15 million for your reorganization plan? So if you can give us more color as well on this reorganization plan for 2022? And the final question is on Americas. I see it was flat year-on-year at EUR 20 million top line. Can you -- are you able to do more with your current production capabilities there? And how is proceeding the plan that you have in place to grow in this area?

[Giulio Cocci, executive]

Okay. Thanks, Francois. Raw materials. What we're seeing now is, let's say, an effect in the -- between 3% and 4%. So slightly lower than what I see looking at some of our peers' presentation. Of course, it is 3%, 4% that 2 months ago was 2%, 3%. So it is increasing. And moreover, what we are understanding is that it's not anymore following any commodity index. So you go to the supplier and you basically negotiate the price of what you need to make your production. I would say, on a weekly basis, not for sure in a midterm planning way. 4% means that we have already launched before, let's say, leaving the company for the summer break a price increase of 5% flat.

We are, of course, negotiating with our customers not anymore at the value, but the validity date. We have some issues with some customers that are more powerful. We have some opportunities with some customers that are as powerful. Our main target, because we know we can absolutely achieve our commitment in 2021, is to make that the 1st of January 2022, we have no effect in our margin. So we are negotiating this 5% increase. But at the same time, for example, Motor divisions, where the commodities are hitting even more, we have already launched another round to be discussed before year-end and to be executed, let's say, in January 2022. So it is an ongoing situation. It is an ongoing situation that is putting some pressure on our margins, but pressure that we are absolutely sure to manage in the short term and to neutralize in the midterm. And when I talk about midterm, I talk about January 2022.

Of course, this year has been -- how can I say, helped in giving us time to manage intelligently, also the price increase that we applied to our customers and to our products by the fact that for, I would say, 7 months over 12, we had steel and copper covered in the best period to cover our commodities in 2020. So we had time to plan the strategy, discuss the issue with our customers and then start applying the price increase. This makes me feel pretty sure that despite we are suffering because we are asking price increase from a side, we are asking desperately materials on the other side. We will be able to manage the short term and will be absolutely comfortable to manage the 2022 challenge.

And in this way, I approach an answer to your second question. 2022 will be for sure a difficult year, full of opportunities, but also full of challenges. Opportunities because we see a market that is still growing. For sure, it will move down versus this year, the first -- the center of this year was also affected by a comparison with the 2020 that was strongly pushed down by the COVID. But we see that the demand is alive. We see that our kitchen producer are asking for products. We see also that they are asking for a richer mix. So there is an important opportunity to grow.

On the other side, there is a very negative scenario from raw material costs and availability. We have been good in managed availability and also in backing up the cost with price increase. And we are not foreseeing issues, if not risks, from this perspective. Of course, the difficult thing to do will be to, how can I say, extract efficiencies from our manufacturing footprint. Why? Because next year, we will have the factory of Cerreto, the factory of Mergo and the factory we have in Poland, that basically will be exchanging products among them. So we will have to focus on efficacy more than on efficiency. So that will not be a -- how can I say, an opportunity to balance the increased cost of raw materials with manufacturing efficiencies. We have a big opportunity in Mexico, but it's 1 factory over 4.

On the other side, we foresee increasing volumes, in both of the segments, in all of the channels. So we have opportunities in models. We have a growth planning OEM in B2B, and we see no reason not to keep on growing as we are doing in our own brand sales. We have a cost base, and I speak about SG&A in the market organization, that is lower than it was in 2019, and it is not supposed to grow because we understood that with this organization, we have more opportunities than needs in terms of enforcing the organization.

And of course, the contribution margin that this growth will give us, let's say, is what we believe we can capitalize. We foresee an operating margin slightly growing. That means basically more than consolidating what we did this year in a scenario that we mentioned to be even more adverse. So basically in line with what is the current consensus because this is the preparation year, is the year in which we move the factories, is the year in which we almost complete the path of our the complexity project. So we are ready for 2023, where we will have the proper production in the proper country. We will have an Italian factory that will be only focused on the high range of our production, and we will have an organization that will be stronger, but less costly than it is and than it was.

I believe I missed the Americas. Yes, we see a lot of opportunity in Americas. Of course, quarter 3, pure numbers, comparing with the quarter 3 of last year that was affected by 2 months of factory lockdown versus the average 1 month that we had in Europe, in the other parts of the world, let's say, offset the fact that America is growing almost 20% versus 2019. So this is the important thing. We see a market that's growing in the 10% that we see in terms of market trends is what I also read, if I'm not wrong in presentation, so it's strong, and it's going to last. This is why also dealing, discussing with our OEM customers that represents the 90% of what we sell in America. So they need to be taken into account.

We foresee an important growth of the opportunity from that perspective in North America, and we decided to anticipate the production capacity meets that we might have had, let's say, in the second half of last year, starting this year because we want to be ready and we want to be the first to be ready to follow that market.

What else? There is the opportunity in terms of increasing our B2C, but again, we need to find a different approach in growing massively our B2C business in America because even if we do 20% more next year, and it's absolutely in our end, it means that from EUR 10 million, we will move to EUR 12 million. So nice to have, but not, let's say, determining what really -- what is really our opportunity in there.

Quarter 3, quarter 4, for sure, there is an important comparison versus last year. There is also a constraint in raw material, for which we have not used our production capacity at full potential. So if there was more availability of raw material, playing with the shifts, playing in the weekends, maybe playing more during the normal working hours, we could have done better for sure. We have been able not to stop the factory. We have been able to serve our customers. We could have done probably more? Yes, yes. Of course, there is a balance that we need to find between what we will share, what we can produce with the current supply chain constraint.

[Operator]

The next question is from Alessandro Cecchini from Equita.

[Alessandro Cecchini, analyst]

The first one is about actually the Western Europe market that was negative in the first quarter. So I would like to better understand the reasons. It's linked to the constraints on raw material, components and so on? And what is the current dynamics? This is my first question. My second question is about basically your guidance is pointing fourth quarter organic growth top line to be negative versus last year. It's a question of comparison base. So just to better understand the drivers. My third question is about -- in the fourth quarter, you will deconsolidate India and you will add EMC. So I would like to better understand what kind of net impact you will have at the EBIT level? And finally, if I understood correctly that your target for next year, 2022, is to grow top line and then to maintain the current EBIT margin. So if I understood correctly.

[Giulio Cocci, executive]

But the dynamics in West Europe, let's say, where we double-sided, meaning that for sure, last year, the West European cluster was growing 8%. So let's say, there has been a normalization of the demand. Normalization of that means from a side that there is a distribution of market share inside the same level of revenues of last year. Now we have analyzed, unfortunately, the data -- official data from [ GfK ] arriving to half of the year, and we have seen that in Europe, in Greater Europe, in this case, we got almost 1.5% market share in value. So despite the market demand is basically flat year-on-year versus 2019, I would say, we are grabbing market share versus our direct competitors.

The raw material constraints have played also a role in this because it doesn't only apply to the appliance producers as we have, and we were finding that especially in Europe, but also to our customers. So we have, for example, the kitchen makers that doesn't found the wood to make the kitchens. So despite the demand seems to be alive, there is a full supply chain constraints that, in my perspective, is also limiting the opportunity at least in the short term of the market growth. So this is the main reason that I see because if I look to our order book, in Germany, in France, even in Italy, where we are already at 50% market share with our own brand the -- let's say, the orders are there. Now we do not see an important decrease quarter-on-quarter or year-on-year.

But at the end, it's the final user that in our case it's not Giulio Cocci the final consumer, but is the kitchen maker, the kitchen specialist, [indiscernible] that is getting order and slowing down the deliveries because there are a lot of constraints in terms of supply chain. So we are not absolutely, I was going to say, scared by this trend because we see, in any case, a midterm growing trend in the market in whatever channel we operate. Our channels are more value-based channels. So even, let's say, more durable from a time perspective. This is our opinion.

In terms of guidance, quarter 4. Quarter 4, of course, we deconsolidate India. There was an important part of our, let's say, organic growth last year. So if I take out India and I compare apple with apple, we are foreseeing minus 7%, minus 8% versus 2020. 2020 quarter 4 was plus 19%. So basically, it means that I'm growing in the region of 7% and 8%. If I did well, the calculation versus 2019, meaning that we see a market that is absolutely still solid, but not booming a lot because of the creation of the book order in the very last part of 2020.

And in terms of EBIT, here, I probably need the help of the Stefania. For sure, India EBIT contribution was absolutely very high in the region of...

[Stefania Santarelli, executive]

Yes, in the region -- if you look at the Q4, the contribution of the EBIT -- in terms of EBIT, it was around EUR 1.5 million, considering around EUR 12 million of net sales. But if you consider at the level of group net profit, we know that what is remained for the Elica Group is only 55%. In terms of -- the part of the EBIT, the contribution of the EBIT of the Q4 was around EUR 1.5 million. If you consider the [ EMC ] support in terms of gross sales, we estimate around quarter, like the quarter 3, so around EUR 7 million of net sales -- EUR 7 million, EUR 8 million of net sales that we generate around more than 1 million of EBIT. And the remaining part will be compensated from the royalties that we get from Elica India and also the activity that we are doing for the cost containment in our organization and OpEx.

[Giulio Cocci, executive]

So basically neutralized and more real looking at the last line of our profit and loss.

[Stefania Santarelli, executive]

Neutralized at the level of group net profit and also quite almost neutralized also at the level of EBIT.

[Alessandro Cecchini, analyst]

Okay. So basically, if I understood correctly, you are pointing basically to maintain the EUR 7 million EBIT of last year despite lower sales, thanks to action cost and price hikes?

[Stefania Santarelli, executive]

So we are speaking earlier about the offsetting of Elica PB India. Then for sure, we have to considering also the reduction of the sales with respect last year because, as you said before, the expectation of the Q4, the Q4 is to have a reduction in terms of net sales. And also in the part of the raw material, we will have an impact of -- in the Q4 with respect to the last year.

[Giulio Cocci, executive]

It might have some up and down coming from, let's say, the current prices of the components, now that we are sure to manage in order, let's say, adjusting our prices from the 1st of January, that we are, of course, determined to manage in the very short term. So if I need PCBs in the late November, and the supplier will ask me, I don't know, EUR 300,000, EUR 400,000, EUR 500,000 more than it should be get them inside with this market scenario will buy them. This can be the variation. Then I will increase the price, our cash cost, I will reorganize again the business, but this might have, let's say, a difference in terms of execution timing. This is the risk and only risk that we see. That means that talking about numbers, if I remember well, our previous consensus was in the region of EUR 30 million operating margin, 100 more, 100 less. We see the opportunity to do better than that. Thanks to more sales, and thanks also to the fact that we successfully close quarter 3, and we do not see unless some risks as the one I told you, quarter 4.

[Alessandro Cecchini, analyst]

Okay. And finally, on the 2022. So I understood correctly that your target is to maintain margins at this kind of level with growing top line.

[Giulio Cocci, executive]

We see the opportunity to, let's say, maintain, slightly improve our 2021 operating margin with increasing sales, of course, yes. Let's say, we expect to have a radical improvement in 2023 because that will be the year in which, let's say, we will be settled as we should have been also in the past. But we see an important contribution coming from sales that will help us if we are good enough, and we have been so far, to manage our cost, to slightly improve our operating margin also in a difficult year like 2022.

[Operator]

[Operator Instructions]. Next question is a follow-up from François Robillard with Intermonte.

[François Robillard, analyst]

Just a quick follow-up on your third quarter figures. Just to get to know more about what -- why taxes were positive in the third quarter, your profit before tax is lower than your net income?

[Stefania Santarelli, executive]

Thank you, Francois, for the question. The Q4 tax rate positive versus the previous one. It's mainly relating to that. The tax rate calculation is done year-to-date. And the impact in the current quarter are substantially too impact. The extraordinary items related to the sales of the [indiscernible] so the income of the EUR 50 million generated a tax rate that is lower than the average because it's around 10% in respect the 54, 56 of the average of the group. In additional, the contribution -- the positive contribution that reduced and became positive. The tax rate is related to the restructuring fund that we created because reduced the baseline for the calculation of the tax impact and generate tax credit. This is the reason why the comparison versus the generates a positive impact of the tax rate.

[Operator]

Mr. Cocci, Ms. Santarelli, there are no more questions registered at this time.

[Giulio Cocci, executive]

Okay. Thanks a lot, and thank you. Have a good rest of the day. Bye-bye.

[Stefania Santarelli, executive]

Bye.