El En SpA

MIL:ELN

Good afternoon, good morning to everyone, and welcome to EL.En's Third Quarter 2024 Financial Results Conference Call. Today's call will be recorded, and so will be an opportunity for questions at the end of the conference call.

With me on the call, Andrea Cangioli, EL.En's Chair and Enrico Romagnoli, EL.En Chief Financial Officer and Investor Relator.

Before we begin, please note that there are -- there is remarks management makes on the conference call about future expectations, plans and prospects and forward-looking statements. Certain statements in this call, including those addressing the company's beliefs, plans, objectives, estimates or expectations of possible future results or events are forward-looking statements. Forward-looking statements involve known or unknown risks, including general economic and business conditions and the condition in the industry we operate and we may be affected, should our assumptions turn out to be inaccurate.

Consequently, no forward-looking statements can be guaranteed and actual future results, performance or achievements may vary materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation about the content nor to update the forward-looking statement to reflect events or circumstances that may arise after the date here of. [Operator Instructions].

But at this time, I want to give the floor to Andrea Cangioli. Please go ahead, Andrea.

Thank you very much, Bianca. Good afternoon, everybody. Thank you for joining this call set up for the comments on the interim financial reports we issued yesterday as of September 30, 2024. I excuse myself for my low voice, I'll try to read and to talk as better as I can.

We are pleased with the overall performance of the quarter, which marked a recovery in revenues and profitability and is realigning the 2024 results, especially under the income from operational metrics to the financial results of last year. In the same period and in the last phase, certain remarkable steps were taken in order to provide our [indiscernible] division an opportunity of sustained growth setting the ground for the assignment of the division to a highly qualified subject that we take over the responsibility of the management of the division. Also, benefiting of our continued commitment to support the activities of our companies in our new role of minority stakeholder. This topic was deeply analyzed in the call we had earlier this week, and I will make further short comments later on in this call.

Going back to the summary of financial results that you're seeing on the presentation, we are still down 5% in revenues on 2023, but we are up 4% in the quarter. And EBIT in the quarter was close to 30% up from 2023, reaching after 9 months, EUR 50.8 million, which is down only 1.7% on the 2023 result of the same period. The Medical business succeeded in market, increasing revenues in the 9 months, while revenue targets were missed in the industrial sector, down 16%.

For [indiscernible] concern EBIT, we are right on path to achieve the yield increase that we guided to. For [ what ] concern the sector composition of 2024s EBIT compared to 2023, the improved profitability of the industrial sector and the effect of certain onetime events that impacted on the 2 sectors are making the industrial sector contribution more relevant than in 2023. We enjoyed a very strong performance in this quarter in certain business areas, which allowed us to offset in the consolidated results, the weaker performance of other activities.

As for the first half of this year, market conditions were good in certain areas, but also in several geographical and application areas that were very far from being favorable. International markets were supportive to our business growth in most of the businesses, meaning application or geographical market combination with 3 great exceptions. The U.S. market for medical device turned out to be not as strong as we were expecting. Anyway, product innovation and strong partnerships with our valued distributor allowed us to achieve a moderately satisfying performance in this area.

The Italian market for industrial application was very weak in demand due to the unfavorable economic environment and to the specific impact of an appropriately managed transition between certain expiring and other new tax incentives, mainly [indiscernible] that caused a real gap in order bookings and deliveries in the first 6 months of the year.

Cutlite Penta in the laser cutting market and Lasit in the laser market had to register revenue shortages up to 40% with respect of 2023, well beyond the expectation of a year with mild declining demand. Good news here is that the order booking seems to pick up quite smoothly after the new incentives have been clearing [indiscernible] removing the rate of uncertainties on the investment case of our customers.

Third area of the difficulty was the Chinese market for [ Lasit ] systems, again, very weak, driving the domestic revenues of our subsidiaries to a 33% decline and preventing the subsidiaries for materially improving their profitability this year as we had hoped and expected. Planned and [ worked for ] with a robust cost saving activities performed beginning in the second half of last year.

Way more rewarding and promising was the market acceptance of our products on the international market. Sales outside of Italy for Cutlite increased by 50% more or less and sale outside mainly China for Penta Laser increased more or less by the same amount. And [indiscernible] sales higher profit margins than the domestic sales. There was a beneficial effect on our profitability. Very evident in Cutlite meant that notwithstanding a 50% revenue decrease was able to widely exceed 2023's EBIT on the 9 months.

More accurate comments are also deserved by Lasit engaged in the laser marking business, following the possible sale to [ RFC ] of El.En's. laser cutting business, will remain as the most significant business within our industrial sector. As we disclosed in previous releases and meetings, great profitability of this industrial business in terms both of marginal sales and EBIT margin is more similar to the profitability profile of the medical sector.

Historically, El.En. group, way higher than the industrial. Over the past 9 months, Lasit's revenue grew by more than 12%, and the annual revenue projection is now estimated to be around EUR 30 million. We're excited about the growth opportunities in this market segment, and are actively supporting its expansion through an aggressive internalization strategy that includes the establishment of local distribution subsidiaries. Subsidiaries have been set up already in Poland, Germany, Spain and the U.K. and other are to come to complete the most effective coverage of the most interesting and promising [indiscernible] markets.

Lasit's profitability over the first 9 months was lower than expected, due together with the weaker Italian market to the [indiscernible] of certain important deals that sit in our Q3 as work in progress, and will contribute to sales and margins in Q4 only. After a slow start, the Medical business displayed a progressive recovery and is now up to a strong close of the year.

Certain general economic environment complexities are making this year less favorable in the medical market, especially the high interest rates that are always accretive to the market's willingness to purchase capital equipment, together with the unrest of certain geographical areas. We oppose our traditional business weapons, release of new innovative products, always abundant and marketing and commercial support to the expansion of the international footprint of our distributions. Notable positive trends were reported in the urology market with the continued success of Quanta System, both for new systems and for the consumable flow. And in [indiscernible] application of the aesthetic business, where the [ Tetra ] products of the new PRO line, namely the RedTouch PRO and Onda PRO for rejuvenation and pigmented lesions and the latter for body contouring and skin [indiscernible] tightening are encountering increasing market acceptance.

New products have been released for the hair removal market as well, like Again PRO by Deka, MeDioStar [indiscernible] by Asclepion, EVO and Suprema by Quanta System. And they allow to maintain a strong and leading competitive position in a market application segment, which lately has not displayed the same degree of vitality of the other segments of Medical Aesthetics.

The innovative processes of the El.En group to enhance its product range and provide customers with attractive and cutting-edge solutions remains central to the group's activities, strategic priorities and investments. Medium-term forecast regarding the growth of target markets remains positive, and the groups continue to rely on their development. It configure it essential to sustain significant investment in research development and innovation to improve its competitiveness over time and capitalize on the growth opportunity that these markets present.

Throughout the year, the group continued its sustainability-oriented activities, adopting among others, the new 5-year plan for 2023-2027 that outlines specific and measurable sustainability activities and objectives addressing sensitive issues such as climate change mitigation, circular economy, promotion of a responsible supply chain, enhancement of individual contribution and community support. The group reaffirms its ongoing commitment to sustainable development, where environmental and social responsibility are increasingly integral to its business [ model ]. In the quarter and right after the end of the quarter, there were 2 significant events on which I would like to spend a few words before handing the call to Enrico.

At the end of August, outlast repurchased 100% of the shares of Cutlite Penta that were held by Penta Laser Zhejiang, but this means contributing to a more distinct identification of Cutlite from its Chinese sister companies that for the sole purpose of the possible IPO, have been allowed to control Cutlite Penta. Subsequently, Penta Laser Zhejiang proceeded to liquidate the private equity funds that had invested in its capital. According to the terms of Cutlite in the original capital increase agreement, reports to investors, invested capital plus interest for a total amount of RMB 151 million equivalent to approximately EUR 19.4 million, clearing the shareholders' base of Penta Laser from the IPO-only oriented financial investors. Subsequently, last week, we announced that we entered into a framework met with Yangtze Optical Fibre and Cable Joint Stock Limited Company [indiscernible] for the potential sale of a majority stake in the company's lens laser cutting business namely Cutlite Penta and Penta Laser Zhejiang.

In addition to the financial metrics that have already been shared with the press release at Monday's call's comments, I would like to add just a bit of more color to how this proposed strategic transaction will impact the business of our sold companies. El. En, [indiscernible] YOFC, a valued partner for the assignment of the responsibility of running one of its technological and business jewels based on a set of significant values and capabilities that YOFC holds and represents.

As a larger financial [indiscernible] corporation looking for diversification of its business with this proportion transaction, YOFC has the goal to diversify in the promising market of laser system, for manufacturing, but also to potentially integrate with its startup [indiscernible] engaged in the development and manufacture of fiber laser, high powerless sources, sustaining the rapid expansion of the business unit and exploiting the intrinsic core values of the Italian and the Chinese components.

Under this slide, the peculiar advantage [indiscernible], a market leader with strong brand identity time to its fully Italian design, management and manufacturing played a key role in the standing revenue growth that Cutlite was able to achieve in the very last year. These are the cornerstone of YOFC strategy is they are fairly committed to see the Italian Cutlite stronger in market effectiveness and Italian identity, elevating its technical and commercial position to excellence on the global stage. I will be back for [ the contents ], and I hand the call to Enrico Romagnoli.

Thank you. Good morning, everybody. I'm going up to give a brief comment on the 9 months financial results. In the first 9 months of 2024, the group revenues closed up to EUR 466.2 million, with a decrease of 5.4% compared to the corresponding period of 2023. In the period, we recorded a decrease in sales in the industrial sector, minus 16%, while we have an increase in the medical sector of 2.1%, closing the gap with the previous year present until last June.

Gross margin for the 9 months 2024 was EUR 190.3 million, up 1.6% from EUR 187.2 million of 2023 with a recovery in sales margin from 38% to 40.8%. The improvement in the gross margin is due for EUR 1.9 million, equal to 0.4 percentage points on turnover from the proceeds for insurance and government reimbursement relating to the damage caused by the flood in Campi Bisenzio in November 2023. Net of these proceeds, the period margin still improved by 2.4 percentage point compared to 2023 due to a more favorable composition of sales both in terms of product type and destination market within each sector and due to the greater relative weight of medical sector.

Operating expenses increased and the impact on sales, up from 9% to 9.7%. And the main reason are the sales and marketing expenses for trade first and Congress incurred by both medical and industrial companies. Staff cost increased in value for EUR 2.2 million, plus 2.7%, and has impact on sales from 16.4% to 17.3%. The national cost for stock option plans in favor of employees amounted to EUR 2.1 million in the period against EUR 2.5 million in the first half of 2024.

EBITDA was EUR 61.9 million, in line with the last year, the impact on revenue, up from 12.6% to 13.3%. Cost for depreciation and provision increased from EUR 10.1 million to EUR 11.1 million and the impact on turnover increased from [ 2% to 2.4% ]. The increase in this cost item was determined by the increase in provisions for credit risk both in general and especially for the specific provision of EUR 2 million set aside by the sudden financial crisis of an important customer of our Japanese subsidiaries with us.

The last unfavorable guarantee condition granted on the sales of laser cutting system in China allowed to partially release the product warranty provision while the risk provision was reduced following the positive resolution of some disputes by Asclepion. EBIT showed a positive balance of EUR 50.8 million, down 1.7% from EUR 51.8 million registered in the last year with a marginal sales at 10.9%, improving on last year's figure.

We recorded a net financial loss of EUR 1.6 million compared to the loss of EUR 0.9 million recorded in the same period of the last financial year because of higher negative exchange difference in the period and a greater amount of interest paid on loans mainly obtained by the companies operating in the industrial laser cutting sector and interest paid on the capital increase of venture capital payback by Penta Zhejiang in September 2024.

The exit of private equity funds from the capital, Penta Zhejiang has established the impossibility to completing the company IPO on the Chinese market. Among the clauses of the contract with reaching 2019, the group acquired the shares of Penta Zhejiang held by the minority partner the JV. The listing by November 2024 was the condition for the payment of an earn-out of EUR 5 million to the liquidity partner. The management based on the IFRS 9 standard, therefore, remeasure the financial liability with recognition of a nonoperating income of EUR 5 million in profit and loss. So the income before taxes showed a positive balance of EUR 53.8 million, EUR 50.8 million last year.

In the period, the net financial position increased for [ EUR 19 million ] at EUR 73.8 million at the end of September. In the quarter -- in the third quarter, we had an overall growth in revenues because of a growth recorded in the medical sector of over 10% and a decrease of 6% in the industrial sector, minus 10% for the Cutlite division.

Margins are improving in line with the 9 months. Looking to the cash flow. The group's net financial position, as I said, reported an increase of EUR 19 million during the 9 months, and the group generated cash also in the Q3 for EUR 5 million. The net income flow from operating activities together with depreciation and allowance exceeded EUR 44 million, which were used for increasing working capital for EUR 19 million to pay dividend for EUR 17 million and for CapEx, EUR 11 million. The partial disposal or disposal of investments in liquidity recorded in noncurrent assets during Q2 contributed for EUR 16.3 million to the net financial position during the period. The residual fair value of liquidity investments still recorded in no current asset is EUR 7.5 million.

The remeasurement on the net financial position debt, due to the expected expiration of the note close, which was obligating [indiscernible] to pay EUR 5 million to the previous part of the Chinese JV in the event of the successful IPO of Penta Laser Zhejiang by the end of 2024, had a positive impact also on the net financial position for EUR 5 million, as this amount was accounted as financial liability in previous net financial position.

For a revenue breakdown by business. The sales and medical sector increase of 2.1% in 2024, thanks to the good performance achieved in Q3 2024. Opposite is the trend in industrial sales with a decrease of 16%, mainly due to the cutting division. In the third quarter, in the Medical, we reported growth in all the Medical segment, except Dental. This allowed us to record an overall growth in the 9 months, too. The increase of medical sales is particularly driven by post sales revenue, which reached EUR 59 million, plus 13%. Revenue from system remained in line with the previous year with a static generating EUR 165.7 million, the same value of last year and Surgery generating EUR 56.4 million compared to the EUR 55.9 million in the same period of 2023.

A strong contribution to sales was provided by optic fiber used as consumables in urological surgery and representing 40% of sales in the segment of good and aftersales services. In the industrial application sector, revenue recorded a decline primarily due to the unfavorable market conditions in the cutting sector in key markets, namely China and Italy. The laser cutting segment generated revenue of EUR 130.5 million versus EUR 166.2 million in the first 9 months of 2023. The revenue and the order acquisition trends in Italy were very weak in the first half of the year. The revenue growth for services remains strong directly reflecting the significant increase in number of systems installed in the past years. Sales of laser sources remained stable as the laser market segment.

In terms of geography. The most significant growth was achieved in Europe in both sectors. In Medical sector in Europe, we had a growth of 6%, while sales in rest of the world is aligned with those of the previous year. In the industrial sector, there was evidence strong performance in international market with robust growth in Europe, plus 16% while the rest of the world saw a slight decline, primarily due to a significant reduction in China and a rapid development across all other markets, particularly in the U.S.A. The Italian market continued to be weak, particularly in the industrial sector, which saw a 42% drop in sales. However, there was a slight recovery in Italy's medical sector, which showed a minimal decrease compared to the previous year.

Andrea, please go ahead with the guidance.

So the financial results for Q3 2024 and of 9 months are in line to the current guidance with a recovery in profitability that places the EBIT for the first 9 months of 2024 very close to that of the corresponding period in 2023. We committed to share with you how the reporting representation of our financial results may vary as an effect of the proposed laser cutting unit sale and the facts that this different representation on our guidance. The net financial results of the activities available for -- this is appropriate definition according to financial reporting, will stay with us until definitely the final stock share and purchase agreement, if and when they would be executed and registered in the respective jurisdictions. Until then, revenues and costs related to such activities for the whole year 2024 will be reclassified in a single reporting line in the P&L, located below the EBIT line.

Therefore, in presence of the possible sale of the cutting business, 2024 consolidated revenues and EBIT will include the medical sector and the remaining part of the industrial sector online. To make it easy, avoiding unnecessary and complicated additions and subtraction, to make the initial guidance comparable to the new representation of our financials, we elected to maintain the reference for such guidance to our current consolidation perimeter.

For 2025, we will tailor the guidance to the new perimeter, but as long as the net results of the [indiscernible] will be contributing to our net consolidated results for this end of 2024. Our guidance will continue to make reference to the original aggregate and in order to allow for the assessment of the achievement of the guidance target, we will provide an appropriate pro forma representation. Within this frame, we confirm that we expect to increase our operating profit for 2024 compared to 2023 while the decline in the cutting sector will prevent consolidated revenue from aligning with the record results of 2023. This is the end of our prepared comments. And so now we are ready for the Q&A session.

Andrea, we opened the Q&A session. The first question comes from Giovanni Selvetti from Berenberg.

Andrea, Enrico, congratulations for the results. I have a couple of questions. Some are very short. The first one is that I was wondering if you give us an update on a cure and the treatment of acne, this has been like not very much discussed as of lately. So I was wondering where are we here? And as far as I remember, the company was starting some trials in the U.S., but I was wondering if the company generating any revenue now? And if not, when is expected to start contributing to the business?

The second one is on net financial charges. I was wondering out of this EUR 1.1 million of negative charges in Q3, how much is FX-related and mainly dollar-related? So how much we -- in a way, we can expect this to reverse in Q4? The third question is maybe about Industry 5.0. I know that the cutting division is now potentially on the sale. But I was just wondering if you can give us an update here. In the last call, you mentioned that you started to see in the early days of September, the order book piling up. So if you see any continuation of these trends. And I have other two, but maybe I'll just ask later on, if there is no other question.

Okay, Giovanni. Thank you for your questions. Accure Acne is alive and is struggling with the fact that it wasn't able to connect the capital that he wanted to collect in order to develop its business. Therefore, they are starting to sell a product, which needs in order to resolve a huge marketing effort, which better said, would need a huge marketing expense and effort and also very risky. And therefore, for the moment, they are selling but they are not selling the volumes that could have expected a few years ago. I believe that at the end of the year, we will have a few millions of revenue in Accure Acne [ and according to a ] system that, as you know, is providing the product.

Ironically, the fact that Accure Acne wasn't able to explode on the market as we had planned is due to the action of our competitor of us, which was very, very active and very successful in anticipating the release of the market of Accure Acne by introducing on the market a competitor system called AviClear. I'm talking of Cutera, a U.S.-based company, which placed a substantial bet on this product, offering it at basically no financial charge to the market, investing a huge amount of money. Again, bet on the success of this product.

And I say ironically, because it doesn't look like that this strategy, at least today, had paid any advantage to Cutera that in the last 2 years has seen its capital. Its market capitalization reduced from over $1 billion to $7 million as today's value due to the fact that this very aggressive policy didn't bring them any cash. It built -- it brought them a lot of losses. But the availability of a supposedly equivalent system of the markets at a much lower cost actually procured a great damage to Accure Acne.

So we'll see how this Cutera development phase will continue. For the moment, we are continuing to support the sale of Accure also internationally. Today, there's a meeting in Bologna where Accure is presented within a small congress to a few [indiscernible] of doctors. So we are promoting it, but we are not expecting any transformational from the volumes of sales of Accure also in 2024. For the interest, I believe that they are mostly due to the Chinese payment to the private equity funds, but maybe -- on the interest, Enrico can answer that.

Yes, because in the ForEx impact on the 9 months is a negative impact of EUR 0.4 million. In terms of ForEx exchange loss in the 9 months of last year, there was a positive effect of EUR 0.2 million. And moreover, in the 9 months of 2024, there was a onetime cost referring to the venture capital that signed a waiver for what concerned the buyback of the capital increase in Penta Laser [indiscernible] and there is a onetime cost of EUR 0.6 million not previously accounted in the P&L of the Penta Laser Zhejiang.

And also you asked to any what we expect in the future, concerning foreign exchange accounting, given the strong reinforcement of the U.S. dollars in the last weeks. And given the fact that we are usually showing a fairly large amount of receivables for the good business we're having in the United States, I expect, if not unchanged foreign exchange to be positive [indiscernible].

[Foreign Language] Switch off the microphone, please.

Going back to your question, Giovanni, 5.0, yes. We are seeing improved traction on the Italian market after during the summer. There were ministerial explanation on how 5.0 could be applied and the clear the table of all the doubts. This, as I already said, in other meetings has a double effect, not at, it clears the scope and the amount of incentives that -- and therefore, it allows several customers of ours take advantage of the incentive. But also, it avoids and removes all the doubts that since nobody knew how this would have worked, nobody was daring to place an order before the explanation were broadcast because they fear that if they place an order too early, they would have risked to miss the opportunity.

Now either if they do -- and now they know, and they place order some with if [indiscernible] some without, but there's no more the risk of not being eligible because of a procedural mistake. This is the reason why I confirm we -- in this moment, we are seeing together with the first international sales expansion that is characterizing [indiscernible] and in this moment, also return in order bookings in Italy.

The second question comes from Matteo Ghilotti from Equita.

The first question is on the sharp acceleration of the service line in the medical business. If I understood well, it's a kind of one-off because it was up 6% in the first 6 months, and now it's up 13%, which is very, very good. If I understood well, it's -- we don't have to project that it's more a one-off or not? And the second question is -- sorry, a very trivial one regarding 2025. Just on the basis of your experience, your gut feeling, if you believe it can be a year in which your business is able to expand? Too early to say just a qualitative answer is perfect.

Service is at -- service is improving. This always happens when we -- as an effect of the installed base, we have another effect here, which is the increase of the consumables. So maybe we won't be able to keep this growth rate very long. But for sure, we are working to keep it. Just to give you an example, during the first 9 months of this year, we bought a portion of a building nearby [ Quanta System ] where we are moving right through of increased size in order to enhance and increase the production capacity of optical fibers. And optical fibers are representing around 40% of the service sales and are representing the share of the service sales that is increasing more rapidly. Therefore, it's difficult to predict this kind of aggregates. But we're working in order to make it -- to have it continue to be a growth and still an important and increasing part of the business.

Concerning 2025. We -- what I can say is that we knew we were forecasting a trend in 2024, which was provided for an increase in order bookings and in revenues towards the second half of the year, which is actually going on. So this is what's going on. Our -- I mean, to what we can see as of today, our forecast have been met. We're now entering the budget season. And so we are now having the first formal talks about what 2025 will be. And there are mixed feelings. Of course, we know that something will go and continue the recovery trend. So we are very positive. We know that something will be weaker. We know that some businesses will probably stay the same. So I can share with you an overall optimism on the trend of our markets. But I am not able to give you anything more precise in this moment.

The third question comes from Andre Bonfa from Banca Akros.

Actually, my -- most of my questions have been already answered, but maybe if you can expand the performance of urology within the Medical division, which traditionally is a double-digit growth business.

Thank you, Andrea. Yes, urology is traditional in a double-digit growing market. It's not easy to double digit for 4 years in a row, 3 years in a row. If we go -- you see that surgical is growing by 1% only. And -- but you're right, I don't remember by heart now how much urology has been growing.

I believe the growth of urology in -- within the surgical is still within the single digits. We're going to get at double digit, but the 1% result -- is a result of a growth in the segment where there was a decrease in other segments like Monalisatouch and surgical CO2s in these 9 months. So we are still very good on urology. Also based on innovation, you know that Quanta System released for sale in 2025, a new product called Magneto, which has proved characteristic in the stone treatment. And of course, the increase of the installed basis in neurological -- neurology system is also the -- what makes the flow of fiber optic consumable increase, as we discussed in the previous question.

And if I may, Andrea, the expansion in the production of fiber optics in consumable, is that essentially related to the consumable for urology or?

It is sure, 100%. Well, let's say, the facility for manufacturing of fiber optics is fully dedicated to urology because urology, together with other surgical specialties, but we sell mostly in urology needs that either a single use or one of the users of a multiuse fiber for each and every surgery that is performed. And therefore, since the application is very popular. So we sell many laser because the application is very popular. And so each case is used for tens of surgeries per day or per week. The fiber optic consumption is high as well. And fiber optics are contributing very well at revenues and also due to certain cost savings that we placed in the production line of fibers also in terms of margins.

Andrea, one more question comes from Carlo Maritano from Intermonte.

I just have a quick question. On Monday, you provided us with an idea of the EBIT of the first half of the cutting business. I was wondering if you have an idea of the 9 months of this business just to help us with the analysis of the perimeter after the lead?

We know [indiscernible]. As I said, it's increasing from last year, but it's in the order of magnitude. It's lower than EUR 2 million.

Andrea, we have no more questions registered at this moment in our [indiscernible].

[indiscernible] wanted to make more questions.

Go on Giovanni.

I still have a few. Maybe on optical fiber. I was wondering if all the optical fibers you sell are just for Quanta, let's say, El.En. products or you can sell them also for the say, Olympus laser systems or whatever competitors are -- like if there's a chance to do that, because in this way, you will be able to sell even if, let's say, the installed base doesn't expand. The second one is like an up data. Remember that at the beginning of the year, you flagged a legal dispute in China for the delivery of laser system. And probably I missed it, but I was wondering if there is an update there.

And maybe the last one is on Asclepion. That historically -- well, at least in the last year had more problems than the other companies in the group to source some materials. And so if all these issues are solved and Asclepion is running again?

Thank you, Giovanni. Three answers. Fibers. We sell the fibers to our customers and also to our OEM customers, including OLYMPUS, which became a competitors when they started working both with another OEM manufacturer. In principle, each manufacturer tries to provide optical fiber to its own customers and tries to protect its own customers from buying fibers, not from competitors, it's not usual, but from pure fiber manufacturers. Because I mean, there are fiber manufacturers, which could be able to develop a product, which is comfortable with us.

Against this, we also have protection on certain products and certain product line. We have RFA protection on the fibers, which keep the our customers completely captive. We listed in China, we listed in China, even though they said that the Chinese Court would have resolved the issue in 3 months as Chinese are very effective, and it's still up. It's a lot of disputes. We didn't get any resolution from the judge yet, even though there has been an assessment, a technical assessment on -- and the ability of the system will provide to effectively fulfill the specification that specification that we have [ promised ]. But we don't know how this assessment will be read and understood and turned into a ruling by the judge. Since this deal is included in the [indiscernible] division being sold, this is one of the points of indemnity that we are discussing with the potential buyer, meaning that we have a certain -- financial presentation of this issue on our financials. And should the outcome be different, this would lead to an adjustment in the selling price of the companies.

Asclepion. It's a good question because Asclepion, unfortunately, was enabled to profits of the very good years '22 and '23 full due to the continuing shortage problems that affected much more Germany than Italy. I would say that the [indiscernible] in Germany today is completely different. Today, Asclepion is doing very well and has no production problem. We are more concerned about the overall situation of Germany. That is a very important market for Asclepion about the whole management of the country and of the company itself, which need to be -- to have a rapid improvement in performance since the performance of Asclepion was okay in this month, but wasn't at par with the other companies in the major [indiscernible] business.

Andrea, we have a few more questions. The first one comes from Jonas Liegl from Lupus alpha.

I was wondering how you look at potential implications from U.S. import duties from the new government we have in place. Are there any plans to prepare in terms of local presence in the U.S.? Maybe some thoughts in general on that topic? And also if you can remind us on your current sales exposure to the U.S., and whether any direct competitors would have an advantage over you in case of new import duties?

It's a very articulate -- articulated answer to this question because it's different from the line sectors. The United States has several local manufacturers of medical laser systems, but it's also relying on a large point of view of imports of medical devices. Therefore, I believe that there would be, in case of increased tariffs, a big advantage for the local manufacturers, which are covering a small part of the market. Also because the manufacturing base of several revenues, selling out of USA is outside, manufacturer takes place in Israel, takes place in Korea, takes place in Europe. Also takes place in the United States, but not average. So we would have a negative effect on that for sure. But we wouldn't be -- I mean, I believe the market couldn't be supported in full by local manufacturing in the United States.

Concerning the industrial system. And another thing, of course, should we set up a subsidiary in the United States for selling our products, it could be a distribution subsidiary. It would make sense for us to manufacture anything in the United States in the [ med health ] because costs are so high that we would say we will better off, of course, depends to the extent of the tariffs. But it'd be better off to swallow the tariffs than to manufacture in highly expensive [indiscernible] complete devices like the one -- we hardly manage sometimes to manufacture here because the product is really complex and difficult to manufacture.

In the industrial business, in the business where we are proposing the sale, I mean the cutting business, we are very active in the United States and most of the international growth of [indiscernible] Penta, the [indiscernible] Penta comes from the United States. And therefore -- and also, we have a related company selling is not a subsidiary, but with our [indiscernible] in the United States. And so we're looking to reinforce our position in the market. All this, I believe that should tariffs be imposed, especially on the Chinese manufacturers, this should impact on our Chinese manufacturing base, but would be [indiscernible] since I would expect, I don't know, tariffs to be higher or Chinese products that [indiscernible] products would give a differential advantage to the European product.

Good news here is that for what concerns laser cutting business there -- excuse me, laser cutting systems, there's a negligible manufacturing base in the United States. So all the products are imported. So if a tariff will be posed it will be eventually a burden for the U.S. market, but it will not create any advantage to local manufacturers because local manufacturers are not present at still.

Third area of interest is the marketing business, which -- following the proposed sales would remain the most significant business in industrial sector within El.En. Group. We have been selling small amounts below 1% of Lasit sales to the United States. But we have plans to expand our footprint in terms of subsidiaries also in the United States following the incorporation in the Western European -- in Europe. The European subsidiaries, Poland, Germany, U.K. and Spain. I believe that -- I know there's a plan to move on and move to the United States. But if we look to the tariffs, never for manufacturing. So we would have the increase of a lower transfer price since you sell the product, not to the end user, but you sell it to the distributor that then sells with a markup to the end user. Therefore, the tariffs every customs, would be lower, but we are not looking for any circle around the tariffs because it wouldn't be appropriate.

And then can you remind us in terms of the share of U.S. for Medical segment in terms of sales?

It's about an amount -- so I don't remember very hard, but in the 9 months, for the year is something that doesn't get to EUR 40 million. Maybe I know it. I mean we never disclosed in detail those figures. But from time to time, we just give small hints about it, in terms of amounts, but it's -- yes, in the medical management business, yes, it's going to be closer to EUR 80 million this year.

Andrea, we have one more question from Giuseppe Mapelli from Equita. After that, Emmanuel.

Just a clarification on Monday's conference call. Maybe I'm wrong, but I understood -- if I understood correctly, you stated that after the transformation of El.En. almost pure medical business with the sale of the cutting business. Let's say, there are some opportunities that will be surfacing that, let's say, this is, in some case, could be considered an enabler. I understood correctly that statement? Or I'm wrong?

No. No. I believe I said something, which could be interpreted this way, I hold. But I'm saying that in the past, people that look to our company, both for evaluation and for potential aggregation face the obstacle of a company that had 2 businesses, which are difficult to aggregate because either you aggregate one, either the other one. And so once we are more concentrated on our single business, potential aggregation could be easier.

I also added a statement that says that we are not looking forward to any specific M&A activity following the increase of our net financial position, which would be the effect of the transition -- transaction and that we continue to be focused on the internal growth of our activity that we believe are -- represent for us a great opportunity of growth by investing in the activities themselves. And this holds true for our medical business, which are mainly the 3 engaging Medical Aesthetics & Surgery, Deka, Quanta and Asclepion and the one engaged in therapy. But holds true also for Lasit. As I just said, we are looking forward to investing in order to make this business new business unit continue to grow within the industrial sector.

One more question from [ Emmanuel Defigureido ] from LBB.

It's just really a clarification or just a little bit more explanation on the possible U.S. tariffs. My understanding in the U.S. from a lot of industries, but I don't know the medical supply side so well, and that's why I'm asking this question is that. A lot of the domestic production is actually based in Mexico. And it's still not very clear what Trump -- what's going to happen, what he's going to do with Mexico. So my question is do some of your competitors have a production base in Mexico, some of the U.S. ones? And if Trump does not put tariffs on Mexico, would you consider opening something in Mexico?

First, we're going to see the amount of these tariffs because unless there are huge installing production capacity to our product in a site, which is different on the site where we have always manufactured, would probably be extremely complex and costly. As I said before, this manufacturing needs a lot of qualified manpower, and we couldn't reproduce our lines. Unfortunately, we -- our products are very articulated and we change quickly. So we need a highly qualified manufacturing floor to be able to manufacture. And this to say that I don't see us moving to manufacture in Mexico.

I believe there are some competitors of us, which rely on Mexican manufacturing. I'm not 100% sure but I believe, for instance, that CynoSure does. I believe, though, that the widest portion of medical devices sold on the U.S. territory is manufactured in Europe, Israel and Korea. And so those are the areas that will compete with us, quoted, or that will suffer with us, the introduction of tariffs. What the local manufacturing, the American manufacturing of products is relevant today. But in the U.S. market, I believe it doesn't reach even 50% of a lot of our products sold.

Andrea, we have no more questions registered at the moment in our list. [Operator Instructions]

No more questions? Then ladies and gentlemen, the conference is over. If you have some questions to investigate in the future, please do not hesitate to contact Enrico Romagnoli that he will be happy to answer your questions. Thank you for attending this conference, and we hope to have you all again next time. Good afternoon to everybody. Bye-bye to everybody.

Bye.

Bye.