Interpump Group SpA

MIL:IP

Earnings Call Transcript 2020-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Interpump First Quarter 2020 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Luca Mirabelli, Head of Investor Relations of Interpump. Please go ahead, sir.

[Luca Mirabelli, executive]

Thank you, operator. A very good afternoon to everyone on the line. A very warm welcome to this presentation. Wherever you are, I trust that you are taking good care of yourself and your families at this time.

I'm here with our CFO, Mr. Carlo Banci; and with Fabio Marasi the CEO of GS-Hydro, which is a group company, and a member of our newly elected Board. As you know, both Fabio and the CEO of WALVOIL, Victor Gottardi, are now directors of Interpump, while Mr. Paolo Marinsek has completed his mandate as Deputy Chairman. And before we move on to the presentation of the results, I would like to say, from the bottom of my heart, a very big, loud thank you to Mr. Marinsek for everything you have done in the past amazing 4 years.

Now let's come to the no-less-amazing quarter that we went through. Interpump's total sales for the first quarter of this very particular year were EUR 344 million almost exactly the same level of Q1 2019, plus 0.1%. This is no doubt a remarkable achievement given the challenging comparison base. Last year, the first quarter was a good one. And considering that in the second half of March this year, we, together with our suppliers and we -- our customers were affected by the shutdown or severe limitation of industrial activity in many of the countries where we operate, particularly in China, Italy, India, Canada and parts of the United States. However, the organic decrease was contained to minus 11.2% for the quarter, and it was counterbalanced by the inclusion of companies acquired in the past 12 months. FX contribution this time was small, plus 0.3%.

Let's look at the results by division. Hydraulics closed the quarter with sales of EUR 234.9 million, incorporating an organic decrease of 15.3%. To be fair, versus the Q1 last year, that was still very, very strong. Comparing this organic minus 15.3% with the exit speed of the previous quarter, the deceleration in Q1 was only 5% to 6%. I say only because the impact of COVID-19 on this division could have been much higher given the geographical distribution of its production. The decrease, as I anticipated, was more than compensated by the contribution of recently acquired companies, specifically 2 months of Hydra Dyne Tech and the entire quarter for both Reggiana Riduttori and Transtecno, bringing to a total growth in Hydraulics sales to plus 0.9%.

Water-Jetting has always proved more resilient in times of adversity and reached the sales of EUR 109 million, a drop of only 2.6%, brought to minus 1.5% by the favorable currency effect and by a minor acquisition made in April last year.

In both sectors, the effect of the COVID-19 was twofold. On one side, a disruption to our production capacity, on the other side, a suspension of deliveries to customers who were closed and the postponement of some pending orders. It is worth pointing out, though, that we didn't record any significant amount of cancellations, nor we suffered from any relevant supply chain issue. Sometimes, working with a sizable net working capital can be an advantage.

Let's move on to sales by geographical area. They reflect quite well the different duration of the lockdown during the month of March. In Italy, where 2 among our largest companies were closed as early as March 16 due to COVID-positive cases detected and the rest of our facilities closed for approximately 1 week in March. But many important customers, especially large OEMs in Hydraulics, opted to shut down for half of the month, and this is reflected in the sales trends in Italy, which are down 19%, almost exclusively in Hydraulics. The rest of Europe was a bit better at minus 13%.

The United States, with a bit of tailwind from the currency exchange, were flattish at minus 0.6%. Canada, where the shutdown was much more drastic, was down nearly 9%. Latin America was down 3%.

Asia Pacific was down 4.9%. And you will be surprised, probably, to hear that China the country with the longest and strictest shutdown, closed the quarter at only minus 4.5%. This minus 4.5% and also the Chinese data in April that was on export in April that was recently published show that in the right circumstances, a quick pick up after COVID-19 is at least a possibility.

South Korea, where the strategy against the virus did not involve the closure of industrial production was up 9%. India's performance at minus 28% is remarkably in line with the one registered in the previous quarter.

I will now move on to the sales by application sectors, at least the most significant ones, and let's start from the bottom. Agriculture was the worst performer at minus 21% compared to last year, followed by trucks at minus 20%. Automotive was minus 15.5%, but now it really represents a tiny fraction of our total sales. Earthmoving and construction followed, and they are both below -- sorry, 14% below last year's first quarter. Sales relative to tunneling, drilling and mining applications are down 10%. Lifting is down 6%. Cleaning does a little bit better at minus 5%, same performance as industrial applications. Food, cosmetics and pharma altogether are down 4%.

On a positive note, contractors are up 1%; steel and aluminum, up 15%; shipyards and marine is up 28%; oil and gas, including offshore, is up a surprising 49%. This is obviously too early to see any effect of the decrease in oil price that took place during the quarter.

The sales by industry broadly reflects the different trend between Hydraulics and Water-Jetting. To add a general piece of advice, given the abnormal situation and the very uneven impact of shutdowns, it would be very unwise, today more than ever, to use these numbers from just 1 quarter to gauge the health of different industries.

Profitability for the quarter held reasonably well, given the situation. EBITDA margin in Water-Jetting was remarkably unchanged from last year at 25.8%, while Hydraulics lost 108 -- sorry, 180 bps, registering at 19.6%. Worth pointing out that 40 bps were due to the dilution brought about by the acquisition. So at constant perimeter, the EBITDA margin would have been 20% for Hydraulics.

Putting the 2 sectors together, the consolidated EBITDA margin for the quarter was 21.6% compared to 22.9% 1 year ago. This margin corresponds to EBITDA of EUR 74.3 million.

Net income came to EUR 33.3 million, and the corresponding tax rate was 28%. The decrease versus last year on top of the slower business, of course, is due to losses on exchange rate due to the weakness of several foreign currencies at the very end of the quarter and a provision related to the end-of-office compensation for the current CEO and Chairman that was assigned by the last -- that was approved by the last shareholders meeting.

Let's now look at the cash flows. This is quite interesting. Cash flow from operations was EUR 66.5 million, minus 8% compared to the first quarter of 2019. Trade working capital, which 1 year ago was massively increased in preparation for a year of hard work on our production capacity, this year shows a completely different and healthy behavior. Trade working capital freed up EUR 2 million, which is a very unusual sign for a first quarter.

On the other hand, nontrade working capital increased by $8.9 million, however, part of this increase is connected to the abnormal situation at the end of March when and wherever production was suspended. Many of our employees in order to preserve their full salary opted to use some of their remaining paid leave, reducing the corresponding liability. Others accepted the intervention of the state lay off fund, the Cassa integrazione in Italy, which results in lower pay but doesn't bite into their paid leave. In this case, the company advanced the money while waiting for the welfare offices to process the paperwork. And both these effects are expected to normalize over time.

CapEx in the quarter was $16.5 million, and all of this resulted in a free cash flow generation of EUR 39 million in the quarter, confirming the good trend seen in the last part of 2019 and also confirming the strong inverse correlation of free cash flow with organic growth of the previous 1 or 2 quarters. So after a couple of weeks -- weak quarters follows very strong free cash flow generation. There is no possible comparison with the free cash flow of the first quarter of last year when it was almost nonexistent due to the front-loading of inventories and the capital absorbed by the working capital.

Moving on, payments related to acquisitions amounted to EUR 37.7 million. This includes the share of Transtecno that was paid in cash, plus the final balance of Reggiana Riduttori acquisition, which was matched by a corresponding decrease in commitment for the purchase of subsidiaries. Finally, EUR 16.6 million were used to buy Interpump shares.

This, along with some other minor items, brought our net financial position at the end of the quarter to EUR 384.8 million, EUR 14 million higher than at the beginning of the year and very similar, if I am allowed this comparison, to the 1 of March 2019, despite the significant increase in the perimeter of the group that took place since then. On top of this, we have the commitments for the purchase of subsidiaries, which went to EUR 61.5 million after the decrease resulting from the payment of Reggiana and the booking of put option on the minority of Transtecno.

In the wake of the COVID-19 pandemic, we adopted worldwide all the safety measures that were recommended by the health authorities everywhere where we operate. This involved, for example, a regular sanitizing of the workplaces, the supply of personal protection devices, the separation of shifts to avoid the crossing of workers at the entrance, new rules for using the common areas, lunch breaks, receiving deliveries and so on. These measures proved effective. I'm very happy to remark, as you have seen in the press release, that we have no indication for severe or fatal COVID-19 cases across the entire group. As we have seen on average, across the group, the impact of COVID-19 in March, or February for China, was approximately proportional to the actual days of closure. To give you an idea, they broadly represent some 7% of the total working days of the quarter, and this is actually comforting.

First, because the shutdown occurred in the last part of the month, which is usually the busiest in terms of shippings and sales. Second, because some extra impacts could have been expected because of supply chain issues or customers closing for a longer period, canceling orders or even going out of business. After all, this is something we experienced in 2009.

As previously touched on, our model is characterized by a higher-than-average sales working capital. We work with sizable stocks of raw materials and finished products in the interest of the flexibility of our business, and this is very useful in times when you are authorized to open but your supplier is not able to deliver for any reason. Of course, there might be disruption on the other side, on sales.

Many customers, indeed, shifted forward with the delivery dates for their pending orders, and in some cases, suspended them. But so far, no one went out of business due to COVID-19, not in any significant measure anyway. The situation might be difficult for some of them, but certainly not as difficult as it was in 2009 when the credit tranche amplified, sometimes deadly, the liquidity problems across various industries. This time around central banks, governments vowed to do everything in their powers to prevent fatal damage to the economy, and this is reasonable to expect that they will within limits of their capacity, of course.

And I would now like to give you an idea, or at least try to give you an idea, of what happened after the end of the quarter. In April, as you know, limitations to industrial production were much stricter than in March. They were enforced throughout the entire month, basically everywhere, except for China, Korea and Germany. However, in the rest of the world, we were able to have some of our activities recognized as supply to essential industries or strategic for export, allowing for some exceptions and a partial restart of about half of our production. It is way too early to have any reliable indication for May, but keeping into account some relaxing of the lockdowns, which is in the headlines everywhere, everything points to the indication that April will represent the bottom of the curve and there are very good chances on a yearly perspective of reaching or maybe exceeding the estimates made by the sell side. Of course, I'm referring to those estimates that were revised for COVID-19.

I am very pleased to notice that after the February lockdown and a quick ramp-up in March in China, in April, our Chinese companies were back to a very strong double-digit year-on-year growth.

I would like to end my remarks on this very positive note, and we will now leave room to questions from the audience. Operator, you can open the line, please.

[Operator]

[Operator Instructions] The first question is from Matteo Bonizzoni with Kepler.

[Matteo Bonizzoni, analyst]

I have three question. The first one is related to April, you were saying that around half of your plants were active during the month. It's fair to assume that these also represents minus 50%, a good assumption for the revenues in the month or not?

Then other 2 question, more technical, let's say, the nonbusiness topics. The first one is on this provision of EUR 5 million for Chairman and CEO. How is the mechanism? So in other words, should we expect for the provision in the next months and -- is going to be paid at the end? So basically, it's just noncash item for now, can you confirm?

And then just to understand the forex losses now, EUR 3.1 million in the first quarter this year versus gains of EUR 1.6 billion last year. You are not particularly exposed, I mean, to strange currency. So the U.S. dollar was stronger versus the euro. I guess it's due to other emerging market countries or something like that. Can you a little bit elaborate on this topic?

[Luca Mirabelli, executive]

Okay. Thank you, Matteo. The first question is about trends in April. Of course, we are not going to disclose the actual number of the sales trend for April also because it still needs to be audited, but -- and we don't want to create a precedent frankly. But it is -- I knew I couldn't slip away with saying pretty much about half. Actually, in terms of sales, the situation was better. We had roughly half of the sales in countries where the lockdown was enforced, plus something much closer to 100% for the countries where lockdown was not enforced, which is China, Korea and Germany altogether. So the April number in terms of sales is actually, I would say, a bit better than half, significantly better than half. So this is as precise as we are probably going to ever be, thanks to COVID-19.

Going to your second question, the provision -- the EUR 5 million provision. The compensation for the termination of office was assigned to the current Chairman and CEO, and it amounts to 3x his yearly compensation. Doing the math, there is another provision coming up roughly half of this size, so another EUR 2.4 million. And of course, it will be adjusted based on the compensation trend. You are perfectly right, it's a noncash item. It is going to be paid, by contract, I need to say, if and whenever Mr. Montipo leaves his office. And this is -- more seriously, this should not be taken as an indication of any imminent event to this extent.

In terms of currencies, your assumption is correct. The losses on exchange rates were due mostly to the weakest currencies, not so much to the dollar, which at the end of the quarter, went back to levels which are very similar to the average levels touched in the quarter. But this was not true for the Brazilian, the Indian and a lot of other, let's say, minor currencies.

[Operator]

The next question is from Domenico Ghilotti with Equita.

[Domenico Ghilotti, analyst]

My first question is a clarification. So if you can clarify the comment that was given on the sell-side constrains. So if I -- just to check -- double check that you were saying that you feel quite confident about the numbers that have been revised, at least for COVID. So if you have this broad indication, and if you can give this interpretation.

Second is on the actions that you are taking. So what kind of actions have been implemented specifically to -- if any, to mitigate on a more structural way, apart from the Cassa integrazione. What kind of -- which kind of action on the cost, on the CapEx and, eventually, also on the -- possibly on the liquidity side?

[Luca Mirabelli, executive]

Okay. So it was two questions, sorry. I was waiting for a third one that never came.

[Domenico Ghilotti, analyst]

I will add.

[Luca Mirabelli, executive]

I will answer -- you're letting us down, Domenico. I'll just cover the sell-side estimate part, and then I'll give the microphone to Fabio Marasi, who will cover all the other themes, the business-related teams. My remark was indicating that any analysts thinking that they might need to revise their end-of-year estimates to incorporate a very bad quarter do not need to do so. So my indication -- and I will stick to this for now, we are not in a position or we do not have enough information to be anything more precise than this. But our indication is that those analysts who revised their estimates to incorporate the yearly loss of business for COVID-19, and that includes, of course, Equita, but also all the others who have published something, they do not need to review their estimate at this point, at least, if they want to take my advice. And then, of course, we will have to talk again about this topic when we present the Q2 results because with the Q2 results, we will have a pretty precise indication of the shape of the curve of the exit from this crisis. For now, giving any more specific recommendation than this one, which is no need to touch your estimate for now, would be really gambling.

Now I'll leave the microphone to Fabio for questions on cost mitigation, CapEx and liquidity.

[Fabio Marasi, executive]

Domenico, regarding the action that we have taken to keep control of our financial situation and liquidity, in particular, apart, of course, the strict control of any discretionary expenses, that is something that we have in our main attention, main goal, always, you have to consider the nature of our CapEx. The nature and the total of our CapEx is made up by many small investments as opposed to a few large projects, and then this makes it possible to modulate the spending as the year goes on and goes by. However, I don't expect a significant reduction in the rest of the year, if we refer to the CapEx, because a lot of our CapEx involved -- has to do with product innovation and even, that is very important, cost saving and manufacturing efficiency.

And these 2 things are very important for us and for keeping the top level of competitiveness of our group. And then we are not absolutely giving up on these matters. And then, of course, we are not short of funds, and it is -- of course, it is and it will be possible that some investment here and there may be postponed for lack of need or because of particular reason, especially at this time. But in your models or in your minds, you have to consider that our total CapEx at the end of the year will stay in the usual range of Interpump Group, that is between 3% to 5% of the turnover. That is something normal. And then nothing exceptional, nothing extraordinary should be expected on these aspects, even in this very particular year.

It is also very important to underline our, in terms of financial liquidity control, the level of working capital. We have always mentioned that we are not the best in the world in the level of working capital in comparison of sales, but our working capital is very fresh and very flexible. And as you have also seen in the first quarter, it is linked to the level of turnover. And then we have a very good cash flow contribution from the reduction of the working capital. And then this is the second asset that is important to underline.

For the general comment on general terms, it's very important to point out how solid is our financial structure and how limited is the leverage that we have in our balance sheet. Then we see no constraints at all even in this very particular year.

[Luca Mirabelli, executive]

And if I may add a remark about operations, the rules changed very rapidly. We are very familiar with the Italian experience, but something similar happened almost everywhere in the world. Rules changed very rapidly. We had and we actually benefited from reshuffling our production and our orders to dedicate our production to those sectors that were allowed keep on operating, so to the vital supply chains or to those sectors that were strategic for export. And this involved an operation, which at Interpump, can probably be more successful than at other companies. If you need to review your production plan completely, changing the priority, changing the production mix for the next weeks, in some cases, for the next few days, it really takes a company which has a habit, a philosophy of making optimal choices in a very fast way. So I'm tempted to believe that under this aspect, Interpump probably could fare a little bit better than other industrial operations.

[Domenico Ghilotti, analyst]

Just if I can follow up on the working capital. So you are not seeing issues in collecting receivables. And on the cost side, you are not planning structurally -- because you sound quite confident on the recovery in the demand at the moment?

[Fabio Marasi, executive]

Regarding the level of OpEx, we are not planning anything extraordinary. Of course, we will use the flexibility that we have, but we are not imagining significant restructuring in any of our facilities. And the second point regarding the working capital and in particular the receivables, of course, it is something that may be temporarily affected, in particular in some of the country and in Italy than abroad, that some delay in the collection of receivables may be expected, but nothing significant and nothing structural if we consider the group as a whole, if we consider the whole year. Of course, these amounts are very important and very delicate for many of our customers as well. But you have to consider that we have a significant number, a very diversified number of customers that are spread all over the world. And then we don't expect significant impact on this.

[Domenico Ghilotti, analyst]

And my third question was on the M&A contribution. It sounded quite strong. Maybe I was -- maybe some mistake in my calculation. But in Q1, how was the performance of the Reggiana and Transtecno compared to last year? So I was assuming a slowdown.

[Fabio Marasi, executive]

Yes. The performances of Reggiana Riduttori and Transtecno in the first quarter of the year has been very positive, at least in line with the expectation and with the numbers that we announced when we closed the acquisition in terms of profitability. In terms of turnover, in terms of sales, Reggiana suffered a little bit more than Transtecno due to the significant exposure to Italian manufacturing because almost everything is manufactured in Italy. And then we suffered from the lockdown, of course.

Transtecno, a totally different situation, totally different company. We had a lot of concern, a lot of worries related to the Chinese manufacturing plant of Transtecno that was affected by the Chinese New Year and the lockdown that in the month of February affected the manufacturing capability of Transtecno. But I'm very glad that -- I'm very glad to say that in the month of March, the Chinese plant and subsidiary of Transtecno performed very, very well. And then Transtecno was able to close the quarter with the same level of turnover of last year. And the expectations are very, very positive for the remaining part of the year also in terms of order backlog. Then we are very satisfied about these 2 acquisitions that [indiscernible] in a new application field, and we are very convinced that it is a sector in which we would like to do something meaningful and some more consolidation.

[Operator]

The next question is from Alessandro Tortora with Mediobanca.

[Alessandro Tortora, analyst]

I have three questions for me. The first one is linked to the last one. You mentioned before that there is room for further consolidation. What's, let's say, your view on the current context in the sense that do you see, let's say, higher opportunities on the M&A side? For instance, maybe some target now a bit more willing, for instance, to join the Interpump universe? And therefore, do we expect, let's say, the M&A machine to be started by year-end? Or considering the uncertainty, it's basically off for the year? So this is my first question. I don't know if you want to answer, and then I'll go on with the last two.

[Fabio Marasi, executive]

Yes. Alessandro, regarding the M&A machine, as you have defined, it is always on. And of course, as you can imagine, during the lockdown, almost all negotiations were suspended because of the impossibility of traveling and meeting and also because, as you can imagine, company owners had more urgent matters to deal with. In any case and except for this delay, the crisis will have no impact on our M&A activity, no negative impact at least. Because on the other hand, it is possible that in some cases or in decision, a difficult external situation might actually encourage more favorable view on our proposal because of the advantages involved in being part of a larger group. And then I have also to say that something can be expected far earlier than the year-end that you mentioned because some negotiation and some processes that were underway before the start of the COVID is being restarted now, and it's something that can be finalized far sooner than the year-end.

Then on a general comment on a general level, I may say that no long-term impact can be imagined from this COVID situation. Maybe something favorable about the possibility of acquire and consolidate further some sector.

[Alessandro Tortora, analyst]

Okay. Very clear. Then the second question is on, during the presentation, you mentioned the performance of China. First of all, I did not, let's say, get the trend in April of China. But if you can also say how the trend in India because situation, let's say, from COVID in India has been managed in a less proper way compared to in China.

And I'll also add the third one. The third question is on trend, again, in countries like Germany, for instance. If you can give us an idea of May month performance where the lockdown is being, let's say, phased out sooner than Italy, for instance, but also the U.S. If you can give us the same idea of performance in different states, for instance, for NLB and Muncie.

[Luca Mirabelli, executive]

Okay. Well, you left out Mariotti & Pecini and a couple of minor companies, and then you have asked about every company in the group. [Foreign Language]

Let's see what we can say. Well, India is the easiest answer. India was close to 100% closed throughout the entire month of April. So India is probably the benchmark, the negative benchmark. There is nothing that could have gone worse than India in April. But of course, it also means it can't get any worse than that. And as a reminder, the weight of India in terms of production is somewhere around 5%, probably -- possibly even a bit less as of today. So luckily, this does not represent a general indication for the trend.

You mentioned Germany. I'm happy to have a smile on my face as I hear about Hammelmann. Hammelmann has had positive growth during the month of April, demonstrating that the lockdown, although, of course, they are also subject to extra safety measures, which could theoretically impact on their productivity, their business is in excellent health.

The United States is a little bit more difficult to assemble. Keep in mind that at this point, we do not have the usual split by country that we only extract on a quarterly basis. So what we have is, generally speaking, an indication on the trend of single companies, which may or may not be a very significant indication. Anyway, I would say that the U.S. overall were down in their production capacity. Again, this is just a loose indication because it's not derived, just to be very clear, from the same set of data where we expect the regular quarterly data. Anyway, the U.S. are down 25% to 30% in April.

[Alessandro Tortora, analyst]

Okay. And basically, what difference between Muncie and NLB, just considering the difference sector in which they operate.

[Luca Mirabelli, executive]

No. I wouldn't say any -- there's no difference that I would attach to the health of the sector. Or if anything, maybe NLB could have suffered a little bit more due to the oil and gas. In April, of course, the downstream started to suffer. It is reasonable that some of the customers of NLB who rent and buy trailer-mounted pumps to do the cleaning at oil refineries probably saw their business going slower. So if I was forced to choose, I would probably expect a better trend for trucks than for oil and gas, and which means that Muncie could have been less affected than NLB, for example. But again, we are getting into too much details to have any hope of being precise or getting meaningful numbers that we could actually compare or relate to anything in the quarterly reporting.

[Operator]

[Operator Instructions] The next question is from Domenico Ghilotti with Equita.

[Domenico Ghilotti, analyst]

I have a question on any kind of structural higher costs that you need to serve the clients in this situation. So do you see at least for the remaining part of the year, maybe also next year, the need to implement all these measures as a significant weight on your profitability and your cost?

[Luca Mirabelli, executive]

Well, I'll leave these answers to Fabio, but let me preliminarily add that we have seen just the first month, which is the surprise month, which is when clearly everything is more difficult and more expensive than on -- than any run rate. So I would ask if Fabio has any feelings attached to the companies he manages regarding this, but I would also point out that what we have seen in April is certainly not likely be the running cost for the safety measures for the rest of the year or even for the future.

[Fabio Marasi, executive]

No, Domenico. I would say that nothing structural and nothing meaningful in terms of higher of structural cost will stay after this very exceptional period because also in these few weeks, what is important in terms of impact on our profitability is related to the possibility of stay open and then the consequences of the lockdown much more than the increase in operational expenses related to the new organization of the production shift or the safety measures that we have put in place. Because you have to imagine that if you look at our expenses, operating expenses for running up a very structured manufacturing plants, the safety measures cost is absolutely not relevant, or peanuts. Of course, what is important or what has been important is the control of the people, is the organization of the manufacturing shifts, is the commitment and the possibility to work in a normal way under these new circumstances. But we do not expect higher operational expenses that has to be taken into account in our profitability estimates.

[Domenico Ghilotti, analyst]

For example, higher demand. So if you have to work on different shifts, but you have to, say, leave more time between one and the other. And so you are losing, say, 1 out of 8 hours, you're not seeing this kind of inefficiencies?

[Fabio Marasi, executive]

No. Because, for example, many of our companies, I'm referring in particular to the Italian ones, are already operating under 2 shifts in the vast majority of our companies. Now if previously the shifts were organized without pauses, without separation or without times in the middle, now we are -- in many of our companies, we are organizing shifts in a way in which we can make sanitation in the middle and having 1 hour time in the middle between one shift and the other. But this is not impacting our manufacturing efficiency.

[Domenico Ghilotti, analyst]

Okay. And the last -- very last question is on Q1 numbers. If I'm not wrong, I saw that the raw material costs, so the incidence of cost of goods sold was higher compared to last year in a period where raw materials were usually a tailwind for different companies. So I am trying to understand if there is any specific reason for that on the...

[Fabio Marasi, executive]

No. We have just seen and just received the report for the passage of some of the most important raw materials in the fourth quarter. And then with some up and some down, I may say that we have not had any significant increase in raw material prices. Maybe the trend is opposite.

[Operator]

The next question is from Matteo Bonizzoni with Kepler.

[Matteo Bonizzoni, analyst]

Yes. A quick follow-up. A question which I have received from an investor. Brazil for you is small. Last year was just EUR 13 million of revenues, so less than 1%. The situation there seems to be deteriorating. Can you a little bit comment on the trend in Brazil that you experienced in the first quarter and what you see now?

[Fabio Marasi, executive]

Yes. Okay. In the first quarter -- just 1 second. Okay, Brazil in the first quarter is minus 1.5% in terms of turnover on a consolidated level. And the Brazilian situation, considering also what is happening around the world, is improving in comparison with last year in terms of profitability as well. In -- and then this is also because of the rationalization that we have performed in the recent quarters in our Brazilian activities. You may be aware that following several acquisitions of companies with Brazilian subsidiaries, we decided, particularly in order to rationalize the cost structure and to improve the efficiency, to merge several of our subsidiaries in Brazil within Interpump Brazil. And then, this merger and this rationalization is, I may say, finally paying off. And we do not expect further losses if we think about the whole year, even if Brazil in recent weeks has been significantly affected by the COVID-19 situation.

[Luca Mirabelli, executive]

If I may add just complete information, the plus 1.5% is in euro, so which means that in local currency, the performance of Brazil in the first quarter was significantly better. We don't have a precise number right here, we might have it in a minute from now. But it is safe to say that the health of our business in Brazil, in the first quarter at least, was very good.

[Carlo Banci, executive]

Plus 6.3%.

[Luca Mirabelli, executive]

Thank you, Mr. Banci. So it was plus 6.3% for the first quarter in local currency.

[Operator]

The next question is from Carlo Maritano with Intermonte.

[Carlo Maritano, analyst]

I just have a quick question. Can you provide us the amount of the contribution of the acquisition on the group EBITDA in the first quarter?

[Fabio Marasi, executive]

The contribution of the acquisition in the fourth quarter is, more or less, 11% in terms of turnover.

[Operator]

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

[Luca Mirabelli, executive]

Okay. So if -- unless someone interrupts me with a new question, I would like to thank you for joining this call today. Thanks for your trust in Interpump, and I will talk to you on September 1 for our Q2 results. Set this date on your agendas, September 1 this year, we will be presenting the results after the place marked for holidays, I'm not sure that there will be actual holidays. But anyway, see you on September 1.

Thanks, everyone. Goodbye.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.