Interpump Group SpA

MIL:IP

Earnings Call Transcript 2020-Q3

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Interpump Third Quarter and 9 Months 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, and thanks to everyone for your patience and for dedicating your time and attention to our results today. I'm here once again with Executive Board Member, Fabio Marasi; and our CFO, Carlo Banci, and we will do our best to illustrate the results and answer any questions you might have about them.

Today, it is almost exactly 8 months since COVID-19 was declared pandemic. Thanks to the quick and efficient reaction of our subsidiaries at all levels during this time, I am pleased to say that Q3 2020 was a quarter of confirmation of all indications we gave during the development of the crisis.

Our sales in the quarter were still down compared to one year ago, but on slightly minus 2.5% at EUR 314.7 million. As expected, this represented a sharp improvement compared to the minus 18% registered in the previous quarter. The organic performance of minus 10.8% was almost exactly compensated for by a plus 11.1% perimeter expansion. Therefore, the reported result of minus 2.5% can be entirely blamed on the currency headwind of minus 2.8%. Besides this overall satisfactory results, I'm also pleased to report a slow but steady monthly improvement of the year-on-year comparison.

Looking at this result by division, we note that the stronger sector this quarter was Hydraulics, and this is new for the year, but not totally unexpected as a stronger rebound for Hydraulics was somehow in the air, given the sizable compression of sales seen in Q2. Reported sales in Hydraulics were up 4.1% compared to Q3 '19. Let's see the split. The organic decrease was a single digit at minus 9.5% with an additional minus 2.8% from the currency exchange. The perimeter expansion was worth plus 16.4%, entirely corresponding to the contribution from Reggiana Riduttori and Transtecno, which as you see was even stronger than in the previous quarters.

Water-Jetting, which has been running at a faster pace so far, apparently felt more fatigue in the quarter. The organic performance was minus 13.1%. The FX, again, minus 2.8%. The perimeter expansion, plus 1.5%. Putting everything together, we get to a quarterly reported year-on-year decrease of 14.4%. However, it is worth remembering that the comparison base for 2019 was particularly challenging and included among else an unusually large order delivered by Hammelmann in the month of July.

Zooming out from the quarterly to the year-to-date figures, Water-Jetting is still demonstrating more resilience at minus 10.2% organic, minus 10.3% reported; while Hydraulics is down 19.3%, nearly twice as much, organically, and 5.3 -- down 5.3% after accounting for FX and acquisitions.

Sales in the quarter were characterized by very different performances in different areas of the world. Let's take a quick look around. Sales in Europe were down 10% in the quarter, of which Italy was minus 14%. North America was down 21%, so twice as bad compared to Europe although to be honest, some 5% is due to the currency exchange. Asia Pacific is a bit of a mixed bag. China is registering sales that are 46% above the corresponding quarter of last year.

Australia and South Korea are also positive, respectively plus 8% and plus 6%. The rest of the countries in the area are strongly negative, but almost irrelevant. What really drives the sales figure for the area to negative territory is the lack of the Hammelmann order we mentioned above that was delivered last year in Singapore. In the rest of the world area, the only noteworthy data is that India is finally up 13% compared to one year ago.

In terms of the sales by application sector, we are finally seeing a lot of sectors and customers waking up after a long sleep. The most lively one in the quarter was construction equipment, which reached a level almost flat compared to the previous year. Other significant applications in Hydraulics were still down, but at last just a single digit. Earthmoving minus 8%, agriculture minus 7%, lifting minus 6%. Trucks, despite the significant improvement from the previous quarter, are still trading at minus 16%.

The collateral application that was growing the most throughout the first 2 quarters made up, as you remember, by oil and gas, marine & offshore is significantly down this quarter due to the unusual comparison base, that is the same getting a large Hammelmann order, but it is still positive year-to-date. Among the sectors that are typically covered by our Water-Jetting division, the only positive one is cleaning registering a plus 3%.

While we are, of course, pleased about most of the transit, I would like to remind you that the situation is developing very rapidly and that the comparative strength of areas and applications that can change and does change at any time. And this is not necessarily bad news for its part. As you know, one of our point of strength is precisely the ability to refocus our activity quicker than most of our competitors can do. And I believe our quarterly results once again reflect this.

Turning the page to profitability. And as you know very well, this is the area where Interpump stands out the most. We closed the quarter with EUR 76 million in EBITDA with a margin on sales of 24.2%. This is the same record high figure of Q3 2019 despite the organic decrease in sales, despite the better performance of Hydraulics compared to Water-Jetting, and despite the dilution brought about by acquisition. So it is fair to say it represents one of our best performances ever.

Going by division. Margin for Water-Jetting was 29.2%, only 80 bps lower than last year's record of 30%. Margin for Hydraulics was 21.7%, 80 bps higher despite a sensitive dilution due to acquisitions, which means that it would have been 100 bps higher as unchanged perimeter. Year-to-date, in the 9 months, this translates to 26.5% margin for Water-Jetting, 110 bps lower than last year, and 20.6% for Hydraulics, only 60 bps lower than last year, totaling a very satisfying 22.6% EBITDA margin for the first 9 months at a consolidated level. So in absolute terms, this means that EBITDA at the end of September stood at EUR 215.3 million.

On a side note, the contribution from the welfare systems to help with labor costs at plants that were not operational due to COVID related limits, like for example Cassa Integrazione in Italy, accounted to 0.7% on sales in Q3, much lower as expected than the 2.3% seen in Q2. And hopefully, this figure will taper off as we go on with the next quarters. Net income for the quarter came to EUR 39.5 million, bringing the year-to-date total to EUR 103 million with a tax rate of 26.7% so far. Last but certainly not least, the cash flow was very healthy also this quarter.

Let's look at the most important items. Cash flow from operations was EUR 65.2 million, EUR 40 million above last year. This growth might appear a bit confusing, but you should consider that June 2019 ended with a Sunday and saw a significant Italian tax deadline last year was extended to July the 1. So it fell in the third quarter while this year it regularly fell in the second quarter. To get rid of this swinging and profusing seasonality, it is perhaps more meaningful to consider the year-to-date figure, which is down exactly 7% compared to the first 9 months of last year, perfectly in line with sales.

CapEx in the quarter amounted to EUR 16.2 million, accelerating from the previous quarter bringing the year-to-date total to 45.7%. Sales net working capital kept decreasing, freeing up a further EUR 9.7 million. Non freight working capital absorbed EUR 4.3 million, mainly due to the different dynamics and timing in tax credit and employees leave accruals. But it is worth reminding that the changes in this line item, because of their nature, tend to self-compensate over the years.

How surprisingly, as a result of all this, free cash flow was very strong at EUR 50.3 million in the quarter, bringing the total year-to-date to EUR 148.6 million. At this point, there is very little doubt that this year's cash generation will make history.

The expense for acquisitions in the quarter was EUR 9.3 million. Additionally, EUR 10.9 million were spent in treasury shares. The overall improvement in net financial position amounted to EUR 33.4 million, bringing our net debt as of September the 30 to EUR 310.7 million. At the same date, the additional commitments for purchase of subsidiaries were worth EUR 58 million.

Let me now go back to my initial remarks about Q3 being a quarter of confirmations. We said that the situation would improve and it did. We had a 6.5% growth of sales in Q3 over Q2, which compares to an average minus 10% seasonal decrease, which is almost regularly seen every year. Since the trough seen in April, consolidated sales improved month after month. Not only sales, but also order intake has picked up month after month slowly but steadily. We said we did not expect a significant deterioration in margins. Margins held better than anyone could have hoped for. In fact, they increased.

We anticipated a very strong cash generation for the year and it just happened almost twice as strong as last year. We understood that we did not agree with the worries expressed by some investors about debt and financing throughout the crisis, and I believe those worries are now gone. Everything we said in the past though was not based on a capacity to predict the future. But rather, it was based on our familiarity with the enterprise business model, our confidence in its resilience and adaptability, and also based on the differences we immediately noticed and highlighted between this and the other major prices that we experienced the one at 2009.

These will be key factors to keep in mind in the upcoming quarter 2. The world COVID-19 situation is taking quick turns like a rollercoaster as contagions search in those areas. We also hear positive news about the vaccine effectiveness and also about the election of a U.S. President that seems to care about the matter. For the time being, all the precautions and lockdown that were imposed for the current wave of contagion have not had any impact on highly-automated industrial plants, which represents the bulk of our activity and by now has proven to be very low-risk environmentally.

Therefore, given the unpredictability of the situation, I can only reiterate my indication that the recovery will be there. The recovery is there. We just don't know a lot about its timing and shape. But remember, today you are listening to a company that has consistently delivered the best possible results across all the different phases we have gone through. And there is no reason to believe that anything different might happen in the future.

As you noticed from yesterday's press release, M&A is still going on. While waiting for some larger deals to mature, we keep picking the low-hanging fruit represented by model companies with a clear and easy integration path. DZ Trasmissioni announced yesterday is a good example and its product range complements in a very nice way the reduction years offered by Transtecno.

At this point, I would like to thank you for your patience and for listening so far, and the line now goes to the operator for the Q&A session. Thank you.

[Operator]

[Operator Instructions] The first question comes from Domenico Ghilotti of Equita.

[Domenico Ghilotti, analyst]

A couple of questions. The first is an indication. So if you can elaborate a little bit more on the Reggiana Transtecno contribution if you have any kind of comparison? Because they sounded very, very stronger and higher than my expectation, so I'm wondering that performing better than the rest of the group. And if this is the case, why? And also in terms of profitability, what is the level of profitability they can -- they have already achieved? This is the first question.

Well, the second question, I'm trying to understand if you are seeing an improvement quarter-on-quarter also for Q4 so far? I understood that COVID is not an issue so far, but I'm trying to understand if there is an underlying demand that is improving for the 2 divisions.

[Fabio Marasi, executive]

Okay. I'm Fabio Marasi and I will take the answer, and then I will leave then to Luca for some further comment. Reggiana and Transtecno are, so far this year, performing very, very well considering what's happening into the market in general for the COVID situation. But in particular, Transtecno is performing very, very well also on absolute terms. Transtecno is up in terms of sales in comparison with the same period of last year at the end of September than in the first 9 months. While Reggiana is slightly down, Transtecno is up 7%. Reggiana is down in line with our Hydraulics division or maybe even slightly better.

In terms of profitability, both companies, both Reggiana Riduttori and Transtecno, are performing very well and are on a consolidated level, above 20% EBITDA margin. When we acquired the 2 companies, they were slightly below. And today, despite the very difficult market situation, they are over past the threshold that is satisfactory for us. We still believe that there are rooms for further improvements in margins because we have only taken the easy action arriving through it in terms of rationalization of the commercial structure around the world. For example, we have merged the subsidiary, the Reggiana Riduttori in Brazil with Interpump Hydraulics, the Brazil in order to achieve cost synergies and better opportunities also in terms of sales.

We have integrated the subsidiary that Transtecno had in Florida in the United States that was very small, just a couple of million dollars. We have the very strong and important subsidiary that Reggiana Riduttori has in the United States that is very well managed with more than $30 million sales and a good profitability. And we have integrated the Transtecno business and Transtecno distribution in the North American market in Reggiana Riduttori in order to have a stronger presence, stronger network, and our suitable organization and inventory in the American market. But these are just the first examples and we really believe that we have a further potential of improving the profitability, thanks to the reorganization of our some normalization action that we can take and we can implement.

Also, the development is expected quite positive because the order intake is very good on both companies. And we have an order backlog that in particular in Transtecno is well above comparison with the same period of last year. Reggiana is below the level of last year, but is improving this amount. And then we have a good expectation for the last quarter, but more important on the midterm perspective.

[Luca Mirabelli, executive]

And to answer your second question, Domenico, let's say that what we can see of Q4 so far, all the good trends went on in the month of October. This is, of course, I can see much more precise in this, but I'm absolutely sleeved by the trend in October and I didn't see any sign of a new turn coming up.

[Domenico Ghilotti, analyst]

And just a complete follow-up on the Transtecno. So what is the reason -- so I understand the profitability that you are already say integrating, so taking some opportunities. But on the top line, what is driving a top line in such a tough year so that you are able to grow the top line? Was something related to cross-selling, so to the synergies or something that was already in Transtecno?

[Fabio Marasi, executive]

It is something that was already in Transtecno and it is mainly explained by China. You are aware that Transtecno has a strong presence in China, both in terms of manufacturing activities. We have an important manufacturing plant with almost 200 people in China for Transtecno. And we realized in China, products for Europe or for exporting in general, but also for internal market. Then the internal market in China -- for Transtecno China is performing very well. But Transtecno is succeeding in having better penetration also on Italian and European customers.

And then so far, we have just started discussing the potential for selling opportunities within the group with Mariotti & Pecini, with INOXPA, in particular with the companies that are part of the [indiscernible] division. But so far, we have not achieved any significant benefit in terms of cross-selling for sales. And then it's a sort of standalone performance in terms of sales development.

[Operator]

The next question is from Alessandro Tortora of Mediobanca.

[Alessandro Tortora, analyst]

I have 3 questions for me. The first one is given that we've -- we were discussing before on order intake or the backlog, can you give us an idea of, let's say, what is happening in terms of order intake trend as for the Water-Jetting? You mentioned before that due to, let's say, COVID lockdown, other collection was basically attributed -- impacted in the previous quarter. So can you give us an idea if order collection recovered in this specific segment? And at least if you think about Hammelmann, NLB, if there are, let's say, significant differences in terms of order intake trend for these companies? This is the first question. Then maybe I will add 2 more from me.

[Luca Mirabelli, executive]

Okay. Well, as you know, we do not comment on specific numbers for order intake for single companies, for single period. But, of course, maybe we can have some general comments to make you aware of any significant distinct module between order intake in the 2. My impression is that on a long term, so year-to-date, the behavior is quite similar. Although, of course, it has a different behavior during the prices of their order intake, the slight sales for Water-Jetting, let's say, was decreased in a less significant way during the target months during April and May, whereas in -- for many of our companies in Hydraulics, the quarter intake was almost suspended, then went down to almost 0. I'm thinking, for example, to the Indian companies for Hydraulics. So there's no doubt that during the prices, Hydraulics took a stronger hit also in terms of order intake. But exactly as it happened with sales, they also have a quicker pickup. I'm not in a position to add any comments about specific companies in either of those sectors, so...

[Fabio Marasi, executive]

No. The only comment that I would like to make is about different trend that Luca just mentioned, and it is as explained or related with a different time to market for the 2 division because you have to imagine that generally speaking, of course, there are differences between the different companies of the 2 division. But generally speaking, Hydraulics is really focused on components -- component manufacturing and sales. And then when the [Audio Gap] manufacturing activity, we had a significant and immediate hit as an immediate consequence. In the Water-Jetting division, we have had some sort of delay because part of the Water-Jetting division is in some way related to projects or to more complicated or bigger plants execution or project deliveries.

For example, we have some cases in Inoxpa or in Hammelmann or even in some case, maybe in NLB. But generally speaking, we have part of the business that is more related to more complicated projects that were probably not immediately stopped during the COVID. And then we -- this is the reason why we had a better performance in that period. And now we are probably suffering a little bit more in these divisions because of the time that we have been stopped or discussing new projects or for developing together with some customer this project at the time of COVID. Of course, this is just a postponement. And today, activity is almost back to normal and then we will see improvement. But the level of the cyclicality or the level of time to market, in particular, not a cyclicality, is different in the 2 sectors.

[Alessandro Tortora, analyst]

Okay. The second question is on the U.S. As you said before, North America performing so well, okay, so far. Can you give us an idea of what is happening there? If, for instance, maybe how should the election in the U.S. affected a bit as you mentioned before, I don't know, any postponement of some orders? But just to have an idea because across the 2 end division, the [indiscernible] let's say, share the weakness, okay, in this area?

[Luca Mirabelli, executive]

Okay. Well, I wish we knew exactly the answer to this question. Of course, it is -- it makes sense to think that there might be some postponing of orders due to the uncertainty of the elections. At least, this is something we didn't see 4 years ago. So there are good reasons to think that this might be going on also this time, but only time will tell. Only when hopefully there is the end of the complex procedure that we are witnessing in these days, we will see if the order situation and the activity of the sectors we cover will resume and how much. Generally speaking, I think that this is just an indication that the U.S. economy was doing great in terms of stock markets, in terms of technologies, but not exactly in terms of every day industry. At least, this is our perception.

However, there is not a lot we can do about it. As you know, I understand that we are -- you are all obsessed with order intake and organic growth. But as a matter of fact, that's the only thing that we cannot control entirely. Of course, we can listen to it, so we can keep our ears and antennas on and make sure that we don't miss any opportunities, but we are not in control of how many opportunities we are presented with. So all we can do is make sure that our company, that all levels, that we acted the most flexible way to whatever situation they're presented with.

[Alessandro Tortora, analyst]

Okay. And the last question is just a clarification on the impact on, let's say, one-off action related to temporary scheme. Can you -- adjusting with the impact that you had, the positive impact, let's say, you had in 9 months or in absolute term or as a percentage of sales for this deduction?

[Luca Mirabelli, executive]

I'm sorry. There might be an audio problem or a problem with my brain, but I didn't understand your question. Could you please repeat it?

[Alessandro Tortora, analyst]

Okay. It's related to the advantage, okay, you got on margin related to Cassa Integrazione in Italy and the similar scheme, okay, in 9 months, okay, let's say beyond the full impact so far, okay?

[Luca Mirabelli, executive]

Okay. Let me get the number to you. It was 0.7% in the quarter. It was 2.3% in the previous quarter, of course, the emergency quarter. And it's currently around 1% year-to-date. And this is going to taper off. It's not going to disappear because, of course, it can only disappear when we are having some, let's say, beautiful, predictable and regular growth going on. This is not the kind of scenario that we are expecting for the next quarter. So it will not go down to 0 completely, but it would certainly stay at, let's say, marginal levels in -- I don't know, in the history, it goes usually from 0 to 0.4, 0.5 depending on how good the situation is and what happens during the year.

Remember that Cassa Integrazione, especially for non-Italian, this might be useful to remember Cassa Integrazione is not only an emergency tool, welfare tool. It's actually a standard structural part of Italian welfare or the Italian labor market. You could see that as the other side of the coin when you think of the proverbial rigidity and the expensiveness of the Italian labor market. But it also provides for some flexibility to face bad moments. So this is never going to disappear. It will simply be deflated to, let's say, ordinary levels and they are levels that are -- have never demanded the comments in the past, and will probably not be worth a comment in the future. I don't expect this to go down to 0 probably until well within the 2021.

[Operator]

The next question is from Matteo Bonizzoni of Kepler.

[Matteo Bonizzoni, analyst]

I have 3 questions. First one is, can you remind us if Hammelmann has a difficult comparison also for the fourth quarter of this year? The second question is, according to your feel, how much of the recoverage which you are experiencing in particular in Hydraulics in order intake, if you do a stocking, so these are going to disappear going forward? And how much is instead a more genuine recovery in the -- in your intake? And that's the last question, if you exclude that, that [indiscernible] will show the account roughly speaking EUR 20 million of EBITDA. Do you expect 2021 to return broadly to the same level of EBITDA of 2019?

[Luca Mirabelli, executive]

Okay. You said, 2018. I'm going to ask to the people at the table about the Q4 for Hammelmann last year, whether it was a particularly challenging, particularly good quarter or not. I'm sorry, I don't remember this off the top of my mind, but Q4 last year seems like, I don't know, primary school age to me. So amazing and that it -- yes, it's registered -- I can see it registered a plus 18% year-on-year in the last quarter last year. So it was definitely a strong quarter. But it didn't have the granularity, the biggest order, which is missing. So hopefully, the business that was gained in Q4 last year by Hammelmann is not exactly the same situation as the -- as what we've seen this quarter. Anyway, yes, it was certainly another very strong quarter.

As to your second question, restocking is not something that we can measure. We don't have a restocking measure for our sales. But I do remember that the same question was asked about the recovery in China after the lockdown. And we all see how we planned. And as of today, we have a plus 46% over a quarter that was not particularly weak last year. So definitely restocking, if it was there, has absolutely no importance and it didn't play any significant part. It should be remembered that most of our OEM customers who work with very little stocks, they use just in time or [ stand by ] or other very, very quick delivery options. Only a minor part of our business goes through dealers.

It is accurate to expect -- it is safe to expect that dealers might have exhausted their inventories during the crisis. But on the other hand, some of them were closed. So again, even when limiting ourselves to dealers, I would not expect a significant part of this pick up to be related to restocking. Any volatility that we are going to see might be connected to future developments in the COVID contagion, but not in any major way to our restocking-destocking mechanism.

And your third question was our expectations for EBITDA in 2021. Well, it clearly -- it's easier for us to comment about margins in EBITDA rather than absolute levels because absolute levels will depend a lot from the curve of the recovery and the timing of the recovery. Now I have to say that almost invariably since the month of May, all the news that we have heard about the recovery were marginally better than the previous ones. I'm referring to anything from the Italian drop of GDP till the timing of the vaccines to the other practical details about fears of our interruptions to industrial productions that had vanished so for now.

So I'm quite optimistic, but certainly, I'm not in a position of giving you an indication -- absolute indication for EBITDA margin in 2021, unless Fabio has anything to correct me.

[Fabio Marasi, executive]

It is, of course, too early to comment. We are starting the budget season in these days and we will be discussing the budget for every single company in the next 4 to 5 weeks -- 4 weeks, let's say. And then it's too early to say, but we do not expect any major changes. We have been able to maintain our very, very strong and satisfactory performance in terms of profitability and EBITDA. We have all the uncertainty and all the problem related to the pandemic, the COVID, the collapse of the reprice of this year. And then we do not see big uncertainty or big problems related to maintaining at least the profitability margins for next year. But it's too early to say.

[Operator]

[Operator Instructions] The next question is a follow-up from Domenico Ghilotti of Equita.

[Domenico Ghilotti, analyst]

Yes. I have a follow-up question on the profitability in the Water-Jetting division in the sense that I'm quite surprised to see -- well, of course, you're starting from a record high level, there is a lower contribution from Hammelmann. There is a lower organic sales and the decline is very, very small and is still basically very close to record level. So what's the magic behind because it's really surprising to see this level of profitability?

[Luca Mirabelli, executive]

Well, I'm afraid it's a very simple magic. And I'm sure that if you look at the numbers, you will notice that the key is the geographical distribution. U.S. were very weak. And I think it's no secret and of course it's no secret from now on, from this set of numbers on that EBITDA margins for NLB are among the weakest in the Water-Jetting sector. So this is an internal rebalancing of ways between contributors. Hammelmann did lose some business, but NLB lost much more. And so the comparative weight was still trending towards the higher margin companies anyway.

[Domenico Ghilotti, analyst]

Okay. And the second question is more strategic. So clearly, you are still missing a relevant exposure to China. So it's still below your -- some of your competitors. Is it something that you can fix with M&A? So Transtecno was a good example and now is delivering high growth thanks to the geographical exposure. Are you looking for this kind? And do you have in pipeline this kind of M&A opportunities to try to increase the weight of China?

[Fabio Marasi, executive]

Domenico, this is a never ending discussion about the exposure to the emerging countries. In sometimes, we are questioned because of the very low exposure. In some other time, we are a little bit exposed. This year, of course, China is performing some better than other markets or other region, and then it would have been better to have a more significant exposure. But generally speaking, I believe that we are quite satisfied about our organization and our diversification in many different aspects of which the diversification in terms of geographical exposure is one of them. Then I would say that we have a very balanced exposure to the different market times to the different regions in the world.

And we are not looking for significant or meaningful adjustments in terms of our exposure in this sense. Of course, if whenever an interesting acquisition we have then, we will be ready to follow it with an opportunistic approach. But we are not looking for major acquisition in China or in other particular region in the world in order to rebalance our presence and our exposure. Of course, we are very, very happy about the development of Transtecno thanks in particular to the presence of the company in China, but after a very, very difficult first quarter because you remember very well that China was the first to be completely blocked by lockdown. We recover very, very well. And now we are performing in a really impressive way supporting the growth of the whole Transtecno group and having a very positive development expectation. And we don't see strategic reason to rebalance our presence as a group.

[Luca Mirabelli, executive]

And again, if I may add a reminder to those who are maybe less familiar with the company, we have been -- we have proven numerous times in the past in both China and India that we are able to scale up our activity in a very far and very quick way. In both countries, we nearly doubled our production in a little more than one year. So clearly, we are not going to let any opportunity be wasted because we lack the organization or realize the operational presence. This is not something that we are very afraid of.

[Operator]

[Operator Instructions] The next question is a follow-up from Mr. Matteo Bonizzoni of Kepler.

[Matteo Bonizzoni, analyst]

Yes, just one question. 2020 will be clearly helped by the significant contribution of Reggiana and Transtecno in terms of the perimeter. Looking to 2021, we know that you are not used to comment specifically on your M&A pipeline. But my question is just to have a flavor, could 2021 be in your wing, significant contribution from acquisition? Or do you see more likely this is more in crisis?

[Fabio Marasi, executive]

Of course, it will depend on the M&A opportunities that we will be able to do in the next few months. You never know. We have always said that we have a significant number of those on the table every day or in any given time. But the execution and the realization of this opportunity is something that we cannot absolutely predict with some sort of significant -- with some sort of reason. We believe that we will be able despite all the programs in terms of logistic and in terms of negotiating an agreement related to the COVID pandemic and the effect, also on the result of the company.

We believe that in any case, we will be able to go ahead with our M&A strategy, and it is to reinvest in external growth and to reinvest in acquisition the vast majority of our cash flow. And the acquisition of DZ Trasmissioni is, of course, a small acquisition is representing our commitment and our execution ability, despite the problems that are related to this period. But we cannot predict now which will be the contribution of acquisition to 2021 results, of course.

[Luca Mirabelli, executive]

I think it's safe to say that if you all know that we can count on a significant fire power though. So again, we are not going to let any opportunity to wait because of the lack of means.

[Operator]

The next question is from Michele Baldelli of Exane BNP Paribas.

[Michele Baldelli, analyst]

I have a couple of question. I'm sorry if I may repeat from my colleagues, but I was not in the call at the start. In the trending October, if you can elaborate a little bit on this color or even a number, if you can? And then in terms of synergies and cost opportunities for the group companies, what do you still see in 2021 that needs to come through? I mean, cost synergies from the new referred companies if there are still some that should go through? GS-Hydro is the profitability already at the [ raging ]? Or shall we think about improvements? If you can elaborate a little bit on this.

[Luca Mirabelli, executive]

Okay. I'll just repeat what we said about October, which, of course, cannot be dealt with in great details, if not the object of our disclosure. But all the positive trends, both in terms of sales and in terms of orders, and order income and size of the portfolio went on in the month of October as well. This is what we have said before. In terms of the synergies, also Fabio has spent a few words about Transtecno and Reggiana. I don't know if you want to repeat it or integrate that with any other...

[Fabio Marasi, executive]

No. I believe that apart the Reggiana and the Transtecno which I've already commented and then the potential opportunities in terms of our cost to synergies and cross-selling -- commercial cross-selling in the gearbox division and transmission division, I believe that we will have on a midterm perspective than 2, 3 years significant opportunities in realizing cross-selling opportunities and projects based on application, thanks to the newly acquired companies. Newly acquired companies means, remind, the companies that entered our group in recent years. You have to imagine that only 5 years ago, we didn't have WALVOIL, we didn't have INOXPA, we didn't have GS-Hydro, the transmission companies. Then we added huge, huge developments with new fields, new components and new application.

If you think about in particular, this is true for the Hydraulics division. If you think about the period that is needed to develop a new vehicle that is usually -- it will last a couple of years, you can imagine how strong and how important are the potential for our companies and in particular for the companies that entered just recently our group, to enter in the customer -- at least in the customer portfolio that is already present in Interpump group. And we really believe and we really count on this opportunity on the midterm in order to over perform the market, whichever will be the performance of the market.

And regarding your last question about GS-Hydro. GS-Hydro, of course, suffered this year in terms of top line. We are down single digit -- mid-single digit. But this was the worst possible year for a company like GS-Hydro that is in some way related to the oil price that collapsed. And that is related or part of the business is related to the installation and onsite job that has been postponed or delayed because of the measure put together or put place in order to prevent the COVID-19 pandemic. But despite the very difficult market condition and the market situation, we have been able to further improve the profitability of the company.

And now [indiscernible], we are confirming this very good results in terms of profitability and cash flow. And in the first 9 months of the year, we have reached 13 point something percent EBITDA margin. That is a significant progress, 3, 4 percentage points, in comparison with the same period of last year. Then we are very satisfied about the development of the company. And GS-Hydro again represent another opportunity for entering new customer or for bringing the products and components that are present in the pan-group catalog to new areas of the market to different end customers. And then we see a lot of opportunities looking at.

[Operator]

[Operator Instructions] Mr. Mirabelli, gentlemen, there are no more questions registered at this time.

[Luca Mirabelli, executive]

Very good. So I thank again for your time today. Remember, we are available for meeting, unfortunately only virtual meetings, directly or through your favorite broker. And we'll speak again on the Q4 results presentation, which as far as I'm aware has not been set yet as a date, but we will definitely publish the calendar for 2021...

[Carlo Banci, executive]

12th of February.

[Luca Mirabelli, executive]

The 12th of February, Mr. Banci is informing. I mean that anyway you will find the date on our website and you will definitely receive the usual indication. So thanks again and have a nice day.

[Operator]

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