Sesa S.p.A. Earnings Call Highlights Growth and Discipline

Sesa S.p.A. ((IT:SES)) has held its Q2 earnings call. Read on for the main highlights of the call.

Sesa S.p.A. Earnings Call Signals Confident Growth Amid Targeted Investment Risks

Sesa S.p.A.’s latest earnings call struck a distinctly positive tone, with management underscoring solid double‑digit revenue and EBITDA growth, a sharp acceleration in the second quarter, and improving financial efficiency. Executives highlighted particularly strong momentum in higher‑value areas such as Digital Green and ICT value‑added services, alongside disciplined capital returns through dividends and buybacks. While some pressure remains on system integration margins and short‑term profitability in Business Services, management’s reaffirmed FY26 targets and talk of reaching the upper end of guidance reflected clear confidence in the group’s underlying organic momentum.

Broad‑Based Revenue Expansion to EUR 1.6 Billion

Sesa reported consolidated revenues and other income of EUR 1.6 billion for the period, a 12.0% year‑on‑year increase on a reported basis. This growth underlines the group’s ability to expand even in a more selective spending environment, supported by its diversified portfolio across ICT, value‑added services, and Business Services. The strong top‑line expansion provides a solid base for future earnings, particularly as higher‑margin activities gain weight in the mix.

Profitability Rises with Stable Margins

Profitability advanced in step with revenues. EBITDA rose 11.4% year‑on‑year to EUR 114.4 million, with an EBITDA margin of 7.1%, broadly stable despite pockets of pressure in system integration. On the bottom line, consolidated adjusted EAT came in at around EUR 50 million, up 17.1%, while group net profit adjusted reached EUR 45 million, up 13%. The faster growth in net profit versus EBITDA signals efficiency gains and lower financial charges, enhancing Sesa’s earnings quality.

Second Quarter Emerges as Growth Engine

Management singled out the second quarter as the main driver of the half‑year outperformance. Q2 revenues climbed to EUR 755 million, up 16% on a reported basis and 9.4% like‑for‑like, while operating EBITDA grew 16.6% reported and 8.4% pro forma. Adjusted group EAT surged by about 30% reported and 17% pro forma. This sharp acceleration into Q2 gives the company strong momentum entering the second half and underpins its confidence in achieving the upper end of full‑year and FY26 targets.

Digital Green VAS Powers High‑Growth Segment

Digital Green value‑added services stood out as a clear outperformer. Revenues in this segment reached EUR 210 million, up 26% versus H1 2025 on a pro forma basis, with EBITDA rising 30% pro forma to EUR 14 million and an EBITDA margin of 6.7%. Management attributed the strong performance to robust demand for solutions linked to energy needs from digitalization and AI adoption. As companies seek more energy‑efficient and sustainable infrastructures for data‑intensive workloads, this segment positions Sesa to tap a structural growth trend with improving profitability.

ICT Value‑Added Services Return to Growth with Strong Backlog

After prior declines, ICT value‑added services returned to growth, a key reassurance for investors given the size of this business. ICT VAS revenues reached EUR 939 million, up 2.1% on a fully organic basis. The recovery was more pronounced in Q2, where revenues rose 8.1%, and management underscored a November backlog up 25%, providing solid visibility for near‑term revenues. The turnaround suggests that earlier softness was cyclical rather than structural, and the healthier pipeline bodes well for sustaining growth into upcoming quarters.

Business Services: Revenue Momentum with Strong Margins

Business Services continued its steady expansion, with revenues of EUR 74 million, up around 7% year‑on‑year. EBITDA grew 6.6% to EUR 11.6 million, corresponding to a robust 15.8% margin. Q2 showed an even faster pace, with revenues accelerating 11%, driven primarily by multiyear contracts. While some of these new contracts currently dilute margins in the early phase, the segment’s high base profitability and recurring revenue profile make it an important, relatively resilient earnings contributor.

Financial Efficiency Improves, Net Debt Edges Lower

Sesa’s balance sheet and financial efficiency showed further progress. Net financial expenses decreased about 11% versus H1 2025, with an even sharper 15.5% reduction in Q2 compared with the previous year’s quarter. Management credited lower interest rates and improved financial management. Net debt stood at EUR 119 million, including EUR 208 million of IFRS debt, a slight improvement from the pro forma EUR 122 million. The combination of lower financial charges and stable leverage supports the company’s ability to continue investing while returning cash to shareholders.

Capital Allocation: More Organic Focus, Stronger Shareholder Returns

The new industrial plan emphasizes a shift toward organic growth and more selective deal‑making, coupled with enhanced shareholder remuneration. Sesa raised its FY26 payout ratio to 40% and has already paid a EUR 1 per share dividend, totaling about EUR 15.5 million. The company also expanded its share buyback program to EUR 25 million, with a first EUR 15 million tranche completed and additional share cancellations of 157,522 shares executed. This strategy signals confidence in the intrinsic value of the business and a disciplined approach to capital allocation.

Selective M&A Remains a Strategic Lever

Despite emphasizing organic growth, Sesa continues to pursue targeted M&A to reinforce its capabilities and geographic reach. In the first half, the group completed four strategic acquisitions across Germany, Spain, Italy, and Switzerland, either already consolidated or due to be consolidated. Entry valuations were around 5x EBITDA, and the acquired companies generally deliver EBITDA margins above 10%. These metrics confirm a value‑oriented approach, with deals expected to be accretive while fitting into Sesa’s broader integration and specialization strategy.

ESG and Human Capital Progress Underpin Long‑Term Positioning

On the non‑financial front, Sesa retained its Platinum rating from EcoVadis, the highest level of ESG recognition from the agency, reinforcing its credentials with sustainability‑focused investors and clients. Headcount increased by 1.7% compared with April 30, 2025, reflecting ongoing hiring in strategic areas. Management highlighted continued investment in training, inclusion, and welfare initiatives, underlining the importance of talent development and employee well‑being as part of the group’s long‑term competitiveness in high‑skill digital services.

System Integration Growth Meets Margin Pressure

System integration recorded revenues of EUR 420 million, up 4% year‑on‑year, but profitability lagged. EBITDA slipped 1.9% to EUR 43.4 million, with the EBITDA margin narrowing to 10.3%. Management cited reengineering efforts in certain business units as the main driver of margin pressure and guided for margins to stabilize at FY 2025 levels. While this suggests limited near‑term upside in profitability from system integration, the retooling is intended to support more efficient growth and better margins over time.

Business Services: Short‑Term Margin Dilution from New Contracts

Within Business Services, management acknowledged a decrease in marginality in Q2, despite the double‑digit revenue acceleration. The pressure stems from the launch phase of several new multiyear contracts, which typically require upfront resources before reaching full profitability. While this weighs on short‑term margins, these contracts underpin future recurring revenues and, once ramped up, are expected to support the segment’s already high profitability profile.

Software/System Integration Slightly Behind Plan

Management admitted that the software/system integration area is slightly below its first‑half guidance, even though Q2 showed improvement and the backlog remains positive. This underperformance creates some execution pressure for the second half, as the company will need to accelerate to meet internal goals. Still, the improved Q2 trends and strong order book suggest the shortfall is manageable rather than structural, provided implementation and delivery timelines are met.

Higher Depreciation and Amortization Weigh on EBIT

Depreciation and amortization increased by around 14% year‑on‑year to EUR 26 million, reflecting sustained investments in technology, infrastructure, and acquired intangibles. Amortization of customer lists and know‑how alone totaled EUR 17.5 million, reducing reported EBIT, which came in at EUR 65 million after these intangible charges. While this higher D&A suppresses reported operating profit, it is also evidence of prior years’ investment and M&A, which management expects to monetize through future revenue and margin contributions.

Pending Disposal Adds Upside but Remains Conditional

Sesa has signed a binding agreement to sell a 6.6% stake in DV Holding, which, if completed, is expected to generate a positive impact of around EUR 7 million on consolidated net profit. However, the transaction remains subject to regulatory approvals, including Golden Power and antitrust scrutiny. Until these approvals are secured, the disposal remains a potential, rather than realized, value‑creating event and adds an element of timing uncertainty to near‑term earnings.

Heavy Investment Cycle Brings Execution Risk

Over the last 12 months, Sesa invested approximately EUR 140 million, including EUR 37 million in the first half alone, spanning M&A and shareholder returns such as buybacks and dividends (around EUR 35 million). For the full year, management expects total investments of about EUR 80 million, including M&A and CapEx. This level of capital deployment underpins growth but also introduces execution risk, especially as the company transitions toward a model with lower recurring annual M&A. Investors will watch how efficiently these investments translate into earnings and cash flow over the coming periods.

Guidance: Upper‑End Ambitions Backed by Strong Momentum

Management reaffirmed its FY26 targets, planning for 5–7.5% organic revenue growth, 5–10% organic EBITDA growth, and roughly a 10% organic increase in net consolidated profit, slightly narrowing the previous 10–12% range. Executives indicated they aim for, and see as achievable, the upper end of these ranges, citing robust H1 and Q2 performance: H1 revenues at EUR 1.6 billion (+12% year‑on‑year), EBITDA at EUR 114.4 million (+11.4%), adjusted EAT at EUR 50 million (+17.1%), and adjusted group net profit at EUR 45 million (+13%). Q2’s strong trajectory and a 25% increase in November backlog provide additional visibility. On investments, Sesa reiterated guidance of about EUR 80 million for the year, with roughly EUR 35 million in M&A and EUR 52–55 million in CapEx, and longer‑term annual targets of around EUR 30 million M&A and EUR 50 million CapEx. The company also maintains a 40% payout policy tied to dividends and a EUR 25 million buyback program, supported by a net debt position of around EUR 119 million and reduced net financial expenses.

In summary, Sesa’s earnings call painted a picture of a company growing solidly across key markets, leaning into high‑growth segments like Digital Green and ICT value‑added services while returning more cash to shareholders. Margin headwinds in system integration and early‑stage contracts, alongside a heavy investment agenda, introduce some near‑term execution risk, but stronger Q2 trends, a rising backlog, and disciplined capital allocation underpin management’s confidence in meeting, and potentially exceeding, its medium‑term guidance. For investors, the story is one of steady growth, improving financial efficiency, and a careful balance between organic expansion, selective acquisitions, and shareholder rewards.