Strong H1 results leading to upward revision of full year outlook,
with volume growth and cost transformation driving profitability up
and leverage down further
Regulated information
- Revenue up 3% like for like, driven by 5% volume
growth;
- Adjusted EBITDA rose by 31%, lifting margin up to 12%,
on continued delivery of the cost transformation program,
strengthening competitiveness and profitability;
- Net debt dropped 12%, thanks to strong FCF delivery and
M&A proceeds, contributing to leverage ratio improvement to
2.5x;
- Full year outlook revised upward, with higher expected
revenue growth, adjusted EBITDA margin and FCF, and with leverage
down further.
CEO quote
Gustavo Calvo Paz, Ontex’s CEO, said: “We
have achieved several key strategic milestones in the first half
year. Two divestments were successfully completed, sharpening our
focus on Core Markets further, and our cost transformation program
delivered solid efficiency gains yet again. This consistent
delivery, coupled with our sustainable innovation pipeline, allows
us to grow our business in North America and strengthen it in
Europe, which gives me confidence to deliver a strong year. Aiming
to further strengthen our competitive position, we announced the
intention to restructure our Belgian production and distribution
activities. These measures will allow us to further reinforce and
grow our business sustainably, while driving profitability and cash
flow generation up.”
H1 2024 results
- Revenue [1] was €916 million, up 3% like
for like. Volumes were up 5%, including mix effects, driven by
double-digit volume growth in North America and in selected product
categories. Prices were 2% lower, as expected, in view of the
evolution of raw material price indices.
- Adjusted EBITDA [1] was €110 million, up
31% year on year. The cost transformation program continued to
deliver 5% operational efficiencies, strengthening profitability
and competitiveness. Meanwhile, volume growth and mix improvement
contributed €6 million. Index-driven lower raw material costs
offset most of the continued inflation impact on other operating
and SG&A costs. The adjusted EBITDA margin thereby rose to 12%,
up 2.6pp year on year.
- Operating profit [1] was €31
million, €4 million lower than last year, as one-time provisions
and impairments of €(42) million were taken primarily for the
intended Belgian footprint restructuring.
- Adjusted profit from continuing operations, excluding
the restructuring costs, was €41 million, well up versus €12
million the year before.
- Loss of the period for the Total Group was €(6) million,
compared to €(19) million the year before. It includes the €10
million profit from continuing operations, up versus €2 million in
2023, and the €(15) million loss from discontinued operations.
Solid operational results of these, were offset by non-cash
currency translation adjustments related to the recent
divestments.
- Free cash flow amounted to €43 million, a significant
increase compared to the €(29) million outflow in 2023, reflecting
the strong operational delivery and helped by capex payment phasing
in the year, while still allowing for working capital investments
to support the Group’s expansion and the cost transformation
program.
- Net financial debt for the Total Group dropped €77
million to €588 million over the half year, thanks to the solid
free cash flow and inflow from recent divestments. Combined with
the EBITDA improvement, the leverage ratio fell from 3.3x at the
start of the year to 2.5x at the end of June.
Q2 2024 results
- Revenue [1] was €456 million, up 2% like for
like. Volume growth and mix effects contributed 5%, driven by
volume growth in North America and in selected product categories.
Prices were down 3% year on year.
- Adjusted EBITDA [1] was €57 million, up 32%
year on year. Relentless focus on the cost transformation program
delivered yet again 5% operational efficiency savings, which more
than covered for the price decrease. Volume growth and mix
improvement contributed €5 million. Lower raw material costs more
than offset other operating and SG&A cost inflation. The
adjusted EBITDA margin rose to 12.5%, up 2.8pp year on year.
- Operating loss [1] was €(3)
million, post the one-time provisions and impairments of €(42)
million. These were taken primarily for the intended Belgian
footprint restructuring.
2024 outlook
Based on the solid delivery in the first half
of 2024, and further progress made on Ontex’s structural
transformation, Ontex’s management revises its previously
iterated guidance upward, expecting:
- Revenue [1] to grow in a range of 4% to 5%
like for like (previously: by low-single-digit);
- Adjusted EBITDA margin [1] of 12%
(previously: in a range of 11% to 12%);
- Free cash flow higher than €20 million (previously: to
improve year on year);
- Leverage ratio to reduce further to below 2.5x by year
end (previously: to below 2.8x).
[1] Reported P&L figures,
represent continuing operations, i.e. Core Markets, only. As from
2022, Emerging Markets are reported as assets held for sale and
discontinued operations, following the strategic decision to divest
these businesses.
Unless otherwise indicated, all comments in this document
are on a year-on-year basis and for revenue specifically on a
like-for-like (LFL) basis (at constant currencies and scope and
excluding hyperinflation effects). Definitions of Alternative
Performance Measures (APMs) in this document can be found on page
9.
Key business indicators
Business results |
Q2 |
H1 |
in € million |
2024 |
2023 |
% |
% LFL |
2024 |
2023 |
% |
% LFL |
Core Markets
(continuing operations) |
Revenue |
455.9 |
445.9 |
+2% |
+2% |
916.1 |
891.8 |
+3% |
+3% |
Baby Care |
195.2 |
201.5 |
-3% |
-4% |
390.7 |
396.6 |
-1% |
-2% |
Adult Care |
195.7 |
176.9 |
+11% |
+11% |
394.5 |
359.9 |
+10% |
+11% |
Feminine Care |
60.3 |
61.7 |
-2% |
-3% |
120.5 |
123.0 |
-2% |
-3% |
Adj.
EBITDA |
56.9 |
43.2 |
+32% |
|
109.8 |
83.8 |
+31% |
|
Adj. EBITDA margin |
12.5% |
9.7% |
+2.8pp |
|
12.0% |
9.4% |
+2.6pp |
|
Operating
profit/(loss) |
( 3.1) |
18.6 |
-117% |
|
31.1 |
35.6 |
-13% |
|
Emerging
Markets (discontinued operations) [2] |
Revenue |
74.7 |
131.3 |
|
-10% |
165.9 |
337.1 |
|
-5% |
Adj.
EBITDA |
8.3 |
7.8 |
|
|
20.0 |
22.8 |
|
|
Adj. EBITDA margin |
11.1% |
5.9% |
+5.2pp |
|
12.1% |
6.7% |
+5.3pp |
|
Operating
loss |
( 18.2) |
( 15.2) |
|
|
( 6.8) |
( 2.8) |
|
|
Total Group
[2] |
Revenue |
530.6 |
577.3 |
|
-0% |
1,082.0 |
1,228.9 |
|
+1% |
Adj.
EBITDA |
65.2 |
50.9 |
|
|
129.8 |
106.6 |
|
|
Adj. EBITDA margin |
12.3% |
8.8% |
+3.5pp |
|
12.0% |
8.7% |
+3.3pp |
|
Operating
profit/(loss) |
( 21.3) |
3.4 |
|
|
24.3 |
32.8 |
|
|
Core Markets revenue |
2023 |
Vol/mix |
Price |
2024 |
Forex |
2024 |
in € million |
|
|
|
LFL |
|
|
Second Quarter |
445.9 |
+21.4 |
-12.9 |
454.4 |
+1.5 |
455.9 |
First Half |
891.8 |
+41.6 |
-16.5 |
916.9 |
-0.8 |
916.1 |
|
|
|
|
|
|
|
|
|
|
Core Markets adj. EBITDA |
2023 |
Vol/mix |
Raw |
Operat. |
Operat. |
SG&A/ |
Forex |
2024 |
in € million |
|
/price |
mat'ls |
costs |
savings |
Other |
|
|
Second Quarter |
43.2 |
-8.0 |
+13.0 |
-5.5 |
+18.8 |
-5.7 |
+1.1 |
56.9 |
First Half |
83.8 |
-10.2 |
+20.1 |
-11.0 |
+37.1 |
-12.1 |
+2.0 |
109.8 |
[2] The Emerging Markets and
Total Group year-on-year comparison is affected by divestments in
the period, i.e. the Mexican, Algerian and Pakistani business
activities. The LFL comparison is corrected for this scope
reduction.
H1 2024 business review of Core Markets (continuing
operations)
Revenue
Revenue was €916 million, up 3% like for
like, with higher, volume-driven, adult care sales of 11%, more
than compensating for a price-related decrease in baby care and in
feminine care of 2% and 3% respectively. Forex fluctuations had no
meaningful net effect, leaving revenue growth at 3% overall
compared to the first half of 2023, and 1% compared to the second
half.
Volumes were up 5%, including mix
effects, driven by strong double-digit volume growth in North
America and in selected product categories.
The strong increase in North America contrasted
with the overall stable demand for baby care products in the
region, thereby highlighting Ontex’s share gains. These were based
on new contracts that started during the second half of 2023, the
first quarter of 2024 and at the end of the second quarter. Further
volume growth in the year will be supported by additional secured
contracts. The year-on-year comparison was partly helped by
customer destocking in the first quarter of 2023 which depressed
order levels at that time.
In Europe, overall demand for baby care products
weakened, while they were stable for feminine care and growing for
adult care, in line with the demographic evolution. While
promotional activities by branded players, temper the previous
share gains of retail brands in baby diapers, the latter continue
to outperform in baby pants and in the feminine and adult category.
Ontex’s sales volumes in Europe overall reflected these market
trends, with lower sales in baby diapers and strong increases in
baby pants and in adult care, especially in the healthcare
channel.
Prices were 2% lower on average. While in
certain categories, such as healthcare, prices remained relatively
stable, as these contracts typically have a longer term and are
more rigid, prices have been coming down sequentially in other
categories since the second half of 2023. This was expected, in
view of the raw material price index decreases which had started
earlier that year.
Adjusted EBITDA
Adjusted EBITDA was €110 million, up 31%
compared to the first half of 2023, and 22% compared to the second
half. Continued delivery on the cost transformation program,
coupled with sustainable innovation, strengthened profitability and
competitiveness, servicing customers better and managing prices to
invest in further volume growth. Meanwhile, volume growth and mix
improvement contributed €6 million. The net cost inflation impact
was largely flat and forex effects were supportive.
The cost transformation program delivered
€37 million net operating savings, leading to a reduction of the
operating cost base by 4.9%. Product innovations, manufacturing and
supply chain improvements, and especially procurement initiatives
remain the drivers behind the structural savings. In June, Ontex
announced the intention to restructure its Belgian production and
distribution activities, as part of its strategic transformation to
strengthen its competitive position in the European market. It
would entail the closure of the Eeklo site, as well as the
transformation of the Buggenhout site into a center of excellence
for research, development and production of medium and heavy
incontinence care products. This initiative aims at strengthening
Ontex’s operational cost-efficiency across Europe, allowing to
pursue the structural operating efficiency gains so far.
Costs were €3 million higher on
a net basis. Raw material cost decreases had a €20 million positive
impact, reflecting the year-on-year lower price indices for fluff,
super-absorbent polymers and non-woven materials. However, these
indices have started to rise sequentially again, compared to the
end of 2023. Other operating costs were up by €11 million year on
year, largely due to inflation of salaries, energy and distribution
costs. SG&A expenditure was up by €12 million, with wage
inflation and actualization of variable remuneration in the half
year.
Forex fluctuations had a €2 million net
positive impact, mainly linked to the appreciation of some non-euro
currencies in Europe.
The adjusted EBITDA margin rose to
12.0%, up 2.6pp compared to the first half of 2023, and 2.0pp
compared to the second half.
Q2 2024 business review of Core Markets (continuing
operations)
Revenue
Revenue was €456 million, up 2% like for
like, with a solid volume-driven increase in adult care of 11%,
more than compensating for a price-related decrease in baby care of
4% and in feminine care of 3%. Forex fluctuations had a minor
positive effect, leaving revenue to grow 2% year on year overall,
and to reduce 1% quarter on quarter.
Volumes, including mix effects, were up
5% year on year, driven by solid growth in selected categories, and
especially in North America. The latter was largely based on
contracts that kicked in in the prior quarters and to a lesser
extent in the quarter. Ontex’s sales volumes in Europe were up
significantly in adult care, especially in the healthcare channel,
and in other selected categories such as baby pants, while in baby
diapers volumes were down, in line with market trends.
Prices were down across categories and 3%
on average compared to last year. These decreases were expected,
and in line with the raw material price index decreases during last
year.
Adjusted EBITDA
Adjusted EBITDA was €57 million, up 32%
year on year, and 8% quarter on quarter, mainly thanks to
relentless focus on delivering on the cost transformation program,
which more than covered for the price decreases. Volume growth and
mix improvement contributed €5 million. Lower raw material costs
more than compensated for other operating and SG&A cost
inflation. Forex effects had a small positive contribution.
The cost transformation program resulted
in €19 million net operating savings, leading to a reduction of the
operating cost base by 5.0%. Product innovations, manufacturing and
supply chain improvements, and especially procurement initiatives
were the drivers behind the structural savings.
Costs decreased by €2 million
net versus last year. Year-on-year decreases of the raw material
price indices had a €13 million positive impact. Other operating
costs were up by €5 million year on year, largely due to inflation
of wages, energy and distribution costs, and SG&A expenditure
was up by €6 million year on year, on wage inflation and variable
remuneration actualisations as in the first quarter.
Forex fluctuations had a €1 million net
positive impact, mainly linked to the appreciation of some non-euro
currencies in Europe.
The adjusted EBITDA margin rose to 12.5%, up
2.8pp year on year and 1.0pp quarter on quarter.
Key financial indicators
Financial results |
H1 |
in € million |
2024 |
2023 |
% |
|
Adj. EBITDA |
109.8 |
83.8 |
+31% |
|
Depreciation & amortization |
(36.4) |
(35.7) |
-2% |
|
Net finance cost |
(26.5) |
(24.8) |
-7% |
|
Adj. income
tax expense [3] |
(5.4) |
(11.2) |
+51% |
|
Adj. profit from continuing operations |
41.4 |
12.2 |
+240% |
|
EBITDA
adjustments [4] |
(42.2) |
(12.6) |
-236% |
|
Impact of
EBITDA adjustments on income tax [3] [4] |
10.5 |
2.5 |
+323% |
|
Profit from continuing operations |
9.6 |
2.1 |
+367% |
|
Loss from
discontinued operations |
(15.5) |
(21.2) |
+27% |
|
Loss for the period |
(5.8) |
(19.2) |
+70% |
|
Basic EPS (in €) |
(0.07) |
(0.24) |
+70% |
|
Capex |
(37.9) |
(44.4) |
+14% |
|
Free cash flow |
43.2 |
(28.6) |
+251% |
|
M&A cash flow |
33.6 |
207.2 |
-84% |
|
Net working capital [5] |
150.7 |
166.5 |
-9% |
|
Working capital / revenue [5] |
7.1% |
7.6% |
-0.6pp |
|
Gross financial debt [5] |
748.0 |
833.5 |
-10% |
|
Net
financial debt [5] |
588.1 |
665.3 |
-12% |
|
Leverage ratio [5] |
2.49x |
3.25x |
-0.76x |
|
[3] The Adjusted income tax expense
consists of the income tax expense, as presented in the income
statement, adjusted for the impact of EBITDA adjustments.
[4] EBITDA adjustments and their
impact on income tax are subtracted from adjusted profit to obtain
profit.
[5] Balance sheet data reflect the
end of the period and compare to the start of the period, i.c.
December 2023.
H1 2024 financial review of Total Group
P&L
Depreciation & amortization
from continuing operations was slightly up at €(36) million,
reflecting the higher investment level.
EBITDA adjustments of €42
million were made in continuing operations. These adjust for €(38)
million restructuring provisions accounted for as “Income &
expenses related to changes in Group structure”, and consist
primarily of €(37) million provisioned for the intended
restructuring of the Belgian operating footprint. This amount
reflects the potential redundancy cost for the employees concerned
according to the Belgian legal requirements. As the social
information and consultation round is still ongoing, and
negotiations were not started up, no reliable estimate for the
social plan beyond these legal requirements could be made. EBITDA
adjustments were also made for €(4) million related asset
impairments, accounted for as “Income & expenses related to
impairments & major litigations”.
Net finance cost from
continuing operations was €(27) million, slightly higher than €(25)
million in 2023, as forex effects offset the reduced interest
charge. The latter is the result of lower indebtedness, following
the repayment of the €220 million term loan mid last year.
Income tax result from
continuing operations was a positive €5 million, compared to a €(9)
million charge a year ago, following the recognition of deferred
tax assets in the period in view of the improving
profitability.
Discontinued operations, consisting of
the Emerging Markets division, generated a revenue of €166 million,
a 5% like for like decrease versus 2023, excluding forex and scope
effects, following the divestment of the Mexican business in 2023
and the Algerian and Pakistani businesses earlier in this year. The
adjusted EBITDA was €20 million resulting in a margin of 12.1%,
almost double the 6.7% from a year ago, reflecting the improvement
of the remaining businesses in Turkey and Brazil. The operating
loss was €(7) million, compared to €(3) million last year, which
still included the partial contribution from the Mexican business
and the full contribution of the Algerian and Pakistani business.
It includes some divestment-related costs as well as the non-cash
recycling of €(20) million currency translation adjustments through
the P&L, from “Cumulative translation reserves” to “Retained
earnings and other reserves” in the equity. This follows the
finalization of the divestment of the Algerian and Pakistani
businesses in the period.
Loss of the period for the
Total Group was €(6) million, compared to €(19) million the year
before, and consists of the €(15) million loss from discontinued
operations and the €10 million profit from continuing operations.
The latter compares to €2 million in 2023, and includes the impact
of restructuring and impairment related costs. Excluding these, the
adjusted profit from continuing operations was €41 million, well up
versus €12 million the year before. Basic earnings per share of the
Total Group were €(0.07), compared to €(0.24) in 2023.
Cash flow
Capital expenditure was €(38) million,
representing 3.5% of the Total Group revenue. The ratio is
relatively low compared to the expected ratio for the year, due to
phasing of payments, and is expected to accelerate in the second
half, to support investments in the North American business
expansion and the further implementation of the cost transformation
program. Capital expenditure excludes financial leases which
amounted to €(12) million, largely in line with 2023. The combined
capital expenditure and leases represented 1.4x the
depreciation.
Free cash flow amounted to €43
million, well up compared to €(29) million in 2023, reflecting the
strong operational delivery and helped by capex phasing. Working
capital needs to support the business expansion and transformation
amounted to €(12) million, while cash-out for restructuring and
primarily divestment-related cash costs were €(5) million. Cash
taxes were €(5) million and net financing cash-out totaled €(17)
million, substantially lower than in 2023, as the interest payments
decreased, and in 2023 significant transaction costs were paid
related to the renegotiated revolving credit facility.
M&A cash flow totaled €34
million. Early April, Ontex completed the divestment of its
Algerian business, and in June its Pakistani business. The net cash
proceeds for both transactions combined so far were €25 million net
of cash disposed, but remain subject to taxes, transaction costs
and the customary post-closing adjustments, likely to be paid in
the second half of the year. A deferred receivable related to the
divestment of the Mexican business in 2023 still remained
outstanding. In the first half year €8 million was received from
the acquirer, and €19 million remains due within the next four
years.
Balance sheet
Net working capital for the Total Group
at the end of the period was €151 million, a €16 million decrease
versus the end of 2023, largely linked to the divestment of the
Algerian and Pakistani businesses. Net working capital in the
remaining operations were largely stable, reflecting a relative
improvement versus revenue. Trade receivables increased in line
with the growing business, partly offset by slightly higher
factoring activity, i.e. €170 million at the end of June.
Inventories were up more to support the ramp-up in revenue in North
America and the footprint adjustments in Europe. Increased trade
payables offset these increases, however, reflecting better payment
terms as a result of the cost transformation program.
Net financial debt for the
Total Group dropped €77 million, from €665 million to €588 million
over the half year, thanks to the solid free cash flow and the
inflow from recent divestments. The leverage ratio decreased
further from 3.25x at the start of the year to 2.49x end of June,
as a combination of the net financial debt reduction and especially
the further increase of the adjusted EBITDA of the Total Group of
the last twelve months.
Gross financial debt of the Total Group
reduced even more, by €86 million, from €834 million to €748
million, thanks to cash optimization. It consists primarily of the
€580 million bond at fixed 3.5% rate maturing in July 2026, of €130
million of short- and long-term lease liabilities, and of €32
million drawn on the floating rate revolving credit facility with a
maximum capacity of €242 million. The available liquidity of the
Total Group increased from €322 million to €370 million, consisting
of the €160 million cash and cash equivalents and the undrawn part
of the revolving credit facility.
Assets-held-for-sale at the end
of the period, i.e. the Brazilian and Turkish businesses, are
valued at €141 million net on the balance sheet and include a €57
million net cash position. The balance sheet also includes €(211)
million of cumulative translation reserves in equity related to
these assets.
Disclaimer
This report may include forward-looking
statements. Forward-looking statements are statements regarding or
based upon our management’s current intentions, beliefs or
expectations relating to, among other things, Ontex’s future
results of operations, financial condition, liquidity, prospects,
growth, strategies or developments in the industry in which we
operate. By their nature, forward-looking statements are subject to
risks, uncertainties and assumptions that could cause actual
results or future events to differ materially from those expressed
or implied thereby. These risks, uncertainties and assumptions
could adversely affect the outcome and financial effects of the
plans and events described herein. Forward-looking statements
contained in this report regarding trends or current activities
should not be taken as a report that such trends or activities will
continue in the future. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. You should not place undue
reliance on any such forward-looking statements, which speak only
as of the date of this report.
The information contained in this report is
subject to change without notice. No re-report or warranty, express
or implied, is made as to the fairness, accuracy, reasonableness or
completeness of the information contained herein and no reliance
should be placed on it. In most of the tables of this report,
amounts are shown in € million for reasons of transparency. This
may give rise to rounding differences in the tables presented in
the report.
Corporate information
The above press release and related financial
information of Ontex Group NV for the six months ended June 30,
2024 was authorized for issue in accordance with a resolution of
the Board on July 30, 2024.
Audio webcast
Management will host an audio webcast for
investors and analysts on July 31, 2024 at 12:00 CEST / 11:00 BST.
Click on
https://channel.royalcast.com/landingpage/ontexgroup/20240731_1 to
attend the presentation from your laptop, tablet or mobile device.
Audio will stream through your selected device, so be sure to have
headphones or your volume turned up. A full replay of the
presentation will be available at the same link shortly after the
conclusion of the live presentation. A copy of the presentation
slides will be available on ontex.com.
Financial calendar
- October 24, 2024 Q3 2024 results
- February 19, 2025 Q4 & full year 2024
results
- April 30, 2025 Q1 2025 results
- May 5, 2025 2025 Annual general meeting of
shareholders
- July 31, 2025 Q2 & H1 2025 results
Enquiries
- Investors Geoffroy Raskin +32 53
33 37 30 investor.relations@ontexglobal.com
- Media Catherine Weyne +32 53 33
36 22 corporate.communications@ontexglobal.com
About Ontex
Ontex is a leading international developer and
producer of care products and solutions for retailers and
healthcare, with expertise in baby care, feminine care and adult
care. Ontex’s innovative products are distributed in around 100
countries through retailers and healthcare providers. Employing
some 7,500 people, Ontex has a presence in 14 countries, with its
headquarters in Aalst, Belgium. Ontex is listed on Euronext
Brussels and is part of the Bel Mid®. To keep up with the latest
news, visit ontex.com or follow Ontex on LinkedIn, Facebook,
Instagram and YouTube.
Ontex Group NV (EU:ONTEX)
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