Earnings call transcript: Ontex Group sees stock dip after H1 2025 results

Ontex Group reported a challenging first half of 2025, with revenue declining by 4% on a like-for-like basis and adjusted EBITDA falling by 22% to €93 million. The company’s stock price reacted negatively, dropping 11.68% to €6.50, well below its 52-week high of €9.39. According to InvestingPro analysis, the stock is currently trading near its 52-week low, and their Fair Value model suggests the stock is significantly undervalued. The company maintains a healthy financial position with an overall Financial Health Score of 2.8 out of 5, labeled as "GOOD." The company is facing headwinds from soft consumer demand and increased competition, yet it remains optimistic about future growth, particularly in North America.

Key Takeaways

• Revenue decreased 4% like-for-like in H1 2025.
• Adjusted EBITDA fell 22% to €93 million.
• Stock price declined by 11.68% following earnings release.
• North America shows growth potential, while Europe faces challenges.
• Company expects H2 EBITDA margin to recover to ~12%.

Company Performance

Ontex Group experienced a decline in revenue and profitability in the first half of 2025, primarily due to decreased sales in its Baby Care and Feminine Care segments. The Adult Care segment, however, showed resilience with a 3% growth. The company is navigating a competitive market landscape, with significant promotional activities from branded players impacting its market position.

Financial Highlights

• Revenue: Decreased 4% like-for-like in H1 2025.
• Adjusted EBITDA: Decreased 22% to €93 million.
• EBITDA Margin: Dropped 2.2 percentage points to 9.8%.
• Free Cash Flow: Negative €40 million in H1.
• Net Debt: Reduced by €50 million.
• Leverage Ratio: Increased from 2.5x to 2.7x.

Outlook & Guidance

Ontex projects a low single-digit decline in full-year revenue, with adjusted EBITDA expected to be between €200 million and €210 million. InvestingPro data indicates analysts remain cautiously optimistic, with consensus forecasts pointing to net income growth this year. A comprehensive analysis of Ontex’s future prospects, including detailed analyst forecasts and Fair Value estimates, is available in the Pro Research Report, part of InvestingPro’s coverage of over 1,400 stocks. The company anticipates an EBITDA margin recovery to approximately 12% in the second half of the year and aims for breakeven free cash flow for the full year. North America is expected to achieve double-digit growth, contrasting with a slightly down European market.

Executive Commentary

CEO Gustavo Calvo Pass emphasized the company’s ongoing transformation efforts, stating, "While the first half of the year has been challenging, I would like to share with you the bigger picture of our transformation journey." He added, "We are steadily progressing and deliver results step by step," highlighting the structural changes aimed at improving resilience to market fluctuations.

Risks and Challenges

• Soft consumer demand across key markets.
• Increased competition from branded players.
• Rising raw material costs, up 4%.
• Higher operating costs, which increased by 8%.
• Destocking by customers affecting volumes.

Q&A

During the earnings call, analysts inquired about pricing dynamics and market expectations. The management addressed liquidity and refinancing plans, as well as improvements in cash flow and working capital. Discussions also covered capacity investments and strategic market positioning, with a focus on strengthening relationships with major U.S. retailers and investing in the private label market.

Full transcript - Ontex Group (ONTEX) Q2 2025:

Jeff Raskin, Investor Relations, Ontex: Good morning, everyone, and thank you for joining us today. I’m Jeff Raskin from IR. I’m pleased to have with us Gustavo Calvo Pass, our CEO and Gil Peters, our CFO, to present the preliminary first half results. Before that, let me remind you of the safe harbor regarding forward looking statements. I will not read them out loud, but I will assume you will have duly noted them.

I also would like to point out that the figures presented are preliminary and not audited, and that you can expect the final two, audited and more detailed figures to be published on July 31 as originally foreseen. With that cleared up, Gustavo, over to you.

Gustavo Calvo Pass, CEO, Ontex: Thanks, Joff. Results in the second quarter were disappointing. The geopolitical environment has impacted consumer demand and thereby our retail customers. These trends combined with some temporary supply chain inefficiencies resulted in significantly lower than expected volumes for the second quarter and for the first half year. This impacted our revenue for the first half year negatively by 4% like for like, including negative price carryover from 2024.

It is important to remember that we had forecasted 3% to five percent revenue growth and built out plans based on that. Lower prices and volume during the first half resulted in lower adjusted EBITDA. This impact was magnified by the lower cost absorption with our operating structure set up for growth and much of the costs fixed in the short term. Adjusted EBITDA therefore came down by 22% and the margin by 2.2 points percentage to 9.8%. Lower EBITDA combined with continued investments in our cost transformation and growth plans resulted in a EUR40 million free cash outflow.

We don’t see the impact of these investments in today’s results, but this will benefit us significantly. We reduced net debt with the divestment of the Brazilian business in April. With lower EBITDA, the leverage ratio crept up to 2.7 times, however, but remaining well below our self imposed three times threshold. While these numbers are disappointing, the challenge we faced during h one convinced me of the importance to accelerate the execution of our strategy to make Ontex stronger. But before elaborating, let me pass you over to Hirt for a more detailed review of h one results.

Gil Peters, CFO, Ontex: Thanks a lot, Gustavo. On Slide four, you will find the revenue bridge, showing the 4% revenue decrease. The carryover from the low seller price in 2024 represented €9,000,000 or 1% with an impact on the three product categories. Volumes came down 3%, including mix effects, representing 27,000,000, and which overall is in line with a drop in consumer demand for retailer brands. Let’s now look to the three categories.

Baby care represented the biggest drop, EUR30 million. Normally, with weaker consumer demand, retailer brands performed relatively better, but in H1 they faced heavy promotional activity by branded players, leading to high single digit decline both in Europe and North America. Moreover, Ontex was affected relatively more, being exposed to regions where these effects were more pronounced, for example, in The UK and Poland, and some customers also destocked magnifying the effect. That being said, our gainloss balance was positive and contributed to added volume. As to Feminine Care, sales were 5% lower like for like, representing the price decrease and a €6,000,000 volume and mix drop.

While consumer demand for retail and brands was overall stable in Europe, we faced inefficiencies in our supply chain, and particularly the Segovia plant outage due to a water flood and unavailability of packaging materials played a role here. We participated in the continued growth of adult care by 3% like for like, with retail growing at a higher rate than the more stable health care channel, where we have a strong position. We could have grown sales further in retail if additional capacity had been online. That capacity is currently being ramped up. Let’s move then to EBITDA on the next slide.

On the EBITDA bridge, you can clearly see the EUR20 million impact that the revenue decrease had on adjusted EBITDA, with about half coming from the direct impact of the price carryover and half from lower volumes, including the effect of lower absorption of fixed costs. Our cost transformation journey continues, and this half year, we generated EUR34 million net savings, creating a 5% efficiency gain on our operating base. We could have done more had volumes been higher. These continued efforts allowed us to compensate most of the cost increases. Then raw materials, these costs rose by about 4%, which was largely expected, and this across inputs, but especially for fluff, where the index has recently reduced, and especially in euro.

Other operating costs rose by about 8%. Half of that is linked to inflation of salaries and the cost of logistics and other services. The other half is linked to temporary costs, some caused by supply chain inefficiencies as we made efforts to mitigate these, but also the anticipation of the ramp up in North America to supply additional contracts, which will start in the second half of the year, and also the impact of U. S. Tariff mitigation costs.

On the positive side, SG and A costs reduced as we adapted it to lower volume level. Let’s move now to the differences between the first and the second quarter on the next slide. You find here the same year on year adjusted EBITDA bridge, where we split the different components between the quarters. Quarter one is in light blue and quarter two in dark blue. The negative price carryover was mainly a Q1 effect and is fading out in Q2 and going forward.

The volume decrease impact, while already visible in the first quarter, was more pronounced in the second quarter, contrary to our expectations, mostly as customer destocking exaggerated the effect and the supply chain disruptions weighed heavier on the quarter. The raw material cost increase was also already visible in the first quarter, but grew in the second, as we anticipated. As already mentioned, these prices are coming down at this moment. Other operating costs went up more in the second quarter due to temporary and efficiency and mitigation costs, for example, related to the Siglovia plant outage. And while our cost transformation program delivered more in the quarter, even with lower volumes, these were not enough to offset the cost increase in Q2.

This explains why the Q2 EBITDA is down 37% as compared to last year and is lower than the first quarter. Then we go into the cash flow on the next slide. On Slide seven, you can find all the cash elements, starting with the EBITDA of EUR 93,000,000, including EUR 6,000,000 contribution from the discontinued emerging markets. Working capital and social liabilities were slightly up mainly due to phasing. But if we look to inventory levels, were at the same level as M24 despite lower sales volumes, mainly due to inefficiencies and delay in aligning production with lower sales.

Together with inefficiencies being resolved, we expect inventories to come down in H2 and be sufficient to support sales growth. Sales and taxes represent EUR13 million and EUR10 million, respectively, and CapEx was €45,000,000 representing 5% of the core revenue. As we highlighted before, this higher level supports our maintenance growth and transformation activities and will create important value and savings in the coming years. This led to an operating cash flow adjusted for one off elements of plus EUR 18,000,000. But then we have also financing, factoring and one offs.

So the cash out for financing was EUR 26,000,000, primarily interest payments, including the last coupon on the refinanced high yield bonds. And use of factoring facilities was reduced by €9,000,000 and came down together with the lower sales. And then we have one off payments of €23,000,000 primarily for the restructuring of our Belgian operations, finalizing the closure of the Eclo plant in Q1 and for which we took the accruals last year. Combined, this led to a negative free cash flow of €40,000,000 which we expect to reverse in the second half of the year. And then we, of course, also received €101,000,000 net proceeds, mostly from the divestment of our Brazilian business in early April.

This includes also the escrow, which was released end of last month. And note that this amount is still subject to the usual balance sheet adjustments and some transaction costs. In April, we also finalized our €1,500,000 share buyback program to cover for long term incentive plans. The program started in December 24 and totals €12,000,000 of which 11,000,000 in 2025. On the next slide, you can see how the net debt came down by €50,000,000 and also contains non cash reduction of €10,000,000 This latter is related to the divestment of our Brazilian activities containing some leasing.

The leverage ratio increased slightly from 2.5x to just below 2.7x over the first six months, with a reduction of the last twelve month EBITDA. We remain well under our own internal limit of 3x and as well under the 3.5x covenant threshold. As you are well aware, we refinanced our bonds, repaying the outstanding €580,000,000 bond a year ahead of maturity, replacing it with a newly issued five year €400,000,000 bond. The delta was covered by the cash proceeds from the Brazilian divestment and the remainder by drawing on our €270,000,000 involving credit facility. On the latter, there’s still about onethree capacity, which, combined with €146,000,000 cash, gives us ample liquidity.

With this, I’ll pass you back to Gustavo.

Gustavo Calvo Pass, CEO, Ontex: Several adverse events affected our first half results. Let me focus on how we expect things to change in the second half of the year. The 2024 price carryover has faded out, and we do not expect significant sales price declines going forward. We have new contracts starting in North America, but also in Europe. Thanks to our positive contract gain losses balance, and we have further prospects going forward.

This will impact in the second half of the year. We expect the customers destocking to be largely over after quarter two. We have new capacity coming on stream, allowing us to participate fully in growing product categories such as in other care, but also others. Next, the Segovia plant outage as well as the packaging materials shortage is over. This should facilitate recovery of revenue with EBITDA benefiting more as the fixed cost absorption effect, which works against us with decreasing volume, will turn in our favor our favor.

On the cost side, the negative temporary mitigation measures will fade out both for the supply chain inefficiencies and The U. S. Tariffs. The anticipated cost for the production ramp up in North America will be absorbed as volumes increase there in the second half with new contracts. And we expect new raw material price to decrease as can be seen already in the evolution of the indices and helped by a weaker U.

S. Dollar, which has a positive transaction effect. The higher EBITDA will benefit free cash flow as well as inventories, which we expect to reduce as volume pickup and efficiencies. How does this all add up for the second half? On the next slide, please.

The expected improvement from 86,000,000 to about $120,000,000 in the second half is expected to come half from revenue and actually entirely from the volume increase for the reasons I already mentioned, while we anticipate that consumer demand remains soft as in the first half. The other half is from the reduction of the cost with two thirds of that coming from continuous strong delivery from our cost information program, which will also benefit from growing volumes. The rest comes from a lower raw material price versus the peak in the first half of the year. Operating costs are expected to be largely flat as the fading out of the temporary exceptional costs I mentioned are expected to offset the continued inflation of salaries and services. With this improvement, we expect the EBITDA margin to recover from just below 10% in H1 to about 12% in H2.

Adding up both brings me to the full year outlook on the next slide. Revenue for the year is now expected down by low single digit like for like, which is based on a recovery from a 4% year on year decrease in the first half to a stable year on year performance in the second. Adjusted EBITDA is now expected in a range of EUR 200,000,000 to EUR $210,000,000, which represents an improvement from EUR 86,000,000 to between EUR 114,000,000 and EUR 124,000,000 H2. Free cash flow expected breakeven recovering the EUR 40,000,000 outflow from H1. And all these will bring back our leverage to about 2.5 times at the start of the year.

Let me finish with, while the first half of the year has been challenging, I would like to share with you the bigger picture of our transformation journey. In the past three years, we have made significant progress to improve the foundations of Ontex. Our balance sheet is now healthy, thanks to the refinance and to divestments. We have significantly improved our innovation pipeline in the last three years. We are in the middle of a major step up in terms of operational efficiencies, improving our footprint and our portfolio.

We continue growing fast in North America, and our company culture is shifting towards being a leaner, more performance driven organization. While our journey is not yet over, significant progress has been made, and it’s critical to keep executing our strategy to create long term value for our shareholders. More than ever, I’m committed to successfully complete the transformation of Ontex. Thank you.

Jeff Raskin, Investor Relations, Ontex: Let’s now move to the Q and A. Before that, can I just ask you to identify yourself clearly and limit your questions to two, please? Over to the operator.

Conference Operator: The first question comes from Charles Eden from UBS. Your line is now open. Please go ahead.

Charles Eden, Analyst, UBS: Good morning. Thanks for taking my question. Just on the EBITDA bridge for a second also on Slide 10 of this presentation, I don’t know if it’s meant to be at scale, but it looks like you’re getting sort of a volume mix uplift sequentially of about 10,000,000 maybe 11,000,000 which would imply probably a 100,000,000 step up in revenues, assuming a sort of 10% margin. Is that all North America, or are you baking in a sequential improvement in the underlying European market in the second half? I’m just trying to understand how much of this is because you are confident on the North American contracts coming in and you maybe you’ve even started delivering, and therefore, you have more surety?

Or is there a genuine risk that if the European market doesn’t improve, we get to q three, and you’re gonna have to cut this full year guidance again? Thank you.

Gustavo Calvo Pass, CEO, Ontex: Yeah. Alright. Thanks, Charles, for the question. The the answering your question is a mix between North America and Europe. We have new contract gains in North America, and, also, we have new contract gains that we gained it last year for starting now delivering in Europe in the second half.

So also includes new contract gains in Europe. And, also, we have some more prospects that they are not into the equation today because they are good prospects, but they are not in the equation. And all in all, we have assumed that the market trend, the market trends of the of the first half will continue that type of, you know, slow and soft market, in the second half of the year. So we are not assuming a change in the market trend and growing market. There is also an effect in that growth that it comes from a destocking from customers that has happened in the first half.

And as you understand, destocking is is a onetime destocking. Well and and now, let’s say, sell in and sell out, it should be much. It should not be a difference. So there we are not assuming continued destocking, right, and reducing stocks. So answering again, it’s a mix between North America and Europe.

And and and Europe also is important in in terms of the gain and losses that we have for the second half. Hope that I have answered your question.

Charles Eden, Analyst, UBS: Yeah. If I could just ask a follow-up and just kind of link to that. Just when you talk about revenues being in line with the second half of twenty four for this year, could you maybe help us understand how you’re expecting that to break down between Europe, which I guess you’re implying is down and North America up? Is it North America up 20% and Europe down

Maxime Renard, Analyst, ING: Yeah.

Charles Eden, Analyst, UBS: Sort of mid to high single digit? Is that is that how I should think of it?

Gustavo Calvo Pass, CEO, Ontex: Yeah. Yeah. So North America will no. We’re expecting North America North America with double digit growth and and, and slightly down single digit down in in Europe.

Charles Eden, Analyst, UBS: Got it. Thanks, Gustavo.

Gustavo Calvo Pass, CEO, Ontex: You’re welcome.

Conference Operator: The next question comes from Usama Tari from ODDO BHF. Your line is now open. Please go ahead.

Usama Tari, Analyst, ODDO BHF: Hi, good morning, Dean. Thank you for the opportunity. This is Samadai from ABN AMRO, ODDO BHF. I have two set of questions. Firstly, being on CapEx, could you explain to me if the Belgium payment has already been done?

And what is the outlook for the one off CapEx by the end of this year? And secondly, on Feminine Care, I believe I read on the slide nine that you expect supply chain issues to be resolved. Is that with concerns to feminine care? Thank you.

Gil Peters, CFO, Ontex: Hello. I will take the first one on which is on our nonrecurring expenses. So if you look at the first half of the year, this is mainly related to the closure of Aclo. We announced it we did actually the closure before Christmas, but the redundancy cost and the final cleaning of the factory was in Q1. So most of that EUR 23,000,000 is all related to the closure of Eclo.

On Brighenaut, you know that we have provisions outstanding, and we expect in Brighenaut that about half of the amount will be in the second half of this year, and half of it will be in the first half of next year. So take as an estimation for the rest of the year about €10,000,000 to €15,000,000 that we still expect as nonrecurring costs.

Usama Tari, Analyst, ODDO BHF: And that will be

Gustavo Calvo Pass, CEO, Ontex: for I will take the second question.

Gil Peters, CFO, Ontex: Sorry. I didn’t understand what you said. Can you repeat?

Usama Tari, Analyst, ODDO BHF: So so the $10.10 to 15,000,000 would be on a half year basis?

Gil Peters, CFO, Ontex: Yeah. On a half year basis, it will be, yeah, it will be more, yeah, to the lower end, between 10 and 10 and 12,000,000, something like that. Yeah. That’s what we expect for the second half of this year.

Usama Tari, Analyst, ODDO BHF: Thank you.

Gil Peters, CFO, Ontex: So that means also lower than the first half of the year, which is also an explanation why we believe the free cash flow in the second half of the year will be better, because proportionally, we have much more nonrecurring in the first half than the second half.

Usama Tari, Analyst, ODDO BHF: K. Thank you. And on the

Gustavo Calvo Pass, CEO, Ontex: the the on your feminine care question, the the the the the challenges that we have in the first half on on the on the supply of feminine care has been solved. And those challenges were, let’s say, from two fronts. One, we have, an unfortunate event, of a flooding or or of a big rain in Segovia in our plant, which, has a big provoke a a big disruption on the supply chain of family care product that in Segovia, we have a strong supply, supply chain production of family care there. And then also from a from a sourcing of packaging for family care specifically, which affected some of our lines in in the sourcing of packaging that also has been resolved. And and those two challenges has been resolved, so we are not expecting any any other we are not today, we are not facing any challenge in feminine care sourcing.

Usama Tari, Analyst, ODDO BHF: Okay. Thank you.

Gustavo Calvo Pass, CEO, Ontex: You’re welcome.

Conference Operator: Our next question comes from Karin Zurter from Kepler. Your line is now open. Please go ahead.

Karin Zurter, Analyst, Kepler: I have two questions. The first one is with regards to your H2 guidance. How you guide for no further deterioration of pricing there? I was wondering what’s the visibility you have on price realization in the second half of the year and particularly later this year because the promo intensity was a bit of a surprise, I think, to everybody in the first half. So what gives you the confidence that promos and net pricing will be less severe in H2?

And then the other question is on the payback of Belgium because that’s been a big restructuring with almost 400 employees within the company. Are those benefits now already visible in the in your cost lines? Or is this more something that will be visible in the second half of the year?

Gustavo Calvo Pass, CEO, Ontex: Very good. Thank you. Thank you for your questions. On on the our our office today, most of this, pricing, negative effect that we have in h one carryover from 2024 pricing, because we have it this in the second half of twenty twenty four and not in the first half of twenty four. So when we compare first half of twenty five versus first half of twenty four, you can see that, difference is price decreasing.

The price decrease that we effectively done in 2024 in second half twenty four, it was related to the reduction of raw material experience in the second half of twenty three. I know that it sounds like we are playing on this on the halves. That’s exactly so there is always a lag, and I’m trying to explain that, you know, without being able to write it down in a paper to you. So it’s difficult to follow perhaps, but I can I can keep explaining? But second half twenty three raw material decrease, made us draw drew our our price discounts in, or adjustments in the second half of twenty four, which now compare with, our first half of the carryover in ’25 versus the first half of twenty four that was in plain in plain plain prices, the the that’s why it’s the negative effect.

So that carryover is is has fade out already. It’s not there anymore. So to your point, I guess, that your question also is related to if we are expecting, a more price intensity or promotion activities from a brands. I I I think that, yeah, probably, it it will continue, Sam. But we have to if if I if I if I go a little bit more in detail without mentioning any any type of brand, we do know which is the brand the a player in Europe, very clear.

That a player in Europe closed their their balance sheet oh, the the the the in this in the in the first half of the year. Right? So they have a close in the June 30. So the importance of bringing back some market share into their results is is relevant. So, normally, what what we have seen in previous year is that there is a very intensified promotion activity, and they were coming from a low market share.

So it’s intensified in the what we call our first half, their second half. So we’re we we are expecting activity from the A brand. We are not saying not. So it is expected, but not as as intense as in the first half for us. Hope that I answered the question, Kern.

Karin Zurter, Analyst, Kepler: Yeah. Yeah. That’s good. Thanks.

Gil Peters, CFO, Ontex: Then I go to the the second question on the Belgium footprint. There we have, on one hand, the closure of Eclaw, and the other hand, the transformation of Birkenau. We can confirm that the business cases as we explained a year ago, it’s they all have an attractive payback of less than than three years. And for us, the business case is stanza, so that means that we’re in we’re we’re doing the work in line with the business cases. Now when does it kick in in the, in the results?

Because that’s, actually your question, Carlo. First of all, on ECLO, I can say, if we report on our cost transformation program, we include the savings of ECLO. So that means they have been realized, actually. So, we have, we added that saving in the first half of the year. But I have to put a nuance.

Of course, the first months, we had a lot of cleanup of the factory. We had to move lines. So we had some cleanup costs. We had some inefficiency costs because of that. So the savings, we added them, but there were also some one off costs.

So that’s part of of the inefficiency that will now has now completely disappeared. On Brighenaut, there, we do not yet have the savings. The transformation is completely ongoing at this moment. The factory, we are completely changing them. And there, it’s it’s the savings will be more coming in the the first half of next year.

And there, should say, we we also refer to the the the in the in the press article, we’re working in line with the business case. We’re very confident on that, but there are some delays which are completely related to the fact that some of the equipment we ordered are is coming in a bit later than expected, which often happens, of course, if you order equipment. But we are progressing well, and we’re still confident to make it happen the first half of next year.

Conference Operator: The next question comes from Maxime from Bank. Line is now open. Please go ahead.

Maxime Renard, Analyst, ING: Good morning. Maximus Renard from ING. Hope you can hear me well. Two questions from my end. First of all, I have a hard time reconciliating your guidance for the second half.

So you mentioned in the presentation that you expect volume growth of 5% to 9%, stable pricing, but at the same time, you mentioned in your press release that you expect revenue in the second half to be stable. So if you could clarify that first. Secondly, looking at your free cash flow guidance, you cut basically your EBITDA guidance by EUR 20 EUR 25,000,000. You have cut your free cash flow guidance by a much more a much higher level than that. So could you elaborate on what would be the building blocks to to reconcile that change in free cash flow guidance?

That would be all for me. Thank you.

Gil Peters, CFO, Ontex: I Maxim, thanks for the questions. I I take the first one. Perhaps to avoid confusion in we we the the guidance we give is of always as compared to the previous year. So that’s the way we look at it. And then if you I think if you take the bridge on slide 10 that Gustavo explains, where we you see the increase of of EBITDA.

There, the volume mix, it’s it’s an improvement of h two as compared to h one. So that’s important to know. The bridge we show is to show you how h two is better than h one because there’s a lot of causes that h one was lower and that disappear, what Gustavo explained. The guidance, of course, is as compared to previous year. Does that clarify?

Maxime Renard, Analyst, ING: Yes. It does. Thank you.

Gil Peters, CFO, Ontex: So, actually, it means that in the second half of the year, we pick up to the, in fact, to the original plan to where we were.

Gustavo Calvo Pass, CEO, Ontex: Then the guidance is the full year. Right? And and then there’s an average of of first half and second half. Yeah. So that’s that’s why it looks flat in revenue stable on the full year, but coming coming from a a decrease in volume in the first half and an increase in volume on the second half.

Gil Peters, CFO, Ontex: Yeah. And then on the on the free cash flow, just, to go a bit in the components, the first half of the year, we are at at minus 40%. The second half of the year, we believe to be able to reverse that. That means plus 40%. Where does that plus 40 come from?

It’s, of course, first of all, the higher EBITDA. Secondly, the working capital. I briefly explained also that in inventory, because of the inefficiencies of the first half of the year, we were not able to lower our inventory. Our inventory was stable, and we believe that we can do the sales growth with the current inventory and and even improve them in the second half of the year when the when the inefficiencies fade away. So there’s an improvement of working capital in it.

And then there is the proportional element, what I said before to one of your colleagues, that the nonrecurring parts in the second half of the year is lower than the first half. And that’s also on related to the interest because, of course, with the high yield bonds, we had our financing fees in the first half of the year. We had the settlement of the the the interest on the high yield bond. So that explains the 40,000,000 of the second half. But then you said that 40,000,000, it’s it’s higher than the improvement of the EBITDA.

It’s because there are other components in it like EBITDA, nonrecurring. So that’s the full picture.

Gustavo Calvo Pass, CEO, Ontex: Maxime, if I may, just to clarify again about the the revenue. In the second half, we we we have a volume growth versus the first half and mainly due to new contracts, that they are already in. Right? Now we are in July. They are we are already starting with delivering on those new contracts that we have in North America and in Europe.

And, also, as I explained before, you know, it’s not just those new contracts, but at the same time that we we we we are not expecting that they are gonna continue any of destocking. So the destocking has been done from the customers. Now we are gonna balance our sell in and sell out with the customers. Therefore, there is a improvement between h two on on on a on a five base and versus h one.

Maxime Renard, Analyst, ING: That’s very helpful. Thank you for the clarification there.

Gustavo Calvo Pass, CEO, Ontex: Thank you.

Conference Operator: The next question comes from Markus Schmitt from ODDO BHF. Your line is now open. Please go ahead.

Markus Schmitt, Analyst, ODDO BHF: Yes. Thanks for taking the questions. Good morning. I have just a question on the on your liquidity situation. On Page eight, you say that the RCF is utilized for twothree.

I think you mean that that it’s is the unutilized part. Right? I mean, you have about 180,000,000 undrawn. Is that is that the right way to read it?

Gil Peters, CFO, Ontex: It’s one third which is not drawn. That’s how you have to read

Gustavo Calvo Pass, CEO, Ontex: it out of the 20 yeah. The 270

Gil Peters, CFO, Ontex: out out of the 270. Yeah. So

Markus Schmitt, Analyst, ODDO BHF: the so the 270, you have a 180,000,000 drawn then. Is that is that is what you say?

Gil Peters, CFO, Ontex: Yeah. That’s what we what we say. Okay.

Markus Schmitt, Analyst, ODDO BHF: Yeah. I’m just puzzled a little bit. Where where is it coming from again? I mean, the pro form a, the refinancing, I think you had $2,024,000,000 oh, sorry, in in cash. Sorry.

In draw in drawn RCF, and now it’s at at 180,000,000. What what was the delta here again, or what was the reason for that?

Gil Peters, CFO, Ontex: Well, I propose that we take that offline because it’s there’s, of course, a whole mechanics that that’s passing at this moment with a high yield bond. And that might yeah. I think I have to give a bit more technical explanation on how the repayment is done, and it gives a temporary, yeah, difference in reconciliation. So but we we can take that offline.

Markus Schmitt, Analyst, ODDO BHF: Yeah. But but then maybe one one easier one. I mean, in in cash on hand was about 146,000,000, and you mentioned the escrow. Is that included in the €146,000,000 or is that not included?

Gil Peters, CFO, Ontex: Yeah. The escrow is actually paid out from Brazil, that cash is included. Yeah. And it has been received, I think, only two two, three weeks ago. Yeah.

Markus Schmitt, Analyst, ODDO BHF: Okay. So it’s still

Charles Eden, Analyst, UBS: there in cash.

Markus Schmitt, Analyst, ODDO BHF: Good to know. And thank you. Yeah. Thank you very much.

Conference Operator: The next question comes from Charles Aden from UBS. Your line is now open. Please go ahead.

Charles Eden, Analyst, UBS: Hi there. Sorry, yes. Just a couple of follow ups. So just so we’re clear on the guidance, flat like for like ish in the second half. So you did EUR $945,000,000 sales in core markets second half of twenty four.

Appreciate FX is a bit of a headwind year on year on translation, but let’s say 9 let’s take 10,000,000 off that, so $9.35, $9.36. Midpoint of the second half EBITDA guide is one twenty. You’re basically saying on that math, you’re gonna do a 12.8 ish EBITDA margin. So I guess no reason is there any reason to think that wouldn’t be the minimum you can do in ’26 given if that’s the exit rate and you’re still gonna take costs out, raw materials as you put out on pulp soft pulp are coming down a bit now sequentially? So that’s the first one.

And then a a similar type of question on on free cash flow, 40,000,000 in the second half. Okay. You know, we’ve gotta think about working capital, etcetera, as the business grows. But let’s say $6,070,000,000, is that sort of how you’re thinking? And I go I know you guide for ’26 at the end of the year, but is there any reason why that shouldn’t be the base case?

And then and then, obviously, that’s sort of implying a a double digit free cash flow yield, on where the equity is today. Is there anything incorrect to what am I missing Okay. In that thinking? Thanks.

Usama Tari, Analyst, ODDO BHF: Yeah. Okay.

Gil Peters, CFO, Ontex: Yeah. On the on the on the first one, so, yeah, it’s it’s we have, of course, in the guidance, a min and a max, so we believe, indeed, we can be above the 12% in in the second half of the year. And, yeah, we don’t give any guidance on 26, but I think it’s logical that our ambition is to work further with that figure. And we with all the further transformations we’re doing, we have the ambition to further improve the margin in coming years. So that’s what I can tell about that one.

And on the free cash flow, there, if we refer back on how we reported on it in the past, important to know, hey, you will have, of course, your EBITDA level, which is key on working capital. We don’t see that big movements anymore in the future. We will we expect to further grow, but we can do it with the current working capital level. Only factoring, of course, will help us a bit because this factoring was coming down now with the revenue. Factoring will go up with the revenue.

And then important is that towards the future and the nonrecurring will gradually fade away, as I told before, and we still expect on booking out in the first half of next year an amount of, yeah, a bit lower than 10,000,000 probably. That’s what still will come, but that’s the amount we foresee. And then on the CapEx, as you know, that we always reported that we were having CapEx levels during the three year transformation of 5% to 6%. We want to go back to 3.5% to 4.5%. So that’s the basis for us for next year, unless we, of course, start up with adjacent activities or really do additional extra growth because normal growth for us, the normal growth of US, it’s included.

We always told that in the 3.5% to 4.5%, it it includes replacement, it includes improvements, and it includes normal growth. If we do, of course, something extra, then it might be we add some CapEx, but then it will come with an attractive business case, of course.

Gustavo Calvo Pass, CEO, Ontex: So, George, if if I if if I may add to to what here will explain, we we we are not gonna give a guidance now for 2026, and I’m sure that they are not looking for that. But but your your deduct your intuition, you know, it it it looks like a a good aspiration for us.

Charles Eden, Analyst, UBS: Understood. Thanks, gentlemen.

Conference Operator: The next question comes from Karol Zuerte from Kepler. Your line is now open. Please go ahead.

Karin Zurter, Analyst, Kepler: Yes, thanks. I have two follow-up questions. To start with the CapEx for Extra Throat, the way I understood it is with the investment you currently do in The U. S, you’re able to get to a revenue base of maybe close to $05,000,000,000 or so. I mean, is that still the dot on the horizon for the for the coming years or or or not?

And and in relation to The US market, you see that, private label has been losing quite some share recently, but also that a couple of other players are investing quite heavily in the market. Kimberly Clark announcing a $2,000,000,000 investment, first quality, 500,000,000.0. Strategically at The U. S. Market in the medium term with these investments in new capacity?

And then the other question, I guess, is on the clarification on cash flow in H2. So part of the cash flow you’re going to generate is by basically assuming that that revenue growth will pick up and then you’re gonna increase factoring again. Did I understand that correctly?

Gustavo Calvo Pass, CEO, Ontex: Okay. I go I take the first question on The US. Our investments, so far will cover future growth. And remember that we are talking about just baby care market. So we can continue double digit growth with the current investment done in US, for baby care.

If, if our plans also includes to move on a second category. And in that second category, it will require, of course, investments, right, in in assets. But that’s that’s a different topic that we will present at the time that we will present it. It is not right now. But answering to you the first part of the first question, which is about if our investments are covering the the the ambition on growing sales and scaling up the business.

Yes. It is. It is included there. The second part of your question is about the extra capacity that competitors or a brand companies are making in they have announced in that they will do in US. And that is related to them, to the a brands.

I it’s hard for me to to to talk about that, but not always when when companies are mentioning investments, not always represent adding capacity. It would be perfectly, as in any cases in the past, it could be that you are replacing technology or you are doing investments, in your footprint. So I I cannot I cannot talk for the competitors, even though it’s a brands. So what I can say about retail brand is that me personally having meetings with the biggest retailers in US, all of them, they are super engaged in terms of developing the private label. And they are very, very pleased with what we are bringing to the table, how strategic we are becoming to them in terms of the innovation pipeline, in terms of the our investments, our plans for for for growing in the categories, the experience that we bring from leadership in Europe, how can help them to do the same thing in US.

So the support from the customers is strong. Of course, that we will need to compete on the shelf, but we are doing so successfully today. So we we still have we we are we are very, very confident on the opportunities and keep growing in US. I hope that I answer your first question.

Karin Zurter, Analyst, Kepler: Yep. Thank you.

Gil Peters, CFO, Ontex: And then on the on the factoring, yeah, that’s straightforward. The minus €40,000,000 in the first half of the year, we yes, the factoring lines decreased with about €9,000,000 So we went down below the €170,000,000 in factoring lines. And in the second half of the year, when the revenue is restored at the level of end of last year, then typically, because we didn’t change anything in our factoring lines, then we go back to the level we ended at the end of the year. So the minus nine will more or less be compensated, and we will be part of the positive in the second half of the year.

Karin Zurter, Analyst, Kepler: Okay. Thank you.

Conference Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks.

Gustavo Calvo Pass, CEO, Ontex: Thank you. Thank you very much for the questions. Thank you very much for making the call for those that attended. And let me let me close with, a message. Like, this weak second quarter, while disappointing, will not derail us from our strategic journey.

We are steadily progressing and deliver results step by step. The reshaping of our portfolio and the strengthening of our balance sheet have been largely realized. The innovation pipeline has been strengthened and will continue to deliver. Our business in North America has demonstrated fast growth on our pursuit of scale, and we have taken major step towards best in class operations. These structural changes will gradually improve our resilience to market fluctuations.

Thank you very much, and see you soon.

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