Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ontex Group NV (ONXXF, Financial) achieved a 3% like-for-like revenue growth in the first half of 2024, driven by a 5% increase in volume and mix.
- The adjusted EBITDA margin rose to 12%, marking a 31% increase in adjusted EBITDA compared to the previous year.
- The company generated significant free cash flow of EUR 43 million, a substantial improvement from an outflow of EUR 29 million a year ago.
- Net debt was reduced by 12% due to free cash flow and M&A proceeds, improving the leverage ratio from 3.3 times to 2.5 times.
- Ontex Group NV (ONXXF) continues to expand in North America, achieving strong double-digit growth in baby care and preparing for new launches in the second half of the year.
Negative Points
- The company is facing challenges in emerging markets, with discontinued operations resulting in a loss of EUR 50 million.
- There are ongoing restructuring costs, including a provision of EUR 37 million for potential redundancy costs in Belgium.
- Raw material costs are expected to gradually increase, potentially impacting future profitability.
- The company anticipates further exceptional costs related to the restructuring in Belgium, which could affect financial results in the second half of the year.
- Despite improvements, the company still faces competitive pressures, particularly from A brands in the retail market.
Q & A Highlights
Q: On the 2024 like-for-like sales guidance raise for core markets, is it driven by better-than-anticipated momentum in North America? Are you winning additional contracts that might accelerate growth in the second half of the year?
A: Yes, the growth in North America is a significant factor. We expect strong double-digit growth to continue in Q3 and Q4, and into 2025. We are investing in the business and innovation, which is yielding positive results. (Gustavo Paz, CEO)
Q: Regarding the medium-term targets set by the previous CEO, what are the current ambitions, particularly on the margin side for core markets? Also, what are your thoughts on cash usage and potential dividends?
A: We are focused on improving margins in North America while building scale. Our goal is to enhance profitability and competitiveness. Regarding cash, we are prioritizing investments and restructuring to improve competitiveness. Dividends will be reconsidered at the end of the 2025 program. (Gustavo Paz, CEO and Geert Peeters, CFO)
Q: What is the outlook for raw material costs in the second half, and how does this affect your pricing strategy?
A: Raw material costs are gradually increasing, but we are resilient and can manage these changes. Our pricing strategy is aligned with market evolution, and we are managing prices effectively based on competitive positioning. (Geert Peeters, CFO and Gustavo Paz, CEO)
Q: How do you see the supply-demand dynamics in the North American market shaping up, and are you expecting a significant shift in market shares?
A: We see positive trends in North America, particularly in baby care. We are gaining market share within the retail brand segment, and we expect this to continue as we build stronger relationships with retailers. (Gustavo Paz, CEO)
Q: Could you provide an update on the emerging markets asset sale process and the timing for these sales?
A: We expect to finalize the sales of our remaining emerging market assets in Brazil and Turkey during this year. We are focused on maximizing shareholder value in these transactions. (Geert Peeters, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
