Intercos Spa

Good afternoon, this is the Coruscall Conference Operator. Welcome and thank you for joining the Intercost Group Full Year 2025 Financial Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, They may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Renato Semerari, Chief Executive Officer of Intercos Group. Please, go ahead, sir.

Thank you very much. Good afternoon, everyone. Thanks for attending our fiscal year 25 earning call. In a year once more marked by severe geopolitical tensions, which have created significant uncertainties and a visible softness in global beauty consumption, Intercos has decided to focus its efforts on the recovery of the profitability loss during the last three years of strong top-line growth. This called for an overall reduction of sales with packaging components and a focalization on the views centered around innovation. I'm glad to note that our efforts were successful and paid the expected dividends. However, Topline was further hampered by currencies headwinds on top of the overall market softness. Let's see an overview of our results. Topline ended the year at 1 billion 47 million euros, overall flat at constant rates and slightly down at current rates. To note, the value-added sales, which I remind you are net sales minus packaging expenses, grew by 1.5% at constant rates, reflecting the mentioned reduction in pack sales. Gross profit conversely increased by 151 basis points, thanks to better mix and productivity gains, as well as procurement efficiencies. Adjusted EBITDA grew by plus 9% to 156 million euros, with margin at 14.9% and 143 basis points over last year. EBITDA on value-added sales reached 19.2%, marking a plus 165 basis points of gain over a year ago. Adjusted net income was also up. and net debt improved its ratio on EBITDA at 0.64 times EBITDA with a cash conversion rate of 47%. This in a year of high CapEx expenditure due to plans, expansion plans, and shares by back program. We will propose to the Assembly of Shareholders a dividend distribution of 19 million euros in line with our dividend distribution policy. Moving to see the key components of our performance versus a year ago at top and bottom line level, I will start from the top line. So last year, we closed fiscal 24 at 1.1 billion and 65 million euros. From this level, we had a negative 2% drop due to currencies. Another 1% drop was linked to lower pack sales. And this was more than offset by the value-added sales gains, heading up to the 1 billion 47 million euros I mentioned earlier. On EBITDA, we started from 143 million last year. we had a 2.5 million euro negative impact from currencies, and then margin improvement brought 13 million euros more, and another 2 million came from higher sales at constant rates. So we're looking at our key numbers. Top line was at plus 0.3% at constant foreign exchange and minus 1.7% at current rates. Value added sales were up 1.5% at constant rates and minus 0.5 at current rates. EBITDA grew by 8.8% with a 14.9% margin up 143 basis points. I said before EBITDA margin on value added sales at 19.2% was our best ever results. and a 165 basis points gain versus a year ago. Net income at 5.5% of sales was up 20 basis points versus a year ago. And net debt was up by only 3 million euros despite 4 million euros of capex more than a year ago, 13 million euros of shares both back and 19 million euros of dividends. We got to these results through a Q4 which was difficult from a top line standpoint due to the high base of 2024 when we grew in quarter four by plus 15%, the peak of currencies as Edwin's in the quarter, back sales contraction and low reorders reflecting the long lasting market softness we had experienced throughout the year. Looking at top-line results in more details and starting looking at the results by business units, MakeUp closed the fiscal with a plus 6% growth at current rates, despite a slightly negative Q4. Growth was well above the market trend, thus allowing us to consolidate our global leadership in the category. All regions posted growth with Asia and EMEA particularly strong. Multinationals were the key engine of growth, particularly thanks to prestige brands. Skincare conversely marked a mid-cycle digit decline after two years of strong growth. I remind you that the CAGR of the three years was at last 13%. The unit paid the toll not only to Forex Exchange headwinds, but also to US tariffs that made us suffer in US. In fact, we posted growth in both Asia and EMEA, but decline in US was more than offsetting those gains. And this is due to the fact that we lack local manufacturing for skincare, as you certainly know. Air and Body registered a double-digit decline following two exceptional years, which had a CAGR of 30%, and the results were impacted by the lower sales with packaging, but more than anything else, the far less important fragrance launches of 2025 versus 2024. Q4 was particularly difficult since last year we had registered a plus 40% growth in the quarter. In terms of sales weight, we saw a shift of four percentage points from air and body to makeup, which obviously helped the mix and helped the profitability of the company. Looking at the geographical trends, Asia confirmed its role of growth engine of the group, posting a plus 6% despite very negative currency effects in both China and Korea. Both countries delivered high single-digit growth at constant rates after years of double-digit results. Makeup and skincare were both growing with makeup at a faster pace. Also, Q4 was positive at constant rates. As for America, America was overall flat at current rates, but positive at constant rates. Effects impacted was particularly heavy on Q4. The region performance traced to strong makeup results, offset by skincare, as already mentioned. EMEA overall results were instead impacted by air and body decline. The growth registered by makeup and skincare could not completely offset the air and body decline, especially in quarter four. Looking at the results by client clusters, after years of growth led by emerging brands, 2025 saw the comeback of multinationals, getting back to a bit less than 50% of our total sales. So multinationals posted a double-digit growth at constant rates or plus 9% at current rates with both makeup and skincare on a growing trend, although the growth was more pronounced in makeup. All regions were up for this cluster of clients with Q4 broadly flat. Emerging brands posted a double-digit decline after several years of accelerated growth. Performance was still positive in Asia, but the cluster paid a heavy toll from the air and body in EMEA. As for retailers that represent a limited weight on our total sales, we saw a comeback to a low single-digit growth, mainly thanks to European retailers. I now pass the stage to Paola, our CFO, to go deeper into the financial results.

Thank you, Renato. Good evening, everybody. Let me walk you through our fiscal year 25 results. As mentioned, in 2025, net sales reached 1 billion 47 million euros. On a constant currency basis, the sales were slightly up by 0.3%. while on a reported basis they declined by 1.7%, mainly due to the significant appreciation of the euro against the US dollar, the Chinese renminbi, and the Korean won. More importantly, we materially improved the quality of our revenues. The higher mix of prestige and free-issue sales resulted in lower reported revenues, but significantly stronger profitability. Gross margin increased to 21%, up plus 151 basis points versus last year. Adjusted EBITDA reached 156 million euros, up plus 8.8% year-on-year, or plus 12.6 million euros. EBITDA margin improved to 14.9% of net sales, up plus 143 basis points. On value-added sales, EBITDA reached 19.2% up 165 basis points, fully recovering the lower profitability reported in the past three years. This margin recovery was not driven by cost-casting, but by structural improvements in gross margin, better sales mix, operational efficiency, and sourcing initiatives. adjusted net income amounted to 57.4 million euros, growing 1.3% versus the previous year. The EBITDA improvement was partially assessed by higher depreciation and higher financial expenses, largely driven by the exchange rate impact, both realized and unrealized, already visible in H1 of 2025. The effective tax rate improved to below 32% versus last year. And finally, net debt stood at €125 million, broadly in line with last year, despite €19 million in dividends and €13.1 million in share buyback programs. This thanks to a strong cash generation capability. Financial leverage further decreased to 0.64 times net debt to adjust EBITDA from 0.68 in the previous year, confirming the strength of our balance sheet. Overall, 2025 demonstrates a clear structural improvement in profitability and financial discipline, at the same time consolidating the strong increase in sales reported over the last years. Moving to the profitability by business unit, MakeUp delivered outstanding performance. Adjusted EBITDA increased from 83 million euros to 107 million euros, up 29%. The EBITDA margin expanded by 293 basis points to 16.3%. Growth was consistent across all quarters, with second half margins reaching 18%. This reflects operational efficiencies, stronger prestige mix, and lower share of full service sales. Skincare also improved for profitability. Adjusted EBITDA increased to 27 million euros, up 7% year on year. with EBITDA margin reaching 16.8%. The improvement was driven by prestige customers in EMEA and Asia. Hair and Body has anticipated experience a decline. EBITDA decreased to 21.9 million euros, down 13 million euros year on year, reflecting lower revenues and reduced 15%. cost absorption after an exceptionally strong 2024. Consequently, at group level, adjusted EBITDA increased to 156 million euros, with margin expansion across makeup and skincare more than offsetting the hair and body normalization. This confirms that our core business, makeup, is structurally strengthening its profitability profile. Moving now to cash flow and balance sheet. Operating cash flow reached 73.5 million euros, up 16.4 million euros versus last year, which represents a strong increase. The improvement was driven by higher EBITDA by 12.6 million euros and by a very effective trade working capital management following the evolution of the sale. The above results include a capex increase to nearly 75 million euros, representing now 7.2% of our sales, and 4 million higher capex versus previous year, reflecting the group's expansion projects, particularly in Asia. Cash flow before dividends and buyback was positive at 29.4 million euros, significantly up year-on-year, plus 43%. The group managed to absorb 32.1 million euros of shareholder remuneration in the Share by DAG program, while keeping net debt broadly stable versus the previous year at 100.5 million euros. Leverage ratio further improved to 0.64 times net debt to EBITDA, excluding IFRS 16, net debt stands at 62.2 million euros. Cash conversion reached 47% after CAPEX and approximately 95% before CAPEX, confirming the strong cash generation capability of the business. I would like to also highlight the ROIC improvement to 14.3% from 13.3% last year. Overall, we combined profitability growth, strategic investments, and shareholder remuneration while maintaining a very solid financial structure in a difficult market environment. Back now to our CEO, Renato Semerari.