Intercos Spa

Good evening, this is the Coruscant Conference Operator. Welcome and thank you for joining the Intercost First Quarter 2026 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 friends star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Renato Semerari, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good evening, everyone, and thanks for connecting to our earnings call. We'll present you our Q1, which, as expected and communicated, was difficult due to a convergence of negative factors. First of all, the currency headwinds. Second, the continued reduction of packaging component in our top line. Third, the softer reorder trend post-summer 2025, which impacted Q1 invoicing, which was ahead of the order's peak at the end of the year, which will impact Q2 onwards. All this on a high comp basis. In fact, last year in quarter one, we grew 13%. Going to the specific results, sales were down minus 6% at constant rates. Adjusted EBITDA margins stood at 11%, which was 66 basis points below a year ago. And this drop of marginality was entirely due to fixed cost absorption. Conversely, the quarter was extremely positive in terms of cash, which was positive by 7 million euros, despite 25 million euros of shares buyback and 19 million euros of dividends distributed. Last but not least, it's very important to note that in the past six months, we had an order entry in double-digit growth. So very, very solid order entry. Looking in more details at our sales development at current rates, make-up, and starting with views, make-up, which represented 65% of sales, was the segment that held the best as already seen in 2025. Sales were down 5% on a very high base of last year, which drew 23%. Considering the headwinds in currencies and the pack sales reduction, we were effectively flat. Emerging brands performed well, but offset by multinationals, whose order entry has recently accelerated in a very visible manner. Prestige brands performed well, while mass declined. Moving to skincare, which represented 13% of total sales, we continued to suffer. We posted minus 17%, mainly due to the Western emerging brands, while Asia continued to perform well in this segment. We expect a comeback in the second half of 2026. Air and Body, which was 21% of our total sales, also posted a double-digit decline, minus 16%, mostly due to fragrances which, as you know, did not have the benefit of significant launches in the past months. Despite we remain focused on innovation, as witnessed by the recent Air Care Award for Innovation, which we got during Cosmoprof this year, We also see a forecast for fragrances that is very solid for the remaining part of the year, so we expect to come back very strongly in this segment as well. Moving to the results by geographic regions, EMEA, which was 52% of total sales, was down 8.5%. I'm always referring to current rates. Makeup posted growth in the region, but this was offset by the negative trend of air and body and skin care. We expect an immediate rebound of the region, as the order intake from November onwards was extremely strong for the region, and we now have an order book which is the strongest ever for this region. As for Americas, representing 28% of our sales, quarter one posted a decline of 8.8%. The region was obviously very much impacted by the dollar devaluation. In the region, makeup was broadly flat, but results were affected by skin care, where our lack of manufacturing sites is penalizing in the current tariff environment. Also for this region, order entry has been extremely strong in the past six months. Asia, which was 20% of our sales, was down 12% on a very high base of last year. Last year we were plus 18%. And also in this case, Forex accounted for more than 50% of the decline. and we saw skin care doing well in the first quarter, but this was offset by makeup. Moving to the customer site, multinationals, representing 50% of our sales, posted a 13% decline on last year, very high base. Last year, we grew 28% in quarter one. All the views suffered in this cluster of clients. However, the order entry trend highlights a comeback of multinationals in the rest of the year. Emerging brands, which were 45% of our total sales, remained overall stable at current rates and quite positive at constant rates. Important to note that we registered a recovery of US brands after the soft 2025. Retailers, which only weighted 5% on our total sales, also posted a double-digit decline, closing first quarter at minus 25%. The result was entirely driven by the Western retailers, while the Asian ones were positive. Now, Looking forward, let's talk about the months ahead of us. First of all, we remain optimistic about the beauty market trend overall. The signs of a progressive comeback to the historical trends of beauty are getting confirmations in the first months of 2026. Both US and China are coming back and Europe is holding quite well. So we expect the market to grow between 4% and 5% in the year. So far, makeup is the less dynamic segment, but we think it will progressively accelerate in the rest of the year. Obviously, the darkest cloud in the coming months is the Middle East crisis with the connected energy impacts should the crisis continue on a longer period. For what concerns intercosts, we remain confident to beat market trend despite our slow start in the year. And there are three factors that are backing our confidence. First of all, the past six months order entry is a double-digit growth versus a year ago, and the order book we had in our hands is also double-digit up versus a year ago. Second, last year launches are getting... strong consumer response in the market, and this should sustain reorders going forward. Third, the new collection of innovation presented at Cosmoprof in over 300 meetings got enthusiastic response from clients, including AirCare, where we won, as I just said, the Cosmoprof Innovation Award. As such, we confirm our guidance for the year, expecting net revenues to grow by about 5-6% versus fiscal year 2025. Thank you very much. I'm ready to get your questions.

This is the Coruscant Conference Operator, where we now begin the question and answer section. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. We will pause for a moment as the callers join the queue. The first question is from Andre Condea of UBS.

please go ahead good evening and thank you for taking my questions two for me please on your 2026 outlook you talk about sales increasing five to six percent but looking at your EBITDA expectations for the year what are you seeing in terms of input costs currently and what tools do you have at your disposal to mitigate these effects and tied to this What does this mean for pricing looking at the remainder of the year? And secondly, you mentioned that Q1 was held back by increased lead times in your orders. Could you perhaps quantify this impact and what benefits will this have on your Q2 numbers? Thank you very much.

Thank you, Andre, for your questions. Yes, our outlook is 5% to 6%. Now, as you know, we do not give guidance on EBITDA terms, although we give a general guidance that if normal conditions are around, we expect leverage from volume leading to about 50 basis points of improvement year on year. But, you know, this is an average of what can happen. Now, in terms of cost and pricing for the time being we are seeing increases in terms of logistic costs and we have communicated to clients that we are passing energy surcharges to them at the end of each month based on the actual cost increase of these logistic costs so we are doing everything to neutralize cost related to logistics which I remind you are pretty limited in our P&L because it's about 2.5% of our sales because we work mostly in a next work environment so this means that we do not have effectively outbound logistic costs while while we have inbound costs. Sorry, I said 2.5 of sales. I'm wrong. It's 2.5 of COGS, which is a bit different. so logistics is the number one factor for the time being in terms of utilities that are even lower than logistic costs in terms of impact in our P&L in reality we work with fixed rates for 2026 so we will have an impact of higher energy costs only if The current crisis goes on to 2027. We will not get an effect in 2026. I hope I've answered to your first question. Second one was about lead times increasing. For the time being, we are not seeing anything significant in terms of lead times of productions and deliveries. this may come if the crisis goes on for a long period but for the time being we're not seeing that very much now the rebound the peak of order increase started in November December so it's quite normal based on the current lead times especially in the western part of the world that this impacts Q2 onwards So if we are confirming the guidance as we are, it means that we expect in the quarters to come a pretty solid growth, high single-digit to double-digit going forward. And this is, as I said, backed by a very, very rich order portfolio that we have in our hands. I hope I answered your questions.

Thank you.

The next question is for Anna Frontani of Barenburg. Please, go ahead.

Hi, good evening, Garena. Thank you for the presentation. I have two questions. One relates to the order intake. If you can please give us a little bit more color, maybe on the composition of this strong order intake that you're seeing, and maybe the split between reorders and new project launches. And then the second one, I've seen the announcement of the CFO changing. If you can please give us some more context on that. Thank you.

Joanne, thanks a lot for your questions. Compositions of order intake, well, first of all, we keep seeing makeup being the main lead of this order intake so we see a lot of traction in makeup we see it in Europe we see it in US we're seeing also movements in the positive direction from Asia but you know Western prestige brands in makeup are the let's say the leading factor so far in what we're getting in terms of orders. I also want to, as I said, I think I said it, but I will repeat it in case, also the forecast for air and body and especially fragrances, which is not part, as you well know, of our order entry because it goes in a rolling forecast model, but a forecast we are seeing is very strong also for that part of the business So I really see makeup and errand body picking up the fastest. Skincare I think is going to be more of a second semester game. In terms of reorders versus new initiatives, we see more new initiatives than reorders at the moment. You know that in general we are about 70-30, reorder 70% and new initiatives 30%. We are now at 65-35, which I always take it as a good sign for the time being for the simple reason that with beauty market and so end consumption increasing progressively in the course of the year, we should see progressively reorders beefing up as well. And also, second point is obviously, you know, whenever we see a lot of new initiatives, that is a good sign for the year, but also for the years to come. So I'm always very happy when I see orders being led by new projects. I think I've answered to your first question. second question is does CFO change yes that is unfortunately we are getting back to square one not something we are happy about I can obviously not disclose the reasons because they are mainly personal so I don't think it's appropriate for me to speak about that the only thing I can say is that We have a very strong team under the CFO. Our team is very well structured. And so I don't see, I'm not, you know, I'm sleeping well at night despite this, again, this change in the rules. That's all I can say about it.

Okay. Thank you very much, Renato.

Thank you, Anna.

The next question is from Molly Weilensack of Jeffries.

Please, go ahead. Nice to be back and hearing the Intercost results this evening. I should take a step back and bigger picture on the acceleration, particularly that we're seeing in makeup. A lot of the brands that are ordering from you started to talk about massive pushes on innovation nearly two years ago. Is this just sort of a delayed process? proof of that happening and why is it taking so long or do you think it's another reason? Thank you.

I'm only nice to see you back.

Thank you.

Well, you know, in general, as you know, because I've said it several times, you know, brands tend to accelerate on innovation when the market conditions get tougher. so last year everybody got very much into it I would say in the past 18 months everybody got more active into new projects the lead times though from the moment you start working on a new project to the moment it gets to market remains especially for multinationals rather long so you're talking 18 months on average Then, you know, there are initiatives that are a bit faster than that, but there are also that are longer than that. So I would say it's quite a normal lag that is leading to the situation we're seeing today. I don't see anything unusual in that front. Asia is faster, usually. We've seen a lot of growth coming from the local Chinese brands, very much led by almost a frenetic attention and activity in terms of innovation. We are now in a phase where Western brands and prestige is regaining a bit of weight. You're certainly seeing that in L'Oreal and in Loder as well, and that is what we're seeing in the market. So I expect that there will be new ways of innovation coming also from the Chinese brands. Obviously, we need to see what happens mid-June with the... 618 event to see, you know, how bold are they going to be or not. So we'll see. But, you know, nothing unusual in terms of initiatives with times, I would say.

Perfect.

Thank you for the call.

Thank you, Molly.

The next question is from Pili Eno of Morca Sunday. Please, go ahead.

Hi, good evening. My first question, I think you may have sort of already answered, given you said the orders are skewing towards new orders. But just on your comment in terms of multinationals in make-up with a recent sharp increase in order intake, is that a very recent comment, you know, perhaps to ensure supply security? Or is that, as you said, you know, over the last six months, you've just been seeing that improvement in make-up? And then just my second question on hair and body. You mentioned some new innovative products, doing very well at Cosmoprof. At the time of full year results, you were saying that division was probably flat or maybe slightly up on the full year. Have your expectations for that division actually improved since then, would you say?

Okay. Thank you, Tilly, for your questions. First of all, No, honestly, I don't think we're seeing any orders intake increase, which is related to supply security. Not seeing that happening. I'm obviously talking on a broader scale. You know, you may have one that is building up a bit of inventory to be safer for the months to come. But generally speaking, This is not a trend we've seen. Otherwise, I would have given you different percentages in terms of order intake. You would have seen higher reorders and lower new initiatives in percentages than what we're seeing. I think that what you're seeing is the funnel of innovation started by multinationals taking longer to get to fruition. gives a peek in new initiatives for multinationals coming now. So in reality, I think that going forward, we could expect a pickup in reorders that in general, because of consumption going up, For the time being, I don't think that we are yet in a position where you need to build inventories to build safety in your supply chain. The situation is too volatile for the time being. There is still a good chunk of expectation that this will not last for too long. the messages from the suppliers in terms of supply it's quite reassuring so there isn't a race to build up there is no forecast of scarcity for the time being so I don't think that the majority of clients are reacting to any of that for the time being Air and body, well, air and body results are going to be influenced mostly from contra-manufacturing. So we are super happy about the award we won in air care at Cosmoprof, more than for the numbers it generates in the short term, because it's a sign that we're learning, our R&D is learning, And we are doing well in terms of innovation process. So that is a good sign for the future and for the direction we've taken with our innovation teams. It will still be, you know, quite marginal. The innovation part in air and body is going to be, you know, maximum 10% so far, I would say. So the contract manufacturing still has the lion's share of that division. Fragrance is an important chunk of it, and the forecast that we're seeing from different clients in fragrances being very robust for the rest of the year. And as you've certainly seen, and you've seen L'Oreal talking about that and the other players and Pooch talking about that, fragrance market continues to do well so you know forecast in terms of products demand remains solid so I'm pretty confident that we will do better than what I that I had anticipated at the beginning of the year in air and body I think that we could be in the region of bit single digit going forward I hope I've answered your questions

Very helpful, thank you. The next question is from Francesco Brilli of Intermonte. Please, go ahead.

Good evening, Renato and Tim. Thanks for taking my question. A couple of questions from my side. The first one is on the U.S. market. If you can provide us some additional call on the current behavior of brands and retailers in terms of innovation launches, replenishment activities and the situation of inventory there and if you think maybe the current environment can accelerate in the next quarter and And I was wondering, following up on what you mentioned, that you can serve local for local, if this can be a factor that could accelerate in the coming quarters the M&A scouting there. The second one is on the margin progression this year. I mean, we appreciate that you have under absorption in first quarter, but should we expect margins to progressively normalize already from second quarter or is it more skewed to the second half of the year? And the last one, if I may, you can provide some some color on the cash generation you have in mind for the full year, for this year?

Sorry, I'm noting down, otherwise I forget. You know that I'm an old guy. I'm sorry. I don't want to forget any of the questions you're making. So, U.S. market. In general, we're seeing U.S. market progressively improving. As you know, we have gone through a 18 months more or less of quite soft market it's not booming yet or actually doing very well in terms of retail sales but because there is a quite important pricing component which I think is the direct consequence of the tariffs so from a volume standpoint we're seeing growth that is in the region of 3% growth for the market, which is good. It's way better than what it was a year ago. So I don't see a situation where brands are having a high level of inventory. I think that what retailers will do is what they always do, which is they keep a coverage in weeks terms. So the higher the consumption they see, the higher the stock they will build because they will want to keep their four weeks, five weeks, six weeks of stock depending on the retailer and depending the category and the brand. So I do not see, actually I see a progressive trend benefits from the end demand we're seeing at the moment. Brands are active in terms of innovation. They've been active all along 2025. Not visible to you, not visible to the market because they were working on that with us and not only with us, unfortunately. And they are coming to market now. So when you hear L'Oreal or Loder talking about very strong innovations coming in now is because they started, as I just said, 18 months ago on average. So that activity is going to be to the benefit of the whole category. Usually a high innovation pace is instrumental to boost the consumption in the market because, you know, again, it's an impulse-driven category, so new things means more people attention, paying attention to these new products, more movement in terms of end consumption. So all this is going in the right direction going forward. M&A, yes, you know, the local for local in skin care, It's very important. We spoke about that last year. This year, we are confirming that. It's very important. We keep on being very close to the market and to the different opportunities that are there. Unfortunately, the results, globally speaking, for the potential targets in 2025, especially those that are private equity-owned, were not in line with the expectations they had, so they are taking longer to get to an exit. We keep monitoring. We keep staying very close. We keep chasing certain targets that are not on the market. We'll see. We'll see. Again, I will repeat myself. I'm sorry for that. I think that the my anxiety is related to the multiples that as you know in US are way higher than the ones we are seeing for listed companies in Europe so I hope that when we will get to work on something tangible there won't be too much of a gap between our multiples and the one of the target we are looking at So we'll see. The one thing I can grant you is that we are very on this, very much on this. Then it happens or not, I don't know. It's not only on us, as you well know.

Margin progression for the rest of the year.

Well, As I said, in Q1, there is nothing worrying in terms of marginality. There is only a mathematical consequence of lower volume, lower net sales, and therefore absorption of fixed costs that has had this 66 basis points impact on marginality. Since we are expecting, as you can easily do the math, on a much better top line in the quarters to come, you will see a much better absorption of fixed costs going forward. So, yes, I do expect margins to go up in the remainder of the year. Aside from the fact that Q1 is always the lowest in every single year for a seasonality standpoint, It's the lower sales and the lower EBITDA of the year. But also in terms of year-on-year improvement, we will see a benefit going forward from a much richer top line. cash generation. I'll give it to my expert on the left side of the screen.

Hi, Francisco. This is my own guide on the net debt, but all in all, if you look at the consensus, there is a net debt which is pretty much stable compared to the 31st December 2025, which is a number that makes sense in our view, and that includes, of course, the dividend distribution for 19 millions and approximately 3 million euros of buyback that we want to close by the end of this year.

Okay, great. Thank you very much. Thank you for the third call.

The next question is from Paola Carboni of Equita. Please, go ahead.

Hello. Good afternoon, everybody. I have a few questions. The first one is a bit of a high-level question about your top-line growth. So just understand how do you look at the current phase of reacceleration, especially in makeup, to understand what kind of growth sustainable growth base is behind that and to what extent is revival of innovation which is the consequence of the last few years very difficult for the sector I don't know if it's something we can discuss at the moment second point is still about profitability just if you can recap with us several moving parts especially in terms of mix. So you mentioned a good prestige component in your order backlog. I wanted to be sure whether I got it right, but also if you can comment still about the order backlog in terms of how we should look at the packaging component incidents going forward and to what extent, let's say what you are seeing, with better top line overall but also possibly greater contribution of head and body and in terms of efficiencies if you are possibly delivering more than you expect so without the guidance but still compared to your initial ambitions for the year what are you seeing at this point thank you very much

Ciao, Carla. Thanks for your questions. First of all, innovation. I think there is a mix of elements in terms of innovation. Number one is certainly the need of brands in difficult market conditions to grab consumers' attention with new products, new ideas, and all that. That is a process that started, as I said, months back, coming to market now, but is something that we are still seeing. So a lot of activity going on as we speak. So I think that that will be sustainable. And then, you know, maybe not always visible in percentages term because, you know, then they will generate reorders and all that. So one is structural. The second is an extra add-on to that, which is related to reformulations that are linked to either regulatory needs or public opinion requirements. Let me try to explain that. Let me do it in the simple way. Talc. As you know, talc has become like poison for everybody. So there are a number of important brands, important companies, especially for U.S., that are running away from powders with talc, and this generates a lot of innovation to relaunch brands and products without talc. So this comes on top of what a brand would normally do to gain market share. it's more of a defensive move that they're trying to play at their advantage by selling it as a total relaunch of product lines. So there are these two factors that are coming into play. The second one will likely come to a hand, but, you know, This will take a while because it's not only talk. There are a number of moving parts, silicones, microplastics. There is a lot going on. I always said that this is a devil but also an angel for us because it brings a lot of complexity but it puts under the spotlight our... superiority in innovation because you know we it's difficult to formulate well without these ingredients and it's difficult for the smaller competitors to be good at that so it gives us a competitive advantage that I think is sustainable so I think there is a big chunk of this innovation sprint that is sustainable there is another part which is let's say, more short-term, but when I say short-term, it's not your short-term. It's at least a couple of years. I know that whenever I say short-term to you, you take the quarter. I take two years. So that is probably going to calm down in three, four years' time. I hope I've answered your questions. Can you confirm?

Yes, the first one, yes, absolutely, and then the second one was...

I know, I know, I know. Thank you. I wrote it down. I just wanted to make sure that I understood well your first question. Second question was about the profitability, the mix, and all that. So... What we see in our order book is, as I said, a very rich order book that is especially rich in makeup. So we expect makeup to be strong. This usually is a good mix. We also see prestige being better than mass market. And this is also usually a good sign in terms of mix for marginality. Then, on the other side, I think that quarter one of this year, so the lowest level of PAC as part of our top line, we said that we were expecting 2026, on average, to be in line with 2025 in terms of PAC. percentage on total sales. This means that in the following quarters, we will see a little bit of rebalancing of what we've seen in quarter one. Nothing dramatic, but a little bit of rebalancing we will see. Also because, as I said, we're seeing air and body and especially fragrances forecast being strong. for the remainder of the year, and that will bring a little bit more of packaging components into it. So, sorry, in terms of mix on the other side, what I just said of air and body being a bit stronger will be a bit of an offsetting element versus what I just said about makeup. All in all, I don't expect mix to be a factor. We expect after the very strong gains of last year to have more of a stability of marginality in the course of 2026, which is basically what we told you when we closed 2025.

And what about your efficiencies, if you can comment on that?

Yeah, no, the projects on efficiencies are going well. Everything is tracking exactly in line with what we were expecting. Obviously, we are at the very beginning of the year, so we need to make sure that when the ramp-up of volumes will happen, we will be cashing in exactly what we are expecting. targeting we have no negative signs so far but we are not seeing either further benefits on top of what we had budgeted for so all in all we are cracking well and we will see in the coming quarters if this gets confirmed no flags at the moment

Okay, very clear.

Thank you very much.

Thank you, Carla.

As a reminder, if you wish to register for a question, please press the starting one on your telephone. Once again, if you wish to ask a question, please press the starting one on your telephone. Mr. Semerari, there are no more questions registered at this time. thank you very much thank you everybody thank you thank you ladies and gentlemen thank you for joining the conference is now over you may disconnect your telephone