Intercos Spa

Good evening, this is the court court conference operator. Welcome and thank you for joining the Intercost Court Court 2026 Financial Results. As a reminder, all participants are enlisted in only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, please signal an operator for question star and zero on their telephone. At this time, I would like to turn the conference over to Renato Semerari, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good evening, everybody. In a global context still marked by geopolitical tensions, currency headwinds, and the beauty market slowly recovering its historical growth pace of 4% to 5%, Intercos came back to growth, registering a quarter to with solid results, both at top and bottom line level. Summarizing the key highlights, Regarding top line, Q2 was the best ever second quarter of our history at 285 million euros, a 5% growth at constant rate. This result allowed us to close the gap versus 2025 accumulated in Q1. The first semester was only 0.5% below a year ago. Important to note that such a result was achieved despite a decline of the packaging component of our revenues. As such, our value-added sales, i.e. net sales minus PAC, resulted in first semester down by 0.9% at reported rates, which means low single-digit up at constant rates. This was done without depleting our order portfolio, which remained up mid-teens versus a year ago, thanks to continued strong order intake. As for EBITDA, Q2 was our best-ever quarterly result at 47.5 million euros, with a margin of 16.7%, which was 16 basis points better than a year ago. First half was therefore at 72.6 million euros, with flat margin at 14.2% on net sales, or 17.9% on value-added sales. EBITDA was helped by a prestige segment, which was up 4 percentage points over a year ago, and the PAC component reduction, which was down by over 1 percentage point. As for net debt, we also were down by over 10 million euros, actually 12 million euros, after having covered for the share buyback expenses. Our strong cash generation led leverage to go down to 0.80 times EBITDA versus last year 0.87 times. So summarizing our financial results, that you will see in greater details with Victorium in a few minutes. Second quarter saw sales up by plus 4.9% and constant effects, plus 4 at reported rates, with an EBITDA of 47.5 million euros up plus 5%. Margin was at 16.7%, an improvement of 16 basis points versus 0.0. First half, reported sales at 512 million euros, minus 0.5% versus the year ago, or minus 2.4% at reported rates. Value-added sales were minus 1% at current forex, and low single-digit up at constant rates. EBITDA at 72.6 million euros, with 14.2% margin in line with the year ago. or 17.9% on value-added sales. Net income was up by 33%, tracing to reductions in financial costs and tax rates. Net debt down by €12 million, despite share buyback equivalent to €16 million. Moving to sales details now, and starting by revenues by business unit at reported forex, makeup second quarter was down by minus 1.4 over a high base of year ago of plus 13%. So this means it was basically flat at constant rates. There are a couple of important points to underline to fully understand the underlying trend of this business unit. First, the PAC component was sharply down. As such, value-added sales were up at mid-single-digit rates, at constant rates. Second, the performance accelerated throughout the second quarter, exiting the quarter at a very fast pace. Test semester closed at minus 3%, again on tough comps. Last year we grew 18%. Again, value-added sales were up low single-digit. Prestige clients were clearly up while mass suffered. EMEA region was the best performer, followed by Americas. Asia was down after years of double-digit expansion. driven by market dynamics that I'll elaborate in a moment. As for skincare, second quarter was down by 3.4%. Also in this case, on top of the currencies headwinds, pack component went down, so value-added sales were low single-digit up. First half was down by 9.5%, with Asia growing, but Western countries offsetting this growth. Air and Body reported an exceptional plus 27% in the second quarter, driven by European clients, especially in fragrance. As such, first half closed at plus 5%, in this case also helped by the packaging components. Moving to revenues by region, EMEA was up plus 10% in the second quarter, driven by prestige clients in both makeup and air and body. Emerging brands took back their growth driver role after one year of multinationals lead. First semester, therefore, ended at plus 1% after the difficult first quarter. Americas closed the second quarter slightly positive, plus 1%, overall in line with the duty market volume dynamics. Prestige multinational clients were the best performers. First half resulted a such down by 4%, also paying the weak dollar toll. Asia was the most challenging region. Here we witnessed a comeback of the Western brands who gained shares back from Chinese brands. Hence, in our numbers, where we post only our sales to local clients, you see a decline in re-authors. As such, after years of double-digit growth and, again, tough days, we recorded a minus 5% in second quarter and minus 8% in the first half. Also, this region was impacted by currencies headwinds, especially in Korea. Moving to client clusters, in general, this year we see the reverse picture of 2025. Multinationals, which were growing at double-digit pace last year and are therefore at tough compatibles this year, closed the second quarter at minus 2%, with American makeup clients performing well, but Asian and skin and hair clients declining. The first half ended at minus 8% versus last year, when we had recorded a plus 18% growth. Emerging brands, conversely, took back their historic driver's seat. In the second quarter, they grew by plus 13%, driven by Asian skincare and European air and body. In the first half, they registered a plus 6% growth. Retailers also went back to a negative trend after an extremely high 2025. Specifically, in the second quarter, they posted minus 14% versus last year, plus 20%. And the first year closed at minus 19% offsetting last year equivalent growth. I now pass the mic to Vittorio, our Chief Operating Officer, who is asking us here for an interim to take you through financials.

Thank you, Renato, and good evening, everybody. Going to the economics of the first half. As you saw in the first part of this presentation, the stop line went down 2.5% reported rate and 0.9% on the value-added sales going at the custom rate in the positive territories, which is a good sign of our value-added sales. Going to the gross margin, we have been able to increase the gross margin percentage of 36 bps, thanks to the mix and the execution of the operational efficiencies we are executing our plan. And thank you to the lower packaging rate, which is one point lower than comparable to last year. This brought to a bid of 72.6 million, which is 2.6% lower for the last year or €2 million, but we recorded the highest quarterly adjusted bid on the Q2 at the €47.5 million or plus 5% compared to last year. So 16 bps increase year-on-year at 16.7%. If you go at the net income, we have a very positive progression at 33.3%. driven by a positive impact of the financial items that last year was driven by the headwinds of the Forex, and a lower tax rate that is from 45.5% last year to 34.7% this year, thanks to the influence by the intercompany dividend that has not been yet distributed, and the mix of the different countries' profits. going up to the business unit to give back we see a progression of the make-up of 9% with an increase of 180 bps and this is thanks to the prestige part of our business that is growing and the positive impact and the EBITDA of this category so increasing 180 bps at 53.2 million euro going to the skin care the opposite to the climbing top line and the under absorption driven by the by the fixed cost drove the 24% drop or 300 bps lower bid margin compared to last year, despite in the second quarter the client mix is rising towards the prestige. Going to R&Body, we saw a 25% reduced bid compared to the last year or 280 bps. This is mainly driven by the contra-manufacturing weight within the category that historically has a lower marginality and a higher weight of packaging within the business unit. Going to the operating cash flow and the net devolution, as anticipated, we had a strong cash generation thanks to the level of the working capital management, and so we hosted an 18.6 million euro progression compared to the last year's H1 at 26.2 operating cash flow. If I take out the capex, the conversion rate is 75%, which is a good sign of the cash generation. The reduced financial expenses and the reduced tax drove to a cash flow before deed and distribution and buybacks at 13.3 million euro that is a progression of net €32.4 million compared to the same period of last year. We then go to the buyback that absorbed €17 million cash in the dividend distribution 18 and then we had a €22.2 cash absorption in the first half compared to €36.8 of the last year. This is driving the hour net debt at €122.7 million including FX16 compared to 134.4 of the last year with an improvement of 12 million euro roughly 12 million euro that is driving our leverage ratio down to 0.8 per compared to the 0.87 of last year with this generation thank you thank you Vittorio moving forward so overall

As you know, the geopolitical scenario is quite complex and very volatile, despite this beauty is overall well-oriented and realigning to the historical trends of 4% to 5% growth. Now, this being said, which is obviously good news, not everything is perfectly aligned, I would say, with what we would like to see, we would love to see. First of all, in Europe, the trends are pretty positive in both volume and price, but makeup, which is our strongest business unit, is performing below skin and fragrances in general, so we would like to see makeup getting a bit faster. UX is a single digit, but it's mostly price-free, so we would like to see more volume contribution to the growth of the market. In China, in spite of a softer than expected June 18 e-commerce festival, it's performing in positive territory. Obviously, this market share shift from local brands to multinationals in the other regions of the world, but it doesn't on the Asian entities. In this context, which we think is going to be confirmed in the second half of the year, so we expect the market to end in between 4% and 5% of growth, We have achieved in the first half results that are in line with our original expectation. Q2 saw an acceleration throughout the quarter. The order book is in the mid-teens up versus a year ago, despite this Q2 revenues acceleration. And orders in flow remain strong. Actually, if I look at last month, It's more than strong. It's a record month. And on top of this, the air and body forecast from clients is stronger than our original expectations. All in all, we hold this vote for a strong acceleration of sales in the second half, which was already forecasted and communicated as a back-loaded year, and this is confirming and everything is aligning to that. Based on this, we confirm our forecast, which is in line with the current net sales consensus, which is in line and is in the range we had communicated at the beginning of the year in terms of guidance for 2026. So everything is moving along expectations. And I thank you for your attention, and we are ready to take your questions. Thank you.

This is the chorus called Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Andre Condrea from UBS. Please, go ahead.

Good evening, and thank you for taking my questions, Renato, Vittorio, and Francois. Two for me, please, if you don't mind. Firstly, you've reiterated dividends on net sales. However, if we think in terms of EBITDA, how should we look at it, given that packaging has declined as a percent of your sales? What are your expectations for that part going into year-end? And secondly, just on the skincare, obviously operating the leverage played quite a sizable role in the 300 basis point margin decline. But could you help us breaking it down a bit further, just trying to understand why margins were so soft in the division? Thank you.

Thank you, Andre. I will answer to your first question, and then Vittorio will answer to your second question. Yeah, I mean, in the EBITDA, in the first half, you see two movements. On one side, you had the positive coming from prestige sales going up and back, going down. The two are, as you well know, well related because, you know, usually prestige brands deliver us their packaging. They don't ask us to buy packaging. On the other hand, the growth of air and body, as you know, is dilutive. This is a business unit that has the lowest margin, so the two components kind of, you know, offset one another. Going forward, we had forecasted the PAC component, which had gone down significantly last year, to remain overall stable in the course of the year. Now, looking at, especially looking at the air and body forecasts from clients for the second half, I think that we will see in the second half either stability versus a year ago and a slight increase versus the first semester in terms of percentage weight.

Okay, if I look at the skincare question, Andrei, so the main drop in the data compared to last year is driven by, as I anticipated before, by the fixed cost absorption on the legal entities where we sell, where we produce our skin care, particularly the portfolio, the execution has been solved due to the level of the orders, and so the level of under-absorption drove, principally drove the drop on the H1.

Understood. Grazie mille.

Thank you. Thank you.

The next question is from , from Morgan Stanley. Please go ahead.

Hi, good evening. Thanks for taking my questions. I have three, if I may. The first is on makeup, where you saw an increase in the prestige skew helping profitability. Would you expect that mix towards prestige to persist, aka are you still seeing that in your order intake? My second question is on skincare. You saw the order book for makeup and skincare progressively accelerate even further. Could you give us any kind of colour in terms of the dynamics between makeup and skincare within that? Aka, you've previously spoken about expecting a pickup in skincare in H2. Are you still confident in that or is it more about the other business units driving the full year? And then my third final question is on China. You mentioned in the outlook that you would expect a progressive comeback of the local Chinese brands. Have you seen any early signs of those comebacks, or is this more just something that you think will naturally happen as a course of business? Thank you very much.

Thank you very much for your questions. First, you talked about prestige clients for prestige orders for makeup. When we look at the portfolio on end, prestige remains very strong. So we do expect prestige to stay high in the second half of the year as well. The second point you mentioned is the board order book between makeup and skin care. Well, makeup is, as I said in the first semester, has been led mostly by growth in the Western sphere. This is still the case in the second half. For skincare, it's the opposite. It's Asia driving. Asia is positive and Western is below. Now, what we expect is to see a comeback, as you said, of China clients, especially in skin care in the second half, so a further acceleration there. As you know, the lead times, all the lead times in China, especially in Asia in general, but in China especially, is a lot shorter than in the Western world. So in Asia, In makeup, we see we have a richer order book than in skincare, and that could simply be related to the fact that the transformation time is longer than what you see in Asia and China. So typically, a brand that needs goods for October, November has already placed orders in in the Western hemisphere is not yet in Asia and in China. Now, coming to your last question, early signs of local brands accelerating in the second half, we do not have anything tangible. You know, when I say anything tangible are firm orders. What we hear, though, is their will to gain shares back during the W11 event. So everybody has been quite surprised after a couple of years where they were winning to see the comeback of the Western brands. They all declare their desire and their eagerness to come back and react to this escalation of of Western brands. So it's not only our assumption, it's what we get qualitatively talking to the local clients. Now, obviously, we need to see orders inflowing at an accelerated pace to, let's say, solidify this intention, and this is going to come towards end of this month, early September. I hope I've answered your questions.

Yes, that's great. Thank you very much for listening.

Thank you.

The next question is from Molly Villenseca of Duffry. Please, go ahead.

Good evening, Renato, Vittoria, Francois. I just want to push you a bit more on makeup and the order book. As you just mentioned, the order book is mostly makeup. You've been talking about record levels since, I think, November of last year. Good to hear that makeup is now, you know, XXX packaging back into mid-single-digit growth. But can you talk us through sort of the acceleration you expect in the second half? And I'm not sure if I missed it, but just your expectations around packaging in the second half as well to get towards maybe a net sales number. Thank you.

Okay. So for makeup, we spoke about an acceleration happening at the end of last year. I must say that this acceleration is further accelerating, especially in makeup, actually. It's mostly focused on makeup during this early summer month. So we really see traction coming in makeup. and mostly ridden by the Western Hemisphere, mostly coming from Prestige. Prestige was up significantly in the second quarter for makeup, also for skincare, but especially for makeup. When we look at the order book we have on hand, we see similar dynamics. So the... Let's say the weight of prestige versus mass is very similar. So we cannot predict what is going to be exactly at the end of the year. But the indications we have in our hands point to the same direction. So all in all, we expect to go in that direction. On the other hand, let's not forget that. What is more of a surprise, quote-unquote, is the fact that the forecast we're getting on the air and body business unit is ahead of our expectations. So that is good news in terms of top line, as you well know. But you also know that that is a bit diluted in terms of EBITDA margins going forward.

Thank you.

Sorry, just to complete. This air and body part that I just mentioned will drive up a bit the percentage of packaging component on the total net sales. It will not be driven by makeup, I think. It will be driven by air and body.

Okay.

Thank you.

Thank you, Molly.

The next question is from Aaron Adamskin of Golden Saks. Please go ahead.

Good evening, Renata, Victoria and Francois. Thanks for the presentation. I have three questions. First, a follow-up on skincare. How would you expect the prestige skincare performance to evolve into the second half of the year? I think you commented on makeup. And also, how should we think about the performance from multinationals in the U.S. and Europe in skincare that appears to have been weaker? Second question is on China. I just wanted to follow up on the comments regarding the fight back of the Chinese local brands and their willingness to regain market share. How would you expect that to play out in practice? Would you expect them to become more promotional, or would you rather see a pace of innovation to accelerate? And just to finish on China, it would also be great to hear your perspective on the trends we've seen so far in July, if you have the read already. And then the last quick question is just a technical one. Can you remind us of your expectations for this year for finance cost and effective tax rate?

Thank you. Thank you for your question. Sorry, I'm writing them down because otherwise I forget them. Skincare, prestige for the second half, we are seeing them moving in a good direction, not a great direction. So we clearly see a difference so far between makeup and skincare in terms of prestige clients and multinationals. I think that skincare, well, I think I know skincare has been mostly driven by Asian clients, and I think this will continue to be the case in the second half. As you know, there are few brands in prestige territory from the local brands. Now, one example is, for instance, in China, Maokeping. Maokeping is one of the few Chinese brands that performed well during the June 18 Festival, so we keep thinking this brand will continue to go well also in the second half of the year, but there aren't that many. So I think that there will be a shift in the total panel of skincare sales. There will be a shift towards Mastige and a bit of Mass, simply because it will be more driven by Asia than the Western world. From the China fight back, I think that it will be... most probably there would be an escalation in promotional. Innovation, yes, but they always add innovation. It requires a push to get the trial going. And when the Western brands are pushing hard to gain share back, they have an inherent advantage that is driven by their brand image. So getting a great offer from YSL or another luxury brand from the Western is tough for them to compensate. So they need to sharpen their pencils to do better in that respect. So yes, I would like to go up to answer your questions. July read, we don't have yet, sorry. We have seen data from up to the end of June. We have seen a read up to the end of July for US market, but not from China. For the finance and tax question, I delegate to someone who's better equipped than me.

Thank you, Renato. So, I start from the tax rate. So, thanks to the ETR. So, let's expect to have the ETR normalized in a 30-31% per consensus because we know that the effect of the dividends is temporary. So, in the H1, we anticipated before that. on the finance costs also here. It's depending, of course, how the forex will move in the second half, but we do expect here to stay in the range of 12.5 million euro aligned to the consensus.

Great. Thank you very much. Thank you, Aaron.

Thank you, Aaron.

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. or any further questions, please press star and 1 on your telephone. The next question is from Paola Carboni of Equita. Please go ahead.

Yes, hello. Sorry, just a quick one from me. How do you see the inventory level? in the system, in the market, and so to what extent can this ensure consistency of the fast growth you are expecting in the next few months? If you can comment by it, I would be pleased. Thank you very much.

Ciao Paola, thank you for your question. Inventory level, to be honest, we do not see any particular point to raise I think it's pretty normalized the market consumer demand is going in a very steady manner so we think retailers have had time to normalize their stock level so sell out, sell in should be very much aligned And we do not hear any particular concern from clients. Obviously, you would always have the exception, one client declaring to be a bit overstocked and therefore reducing orders. And on the other side, you would always have the exception of someone who is a bit short in inventory and wants to accelerate orders. But all in all, I do not see any warning sign. And when I look at the reorders trend, as you know, we have a large part of our sales every year is based on reorders. They are coming in in a more regular and more consistent way than a year ago. So that is, generally speaking, a sign that, the inventory level in the market is pretty normalized.

And this applies also to the HeronBody segment, which is apparently surprising also your own expectations?

Well, in HeronBody, the reality is that on one side, we have won some new projects we were not expecting in the year, to be honest. but also established clients have done a bit of a yo-yo. They were ordering a lot in 2024. They adjusted their inventories in 2025, and now they're running at a more regular pace. So over, let's say, a depressed base, they are now looking better. But when I look at the millions, aside from the indexes, I do not see anything really surprising. The good news is that the decline of last year was not a sell-out decline. It was an inventory adjustment. So now they're normalizing. And, you know, in our forecast, maybe we've been a bit conservative. We were expecting them to stay down at the level of 2025. and in reality they're going up versus that level.

Very clear. Thank you very much.

Thank you, Paola.

The next question is from Micheli Romanazzi of BNP Paribas. Please, go ahead.

Good evening. Thanks for taking my question. I have one follow-up, please, on... profitability now you gave us some pointers how to think about H2 but if I look at full year consensus right now I can see EBTA of 164 million with margin stable year on year are you comfortable with where consensus is thank you yes I am I think it's pretty accurate actually I wouldn't be able to do it better than that very clear thank you

I'm joking, sorry. No, but, you know, jokes apart, no, I think it's pretty accurate. It's what we expect for the time being. Thank you.

Thank you.

The next question is a follow-up of Aaron Adamski of Goldman Sachs. Please go ahead, sir.

Yeah, thanks for taking my follow-ups. I have two quick questions. First one, fragrances. Could you give us some more color on what's driving the strong performance in Europe? Is it the specific client or specific innovation that's driving that? And then second, just on the innovation appetite, are you seeing any divergence in terms of demand for innovations between emerging brands and multinationals, or is it broadly similar? Thank you.

Hi. Thank you for your questions. to move ahead, to come up with innovation. There is also a lot of activity going into reformulations of existing franchises. They are driven by regulatory needs, either short-term or mid-term regulatory needs. So there is a lot of renewals going on both for emerging brands and for multinationals. I don't see any slowdown at all.

Great. Thank you very much.

Thank you.

The next question is a follow-up of Andrea Condrea of UBS. Please go ahead.

Thank you for taking my call. Just one from me, please. Would you mind updating us on the search for a permanent CFO? How's that going along? Thank you.

Yeah, I mean, we are scanning the market a lot. As you can imagine, we do not want to make any mistake. We want to be bulletproof on this one. I must say that aside from Vittorio that is probably complaining about his workload, he's doing a super job as a CFO, so I'm almost... Thank you. I kind of don't feel the pressure to rush into a new hiring, but we have scanned about 70 resumes We have gone through a round of interviews of about, I would say, 20 candidates, more or less. We are, you know, going through the funnel and shrinking the candidate list. So I think that, you know, between September, October, we should come to a conclusion on that. In the meantime, we have recruited the new IR manager who's going to join us on August 24th. So that is going forward. We've done some other additions in the finance team. So we are beefing up and working having stronger shoulders. But, you know, on the CFO side, we want to be very sure about what we do. So we're going to take our time.

Understood. Thank you very much. Thank you.

The next question is a follow-up of Paola Carboni of Equita. Please go ahead.

Yes, thank you for taking my second question. I was wondering if you can share with us some first thoughts about your view on the market for 2027 and in particular your view for what concerns the strong acceleration we are going to see in your revenues and from your other backlog in the second part of this year. So to what extent do you think we can have or to what extent can this be sustainable also entering into 2027? Or do you see any temporary element that should fade in the short term? Thank you.

Thank you, Paola. Well, it is really early, frankly speaking, to have a view on 2027. I personally believe the market will realign, you know, as it is already, as expected it's doing this year, it's realigning to its historical growth trends. I think that that is there to stay also next year. I would expect, or at least I hope, that the currency will be a bit more favorable next year. But in terms of behavior in general, I wouldn't expect any big news, to be honest. So I expect the market to stay in the 4% to 5% growth rate. I expect brands to continue to have a very high appetite for innovation. especially because there are some regulatory changes that are going to get closer in terms of timing. So that race will continue to be up there. And, you know, in terms of backlog or anything like that, it will depend a lot on how we perform at the end of the year and what is going to be the ordering flow. in the second half of the year, especially from October onwards. So it's a bit early. I have no, let's say, anxiety about 2027 for the time being.

Okay, thanks.

Thank you.

Dantanon, there are no more questions for the editor at this time.

So if there are no more questions, I thank everybody and wish everybody a good summer. Thank you very much.

Thank you very much.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone.