Ontex Group Nv Ord

And welcome, everyone, for joining us today. I'm Jeff Ruskin from Investor Relations, and I'm pleased to have with me Gustavo, our CEO, and Peter, our CFO, to present our first half and second quarter results. Before that, let me remind you of the safe harbor regarding forward-looking statements. I'm not going to read them out loud, but I assume you will have duly noted them. Gustavo, over to you.

Thank you, Geoff. Good afternoon, everyone. I'm very pleased to report the continuous turnaround being delivered since mid-2022. We have continued to grow our top line over the past year, delivering healthy volumes and positive pricing. This improved activity has allowed us to drive the structural cost savings in a meaningful way. The full extent of the turnaround momentum is shown by the profit from continued operations, this one from a loss in the first half of 2022, to a profit of 2 million this year. We also ended cash burn from last year, generating 4 million in cash in H1. I would like to thank all our teams for their efforts, dedication, and hard work. Now moving on to page 4, we have delivered a strong 50% like-for-like revenue growth, bringing the first half total revenue to 1.2 billion euros. Our EBITDA margin more than doubled year-on-year to 8.7%, bringing adjusted EBITDA for the total group to €107 million. This includes a €23 million contribution from discontinued emerging markets, whose margin almost tripled to 6.7% in the first half. We have reduced our net debt by 24% over the period, and the EBITDA improvement dropped leverage down to 4.5 times, a strong improvement by 2 points, tracking towards our objective to be below 3. Since the finalization of the sales of Mexico to Softis, we have now divested half of our emerging markets, and we are making good progress on the other divestments as well. Therefore, continued operations of core markets represents more than 80% of our total business now. So, let's look at its performance in the first half in more detail. As you see on slide five, we delivered 15% year-on-year growth in core markets as well, maintaining the momentum we delivered at the end of last year. Volumes were overall stable in an overall software market environment, showing resilience of on-text positions. Within a European decreased total market demand, retail brands keep on gaining volume and value share, while on-tech keeps the retail brand market growth in Europe. In North America, within a declining demand as well, branded business is doing relatively better versus retail brands. On-tech's volumes are down versus a year ago, but more specifically linked to customer stocking in lifestyle brands. especially in the first quarter. Important to note, North America, although still a small part of our portfolio, represents a significant growth opportunity for us, and our new management in place are making strong progress on our growth ambitions. On top of the overall resilient volumes, our mix is improving by stronger sales in selective product categories where we can make a difference, including adult care in continence, That allows us to grow revenue, but has an even stronger effect in EBITDA. Pricing was the main revenue driver, of course, responsible for 14% of the growth, resulting largely from the successful pricing initiative rolled out during 2022. Additional pricing has continued at the beginning of this year, especially in certain healthcare contracts, as it took more time to implement. These price increases were needed to offset the commodity inflation and which is still increased sequentially in the first half. While pricing has covered the additional inflation incurred over the past 12 months, it has not been sufficient to offset the commodity inflation since 2021. As commodity prices are gradually turning as well, pricing actions will be very selective. Moving to slide six now, our cost reduction initiatives have accelerated during the first half. In the green bars, you can see the gross delivery every quarter, which has increased from some 25 million euros in the first half of 2022 to 35 million this year, representing a 40% increase in cost savings. This is the result of the strict application of cost efficiency measures, which we have implemented. The effective output from our machines continues to improve, and scrap rate has been reduced compared to the 22 levels. While our cost-saving plans required some additional inventory buffer, service levels improved by close to 3% points, which has been very beneficial impact in our distribution costs. The orange line on the top shows the gross cost savings impact on the cost base. And while reaching the highest ever percentage of 5.6, we are highly committed to unleash all opportunities in this area in order to achieve our competitive aspirations. Revenue growth and cost reduction measures resulted in a strong recovery of EBITDA as shown in slide 7. We have delivered consistent sequential improvement over the last four quarters in both Absolute adjusted EBITDA and adjusted EBITDA margin. The adjusted EBITDA for this first half year was €84 million, 2.1 times the EBITDA of a year ago. This was driven by the mixed improvement and the cost reduction delivery. The pricing was crucial to offset the continued additional cost inflation compared to a year ago, but as I explained before, it has not been sufficient to recover the cost inflation incurred since 2021. This can be seen in the EBITDA margin. While we are making good progress with our efforts to consistently rebuild the margin, we are still some way off the level we aspire to be at. To get there, we will maintain relentless focus on the execution of our strategy, optimizing business, targeted growth in those selected product categories and geographies where we make a difference, and discipline on our expenses. As well as they all know, the recovery in operating profitability and margins is absolutely key to improving our financial structure and making our balance sheet healthier as can be seen on slide eight. The leverage in the orange line has come down consistently from close to the eight times peak in September last year to a standard 4.5 times at the end of H1. The net financial debt of the total group in the green bars has been reduced by 24% since the start of the year, thanks to the cash proceeds from the Mexican divestments. Our expectation is to bring leverage down further to below 3.75 times by the end of the year, and further improve our balance sheet beyond that. With that, let me hand over to Peter for a more detailed financial review.

Thank you, Gustavo, and good afternoon to all. Let me dive into the different moving parts of the P&L and the cash flow now. On slide 10, you can see the year-on-year revenue bridge for core operations in the second quarter, shown on top, and the first half, shown below. Both show consistent 15% like-for-like growth. This was mainly driven by pricing, 13% in the second quarter, 14% year-to-date. And while the increase largely comes from the pricing actions in 2022, we have implemented further pricing in the first and second quarter of this year. In a softer overall market, OnTex's volume mix is up 1% for H1 and 2% for quarter 2, comparing to a strong first half last year. Gustavo already explained that we're outperforming both the overall and retail brand market in Europe. And in North America, customer destocking was more pronounced, especially in the first quarter, but still impacting the beginning of the second quarter as well. This year's revenue growth has been positively driven by continued strong growth in priority product categories in adult confidence, especially in healthcare and in banks. Note that we also see some Forex headwinds. with the year-on-year depreciation of the British pounds and the Australian dollar in the first half, and also the US dollar and Russian ruble in the second quarter. On slide 11, you can see the year-on-year bridge of adjusted EBITDA of our core markets, the second quarter on top, the first quarter at the bottom. Both of these show that we more than doubled the adjusted EBITDA. This was entirely driven by volume mix and the cost-saving measures, as you can see from the orange circle box. As we talked in earlier result calls, one of our priorities is to focus on driving growth in products and channels that create better value. And that positive mix effect led to respectively 2 and 7 million euro EBITDA contribution in Q2 and H1. Another priority is to accelerate operating cost reduction measures, and they deliver 20 and 35 million euro in quarter two and half year one, respectively. Acquiring actions allow to offset inflation and adverse forex, as seen in the yellow boxes. But as said before, while these offset the year-on-year increase, so versus 2022, it does not cover yet the inflation incurred since the beginning of the inflation wave in 2021. Therefore, continuing our margin recovery momentum is a key priority. Raw material and other operating costs were up versus the end of last year, with inflation year-on-year adding 16% in the first quarter and 11% in the second. While some raw material prices are coming down, some others, like fluff and sub, are still up. And although logistics costs are also reducing, wage inflation impacts costs gradually, directly in our operations and indirectly through services or purchase goods. All in all, there is no meaningful sequential commodity cost increase from the first quarter to the second quarter, leading us to believe that we have reached the peak. SG&A was slightly up with wage inflation, but remains at 9% of revenue thanks to strict cost control, and despite the absorption of corporate costs previously allocated to the divested businesses. And the Forex impact on EBITDA was negative due to adverse Forex impact of revenue. And this was in the first quarter further impacted by the appreciation of the dollar, which for us impacts costs more than revenue. Now moving below the adjusted EBITDA line for the first half on slide 12. In the middle of the table, you see that profit from continued operations strongly improved and turned positive to €2 million versus €100 million negative last year. Depreciation was up with investments in growth. EBITDA adjustments contains €13 million of mostly restructuring costs to further optimize our business in Europe. And the number of last year includes large impairments we took at that time. Financial costs were up, reflecting the rate increase for the floating part of our debt, as well as some bank costs related to the refinancing. So with all of that, EPS of continuing operations returned to positive territory, strongly improving versus the previous half years. The negative profit on discontinued operations is mainly driven by impairments. We took on some of our Middle Eastern assets, divestment costs, and impact of hyperinflation. And that offsets the 23 million positive EBITDA from these emerging markets. Turning to cash on slide 13. We turned to positive free cash flow thanks to more than doubling our adjusted EBITDA in both continuing and discontinued operations. In continuing operations, we generated 84 million, as I just discussed. But we certainly also step changed discontinued operations where we generated 23 million, as you can see in the light blue bar to the left of the chart. This represents a very strong recovery compared to the first half of last year where margins have improved from 2.6 to 6.7% and positive cash generation. While the majority of EBITDA is still from the Mexican business, the majority of the improvement is coming from our emerging markets outside Mexico. which were loss-making in 2022. And that improvement will continue. Our EBITDA margins are not yet where we are targeting them to be, so driving those will further improve our cash generation, of course. But we have now progressed to a level of operational cash generation that allows us to fund a ramp-up of investments into our transformation. We are increasing our CapEx investments in growth and cost savings at €44 million in H1. And that's a strong increase from 2.3% of revenue a year ago to 3.6% this half year. We indicated before that we would increase the base in the framework of our strategic transformation. And this will bring the cutbacks back to around 4% for the year. Next to that, we also invested 14 million euro in restructuring projects to reset our cost structure. Working capital needs were up. as a reflection of the impact of the further inflation and pricing on inventories and receivables. And we also saw a slight increase of inventory days. There's always a bit of a push and pull between service levels and stock levels, but this temporary effect will turn into an opportunity as the ongoing simplification and complexity reduction will allow to bring inventory days down again over time. Nets, still work to do. But we have made significant progress on our free cash flow, turning back to positive, coming from 59 million negative in H1 last year. This brings us to debts on slide 14. On the left, you can see that our net debt reduced by 24% over the first half of 2023, thanks to the proceeds of the Mexican divestment that was used to pay back our term loan. There were 33 million costs related to financing, 26 million of net interest cash outs, which increased with the higher interest rates, and 7 million other financing costs related to hedging and capital transaction costs. This brought the net financial debt to 658 million euro. And as already explained by Gustavo, the leverage ratio thereby came down from 7.7 times at the peak in Q3 last year to 4.5 times now. Turning to the gross debt on the right of the chart, when we exclude the leases, 80% of our gross debt is covered now by our bonds, with a fixed rate coupon of 3.5% and maturing in mid-2026. A very sound situation to be in, considering the current volatility in financial markets and interest rates. The remainder of that gross debt essentially consists of the utilized portion of our revolving credit facility. at 160 million at the same level as we had at the start of the year, for which we have recently extended the majority. So, this RCF is now the only portion of our debt that really holds maintenance governance, and this facility has been renegotiated in quarter two, resulting in an extension of the term to end 2025 and allowing some more margin on the governance thresholds. We have more work to do in our journey. But the repayment of the term loan, the extension of the revolving credit facility, the strongly improving leverage ratio, and the free cash turning positive are major steps forward in improving our financial profile. And on that note, I'll hand back to Gustavo.

Thanks, Peter. So turning now to our outlook. Our delivery in the first half allows us to upgrade the adjusted EBITDA margin outlook upwards to the high end of the 8% to 10% range. We confirm our expectations of high single-digit for like growth in cold markets for the full year. After high double-digit growth delivery in H2 last year driven by the volume and particularly pricing growth, we face a high comparable base, so expect a slower rate of growth in the second half. Emerging markets, excluding the Mexican business now, is expected to continue to contribute positively to free cash flow and EBITDA. In light of these positive trends, we expect the leverage ratio of the total group to improve further to below 3.75 times. To sum up, the first half results for 2023 are very encouraging. They show that the turnaround strategy at Ontex is now delivering in all fronts, growing revenues, improving margins, overall profitability, and free cash flow, and rebuilding our financial structure with significantly reduced leverage, net debt, and securing financial with extended maturities. We continue the momentum on refocusing the portfolio with promising progress on the remaining investments. Acceleration of our strategy is well underway and the positive momentum motivates us all to continue with this journey as we still have much more to do. Finally, I would like to thank all ONTEX employees for embracing the accelerated execution of our strategic plans. I would also like to thank other stakeholders for the support and confidence they have shown in ONTEX's ability to deliver its turnaround. Now, Peter and I are available to answer your questions.

Before handing over to the operating, could I ask you to state your name and firm clearly and limit your questions to two. If time allows, we'll do a second round for additional questions, and if not, feel free to contact the investor relations afterwards. Operator, over to you.

We're there for you to ask any questions. Please press the star and number one on your telephone keypad. We have our first question from Charles Eden of UBS. Your line is now open.

Hi, good morning. Yes, Charles Eden from UBS. Two questions from me, please. Firstly, Gustavo, you mentioned your prepared marks that you were making. I think good progress on the divestments of the remaining emerging market businesses. Are you still expecting some movement on some of the smaller businesses within that in the second half of this year? And then my second question is on the margin bridge. I think the expansion you've seen in the second quarter is arguably even more impressive in the context of continued raw material and affects headwinds. So I guess OnTex is clearly doing a good job of controlling the area that you can control. My question, and perhaps this is for you, Peter, is when do you expect raw materials in that EBITDA bridge shown on slide 11 to turn positive? I guess it was down or a headwind of 31 million in Q2, down from the 38 million headwind in Q1. But given your hedging policy, it's not that easy to understand the potential improvement in the second half. So perhaps you could help us with this a little bit, please. Thank you.

Thank you.

Thank you, Charles. I'm going to cover then the first one on the additional divestments. Yes, we are making progress on the smaller divestments, and we are in a stage that we certainly believe that two of those small divestments are going to come during the second half of the year. They are small, but we are making good progress. So, Algeria, we have reached an agreement in principle with a potential buyer and our Algerian business and subject to the competition of the ongoing works council, the works council information and consultation procedures during the first week of August. Yeah, we believe that we're going to be able to execute those two in the first, in the second half of the year.

And then your second question, Charles. So, yes, you were starting from page 11, which is obviously on the historic bridge. It's good to just repeat on that. We are still at peak, as you also said yourself. We're up still 16% or 11% in the second quarter versus versus last year, and we've not seen any meaningful difference in the level of inflation between Q1 and Q2. So there we are still at the peak. We also do believe that we are at the peak because we see some tailwinds on several raw material components. They do come with a delay, as you know, and because it's like three to five months before the index really translates into our P&L. Now, it's happened already a little bit, so we do see tailwinds entering into our P&L for the third quarter already, which will help to recover some of our margins, will be one of the elements to help to recover our margins or to potentially reinvest in parts of our business. But we do see some tailwinds already coming in. So what we have done in our outlook is obviously, as we always do, not banking on things before they happen. So we're basing ourselves on the current levels that we see, which are slightly beneficial versus what we've seen in Q2. So that helps. But we've been prudent for the rest of the year. Forex is still uncertain. It has been adverse in H1. And the other thing, and I think you know that, but just want to repeat it, is that obviously some of the tailwinds that we see on indexes like Fluff and Gostic Soda, they are only part of the equation. There's other elements in our pricing that we get from suppliers that are not linked to that and often, you know, more linked to things like salary and wage inflation. You know, if you look back over time, we, you know, versus 20, the last two, between 20 and 22, we had on our total cost and inflation of about 30% indices increased about double of that. So there's only part of that that lands in our P&L and the same is going to happen moving forward.

Thanks, Peter. Can I just quickly follow up, just so I'm clear? So first half, just core markets, I'm talking about 9.4% EBITDA margin, adjusted EBITDA margin, 9.7% in the second quarter. It feels like incremental tailwinds takes you above 10, my words, not yours, in the second half. So is there a chance that if raw materials continue to trend downwards that you could even overshoot that top end of that guidance, or is that getting a little bit ahead of us now. So, thank you.

Yeah. So, I'm going to take that one. I always like to say that I'd rather be prudent than overpromise, and also I'd rather overshoot than fail. So, yeah, it could happen. But we stick with our today's, you know, outlook of aiming to that high end of our range.

Yeah. Understood. Thank you very much, guys.

You're welcome.

Our next question from Wim Halste of KBCS. Your line is now open.

Thank you. Good morning. Wim Halste, KBC Securities. Excuse me. A couple of questions also from my side. Then firstly, going on the discussion of raw material trends, what does that mean for your pricing and the overall pricing dynamics in the markets? I think, yeah, your customers also Obviously see that some of the initiatives are starting to come down. Probably they acknowledge that there is wage inflation, et cetera, that you still have to deal with. But do you see any start of pricing pressure and other customers coming back asking for renegotiations? Do you give into that? Any feedback on that topic would be interesting. And then also on the overall market dynamics, I think you mentioned that private label is doing While in Europe, I think in U.S., the volume momentum of your business is a bit different. But can you maybe also elaborate on that market, how private label versus A brands are doing and what maybe the differences are and the reasons for those differences are between those geographies? Those are my questions. Thank you.

Thank you, Wim. Good questions. I will take first, I will take both questions on the pricing. Let me focus on our focus has been and it will continue to be on sustaining our good performance in the volume and mix. So our commercial teams are focusing on that, sustaining this scale regaining market share in Europe, gaining market share in U.S. And, well, you know, if we do realize and materialize these noisy prices, you know, coming down a little bit and we have more room, but our focus, it will be on the volume and mix. So, we are going to keep supporting our customers, working with them as needed on their retail brands and sometimes they do a lot of offers, promotions in their retail brands and we want to be with them partnering on those growth activities that we have and we want to do with them. So, that is what I would answer in terms of the first question. On the second one, the differences in the market dynamic, Yes, you captured very well. In Europe, retail brand is bigger, much bigger as a total market than what it is in U.S. So that's why U.S., not just because we have a lower market share, much lower than in Europe, we have an opportunity to grow in a market share, but also the retail brand, retail brands in U.S., they have much more room to keep growing. Today, the initial year has been slowed down that growth in retail brand. Actually, branded business has been performing better than the retail brand. But that is what you see normally in the evolution. It's part of the evolution of that market. We strongly believe that retailers and all our conversations with them, with the customers are indicating their interest and strong interest in developing retail brands. And we are having very, very good meetings with them, strategic meetings in how to improve and how to get the learnings of this retail brand here in Europe on the growth in Europe applied into the U.S. So big prospect there, and for us, it will represent our big source of growth.

Okay, thank you.

Next question comes from . Your line is now open.

Yes, good morning. Good afternoon. Thanks for taking the questions. I have two questions and one check. With regards to tendering activity, how do you think, the next six to 12 months will look like. I recall you saying earlier that there's been limited tenders over the last periods. So, yeah, interesting to see what you see in the market. And then I had a question on the hyperinflation in Turkey, which was a minus in the discontinued line. Given we're still in the inflationary period, is it... likely that's going to be a negative number in the discontinued line for a bit. And the thing I wanted to check, you mentioned Algeria, but what was the other market close to potentially a deal? Thank you.

Very good. I'm going to take the, how do we see the tender in activities from the customers? I think that the customers are reacting in terms of, it has been increased. It's absolutely has been increased. Why is that? I think that we are coming from a year of huge prices increases due to the commodities during last year, and also combined with supply chain challenges. Supply chain that, you know, we all as consumers, we saw it on the shelf, you know, lack of products in many cases. All that, you know, combination made now that we are in a more stable commodity prices, you know, come down and also the supply chain challenges has been, let's say, again come down and there is no a lot of that. Customers have decided to go into accelerate perhaps a little bit of their tendering process. which is reasonable and we see that in some, in many, many cases as an opportunity. So, we are not going to be short of taking this opportunity for us. Second question on inflation.

Second question on inflation. Yes, it is a negative impact on the results. It's actually minus 7 million. That has an impact negative for the discontinued operations over the period that we're talking about. Looking forward, honestly, it's hard to predict what's going to happen with that, but year-to-date, it's 7 million. And then the other emerging markets, yes, Gustavo talked specifically about Algeria. I think it's fair to say that the other one that we're close to, you know, closest to finalization would be Pakistan. Again, not that significant on the overall picture. And on the other two markets, Russia, sorry, Turkey and Brazil, we are progressing well. And as you've seen, the numbers are picked up very, very strongly, which obviously, not only helps in our cash flow today, but also into the value we could potentially get out of that.

Okay, thanks. And just to check, Peter, suppose inflation in Turkey remains at 50, 60% today, you will continue to have hyperinflation, and that's then something for us to keep in mind, right? Yes. Okay, thanks.

We have our next question from Marcus Schmidt from ODDOBHF. Your line is now open.

I have two questions, if I may. The first one is if you could disclose what the revenue in adjusted EBITDA was in the discontinued operations ex-Mexico in the first half. And the second question would be what amount of restructuring cash outs you expect for H2. Thank you.

All right. Thanks, Marcus. I'll take those questions. On your first one, emerging markets, so I already explained that we've seen a fast recovery in all the emerging markets and more so outside of Mexico. Not going to repeat the details of that. In the second quarter of the 8 million generated in emerging markets, 5 million was generated outside of Mexico, which is mid-single digits data percentages. We expect that to continue for the periods forward. So that's on that question. And then the restructuring cash outs. Now there was 14 million cash outs in H2 of the total amount of non-recurring debt we recorded. We will continue to invest to generate cost savings to keep our SG&O under control. For the full year, it's probably going to be comparable to 2022, potentially slightly higher.

Okay. Thank you very much.

And now from Ferdinand de Boer from De Groot Petercam, your line is now open.

Yes, good morning. Thank you. I'd like to come back on your comments on the U.S. with Brenda doing actually better. If I listen to other FCG players, if I listen to the food retailers, they all say that private label actually is gaining. Also in the U.S., I'm a little bit amazed about your remarks. Could you comment on that? And also what I hear from a lot of other players is that everybody expects promotions to be stepped up in the second half as volumes are under pressure for most MCGs. So what would impact that on the private label part? Because I think you have less means to go promotional. So that's one question. And the second one is on your marketing spend. They still remain very high. Any thoughts on that one going forward? And maybe to come back on the other first question, the negative impact of Forex on EBITDA in the second quarter was minus 11 million. Should we assume that that is still going to be negative in Q3 but then turn positive in Q4 given the exchange rate dollar of the last few quarters?

Okay. I'm going to... Try to clarify, you mentioned, I think that your question is because you heard from U.S. market retail brands are gaining share versus branded, no? Yeah. Yeah. So it's doing better retail brand than the branded. That is what you're saying.

Yeah, that's it.

At least what I heard, yes. Yeah, so in US, our research indicate that retail brands during this first half of the year has declined versus the total market. It could be because we're talking about our categories, and perhaps the data that you might manage is in total retail brands, but within our categories. As I mentioned before, in the market of U.S., if you start tracking even, you know, two, three years, four years in the past, you can see that there are ups and downs, but continuously going up, right? So, on a positive trend for retail brands, but with ups and downs. And that is normally never evolution because in the U.S. market, you have a handful of customers only that runs a strong retail brands percentage of the market. So perhaps five customers make 80% of the market in the retail brands within our categories. So one customer's success there in the retail brand can impact in the total market significantly. or one customer failure in the current retail brands can impact in the total market. That's why we see those ups and downs, but with a positive trend throughout the years. So for us, that means that there is an important opportunity. And why is that? Because we can use our experience in developing retail brands and helping customers here in Europe on developing their retail brands Ontex is a leading, global leading company on retail brands and a leading position in Europe and with a lot of history in developing retail brands in these categories. And that is starting to be recognized by customers in U.S. and we're working together with them to help them to develop their retail brands. That's why we see it as a big opportunity. On the Second questions on the promotions that the customers perhaps are going to be looking forward on the other companies that we're going to see a second half, strong promotions and the impact, potential impact in the retail brand. Well, definitely retail brands and represent, they are somehow tied to the branded business. There is something very positive here as well, which is retailers are looking for improving the quality and the premium of their retailer brands. As they are using, in the case of baby care, it is clear that they are using baby care to attract their consumers. And the quality of the products are very, very important. So, promotions are run by the customers, not by us, as you're saying. But what we have to do is definitely partnering them and support them in their plans of the promotions. That is something that I was trying to explain that our focus now, strong focus during the first half of the year and we continue to be is partnering our customers in their efforts to promote retail brand in our categories, in the selective categories that we choose to. where we believe that we have a lot to win. On the marketing spending, I'm a little bit off because we don't have a strong marketing spending. Actually, it's just on the branded business on the emerging markets where we have some marketing spending. And we have been, yes, in the case of Turkey and Brazil, for instance, I can see that we increase a little bit our marketing and spending, but has paid off significantly turning around those businesses. So, we expand, we grew in the selected categories, and the result has been fantastic because we turn into positive cash flow and a strong EBITDA growth. So, yeah, if you were referring to those, Couple of countries, yes, we increase a little bit our spending, but with fantastic returns there. And in the forex dynamics.

Yeah. So, yes, forex dynamics going forward. And I'm not going to be very detailed on this one because there is still a lot of volatility, of course, in the system if you look at some of the currencies that we've seen. We do expect still a bit of negative also for the second half. But again, you know, we're trying to be, which is part of the prudence that we talked about earlier. Also note that we are hedging our main currencies. So whenever there's a move, we have a delayed effect on that.

Okay. Thank you very much.

You're welcome.

Again, if you have any questions or if you'd like to ask any questions, please press star and number one on your telephone keypad. Again, that's star and number one on your telephone keypad. We have another question coming from Carol Zoti of Kepler-Cherveau. Your line is now open.

Yes, thank you. Can you speak about the activities in Russia? Because, of course, it's a team in the sector and you have a fairly sizable business there. Is it still part of the core of Umtex and how's the business going there?

Yeah. Okay, I can answer that. So, as you know, we are You know, we have done a lot of interventions, first of all, in Russia, because we are producing, of course, sanitary products for the market, both baby and elderly, so essential products. We have done a lot of intervention in ring fencing that business last year, making it very autonomous. So, essentially, it's a local plant near Moscow supplying a local market, working from local sourcing. Obviously, all of that in full compliance with all the regulations. and we have stopped investments, investments in growth, equipment, in research, and in marketing, which is also, by the way, why we've done an impairment last year, because the potential of that business to be broader than just local for local is not there. The business is still generating EBITDA, but the total of the revenues, but actually it's growing significantly lower than the rest of the core. So it's about 6% of the total revenues that we generate into the core, which is lower than what it has been in the past. Obviously, the ruble is playing its role there with the recent depreciation of that, but also volumes or the demand, I have to say, in the Russian market is actually slower, and we're growing more outside of Russia than we're growing inside of Russia. So, yes, it's still part of our business, but it's a local for local, and it's for sure less, you know, losing a bit of traction in the total of the core that we have.

Is there any further questions?

We have another question from Patrick from Workplace. I'm opening his line now.

Just the first one, I just kind of want to go in deeper on the landscape in Europe because You know, the volume mix was 2% and the volumes were flat, but you also said there's, you know, a positive backdrop for you guys with down trading in the market. So, if that's the case, you know, why isn't there, I guess, any potential, I guess, market share shifts that you're seeing that maybe would impact the volume number in Q2 or maybe in the second half of this year? Is it because it's a very competitive landscape? Obviously, we talked about tender activity picking up. Is there more private label and kind of retail branded competition in the space that's making it a bit more difficult to win. And in the second question, just beyond North America, the stocking effect, as far as I remember, I think that started in early 2023. Is that something that should subside in Q3 or Q4, maybe providing some volume kind of uplift in the second half? I know it's a smaller part of core markets, but just kind of trying to work through the dynamics there. And just on, while we're talking about North America, looking at the adult category, I just noticed that, you know, quarter and quarter, organic slowed a bit. So is there any dynamics there that we should be thinking about? Was it just more pricing coming off as opposed to anything else? Thanks.

Thank you, Patrick. The first one on the volume, so we – If I split between the core markets between Europe and U.S., we have grown volumes in Europe, and we did much stronger than the retail market, right, in Europe. So that's why we are certain that we outperformed the retail market in Europe, and we are regaining market share here. So that would be the answer in terms of. So the total volume that we are presenting kind of like stable is the combination of Europe and U.S. And U.S. has been affected by this and starting to answer in your second question by the de-stocking that was very heavy in this first quarter and beginning of second quarter, but it started to change already in June. And what we see for the rest of U.S. coming towards the rest of this year, sorry, is that we're going to keep growing volume in U.S. First of all, the stocking finished, let's say, with these lifetime brands. And then we have volume, new customers volume coming during the second half of the year. So it's going to be a positive impact in our volumes in U.S. And for us, every gain that we have in volume today will represent a market share growth there. So I hope that I answered your two questions. You have one more in pricing. Yeah. Sorry, you have one more in pricing U.S. I believe that we don't see any changes in prices there.

Okay, thank you.

Any further questions? Yeah, we don't have any questions. I'd now like to hand over to the management for their closing notes.

So thank you very much for participating and for the questions. It means a lot to me, honestly. I absolutely believe that we will return ONTEX to the competitive leading position it deserves as the preferred partner in retail and healthcare while delivering expected returns. So thank you again and have a great weekend.