Ontex Group Nv Ord

Good afternoon, everyone, and thank you for joining us today. I'm Jeff Raskin from Investor Relations. I'm pleased to have Gustavo, our CEO, and Hirpeters, our new CFO, with us today to present the full year and Q4 results. Now, before that, let me remind you of the safe harbor regarding forward-looking statements. I will not read it out loud, but I will assume you will have duly noted it. You are well aware that since 2022, our P&L is based on continuing operations, which consists of our core markets activities only. The emerging markets are reported as discontinued operations, and while in the process of being gradually divested, they do still contribute to total debt and cash flow figures. Regarding cash flow, please note that we change our definitions of reported cash flow, which used to be free cash flow before financing, to free cash flow after financing, or free cash flow to equity. With that cleared up, Gustavo, over to you.

Thanks, Joff. I'm delighted to be here with Geert Pieters, our new CFO. By now, I have a complete team in place to deliver on our strategy. They have a tremendous amount of experience and complementary skills and are highly energized. With no hesitation, I can't dream of a better team. Now, turning to encouraging set of numbers for 2023 that we published this morning. This confirmed that we are well on the way to restoring ONTEC's financial health. notably with a positive earnings per share and free cash flow. Of course, there is still more to do. Yet, in 2023, we cross a significant milestone on our cash flow generation, allowing us to accelerate our investments. Let's move to the page four now. A year ago, I shared with you a series of activities on which we would focus, such as decomplexification, value innovation, operational efficiencies, focusing core, selected growth categories, divestments, etc. These are all critical to execute the transformation of ONTEX and driving cash flow and balance sheet improvement. This slide is showing the result of the focus and hard work the ONTEX team has done. A 10% like-for-like growth top line to the high end of our year-ago expectations for 2023. A 10% EBITDA margin also to the high end of our expectations, which allow us to return to a positive earnings per share. And a strong turnaround of cash and leverage, critical to restoring financial strength. the leverage in a positive 9 million euros of free cash flow, and the leverage in down to 3.3 times at group level. On the next page, I will elaborate more on these strong results. Nine out of 10 percentage point like-for-like growth came from pricing as a result of our strong pricing management throughout the last years, with peaks and downfall drops in commodity prices. In this context, we have maintained total volume stable. Yet, based on our focus strategy, we have achieved a double-digit volume growth in selected categories in Europe and have established a solid growth platform with retailers in North America. Moving to slide six, As you all know, we took a hit in 2022 with the unprecedented input cost inflation impacting the industry significantly and bringing our margins of core markets down to 6.2% in orange in the chart. Mid-2022, we managed to turn the corner. Today, for six consecutive quarters, we are very pleased to report sequential improvement of adjusted EBITDA, as seen in the blue bars, driving margin up to 10%. Pricing was a key driver, allowing to partially compensate for the additional cost inflation over the last two years. The structural drivers behind this recovery are the volume mix improvement and the strong delivery on our customer information program, which leads me to the next slide. In green, the gross savings we deliver from the customer information program achieving €72 million in 2023. This includes continuous improvement measure on OE and scrap level in the plants. It also reflects the ongoing decomplexification and asset harmonization efforts, with a strong contribution from our procurement team, having selected, qualified, and negotiated alternative raw material sources. Last but not least, it also includes the continued efforts we are taking to optimize our overall footprint and logistics. These structurally high-impact efforts require strong team execution and high level of investment, which you can see on the next slide eight. Our business expansion initiatives and our cost information program require higher investments, up to a level of 96 million euros mostly in our core markets. The orange line illustrates the capex intensity in our core markets. with more than 5% in 2023. While this is a large number, we strongly believe in the returns that these investments are delivering. Importantly, is that we are able to self-fund these investments while still generating positive free cash flow and while strengthening our balance sheet as it can be seen on the next slide 9. In green, The net financial debt of the total group, which we brought down to 665 million euros during 2023, mainly resulting from the successful divestment of the Mexican business. Improving EBITDA is the key to reducing on-tax leverage. The growth in our EBITDA in 2023 nearly half our leverage to 3.3 times down from 6.4 times at the end of last year. Critical business levers such as returning to positive cash flow and improving balance sheets are on the path to the levels we aspire to. With this, I leave it to Geert for the detail on the financial review.

Thanks a lot, Gustavo. First of all, good afternoon, everyone. I'm really excited to have started in ONDEX on the 1st of December, and I absolutely love the good vibe and passion in the team together with Gustavo. A little bit on my background. I started in PricewaterhouseCoopers being a senior manager in the corporate finance and business transformation teams. And then afterwards, I worked in three large and fast-changing corporations as a CFO. My last assignment was in Green Yard. It's the number two worldwide in fruit and veg. And like Ontex, it's also listed in Belgium. It has a European-US footprint and has a focus on retail as its main customer. And we were also very successful in making a transformation. I feel really blessed today to be able to present the strong on-tax figures over 23. All figures moved significantly into the positive direction. Let's have a look at the first financial slide on revenue. On this slide, you will find on the top of the revenue bridge for the full year, at the bottom, the quarter four, it's each time for continuing operations, so that means the core markets. As you see on the top, it shows respectively a 10% like-for-like growth for the year. And at the bottom, you see a stable revenue evolution over the fourth quarter. As Gustavo pointed out already, price was the main revenue driver with an impact of 9% on the full year. Quarter on quarter in 2023, prices were up in the first half and started to gradually decrease in the second half of the year, in line with the lower raw material prices. But year on year, we were still up in the fourth quarter by 3%. as to volumes the overall markets in europe and north america were down with only adult care still growing but if we look at the retailer brands however those gained market share indeed consumers they are looking for better value for money as inflation impacted their purchase power and this is not yet the case in north america Full year was stable overall. We grew double digits in selected categories, resulting in a positive mix impact. In quarter four, volumes were lower, but actually we did not lose any market share nor any customers. It's mainly a timing impact. The timing impact because there was some pre-buying of a U.S. customer at the end of 22, and at the end of 23, there was a low promotional activity in Europe. So we are confident that the coming months this will recover. Differently from last year, Forex had a negative impact, and it's because of several currencies. It's devaluations on the US dollar, the Australian dollar, British pound, and the Russian ruble. How does this translate in EBITDA, which you find on the slide 12? Again, it's for the car markets with on top of the full year and at the bottom quarter form. Full year, the adjusted EBITDA rose from 104 to 174 million euro, or an impressive 67% percent growth. In the left yellow box you will find what drives our EBITDA up and mainly the gas transformation program that was already mentioned by Gustavo with a second year in a row where we delivered savings of around five percent of the operating cost base. You'll also notice the positive mix impact showing for the full year. In the right brown box you will see how we manage the prices And this is almost fully offsetting the increase of raw materials, the inflation on the operating costs in SG&A, but also the adverse forex. As to raw materials, year-on-year increase is mainly due to higher fluff prices and to a lesser extent also SAP in the year. As prices gradually came down throughout the year, we have for the first time in a long a positive effect in Q4, but not enough to offset fully for the continued inflation of other operating costs and SG&A. As to forex, of course, we first have the revenue impacts of the currencies I already mentioned before. On top, we have the Mexican peso that rose, cost up in our Tijuana plant in the west of the U.S., and the U.S. dollar, including the hedging, had a slight negative impact on the results. Let me now present how that adjusted VDA of €174 million translates to bottom line positive net results. Because actually we achieved indeed a positive profit for the period of €35 million. Per share it's €0.43 million. This reflects the profit recovery, but remembers also that last year the result included large impairments taken on goodwill and assets. So we clearly turned the page. How did we get there? Let me explain line by line. First, the depreciations, they remained around €70 million in line with last year, despite stepping up the investments. Secondly, we have some adjustments. They're all non-recurring of nature, about 50 million euro, all related to optimizing the European footprint and the product portfolio. And it includes a 5 million euro non-cash impairment. Thirdly, we have the finance costs. As you will see in the table, they decreased with 5 million euro to 45 million euro, despite interest that increased. But of course, we are protected by our fixed rate bonds, And our interest declined because of the lower indebtedness due to lowering the leverage ratio. Fourth, we have the tax costs. Also, the tax costs decreased to €60 million. It represents an effective tax rate of 38%, which is, of course, the mix of the different geographies in which we are active. And we were still very conservative in the treatment of our deferred tax assets. And then last but not least, we have the discontinued operations. It's our emerging markets. They contributed €8 million. And in that €8 million, we also still have some divestment-related costs and impairments for €27 million. And there's also some hyperinflation in Turkey costing €8 million. So if we correct for those impairments in the hyperinflation, you notice that the emerging markets really had very strong results. Moving then to the cash. The slide 14 shows how we generated €9 million of positive free cash flow, and that's with a division mission, as Joff said, including the debt service, including the interest. The starting base is €223 million of adjusted ABDA. That's the adjusted ABDA for the total group. That includes all the emerging markets, but also four months of Mexico, which is in the meantime divested. I want to highlight some important components in that cash flow build-up. First of all, we invested €36 million in working capital. The latter increased due to inflation, of course, but at the same time, we used lower factoring. Further, I can confirm that as a management, we're very focused on working capital improvements, but at the same time, implementing the transformation also leads to temporary inefficiencies, for example, in inventories. The largest block you find in the cash buildup is the investments with 121 million euro, including the 25 million of leasing. And Gustavo explained already and will further explain on our plans of investments. And then we have tax and finance costs. They're just in line with the P&L items. Non-recurring, we had some non-cash impacts. So what was left was 18 million euro in our fee cash flow. And then the last financial slide is on the net financial debt. The net financial debt on page 15 came down by 23% to a level of €665 million. This brought our leverage ratio to a safe 3.3 times from 6.4 last year. So it's quite clear that the 3.3 were well within the leverage maintenance covenant. The deleveraging was achieved, of course, first of all, due to the free cash flow of 9 million, but also because of the disposal proceeds for 200 million euros, which are mainly related to Mexico. These proceeds include all the transaction costs, also working capital closing accounts that were settled at the end of 23, and we still have a deferred receivable coming in the future, which you find on the balance sheet for about 30 million euros. If we then look to the gross debt, the gross debt ended up 834 million euro. It is composed of three elements. We have, of course, a fixed rate bond for 575 million euro. We have leasings for 133 million. And the RCF was only partially drawn for 115 million euro. The term loan is not there anymore. The 220 million euro was repaid mid-2023. The difference between the gross and the net debt is the cash, of course. It's €168 million. And together with the part of the RCF which has not been drawn, it's €155 million, so an amount of far above the €300 million, is a nice liquidity buffer for ONTEX. Now we will pass the word back to Gustavo, who will tell a bit more about the outlook for this year.