Ontex Group Nv Ord

Good afternoon, everyone, and thank you for joining us today. I'm Jeff Graskin from Investor Relations, and I'm pleased to have Gustavo, our CEO, and Geert Peters, our CFO, with us today to present the first quarter results. Before that, let me remind you of the safe harbor regarding forward-looking statements. I will not read them out loud, but I will assume you will have duly noted it. You are well aware that since 2012, Our P&L is based on continuing operations, which consists of our core market activities only. The emerging markets are reported as discontinued operations and widened the process of being gradually divested. These do still contribute to total debt and cash flow figures. Please note that we have slightly adjusted the definition of savings in our EBITDA bridge as to better reflect net savings, netting them with the implementation costs, whereas we previously reported growth savings. With that cleared up, Gustavo, over to you.

Thanks, Geoff, and hello, everyone. It is definitely good to start the year delivering a strong quarter one. This gives us confidence in the outlook we provided you in February and bring us further on our transformation path. Our results are summarized on the next slide. Let's continue expanding our business. 4% like-for-like revenue growth in the quarter. While last year our growth was largely price-driven, now it is based on volumes, especially North America being our main source of growth. And in Europe, we continue growing in selective categories such as adult care and baby banks, leveraging our competitive advantages. The adjusted dividend margin rose to 11.5%, 2.4 points higher than a year ago, and 1.1 higher than the previous quarter. Again, strong delivery of the cost information program was at the base, while we were managing prices in function of input cost and market dynamics. The strong EBITDA delivery in the quarter allowed to further reduce the net financial debt and increase the last 12 months adjusted EBITDA, which brought our leverage ratio to drop to 2.8 times. This is already below the three times we guided to be reached by year end. Our financial position is thereby continuously strengthening. Our delivery in Core 1 is largely the effect of our strategic roadmap that we are implementing starting 2023 and enabling value creation. Moving to next slide five now. As we have expressed multiple times, our vision is to be the number one trusted partner for our retail and healthcare customers. Our leadership position in Europe is well established in baby, feminine, and adult care categories, and we know it is not a given, so we need to work every day to nurture that. In North America, we are rapidly building this position, focusing first in baby care. To create value equity, We have identified three main drivers, and in each of these we have made further progress this quarter. First, by competitive and sustainable innovation, bringing value to our portfolio. We have rolled out new products like our new line of swimming pants and satin-sense tampons, among others. It feels good to also receive recognition to our efforts with the carbon disclosure project awarding us as an A- rating for leadership in climate change and B for forest disclosure, and thereby also listing us on the supplier engagement leaderboard. Awesome innovation will remind a leader and have now been listed for the second year in a row among top 10 applicants in Belgium. Second value driver, business expansion. With the biggest opportunity being in North America, where we envision a strong double-digit growth this year and beyond. The growth will come from existing and new customers, already delivering a strong quarter one. This will contribute more in the coming quarters as we are preparing for new launches in quarter two and quarter three of this year. And third, best-in-class operations. With further implementation of our cost transformation program, innovation, manufacturing, supply chain, and procurement, gradually transforming our European operations into a best-in-class. The operating cost base reduced by 5%, as we did in the last two years, enabling us to regain competitiveness. And finally, let's not forget that we have further progress on the portfolio refocusing with the finalization of the Algerian divestment early April. With that, I hand over to Geert for a more detailed analysis on our financial results. Thanks a lot, Gustavo, and also from my side, hello to everyone. Let me go into more detail in the elements that drove our results. Revenue grew 4% like for like in the first quarter of 2024, mostly driven by volume growth. Volumes grew strong double digits in North America, which currently focuses on baby care products. And as Gustavo explained, growth came from additional contracts secured in the second half of last year, and new contracts have kicked in this quarter and are ramping up. In Europe, adult care grew by 10% with retail brands gaining market share and on-tech strengthening its position. As to baby care, we noticed stronger competition from the A-brands trying to recover market share with promotional activities. We, however, managed to compensate declining diapers with double-digit growth in the selected category of baby pens. Pricing, and that in line with expectations, ended slightly lower than a year ago. Prices have been coming down since the second half of last year, subsequent to the raw material price decreases. As to Forex, we continue to have a slight adverse impact, bringing the total growth to 3%. Let's move to EBITDA on the next slide. We managed to increase the adjusted EBITDA by 30% year-on-year. Let's explain step-by-step. First, there's a slight positive impact from volume and mix, as I explained on the previous slide with the revenues. The most important driver, however, remains our structural cost transformation program, which continues to deliver important structural net savings, yet again 5% of operational costs. And as explained in Revenue Bridge, prices were slightly lower, reflecting the positive evolution of raw material indices. They came down sequentially last year, with year-on-year impact turning positive in the last quarter of 2023. We do not expect further raw material price improvements in the coming months. Operating costs continue to be impacted by inflation, but at a lower pace than last year. This includes energy costs and salaries primarily. The latter also mainly explains why SG&A costs are up. On top, this SG&A includes the actualization and variable remuneration at the start of the year, which is actually more than enough in one quarter, and it's based on the solid performance of 23%. Finally, the Forex impact on EBITDA turned positive for the first time since a while. This is largely the effect of the US dollar which weakened in Q1, impacting positively our US dollar costs and this more than offsets the adverse revenue impact. And as Gustav already explained, the strong growth of the adjusted EBITDA led to a further margin increase to reach 11.5%. If you then take slide 9, you can see the quarter-on-quarter evolution of the adjusted EBDA. It has been improving since mid-2022, and this quarter is already the seventh consecutive sequential increase. That EBDA improvement has also been the main driver supporting the leverage reduction, as we can see on the next slide. The leverage ratio on this slide is presented as a bold orange line. and this has been continually coming down since September 22 and now drops below 3 to 2.8. The drivers of this balance sheet strengthening are as well the decreasing net debt as the increasing last 12 months EBITDA evolution. Presented as a blue line, the LTM adjusted EBITDA is growing significantly, already up to €229 million this quarter. On one hand, as explained before, this is driven by the strong adjusted EBITDA delivered by the continuing operations, but on the other hand, the emerging markets also contribute this quarter another €12 million. Therefore, the total group EBITDA in Q1 amounted to €65 million, taking into account also a minimum of non-recurring items. Presented as a green line, the net financial debt came down in the first quarter to 646 million euro. As to cash flow generation this quarter, working capital was slightly up with growth of the business, but capital expenditure spending was lower than expected due to phasing. We however still expect our investment levels to reach 6% of the core market's revenue for the whole year. Looking back on the graph, to the mid-2023 and I'm again at the green line, please be reminded that this was impacted by the proceeds of the Mexican divestment which pushed down the net debt. Moreover, the adjusted EBITDA was taken out from the scope of the LTM EBITDA. Since then, net financial debt has been relatively stable as we temporarily reinvest the cash flow in the transformation of the group to drive mid-term value creation. I will hand over back to Gustavo for the outlook. Thank you, Geert. What I'm pleased about the further progress, we all have it very clear that much is still to be done, and the ONTEX team is determined to do it. The delivery so far continues giving us confidence in reaching the outlook we gave earlier this year, as we confirm on the next slide, 12. We expect core markets to grow revenue by low single digits, like for like, in 2024. Adjusting the margin of our core markets is anticipated to step up from 10% in 2023 to between 11% and 12% this year, driven mostly by continuous delivery on our cost information program. Looking at the total group, we expect free cash flow to improve year on year, And this while stepping up investments to more than 6% of our core market's revenue. And finally, we expect our leverage ratio to drop from 3.3 times at the start of the year to below 3 times by end of year. With 2.8 times end of March already, we anticipate to do even better by year end. And with this, Gil and I are ready to answer your questions.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star 1 on your telephone keypad. If you wish to cancel your request, please press star 2. And we can ask you to limit your questions, the number of questions, to 2. Thank you. We will now take our first question from Wim Hostet from KBCS. Please go ahead.