Ontex Group Nv Ord

Good afternoon, everyone, and thank you for joining us today. This is Geoff Raskin from IARC. I'm pleased to have today with us Gustavo, our CEO, and Geir Peters, our CFO, to present the third 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're well aware that since 2022, our P&L is based on continuing operations, which consists of our core market activities only. while the emerging markets are reported as discontinued operations. We have already divested or are in the process of divesting most of these. But meanwhile, these activities continue to contribute to our results. Please note that since the start of the year, we have changed the definition of free cash flow. To reflect free cash flow after financing and the operating savings in our EBITDA bridge, we have adjusted to a net figure after subtraction of implementation costs. We have now also adapted the presentation of the year-on-year bridges for adjusted EBITDA, isolating only the translation impact of foreign exchange fluctuations, both for Q3 and for year-to-date figures.

With that cleared up, Gustavo, over to you. Thanks, Geoff. I'm proud of the on-text teams with a solid delivery in Q3 as summarized on slide three. First, we continue to grow volumes by 4% with double-digit growth in adult care and double-digit volume growth in North America baby care, two of our focus areas supported by a strong sustainable innovation pipeline. Sales prices were lower, reflecting past raw material price decreases, leading to a revenue growth of 2% like for like versus quarter three last year, and 3% more sequentially compared to quarter two this year. slowing, showing continued growth in the year and making quarter three the highest revenue generated in core markets since 2021. Second, the adjusted EBITDA margin rose to 12%, 2.4 percentage points higher year ago, and adjusted EBITDA rose 29%, driven by volume growth and continued strong delivery on the constant formation program. Third, With lower debt and increased EBITDA, we brought our leverage down further to 2.4 times, strengthening our balance sheet. These solid results are the outcome of the laser-focused execution of our strategy through the defined three value creation drivers. On next slide now, and before digging into this, let me highlight the agreement we reached to sell our Brazilian business to Softis. We expect the deal to be closed during the first half of 2025, by which we will receive net proceeds of about 82 million. This transaction will thereby not only allow us to focus even more on retail brands and healthcare in Europe and North America, but also give us additional means to transform the company further, building on the three value creation drivers that you see described on this slide. Starting first with competitive and sustainable innovation. This quarter, we launched our next generation of baby vans, DreamShield 360, with our unique and patented pee and poo barriers and a 360 fit for all around protection and comfort. We anticipate a strong uptake from this product, as we already see with our latest baby diaper innovation launched in quarter two with integrated and patented stop and lock anti-leak technology. In feminine care, we introduced satin-sense tampons, improving comfort with its silky coating, ensuring smoother insertion and removal. And in adult care, we are deploying our channel X-Core technology, a new core design that meets the top three needs of adult consumers. protection, comfort, and discretion. These innovations also are environmental benefits, reducing plastic consumption. On that topic, I would like to congratulate the ONTEX collaborators and the sustainability team in particular for the Ecovalleys gold rating for ESG transparency awarded recently. They are doing a terrific work in that field. This innovation pipeline is the fuel for our business expansion ambitions shown in the next slide. We recorded double-digit volume growth again in adult care category with our strong position in Europe supported by consumer trends. We also continue to grow baby care volumes by high double-digit with retailers in North America, with new contracts having started in the last quarters and continue onboarding of new customers. two in the first half of the year, and now two more in quarter three. The combined effect of a strong innovation pipeline and our commercial initiatives are helping us to build solid long-term partnership with our customers. And third driver is best-in-class operations, where we reduce our operating costs again by 4%, gaining competitiveness by a relentless implementation of our cost transformation program. A key milestone to pursue this effort is the conclusion last week of the social plan regarding our Belgian footprint transformation. We will close ECLO plant by year end, and we will transform Bougainville over the next year and a half into a center of excellence for research, development, and production of medium and heavy incontinence products. While these are very difficult decisions to take, to make, They aim to strengthen our operational cost efficiency across Europe, enabling us to improve our competitiveness further. That being said, I leave you over here for the details of the financials.

Thank you, Gustavo. So we are now on slide seven with the revenue bridge for Q3 versus last year, showing like for like the growth of 1.7%. As Gustavo already mentioned, out of this 1.7%, volume and mix grew 4.4%. The main contribution came again from adult care with volumes growing double digit, as it did in the first two quarters. Adult care is now the largest category in our portfolio. We have a very strong position in Europe, especially in the institutional channel where we gained this year new contracts. Also in the retail channel, we noticed further growth supported by societal trends with a growing and more active aging population. Volumes were up in baby care as well. In Europe, they were stable, thus we outperformed the market. Overall market demand continues to reduce slightly in line with the lower birth rates, and at the same time, this quarter, retail brands are not gaining share due to continued intensified promotion activity by branded players. Then in North America, however, baby care volumes were up double digits with a steep drop ramp up in production. This is supported by several new contract gains this year, with two large new retail contracts that started up in Q3. While retail is growing fast, we are more selective in contract manufacturing, where we mainly focus on a limited number of lifestyle customers. I've also been more selective keeping focus in feminine care, which explains the lower sales volumes in that category in the quarter. Sales prices were 2.6% lower year on year, reflecting the drop of raw material prices in the past periods. The sales prices thereby normalized after the huge increase in 22 and 23. Compared to Q2 this year, our sales prices have stabilized, as did raw material prices. Sales prices remain, of course, an instrument to strengthen our competitive positions, combined with innovation, reliability, quality, and of course, excellent added value services. So, we will further engage in limited price investments, but this will be more than compensated by higher efficiency. This brings me to slide eight with the adjusted ABDA bridge. The adjusted EBITDA grew 29% to reach €56 million in Q3. Let me go through the different building blocks. The strong volume mix, as explained on the previous slide, contributed €8 million. Our cost transformation program continues delivering significant savings, this quarter amounting to €40 million net of implementation costs. And as before, this comes from multiple improvement initiatives in purchasing, manufacturing, logistics, and product innovation. These reduce our operating cost base year on year by 4%. Next, you see the 12 million Euro impact from lower sales prices. But as I explained before, this is more than covered by decreased raw material prices. The industries driving these prices have been normalizing gradually after the peak in 22. And currently, raw material prices are stabilizing. If you look at the impact year on year, this is still a significantly positive. Other operating costs were up 10 million euro. This is explained by continued inflation of wages, energy, and logistic costs, but also, and this quarter more than before, by inefficiencies in our supply chain due to production ramp-up and asset transformation. These are of a temporary nature, and we expect these to bring important savings in the future. Finally, SG&A costs were also slightly up with inflation and Forex translation effects at a limited negative impact. All in all, the adjusted WDA margin further strengthens, growing from 9.5% in Q3 last year to 12% this year. And finally, we can see further strengthening of the balance sheet on slide nine. Net debt, which is presented in green here, landed at 579 million euro at the end of September, which is 9 million euro better than in June, and even 86 million Euro improvement compared to the start of the year, thanks to strong adjusted EBDA generation and the disposal of Algeria and Pakistan. This lower debt drives down our financing costs thanks to a minimum use of the revolving credit line and a lower margin which is based on the leverage grid. The adjusted EBDA for the total group generated in the last 12 months and adjusted for scope changes further rose to €241 million, which is shown in blue. And then in orange, the leverage ratio dropped further to 2.4 times, improving compared to 2.5 times in June and 3.3 times at the start of the year. This brings us in an even stronger position to realize a successful refinancing, which we are actively preparing. I hand you back over to Gustavo for the outlook.