Ontex Group Nv Ord

Good afternoon, everyone, and thank you for joining us today. I'm Geoff Ruskin from Investor Relations, and I'm pleased to have with us Gustavo Calbobas, our CEO, and Geert Peeters, 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 it out loud, but I will assume you will have duly noted it. And with that cleared up, Gustavo, over to you.

Thanks, Geoff. While market conditions have not been supportive in 2025 so far, our ongoing transformation journey continues to structurally improve our competitive position in the market. You can see the benefits of this in the quarter-on-quarter results, where we turn the sequential growth. Our revenue in quarter three is up 4% compared to quarter two, driven by volumes from new contract wins in a continuous soft market environment. Our EBITDA margin improved by 3% points, thanks to the revenue growth and net cost improvement, including continued delivery on our cost transformation program. And meanwhile, our leverage remained at 2.7 over the quarter. The soft market environment on the first half of the year did continue in the third quarter. Therefore, our results are still lower compared to last year. Let me pass you over to here, for a more detailed financial analysis.

Thanks a lot, Gustavo. On this slide, you will find the different components that contributed to the 5% year-on-year decrease of revenue in Q3 to reach €445 million in the quarter. The price and mix impact was almost nil and contains a limited price investment and a small positive mix contribution. Since mid-last year, prices were rather stable, leading to a neutral year-on-year impact. The lower revenue is explained by lower volumes, as in the previous quartets. The drop amounted to 4% and is in line with the construction of the consumer demand in private label in Europe and North America. In adult care, we're growing by high single digits in the retail channel and we're ramping up capacity, including the healthcare channel, where Ontex has a high exposure and demand is more stable. Overall growth in adult care was 1%. In feminine care, we performed strongly, with a volume growth of 5%. And baby care volumes were down 11%, as demand continued to be soft in private label, partly as promotional activities of A brands continued in certain countries. In North America, this was exacerbated by a decline in contract manufacturing. Positive was the startup of new contracts in North America and in Europe, albeit that some started a bit later in the quarter than originally expected. We also recorded a 1% negative impact from Forex, caused by the depreciation of the British Pound, Australian Dollar, and especially the US Dollar. What this means on a quarter-on-quarter basis can be seen on the next slide. In the first two quarters, we have experienced sequential revenue declines by 5% each, but we are now turning the curve in quarter three, with 4% sequential growth, including a positive price-mix contribution. Volumes dropped in the first quarter mainly due to soft consumer demand and in the second quarter they came down further as on top some customers decreased inventories and on-takes faced some supply chain disruptions, amongst others due to the outage in our Segovia plant. Although the market remains very soft in the third quarter, customer destocking is over and capacity constraints are being solved. Moreover, we gained new contracts that mostly started up at the end of the quarter. Forex had a positive contribution in the first quarter and turned negative afterwards, mainly due to the depreciation of the US dollar. Now let's move to the adjusted EBITDA on the next slide. On the year-on-year bridge, we find the building blocks which led to the adjusted EBITDA of €51 million. The revenue decrease had a €6 million negative impact, which is a main explanation for the year-on-year adjusted EBITDA drop. As our cost transformation journey continues, net savings for an amount of €16 million in the quarter fully offset cost increases. Contributions came from optimizations in innovation, purchasing, supply chain and manufacturing, including the contribution from the ongoing Belgian footprint transformation. Raw material costs were still up year on year, mainly for fluff and packaging materials, albeit less than in Q2. Actual prices for raw materials have started to stabilize after the peak, but still remain high, higher than the level of last year. Other operating costs were up, largely due to inflation of salaries, logistics and other services. Furthermore, there are still some supply chain inefficiencies, which, however, are declining. Also, the increase in operating costs is partly offset by lower SG&A costs, which have been adapted to the lower volume level. The margin amounted to 11.4%, while this represents a 0.6 percentage point decrease versus last year. It's a 3% point improvement versus Q2. More on the quarter-on-quarter comparison can be found on the next slide. We experienced two quarters of sequential adjusted ABDA decrease, especially in the second quarter. But in Q3, we have been turning the tides from Q2 from the Q2 low point to return to the Q1 level. You can first notice the impact of the revenue evolution, which I described earlier. It is important to see that we have already recovered in the third quarter about 75% of the negative impact of the first half of the year. Net costs started to ease in Q3 versus Q2. Stabilization of raw material costs and improved supply chain efficiency allowed our continued cost transformation efforts and SG&A streamlining to flow through. Before I pass the word to Gustavo, let's cover first the leverage and net debt on the next slide. With solid EBITDA delivery, no material restructuring cash outs, and managing the cap expense, we produced positive free cash flow in the quarter. Net debt for the group thereby reduced by €9 million to €543 billion, maintaining a solid liquidity position. The leverage ratio remained stable at 2.7 times as the lower net debt was offset by slightly lower adjusted EBITDA in the last 12 months. Gustavo will now give more insight into our expectations to further improve revenue and EBITDA in Q4.