Ontex Group NV Q3 2024 Financial Results

Ontex Group NV (ONTEX.BR), a prominent international personal hygiene company, announced a 2% year-over-year revenue growth for Q3 and a remarkable 29% increase in adjusted EBITDA to €56 million. Currently implementing a transformation strategy, the company revealed plans to divest its Brazilian operations, adjusting its revenue growth forecast for 2024 to a range of 2-3%.

Key Takeaways

• Ontex achieved a 4% volume increase, predominantly from Adult Care and Baby Care in North America.
• Reported 2% revenue growth year-over-year; adjusted EBITDA surged by 29% to €56 million.
• Plans to sell its Brazilian unit to Softys for €82 million.
• Revised revenue growth outlook for 2024 lowered to 2-3%.
• Management remains positive about growth in North America and improving profitability.

Company Outlook

• Ontex is focused on transforming its operations, aiming to reduce net debt to €579 million with a leverage ratio of 2.4x.
• The company targets an adjusted EBITDA margin of 12% and over €20 million in free cash flow.
• Plans to refinance bonds by mid-2025 are underway, with proceeds from the Brazilian sale anticipated to reduce gross debt.

Challenges and Opportunities

Bearish Highlights

• U.S. operations continue to dilute overall profits due to ramp-up inefficiencies.
• Management noted delays in customer onboarding affecting sales delivery.

Bullish Highlights

• Strong double-digit growth expected for U.S. business in Q4 and into 2025.
• New product innovations in Baby Care and Adult Care are poised to drive growth.
• High growth projected in the U.S. retail market for Baby Care until 2025.
• A favorable demographic trend supports the growth of Adult Care.

Misses

• Specific revenue targets for 2024 and 2025 were not disclosed.
• The portfolio streamlining initiative may lead to some volume loss.

Q&A Highlights

• Management confirmed strong growth expectations for Q4 and 2025 in the U.S.
• The onboarding of sizable customers is progressing on schedule, indicating significant future growth.
• Positive trends in product mix were noted, with a shift from baby diapers to baby pants in Europe.
• Cost transformation programs are emphasized for maintaining competitiveness.

In summary, Ontex is witnessing solid performance driven by key markets, especially in North America. Its strategic actions and product innovations suggest a positive outlook despite some operational difficulties. With a focus on transformation and efficiency, Ontex appears well-positioned for future success in the personal hygiene sector.

Full Transcript – Ontex Group (ONTEX) Q3 2024

Presentation Overview

Geoff Raskin: Good afternoon, everyone. Thank you for joining us today. This is Geoff Raskin from IR. We have CEO Gustavo Paz and CFO Geert Peeters with us to discuss the Q3 results. Please note the Safe Harbor concerning forward-looking statements.

Gustavo Paz: I'm proud of our teams for solid delivery in Q3. We continue to grow volumes by 4%, driven by Adult Care and Baby Care in North America. Despite lower sales prices due to past raw material price decreases, our revenue grew by 2% year-over-year. The adjusted EBITDA margin increased to 12%, showing strong delivery on our cost transformation program and reducing our leverage to 2.4x. We're excited about the planned sale of our Brazilian business to Softys for €82 million, enhancing our focus on retail brands and healthcare.

Geert Peeters: Our Q3 revenue showed a growth of 1.7%. Adult Care volume up was double-digit, driven by new contracts, while Baby Care volumes were stable in Europe but surged in North America. Pricing remains stable as we aim to maintain competitiveness.

Gustavo Paz: We expect strong growth in the U.S. business through 2025 due to ongoing contracts with significant customers. Our transformation initiatives position us well for continued success.

Geoff Raskin: We appreciate all your questions and insights. Thank you for your participation today.

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