• Revenue Growth: 2% like-for-like versus Q3 last year; 3% sequential growth compared to Q2 this year.
• Adjusted EBITDA Margin: Increased to 12%, up 2.4 percentage points from the previous year.
• Adjusted EBITDA: Rose 29% to EUR56 million in Q3.
• Volume Growth: 4% overall, with double-digit growth in adult care and North America baby care.
• Operating Cost Reduction: Decreased by 4% due to cost transformation program.
• Net Debt: Reduced to EUR579 million, a EUR9 million improvement from June and EUR86 million from the start of the year.
• Leverage Ratio: Decreased to 2.4x from 2.5x in June and 3.3x at the start of the year.
• Sales Prices: 2.6% lower year-on-year, reflecting past raw material price decreases.

• Warning! GuruFocus has detected 7 Warning Signs with ONXXF.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ontex Group NV (ONXXF) achieved a 4% volume growth in Q3, with double-digit growth in adult care and North America baby care.
• The adjusted EBITDA margin increased to 12%, a 2.4 percentage point improvement from the previous year, driven by volume growth and cost transformation.
• The company reduced its leverage ratio to 2.4x, strengthening its balance sheet.
• Ontex Group NV (ONXXF) launched innovative products like Dreamshield 360 baby pants and SatinSense tampons, enhancing its product portfolio.
• The company received an EcoVadis Gold rating for ESG transparency, highlighting its commitment to sustainability.

Negative Points

• Sales prices decreased by 2.6% year-on-year, reflecting past raw material price decreases.
• The company revised its revenue growth guidance to 2-3%, down from a previous higher outlook.
• There were inefficiencies in the supply chain due to production ramp-up and asset transformation, impacting operating costs.
• The feminine care category experienced lower sales volumes due to a strategic refocus.
• Ontex Group NV (ONXXF) faces intensified promotional activity from branded players, affecting market share dynamics.

Q & A Highlights

Q: Can you elaborate on the US business, specifically regarding contract ramp-ups and profit evolution? A: Gustavo Paz, CEO, explained that the onboarding of new customers in the US is proceeding as expected, with strong growth anticipated in Q4 and continuing into 2025. The ramp-up of capacities and deliveries is being spread throughout the quarters. Geert Peeters, CFO, added that while the US business is currently dilutive, economies of scale and reduced inefficiencies will improve profitability over time.

Q: What led to the change in revenue growth guidance, and how is Europe performing? A: Gustavo Paz clarified that the change in guidance is due to the phasing of orders and deliveries, not a loss of customers. The onboarding of new US customers is on track, but volumes are being spread across quarters. In Europe, Ontex is meeting expectations, with stable baby care volumes and positive innovation impacts.

Q: Can you provide insights into the adult care market and share gains in Europe? A: Gustavo Paz highlighted that adult care is a growing segment due to an active aging population. Ontex is seeing growth in both institutional and retail channels, supported by consumer trends and strategic partnerships with retailers. The company has a strong innovation pipeline that is well-received by customers.

Q: What is the outlook for pricing and mix in Europe, considering branded competition? A: Gustavo Paz noted that the mix is positive due to innovation and competitive advantages in selective categories. While branded players are increasing promotional activities, retail brands remain strong due to high quality and sustainability. Ontex does not foresee major pricing battles and emphasizes its cost transformation program to maintain competitiveness.

Q: What are the plans for refinancing and capital allocation following the Brazilian business sale? A: Geert Peeters stated that Ontex is preparing for refinancing, aiming to complete it by mid-next year. The company plans to reduce gross debt significantly and allocate capital smartly between different financial products, ensuring sufficient headroom and cost efficiency.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.