• Revenue Growth: 3.5% like-for-like, driven by 6% volume growth.
• EBITDA Margin: Recovered to 12%, with a 28% improvement in EBITDA to EUR223 million.
• Free Cash Flow: EUR48 million, a significant improvement from the previous year.
• Leverage Ratio: Reduced to just below 2.5 times.
• Net Profit: EUR21 million positive in core markets, despite EUR55 million in non-recurring costs.
• Adjusted EBITDA: Increased by 28% to EUR223 million.
• CapEx: EUR112 million, representing close to 6% of core market revenue.
• Net Debt: Reduced by 8% from EUR665 million to EUR612 million.
• Gross Financial Debt: Reduced from EUR834 million to EUR736 million.
• Available Liquidity: Increased from EUR322 million to EUR370 million.

• Warning! GuruFocus has detected 6 Warning Signs with ONXXF.

Release Date: February 19, 2025

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

Positive Points

• Ontex Group NV (ONXXF) reported a 3.5% like-for-like revenue growth in 2024, driven entirely by a 6% increase in volume, particularly in North America and selected categories.
• The company's EBITDA margin recovered to 12%, supported by a cost transformation program that improved competitiveness and profitability.
• Ontex Group NV (ONXXF) achieved a strong free cash flow of EUR48 million, a significant improvement from the previous year.
• The leverage ratio was reduced to below 2.5 times, providing greater financial flexibility.
• The company launched 13 major innovations in 2024, focusing on sustainable and competitive product development, and filed for 28 new patent families, enhancing its innovation strategy.

Negative Points

• Sales prices decreased by 2.2% overall, reflecting lower raw material prices and impacting revenue in certain categories.
• The company incurred significant non-recurring costs, including EUR62 million in restructuring provisions related to the Belgian footprint and EUR11 million in asset impairments.
• Discontinued operations in emerging markets resulted in a loss of EUR11 million, affected by challenging market conditions and divestment-related costs.
• The effective tax rate improved, but net profit in core markets was lower due to post-tax non-recurring costs.
• The company faces potential tariff risks in North America, which could impact cost structures and pricing strategies.

Q & A Highlights

Q: Can you explain the relatively low incremental margin in your 2025 EBITDA guidance? Are there additional cost headwinds, or is this a case of prudence? A: Gustavo Paz, CEO: We are being prudent given the current economic, social, and political circumstances. We aim to continue showing growth in EBITDA and cash flow, confirming the range set in our outlook.

Q: What are the expected restructuring costs impacting free cash flow in 2025, and what might a clean free cash flow look like? A: Geert Peeters, CFO: We expect solid free cash flow in 2025. The restructuring costs are spread over 2024 and 2025, with about half of the EUR60 million Belgian footprint restructuring expensed in 2024 and the remainder in 2025 and early 2026.

Q: Can you elaborate on your production footprint in North America, particularly the capacity changes in Stokesdale and Mexico? A: Gustavo Paz, CEO: Stokesdale's capacity will more than triple by the end of 2025, with increased output. We maintain a footprint in Mexico to supply the US West Coast, offering supply chain benefits.

Q: How might potential tariffs on imports from Mexico affect your business? A: Gustavo Paz, CEO: Tariffs are a cost like any other, and we are prepared to address them. We are committed to our growth ambitions in the US and have plans to mitigate potential challenges.

Q: What is the expected net debt ratio by the end of 2025, and what proceeds do you expect from the Brazilian and Turkish sales? A: Geert Peeters, CFO: We expect around EUR100 million from the Brazilian and Turkish sales. We aim to maintain a leverage ratio between 2 and 2.5, which we consider healthy.

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