Ontex Q3 2021 Trading Update
Stabilizing revenue: LFL in line with prior year and sequential growth
Margin down: Severe impact of cost inflation and supply chain disruptions
Executing strategic agenda: Growth priorities & structural cost savings
AALST-EREMBODEGEM, Belgium--(BUSINESS WIRE)--October 28, 2021--
Regulatory News:
Ontex Group NV (Euronext Brussels: ONTEX) today announced its results for the nine months ending September 30, 2021.
Esther Berrozpe, Ontex CEO, commented: "Over the first nine months, the focus has been on stabilizing the top line and our revenue started to grow quarter on quarter since Q1. The unprecedented raw material and supply chain crisis has impacted both costs as well as our ability to source raw materials. This had a very significant impact on our Q3 results. In this environment, we are accelerating our actions to turnaround Ontex's performance. We must become more efficient by reducing our cost base and at the same time, be more customer centric to maximize our growth opportunities. Cost savings generated so far this year have offset a large part of the raw material price increases. The long-term structural changes are on track and lay important foundations for the future. I am confident that these will be of considerable benefit once the current challenges are behind us."
Q3 2021
-- Revenue of EUR512 million leading to top-line stabilization: +0.9% at
reported currencies and stable LFL; sales up in Adult Care & Baby Pants.
Q3 grew sequentially +2% compared to Q2 despite c. EUR13 million of
orders not produced due to supply chain disruptions
-- Adjusted EBITDA: EUR40 million, -29.9% vs prior year; strong generation
of structural operational efficiencies and reduced overhead cost
partially offset the impact of unprecedented increases in raw material
prices
-- Adjusted EBITDA margin of 7.8%, -344 bps year-on-year
-- Currency effects: +EUR4.5 million on sales and +EUR1.2 million on
Adjusted EBITDA
-- Net debt: EUR837 million at September 30, 2021, a slight decrease
compared to December 31, 2020 and June 30, 2021
STRATEGIC PRIORITIES UPDATE
-- Simplify our Organization: Major reorganizations of Commercial Divisions,
end-to-end Supply Chain, and Innovation activities
-- Focus on attractive categories: Solid mid-single digit sales growth in
focus areas of Adult Care and Baby Pants
-- Accelerate innovation cadence: Announced new Excellence Center in Mayen
(Germany) for Global Engineering and Global Baby Care Platforms
-- Structurally reduce costs: generated EUR42 million net costs savings YTD
-- Drive higher capacity utilization: Announced project to phase out
manufacturing in Mayen (Germany) by mid-2022
-- Deleverage: received EUR81 million following an arbitration settlement
agreement regarding the acquisition of the Brazilian business
-- Drive our sustainability agenda: broke ground at Ortona (Italy) factory
to house Italy's largest system for on-site solar power generation and
consumption as another step towards our goal of carbon neutral operations
by 2030
2021 OUTLOOK
Since the beginning of the year, Ontex has been generating significant net operating and SG&A costs savings, which have been important given the unprecedented rise in commodity raw material prices as the year progressed. More recently the Group has faced additional cost increases in energy, as well as higher costs and availability issues in transportation and other raw materials. In this context, Ontex now expects for FY 2021:
-- LFL revenue c. -1%
-- Adjusted EBITDA margin of c. 9%
-- Strict cash control with capital expenditure at 3.5% of revenue
KEY FINANCIALS FOR FIRST 9 MONTHS AND Q3 2021
9 months Third Quarter
-------------------------- ----------------------
in EUR million, except per
share data and ratios 2021 2020 Variance 2021 2020 Variance
-------------------------- ------- ------- -------- ----- ----- --------
Reported Revenue 1,492.9 1,561.3 -4.4% 512.3 507.9 0.9%
-------------------------- ------- ------- -------- ----- ----- --------
LFL Revenue 1,527.1 1,561.3 -2.2% 507.8 507.9 0.0%
-------------------------- ------- ------- -------- ----- ----- --------
Adjusted EBITDA 141.0 183.1 -23.0% 40.0 57.1 -29.9%
-------------------------- ------- ------- -------- ----- ----- --------
Adjusted EBITDA Margin 9.4% 11.7% -228 bps 7.8% 11.3% -344 bps
-------------------------- ------- ------- -------- ----- ----- --------
Net Debt 836.9 877.6 -4.6%
-------------------------- ------- ------- --------
Net Debt / LTM Adj. EBITDA 4.32x 3.43x 0.89x
-------------------------- ------- ------- --------
Notes which apply to this document
Unless otherwise indicated, all comments in this document on changes in
revenue are on a like-for-like basis (at constant currencies).
Definitions of Alternative Performance Measures (APMs) in this document can be
found under the section Corporate Information.
Due to rounding, numbers presented throughout this press release may not add
up precisely to the totals provided and percentages may not precisely reflect
the absolute figures.
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INVESTOR UPDATE
Ontex will hold a virtual investor update on December 15, 2021.
ARBITRATION SETTLEMENT RECEIVED AND USED TO REDUCE DEBT
Ontex announced on September 15, 2021 that it had entered into an agreement with Hypera S.A. ("Hypera", formerly Hypermarcas S.A.) settling claims relating to the acquisition of the Brazilian personal hygiene business of Hypera by Ontex. As part of the settlement, Ontex received EUR81 million (BRL 500 million) from Hypera on October 1, 2021. After deduction of c.EUR7 million arbitration-related costs, the balance of the settlement amount has been used to pay down debt, consistent with the Group's ambition to reduce leverage.
Q3 2021 HIGHLIGHTS
Q3 2021 revenue was EUR512 million, stable LFL versus the prior year and up 2% sequentially versus Q2 2021 despite c.EUR13 million of orders which could not be fulfilled due to supply chain disruptions. The areas identified in June as key to delivering sustained revenue improvement were visible in Q3: starting to reverse the sales trend of retailer brands in Europe, outperforming in North America, growing our current emerging markets business, and accelerating in Adult Care. On a reported basis, sales were up 0.9% due to a positive currency impact of +EUR4.5 million in the quarter.
Adjusted EBITDA in Q3 2021 was down -29.9% compared with prior year at EUR40 million. Significantly higher raw material prices were the main driver of the decline, and lower volumes weighed on the quarter as well. These impacts were partly mitigated by the strong reduction of net operating expenses and SG&A related to ongoing productivity and overhead savings programs. Adjusted EBITDA margin of 7.8% was down -344 bps versus prior year including a currency impact of +EUR1.2 million.
Net debt was EUR837 million at September 30, 2021, slightly reduced compared to the positions at December 31, 2020 and June 30, 2021. Leverage was 4.32x at September 30, 2021. Net debt pro forma following the settlement payment of EUR81 million received on October 1, 2021 was EUR756 million, resulting in pro forma leverage of 3.91x.
OPERATIONAL REVIEW: CATEGORIES
Categories 9 months Third Quarter
---------------------------------- -------------------------------
in EUR % as % at % as % at
million 2021 2020 reported LFL 2021 2020 reported LFL
----------- ------- ------- -------- ------ ----- ----- -------- -------
Ontex
Reported
Revenue 1,492.9 1,561.3 -4.4% -2.2% 512.3 507.9 0.9% 0.0%
----------- ------- ------- -------- ------ ----- ----- -------- -------
Baby Care 807.2 871.8 -7.4% -4.6% 282.5 282.1 0.1% -1.1%
----------- ------- ------- -------- ------ ----- ----- -------- -------
Adult Care 510.4 503.7 1.3% 3.9% 174.2 165.3 5.4% 5.0%
----------- ------- ------- -------- ------ ----- ----- -------- -------
Feminine
Care 147.5 162.3 -9.1% -12.0% 46.9 51.3 -8.6% -9.0%
----------- ------- ------- -------- ------ ----- ----- -------- -------
Other 27.8 23.5 18.2% 22.7% 8.7 9.1 -4.4% -5.5%
----------- ------- ------- -------- ------ ----- ----- -------- -------
Baby Care
Q3 2021 Baby Care revenue decreased -1.1% year-on-year, while at the same time Q3 was the second quarter in a row of mid-single digit sequential growth. Sales of Baby pants in Q3 grew mid-single digits compared to prior year in both Europe and AMEAA as a result of our focus to capture more of the consumer trend towards this product type. Baby diaper revenue was lower overall based on a decline in Europe and growth in AMEAA. For the first 9 months of 2021 Baby Care sales were down -4.6%.
Adult Care
Q3 2021 sales in the Adult Care category grew 5.0% year-on-year and were also up sequentially versus Q2 2021. Adult Pants increased ahead of the overall category led by double-digit growth in AMEAA. Retail channel revenue was up 14% with double-digit growth in both Europe and AMEAA. Sales in institutional channels were slightly lower, and continued to be impacted by a slow recovery in occupancy rates in care homes. Adult Care sales were up 3.9% in the first 9 months of 2021.
Feminine Care