Q2 results
Revenue [1] of Core Markets was €396 million, up 10% like for like, including 5.1% volume/mix growth and 5.3% overall higher prices. With a 2.9% increase compared to Q1, this marks five consecutive quarters of sequential growth.
Adjusted EBITDA [1] of Core Markets was €19 million, down 57% year on year, and 10% quarter on quarter. The revenue growth drop-through contributed €32 million and gross savings €17 million to the year-on-year evolution, partly offsetting the adverse impact of raw material and operating cost inflation of €(76) million. The adjusted EBITDA margin thereby dropped to 4.8%, down -7.8pp versus Q2 2021, and down -0.7pp sequentially versus Q1 2022, as the geopolitical context drove input costs up further sequentially more than prices were raised.
Total Group revenue, including discontinued Emerging Markets was €598 million, up 15% LFL, driven by 10% pricing and 4.3% volume/mix, while adjusted EBITDA came in at €25 million, down 52% year on year, but slightly up quarter on quarter demonstrating stabilization at total Group level. The resulting EBITDA margin of 4.1% was down 6.1pp versus Q2 2021, and 0.3pp sequentially versus Q1 2022.
[1] At current exchange rate.
Unless otherwise indicated, all comments in this document on changes are on a year-on-year basis and for revenue specifically on a like-for-like (LFL) basis (at constant currencies and scope and excluding hyperinflation effects). Definitions of Alternative Performance Measures (APMs) in this document can be found further in the document.
Outlook
The uncertain geo-political environment and resulting volatile inflationary macro-economic situation is persisting, causing visibility to remain low. Provided that the market momentum persists and inflationary pressure on commodity and energy prices does not further expand, Ontex expects for the full year 2022:
Revenue of Core Markets and of total Group, including discontinued Emerging Markets, to grow at least 10% like for like, based on positive market momentum and continued price increases;
Adjusted EBITDA margin for the next quarters to sequentially improve for both Core markets and the total Group, as additional pricing is passed through and structural cost reduction measures continue to deliver;
Adjusted EBITDA of Core Markets to be within a €100 to €110 million range, while total Group adjusted EBITDA is expected in a €125 to €140 million range;
Cash flow discipline to remain a focus, with leverage to reduce by year end from 6.8x in June, and working capital over sale is to normalize while capex is to gradually grow to 4% of revenue in H2.
Portfolio developments
Ontex entered into a binding agreement to sell its Mexican and related export activities to Softys S.A. marking a milestone in the transformation of Ontex. The transaction is based on an enterprise value of MXN $5,950 million, or approximately €285 million[1]. This includes a deferred payment of MXN $500 million, spread over a maximum of five years. Net cash proceeds are estimated at approximately €250 million, after the impact of taxes, transaction expenses and balance sheet adjustments. The closing is foreseen by early 2023, subject to the customary conditions, including the applicable merger clearance approvals. Proceeds from the transaction will be exclusively applied to reduce debt.
Ontex is making progress in the divestment of its remaining Emerging Markets businesses, as discussions with potential acquirers continue.
[1] At current exchange rate.