Ontex reports strong H1 results, raises full-year outlook

Ontex has announced robust results for the first half of the year, leading to an upward revision of its full-year outlook. The company attributed its improved profitability and reduced leverage to volume growth and cost transformation.

In North America, Ontex experienced a significant increase in demand, in contrast to the overall stable market for baby care products. This growth is attributed to new contracts initiated in the latter half of 2023 and the first two quarters of 2024. Ontex anticipated further volume growth supported by additional secured contracts. The year-on-year comparison benefited from customer destocking in Q1 2023, which had depressed order levels.

In Europe, demand for baby care products weakened, while demand remained stable for feminine care and grew for adult care, reflecting demographic trends. Retail brands in baby diapers saw reduced share gains due to promotional activities by branded players, but continued to perform well in baby pants, feminine, and adult care categories. Ontex’s sales volumes in Europe mirrored these trends, with lower baby diaper sales and strong increases in baby pants and adult care, particularly in the healthcare channel.

Average prices fell by 2%. In healthcare, prices remained stable due to longer-term, rigid contracts, but other categories saw sequential price declines since H2 2023, in line with raw material price decreases that began earlier that year.

 

Adjusted EBITDA increased by 31% to €110 million compared to H1 2023, and by 22% compared to H2 2023. The company’s cost transformation program, along with sustainable innovation, bolstered profitability and competitiveness, improved customer service, and facilitated price management to invest in further volume growth. Volume growth and mix improvement contributed €6 million, while net cost inflation impact remained flat, and forex effects were supportive.

The cost transformation program yielded €37 million in net operating savings, reducing the operating cost base by 4.9%. Drivers behind these structural savings include product innovations, manufacturing and supply chain improvements, and procurement initiatives. In June, Ontex announced plans to restructure its Belgian production and distribution activities as part of its strategic transformation to enhance its competitive position in Europe. This includes closing the Eeklo site and transforming the Buggenhout site into a center of excellence for research, development, and production of medium and heavy incontinence care products. This initiative aims to strengthen Ontex’s operational cost-efficiency across Europe.

Net costs rose by €3 million. Decreases in raw material costs had a €20 million positive impact, reflecting lower year-on-year price indices for fluff, super-absorbent polymers, and non-woven materials. However, these indices have begun to rise again sequentially since the end of 2023. Other operating costs increased by €11 million year-on-year due to inflation in salaries, energy, and distribution costs. SG&A expenditure increased by €12 million due to wage inflation and variable remuneration adjustments in the first half of the year. Forex fluctuations had a €2 million net positive impact, mainly due to the appreciation of some non-euro currencies in Europe.

The adjusted EBITDA margin rose to 12.0%, an increase of 2.6% points compared to H1 2023, and 2.0% points compared to H2 2023.

Gustavo Calvo Paz, Ontex’s CEO, stated: “We have achieved several key strategic milestones in the first half year. Two divestments were successfully completed, sharpening our focus on core markets further, and our cost transformation program delivered solid efficiency gains yet again. This consistent delivery, coupled with our sustainable innovation pipeline, allows us to grow our business in North America and strengthen it in Europe, which gives me confidence to deliver a strong year. Aiming to further strengthen our competitive position, we announced the intention to restructure our Belgian production and distribution activities. These measures will allow us to further reinforce and grow our business sustainably, while driving profitability and cash flow generation up”.