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Diaper Maker Ontex Starts To 'Gather Momentum' In Third Quarter

By Steve Wynne-Jones
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Diaper Maker Ontex Starts To 'Gather Momentum' In Third Quarter

Diaper and wet wipes manufacturer Ontex has posted a 0.2% increase in like-for-like sales in the third quarter of its financial year, however its Europe division continues to weigh on the business' performance.

Third quarter like-for-like revenue at the firm, which owns the Bio-Baby, Moltex and NAT brands, among others, stood at €567.6 million, up marginally on the €566.6 million it reported for the same period last year.

Reported revenue was up 1.4% in the three month period to 30 September, while adjusted EBITDA was up 0.5% to €65.8 million.

The group said that topline sales were driven by the 'continuous sales momentum' of its brand portfolio in emerging markets, with the group posting higher revenue in Brazil in particular.

Its Transform-to-Grow initiative, which has seen it streamline operations and focus on growth markets, saw the full implementation of new operational and commercial workstreams, with a full update on this expected at the close of the full year.

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The group also saw a 4.7% decrease in its net debt levels, which stood at €875.7 million in the period, down €42.8 million on the same period last year.

'Turning The Corner'

“Our Q3 trading performance shows that we are turning the corner and gradually gathering momentum," commented Charles Bouaziz, Ontex chief executive.

"For the first time this year, both like-for-like sales and adjusted EBITDA at constant currencies rose in the quarter versus last year. Sales of Ontex brands in AMEAA continued to be our growth engine, while the sales trend of retailer brands in Europe confirmed that the business is progressively recovering, as expected. We maintained our focus on free cash flow generation, which resulted in a further reduction of net debt."

Geographical Performance

On a regional basis, its Europe division saw a 6.0% decline in like-for-like sales (-5.6% reported sales), with the period marked by 'strong promotional activity' by competitor brands, with Ontex also seeing retailer brand contract losses.

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Eastern Europe saw a 7.9% like-for-like revenue decline, while Western Europe saw a decline of 2.5%.

The Americas, Middle East, Africa and Asia (AMEAA) region, on the other hand, saw a 6.6% increase in like-for-like sales (+9.5% reported), with local brands performing well in Brazil and Mexico and US sales almost on a par with the strong comparative quarter the prior year.

The group's Healthcare division saw a 2.1% increase in like-for-like sales (+2.0% reported), due to increased sales of adult diapers.

Analyst Viewpoint

Commenting on its performance, analysts Liberum Capital said "We expect 3%+ LfL growth on average over the next 5 years driven by increased exposure to branded products, emerging markets and adult incontinence.

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"Margins should return to growth from 2020 driven by operating leverage, stabilising input costs and the benefits of price increases."

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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