Ontex Stock

Good afternoon, everyone, and thank you for joining us today. I'm Geoff Raskin from IR, and I'm pleased to have with us Laurent Nielly, our CEO; and Geert Peeters, our CFO, to present the outcome of our strategic review and the results of the first half year of 2026.?

Before that, let me remind you of the safe harbor regarding forward-looking statements. I will not read it out loud, but I will assume you will have duly noted it.

With that cleared up, Laurent, over to you.

Thank you, Geoff, and good afternoon, everyone. Today, we have several key messages to share. Of course, our H1 results and our outlook revision, but also the change of CFO we just announced. And I want to take the opportunity to thank Geert not only for his numerical contribution in the last 2.5 years, but also to be there with me today as we guide you through some of the key changes at Ontex.

And in fact, today, I will spend my comments on the strategic review first before moving to highlights of H1 and our outlook, then Geert will cover the financial analysis of the half year. I will come back to give you our priorities for the remainder of the year.

When I took the helm of the company, my first mission was to ensure we would stabilize our business. This task will stay with us as we face a difficult environment. We've been very fast in deploying pricing actions, while at the same time pushing for more cost initiatives.

In parallel, my first six months as CEO have been dedicated to taking a fresh and objective look at every aspect of our business. With the support of the Board, we did deep review in both North America and Europe, leveraging external advisers and our full team. The outcome of this work is leading to a fundamental transformation of the company to resume both top and bottom line.

We have not waited to enter into execution mode. Actually, the consequences of the Middle East crisis made it all the more urgent for us to act. And as you can see here, we have taken already many steps.

Finally, I have made several changes in our leadership team. In addition to the new CFO we announced today, we have backfilled the Head of Europe and have a new Head of North America.

But let me now explain a little bit more what is behind our fundamental transformation. It is articulated around four major shifts.?First shift is to increase structural productivity by launching an ambitious expanded program, which we label Focus to Value. It will be a central pillar of the transformation, and I'll come back on the next slide with more details.

Second, we are resetting our approach in North America to transition from volume-led expansion to a disciplined value creation model focused on profitability, asset efficiency and returns.

Third and fourth relate to Europe, where we will both accelerate adult care, the cornerstone of our future profitable growth, while adopting a more targeted approach to protect our important baby and feminine care positions.

So let me expand on the Focus to Value program, which encompasses all productivity initiatives of the company. Reflecting on what we experienced in the past few years and building on the work with advisers, we have set clear and ambitious targets with a scope that goes deeper and broader, including cross-functional initiatives to further reduce complexity and waste, and with a focus on performance-driven culture.

We aim to deliver EUR 240 million of savings over '26-'28 versus our '25 baseline, which represents EUR 40 million more than the EUR 200 million we had committed for. Actions have already started to further adjust the cost base, amplify product and logistics savings through simplification, lean manufacturing and network optimization, and a streamlined organization across white-collar functions. There, at the end of the program, we aim to have reduced white-collar positions outside manufacturing by more than 20%.

To achieve the incremental EUR 40 million identified, it will require additional restructuring costs of about EUR 30 million to EUR 35 million, leading to a total of about EUR 60 million to EUR 65 million restructuring for the total program to be phased over the next 24 months, of which about EUR 20 million impacting the second half of '26.

To ensure we don't lose any time and are able to adjust as the business evolves, we have put in place a Transformation Management Office, which is operational today.

Let me now take you through our changes in North America. There, we have a clear case for change. Market dynamics have evolved in the past few years in the baby market. We have a complex setup that is suboptimal to drive cost leadership, combined to a business that does not deliver the returns expected on the high investments we realized. This is leading us to fundamentally reset the approach to prioritize profitability.

We have a new leadership in place. We've already adjusted our plans and have started to simplify our operational setup, which includes a thorough review of our assets and capacity. This resulted in a significant noncash impairment to adjust both the historical goodwill and the asset base. What we're pursuing? Progressively shift our portfolio where we can generate profit, and we believe there are many opportunities to do so, deliver a simpler operating model, all aiming to return to sustained cash flow generation.

Let me now touch briefly on Europe. Adult care is a structurally attractive growing category where we already hold a strong position. It will become the cornerstone of our future growth. We will increase focus and investment in capacity, innovation and go-to-market. That will reinforce our leadership and allow us to grow volume and volume share across retail and healthcare channels. This is obviously a topic that we will share more elements of in the future interactions.

But at the same time, we intend to protect our very important position in baby and feminine care. But we concluded here too that we had to approach it in a different way. As market declines, especially in baby, as we still have legacy assets that drive complexity despite our many recent efforts, we are reviewing our approach to ensure we allocate our resources where we can best unlock value to our customers and to us. At very specific times, it might mean to rely more on outsourcing partner. At other times, it might mean that we define our innovation strategy much more in tune with our asset capability to optimize investment. In all cases, this is to best position us to continue to serve our priority customers the best way possible.

To execute this shift, we have identified selective opportunities to simplify our asset base, retire some old lines to again drive efficiency. This explains why we have recorded some non-cash impairment here as well. All that to pursue clear goals, protect our volume share by focusing where we can make the difference for our customers, unlock innovation speed and productivity to improve return on capital.

To enable the transformation, we have mentioned additional restructuring cost and alluded it to non-cash impairments, which will total EUR 144 million that Geert will detail more in his part. This is consistent with our ambition to simplify our operations, to focus on segments best placed to improve returns, thereby shaping a more resilient, cash-generating and value-driven Ontex.

Let me now transition to our second key topic and share highlights of H1 and our revised outlook. Our H1 performance was mostly characterized by year-on-year lower demand leading to lower volume. It drove revenue down 2.2% like-for-like and adjusted EBITDA margin by 0.7 percentage points, the result of the lower volume, while cost inflation was offset by productivity. Nevertheless, we generated positive free cash flow and combined with some M&A inflows, this brought our net debt down to reduce leverage over the half 1 to 3.2x.

Let's look at quarterly evolution on the next slide. What is encouraging to see is that we have managed to stabilize the quarterly performance since the fourth quarter last year, and this despite a more challenging environment. While year-on-year, our Q1 performance was well below last year, in Q2, revenue was in line and adjusted EBITDA is stable. In fact, adjusted EBITDA is stable over the last three quarters, a good outcome of our singular focus on stabilizing the business, albeit we all agree at a level we would like to see higher. We will keep this maniacal focus on stabilizing our business, yet we know that in the middle, this crisis impact will be more severe in Q3.

So that leads me now to look at H2, where indeed we expect to continue to operate in an equally challenging and volatile environment. The demand side has softened a bit further compared to what we expected, and we believe it's going to remain mostly unchanged with still the opportunity that we have and the headwind that we have. On the cost side, however, the geopolitical situation remains uncertain and is pressuring our margin. It is fair to say that the speed and the intensity of the cost increase in Q2 was more than what we had expected, but we are taking actions. And as we explained earlier, we expect to fully recover the cost impact over time, yet with timing delay.

The situation remains fluid, as all you know, with changes every day, every week. Based on the evolution so far and the latest assumptions, we are revising and broadening the outlook, as presented on the next slide. Adjusted EBITDA to end up in the range of EUR 165 million to EUR 180 million, which is midpoint -- which midpoints is broadly aligned with prior year results and latest consensus. Driving this, we expect revenue to be broadly stable and some margin recovery as we enter Q4, as the pricing actions and efficiency initiatives start to more than offset the cost inflation.

We expect negative free cash flow between EUR 10 million and EUR 25 million. The decrease versus the previous positive outlook is the result of the lower expected adjusted EBITDA and the higher restructuring costs, partly offset by better working capital management results. The combination of both is to keep leverage below 3.5x at the end of the year, a point that Geert will comment further. So a perfect transition to our H1 financial review.

Geert, back to you.

Thanks a lot, Laurent. Let me go through the year-on-year performance of the first half year results. As Laurent pointed out, revenue declined 2% like for like, driven by volumes, although Q2 showed a mild growth, on top FX, being mainly the U.S. dollar depreciation, added another 1% decrease.

Baby and feminine care volumes came out 4% lower. Both can be explained by the decrease in contract manufacturing volumes as well as some contract exits in overseas regions, which were anticipated. When we only look at retailer brands, we actually did better than the market. Our baby care volumes were largely stable in Europe and even slightly increased in North America, while both markets for retailer brands actually showed a mid-single-digit decline. Ontex mainly benefited from a strong position in baby pants, which continues to grow double digits.

Adult care also continued to show growth, albeit more modest by 1%. This is due to a robust performance in the healthcare channel, whereas in retail, volumes were down linked to Ontex customer exposure and temporary capacity constraints.

Although we have committed price increases in Q2 to mitigate the cost inflation, this will only impact the second half of the year. The negative price impact you noticed in the revenue bridge of H1 is still a carryover from last year as a response to raw material price increases in that year.

Moving to adjusted EBITDA on the next page. The lower volume and revenue pushed our adjusted EBITDA EUR 12 million lower. We managed, however, to reduce costs by EUR 2 million net, thanks to savings offsetting the rising input price environment. Raw material prices started to go up due to the Middle East crisis, especially from June onwards, as a contractually delayed impact of indices kicked in. This was primarily the case of oil-derivatives such as backsheets and certain packaging materials. Other input costs rose as well, but earlier from March onwards, in particular, transport costs driven by the higher diesel price. Supply chain inefficiencies, which started in the second quarter of the year, are improving, but still impacted the comparison, especially in the first quarter.

Our cost transformation program has been continued, but at the same time, deepened and broadened under the new name, Focus to Value. It contributed significant savings in cost of goods sold and SG&A. Last but not least, the translation impact was slightly positive. Altogether, adjusted EBITDA came down by 9% to EUR 78 million and margin by 0.7 percentage points to 9.1%.

Let's dive a bit deeper in the full P&L on the next slide. The adjusted profit for the half year was plus EUR 9 million, slightly better than last year despite the lower adjusted EBITDA. Main reason are the net financial costs, which amounted this year to EUR 90 million, but were inflated last year by unrealized negative forex impacts that were temporarily and mostly recovered in the second half of '25. Adjusted tax was somewhat higher than last year due to the higher net profit before tax.

The adjusted figures exclude two buckets of one-off costs being on one hand, the restructuring costs, and these amount to EUR 9 million net and consist of partial provisions of EUR 21 million for the Focus to Value program, of which a small part was already expensed in H1. That was partly offset by a positive EUR 12 million accrual for tax that we expect to reclaim in the future in Brazil.

And on the other hand, we have the non-cash impairments for EUR 144 million, triggered by the strategic review, as been explained by Laurent. EUR 51 million is the impairment of the goodwill on the North America business, where we have reviewed our ambitions. And the other EUR 93 million is on assets, mostly equipment in baby and feminine care categories where we adjust capacity and focus on our core assets.

This brings us to a total loss for the period of EUR 143 million, which compares also to a negative amount last year of EUR 115 million. But last year, we also had non-cash impacts, but for different reasons, namely due to the divestment of the Brazilian business, the cumulative translation reserves were recycled from the balance sheet into the P&L in '25. As you notice, the P&L is impacted by several non-cash effects.

Let us now look into the cash flow of the first year half, which shows a much brighter picture. We managed to realize in the first half of the year a positive free cash flow before interest of EUR 27 million and including interest of EUR 7 million. Our continuous focus on improving working capital delivered results. Indeed, net working capital over revenue dropped by 0.6 percentage points to 4.5%. The improvement is a combination of optimizing payment terms and inventory levels. We had a positive impact from employee benefits. This is due to the difference between the accrual for variable remuneration related to '26 and the actual lower payout on the performance of '25, which occurred in the first half of '26.

As to CapEx, that amount was EUR 29 million, which is 3.4% of revenue and is relatively low, but is linked to the phasing over the year because in the meantime, we have commitments so that CapEx levels will catch up in the second half of the year. We paid out EUR 11 million in restructuring costs in the first half of the year, which are mostly related to the finalization of the?Belgian?footprint optimization. Also, some initial actions have been executed on the Focus to Value program. And then the tax and financing cash outs were slightly lower than last year.

That brings us to an overview of the net debt on the next slide. Our net debt further reduced by 6% or EUR 37 million, of which free cash flow contributed plus EUR 7 million, as explained on the previous slide. We also had EUR 29 million positive impact from M&A activities, mainly thanks to the repatriation of the cash in Algeria. This cash comes from the divestment of the Algerian business in '24, which took time to repatriate until Q1 '25, that was classified as a financial asset at the end of '25. Within the M&A block, we also have some limited post-closing adjustments related to the Brazil and Turkey divestments last year.

Net debt, thereby, amounted to EUR 540 million at the end of June and gross debt to EUR 619 million. Debt included EUR 68 million drawn on the RCF, which represents 25% of the total capacity, and we finished the first half year with a cash position of EUR 79 million.

And then the last slide on finance. Our prime focus as a management remains, of course, reducing net debt and keeping sufficient leverage headroom despite pressure on the LTM EBITDA. Thanks to decreasing net debt, as explained before, we managed to reverse the uplift of the leverage ratio at the end of '25 by reducing it back from 3.3 last year to 3.2 at the end of the first half of the year. This keeps us well below the 3.5x threshold of the RCF covenant, and we expect to remain below that level going forward. Our liquidity position remains strong with about EUR 280 million based on our cash position and 75% of the RCF undrawn. So we can conclude that we have the financial flexibility needed to execute our plans.

With that covered, I hand over to Laurent.

Thank you, Geert. And before we move to Q&A, let me close with our priorities for H2. It is very clear that we need to focus on delivering the outlook that we just shared, and to put in motion the strategic transformation we announced.

But first, we will continue the pricing actions to pass through cost inflation. We will also continue with our saving initiatives, helped by the start of our Focus to Value program. The third focus is to ensure that the capacity that we have put in place in the last 2 years, especially in adult care, is ramping up to its full potential. Fourth, we will continue to work to preserve our balance sheet strength and financial flexibility, which, again, we see sufficient to execute our transformation agenda.

And finally, we will continue to evolve the organization to future requirements, be it as a result of the streamlining actions that we're taking, or to ensure our operating model is best suited to deliver on our ambition.

With that, Geert and I are ready to take your questions.

[Operator Instructions] The first question comes from Karine Elias from Barclays.

I just had two questions, if I may. Looking at the Q2 performance, I saw that the net cost of SGA benefit was EUR 7 million. And I was just trying to understand what the impact of this would have been? I think you mentioned it would have impacted June. So I'm just trying to understand what the building blocks were for that? And I suppose related to that, should we think that this obviously will annualize in Q3 and Q4? Because obviously, your Q3 EBITDA last year was a bit higher than -- at EUR 51 million, if I remember correctly. And then my second question was, if you can just remind us of what the minimum liquidity that you need to run the business?

Karine, I will take these questions. On -- the second one is a very easy one because we have no covenant anymore on the liquidity. So it was one we had in the past, but not anymore since the end of -- since the renewal of the RCF a year ago.

On the Q2 performance, the net cost impact, we started as the impact from the Middle East. But as I said, it started in June based on the indices. You know there's a delay on indices. In Q1, we still had some limited positive impacts. And if you take altogether our net cost, yes, it's a sum of some negative Middle East impact, also some diesel, of course, that kicked in from March onwards, and on the other hand some inefficiencies we had in Q1.?And at the same time, we -- of course, we continue having our cost transformation program, which we broaden now into the Focus to Value. And all that together gave you the net cost impact that you find in our bridge.?

?

But I think, to give you an element on questions, we estimate that we had at least EUR 10 million of additional inflation in Q2 due to the Middle East crisis.

And should we expect a similar impact in Q3 or because of the fact that the timing with end of June, we should expect inflation to be a bit higher than the EUR 10 million?

?

As I mentioned, we expect the biggest impact to be in Q3 and then to slightly decrease as we go into Q4.

And just for the liquidity point -- I'm aware obviously of the covenant point. But just in general, what sort of cash balance you'd like to keep to run the business typically? I mean it's been stable at EUR 70 million, EUR 79 million. Obviously, you've got the visibility under the RCF. Am I right in thinking that you need about EUR 150 million typically to operate the business?

No, no, it's lower. So we can run at about EUR 50 million. And important is, as you said, to stress the fact that we are -- we still have a huge headroom on the RCF, so we can easily increase our cash position if we like. So we typically keep it between the EUR 50 million and EUR 100 million, but EUR 50 million.

The next question comes from Sanjay Bhagwani from Citigroup.

My first one is on the cost savings program. Are you able to help us understand how much of the EUR 240 million saving target actually is likely to flow into the P&L, that is the net impact? And what could be -- the phasing of that will be? I mean, I can imagine some of this is already showing up in H1 '26. So how should we think of this for '26 and '27 of the total EUR 240 million? That's my first question. And I'll just follow up the next one after this.

26:54

Maybe I'll take that question, Sanjay. Thank you for the question. We -- The EUR 240 million is our total saving program, and it's used to cover inflation, to cover also some targeted investment that we do in some categories and geographies. And then obviously, the rest to -- will go to margin expansion. And this is a relatively complex equation, which we don't disclose precisely. We'll do later when we share our midterm financial ambition. But what we mentioned here is that the EUR 40 million incremental that is in this EUR 240 million, we aim to flow it through from -- through EBITDA expansion.

I think the second is a bit more housekeeping question on this one-off tax benefit. If -- so what could be the cash timing of this -- around the EUR 12 million, I think you mentioned -- this reclaim? When should we see the cash coming in for this? And if this cash has already been baked into the full year guidance or not for the cash flow?

No. Thanks also for that question, Sanjay. Very good to ask this because it will take some time. It's --because, yes, there -- in Brazil, things are taking time in order to recover tax from government. So it can take another 2, 3 years. So it's not part of our guidance. We don't expect it this year. The reason we booked it is that we had a positive outcome of a court case. So we have a very strong position.

The next question comes from Maxime Stranart from ING Bank.

Two questions on my side, if I may. First one would be on restructuring costs. You have announced now that you will spend EUR 60 million to EUR 65 million over the next 12 -- over the next 24 months. Could you maybe a bit elaborate on what's the payback period you see on that investment and how basically you see the phasing of those savings in the short to medium term? That would be the first one.?

And then secondly, if I look at the new guidance of the company, obviously, given the difficult history of Ontex with regards to guidance, can you maybe elaborate on the building blocks and how -- and what's basically assumptions are behind the low and the upper end of the guidance? That would be all for me.

Okay. Thanks, Maxime. I will take the first one. On restructuring, I will explain it a little bit more elaborate because I can imagine there, from the other analysts also questions about that. So before we mentioned that we would have restructuring costs of EUR 10 million plus EUR 30 million. That was what we explained a couple of months ago. The EUR 10 million was related to the footprint of Belgium. That's mainly the cash out that we had in the first year of the -- first half of the year. So that EUR 10 million is gone. And the other EUR 30 million, that we increased now from EUR 60 million to EUR 65 million. So that means it's another EUR 30 million to EUR 35 million.?

Out of that EUR 60 million to EUR 65 million, we believe, that's what Laurent said, that EUR 20 million will be in the second half of the year. The remaining part of the amount, we will try to, of course, accelerate and realize as much as possible our transformation program in the course of '27. That means that most of those costs, the cash out will be in '27. From a P&L point of view, it might be that we take decisions now that it will be in the P&L of '26. Cash out will be mainly the part on top of the EUR 20 million of the second half of this year, will be mainly in '27. Is that clear?

Yes. But that was only part of my question. My focus was mainly on the payback period you see. So basically, if you invest those EUR 20 million today, what basically time line do you expect to catch up those 20 million investments? That's basically the focus I have.

Well, maybe Maxime, what I -- what we can share is that we communicated that there is -- we are committed to EUR 40 million incremental productivity to flow through and for which we're going to spend EUR 30 million to EUR 35 million. So you see that's the kind of payback that you have there, right? So it's slightly below one. Now from an exact timing of perspective, some actions are already in implementation mode. Some will take through '27, so -- but roughly, this is the math that you can use.

And maybe I'll take your second question on the guidance revision and why broadening the range or creating a range. And the key reason is really linked to the volatility and the uncertainty on the outcome and the impact of the Middle East crisis with changes in oil price and raw material indices by the week.

And so what we did was to look at the key -- two key factors that are impacted by that volatility. On the one hand, it's the cost that we have. And so we created a series of scenarios. And on the other hand, it's the speed at which the pricing will be executed, because while we're progressing very well on executing our pricing, sometimes we still work with our customers to find the best timing to reflect that pricing so that we can find the right solution to protect the volume and their position in the market.?

So when you combine those two variables, this is why we thought it would be more prudent given the visibility that we have on the cost evolution to create a range.

The next question comes from Rebecca Clements from JPMorgan.

Stepping back a little bit with the strategic change, could you just elaborate a little bit on what exactly does protect mode mean for baby and fem Care in the context of do you have relationships with the same customers across all of the categories you're in? And -- how should we think about this? Because protect could mean many things, but does it mean you're actually probably going to end up being a smaller business in those two divisions going forward? That's my first question.

No. Otherwise, we would not have been called protect, right? So protect is really to defend and to hold on to our position. But in order to do that, to be more choiceful on where we allocate resources, so if you think about it, is to really think about where we have the best chances and the best segments to be able to create value for our customers. So for instance, if you talk about baby, we know that baby pants and large sizes of diapers are the two growing segments on which we want to help our customers to fully benefit from the opportunity. It might mean -- on the other hand, it might mean that in some of the subcategories of fem care, we protect and we protect our position, but we are going to find solutions with some co-manufacturing partners so that we can be much more choiceful on where we put our own capital across the different segments and assets. But we aim to defend that business, Rebecca.

And that carries over as well to North America given the capacity expansion?

See, North America, for all sake of understanding, is mostly a baby market, right? We have a very, very tiny position in fem care. There the -- as we expressed earlier, we -- what we're doing is to review the full portfolio of products and customers and really understand where we have the best chances to win. It's not that we are going to proactively exit markets, is that you have to make a choice on where you allocate your resources to win those contracts and to be the best partner for those customers.

And I think what we've concluded is we can't do it across the entire portfolio blindly, and we're going to be more choiceful. But that doesn't mean that there are not opportunities for growth. There are many opportunities for growth. It's going to be approached in a different way.

And then just in -- my second question in the context of that, is there any change in expectation to the amount of CapEx? I don't know that you really gave formal guidance, but I think I had it running kind of 4% -- almost 4% of revenue. Is that an appropriate way to look at it? Or is there going to be retrenchment on CapEx as well?

I can take that one, Rebecca. Indeed, in the past, we always said we would be around the 4%. Actually, we -- most of the time, we were talking about 3.5% and 4.5%. We believe it's important that we continue investing in the business. We also see a lot of opportunities. The first one is, of course, in adult, where there's significant growth that we still expect. But it's also about automation. We see quite some automation opportunities with a nice payback. And we're also in a large digitalization program as a group. So actually, if we find the right business cases, because we will assess everything, of course, individually with the good paybacks, then we aim to be at the higher end of the range. That means more to the 4.5% on a case-by-case basis to be assessed.

But maybe to complement that, I think versus the recent past, you could assume that there will be proportionately less CapEx in North America because we had invested heavily to build up capacity. And then in Europe, you would assume that most of the CapEx would go to either those productivity opportunities or digital opportunities or to adult.

[Operator Instructions] The next question comes from?Wim Hoste from KBC.

I have a couple ones. First on North America, can you offer a bit more granularity on the ambition levels you still have there with regards to revenue, also the kind of margin potential that, that market would offer? And then also regarding the operational setup with production in Mexico, U.S., how should we think about that operational setup? If you can offer a bit more granularity there, that would be nice.

And then second question or second set of questions would be more on the overall level of competitiveness and promotional pressure with the A-labels in -- certainly in Europe. Can you offer a bit of granularity there on start of the Q3 how that is evolving, what kind of signals you're getting in each of the individual countries or markets where there's an easing or just not? And then also not against the pressure from A-labels, but more inside the retail brands, what is kind of the competitive fight going on over there? The -- Is there a relatively pricing discipline in that segment? Is everybody trying to increase prices given the inflationary trends or some people kind of trying to gain some market shares or tenders by postponing that a little bit? If you can also offer a little bit of granularity on that, that would be helpful.?

Thank you, and pretty broad questions.?So on -- I'll start with North America. No, I don't think we are at a time where we will offer granular plans. I think we aim later this year to be able to share more of our financial ambition. But I think what I can share is that we are going to probably not expect the same level of absolute growth in North America that we were initially reflected into our long-term ambition. So that's one fair -- but still growing, maybe not at the same rate.?

And the margin, I think what you should expect is, because we said that the focus will be on profitability, that we would expect a higher pace of margin rebuild in North America, which we have disclosed several times that was a highly dilutive business, which was a consequence of us being in this ramp up -- aggressive ramp up mode.

On the European dynamic first versus the A-brands, we haven't really seen a shift in the approach. We're not in the boardroom of P&G and what they do for Pampers, but you could -- you probably have read that Essity on one hand was happy with the push they're doing on their brand Libero and that P&G also was relatively happy with the share gains that they had on Pampers. So what we observed was that those A players, we took a more aggressive stance to defend their position. We don't see a key change on that. And this is something that we're just -- is part of our strategy and how we fight. So that's up to us to bring solutions to our customers in this environment to be able to be more positioned, which is what is our focus on.

Versus the other manufacturers and the pricing dynamics, you can understand that I cannot comment on pricing and relative pricing. I'm not previewed of what our competitors do. We are sitting with objective and factual approaches with our customers where we share the evolution of our cost. We look jointly what we can do on the mix, on the product, on pricing, if we have to do choices, because we understand that's the best way to preserve and build partnership and collaboration with our customers. So it's a case-by-case example. And we don't -- I cannot comment on our competitors' approach and strategy.

The next question comes from Floris Dijkstra from BNP Paribas.

I'll ask them one at a time. So very quickly, in regards to the input cost inflation due to what's happening in the Middle East, did everyone in your industry hit similarly? Or are there differences between you and your competitors and some of the A-brand players because of how you source them?

Thank you, Floris.?Our understanding is that everybody in the industry is impacted. Of course, it will depend on whether they have hedging strategy in place and the structure of that contract. But most of the contracts for all of the players of the industry usually work with price formula, which are adjusted when the indices or the energy costs evolve. And all of them will have a slight lag because of the inventory position that you may hold. So that I would expect would be pretty similar, except if there were a very different hedging strategy in place. So that's for your first question.

And then just on the updated guidance. So I think it said you got close to 3.5x net leverage number. From my understanding, that's the leverage covenant on the RCF. Could you just give a bit more information on how that covenant works? I understand you get a one-off spike. And then what does it exactly prevent you from doing? Is it some kind of stopping on the draw? Just any clarity would be appreciated.

Floris, thanks also for this question. Indeed, we have a one-off spike. That means that each half year we have a testing of the covenant. That means the next testing is on the full year results. And that means that if we believe that we will be below the 3.5 -- actually, if we would be at 3.6, for example, it would be below that 3.75. It would not be -- give a covenant breach. Now the question you're asking is, imagine we would have a covenant breach, which we don't expect at all because otherwise, we would have come with a different communication. Then you typically sit together with the banks and you present your plans and you discuss on a new covenant path. So that's how it works, but that's not the case at this moment. Does it answer your question?

The next question comes from?Fernand de Boer from Banque Degroof Petercam.

I have a question on the impairment charges and let's say, on your strategy. So why do you have to take the impairment charges related to your strategy? Because actually, if you take the impairment charge, my understanding was always that in the future, you don't expect to proceed anymore of the EBITDA. But on the other hand, you say, okay, maybe U.S. a little bit scaling down, but [indiscernible] less growth, less ambition, but still higher margins, et cetera.?So why then to take these impairments? I don't understand. And also if you're going to use third-party players -- sorry, third-party players, you also have to pay them. So you have your own production, you -- firstly do your cut these lines and then you are going to outsource it? I'm totally lost in this.

Obviously, the one on impairments, I will take because it's indeed also a bit of technical matter from an accounting point of view. You make -- you have to make a bit of distinction in the EUR 144 million. You have the goodwill. And as you can read in the half year report, but also the full year report, it's -- you have to do a kind of impairment test, it looks to your future plan. And first of all, important to know that goodwill in North America, it exists already for many years. It's based on past transactions that were done, even not -- it's the total structure that was built up at the time. So there is no clear, yes, specific origin related to recent M&A, for example.?

What are you doing then -- and you look at your plan and of course, because we go from a volume strategy, and you know that was the intention to grow in sales to a more selective profitability strategy that comes, of course, the coming years with the cash flow, which is more -- less modest than we expected before. And based on that test, we decided to take out the goodwill. So it's related to the ambition and the change in the strategy.

On the assets, for me, there are two parts. Some of it are very concrete, like in Europe. And for us, Europe includes Australia. You have seen that we stopped the operation locally in Sydney. It will become an export business. You have perhaps seen in the H1 report also that we have an intention to restructure some activities in Mayen that brings some asset impairments because some assets will not be used anymore.

For the rest of the business, and it's partially North America and partially in Europe and with the main focus on baby and fem because there, as Laurent explained, we focus on protecting the business, defending the business. And there we said, okay -- we looked at our asset base and we said, okay, if we take our assets we want to simplify, we will also focus on the core assets that are most efficient, the newest ones. And then we said, okay, then it's better to take the old ones out because we want to go for full efficiency within our transformation. And that brought another bunch of impairments. So that's the buckets we're looking at.

Sorry, I thought?Mayen,?Germany production was already closed down a few years ago where you all took a lot of restructuring charges. So I'm not...

It's the reorganization of... [indiscernible]?Yes. Fernand, it's the reorganization of some of our -- Yes.?Fernand, maybe the intention in Mayen relates to some innovation, R&D activities and engineering activities that we are reorganizing. So that's why, yes, it's not linked to a manufacturing production site per se. But we also had pilot lines, as you know, in Mayen, or you may know, in Mayen.

And then to come back on North America. These lines are quite new. So what...?

The -- Yes. Thank you for the question again on North America. The North America business is a mix. You know we have two sites, and it's a mix of new assets that, of course, are fully operational and fully used and some older assets that we had, that we -- some of them we were keeping as part of having eventually capacity available as part of our previous high-growth, high-volume growth plan.

As the market evolves as well, some of the product requirements to win in the market has changed, and we've concluded that some of those assets will no longer be in use because either too costly to modify or frankly, because we could not be competitive to find the right contract to serve them volume. So when you reach that conclusion, it is the right approach to adjust your asset base.

The next question comes from?Usama Tariq from ODDO BHF.

I have just one or two general questions. With regards to the review, could you provide just a bit of more color on, for example, feminine care going forward, and specifically on that, where do you see that going in 1 or 2 years? My second question would be more of a clarification with regards to contract manufacturing. Did you -- I'm sorry if I missed something. Did you indicate something on it with regards to the review? Is it going to stop completely? And those will be my two questions at the moment.

Thank you, Usama. On the first question, our feminine care business is almost 95% plus European business. That is a relatively stable business, and we intend to keep it that way. So no change there. When we say that we go with a more targeted approach is how we serve that business, but not the absolute sales of that business, which we believe plays a very important role and for which we have a key role for many of our customers.

On the contract manufacturing, no, we didn't indicate any changes on our spend on contract manufacturing. What we mentioned is that in some very selective situations, we might go with an outside partner to source some product if we believe that it's a better use of resources than putting our own capital.

Thanks. That concludes the Q&A session. Laurent, do you want to finish off with a couple of words?

Yes. Thank you. Thank you, everybody, for joining, especially on the eve of a summer break and on a very heavy week for many of you. Today, we have communicated three important messages.

First, our progress on stabilizing the business, which includes the liquidity and the leverage, which is a very solid achievement. However, we also communicated a revision of our outlook given continued uncertainty and deeper impact from the Middle East crisis. And third, we shared the key outcome of our strategic review with the fundamental transformation shaping a new Ontex.

We have a very clear direction, a team in full execution mode. And while the market is challenging, all our associates are working very hard to pave the way to a more resilient, cash-generating and value-oriented Ontex.

Thank you for attending this call. Have a great rest of the day and summer vacation for those who will benefit from it. Thank you.

Thank you.

Good morning, everyone, thank you for joining us today. I'm Geoffroy Raskin from Investor Relations. I'm pleased to have with us Laurent Nielly, our CEO; and Geert Peeters, our CFO, to present the results for the first quarter of 2026.

Before that, let me remind you of the safe harbor regarding forward-looking statements. I will not read it out loud, but I will assume you will have duly noted it.

With that cleared up, Laurent, over to you.

Thanks, Geoff. Good afternoon, everyone. I will provide a few introductory comments on the quarter. Geert will cover the financial analysis. And then I will come back to give you a few thoughts on what we see and also on our strategic review progress.

Overall, Q1 was a relatively soft quarter. Not a surprise, as we had indicated in February that our results this quarter would be in line with Q4 of last year and thereby down versus a relatively strong first quarter in '25. And importantly, we delivered on what we expected.

Revenue was down like 4% like-for-like compared to a year ago because of weaker market demand in Baby and Feminine Care, even if in retailer brands, we slightly outperformed the market overall, and because of some lower sales in contract manufacturing, especially in the U.S., as we had expected.

The adjusted EBITDA was in line with Q4, but lower than the previous year. Margin came down by 2 percentage points due to the impact of lower volumes and higher net costs, which we partially mitigated through continued savings efforts in operation and in SG&A. The lower adjusted EBITDA this quarter drove the last 12 months adjusted EBITDA down, which led to a slight increase in the leverage ratio despite the reduction in net debt.

Now, if one looks at the past 5 quarters, reported revenue on the left of the slide and adjusted EBITDA on the right of it, it is fair to say that our performance is still not where we expect it to be. Yet we see a few encouraging signs on our journey to stabilize the business.

Adult Care, our largest category, continues to grow, and we are ramping up more capacity to fuel future growth. Even in this quarter, Adult Care growth was not enough to offset decline in Baby and Fem care demand. With this lower demand versus Q4 and the geopolitical instability started early March, delivering stable adjusted EBITDA is a good sign of our resilience and an important consideration to face the rest of the year.

I'll come back to this later, and we'll pass now over to Geert for more detailed financial analysis.

Thanks a lot, Laurent. And also from my side, good morning to everyone. In the following slides, I will focus on the year-on-year evolution of revenue and adjusted EBITDA, and will, of course, also comment on the debt and leverage evolution over the quarter.

But first, the revenue on the next slide. The waterfall shows the evolution of revenue from Q1 2025 to Q1 2026. The combined price and mix impact was largely stable, meaning that the 4% like-for-like decrease is entirely linked to lower volumes.

Let's then look at Baby, Feminine Care, and Adult Care. First, the Baby Care volumes, they were down 11% versus a strong Q1 2025. You might remember that last year, the Q1 sales were pushed up in the first quarter due to concerns on U.S. tariffs, which then reversed in Q2. The market demands in Baby Care also decreased by mid-single digits in Europe and even by high single digits for retailer brands. And also that's the case in North America.

Overall, we did somewhat better than the market in this market segment, thanks to growth in baby pants in Europe and also new and previously secured contracts that are ramping up in North America. We could then say in North America that the Baby Care retailer sales, they were growing year-on-year.

And then on contract manufacturing, you remember from February that the sales in North America came down, and this is as we anticipated, and that's due to the mix of market share losses by our customers and some contract exits. We also -- in our sales in overseas markets, they were substantially lower, but this is largely because of planned contract exits.

And then Feminine Care, that volume reduced by 4%. This is largely in line with the market evolution. And then as Laurent said, Adult Care volumes were positive. They were growing again 2%, reflecting sustained growing demand in the retail channel and stable demand in healthcare in Europe, where we have a very strong position. Forex had a 1% adverse impact, mainly due to the U.S. dollar depreciation of about 10% year-on-year.

Let's now explore the evolution of the adjusted EBITDA as compared to last year. So on the next slide, you'll find a bridge that shows the decrease of adjusted EBITDA from Q1 2025 to Q1 2026, which is a drop of more than 20%. The largest impact comes from the previously discussed lower revenue, which led to a decrease of EUR 8 million.

Including this volume effect, the net costs increased by EUR 5 million with different net of saving initiatives. And let me take each of them step-by-step. First of all, the index, although the index evolution had a positive impact on fluff, SAP, and non-woven, backsheets and packaging materials were more expensive and that's on the year-end resulting in slightly negative impact.

If we then look to the other operating costs, they increased as well, linked to the continued inflation of salaries and services, but we are making good progress on gradually improving the supply chain efficiencies, which impacted Ontex from Q2 last year onwards with still some limited leftover impact. And then, of course, the rising oil prices, they have resulted in higher transportation costs, which is a cost category where the cost pass-through occurs almost immediately. But I should say in Q1, the impact was still very limited.

Then we have the operating efficiency programs that we run. They continue with the full year impact of initiatives launched last year and several new ones. Also this quarter, a large part of the cost increases were offset by initiatives in procurement, manufacturing, logistics, and innovation. And then we started up a specific saving program to streamline the SG&A organization. The first results already materialized and they offset the inflationary pressure on salaries and services.

You will see in the bridge also the forex. There is a translational forex impact, but this is very limited and positive. That results in an adjusted EBITDA of EUR 30 million, which is identical to Q4 2025. The margin thereby stands at 9.1%, which is 2.2 percentage points lower than last year, reflecting less fixed cost absorption due to lower volumes and net inflation of costs.

Let's now move from the P&L to the balance sheet on the next slide. Our net financial debt reduced over the quarter from EUR 577 million to EUR 550 million. We finally managed to repatriate the cash that we held in Algeria following the divestment of our activities there in 2024. You remember at the end of 2025, that cash amount had to be reclassified from cash to financial assets on the balance sheet, but they are now back to us and in the cash pool and used to repay part of the RCF because this allowed us then to significantly reduce the position of RCF below 30%, while keeping an amount of cash of a bit more than EUR 70 million.

Our liquidity position, and we define it as the sum of the cash and the undrawn parts of the RCF, thereby strengthened further from EUR 240 million to EUR 262 million over the quarter. And then the leverage ratio ended at 3.36. This is, of course, within the agreed covenant level. And as Laurent will explain in the outlook, we expect it to gradually decrease in the coming quarters.

Laurent, now back to you.

Thanks, Geert. Let me now come back on some of the elements impacting our business and what we expect and will do in the coming months. On the demand side, while slightly worse than expected in Q1, the assumptions are largely the continuity of what we discussed in the past few quarters. Adult Care remains robust. Growth in the past 6 months is a bit lower than in recent years in both retail and healthcare institutional channels, which indicates that the economic reality also has an impact on the category, but we do not think it changed the mid to long-term attractiveness of it.

On the other hand, demand in Baby is to continue to be relatively weak in Europe and North America, the combination of demographics and lower income consumer sentiment. We also see high activity from branded players in Baby, exacerbating the effect on the retailer brands, whether promotional pressure in Europe or new players growing fast in the U.S. Although it is fair to say that we do not see that worsening. And even in Europe, we see a little bit less pressure as of April. Overall, Ontex's market share opportunity, which we had identified and already started to address last year, remain.

On the cost side, however, the geopolitical situation is likely to put temporary pressure on margins. The energy crisis drive oil, energy, transport, and raw material prices up, partially from supply pressure on some materials, especially for oil derivatives, which are very present in our product.

We have strong supply chain and strong procurement teams. We have protections for strategic suppliers relation, long-term contract, and we can count on a broad base of supplied -- of qualified suppliers. And like in 2022, we are taking actions to mitigate the impact of this new disruption. We have several levers, whether volume and mix where we can, cost-out initiative, and also by working with our customers on pass-through pricing actions. We will fully recover the cost impact over time, yet with some timing delay.

The situation is relatively fluid, all of you can read every day, which changes by the day, by the week. So based on our current assumption and despite the adverse market events, we are maintaining our outlook at this stage as presented on the next slide. As I just mentioned, we're maintaining our outlook on the basis of our latest projections, which assume a gradual deescalation of the energy crisis in the following months.

Adjusted EBITDA to improve 10% for the full year with an improvement expected quarter-by-quarter. We expect to turn free cash flow positive again and the combination of both is to lead our leverage ratio down from the current about 3.4x at the end of March to a lower level, not to exceed 3x by the end of the year.

Finally, before we take your questions, I wanted to spend a moment on our strategic review and some of the initiatives we are accelerating. As you remember, we launched a strategic review last January. The Board formed a strategy committee with clear objective to drive sustained value creation. External advisers have been appointed to help review our businesses in North America and Europe. The diagnostic phase is mostly complete. It is helping solidify some of the elements we set in our 3-year plan, yet it's also identifying opportunity to accelerate execution, especially in cost improvement areas. We aim to finalize the strategic review in the coming months, and we will share more by our next earnings call.

But in parallel, we're already moving in execution mode on several work streams. First, we have accelerated the plan to streamline the organization, aligning it with the current scope of our business and the market perspective. We aim to reduce the number of positions in SG&A by 15% and this within the next 12 to 18 months.

Second, we are rightsizing our production capacity faster, adapting it to the new demand reality in both Europe and North America, including investing in training and setup to increase flexibility of the workforce, allowing us to redeploy our staff where capacity is added, namely in adult and in baby pants. The rightsizing includes our decision to cease baby diaper production in Australia by the end of the year.

Third, we have launched a new set of initiatives to improve working capital management, aiming to drive the working capital percentage of revenue down by another 50 basis points while, of course, preserving our service level to customers.

As you can see, our clear focus is on the short-term priorities and challenges. The initiative I just mentioned are continuous efficiency improvements, the management of our supply and pricing actions. But we're also working to complete our strategic review in order to position our portfolio back to profitable growth in the years to come. You will hear more of that again by our Q2 results call.

This closes our prepared remarks. Geert and I are now ready to take your questions.

[Operator Instructions] The first question comes from Karine Elias.

I had 2, but they're kind of linked in a way. I'm just looking at your guidance for the full year. And obviously, the EBITDA growth of 10% is based on a largely stable sales volume. I was wondering whether if you could comment on that for Q2? Is that what you're seeing at the moment? And maybe if you could provide a little bit more color on how you expect Q2 to shape up, would be very helpful.

Thank you, Karine. This is Laurent here. Obviously, we cannot and we will not provide guidance for Q2 per se. But on your question on the top line, we see relatively stable sales in Europe. So we feel pretty confident on the side. And you remember as well that because of the phasing of some of the sales we have quarter-by-quarter, we also see a good opportunity to have higher sales in Q2 in North America versus what we had in Q1. So overall, the statement of full year stable revenue, we feel is the right basis for the construction of our full year outlook.

The next question comes from Wim Hoste from KBC.

Two questions then from my side, please. First, on cost savings. I was wondering if you could provide a little bit more granularity on the mentioning of 15% job cuts in SG&A. How much savings does that represent? How much positions will be cut? Will there be other savings beyond -- additional savings beyond this SG&A exercise, if you can offer a little bit of clarity on that?

And then another question would be on the evolution of the raw material basket and energy prices. If you can provide a bit of granularity on how we should expect that to evolve in Q2, Q3 specifically? And what kind of pricing increases have you announced in the market or implemented in the market and how fast will these come? If you can talk a little bit around that, that would be also helpful.

Okay. Wim, this is Laurent. I will address your first question on the SG&A, and then Geert will provide you more granularity on the cost side on the materials. Our goal from an SG&A -- our organization perspective is to adjust our organization to the new scope of our business after all the divestments that we've done, and also to reflect what we see in the market reality of where we have the growth and where we need to invest and where we have less demand and maybe we have to streamline our organization.

When we presented last December the ambition to generate a new total cost saving program over the next 3 years, we had indicated that it will be broadened from just cost of sales to also include SG&A. And so what you see here more is a little bit more transparency on what we aim at doing. But at this stage, you will understand that we are not going to translate that into a number of people, a number of position, or by country because this is something that we deploy in our organization, and we want to do it in a way that is respectful for all our employees.

Now on the cost, Geert will provide some more.

Yes. Hello, Wim. On the raw material cost and the overall cost increases, a couple of elements. First of all, yes, of course, mainly in the raw materials, we will have quite some impact. We have a lot of the input material that we use are oil derivatives. So that means they're based on polyethylene, polypropylene. And that means that the oil price impact the indices. And as you know, the indices are the driver of our contracts. Of course, that always comes with a delay. Typically, it's a quarter delay. So that means timing is very important in the whole story.

I come back to timing immediately because apart from raw materials, there's, of course, other categories like mainly transport costs. Of course, we're talking about a much smaller amount because the percentage of our cost of goods sold is much more limited as compared to the raw materials. And then there might be some indirect impacts on salary and which is not yet -- not at all clear at this moment.

We added up all that based on the latest visibility we have in the market and made our new projections. Yes, the timing is very important. As I said, first of all, transport, it kicks in immediately because you have immediately surcharges on your fuel. Raw materials, it's -- has not had an impact on Q1. We expect it will start having an impact from mid-Q2, mainly also from having a more full impact in June, July.

And as you have seen in our outlook, which is important, we noticed that the market in general, and we follow that expectation is that the crisis will ease, will deescalate during the summer. That means that in Q4, and that's also what we see in the forecast we get on indices that we see some easing of those indices. Of course, not to the normal level yet, but definitely not to the level of Q3.

We took all that together. And yes, we mentioned about pricing actions we're going to take, yes, we're not going to mention, of course, any percentages there. For us, most important is that we align that increase with the size of the cost, and that means we have to be very agile because that cost is constantly evolving on a weekly basis. So we will adapt to that so that we can keep the net impact as low as possible. And the net impact will, of course, mainly be a time delay, which we try to keep as limited as possible. I hope that answers your question.

The next question comes from Rebecca Clements from JPMorgan.

Mine are kind of more cash flow related. How committed are you to your CapEx for the year? And would you be able to pull back on that if you felt like free cash flow was starting to look weak or pressured a bit around your leverage covenant? That's my first question.

And the second question is around, you alluded to working capital improvements. I was wondering what levers you're going to be pulling or how you would be improving that working capital? What mechanism you'd be using for that?

Thanks, Rebecca, for that question. Cash flow is for us crucial, as you know, we put also a guidance on it that we -- our guidance is set to be above 0, and that's -- and of course, for the coming years, it should become positive again and create value. Short-term, because of the pressure we have, we still believe that we will be close to 0 with the cash flow.

But what are the levers we have because that's more or less the question you're asking. Of course, in CapEx, we always have a lever because it's -- we, as a management, we decide what's needed in CapEx or not. I should say, nevertheless, we -- at the same time, we continue to ramp up capacity in adults, as Laurent explained during the presentation. So there are some commitments that we have taken, which are important for the growth of the company that we will continue. And there, we might reduce CapEx a little bit. We want to keep it limited.

For us, the more important lever is the one of the working capital, as you mentioned, because there, we still see that we -- mainly in inventory, we still have quite some room. Where does it come from? Yes, different things. First of all, in North America, of course, we had the business that we ramped up with 2 big contracts after summer last year that came with quite some inventory, and we are now stabilizing that the inventory level and going to a more normal level. We took already some -- quite some correction in Q1 because we take it as an important action to bring the level of inventory in the U.S. to a target level, which is for us in line with Europe.

And then we have structural continuous improvement programs. For example, there are all different type of things on complexity of material, on phasing in of new projects and phasing out of old products. So there's a whole team working on it, and we have quite some working capital focus throughout the organization and a dedicated team to look at all the improvements we can do.

And can I just clarify what your -- you had a footnote on your slide about the RC -- your test where the covenant is 3.5x leverage, but you have a note about 3.75x at the bottom of that slide.

Yes.

What was the 3.75 note referring to, please?

So the covenant is 3.5, and we believe in our guidance is to be below the 3.5. But from the position we have now, the 3.36 to gradually decrease further towards the end of the year. So covenants is -- we're based on the current information, comfortable on that. But what we mentioned is in our contract, we have a semiannual test of covenants. So at half year and at the end of the year, and we have one possibility to breach the covenant until the level of 3.75. We don't believe we need it. But if it would happen, then it can go up one time until 3.75. So that's the meaning.

Was that always in your covenant? Or was that something that you negotiated for this year, the 3.75 one time?

No, it's not separately negotiated. It was part of the refinancing. So the refinancing we did at end of 2024 on the RCF, it was included in that contract. So it's not something we specifically negotiated for the current year. It's part of the overall contract.

[Operator Instructions] And the next person on the line is Maxime Stranart from ING.

Two questions from my side. First, looking at volume growth, I think it's the fifth quarter in a row now that volume growth is negative. How confident are you that you're now turning the tide? Obviously, Baby Care is still in the doldrums and Q2, you're lacking [indiscernible]. So I just want to feel your confidence in being back to volume growth in Q2.

And secondly, I think echoing some questions already, but just coming back on that. How confident are you in the phasing of the EBITDA guidance for the full year. Obviously, if I understand you correctly, you expect short-term margin pressure. So I guess Q2 will still be pressurized. So I just want to understand how back-end loaded the guidance is? That would be all for me.

All right. Maxime, Laurent, thank you for your questions. On the volume growth, there was 2 factors impacting it in the first quarter, right, versus prior year. There was baby, as you mentioned, and which has been declining for a number of quarters, you're absolutely correct, because of the overall category being in decline in Europe as well as some lower sales in our contract manufacturing business in North America that more than offset the growth that we had in retail brand, right?

So we are ending that cycling through the decline -- the sharp decline in contract manufacturing in Europe. So we are going to be in the U.S., sorry. So we're going to be now in a position where it was already in our base. And so therefore, we should not see the same level of decline sequentially from a baby perspective.

And then the way we built our perspective is that then after that, this growing exposure to Adult Care, which is structurally exposed to growth would allow us to offset maybe some structural decline in Baby. In order to not decline in Baby, you would have to go and be much more aggressive on share gains, which we have the plan, but we are very careful on how we look at it because obviously, we want to be careful about gaining profitable contract and not contract that don't lead to the good use of employed assets or capital.

The second factor that impacted our volume specifically for Q1 is on Feminine Care, we exited some contract in North America on the back half of last year. And so we still had this year-on-year decline based on contract manufacturing, right? So those are the 2 ones. So we're -- based on those, we are confident that as the year progress, the evolution of our volume will become more favorable. And that's one of the key factor behind our EBITDA progression as we progress in the year because obviously, when you can go back and produce more volume and you have the set capacity, then you become much more efficient in the way you can absorb fixed cost.

But you raised the point, which is on Q2, which we are not going to provide any specific guidance because, frankly, we are -- the cost evolution evolves. But if you listen to what he had said, which is there is usually a small gap into our pricing versus cost, then yes, we think that there might be some margin pressure on Q2, and that's what we're working through. I hope I helped on your questions.

The next question comes from Fernand de Boer from Degroof Petercam.

I would like to come back on the cost acceleration because you're mentioning 15%, which I think is more than some average around EUR 600 million. And if you then look at your cash out for this year, and you actually said an incremental EUR 10 million, but that's then only for this year? And could you expect much more restructuring charges and then the cash outflow in 2027, 2028?

And I'm a little bit puzzled about your remark on Australia to cease production because I thought that actually all the production was produced for Australia was produced in Europe and then exported to Australia. So could you elaborate a little bit on that one?

Yes. Fernand, let me take your Australia point, and then Geert will come back and clarify the other questions. So in Australia, we were producing baby diapers, and only this category were produced locally. So it was a small operation, and we were no longer competitive from a cost side versus some of the alternative sourcing for some of the customers.

So what we've decided is to cease operation of baby diaper, but to continue with the business, absolutely. And that business is focused on growing categories where we have a right to win and sourced from our European factories. So your understanding is correct on that front.

Now I'm going to pass it on to Geert on your cost question.

Yes. On the restructuring charges, I don't know if I fully understood your question, but on restructuring, what I can say, we -- last time, we explained that we have another EUR 10 million we expect as restructuring costs in 2026. I can go to 2027, 2028 afterwards, but on 2026, an extra EUR 10 million apart from the cost we still has related to the Belgium footprint, which had already an accrual 2 years before. In summer of 2024, we took that accrual. So that extra EUR 10 million that I already explained a couple of months before, which is in our budgets, in our plans, that we maintain. That also means that the streamlining of the organization, as Laurent said, it's something we were already working on. For us, it's becoming more concrete, and we give more information about it now. But it's part of that restructuring cost.

Also the other element that Laurent mentioned on rightsizing of plants, it's included in that EUR 10 million. For 2027, 2028, we don't give any guidance, but what we mentioned before on the restructuring, what we see over a longer period, based on what we know now, we're talking about the same numbers, and we will see from the strategic review that on which we give more information after Q2, if there's anything more specific we have to tell about that to clarify. Does it answer your question, Fernand?

Yes, pardon me, because if I understand correctly, you say at the end of this year, of 2025, you had around 4,900 employees active. And now you say the coming 18 months, 15% will go. So let's say 700.

No, it's 15%. Fernand, the 15% is on SG&A. That's what we specified, right? So it's not on the total population. That's maybe where the misunderstanding is.

Yes. Okay. The press release says number of SG&A positions. Okay. Fine. Fine then. All right. Thank you.

Yes. Yes. Yes. Yes. Otherwise, it would be another magnitude. You're absolutely correct.

And the last question comes from Charles Eden from UBS.

It's just a bit of a clarification on the free cash flow and more specifically, the net working capital comments. Obviously, there's going to be a sharp amount of inflation in the oil derivatives already coming through, and obviously, that will sit into the inventories at year-end. Are we right to assume what you're saying is you should be able to make improvements sufficient enough to mean that your absolute working capital is lower year-on-year despite that inflation? Or is that not the correct way of interpreting the sort of Slide 12 that shows the net working capital management sort of contributing to positive free cash flow? I'm just trying to -- it seems quite ambitious in the context of the magnitude of oil-based inflation, which we may be seeing if the conflict is sustained.

Okay. The 0.5% as compared to sales, you have to see it. Yes. You can translate it as in an absolute impact. So that means that the current level we have of working capital, it amounts typically around EUR 100 million that we believe, if you take that percentage as compared to sales, that we can reduce it with 0.5%.

If you refer to the inflation, we took that assumption into account. So if we look at how our working capital is organized, we also believe we can manage that within that percentage.

Yes. So it's quite ambitious, you're right. But remember also that we're deploying pricing actions, and so what you see on inflation from an inventory perspective, you should see it capture into sales uplift as well, right?

I just -- from previous cycles, sometimes the pricing is quite difficult and the inflation in the inventories is unavoidable. So I'm just trying to sort of get a sense of where you're coming from. That was clear. Thank you.

All right. That ends up the questions. Laurent, over to you.

All right. Well, thank you, everyone for attending our call and for your questions. I want to summarize a couple of key themes that were presented. We had a relatively soft quarter as we expected. Importantly, we were able to deliver on what we had said, and a bit softer demand and some new geopolitical disruptions didn't get in the way of our ability to deliver, which I take it as an encouraging sign.

This give us confidence that we will be able to navigate the coming few months of inflation and pass through pricing with all the uncertainties that it entails, of course. But we have demonstrated that we could do it in 2022 to 2023, and I'm confident we will do it again.

The strategic review is progressing with focus on cost, but also on completing our plans to return the portfolio to a profitable growth and to secure sustained value creation. And more of that will be shared in our Q2.

Finally, I am thankful to our team for their hard work and the commitment that they show to our company. Have a great rest of the day. Thank you.

Good noon, everyone, and thank you for joining us today. I'm Geoff Raskin from IR. I'm pleased to have with us Laurent Nielly, our new CEO; and Geert Peeters, our CFO, to present the 2025 results. Before that, let me remind you of the safe harbor regarding forward-looking statements. I will not read it out loud, but I will assume you will have duly noted it. With that cleared up, Laurent, over to you.

Thanks, Geoff. And before I dive into the results, allow me to say some words about me. First of all, let me share my appreciation for the Board and for our former CEO, Gustavo Calvo Paz, for the trust and the support in this transition. I'm honored to take over and realize the challenges ahead to both rebuild trust fast and to continue to work to unlock the interesting value of Ontex. I joined Ontex 8 years ago to help turn around the just acquired business in Brazil, then moved to Europe with a mission to bring strategic discipline, drive the business back to growth and to rebuild profitability after the inflationary shock in '22. I have a deep understanding of our company, and I share the passion for our purpose, mission and people.

We have strong assets, potential, and I take on the assignment with high energy, but obviously also at a time of big disappointment after a challenging '25. As you know, the year did not evolve as we had anticipated at the start of '25, and we had to revise our outlook twice. The final results should be of no surprise to any of you being in line with the outlook we communicated early December. Revenue was 5% lower like-for-like in a challenging market and the adjusted EBITDA came down by 2 percentage points, mainly due to the impact of lower volume. The 10% margin level is still demonstrating resilience of the business in a difficult year. We did better than we anticipated for free cash flow, ending with a negative EUR 25 million. Net debt benefited from the divestment proceeds with lower adjusted EBITDA, our leverage rose to 3.3x.

Let me expand a bit on the main elements that drove our results in the year on the next slide. Clearly, our volumes, which are the backbone of our business, did not meet our ambition with 3 key factors. We faced a softer demand in '25, especially in Baby Care. We could not pivot on some of the growing segment as fast as we wanted in the midst of our transformation in Europe that limited temporarily our flexibility, and this was amplified by some disruption in supply that we had discussed in previous quarters. And in North America, we experienced much more repeat decline in our contract manufacturing sales. Against this backdrop, we continue to preserve our competitive position, signing and starting delivery of new contracts, thereby maintaining our positive contract gain and loss balance for the year.

We also continue to innovate in all 3 categories and are recognized on our sustainability performance, as illustrated recently with an A score from CDP. Most importantly, we reached some key milestones in our transformation journey. We completed the divestment of our emerging business. Our Belgium footprint work is progressing well. And in North America, we added production line in our North Carolina factory. Before I pass over to Geert on the financial analysis of the year, I'll quickly touch base on the fourth quarter performance. Our revenue came down by 7.6% like-for-like in Q4 versus a strong quarter last year. This is 2% lower than our third quarter of '25 with demand softening further, especially in Baby Care, both in Europe and North America. You can see in the chart that the decrease and the volatility of revenue in the last 8 quarters is mostly linked to our Baby Care business. whereas Adult has consistently grown and in the last quarter, represents 47% of our revenues.

The lower volume in Q4 impacted the profitability, especially as we had anticipated growth and the adjusted EBITDA margin, therefore, dropped 3 percentage points versus last year to 9%, which is 2.4 points decline quarter-on-quarter. While Q4 was again below our expectation, it is important for me to stress the many progresses made on our transformation journey, which are strengthening the company and which will bear fruits in the months and years to come. Yet it is equally clear that more is needed to improve back our trajectory. With this, I pass over to Geert for a more detailed analysis on our full year results.

Thanks a lot, Laurent, and hello, everyone. In the financial review, I will focus on the full year results and start, of course, with the revenue. On this slide, you will find the full year revenue bridge showing the 5% revenue decrease, which was almost entirely due to the volume decline by EUR 93 million. As Laurent already explained, this was caused mainly by the lower demand for retailer brands in Baby Care and specifically in North America, the decline of contract manufacturing causing Baby Care volumes to drop by 12%. Feminine Care sales volumes were 2% lower, which largely reflects the market trends. We benefited from the continuing growth of the adult care market, albeit with a modest 1% volume growth Reason is that we have a large exposure to the more stable healthcare channel. To capture further growth in the retail channel, we're currently ramping up the capacity.

Our sales prices were slightly lower, reflecting the carryover from the lower sales price in '24 as well as some targeted price investments and our product mix improved at the same time and more than compensated for this. ForEx fluctuations had a small negative impact, mostly linked to the depreciation of the British pound, the Australian dollar and especially the U.S. dollar. Let's move now to the adjusted EBITDA bridge on the next slide. On the EBITDA bridge, you can see that EUR 40 million impact of the lower revenue on adjusted EBITDA. It includes also lower absorption of fixed costs. Positive is that our cost transformation journey continues. And this year, we generated EUR 69 million net savings, creating a 5% efficiency gain on our operating base.

This encompasses efforts across the organization and includes the first benefits from the Belgium footprint transformation. We could have done more had volumes been higher. These continued efforts compensated most of the cost increases but leaving an EUR 8 million negative net cost impact. Raw materials prices rose by about 4%, mainly driven by higher indices. The impact was across inputs, but especially in packaging, superabsorbent polymers and fluff. Raw material price indices spiked in H1, but came down since, but on average, they're still higher than in '24. Other operating costs rose by about 8%. A large part is linked to inflation of salaries, logistics and other services. some were also caused by the supply chain inefficiencies we faced mainly in the first half of the year, think for example, outage of our Segovia plants. Despite all these challenges in '25, we managed to keep an adjusted EBITDA margin of 10%, which is 2 percentage points lower than last year.

How this revenue and margin translates in net profit and also including the divested emerging markets can be seen on the next slide. Adjusted EBITDA -- sorry, adjusted profit from continuing operations was EUR 34 million as compared to EUR 76 million in '24. The decline can be fully explained by the lower adjusted EBITDA. In '25, we had much lower restructuring costs as compared to '24. This represented some EUR 19 million and were mostly noncash caused by impairments of obsolete assets and intangibles. Profits from continuing operations, which includes also the nonrecurring costs, thereby amounted to plus EUR 60 million and is, therefore, more or less in line with '24, which ended at EUR 21 million. As to the emerging markets, we posted EUR 190 million loss for Brazil and Turkey, and this loss is entirely caused by the noncash accounting impact from currency translation reserves.

These were accumulated over the many years in the past, and these are recycled through the P&L once the divestment is completed, and this caused EUR 210 million combined loss in '25. But as I repeated already, it's noncash. With the last divestments executed only the core business is left. The result is much stronger -- is a much stronger balance sheet with lower debt, which we will discuss later. Let's now move to the cash flow on the next slide. Here, you'll find the bridge explaining how the adjusted EBITDA of EUR 184 million translates in a free cash flow of minus EUR 25 million. Net working capital changes were largely neutral, with an increase in discontinued operations, offset by an improvement in our core business. That latter core business improved from 5.4% to 5.1% over sales, mainly thanks to lower inventories, lower receivables and higher factoring.

We have a EUR 12 million negative impact from employee liability changes as we accrued lower variable remuneration in the EBITDA of '25, which will lead, of course, to lower cash payout in '26. CapEx was EUR 81 million, representing 4.5% of the revenue of our core business and a nonrecurring cash out amounted to EUR 30 million mainly due to the already provisioned Belgium footprint restructuring. This brings the free cash flow before financing to plus EUR 18 million. Cash out related to financing was EUR 43 million, higher than in '24 due to the high-yield bond refinancing and a favorable interest rate swap, which came at maturity end of '24. This brings the free cash flow to equity holders to the minus EUR 25 million, as I told you before.

Let me go to the net debt. Our net debt reduced by 6% from EUR 612 million end '24 to EUR 577 million end '25. Apart from the free cash flow, which I explained on the previous slide, we finalized the divestments of the Brazilian and Turkish business, which brought EUR 131 million net proceeds. We, however, had to reclassify EUR 34 million of cash residing in Algeria, dating from the divestment in '24, and it was reclassified as a financial asset. But currently, we're making good progress in repatriating this money. We also had an increase in lease liabilities and some other noncash elements, which amounted to EUR 27 million and relates to future commitments related to the renewal of some real estate leases.

Next, we have the share buyback program, which was launched in '24 whereby we acquired 1.5 million shares to cover the future potential option plans with an impact of EUR 11 million in '25. This brings us thus year-on-year to the reduction of net debt by 6% and gross debt by 12%. And just to summarize, if we look at our gross debt, which is EUR 647 million, it's at the right side of the slide, you can see it consists of EUR 145 million of leases, of course, a EUR 400 million of high-yield bonds. And then we have the revolving credit facility, of which we had drawn EUR 100 million, which is a bit more than 1/3 of the total facility. And then before I pass the word back to Laurent, we can have a look at the leverage ratio. And in this graph, you can see the evolution since the end of '22. The net debt you can find in the middle in green and has reduced year-over-year by constantly deleveraging the net debt.

The last 12 months adjusted EBITDA, which is at the top in blue, improved consistently year-over-year until the end of '24. In '25, we have the decline because of the challenging year, but also, of course, the scope reduction following the different divestments. In yellow then at the bottom, you find the ratio of both representing the leverage ratio. It improved from 6.4x at the end of 2022 to 3.3x at the end of '23, 2.5x the end of '24, and now we returned back just above 3x at 3.3x at the end of '25. Nevertheless, the balance sheet remains healthy. The leverage ratio remains below the 3.5x covenant, which is a threshold in the RCF, and important to stress is that we have ample liquidity, namely EUR 240 million, which is the cash of EUR 70 million and about 2/3 of the RCF, which is undrawn. The maturity of our debt is extended to at least '29. Now I'm very pleased to pass the word back to Laurent.

Thanks, Geert. After 2 solid years in '23 and '24, '25 was more difficult. So how do we see '26. And I will start with the overall market conditions, that we anticipate to remain pretty similar to '25 overall with low consumer confidence and continued promotional activity by A brands. Yet we equally expect the Adult Care momentum to continue and overall retail brand to remain a compelling consumer proposition with opportunity to grow share. On top of this general setting, the following elements are reflected in our assumptions. We expect birth rates in Europe to drive overall Baby Care demand slightly lower as they did in '25. In North America, worth mentioning that our contract manufacturing current sales level will create a negative comparison in the first half of '26 and especially in the first quarter, whereas you might remember, we had anticipated shipments at the end of Q1 '25 ahead of the trade buyer threats between the U.S. and Mexico.

And in the other smaller overseas business that we have, we continue to review our portfolio with targeted exits of unprofitable contracts. So let me now share how this will translate to our ambition for '26 year. We target adjusted EBITDA to improve by 10% as we accelerate our extended cost transformation program throughout the year, and progressively return to more stable operations. This EBITDA improvement will be gradual, starting from a soft first quarter which is expected in line with the fourth quarter of '25, but therefore, lower than the strong first quarter that we had in '25. This improvement is underpinned by overall largely stable revenue for the full year. And here again, you should expect a lower Q1 versus prior years for the reason that I just explained. And then volume growth to pick up in subsequent quarters.

We expect free cash flow after financing to be back in positive waters, driven by this higher adjusted EBITDA, lower restructuring charges and a continued effort to drive our working capital down. This, in turn, will lead leverage down to 3x or better by the end of the year. To deliver this plan, our priorities are clear as presented in the next slide. First, resume volume growth. This includes ramping up the existing and newly secured contract as well as the benefit of the additional capacity we have added in Adult. Second, continue our productivity program with an extended cost transformation initiative which includes an adjustment of our organization to our new scope of business. And third, a laser focus on improving cash conversion.

In parallel, we started a strategic review with a clear focus on value creation. We want to go fast, whether by improving delivery and speed of our current plan or by adding new elements to create incremental opportunities and we will update you on a regular basis as progress is being made. This closes our prepared remarks. Geert and I are now ready to take your questions.

[Operator Instructions] And the first question is coming from Wim Hoste. Your line is open. Please go ahead.

I have a couple of ones. First one on the U.S. market. How should we think about revenue evolution in '26? You explained the situation with the contract manufacturing drop in preceding quarters. But will this contract manufacturing further drop in '26? How much support can you get from recently signed or started up contracts? Can you offer a little bit of clarity on that as well, please? So that's the first question. The second one is a more general one, pricing versus raw material evolution, if you can elaborate on that as well. And then a third and smaller one is how much CapEx budget have you included in the free cash flow guidance? That would also be helpful.

All right. Thank you, Wim, for your questions. I'll take on the first 2 questions and then Geert will address the third one. So on the U.S. market growth, as you know, we don't provide guidance of expected growth by region, but the dynamic that was described is what you should continue to expect, which is we're continuing to grow on our retail brand business. And yearon-over-year, our contract manufacturing sales in '26 will be lower than the full year '25. Overall, with the 2 blocks, we expect the U.S. to contribute more growth in Europe in '26. That's for your first question.

On the second question on pricing versus raw material, we expect stable to slightly positive contribution of raw material in '26 versus '25. And at the same time, we expect that as we have some contract renewal or tenders that we participate to, we might strategically invest on targeted customers to secure our gains. So this is the dynamic that we always have, where we try to remain competitive as we see raw material cost evolution. And on CapEx, I will pass it on to Geert.

On CapEx, yes, we keep, in fact, to the guidance we gave several times that at the end of '25, we wanted to go back to a level of 3.5% to 4.5% of CapEx to revenue. So that's what we're heading for and which is sufficient to execute our plans.

The next question comes from Karine Elias from Barclays.

Just going back to your -- the guidance on the full year EBITDA. Obviously, Q1 has been a tough comp. So I understand the decline that you mentioned, which would be similar to Q4. But just as we think through the year, what's your visibility like into Q2? Should we expect the EBITDA improvement to start showing from Q2 onwards? Because on my numbers, if we've got a EUR 50 million decline in Q1, that means a EUR 37 million improvement in Q2 through to Q4 to get to your guidance. Just wondering a little bit how we should think about the of the EBITDA.

Thanks Karine, for your question. So the way we look at it and you phrased it well. So we expect Q1 in line with the last quarter of last year of '25 and then indeed, as we said in our guidance, we expect gradual improvements throughout the year. What are the drivers? Of course, there are different elements. First of all, it's the continuous productivity improvement, which we're constantly working on with the cost transformation program which we also had last year, but this year, we project a much more stable year because there was quite some instability coming from external factors that happened, but also the changes we did in our organization. So we have the Belgium footprint reorganization that we were executing that's ending at the end of Q1, so that's finalized, so that will bring a lot more stability. And also in North America, we had an important ramp-up as well in production as in sales and also there, we see much more stability, which will help us to drive that EBITDA growth.

Great. But just to clarify, so we would expect to start seeing that from Q2 onwards? Or is it going to be more back-ended?

From Q2. So it's really throughout, it's step-by-step, quarter-by-quarter.

The next question comes from Usama Tariqfrom ABN AMRO ODDO BHF.

I just have one set of questions. Could you provide some view on the nonrecurring cash outflow for next year. So this year was around EUR 30 million. So any guidance there or pointer there would be very helpful. And just my second question would be it's a bit more general, but please correct me if I'm wrong, Ontex still has some exposure to Russian assets. Would that also be considered into the strategic review going forward? Or if you could provide any pointers there, that would be really grateful.

I take your first question on the nonrecurring. There, as a management, we have always had the intention to decrease our nonrecurring. So we also keep to that intention. That means that based on the plans we have at this moment, we still have about EUR 10 million of the last phase of the footprint in Belgium. So that's the big provision we made in '24 and what we gradually executed over the 1.5 years more or less. So there is EUR 10 million, but it's already in the P&L. So it's a cash out. And based on the current plans we have and the further transformation, we foresee more or less another EUR 10 million.

All right. And Usama, Laurent, I will tackle your second question. Yes, we still have our assets in Russia. You know our Russian business is about 5% of our total revenues. The strategic review is actually a pretty broad exercise where we're going to review where we compete in different categories, different markets and where we should allocate our resources to maximize value creation. And as part of this, if it's relevant to review our position with this market, we will, but it's way too early to preclude any conclusion.

[Operator Instructions] The next question comes from Fernand de Boer from Degroof Petercam.

Actually, I have one question. So you're guiding for a lower EBITDA in Q1 versus last year. So that means that on a 12-month basis, your EBITDA also comes down. What is your cash flow outflow expected for Q1 or first half because I think then you still are within the covenants, but if you look at that, then you could be very close. And what happens if you would drop below the -- above the 3.5x?

Okay, Fernand. I will answer on that question. Yes, we're not giving guidance by quarter that you know on cash flow. But of course, we are very aware on the quarter-to-quarter. We have a slow onset, a very clear cash focus, so that will be -- it's something not we look at on a quarterly basis. It's on a weekly basis that we're on top of that. As to covenants, you know that we guide to the -- towards the end of the year to go below 3x. That will not be in the first half of the year. But the purpose is to go down. It's also for us, the covenant testing. I want to stress that one. It's always coming at the end of half year. So we feel confident that we are -- yes, we're doing well and we are within the target set.

Okay. Maybe I missed it, but did you give an amount of factoring?

Yes, it's in the press release, but I can tell you, of course, it's EUR 185 million.

Yes. Sorry.

No sorry. It's normal. You couldn't read everything. That's perfectly normal.

The next question comes from Rebecca Clements from JPMorgan.

Can you hear me? .

Yes, we hear you well.

Okay. Okay. Great. Just following up on the accounts receivable factoring. You said it was EUR 185 million used at year-end. Is that correct?

Yes, that's right.

Okay. I think you had said last year that you expected some working capital pressure because of reduced receivables. It -- and I think that was related to the securitization facility. Could you just talk us through -- is that still the case? Or do you expect there to be some negative impact on the receivables side through at least part of 2026 due to the lower sales? That's my first question.

Yes. Good question, Rebecca. But of course, working capital, we look to the total. So it's for us inventory accounts, payable accounts receivable. Factoring at year-end, it was a bit higher than normal because there was quite some invoicing just at the end of the year. So it's a bit accidental. That's also one of the reasons where our free cash flow was somewhat better than the guidance. But for the rest of our accounts payable, yes, you have seen we don't give guidance on revenue, but we expect it to stabilize, and that means that our accounts receivable will be following the same pattern and with a close follow-up, of course, on our DSO. Does it answer your question?

Okay. Sort of. I was just wondering, because of, I guess, reduced -- given who you're selling to and which receivables go into that facility. I just wasn't sure if there would be some sort of temporary potentially negative impact of not being able to submit receivables to that facility that could impact you midyear? .

Not really. No, it's -- no, it's normal operation.

Okay. Okay. And then my second question is related to your visibility. So you said things are more stable now. I know last year, one of the challenges in the second half was that circumstances changed more quickly than you could react to and you ended up having some cost absorption issues from a manufacturing perspective. What gives you comfort that you feel the situation is more stable, whether it's North America Baby Care or European Baby Care? What gives you that sort of confidence in it being more stable because it seemed last year that it was quite difficult for you guys to predict kind of where volumes were going and plan accordingly.

Yes, Rebecca, thanks for the question. This is Laurent. I think when we talked about stability here, we were referring to our operations, not necessarily the sales pattern. We fundamentally -- what we're doing to be better prepared because we expect that there will still be some volatility from time to time in our sales, is to improve forecast accuracy and our ability to anticipate with leading indicators that would allow us to adjust our operation and our production ahead of time. And as at the same time, we're going to have less movements of start-up of new lines, relocation of lines from one factory to the other, et cetera, it will be in the context of a more stable operational framework, which will help us to be much more fluid and to create less inefficiency when you have some volatility in the demand pattern.

Okay. That's helpful. Can I get one more question in or no? Is that okay?

Yes, sorry.

Do you -- was most of the issues around not being able to react as quickly enough, was that North American Baby Care? Or was that across Baby Care globally for you?

It was across the care on both sides. Proportionately, obviously, it was a bigger impact on the U.S., but Europe also, we observed a change in behavior in the market. And our role is to partner with our customers to help them adapt to that situation. So we saw a much greater promotional activity from a brand in Europe. And we're talking to our key partners to share analysis with them and come up with ideas and proposition for them how best to be competitive in this new market reality to protect their position and for them to win on the marketplace. So on both sides.

The next question comes from Charles Eden from UBS. Charles, we are listening.

Two for me, please. Just firstly, on the EBITDA bridge, that 10% growth, which is what, EUR 17 million, EUR 18 million year-on-year. I hear you flat revenue. So I guess no real drop-through from the top line fluff and other inputs broadly stable, maybe EUR 1 million or EUR 2 million contribution. Is there anything else in the bridge? Or are you basically saying EUR 15 million of cost savings year-on-year gives you the growth? And maybe if that is true, where exactly are the cost savings coming from? Is it headcount reduction? Is it efficiencies? Is it a combination? Any color you could give us there would be appreciated.

And then my second question is just on the strategic review and Laurent, firstly, welcome. But secondly, just in terms of expectations on the strategic review, obviously, the business has changed a lot over the last few years. What can we expect you to be focusing on doing a strategic review? I assume there's not change your portfolio top of the list. But what are the areas that are top of that list for that strategic review?

Sure. I'll address quickly your first question on the EBITDA. I think that you're right that our continued productivity will be the key driver of our margin expansion and therefore, EBITDA growth and the second element that you need to keep in mind is mix, we benefit from a favorable mix. So even within stable sales environment, the mix will be a positive contributor. On the building block of this cost productivity, they are the usual suspects in terms of we work with procurement on improving the mix of our suppliers. We work on manufacturing, on the efficiency of our lines. We are doing some re-networking analysis on logistics. We have the design-to-value initiative where we always cost optimize our product, and we're extending that in '26 to also include some adjustments on our organization design to generate additional savings.

So those would be the key building blocks. On the strategy review question. It is a pretty broad effort, as you could have read in our press release in January, where we basically are stepping back and are looking at where best to allocate resources, capital to create maximum value for our shareholders, where we have the best chances to win and where it grows. We believe that all our categories have potential. We have already done a huge focused effort to focus on Europe and North America. There is -- both have potential. Yet what we're looking at is the new conditions to compete and how do we tweak, if you want, the formula between the focus on different categories, what it takes to compete and therefore, what is the proper footprint and organization to maximize our cost in order to be able to continue to grow volume in those categories.

So a bit long answer to your questions because this is exactly the goal of that effort. And our commitment is that as we progress, we will share our conclusions in our subsequent earnings calls with you.

And the next question comes from Maxime Stranart from ING.

Hope you can hear me well. Two questions from my side, if I may. Apologies if it has been asked already. A bit of delay here. So first of all, looking at your EBITDA guidance and the cadence throughout the year, can you elaborate on when do you see inflection point coming in? Based on your guidance, I understand that EBITDA should decline by basically almost 20% in Q1. So just a view on how we should see the work panning out. Second question would be on restructuring. I think you announced previously that you wanted to accelerate savings and productivity improvement there. I think you mentioned EUR 40 million, of which some were to be included in SG&A and some restructuring. Any view you can share on that? That would be helpful.

So Maxime, your first question, our EBITDA guidance is that our Q1 is in line with last quarter of '25, and then we see a gradual improvement quarter-by-quarter. Is that answering your question?

Yes, it does. Just want to cross check there. So basically, if I look at last year, Q1 was good, Q2 was bad, Q3 was good. So I just wanted to make sure I understand the phasing of your guidance correctly.

Yes. But indeed last year was at a quite volatile pattern. That's not what we expect. And yes, as you have seen, we give guidance on EBITDA. So we're, of course, also focused on revenue. But for us, the productivity improvements are important. The mix improvements, the stability that we've built in the business, and that's what will drive that continuous growth throughout the quarter.

The second question was on restructuring. Maybe Geert, you can add on that as well in terms of what to expect.

Yes. So restructuring, linking to what Laurent said before, for us, we have existing plans, which is on one hand a continuation of the plants in the past, but all with new initiatives because we're talking about add-on savings. And in the strategic review, they will look at what extra things they can untap as potential. But in the restructuring plan, which is part of the guidance we give, they -- yes, there's a whole bucket of savings with the restructuring costs that I mentioned before, of still above what we still have to pay on bringing out the Belgium footprint, we still have EUR 10 million of restructuring costs and there's another EUR 10 million we expect this year to execute the existing plans.

Okay. Got it. I apologize, I missed the beginning of the call. I just wanted to clarify then you basically expect a EUR 20 million basically cash outflow from restructuring. Just want to make sure.

That's right. That's right. Based on the existing plans.

So there are no more questions. So I hand it back over to you, Laurent, for your closing remarks.

All right. Thank you, Geoff. 2025 was a year that did not live up to our expectations. Yet we continued to deliver on our transformation program, and we showed some solid resilience, including in our profitability and in our ability to compete in the marketplace. We remain upbeat on the potential we have in the different markets in which we participate. The strategic review is a needed step to sharpen our trajectory and focus even more on where we can create compelling value and we will share our conclusions and the year progresses.

We have very clear priorities set to deliver our '26 plan with a laser focus on financial discipline and cash. We are confident we can start to rebound even in the first part of the year will continue to be subdued. The priorities we shared today are the ones of our close to 5,000 employees who give their best every day, so we deliver great proposition to our customers. They understand the need for us to rebuild trust and to adjust our journey to best reflect the market realities. With that, thank you for joining, and have a great day.

This concludes the call. Bye-bye.

Bye-bye.

Good afternoon, everyone, and thank you for joining us today. I'm Geoff Raskin from Investor Relations, and I'm pleased to have with us san Gustavo Calvo Paz, our CEO; and Geert Peeters, our CFO, to present the third quarter results.

Before that, let me remind you of the safe harbor regarding forward-looking statements. I will not read it out loud, but I will assume you will have duly noted it. And with that cleared up, Gustavo, over to you.

Thanks, Geoff. While market conditions have not been supportive in 2025 so far, our ongoing transformation journey continues to structurally improve our competitive position in the market. You can see the benefits of this in the quarter-on-quarter results, where we turned the sequential growth.

Our revenue in quarter 3 is up 4% compared to quarter 2 driven by volumes from new contract wins in a continued soft market environment. Our EBITDA margin improved by 3 percent points, thanks to the revenue growth and net cost improvement, including continued delivery on our cost transformation program. And meanwhile, our leverage remained at 2.7 over the quarter. The soft market environment on the first half of the year did continue in the third quarter. Therefore, our results are still lower compared to last year.

Let me pass you over to Geert for a more detailed financial analysis.

Thanks a lot, Gustavo. On this slide, you will find the different components that contributed to the 5% year-on-year decrease of revenue in Q3 to reach EUR 445 million in the quarter. The price and mix impact was almost nil and contains a limited price investment and a small positive mix contribution. Since mid-last year, prices were rather stable, leading to a neutral year-on-year impact. The lower revenue is explained by lower volumes as in the previous quarters. The drop amounted to 4% and is in line with the construction of the consumer demand in private label in Europe and North America.

In Adult Care, we're growing by high single-digits in the retail channel, and we're ramping up capacity, including the healthcare channel, where Ontex has a high exposure and demand is more stable, overall growth in Adult Care was 1%. In Feminine Care, we performed strongly with a volume growth of 5%. And Baby Care volumes were down 11% as demand continued to be soft in private label, partly as promotional activities of A brands continued in certain countries.

In North America, this was exacerbated by a decline in contract manufacturing, positive was the start-up of new contracts in North America and in Europe, albeit that some started a bit later in the quarter than originally expected. We also recorded a 1% negative impact from ForEx caused by the depreciation of the British pound, Australian dollar and especially the U.S. dollar. What this means on a quarter-on-quarter basis can be seen on the next slide.

In the first 2 quarters, we have experienced sequential revenue declines by 5% each, but we are now turning the curve in quarter 3 with 4% sequential growth, including a positive price/mix contribution. Volumes dropped in the first quarter mainly due to soft consumer demand. And in the second quarter, they came down further as on top, some customers decreased inventories and Ontex faced some supply chain disruptions, amongst others, due to the outage in our Segovia plant. Although the market remains very soft in the third quarter, customer destocking is over, and capacity constraints are being solved. Moreover, we gained new contracts that mostly started up at the end of the quarter. ForEx had a positive contribution in the first quarter and turned negative afterwards, mainly due to the depreciation of the U.S. dollar.

Now let's move to the adjusted EBITDA on the next slide. On the year-on-year bridge, we find the building blocks, which led to the adjusted EBITDA of EUR 51 million. The revenue decrease has a EUR 6 million negative impact, which is the main explanation for the year-on-year adjusted EBITDA drop. Indeed, as our cost transformation journey continues, net savings for an amount of EUR 16 million in the quarter fully offset cost increases. Contributions came from optimizations in innovation, purchasing, supply chain and manufacturing, including the contribution from the ongoing Belgium footprint transformation.

Raw material costs were still up year-on-year, mainly for fluff and packaging materials, albeit less than in Q2. Actual prices for raw materials have started to stabilize after the peak, but still remain high, higher than the level of last year. Other operating costs were up largely due to inflation of salaries, logistics and other services. Furthermore, there are still some supply chain inefficiencies, which, however, are declining. Also, the increase in operating costs is partly offset by lower SG&A costs, which have been adapted to the lower volume level. The margin amounted to 11.4%, while this represents a 0.6 percentage point decrease versus last year, it's a 3 percent point improvement versus Q2. More on the quarter-on-quarter comparison can be found on the next slide.

We experienced 2 quarters of sequential adjusted EBITDA decrease, especially in the second quarter. But in Q3, we have been turning the tide from Q2 -- from the Q2 low point to return to the Q1 level. You can first notice the impact of the revenue evolution, which I described earlier. It is important to see that we have already recovered in the third quarter about 75% of the negative impact of the first half of the year. Net costs started to ease in Q3 versus Q2. Stabilization of raw material costs and improved supply chain efficiency allowed our continued cost transformation efforts and SG&A streamlining to flow through.

Before I pass the word to Gustavo, let's cover first the leverage and net debt on the next slide. With solid EBITDA delivery, no material restructuring cash outs and managing the CapEx spend, we produced positive free cash flow in the quarter. Net debt for the group thereby reduced by EUR 9 million to EUR 543 million, maintaining a solid liquidity position. The leverage ratio remained stable at 2.7x as the lower net debt was offset by slightly lower adjusted EBITDA in the last 12 months.

Gustavo will now give more insight into our expectations to further improve revenue and EBITDA in Q4.

Thanks, Geert, for this detailed analysis. I want to say in July, we have talked about the several adverse factors that affected our results in the H1. And I shared what we should expect to improve in the second half of the year. So what happened so far? Quarter 3 price is stable. Negative price carryover has stopped. New contract wins have started in North America and in Europe. Customer destocking is over. New capacity in high-growth product categories has come on stream. The Segovia plant outage as well as the packaging material shortage are over. The temporary measures to mitigate the U.S. tariffs have phased out. And finally, raw material prices stabilized.

The second half of the year has started largely as expected. And we expect this to be reflected further in the fourth quarter, as we can see on the next slide. Looking at revenue first, on the left in dark blue, we have had 4% sequential growth in quarter 3 with positive price/mix and especially thanks to volume with the new contract wins kicking in at the end of the quarter. Our current projections indicate that 5% growth in quarter 4 is realistic based mostly on volume from the new contract wins.

On the right side, in light blue, we have the quarter-on-quarter evolution of adjusted EBITDA. In quarter 3, we grew by EUR 50 million, thanks to higher revenue and improving net cost. In quarter 4, we expect cost to improve further sequentially with further raw material price stabilization and further operating and SG&A cost optimization. Combined with the positive impact of volume-driven revenue growth, we project a sequential increase in EBITDA at least EUR 30 million.

As a result, we keep our expectations for the year at the same level as in July, as shown on the next slide. Revenue for the year is expected down by low single-digit like-for-like and adjusted EBITDA in a range of EUR 200 million and EUR 210 million. Solid EBITDA generation and working capital management efforts in quarter 4 will drive positive free cash flow further in the quarter and thereby bring the free cash flow for the year to breakeven. Combined with divestments proceeds, this bring net debt down by year-end and bring back the leverage ratio to about 2.5x, which is the level at which we exited 2024.

So let me finish saying, while we are turning the high sequentially getting back to growth, we have continued to build on our foundations of our operations as stipulated in our strategic road map, resulting in Ontex becoming more strongly positioned for the future.

With that, Geert and I are ready to take your questions.

[Operator Instructions] The first question comes from Charles Eden from UBS.

I just wanted to dig a little bit deeper into the implied Q4 EBITDA because I guess to get to the bottom end of the full year guidance, that means you need to do at least EUR 63 million of EBITDA in core markets in Q4. Could you just help us in the building blocks there? Is it just that the phasing of the new contracts are not in the base in Q4 -- in Q3. So when we get to Q4, that comes in, and that's the major delta. Are you baking in an improvement in the underlying markets in Europe? And if so, is there anything you're seeing to give you confidence in that?

And then linked to that, when I think about 2026, is there anything one-off in that EUR 63 million plus you're saying for Q4? Or should we be saying that's the quarterly run rate to expect for 2026? And if so, that implies sort of EUR 250 million of EBITDA. So is that -- if that's not the right way to think about it, could you help me bridge those factors?

Charles, I'll take that question. So thanks for the 2 questions. First, on the Q4, if you look at the bridges we made, yes, first of all, your calculation is right, to enter the low end of the EBITDA, we need about EUR 63 million, which is EUR 12 million extra from the quarter 3. How do we think to achieve it? About more than -- a bit more than half, it's revenue related. As you can see, we expect about 5% at least extra revenue as compared to Q3. This is mainly related to the new contracts. As we said, those new contracts started only at the end of September as well contracts in Europe, but at the same time, 2 big ones in North America that will have a full quarter impact. That will be the main driver.

To a certain extent, also, we're expanding the capacity in adult. So that will also help us. And on the market itself, we're not assuming an improvement on the market. So if markets would improve in the last quarter, that could bring us some upside. Then the other half, but it's a bit less than half, it will be mainly cost driven. On one hand, we said that raw material prices are stabilizing, and the impact year-on-year is still negative. But quarter-on-quarter, we have a slight improvement again in Q4. And at the same time, we're also looking at our SG&A. Our activity level is lower. So we want to keep the SG&A at a level which is in line with that lower volume level.

And then to translate it to next year, yes, we're still working on the budget. So there's not much I can tell about that. But of course, the new contracts will be a very strong basis for next year. So that will be an important driver for the budget of next year.

Okay. So nothing one-off. The cost savings in Q4 are permanent. There's not sort of you're phasing some costs into next year. I'm just trying to understand, there's nothing that you're calling out that would not suggest that EUR 63 million can be a recurring level of profitability. Is that correct?

Yes, there are no big one-offs. But at the same time, of course, we adjusted SG&A. It might be that we have to release it a bit more next year. So it's not that it just copy paste multiply by 4. So...

The next question comes from Usama Tariq from ABN AMRO ODDO BHF.

I just have 2 questions. Firstly, on pricing for Q4. So you indicate relatively stable pricing. Do you see some negative effects from promotional activities still in Q4? And do you expect that to have an impact on you? In general terms, do you think you will be forced into cutting some prices if other brands do very strong promotional activity?

And my second question would be, could you kindly also recall what is the restructuring cash out that you still have to do or expect in Q4 or in 2026? That would be my 2 questions.

All right. Usama, thank you very much. I'm going to take the first question, and Geert is going to take the second one. On the pricing front, yes, pricing is stable for us. And when we are talking about stable, it's always stable for us. And we are not expecting any changes in the quarter 4 in our front, no expectation to change the pricing -- our pricing. What can happen in the market is a competitive market at this moment because when the market is in a soft mode, definitely, there is more competition, but competition is not just on the pricing front. Competition is in promotions and A brands are defending -- for sure, defending their positions and also competition from other private labels, maybe. But our contracts, they have a pricing already, and we will continue with that pricing. There is no move for us depending on the market.

Okay. Usama on the second question on nonrecurring. Good news is that in Buggenhout, which is the plant, which we're completely upgrading, we're fully getting up to speeds. So new machines have been installed. We expect to have a fully operational plant in a very new state, best of practice states by the second quarter of '26. That means also that we will be getting the savings from that one because it will be an important contributor for the cost transformation. Last quarter, because that also means that we have now the restructuring costs kicking in. Last quarter of this year, we are expecting a bit more than EUR 5 million still as nonrecurring. And for Q1, Q2 next year, it will be a bit more than EUR 10 million related to that footprint in Belgium.

And more than EUR 10 million, I understand, is per quarter or is it EUR 10 million in total?

No, no. In total, for next year. Last quarter of this year, EUR 5 million, EUR 10 million for next year. And if you add up all the amounts that we already reported in the past year in line with the provision that we made last year because we had a P&L provision for it. So it's a cash out on a provision that we made in our books.

Our next speaker is from KBC Securities, Wim Hoste.

Two questions for me, please. Can you elaborate on the contract book for next year? Are the new recently gained contracts by now fully started up? Or are the new contracts to be expected to contribute also into next year, if you can clarify that?

And the second question would be on the contract manufacturing business. In the U.S., can you remind us how big that now is and how you expect that to further evolve in the next few quarters?

Okay. Wim, thank you for your questions. Contract wins, we do have contract wins this year that kick in at the end -- towards the end of the third quarter and will continue. And will continue for the entire 2026 and 2027 in some cases, for sure. And we have won some -- also some new contracts that are going to kick in next year. So they are not yet -- there is always a time when the tender happens, you win and then you start supplying. So we're going to have very good news next year, but the good news has happened already with the contract wins. So yes, we have in 2026 contracts coming. So our projections on gain and losses is positive throughout also 2026.

Second question, you asked about contract manufacturing. And it's an interesting question because years ago, contract manufacturing was larger -- the larger business that we had in U.S. And starting in 2023, we decided to put more strategic emphasis on retail brands on private label segment. And we started to grow significantly our private label segment, while contract manufacturing is facing more the soft market situation at the moment. So we are -- our contract manufacturing volume is declining as a result of the situation in the market, in general market. So contract manufacturing is brands that we don't control at all, while in the private label sector with the retailers, we work together with the retailers on developing their private label for the Baby Care segment in this moment. So we're growing significantly in the retail brand business, while contract manufacturing is declining at the moment.

Okay. If I can just follow-up on the first question. The contract wins you commented on for next year, are those in the U.S. market or are those in Europe?

Both. The contract wins this year, before impacting in U.S. next year and contract wins -- important contract wins in Europe impacting next year.

Our next question comes from Maxime Stranart from ING Bank.

Two questions on my end as well. First of all, looking at Adult Care, where the growth is somewhat below what Essity has reported. So if you can elaborate a bit on the reason why the growth has trailed branded products in Adult Care and how you see this evolving in the future? Secondly, looking at Q4, especially in your guidance, quick math on the bottom end would imply that your margin would jump by more than 200 basis points and then obviously to 13.5%, a level reached since the pandemic. So quite surprised about such a guidance in terms of margin. So if you could elaborate on that?

And following up on Charles' question, is it a level we should see as sustainable in the long run? That would be all for me.

All right. Maxime, thank you. On Adult Care growth -- our Adult Care growth in retail brands is high single-digit, which is, I would say that is higher than even what the market is growing. So we are very, very happy and pleased how we are performing there. And as we said before, more capacity in certain segments or categories, high-growth categories are coming into stream. So with good innovation, so we know that we are going to get -- continue getting wins in the Adult Care segment in the retail brand.

Then you have the healthcare for us, the channel -- healthcare channel, which is different because those contracts are much long-term. It's different. The big tenders with -- normally with the government or big companies in nursing homes. So those tenders are long-term contracts and sometimes happens that in one specific quarter, you can have one coming in and another one coming out and maybe the quarter is not exactly. So we need to measure healthcare more at least in a yearly basis, how we are doing. And the net result of the year is a positive result for -- also for the healthcare business. So I repeat high single-digit growth in the retail brand of Adult Care, which is higher than the market growth.

And then for the second question, Maxime, indeed, if you calculate back for Q4 based on the guidance, you arrive at about 13.5%. Of course, our margins, first of all, as you know, we are a very volume-driven company. So that means that the volume growth in Q4 and having a better absorption of our fixed costs will help us with our gross margins. So that explains the improvement. Now your question also is to what extent is that sustainable? Of course, there are several components. It's about raw material pricing. It's -- I was telling you also on the SG&A currently, we're curtailing the SG&A. We're also always every quarter, we have to take positions on what are, for example, the rebates we expect to receive. So it's a combination of all the elements that will give us the 13.5%.

So towards the future, I can say definitely a sustainable margin, which we think we can have in a sustainable way in the future, but it doesn't mean it's for the coming quarters that you can just -- the same answer as before on the revenue that you can just multiply by 4. That would be more a goal for the future, and it's now a positive combination of different components.

[Operator Instructions] And our next question is from Karel Zoete from Kepler Cheuvreux.

I have a question on the baby business and the capacity in Europe. And that kind of relates to pricing because I think the market has been difficult for a while now and volumes about 10% down, and you're probably not the only one suffering. So how do you see this with regards to capacity utilization in your European platform? And what -- how do you see price negotiations or new contracts into next year for the European baby business?

And the second question is on the reduction in SG&A in Q4. I don't completely understand why it should be down. You're landing a couple of new contracts that probably comes with more commercial efforts as well. So why would SG&A be down sequentially?

All right. Karel, I'm going to take the first one. I believe that Geert is going to answer you the second question. On the -- yes, your point is very valid, right, because the capacity installed in generally speaking, right, in the whole European market is -- now is getting idle in some cases. So -- but we should not also forget the transformation, right, of the Baby Care business. So baby diapers is going down more significantly, while baby pants, although now this past quarter slowed down the growth, but year-on-year, it's still growing baby pants. So there is a move from baby diapers to baby pants.

Also within baby diapers and baby pants and youth pants, there is a dynamic that is happening that is larger sizes. So there is a transformation between a movement -- a more consumption in larger sizes. This is due to a trend that babies are using diapers for a longer period of time. And when we see each other next, I want to explain a little bit even more because there are very interesting insights regarding that happening because that trend is happening not just here, but also in U.S. is following something about also the aging of the couples of the parents, interesting to know.

But in our case, in particular, we are renewing, as you hear from us all the time that we are doing footprint work, footprint all the time investment in efficiencies. So we use this also momentum of more capacity -- more free capacity in diapers to do the adjustments where we need to do it, thinking in the future and thinking in the trends. Then you asked about if this excess capacity cannot impact in the next future contracts and pricing in Baby Care. I'm going to say that potentially, yes, if you just play in the very, very low end of the segment, definitely.

We -- starting some years ago, we started to invest significantly in innovation, coupled with our partners or our customers, retailer customers that partner with them in innovation. We are bringing a lot of innovation into the market, which -- it's very important to take into consideration that it's not just a price type of competition. Also it's innovation, it's sustainability, it is customer service, it's quality assurance, all those things that for which we, as a company, when I mention that we are working on our foundations to structurally change our foundations and be more efficient, all of that is included. And that gives us the competitiveness into the marketplace. So we are not just competing in the pricing. We need to be more efficient. Yes, definitely, but also innovative and have high customer service and quality assurance. And of course, the patents and the regulatory is also a very important subject.

That's for Baby Care. Now I'm going to leave Geert on the second question.

Karel, on the question on the SG&A, first of all, to clarify, if you look to the quarter-on-quarter from Q3 to Q4, their SG&A is less an explanation because SG&A is already lower in Q3. The explanation from Q3 to Q4 in operating costs, it's more related to a stabilization of raw material prices and gaining further efficiency. Now on the SG&A itself, if we look at SG&A at a lower level in Q3 and Q4 looking at it and explaining a bit more on why SG&A is lower. For me, there are 3 components. First of all, important for you to understand our SG&A, it's not that if we sell more contracts, we have more SG&A. Our SG&A, it's a rather fixed amount. All the sales teams, all the administration, it's in place. So that means it's a rather fixed cost. It doesn't mean, of course, that there are 3 ways to bring the SG&A down. It's, first of all, cost consciousness. It's about how we function, how much we travel in an organization, all that type of stuff. So we are in a very cost-conscious mindset over the last months because of the lower results, which is also logical that we do that.

Second thing is, of course, we are looking extra to being a more efficient organization, how can we work more efficiently with the staff we have. So that's the second area. That's, of course, more sustainable towards the future. And then a third component, there's always a variable component, of course, in the SG&A because part of the remuneration of management of sales, it's a variable remuneration, which is down because of the sales and the EBITDA, which is down.

The next question comes from Markus Schmitt from ODDO BHF.

I have one just on free cash flow guidance. So you had [ EUR 9 million ] in Q3, EUR 31 million is therefore left to meet the guidance. You expect apparently strong EBITDA in Q4, and you paid the cash interest on the bond already in July. And you just mentioned that there will be some restructuring costs in Q4. This brings me to about EUR 10 million of contribution from inventory releases in Q4 to meet the guidance. Is this assumption about correct? Or do I miss something here?

Markus, I love that you already give 90% of the answer because indeed the drivers of the better free cash flow in Q4 are EBITDA. It's indeed the high-yield bond coupon. The next one is only in January. So that's an important explanation. Nonrecurring, there will be some nonrecurring, but it's limited. And then the 2 other components is CapEx. We are, of course, this year because our result is less, we're not spending the full CapEx that we intended to do without hampering the business because I can tell you the key CapEx we need to build the capacity, for example, in Adult Care, of course, that one continues. So we're also bringing down CapEx.

And the last element is like you say, on the working capital. Now in the working capital, there are always 2 elements. First of all, at the end of the year, you have the typical seasonal impact, our inventories are always down in the Christmas period towards the end of the year because we produce less at that moment. So that's one of the components. Other component is you know that we have been talking in Q3 on inefficiencies. We solved a lot of inefficiencies in Q3, but having the full impact in Q4, and that's mainly on an inventory level, we believe that we still have a step we can -- we will make in the short-term on inventory. So your conclusion is quite correct.

Almost on target. Okay.

And then our last question comes from Karine Elias.

Sorry, if you've covered that before. But just wondering if you can comment on the competitive environment. Are you seeing any changes with regards to the A brands behavior on promotional activity? That would be very helpful.

Karine, Gustavo here. The A brands, yes, are defending their volumes. And of course, as it was expected from our side. And that is in both regions where we are focusing on in Europe and in U.S. And -- but anyway, for them, also, it's an important -- the volume is important for every single company here. So -- and in Baby Care, in particular, that is a declining market at the moment. What we are expecting for the future is that we are expecting to continue competing. So private label -- private label is an important -- a very important business for the retailers. And we are not expecting that, that is strategically changing the retailers. So retailers and I, we are all constantly working together on continuously putting in place consumer-driven volume growth for the private label. So yes, we compete through to A brands through the retail brands in hand-to-hand with them. So yes, it's going to be competitive. In other words, continue to be competitive.

So there are no more questions. And thereby, I hand you back over to Gustavo for your closing remarks.

All right. Thanks all for the questions and the interest and participating in the call. So perhaps I'm going to repeat something that I said earlier during the presentation that while we are turning the tide sequentially and getting back to growth, we have continued to build our foundations of our operations as stipulated in our strategic road map, resulting in Ontex becoming more strongly positioned for the future. So thank you again. Thank you very much and see you next.

Thank you.

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