Ontex’s AGM Success Reflects Resilience Amid Strategic Shifts

The Ontex Group’s 2025 Annual General Meeting (AGM), held on May 5, underscored the Belgian-based hygiene products giant’s ability to navigate a challenging market environment while maintaining strong shareholder confidence. All resolutions, including the approval of financial statements, board reappointments, and strategic initiatives, were passed by a large majority. This broad support reflects investors’ faith in Ontex’s strategic transformation program, which has delivered cost savings and positioned the company for sustained growth.

Q1 2025: Resilience Amid Revenue Headwinds

Despite a 2.8% like-for-like (LFL) decline in Q1 2025 revenue to €451 million—driven by softer European demand and price reductions—the company demonstrated operational resilience. Adjusted EBITDA held steady at €51 million (11.2% margin), with €15 million in cost savings from its transformation program offsetting rising raw material costs. Key highlights include:
- North American growth: Baby care volumes surged by double digits due to new retail contracts, illustrating the benefits of geographic diversification.
- Strategic divestments: The Brazilian business was sold for €81 million, with proceeds earmarked for debt reduction. A Turkish business divestment is also slated for late 2025, further streamlining the portfolio.
- Debt management: A €400 million bond issuance refinanced maturing debt, while a €1.5 million share buyback program reinforced capital discipline.

Balancing Leverage and Growth

While net financial debt rose to €656 million by March 2025 (up from €612 million at year-end 2024), management remains confident in its ability to reduce leverage to below 2.5x by year-end. This target is achievable thanks to:
1. Free cash flow stability: Despite higher working capital needs, Ontex expects strong cash generation as transformation investments near completion.
2. Tariff mitigation: USMCA trade agreements have eliminated tariffs on Mexican-manufactured goods, easing pressure on North American operations.
3. Category optimization: Adult care volumes grew in Europe, while baby care’s North American outperformance offsets European promotional pressures.

2025 Outlook: Growth Drivers in Focus

Ontex reaffirmed its full-year targets of 3–5% LFL revenue growth and a 4–7% rise in adjusted EBITDA. These projections hinge on:
- Volume acceleration: North American baby care and adult care in Europe are expected to drive H2 gains.
- Margin expansion: Cost savings and tariff-free exports should lift EBITDA margins back toward 11.5%.
- Debt deleveraging: The Turkish divestment and free cash flow generation will reduce net debt by an estimated €100 million by year-end.

Risks and Considerations

• Raw material costs: Fluctuations in fluff pulp and superabsorbent polymer prices could pressure margins if not offset by further cost savings.
• Geopolitical risks: While USMCA mitigates tariffs, broader trade disputes or supply chain disruptions could re-emerge.
• Competitor pricing: Aggressive discounting by private-label brands in Europe remains a threat to baby care margins.

Conclusion: A Path to Sustainable Value Creation

Ontex’s AGM success underscores shareholder approval of its strategy to prioritize disciplined capital allocation and operational efficiency. With €15 million in annualized cost savings now embedded, the company is well-positioned to capitalize on its North American growth and portfolio streamlining.

The financial metrics tell the story: despite a 2.8% revenue dip in Q1, EBITDA margins held at 11.2%, and leverage—though temporarily elevated—is on track to fall below 2.5x by 2025. The completion of the Brazilian divestment and planned Turkish sale will further strengthen the balance sheet, while North American volume growth and USMCA tariff benefits provide tailwinds.

Investors should monitor two key indicators:
1. H2 revenue growth: If North American volumes continue to outperform, Ontex could exceed its 3–5% LFL target.
2. Leverage reduction: A net debt decline to below €600 million by year-end would validate management’s financial discipline.

In a sector marked by thin margins and supply chain volatility, Ontex’s focus on cost control and strategic divestments positions it as a resilient player. The AGM’s strong vote of confidence suggests investors are betting that this focus will translate into long-term value creation.