Strategic Shareholding Shifts in Ontex Group and the Implications for Institutional Investors

The hygiene and care sector has long been a resilient corner of the global economy, but in 2025, Ontex Group NV (ONTES) is undergoing a transformation that could redefine its role in the market—and the stakes are getting higher. With a 7.5% stake now held by Brandes Investment Partners, one of the most ESG-focused institutional investors in the industry, the dynamics of governance, valuation, and strategic direction are shifting in ways that could ripple across the sector.

A New Player in the Room: Brandes' 7.5% Stake

Brandes' recent crossing of the 7.5% threshold in Ontex is no small matter. This move, which elevates the firm from a 6.38% stake to 7.51% ownership, triggers mandatory disclosures under Belgian law and signals a strategic bet on Ontex's long-term potential. For institutional investors, this is a red flag worth analyzing. Brandes is not just a passive holder; it's a firm that integrates ESG rigor into its investment thesis and has a history of engaging with management to drive governance improvements.

Brandes' approach is clear: it prioritizes companies that demonstrate strong corporate governance, environmental accountability, and social responsibility. In the hygiene sector, where supply chain transparency and sustainability are increasingly critical, this could mean Ontex is under the microscope for its labor practices, carbon footprint, and innovation pipeline. For example, Ontex's recent €70 million in cost savings from its 2024 transformation program—driven by supply chain and manufacturing efficiencies—aligns with Brandes' focus on operational discipline. However, the firm may push for further strides in areas like renewable energy adoption or circular packaging, which could add to costs in the short term but enhance brand loyalty and regulatory compliance in the long run.

Governance at a Crossroads

Ontex's corporate governance structure, while robust, faces new challenges. The Board, chaired by independent director Hans Van Bylen, has already taken steps to align with the 2020 Belgian Corporate Governance Code. Committees like the Audit and Risk Committee and the Remuneration and Nomination Committee are well-staffed, but Brandes' growing influence could prompt calls for greater shareholder representation or more aggressive ESG metrics in executive compensation.

Consider this: Brandes' proxy voting process is guided by ESG impact, and its analysts are known to push for shareholder proposals that tie executive pay to sustainability goals. If Ontex's current Remuneration Policy—which was approved by shareholders in May 2025—doesn't already include such metrics, expect pressure to revise it. This could lead to a governance shift that prioritizes long-term value creation over short-term gains, a move that might appeal to ESG-focused investors but could frustrate those seeking immediate returns.

Valuation Implications: Balancing Growth and Governance

Ontex's financials tell a story of resilience. In 2024, the company reported a 3.5% like-for-like revenue increase to €1.86 billion and a 28% surge in adjusted EBITDA to €223 million. These figures are impressive, but they come amid a backdrop of strategic divestments and restructuring costs. The closure of the Eeklo plant in Belgium and the transformation of Buggenhout into a center of excellence for incontinence care products—funded by a €62 million provision—highlight the risks of operational overhauls.

Brandes' stake could stabilize Ontex's valuation by injecting confidence in its governance and ESG credentials. However, the firm's emphasis on sustainability might also introduce volatility if investors perceive short-term costs as a drag on earnings. For example, Ontex's recent share buyback program (which repurchased 1.8% of issued shares) and its new €270 million credit facility suggest a focus on shareholder returns. If Brandes advocates for redirecting some of these funds into green initiatives, the stock could face near-term headwinds.

Strategic Leverage: Sector-Specific Opportunities

The hygiene and care sector is primed for disruption, driven by an aging global population and rising demand for adult incontinence products. Ontex's 2024 innovation pipeline—13 major product launches across baby, adult, and feminine care—positions it to capitalize on these trends. Products like ConfiDaily™ pantyliners and SatinSense® tampons reflect a commitment to premium, A-brand standards, which could command higher margins.

But here's where Brandes' influence becomes pivotal. The firm's experience in the healthcare and consumer goods sectors could help Ontex accelerate its R&D efforts or forge partnerships with biotech firms to develop biodegradable materials. Such moves would not only align with ESG goals but also differentiate Ontex from competitors like Essity and Kimberly-Clark.

The Bottom Line for Institutional Investors

For institutional investors, the key question is whether Ontex's strategic and governance shifts will outpace its operational challenges. Brandes' 7.5% stake is a vote of confidence, but it's also a call to action. Investors should monitor:
1. Governance reforms: Will Ontex incorporate ESG metrics into executive compensation?
2. Capital allocation: How will the €270 million credit facility be used—share buybacks, R&D, or ESG investments?
3. Sector trends: Can Ontex maintain its 3–5% revenue growth in a market increasingly dominated by sustainability-driven consumers?

The hygiene sector is a fortress industry, but Ontex's ability to adapt to ESG pressures and governance demands will determine its long-term success. If Brandes and other institutional investors continue to push for a balance between profitability and sustainability, Ontex could emerge as a model for the sector. For now, the stock offers a compelling mix of resilience and reinvention—but it won't come without its share of turbulence.

In conclusion, Ontex's strategic shareholding shifts under the microscope of Brandes' 7.5% stake present both risks and rewards. For investors willing to navigate the governance complexities and embrace the ESG-driven future of the hygiene sector, Ontex could be a high-conviction play. But patience and a long-term horizon will be essential.