This is the Chorus Call Conference Operator. Welcome, and thank you for joining the Intercos first half 2026 financial results. As a reminder, all participants are in listen-only mode . After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, please signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Renato Semerari, Chief Executive Officer. Please go ahead, sir.
Thank you very much. Good evening, everybody. In a global context, still marked by geopolitical tensions, currency headwinds, and the beauty market slowly recovering its historical growth pace of 4% to 5%, Intercos came back to growth, registering a quarter two with solid results both at top and bottom line level. Summarizing the key highlights. Regarding top line, Q2 was the best ever second quarter of our history at EUR 285 million, a 5% growth at constant rate. This result allowed us to close the gap versus 2025 accumulated in Q1. The first semester was only 0.5% below a year ago. Important to note that such a result was achieved despite the decline of the packaging component of our revenues. As such, our Value Added Sales, i.e. net sales minus pack, resulted in first semester down by 0.9% at reported rates, which means low-single-digit up at constant rates.
This was done without depleting our order portfolio, which remained up mid-teens versus a year ago, thanks to continued strong order intake. As for EBITDA, Q2 was our best ever quarterly result at EUR 47.5 million with a margin of 16.7%, which was 16 basis points better than a year ago. First half was therefore at EUR 72.6 million with flat margin at 14.2% on net sales or 17.9% on Value Added Sales. EBITDA was helped by prestige segment, which was up 4 percentage points over a year ago, and the pack component reduction, which was down by over 1 percentage point. As for net debt, we also were down by over EUR 10 million, actually EUR 12 million, after having covered for the share buyback expenses. Our strong cash generation led leverage to go down to 0.80x the EBITDA versus last year, 0.87x.
Summarizing our financial results that you will see in greater details with Vittorio in a few minutes. Second quarter, sales up by +4.9% on constant effects, plus four at reported rates with an EBITDA of EUR 47.5 million up +5%. Margin was at 16.7%, an improvement of 16 basis points versus a year ago. First half reported sales at EUR 512 million, -0.5% versus a year ago, or -2.4% at reported rates. Value Added Sales were -1% at current Forex and low-single-digit up at constant rates. EBITDA at EUR 72.6 million with 14.2% margin in line with a year ago or 17.9% on Value Added Sales. Net income was up by 33%, tracing to reductions in financial costs and tax rates. Net debt down by EUR 12 million, despite share buyback equivalent to EUR 16 million.
Moving to sales details now. Starting by revenues by business unit at reported Forex, Makeup second quarter was down by -1.4% over a high base of a year ago of +13%. This means it was basically flat at constant rates. There are a couple of important points to underline to fully understand the underlying trend of this business unit. First, the pack component was sharply down. As such, Value Added Sales were up at mid-single-digit at constant rates. Second, the performance accelerated throughout the second quarter, exiting the quarter at a very fast pace. First semester closed at -3%, again on tough comps. Last year, we grew 18%. Again, Value Added Sales were up low-single-digit. Prestige clients were clearly up while mass suffered. EMEA region was the best performer, followed by Americas.
Asia was down after years of double-digit expansion, driven by market dynamics that I'll elaborate in a moment. As for Skincare, second quarter was down by 3.4%. Also, in this case, on top of the currency's headwinds, pack component went down, Value Added Sales were low-single-digit up. First half was down by 9.5% with Asia growing but Western countries offsetting this growth. Hair & Body reported an exceptional +27% in the second quarter, driven by European clients, especially in Fragrance. As such, first half closed at +5%, in this case, also helped by the packaging component. Moving to revenues by region, EMEA was up +10% in the second quarter, driven by prestige clients in both Makeup and Hair & Body. Emerging brands took back their growth driver role after one year of multinationals' lead.
First semester ended at +1% after the difficult first quarter. Americas closed the second quarter slightly positive, +1%, overall in line with the beauty market volume dynamics. Prestige multinational clients were the best performers. First half resulted as such down by 4%, also paying the weak dollar toll. Asia was the most challenging region. Here we witnessed a comeback of the Western brands, who gained shares back from Chinese brands. Hence, in our numbers, where we post only our sales to local clients, you see a decline in reorders. As such, after years of double-digit growth and against tough base, we recorded a -5% in second quarter and -8% in the first half. Also, this region was impacted by currency's headwinds, especially in Korea. Moving to client clusters, in general, this year we see the reverse picture of 2025.
Multinationals, which were growing at double-digit pace last year and have had tough comparables this year, closed the second quarter at -2%, with American Makeup clients performing well, but Asian and skin and hair clients declining. The first half ended at -8% versus last year, when we had recorded a +18% growth. Emerging brands, conversely, took back their historic driver seat. In the second quarter, they grew by +13%, driven by Asian Skincare and European Hair & Body.
In the first half, they registered a +6% growth. Retailers also went back to a negative trend after an extremely high 2025. Specifically, in second quarter, they posted -14% versus last year +20%, and the first half closed at -19%, offsetting last year equivalent growth. I now pass the mic to Vittorio, our Chief Operating Officer, who is acting as CFO ad interim, to take you through financials.
Thank you, Renato. Good evening, everybody. Going to the economics of the first half. As we saw in the first part of this presentation, the top line went down at 2.5% at reported rate, and 0.9% on the Value Added Sales, going at the custom rate in the positive territories, which is a good sign of our Value Added Sales. Going to the gross margin, we have been able to increase the gross margin percentage of 36 basis points, thanks to the mix and the execution of the operational efficiencies we are executing our plan. Thank you to the lower packaging rate, which is one point lower than comparable to last year. This drove to an EBITDA of EUR 72.6 million, which is 2.6% lower of the last year or EUR 2 million.
We recorded the highest quarterly adjusted EBITDA on the Q2 at EUR 47.5 million or +5% compared to last year. 16 basis points increase year-over-year at 16.7%. If you go at the net income, we have a very positive progression at 33.3%, driven by a positive impact of the financial items that last year was driven by the headwinds of the Forex, and a lower tax rate that is from 45.5% last year to 34.7% this year, influenced by the intercompany dividend that has not been yet distributed, and the mix of the different countries' profit. Going to the business units EBITDA, we see a progression of the Makeup of 9% with an increase of 180 basis points. This is thanks to the prestige part of our business that is growing, and the positive impact in the EBITDA of this category.
Increasing under 180 basis points at EUR 53.2 million. Going to the Skincare, the opposite, the decline in top line and the under absorption driven by the fixed cost drove the 24% drop or 300 basis points lower EBITDA margin compared to last year, despite in the second quarter, the client mix is rising toward the prestige. Going to Hair & Body, we saw a 25% reduction in EBITDA compared to the last year or 280 basis points. This is mainly driven by the contract manufacturing weight within the category that historic has a lower marginality and a higher weight of packaging within the business unit. Going to the operating cash flow and the net debt evolution, as anticipated, we had a strong cash generation, thanks to the level of the working capital management. We posted an EUR 18.6 million progression compared to the last year.
H1 at EUR 26.2 million operating cash flow. If I take out the CapEx, the conversion rate is 75%, which is a good sign of the cash generation. The reduced debt financial expenses and the reduced tax drove to a cash flow before dividend distribution and buybacks after EUR 10.3 million. That is a progression of net EUR 32.4 million compared to the same period of last year.
The buyback that absorb EUR 17 million cash and the dividend distribution EUR 18 million, we had a EUR 22.2 million cash absorption in the first half compared to EUR 36.8 million of the last year. This is driving our net debt at EUR 122.7 million, including IFRS 16, compared to EUR 134.4 million of the last year with an improvement of roughly EUR 12 million, that is driving our levered ratio down to 0.8x compared to the 0.87x of last year, with this generation. Thank you.
Thank you, Vittorio. Moving forward. Overall, as you know, the geopolitical scenario is quite complex and very volatile. Despite this, beauty is overall well-oriented, and realigning to the historical trends of 4%-5% growth. This being said, which is obviously good news, not everything is perfectly aligned, I would say, with what we would like to see, we would love to see. First of all, in Europe, the trends are pretty positive in both volume and price, but Makeup, which is our strongest business unit, is performing below Skincare and Fragrances in general. We would like to see Makeup getting a bit faster. U.S. is up high-single-digit, but it's mostly price driven, we would like to see more volume contribution to the growth of the market.
In China, in spite of a softer than expected June 18 e-commerce festival, it's performing in positive territory. Obviously, this market share shift from local brands to Western multinationals helps us in the other regions of the world, but it doesn't on the Asian entities. In this context, which we think is going to be confirmed in the second half of the year, we expect the market to end in between 4% and 5% of growth. We have achieved in the first half results that are in line with our original expectation. Q2 saw an acceleration throughout the quarter. The order book is in the mid-teens up versus a year ago, despite this Q2 revenues acceleration, and orders inflow remains strong. Actually, if I look at last month, it's more than strong. It's a record month.
And on top of this, the Hair & Body forecast from clients is stronger than our original expectations. All this bodes for a strong acceleration of sales in the second half, which was already forecasted and communicated as a back-loaded year, and this is confirming, and everything is aligning to that. Based on this, we confirm our forecast, which is in line with the current net sales consensus, which is in line and is in the range we had communicated at the beginning of the year in terms of guidance for 2026. Everything is moving along expectations, and I thank you for your attention, and we are ready to take your questions. Thank you.
This is the Chorus Call Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question, press star and one at this time. The first question is from Andrei Condrea from UBS. Please go ahead.
Good evening, and thank you for taking my questions, Renato, Vittorio, and François. Two from me, please, if you don't mind. Firstly, you've reiterated your guidance on net sales. However, if we think in terms of EBITDA, how should we look at it given that packaging has declined as a percent of your sales, and what are your expectations for that part going into year-end? Secondly, just on Skincare, obviously, operating leverage played quite a sizable role in the 300 basis point margin decline. Could you help us breaking it down a bit further? Just trying to understand why margins were so soft in the division. Thank you.
Thank you, Andrei. I will answer to your first question, then Vittorio will answer to your second questions. In the EBITDA in the first half, you see two movements. On one side, you had a positive coming from prestige sales going up and pack going down. The two are, as you well know, well related because usually prestige brands deliver us their packaging. They don't ask us to buy packaging. On the other hand, the growth of Hair & Body, as you know, is dilutive. This is the business unit that has the lowest margin. The two components kind of offset one another. Going forward, we had forecasted the pack component, which had gone down significantly last year to remain overall stable in the course of the year.
Especially looking at the Hair & Body forecasts from clients for the second half, I think that we will see in the second half either stability versus a year ago and a slight increase versus the first semester in terms of percentage weight.
Okay. If I look at the Skincare question, Andrei, the main drop in EBITDA compared to last year is driven by the anticipated before by the fixed cost absorption on the legal entities where we produce Skincare. Particularly, the execution has been soft due to the level of the orders, the level of under absorption principally drove the drop on the EBITDA in H1.
Understood. [Non-English content ].
Thank you.
Thank you.
The next question is from Tilly Eno from Morgan Stanley. Please go ahead.
Hi. Good evening. Thanks for taking my questions. I have three, if I may. The first is on Makeup, where you saw an increase in the prestige SKU helping profitability. Would you expect that mix towards prestige to persist, aka, are you still seeing that in your order intake? My second question is on Skincare. You saw the order book for Makeup and Skincare progressively accelerate even further. Could you give us any kind of color in terms of the dynamics between Makeup and Skincare within that?
Aka, you've previously spoken about expecting a pickup in Skincare in H2. Are you still confident in that, or is it more about the other business units driving the full year? Then my third final question, please, on China. You mentioned in the outlook that you would expect a progressive comeback of the local Chinese brands. Have you seen any early signs of those comebacks? Is this more just something that you think will naturally happen as a course of business? Thank you very much.
Thank you very much for your questions. First, you talked about prestige clients for prestige orders for Makeup. When we look at the portfolio on end, prestige remains very strong. We do expect prestige to stay high in the second half of the year as well. The second point you mentioned is the order book between Makeup and Skincare. While Makeup is, as I said, in the first semester, has been led mostly by growth in the Western sphere. This is still the case in the second half. For Skincare, it's the opposite. It's Asia driving. Asia is positive and Western is below. What we expect is to see a comeback, as you said, of China clients, especially in Skincare in the second half, so a further acceleration there.
As you know, the lead times, order lead times in China, especially in Asia in general, but in China especially, is a lot shorter than in the Western world. In Makeup, we see we have a richer order book than in Skincare, and that could simply be related to the fact that the transformation time is longer than what you see in Asia and China. Typically, a brand that needs goods for October, November has already placed orders in the Western Hemisphere, is not yet in Asia and in China. Coming to your last question, early signs of local brands accelerating in the second half. We do not have anything tangible. When I say anything tangible, are firm orders. What we hear, though, is their will to gain shares back during the 11.11 Event.
Everybody has been quite surprised after a couple of years where they were winning to see the comeback of the Western brands. They all declare their desire and their eagerness to come back and react to this escalation of Western brands. It's not only our assumption, it's what we get qualitatively talking to the local clients. Obviously, we need to see orders flowing at an accelerated pace to, let's say, solidify this intention, and this is going to come towards end of this month, early September. I hope I've answered your questions.
Yes, that's great. Thank you very much, Renato.
Thank you.
The next question is from Molly Wylenzek of Jefferies. Please go ahead.
Good evening, Renato, Vittorio, François. I just want to push you a bit more on Makeup and the order book. As you just mentioned, the order book is mostly Makeup. You've been talking about record levels since, I think, November of last year. Good to hear that Makeup is now, ex-FX, ex- packaging back into mid-single-digit growth. Can you talk us through sort of the acceleration you expect into the second half? And I am not sure if I missed it, just your expectations around packaging in the second half as well to get towards maybe a Net Sales number. Thank you.
For Makeup, we spoke about an acceleration happening at the end of last year. I must say that this acceleration is further accelerating, especially in Makeup. Actually, it is mostly focused on Makeup during this early summer month. We really see traction coming in Makeup and mostly driven by the Western Hemisphere, mostly coming from prestige. Prestige was up significantly in the second quarter for Makeup, also for Skincare, but especially for Makeup. When we look at the order book we have on hand, we see similar dynamics. Let's say the weight of prestige versus mass is very similar. We cannot predict what is going to be exactly at the end of the year, but the indications we have in our hands point to the same direction. All in all, we expect to go in that direction.
On the other hand, let's not forget that what is more of a "surprise" is the fact that the forecast we're getting on the Hair & Body business unit is ahead of our expectations. That is good news in terms of top line, as you well know, but you also know that that is a bit diluted in terms of, a bit, the margins going forward.
Thank you.
Sorry, just to complete. This Hair & Body part that I just mentioned will drive up a bit the percentage of packaging component on the total net sales. It will not be driven by Makeup, I think.
Yeah.
It will be driven by Hair & Body.
Okay. Thank you.
Thank you, Molly.
The next question is from Aron Adamski of Goldman Sachs. Please go ahead.
Good evening, Renato, Vittorio, and François. Thanks for the presentations. I have three questions. First, a follow-up on skincare. How would you expect the prestige skincare performance to evolve into the second half of the year? I think you commented on makeup. Also, how should we think about the performance from multinationals in the U.S. and European skincare as that appears to have been weaker? Second question is on China. I just wanted to follow up on the comments regarding the fight back of the Chinese local brands and their willingness to regain market share. How would you expect that to play out in practice? Would you expect them to become more promotional, or would you rather see a pace of innovation to accelerate?
Just to finish on China, it would also be great to hear your perspective on the trends we've seen so far in July, if you have the read already. The last quick question is just a technical one. Can you remind us of your expectation for this year for finance cost and the effective tax rate? Thank you.
[Non-English content], Aron. Thank you for your question. Sorry, I'm writing them down because otherwise I forget them. Skincare prestige for the second half, we are seeing them moving in a good direction, not a great direction. We clearly see a difference so far between Makeup and Skincare in terms of prestige clients and multinationals. I think that Skincare, not I think I know, Skincare has been mostly driven by Asian clients, and I think this will continue to be the case in the second half. As you know, there are few brands in prestige territory from the local brands. One example is, for instance, in China, MAOGEPING. MAOGEPING is one of the few Chinese brands that performed well during the June 18 festival.
We keep thinking this brand will continue to go well also in the second half of the year, but there aren't that many. I think that there will be a shift in the total panel of Skincare sales. There will be a shift towards prestige and a bit of mass simply because it will be more driven by Asia than the Western world. From the China fight back, I think that it will be, most probably, there will be an escalation in promotional. Innovation, yes, but they always had innovation. It requires a push to get the trial going. When the Western brands are pushing hard to gain share back, they have an inherent advantage that is driven by their brand image. Getting a great offer from YSL or another luxury brand from the Western is tough for them to compensate.
They need to sharpen their pencils to do better in that respect. Yes, I would go up to answer your questions. July read, we don't have yet, sorry. We have seen data up to the end of June. We have seen a read up to the end of July for U.S. market, but not from China. For the finance and tax question, I delegate to someone who's better equipped than me.
Thank you, Renato. I start from the tax rate with thanks to the ETR. We expect to have ETR normalizing at 30%, 31% as per consensus because we know that the effect of the dividends is temporary. In the H1, we anticipated before. On the finance cost also here is depending, of course, how the Forex will move in the second half. I would expect here to stay in the range of EUR 12 million- EUR 12.5 million, aligned to the consensus.
Great. Thank you very much.
Thank you, Aron.
Thank you, Aron.
As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. The next question is from Paola Carboni of Equita. Please go ahead.
Yes, hello. Sorry, just a quick one from me. How do you see the inventory level in the system in the market? And so, to what extent can this ensure consistency of the fast growth you are expecting in the next few months? If you can comment by category, please. Thank you very much.
[Non-English content], Paola. Thank you for your question. Inventory level, to be honest, we do not see any particular point to raise. I think it is pretty normalized. The consumer demand is growing in a very steady manner. We think retailers have had time to normalize their stock level. Sell-out, sell-in should be very much aligned, and we do not hear any particular concern from clients. Obviously, you would always have the exception, one client declaring to be a bit overstocked and therefore reducing orders.
On the other side, you will always have the exception of someone who is a bit short in inventory and wants to accelerate orders. All in all, I do not see any warning sign. When I look at the reorders trend, as you know, we have a large part of our sales every year is based on reorders. They are coming in in a more regular and more consistent way than year ago. That is, generally speaking, a sign that the inventory level in the market is pretty normalized.
Let's say this applies also to the Hair & Body segment, which is apparently surprising also your own expectations?
Well, in Hair & Body, the reality is that on one side we have won some new projects we were not expecting in the year, to be honest, but also established clients have done a bit of a yo-yo. They were ordering a lot in 2024. They adjusted their inventories in 2025, now they're running at a more regular pace. Over, let's say, a depressed base, they are now looking better. When I look at the millions, aside from the indexes, I do not see anything really surprising. The good news is that the decline of last year was not a sell-out decline. It was an inventory adjustment. Now they're normalizing and in our forecast, maybe we've been a bit conservative. We were expecting them to stay down at the level of 2025, in reality, they're going up versus that level.
Very clear. Thank you very much.
Thank you, Paola.
The next question is from Mikheil Omanadze of BNP Paribas. Please go ahead.
Good evening. Thanks for taking my question. I have one follow-up, please, on profitability. Now you gave us some pointers how to think about H2, but if I look at full-year consensus, right now I can see EBITDA of EUR 164 million with margins stable year-on-year. Are you comfortable with where consensus is? Thank you.
Yes, I am. I think it's pretty accurate, actually. I wouldn't be able to do it better than that.
Very clear. Thank you.
I'm joking, sorry. No, jokes apart, no, I think it's pretty accurate. It's what we expect for the time being.
It's reflecting the expectation.
Yeah.
Thank you.
Thank you.
The next question is a follow-up of Aron Adamski of Goldman Sachs. Please go ahead, sir.
Yeah. Thanks for taking my follow-ups. I had two quick questions. First, on Fragrances. Could you give us some more color on what's driving the strong performance in Europe? Is it a specific client, a specific innovation that's driving that? Second, just on the innovation appetite, are you seeing any divergence in terms of demand for innovations between emerging brands and multinationals, or is it broadly similar? Thank you.
Hi. Thank you for your questions. Fragrance, well, first of all, I must say that the trend of the Fragrance market remains above, I think, everybody's expectation, certainly our expectation, especially when I look at the trend in America. It's continuing to grow at a faster than usual rate. There is that element that is driving consumption ahead of expectation. For all the clients that are particularly developed or strong in the American market, this is good news and drives higher volumes. Innovation, the flow of innovation is pretty similar year-on-year. Everybody plans more or less the same level. The reality is that it all depends on the rate of success that these new initiatives have, and therefore that can drive big swings in terms of performance for clients and therefore for us as well.
I think that all this is more or less normal in terms of trend. Yes, we have one important client that, as I said, tempered its volumes or is buying to adjust inventory last year, this year has come back to its, I would say more regular ordering pace. That is also helping and making a difference. Coming to your second question, innovation demand from emerging brands and multinationals, very similar. They are all very eager to move ahead, to come up with innovation. There is also a lot of activity going into reformulations of existing franchises. They are driven by regulatory needs, either short-term or mid-term regulatory needs. There is a lot of renewals going on, both for emerging brands and for multinationals. I don't see any slowdown at all.
Great. Thank you very much.
Thank you.
The next question is a follow-up of Andrei Condrea of UBS. Please go ahead.
Thank you for taking my follow-up. Just one from me, please. Would you mind updating us on the search for a permanent CFO and how that's going along? Thank you.
Yeah. We are scanning the market a lot. As you can imagine, we do not want to make any mistake. We want to be bulletproof on this one. I must say that aside from Vittorio, that is probably complaining about his workload, he's doing a super job as a CFO.
Thank you.
I kind of don't feel the pressure to rush into a new hiring. We have scanned about 70 resumes. We have gone through a round of interviews of about, I would say, 20 candidates, more or less. Shrinking the candidate list. I think that between September, October, we should come to a conclusion on that. In the meantime, we have recruited the new IR manager, who's going to join us on August 24th. That is going forward. We've done some other additions in the finance team, so we are beefing up and having stronger shoulders. On the CFO side, we want to be very sure about what we do, so we're going to take our time.
Understood. Thank you very much.
Thank you.
The next question is a follow-up of Paola Carboni of Equita. Please go ahead.
Yes. Thank you for taking my second question. I was wondering if you can share with us some first thought about your view on the market for 2027, and in particular, your view for what concerns the strong acceleration we are going to see in your revenues and from your order backlog in the second part of this year. To what extent do you think we can have still a tail, or to what extent can this be sustainable also entering into 2027? Do you see any temporary element that should fade in the short term? Thank you.
Thank you, Paola. Well, it is a bit early, frankly speaking, to have a view on 2027. I personally believe the market will realign, as expected, is doing this year, is realigning to its historical growth trends. I think that that is there to stay also next year. I would expect, or at least I hope, that the currency will be a bit more favorable next year. In terms of behavior in general, I wouldn't expect any big news, to be honest. I expect the market to stay in the 4%-5% growth rate. I expect brands to continue to have a very high appetite for innovation, especially because there are some regulatory changes that are going to get closer in terms of timing. That race will continue to be up there.
In terms of backlog or anything like that, it will depend a lot on how we'll perform at the end of the year and what is going to be the ordering flow in the second half of the year, especially from October onwards. It's a bit early. I have no, let's say, anxiety about 2027 for the time being.
Okay. Thanks. Thank you.
Gentlemen, there are no more questions registered at this time.
If there are no more questions, I thank everybody and wish everybody a good summer. Thank you very much.
Thank you very much