Good evening. This is the conference call operator. Welcome and thank you for joining the Intercos nine months 2026 results conference call. 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, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Renato Semerari, CEO of Intercos. Please go ahead.
Good evening, everybody, and thanks for joining our call. Overall, I'd start by saying that in a beauty market showing off its resilience in spite of macro turmoils, Intercos has recorded a strong Q3, delivering on the expectations of an acceleration of sales with all our historic business strongholds, which are Makeup, West Hemisphere, and prestige clients posting strong increases.
Q3 has in fact been our best quarter ever in sales terms, only a few million shy of EUR 300 million, up 13% at current rates and 12% at constant rates versus year ago. Value-added sales were also up by + 12%. All this without any depletion of our orders portfolio, which instead got stronger and stronger thanks to the very strong order entry flow. Q3 EBITDA was also up by 7.5% versus year ago, with a margin on value-added sales close to 20%.
Our leverage remained at 0.9 x EBITDA, like last year, with cash delivery offsetting the vast majority of the EUR 60 million out of pocket due to share buyback plus dividends. Zooming in a bit more on our Q3 overview, net sales and value-added sales were both up double digit in the quarter, respectively 12.9% up for revenues and 12.4% up for value-added sales at current rates.
As we will see, these results trace to the exceptional growth of Hair & Body, as well as the double-digit increases of Makeup. Yet, the over-proportional growth of Hair & Body led to a dilutive mix effect on EBITDA margins, and as a result, EBITDA grew by 7.5% with margin on value-added sales at 19.5% and 15.1% on net sales. These Q3 results brought us to a year-to-date picture with sales up + 2.7% at current rates or + 3.7% at constant rates.
Value-added sales up + 3.5% at current rates, so presumably in the range of 4.5% at constant rates. EBITDA at 18.5% margin on value-added sales or 14.5% on total sales, with a dilution respectively of 46 basis points on value-added sales and 25 basis points on net sales.
Going to top-line details, starting by sales by business unit, Q3 was overall driven by the double-digit growth of Makeup and Hair & Body, while Skincare was still a bit of a drag. Going to the specific, Makeup confirmed to be our backbone, representing over 60% of our total sales. Q3 registered a +1 1% growth at current rates, with value-added sales growing even faster than that. Europe plus U.S. grew at a very fast pace, while Asia kept being a bit difficult.
Business unit performance was very even by clients clusters, with prestige growing at about twice the mass market pace. Moving to Hair & Body, it represented 24% of total sales, with an exceptional growth of + 36%, with value-added sales growing at the same pace. All product segments, fragrance, hair care, personal care, grew at a very strong pace. Moving to Skincare, it confirmed the negative trend of the first half, declining 9.7%.
It also confirmed the two-sided path with Asia growing mid-teens, but Europe declining at fast pace. This trend, which is visible on the total market with K-beauty and derma winning over the classic Western segment, it is further amplified in our case by the difficulties of a few important clients. Luckily, the order book is giving confidence for a recovery in Q4, with Asia still driving, but West improving as well.
Moving to the performance by region, overall Q3 saw all regions contributing to the company growth. Americas were the strongest contributor, posting a + 20% growth. This traced mostly to Makeup growth within multinational clients. Also, Hair & Body displayed strong growth. EMEA also grew double digit, + 13%, further accelerating from the Q2 + 10%. Makeup and Hair & Body both confirmed strong traction, and this was partially offset by Skincare, as previously said. Emerging brands were the fastest growing client cluster.
Asia also came back to grow, although more moderate than the other regions. Performance traced to Skincare mid-teens growth, while Makeup remained soft. Korea was clearly the brightest regional country, profiting from K-beauty momentum. Moving to the picture by clients cluster, also in this case, all customer clusters displayed year-on-year growth in Q3. Emerging brands were once more the key growth engine, with a + 22% increase.
Hair & Body and Makeup were the key business units, both mostly thanks to the EMEA region. Multinationals came back to growth, posting a + 6% index. These clients performed particularly well in Americas and Europe for Makeup. Also, Hair & Body contributed positively. Conversely, Skincare was a visible drag. Retailers also displayed a + 3% increase, mostly driven by Asian retailers and an important European player.
Moving now to the outlook. In the past nine months, we have seen the market going back to its historical growth trends of about + 4%, demonstrating once more its extraordinary resilience in spite of geopolitical crisis and increasing social tensions. Europe has reached mid-single-digit pace with volume on the lead. U.S. displayed high single digit with price on the lead, but volume also contributing, while China still below expectation, but with good brick-and-mortar trend.
E-commerce was weaker so far, but the Double 11 event is still to come, and the early indications show it could be a plus event this year. On our side, we clearly outperformed the market in Q3, transforming the strong order book accumulated in the first half on Makeup and the exceptional Hair & Body clients rolling forecast.
In the course of Q3, we kept an extremely strong orders inflow, not only on Makeup, but also on Skincare. All this gives us further confidence that Q4 will post another double-digit increase, and we therefore confirm our top-line guidance for fiscal year 2026, as well as the expectation of a strong start in 2027. That's all on my side. I'm ready to take on your questions.
This is the Chorus Call conference operator. We will now begin the question-answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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 may press star and one at this time. The first question is from Andrei Condrea from UBS. Please go ahead.
Good evening, Renato, and thank you very much for taking my questions. Two from me, please, if you don't mind. The first one, just to confirm on the 2026 outlook, you've had a strong acceleration in Q3 ahead of expectations. If we look to Q4 and the end of the year, is it reasonable to say that we could be looking more towards the top end of your guidance, closer to 6% in quarter growth?
And beyond that, if we look into 2027, obviously the order book gives you very strong visibility, at least for Q1 and Q2. How should we think about the shape of growth, given that you're going to be lapping double-digit growth in the back half of the year? Thank you very much.
Thank you, Andrei. For the fourth quarter expectation, we are confident that we're going to deliver a double-digit growth again. It's very difficult when you have such a narrow guidance, which is + 5%, + 6%. It can be anywhere in the middle of that. To be honest, I feel pretty comfortable with the consensus that I see today.
We may do slightly better, maybe. It all depends on execution, and with December being a short month because of Christmas, you may have some cutoff impacts in terms of revenues. All in all, I don't think it is changing a lot the picture, so we're going to be in that range, and we're pretty confident about that. For 2027, we believe we're going to start on the right track. January, February, I'm pretty sure we'll be in the double-digit territory. March is a bit farther ahead.
It will depend a bit on how Asia orders will flow in. As you know, Asia has a shorter time to market in terms of reorders and orders execution in general, so that will be to be seen. But I think we'll start the year on a very good pace. I hope I've answered your questions.
Thank you very much.
The next question is from Aron Adamski from Goldman Sachs. Please go ahead.
Thank you. Good evening, Renato. Thanks for taking my questions. I have three quick ones. First, as you look at the beauty market heading into 2027, could you share your views on which categories do you expect to be the primary drivers of growth? Second, could you please share with us how are you thinking about the next year's cost environment, in the context of all the commodity movements, and also including any required levels of pricing actions that you might need to take?
And then my final question is just on Skincare. It would be great if you could please give us some more color on the weakness in the Western skincare segment that you have called out. Is it connected in any way to the U.S. premium Skincare market? Anything that you could share on this would be great. Thank you.
Hi, Aron. Thank you for your questions. Beauty market growth. We are seeing that we're coming from a few years where Skincare and face makeup was clearly doing better than color cosmetics in general. We are seeing a comeback of color cosmetics in the recent quarter, and we think this can continue going farther. It is a movement, let's say, in the good direction for about all the segments.
Eyes remain probably the weakest one, although it has been improving lately. I think that we will continue seeing face makeup doing well. We will continue seeing Skincare doing pretty well, especially in Asia with this K-beauty wave continuing. We will see probably lips doing better than in the recent past. Eyes probably will remain a bit weaker than the rest. Moving to the second question, which is the cost environment.
Obviously, there is a lot of volatility, and a lot will depend on how the gas price, the oil price will move going forward. I think that we are all looking at what is going to happen between U.S. and Iran following the elections we've all seen.
If the oil price remain on the high rate around $100, we will see commodity inflation, and we will be reverting it, and transportation especially, which, as we discussed in the previous calls, is something that we've seen reacting immediately to the disruption of the energy market. Yes, we are starting to work with clients for price increases at the beginning of next year, and we will do that. We'll try to pass on to clients all the inflation that we will be forecasting with the uncertainty related to the volatility I was mentioning before.
We hope we're going to be on the right side of forecasting, and that's probably the biggest question mark. The third question was related to Western skincare. I think that we've seen also from the earning calls of the results of L'Oréal, Lauder, and the likes that there is a clear trend in the market, which is seeing K-beauty growing very fast. We're seeing derma brands going extremely well.
We see the, let's say, the heritage brand, the classic Western skincare paying the price for these increases of these two other segments. I don't know if you noticed, but I did, and I'm talking about a client which doesn't buy skincare from us. Even in the Lauder conference call, they talked a lot about The Ordinary. They didn't talk that much about Estée Lauder brand and Clinique.
Reality is that the classic skincare is a bit suffering, especially the younger generation are very much focused on the ingredients, and they have a higher level of knowledge about which are the ingredients they should be looking for, and they go for brands that put that as a number one selling proposition.
This trend is likely to continue next year as well, which is one of the reasons why we're pushing and promoting more and more Korean formulations also to the Western players, so that they can have in their assortment proposals and propositions that are more inclined and resonating better with the younger generations. This is a bit the picture today, and we see no signs for this changing in the next 12 months, I would say.
Okay, perfect. Thank you very much.
Thank you.
The next question is from Tom Randall of Jefferies. Please go ahead.
Thanks for taking my question. I've got two, if that's okay. The first one's on Makeup. Strong performance, 11% growth. The question is, did that over or underachieve the expectations that you had for the division in the quarter? That's in the context of a record order book at the end of last year, which kind of continued into the start of this year.
Have we seen that play out, or is there more to come from Makeup? Secondly, back on Skincare, can you quantify the magnitude of the recovery in Q4? Do we expect Skincare to turn positive, or is it still going to be negative as we move into the fourth quarter? Just on top of that, is the acceleration going to be driven by a further acceleration in K-beauty, or is it more of a recovery in Western skincare? Thank you.
Thank you, Tom. Makeup, personally, I think it is over our expectations, to be honest, and the order inflow is even more in that territory. We see order intake getting from strength to strength, especially in Makeup. The overall trend in the U.S. and in Europe is certainly above my expectations. Both my expectation at the beginning of the year, but I would say also my expectation at the end of the first semester.
More to come, because the ordering flow keeps getting stronger and stronger, so we see no sign of a softening of that trend. Going to Skincare, Q4 will see more and more help coming from Asia and from Korea more specifically. We also see in the order book encouraging signs coming from the Western hemisphere. There will be improvement coming from that part of the equation as well. S kincare in Q4, we see it positive.
That's super helpful. Thank you very much.
Thank you.
The next question is from Paola Carboni of EQUITA. Please go ahead.
Yes, hello Renato. Good afternoon, everybody. I have a few questions. The first one, if you can comment on the profitability of the Makeup segment alone. I know you don't give this detail on a quarterly basis, but just to understand how the category is doing, let's say, without the dilution effect of the Hair & Body.
And then a question on the Hair & Body. I know you don't have any advanced backlog here, but maybe you can share with us your feeling for next year based also on the launches, on the product launches, the fragrance launches that your clients are envisaging for the next few quarters. And last one, if I may, is on the CapEx side, if you can update us on your plan for this. Thank you.
Ciao, Paola. The first question was profitability of Makeup. Profitability of Makeup has been very good, and you can easily get to that conclusion looking at two indicators. Number one, obviously — actually, three, sorry. It came to my mind, a third one. First, because of, obviously, with this kind of growth, we can run things efficiently in terms of production.
Second, because the value-added sales have been growing faster than the net sales, and this obviously leads to better marginality, as you well know. And the third is that, as I said during my comments, prestige was growing way faster than mass market. All the three indicators go in the right direction. You would normally expect Makeup to have good profitability, and you would be right. That is the first.
The reality is that the dilution you see on the total EBITDA of the quarter, the vast majority comes from the mix effect of Hair & Body. There is also a bit of under-absorption in Skincare, on the Western skincare, which has a bit of an impact on Skincare. Those are the two factors that play in the picture. As for Hair & Body, I think that aside from the fragrance that is always a bit volatile, and as you rightly said, is driven by the success or not of new launches and all that, and for this season, we know what's the reality by now. For next year, we'll need to see. It's way too soon to have any feeling about that.
The good point and the encouraging point I would like to stress is the fact that this growth we are seeing is not driven only by fragrance. It's driven by personal care, it's driven by hair care, and those are segments which are less volatile than fragrances. This gives us a base for next year that is, I think, more solid than if it was only growth coming from fragrances.
The last point is related to CapEx. We are going ahead with the plans that you well know. I think the year will come more or less in line with what we had estimated, in the region of 6% on net sales, more or less. Next year, it will be probably a bit more than that, more towards the 7%, I would say.
Although we are reviewing all the demands from the legal entities, the subsidiaries, in these days. They usually come with a shopping list that is never-ending, but the shopping exercise has just started. I think we will land more or less in that region that I was mentioning to you.
Thank you very much.
Thank you, Paola.
The next question is from Tilly Eno from Morgan Stanley. Please go ahead.
Hi, good evening. Thanks for taking my questions. The first one is just on the acceleration in orders you saw in Q3. Would you say there was also an acceleration in the sort of underlying beauty market, or is this just wallet share gain with your customers? And then the second question on the Western skincare improvement. I guess you're saying some of that is from K-beauty, but also some early signs of prestige orders. What in particular is driving that pickup in the Western skincare orders?
Are they adopting some more of the Korean options that you're sort of trying to bring across from other regions, or anything else driving that? And then just a third one, if I may squeeze in. I know previously you've spoken about a desire to get sort of more manufacturing capabilities in U.S. skincare. Do the current dynamics in the market change your thinking at all there? Would you sort of prefer to continue to expand in Asia, and that be your real skincare hub? Thank you.
Thank you very much. The acceleration in the order book is driven certainly by the fact that we are gaining market share. We are gaining share of wallet also in our key clients, or maybe even especially in our key clients. There is no doubt that the underlying market is going better, especially going better in volume terms, helps the reorders. There is no doubt about that.
Very difficult to strike a balance between how much is coming from one, how much is coming from the other. The reality is that in this quarter, we've been growing about 3x the market speed in Makeup. I assume the majority of our gains are coming from share gains or share of wallet gains. There is no doubt that the beauty market helps as well.
Going to the West skincare improvements we see going forward, I think that it's linked to a better picture in terms. There are a few launches that are going to help. We have gained a few clients that are playing in the derma section, and that will help. The more they grow, the more we'll benefit from that. The vast majority still comes from the K-beauty growth we are seeing.
There is an improvement in the Western skincare for us in Q4, but the vast majority, it's Asia-driven again. The more the weight of Asia on our total Skincare gets bigger, the more we'll see that having a bigger impact on the total business unit performance. It's mathematic, so that is going to help as well. I don't see yet a big impact of, let's say, European skincare brands getting the benefit of Korean formulations.
This is more an exercise we'll do more and more in the coming months. Not that we didn't present and promote our products to these clients, but I think they were pretty slow in adopting and changing a bit their standard way of looking at things in the past. We think and we hope they're going to be moving at a faster speed towards what's driving the business today.
The last point, no, we are not changing our mind about the need to have a manufacturing site of skincare in U.S. The fact that this would be a long-term investment, so it's not something that is driven by a trend that is very visible today, may not be that strong in the future, number one. Number two, there's nothing that, how to say, that forbids you from producing a Korean formula in a U.S. plant.
It's a matter of footprint, it's a matter of proximity with clients, it's a matter of time to market, and obviously, the day we succeed in doing such an M&A, we will make sure that we will be able to produce in this plant whatever we formulate in Korea or in China, by the way. We are not changing our mind.
And by the way, just to complete, we've already done the investment needed in Asia, in Korea, and in China to cope with the growth that this K-beauty wave is bringing. It's not that we need to choose one or the other. The Asian one, we saw it coming, and that's why we invested heavily last year to increase our capacity over there. We're now fine, so we move forward.
Thank you, Renato.
Thank you.
The next question is from Mikheil Omanadze from BNP Paribas. Please go ahead.
Good evening, all. A few questions from me, please. The first one would be on the growth in the order book. You say that it is stronger than the mid-teens year-on-year that you commented on at the H1 stage. Can you provide a bit more color on that? Are we talking high teens or more than 20%? The second question would be on profitability.
Now, you mentioned that you are comfortable with where consensus sits on sales for this year. Are you also comfortable with consensus EBITDA expectations? And for the next year, given how the cost outlook looks like, do you think you will be able to expand margins? And lastly, on the CFO position, how is the search process going? Thank you.
I'm writing down because I'm old and I forget the questions. Order book trends, it's more than 20%. I'm telling it, and I see Francois looking badly at me, but it's stronger. I'm okay. I'm fine with the consensus also for this year, both top line and bottom line. I think we're going to be in that range. No news on that.
Next year, margins, obviously, our intention will be to do better, and we always start the year with the intention of doing better. Now, we need to see, and we'll discuss more when we have more visibility on the landing of this year and the forecast for next year, which is going to be for our next earning call. As for the CFO search, things are going ahead, so I think that you will have news in a not-too-far future.
That's all very clear and helpful. 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 questions again. I would like to have a comment from your side on the mix of your order backlog and your recent order intake, specifically as far as the packaging component is concerned, the prestige segment is concerned, so to have some color on that. And secondly, still, I mean, profitability-wise, I was wondering, let's say, whether the Skincare margin drop is just a matter of less volume and so under absorption of cost, as you said, or is there any implication from the fact that Asian brands are outperforming whilst Western brands are suffering? Thank you.
Paola, on the packaging front, I think that what we said beginning of August is what we've seen in Q3 and what we think is going to happen in Q4 as well, which is it's going to be pretty stable at the level we currently have. We do not see big swings in that sense. We keep seeing prestige in our order book, so the quality is still there.
Then, in the order book, you have orders that are sooner or later, depending on what the new order, you can have new launches and all that. But if I look at the total order book today, we see prestige being still strong. Going forward, we'll see benefits from that. The last point on the Skincare margins, yes, there is under absorption in the Western world, and that has an impact. There is also a little bit of a mix effect because the K-beauty is, as you know, priced lower than especially the Western prestige. So there is a bit of margin dilution from that. In the mix, that plays also a bit of an effect.
Okay. Thank you again.
Thank you.