Good afternoon, everyone, and thank you for joining us today. I'm Geoffroy Raskin from Investor Relations. Before I pass on to our CEO and CFO, let me remind you of the safe harbor regarding forward-looking statements. I will not read them aloud, but I assume you will have duly noted them. I would also like to point out that since 2022, we will present our emerging markets as assets held for sale and discontinued operations following the strategic review and our plans.
Thank you, Geoffroy, and good afternoon, everyone. There are three major highlights to our Q1 results. The first is the turnaround in our revenues with a return to top-line growth driven both by volume and pricing. It is really encouraging that we have now turned the corner in Europe after so many years of declining sales. This is a result of the significant efforts by our teams to rebuild customer confidence, to propose high growth products, and to improve our service reliability. In the US, the business continues to grow strongly, and emerging markets benefit from strong pricing. The second major highlight is the continued delivery of our cost reduction program. The structural changes that we are making at Ontex to leverage our leadership footprint in Europe and to ensure that we are highly competitive and can offer our customers excellent products and services.
Lastly, in Q1 2022, we were hit by the full impact of an unprecedented raw material cost inflation that we have seen building during 2021. Despite all the actions we have taken on areas within our control, the huge price increases in raw materials and some other input costs could not be fully compensated for, and as a direct consequence, we have experienced a significant decline in our EBITDA. Turning now to revenues on slide five. As you can see on this chart, our revenues for the total group in Q1 are up 15% like for like, with 9% volume growth and 7% pricing. This marks the Q4 of sequential growth and is the highest revenue since the Q1 of 2020. Our core markets recorded a 13% growth, with Europe returning to strong growth.
Volume was the main driver, and although we believe that part of the volume growth was helped by some loading in baby care and to a lesser extent, feminine care, we can clearly identify a strong positive turnaround in the last 12 month trend, which we have not seen since 2017. Our main strategic growth drivers are the North American region, baby pants, the adult care category, as well as sustainable and natural solutions. All of them are continuing to gather a solid momentum and were key enablers to the volume growth. In the North America region, we recorded growth above 30%, reflecting the drop-through of the contract wins in the previous quarters and a very strong demand from our customers. Both sales to retailer and lifestyle brands grew significantly.
For baby pants, we have seen strong double-digit growth in sales, also helped by the market share gains of retailer brands in this growing subcategory. This is due to the launch of a new baby pant concept by Ontex, customer gains, and our supply chain team having successfully installed more capacity. Adult care revenues were up double digits overall, mid-single digit in the core markets. We are seeing a fast pace of growth in retail and online channels, which more than offsets the lack of growth in institutional channels. On the product innovation side, we were honored to receive the Pharmacy Product of the Year award in the U.K. for our new iD Sleep range. Lastly, we have continued to support our eco solutions portfolio in feminine care with the reusable period cups and underwear, which we have started to offer to our customers this quarter.
Turning now to slide seven. You will remember that we have the objective to reduce the group's cost base by 4% each year. The structural cost reductions are continuing with the overall objective of another EUR 80 million in 2022, of which over EUR 60 million in our core markets. On the production front, we have continued to improve our operating efficiencies in Q1 versus the last quarter and year-on-year. This includes the optimization of overall equipment effectiveness and raw material usage to increase our production capacity of our assets and reduce waste. We also made significant progress on design to value, redesigning our products to reduce cost and complexity while maintaining performance and quality levels. The optimization of our manufacturing footprint is now well underway, and production in our factory in Mayen, Germany, has now been closed, which will benefit us the upcoming quarters.
On the SG&A side, costs have continued to come down. Our ambition is to contain this offsetting inflation. With revenue increasing, we are well on the way to achieve our target of 10% of revenues, which we are close to already this quarter. Meanwhile, as expected, the impact of raw materials and operating costs has increased. The rise in our main indices and other drivers such as energy and trade costs, which happened in 2021 and now are fully reflected in our cost base. These climbed more than 20% overall compared to the Q1 of 2021. We are taking the necessary measures to counter it with continued savings efforts and with pricing.
Meanwhile, triggered by the geopolitical situation, we see an additional rise in raw materials and operating costs, with the main indices increasing by an additional 10%-30% in the last month. We cannot predict how things will evolve, but we have included this in our updated outlook and will price against that. Turning now to slide nine. As I mentioned in my opening remarks, pricing is absolutely key to help the group offset the unprecedented raw material cost situation and to restore our margins. Overall, including discontinued operations, our prices rose 7% compared to the Q1 of 2021 after a long period of year-on-year price investments. This increase is the highest we have seen in the last couple of years. In emerging markets, prices were up double digits without impacting volume.
In fact, prices were up 17% and volume grew 3.1%. In our core markets of Europe and North America, where the majority of our business is retailer brands, we saw the first benefits of our price increases flowing through at the level of 2% on average for the quarter and trending higher in March. We realize that implementation is lagging inflation as contract negotiations take time. The objective in our core markets is to continue to roll out price increases over the year, taking the necessary actions to cover the latest forecast on input cost inflation. On this note, I now hand over to Pieter, who will dive more deeply into the financials for the quarter.
Thank you, Esther, and good afternoon, everyone. Let me remind you that where Esther talked about the impact of the whole group, I will now more specifically refer to the P&L as reported. For continuing operations only, which are our core markets, mainly in Europe and North America. In these markets, revenue grew 13% like for like, with a strong volume and mix impact of 11%, marking a solid turnaround. As Esther already explained, contract gains across Europe and North America are coming on stream, and we see good momentum in our product growth drivers, notably pants. About half of results, the growth resulted from one-offs, especially in baby care and to a lesser extent, fem care, where some loading ahead of uncertain times and pricing has driven a peak of sales in March.
You will note that growth in the adult category for continuing operations is lower than average, but the one-offs I mentioned that boosted the other categories do not apply here. Also, this is where we have a large portion of institutional contracts where price changes require more lead time. Prices were up 2% on average, trending upwards towards quarter ends, and as Esther explained. More has been secured to materialize in the coming quarters. The appreciation of the U.S. dollar and the British pound sterling offsets the impact of the devaluation of the Russian ruble, meaning that the like-for-like growth is also the overall growth. Turning to slide 12 to the adjusted EBITDA, the raw material inflation played out as expected, offset partly by the revenue growth and the continued savings. Altogether, input cost inflation had a 118% impact on EBITDA.
Index-based raw materials were up some 30%, mainly on superabsorbent polymers, while other raw materials and packaging costs were up about 20%. Other operating costs, such as logistics and energy, were up as well, while the wages reflected the inflationary environment. The delta is high as it compares to the Q1 in 2021, where we still benefited from raw material price decreases. Cost reduction measures had a positive 30% impact, mainly from operating costs, but also SG&A. In SG&A, we did better than compensating the inflation. The Forex effect was negative due to a combination of the Russian ruble devaluation impact on sales and the US dollar appreciation impact on costs. With growing revenues, but EBITDA impacted by more inflation, the margin reduced to 5.4%.
A 6.7 percentage point delta versus last year. This is high, but remember that margin already came down during last year as the inflationary impact dropped through. Compared to the last quarter of 2021, the decrease is 2.9 percentage points. On page 13, just a few words on discontinued operations. Our emerging market activities, which we are in the process to divest. Revenue was up 22%, very much driven by higher prices across all geographies and overall good volume performance. The adjusted EBITDA margin was 2.2%, with cost inflation offsetting the price increases and cost savings, including the closure of the Ethiopian plant.
Net ForEx impacts were also negative as sales decreased with the Turkish lira devaluation, while costs increased with the appreciation of the U.S. dollar. Despite representing a year-on-year decrease of 3.8 percentage points margin, the quarter results reflect sequential improvements with adjusted EBITDA margin up 1.9 percentage points, indicating that the turnaround of margin is underway. Let's now move to total group on slide 12. I am not going to repeat the group results, but directly switch to net debt, which stood at EUR 833 million at the end of the period. A EUR 108 million increase over the quarter. Although CapEx management remained disciplined, working capital needs increased substantially with revenue growth, especially with the very high sales we've seen in March.
The higher raw material prices and the measures we deliberately took on inventory positions to secure the supply chain in these volatile markets had a further impact. This will mobilize going forward. In combination with lower EBITDA, this resulted in a negative free cash flow and the leverage ratio thereby rose to 5.7x from 4.2 x at the start of the period.
Turning to the outlook for 2022, clearly the geopolitical environment is very uncertain. The inflationary macroeconomic situation with continued volatility in commodity and energy prices, as well as supply chain disruption, means that visibility remains very low. Taking into consideration these factors, Ontex is currently reviewing the impact on its midterm financial roadmap. For the full year 2022, Ontex expects the following. Thanks to the momentum of our growth drivers and the effect of the acceleration of price increase implementation, we expect our revenue to grow high single digits like for like. This is lower than in the Q1 , as Q1 growth was helped by a low comparable and some loading prior to pricing and further pricing could also affect volume development.
The adjusted EBITDA margin for our core businesses going forward will be affected by input cost inflation, which is expected to increase further sequentially as of Q2 to reach around EUR 200 million for the year versus 2021. This is higher than the EUR 160 million-EUR 170 million we expected in February. We will continue our cost reduction program to generate more than EUR 60 million savings and roll out further price increases throughout the course of the year. Taking all these elements into account, we expect our EBITDA margin to improve in the H2 of the year compared to the level of the Q1 . We continue to manage the discontinued emerging market operations and set adjusted EBITDA margins to recover further during the course of the year.
Cash flow discipline will continue, and we would expect CapEx to increase gradually to around 4% of revenues. Before going into Q&A, let me conclude. Our immediate priorities for 2022 are to increase prices to pass through the raw material cost inflation. We are gaining significant traction, and combined with our ongoing cost reduction efforts, we will improve margins as the year progresses. This is a top priority for the company. Regarding divestments, we are making good progress. We have received several non-binding offers and due diligence is progressing. Thank you for listening.
Thank you, Esther and Pieter. We will now pass over to the Q&A. Can I ask you to limit yourselves to two questions only, and if need be and time allows, we'll take a second round. Operator, pass back over to you.
Thank you. As a reminder, if you would like to ask a question on today's call, please press star one on your telephone keypad. You'll then be advised when you can ask your question. To remove your question from the queue, it is star two. Again, it is star one on your telephone keypad to register for a question. The first question is coming from the line of Wim Hoste from KBC Securities. Your line is now unmuted, and you may go ahead.
Yes, thank you and good afternoon. I have then two questions, please. First is on the discussions with AIP, as confirmed yesterday. To what extent is your own strategy execution with regards to emerging markets potentially derailed by these discussions? Can you maybe offer a bit of light on whether the scope of an AIP deal would be the full Ontex or only the core markets? Any thoughts on that would be helpful. That's the first question. The second one is, with the inflation on raw materials, et cetera, continuing, can you maybe elaborate on how you structure contracts if you renegotiate them?
Do you try to build in and do you succeed in building in some additional flexibility or some indices clauses or formulas, et cetera? Any thoughts on that would also be helpful. Thank you.
Good afternoon, Wim. Thank you for your questions. Let me address the first one on, you know, news in the press related with our discussions with AIP. You know, I confirm that we have engaged in preliminary discussions with American Industrial Partners with respect to a possible transaction that might or might not result in a business combination with AIP's portfolio company, which is called Attindas. I need to say that the discussions are at an early stage and no agreement has been reached as to the structure or terms of any possible transaction. To your question on, you know, that this impact on our strategy, the answer is no. We continue to focus and execute our strategy.
As I said before, priority is continue with the very strong growth that we've seen and the momentum that we've seen in Q1, continue with the savings program, accelerate our pricing in the market to fully offset inflation, and continue with our divesting program. At this point, there is no impact, and I don't expect any impact in the near term. To the second question on on the inflation on raw materials and whether you know this you know we are changing the contract or negotiating. I think you know we are talking about maybe two different type of contracts on the one hand, or maybe right now three different type of situations.
On the one hand, we have the branded business, which is the business that we have in the emerging markets. You know, in this case, we have a supply contract. We increase prices, and typically we have a notice period that could go between 15 days and 60 days. That's why we see very, very strong pricing in the emerging markets, because basically the amount of time needed to execute the pricing is much shorter. We have retailer brands, so the partner brands. Retailer brands and private label, where we have a different type of contract, and basically it means that we need to renegotiate the contract.
It takes a little bit longer, but you know, we have done it, and we will see significant prices going through the P&L in Q2 and then beyond. What we are doing is, yes, we do have raw material indexes escalators in some contracts, and as much as possible, we are trying to integrate those. It is not the case in the majority of the contracts. What we are doing is agreeing with our customers that you know, we will continue to price in ways depending on the evolution of the raw materials. You know, our customers understand the need of increasing prices driven by the raw material situation. Basically, we will go in waves as the situation evolves.
Lastly, we have the institutional business, which typically is a business that we have with governments or you know governmental institutions. There it takes a longer period of time because you know these very long-term contracts and you are talking with governments or governmental institutions, so it's just longer. We are also increasing prices there, but it just takes a little longer.
Okay. Thank you.
Thank you for your question. The next question is coming from the line of Nick Roque from Barron's. Your line is unmuted, and Nick, you may go ahead.
Hey, guys. Thanks for the presentation and taking the questions. In terms of the contracts that you have renegotiated, and you mentioned will be flowing through in the next few quarters, what are the price increases in percentage terms that you've already agreed on those?
The question is, what is the price increases that we have agreed in the renegotiation of the contracts? You know, I cannot give you the specific amount, but I can say that, you know, the pricing that we are planning together with the cost efforts, the objective is to fully offset inflation. As I said before, there is, you know, a time lag between, you know, the raw material input cost increase that we see and the time needed to execute all our costs and pricing efforts. I am, you know, happy with where we are.
We have been working on the renegotiation of the contract since late last year. You know, we have started seeing some pricing flow through in Q1, and we will see more of that throughout Q2 with a full impact starting at the end of Q2. As I said, we will plan additional waves as the year progresses based on the situation with the raw materials. Now, the overall impact on the margin is also going to be dependent on volume development. Here it is difficult to predict because on the one hand you know, there is a certain elasticity to pricing.
At the same time, we are talking about selling necessary products, so even if you increase prices, it probably is not gonna provoke less consumption. We could see a shift from you know more premium brands to retailer brands, which we would benefit from. At the same time, we do see still a supply chain that is highly disrupted. All that is a little bit a challenge and the reason why we are not able at this point to give a specific outlook on margins.
No, I understand why you don't wanna give, maybe specific figures, but maybe to ask the question a different way. Are the price increases that you're negotiating today in excess of the 2% you're seeing in your core markets in Q1?
Yes. Definitely and significantly, yes.
Sorry, to be clear, that's for your core markets, 'cause I know for the whole group, they're higher. That's for your core markets, they're in excess of 2%.
Yes. For the core markets, yes.
Okay.
We will continue to price with additional pricing in emerging markets because of the additional inflation and Forex. Yes, in the core markets we will see more pricing.
Okay. Got it. Then the second question I had is just in terms of your cash flow disclosure, are you able to say what the working capital outflow was in Q1? I know we can sort of back solve it, but it'd just be useful to know what the actual number was.
I'll take that one. I mean, I'm not going to disclose on a quarterly level the actual working capital, but I can give you a bit more flavor, so you can do some thinking yourself. You know, as you've seen on the net debt, we've seen a significant increase of which the majority is coming from working capital.
Yeah.
It's essentially the vast majority of that increase is coming from the high sales that we've seen in the month of March. You've heard Esther explain that we had some pre-price loading, and that's showed especially in March in, you know, in front of the pricing that is coming later. So that's higher receivables is really the majority of the EUR 108. The second thing we've been doing is taking markets and where we can, we have been taking positions to secure higher safety stocks to secure supply, which to some extent of course has helped to deliver the top line that we have.
Of course, that has not been helping working capital, which is one of the reasons that we say that we feel that we are going to normalize that as we move forward, and we will continue obviously to have a strong focus on that in the months ahead.
Got it. Thanks for taking both those questions. Appreciate it, guys.
Thank you.
Thank you for your question. The next question is coming from the line of Reg Watson from ING. Reg, your line is unmuted, and you may go ahead.
Thank you. I'd like to come back to the price increase question, if I may. Obviously, you've explained why pricing in emerging markets has come through much sooner than in the core. Would it be reasonable to assume that the order of magnitude of pricing you've achieved in emerging markets is ultimately the level of pricing you will achieve in core or not?
You know, if you know, that's a big assumption. First of all, in emerging markets, we have two situations. We had to price for inflation and for forex. You need to consider that we have a sizable business in Turkey and the Middle East, and that business has been highly impacted by the devaluation of the Turkish lira. Typically in these markets, you price for both forex and inflation, while in Europe we are pricing for inflation only.
If we were to strip the Forex component out of that, would it be reasonable then to look at the pure pricing that you've been able to achieve in own brands and assume that you can also achieve the same pricing in your retailer brands and white label?
I don't think we can compare because also the level of inflation is different in Europe versus emerging markets. You know, we see a spike on some input costs driven by the conflicts that we have in Russia and Ukraine. I think the two variables have a big impact. What I'm saying is that between pricing and cost the objective is to fully offset inflation. Of course, I mean, we have, you know, different competitive dynamics that we, you know. For me, top line is very critical.
We need to continue with the positive trend, but we are prioritizing pricing over versus volume, but we need to be aware of the competitive dynamics that we have in different regions.
Okay. Esther, can I clarify? When you talk about inflation, you're talking about general price inflation in emerging markets rather than specifically input cost inflation. Is that correct?
It is both. It is input cost inflation, but there is the general inflation, like wages and others that are greater in emerging markets. I'm talking about both.
Is it reasonable then to assume that if inflation in Europe starts to run at 7%-10% levels, you could achieve that kind of level of pricing in Europe as well?
Inflation is 7%-10%.
Yeah. I mean, if you look at the latest inflation readings in Europe, in the Eurozone, they're I think 7% or above.
Okay. Yeah. Yeah. I don't think you know, we have seen, to be honest, we have seen much more than that, because on the one hand, you have the overall inflation, but our raw materials increased around 20% year-on-year. So, you know, then you have the overall inflation plus a situation in raw materials that is more accentuated. You know, I'm not going to give a specific number right now, but what I can tell you is that our target is to price and together with the cost efforts, to fully offset inflation over time.
Okay.
That when the situation with the raw materials, so the inflation will normalize and the situation with raw materials will stabilize, you know, we can exit very strong, because all the structural changes that we are doing to reduce the cost and to improve the mix and to grow into the more profitable categories will stay in the P&L.
Okay, thank you. My second question on the AIP, the notice you provided on AIP yesterday, you mentioned that it was a business combination. Can I clarify that business combination is AIP looking to buy Ontex rather than a sort of merger of two equals type thing?
I can tell you that, you know, conversations are ongoing. It's very early, but, you know, the combination could take any shape. At this point, you know, we don't have a defined path on how that combination could look like.
Right. Okay. Thank you. Appreciate your time. Thanks very much.
The next question is coming from the line of John Ennis from Goldman Sachs. Your line is unmuted, and you may go ahead.
Hello, everyone. Thank you for taking my question. My first is on cash flow and the net debt outlook for the year. I guess excluding any potential proceeds from the discontinued operations, I guess the net debt through the year could be comfortably over 6x for the year. If this, you know, this does happen to be the case, are there any additional finance charges associated with that? Related to cash flow and leverage, can you give us a bit more of a steer on the working capital expectations for the year? Is it a case that inventories effectively largely grow in line with the broader inflation rate you're seeing for your commodity basket? Any kind of steer for the year would be helpful. That's my first question.
Then my second question's on the trade loading effect for the core business when it comes to your volume growth this quarter. I think there was a partial boost there. Can you help quantify the magnitude and how you're thinking about that unwinding? I'm guessing the unwind isn't largely in 2Q, but interested to hear your thoughts. Thanks.
Okay. Thank you, John, for your questions. I'm gonna answer the second one, and then I will ask Pieter to comment on the first one. On the trade loading effect, as I said, you know, we are very determined to accelerate our pricing, and that is, you know, coming in Q2. We had to put some pricing in Q1, which is definitely not enough, so we need to accelerate. Yes, typically when you agree on customer price increases, there could be some loading. If you talk about the core markets and we think about the 13% growth, you know, 2% is pricing, so 11% is volume. There is some mix also there, like around 2 points.
Out of the like for like volume, 9 points, I would say that half is structural volume increase, which is driven by contract gains and strength in certain categories like pants, and half is loading. If you would put everything together, you know, out of the 13 points, you would probably remove 4 or 5 points for the loading, I would say.
That's perfect. Thank you, Esther.
Yeah.
Thank you.
On your first question, John, on working capital, it was quite broad. Working capital, cash, a bit more flavor on the outlook, you know, and the governance. First of all, as you know, we have a waiver and the financing is in place. There's no short-term pressure on the results as of, as a consequence of the leverage, which also means that we have the operational space to execute our restructuring plans. You can see that the underlying drivers of our plan, the costs, the turnaround of the sales, is coming in and we actually have increased our view also on the cost savings for the year.
We're confident, I am confident that, you know, we are delivering on what we need to deliver to be in that. Working capital, specifically in that, I don't want to overinterpret the results of one quarter, 'cause it's. You know, as I explained already in one of the previous questions, we had a short-term spike because of the safety we're taking on the inventories and because of the peak sales we had on the end of March, which we believe is going to normalize to the later end of the year.
In terms of outlook, I mean, it's like with EBITDA, you know, the free cash is gonna follow the EBITDA trends over the year, and we're pursuing all the initiatives that we are to drive, and we are going to price for additional inflation and inflation as it comes.
That's helpful. Thank you both.
Oh yeah, make sure one thing, there is no additional cost. You asked for the cost, I remember now. There's no additional cost, linked to the leverage that we're gonna have, and or the waiver, so.
Perfect. Thank you.
Thank you for your questions. As another reminder, it is star one on your telephone keypad to ask a question on today's call. The next question is coming from the line of Fernand de Boer from Degroof Petercam. Your line is unmuted, and you may go ahead.
Yes. Thank you very much. I have more than two questions, but I will try to limit them. One, could you remind us of the service levels in this quarter? The volumes were quite up, but what about the service levels? Have that also now recovered to the required levels of, let's say, 95% or even more? That's the first question. In your speech, Esther, you said that you had several offers for the emerging market activities. Are there then one offers for partial or parts of that emerging markets, or is it offers for the entire block? Maybe given the value are your margins are today, do you still believe that you can reach the target margin of your strategic plan next year?
I'm gonna ask Pieter to talk about the service levels, and then I'll answer the rest.
Yeah. On the service levels, you know, we're not disclosing service levels by quarter, but I can tell you, we are improving, so it's on a positive trend, month after month. Having said that, there's industry setbacks that are happening, so it's each time a little bit of setback and then moving back up. Recently, we're much better than what we're disclosing before. Of course, the impact of the events in Russia have created a few more shortages, of which again, we're recovering. Month after month, we are stepping it up, and you know, we can see that is happening across the industry, where we do that.
Okay. I'm gonna answer to the... You know, you asked about the several offers for emerging markets, and whether, you know, we are looking at selling it in isolation or in bundles. I can tell you that we have three programs ongoing. We are having offers on the three programs. We'll see. I think there are different types of offers, and we'll evaluate what we have. I think the due diligence is ongoing as we speak, and we'll come back when we have news. It's still preliminary to answer that question. I think I don't know if I understood your question.
The question was related to considering the current margins in Q1, whether I am still confident on the target. So the midterm target, correct? This was the-
Yes. Correct.
As I said, the market remains volatile and challenging, and then the geopolitical environment has worsened the situation. You know, we talked about three targets for the midterm top line, 2%-3% growth. We are fully on track. Actually, I think that we could do better. Margin improvement. We are on track on the components that we control, on the growth, on the mix, on the savings, while inflation remains very volatile and has a huge impact. However, you know, in the.
The challenge here is, you know, how inflation is gonna evolve and how fast versus the speed at which we can compensate and offset with the priorities that we have, which is the growth, the mix and the savings. But in the long run, I do see those targets feasible. Then the last commitment was on the leverage and reducing the leverage to below 3%, and then going forward below 2%. As I said, we are making good progress on the divestment. You know, the EBITDA will improve. And as you know, as usual the cash flow will follow the EBITDA. I do believe that we will get there.
Okay. Maybe one last question on the cost of goods sold. The dollar is up quite substantially to the euro. As currencies stay where they are today, what would be the full year impact? I think that should be the case as you are hedging. What would be the full year impact on your cost of goods sold, or is that included in EUR 200 million?
Yeah. We gave some guidance in our outlook about the cost of goods, you know, we go from EUR 160- EUR 170 on the core. It would be EUR 30 million additional inflation. Part of that includes indeed the impact of the U.S. dollar appreciation in that number.
Okay.
That's also part of the pricing plans and intentions that we have.
Okay, very clear. Thank you.
Thank you for your questions. The final question in the queue is coming from the line of Andre Phillips from Barclays. Andre, your line is unmuted, and you may go ahead.
Hi. Thanks for taking my question. It's actually Cornelia from Barclays. I had a couple, if possible. I was just wondering, you've disclosed the adjusted EBITDA. Can you tell us what the underlying EBITDA was, i.e., what were the add backs? And then secondly, just to go back on the working capital, should we expect working capital to reverse in the Q2 ? More importantly, should we consider your 5.7x leverage as a peak? Thank you.
I'm gonna ask Pieter to answer the question.
To be honest, I have not understood the first one. Can you clarify?
You've disclosed the adjusted EBITDA. I'm just wondering what the actual underlying EBITDA was, i.e., what were the add backs?
Okay. We're not gonna comment on that one. I think that goes a bit too far for this quarterly update. Let me get to your second question on working capital. As I mentioned earlier in the call, we do expect to normalize. I'm confident that, you know, some of the one-offs that we've seen on net working capital this quarter is going to normalize over the rest of the year. We will see a reverse of that going forward. I will not comment further on the actual leverage. As we said, our EBITDA is going to improve as the year moves on. We will be very cash focused over the next quarters to keep that under control.
Great. Thank you. Good luck.
Thank you.
Thank you.
Thank you for your question. Another question has come through in the queue. That line is coming from the line of Othmane Bricha from Bank of America. Your line is unmuted, and you may go ahead.
Thanks for squeezing me in. I have couple, please. First, on the consumer behavior, could you comment on what have you noticed in Europe as the consumer starts feeling the pressure of inflation? And do you think that you will be beneficiary of consumers trending down to private label? And my second one is on institutional contracts. How much have you already renegotiated since H2 last year, and how much are remaining? Thank you.
Thank you for your question. On the consumer behavior, you would argue, especially in the mature markets where, like Europe and North America, where private labels have a considerable presence, because we are talking about, in general, a market share of around 30% on the total market. We are facing unprecedented times. We haven't seen this level of inflation for many, many years, so it is difficult to predict what is gonna happen.
Everything would point to the fact that, you know, consumers will lose purchasing power, and it is happening as we speak, and that they will become smarter and look for, you know, lower-end products or lower cost products, looking for, you know, the products that can give a good level of performance and quality at a lower cost. This is the value proposition of private labels. I would expect a shift which we have not seen yet happening in the market. You know, everything would point that could happen. Of course, we are in a very good position to benefit from that, considering our presence in that market. The second question is on institutional contracts.
To be honest, I cannot disclose. What I can say is out of the three type of customers that we have, this is the most challenging. The contracts are much longer term. Typically, you don't, you know, it's not private institutions. They're very often public institutions. We are renegotiating every single contract, including this group. This group is gonna take a little longer compared to the rest that is coming now.
Okay. Thank you.
Thank you.
Wonderful. Thank you so much for your questions. Can I just request, are we happy to take follow-up questions?
We'll have one more, I see, and then we'll stop after that if you're okay.
No problem. Okay. We do have a follow-up question coming from the line of Fernand de Boer from Degroof Petercam. Your line is unmuted, and you may go ahead.
Yes. Hello, it's Fernand de Boer again. I have actually a follow-up question on the pricing. I heard yesterday that actually retailers are taking up the price of private label actually even more than some of the A-brand producers. Not to say that it is specifically for diapers, but what do you see in the stores? What do you check on the pricing levels your retailers are charging to the customers, their consumers?
Okay. No, thank you for the question. Typically how it works is, retailers wait for the A brands to increase prices, and then they follow. Typically, there is a difference on pricing. It varies a little bit, category by category, but they want to position their own brands at a certain difference versus A brands. So that's why, you know, it takes a quarter, an extra quarter for private labels, in a way to move. You know, you probably saw some of our publicly listed peers publish their results. They are driving a similar level of pricing that we are as a company.
Being their business mostly branded business, that is already visible in the shelves and private labels are following. The latest and most recent market data that we have, we see a pricing already coming on some private labels.
Okay. Thank you.
I expect more coming in the quarters to come.
Okay. Thank you.
In terms of
Yeah. Thank you.
Thank you so much for your questions, everyone. There are no further questions in the queue, so I will hand you back over to your host to conclude today's conference.
Thank you for your questions. With the geopolitical and input cost environment have created new challenges to us. I do not want to lose sight of the performance of the teams at Ontex in delivering what we set out to do 12 months ago. We have returned to top-line growth. We are increasing prices, and we are delivering significant structural cost savings. Finally, we are making good progress on divestments. Thank you for your time today, and I look forward to meeting some of you in person in the coming days. Goodbye.
Thank you everyone for joining us on today's call. You may now disconnect your handsets.