“Our teams delivered strong like-for-like revenue in 2017, ahead of our markets despite very competitive conditions. This growth is across all three categories, and we gained share in most of our markets, including our leading position in European retailer brands,” says CEO Charles Bouaziz. “Our efforts to drive this strong revenue growth to adjusted EBITDA largely mitigated significant input cost and FX headwinds and capacity constraints.”
Amidst this growth, Ontex’s profitability was negatively impacted by Hypermarcas, the Brazilian hygiene company it acquired last year. This business was not only impacted by challenging market conditions but also by customer discounts that were above budget. In December, Ontex took a charge of €15 million to cover the year. Looking forward, significant actions have already been taken to address the issues in Brazil including changes in sales incentives.
Despite this setback, Ontex remained optimistic about the $300 million acquisition, which extends its market position in the Americas to Brazil, increasing sales from Ontex-owned brands, and accessing a fast growing market for adult incontinence. Hypermarcas’ annual sales are said to be about $370 million and include strong local brands including PomPom, Cremer and Sapeka diapers and the BigFral and AdultMax adult products.It is the market leader in the adult incontinence category and holds a solid No. 3 position in baby care in Brazil, where it has outperformed the market since 2012.
All three of Ontex’s key markets were broadly stable in 2017. Baby care experienced strong pricing pressure due to international brands’ promotional activities while baby pants grew strongly in Europe and diaper sales declined. Adult incontinence was the highest growing category in 2017 reporting 14.8% growth compared to the prior year.
Retailer brands continued to grow faster than the overall market in Europe where store brands represent more than 50% of the total baby care category as more consumers look for retailer brands based on their attractive combination of performance and value.
Within this business climate, Ontex was able to grow sales thanks to strong demand for its products, allowing it to outperform consumer staples and grow its marketshare in most categories.
In 2018, Ontex will continue to invest in initiatives to support sustainable profitability growth, strengthening its leadership positions in retailer brands and achieve improvements in Brazil. In recent months, the company has announced investments in developing markets including Ethiopia and Poland.