Ontex Group NV (ONXXF) Q2 2024 Earnings Call Transcript

Ontex Group NV (OTCPK:ONXXF) Q2 2024 Earnings Call July 31, 2024 6:00 AM ET Company Participants Geoff Raskin – Investor RelationsGustavo Paz – Chief Executive OfficerGeert Peeters – Chief Financial Officer Conference Call Participants Charles Eden – UBSFernand de Boer – Degroof PetercamKarel Zoete – Kepler CheuvreuxMarkus Schmitt – Oddo BHFRebecca Clements – Fidelity International Geoff Raskin Good afternoon, everyone and thank you for joining us today. This is Geoff Raskin from IR. I’m pleased to have Gustavo, our CEO; and Geert Peeters, our CFO, with us today to present the first half year results. Before that, let me remind you of the safe harbor regarding forward-looking statements. I will not read it out loud, but I will assume you will have duly noted it. You’re well aware that since 2022, our P&L is based on continuing operations, which consists of our core market activities only, while the emerging markets are reported as discontinued operations. We have already divested more than half of these, and we are working on strategic options for the remaining. Meanwhile, these activities continue to contribute to our results and to the presented debt and cash flow figures, in particular. Please note that since the start of the year, we have changed the definition of free cash flow to reflect free cash flow after financing, and the operating savings in our EBITDA bridge to a net figure after subtraction of implementation costs. With that cleared up, Gustavo, over to you. Gustavo Paz Thanks, Geoff. I’m proud of the Ontex teams with a consistent delivery in quarter two as in quarter one, allowing me to present strong first half results. This gives me confidence in delivering a strong year and brings us another step further on our transformation journey. Our first half results are summarized on Slide 4. We continue to strengthen our competitiveness through more efficient operations, coupled with our strong sustainable innovation pipeline. As a result, we have achieved a 3% like-for-like revenue growth, driven by 5% volume and mix growth. The adjusted EBITDA margin rose to 12%, delivering an adjusted EBITDA 31% higher than a year ago, driven by volume growth and continued strong delivery on the cost transformation program. The resulting adjusted EBITDA was converted in significant free cash flow of €43 million versus an outflow of €29 million a year ago. This allowed us to further strengthen our financial position. Free cash flow and M&A proceeds brought net debt down by 12% and, combined with a strong adjusted EBITDA, brought our leverage ratio to drop from 3.3x at the start of the year to 2.5 by June. On the next page, we summarize the further progress on our Ontex transformation journey. As we have expressed multiple times, our vision is to be the number one trusted partner for our retail and health care customers. Our leadership position in Europe is well established in the three categories that we serve: Baby, Feminine and Adult Care. In North America, we are rapidly growing toward this position in Baby Care first. We have made further progress on the portfolio refocusing with the finalization of the divestments of the Algerian business in April and Pakistan in June. Meanwhile, we continue to work out strategic options for the Brazilian and Turkish operations. To create value, we identified three main drivers. And in each of these, we have made further progress in the first half. First, competitive and sustainable innovation. In May, I already talked about Ontex being recognized as an innovation leader in Belgium, and the rollout of our new line of swim pants and our latest tampon innovation. Since then, we have launched our new Stop&Lock Anti-Leak technology for baby diapers and our new line of used pants. In May also, I talked about the recognition we received for our efforts with the carbon disclosure project. We continue to keep sustainability at the core of our product innovation pipeline. We are proud to support Woosh with a recycled diaper technology as they recently announced further progress in their commercial closed-loop diaper project. Our second value-creation driver, business expansion, with the biggest opportunity in North America where we envision a strong double-digit growth this year and beyond, which we did achieve in quarter one and quarter two and we are preparing new launches in quarter three and quarter four. Furthermore, we continue to generate double-digit volume growth in selective categories such as adult and baby pants. And the third value creation driver, best-in-class operation, with further progress in our cost transformation program and gradually transforming our supply chain to best-in-class. Scrap rate, overall equipment effectiveness and service level improved further, and we have – we reduced our operating cost base by 5% as we did in the last 2 years. In June, we announced the intention to restructure our Belgium production and distribution activities. While these are difficult decisions to make, the aim is to strengthen our operation and cost efficiency across Europe, enabling us to strengthen our competitiveness further. Moving now to Slide 6. You can see here the quarter-on-quarter evolution of the adjusted EBITDA since 2023. In the first half of the year, the adjusted EBITDA margin on the orange line has increased to 12%, 2.6 percentage points up compared to the first half of 2023 and 2 points compared to the second half. It has also further increased within the period, reaching 11.5% in the first quarter and 12.5% in the second quarter. Combined with the revenue growth, the absolute adjusted EBITDA in the blue bars is up 30% year-on-year in the first quarter and up 32% in the second quarter, marking the eighth consecutive year-on-year increase. With this, I leave you with Geert for more in-depth view. Geert Peeters Thank you, Gustavo. Let me go into more detail in the elements that drove our results, starting on Slide 8. In this graph, you can see how revenue has grown from the first half of ‘23 to the first half of ‘24. Revenue grew 3% like-for-like in the first half of ‘24, driven by 5% volume growth, both in Q1 and Q2. In North America, volumes grew strong double-digit, as Gustavo explained, based on Baby Care contracts secured last year and contracts in the first year ramping up. Volumes in Europe were slightly down, thanks to strong sales in Adult Care – sorry, were slightly up, of course, thanks to strong sales in Adult Care. In this category, we benefit from contract gains and higher demand, supported by demographic trends. In Baby and Feminine Care, overall demand was weaker, but retail brands are performing relatively better. As expected, prices came down by some 2% on average and more, in particular, in Baby and Feminine Care, whereas there were more resilience in Adult Care. This explains why Adult Care revenue is up 11% like-for-like, whereas the other categories are slightly decreasing. ForEx had no meaningful net impact. Let’s move to EBITDA on the next slide. The adjusted EBITDA rose 31% year-on-year, and let’s go through the building blocks step-by-step. First, there is a positive impact from volume and mix. We expect that impact to grow, thanks to our relentless focus on gaining competitiveness. Most important driver remains our structural cost transformation program, which continues to deliver important net operating savings, bringing 5% operational efficiencies. Coupled with sustainability – sustainable innovation, this allows us to strengthen profitability and competitiveness, serving customers better and managing prices to invest in future growth. Costs were overall flat, with a positive raw material impact, thanks to year-on-year lower indices, offsetting continued cost inflation of other operating costs such as energy, distribution and wages. Note that raw material indices are up again since the end of last year, and that positive year-on-year impact will gradually decline. SG&A came out at 10% of revenue, impacted by inflation and by actualizations of incentive provisions. As Gustavo already explained, the adjusted EBITDA margin thereby increased to 12%. And on the next slide, I will discuss the P&L below the EBITDA level. The finance costs came out slightly higher despite lower indebtedness and margins due to net exchange differences in financing activities. Taxes were lower as we recognize tax assets for an amount of about €10 million. This is consequent to consistently achieving our financial plans and is confirming our future profit prospects. This led to an adjusted profit from continuing operations of €41 million, well up compared to €12 million last year. We made adjustments for restructuring costs, primarily those related to the intended restructuring of our Belgian operations. We currently have taken a provision of €37 million, reflecting the potential redundancy costs according to the Belgian legal requirements. There were also €4 million related equipment impairments. Note that we are not able to make a reliable provision for social plan on top of this as, currently, the infant consultation round is ongoing and negotiations only start later. The profits from continuing operations thereby was €10 million. Discontinued operation ended with a loss of minus €50 million. Adjusted EBITDA, nevertheless, was positive at €20 million. Reason is a non-cash impact as a consequence of the divestment of Algeria and Pakistan. This divestment led to a minus €21 million P&L impact of historic currency translation adjustments. These so-called CTAs reflects the ForEx valuation effect on foreign assets and are posted year-on-year in equity on the balance sheet. At the time of disposal, these CTAs are recycled through the P&L. Combining the results of continuing and discontinued business led to a limited loss of the period for the group of minus €6 million. Let’s now move to the cash flow side of our financial results. In the first half year, we managed to generate a free cash flow of €43 million, which is a substantial improvement compared to the outflow of €29 million last year. We start from an adjusted EBITDA of the group amounting to €130 million, consisting, on one hand, of the core markets for €110 million and, on the other hand, of discontinued emerging markets for €20 million. Working capital needs were €12 million, while the underlying working capital efficiency improved. Inventories were up to support the volume growth, especially in North America, where new contracts require us to anticipate filling the shelves at the start of the contract, but also to support the footprint adjustments and investments in Europe. Payables compensated this to a large extent, thanks to better negotiated payment terms, which is also part of the cost transformation program. CapEx amounted to €38 million. This is lower than last year, but this is due to phasing of payments. As you remember, we announced that we planned a significant increase in the CapEx level in ‘24 to support business growth and also the cost transformation program. We are still committed to do this, and these payments will catch up in the second half of the year. Restructuring cash-out was €5 million, mainly related to divestment costs. The anticipated restructuring costs for the intended footprint optimization in Belgium, once confirmed and negotiated, is only expected at the end of ‘24 and in the course of ‘25. Financial cash-out was €70 million, well below the €33 million of last year, due to lower indebtedness and lower interest margins. Moreover, last year, the financing costs were paid at the time of the RCF renegotiation. What does all this mean for the debt position? Net debt reduced by €77 million or 12% over the first half to €588 million, thanks to the free cash flow, but also thanks to M&A proceeds of €34 million. The latter comprises €25 million of proceeds from the divestment of the businesses in Algeria and Pakistan. Note that this amount is enterprise value, excluding the cash, but that still taxes have to be paid in Q3. Moreover, the M&A proceeds includes €8 million received from the acquirer of our Mexican business last year as a deferred payment and still an amount of €90 million is expected to come. Gross debt reduced even more by €86 million as we are also optimizing our cash position. Our use of factoring facilities remained largely stable at €150 million. It’s a limited increase of €6 million versus the end of last year. Our debt structure is thereby solid with 70% lease liabilities, 77% high-yield bond, which is maturing mid-’26, and only 4% of revolving credit facility, which matures end ‘25. End June, we have only drawn 13% of that revolving credit facility. That solid position can also be seen in our solvency and liquidity indicators on the next slide. The leverage ratio presented as a bold orange line has been continually coming down since September ‘22 and dropped below 3x in the first half year to 2.5x at the end of June. The drivers of the solvency strengthening and also being presented on the chart, with a decrease in net debt as a green line and increasing last 12 months adjusted EBITDA as a blue line. This adjusted EBITDA reached €236 million and excludes the businesses of Mexico, Algeria and Pakistan as from the date of their effective divestment. Our liquidity position also improved further. We have now €370 million liquidity headroom consisting of €160 million in cash and €210 million undrawn on the revolving credit facility. It’s needless to say that with these figures, we fully comply with a large headroom to the bank governance. I now hand you back to Gustavo for the outlook. Gustavo Paz Thank you, Geert. While I’m pleased about the further progress we are making on our transformation journey, we acknowledge that much is still to be done. The delivery so far has given us strong confidence in the rest of this year, and consequently, we have revised our outlook upward across all metrics, as we can see in the Slide 15. We expect our core markets now to grow revenue between 4% to 5% like-for-like in 2024, higher than the low single-digit announced in February, driven by new contracts in North America and in selected categories. The adjusted EBITDA margin of our core market is anticipated to end at 12%, more than 2 percentage points higher than in 2023, with our cost transformation program as the main driver behind the profitability increase. Looking at the total group, we expect free cash flow to end up higher than €20 million, a strong improvement year-on-year, and this with a sufficient headroom for investment in CapEx and restructuring. And finally, in February, we expected our leverage ratio to drop from 3.3x at the start of the year to below 2.5x by year-end. And with this, Geert and I are ready to answer your questions. Geoff Raskin Before handing over to the operator, [Operator Instructions]. Operator, over to you. Question-and-Answer Session Operator Thank very much, sir. [Operator Instructions] Our first question today will be from Charles Eden of UBS. Please go ahead. Your line is open. Charles Eden Hi, good morning, everyone. I’ll ask up to two, as promised. So on the ‘24 like-for-like sales guidance raise for core markets, would it be fair to assume that’s effectively driven by better-than-anticipated momentum in North America, where it looks like you’re growing volumes sort of 40% plus in Q2. And does that mean you are winning additional contracts in the quarter, which might see that growth accelerate actually in the second half of the year? And then second question, a bit more sort of medium term, longer term, and I appreciate these targets were presented by the previous CEO. But Gustavo, you were on the Board during this time, so I suspect you’re more than slightly involved in shaping these objectives. But when these presented, there was a target of 2% to 3% like-for-like revenue growth, 12.5% to 13.5% margin in core markets and a leverage ratio of less than 3x. At the time, they start a long way away in ‘21. But I guess, you’re there on two of these metrics or will be by the end of the year and not far away on the margin. So I guess, the question is, what are the expectations? What are the ambitions now, particularly on the margin side over the medium term for core markets? And then also leverage, I guess, you’d be under 2.5x at the end of the year. What are you thinking about cash? Yes, invest in the business, but is it – are you thinking about bringing a dividend back next year? Maybe you could also talk on use of cash. Thank you. Gustavo Paz Alright. Thank you, Charles. I appreciate the question. I’m going to try to address little by little. North American growth, yes, we continue making further progress in North America. And the answer would be, yes, we expect quarter three, quarter four to continue with our strong double-digit growth. So there is – and also, not just in quarter three, quarter four, but continue in ‘25. So this is a huge amount of efforts that we are doing there. We are approaching our customers in the right way. We have the support of them and investing in the business, investing in innovation, and it’s going well. So yes, we expect to continue to grow strong double-digit growth. In terms of the margin – and I’m going to leave the cash answer to Geert. In terms of the margin, so we are – while we are in core markets. While we are building the scale in North America, it’s very nice to see how we are definitely improving our margins also in North America. While we are building that scale, we need to be patient because we are investing in capacity. We – that means that we have a start-up cost. That means that we have to grow our business while building the scale that helps on the profitability side, and then making North America contribute to, in an accretive way, in the future in the future months to come and years to come. So in that way, the core business, North America and Europe, will continue to improve our margins. That is the expectations. So growth in North America is a big driver, definitely. Geert Peeters Now from my side, on your question, Charles, related to the leverage and the cash. As you know, at the ‘23 to ‘25 plan, to which we are highly focused, is fully focused on the fact that we want to improve significantly our competitiveness with the purpose to have long-term value creation. So for this year and next year, we are still fully in that program. So we want to use the cash as much as possible for the investments for the restructuring. You know that there are still some cash-outs coming, of course, as I explained in my expose. At the same time, we strengthened the balance sheet that you see also in the leverage ratio. And if we take all together, the end goal for us is indeed to have a significant, sustainable cash flow in the future at that moment. And then we’re at the end of the ‘25 program, we will reconsider dividends, which is, of course, part of that long-term value creation story that we’re currently building. Charles Eden Okay, thanks for detail answers. Operator Thanks so much. We will now move to Fernand de Boer of Degroof Petercam. Please go ahead, sir. Fernand de Boer Thank you for taking my questions. Two questions. One is on the gross – sorry. On the raw material costs, you had a benefit in the first half, accelerating in the first – Q1 accelerating in the second quarter. So what could you say about commodity costs more in the second half? And then in your assumption for, let’s say, top line growth of like-for-like sales growth moving to 4% to 5%, I mean, acceleration in the second half. What is your assumption of price because in the – I think, in the second quarter, price is minus 3%, in the first quarter, price minus 1%. So what should you take there, minus 4%, maybe in Q3, and then gladly getting better a little bit? Or what’s your assumption there? Geert Peeters Yes. Fernand, I will take the first question, and then Gustavo will tell you something about the sales growth guidance. On raw material costs, indeed, it’s always a bit of a mixed picture, but we see that they are gradually increasing. Of course, that’s fully included in our forecast that we are updating month-on-month and which we closely always discuss with our sales teams. So that means that, as I said, we believe that the positive impact year-on-year will gradually decline. But for us, it’s a normal evolution, and we’re not talking anymore on big changes as we have seen during the COVID period. This is a normal trend, and we are resilient enough to absorb that, and to sales prices that are aligned with the evolution in the market. Gustavo Paz In terms of the revenue for the second half, your question – perhaps, first, on the price decreases first quarter and second quarter, we – they are – actually, we have been managing prices – actually, perhaps, even better than expected. And we will continue to do that. The prices are responding. So raw material costs going down or up is one of few several inputs on the pricing strategy. And we respond and we manage the prices based on – depending on the categories, depending on the evolution that we’re seeing, the competitiveness. And when we are saying that we are looking after growing in selected categories is because where we feel a strong position in those, where we have more competitive advantage, and then managing prices is also related to that to our competitive position. So we don’t see any – we don’t foresee any bad surprises. On the contrary, we are managing very well our pricing strategy in the market so far, and we expect that to continue. Fernand de Boer Do you already then see some, let’s say, ease of competition, that you are less promotional, as you indicated, after the first – full year result in Q1 and so? Gustavo Paz Sure, Fernand. If you apologize me, can I ask you to speak louder or closer to the microphone because we can barely hear you. There you go. Fernand de Boer Sorry. Compared to the previous quarter, you mentioned the high promotional levels at A brand players. Do you already see some changes there? Or do you see them actually getting more aggressive? Gustavo Paz Okay. So there are two distinctions, right? Because I thought that you were talking about our prices. On the A brands, it’s about the retail brand competitiveness in the store against the A brands. The A brands are doing promotions that they continue to do. I’m sure that you have listened also the A brands’ announcement. They keep – so they have lost some market share in the marketplace and during the last year, year-on-year comparison, and therefore, they are looking forward to recuperate that, and they are doing some promotions. How heavy they are going to be in the second half of the year, I don’t know. I cannot say that. That is in hands of the A brands. But also, the competitiveness on shelf, it’s related to the retail brands versus them. But not always retail brands compete on the A brands, so it’s also the competitiveness between retailers. So that dynamic, it’s all what it takes for us also then to manage our prices. It’s a market dynamic. We don’t see anything, especially happening different than the normal course of the business. Fernand de Boer Okay, thanks very much. Operator Thank you, sir. Our next question will be coming from Karel Zoete of Kepler Cheuvreux. Please go ahead. Karel Zoete Yes. Good morning. Thanks for taking my questions. I have two questions. The first one is, yes, a follow-up on basically on the North American market. We see, at competitors, things are tough. At the same time, you and others are adding quality, like, first, quality and several other players. How do you see supply/demand in the North American market shaping up over the coming years? And are you and others basically banking on a significant shift of market shares in the years ahead in the North American market? And the other question is more a housekeeping one on expectations for H2. First one is on interest costs. Those were still high in H1. What should we expect for the second half of the year? And also looking at the P&L, I did understand that we should anticipate potentially more exceptional costs in the P&L for the second half in relation to the restructuring in Belgium. Thank you. Gustavo Paz I’ll take the first one. So thank you, Karel. On the – so how do we see North America supply/demand? Well, yes, existing competitors in the retail brand, we are focusing today in the Baby Care first. And we have several opportunities to grow our business. There is a trend, a very good trend in terms of that we are building with the customers, on building retail brand, a stronger, more strategic management of the retail brands. And that is giving more room to grow to the retail brand. And we are participating in those discussions, and we are part of those new businesses that the retailers are building. So we are seeing just our growth today is coming from market share growth from our side. We have a low market share. We are growing our market share within the retail brand. But it – definitely, it will impact in the retail brand segment as a whole and to start growing that retail brand segment. We are talking now – specifically, we are focused in Baby Care. So how do I see it? I see it very positively. On the – on your second question questions because they were – Geert will address them. Geert Peeters So Karel, thanks for your questions also. First one, let me perhaps start with the second one because the first one, we can derive from that one. Indeed, as I told during the presentation, we – probably the intention is confirmed based on the consultation information rounds in Belgium, then yes, typically, as you know, there is a negotiation on a social plan, which is on top. And that on top provision has not yet been taken because we even didn’t start negotiations so we cannot make any reliable estimates, so that’s included. And as included, I mean there is no provision made. But at the same time, of course we give a cash flow guidance. We – that cash flow guidance is based on the breadth of results we have, and we foresee headroom for what will still might come in cash flow in ‘24, which will be only part of the amount, of course because you know that the plant of Buggenhout, it will – their wind down will be on a much longer period. Also, partially, Eeklo, it will be partially ‘25 also. We will give more visibility on it when it’s clear, of course, so that will be in the coming months. And what does it mean with the interest costs there, we are at €588 million net debt, so you can derive from the free cash flow that the second half of the year, it will – we will have a limited minus to come to that €20 million or above. So, the net debt will probably slightly increase. But at the same time, our margins will become much better because, as you know, on the RCF, we have a margin grid, which is dependent on the leverage ratio. We are now in the category of the 2, 2.5, which comes with much better margins. Karel Zoete Okay. Supper. That’s helpful. Thanks. Operator [Operator Instructions] We will now move to Markus Schmitt calling from Oddo BHF. Please go ahead. Markus Schmitt Yes. Thanks for taking the questions, I have two. So, first of all, could you please maybe provide an update on the emerging markets asset sale process and timing? And also if you think that the 2026 bond will be refinanced anytime soon, given the good operating performance, or is the bond refinancing, whether something for next year? Thank you. Geert Peeters Okay. I will take the first one, emerging markets. Sorry, the timing – so we are still expecting the timing for the two remain – Brazil and Turkey, during this year, and with continued progress. We always should be looking – we are always looking for the value for the shareholders. And yes, we expect to finalize during this year. Gustavo Paz And then on the refinancing, yes, I always repeat also the fact that the maturities are still far away, of course, because of the high-yield bonds, it’s in 2 years. It’s mid-‘26 and the RCF is end ‘25. We are very focused, as I have said, on the – on further realizing our plan, improving the operational performance, strengthening the balance sheet. We are very pleased that it was also reflected in the first half in better ratings as well Standard & Poor’s and Moody’s upgraded us. We hope that address more room in the future. We will see what will happen because the improvements we are doing, we will probably also not get unnoticed by them. So, that’s why we are not very – we don’t feel it as an urgent necessity to do the refinancing at very short-term. And for the rest, yes, we are very confident on the refinancing ourselves. We have very good relations and support from our long-term relationship banks. also the sounding in the market, we hear it’s good. So, we are very confident that we – at the right moment, we do the refinancing. Markus Schmitt Okay. Well, understood. Thank you very much. Operator Thank you. Our next question will be coming from Rebecca Clements of Fidelity International. Please go ahead. Rebecca Clements Hi. Can you hear me? Gustavo Paz Yes. Rebecca Clements Hi. Just to follow-up on the previous question about the refinancing. Do you have any specific ratings targets you would like to achieve or any specific leverage target you would like to achieve before attempting the refinancing? Gustavo Paz No, we don’t have a specific target. We – yes, based on what we are doing now, we will just further strengthen in leverage. So, based on our guidance of the EBITDA, our LTM EBITDA will further improve. So, it will further drive down the leverage ratio. We don’t have a specific target. We will be very happy to be between 2, 2.5 further in the coming periods. Geert Peeters And the credit ratings. Gustavo Paz And on the credit ratings, there – yes, that’s why I said that we hope we can take an extra step, and we will see. It’s up to us to convince the rating agencies to notice the big improvements we are making and the cash flow generation, of course, because it’s all about also showing that we managed to deliver a sustainable cash flow. Rebecca Clements Okay. And then just a couple of housekeeping questions. With respect to the €37 million of provisions that you have taken for Belgium, how much of that do you – will that actually be €37 million of cash outflow is my first question? And then how much of that do you expect to pay out in 2024 versus tipping over into 2025? Gustavo Paz Yes. The €37 million, yes, it’s also based on assumptions, of course, because we announced an estimated number of people, but it remains an intention and even based on the final outcome. Also a number of people can always change a bit. Some people leave themselves and all that, so it’s based on assumptions. So, the final outcome will be more clear in the coming months. And yes, we don’t have a very specific estimate for the cash-out that will come this year. It will be parts, but yes… Geert Peeters Rebecca, we have to make sure that we understand that we – so far, we announced the intention and information and consultation period of time is the one that we are living today. And we still have that information consultation period of time towards the end of August. Therefore, there is no way that we can do any appropriate estimate more than the ones that we have announced. Rebecca Clements No. I understand that. I am just wondering if, from a timing perspective, I mean let’s just assume that it’s $37 million cash-out. Would it be more heavily weighted to be paid out in 2024 or probably more likely to be paid out in ‘25? Gustavo Paz Based on the intention announced so far, the execution of the two plants, one is going to be between ‘24 and beginning ‘25, and the second one is going to be more during ‘25, the execution of that intention. Rebecca Clements Okay. That’s helpful. And then your leases were a little bit higher. I think this one, your carrying value was, I think €115 million at year-end. And I think I saw in the slides it’s €130 million is your carrying value of leases on the balance sheet currently. Are you adding leases, or is that just something that’s reflective of rates? Gustavo Paz Yes, the leases. Yes, there is nothing particular. Yes, it’s a recalculation. We didn’t add very big new assets. So, it’s for us a limited amount, no specific to mention. Rebecca Clements Thank you. And then the last question is just you talked about being very focused on your 2025 plan. In a perfect world, what would be the amount of CapEx you would be able to spend, given where you want to take the business? Is it – would you want to spend quite a bit more than you currently are ideally for growth reasons, or are there some timing constraints on that away from the fact that you are obviously still very focused on the balance sheet as well? Gustavo Paz We are not at the stage that we are giving any guidance for 2025, right. But what we said in some time ago is that we have a 3-year to 5-year plan that is a first part of ‘23, ‘24, ‘25, the first three years. They were going to require investments and strong investment from our part in terms of in two major areas, one in operational efficiencies that is mostly in – European focused. And then the second piece, big piece is the growth in U.S. But Rebecca, I hope that you can apologize us, but we are not giving guidance yet to 2025. Operator Thank you. We will now go to Fernand de Boer, calling with a follow-up question from Degroof Petercam. Please go ahead. Fernand de Boer Yes. Thanks for taking my question. I have one follow-up question on, actually, the first question on the margin beyond maybe this year and beyond the 12%. Do I understand your answer correctly, Gustavo, that you say, actually, we will see margins going up in Europe and in the U.S. But due to the stronger growth in the U.S., where we will have a little bit lower margins for the time being, actually, the margin of 12% is it? And you should maybe better look at absolute EBITDA growth than specifically on higher margin than 12%? Gustavo Paz You have a good view of Fernand. So, that’s correct. I would add also to that assessment that you have done. I would add also that, as we are growing in top line, we – and we plan to grow in EBITDA, in adjusted EBITDA, but of course that the top line growth in the second half of the year is stronger. And that will, of course in the equation, it will in the margin also is another piece of the equation that you have done. But you are very well set. Fernand de Boer Okay. And I have one financial question. If I read your comments correctly, then you have quite a big net cash position in emerging markets, but still you have a negative interest line. Where does that come from? Gustavo Paz Negative interest line in the emerging market, now, it’s a difficult question. But one of the reasons is emerging markets or is the – now, one of the things, for example, in the emerging markets is that the hyper inflation in Turkey, it’s booked as a financial – as a difference between – yes, the recalculation, it’s booked as a financial cost. So, for example, that’s one of the important reasons why we have a financial cost. Geert Peeters It could be in the divestment… Fernand de Boer Okay. Thank you very much. Operator Thank you, Mr. de Boer. Ladies and gentlemen, we have time for only one more question, that question is going to be a follow-up question from Karel Zoete of Kepler Cheuvreux. Please go ahead. Karel Zoete Yes. Good morning. Thanks for this. On the restructuring in Belgium, can you speak a bit more about the benefits, not only about costs? What kind of payback do you see on these interventions you make? And the other thing is maybe on the currency situation that Fernand touched upon. I suppose you would sell the Turkish and Brazilian business. Would we also have this adjustment of the currency? I suppose we see that in the equity or in the profits? Thank you. Gustavo Paz Okay. Very good, Karel. I will take the first one and leave the second one for Geert. On the – the first thing that I would tell you on the benefit is this is for reaching more competitiveness and more efficient operations across Europe footprint. And to your question about the payback, you were very specific on that. I don’t have the answer. I can’t disclose a specific answer to you. But I can tell you that, and I said it in other analyst calls, that we – as management of the company, we do all the time, we look at after approving investments and moving ahead on investment. Our criteria is for those investments that they have 3 years or less years in payback. In this case, it’s not that we are doing that analysis. We don’t know the cost of this investment. But that is – the intention is to improve our operational efficiencies in Europe as a whole, the footprint. That’s responding to your first question. Second? Geert Peeters Yes. Then on the second question of the CTA and the cumulative translation adjustments, yes, a good question, also a very relevant one. If you just take our balance sheet, and you look as part of the equity, then you see the amount as a negative amount, which is on our balance sheet related to the CTAs which have not been realized. And it’s an amount of about €210 million, which is related to mostly to those emerging markets. So, that means that if that materializes that those amounts will also be in the P&L. But of course, as you know, it’s a technical accounting thing because there is no cash impact at all. And we have seen that in other press releases over the last days that there are other market players going out of emerging markets who also have a lot of CTA. So, it’s something quite common. Karel Zoete Okay. Thanks for that. Many thanks. Operator Thank you for your questions sir. Ladies and gentlemen that will conclude today’s question-and-answer session. I would like to turn the call back over to Mr. Gustavo Calvo Paz for any additional or closing remarks. Thank you. Gustavo Paz Alright. Thank you very much for your questions, which I hope we have addressed properly and for your support. That means a lot to me. Let me leave you with a final remark. The teams behind these results are working very hard day-by-day. And the quarter-on-quarter sustainable success are giving them huge energy and hunger for more. So, have a good day and a wonderful summer. Thank you. Operator Thank you very much. Ladies and gentlemen that will conclude today’s presentation. Thanks for your attendance. You may now disconnect. Have a good day and goodbye.

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