Intercos Aktie

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining Intercos First Quarter 2026 Financial Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Renato Semerari, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good evening, everyone, and thanks for connecting to our earnings call. We'll present you our Q1, which as expected and communicated was difficult due to a convergence of negative factors. First of all, the currency headwinds; second, the continued reduction of packaging component in our top line; third, the softer reorder trend post summer 2025, which impacted Q1 invoicing, which was ahead of the orders peak at the end of the year, which will impact Q2 onwards. All this on a high comp basis. In fact, last year, in quarter 1, we grew 13%. going to the specific results, sales were down minus 6% at constant rates.

Adjusted EBITDA margin stood at 11%, which was 66 basis points below a year ago. And this drop of marginality was entirely due to fixed cost absorption. Conversely, the quarter was extremely positive in terms of cash which was positive by EUR 7 million despite EUR 25 million of shares buyback and EUR 19 million of dividends distributed. Last but not least, it's very important to note that in the past 6 months, we had an order entry in double-digit growth. So very, very solid for the order entry. Looking in more details at our sales development at current rates, Make-up and starting with BUs, Make-up, which represented 65% of sales, was the segment that held the best, as already seen in 2025.

Sales were down 5% on a very high base of last year, which grew 23%, considering the headwinds in currencies and the pack sales reduction, we were effectively flat. Emerging brands performed well, but offset by multinationals, whose order entry has recently accelerated in a very visible manner. Prestige brands performed well, while mass declined. Moving to Skincare, which represented 13% of total sales. We continued to suffer. We posted minus 17% and mainly due to the Western emerging brands, while Asia continued to perform well in this segment. We expect a comeback in the second half of 2026.

Hair & Body, which was 21% of our total sales, also posted a double-digit decline, minus 16%, mostly due to fragrances, which, as you know, did not have the benefit of significant launches in the past months. Despite we remain focused on innovation as witnessed by the recent Hair Care Award for innovation, which we got during Cosmoprof this year. We also see a forecast for fragrances that is very solid for the remaining part of the year. So we expect to come back very strongly in this segment as well.

Moving to the results by geographic regions. EMEA, which was 52% of total sales, was down 8.5%. I'm always referring to current rates. Make-up, positive growth in the region, but this was offset by the negative trend of Hair & Body and Skincare. We expect an immediate rebound of the region as the order intake from November onwards was extremely strong for the region, and we now have an order book, which is the strongest ever for this region. As for Americas, representing 28% of our sales. Quarter 1 posted a decline of 8.8%. The region was obviously very much impacted by the dollar devaluation in the region, Make-up was broadly flat, but results were affected by Skincare where our lack of manufacturing sites is penalizing in the current tariff environment. Also for this region, order entry has been extremely strong in the past 6 months.

Asia, which was 20% of our sales, was down 12% on a very high base of last year. Last year, we were at plus 18%. And also in this case, ForEx accounted for more than 50% of the decline and we saw Skincare doing well in the first quarter, but this was offset by Make-up.

Moving to the customer type. Multinationals, representing 50% of our sales posted a 13% decline on last year, very high base. Last year, we grew 28% in quarter 1. All the views suffered in this cluster of clients. However, the order entry trend highlights the comeback of multinationals in the rest of the year. Emerging brands, which were 45% of our total sales remained overall stable at current rates and quite positive at constant rates. Important to note that we registered a recovery of U.S. brands after the soft 2025. Retailers, which only weigh at 5% on our total sales also posted a double-digit decline closing first quarter at minus 25%. The results was entirely driven by the Western retailers while the Asian ones were positive.

Now looking forward, let's talk about the months ahead of us. First of all, we remain optimistic about the beauty market trend overall. The signs of a progressive comeback to the historical trends of beauty are getting confirmations in the first months of 2026. Both U.S. and China are coming back and Europe is holding quite well. So we expect the market to grow between 4% and 5% in the year. So far Make-up is the less dynamic segment, but we think it will progressively accelerate in the rest of the year. Obviously, the darkest cloud in the coming months is the Middle East crisis with the connected energy impacts should the crisis continue on a longer period. For what concerns Intercos, we remain confident to beat market trend despite our slow start in the year, and there are three factors that are backing our confidence.

First of all, the past 6 months order entry is a double-digit growth versus a year ago. And the order book we have in our hands is also double-digit up versus year ago. Second, last year launches are getting strong consumer response in the market, and this should sustain reorders going forward. Third, the new collection of innovation presented at Cosmoprof in over 300 meetings got enthusiastic response from clients, including Hair Care, where we won, as I just said, the Cosmoprof Innovation Award. As such, we confirm our guidance for the year expecting net revenues to grow by about 5%, 6% versus fiscal year 2025.

Thank you very much. I'm ready to get your questions.

[Operator Instructions] The first question is from Andrei Condrea of UBS.

Two for me, please. On your 2026 outlook, you talked about sales increasing 5% to 6%. But looking at your EBITDA expectations for the year, what are you seeing in terms of input costs currently? And what tools do you have at your disposal to mitigate these effects? And tied to this, what does this mean for pricing looking for the -- looking at the remainder of the year? And secondly, you mentioned in Q1 was held back by increased lead times in your orders. Could you perhaps quantify this impact? And how -- what benefits will this have on your Q2 numbers?

Thank you, Andrei, for your questions. Yes, our outlook is 5% to 6%. Now as you know, we do not give guidance on EBITDA terms, although we give a general guidance that if normal conditions are around, we expect leverage from volume, leading to about 50 basis points of improvement year-on-year. But this is an average of what can happen. Now in terms of cost and pricing, for the time being, we are seeing increases in terms of logistic costs, and we have communicated to clients that we are passing energy surcharges to them at the end of each month based on the actual cost increase of this logistic costs.

So we are doing everything to neutralize cost related to logistics, which I remind you are pretty limited in our P&L because it's about 2.5% of our sales because we work mostly in a next work environment. So this means that we do not have effectively outbound logistic costs while we have an inbound costs. Sorry, I said 2.5% of sales, I'm wrong, it's 2.5% of COGS which is a bit different.

So logistics is the #1 factor for the time being. In terms of utilities that are even lower than logistic cost in terms of impact in our P&L. In reality, we work with fixed rates for 2026. So we will have an impact of higher energy costs only if the current crisis goes on to 2027, we will not get an effect in 2026. I hope I've answered to your first question.

Second one was about lead times increasing. For the time being, we are not seeing anything significant in terms of lead times of productions and deliveries. This may come if the crisis goes on for a long period. But for the time being, we're not seeing that very much. Now the rebound, the peak of order increase started in November, December. So it's quite normal based on the current lead times, especially in the western part of the world that this impacts Q2 onwards. So if we are confirming the guidance as we are, it means that we expect in the quarters to come a pretty solid growth, high single digit to double digit going forward. And this is, as I said, backed by a very, very rich order portfolio that we have in our hands.

The next question is from Anna Frontani of Berenberg.

I have two questions. One relates to the order intake. If you can please give us a little bit more color, maybe on the composition of the strong order intake that you are seeing? And maybe the split between reorders and new project launches. And then the second one, I've seen the announcement of the CFO changing. If you can please give us some more context around that.

So Anna, thanks a lot for your questions. compositions of order intake. Well, first of all, keep seeing Make-up being the main lead of this order intake. So we see a lot of traction in Make-up. We see it in Europe, we see it in U.S. We are seeing also movements in the positive direction from Asia, but Western prestige brands in Make-up are the, let's say, the leading factor so far and what we are getting in terms of orders. I also want to -- as I said, I think I said it, but I will repeat it in case. Also, the forecast for Hair & Body and especially fragrances, which is not part, as you well know, of our order entry because it goes in a rolling forecast model. But the forecast we are seeing is very strong also for that part of the business.

So I really see Make-up and Hair & Body picking up the fastest. Skincare, I think, is going to be more of a second-semester game. In terms of the orders versus new initiatives, we see more new initiatives than reorders at the moment. You know that in general, we are about 70-30. Reorder, 70%, and new initiatives, 30%. We are now at 65-35, which I always take it as a good sign for the time being for the simple reason that with beauty market and so, and consumption increasing progressively in the course of the year, we will see -- we should see progressively reorders being up as well.

And also second point is, obviously, whenever we see a lot of new initiatives, that is a good sign for the year but also for the years to come. So I'm always very happy when I see orders being led by new projects.

I think I've answered to your first question. Second question is the CFO change. Yes, that is, unfortunately, we are again back to square one, not something we are happy about. I can obviously not disclose the reasons because they are mainly personal. So I don't think it's appropriate for me to speak about that. The only thing I can say is that we have a very strong team under the CFO. Our team is very well structured. So I don't see -- I'm not -- I'm sleeping well at night despite this -- again, this change in the role. That's all I can say about it.

The next question is from Molly Wylenzek of Jefferies.

I'm hearing the Intercos results this evening. I just want to take a step back and bigger picture on the acceleration, particularly that we're seeing in Make-up. A lot of the brands that are ordering from you started to talk about massive pushes on innovation nearly 2 years ago. Is this just a sort of a delayed proof of that happening? And why has it taken so long? Or do you think it's another reason?

Molly, nice to see you back. Well, in general, as you know, because I've said it several times, brands tend to accelerate on innovation when the market conditions get tougher. So last year, everybody got very much into it, I would say, in the past 18 months, everybody got more active into new projects. The lead times, though, from the moment you start working on a new project to the moment it gets to market remains, especially for multinationals rather long. So it's -- you're talking 18 months on average, then there are initiatives that are a bit faster than that, but there are also that are longer than that. So it's -- I would say, it's quite a normal lag that is leading to the situation we are seeing today. I don't see anything unusual in that front.

Asia is faster usually. We've seen a lot of growth coming from the local Chinese brands, very much led by almost a frenetic, frantic attention and activity in terms of innovation. We are now in a phase where Western brands and Prestige is regaining a bit of weight. You're certainly seeing that in L'Oréal and Lauder as well, and that is what we are seeing in the market. So I expect that there will be new waves of innovation coming also from the Chinese brands. Obviously, we need to see what happens mid-June with the 618 event to see how bold are they going to be or not. So we'll see. But nothing unusual in terms of initiatives, lead times, I would say.

The next question is from Tilly Eno of Morgan Stanley.

My first question, I think you may have sort of already answered given you said the orders are skewing towards new orders. But just on your comment in terms of multinationals and Make-up with a recent sharp increase in order intake, is that a very recent comment, perhaps to ensure supply security, or is that -- as you said, over the last 6 months, you've just been seeing that improvement in pickup.

And then just my second question on Hair & Body. You mentioned some new innovative products doing very well at Cosmoprof. At the time of full year results, you were saying that division was probably flat or maybe slightly up on the full year. Have your expectations for that division actually improved since then, would you say?

Okay. Thank you, Tilly, for your questions. First of all, no. Honestly, I don't think we are seeing any orders intake increase, which is related to supply security, not seen that happening. I'm obviously talking on a broader scale. You may have one that is building up a bit of inventory to be safer for the months to come. But generally speaking, this is not a trend we've seen. Otherwise, I would have given you different percentages in terms of order intake, you would have seen higher reorders and lower new initiatives in percentages than what we're seeing.

I think that what you're seeing is the, let's say, the funnel of innovation started by multinationals taking longer to get to fruition, gives a peak in new initiatives for multinationals coming now.

So in reality, I think that going forward, we could expect a pickup in reorders that in general, because of consumption going up. For the time being, I don't think that we are yet in a position where you need to build inventories to build safety in your supply chain. I mean, the situation is too volatile for the time being. There is still a good chunk of expectation that this will not last for too long. The messages from the suppliers in terms of supply, it's quite reassuring. So there isn't a race to build up, there is no forecast of scarcity for the time being. So I don't think that the majority of clients are reacting to any of that for the time being.

Hair & Body, well, Hair & Body results are going to be influenced mostly from contract manufacturing. So we are super happy about the award we won in Hair Care at Cosmoprof, more than for the numbers it generates in the short term because it's a sign that we are learning. Our R&D is learning, and we are doing well in terms of innovation process. So that is a good sign for the future and for the direction we have taken with our innovation teams. It will still be quite marginal, the innovation part in Hair & Body is going to be maximum 10% so far, I would say. So the contract manufacturing still has the lion's share of that division. Fragrance is an important chunk of it, and the forecast that we're seeing from different clients in fragrances being very robust for the rest of the year. And as you've certainly seen, and you've seen L'Oréal talking about that and the other players and Puig about that.

Fragrance market continues to do well. So forecast in terms of products, demand remains solid. So I'm pretty confident that we will do better than what I -- that I had anticipated at the beginning of the year in Hair & Body, I think that we could be in the region of mid-single digit going forward.

The next question is from Francesco Brilli of Intermonte.

A couple of questions from my side. The first one is on the U.S. market. If you can provide us some additional color on the current behavior of brands and retailers in terms of innovation launches, replenishment activities and the situation of inventory there. And if you think the current environment can accelerate in the next quarter? And I was wondering the -- following up on the -- what you mentioned that you can serve local for local, if this can be a factor that could accelerate in the coming quarters, the M&A scouting there?

The second one is on margin progression this year. I mean, we appreciate that you have under-absorption in first quarter, but should we expect margins to progressively normalize already from second quarter? Or is it more skewed to the second half of the year?

And the last one, if I may, if you can provide some color on the cash generation you have in mind for the full year for this year.

Sorry, I'm noting down. Otherwise, I forget that. I'm an old guy. I'm sorry. I don't want to forget any of the questions you're making. So U.S. market, in general, we are seeing U.S. market progressively improving. As you know, we have gone through 18 months more or less of a quite soft market. It's not booming yet or actually is doing very well in terms of retail sales but because there is a quite important pricing component, which I think is the direct consequence of the tariffs. So from a volume standpoint, we are seeing growth that is in the region of 3% growth for the market, which is good, it's way better than what it was a year ago. So I don't see a situation where brands are having a high level of inventory.

I think that what retailers will do is what they always do, which is they keep a coverage in weeks terms. So the higher the consumption they see, the higher the stock they will build because they will want to keep their 4 weeks, 5 weeks, 6 weeks of stock depending on the retailer and depending on the category and the brand. So I do not see -- actually, I see progressive benefit from the end demand we are seeing at the moment. Brands are active in terms of innovation. They've been active all along 2025, not visible to you, not visible to the market because they were working on that with us and not only with us, unfortunately. They are coming to market now.

So when you hear L'Oréal or Lauder talking about very strong innovations coming in now is because they started, as I said, 18 months ago on average. So the activity is going to be -- to the benefit of the whole category, usually a high innovation pace, it's instrumental to boost the consumption in the market because, again, it's an impulse-driven category, so new things means more people attention -- paying attention to these new products, more movement in terms of end consumption. So all this is going in the right direction going forward.

M&A, yes, the local for local in Skincare is very important. We spoke about that last year. This year, we are confirming that. It's very important. We keep on being very close to the market and to the different opportunities that are there. Unfortunately, the results, globally speaking, for the potential targets in 2025, especially those that are private equity owned were not in line with the expectations they had. So they are taking longer to get to an exit.

We keep monitoring. We keep staying very close we keep chasing certain targets that are not on the market. We'll see. Again, I will repeat myself, I'm sorry for that. I think that the -- my anxiety is related to the multiples, that, as you know, in U.S. are way higher than the ones we are seeing for listed companies in Europe. So I hope that when we will get to work on something tangible, there won't be too much of a gap between our multiple and the one of the targets we're looking at. So we'll see. We -- the one thing I can grant to you is that we are very on this -- very much on this, then it happens or not, I don't know. It's not only on us, as you well know.

Margin progression, okay, margin progression for the rest of the year. Well, as I said, in Q1, there's nothing worrying in terms of marginality. There is only a mathematical consequence of a lower volume, lower net sales and therefore, absorption of fixed cost that has had the 66 basis points impact on marginality. Since we are expecting, as you can easily do the math on a much better top line in the quarters to come, you will see a much better absorption of fixed cost going forward. So yes, I do expect margins to go up in the remainder of the year. Aside from the fact that Q1 is always the lowest in every single year from a seasonality standpoint, it's the lower sales and the lower EBITDA of the year. But also in terms of year-on-year improvement, we will see a benefit going forward from a much richer top line. Cash generation, I'll leave it to my expert on the left side of my...

Francesco, we don't guide on the net debt. But all in all, if you look at the consensus, there is a net debt, which is pretty much stable compared to the 31st December 2025, which is a number that makes sense in our view, and that includes, of course, dividend distribution for EUR 19 million and approximately EUR 30 million of buyback that we want to close by the end of this year.

The next question is from Paola Carboni of Equita.

I have a few questions. The first one is a bit of a high-level question about your top line growth. So just to understand how do you look at the current phase of reacceleration, especially in Make-up to understand whether -- I mean what kind of, let's say, sustainable growth base is behind that? And to what extent is, let's say, revival of innovation, which is the consequence of the last few years, very difficult for the sector? I don't know if it's something we can discuss at the moment.

Second point is still about profitability. Just if you can recap with us the several moving parts, especially in terms of mix. So you mentioned good prestige component in your order backlog. I wanted to be sure whether I got it right. But also if you comment -- if you can comment still about the order backlog in terms of how we should look at the packaging component incidents going forward? And to what extent, let's say, what you are seeing with a better top line overall, but also possibly greater contribution of Hair & Body and in terms of efficiencies, if you are possibly delivering more than you expect. So without the guidance but still compared to your initial ambitions for the year. What are you seeing at this point?

Sure. Paola, thanks for your questions. First of all, innovation, I think there is a mix of elements in terms of innovation. Number one is certainly the need of brands in a difficult market conditions to grab consumers' attention with new products, new ideas and all that. That is a process that started, as I said, months back coming to market now, but it's something that we are still seeing. So a lot of activity going on as we speak. So I think that, that will be sustainable. And then maybe not always visible in percentages term because then they will generate reorders and all that. So one is structural. The second is an extra add-on to that, which is related to reformulations that are linked to either regulatory needs or public opinion requirements.

Let me try to explain that. Let me do it in a simple way. Talc, as you know, talc has become like poison for everybody. So there are a number of important brands, important companies, especially for U.S. that are running away from powders with talc, and this generates a lot of innovation to relaunch brands and products without talc. So this comes on top of what a brand would normally do to gain market share. It's more of a defensive move that they're trying to play at their advantage by selling it as a total relaunch of product lines so there are these 2 factors that are coming into play.

The second one will likely come to end, but this will take a while because it's not only talc, there are a number of moving parts, silicones, microplastics. There is a lot going on. I always said that this is a devil but also an angel for us because it brings a lot of complexity, but it puts under the spotlight, our superiority in innovation because we -- it's difficult to formulate well without these ingredients and it's difficult for the smaller competitors to be good at that. So it gives us a competitive advantage that I think is sustainable. So I think there is a big chunk of this innovation spring that is sustainable.

There is another part, which is, let's say, more short term. But when I say short term, it's not your short term, is at least a couple of years. I know that whenever I say short term to you, you take the quarter. I take 2 years. So that is probably going to calm down in 3, 4 years' time. I hope I've answered your questions. Can you confirm?

Yes. The first one, yes, absolutely. And then the second one was...

I know, that's why I wrote it down. I just wanted to make sure that I understood well your first question. Second question was about the profitability, the mix and all that. So what we see in our order book is, as I said, a very rich order book that is especially rich in Make-up. So we expect Make-up to be strong. This usually is a good mix. We also see Prestige being better than mass market. And this is also usually a good sign in terms of mix for marginality.

Then on the other side, I think that quarter 1 of this year saw the lowest level of PAC as part of our top line. We said that we were expecting 2026 on average to be in line with 2025 in terms of PAC percentage on total sales. This means that in the following quarters, we will see a little bit of rebalancing of what we've seen in quarter 1. Nothing dramatic, but a little bit of rebalancing, we will see.

Also because, as I said, we're seeing Hair & Body and especially Fragrances forecast being strong for the remainder of the year, and that will bring a little bit more of packaging components into it. So sorry, in terms of mix on the other side, what I just said of Hair & Body being a bit stronger will be a bit of an offsetting element versus what I just said about Make-up. All in all, I don't expect mix to be a factor. We expect after the very strong gains of last year to have more of a stability of marginality in the course of 2026 which is basically what we told you when we closed 2025.

And what about your efficiencies? If you can comment on that. I mean...

Yes. No, the projects on efficiencies are going well. Everything is tracking exactly in line with what we were expecting. Obviously, we are at the very beginning of the year. So we need to make sure that when the ramp-up of volumes will happen, we will be cashing in exactly what we are targeting. We have no negative signs so far, but we are not seeing either further benefits on top of what we had budgeted for. So all in all, we are tracking well, and we will see in the coming quarters if this gets confirmed. No flags at the moment.

[Operator Instructions] Mr. Semerari, there are no more questions registered at this time.

Thank you very much. Thank you, everybody. Thank you. Bye.

Thank you.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Intercos Group Full Year 2025 Financial Results Conference Call. As a reminder, all participants are in listen-only mode. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Renato Semerari, Chief Executive Officer of Intercos Group. Please go ahead, sir.

Thank you very much. Good afternoon, everyone. Thanks for attending our fiscal year '25 earnings call. In a year, once more marked by severe geopolitical tensions, which have created significant uncertainties and a visible softness in global beauty consumption, Intercos has decided to focus its efforts on the recovery of the profitability loss during the last 3 years of strong top line growth. This called for an overall reduction of sales with packaging component and the focalization on the BUs centered around innovation. I'm glad to note that our efforts were successful and paid the expected dividends. However, top line was further hampered by currencies headwinds on top of the overall market softness.

Let's see an overview of our results. Top line ended the year at EUR 1.047 billion, overall flat at constant rates and slightly down at current rates. To note, the value-added sales, which I remind you are net sales minus packaging expenses grew by 1.5% at constant rates, reflecting the mentioned reduction in pack sales. Gross profit conversely increased by 151 basis points, thanks to better mix and productivity gains as well as procurement efficiencies. Adjusted EBITDA grew by plus 9% to EUR 156 million, with margin at 14.9% and 143 basis points over last year. EBITDA on value-added sales reached 19.2%, marking a plus 165 basis points of gain over a year ago. Adjusted net income was also up and net debt improved this ratio on EBITDA at 0.64x EBITDA with a cash conversion rate of 47%. This in a year of high CapEx expenditure due to plants expansion plans and shares buyback program. We will propose to the assembly of shareholders a dividend distribution of EUR 19 million, in line with our dividend distribution policy.

Moving to see the key components of our performance versus a year ago at top and bottom line level. I will start from the top line. So last year, we closed fiscal '24 at EUR 1.065 billion. From this level, we had a negative 2% drop due to currencies. Another 1% drop was linked to lower pack sales and this was more than offset by the value-added sales gains leading up to the EUR 1.047 billion, I mentioned earlier. On EBITDA, we started from EUR 143 million last year. We had a EUR 2.5 million negative impact from currencies and then margin improvement brought EUR 13 million more and another EUR 2 million came from higher sales at constant rates.

So relooking at our key numbers, top line was at plus 0.3% at constant foreign exchange and minus 1.7% at current rates. Value-added sales were up 1.5% at constant rates and minus 0.5% at current rates. EBITDA grew by 8.8% with 14.9% margin, up 143 basis points. As said before, EBITDA margin on value-added sales at 19.2% was our best-ever results and 165 basis points gain versus year ago. Net income at 5.5% of sales was up 20 basis points versus a year ago and net debt was up by only EUR 3 million despite EUR 4 million of CapEx more than a year ago, EUR 13 million of shares bought back and EUR 19 million of dividends.

We go to these results through Q4, which was difficult from a top line standpoint due to the high base of 2024 when we grew in quarter 4 by plus 15%. The peak of currency headwinds in the quarter, pack sales contraction and low reorders, reflecting the long-lasting market softness we had experienced throughout the year.

Looking at top line results in more details and starting -- looking at the results by business units, Make-up closed the fiscal with a plus 6% growth at current rates despite a slightly negative Q4. Growth was well above the market trend thus allowing us to consolidate our global leadership in the category. All regions posted growth with Asia and EMEA, particularly strong. Multinationals were the key engine of growth, particularly thanks to Prestige brands.

Skincare conversely marked a mid-single-digit decline after 2 years of strong growth. I remind you that the CAGR of the 3 years was a plus 13%. The unit paid a toll not only to ForEx exchange headwinds, but also to U.S. tariffs that made us suffer in U.S. In fact, we posted growth in both Asia and EMEA, but decline in U.S. was more than offsetting those gains. And this is due to the fact that we lack local manufacturing for Skincare, as you certainly know.

Hair & Body registered a double-digit decline following 2 exceptional years, which had a CAGR of 30% and the results were impacted by the lower sales with packaging, but more than anything else, the far less important fragrance launches of 2025 versus 2024. Q4 was particularly difficult since last year we had registered a plus 40% growth in the quarter. In terms of sales weight, we saw a shift of 4 percentage points from Hair & Body to Make-up, which obviously helped the mix and helped the profitability of the company.

Looking at the geographical trends, Asia confirmed its role of growth engine of the group posting a plus 6% despite very negative currency effects in both China and Korea. Both countries delivered high single-digit growth at constant rates after years of double-digit results. Make-up and Skincare were both growing with Make-up at a faster pace. Also, Q4 was positive at constant rates. As for America, America was overall flat at current rates, but positive at constant rates. FX impacted was particularly heavy on Q4. The region performance traced to strong Make-up results offset by Skincare, as already mentioned. EMEA overall results were instead impacted by Hair & Body decline. The growth registered by Make-up and Skincare could not completely offset the Hair & Body decline, especially in quarter 4.

Looking at the results by client clusters. After years of growth led by emerging brands, 2025 saw the comeback of multinationals getting back to a bit less than 50% of our total sales. So multinationals posted a double-digit growth at constant rates or plus 9% at current rates with both Make-up and Skincare on a growing trend, although the growth was more pronounced in Make-up. All regions were up for this cluster of clients with Q4 broadly flat. Emerging brands posted a double-digit decline after several years of accelerated growth. Performance was still positive in Asia, but the cluster paid a heavy toll from the Hair & Body in EMEA. As for retailers that represent a limited weight on our total sales, we saw a comeback to a low single-digit growth, mainly thanks to European retailers.

I now pass the stage to Paola, our CFO, to go deeper into the financial results.

Thank you, Renato. Good evening, everybody. Let me walk you through our fiscal year '25 results. As mentioned, in 2025, net sales reached EUR 1.047 billion. On a constant currency basis, sales were slightly up by 0.3%, while on a reported basis, they declined by 1.7%, mainly due to the significant appreciation of the euro against the U.S. dollar, the Chinese Renminbi and the Korean won. More importantly, we materially improved the quality of our revenues. The higher mix of Prestige and free-issue sales resulted in lower reported revenues, but significantly stronger profitability.

Gross margin increased to 21%, up plus 151 basis points versus last year. Adjusted EBITDA reached EUR 156 million up plus 8.8% year-on-year or plus EUR 12.6 million. EBITDA margin improved to 14.9% of net sales, up plus 143 basis points. On value-added sales, EBITDA reached 19.2%, up 165 basis points, fully recovering the lower profitability reported in the past 3 years. This margin recovery was not driven by cost cutting, but by structural improvements in gross margin, better sales mix, operational efficiency and sourcing initiatives.

Adjusted net income amounted to EUR 57.4 million, growing 1.3% versus the previous year. The EBITDA improvement was partially offset by higher depreciation and higher financial expenses, largely driven by the exchange rate impact, both realized and unrealized, already visible in H1 of 2025. The effective tax rate improved to below 32% versus last year. And finally, net debt stood at EUR 100.5 million, broadly in line with last year despite EUR 19 million in dividends and EUR 13.1 million in share buyback program. This thanks to a strong cash generation capability.

Financial leverage further decreased to 0.64x net debt to adjusted EBITDA from 0.68 in the previous year, confirming the strength of our balance sheet. Overall, 2025 demonstrates a clear structural improvement in profitability and financial discipline, at the same time, consolidating the strong increase in sales reported over the last years.

Moving to the profitability by business unit. Make-up delivered outstanding performance. Adjusted EBITDA increased from EUR 83 million to EUR 107 million, up 29%. The EBITDA margin expanded by 293 basis points to 16.3%. Growth was consistent across all quarters with second half margins reaching 18%. This reflects operational efficiencies, stronger Prestige mix and lower share of full service sales. Skincare also improved profitability. Adjusted EBITDA increased to EUR 27 million, up 7% year-on-year, with EBITDA margin reaching 16.8%. The improvement was driven by Prestige customers in EMEA and Asia. Hair & Body, as anticipated, experienced a decline. EBITDA decreased to EUR 21.9 million down EUR 13 million year-on-year, reflecting lower revenues and reduced the fixed cost absorption after an exceptionally strong 2024.

Consequently, at group level, adjusted EBITDA increased to EUR 156 million, with margin expansion across Make-up and Skincare more than offsetting the Hair & Body normalization. This confirms that our core business Make-up is structurally strengthening its profitability profile.

Moving now to cash flow and balance sheet. Operating cash flow reached EUR 73.5 million, up EUR 16.4 million versus last year, which represents a strong increase. The improvement was driven by higher EBITDA by EUR 12.6 million and by a very effective trade working capital management following the evolution of the sales. The above results includes a CapEx increase to nearly EUR 75 million representing now 7.2% of our sales and EUR 4 million higher CapEx versus previous year, reflecting the group's expansion projects, particularly in Asia. Cash flow before dividends and buyback was positive at EUR 29.4 million, significantly up year-on-year plus 43%.

The group managed to absorb EUR 32.1 million of shareholder remuneration in the share buyback program while keeping net debt broadly stable versus the previous year at EUR 100.5 million. Leverage ratio further improved to 0.64x net debt to EBITDA, excluding IFRS 16, net debt stands at EUR 62.2 million. Cash conversion reached 47% after CapEx and approximately 95% before CapEx, confirming the strong cash generation capability of the business. I would like to also highlight the ROIC improvement to 14.3% from 13.3% last year.

Overall, we combined profitability growth, strategic investments and shareholder remuneration, while maintaining a very solid financial structure in a difficult market environment. Back now to our CEO, Renato Semerari.

Thank you, Paola. So looking forward now, we entered the year with confidence about the beauty come back to its historical growth base. Our view was comforted by the good results of Q4 in China and some early signs of recovery in U.S. Also, in November, December, we registered our new record of orders intake signaling that consumption and reorders are picking up again. We hope that last weekend news won't put new clouds on the overall economy and on beauty, but we are quite confident about the year 2026.

As far as Intercos is concerned, after a year focused on profitability recovery, we entered 2026, determined to get back to a more solid growth pace despite currency headwinds. Leveraging our innovation superiority. We want to keep consolidating our leadership in Make-up and get back to growth on Skincare. We expect growth to be skewed to the second part of the year, starting quarter 2, 2026.

So in terms of outlook for the year, we expect a growth of about plus 5%, plus 6% despite the currency headwinds.

I think that with this, we have closed our remarks and we are ready to get your questions. Thank you.

[Operator Instructions] The first question is from Andrei Condrea of UBS.

[Foreign Language] Two for me, please. So obviously, on 2026 sales, you're guiding for an increase of 5% to 6% in reported terms, but in constant FX, how much do you expect that growth to be? And you've mentioned that you want Skincare to return to growth. What about the other categories? How do you see them accelerating through the year? And tied to that, you expect growth to be weighted towards the second half as well as Q2. For Q1, does that mean that it will likely be flat, maybe slightly positive?

And my second question on EBITDA, I've noticed you've not guided on it. But just in terms of moving parts, you're not going to see as big of a benefit from lower full-service sales. We've got efficiencies still coming through the business. Is it fair to assume your margin will be at least flat? [Foreign Language]

Thank you, Andrei. Yes, 2026 guidance we're giving is around 5%, 6% growth. That would mean at constant rates will be in the range of 7% -- so it's about 1 point something to translate in constant rates. Obviously, we'll need to see because there's moving parts. But when we look at our forecast and looking at the bank forecast, this should be the gap between current and constant rates.

In terms of growth, I told that we want to come back to growth in Skincare. But I also said that we want to consolidate our leadership in Make-up. So we want to have growth also in Make-up, and we want to have it above the market, which will likely be in the region of plus 4% if things go as we expect. We believe Hair & Body will be more or less in line with this year, maybe some slight improvements, but it won't be the major driver of growth also for 2026. We expect Q1 to be certainly softer than the other quarters. We had the peak of order intake, which marked a bit of change of direction in terms of reorders.

Something I didn't mention during my remarks is the fact that in 2025, our sales of new projects was positive. We suffered more in terms of reorders. So the fact that we peaked in terms of order intake at the very end of the fiscal '25 means that we will have an impact starting Q2 of 2026.

As you said, and that's the last point, I think you touched upon in terms of marginality for 2026, yes, we expect it to be slightly improving, but it's not certainly going to be anything like this year, which, to be honest, we did better than we had expected at the beginning. So we think that we will consolidate our marginality of this year and get back to growth in top line. I hope I've answered all your questions.

The next question is from Aron Adamski of Goldman Sachs.

Renato, Paola, Andrea. I have 2. First, on inventories. What is your assessment of the current inventory levels at the customer level? And do you expect to see any destocking through the year? And if that is the case, which categories could be more impacted by that? My second question is on your balance sheet, which gives you a decent amount of capital allocation and flexibility. Could you update us on your current M&A priorities by geography and maybe category? And if you could, what is the current M&A landscape out there right now? And maybe just a third last small question, what level of finance costs and tax rate do you forecast for 2026?

Thank you very much, Aron. Inventory of our customers. Well, that is -- as you well know, it's a moving target in the sense that if consumption goes up, then they will need to go up as well in their inventory because everybody measures it in terms of weeks on end. We don't think there is a phenomenon of high stocks at the moment. We're coming out of I would say, at least 18 months of softer than usual market. So I think that everybody has adjusted its inventory to the current situation. So I'm rather expecting help from that element in the second half of the year. If consumption, as I expect, comes up in the coming months, then they should adjust upwards their inventory policy.

So I don't expect negatives from that standpoint, I rather expect some good news in the second half of the year. Second question is related to our capability, possibility to do M&A, given our solid financial situation. Well, I've said it more than once, our #1 objective in terms of M&A is Skincare in U.S. and even more Skincare with an OTC, so SPF focus. We suffered this year in U.S. in Skincare. Otherwise, we would have been positive also in Skincare in 2025. Because not having a manufacturing site for Skincare in the U.S., the tariff game made us be not competitive or not competitive enough to serve U.S. customers out of Europe or Asia. So that remains our #1 objective.

We are proactively scouting, see if -- we have a list of -- a very precise list actually of targets, we would like to study and possibly acquire. Unfortunately, for the moment, it doesn't look there are many sellers, to be honest, because most of those who were bought by private equity are willing to wait a bit longer to get the results that we're expecting with their exit. Everybody is paying a little bit the softness of the market. So the results are not up to what the expectations were. And therefore, they are holding their shares for a bit longer. I hope again that in the second semester of the year, there will be new openings, and we will be certainly very active on that front. For the tax rate, I will past to -- I don't like paying taxes in general, but I know that we have to. So I pass it to Paola and Andrea.

As we said, we closed the year 2025 slightly below 32% at 31.9%. So the plan for next is to stay definitely below that. So most likely further improvement. So I would say around 31%, something like this.

I hope we've answered your questions, Aron.

Yes. That's very clear. And can I just ask a very quick follow-up on guidance. On the first question, can you give us a sense of what sort of beauty market growth rate underpins your sales forecast? Because it sounds to be a little bit above what we are hearing compared to what the current beauty market run rate is right now. So I was just trying to bridge some of that very strong growth versus where we are seeing beauty markets right now.

And you're right, Aron. The -- we are willing to grow faster than the market. The market will likely be around 4%. We want to grow a bit higher than the market and especially on the innovation-focused categories, we want to be ahead of market. So that's why our guidance is higher than what you have in terms of outlook for the market.

The next question is from Tom Randall of Jefferies.

I've just got one, if that's okay, and it's on the Make-up kind of recovery that we're seeing. So you mentioned it's Make-up outperforming within your portfolio. Are we seeing kind of a step-up in innovation and the cadence of innovation and launches from your clients? And is that skewing towards Prestige kind of innovation briefs?

Tom, thanks for your question. Well, you're right. I mean -- and it's very typical whenever you have the market being softer, the brands need to rely on innovation to gain market share and sustain top line. Let's always remember this is a market where brands enjoy, I would say, a healthy over 70% gross margin. So pushing top line is, by far, the #1 priority for brands. So whenever the market is lower, actually, the more the market is soft, the more brands look for innovation to sustain sales. And this is true across the board. It's valid for Mass but it's -- and for Prestige.

For what Intercos is concerned, Prestige has been the hero for us in 2025. We expect and we want it to be the case also for 2026. This is our nature. We tend to sell innovative products that are first and foremost, appealing to Prestige brands, while usually Mass brands tend to rely on what has been successful in Prestige before launching and going ahead. So in Make-up, we have always been slightly skewed to prestige. And this year, it's not a let's say, an exception to this. To the contrary, this year, we grew much better in Prestige than in Mass. Did I answer your question, Tom?

That's very helpful.

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

Thank you very much. Thank you.

Thank you. Bye.

Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Intercos 9 Months 2025 Financial Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Renato Semerari, CEO of Intercos. Please go ahead, sir.

Thank you very much. Good evening, everybody, and thanks for joining our call. In a global market that has continued to display softer-than-normal trends, especially in volume terms and especially in the U.S. market, Intercos kept focusing on restoring profitability after 3 years of exceptional top line expansion with a CAGR of plus 16.5%, but with a margin dilution that was apparent in these 3 years.

This focus, if you move to my second slide, brought Intercos to achieve a 12% EBITDA growth in fiscal '25 year-to-date, resulting in a 143 basis points margin improvement. The macro blocks that led us to these results are a slightly positive volume component, a significant profitability improvement mainly due to productivity gains and a deliberate rebalancing of our sales mix that we will discuss in more details later.

And third, a negative ForEx exchange impact. All in all, we closed the 9 months with EUR 116 million and a 14.7% EBITDA margin.

Looking at results in a bit more details, in the year-to-date, sales were up by plus 2.9% at constant rates, thanks to the strong performance of our core color business, which was up 9%. Overall stability of Skincare and a market decline on the other hand of contract manufacturing and, therefore, our Hair & Body business unit.

Adjusted EBITDA growing double digit, as we just said, with all quarters of the year up substantially, thanks to a better BU mix. So with Make-up now over again the 60% bar and Hair & Body down, a lower weight of pack in sales, and this is a very important component, especially in the third quarter, a better mix within the BUs with Prestige growing faster than mass and productivity gains across the board.

Net debt, the leverage was stable versus last year at 0.86x EBITDA with an absolute value increase mainly driven by CapEx linked to our plant expansion plan, dividends and the share buyback program that we announced a few months back. In the third quarter of this year, sales were down by 2.7% at constant rates, mainly, if not exclusively tracing by decline of pack components of our top line, which, as I said earlier, was a deliberate choice and direction we took at the beginning of the year.

The EBITDA, despite the top line decline, was up 5.4% with an acceleration of the margin expansion at plus 161 basis points to 15.9% margin. This is our third quarter in a row of marked margin expansion.

Moving up the details of the sales component and starting with the view by business unit, Make-up is our best-performing business unit in the year with a plus 9% growth and over 60% of our sales. Multinationals are the key growth driver, both in Asia and in Europe. Prestige performing better than mass. In the third quarter, sales drop was essentially driven by foreign exchange and pack with also to keep in mind that last year base was pretty high since we grew 15% in the third quarter of last year.

Skincare in the year-to-date still shows a slight decline of minus 3%, all driven by the first quarter results. Asia and EMEA are both growing, while U.S. is suffering, also driven by tariff affecting particularly Switzerland, which, as you know, is affected by a 39% duty in coming to U.S. In the third quarter, we had a slight positive result, plus 2% despite the last base we had last year at plus 12%.

Hair & Body in the year-to-date shows a double-digit decline, mostly driven by fragrance and mostly driven again by the packaging component and a high base of last year. As you know, we had a very, very high growth across 2024.

Now looking at the picture by region, overall, the year-to-date shows and points to Asia as our key growth driver, plus 9% in 2025, while EMEA and U.S. are quite stable. Looking region by region, Europe a very consistent trend, pointing at stability, both in year-to-date and third quarter are at minus 1%. This is made up by Make-up and Skincare growing, but offset by the Hair & Body performance, which, as you know, is -- has a quite high impact on this region. Multinationals and especially the Prestige brands of multinationals are the best performers, both in the year-to-date and in the quarter.

Americas, a slight positive in the year-to-date, plus 1% despite the double-digit decline of the third quarter. Make-up is growing with Skincare offsetting here, again, ForEx has an important impact. But the overall soft performance of the market and our clients over the first semester had obviously an impact on reorders.

As for Asia, high single-digit growth in the year despite the very high base of last year at plus 29%. Both China and Korea keep displaying strong trends in the year. In the third quarter, which was highly impacted by negative currency trends, we recorded a slight decline on a high base of last year, which was 30% up in the quarter. And this was driven by a softer trend in Korea, while China kept growing at high single-digit rates.

Moving to the cluster of clients. 2025 is characterized by a consolidation of the emerging brands, mostly due to the performance of Hair & Body.

Multinationals in the year-to-date are growing at double-digit pace and regaining 50% weight on our total sales. Make-up is obviously the main driver of this comeback with strong results in all regions. Prestige was clearly the best performer. And also in third quarter, multinationals displayed growth.

Emerging brands, as said, saw a consolidation, which was mainly driven by Hair & Body and affected both in EMEA, especially EMEA, but also U.S. Asia saw conversely steady growth in both Make-up and Skincare for this cluster of clients. As for retailers, in the year-to-date, retailers displayed high single-digit growth after a difficult 2024. Hair & Body was good for this group of clients, although in the third quarter, we had negative results, mainly driven by new projects seasonality.

To conclude, in a year which has confirmed an overall softness of the market and that we believe is going to get back to normalized growth rates in 2026, Intercos has decided to focus efforts in restoring the marginality level lost during the past 3 years of accelerated top line expansion. Also, the team is executing the plan that is instrumental to the group future growth, both in terms of innovation with an acceleration of blue sky innovation led by the think tank, which is a multifunctional team devoted to this kind of disruptive innovation.

Manufacturing expansion that, as you know, has seen the expansion of our Korean and Chinese plants in 2024 as well as in terms of organization design. This is probably new to you, but we have decided and implemented new reporting lines for regional R&D meant to increase the autonomy and, therefore, improve our speed in responding to the regional emerging trends. In the meantime, we confirm our confidence in matching the current fiscal year '25 EBITDA consensus.

That's all on my side. I'm available for any questions you may have.

[Operator Instructions] The first question is from Anna Frontani from Berenberg.

I have 3 questions. The first one is on sales growth. If you are comfortable with 2025 sales growth of 3% to 4% at constant FX.

Second question. You've shifted the focus from top line expansion to profitability. I wonder how sustainable are the current margin levels once volumes will recover in 2026?

And the third question is on the U.S. Because you mentioned a rebound in '26, do you have a specific timing in mind? Should we expect a rebound more in the first half or maybe in the second half?

Thank you, Anna. So no, I don't think that we will match the 3%, 4% growth in the year at constant rates. I expect that there will be stable or a slight positive at the end of the year. And this is driven by the packaging component element that I mentioned to you earlier. So we took decisions at the beginning of the year that coupled with a market that is softer than we had expected because we were expecting a second semester rebound, which didn't happen, I think is going to bring us overall in a stability kind of position in terms of top line. This is what I think or what we believe we're going to be landing for the year.

The second point, the sustainability of margins, yes, I do believe that these moves are sustainable because of all the work that is now showing in terms of productivity, because of the push that we have deliberately made towards clients and brands and initiatives that are at higher margin level. There is always some volatility that is related to the sales mix of different clients. But all in all, we have made a shift in our portfolio of clients and products that should show sustainability over time. We're basically going back to the profitability levels we had back in 2019, which we think it's a very sustainable base on which to build further improvements going forward, to be honest.

The third question is the most difficult one because no one has a crystal ball, obviously. I do personally expect that the progressive decrease of interest rates in the U.S. will have an impact on consumption. I think it will be more visible in the second half of the year than in the first half of the year, although I personally hope that we will start seeing some effects already in the second quarter. But that's my guess. So take it with a certain level of cautiousness, I would say. But this is what I would expect. U.S. now is showing a flattish market since 2 years. Usually, in the normal trend of the past, you would see that after 2 years, you should see a rebound. So we hope this is going to come. I hope I've answered all your questions.

Yes, you did. I just have a clarification on the first one to ask you. So we can expect flat sales growth for 2025, which factors in a negative FX contribution?

We're going to be landing at the same level of last year, all in all. This is what -- obviously, the currency impact, the more you go on in the year, the worst it has got. So there is a higher impact progressively. But all in all, I think we're going to end up flat versus last year in sales terms.

The next question is from Andrei Condrea of UBS.

Two from me, please. First of all, if we look towards 2026, obviously, you spoke already about the U.S. But could you share some more color as to what makes you so confident about the other regions, China, Korea and the emerging markets? And secondly, could you offer a bit more color on the changes you're making in terms of your local operations with the increased autonomy and improved innovation speed?

Thank you very much for your questions. Well, in terms of trends, China has shown quite good recovery numbers post the June '18 event, which was negative versus a year ago. In the year-to-date, China is a plus 3.9%, which isn't yet at the level we were expecting, but it's definitely better than last year.

Now the big question is what is going to happen in the double-11 event, which is the most important of the year. What we know is that the promotional sprint has started earlier than usual this year, and this helped the market to record a plus 8% growth in the last 4 weeks. But the jury is out. We obviously hope to see a good all in all double-11 season, which would signal that China is getting out of the woods and that there will be a much better 2026.

Emerging markets, they are doing well. We are doing fantastically well in India and in Brazil as well. But reality is that their impact on the total results of the company and in general of the beauty market is still quite limited. So they do not have the size altogether to make a swing on the total results yet of the company. But I'm very positive about especially India. I'm also positive about Southeast Asia, but those are still quite marginal in the global scheme.

Korea is a bit of a different story. Korea local market is not that big either. It's a very competitive market. We are seeing a very violent reaction from our competition, given the growth we've had in the past 3 years. So they are really dumping on many fronts on prices to recover a bit of the lost shares -- the shares they've lost in the recent past. Korea is more a factor of how much -- the country is going to be exporting into U.S. and Europe. We know that Korean brands are having a good development in U.S. and also partially in Europe. This is more Skincare-driven, so it's not having a big impact on us so far. But all in all, Korea, we keep being quite bullish on the growth we can have, mostly driven by the share gains we can still achieve in that country. But all in all, as you know, Asia is mostly dependent on what is going to happen in China. So that is the market everybody is looking at.

The second point is quite important. So what we have noticed is that the era of extreme globalization is over. I think that this is not a big discovery. It's visible across the board. And we had a way of working that wasn't really allowing us to be as fast as we could be in catching local trends. We've always been very good in all what is blue sky research and coming up with new technologies that then get applied across the board. We've been very good in catching some global trends and responding well and fast to those. But then there are -- and we've seen more and more local trends that are important in just one region, and we've not been fast enough to jump on those. And we have noticed it, especially in the Western world, which was more dependent from our corporate R&D, so the central teams, while, for instance, for China that we had decided to keep more autonomy in -- for the local labs. They were more reactive and faster.

So what we decided is to shift the reporting of the local R&Ds to the local CEOs so that R&D sales and marketing can be faster and more reactive or actually more proactive in responding to these local trends. So we think that this will -- coupled with all the goodies we have in terms of more fundamental innovation, which is going to be led as in the past, but this proximity of decision-making in the regions will allow us to be faster and more proactive for what local trends are concerned. So this is something that we have announced a few weeks ago, and we think it's going to give us results already starting next year. I hope I've explained it a bit better. Otherwise, if I've not been clear, please ask again.

The next question is from Francesco Brilli of Intermonte.

I've a couple of questions from my side. The first one is on 2026 guidance behind your confidence on a more normalized and rebound in volume growth and revenue growth. So do you have just the confidence on trends on different markets? Or is based also on internal activities, new launches or commitments from clients on new technologies? So you have something that make you confident on a rebound in 2026? Or it's just a projection on market trends? That's the first question.

And the second one is on the APAC normalization in third quarter. I appreciate that the ForEx impact is hitting, but it would have been up low single digit at constant FX. So we were used in the last few quarters to see a much higher growth. I was wondering if something happened there, something changes or it's just a mix of comp base and ForEx impact.

Okay. Francesco, the guidance for '26, obviously, the guidance we're going to give it at our next earnings call. We are going through the budgeting process as we speak. So at the end of it, I will have much clearer ideas. But all in all, there are 2 components. One is that we see -- we believe and based on the -- on historical data that 2026 should see a rebound of the market. And I've also seen a number of clients that are all pointing and believing in the same direction. So this is obviously very important because it impacts more or less 70% of our sales, which are reorders. So if sell-out is lacking, then this 70% suffers.

But the second is also driven by the level of interest, especially in big multinationals about the innovations we are showing to them and the level of interest on new technologies, and formulas we are showing them is pretty encouraging. This year, already, we have a weight of new products that is beyond the usual 30%. So we are already seeing more, let's say, interest in outsourcing innovation to us. And we think based on all the signals we have and the interest from clients that this is going to continue in 2026. So both are pointing in a good direction. Then how much that will materialize, we'll have clear view in a few weeks.

As for the second, which is the APAC normalization, well, I've always said that when you have very, very fast growth, there is a moment where there is consolidation. That's -- I couldn't say it's biology, but it's quite normal. This normalization is coming from ForEx exchanges that is clearly well out of our control. but it's also driven by -- in the quarter -- in the last quarter in Korea because we are coming out of years of exponential growth in Korea and we had a quarter that was softer because of clients dynamics, launches dynamics, a number of things that it's bound to happen sooner or later. What is important, it's the trajectory, which remains very positive. And for the region, all in all, I must say that I'm very happy about the results we're getting this year as well. So I do not see any alarming sign, to be honest. I hope I've answered your question, Francesco.

[Operator Instructions] The next question is from Paola Carboni of Equita.

I have a few questions. The first one is a similar question about China. So if I got it right, you mentioned high single-digit growth. So it's a progressive slowdown here, although clearly outperforming the market. But I'm just wondering here whether are you seeing again a bit of catch-up from multinationals compared to Chinese brands on that market and how this is possibly affecting your performance in the region?

Then another question is about the new organization for the R&D responsibility and so with greater local autonomy. I'm just wondering whether this might impact your profitability in any way, like, for example, a business of scale in your innovation -- economies of scale in your innovation process?

And third question, sorry, is instead on the sales mix. If you can share with us your thoughts about the possible landing point of the mix between full service and free issue because we started the year saying that it wouldn't change too much versus last year, whilst apparently, given the very strong performance of EBITDA margin we are seeing, it's probably going towards an improving trend compared to -- an improving mix compared to 2024. I'm wondering if this is correct? And where do you think we should be end of this year and possibly also next year? So to what extent are you committing on this direction even further?

Okay. Thank you for your questions, Paola. Yes, China continued growing high single digit. In reality there, you do not see the results of what's happening with multinationals versus the local brands. I remind you that in the numbers you're seeing, you're only seeing what we sell to the local clients because multinationals are tracked where the -- and are placed where the headquarter of the multinational is.

No, no, Renato, that's clear to me. It's just that because, I mean, as much as for Korea, your growth used to be much stronger last year. So I'm just wondering whether such a slowdown is possibly correlated to multinational picking up a little bit again in the region versus local brands that you are working with?

No. I mean -- thank you. I just wanted to be clear not to confuse others. Maybe I realize that sometimes it's not easy to remember that point. No, all in all, I wouldn't say so. So we see multinationals starting to do better. L'Oréal is doing reasonably well in China. Lauder, you've seen the results. They are clearly saying that they're getting a bit out of the woods and the crisis they had with the local market in China. But all in all, local brands are still doing better than international brands in total. So we do not see a rebalancing of the positions. Then you will always have one brand doing better than the other and things like that. And it will depend also a lot again on what happens with the double-11 activity and the level of promotional push that the brands will put in play.

I think that there will be a moment where the swing of market shares from international brands and Chinese brands will slow down in terms of gains for the local brands. I do not see any reverse, at least not in the short midterm. So I think that the part of the market that has been gained by the local brands will remain in the hands of these local brands for a while. Obviously, if the market picks up, that is going to benefit to the volumes of everybody in proportion to the shares they own. But I do not see -- sorry, international brands overall taking share back from local brands. Again, it's what we sense, so we might be wrong, but this is what we're getting as signals from the market. The second point, I hope I've answered your first question, Paola.

Yes, very clearly.

Thank you. The second point about the new organization of R&D. It's not going to have an impact on profitability in any material way in the sense that it's not that we are building an organization that wasn't existing, we are only shifting the decision power more regionally than centrally for, let's say, the nondisruptive innovation, which is new technologies or new things like that. So there won't be an impact of that kind. There won't be an impact in terms of critical mass that we have behind our innovation.

Again, most of our investments in innovation are in the advanced innovation, the blue sky innovation, which is going to stay led by the central teams. What we want is a faster decision process and adoption of formulations that are kind of already somewhere in our portfolio's adaptation to local trends in a faster way. So the answer is no. I do not expect any impact from this new organization on profitability per se. I expect only a faster speed to market for those local trends instead of getting them approved by a central team that will debate because they do not leave and do not see the market reality on a daily basis. This decision is going to be taken locally where sales, R&D and marketing are sitting together, talking to clients together on a daily basis, they can react faster and better. That's it.

The last question you had, sales mix, full service and free issue, it's true that what we said at the beginning of the year is that we saw the shift from free issue to full service had stopped. In the last quarter, we are seeing a rebalancing of the proportion getting a bit closer to what historically we were used to. It's -- again, it's the result of a specific push in certain cases. It's within the same clients. We have agreed not to buy packaging any longer for them. So it's going a bit back in the past.

Now to -- as I said earlier, and you can make the math for yourself, the decline of the third quarter at constant rate is all linked to packaging. So there is a change for the better. Admittedly, last year, in the last quarters, third quarter and -- and in the second half in general. So third quarter and fourth quarter, there was a particular spike in the component of packaging in our sales. So this is coming back to a healthier level.

So all in all, you can assume that the level of pack in terms of weight on the sales is going to remain the same that you have seen more or less in the first half of this year, which is the opposite of what happened last year when the weight of packaging in the second half increased quite significantly.

Okay. And so just as a follow-up to that, your guidance of simply confirming consensus EBITDA might possibly turn a bit conservative given that you have already gained more than EUR 10 million in the first 9 months. So do you have any specific concern on Q4, why should we not have any increase in absolute EBITDA in Q4 then?

I wish you were right. And I would love to surprise you with some positives. We need to see -- I think that all in all, if it is not consensus, it won't be materially different, to be honest. So we'll see. And obviously, the better we do, the happier we are.

The next question is from Mikheil Omanadze from BNP Paribas Exane.

So my first one would be on the recently announced partnership between L'Oréal and Kering. Do you think there could be any implications from this partnership for Intercos? Is there potential for some incremental business for you?

And the second one is a follow-up question. And apologies, I know you've been asked about this already, but just to be absolutely certain in terms of full year expectations, when you refer to stable sales, you meant stable absolute sales, i.e., the same absolute sales as we achieved in 2024, i.e., EUR 1,065 million. That's what you are referring to and not growth, not flat constant FX growth. Am I correct?

Thank you for your question. First question, L'Oréal-Kering partnership implication. Well, in reality, Kering is not an organization we are dealing with because their brands are licensed to Coty nowadays. The most important one, actually, the only important one for us is Gucci. And you've seen that the Coty contract expires in 2028. So there won't be any immediate change.

Now what I expect long term, and I see it as a positive for us as well is the fact that L'Oréal has -- and I wish this was not recorded. L'Oréal has better muscles than Coty in pushing brands, especially Make-up. They have a machine that is #1 in the world. Otherwise, they wouldn't be the #1 player in the world. So I do expect them to push these brands better and faster, and this should be a positive for us. As you know, we are very good partners with L'Oréal already. So I do not see any possible negative from this move.

Also, the fact that, if I remember well, they are getting the license for the Kering brands to 2050 where I will be retired at that point, if I'm alive. It means that L'Oréal will have all the latitude to invest behind these brands and harvest the fruit of these investments before their licenses get back into discussion. So I see it positively. It won't have an impact in short term because there is not going to be a short-term change for us because Coty is going to stay there until 2028.

And the second question, the answer is yes. It's current exchange rates. We think we're going to be landing in line with the EUR 1.60 billion something of last year. So answer is yes.

[Operator Instructions] The next question is a follow-up of Paola Carboni of Equita.

Yes, it's me again, sorry. I wanted to hear from you about what's happening in the U.S. You have referred to the fact that possibly the price increase your clients are implementing to offset tariffs might have been impacting to some extent, volumes. Did I got it right? What's the, let's say, price effect you are seeing? And to what extent do you believe this might really be a hinder to volume in the next few quarters for the U.S. market?

Thank you, Paola. Yes, in terms of pricing, what we are seeing is that the overall price per unit in U.S. have moved from 1.6% in the first quarter of this year to 4.4% in the third quarter of the year and in the last 4 weeks at 6%. This is -- it's not called anymore Nielsen IRI. It's a different name of company. These are retail data. So there is a move in pricing, which is pretty evident.

Now will this impact in a significant way volumes? Personally, I don't think there is going to be a major change in trends. The reality is that volume trends have been soft since 2 years, as I said before. So I don't think it's going to help. But I think that the move on interest rate is going to be more important than these price increases. Then we need to see what is going to happen. It's going to get worse or not. I don't know. But in general, the market -- sorry, the U.S. consumer has always proven a high sensibility rate to interest rates, which is linked to the fact that they are all they're getting debts very young in their lives since they had to pay tuitions to university and so on. So when interest rates go down, it makes an impact on their available income, and they go into consumption pretty fast.

So I think and I hope I'm right. That moves is going to be more important and more than offsetting the price increases we are seeing, which are most probably related to these duties dynamics. Then you may have different behaviors from different -- for different brands. Obviously, the brands that are more, let's say, relying on price competitiveness may be affected, but it all depends on how the relative moves of pricing are going to happen.

Mr. Renato Semerari, there are no more questions registered at this time.

Thank you very much.

Thank you. Good evening to everybody. Bye.

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Intercos Group First Half 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Renato Semerari, Chief Executive Officer. Please go ahead, sir.

Good evening, everybody, and thank you for connecting to our conference call. In a generally, a stable macro environment and a beauty market that is displaying an overall soft trend in both Western and Eastern World, Intercos posted strong semester results with sales ahead of market and above all, a very good improvement in profitability.

Now it's important to underline that the semester offers the most objective view of our results since quarter's reading is blurred by last year's cyber attack, namely the quarter 1 was depressed by the cyber attack. So it was easy to beat comps.

In quarter 2 last year, we had the backlog absorption. So all the orders that we could not produced in quarter 1, were absorbed in the course of the second quarter. So all in all, we believe that the first semester data reflect a bit the overall trend of the company, giving a more reliable balance to our results.

So in the first half, we had sales growing ahead of market, as I just said, with a plus 6% at constant rates versus a year ago, and this was driven by the exceptional performance of Make-up, which grew at double-digit rate and gained back a weight on our total sales of above 60%.

But what is really remarkable, in my view, is the record EBITDA that we posted in the semester. We posted EUR 75 million of adjusted EBITDA, up 16.5% versus a year ago, with 140 basis points of improvement over the first semester of last year.

Looking at the EBITDA margin on value-added sales, we reached 18.3% of margin, up 176 basis points, which is the best ever margin on value-added sales the company has ever had. And it's important to note that profitability grew substantially also in the second quarter, and we now have a rolling EBITDA of EUR 154 million.

Net debt was at EUR 135 million, maintaining the leverage ratio we had overall last year with 0.87x EBITDA, despite the increase in CapEx we have experienced in the first semester for the expansion of the Korea plant and the Chinese plant as we had anticipated now a roadmap of planned expansions.

Let's now look at the overall figures a bit more in detail. So as I said, sales were up 5% at current rates, 6% at constant rates, with value-added sales growing also by 5% at current rates, which reflects a substantially flat percentage of packaging costs on our sales. So the phenomenon we had seen in the past 2 years of an increasing weight of packaging on our net sales has stopped, and we are now flat versus a year ago in terms of weight of packaging.

Adjusted EBITDA grew, as I said, by 16.5%, with a margin expansion of 140 basis points. As I said, what is more important, in my view, is the marginality on our value-added sales, which grew by 176 basis points, getting to 18.2%, which is the highest ever achieved.

Net income was instead down by 60 basis points due to two factors: the negative exchange rates had an impact and also interest rates had an impact. Stefano will take you through in more details on these dynamics.

Looking at the second quarter in isolation, sales were substantially flat at constant rates facing last year orders backlog recovery, as I just said. The good news is that the margin expansion was there, despite top line was basically flat, with a gain of 103 basis points over last year, which was the best quarter in terms of profitability for the total year.

Now looking at the sales dynamics, let's start by the sales by business units. Now here, the sales trend showed a completely different dynamic than last year with growth, which was entirely driven by our key business unit, which is Make-up. Make-up was up by 18% in the semester and plus 13% in the second quarter. We posted growth -- material growth in all regions.

Multinationals were the key contributor to the growth, mostly pushed by our innovation in powders and foundations. Those were the two segments that were displaying the fastest growth rates.

Both Mass market and Prestige grew with a skew to Prestige, which also helped profitability. So Make-up went back to over 60% of our total sales, and Stefano will explain that this as a mix impact, which is favorable for our total profitability.

Skincare closed the first half at minus 6%, mostly due to the first-quarter result. The performance was affected by the U.S. emerging brands, while multinationals were growing, especially in Europe. Important to remind that [ BU ] was facing a strong first half of last year at plus 15%.

Hair & Body closed the semester down by 15%, entirely due to the sharp drop we faced in the quarter 2. Last year, just as a reminder, quarter 2 posted a plus 39%, thanks to a number of Fragrance initiatives that could not be anniversarized this year.

Moving to sales by region, sales growth were again pushed by the performance of Asia like in the past 2 years. America came back to high single-digit growth, while Europe had a flat semester.

Going in more details region by region, Asia posted a plus 16% in the first half despite last year very high base. Last year, we had a plus 28%. We had both quarter displaying double-digit increases, with both Korea and China continuing on their traction, and this is no different versus what we experienced last year.

Make-up was clearly the driver segment in this growth, and now we have Asia [ weighing ] for 24% of our total sales. Just as a reminder, a couple of years ago, Asia was only 17% of our sales.

America posted a plus 9% growth in the semester, with both quarters displaying growth. Make-up was once more the only growth driver. Prestige was clearly the winning channel, driven by both multinational and emerging brands.

As for EMEA, the semester ended flat versus a year ago due to the soft quarter. Now the region was -- the regional performance was affected by the difficult Hair & Body second quarter. As you know, Hair & Body is a segment which is basically present in Europe. So the drop we saw in the segment had a weight on the region, while Make-up and Skincare at very healthy growth rates.

Moving now to sales by client clusters. Also in this case, we witnessed a growth profile which is different from the recent past. In fact, multinationals took back the main role in the scene, getting back to 48% of our total sales. So they posted double-digit growth in both quarters, closing the first half at plus 18%. Make-up was obviously the focus, with Asia and U.S. as key regions.

As for the emerging brands, they closed the semester down minus 8% due to the second quarter double-digit decline in front of a year-ago plus 34% growth. Also, in this case, the main driver of the decline was Hair & Body category, as explained a few minutes ago.

As for retailers, as you may remember, last year, we had a difficult year with retailers. Now we gained back part of the year-ago decline, growing at double-digit rates in both quarters. First half ended at plus 18%, with Make-up and EMEA as major drivers for this group of clients.

Let me now pass the mic to Stefano, who will take you more in details into the financials.

Thank you, Renato. Good evening, everyone. Well, as already mentioned by Renato a few minutes ago, the first half of the year recorded a 5% increase in sales, bringing total revenue to EUR 525 million and this despite market uncertainty caused by the severe geopolitical situation and the well-known issues of the U.S. tariffs, which dominated the scene in the second quarter.

The macroeconomic turbulence triggered by the Trump administration was also felt in the currency markets. And for our group, the depreciation of U.S. dollars and the Chinese renminbi weighed particularly heavily. In fact, revenue growth at constant rate FX would have been 6%, 1 percentage point higher than the reported figures.

The EBITDA showed a strong growth, reaching EUR 74.5 million or up 16.5%, effectively 3x the rate of revenue growth, with the EBITDA margin further improving from Q1 to 14.2%. Main reasons for this positive and sound performance were the excellent performance of the Make-up business unit, up 18% compared to last year. a favorable customer mix, particularly because of the growth of the Prestige clients, which grew double digit in both in the Make-up and the Skincare business unit.

At the same time, the group was able to keep the pre-issue revenue model with adjusted EBITDA on value-added sales at 18.3% or plus 177 basis points versus '24. On top of this, the company and the group continued the improvement in the transformation cost.

Among the operating expenses, we recorded net nonrecurring charges of EUR 4.4 million, mainly related to HR severances, legal consultancies, LTI bonuses; with positive impact that came from the insurance indemnities for about EUR 2.5 million and the release of bad debt provisions.

Taking into account the depreciation and impairments, which amounted to EUR 26.2 million, the EBIT came in at EUR 43.9 million, equal to 8.4% of revenues, up 25% over last year. The financial component weighed on operating profit by EUR 13.4 million, mainly due to currency effects, with a net impact of approximately EUR 6.6 million.

With an average net financial position ex-FX -- ex [ IFRS ] of EUR 75 million for the semester, the financial components resulted in the net financial charges of EUR 6.4 million.

Finally, considering a reported tax rate of 45%, the group net income amounted to EUR 16.6 million, where excluding extraordinary income components, net profit reached EUR 20.7 million, equal to 4% of net sales, slightly below last year result despite the aforementioned FX impact.

Let's then turn to the results -- EBITDA result by business unit. The $74.5 million EBITDA is attributable 66% to the Make-up business unit, 19.2% to the Skincare business unit and the remaining 15.2% to the Hair & Body business unit.

Compared to the same period last year, the Make-up division improved its profitability by over 120 basis points with an absolute increase in EBITDA of 27.8%. And this positive result was achieved across all geographic areas, where the group operates, thanks in particular to the performance of Prestige and multinational customers.

After a particularly strong '24 in terms of revenue, the Skincare business unit experienced a slight decline in sales but still managed to improve its EBITDA both in absolute value at $14.3 million or plus 32.5% and in relative terms to revenue, plus 530 basis points, thanks to a more favorable Prestige customers' mix.

The Hair & Body business units saw reductions in contract manufacturing activities related to emerging brands during the first half of the year, brands that had shown strong results in the same period last year due to the numerous product launches. As a consequence, EBITDA was impacted by these trends and decreased to EUR 11.2 million, down EUR 3.6 million, representing 10% of the net revenues.

All in all, the excellent results of the core Make-up business unit more than offset the temporary weakness in the business unit dedicated to contract manufacturing.

Let's have a look then to the cash flow. In the first half of the year, the group used approximately EUR 36 million in working capital and over EUR 33 million in CapEx. As a result, the operating cash flow was EUR 7.7 million and the lower cash generation compared to the one recorded in the same period last year, it is justified by higher CapEx, particularly in China and Korea, where the group is expanding production capacity in response to the significant local business growth and by higher DSO due to the current seasonality and the current weight of multinationals.

At this stage, we do not see any critical issues in terms of cash flow, even when considering expectations for the second half of the year. Following the distribution of approximately EUR 18 million in dividends, the net financial position stood at EUR 134.5 million, corresponding to a leverage ratio of 0.87x EBITDA.

That's all for the financial highlights.

Thank you, Stefano. Now moving a bit our side ahead of us. Now the situation of the market is very visible for everyone. So the market is quite unstable, as we've seen these trade wars and announcement about tariffs are polarizing everybody's attention, including in our sector.

All in all, the market is quite soft in the beauty sector this year, especially for what concerns Make-up, which is obviously the segment we follow with more interest, given the weight it does on our business.

So U.S. market is showing a low confidence rate from consumers. Most of the segments, especially Make-up, are showing a soft trend, eyes are declining since a few years, sales is quite stable; while lips is the only segment that is really showing growth. So U.S. remains an area of a bit of concern.

On the other hand, we have EMEA that is posting some positive growth, not comparable to the growth rates of the last year, but still positive, although less so in volume terms, which is the indicator that is more interesting for us.

As for Asia, we've seen some positive recovery signs from China. Unfortunately, the June 18 promotion, e-commerce promotion was not that positive. But despite that, the semester closed with a plus 3% growth in China, which is better than the one we saw last year, but still not strong enough to drive growth in a more decisive manner on a global spectrum.

So all in all, the market is pretty soft. We'll now see what are the consequences of all the tariff moves on the second semester. But all in all, we expect now a market that will remain positive but below the usual growth rates this market is used to do.

In this context, we have decided to focus our attention, to focus our efforts on our core business, which is Make-up. This is the segment where we can leverage superiority in innovation, and this is where we're going to be focusing our attention, as well as pushing hard to improve our profitability as we did in the second semester.

So despite this will be a year with top line growth rates, which are below the usual rates of this company, we are very confident in a significant improvement in profitability, which will -- which makes us confident to reach the consensus expectations in terms of EBITDA for the fiscal year.

The last sign I would like to leave you is that the order entry continues to be solid, and this gives us confidence -- and especially in Make-up, which again, as I said, is the focus of our effort for this year.

That's all the key points we wanted to flag to you. We are now ready to take on your questions.

[Operator Instructions] The first question comes from Anna Frontani of Berenberg.

I have a bit of questions. The first one is if you can confirm whether you still expect full-year sales growth at constant FX in the range of 5% to 7%, as previously communicated?

Excuse me, we can't hear you very well.

My first question is related to the previously communicated guidance. Do you still expect sales growth for 2025 at constant FX in the range of between 5 to 7?

The second question is about emerging brands that noticed the decline in Q2. If maybe -- could you provide more color on what's driving the softness? Are you seeing a broader slowdown in demand, delays in launches or maybe some brand-specific issue?

Then third question is about the U.S. market dynamics. Specifically, we've seen the news [ Kolmar ] Korea plant opening in the U.S. I was curious if you're seeing an impact or a shift in customer behavior from these or maybe it's too early to have some potential implication for Intercos?

And sorry, if I can squeeze a very quick one. If you can give us the split of volume versus pricing, either for Q2 or H1 growth?

Okay, Anna, thanks a lot for your questions. I'll start from the last one, which is the easiest. The pricing impact was in the range of 0.5%, so was a limited -- very limited impact on the total, as expected. So not -- its growth was really volume-driven once more versus pricing.

Moving to the guidance, which is the key question here, the reality in terms of top line, we expect it will be a bit below that. It will be in the low single digits, is going to probably be more in the range of 3%, 4%, more than 5% to 7%, given how the market is shaping and the fact that we have Hair & Body that is going to be below our initial expectations and is showing a declining rate.

So we are very confident about growth in -- on our innovation categories, while on the more contract manufacturing part of the business, it will be tougher than originally anticipated. So in terms of top line guidance, I would say a bit more on the conservative side.

On the other hand, and this is more important, I think that the results in terms of profitability is better than what we had anticipated. And as you've seen, I've always spoken about a 50 basis points improvement. We are way above that rate, and that is what we want to focus in this moment of overall market softness.

So all in all, it will be a rebalancing year after very strong years in terms of top line growth with dilution in marginality. This year, we're going to rebuild marginality and have a more moderate growth rate in terms of top line.

Going to the emerging brands, well, the picture is a bit affected by what is happening in the Hair & Body sector, where we had emerging brands that were pushing sales, thanks to initiative in the Fragrance market that had a high impact in terms of top line last year. And this year, the anniversary of those initiatives is not producing the expected results and is a lot softer there. So emerging brands is a bit affected by this trend.

If I look at the key -- the core segments of Make-up especially, we are seeing emerging brands continuing to perform well; in some regions, very well. So all in all, we are not worried about the signals that we're getting. It's more contingent on specific performances in certain segments.

As for the U.S. market, I think the [ Kolmar ] is not that I think, I know that the [ Kolmar ] decision was taken way before the famous April 2 announcement of Mr. Trump. It's a market where [ Kolmar ] wants to expand. It's very much focused on Skincare, which is their core category, as you know.

We are already equipped with plans in U.S., as you well know. And -- but it's a bit early to say -- to predict what is going to happen. The picture is clearing up. But with ups and downs, we do not know exactly on which foot we're going to be dancing.

The reality is that we have not seen -- aside from a few emerging brands that are asking us to move production to U.S., we are not seeing yet a massive movement in that sense. It's a movement that I would personally like a lot, to be honest, because we are better equipped than most of our competition in U.S. So we would welcome a move to U.S.

The big question mark for clients is related to packaging, which in many, many instances, is still coming from China. And so the more packaging cost, the more the tariffs on China are having an impact on the final cost of goods. So it will be a bit of a scattered reaction, depending on what kind of packaging clients are buying from which country that will lead to different way of behaving.

So we are obviously studying. We have seen the impact of tariffs on the second quarter of the year. We have reverted the vast majority of it to our clients. Whether that will trigger a massive movement to U.S. is still to be seen, it's a bit -- still a bit early days. I hope I've answered to all your questions.

The next question is from Guillaume Delmas of UBS.

Two questions for me, please. The first one is on your EBITDA margin outlook. So you've decided to focus on profitability this year. You mentioned that the first-half margin was ahead of your expectations. So several questions here.

What were the main reasons for this positive margin surprise in the first half? And do you think this is extrapolable to the second half, so that 100 basis points plus of margin improvement in the first half, we could see something of similar magnitude in the back half of the year? And thinking about 2026, are the margins you'll be achieving in 2025 sustainable or it's a bit of a one-off. And from next year, we could see margins coming backwards?

And then my second question is on adjusted net income because again, your EBITDA in the first half was nicely ahead. Year-over-year, I think, 16.5% you mentioned. But then adjusted net income was 9% below. So tax rate, financial expenses very much ahead in the first half compared to where they were in the first half of last year.

What should we expect for both lines, tax rate and financial expenses, for 2025 as a whole? And how will it compare to 2024 to what you reported in terms of tax rate, financial expenses last year?

Thank you very much, Guillaume. So EBITDA margin, there were different factors that played in our favor. There were things that we knew and we expected and things that we didn't expect at least in the extent that we saw it coming.

Mix was favorable compared to last year.

There were two different types of mix effects. One is the relative weight of the business units on the total sales, which had an impact. So the fact that Hair & Body, which, as you know, is the business unit with lower marginality for us; went down, while Make-up went up in such a significant way, played in our favor and brought our weight of segment, more in line with our historical situation. This was favorable. And this was a bit above our expectations because we were not expecting Hair & Body to perform to this extent.

The second is the fact that Prestige has been growing faster than Mass market. This also is very visible in Skincare profitability. It's also visible in Make-up profitability, and this was somewhat expected. But again, given the growth rate we had in Make-up and especially driven by Prestige, was a bit above our expectations as well.

And the third factor, which is the one we knew better, is productivity that for once, it has not been hidden by mix effects, increases of packaging cost and all that. So all of a sudden, then you're now seeing the results of not only 6 months of work, but the whole previous year work now become visible to you, and this is also leading to the improvement in profitability. So all this went in a very positive way, I would say.

Is this a one-off? Personally, no, I don't believe it's a one-off. The productivity improvements were already there last year. We continued in this semester to bring productivity improvements. And they will keep being visible, unless there are factors like full service, so packaging growing in a significant manner or having different mix effects that like in the past years, were affecting our profitability.

So I don't think it is a one-off. In reality, there is nothing really extraordinary. We are just coming back to a mix of business that is more in line with the history of this company. So I think that it's more a one-off, what we've experienced in the past 2 years more than what we are seeing this year. So I'm pretty confident for next year as well.

Now on the adjusted net income, it's better that I pass to Stefano. He is certainly more precise than I am on this.

Well, regarding the tax rate, as you may know and understand that the tax rate of the first half is affected by the dividend distributions. That's why we saw 45%. What we see for the full-year tax rate more standard, in line with last year. And I would say I would expect the tax rate of about 30%.

Regarding the financial expenses, taking aside for a while the possible impact on currency, that is very difficult to predict at this stage; I would consider EUR 10 million net financial expenses.

The next question is from David Hayes of Jefferies.

I was going to follow up on Guillaume's question, actually, just in terms of the profit uplift versus the sales direction. So you're talking in the outlook about focus on the core and therefore, boosted profit. So are there certain projects that aren't happening this year and that you're kind of delaying into next year?

And I guess, is there some kind of impact potentially of that in terms of growth next year? Just trying to get a sense of whether there's sort of noncore projects that you're basically delaying because of the uncertainties.

And then I guess, just into the second question in terms of the emerging brands in EMEA, it feels like that's where the real, obviously, soft spot is to your discussion. Is that just very consistent across all of your customers? Or is there 1 or maybe 2 customers that have particularly been buying differently and have planned differently and that's been the surprise? I just wonder, how consistent the difference in demand is?

David, projects delaying, no, there isn't any delay on any project. Now it happens that our projects were focused on our core, again. So the reason why we are expanding, as an example, our capacity in Asia this year, and we will be doing the same for in Europe next year, very much focused on Make-up and to a lesser extent, on Skincare, but not really on the contract manufacturing side of things, which in reality we had done a couple of years ago.

So no, there isn't project delaying, but there is a deliberate effort from our sales force to focus and from our marketing forces to focus our efforts on where we can get higher dividends out of the effort in terms of marginality and profitability. But there isn't anything substantial and mid or short or long term that we have decided to park.

We don't think there is anything to park because we are -- all in all, we are pretty satisfied with the results we had because we knew we had to recovering profitability. You all have been very vocal on the fact that we needed to show improvements on profitability. So it shouldn't come as a surprise that we are focusing on that. But we are not stopping anything we had planned to do for any reason.

In terms of Europe, emerging brands, as I said, it's very much driven by Hair & Body customers. As you know, we had exponential growth in the past 2 years in that area, in that group of customers, in that segment, which was particularly driven by Fragrances.

And the fragrance world, I'm very knowledgeable of it because they've been on the brand side for many years and I had Fragrances in my portfolio for many years; it's quite volatile, it can react pretty quickly to new initiatives, new launches. And then if you're not strong enough in planning the anniversary of those, then you have a drawback the following year.

And unfortunately, this is what happened in these systems. So we've been particularly affected by this factor. I think that the growth we have experienced in the segment in the past 2 years was way above anybody's expectation. So this year, we have the other side of the coin, let me say. So in terms of mid, long-term trajectory, it doesn't change anything substantial, to be honest.

The next question is from Paola Carboni of Equita.

My first question is on order intake, Apparently, your downward revision of the guidance is pretty much linked to the decline in Hair & Body. So I was wondering, would it be fair to say that -- I mean, given the still supportive order intake, your expectation, your outlook for Make-up and Skincare are broadly unchanged compared to what you said in past calls?

And also still on the order intake, can you comment about the visibility you might have terms of Make-up, so the contribution of Prestige versus Mass? Is the outperformance of Prestige continuing apparently within the order intake, the order backlog you have?

Second question is that about your EBITDA margin trajectory and which has been admittedly very, very strong. You are delivering on efficiency gains. I was wondering, where you are here in your journey in terms of a potential efficiency gain? So how much can we expect this lever to play in favor of further profitability gain in 2026 and 2027, for example?

And then the last question is on Hair & Body. You have referred to it apparently as a temporary decline. So I was wondering, what gives you maybe any confidence that this is just a matter of, you said, anniversarying, past launches or maybe destocking from some client or whatever drove you to say temporary, let's say?

One second, I'm noting down because I'm getting old, and I forget questions.

So order intake. So order intake, as I said, is -- remains solid. It's going very well, especially in Make-up. And the trend we are seeing in our portfolio of orders mirrors quite well what has happened in the first semester.

So we are seeing the same -- let's say, we are seeing those Prestige and Mass market going up, to be honest, but Prestige a bit faster than Mass market. So we think it's going to stay like that at least for this year, which is obviously good news.

Then we'll see how things evolve in terms of general economic conditions, especially in U.S. Is there going to be inflation due to tariffs or not? This could create in 2026 some changes in the consumer preference in terms of segments and all that. But that is a bit too soon to be seen. So for the time being, we are seeing solid order entry and Prestige performing well. So it's good news.

Going to your second question about EBITDA margin and productivity going forward, so there are two types of productivity improvements. There are the daily work that is done in our plans to improve productivity. This is a daily work and is going on. So we are not at the end. And I think we will never be at the end. Otherwise, it means that we should we need to do some other changes, but -- so this will continue to go on.

There could be other activities that are a bit more, let's say, discontinuous that we will be looking and we are studying. Those will have an impact, if we go ahead further on in the future.

But obviously, we're looking at positioning ourselves in lower cost -- lower labor-cost countries for parts of our production. I think that the commercial agreement, the partnership we signed with Meiyume in Indonesia is going in that direction. So giving us capacity in lower-cost labor countries is a direction that it's important for us, and there might be projects going in that arena also in the future. So we will keep working. This is not a one-off, it's an ongoing effort that needs to be made.

Hair & Body performance, I said, temporary because it's this sharp up and downs tend to reset the base in a more consistent way. In the past 2 years, and we said it pretty overtly, we had -- as an example, we had a segment that was basically new for us, there was Fragrances, on which we grew much more than what we had expected. So we gained new clients and significant initiatives from these clients.

Now there are not many clients in that segment. So it's -- if a few of them have a quiet year in terms of initiatives, it can have an impact on the overall performance that we are having in the segment, and this is what is happening this year.

So I think that we are resetting the base in a more reasonable place, which will then should give us a more, let's say, linear growth profile in the future than what we had in the recent past. So temporary is -- because the up and down, it's pretty suddenly linked to the initiatives that happened last year. And then I think that the base will be in a more stable place, let's say.

Just a follow-up on this. Is there any chance that this moderation in Hair & Body might be offset by maybe your initiatives to be more present within the Hair & Body segment, where you can work with your own formulation, which was one of our aims, let's say? I don't know if you can tell us about discussions in this direction.

Well, this is a bit like productivity, is something that we work on day in day out. It's a constant effort. So we are growing in terms of innovation capabilities in -- especially in the Hair Care, I would say, less so in the Body Care, but Hair Care is an area of focus for us in terms of innovation.

We are growing. But typically, these are segments where you gain either small clients, emerging brands that need to grow or niche initiatives of bigger brands. So the growth will come little by little, brick by brick, year after year.

You won't see the volumes injections you can get when a fragrance -- an important fragrance is being launched to the market. That gives you immediate volumes that are concentrated in a matter of 6 months in reality. And then it depends a lot on what happens in terms of sellout for that brand, but you have an immediate impact.

In the Hair Care and innovation side, it's a little-by-little building the client base, building the project base, and it's a long-term journey that we are in. We are making progress year after year, but it's a long way forward, still.

The next question is from Mikheil Omanadze of BNP Paribas.

I have one question and two follow-ups, please. So when we listen to the beauty players, especially in the cosmetics and skincare side of things, initially, H2 was supposed to be half year heavy with launches. Do you still think it's going to be the case? Or you are seeing some of those launches being postponed into the next year?

And then in terms of the follow-ups, the first one, just to make sure I understand this correctly, the plus 3% to 4% for the full year, that's at the constant FX level, right, which would imply 0% to 2% constant FX for H2?

And also a follow-up on one of the questions. Could you confirm that the guidance cut was largely driven by Hair & Body or you would prefer not to specify segment-wise?

Mikheil, no, we're not seeing launches postponed. We are seeing some lengthening of the orders, but more on the repurchase side. So -- and this is mostly driven by brands being a bit cautious, given the tariffs instability [Audio Gap] not to be to expose to big orders that would come and get hit by tariffs or unexpected kind of tariffs.

But I think this is going to be -- it should clear up with the month of August when we will know more clearly what is going to happen in that front.

So no -- I mean, to be honest, the second semester for the beauty market in general is the semester of the big launches. This is pretty standard. And I would be surprised that brands would delay launches, given the fact that without initiatives in a market that is not growing fast, it would be very bad in terms of end results.

The reason is skewed to Christmas, it's not a mystery. So it's pretty normal that September, October are the months where most of the initiatives appear to profit from the novelty effect at the peak consumption period of Christmas. So no, I don't see postponements in that.

Now obviously, for us, everything is a bit anticipated. So if someone launches in September, it means that we are producing 3 months ahead of that, normally 2, 3 months ahead of that. So it's not the same pace.

The second point you made, yes, well, constant rates, yes, we are talking about that because to be honest, we are a bit confused about the currency trends in general. I must say that we do not get a lot of help from what we see from the banks because we see a lot of divergent opinions in terms of what to expect.

So yes, I prefer to talk about constant rates because it would be a bit of a gamble to see what happens on the currency front. From an ignorant like me, I would have expected euro to go down relative to the dollar, given the different trends in terms of interest rates. It has happened exactly the opposite. So honestly, it's a bit difficult for us to predict what is going to happen in that front.

On the third element, the guidance, yes, it's mostly driven by Hair & Body. We knew that it was not going to be a brilliant year for the segment. We always said, it was going to be a consolidation year in that front. Well, the consolidation is there, but it's a bit more a bit more evident than what we had expected at the beginning.

Again, I think that what you're seeing in terms of results for the first semester are really showing the main dynamics of the year. And again, I would like to underline the EBITDA improvements that come also thanks to a different mix of the different segments we are competing in.

So I think we look at both the positive and the less positive things. But personally, I'm very happy about the performance we are having in EBITDA, and the mix of segment is contributing to that as well. So it's everything is good and bad. And this one, I'd rather take it positively rather than the opposite, to be honest.

[Operator Instructions] Ladies & gentlemen, at this time, there are no more questions registered.

Thank you, everybody. Thank you. For those of you who will enjoy vacations, have a nice vacation. Goodbye.

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