February 11, 2025 17:34 GMT
CONSUMER CYCLICALS: Coty; 1H (to Dec) results
CONSUMER CYCLICALS
(secured; Ba2 Pos/ BBB-/BBB-)
Results missed guidance for LFL +3-4% sales growth, margins continued to expand though leaving credit impact limited (short-end debt only). Guidance has now shifted to revenue falls ahead as growth normalises. The problem areas for market remain the more affordable mass beauty and China and travel retail - Coty is low exposed to both.
- 1H revenue LFL +2%, net of FX (-2%) and divestitures (-1%) was -1%
- Prestige (2/3 of group) LFL +4%, consumer beauty (more affordable/mass) -2%
- APAC was only notable region down -11% in Q2 but Coty has small exposure (13%).
- EMEA -5% (but -2% in Q2) while US was +1% (2Q -1%)
- Gross margin at 66.1% (+180bps), EBIT at $507m (+17%) on a 15% margin (+220bps)
- adj. EBIT margin 19% (+90bps)
- adj. EBITDA $750m (+3%) margin at 22.5% (+90bps)
- Net levered at 2.9x (in-line with guidance <3.0x)
- Wella brand stake (25.8%) unch at value of $1.05b
- 2H25 LFL sales to be -1% to -2% (in-line with Q2 trends), FX headwind of another -3% on that
- net FY25 reported sales to decline by LSD
- margins to still expand leaving FY EBTIDA at $1.115-$1.125m (largely unch vs. last year $1.1b)
- above assumes a LSD to MSD FX headwind
- FY FCF guidance at $400m (circa +10%yoy), down from prev. low to mid $400m guidance
- Targeting exiting CY25 leverage -0.5x yoy (i.e. net <2.5x).
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