Ontex Group N.V.

Good afternoon, everyone and thank you for joining us today. I'm Geoff Raskin from Investor Relations.

Before I pass on to our CEO and CFO, let me remind you of the safe harbor regarding forward-looking statements. I will not read them aloud but I assume you will have duly noted it.

I would also like to point out that since 2022, we will present our emerging markets as assets held for sale and discontinued operations, following the strategic review and our plans to divest. Our P&L will thereby only encompass our core markets as continuing operations.

In the meantime, we will continue to provide you with business information for both continuing and discontinued operations and we'll make clear, throughout this presentation, what scope we have. And now let me pass you over to Esther Berrozpe, Ontex's CEO.

Thank you, Geoff and good afternoon, everyone. There are three major highlights to our Q1 results.

The first is the turnaround in our revenues, with a return to top line growth driven both by volume and pricing. It is really encouraging that we have now turned the corner in Europe after so many years of declining sales.

This is a result of the significant efforts by our teams to rebuild customer confidence, to propose high-growth products and to improve our service reliability. In the U.S., the business continues to grow strongly and emerging markets benefited from strong pricing.

The second major highlight is the continued delivery of our cost reduction program, the structural changes that we are making at Ontex to leverage our leadership footprint in Europe and to ensure that we are highly competitive and can offer our customers excellent products and services. Lastly, Q1 2022, we were hit by the full impact of an unprecedented raw material cost inflation that we have been building during 2021.

And despite all the actions we have taken on areas within our control, the huge price increases in raw material and some other input costs could not be fully compensated for and as a direct consequence, will have experience a significant decline in our EBITDA. Turning now to revenues on Slide 5.

As you can see on this chart, our revenues for the total group in Q1 are up 15% like-for-like, with 9% volume growth and 7% pricing. This marks the fourth quarter of sequential growth and is the highest revenue since the first quarter of 2020.

Our core markets recorded a 13% growth, with Europe returning to strong growth. Volume was the main driver and although we believe that part of the volume growth was helped by some loading in Baby Care and to a lesser extent, Feminine Care, we can clearly identify a strong positive turnaround in the last 12 month's trend which we have not seen since 2017.

Our main strategic growth drivers are the North American region, baby pants, the adult care category as well as sustainable & natural solutions. All of them are continuing to gather a solid momentum and were key enablers to the volume growth.

In the North America region we recorded growth above 30%, reflecting the drop through of the contract wins in the previous quarters and a very strong demand from our customers. Both sales to retailer and lifestyle brands grew significantly.

For baby pants, we have seen strong double-digit growth in sales, also helped by the market share gains of retailer brands in this growing subcategory. And this is due to the launch of a new baby pants concept by Ontex, customer gains and our supply chain team having successfully installed more capacity.

Adult care revenues were up double digits overall. Mid-single digits in the core markets.

We are seeing a fast pace of growth in retail and online channels which more than offset the lack of growth in institutional channels. On the product innovation side, we were honored to receive the Pharmacy Product of the Year award in the U.K.

for our new iD SLIP range. Lastly, we have continued to support our eco solutions portfolio in Feminine Care with the reusable period cups and underwear which we have started to offer to our customers this quarter.

Turning now to Slide 7. You will remember that we have the objective to reduce the group's cost base by 4% each year.

The structural cost reductions are continuing with the overall objective of another €80 million in 2022, of which over €60 million in our core markets. On the production front, we have continued to improve our operating efficiencies in Q1 versus the last quarter and year-on-year.

This includes the optimization of overall equipment efficiency and raw material usage to increase our production capacity of our assets and reduce waste. We also made significant progress on design-to-value, pre-designing our products to reduce cost and complexity, while maintaining performance and quality levels.

The optimization of our manufacturing footprint is now well underway and production in our factory in Mayen, Germany has now been closed which will benefit us the upcoming quarters. On the SG&A side, costs have continued to come down.

Our ambition is to contain this offsetting inflation. And with revenue increasing, we are well underway to achieve our target of 10% of revenues which we are close to already this quarter.

Meanwhile, as expected, the impact of raw materials and operating costs have increased. The rise in our main indices and other drivers, such as energy and freight costs which happened in 2021, now are fully reflected in our cost base.

These climbed more than 20% overall compared to the first quarter of 2021. We are taking the necessary measures to counter it with continued savings efforts and repricing.

Meanwhile, triggered by the geopolitical situation, we see an additional rise in raw materials and operating costs, with the main indices increasing by an additional 10% to 30% in the last month. We cannot predict how things will evolve as we have included in our updated outlook and will price against that.

Turning now to Slide 9. As I mentioned in my opening remarks, pricing is absolutely key to help the group offset the unprecedented raw material cost situation and to restore our margins.

Overall, including discontinued operations, our prices rose 7% compared to the first quarter of 2021 after a long period of year-on-year price investments. This increase is the highest we have seen in the last couple of years.

In emerging markets, prices were up double digit without impacting volumes. In fact, prices were up 17% and volumes grew 3.1%.

In our core markets of Europe and North America, where the majority of our business is retailer brands, we saw the first benefits of our price increases flowing through at the level of 2% on average for the quarter and trending higher in March. We realized that implementation is lagging inflation as contract negotiations take time.

The objective in our core markets is to continue to roll out price increases over the year, taking the necessary actions to cover the latest forecast on input cost inflation. And on this note, I now hand over to Peter, who will dive more deeply into the financials for the quarter.

Thank you, Esther and good afternoon, everyone. Let me remind you that where Esther talked about the impact of the whole group, I will now more specifically refer to the P&L as reported, so for continuing operations only which are our core markets, mainly in Europe and North America.

In these markets, revenue grew 13% like-for-like, with a strong volume and mix impact of 11%, marking a solid turnaround. As Esther already explained, contract gains across Europe and North America are coming on still and we see good momentum in our product growth drivers, notably pants.

About half of the results -- the growth resulted from one-offs, especially in Baby Care and to a lesser extent, Fem Care, where some loading ahead of uncertain times and pricing has driven a peak of sales in March. You will note that growth in the adult category for continuing operations is lower than average but the one-offs I mentioned, that boosted the other categories, do not apply here.

Also, this is where we have a large portion of institutional contracts where price changes require more lead time. Prices were up 2% on average, trending upwards towards quarter end and as Esther explained and more has been secured to materialize in the coming quarters.

The appreciation of the U.S. dollar and the British pound sterling offset the impact of the devaluation of the Russian ruble, meaning that the like-for-like growth is also the overall growth.

Turning to Slide 12, to the adjusted EBITDA. The raw material inflation played out as expected, offset partly by the revenue growth and the continued savings.

Altogether, input cost inflation had a 118% impact on EBITDA. Index-based raw materials were up some 30%, mainly on superabsorbent polymers, while other raw materials and packaging costs were up about 20%.

Other operating costs, such as logistics and energy, were up as well, while the wages reflected the inflationary environment. The delta is high as it compares to the first quarter in 2021, where we still benefited from raw material price decreases.

Cost reduction measures had a positive 30% impact, mainly from operating costs but also SG&A. We did -- in SG&A we did better than compensating the inflation.

The Forex effect was negative due to a combination of the Russian ruble devaluation impact on sales and the U.S. dollar appreciation impact on costs.

With growing revenues but EBITDA impacted by more inflation, the margin reduced to 5.4%, a 6.7 percentage points to delta versus last year. This is high but remember that margin already came down during last year as the inflationary impact dropped through.

Compared to the last quarter of 2021, the decrease is 2.9 percentage points. On Page 13, just a few words on discontinued operations, so our emerging market activities which we are in the process to divest.

Revenue was up 22%, very much driven by higher prices across all geographies and overall good volume performance. The adjusted EBITDA margin was 2.2%, with cost inflation offsetting the price increases and cost savings, including the closure of the Ethiopian plant.

Net Forex impacts were also negative as sales decreased with the Turkish lira devaluation, while cost increased with the appreciation of the U.S. dollar.

Despite representing a year-on-year decrease of 3.8 percentage points margin, the quarter results remark sequential improvement with adjusted EBITDA margin up 1.9 percentage points, indicating that the turnaround of margin is underway. Let's now move to total group on Slide 12.

I am not going to repeat the group results but directly switched to net debt which stood at €833 million at the end of the period, a €108 million increase over the quarter. Although CapEx management remained disciplined, working capital needs increased substantially with revenue growth, especially with the very high sales we've seen in March.

The higher raw material prices and the measures we deliberately took on inventory positions to secure the supply chain in these volatile markets had a further impact. This will normalize going forward.

In combination with lower EBITDA, this resulted in a negative free cash flow and the leverage ratio, thereby rose to 5.7x from 4.2x at the start of the period.

So turning to the outlook for 2022. Clearly, the geopolitical environment in very uncertain and the inflationary macroeconomic situation with continued volatility in commodity and energy prices as well as supply chain disruption means that visibility remains very low.

Taking into consideration these factors, Ontex is currently reviewing the impact on its midterm financial road map. For the full year 2022, Ontex expects the following: thanks to the momentum of our growth drivers and the effect of the acceleration of price increase utilization, we expect our revenue to grow high single-digit like-for-like.

This is lower than in the first quarter as Q1 growth was helped by a lower comparable and some loading prior to pricing and further pricing could also affect [indiscernible] development. The adjusted EBITDA margin for our core businesses going forward will be affected by input cost inflation which is expected to increase further sequentially as of Q2 to reach around €200 million for the year versus 2021.

This is higher than the €160 million to €170 million we expected in February. We will continue our cost reduction program to generate more than €60 million savings and roll out further price increases throughout the course of the year.

Taking all these elements into account, we expect our EBITDA margin to improve in the second half of the year compared to the level of the first quarter. We continue to manage the discontinued emerging market operations and expect adjusted EBITDA margins to recover further during the course of the year.

Cash flow discipline will continue and we would expect CapEx to increase gradually to around 4% of revenues. Before going into Q&A, let me conclude.

Our immediate priorities for 2022 are to increase prices to pass through the raw material cost inflation. We are gaining significant traction and combined with our ongoing contract action efforts [ph], we'll really improve margins as the year progresses.

This is a top priority for the company. Regarding divestments, we are making good progress.

We have received several nonbinding offers and due diligence is progressing. Thank you for listening.

Thank you, Esther and Peter. We'll now pass over to the Q&A.

[Operator Instructions] Operator [indiscernible].

I have then two questions, please. First is on the discussions with AIP, as confirmed yesterday.

Yes, to what extent is your own strategy execution with regards to emerging markets potentially derailed by these discussions? Can you maybe offer a bit of light whether the scope of an AIP deal would be the full Ontex or only the core markets?

Any thoughts on that would be helpful. That's the first question.

And the second one is, yes, with inflation on raw materials, et cetera, continuing, can you maybe elaborate on how you structure contracts if you renegotiate them? Do you try to build in -- and do you succeed in building in some additional flexibility or some indices, clauses or formulas, et cetera?

Any thoughts on that would also be helpful.

Good afternoon, Wim. Thank you for your questions.

Let me address the first one on the news, on the press related to our discussions with AIP. I confirm that we have engaged in preliminary discussions with American Industrial Partners with respect to a possible transaction that might or might not result in a business combination with AIP's portfolio company which is called Attindas.

I need to say that the discussions are at an early stage and no agreement has been reached as on the structure or terms of any possible transaction. To your question on does this impact our strategy, the answer is no.

We continue to focus and execute our strategy. As I said before, priority is continue with the very strong growth that we've seen and the momentum that we've seen in Q1, continue with the savings program, accelerate our pricing in the market to fully offset inflation and continue with our [indiscernible] program.

So at this point, there is no impact and I don't expect any impact in the near term. To the second question on the inflation, on road maps and whether this -- we are changing the contracts and are negotiating.

I think we are talking about maybe two different type of contracts, on the one hand -- or maybe right now three different type of situations. On the one hand, we have the branded business which is the business that we have in the emerging markets.

In this case, you basically only have a supply contracts. We increased prices.

And typically, we have a notice period that could go between 15 days and 60 days. And that's why we see very, very strong pricing in the emerging markets because basically the amount of time needed to execute the pricing increase is much shorter.

Then we have retailer for the partner brands. So retailer brands and private label, where we have a different type of contract.

And basically, it means that we need to renegotiate the contract. So it takes a little bit longer but we have done it and we will see significant prices flowing through the P&L in Q2 and then beyond.

What we are doing is, yes, we do have price escalate -- raw material indexes escalators in some contracts. And as much as possible, we are trying to integrate those.

But it is not the case in the majority of the contracts. So what we are doing is agreeing with our customers that we will continue to price in ways depending on the evolution of the raw materials.

And our customers understand the need of increasing prices driven by the raw material situation. And basically, we will go in ways as the situation evolves.

And then lastly, we have the institutional business which typically is a business that we have with governments or mental institutions. And there, it takes a longer period of time because very long-term contracts and you are talking with the governments or with mental institutions.

So it's just longer. We are also increasing prices there but it just takes a little longer.

In terms of the contracts that you have renegotiated, you mentioned will be flowing through in the next few quarters, what are the price increases in percentage terms that you've already agreed on those?

So the question is what is the price increases that we have agreed in the renegotiation of the contracts. I cannot give you a specific amount but I can say that the pricing that we are planning together with the cost efforts, the objective is to fully offset inflation.

As I said before, there is a time lag between the raw material input cost increase that we see and the time needed to execute all our costs and pricing efforts. But I am happy with where we are.

We have been working on the renegotiation of the contracts since late last year. And we have started seeing some pricing that flowed through in Q1 and we will see more throughout Q2, with the full impact of that being at the end of Q2.

And then as I said, we will plan additional ways as the year progresses based on the situation with the raw materials. Now the overall impact on the margin is also going to be dependent on volume development.

And here, it is difficult to predict because on the one hand, there is a total elasticity to pricing. At the same time, we are talking about selling necessary products.

So if you increased prices, probably it's not going to provoke our next consumption. We could see a shift from more premium brands to retailer brands which we will benefit from.

And at the same time, we do see still a supply chain that is highly disrupted. And all that is a little bit challenged and the reason why we are not able at this point to give a specific outlook on margins.

I understand why you don't want to give maybe specific figures. But maybe to ask the question in a different way.

Are the price increases that you're negotiating today in excess of the 2% you're seeing in your core markets in Q1?

Yes. Definitely and significantly yes.

I'm sorry, to be clear that's for your core markets because I know for the whole group, they're higher. So that's for your core markets, they are in excess of 2%?

Yes. For the core markets, yes.

And we will continue to price with additional pricing in emerging markets because of the additional inflation and Forex. But yes, in the core markets, we will see more pricing.

Okay, got it. And then, the second question I had is just in terms of your cash flow disclosure.

Are you able to say what the working capital outflow was in Q1? I know you can sort of back solve it.

But it just be useful to know what the actual number was.

I'll take that one. I mean, I'm not going to disclose on a quarterly level, the actual working capital but I can give you a bit more flavor so you can do some thinking yourself.

As you've seen on the net debt, we've seen a significant increase, of which the majority is coming from working capital. And it's essentially the vast majority of that increase is coming from the high sales that we've seen in the month of March.

You've heard Esther explain that we had some pre-price loading and that showed especially in March in front of the pricing that is coming later. So that's a higher -- high receivables is really the majority of the €108 million.

The second thing we've been doing is taking -- markets and where we can, we have been taking positions to secure higher safety stocks to secure supply, which, to some extent, of course, has helped to deliver the top line that we have. But of course, that has not been helping working capital which is one of the reasons that we say that we feel that we are going to normalize that as we move forward.

And we will continue, obviously, to have a strong focus on that in the months ahead.

I'd like to come back to the price increase question, if I may? Obviously, you've explained why pricing in emerging markets has come through much sooner than in the core.

Would it be reasonable to assume that the order of magnitude of pricing you've achieved in emerging markets is ultimately the level of pricing you will achieve in core or not?

If -- that's a big assumption. So first of all, in emerging markets, we have two situations.

So we had to price for inflation and for Forex. You need to consider that we have a sizable business in Turkey and the Middle East and that business has been highly impacted by devaluation of the Turkish lira.

So typically, in these markets, you price for both Forex and inflation, while in Europe, we are pricing for inflation only.

Okay. If we were to strip the Forex component out of that, would it be reasonable then to look at the few pricing that you've been able to achieve in own brands?

And I'd assume that you can also achieve the same pricing in your retailer brands and the white-label?

I don't think we can compare because also the level of inflation is different in Europe versus emerging markets. We see a spike on some input cost driven by the conflict that we have in Russia and Ukraine.

So I think the two variables have a big impact. What I'm saying is that between pricing and cost, the objective is to fully offset inflation.

And then, of course, I mean, we have different competitive dynamics there. For me, top line is very critical.

We need to continue with a positive trend but we are prioritizing pricing versus volume but we need to be aware of the competitive dynamics that we have in different regions.

Esther, can I clarify? When you talk about inflation, you're talking about general price inflation in emerging markets rather than specifically input cost inflation.

Is that correct?

It is both. It is input cost inflation but there is the general inflation like wages and others that are greater in emerging markets.

But I'm talking about both.

Okay. So is it reasonable then to assume that if inflation in Europe starts to run at 7% to 10% levels, you could achieve that kind of level of pricing in Europe as well?

Yes, sorry, inflation is 7% to 10%...

Yes. I mean, if you look at the latest inflation readings in Europe -- in the Eurozone, there are, I think seven or above?

Yes, I don't think we have seen -- together we have seen much more than that really. Because on the one hand, you have the other inflation but our raw materials increased around 20% year-on-year.

So you have the other inflation plus a situation in raw materials that is more accentuated. I'm not going to give a specific number right now but what I can tell you is that our target is to try together with the cost efforts, to offset -- to fully offset inflation overtime.

So that when the situation with the raw materials -- so when inflation will normalize and the situation with raw materials will stabilize, we can exit very strong because all the structural changes that we are doing to reduce the cost and to improve the mix and to grow into the more profitable categories that we say in the P&L.

Okay. And then my second question on the AIP, the notice you provided on AIP yesterday.

You mentioned that the -- it was a business combination. Can I clarify that, that business combination is AIP looking to buy Ontex rather than a sort of a merger of two equals type thing?

I can't tell you that, the conversations are ongoing, it's very early but the combination could take any shape. So at this point, we don't have a defined path on how that combination could look like.

My first is on cash flow and the leverage outlook for the year. I guess, excluding any potential proceeds from the discontinued operations, I guess the net debt to EBITDA could be [indiscernible] over 6x for the year.

And if this does happen to be the case, are there any additional finance charges associated with that? And related to cash flow and leverage, can you give us a bit more of a steer on the working capital expectations for the year?

Is it a case that inventories effectively largely grow in line with the broader inflation rate you're seeing for your commodity basket? And any kind of scale for the year would be helpful.

That's my first question. And then, my second question is on the trade loading effects for the core business when it comes to your volume growth this quarter.

I think there was a partial boost there. Can you help quantify the magnitude and how you're thinking about that?

Unwinding -- I'm guessing you unwind this largely in 2Q but interested to your thoughts.

Okay. Thank you, John, for your questions.

I'm going to answer the second one and then I will ask Peter to comment on the first one. So on the trading loading effect, as I said, we are very determined to accelerate our pricing and that is coming in Q2.

We had to put some pricing in Q1 which is definitely not enough. So we need to accelerate.

And yes, typically, when you agree with the price increases, there could be some loading. So if you talk about the core market and we think about the 13% growth.

2% is pricing, so 11% is volume. And there is some mix also there, like around two points.

So out of the like-for-like volume 9 points, I would say that half is structural volume increase which is driven by contract gains and strength in certain categories, like advance and [indiscernible]. So if you would put everything together, out of the 13 points, you would probably remove four or five points for the loading, I would say.

On your first question, John, on working capital, it was quite broad. Our working capital, cash, a bit more flavor on the outlook and the governance.

First of all, as you know, we have a waiver and the financing is in place. So there's no short-term pressure on the results as a consequence of the leverage which also means that we have the operational space to execute our restructuring plans.

And you can see that the underlying drivers of our plan, the costs, the turnaround of the sales is coming in and we actually have increased our view also on the cost savings for the year. So we're confident.

I am confident that we are delivering on what we need to deliver to be in that. Working capital, specifically in that, I don't want to over interpret the results of one quarter, because it's -- as I explained already in one of the previous questions, we had a short-term spike because of the safety we're taking on the inventories and because of the peak sales we had on the end of March which we believe is going to normalized to the later end of the year.

So in terms of outlook, I mean, it's like with EBITDA. The free cash is going to follow the EBITDA trends over the year and we're pursuing all the initiatives that we are to drive and we are going to price for additional inflation and inflation as it comes.

One thing; there was no additional cost. You asked for the cost, I remember now.

There's no additional cost linked to the leverage that we're going to have or the waiver.

I have more than two questions but I will try to limit them. One, could you remind us of the service levels in this quarter?

Your volumes were quite up but what about the service levels, have that also now recovered to the required levels of, let's say, 95% or even more? That's the first question.

And in your speech, as you said, that you had several offers for the emerging market activities. Are they then one, offers for partial or part of that emerged markets?

Or is it offers for the entire block? And maybe given where you are, your margins are today?

Do you still believe that you can reach the target margin of your strategic plan next year?

I'm going to ask Peter to talk about the service level and then I'll answer the rest.

Yes. On the service levels, we're not disclosing service levels by quarter but I can tell you, we are improving.

So it's on a positive trend month after month. Having said that, there's industry setbacks that are happening.

So it's each time a little bit of step back and then moving back up. So recently, we're much better than what we've disclosed before.

But of course, the impact of the events in Russia have created a few more shortages of which, again, we're recovering. But month after month we are stepping it up.

And we can see that, that is happening across the industry where we do that.

Okay. Then I'm going to answer to the -- you asked about the several offers for emerging markets and whether we are looking at selling this in a solution or in bundles.

I can tell you that we have three programs ongoing. We are having offers on the three programs.

And we'll see. I think there are different types of offers and will evaluate what we have.

I think a few [indiscernible] as we speak and we'll come back when we have [indiscernible]. I think -- I don't know if I understood your question.

I think you were -- the question was related to considering the current margins in Q1, whether I am still confident on the target for 20 -- for the midterm target, correct?

Yes, correct.

So as I said, the market remains volatile and challenging. And then the geopolitical environment has worsened the situation.

We had -- we talked about three targets for the midterm. Top line, 2% to 3% growth.

We are fully on track. Actually, I think that things could be better.

Margin improvement, we are on track on the components that we control, on the growth, on the mix, on the savings, while inflation remains very volatile and has a huge impact. However, in the -- so the challenge here is how inflation is going to evolve and how fast versus the speed with which we can compensate and offset with the priorities that we have which is the growth and the savings.

But in the long run, I do see those targets are feasible. And then, the last commitment was on the leverage and reducing the leverage to below three and then [indiscernible] probably on two.

And as I said, we are making good progress on the divestments. The EBITDA will improve.

And as usually, the cash flow will follow the EBITDA. So I do believe that we will get there.

Okay. Maybe one last question on the cost of goods sold.

The dollar is up quite substantially to the euro. And as currencies stay where they are today, what would be the full year impact and I think that should be the case as you are hedging, what would be the full year impact on your cost of goods sold?

Or is that included in the €200 million?

Yes, we gave some guidance in our outlook about the cost of goods that we go from the €160 million to €170 million. On the core, it will be a €30 million additional inflation.

Part of that includes indeed the impact of the U.S. dollar appreciation in that number and that's also part of the pricing plans and intentions that we have.

It's actually [indiscernible] from Barclays. I had a couple, if possible.

I was just wondering, you've disclosed the adjusted EBITDA. Can you tell us what the underlying EBITDA was i.e., what were the add-backs?

And then secondly, just to go back on the working capital. Should we expect working capital to reverse in the second quarter?

More importantly, should we consider your 5.7x leverage as a peak?

I'm going to ask Peter to answer quickly.

To be honest, I have not understood the first one. So can you clarify?

You disclosed the adjusted EBITDA. I'm just wondering what the actual underlying EBITDA was, i.e., what were the add-backs?

Okay. We're not going to answer on that one.

I think that question is too far for this quarterly update. So let me get to your second question on working capital.

As I mentioned earlier in the call, we do expect to normalize. I'm confident that some of the one-offs that we've seen on net working capital this quarter is going to normalize over the rest of the year.

So we will see a reverse of that going forward. I will not comment further on the actual leverage.

But as we said, our EBITDA is going to improve as the year moves on. And we will be very cash focused over the next quarters to keep that under control.

Thanks for squeezing me in. So I have a couple please.

So first on the consumer behavior. Could you comment on what have you noticed in Europe as the consumers are feeling the pressure of inflation?

And do you think that you will be beneficiary of consumers running in a -- pulling it down to private labels [ph]? And my second one is on institutional contracts.

How much have you already renegotiated since H2 last year and how much are remaining?

So thank you for your questions. So on the consumer behavior, you would have you -- especially in the mature markets, where -- like Europe and North America where private labels have [indiscernible] purchase because we are talking about, in general, a market share of around 30% on the total market.

We are facing unprecedented times. We haven't seen this level of inflation for many, many years.

So it is difficult to predict what is going to happen but everything would point to the fact that consumers will lose purchase power and it is happening as we speak and that they will become smarter and look for lower-end products or lower cost products, looking for the products that can give a good level of performance and quality at a lower cost. And then this is the value proposition of private labels.

So, I would expect a shift which is -- we are not seeing yet happening in the market but everything is pointing that, that could happen. And of course, we are in a very good position to benefit from that continuing our presence in that market.

And the second is on institutional contracts that to be honest, I cannot disclose. What I can say is out of the three type of customers that we have, this is the most challenging.

The contracts are much longer term. Typically, given -- it's not private institutions, they very often are public institutions but we are renegotiating every single contract, including this group.

This group is going to take a little lower compared to the rest that is coming now.

We'll have one more actually and then we'll stop after that, if you're okay.

It's Fernand de Boer again. I have actually a follow-up question on the pricing.

I heard yesterday that actually retailers are taking up the price of private label actually even more than some of the A-brand product producers and not to say that it is specifically for diapers. But what do you see in the stores, what do you check on the pricing levels the retailers are charging to the customers to their consumers?

Okay and thank you for the question. So typically how it works is that retailers wait for the A-brands to increase prices and then they follow.

Typically, there is a difference on pricing, it varies a little bit category by category but they want to position their own brands at a certain difference versus A-brands. So that's why it takes a quarter, an extra quarter for private labels with the move.

As you probably saw some of our publicly listed peers published their results, they are driving a similar level of pricing that we are as a company but these are business mostly branded business. That is already visible in the shelves and private labels are following and latest then -- the recent market data that we have, we see a pricing already coming also on private labels.

But I expect more in the quarters to come.

So, thank you for your questions. And with the geopolitical and input cost environment, have created new challenges to us.

I do not want to lose sight of the performance of the team Ontex [ph] delivery, what we set out to do 12 months ago. We have returned to top line growth, we are increasing prices and we are delivering significant structural cost savings.

And finally, we are making good progress on divestments. Thank you for your time today and I look forward to meeting some of you in person in the coming days.

Goodbye.