Ontex Group NV (ONTEX) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us today. I'm Geoff Raskin from IR. I'm pleased to have with us Gustavo Calvo Paz, our CEO; and Geert Peeters, our CFO, to present the preliminary first half results. Before that, let me remind you of the safe harbor regarding forward-looking statements. I will not read them out loud, but I will assume you will have duly noted them. I also would like to point out that the figures presented are preliminary and not audited and that you can expect the final audited and more detailed figures to be published on July 31 as originally foreseen. With that cleared up, Gustavo, over to you.

Thanks, Geoff. Results in the second quarter were disappointing. The geopolitical environment has impacted consumer demand and thereby our retail customers. These trends, combined with some temporary supply chain inefficiencies resulted in significantly lower-than-expected volumes for the second quarter and for the first half year. This impacted our revenue for the first half year negatively by 4% like-for-like, including negative price carryover from 2024. It is important to remember that we had forecasted 3% to 5% revenue growth and built out plans based on that. Lower prices and volume during the first half resulted in lower adjusted EBITDA. This impact was magnified by the lower cost absorption with our operating structure set up for growth and much of the costs fixed in the short term. Adjusted EBITDA, therefore, came down by 22% and the margin by 2.2 points percentage to 9.8%. Lower EBITDA, combined with continued investments in our cost transformation and growth plans resulted in a EUR 40 million free cash outflow. We don't see the impact of these investments in today's results, but this will benefit us significantly. We reduced net debt with the divestment of the Brazilian business in April. With lower EBITDA, the leverage ratio crept up to 2.7x, however, but remaining well below our self-imposed 3x threshold. While these numbers are disappointing, the challenge we faced during H1 convinced me of the importance to accelerate the execution of our strategy to make Ontex stronger. But before elaborating, let me pass you over to Geert for a more detailed review of H1 results.

Thanks a lot, Gustavo. On Slide 4, you will find the revenue bridge showing the 4% revenue decrease. The carryover from the low seller price in 2024 represented EUR 9 million or 1% with an impact on the three product categories. Volumes came down 3%, including mix effects, representing EUR 27 million and which overall is in line with the drop in consumer demands for retailer brands. Let's then look to the three categories. Baby Care represented the biggest drop, EUR 30 million. Normally, with weaker consumer demand, retailer brands performed relatively better. But in H1, they faced heavy promotional activity by branded players, leading to high single-digit decline, both in Europe and North America. Moreover, Ontex was affected relatively more, being exposed to regions where these effects were more pronounced. For example, in the U.K. and Poland. And some customers also destocked magnifying the effect. That being said, our gain/loss balance was positive and contributed to add volume. As to Feminine Care, sales were 5% lower like-for-like, representing the price decrease and a EUR 6 million volume and mix drop. While consumer demand for retailer brands was overall stable in Europe. We faced inefficiencies in our supply chain and particularly the Segovia plant outage due to a water flood and unavailability of packaging materials played a role here. We participated in the continued growth of Adult Care by 3% like-for-like, with retail growing at a higher rate than the more stable health care channel, where we have a strong position. We could have grown sales further in retail if additional capacity had been online. That capacity is currently being ramped up. Let's move then to EBITDA on the next slide. On the EBITDA bridge, you can clearly see the EUR 20 million impact that the revenue decrease had on adjusted EBITDA with about half coming from the direct impact of the price carryover and half from lower volumes, including the effect of lower absorption of fixed costs. Our cost transformation journey continues. And this half year, we generated EUR 34 million in net savings, creating a 5% efficiency gain on our operating base. We could have done more, had volumes been higher. These continued efforts allowed us to compensate most of the cost increases. Then raw materials. These costs rose by about 4%, which was largely expected and this is across inputs, but especially for fluff, where the index has recently reduced and especially in euro. Other operating costs rose by about 8%. Half of that is linked to inflation of salaries and the cost of logistics and other services. The other half is linked to temporary costs, some caused by supply chain inefficiencies as we made efforts to mitigate these, but also the anticipation of the ramp-up in North America to supply additional contracts, which will start in the second half of the year. And also the impact of U.S. tariff mitigation costs. On the positive side, SG&A costs reduced as we adapted it to lower volume level. Let's move now to the differences between the first and the second quarter on the next slide. You'll find here the same year-on-year adjusted EBITDA bridge, where we split the different components between the quarters. Quarter 1 is in light blue and quarter 2 in dark blue. The negative price carryover was mainly a Q1 effect and is fading out in Q2 and going forward. The volume decrease impact, while already visible in the first quarter was more pronounced in the second quarter, contrary to our expectations, mostly as customer destocking exaggerated the effect and the supply chain disruptions weighed heavier on the quarter. The raw material cost increase was also already visible in the first quarter, but grew in the second as we anticipated. As already mentioned, these prices are coming down at this moment. Other operating costs went up more in the second quarter due to temporary inefficiencies and mitigation costs, for example, related to the Segovia plant outage. And while our cost transformation program delivered more in the quarter, even with lower volumes, these were not enough to offset the cost increase in Q2. This explains why the Q2 EBITDA is down 37% as compared to last year and is lower than the first quarter. Then we go into the cash flow on the next slide. On Slide 7, you can find all the cash elements, starting with EBITDA of EUR 93 million, including EUR 6 million contribution from the discontinued emerging markets. Working capital and social liabilities were slightly up mainly due to phasing. But if we look to inventory levels, they were at the same level as end '24 despite lower sales volumes, mainly due to inefficiencies and delay in aligning production with lower sales. Together with inefficiencies being resolved, we expect inventories to come down in H2 and be sufficient to support sales growth. Sales and taxes represent EUR 13 million and EUR 10 million, respectively, and CapEx was EUR 45 million, representing 5% of the core revenue. As we highlighted before, this higher level supports our maintenance growth and transformation activities and will create important value and savings in the coming years. This led to an operating cash flow adjusted for one-off elements of plus EUR 18 million. But then, we have also financing factoring and one-offs. So the cash out for financing was EUR 26 million, primarily interest payments, including the last coupon on the refinanced high-yield bond. And use of factoring facilities was reduced by EUR 9 million and came down together with the lower sales. And then, we have one-off payments of EUR 23 million, primarily for the restructuring of our Belgian operations, finalizing the closure of the Eeklo plant in Q1 and for which we took the accruals last year. Combined, this led to a negative free cash flow of EUR 40 million, which we expect to reverse in the second half of the year. And then we, of course, also received EUR 101 million net proceeds, mostly from the divestment of our Brazilian business in early April. This includes also the escrow, which was released end of last month. And note that this amount is still subject to the usual balance sheet adjustments and some transaction costs. In April, we also finalized our EUR 1.5 million share buyback program to cover for long-term incentive plans. The program started in December '24 and totals EUR 12 million, of which EUR 11 million in '25. On the next slide, you can see how the net debt came down by EUR 50 million. As just -- and also contains non-cash reduction of EUR 10 million. This latter is related to the divestment of our Brazilian activities containing some leasing. The leverage ratio increased slightly from 2.5x to just below 2.7x over the first 6 months with a reduction of the last 12-month EBITDA. We remain well under our own internal limit of 3x and as well under the 3.5x covenant threshold. As you are well aware, we refinanced our bonds, repaying the outstanding EUR 580 million bond a year ahead of maturity, replacing it with a newly issued 5-year EUR 400 million bond. The delta was covered by the cash proceeds from the Brazilian divestment and the remainder by drawing on our EUR 270 million revolving credit facility. On the latter, there's still about 1/3 capacity, which combined with EUR 146 million cash gives us ample liquidity. With this, I'll pass you back to Gustavo.

Several adverse events affected our first half results. Let me focus on how we expect things to change in the second half of the year. The 2024 price carryover has faded out, and we do not expect significant sales price declines going forward. We have new contracts starting in North America, but also in Europe. Thanks to our positive contract gain/losses balance, and we have further prospects going forward. This will impact in the second half of the year. We expect the customers' destocking to be largely over after quarter 2. We have new capacity coming on stream, allowing us to participate fully in growing product categories such as in Adult Care, but also others. Next, the Segovia plant outage as well as the packaging materials' shortage is over. This should facilitate recovery of revenue with EBITDA benefiting more as the fixed cost absorption effect, which works against us with decreasing volume will turn in our favor. On the cost side, the negative temporary mitigation measures will fade out, both for the supply chain inefficiencies and the U.S. tariffs. The anticipated cost for the production ramp-up in North America will be absorbed as volumes increase there in the second half with new contracts. And we expect new raw material price to decrease as can be seen already in the evolution of the indices and helped by a weaker U.S. dollar, which has a positive transaction effect. The higher EBITDA will benefit free cash flow as well as inventories, which we expect to reduce as volume pick up and efficiencies. How does this all add up for the second half? On the next slide, please. The expected improvement from EUR 86 million to about EUR 120 million in the second half is expected to come half from revenue and actually entirely from the volume increase for the reasons I already mentioned, while we anticipate that consumer demand remains soft as in the first half. The other half is from the reduction of the cost with 2/3 of that coming from continuous strong delivery from our cost transformation program, which will also benefit from growing volumes. The rest comes from a lower raw material price versus the peak in the first half of the year. Operating costs are expected to be largely flat as the fading out of the temporary exceptional costs I mentioned are expected to offset the continued inflation of salaries and services. With this improvement, we expect the EBITDA margin to recover from just below 10% in H1 to about 12% in H2. Adding up both brings me to the full year outlook on the next slide. Revenue for the year is now expected down by low single-digit like-for-like, which is based on a recovery from a 4% year-on-year decrease in the first half to a stable year-on-year performance in the second. Adjusted EBITDA is now expected in a range of EUR 200 million to EUR 210 million, which represents an improvement from EUR 86 million to between EUR 114 million and EUR 124 million in H2. Free cash flow expected breakeven, recovering the EUR 40 million outflow from H1. And all this will bring back our leverage to about 2.5x at the start of the year. Let me finish with, while the first half of the year has been challenging, I would like to share with you the bigger picture of our transformation journey. In the past 3 years, we have made significant progress to improve the foundations of Ontex. Our balance sheet is now healthy, thanks to the refinance and to divestments. We have significantly improved our innovation pipeline in the last 3 years. We are in the middle of a major step-up in terms of operational efficiencies, improving our footprint and our portfolio. We continue growing fast in North America, and our company culture is shifting towards being a leaner, more performance-driven organization. While our journey is not yet over, significant progress has been made and it's critical to keep executing our strategy to create long-term value for our shareholders. More than ever, I'm committed to successfully complete the transformation of Ontex. Thank you.

Let's now move to the Q&A. Before that, can I just ask you to identify yourself clearly and limit your questions to two, please. Over to the operator.

[Operator Instructions] The first question comes from Charles Eden from UBS.

Just on the EBITDA bridge for the second half. So on Slide 10 of the presentation, I don't know if it's meant to be at scale, but it looks like you're getting, sort of, a volume mix uplift sequentially of about EUR 10 million, maybe EUR 11 million, which would imply probably EUR 100 million step-up in revenues, assuming a sort of 10% margin. Is that all North America? Or are you baking in a sequential improvement in the underlying European market in the second half? I'm just trying to understand how much of this is, because you are confident on the North American contracts coming in and maybe you've even started delivering and therefore, you have more surety? Or is there a genuine risk that if the European market doesn't improve, we get to Q3 and you're going to have to cut this full year guidance again?

Yes. All right. Thanks, Charles, for the question. The -- Answering your question is a mix between North America and Europe. We have new contract gains in North America. And also, we have new contract gains that we gained in last year for starting now delivering in Europe in the second half. So also includes new contract gains in Europe. And also, we have some more prospects that they are not into the equation today, because there are good prospects, but they are not in the equation. And all in all, we have assumed that the market trend -- the market trends of the first half will continue that type of slow and soft market in the second half of the year. So we are not assuming a change in the market trend and growing market. There is also an effect in that growth that it comes from a destocking from customers that has happened in the first half. And as you understand, destocking is a onetime destocking. And now, let's say, sell-in and sell-out, it should be much. It should not be a difference. So we are not assuming continued destocking, right, and reducing stocks. So answering again, it's a mix between North America and Europe. And Europe also is important in terms of the gain and losses that we have for the second half. I hope that I have answered your question.

Yes, if I could just ask a follow-up and just kind of linked to that. Just when you talk about revenues being in line with the second half of '24 for this year, could you maybe help us understand how you're expecting that to break down between Europe, which I guess you're implying is down and North America up? Is it North America up 20% and Europe down sort of mid- to high single digits? Is that how I should think about it?

Yes. So North America -- we expect in North America with double-digit growth and slightly down, single digit down in Europe.

The next question comes from Usama Tariq from ODDO BHF.

This is Usama Tariq from ABN AMRO, ODDO BHF. I have two set of questions. Firstly, being on CapEx. Could you explain to me if the Belgium payment has already been done? And what is the outlook for the one-off CapEx by the end of this year? And secondly, on Feminine Care, I believe I read on the Slide 9 that you expect supply chain issues to be resolved. Is that with concerns to Feminine Care?

I will take the first one on, which is on our non-recurring expenses. So if you look at the first half of the year, this is mainly related to the closure of Eeklo. We announced it earlier, we did actually the closure before Christmas, but the redundancy costs and the final cleaning of the factory was in Q1. So most of that EUR 23 million is all related to the closure of Eeklo. On Buggenhout, you know that we have provisions outstanding. And we expect in Buggenhout that about half of the amount will be in the second half of this year and half of it will be in the first half of next year. So take as an estimation for the rest of the year, about EUR 10 million to EUR 15 million that we still expect as non-recurring costs.

And that would be...

I'll take the second question up.

Sorry, I didn't understand what you said. Can you repeat?

So I said that, the EUR 10 million to EUR 15 million would be on a half year basis?

Yes, on a half year basis, it will be more -- yes, to the lower end between EUR 10 million and EUR 12 million, something like that. That's what we expect for the second half of this year. So that means, also lower than the first half of the year, which is also an explanation why we believe the free cash flow in the second half of the year will be better, because proportionally, we have much more non-recurring in the first half than the second half.

And on the Feminine Care?

Moving on your Feminine Care question, the challenges that we have in the first half on the supply of Feminine Care has been solved. And those challenges were, let's say, from two fronts. One, we have an unfortunate event of a flooding of a big rain in Segovia in our plant, which has a big provoke, a big disruption on the supply chain of Feminine Care product that in Segovia, we have a strong supply production of Feminine Care there. And then, also from sourcing of packaging for Feminine Care specifically, which affected some of our lines in the sourcing of packaging that also has been resolved. And those two challenges has been resolved. So we are not expecting any other -- we are not -- today, we are not facing any challenge in Feminine Care sourcing.

Our next question comes from Karel Zoete from Kepler.

I have two questions. The first one is with regards to your H2 guidance, you guide for no further deterioration of pricing there. I was wondering what's the visibility you have on price realization in the second half of the year and particularly later this year, because here the promo intensity was a bit of a surprise, I think, to everybody in the first half. So what gives you the confidence that promos and net pricing will be less severe in H2? And then, the other question is on the payback of Belgium, because that's been a big restructuring with almost 400 employees within the company. Are those benefits now already visible in your cost lines? Or is this more something that will be visible in the second half of the year?

Thank you for your questions. On the -- Today, most of this pricing, negative effect that we have in H1 are carryover from 2024 pricing, because we have this in the second half of 2024 and not in the first half of '24. So when we compare first half of '25 versus first half of '24, you can see that difference is price decreasing. The price decrease that we effectively done in 2024, in second half '24, it was related to the reduction of raw material experience in the second half of '23. I know that it sounds like we are playing on the halves, but that's exactly. So there is always a lag. And I'm trying to explain that without being able to write it down in a paper to you, so it's difficult to follow perhaps, but I can keep explaining. But second half '23 raw material decrease made us drew our price discounts in adjustments in the second half of '24, which now compare with our first half of -- the carryover in '25 versus the first half of '24 that was in plain prices, that's why it's the negative effect. So that carryover has fade out already. It's not there anymore. So to your point, I guess that your question also is related to, if we are expecting a more price intensity or promotional activities from A brands. I think that, yes, probably it will continue some. But we have to -- if I go a little bit more detail without mentioning any type of brand, we do know which is the brand, the A player in Europe, very clear. That A player in Europe closed their balance sheet in the first half of the year, right? So they have a close in the June 30. So the importance of bringing back some market share into their results is relevant. So normally, what we have seen in previous year is that there is a very intensified promotional activity, and they were coming from a low market share. So it's intensified in the -- what we call our first half, their second half. So we are expecting activity from the A brand. We are not saying not. So it is expected, but not as intense as in the first half for us. I hope that I answered the question, Karel.

Yes. Yes.

Then I go to the second question on the Belgium footprint. There, we have, on one hand, the closure of Eeklo and the other hand, the transformation of Buggenhout. We can confirm that the business cases, as we explained a year ago, they all have an attractive payback of less than 3 years. And for us, the business cases stand. So that means that we're doing the work in line with the business cases. Now when does it kick in, in the results, because that's actually your question, Karel. First of all, on Eeklo, I can say if we report on our cost transformation program, we include the savings of Eeklo. So that means, they have been realized actually. So we have -- we added that saving in the first half of the year. But I have to put a nuance, of course, the first months, we had a lot of cleanup of the factory. We had to move lines. So we had some cleanup costs. We had some inefficiency costs because of that. So the savings, we added them, but there were also some one-off costs. So that's part of the inefficiency that will now -- has now completely disappeared. On Buggenhout, there, we do not yet have the savings. So the transformation is completely ongoing at this moment. The factory, we are completely changing them. And there, it's -- the savings will be more coming in the first half of next year. And there, I should say, we also refer to the -- in the press article, we're working in line with the business case. We're very confident on that, but there are some delays, which are completely related to the fact that some of the equipment we ordered is coming in a bit later than expected, which often happens, of course, if you order equipment. But we're progressing well, and we're still confident to make it happen the first half of next year.

[Operator Instructions] The next question comes from Maxime Stranart from ING Bank.

Maxime Stranart from ING. I hope you can hear me well. Two questions from my end. First of all, I have a hard time reconciliating your guidance for the second half. So you mentioned in the presentation that you expect volume growth of 5% to 9%, stable pricing, but at the same time, you mentioned in your press release that you expect revenue in the second half to be stable. So if you could clarify that first. Secondly, looking at your free cash flow guidance, you've cut basically your EBITDA guidance by EUR 20 million, EUR 25 million. You have cut your free cash flow guidance by a much more -- much higher level than that. So could you elaborate on what would be the building blocks to reconcile that change in free cash flow guidance? That would be all for me.

Maxime, thanks for the questions. I take the first one, perhaps to avoid confusion. The guidance we give is of always as compared to the previous year. So that's the way we look at it. And then, if you -- I think, if you take the bridge on Slide 10 that Gustavo explained where we -- you see the increase of EBITDA there, the volume mix, it's an improvement of H2 as compared to H1. So that's important to know. The bridge we show is to show you how H2 is better than H1, because there are a lot of causes that H1 was lower and that disappear, what Gustavo explained. The guidance, of course, is as compared to previous year. Does that clarify?

Yes, it does.

So actually, it means that in the second half of the year, we pick up to the -- in fact, to the original plan to where we were.

Then the guidance is the full year, right? And then, there's an average of first half and second half. So that's why it looks flat in revenue stable on the full year, but coming from a decrease in volume in the first half and an increase in volume on the second half.

And then on the free cash flow, just to go a bit in the components, the first half of the year, we are at minus EUR 40 million. The second half of the year, we believe to be able to reverse that. That means plus EUR 40 million. Where does that plus EUR 40 million come from? It's, of course, first of all, the higher EBITDA. Secondly, the working capital, I briefly explained also that in inventory, because of the inefficiencies of the first half of the year, we were not able to lower our inventory. Our inventory was stable, and we believe that we can do the sales growth with the current inventory and even improve them in the second half of the year when the inefficiencies fade away. So there's an improvement of working capital in it. And then there is the proportional element, what I said before to one of your colleagues that the non-recurring parts in the second half of the year is lower than the first half. And that's also related to the interest because, of course, with the high-yield bonds, we had our financing fees in the first half of the year. We had the settlement of the interest on the high-yield bond. So that explains the EUR 40 million, of the second half. But then you said that EUR 40 million, it's higher than the improvement of the EBITDA. It's because there are other components in it, like EBITDA, non-recurring. So that's the full picture.

Maxime, if I may, just to clarify again about the revenue. In the second half, we have a volume growth versus the first half and mainly due to new contracts that they are already in, right? Now we are in July, we are already starting with delivering on those new contracts that we have in North America and in Europe. And also, as I explained before, it's not just those new contracts, but at the same time that we are not expecting that they are going to continue any of destocking. So the destocking has been done from the customers. Now we are going to balance our sell-in and sell-out with the customers. Therefore, there is an improvement between H2 on a fact base versus H1.

The next question comes from Markus Schmitt from ODDO BHF.

I have just a question on the -- on your liquidity situation. On Page 8, you say that the RCF is utilized for 2/3. I think you mean that it's -- that is the unutilized part, right? I mean, you have about EUR 180 million undrawn. Is that the right way to read it?

Yes, it's 1/3, which is not drawn. That's how you have to read it.

Out of the EUR 270 million.

Out of the EUR 270 million.

So the EUR 270 million, you have EUR 180 million drawn then. Is that, that is what you say?

Yes, that's what we say.

Okay. I'm just puzzled a little bit. Where is it coming from again? I mean, the pro forma the refinancing, I think you had EUR 24 million -- sorry, in cash -- sorry, in drawn RCF. And now it's at EUR 180 million. What was the delta here again? Or what was the reason for that? Maybe I can get...

What I propose is that, we take that offline, because it's -- there's, of course, a whole mechanics that's causing at this moment with the high-yield bonds and that might -- I think, I have to give a bit more technical explanation on how the repayment is done and it gives a temporary difference in reconciliation. So we can take that offline.

Yes. But then, maybe one easier one. I mean, in cash on hand, it was about EUR 146 million, and you mentioned the escrow. Is that included in the EUR 146 million? Or is that not included?

The escrow is actually paid out from Brazil. So that cash is included, yes. And it has been received, I think, only 2, 3 weeks ago, yes. So it's still there in cash.

[Operator Instructions] The next question comes from Charles Eden from UBS.

Just a couple of follow-ups. So just on the guidance, flat like-for-like-ish in the second half. So you did EUR 945 million sales in core markets second half of '24. I appreciate FX is a bit of a headwind year-on-year on translation. But let's say EUR 9 million -- let's take EUR 10 million of that, so EUR 935 million or EUR 936 million. Midpoint of the second half EBITDA guide is EUR 120 million. So you're basically saying on that math, you're going to do a 12.8-ish EBITDA margin. So I guess, no reason -- is there any reason to think that wouldn't be the minimum you can do in '26? Given if that's the exit rate and you're still going to take cost out, raw materials as you put out on pulp -- fluff pulp are coming down a bit now sequentially. So that's the first one. And then a similar type of question on free cash flow. EUR 40 million in the second half. Okay, we've got to think about working capital, et cetera, as the business grows. But let's say, EUR 60 million, EUR 70 million, is that sort of how you're thinking of? And again, you will guide for '26 at the end of the year, but is there any reason why that shouldn't be the base case? And then obviously, that's sort of implying a double-digit free cash flow yield on where the equity is today. Is there anything incorrect? Or what am I missing in that thinking?

Yes. On the first one, so yes, it's -- we have, of course, in the guidance, a min and a max. So we believe indeed we can be above the 12% in the second half of the year. And yes, we don't give any guidance on '26, but I think it's logical that our ambition is to work further with that figure. And we -- with all the further transformations we are doing, we have the ambition to further improve the margin in the coming years. So that's what I can tell about that one. And on the free cash flow, there, if we refer back on how we reported on it in the past, important to know you will have, of course, your EBITDA level, which is key. On working capital, we don't see that big movements anymore in the future. We will -- we expect to further grow, but we can do it with the current working capital level. Only factoring, of course, will help us a bit because this factoring was coming down now with the revenue, factoring will go up with the revenue. And then important is that towards the future and the non-recurring will gradually fade away, as I told before, we still expect on Buggenhout in the first half of next year, an amount of a bit lower than EUR 10 million probably. That's what still will come, but that's the amount we foresee. And then on the CapEx, as you know, that we always reported that we were having CapEx levels during the 3-year transformation of 5% to 6%, we want to go back to 3.5% to 4.5%. So that's the basis for us for next year, unless we, of course, start up with adjacent activities or really do additional extra growth, because normal growth for us, the normal growth of U.S., it's included. We always told that in the 3.5% to 4.5%, it includes replacement, it includes improvements, and it includes normal growth. If we do, of course, something extra, then it might be we add some CapEx, but then it will come with an attractive business case, of course.

So Charles, if I may add to what Geert, well, explained, we are not going to give a guidance now for 2026, and I'm sure that you are not looking for that. But -- but your intuition, it looks like a good aspiration for us.

The next question comes from Karel Zoete from Kepler.

I have two follow-up questions. To start with the CapEx for extra growth. The way I understood it, is that with the investments you currently do in the U.S., you're able to get to a revenue base of maybe close to EUR 0.5 billion or so. I mean, is that still the dot on the horizon for the coming years or not? And in relation to the U.S. market, you see that private label has been losing quite some share recently, but also that a couple of other players are investing quite heavily in the market, they are Kimberly-Clark announcing a EUR 2 billion investment, First Quality, EUR 0.5 billion. How do you look more strategically at the U.S. market in the medium term with these investments in new capacity? And then the other question, I guess, is on the clarification on cash flow in H2. So part of the cash flow you're going to generate is basically assuming that revenue growth will pick up and then you're going to increase factoring again. Did I understand that correctly?

Okay. I'll take the first question. In the U.S., our investments so far will cover future growth. And remember that we are talking about just Baby Care market. So we can continue double-digit growth with the current investment done in U.S. for Baby Care. If our plans also includes to move on a second category. And in that second category, it will require, of course, investments, right, in assets. But that's a different topic that we will present at the time that we will present it. It's not right now. But answering to you the first part of the first question, which is about, if our investments are covering the ambition on growing sales and is scaling up the business, yes, it is. It is included there. The second part of your question is about the extra capacity that competitors or A brand companies are making, they have announced that they will do in U.S. And that is related to them to the A brands. It's hard for me to talk about that. But not always. When companies are mentioning investments, not always represents adding capacity. It would be perfectly as in any cases in the past, it could be that you are replacing technology or you are doing investments in your footprint. So I cannot talk for the competitors, even though it's A brands. So what I can say about retail brand is that me personally having meetings with the biggest retailers in U.S., all of them, they are super engaged in terms of developing the private label. And they are very, very pleased with what we are bringing to the table, how strategic we are becoming to them in terms of the innovation pipeline, in terms of our investments, our plans for growing in the categories, the experience that we bring from leadership in Europe, how can help them to do the same thing in U.S. So the support from the customers is strong. Of course, that we will need to compete on shelf, but we are doing so successfully today. So we still have -- we are very, very confident on the opportunities and keep growing in U.S. I hope that I answered your first question.

And then on the factoring, yes, that's straightforward the minus EUR 40 million in the first half of the year, we -- yes, the factoring lines decreased with about EUR 9 million. So we went down below the EUR 170 million in factoring lines. And in the second half of the year, when the revenue is restored at the level of end of last year, then typically, because we didn't change anything in our factoring lines, then we go back to the level we ended at the end of the year. So the minus EUR 9 million will more or less be compensated, and we will be part of the positive in the second half of the year.

There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks.

Thank you. Thank you very much for the questions. Thank you very much for making the call for those that attended. And let me close with a message like this weak second quarter, while disappointing, will not derail us from our strategic journey. We are steadily progressing and deliver results step by step. The reshaping of our portfolio and the strengthening of our balance sheet have been largely realized. The innovation pipeline has been strengthened and will continue to deliver. Our business in North America has demonstrated fast growth on our pursuit of scale, and we have taken major steps towards best-in-class operations. These structural changes will gradually improve our resilience to market fluctuations. Thank you very much, and see you soon.