Q3 2020 Earnings Call
[music].
Good morning, Ladies and gentlemen, my name is Maria and I'll be your conference operator today.
At this time I would like to welcome everyone to Cody third quarter fiscal 2020, <unk> results conference call.
As a reminder, this conference is being recorded today may 11th 2020.
On today's call appear on the city, Chief operating and Chief Financial Officer.
<unk> Chief Executive Officer.
I would like to remind you that many of the comments today may contain forward looking statements.
Please refer to Cadiz earnings release, and the reports filed with the FCC, where the company list factors that could cause actual results to differ materially from these forward looking statements.
All commentary on like for like net revenue reflect the comparison of the business at constant currency in the current and prior year, excluding the impact of acquisitions and divestitures.
In addition, except where noted the discussion of our financial results and our expectations reflect certain adjustments I specified in the non-GAAP financial measures section of the earnings release.
You can find the bridge from GAAP to non-GAAP results and the reconciliation tables in the earnings release.
Ill now turn the call over to the city.
Thanks.
And good morning, everyone I'm working through the.
[music] third quarter conference call.
Okay, Cookie Oh, let's see school fees grew 20.
[music] together with.
In London, and we're very happy doors.
Yes, so deep.
Exciting Conference Conference call.
Before we start and <unk>.
Neither of the page.
I just would like to two funk cookie teams for what they have done than what they have demonstrated for that that's true.
The best few refund north no.
Beyond their hard work to handle the situation from a decent standpoint.
These crazy that's been the opportunities for.
Many associates at Cookie to take all contribute to many initiative, which illustrates a the rule, we walks and we try to out of India and very much.
We have been producing I drew I could do you can sanitizer in 12 of our plan intend to from countries, including in France, UK, and Germany medical and in the U.S. and we have done they tended to frontline healthcare workers all brands.
On the other end up being done they can globules and capture shenqiu to local hospitals and everywhere in the group a universe really phones have been established true if that's true ups cookie.
To work the contributes to or what has been a huge so either if you. So my my main take your where in fact over the past a few weeks ease the great commitments. The energy under 30 day, IP, which has been sort of trend by your associates and before we took of what's a wheel bearing fruit and what we are building I just want keeping.
Publicly thank all of them on each of them for Fabio.
Now moving to the to the following page.
He.
This is a summary of your upcoming cool and and relief.
As you have seen.
With a read the press release, we supposed to you were not seen.
Something which is far more than just earnings today.
The treasurer.
Important initiative, which oh agreeing to accelerate the transformation of a of cookie.
The first and then he's obviously.
The announcement of a strategy.
Partnership, we though we scale.
That's a major step we've a $750 million Richmond prepare chess subscribed by kick out.
Improving immediate youre already pretty seamless freeway and at the same time the signature of name or you for exclude these talks to be have a week ago, almost 64 keep out in the sheep and professional have you can read that have for an enterprise value, which is basically a refresh.
Team precursors conditions at 4.3 billion.
Billion barrels for 12.3.
Times, She school 19, they'd be D.A. Frist group, which does not include Brett you a importantly.
The second the sick on the demand.
He's a the delivery of a like for maintenance revenues, which are down in Q free by 20%, then I think thats wise.
I admit that's clear a few few weeks ago, but.
But we just sold a bridging de leverage we will come back on on that and that's been for has pretty much a call to action and so we are announcing today occupancies and to reduce Oh seeks goes days by 700 millions it off.
All 25% to make sure in fact, we have to write a cost structure and we adapt to the new and garments Fastenal and.
They're not sitting on to use.
It is important as well use the per person and the restart which we are bearing fruit at a demands.
With a focus on what's Oh, the most are relevant blips phones, if cookie disagreements and yeah. We've mentioned root free will come back on on that you come as a kind of European less so.
So let me come back maybe on all these different elements and then we we'd like it really gets a unique.
On the strategic review first so the the a food Blitz, a isn't you booked into a month.
We have seen crude need that's breads, New York Nice beauty operations would remain fully in cookie. They are one of the kids sets over a consumer beauty Brent unique and we are very happy a that they will stay within this unique and keep contributing and helping US a building consumer beauty beauty Brett.
The second the Nazis the circumstances.
Having sex repeat opportunity and a and on the creative option, we chief 64 key partner sheep on professional beauty and retain have which we call Uh huh.
And that's created because that's basically a building seeks which otherwise would have been a difficult conditions can take saeed delinquency Ritchie and I think these estimates is continued he is very important for the business and very important for the for the partners any creates an element of sharing that you Oh he cookie.
We'll continue being exposed and benefit from the value creation agenda of a these are these 60 40 Buffalo she.
The very reassuring as I mentioned I alluded to reflect the strategic nature and the resilience of these business at a.
More than 12 times 2019, a it'd be a richer even the grand circumstances <unk>.
He is a real sign of a a stronger extreme confidence.
We expect that's a de he's going to.
To bring to cookie or incremental cash proceeds of free billion, but also just a d. So do you start to 60 40 or JV and that's when you come. In addition, Weve. A then they spots, which we are going to see after without even 750 to 1 billion preferred stuck a investments we have discussed on an agreed.
The main terms, but obviously, that's kind of a definitive agreement keys eastland. Thanks, so beyond the maintenance, which I mean formalize whenever you we now need to complete the work and agree on on everything that's a work, which she's going to be taking place and declining days and weeks, we love you to signing a deal.
End of May so inline with what we had said from the very beginning by by summer. We expect a closing of defaults action to dictate within six to nine multiple signings would actually be at the very at the very end its 20 or beginning of the beginning of two anyway.
So that's the cruising somehow of two of the strategic review, but the strategy preview S.S. carried a sick on imports in settlement, we achieved a the issuance of the convertible preferred shares for $750 million, we try to extend the books when billion that off upon signing off does.
ER deal and this 1 billion <unk> 750, plus two she comes on top of differing opinions at all I was referring to before the preferred shares we carry a coupon of 9% ER and have the conversion price, which is 20% to move Friday crews and therefore is set at six point.
24, do it off beyond the strengthening of liquidity balance sheet, a in a very meaningful vendor diesel immunized brother partnership and Cookie will benefit from the presence of to represent the chivas kick out at a at each so I think people.
So that's the obvious the key elements in the strengthening of our liquidity before that and their head of that's we had a announced a few days ago that we had been reaching concluding an amendment of a credit agreements with your lenders and when your holiday for covenants are terrific.
The fact that to the covenants will be supported by the by the crisis and we had also at the same time would be to head of that in fact decided to suspend to catch the visa and until we come back to which we believe the use of broker or lived rage beautiful.
All types and they did to TV as well as a result of all that obviously a liquidity eastern though.
Quite strong in the beginning of Q4, Weve, a 1.3 billion that all a in a in cash on hand.
At the beginning of departure and we expected to remain.
Even stronger in fact to be even trying to read you exceeded the walk through we'd one thing to when confide three to 2 billion. IDV 50. So are these culture and the exit of the few school a your.
So that's really a what I want people say about the about the transaction, we announced today and the strategy partnership with a we've kicked gal.
The other very important adamant next page 10-Q ease a eased the obligation of alternative wrong and to fix cost duration of all fixed cost altogether. We are designed to plan we chain that's for using a fixed goes by 700 billion.
700 million that officer, he by 2020 free that's going to represent 25% off a base of freed billion or fix cost in fiscal 19, and we are taking fundamentally free initiatives to do so.
The first is going to be a a revisiting glover end to end supply with a view to adapt to the change of demand to increased flexibility extremely important.
But also to improve efficiency and to reduce arcos by an amount of $100 million a I conducted that's in the minutes.
The second they didn't want to use a the acceleration of the procurement initiative in two areas in the area of business. So these first it but also in the area of commercial excellence, He's where are we I've not a infect leveraged on scale a two large the cost and we are going to do so we have started to.
Do so and we are going to compete and talk to fight and at the same time or intentionally that's part of the sincerity docker and to be used to increase or deliver support behind our brands and do a public TV a prudent keeps you book.
The third that in monkeys about or the completion than the extension over a routine program well too easy a change of organization and the program together leaner organization, which well design as part of done wrong.
And we have been a dream or during that that's you malls finalizing the negotiation with the unions, we all know a in a position to to implement that.
We are not only brings component that we agreed to see the way we can further simplifying the organization by leveraging or process. He is reviewing all network. A we have many many sites indication around the world and at the same time, we will be as a teenager compensation.
[noise] between the various projects a I'm mentioning here in fact, we ever COO of.
$860 million.
Our mission of 700, because we know that Oh, we need to take some headroom a number of them are quite advanced and we expect to Delever in fees grew 21 more than a third of the setting. So it's not a program, which she's going to be a backend eat a it's a program, which she's going to some degree as soon as.
The company fiscal year. The goal. We are these really to make good T more efficient to make it seemed per and to make it a feat.
For growth the deployment of these fixed cost reduction program in fact loses to confirm or mid teen a pretty much in targeted by FICO 20 free on this school, which she's a scope boasts a strategic reviews, so without a the 64 key partnerships.
Keep in a professional and so and Herita.
I know very quickly go on each of the streams to give you a bit more color on what's on what to TV.
On the supply side first.
Well manufacturing footprint consist of a 13 factory, which are running at a at an average utilization, we cheese, which he is below 40% a with a number of complexity over 30000 products through a combination.
We have a b complex you give portfolio we've more than 50000. This can use you know that we have a speed to market, which is you know views. So both chemo and we need to a we estimate we need to accelerate done by like 20% or more and altogether a given the the downsizing of abuse.
Yes, we estimate that.
We need to to go for a fixed cost reduction of 20% the base of the cost of supply or even higher than 1 billion that all 50% to use fees. So it means that the reduction of 20% would mean that we are going to targets a cost savings by 200 million that off.
There's never a project, which has been a this is getting the past or some other than our relevance in that same or less the supply a team led by reach all these are going to boots, a everything together and to design, a roadmap, which you're going to be ready by the universe.
And he was in addition, we took on a which we've stopped shortly after depending on the depending on the topics.
So that's the first elements. The second one is about procurements are again, a the fragmentation of Cookie has presented us to reduce goes from two important France on the rights side of the screen first on network remains to exploded with many offices around the globe Hi try.
Yes, I guess costs, we will capitalize on the moves which we haven't you shouldn't that's 18, most and for instance, or some of you know that we have been a wheel downsizing or prisons in d. embraced it building Oh, we are going to crews are a 15 in pennington and we are going to reduce the cost linked.
We then networks are to continue that's that's movements.
In the same way, we are going to reduce the recourse to extend the 70 fees, which are obviously a costly by himself, but don't typically that has been independence generating an efficient of project with orphan liver of delivery, which was not or not I know.
And we expect these various measures to help to save 30% of all non people cost that's would be by the way putting us in the mid yen of comparable companies in terms of course revenue. So nothing to took off by owning the best in class, but in the mid young so the measures the possible measure is it possible improve.
Well its benchmark are clearly showing goes the disease possible.
On the left inside NCP. So I just want to be clear here, we are not true keen to get NCP, which we ought to get yet is rather to increase their impact and Pascal Oh procurement, a head and the teams I've already progressed from the organization of a of media and.
Concluded global negotiation already for it but they will start delivering in preschool equaled 21. The secondly, the monkeys. That's we yet have to platform on marketing I tell you also need true tests or it's a try we are very offend fragmented and thinking he should achieve a different coast ingevity complexity everywhere.
We asked talking a the project of a of Petrochem and here the city at stake out very very sizeable.
We really in addition increased spend accountability and and make sure that every expense goes direct to PNM and he's not flowing in the defense manner, starting from the first of a a few like no as I said, we don't want Tony to get efficiency, but we won't as well to increase.
Or impact and therefore, we are going in this program to resist 50% of on selling immediately in pretty good NCP are you working media in.
Priority.
That said the kids.
It's about making coty.
A simpler.
We have much to do to make it to make these all conditions improve and murtha. Keith. So you remember that's leaving you should see the downsizing of organization a year ago with a target of 180 million to now no that didn't negotiation has been a concluding with the work partners during the third quarter.
We're ready to deploy meets all new which grew by the way in Amsterdam as opposed to last week and team Sop aggressively Niagara GGR Oh go obviously could lead a as many slower than the then plan.
One of the element of I mean, what are the element of these downsizing has been really the writing as a cookie operating system, which is basically the description those accountabilities and interdependency and this work as evidenced meseberg opportunities for processing figures from the transistor efficiency and that's going to help those.
Further decreasing oh strictly because in the into future [noise].
In addition to these will be revisiting often decisions. He stepped on the property see with a view to better leverage and grow a cookie tenants.
So to monitor only a booth a into free or pages, and the 700 million or do not a program. We are sitting today or did you get you governance, Oh I in my function as a few I'm going to lead the program and with a subset of D C, which she's going to be made those people from.
Supplied from procurement from itself from trying to us from I guess, but also a the head of the two regions. We have a yet and then attack and we have appointees Oh head of Oh, I as I T. Zoom will be night, Chief transformation Officer, and you will coordinate the various let's take the.
So if the of the transmission. So that's another show the program on which we are going full speed right, no and which I. Just wanted to repeat is an extension of that their own and next originally thought our own and he's the rights or the right level of sitting we need to be able to address or the size of of course.
You're right on give us flexibility to a two you know group.
I know tend to the third quarter a result.
We dispose snapshot before I hand over to a two care as expected and shared with you where you're in a in April or net revenues have declined over the quarter by 20% on the on the life on I believe and White January and February where Sherene progresses in particular on the performance of all brands in consumer beauty.
Copied 19 or did you have impacted or performance in Asia. Then in January February, but obviously the beaten happened in March or with the first look bounce in Europe, which started in Italy extended to two of the market's pretty quickly and so.
No Tony your net revenues were impacted but youre pretty income was a impacted even more deeply by this loss of revenue on a NRG as well as by someone else I, Tim and I will come back on the on that obviously ER as was impacted as well.
As a result of decent or Kessler with negative as these by the way usually the case in the third quarter. That's obviously significantly more here given a drop of a perfect.
Well the first sign off on a given 18 disease on net revenue no declining by 7% like for like or a pretty income remains in line with that so the first pass at a friend's an $18 million and okay. So he is a broadly stable. So I'll come back at the end of the presentation on the main prophy tenants, but I will hand over to care.
To talk about the took like trends we have observed boof.
On the impact of coverage, but also on the or the formats in terms of said overtime lunch yeah over to you.
Thank you all the way ice dishes my last earnings call, Italy's Coty I want to take a moment. The thank everyone. On this call for company US on this journey, which continues of course as candidly is just indicated.
Especially I want to thing to could the teams for the tremendous achievement, a well and default that they have boots in over the past two years to laid on the foundations for stronger company.
The good T.S., we should have demonstrated both you know sales face together and now indeed testing times videos as well as an inspiring ability to learn and adopt new ways of working.
The aim of this approach as you May remember was an easy to strike the balance between creativity and discipline and we are beginning to see the results of this will materialize or co civil brands markets an initiative.
As you can see on this slide we had a number of told me innovation successes this call to either on a scurried began to disrupt the demand be true.
Starting with Kroger on we continue though laser focus on improving equal melts fundamentals.
As a result.
Well they'll get L. recently, so pass to competitive digitally native bind to become number free massive cosmetics, one on Amazon U.S.
The blends improved performance both online and offline was in part fueled by the launch of clean fresh earlier in the quarter. This was the first clean label product line of course establish masco speaks lands and quickly became the number one foundation.
In launch in mass.
Similarly remained maintained the momentum we have seen in recent quarters fueled by media support and strong you still execution.
And supported by the recent launch of Scandalize volume on demand Mascara.
Email is no reached its highest market share in the UK in over five years at 51%.
[noise] study Hanson continues to fire on all cylinders.
The banished continues to be still needs leading market position.
Reaching its highest she U.S. marketshare instead, what are your that 45%.
This is in part due to the launch of clean Labor line, good kind fuel.
Which has already reached close to 40% of the name market.
In prestige fragrances.
We had an undergrad launches.
Only a few weeks after launch most alive became the number one female fragrance in Germany.
[noise] seemingly she gave anyone allfast clean label mainstream finance was seeing strong momentum in multiple markets.
As a top free lunch at Macy's and topped five in markets like U.S., Canada in Germany.
While the lot dogs are impacting consumer demand and access these launches amongst others have clearly resonated with consumers and will fuel all equal that he was treated else became to open.
Moving to all performance by segment, India, you guys like for like company use declined 18.8% as a result of the love Dons I'd ended the quarter, the especially today well be writing deleverage pushed operating margins.
Well to 2.6%.
Hi way, though.
Building on the polar ice outlined already last quarter, we continue to see green shoots in the region.
Well the sales time in many years Codell girls marketshare in brick and mortar retail standardized and actually expanded even as Damascus metrics market has been impacted.
Sally Hansen, which was already expanding market share sales are actually they could these gain we shape and one basis point and why clear. All also continues to see implementing check kinds.
As a cobi pandemics pledged to the Americas, leading to store closure and stay at home holders.
We saw cultural shift built using online.
Oh Eco best says accelerated beginning in March and remain very oldest through April we saw a bunch of could really outsized eco brass growth was you know masterpiece, nice, which as you can see on the slide grow into U.S. hundred 64%.
Why not quite as time without also very pleased with a strong set out to growth was in U.S. places, which actually could meaningfully in April.
Indeed, EEMEA region like for like how many years say, 20.1% due to the koby situation and the resulting let dawns, but we are put in place.
Just like for like decline led to an operating deleverage questioning demolishing to minus 2.5%.
Despite the koby the related pressure, we do see evidence of fault on their own sticking hold.
Within the mass business some of our cable ends were able to take market share to and Q3.
Remain Max sectoral and bring nobody all grew market share by 50 or more basis points in brick and mortar doing much.
Oh, the eco best side of our business, we have seen set out kind of accelerate I still close your unlocked dogs were implemented see me now to the I mean, because we have seen box Korea equal mass kind, we seem to match beauty category, we have some region such as the UK and Amy globally in excess of handle.
<unk> percent.
Oh prestige Eco now says growth was not quite as time highway, though we have seen set out kind of like city right through the month April as many consumers get down to purchasing prestige beauty after a weeks of being London.
In the APAC region like for like coming you faded, 34.8% ideally genuine was one of the earliest he'd like could be dealing to go out too.
Both China and covered retailer, where he touchscreen Q3.
Encouragingly, well starting to see times, improving China, though many markets could you do have loved ones in place.
Well the all the like for like decline led to very meaningful operating profit deleveraging the quartile pushing all margin done to minus 14.1%.
Despite this we continue to see positive sign that outside of geese, having success.
Sure. The hail both study answered in cable gain over there and what and 200 basis points, respectively of market share he knows cardio doing much.
In addition, we also believe market she always into China prestige makeup market.
Although overall market share remains quite small today.
We continue to believe the prestige makeup market publicly within China will be an important long term growth high though.
Moving to eco names, we have experienced very strong looking at least on small.
Similar to other regions as consumer shifted more spending on line.
Just to highlight a couple markets or Saudi on Japan with both experience.
Eco mask set out in excess of 100% during the March and April values.
For professional beauty business like for like revenue declined 11.9%.
This decline was due to the covered 19 pandemic.
Which forced many silence to close possibly doing much.
No. They all do like for like decline led to operating margins being pressured falling to 5.4%.
[noise] Highway, though we continue to be very pleased with ecommerce controlled the portion of beauty business, including Ghd, which did either on those oclock till daily so the goal.
As I just mentioned many segments were forced to close during the quarter and still remain close to these days.
Despite these demands for set on services such as growing remains very strong base on the sale legally conducted in the U.S. in the UK.
The majority of correspondence want to sell an appointment we seem to 52 weeks of side on the reopening.
We view these are the very encouraging sign that the difficulties. Many sat on the had so many centers of fishing are likely to be temporarily.
Before returning to line back to PLD I would like to later I had my thanks to older Cookie Associates will the Johnny achieve accomplished together.
They all have been through food in the action attitude to all vision that to beat the bigger business, we needed fast to beat the better one.
I have just share we use fuel fold greenshoots.
There are many years, there's going to entry in the company and many multiple I.
I know what other gone times, all the retesting, having leave my save who some of this event in the past.
Yes, I know so that all people have to skis and the dive to get fleece crises why is staying the course of friend both trend funding all fundamentals.
I have absolute confidence that the coty people will not waste these cases.
They will use it to individually and collectively loan anvil.
And that our company we've come out of it strongly held on either.
The only I'm, telling them I come back to you.
Thank you yeah.
Thank you Pete on each good too and it's good to have had you want to have you.
No I'm turning back to the to the result of third quarter.
Taking over on the on the minus 20% like for like net revenues.
We've seen a though so terms meant a decrease of Ah onez revenues like for like by 370 million there now.
And given that the impact was late in the quarter and that we didn't know treaty as a then siri time to a to react there was no evolution of a FICO scores, which remain broadly flat versus the previous sure and so the loss of revenues was only mitigated by variable cost and went almost for almost half of it so.
Great to the operating income for a loss of Oh, I O <unk> hundred $74 million.
On top of de <unk> hundred $74 million, where you called it several nonrecurring charges Oh for it to sort of $53 million, a first depreciation of the ruble and the Brazilian real nice led to a sum.
Revaluation of intercompany receivables and resulted in a in a friend exchange losses.
Secondly, or excess and obsolete absurdity provision was boosted by curried as a obviously make any clear expertise sales in the coming 12 more decrease and as a result of that we.
Made some a provision on the on the inventories the homes a 12 month.
And last Oh, we do not in corporate to of course, certain factory up to our Cogs, sorry, certain factory cost as we had been a slowing down or even stripping the prediction induce induced factory. So as a result of old via both the operating income went to zero for the quarter down by 200.
In 20.
7 million dollar and <unk> EPS was negative given the fact that we have interest and tax charges below the operating income.
And next time next slide three or free cash flow. He is a is usually week at this time of the you're in the foods crusher.
But it was obviously amplified by the weakness of the an immediate which stood at 200 and free.
Million that all their working capital under one of course were negative for 322 million to now and we also closed at the very beginning of Jerry <unk>, the King Kt deal.
Investing 600 million dollar and that's a together a increased adapt to a level of 8.1 billion, though at the end of the at the end of the clutter.
I will conclude by a after having talk of the cash the liquidity the reduction of of course I will conclude by just leveraging on the with pure has been telling you on the performance of the overall brands in a in the middle of this this crisis and descriptor, having group gets a wet so we see.
As a as some of her key assets for growth at the outset of or the recovery and does quite interesting on luxury or inhibition pipe comprises many projects some of the and some of them are yet to come and you see on on the left with the chart.
The disease, they tools by Marc Jacobs.
Some of them as being a very successful at launch as mentioned by Oh go Covey that obviously, Turkey. The dynamic and this is a case of books horizon and CK everyone. So this is obviously, a as we reactivate or distribution going to be.
An asset for us domestic beauty.
He is increasingly so the recent trends of definition progress for free of all see brands on your lender that in the last quarter, we have been talking of science and remember which came to you definitely definitely well did in addition to that's going to go.
With the launch of.
With the launch of.
Her clean fresh sorry.
As being a as being a clearly improving in terms of train and this is in the context for must beauty is likely to benefit from a foreseeable switched to afford it won't be t. by by consumer.
The other elements, which is interesting is that a the opex program, we have been designing Andy.
Grow that had a good itself is going to as a very direct a use in this in these circumstances, because we have to prioritize obviously the restarts weekend that restart everything at same time and will be restarting it very T. A the SK use and the product, which we believe can grow.
Faster and can be other stronger net revenue base.
The firming Internet TV you can ask you probably a I've heard that from many many company we have a as many others shifted resources and energy to D. So.
Chanel, we some success I must say Sally Hansen and Gotta go gaining market share on that as we need to U.S. and.
I believe Oh, my God as well a couple of getting particular became number free.
Branch from getting went position.
Number four it became number three during d. So descriptors. So we are we are progressing and progressing well. We also accelerated the prepared as shown us.
The progression to expand Cali, we'd be launching Kelly a in Europe. This small in May I think on the 20 seconds nine that's going to be done with a glass and at the same time to performance of skin care or four kt in direct to consumer has been strong and we're working at widening.
Strengthening the the platform.
And so when I mentioned in these these several examples because these are always sets and platform. We charted relevance in the current circumstances relevance in the current circumstances and have been shrink stronger improved trends and we will be using them clearly in the context of results, which we believe is going to be gradual answer.
Aktiv, depending on the markets and which we therefore, we'll be running in a very articulate cheat unorganized manner with the you to maximize or impact.
And to maximize our success with the.
With a with consumer so I move now to conclusion and.
Make sure we have some time for.
For a for questions.
I just want to say that we are a very excited so views that we are going through time of Oh, uncertainties, but we have been a getting equipped to phase lose into that's only say stupid to leverage a the uncertainties and the opportunities we are going to cross.
We have no the right balance sheet.
We'd have the right balance sheet now and we have we love when even stronger balance sheet at the end of the at the end of the your.
We have the right program to adapt or cost and on mindset and I think thats very very fundamental with a 700 million.
Cost reduction program and we have the relevant and we believe the right topline levers and therefore, we are all very exciting those are having all these assets in hands and be able to and be able to get some senior at very attractive.
That's all for Lisa pretty long present, the Sean and we'll try to answer your questions now thank you.
Thank you Sir the floor is now open for questions to ask a question at this time. Please press star one on your telephone keypad.
If at any point your question has been answered your question.
You asked the pound <unk>.
Our first question comes from a lot of Nik Modi RBC.
Yes. Thank you good morning, everyone Pierre Great work and we feel good luck going forward.
Two questions on my end one is.
The taxes.
Related to this transaction.
Maybe you could just getting any perspective on how to think about that and then the second question gets down to get margin targets and what what kind of assume topline have you embedded in that assumption. Thank you.
Okay.
Thank you need can and by the way we talk to you.
On a the taxis, we're talking of at a moment when she's going to be within 300 million that house.
Obviously, we need to a completely get condition, but that's going to be a within 300.
On the on demand gene so.
You know we have to assume that's when we don't know, what's what's with where the growth is going to be the reality is that I think we have everything we need to get tree, but you and I see the environments. We see a the look down stopping and then restarting a you see the very.
Well, the social differentiation and came back on the only Thunder Venus and therefore.
We as too I as this year phones, you I asked we assume that it's not going to get a better soon or any she does that still think because they will have the right to structure, but if it doesn't I need to get protected so in building that I have assuming building. These Latino Gina.
Assumed that so we will not come back to Oh, we need to be equipped to do to phase the case, where we will not come back to a 2019 net revenue level before.
The back end of the plan and even after that suite to take us time to to do so even in this case so even in the case, where that we've gotten oh, we will be during the meeting.
The meeting so are you I machines have been a I've been talking about.
Excellent.
One more.
It seems pretty impressive actually you're ramping up the cost savings quite a bit about extra cash charge and so I I just wanted to see if you could provide any context around that.
For the first time at least I see that happened.
Sure.
Well the realities that team the progress he sees we've made so far.
We've seen a level of when of course, which has been better than what we had indicated we had been pretty careful that yelled said the turnaround because these trade. The company was encouraging us to take some that takes some headroom I know the reality of what we have been managing for the best for the best when you're as being.
There has been a lever a and therefore the envelope we had a two deployed the turnaround or easy enough to cover the additional costs, which which we will incur a having in mind two things a there's a lot in the plan, which she noted.
Going to be on that's only going to be about people and severance. So there's a lot which will be done by a true misos undisciplined, rather than true who severance.
And and and the second one is that yeah. We've improved I mean, we've food for the past when you're with a teeny to silent a work pretty to works, which we have done very methodically we've been trying to.
To make sure that we will minimize these when of course, because we knew that a they had been a extremely how fruitful for the for the company. So.
Yeah, I mean, we will these 500 million there now net by the way because we believe a in a in the restructuring. We can also has on the capital gain which I'm going to finance some some cost.
We can do it's a with these angela.
Our next question comes a lot of <unk> Singh of Evercore.
Great. Thank you very much and congratulations on the transaction.
A lot of moving pieces here and I I just wanted to make sure I heard this right I I think maybe I didn't but you're you're talking about taking 700 million a fixed costs out I think I also heard that the the total that you're going after is 850.
Is the 150 reinvestment in the business I'm, just trying to understand those parts again and again my apologies because I know you mentioned that I and then second it looks like you know that the working capital was was it was pretty negative in the quarter can you talk a little bit more about that and what the working.
Capital outlook looks like for the rest of the the year. Thank you.
Yeah, Hi, thank you.
No indeed, I its let let's be clear on that so.
What I said is that we as a total.
Program. It's all these opportunities if you wish a series of opportunities have you seen that that's on the I'd.
Which amounts to $850 million and we see sufficiently the confidence in diesel continues to be able to commit on 700 million barrels, which means that we assume that some of them on that's going to be relies on battery life not realize fleet. That's you know every time you do that's kind of program that's material.
To that's what you have to issue.
In the 700, we're discussing a most of the elements on gross but there is one element, which is net and it's a D N C D components.
Rich.
Broadly speaking.
He is going to be I mean deficiencies, we expect efficiency to be in the region. This.
250 to 300 and half of that to be invested so in the 700 I'm counting only half of the sitting I'm gonna made on a I'm going to making that a on that side. Okay. So there are two elements. When is the fact that we have headroom and your when is the fact that.
We are counting on even net of what we save on D. and speed you can see we think it's important in fact to do endings and size of reallocation to what is working and what is going to be activities are they coming.
On the working capital side, So I think the dynamics to have in mind on the photo wing.
We you know we don't have much increasing the inventories now we had at the beginning of the quarter because at some at some moments we saw a human going down, but obviously production did not stop right away.
Well, it's that a it stopped growing.
The interesting at him and he is about the Bulls and a and receivables because we have seen on top of the decline of net revenues, we have seen a discussion of some some of the consumers being difficult.
And not many have come to a significant piece of the point that they will become a refer us but many of them as being equal T basically telling us that they needed a they need help and support and that they will be a and postponing. So I know some payments and we have to think that can go.
Good good obviously, we have to think that and shared between your a weather environment. So we've been interesting the cash flow and the way we manage cash to make sure that we will be spreading and sharing d. So this element of contraction of liquidity, which exist across the supply chain a in their industry.
And in many industries that are the same time so.
I mean, all the details to a two maybe be a big long, but to say that can see in Q4, a another quarter of negative evolution of a of working capital that we which we are controlling very tightly balancing basically a they need to a the control cash and on the other end.
The need to.
To two beyond a to continue building median some relationship with other partners.
Our next question comes from want aphasia, all leg of Deutsche Bank.
Yes, hi, thank you.
Hi, My first question that's just about.
The $700 million of reduction and Scott.
How quickly do you think you can you can get there I think it sounds like it's by Cisco 23, where the program.
But I'm wondering if you can give us some guidepost in terms of you know what type of savings, we should expect and Petsko 21.
Okay.
Well I mean, my answer is going to be simple, it's not going to be a but cody.
I couldn't be more folks who need we expect savings in fiscal 21 to be more than the food between 35 and 40% in fees grew 21.
And then premier food in fiscal 2000 to a and the remaining in equal or 23.
And the reason for that he is that again I mean, some initiatives first of all or part of the Toronto only to sort of each incremental that's the first point. The second point is that some initiative I think to be leveraging on the current err on the grand circumstances, and without having to do on travel well, what I mean to do on.
Consulting actually going to be I plan to be.
The extension of the crisis management mode. We've been infinite that's you monetize many other companies.
I would ask sentiment is that many many things had been studied a at could teach many project, which had not been implemented because we have decided to pursue other priorities I know we've put them together they exist they have.
A lot of strong foundation and some of them can go pretty fast and so that's that's the reason why a will go for from facing I mentioned.
Our next question comes from lot of Olivia Tong of Bank of America.
Great. Thanks, good morning.
Yeah.
Hi, how are you.
I'm good.
Good I guess you know.
Just your businesses are very different some are significantly hurt by the pandemic in recession.
That's that's going to come like luxury why won't one could argue that consumer beauty should hold up better given wider availability channels garbage out. So can you talk about your view and then maybe a little bit in terms of.
Performance beginning corner to end of quarter, and then April trends across your keep businesses. Thanks.
Yeah, well as I said, the beginning of the capturing was.
Was showing a.
Well in reality three different trends, a remember that we've been going from a divisions two segments and there was some level of four noise on on that be more importantly, we at the beginning of a convenient and well do slow down as a travel retail following the Hong Kong.
He shoes, a and so from a social evasion travel retail was was weak.
But see at the same time, we have we have been seeing a very successful launches a pretty good performance of a year of CK every one of or.
Both.
Of best alive.
And very interesting performance from the cover go a keen French and from science and pure a you know the two or three grants, which we launched together, we though system. We keep at home. So that's why the mix of its Oh, we plus and minuses, but broadly speaking in line with whats we expect.
He is and then notch I can be precise from the.
Second we have second week of notch became very much in the pressure and started you need to anybody even spread into Europe very very quickly.
And April.
April obviously, we expect he's going to the.
He's going to be a significant he seems that he was may isn't likely to be in the same reagents and and to be to be questions, maybe about June and ready to recover and I think it depends very much I guess I probably market by market by market among other reasons because the phasing of the.
And the can damage.
And then of down these different depending on the countries and business by business. You know people want to go back to 200. Soon I think that's all that said we understand the against for for everyone.
And ER and the opening of some no trees toys thing to think more time, but.
Yeah April and May would be difficult, we expect due to start showing some signs of recovery and we expect Q1 to be showing as Watson signs of recovery, but I think you one Luna beach.
By any means a return to a previously wanting to normal.
Our next question comes from Wanna, Steph Wissink of Jefferies.
Thanks, Good morning, everyone I'm just a follow up question on your E. Commerce comments it seems to be the one trend that was pretty positive across all of the segment I'm wondering if you can maybe breakdown for asset class math pro and proceeds but your strategies are to grow your online share and how that may transition.
Advance coming out of the Chrysler Thank you.
Yeah, you want to think that tick it up.
Sure.
I think really way off where we decided to make a decisive. They 14 ecommerce has been a really on consumer beauty, where we are really underplaying all fail shale. So we we in luxury and in a in luxury and in the and in publishing.
Clearly, we continue to strengthen and and the growth has been sullied aligned with the market Rousselot I'd say that she is very good well we had been really as I said earlier catching up has been on the as being on the on the consumer beauty way or we have by and large.
I I look at the last month. All these nash's is is going globally by 75% right. So it's very very good result at least for the place where we can get that time talking said LTL.
[music].
And and which is very very substantial acceleration will not okay to the sent by noted which we may shale to be.
In the mid teens are on 15%. So that's a that's just picked acute a spectacular performance what have we done that I need to be honest with you a lot of basics I'd love to focus on completion, a lot to focus on the basic Sofica mouse.
Building, all skies skis set into the organization and the really.
Building, a playbook building a playbook deploying the playbook deploying the playbook into key market and after that deploying to play moved from the came back into the rest came out to the to the to the to the lead.
To the smaller markets. So I think that we all that well have made a step here and we have made a substantial step change.
I do not see why we would go back well be going forward. So.
And that's that's clearly very pleasing and again is in my view. It is very exemplary of the country on it we want to create a culture all of the culture of of die, but also a culture of discipline and a and distribution of Playbooks would that make sure that everybody catches on that and and we feel.
They are they're good about that in the same way in and we feel very good about Elgin, Illinois Panda in a consumer beauty in the old to give you a bit all if he did a bit of data I'm talking like combination of bleak in multiples and and the any government.
If we look at all these nation consumer beauty.
Something like a 12 to 18 months ago, we we'd have lost market shales in 80% of all market.
Now in the last a in the last valued we are stable or gaining share in 80% to fall markets and they often the reason why we do share is because we have made active decision of winning some lines from the market Faisel from both a lot in the UK right, where we knew we were not able to operate at scale.
So I I'll be on actually as you I think a while working to plan and the plan is working okay. We have the crises, but I really believe and I see detail you know I believe will come out of the stronger because we now start to embed Opex pulled all Oh collection focus for God on equal mouse Oh.
Just aging pulled off all marketing Oh investment that scale behind and not limited number of mine as well as.
Yes, we have experienced a bit of said back but the focus on gross margin lowing promotion building working media all this stuff works.
Our next question comes from a lot of Lauren Lieberman of Barclays.
Hi, good morning, Hi.
So I guess I guess I want to go back and think about.
Today versus last July.
And just thinking about strategic priorities from senior versus what they may have been a have any change in July.
And if you think about kind of pro forma.
Portfolio would you say that you now have what you need to grow and I know you've made the comment on 29 team you know when it gets back to that but let's try to pretend to know Noncovered world right with that portfolio be better structured progress now or do you still need additional assets get towards goes faster growing.
Sectors within BT.
[noise] Oh.
Yeah I mean.
And stuff and you can and we can play to together.
I think the fundamental differences in a year ago is exactly what we said we want you to achieve with the opening of the strategic review our E.
Refocused the company research because the company on a fragrance on customer teach on skincare.
Gevo sit on the give ourselves a number of categories on which we can make a we can make a difference which are basically a at that T to a the level of human investments in force you can we can we can have and at the same time really size the better.
Sheets to make sure. That's we have the means to develop these are two different these categories and winning these a in these categories.
And so yeah I mean, my answer would be that we have achieved exactly what we said we will be achieving.
We have a invecture each and in fragrance particular, a number of a number of assets.
Which are evidenced by the new launches, we are doing and by the success of a so some of our brands a in consumer beauty. We have you takes a simplification program and the program as reimbursement B. I owned brands behind on brand. So we start working fundamentally in Kenya, a we need to accelerate.
No we have one very very strong and important that influence we achieved.
Paying bulfinch keen and in direct to consumer and he's Kelly.
And I can promise you that this is going to be a real real that sets for the for the company and all that Weve.
Hey, then that's a level of debt to cheese and I believe the right went to a financial flexibility to support that that portfolio and be a with a real intention and program to address the simplification as coty and to make it not only lightering them of course Bruce he.
There's also sorry, a much more manageable and so yes, I think strategically we have revised the company restricted to PSMC, which in which Oh with which it can we.
Our next question comes from one of my answer Chan of Stifel.
Yeah. Thanks.
Morning.
Everyone.
I guess just.
And work on.
On the deal announced so can you maybe preliminarily talk about.
And when the deal closes.
69 months, and then on the Brazil business, So I called.
Your commentary about having a fairly large hair components I guess I'm curious how to think about that business.
Now given given what has been announced and how to think about competitively as well as whether any pieces of it or how much of the business gets get sold as part of the deal. Thanks.
Yeah. Thank you so in terms of dilution will come up with a we precise numbers. This this stage at which we are ease a.
Yeah, he's only been instead, it's a don't forget that we all need talking with them. When you when those numbers parameters, we need to a we need to fix including.
The precise a precise carve out the build up for the standard.
These new 60 40 company.
And the food away, we are going to address and second season. The anchor T.. What's true is that the Dow stranded cost spin is trying to east coast toggling be addressed by the for passed by the I'm.
Sorry by the 700 million.
Don't know guest a reduction program.
The do do do way to look at that and to get a confirmation of that is the fact that we come from Oh meet target for operating margin, even though a disease no applying to a group, which is going to be a about sensor.
Labor intensive for in terms of site. So we'll deal with that and that's going to be part of that can be as part of 700 million that are construction cost reduction program.
On Brazil, yes, you're right, it's more than that but it's a it's a part of that and basically that means that a.
Similar to a which we do in luxury where we are licensees of some brands.
Brett he's going to be the licensee of developed Brian in that country in the in the consumer space as long as both parties find it interesting now developed brand is a very important brand in Brazil, and the platform, we as we'd like them.
My guess is an extremely efficient at home in Brazil, a we've not many equivalents a in terms of its a ability to produce distributes the writes a constant with the efficiency and with the and Weve reached so my bet is that he is going to continue for a quite long period of time.
Conversely, we reorganizing or a luxury business in Brazil, and we decided that we would be leveraging a detail Mike as pets phone to try and accelerate our penetration in the rest of all businesses.
Our next question comes from one of Wendy Nicholson of Citi.
Hi, good morning.
One of things I know you talked about last.
July was a need or desire to really pull back on your as you assortment on in really narrow you're asking you count and just in the context of what you mentioned in terms of the conversations with some of your retailers who are going through a difficult time right. Now just wondering you know is is that an opportunity to move.
Let's start on the S.K. you reduction on and so if you could update how how much progress have you made.
Nobody nineteena, particularly good opportunity to move faster or what's your thinking on that side. Thanks.
Yeah, you want stake or you want me to show I think honestly speaking I don't think that that could lead makes a difference to our plan. We had the plan to focus on all pull us queues and to give them a disproportionate shale.
Oh of shale and and the line.
I would call. It all all poll rescues with the upholstery line, probably distribution promotion and advertising standpoint that is exactly what we are doing fine says was called out here in the U.S. So our view is that clearly, yes, we can always like city right and we will because we have not yet.
Got it refine our poach, we started with a limited number of markets and now we see that this plan is working so we are expanding and we are actually writing well not the second phase where were looking at.
The combination between markets, we have not only look at complexity within market, but now we're looking at complexity between markets and that's a next stage of the old came from that one but I may not be today. So I don't think I don't think koby changes everything to the plan, we need to Alex we need to continue to Bush, we need to continue to go.
Shelf cool franchise and as I said earlier to have a total activation through the line from distribution to promotion to advertising through all core franchise and and we know that it is also the also the way we believe Brian attribution flaws advertising support to make.
Sure that we advertised the goal line or the calls sub franchise will decline and we have seen it as a fantastic result in Colombia L. in the U.S. market for instance, where.
I'll talk six or seven franchises are really going very fast.
Our next question comes from the line of Joe Lucky of Wells Fargo Securities.
And that's going to be on lengthy thank you hi.
Hi.
I wanted to ask about Kylie and you know the trends you're seeing in that business is you're kinda navigating this crisis.
Obviously, there third largest retailer partner you know experienced some disruption closing stores and so forth and I, obviously Kylie has a pretty big Ecom presence. So just wanted to figure out the balances.
You know as you're working through there and then if there's been any sort of.
Manufacturing issues on you with with that business are you able to keep up with supply in and if there were are there any any chance the any any.
Plans to move on manufacturing in house, a little quicker than you had previously plan. Thanks.
Well, let a very good question.
So yeah, I mean, we're constrained by on costs net we've clearly being constrained by by production. The a third party manufacturing, we using as being as as has been Oh.
Shutting down a and therefore, we've been a weve been or out of stock for a lot of the cosmetic references.
A which is a P.T. by way because the direct to consumer she works and he's a an easy and he's very active so.
We are indeed looking at with all the options. We in the short term that's going to be I think the reopening but in the mall a medium term of course, because we need to be able to to make sure that we have supply at all time, we can't be a in that a in that's kind of position again.
Uh huh.
Oh, there aside these E skincare and here, we have really really seen a nerve function a lot of traction on the direct to consumer side in particular beyond what we are what we thought so.
It's really good because it means that we have confirmation that skincare interest kaylee as a.
As has a lot of future in front of the infant ever and we need to go to develop that now which we also doing if they could take advantage of this period to a.
Number one accelerate on building of.
Of the infrastructure, we need a under frame, we need to be able to leverage Coty network and size a for the benefit of for the benefit of Kylie.
And we've been pretty active on that and ER and we'll be in fact ahead of we are ahead of the plan, we had and on the on the other and we have a 13 the the launch in a in Europe as I said during the call and on the 22nd was nice we've seen a 11 defined we'll be launching.
Kelly protein a skinny.
In Europe, so a lot of promising events, we have to solve discretion as to supply a between I've ever seen we we everything we need to do me a and then on the demands a direct to consumer which equaled economists is really the buttons.
He for both by the we can eberle, so the rest of the rest of cooking.
[noise] alright.
Well. Thank you again, a very happy to have been able to share. These are important news with with you and I wish you all that we we show pure again nice.
To stay safe and to stay close to this incredible market.
I would have uncertainties also full a full of opportunities. Thank you and we wish you a very good day.
Thank you, ladies and gentlemen image.
This does conclude today's conference call you may now disconnect.
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