Half Year 2026 AS Madara Cosmetics Earnings Call
Speaker #1: Netics investor webinar. We will start with a presentation after which we will be addressing your questions. You're kindly invited to submit them in writing through the Q&A window below the presentation, or raise your hand and be unmuted after the presentation is over.
Speaker #1: In case you'd like to rewatch the session, the recording will be available shortly after the call. Now, let me introduce today's hosts. Gunta Šulte, member of the management board and the CEO, and Tatjana Nagle, member of the management board and the CFO.
Speaker #1: The floor is yours.
Speaker #2: Thank you very much, and good morning everybody on this rainy day. As usual, we are very happy to welcome you on the investors' update on how Madera Cosmetics has been proceeding in the first half of the year.
Speaker #2: Without further ado, I will move on to the some legal disclaimers. To today's agenda, as usual, you see myself, I'm CEO of the company, Gunta Šulte, and also a member of the management board and here with me, as usual, is Tatjana Nagle, who is Chief Financial Officer of the company and also a member of the management board.
Speaker #2: And today we are happy to share maybe in more detail how the first half of the year has been for Madera Cosmetics. So going through key highlights, key numbers, and then also a sneak peek of what's to be expected in the second half of the year.
Speaker #2: And as usual, you will have also a link to the full unaudited report of financial statements for the first half of the year in the active link in the presentation.
Speaker #2: So without further ado, I'm happy to share that the first half of the year has been really I would call it a trajectory changing and success for Madera, and I'm really, really proud of what the team in combined effort has achieved.
Speaker #2: And I think this is a testament of all the previous years' commitment to doubling down on e-commerce so we are happy to report double-digit growth both in our revenue or.
Speaker #2: Turnover and then also growth in our efficiency which has been a relentless work in the background. I have been already on previous webinars explained and told why companies shifting to e-commerce-first approach and by this I don't mean only the e-commerce as Madera Cosmetics' store standalone, I mean by e-commerce all the ecosystem that is surrounding it.
Speaker #2: So meaning Madera Cosmetics' store, meaning marketplaces, meaning third-party or B2B pure players, we see this is as fast as devolving segments or channel in the industry.
Speaker #2: Where the decision-making is taking place and where the shopping is taking place. So I'm very, very happy to announce that we really grew double-digit in e-commerce and that was the driving force for growth for Madera in the first six months.
Speaker #2: We saw a really tremendous growth in one of our categories which is hair care. To much extent it was also driven by one single product that went viral which is keratin silk mist spray and you see it on the bottom right corner of the slide.
Speaker #2: This particular product grew multiple times and this was not an accident so this was basically a relentless work of team finding the angles and products that we can really boost and grow online and this trend started in TikTok but it really grew in a the only positive way as a let's say this positive virus that took over also the other ecosystem of e-commerce meaning we saw the first positive spillovers on our direct e-commerce store on marketplaces like Amazon, like TikTok and then we also saw fantastic spillover for our physical retail both for Madera retail stores that we have here in Latvia but also other physical players across the Europe.
Speaker #2: So it's really the way to go and with that I'm also very pleased to inform that we are further continuing commitment of diversifying online channels and we started already last year of opening the first TikTok shop in United Kingdom.
Speaker #2: This is a resource-heavy process and heavy channel so I'm not going to lie it's not victory from day one. You really have to invest to unlock the channel.
Speaker #2: So we can't make too many at the same time given the also task that we want to be efficient in how we operate. So this is resource and finance-heavy so with that we have also taken commitment this year to enter another TikTok shop in Germany but what I'm even more proud to present today is that because of Madera's Cosmetics team work with the TikTok shop Europe because it's different than TikTok UK we have really unlocked for the entire Latvian businesses to sell on TikTok European shops.
Speaker #2: It's not only Germany there is TikTok shop France, there is TikTok shop Spain, etc. to shop from or to sell their goods from Latvia.
Speaker #2: It was not possible before you. To open your warehouse or ship goods from that particular country so because of teams discussions and work with TikTok EU team this is this obstacle is now removed and ourselves we are starting operations literally now in September but I think it's again a very positive spillover that we are able to contribute to whether e-commerce community in the region.
Speaker #2: Another highlight has been really in successful innovations and here we doubled down on stick format we launched stick format of our best-selling product CC cream that product is called CC Go also having SPF 30 six shades and this has been by far we launched it in April and it has been by far the best-selling innovation of year to date and then also another innovative format and in stick format yeah packaging it's a duty stick which is caffeine infused gel-based serum in the stick format again having a very positive takeoff in our B2B and also e-commerce channels.
Speaker #2: And last but not least I have to even despite I'm saying e-commerce first B2B is and will be a very important pillar for Madera and I think it's also making brand alive in physical retail and not only physical because by B2B we also mean online B2B partners which is not only almost half contributing to our turnover but also a major or big part profit contributor as well so I'm very happy to share that we also grew in most of our markets particularly I'm very happy to share that Finland is finally back to growth and we changed beginning of the year operating model in this particular market which is one of let's say most saturated markets for Madera the other one is Latvia and in these high saturation markets to be honest it's very difficult to change the trajectory because it's quite saturated already in terms of our presence.
Speaker #2: However despite the fact that we have been declining for multiple years in the markets so we took or Madera Cosmetics team took over e-commerce of that market or Finnish market and transmari is continuing to operate in physical retail and we see finally brand being back to growth.
Speaker #2: We see multiple times increase in new user acquisition which again will bring positive spillover to physical retail. And with that jumping also on the next subpoint on B2B footprint is that also transmari has had a major success of adding another major chain retail chain to Madera's B2B client list so KCT market but not only that we had two major wins in France so we started cooperation with it's almost a monopoly but monopoly maybe not the right word it's a major player in professional hair care or specializing in hair care products the chain is called Blue Libaloo but with a really extensive physical retail of more than 400 physical outlets in France and we started with them as one of the few skincare brands that they're introduced within their retail channels and another partner I'm very proud of is starting cooperation with Monoprix which is upper premium retail chain and we started first half of the year with 30 stores and literally now are adding another 30 stores with Madera Makeup products.
Speaker #2: And last but not least because the list is actually longer here just a few biggest names we also started an extended cooperation with Benu Pharmacies in this particular case in Netherlands because we already have successful partnership in Latvia.
Speaker #2: So with that I'm giving floor now to Tatiana to tell more about numbers.
Speaker #1: Thank you Conta. Hello dear shareholders. So key numbers from my side and I'm really happy to share such numbers with you. So if we look at the revenue then we achieved growth of more than 17% which is 13.36 million euros and as you remember the guidance for the year was plus 10% in revenue so I'm super happy that in the first half of the year we managed to over exceed then if we look at the profitability numbers then there is also a major improvement so if we look at the EBITDA then it almost doubled in compared to the same period last year so it was 1.51 million euros also if we look at the pre-tax profit then.
Speaker #1: Here is also a growth of roughly 300% so also here is a major improvement in comparison to the first half of the last year and the EBITDA margin is also improving so last year in the first half it was 7% year was about 10% then what we see in the first half of this year then it is 11% and here I have to stress that it wasn't just luck it was really discipline work to achieve these improvements and of course one part is revenue growth another part is cost discipline so if you look at the P&L statement then which you can see is administration costs have decreased if you look at sales costs then the growth of sales cost is much lower than the revenue growth so yes overall a number of transformations were done within the company to improve efficiency.
Speaker #1: If we look at the markets and maybe a bit more about revenue stream then overall the proportions between these big segments sales in Latvia sales in the European Union and outside the European Union have not changed dramatically so Latvian market still is the largest market although we have candidates to become number one markets as well outside Latvia so here one revenue stream and profit stream is Madera brand so Madera grew by 13% combined and then contract manufacturing segment grew by 50% and here we have self-named Mossa as the main drivers for growth.
Speaker #1: And then if we focus more on Madera brand which is and will remain the core of the business then here what we see is that in Latvia which is the biggest market revenue remained stable and here we have to admit and understand that in Latvia we are quite mature brand so it's very hard to report big increases so rather for Latvia it's important to remain stable and not to drop so here I'm happy that we remain stable and that there are no big negative changes and then if we look at the markets outside Latvia then what we saw is that our top markets reported in total plus 20% growth and these markets account for 45% of our brand turnover.
Speaker #1: So the markets are Germany, France, Czech Republic, Spain, Finland and here Gunt already mentioned that we had very nice results in Finland also the operating model has changed with Madera team taking over direct e-commerce so we are happy to report that we had plus 20% growth in Finland and also there are some outperforming markets so it is Czech Republic and Slovakia together as they are operated by one distributor also we are continuing growth pattern in Spain Spain grew by 51% also in France we are doing 21% growth in Germany growth this half of the year was weaker where mainly e-commerce struggled to yes achieve high growth so the growth is much milder.
Speaker #1: And also if we look at global arena so here we are happy to continue our expansion in Saudi Arabia and also we made market entry in Singapore market.
Speaker #1: If we look more closer at the channels and here maybe more about e-commerce then what we see is that our direct e-commerce share is increasing so there is still a percentage point increase in compared to the same period last year so now e-commerce share is 40% of the revenue and the revenue growth of this segment was 24%.
Speaker #1: And here so one channel is our own online store which grew by 16% and then another sales channel internally we call the marketplaces but basically what we have here Amazon, TikTok shop, Zalando so all of these combined reported plus 100% growth in turnover so again coming back to Gunt's point what we see is that we can achieve much faster growth in e-commerce and it's very important to continue develop these segments.
Speaker #1: So if we look at our own online store and how we did there and there is of course more metrics compared to other channels so basically there are some markets which are continuing to outperform so I'm super happy to see that we continue growth trend in Spain and also what is important to note and where we see a bigger shift is in our online market the proportion of new customers and repeated customers so there's seven percentage points increase of new customers and again referring back to Gunt's point on e-commerce strategy and working on new client acquisition and finding new angles and unlocking the correct ways to approach new customers were this season it happened to be our keratin silk mist so it really helped to achieve increase in new customer growth so super happy for that.
Speaker #1: Yes we can go to products.
Speaker #2: Thank you. Then I will take over from here more explaining to detail what happened with our product categories. Overall alongside with the innovation we already mentioned we launched in total 10 new products in Madera portfolio in the first half of the year which contributed to more than half a million in turnover.
Speaker #2: And jumping on the picture to the right I think we had some really more visible shifts in product category split than if compared to previous reports we've really see two categories accelerating and this is also visible in how they're let's say taking bigger share within our portfolio which I am very pleased about because the more we diversify in terms of internal portfolio performance the better it is for the company.
Speaker #2: So we see really substantial growth in share for haircare products by 6% percentage points and again this is going back to the starting from one product which gave positive fill over for the entire haircare category and another category which accelerate continued acceleration was makeup and this is a lot thanks to CCGO launch.
Speaker #2: In stick format respectively because the pie is 100% then other categories which grew less than obviously their share decreased which is logical. What I want to emphasize is that we see really market trend and also growing demand in stick formats products both skincare makeup suncare and this is why company has made prepayment and is bringing in in-house our own stick or more advanced stick filling machine we already have one but it's rather let's say specific and limited in terms of outputs so we are upgrading ourselves and bringing more higher pace and higher versatility filling machine from Germany which is arriving second half of the year and the team is really excited that we can really then increase the playground in stick formats like I mentioned it's not only let's say the visible products that were showed but really the opportunities are much wider and we can also increase the production output for our mascaras concealers with this filling machine.
Speaker #2: And what I'm also very honored to see and humbled to see is really a global level unpaid unasked recognition from really a global stage we have had these mentions already in the past and I was also very honored to see our teams efforts recognized by one of highest paid supermodels in the world and she was mentioning Madera subglow foundation and we were presented in multiple Vogue channels Vogue France channels which is one of the most prominent Vogues in the globe and again this came as a very positive surprise for the teams it was not aimed or it was not targeted it came entirely organic and really I think reemphasized that product comes first product quality comes first and product functionality comes first and then as a let's say positive additional point that we bring is that we are clean and certified but really that the product performance has to be there ultimately and this is what I think we see both in positive numbers in growth of revenue and new customer acquisition but we also see this in more let's say soft organic mentions that we get from world-class mentions.
Speaker #2: And then maybe just to show what were other innovations we were innovations that we did in the first half of the year so another major trend in skincare is exosomes so we launched exosome and peptide rejuvenating serum then a massive project for the team was actually rebrand for one of the first products that brand had launched which is deep moisture line so deep moisture line got even better formula more relevant formula for nowadays consumer better packaging more recyclable packaging so the entire line was relaunched and already mentioned innovations in stick format so six shades of CCGO and then also Dewy Stick and yeah like the last two were definitely the stars of this first half of the year.
Speaker #2: And then just a quick sneak peek of what's to be expected for the upcoming second half of the year then we are not changing the course so it's further acceleration of our e-commerce channels and I emphasize in multiple form that it's really like I mentioned it's both working on new user acquisition for our direct e-commerce shop but it's also diversifying marketplaces so we are starting operations in Germany in TikTok shop literally now in September with that also starting different platforms for affiliate marketing that should and will bring new user acquisition for our direct e-commerce then we are further bringing in new products for the second half of the year the focus will be on lip care eyelash treatment and another core line relaunch which will be sauce skincare line and then what is happening in the background or behind the curtains that maybe is not visible to the outside world but which is fundamentally important that we maintain or even further improve our operational efficiency is process automations this is happening on multiple frontiers mainly e-commerce planning and manufacturing is attributed not attributed sorry covered this year so really working on full-scale automation in terms of how the process and data flows and also bringing AI layers for relevance and with that we are maintaining our commitment of growing at least 10% for this year equaling to at least 25.5 million euros and delivering efficient growth and sustainably efficient growth so maintaining double digit EBITDA margin which we believe is a good prerequisite for further future growth.
Speaker #2: So with that thank you very much this is the end of the presentation.
Speaker #1: Thank you so much. We will now be continuing with the questions and answers session participants please submit your questions either in writing through the Q&A window that you see below or alternatively please raise your hand and you'll be unmuted.
Speaker #1: We'll start with the first question that we have received where do you see Mother Cosmetics in three to five years?
Speaker #2: Thank you. So here I have to be very very careful not to give any external commitments in numbers but I think definitely discourse that we have started of first of all becoming dominant ecom player and I think this is very important for brands as such because this is where consumers are leaning towards so it's further growing and doubling down on e-commerce channels is it our own or is it third party will be very important and it's also very important that we continue finding markets that deliver growth like that Iana mentioned outside these saturated markets so I really expect that in a couple of years times we already reach saturation in some other key European markets and then discover new ones and having said that I think ultimately for us it's important that we deliver excellent product and this is where team will continue to invest in the back office it's really product excellence that we deliver functionally amazing formulations and products and on top we do it in a cleaner more sustainable way so e-commerce growth further geographical diversification and excellent product.
Speaker #1: Thank you. Are you considering manufacturing or outsourcing outside of Latvia as well?
Speaker #2: I can take that as well. So we already historically had had some marginal cases where we have tried with contract manufacturing one was for Iana correct me if I'm wrong but I think it was for eye patches so the mask permit that you put under your eyes and now we are actually co-manufacturing with Faber-Castell our eyebrow and eye pencils so this is the only product that is manufactured with third party having said that going through these discussions and experiences with third party manufacturers we really at this point don't see much of added value speed or cost benefits to go outside and I would really believe our R&D capabilities are really world-class in what we do I can't be that arrogant to say never in the future but I don't see it as a strategic shift in the nearest years.
Speaker #1: Thank you. At the moment no questions have come in. We will pause for a minute to give everyone an opportunity to submit any final ones.
Speaker #1: One more. Are there any lessons you can take from Prime Promethex?
Speaker #2: Plenty. And then to be honest I'm really really proud that Latvia has had such a success case in cosmetics industry because to be honest it's not easy to achieve so what and how we are treating when discussing about Prime Promethex and team is it's really exception that we all look up to but we really have to understand it's completely different business operating model so it's almost mono market it's purely e-commerce it's fully outsourced manufacturing and it's really unfair to compare apples to apples however what we can take and I think it's fantastic lesson from Prime Promethex is really how they do and treat their contents and how they can scale their contents so I think this is this is one of the learning lessons that they have mastered that beyond any other player here in Latvia how to really scale in content and use requisition so thank you.
