During the BIC Second Quarter and First Half 2024 Earnings Conference Call, CEO Gonzalve Bich provided an overview of the company's performance. Despite a decline in net sales in North America and the lighter market, BIC saw growth in other regions and divisions. The company's adjusted earnings per share increased slightly, and it reported a strong net cash position and free cash flow. BIC is implementing a reorganization plan in North America and remains committed to its Horizon plan and sustainability initiatives.
Key Takeaways
- BIC's net sales declined by 3.2% to €1.1 billion in the first half of 2024, with a stable adjusted EBIT margin of 14.9%.
- Adjusted earnings per share rose by 0.7% to €2.95.
- The company's net cash position stood at €262 million at the end of June 2024.
- Free cash flow improved significantly, reaching €37 million.
- There was strong growth in Europe, Brazil, and the Middle East and Africa.
- BIC is focusing on innovation and has seen success with new product launches and e-commerce growth.
- The company is undergoing a reorganization in North America to improve its business structure and reduce costs.
Company Outlook
- BIC expects full-year 2024 net sales to grow in the low-single digits at constant currency.
- A slight improvement in the adjusted EBIT margin is anticipated.
- Free cash flow is projected to be above €220 million.
Bearish Highlights
- The lighter market in the U.S. experienced a decline due to a challenging macroeconomic environment.
- Net sales in North America decreased, necessitating a reorganization plan.
- The Flame for Life division's net sales dropped by 5.8%.
- Cello, BIC's business in India, faces profitability challenges.
Bullish Highlights
- The Human Expression division saw a 2.3% increase in net sales at constant currency.
- The Blade Excellence division's net sales grew by 3.5% at constant currency.
- BIC experienced significant growth in Brazil's market.
- The company is working on M&A opportunities that align with its core capabilities and financial guidelines.
Misses
- The overall net sales for the first half of 2024 decreased by 3.2% from the previous year.
- The growth rate in 2024 is expected to be below BIC's mid-single digit target.
Q&A Highlights
- It is too early to comment on back-to-school season results for the Human Expression division.
- Restructuring activities are expected to improve volume operating leverage in the second half of the year.
- CapEx for the year will remain within the guided range of €100 million to €110 million.
- BIC is focusing on driving down costs in its India business.
BIC's performance in the first half of 2024 reflects the company's resilience in the face of a challenging market in North America. The company's commitment to innovation and growth in other regions demonstrates its strategic adaptability. BIC's reorganization efforts in North America aim to align the cost structure with market conditions and set the stage for future profitability. The company's strong cash flow and net cash position provide a solid financial foundation as it navigates the evolving global market landscape.
Full transcript - BIC (BICP) Q2 2024:
Operator: Welcome to BIC Second Quarter and First Half 2024 Earnings Conference Call. My name is Ellen, and I will be your coordinator for today's event. Please note this call is being recorded and for the duration, your lines will be on listen-only. [Operator Instructions]. I will now hand you over to Brice Paris, VP, Investor Relations. Please go ahead.
Brice Paris: Good evening, everyone, and welcome to BIC's second quarter and first half 2024 results call. I'm Brice Paris, Head of Investor Relations. We are in Shelton today with Gonzalve Bich, our CEO; and Chad Spooner, our CFO. This call is being recorded, and the replay will be available in our website along with today's presentation and press release. We will start with the usual results presentation, followed by a Q&A session. But first, please take the time to read the legal disclaimer on Page 2. With that, I give the floor to Gonzalve.
Gonzalve Bich: Thank you, Brice. Welcome everyone and thank you for joining us to discuss BIC's 2024 second quarter and first half results. I'll kick off with a summary of our performance for the first half of the year, then Chad will take you through our detailed financial results, and I will then conclude with our outlook for the remainder of the year. The first half of 2024 was marked by an unstable macroeconomic and political environment across the globe, with consumers continuing to face inflationary pressures in their everyday lives. This was reflected in our first half results. While we experienced a strong decline in our net sales in North America, our performance across the rest of the group continued to be strong, growing 7% at constant currency. In this context, we continue to focus relentlessly on what we can control, while at the same time managing the headwinds resulting from things we cannot. First, what we cannot control is market volatility. In the U.S., the macroeconomic environment has deteriorated since the beginning of the year with lower than expected GDP growth. Consequently, growth slowed in the first half of 2024, with inflation-weary consumers spending less and driving to a shift away from general merchandise towards food, as recently observed by top retailers across the U.S. This led to reduced consumption, notably in the small independent stores which are the most affected. As a result, the market declined more than expected throughout the first half of the year. At the beginning of the year, we expected the U.S. lighter market to decline by low to mid-single-digits in 2024. However, as recently announced, we now expect the market to fall by mid- to high-single-digits in value for the full-year. Against this backdrop, it is imperative to continue to focus on what we can control through the successful implementation of our Horizon strategy. As a consequence, we are adapting our cost structure to the current challenging business environment through a reorganization plan that we initiated in North America in the second quarter. At the same time, we continue to amplify our commercial and operational strengths. Let me give you a few examples of what we have accomplished in the U.S. market first. Specifically, our ability to innovate and persuade consumers to trade up is helping to increase the distribution of added value products such as decorated lighters and our EZ Reach lighter, which has now reached 6% market share in value. We're also excited about the recent launch of our new EZ Load utility lighter supported by a digital media plan and partnership with social media influencers to raise awareness. Additionally, the DJEEP lighter Ignite Your Passion campaign with DJ Khaled in the U.S. got off to an exciting start in the second quarter with over 2 billion impressions delivered from media and influencers following a press event in New York City. Our e-commerce initiatives in the U.S. also continue to build momentum with double-digit growth in online sales year-to-date. Best selling products include our iconic mechanical pencil and ballpoint pens and correction tapes ahead of the back-to-school season, as well as more recent innovations like the Soleil Escape shaver. Secondly, we remain well positioned to capitalize on growth across the rest of the group, which generated circa 7% in net sales growth during the first half, notably driven by Europe, Brazil and the Middle East and Africa. In Europe, we posted robust net sales growth in our three divisions by focusing on commercial excellence. This growth was driven by successful commercial execution backed by our strong value for money positioning and solid e-commerce performance, which saw a 25% increase in net sales. We also achieved further distribution gains, notably in the strategic discount channel. In terms of further geographic expansion, we benefited from increased distribution in growth markets like Eastern Europe, which continued to grow strongly and contributed to almost half of our sales growth in Europe. We also maximized opportunities in some of our more mature markets with trade-up products such as decorated and personalized lighters, as well as our hero product, the iconic 4-Color pen. In Blade Excellence, we proudly overtook the number two position in the European wet shave market, reinforcing our brand recognition and trust with consumers, gaining market share in 9 out of 12 reported countries. This growth was driven by men's products, particularly the flex range. In our Flame for Life division, it's also worth noting that our premium DJEEP lighter brand grew by double-digits in Europe during the first half as we continue to lean towards a more value driven model. Elsewhere, in Latin America and specifically in Brazil, one of our top 5 countries, BIC continues to perform strongly, achieving high single-digit growth in the first half of the year, driven by strong commercial execution. We saw good performance from our added value utility lighters such as EZ Reach and Handy BIC in Brazil as we pursued strategies to address all flame occasions. For example, our EZ Reach lighter launch plan centered around digital media platforms to build awareness and delivered impressive results with over 300 million consumer impressions. The growth of our Blade Excellence division in Brazil was driven by strong market performance and effective communication campaigns, notably those highlighting our 3 blade products such as Soleil Escape and Flex (NASDAQ:FLEX) 3. In Human Expression, our latest campaign featuring our iconic 4-Color pen has reached over 50 million consumers with a remarkable 22% engagement rate, solidifying our leadership position in Brazil. In Mexico, we saw a good start to the back-to-school season with double-digit net sales growth in strategic segments such as marking, coloring and correction. In the Middle East and Africa, performance was solid in the first half with double-digit growth driven by solid execution. In Human Expression, our Lucky Pen range in Nigeria acquired in 2019 continues to succeed, contributing to nearly 50% of net sales. Both the Middle East and South Africa experienced double-digit growth, bolstered by strong distribution gains. In Blade Excellence, we saw double-digit growth with strong market recoveries and good performance from strategic products with increased distribution and higher visibility across key countries for Flex and Soleil brands. Third, despite adverse economic trends, notably in North America, we're doubling down on our efforts to deliver our Horizon plan at a global level. Revenue growth management continued to deliver positive net sales growth per SKU of 14% during the first half of the year, while our portfolio rationalization efforts showed return with a total SKU count reduction of 12%. Our digital capabilities continue to have a strong impact and are ahead of our targets with core e-commerce net sales growing double-digit in H1. North America and European countries are at the forefront as we benefit from the increasing engagement from existing large pure players and new customers. EZ Reach continues to evidence the impact innovation is having on our business following its continued rollout in Europe and Brazil. This is reinforced by impactful advertising campaigns in the U.S. and innovative marketing campaigns across the world, focusing on digital initiatives to improve our reach and targeting. On top of the marketing campaigns I just mentioned, I'd like to highlight that in Canada, our added value product, the Soleil Escape razor has become the official razor of all Canadian teams in the new league. This partnership with the professional women's hockey league generated impressive reach, while supporting and empowering female athletes, reflecting BIC's commitment to gender equality. I remain proud of the progress we're making to maximize sustainability at BIC, another key pillar of our strategy. In May, we published our sustainability report, which provides a detailed overview of BIC's global impact and our progress towards our key goals. As an example of this, we improved our energy efficiency by 11% over 10 years and secured clean energy power purchase agreements in France, Greece, and Mexico. I'm also delighted to see significant progress in South Africa, where we've transitioned our Johannesburg manufacturing plant to 100% green renewable electricity, the first of its kind in Africa. All of these initiatives align with BIC's commitment to reducing our environmental footprint and carbon emissions by 2025. Also in this region, I'm proud of the initiative of BIC South Africa's successful conclusion of its school roadshows program for the year as part of its nationwide Buy a Pen, Donate a Pen initiative. This program has positively impacted over 1 million students and more than 40,000 teachers in primary and high schools this year alone, contributing to our commitment to improve the learning conditions for 250 million students by 2025. Finally, on the profitability side, our margins were resilient with a first half adjusted EBIT margin of 14.9%, flat versus H1 2023. In Q2, we accelerated the necessary measures to mitigate the negative impact of the challenging macro environment on our business. Accordingly, we've launched a reorganization plan to reduce costs and enhance our operating model efficiency. This plan allows for streamlined, faster decision making. Further, by restructuring our cost framework and focusing on targeted strategies, we can leverage category specific insights more effectively to aid in achieving our financial goals. To conclude, we expect the rest of the year to remain challenging with further headwinds from market volatility. That said, we're confident in achieving our full-year guidance as our strategic initiatives and cost actions should balance the negative trend in consumer spending. With that, I now turn you over to Chad, who will review our first half financial results. Chad?
Chad Spooner: Thanks, Gonzalve. Let's begin with an overview of our consolidated results for the first half of 2024 on Slide 6. Net sales for the first half were €1.1 billion, a 0.5% decrease at constant currency, excluding Argentina. Our adjusted EBIT was €170 million, which resulted in a margin of 14.9%, flat versus prior year. I'll go into more details in the drivers later in my presentation. Adjusted earnings per share was €2.95, an increase of 0.7% versus last year. Free cash flow for the first half was strong at €37 million versus €3 million in H1 of 2023. At the end of June 2024, our net cash position was €262 million. Turning to the next slide, you'll see the snapshot of our three divisions' performance for the first half, starting with Human Expression. Net sales were €453 million, up 2.3% at constant currency, excluding Argentina. In Europe, net sales grew high single-digit with growth coming from all geographies and channels. In both Western and Eastern Europe, we increased our distribution, notably in the strategic discounters channel, while e-commerce net sales grew double-digit. In Mexico, we saw a positive start to the back-to-school season, with growth coming from both core products and added value products, such as marking and coloring. These strong results were partially offset by softer performances in other regions. In the U.S. specifically, net sales were impacted by negative market trends. The Human Expression adjusted EBIT margin was 11.4%, an improvement of 1.7 points compared to H1 last year. The biggest contributor was gross profit margin improvement, driven by price and mix, as well as favorable ForEx. In the center of the slide, you'll see our Flame for Life divisions performance. Net sales were €402 million, down 5.8% at constant currency, excluding Argentina. As mentioned by Gonzalve, performance was strongly impacted by the challenging market environment in the U.S. lighters business, where consumption trends deteriorated, particularly in the convenience channel. However, in Brazil, Europe and the Middle East and Africa region, net sales performance was solid, driven by strong commercial execution and distribution gains. In Europe, our trade up strategy was a success with double-digit growth for both our decorated lighters and premium DJEEP lighters. In addition, following its launch last year, our utility pocket lighter EZ Reach continued to ramp up in both Europe and Brazil, supported by impactful digital campaigns. The Flame for Life division soft performance was reflected in the adjusted EBIT margin declining from 35.3% in H1 2023 to 31.5% in the first half of 2024. This was mainly driven by higher raw materials cost, unfavorable fixed cost absorption, and negative net sales operating leverage in the U.S. Lastly, in our Blade Excellence division, performance was solid. Net sales were €271 million, up 3.5% at constant currency, excluding Argentina. Most regions contributed to growth. In Europe, we gained market share in nine out of 12 countries boosted by our strong value for money positioning, and we became the number two player in the wet shave market. We also continue to expand our footprint in Eastern Europe and notably in the discounters channel with the success of added value products such as the BIC Hybrid Flex and the BIC Click Soleil. In Brazil, the continued acceleration of our 3-blade segment, as well as our hybrid ranges environment with a contraction in demand affecting the disposable shaver market. The Blade Excellence adjusted EBIT margin improved strongly to 14.1% compared to 7.6% in the first half of 2023, boosted by strong gross profit margin improvements with favorable price and mix, fixed cost absorption, as well as manufacturing efficiencies. Turning to Slide 8, let's now review our consolidated financial results starting with the 2024 net sales evolution. On an as reported basis, net sales for the second quarter of 2024 totaled €618 million, down 3.2% versus last year. At constant currency excluding Argentina, our net sales were down 0.9%. Currency fluctuations had a negative impact of minus 1.5 points, Argentina contributed minus 0.8 points. On an as reported basis, net sales for the half year of 2024 totaled €1.1 billion, down 3.2% versus last year. At constant currency excluding Argentina, our net sales were down 0.5%. Currency fluctuations had a negative impact of minus 1.9 points, Argentina contributed minus 0.8 points. Let us now take a closer look at our adjusted EBIT margin change versus the prior year for the second quarter 2024 on Slide 9. Q2 2024 adjusted EBIT margin was 17.4%, an increase of 0.9 points versus Q2 last year. First off in Q2, gross profit margin was adjusted for the change in fair value related to the physical power purchasing agreement in France. Excluding this fair value adjustment, Q2 gross profit margin was up 0.8 points. This was driven by favorable price and mix, ForEx and manufacturing efficiencies, partially offset by unfavorable fixed cost absorption. Brand support was flat versus the second quarter of last year. OpEx and other expenses decreased by 0.1 points. Let us now take a closer look at our adjusted EBIT margin change versus the prior year for the first half of 2024. H1 2024 adjusted EBIT margin was 14.9%, flat versus last year. As communicated in February, a special bonus to be paid in the second half, which is a non-recurring item excluded from our adjusted EBIT margin, will be awarded to team members who have not been granted shares under our regular long-term incentive plans. Excluding this special bonus and the fair value adjustment of the PPA in France, first half gross profit margin was up 0.6 points. This was driven by favorable price and mix, ForEx and manufacturing efficiencies. This was partially offset by higher raw material costs, notably in the lighter business, and unfavorable fixed cost absorption. OpEx and other expenses increased by 0.6 points due to net sales negative operating leverage in the first half of 2024. On Slide 10, we have the key P&L elements. Adjusted EBIT for the first half of 2024 was €170 million compared to €175 million last year. Nonrecurring items for the first half of 2024 were related to the special bonus and the fair value adjustment on the PPA in France, which I mentioned before, as well as restructuring expenses to optimize our cost structure. First half 2024 income before tax was €155 million compared to €169 million in the first half of 2023. Net income group share was €111 million compared to €122 million for the first half of 2023. Our adjusted EPS group share was €2.95 compared to €2.93 last year. In the first half of 2024, we invested €32 million in CapEx. The greatest focus was on our growth CapEx, which represented 60% of our total CapEx, as we continue to invest in our business to deliver our long-term growth ambitions. Moving on to Slide 12, we see the main elements of working capital. Our inventory levels slightly increased as expected, as we see every year at the beginning of our back-to-school shipping season. In line with our horizon goals, we continue to drive inventory efficiencies, improving our inventory days versus previous years. This June, we had inventory days of 176 days, which is an improvement of six days from June of 2023. We also sustained our working capital levels for receivables in days, with DSO equaling 70 days. Trade and other payables increased by €39 million, since the end of December. On Slide 13, we have our net cash evolution from December 2023 to June 2024. We had strong operating cash flow, coupled with continued improvement in working capital, as explained in the previous slide. Net cash was also impacted by investments in CapEx for €32 million. This resulted in positive free cash flow of €37 million. During the first half of 2024, we paid €119 million in dividends and bought back €30 million in shares. Lastly, our net cash position at the end of June 2024 was €262 million. This concludes the review of our first half 2024 consolidated results. With that, I'd like to hand it back over to Gonzalve.
Gonzalve Bich: Thank you, Chad. We'll open the floor to questions in just a moment. But before we do, I'd like to leave you with three words that make me confident for the future. The first is trust. As consumers continue to face significant challenges with the uncertain macroeconomic environment, they're turning to the BIC brand for the quality and value we deliver, both of which are top of mind. In turn, this trust from the consumer gives us confidence that we're making the right decisions. The second is execution. We will continue to focus on what we can control, driven by the solid commercial execution of our teams in key geographies such as Europe, Brazil, and the Middle East and Africa. The third is agility. We continue to progress with our strategic Horizon plan, utilizing the capabilities the teams have built since the plan launched. While external factors will continue to fluctuate, our ability to weather the continued headwinds we know are ahead is stronger than ever. This provides confidence we can achieve our full-year goals. Consequently, as we said in June, full-year 2024 net sales are expected to grow in the low-single digits at constant currency, excluding Argentina. We expect to see a slight improvement in the 2024 adjusted EBIT margin as we continue to drive EBIT expansion to deliver long-term profitable growth in line with our long-term goals, and we expect free cash flow to be above €220 million in 2024. Thank you very much. I'll now open the floor to your questions.
Operator: Thank you. [Operator Instructions]. We will take our first question from Kate Rusanova, UBS. Your line is open. Please go ahead.
Kate Rusanova: Good morning, Gonzalve, Chad, and Brice. Thank you for taking my questions. I have four. So firstly, when you lowered your full-year sales growth guidance in June, softer growth in U.S. lighters was called out as the key reason for that. However, it seems that you now also expect lower market growth for lighters and shavers in Europe. Can you please comment on what drove this downgrade? Is this due to intensifying competition or generally lower consumer sentiment? Secondly, on Blade Excellence, can you please provide more color on what contributed to such strong operating margin expansion in the second quarter against a rather soft top-line performance? It would be great if you can also update us on the progress of your Blade business. When should we expect to see the contribution from this three new clients? Thirdly, you mentioned strong results for some of your key products in Brazil and Mexico. However, in Q2, Latin America posted only 2.2% growth on the comparative basis. That is the lowest since the start of 2022. So can you explain why? And my last question relates to your medium-term trajectory. As part of the horizon plan, you've been targeting mid-single digit annual net sales growth. 2024 is expected to be below that ambition. So can you provide the building blocks of that acceleration to back to mid-single digit territory in 2025? Thank you.
Chad Spooner: Hi, Kate. Thanks so much for the questions. I'll start and answer, if Gonzalve has any additions, he can chime in. But the first thing we'll talk about is Europe. So what we changed was the outlook of the market for what we're seeing. We're not seeing reduced performance, obviously, in Europe, and Europe was not part of our guidance downgrade in sales. It was purely driven by North America, which I think everyone is reading about in the FT and Wall Street Journal, that all companies were seeing the pressure in North America. In Europe, though, what we have seen from a market perspective, which as we said, is really on consumer sentiment, right? So that is what we're seeing in the market. We're letting you know what we see. It hasn't changed our outlook for our European business for the year, which is very strong. The second question we had was about Blade Excellence and the strong margin that we had in the second quarter. Let me just talk to it in terms of what have we seen for the first half for our Blade Excellence business. I think that'll give you some indication. We had a really strong favorable price and mix in the first half of the year for a Blade Excellence business, which helped drive our gross profit. We also saw some very strong favorability and cost of production, as well as some currency fluctuations, which are favorable. Last year, we talked about unfavourability of the Mexican peso, the U.S. dollar. This year, it's going the opposite direction. So it's really, I'll call it in a two year basis, kind of flat. But we're getting the benefit this year where we had the pain last year at the same period. And as well, the brand support that we had at the same time last year isn't as much for Blade Excellence. So those are some of the things that drove such a really strong margin in the first half of the year. The next question we had was about, within Blade Excellence, our contribution from BBT. And this is one of the things that we've talked about is that this is a business that takes time to build, because we are building for our customers who then sell to retail. And they are, as they have the same impacts from the global environment, so when we have pressures -- we see pressures in the U.S., they're seeing the same kind of business environment. So where they have softness, it gets relayed right back to us as well from a BBT perspective. The contracts that we've signed in the past and we continue, obviously, to look for new customers, this takes time. This is a -- if you think of the product lifecycle and getting into retail and the timeframe it takes anywhere from 12 to 18 months, that's really the timeframe from us to build a product for them to get it out on shelf, et cetera. So it's one of you don't see a step function, I think we've talked about this in the past, or you don't see a gradual every quarter, hey, 10%, 20%. But once they start to go in production in retail, that's when we start to see some of that impact. And so, in 2025, hopefully we'll start to see some more of these new customers impact. In regards to strong performance, you said for LAM, but the lowest that we've seen to date. When I look at the Latin America market, what I really see is significant growth in Brazil, right? So we talk about Latin America and Brazil has really had tremendous growth. Mexico has been somewhat not as much, but that's where we're seeing our Latin America growth. And we really have seen excellence in Brazil. We've talked about in Flame for Life and in Blade Excellence, and we'll continue to see that strength in Brazil throughout the year. So...
Gonzalve Bich: Nothing's really changed. Fundamentally, Kate's right, from a purely mathematical, since the quarter in 2022, this is the "lowest." But fundamentally, the business is still strong, growing, market share gain, distribution gain, there's a lot to be happy about in -- otherwise difficult to global context. So really, Latin America is still a growth pillar for us.
Chad Spooner: And then I'll start on the question that you had about the Horizon outlook and where 2024 is landing in low-single digits. I want to take a step back and remind us, once we got through 2023, we're three years into horizon. We were close to 9% growth on a CAGR basis. And when we first talked about Horizon, we talked about a trajectory, right? Mid-single digit growth trajectory. And so if you think of that as a line over that five year period, and we are already at 9% in the CAGR basis, we're a bit above that line. This year is going to bring us a bit closer to that line, 8.8% to be exact, right? But that's kind of -- that trajectory, we've probably overachieved it in the first three years. This year it's coming down, given what we've seen in North America, and I think everyone in the world seeing this. So I don't think it's changed the wording that we've set of where our trajectory is for Horizon. We're still looking at that same type of trajectory.
Gonzalve Bich: Thanks Kate.
Operator: [Operator Instructions]. We will take our next question from Marie-Line Fort, Bernstein. Your line is open. Please go ahead.
Marie-Line Fort: Yes, good evening. Thank you for giving me the opportunity to ask questions. My first question, I'm sorry to come back. It's about your growth drivers that you could activate over 2025 to continue to maintain your 5% organic sales growth target. Just to know what will be the release in a context that probably will continue to be difficult in 2025. My second question is about Inkbox. Would like to know how it has performed over the first half and what is the outlook for the rest of the year? And also probably a brief update on Cello would also be welcome. And my last question is about your external growth strategy. Where you are and why is there some reason for not going ahead for this strategy? Thank you.
Gonzalve Bich: Hi, Marie-Line. Thanks for your questions. And I'm going to ask, can you repeat question four again real quick before we get started just to make sure I understood what your question was? Was it M&A?
Marie-Line Fort: Yes, last question about the M&A.
Gonzalve Bich: Okay, got it. Got you. So on the growth drivers, back to that. Okay. Right now, we're in the process of rolling up and thinking about our 2025 growth drivers for the business. As you can imagine, with all of the uncertainty in North America, which is such a big region for us, we want to make sure we get this right as we start to 2025. So we'll be giving more guidance to the market later in the year as we have a better picture and more stability in North America. But as you can see, the rest of our business continues to perform at a very healthy growth rate at 7% at constant currencies. Europe, EMEA, and Brazil this year continue to have very strong performance. So the question is really, what are we going to see for North America in 2025? And I think a lot of people are still trying to figure that out.
Chad Spooner: With regards -- sorry, Inkbox H1 integration complete, from an organizational and process perspective, as well as manufacturing that we talked about earlier this year, and the team has been extremely focused on expanding retail distribution, which I'll remind us started last year, as well as online. We remain the number one in the category from a market share perspective, but also just from a influencer and recognition perspective and growing new channels for 2025, including B2B. H1 itself was soft, but improvement is expected by year end. And both brand and shopper retail data is very encouraging. So it's really a tale of two halves, the first half very inwardly focused, while still driving the business, and the second one very much focused on growth. In regards to Cello, India remains a challenging market from a profitability standpoint. Our team continues to do an excellent job of really executing operationally and doing everything we can to drive the cost down to get the business closer to profitability. But I would say that this year, we still have work to do, and our ambition of getting to breakeven by the end of this year might not be the case and might go into 2025.
Marie-Line Fort: So there is no promotions?
Gonzalve Bich: And with regards to M&A, Marie-Line, our external growth opportunities, please don't believe that the teams, Chad and I, as well aren't working on them, but we remain very much focused on what we talked about at the full-year, which is we're not going to do a deal just for a deal's sake. We're making sure that we're looking at opportunities that leverage our core capabilities, route to market, brand, channel, manufacturing, excellence and the like, and to create positive forward synergies for the business. So you should expect the same from us, but you should as well expect us to stay within the guidelines that we set for ourselves both operationally and financially for investment.
Marie-Line Fort: Okay. Thank you. Just to follow-up on the growth driver for 2025, I was not expecting some macro expectations. I was just would like to know what are your internal strategies in terms of new products, in terms of new initiatives, it's more on that side. I would be curious to know what could be the drivers for 2025.
Gonzalve Bich: Thanks Marie-Line. As Chad -- you heard Chad say, we're in the middle of rolling up, well, we're not in the middle, we've just started rolling up our 2025 budget, so it'd be premature for us to make public statements to that effect. And we're very focused on closing out the year in line with what we said.
Marie-Line Fort: Thank you.
Operator: We will take our next question from Cedric Rossi, Bryan Garnier. Your line is open. Please go ahead.
Cedric Rossi: Yes, good evening everyone. I just had a quick question regarding Human Expression. So I heard about what you were saying regarding the retailers mood, but I was curious to know their mood ahead of the back-to-school season regarding Human Expression. If I recall correctly, last year, they were ordering well in advance, because they were still worried about supply chain shortages. I guess this year is not the case. So, do you expect any phasing impact between Q2 and Q3 this year? Thank you.
Chad Spooner: Hi, Cedric, it's really too early for us to comment on back-to-school season results, given the only part of the world that's already really gone on is a part of the U.S. in the south that goes really early back-to-school. But we've closed out Q2 ship and now we have the [indiscernible] in French. The replenishment orders to be done in the last week of August and the three first weeks of September, depending on the sellout. So that's what we're really focused on monitoring and making sure that the promotional monies that we put in communication deliver what we want them to do. But it's too early to tell. We'll let you know at Q3.
Cedric Rossi: Okay. Thank you.
Operator: [Operator Instructions]. We will take our next question from Christophe Chaput, ODDO. Your line is open. Please go ahead.
Christophe Chaput: Yes. Good evening to the team. Just a quick one for me. So, on Q2, you booked a restructuring cost by €5.1 million. What kind of impact you could benefit in H2 in terms of cost cutting? Sorry if you give the figure and I missed it. And if the macroeconomic context continues to be difficult in H2 in the U.S., do you -- let's say, you're ready to think about additional cost cutting measure that you could put in place? Thank you.
Chad Spooner: Hi, Christophe, this is Chad. As you can imagine, right, when we saw what was going on in North America, we said the market is becoming very challenging and we need to right size our business for the future, right? So that's the first thing that we should take into mind when we did this, which is why we did some of these restructuring activities is. We need to get a cost structure that's in line with the business today and that can benefit us for the future. So, what we've done from these restructuring activities is really looked at how can we get closer to the decision making customer, take out some of the layers that we had in the company. And I think Gonzalve talked about this, how do we reduce our cost structure in our categories, which will enable our teams to get the strategies and insights and those things closer to where the decision points are. So, the restructure and reserve you see will drive, I won't give the exact basis points, but you'll start to see a bit more volume operating leverage in the second half of the year as we see these benefits. And then we'll see these as well, obviously, setting us up for 2025 margin as well. So we will get that, I'll say we'll get more benefit than we spent in restructuring costs. That's one thing I will say in terms of -- for the second half of the year.
Operator: We will take our next question from Alessandro Cuglietta, Kepler Cheuvreux. Your line is open. Please go ahead.
Alessandro Cuglietta: Yes, good evening everyone. Just a quick question on your CapEx envelope for the year, because I had in mind that it should be around €100 million and you were only at somewhere around €30 million in H1. Is there something I'm not understanding correctly or is it still the target?
Gonzalve Bich: Alessandro, yes, if you look at our traditional trend, we usually run first half light of our half of our target, I think every year that happens. And then, more of the CapEx is spent in the second half of the year. One of the things I always say is, we say it's €100 million give or take a little bit, I think this year we might have targeted even €110 million. But it'll be within that range. It's not going to obviously be over €110 million, given the market and everything we're seeing now, but we will see more of the CapEx in the second half of the year like normal, but we're still committed to our guidance on CapEx that hasn't changed as of now.
Alessandro Cuglietta: Okay. All right. Thank you.
Operator: There are no further questions on the line. So I will now hand you back to your host for closing remarks.
Gonzalve Bich: Thank you very much, everyone, for joining us for this. As usual, Brice and the IR team are at your disposal for any further clarifications or other questions should they arise. We look forward to seeing you at our third quarter conference call after the release, and I will wish all of you a very good summer. Thanks very much.
Operator: Thank you for joining today's call. You may now disconnect.
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