May 8, 2019 / 9:28 AM / 4 months ago

UPDATE 1-Belgium's Ontex cuts guidance, shares fall 11 percent

(Adds share price, analyst comment and details)

May 8 (Reuters) - Shares in diaper maker Ontex fell more than 11 percent on Wednesday after the Belgian company cut its profit guidance - saying it now expected stable profit this year compared with a previously forecast improvement. Profit would improve in 2021, it added.

The company, which makes diapers and wet wipes under its own brand and on behalf of major retailers, reported a 0.4 percentage point drop in its first-quarter adjusted core profit margin to 11.2 percent and said it expected “stable adjusted EBITDA at constant FX”.

Ontex previously expected its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to improve year-on-year.

“Our revenue was impacted by lower sales of retailer brands in Europe, but we posted good growth of Ontex brands in other markets. While raw material costs have been stabilising over the last months, year-on-year they remained a headwind in Q1, as did foreign exchange,” said Ontex chief executive Charles Bouaziz.

Both EBITDA and revenue for the first-quarter were lower-than-expected, analysts said.

Going forward, Ontex aims to improve efficiency and shift to high-growth products as part of a transformation plan, it said in a statement, which aims to lift margins by 1.25-1.75 percentage points.

As part of the program, Ontex also eyes working capital improvement and targets cash conversion of 55-65 percent. Management expects one-off costs of 85 million euros, with about half spent in 2019, and incremental capex of 45 million euros.

JP Morgan views Ontex targets for 2021 as ambitious.

Ontex shares traded 11 percent lower at 18.65 euros by 0850 GMT.

More detailes on the outcome of the company’s strategic review will be presented during the investor update at 1030 GMT. ($1 = 0.8920 euros) (Reporting by Pawel Goraj, editing by Louise Heavens and Alexandra Hudson) ;))

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