Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Intercos nine months 2022 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Renato Semerari, Chief Executive Officer of Intercos. Please go ahead, sir. Very much. Good evening, everybody, and good morning for the U.S. attendees. Welcome to this call. I would like to start a bit unusually, starting from the results of the third quarter before getting into the year-to-date results. I'm doing that because quarter three has been the best Intercos quarter ever, both at top line and bottom- line level. Net sales accelerated and reached EUR 229 million, which is a 34% growth at current rates, and +29% at constant rate. This was driven by the progressive improvement in production feasibility, which we announced already starting last summer. Growth was largely driven by volumes, with pricing counting for only about 5% of the result. EBITDA was up +35% versus year ago, with margin for the first time in the year above year ago at 15.6%. This was also helped by the energy extra charge that we started to implement in quarter three, which accounted for about EUR 1.5 million. Net debt was also at historically low level, with a leverage at one times the long-term, the 12 months rolling EBITDA and reaching EUR 116 million, which is EUR 64 million better than last year and EUR 10 million better than the ending of December of last year. These strong quarter three results brought us in the year-to-date at a growth of our top line of +23% at current rates and 18% at constant rates, with a growth of EBITDA at 20% or 14.1% EBITDA margin. Pretty strong results in the quarter and in the year-to-date. Let me give you a bit more color on the revenues. Looking at the revenues by business unit, we continue to witness the comeback of makeup, which are representing in the third quarter 67% of our sales and 66% in the year-to-date. Skincare is a segment that is showing some softness, mainly driven by Asia and the difficult year in China that you well know about. Looking at the results in a bit more details, in the quarter, makeup grew +45% and was the key growth driver, closely followed by hair and body, which grew +40%, mostly thanks to two key projects which were postponed from quarter two. You may remember that we commented on it during last call. Skin was soft at -7%. Although if I look at the sales level versus 2019, it remains the best performer at +34% in the year-to-date versus 2019. All the business units are now showing a double-digit increase versus the pre-COVID levels. In the year-to-date, all the views are positive, with makeup leading the pack at +32% growth, followed by hair and body with +15% and skin at +3%. Moving to the geographic performance, we continue to see the progression of our American commercial company, with Europe and Asia losing a bit of weight in the total of our turnover. In the third quarter, Americas were the growth driver at +43%, followed by EMEA with a +29% and Asia a +24%. This was driven by Korea exceptional growth, but also China in the quarter came back to positive with a +4% in the quarter. In the year-to-date, Americas are leading the pack with +36%, followed by EMEA at +18% and Asia at +15%. Moving now to the results by customer type. Emerging brands, as you know, have been the growth driver and keep gaining weight with multinationals and especially retailers losing a bit of weight on our total turnover. Emerging brands in the quarter represented 36% of our sales, with multinationals at 49%. In the quarter, emerging brands performed the best, +42%, but closely followed by multinationals, which also scored a fantastic growth of +40%. Retailers were growing but at a much milder pace at +7%. In the year-to-date, emerging brands outperform everybody else at +35%. Multinationals show a very strong +21%, and retailers are at +8%, and they are held back by specifically by a key Chinese retailer that is suffering a lot this year. Now moving on to the guidance, given our strong Q3 results, we're now raising our fiscal 2022 guidance with top line going from a +10%-+15% range to a +20%-+22% range. We also expect in quarter four to achieve an EBITDA margin overall in line with the EBITDA margin of Q3. The current environment remains complicated. We are confident that we are now much better equipped to minimize the supply chain issues that we've been living through throughout the year. Also, we are now sure we have room for further price adjustment in Q1 of 2023, 'cause when we look at the price increases that have taken both mass brands and prestige brands, we clearly have room to raise our prices and minimize the impacts that are expected on the inflation side. We have announced the new price increase to our clients, and we are starting negotiations in these days with all the key clients. Looking further ahead, we remain extremely confident by our capacity to outperform the market. Our innovation, our diversification in products, geography, and client types, as well as our demonstrated pricing power, are fantastic assets on top of a market which has always shown resilience, even during economic recessions. More than anything, we are very confident also because the order intake pace is continuing to flow at a very strong pace. In fact, as you can see in the presentation deck, we continue having an order inflow, which is very positive. In the last four months of the year, we are still growing double-digit versus year ago, so we keep having a strong performance, especially in makeup. Now on top of this, as you know, we will be having starting in Q4, but especially starting Q1 of next year from important new projects in hair and body, which will also help fuel our growth. This order intake continue to fuel a very positive order book. In at the end of October, we had an order book for makeup and skincare of EUR 324 million, which is 49% higher than our best year ever, which was 2019 so far, because this year it's gonna be better, and also 21% above the level of a year ago. Very strong order book at the end of October means that we are positively looking at the end of this fiscal and a positive start in the new fiscal as well. That's all on our side. We're ready to take your questions. Excuse me. This is the Chorus Call conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove your question, please press star and two. Please pick up the receiver when asking questions. The first question comes from Kate Rusanova of UBS. Good afternoon, Renato, Pietro, and Andrea. My first question is, you have now mentioned on a number of occasions that you have been expecting a slowdown in the order intake for the makeup category. So far it hasn't materialized, and instead, the order intake has accelerated sequentially. Just wondering, what contributed to such strong performance, and, if there have been any signs that have made you more confident about the demand for this category for the next 12 months? Then my second question is on your Q3 margin performance, because it seems to be rather soft considering the strong operating leverage you saw in the quarter, and also helped by the improved production visibility. Why is that? Did the cost inflation trend above your expectations? Finally, I appreciate the market remains very volatile, but any indication as to what level of cost inflation you expect next year would be very much appreciated. Also, what potential level of margin improvement we should expect. Do you think that 2023 margin improvement can be in line with your ambition of 50-100 basis points per annum? Thank you. Hi, Kate. Thank you for your questions. Yes, you're right. We've been expecting some softness in the order intake. It hasn't materialized, especially makeup, we are not seeing any sign of slowdown. I think this is, you know, a function of new projects that we're winning with clients and also especially, I would say, strong performance from the products we have launched in the past two years that are performing extremely well. I was looking at some results, but we have especially in the foundation category in Asia, for instance, in cushion out of Korea, we are seeing very strong results from launches that have happened in the past, I would say 18 months. That is certainly helping a lot. You know, I cannot say that we are sorry for being wrong in this case. I'm very happy to be wrong when it's for the good reason. You know, so far so good. We're not seeing signs of softness. I would have expected it to start coming, but not coming yet. Margins. Yes, you know, all in all, I think I would like to underline the fact that in absolute terms, our EBITDA has been extremely strong in Q3. If I'm not wrong, better than the consensus I had seen circulating around. The margin is a bit soft, but it's better than year ago, which it took us some time to get there. You know, our objective remains the one of improving EBITDA margin at least 50 basis points year-on-year, and we will be working against this. Now, you know, with maybe looking back, we may have raised prices more than what we've done. Honestly, you know, the impacts we've seen in energy and other things, we could not forecast them, we could not imagine they were about to come, and we paid a bit the price of all this in the past nine months. You know, we think that we are now better equipped. Our production feasibility has improved. It's not yet to the level of 2019, but is way better than in the past, in the beginning of this year and the end of last year. We are now starting to plan production in a more efficient way, and I'm pretty confident that we will soon go back to the right trajectory in terms of margins, gains. I hope I've answered all your questions. Yeah. Thank you. Maybe just on the inflationary outlook for 2023. It's. I wish I knew that. If I was good at forecasting that, I would be betting a lot more on soccer games. I would be much richer than I am. You know, we think that we're gonna continue seeing volatility, and that's the biggest issue. The biggest question mark is related to the energy costs, and that are very difficult to predict. We see, you know, big ups and downs almost on a weekly basis. For what we are concerned, we have announced to our clients another 5% increase to our prices. We think that should completely offset the inflation a bit. We do not expect a lot of inflation on raw materials. We expect energy to remain at high levels, but there will be more labor pressure in terms of salaries, because, you know, in an inflationary environment like the one we are seeing, it's pretty obvious that the labor cost will increase more than what we've seen so far. All in all, we think that with another 5% increase, we should be in a good position. Great. Thank you very much. You're welcome. The next question, sir, is from Anna Frontani of Berenberg. Hi, good evening, Renato, and congratulations on the results. I would have a couple of questions for you. The first one is on your multinational clients, because we have seen some beauty companies being more cautious with their outlook for the year. How does this affect Intercos? Should we expect actually a normalization in the growth of multinational clients, but could maybe emerging brands and retailers make up for that? That's the first one. Then the second question is if you can provide some color on the dynamics of prestige versus mass, what is it you've been seeing in the quarter and what is your view for Q4 and 2023? Okay. Anna, multinationals, in reality, if you look at our results, multinationals have been accelerating, and they grew very well in Q3, and we expect also Q4 will be very solid. Now, the reality is that we are seeing significant growth from all the main multinationals we are serving. We don't have even one that is declining so far, and we are not getting signs that are worrying us. I've read and I've heard the L'Oréal results. They are mostly affected by skincare, and skincare specifically in Hainan in China. As you know, we are not exposed to that business, unfortunately, because it's big. On the other hand, we do not feel that pain either. We have done projects for the big multinationals that are proving to be strong and perform well in the market. I've seen comments from Fabrizio Freda saying that they were seeing some strong results, for instance, in MAC, which if I'm not wrong, grew 22%. You know, all in all, you know, for what we are exposed, we're not seeing any softness coming from multinationals. Bear in mind that the percentage of what we sell to them in terms of, you know, their total cost of goods is single digit. It's very single digit, so it's pretty marginal to them. You know, for small guys like us, the important is that what we sell them is performing well in the market, and we won't feel the pain that they're feeling in general. No signs whatsoever, I must say, of multinationals suffering. To the contrary, we are seeing them growing very nicely and actually accelerating in the course of the fiscal. I would say exactly the same in the prestige segment, which is performing extremely well, and in Q3 at very strong growth rates. No signs of downsizing or downgrading either. For the time being, we are seeing very solid growth driven by this segment. Also remember that a very important chunk of what we sell in prestige is represented by emerging brands. They are in an expansion mode in terms of geographies and products, and this is all playing in our favor. We're pretty optimistic both on the multinationals and prestige side of the business, and even more on the masstige side of the business as well. Thank you very much. Thank you, Anna. The next question is from Molly Wylenzek of Jefferies. Good evening. I'm just wondering about your order book. I know there were some concerns in the beginning of the year that it was quite elevated because the lead times were so long, but it's remained so strong. Can you give us an update on lead times, and whether those are back down to more relatively normal levels? Hi, Molly. Not really, in the sense. Well, yes and no, let's say. In the sense that the lead times of our sourcing has not gone down, so the increase in lead times for us to get the components has remained long, very much in line with the beginning of the year. What has changed is that we are better equipped, as I was mentioning in the last call, because of the inventory increase we have done, and because we have found a way to get around and find different suppliers in different regions, to procure the raw materials that prove to be more complicated. We are a bit faster, but not because the market from a supply chain perspective has really improved in terms of lead times. Obviously, the fact that we are improving our production feasibility is allowing us to better execute our order book versus the first six months of the year. On the other hand, you know, it remains high because it will take time to absorb all of it. The order intake remaining strong, to the contrary of what I was expecting, at least, you know, that it doesn't help to completely digest it. It remains strong. It's positive and negatives as everything. You know, the good thing about it is that we will be starting the year with a rich order book, which is a nice insurance for a good start of the year, I would say. Yeah. That's great. Can I sneak in one more? Obviously 2022 was a really strong year in terms of emerging brands, new emerging brands coming to the market after a couple years of less activity. How is 2023 shaping up? It's a bit early to say. I must say that I continue to be optimistic. You know, the brands that have been driving the growth for emerging brands remain strong. They're giving us forecasts that are pretty encouraging. As you know, some of them are still in a geographic expansion mode, and this will help our volumes. I continue to believe that in 2023, we won't see softness on the emerging brands side. Thanks. Thank you, Molly. The next question is from Rashad Kawan of Morgan Stanley. Hey, good evening, Renato. Thanks for taking my call and my question. Just a quick question on China. Can you talk about the outlook you have there? I mean, I think you talked in a prior call about seeing consumers migrate more towards the leading brands in times when mobility is restricted. But at the same time, you talked about kind of growing 4% this quarter. If you can talk about what you're seeing on the ground there and expectations for the rest of the year, that would be helpful. Thank you. Hi Rashad. China remains a bit complicated. I'm sure you've seen that the government has no intention to soften the anti-COVID restrictions. You know, it's news of a couple of weeks ago that they've shut down the Walt Disney park. Too bad there were about 100,000 people inside. So it doesn't look to get any milder on that perspective. I think that we should expect that till the tension is so high and the restrictions so severe that there will be, you know, difficulties for consumers to restart shopping in a normal way. I still expect quite a depressed China market till the end of this year, most probably through the first quarter of next year. We hope that in the second part of next year, things will start improving, and they will start releasing a bit of this pressure. I'm always very confident that as soon as the situation will normalize, consumption will pick up again in a very important manner in China. Now, the whole, the real question is when is that going to happen? Because, you know, in 2023, it will make a difference if it starts in April or if it starts earlier or later than April. We will have to see. Obviously, it's very difficult to predict that. The only, quote-unquote, relief point for us is the fact that our exposure to China is much more limited to that of many brands, and many players in our industry. China by now weighs about 10% in our, on our sales. Even and we've seen it, you know, probably in the softest year ever of China, we're doing probably the best year ever in terms of growth. For us, it's quite limited. You know, obviously, especially for skincare, it is very important to see a pick-up again of China. We hope this will improve soon. Got it. Thank you. If I can just squeeze in another question on margins. Obviously a sequential improvement there, and I know you don't break up margins by divisions in the quarter. If you can talk about maybe hair and body specifically and whether the postponed projects that came online in this quarter had an impact on kind of the margin profile for the quarter, that would be great. Thank you. Not really that much. You know, when you talk about high volumes projects at the startup, you usually have a bit of you know rust to take off and you know adjust the lines so that you reach the going productivity. It didn't materially impact yet in terms of margins. We're confident that going forward it will be the case but it hasn't been really the case in Q3. No, it was mostly driven by makeup, the increase in profitability in the quarter. Yeah. Got it. Thank you very much. As a reminder, please press star and one on your telephone for questions. The next question is from Misha Omanadze of BNP Paribas Exane. Hi, all. Thank you very much for taking time for my question. I have two actually. Question number one, reflecting on your recent conversations with your customers, where do you see retail inventory levels for various beauty categories in Western Europe and the U.S.? Question number two, I understand that it may be a bit early for this question, but can you give some color on how you think about your likely sales growth trajectory next year? Thank you. Okay. Hi, Misha. The first question was related to the inventory in our clients, right? Yes. Well, or if your clients are flagging that there are changes in inventory levels at retail, at the retailer level. Not really. I mean, our clients, if I can be blunt and transparent, are all shouting and screaming because they want us to accelerate productions 'cause, you know, in some cases they are out of stock on some of our items we provide them. I would be very surprised if they claim that they have high inventory in their warehouses. So far, we haven't seen or heard about reductions of inventories at retailer level. I know that L'Oréal in their earnings call has spoke about the risk, but I think they were mentioning more about the future. I may have misread or not exactly heard what they said. No, I you know, in our interactions with clients, nobody is mentioning this point to us at all. Coming to your second question, I think that we want to see how this year unfolds to the end before expressing, you know, our guidance for next year. I must say, and I know that Andrea and Pietro will hate me, I'm still optimistic. I'm very confident we will outperform the market. We need to understand a bit better what is gonna be the outlook for the market before giving a range on our numbers. I'm pretty sure that we will do better in the market also next year. That's very helpful. Thank you very much. Thank you, Misha. Now, at this time, there are no questions registered. Okay. Thank you very much to everybody and speak soon. Thank you. Thank you very much. Thank you. Bye.