Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Intercos nine-month 2023 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. Please go ahead, sir. Good evening, everybody. Tonight, I would like to start by sharing a picture on how retail market is performing. Overall, the Western market continue to display solid growth, both in Europe and in U.S., although we are seeing a bit of a softening of these growth trends from the double digits of the first half. On the other hand, China is still growing at a lower than expected pace. Also, Western clients, the destocking is still continuing, especially in prestige, yet we continue to believe this phase will end in the coming months. In such a market environment, Intercos is entering now also in a phase of difficult-to-beat comparables. As a reminder, the third quarter, 2022 was a record quarter, with sales up +34% and EBITDA up +35%. In such a context, we are posting very strong first nine months results with solid third quarter performance. In the year to date, sales are up +25% at constant rates, +23% reported, and +21% EBITDA. Net debt on EBITDA ratio is well below one, despite the IFRS 16 impact of rent contract renewals. This was achieved thanks to the solid third quarter performance, with sales up +11% at constant rates and 8% at reported rates, and EBITDA overall in line with the year ago in absolute terms, despite the already anticipated mix headwinds. In other terms, our diversification allows, allowed us to offset, at absolute level, the mix impact on margins with higher sales. Now, diving into the sales results and starting by sales by business unit. We closed the first 9 months of the year with all the business units in double-digit growth. Hair and Body is confirming to be the growth driver in the year to date, a +57% versus year ago, and in the quarter, +37%. This is mostly driven by fragrances segment. Makeup continues to represent over 60% of our business and displays a +16% growth in year to date. Third quarter was slightly down versus year ago, which was a record quarter, at +45% versus the third quarter of 2021. Western markets and multinationals, which last year had a major boost due to the backlog digestion, were softer than year ago, while Asia and emerging brands performed above the year ago. Skincare posted a +13% in year to date, mainly driven by Western clients. Third quarter saw an acceleration of the growth pace, thanks to multinationals and emerging brands. Moving now to the sales by regions. Also, all regions displayed double-digit growth in the year to date. EMEA is the main growth driver, both in year to date, +34%, and in the third quarter, +15%, helped by the strong growth of Hair and Body and Skincare. Americas and Asia have similar growth patterns in the year to date, respectively, +12% and +15%. However, the third quarter results are quite different, with Asia posting double-digit growth in the quarter, and notably China confirming double-digit pace. Conversely, Americas was slightly down facing last year comparable, which was an all-time high, +47% versus 2021. Moving to the sales by customer type, all clients, customer, clusters are growing at high single digit or double digit in the year to date. Emerging brands are still our main growth engine. They displayed exponential growth in the year to date, +52%, and also in the third quarter, a +37%, now weighing over 40% of our sales. Multinationals keep being our core cluster with about 50% of sales in the year, and they display a strong +9% in the year to date, despite third quarter was down due to very high comps. Last year, we grew in the same quarter, +40%, plus the destocking of major players we already discussed in the previous calls. Last but not least, retailers display a high single digit trend, +8% in the year to date, with a slight acceleration in third quarter, mainly driven by prominent Western retailers. Now, coming to the outlook. The current environment, as I said, in a nutshell, we are seeing retail Western world performing well, while China is still soft and the Double Eleven presale was not very good or at least not in line with the expectations, especially for Tmall, while Douyin performed very well. But the relative weight of the two platforms is very different. Also, we are seeing, again, de stocking continuing, and we believe this will last for a few months more. But we've also seen that the diversification of our business is allowing us to perform well ahead of the market. In the medium term, we are extremely optimistic. De stocking is limited in time by nature, first of all. Second, the innovation search is more and more intense in times when the market is growing at a softer pace, because in these moments, market share gains is the king for any brand who wants to continue growing. Third, the search for clean and free of, you know, let the bad items, quote, unquote, is leading many clients to open much more briefs of new initiatives with us, and this is all good news for Intercos. Last but not least, we still believe Asia will definitely rebound sooner or later. India is extremely dynamic. Although very small today, it will become a major factor in the future. China will exit from the current difficulties sooner or later, will retake its role of growth driver, and also Southeast Asia is starting to become more and more relevant in the near and midterm future. Now, going to what we believe is gonna happen till the end of this fiscal year, as I said, we believe that de stocking will continue till probably the end of the year. But we also believe that the diversification of our business will allow us to offset this impact, although with a different mix of categories and clients. In light of all what I just said, we expect for quarter four, top line, single digit up, so continuing to grow single digit in top line versus fourth quarter of last year, despite the very high comparables that we will be facing. EBITDA will be broadly in line with last year in absolute terms, which, as said, means that our diversification will allow us to offset with higher volumes, the lighter marginality. This forecast is backed by our order entry development, which keeps being strong. As you've seen, we keep having a very healthy order intake, despite we are seeing still reorders coming in double-digit down versus a year ago. And this means that new orders are big time up versus a year ago, and this is a very positive note for the future and starting from next year. The order book remains very healthy and now completely clear of orders backlog, which inflated the year ago level in a significant way. In fact, if you look at our level of portfolio versus the last non-inflated October, we are 9% above October 2021. This is all on my side. I leave room for questions. Thank you. Thank you. 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 touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Kate Rusanova with UBS. Please go ahead. Good afternoon, Renato, Pietro, and Andrea. Thank you for taking my questions. So first of all, you mentioned in the press release that you expect the destocking by British customers to end in a few months. So does this bode well for a strong first quarter? In other words, can we see the return to, let's say, mid-single digit or high single, high single digit growth in makeup? And then, you mentioned that new projects continue to grow very strongly. Can you provide more color on this? Are these new projects mostly ordered by mass clients? And do these new projects come at a higher price? In other words, when these projects become reorders next year, shall we expect a strong mix benefit? And then my second question is on your EBITDA margin. Firstly, would you be able to provide your margin development based on value-added sales and how it progressed year-on-year? And then also, should prestige customers start to reorder relatively quickly, shall we see a similarly quick bounce back in margins? So I appreciate this is early time, but do you still stand by expectations for at least 50 basis point adjusted EBITDA margin expansion next year? Thank you. Hi, Kate. I tried to write as quickly as you speak, as usual. So I'll try to. You stop me or add if I forgot anything. So the destocking, yes, we believe it's gonna last till the end of the year. This is affecting not only makeup but also Skincare. The trend is exactly the same between Skincare and makeup. We believe that this is gonna end soon. We have seen the destocking now for a good, you know, if it lasts till the end of the year, it's gonna be 10 months in a row that we see this trend, so it will inevitably start lifting and going back to a normal trend. New projects, they're both mass and prestige, but, you know, there are many prestige projects that are coming in, and there are also many more coming in terms of development nowadays. So briefs that are open, that we're working on, developments that we are working on, and that you do not see in the order book yet because it's not yet an order. So, no, I do not see a trend that says that new projects will be skewed to mass market at all. EBITDA margin on value-added sales, we do not give this kind of view. I can tell you that- On a quarterly basis. But I can tell you that in 2023, what I see today in the nine months is positive, so we are working well. And the problem, the headwind on the marginality that you're seeing, is all mix related. You know, it goes back to what we discussed several times. In a time when, the orders of prestige clients are going down, we are offsetting it through diversification, with mass market clients, with, hair and body care growing at a very fast pace. And all in all, this is helping us to keep a very, very solid top line growth and a very good EBITDA at the end of the day. So all in all, you know, it's the good and bad, it's, in this moment, diversification is playing a major role. You do not see it in margins, but you see it in absolute terms, and this is what I always said, it's the number one priority for us. The fourth quarter was about bounce back, but I don't remember exactly. I didn't get. So if you could repeat your fourth question, Kate, please. Yeah, that was actually about the next year. So do you still expect? Ah. Yeah. So does the guidance of at least 50 BPs margin expansion stand for next year? It's way too early to say. We're entering, as we speak, in our budgeting season with all the markets. So, whatever I say, it's with very limited visibility, so I prefer not to answer that question. I can tell you that, because of our business model and how things are developing in terms of projects and all the rest, I am convinced, and deeply convinced that we will keep performing ahead of market. So I'm pretty positive on that. On whether we're gonna be 50, 30 or 10 basis points in EBITDA margin, I have really no clue. It's not that I don't want to answer, I don't have the numbers yet to give you any indication. Thank you. Thank you, Kate. The next question is from Anna Frontani with Berenberg. Please go ahead. Hi. Good evening, Renato, Pietro, Andrea. Thank you for the presentation. Three questions from me. The first one, if you can provide the split between volume and pricing for your growth rate, either nine months or Q3, as you wish. The second one, in light of the comments from the beauty multinationals we have, we have seen and heard last week, can you remind us, what is your exposure to China? And, what is your take on the dynamics of prestige and mass, trends in the region? And, third question, the realignment of, the luxury brand inventory levels that you noticed, particularly multinational, is it a topic for emerging brands to the same extent? Or if not, why not? Thank you. Okay. So Anna, thanks for your question. Pricing accounted for less than 3%, 2.6%. Yes. So it's again mostly volume-driven growth, again and again and again, and this is confirming also in the third quarter of the year. China exposure... As you know, we do not know exactly how much of our clients ends up in, in China. Our direct exposure to Chinese clients is about 12%, so this is the total. Again, when I look at our data versus the multinationals numbers that you are referring to, we are clearly doing a lot better. You know, again, in third quarter, China, for us, was up double-digit and solid double-digit, so it's we keep performing well with Chinese clients. Now, what is happening in the market, it is clear that we have entered into a phase where local brands are, you know, broadly speaking, and generally, doing better than than imported brands, which as you well know, tend to be prestige positioned. So, today, mass is winning in China, but I don't think it's very much driven by the segment per se, but I think that are locals winning over imported. This trend, from what I've seen, is confirmed by the presale of the Double Eleven event, and it's a bit of a chicken and an egg story, in the sense that I don't know how much is driven by the Tmall difficulties, that, as you know, is the platform that is mostly exposed to imported brands, while Douyin is doing very well, and they are mostly, exposed to local brands. So is it the platform that leads to this, skew towards, Chinese brands? Or is it the Chinese brands that are influencing the sales of the platforms? I tend to believe it's the second. Again, when I was there, last time, I clearly saw, not only a government that is pushing for local consumption with local brands, but I've also seen a pride of being Chinese and consuming Chinese products that I'd never seen before. So it's, it's again, it's a trend that comes and goes. I've seen it, many times. This is a period when locals tend to win over imported. Now, the other thing I would like you to remember, and I, and I want to underline, and especially I'm referring to Estée Lauder now. You've seen their results, you've seen that their difficulty is, again, mostly focused on Skincare, which was down something like 20%, while makeup was up 1%. You may argue that 1% is not a significant growth, but it's definitely a lot better than -20%. Now, I repeat, unfortunately, we are not a client, a supplier of Estée Lauder for Skincare. I would love to, because it's huge volumes, but, you know, in the bad times, we are not exposed to that part of the business. So that is not really impacting ourselves. Obviously, we would love to see Estée Lauder performing better also in makeup. That is a fact, but, their performance is not that of a problem in makeup. Luxury versus emerging brands relative to destocking. Well, you know, multinationals are the ones who have more means to protect within higher inventories than emerging brands. You know, they... The topic of cash availability is certainly a major concern for any emerging brand. It's definitely not a big problem for the multinational. So obviously, in periods where you want to protect the fill rate of your brands, multinationals are more reactive. They have higher means to build inventory, while emerging brands always have to count how much cash they are consuming for doing so. So there is obviously a more pronounced exposure of multinationals to destocking versus emerging brands for this basic reason, I would say. I hope I've answered to the three questions, Anna. Yeah, thank you very much. Just to check, the 2.6 of pricing is for the quarter, right? Or year-to-date? Yes, it's... Yeah, it's for the quarter, but in the year- to- date, it's very similar. So it's below three, no matter what. Perfect. Thank you very much. You're welcome. The next question is from Tilly Eno with Morgan Stanley. Please go ahead. Hi, good evening, Renato, Pietro. Thank you very much for taking my questions. Two for me, please. One, just a follow-up on your comment about the rationalization of prestige brand inventory levels. What, what gives you confidence that this should only last a few months? You know, are you seeing a normalization in your orders yet, or is this based on your discussions with your customers? Just any more color there. And then the second question: you saw a big step up in Skincare performance in Q3, and I think you noted that that's driven by customers headquartered in the U.S. and Europe. But do you have a feel for where the end consumption is coming from that's driving this? I.e., how much of it is sort of international clients selling into Asia, or just thinking about, you know, from the perspective of how much headroom there is left for recovery in the Asian market? Thanks. Thank you very much. So inventory is a mix of, let's say, gut feelings, in the sense that, de stocking trend that last for, 10 months, in view of the end retail that continues to be positive, seems to be very logical. You know, considering that the inventory build-up lasted about 12 months, it's quite normal to believe that, that de stocking phase is gonna last, more or less at the same level. Then we have indications here and there, you know, at the, anecdotal level, for instance, that we know that Sephora US, lowered their weeks of coverage, and they've already achieved their target. So the first signs of, you know, players that have achieved where they wanted to, get to, starts being there. And in general, our discussion with clients doesn't show us a dramatic picture in terms of inventory, which means that, you know, most of the job has been done. Are we seeing already an inversion of trend? Not yet. I hope they will start coming in the weeks to come. But, you know, we are, I think, legitimately confident that we are at the end of the period. In terms of Skincare, yes, it's Western brands. There are certain that are exposed to Asia as well, but it's mostly brands that are, you know, that have the bulk of their business in the Western world. And, you know, in one specific case, which is a major driver, is mostly U.S. demand. So they're present in different regions, but the U.S. portion of their business is predominant. So it's not really brands that are particularly exposed to the Asian business. I hope I've answered your questions. That's perfect. Thank you, very helpful. Thank you. Thank you very much. As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Mikheil Omanadze with BNP Paribas Exane. Please go ahead. Hi, Renato. Hi, Pietro. Just a quick question from me. When you said that you're convinced that you will be able to perform ahead of the market, was that comment just a medium to long-term comment, or it was related to FY 2024 as well, specifically? Thank you. Hi, Mikheil. Now, I don't want to sound arrogant, but I think it's both next year and the years to come. Honestly, the trend we're seeing in terms of the level of interest we're gathering from clients on our innovation is only up, and this is from both multinationals and emerging brands. I think that the overall trend, it's favorable to us. When I mentioned things like, you know, the search for performing products that are without talc and are free of microplastics and so on and so forth, you know, we are seeing both prestige clients and mass market clients coming to us with a rate and a desire for accelerating the innovation pace in this territory, which is unprecedented. The fact that, especially in powders, we are the recognized leader in powders, is driving a lot of these demands to us. So this gives us a lot of confidence. When you're coming out of ten months of very strong double-digit increases in new orders, and you have a pipeline of new projects that are not yet orders, that is as rich as we have today, frankly speaking, if we do not perform better than market, we've done something horribly wrong, or it has happened something horribly bad in terms of macroeconomy or, you know, political issues, and God knows if we're seeing enough of them. So it's for 2024 and also beyond that. Then, how long beyond that? It's obvious, but, you know, I can tell you that the pipeline of initiatives we're seeing are covering 2024, but are covering 2025 already. Very clear. Thank you.