Coty Q2 2021 Earnings Report
Key Takeaways
Coty Inc. reported continued improvement in financial results for the second quarter of fiscal year 2021, ended December 31, 2020. Adjusted operating income increased by 7% versus last year, and Financial Net Debt fell to approximately $4.8 billion.
2Q21 net revenue trends show moderate sequential improvement, despite resurgence of COVID and related lockdowns, with Continuing Operations net revenues declining 16% as reported and 18% LFL
Solid growth in 2Q21 Continuing Operations adjusted operating income of $188.4 million, up 7% YoY, with 280 bps of margin expansion to 13.3%
Strong 2Q21 free cash flow of $389.4 million was ahead of internal expectations, driven primarily by solid profit growth
Financial Net Debt better than expected at $4,842.6 million, supported by the proceeds from the Wella transaction and strong free cash flow, partially offset by negative FX impact. Economic Net Debt now $3,656.1 at quarter end.
Coty
Coty
Coty Revenue by Geographic Location
Forward Guidance
Despite continued disruptions to sales channels and short-term orders related to the COVID-19 pandemic, we remain focused on our strategic priorities and the improvement of our sell-out trends, and will start raising our commercial investments to fuel improvements ahead of FY22. This is made possible by the decrease of our fixed costs, which we expect to reach approximately $300M for this fiscal year and will contribute to an expected adjusted EBITDA of $750M for FY21. With a financial net debt that has now crossed below $5B, we will continue to drive our leverage ratio towards 5x by the end of CY21, in line with our prior guidance.
Positive Outlook
- Strategic priorities focused on improving sell-out trends.
- Commercial investments will increase to fuel improvements ahead of FY22.
- Fixed costs are expected to decrease by approximately $300M for this fiscal year.
- Adjusted EBITDA is expected to be $750M for FY21.
- Leverage ratio will continue to be driven towards 5x by the end of CY21.
Challenges Ahead
- Continued disruptions to sales channels.
- Short-term orders related to the COVID-19 pandemic.
- Uncertainty of the COVID-19 pandemic.
- Potential future impacts to financial results.
- Dependence on strategic priorities to improve sell-out trends.
Revenue & Expenses
Visualization of income flow from segment revenue to net income