Coty (NYSE: COTY) found its shares list lower on release of first-quarter economic numbers. The cosmetics company reported earnings that matched Wall Street estimates, with revenue slightly above analysts’ forecasts. Demand for Coty’s products held up despite higher prices, although it did take a hit from a stronger U.S. dollar.
During Q1, Coty generated strong free cash flow of $88.2 million, driving Financial Net Debt lower to $4.2 billion at the end of the quarter. As a result, the financial leverage ratio of <4.5 exiting Q1 improved sequentially from the 4.7x at the end of the previous quarter, putting Coty well on track for its target to drive leverage towards 4x exiting CY22.
The value of Coty's retained 26% Wella stake increased to approximately $1.0 billion at quarter-end, reflecting Wella's recent acquisition of a high-growth haircare brand. This supported Coty's Economic Net Debt at approximately $3.2 billion.
Commenting on the operating results, CEO Sue Y. Nabi said:
"Our strong Q1 results, in the midst of a complex external environment including ongoing component shortages, confirm the strength and resilience of Coty's brands, teams, strategy and operating model. This represents the ninth consecutive quarter of Coty reporting results in-line to ahead of expectations. The progress we continue to make should be evident across all key financial KPIs, from sales to gross margins and adjusted EBITDA to our deleveraging progress.
COTY shares dipped 13 cents, or 1.6%, in the first few minutes of trading to $6.85.
