Coty continues to target FY23 adjusted EBITDA of $955-965M based on current FX rates, relatively in-line with its medium term growth target of +9-11%, adjusting for the impact of the Russia exit.
Coty continues to expect FY23 adjusted EPS growth in the mid-teens to $0.32-0.33, which excludes any mark-to-market adjustments on the equity swap and assumes no significant changes in the current tax regulations. The Company continues to anticipate adjusted EPS growth acceleration in FY24 and beyond fueled by lower interest expenses as part of its deleveraging efforts, consistent with its medium-term targets.
The Company continues to expect FY23 revenues for the core business, adjusting for the impact of the Russia exit, to grow 6-8% LFL. The exit from Russia is estimated to negatively impact FY23 sales by approximately 2%. Based on current exchange rates, the Company anticipates FX headwinds on FY23 revenues of 6-8%.
With strong Q1 results, 1H23 core business LFL revenue growth trends are expected to be consistent with its annual growth target of +6-8%, with demand remaining robust in Q2 and component constraints the primary limitation to growth. Q2 sales results will include the impact from exiting the Russia business, estimated at approximately 3% of revenues, as well as an estimated FX headwind on sales of 7-9% at current rates, with more moderate impact on profit.
Coty continues to expect modest gross margin expansion in both Q2 and in FY23, despite the elevated inflationary environment.
In addition, the Company continues to target leverage towards 4x exiting CY22 based on CY22 adjusted EBITDA approaching $950M, and continues to expect leverage of approximately 3x exiting CY23 and 2x exiting CY25.
