Struggling cosmetics maker Coty will take a $3 billion write-down as it implements a turnaround plan to improve margins, drive cash flow, and reduce leverage.

Coty, whose products include CoverGirl cosmetics and OPI nail polish, is looking to simplify its operations by cutting down product lines and streamlining its management team. Job cuts were not announced but the company said it would be reducing organizational layers.

“We have built a realistic four-year plan focused on restoring our profitability and deleveraging our balance sheet. We will recover competitiveness by strengthening our brands, expanding our gross margins, and methodically reducing our costs,” said chief financial officer Pierre-Andre Terisse.

“In Fiscal 2020 will be focused on three key performance indicators: gross margin; operating income; and free cash-flow. We are confident in this plan and the results of our actions to date support our belief that we can deliver our objectives,” said Terisse.

To implement the turnaround, Coty expects to incur one-time cash costs of about $600 million spread over the fiscal years 2020-2023, in addition to approximately $150 million connected to previous programs.

Pierre Laubies, Coty’s CEO, said that the companies’ financial priorities are clear. “To improve profitability and deleverage – and we are intent on setting realistic targets and delivering them,” he said. “Today starts our new agenda.”

“Over the past few months, we have focused on both stabilizing our operations and identifying a path towards turning around the company,” said Laubies. “Our turnaround plan will enable us to build a better business in the coming four years, while we gradually prepare for growth.”

Coty expects the following for fiscal year 2020, versus fiscal year 2019: moderating decline in net revenues; constant currency adjusted operating income up 5% to 10%; and moderate free cash flow improvement.

For fiscal year 2023, Coty is targeting an operating margin between 14% and 16%; free cash flow of around $1 billion; and leverage of net debt to EBITDA less than 4x.

“Together this will give us the flexibility to step up our commercial investments while simultaneously driving significant operating margin expansion and enable Coty to achieve a leverage ratio of net debt of EBITDA below 4x by fiscal year 2023,” said Terisse.

The new organization design is expected to be in effect by January 1, 2020. The full structure and implementation and consolidation of management headquarters are expected to be completed by July 1, 2020, subject to legal processes where required by local regulations.

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