Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong improvement in financial results with exceptional growth in Perfumery & Beauty.
- Successful integration of the merger and progress in the vitamin transformation program.
- Positive momentum in Taste, Texture & Health with double-digit volume growth.
- Health, Nutrition & Care returned to volume growth driven by higher demand for dietary supplements.
- Upgraded full-year outlook with adjusted EBITDA expected to reach around EUR2 billion.
Negative Points
- Continued impact of negative FX, resulting in a EUR25 million loss in the first half.
- Vitamin prices remain volatile, with some vitamins not reaching sustainable profitability levels.
- Animal Nutrition & Health still cautious on volume growth due to ongoing market uncertainties.
- Seasonal factors and production stops expected to impact Q3 and Q4 performance.
- Challenges in passing on high fish oil prices to customers, affecting profitability in marine lipids.
Q & A Highlights
Q: Could you please help us break down the 17% volume growth in Perfumery & Beauty (P&B) between the three business units: Perfumery, Ingredients, and Beauty & Care?
A: All three units—Perfumery, Ingredients, and Beauty & Care—experienced double-digit growth. This strong performance was consistent across the board.
Q: Given the EUR15 million benefit from improved vitamin profitability in Animal Nutrition & Health (ANH) in Q2, what benefit would you expect from Q3 and Q4 based on current spot prices?
A: Spot prices for vitamins are rising, but the impact on contracts takes time. For vitamin E, the average price in H1 was 7.5, with current spot prices at 9.5. This could result in a positive impact of around EUR30 million in H2, predominantly in Q4.
Q: What volume assumptions are you baking into your upgraded guidance, particularly for P&B and Taste, Texture & Health (TTH)?
A: We see continued strong momentum in P&B and TTH into Q3, with Q4 typically being the weakest quarter. For Health, Nutrition & Care (HNC), we expect a strong second half, especially in biomedical and i-Health. ANH will see improved momentum but with cautious volume management.
Q: Why did the margin in Fragrance go backwards sequentially despite strong top-line growth?
A: The margin drop was due to production costs and mix effects. Additionally, a one-off cost related to a system upgrade in the DRT business impacted the margin. This cost was anticipated and treated as part of normal activity.
Q: On the guidance, why not state "at least EUR2 billion" instead of "around EUR2 billion"?
A: The term "around" reflects the typical seasonality and uncertainties in H2, including Q3 stops and Q4 being the weakest quarter for P&B and TTH. The guidance is based on a balanced view of these factors.
Q: Can you explain the impact of high fish oil prices on your business and the benefits for Veramaris?
A: High fish oil prices have been passed on to customers, but this led to reduced consumer demand. Veramaris benefits from high fish oil prices and is contributing positively to EBITDA. The strategic exit from the marine lipids business will help improve margins and growth.
Q: What is the regulatory or policy backdrop regarding potential tariffs on vitamins?
A: We have not made any assumptions about potential tariffs. However, if tariffs are imposed, it would be positive for us as 75% of vitamin production is in China, and we have European-based production.
Q: On the asset sales, what is the expected sale value given the impairment taken?
A: The asset value of EUR178 million includes both yeast extracts and marine lipids businesses. The impairment was due to the allocation of historical goodwill. We expect the sale value to be higher than the combined asset value.
Q: Why don't we see the volume leverage translating to sequentially higher margins in TTH?
A: The margin improvement in TTH is consistent with our guidance and impacted by seasonal effects and cost phasing. We expect continued improvement with the portfolio tuning and strategic deals like the yeast extracts exit.
Q: What are the moving parts behind the volume growth in P&B from 4% in Q1 to 17% in Q2?
A: The step-up in volume growth is due to recovery and normalization in Ingredients, strong performance in Beauty & Care, and a full innovation pipeline. The overall trend reflects a strong order and innovation pipeline.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
