Corbion Nv Unsp/Adr

Welcome to the Corbion 2022 first half results. With us today are CEO Olivier Rigaud and our CFO, Eddy van Reden van der Kloot. My name is Jeroen van Harten, Head of Investor Relations. Proceedings for today, we're going to start with a presentation that Olivier and Eddy will walk you through, after which we'll move into Q&A. The presentation you can find either on the webcast or you can download it from our website from the investor relations section. And with that, Olivier, please go ahead.

Good morning, everyone, and really pleased to present our first offer results. So starting with the first slide, I'm really pleased to explain the business activity and the strong momentum we saw over at H1 with the organic sales growth on our core activities of 23%, and that was driven by the three business units. During the period, we delivered an adjusted EBITDA of 89.9 million, so this EBITDA increased by 16.6% year-on-year, responding to 13.1% margin, and an organic growth of minus 0.4%. Across the period, we've seen continuous inflationary costs development. And the fact that we moved to quarterly pricing really helped us to pass on these costs to the market. As we speak, we've had the first increase in Q1, as you might remember, and the second successful round across Q2. We've also implemented a further round in Q3. So this helped us really to let's say, go for adjusted data improvement across the period. I'm also pretty happy to report that June was the first month where we reached breakeven for our AgroPrime DHA business, algae business, and we see very promising business development there. I will come back to that in a minute. Across the period, we also continued a quite high investment level to support growth. And actually, next to the biggest project we have in our new lactic acid plant in Thailand, We are further developing into specialty food ferments in the U.S. and algae ingredients in Brazil. Last but not least, on sustainability, we made a lot of progress and actually we decided to apply for a renewed science-based target and to increase our emission level to the 1.5 degree in line with the Paris Agreement. Now, diving into the next slide and discussing about business development, and starting with the SFS, Sustainable Food Solution. Looking at the sub-segment, within preservation, we saw a shift in terms of projects, a pipeline, and shifting from purely new innovation to helping customers reformulate, either to improve their costs or to overcome some of the raw material shortage. During the period, we also accelerated the launch of new natural antioxidant platform, primarily working on ascorbic acid, natural ascorbic acid from acerola and carnosic acid from rosemary. These are two very nice complements to the current preservation portfolio of Carbion. Within functional systems, the focus continues on shelf life expansion in promoting food permanence for natural mold inhibitors. And we also, I mean, as in preservation, see some shift really helping customers to overcome some raw material shortage. Could be, you know, vital with gluten replacement or fat. So this is a big trend we see happening in the market right now. We also execute on our strategy by launching a new dairy stabilizing platform, and we see first traction and first promising sales in that area as well. Moving to laxing acid and specialties, we saw growth in all segments. primarily driven by a strong recovery in medical biopolymer post-pandemic. We do not only see a resume of elective surgery, but we also see a strong development in slow-release drug delivery there. Across the second quarter, we saw also a nice momentum into the semiconductor with our green solvent and our pharma business segment. We've also had robust lactic acid cells to our PLA convention over H1, but I will come back on this at a later stage as well on the PLA dynamic. Finally, on incubator, we've seen a significant traction in these new customer adoptions of AlgoPrime DHA. And again, as we stated, we'll be proud of having in June the first break-even month for this business, despite higher variable costs. we faced, you know, and that was probably related to some freight costs from Brazil, as well as some of the ingredients we are using for this product line as red seed oil. Moving on to the key investment projects, we mentioned, obviously, the biggest one being our new ginseng-free lactic acid plant, and this is progressing nicely today. As you can see or might see in the picture, we are progressing well on the construction, and we are still on track to deliver You know the commissioning as we planned in the later part of 2023. The second investment, which is more specialty-oriented around food permits and more monitors, is, again, to serve the SFS business segment from Peoria in the U.S., where the investment is going on as we planned, and we are expecting a commissioning for the end of 2022. who have this capacity available to sustain our sales development in that segment in 2023. The same is valid in the algae plant in Brazil, Orange Juba. We are also there. We have a project that is bringing more flexibility to the plant and also will enable us, as from 2023, to go from a break-even situation to a profitable picture in this plant by also helping us improve the product mix significantly. So, and moving on, on the sustainability comment I made earlier, you might remember at the time, you know, Corbillon was a frontrunner when we applied for the below two degree, you know, commitment. But what we've achieved over the last couple of years is basically a very nice reduction in our carbon emission. We are already at a 24% in CO2 emission reduction, so we believe that we need to set a more ambitious target. And we have our game, and so we recently submitted actually last month, you know, a new target based on the 1.5, you know, and hopefully we're going to wait for the outcome of these SBTs in organization by the fall. And we will for sure revert on that to you later on this year. On this, I'd like to give the floor to Eddie to take you through the financial performance and the details.

Thank you very much, Olivier. Good day, everybody. So we are on the page on the profit and loss. So as you can see, for the first half year, the net sales for the total company have increased by 33%. And within that, about 23% has been the organic growth. So we did also have support from stronger currencies. The adjusted EBITDA level, an increase of close to 17% for the first half year. Again, quite some support from currencies. The underlying organic growth was more or less flat for the first half year. Margins for the total company, this is 13.1% first half year. And please note that there is a margin increase in Q2 versus Q1 because Q2 we had slightly higher margin profile of 13.6. And that reflects the good momentum we're making in passing through earlier cost increases and increased sales prices. The gain that we made in the adjusted EBITDA level up to 16.6%, we could not fully translate to the result after tax had a bottom line of the P&L, because there you see a minus 23%. That has really been caused by two key drivers. One is to be found on the adjustment line in the middle of the table, where last year we had quite a sizable positive contribution on adjustments really being related to the divestments we made in the frozen dough activities in the US and the plot of land in the Netherlands and Vreda. So that was a sizable book profit and the majority of the contribution of the 23.5 million of last year. This year we also had a smaller size divestment and that contributed to about 5.5 million on the adjustment line and that is related to warehouse we had in the U.S., the Totowa warehouse sale in January this year. The second item I'd like to highlight in terms of comparison to last year is on the Texas line. We, this year's tax line, to be more a kind of normal tax level of a good 25% with minus $18 million, but if you compare it to last year, we there had a much lower tax expense, and that is again related to the sale of the Pereda product not very could value a tax asset that was a kind of one-off benefit in last year's P&L. So then we move to the next sheet. That is really one of our key themes, of course. It is about the firm pricing actions that we have implemented, and we continue to implement, by the way. By now, you are kind of used to our, on a two-quarterly basis, to update our outlook of all the cost increases I'm talking here about the variable cost increases, what we have already experienced and what we do expect to experience over a two-year period as it's measured. So it is 2022 versus 2020. The top right-hand side gives you the composition of the table. And if you compare the situation with the current outlook to the last table or the previous one that we shared late February, then the total cost increase for the company have increased from 165 million measured over this period to 240 million. So that means another 75 million step up. And that, of course, is what we've done with our quarterly pricing structure, contract structure is what we are passing through to the market. Within that 75, a big share is, of course, everything to do with raw materials and energy. but also freight. About a third of that increase is really caused by freight. That's a sizable component itself. Then a big item in the different businesses, sustainable food solutions. Their organic growth for the first half year in sales is close to 19%. Within that, the volume development was pretty much flat, but I would say that's a nice result because basically we made quite some March share gains last year, and we've been able to hold on to those positive volume developments in earlier periods in this period when we are passing through price increases. So that's a good result, I would say. And Olivier already talked a bit to a couple of the drivers that we have in different sub-segments within food, the new product introductions, the reformulations, etc., Margin profile came down a bit compared to last year. And again, Q2 slightly stronger than Q1 in terms of margin development. And I'd like to highlight also, and it's true for all businesses, wherever we are passing through these sizable cost increases, mathematically you have this, what we call this margin dilutive impact. So that is true for all our businesses and also for food. Next page, electric asset. Again, very sizable sales growth organically, 26% for the first half year. A small volume uptick, a good 1% for the first half year. And it's really, again, the price increases, plus some mixed improvements that are driving the organic growth. And a couple of elements to be mentioned there in terms of subsegments is, indeed, the semiconductors industry, which hold on firm, and of course, the good recovery effort of prospects that we are having experience and seeing for the medical biopolymers, which is, of course, a high-value subsegment in this business unit. Then incubator, next page. There, we continue to invest in incubator. Within the incubator, like Olivier has stated, we have turned around the DHA business of LG as per June into a positive territory. We continue to invest, of course, in other initiatives in this portfolio, and that we have always look at it between half and one and a half percent of our total courses, so that is the the bracket that we like to operate the incubator. And also, by the way, there's also quite some currency impact in this comparison to last year, because the dollar has strengthened quite a bit, also the AI, but also the dollar, and we have quite some dollar cost also in this part of the cost derivative. The next one is about the PLA joint venture results. EBITDA up by about 10%. Margin more or less kept on cruising in the good 30s. Underlying sales growth organically has been 23%. But within that, again, quite supported by currencies. So outside of the currencies, underlying organic growth has been a good 11%.

Monco activities.

So this is comprising our US-based emulsifier business. Really developed very nicely. We managed it for value, as you are aware. So really, the prime focus is here to hold on as much as possible to the EBITDA delivery. And as you can see in this picture, we really have outperformed in that sense, also compared to last year. So a very strong delivery here in absolute EBITDA terms, also margin-wise, and really successful Dynamic, I would say, and again, also handling, managing the cost increases that are also impacting this business, especially soybean oil, for example, is a known one in this area. So we're happy with the delivery of this business. Then in that bridge, As indicated in earlier conversations, in the investment phase we are in, we are expecting to increase the net debt leverage. So that's also what happened according to expectations from the 2.6 terms in December last year to a 3.3 as per June. The bridge you can find in this sheet, what has been causing the net debt development, At a given time, I don't think we need to go through the whole bridge. Going forward, the outlook, that's also what we shared in the press release, is that we do not see, with the current outlook, a further increase in this net-debt EBITDA ratio development. As a matter of fact, we've seen improvements towards the end of the year. And the EBITDA delivery is one component in that, of course. Then we bring it back to the outlook.

Yes, so just having to conclude this presentation and before opening to Q&A on the Elk Brook, you might have seen on the press release, so we are upping our guidance on net sales organic growth for the core activity from 20% to 25% for this year. As any determination, we see, of course, further cost increase for the core, you know, in the range of $190 million, used to be $130 million. And as we explained, you know, we are very close to the ball on price increase, so we are preparing the next one for Q4. On adjusted EBITDA margin there, we see development into the lower end of our 12% to 15% range. Obviously, the more we are increasing our prices, the higher the diluted effect on margin. We do see that we are really on track to substantially improve our absolute adjusted EBITDA compared to last year. CapEx-wise, we are getting in the range of 200 to 230 million there, with all the key projects being on track. And as Amy just explained, on our ratio, on our than-depth EBITDA ratio, we also foresee an improvement from the 3.3 we have at the end of H1 by the end of the current year.

On this, I'd like to open the call for Q&A.

Thank you, sir. If any participant would like to ask a question, please press the star followed by the one on your telephone. If you wish to cancel this request, please press the star followed by the two. There will be a short pause while participants register for a question. The first question comes from Alex Sloan from Berkeley. Please go ahead.

Yeah, hi, morning all. Thanks for taking the questions. I've got three, if okay. The first one, I mean, clearly you've had a very strong price mix performance in the quarter. I wondered if you could help us within SFS and lactic acid and specialties in particular, maybe breaking out the rough mix contribution versus pure pricing, given you have, I guess, very different margin profiles, particularly within lactic acid and specialties, that would be helpful. And second one, just on the PLA, the lower volume outlook there from your business, I guess the question would be, how do we think about this from the broader lactic acid market? I mean, clearly there's more capacity coming on stream, including your own Thai plant. So is the slower PLA outlook, is it a one, two-quarter phenomenon, or is there anything more structural that's going on there that could actually have implications for supply demand in lactic acid more broadly over the next year or two? And then if I can squeeze in a third, just on the non-core, as you said, a very strong first-half performance there. and decent outlook there. So, I mean, given you are perhaps closer than you would like to Covenants on leverage, how do you think about this business and your options for this business, you know, as potentially a means to accelerate the leverage going forward? Thanks.

Yeah, thank you, Alex. So, I will cover the PLE and Eddie will cover the price mix and the non-core questions on

Yeah, so the question on the price mix, and I think the question was especially geared to the second quarter. So for the food business, as you've seen, we have organically been growing the business with 21% in Q2. Volume has been already modest, 0.4%. So the remaining is indeed from price and mix. The far majority is price. Mix is somewhere in the order of maybe 3% to 4%. So... a solid single-digit positive mixed effect in the food business. On lactic acid, specialty business, slightly more pronounced. So they're out of the 29.4 organic sales growth in Q2, close to 9%, 9% to 10% has been mixed effects. And the biopolymers, medical biopolymers is is always known to be a known big one in these mixed effects when you have a good developmental moment in there. So I think that addresses your price mix questions on the non-core. Yeah, I'd like to say it is always an option, but it is not the fairly developmental non-core. In those prices, we are very happy with the delivery, the solid EBITDA delivery of this business. It proves again how robust and resilient this business is, even in the current highly dynamic cost inflationary environment. So in that sense, it's a solid part of our portfolio, and there's no imminent need to take a different position on non-core as we have done in earlier conversations.

On just the PLA lower volume outlook, so what is happening in PLA, we've seen a couple of impacts. The biggest one coming from the Chinese lockdown. You might remember China used to be and has been always a very nice market for PLA. And, you know, serving this market out of our operations is, I mean, again, giving us a nicely competitive position in China. But we really faced a slowdown in China because of primarily the lockdown. Another indirect impact we suffered from, also related to China, is that the freight rate from China to the U.S. and Europe went dramatically up, although they are relaxing now that during the period, we've seen a lot of the Chinese customers getting out of business because simply, I mean, the freight rate was penalizing their business massively. being able to export these products over the world. And the last impact we are seeing now is that because of the surge in energy cost and prices, you might remember PMA in a lot of cases is compounded with other type of polymers, whether they are bio-based or non-bio-based. But the two we are thinking about, for instance, PBAT, which is biodegradable but fossil-based, or PHA, which is a biobased as well as biodegradable, we have quite some, let's say, important customers that are co-compounding these polymers together. And the dynamic into these products is much slower on the fossil-based one, as you can imagine. This is related to the high input cost they also face and high energy prices to produce these polymers. In the case of PHA, this is based on vegetable oil, primarily canola oil. And this type of business following the Ukraine situation is also facing not only a massive shortage, but a huge inflation increase. So back also to your question on capacity development, we do not see, let's say, any negative from new competition or extra competition. On the opposite, without giving a specific name, one of the biggest projects in China that was and became on stream early on this year, we understand from our competitive intelligence that this plant has been most bought since April on PLA. So we don't see that as an immediate reason or impact. So we believe, just to conclude on these PLA questions, that obviously You know now that there is a deep primary impact on the second half. However, when we look at the pipeline, we are working a lot to diversify our mix, you know, from single-use plastics or food packaging also to some new categories. I'm thinking, for instance, about building materials or, you know, new markets where there is today massive use of synthetic polymers or binders where MPLA, I mean, has a great future. Now, Difficult to tell you how fast this could materialize, but the pipeline is looking pretty good. It's a matter of time. We are preparing to lower sales across H2.

That's definitely going to happen. Thanks very much.

We will now take our next question from Sebastian Bray from Bernberg. Please go ahead.

Hello, good morning, everybody, and thank you for taking my questions. I have three, please. The first is on the balance sheet situation at the company, and I'm not so much asking about how to get to a reduction in net debt to EBITDA for H2, but I have a question on the definition of covenant net debt and some lease liabilities that appeared in the full year report 2021. Has that the full year There were 67.8 million of lease liabilities that were not included in the covenant debt, to my understanding, because it, quote, was not reasonably certain that the leases will be extended. If these were included, the company would get uncomfortably close to its covenants. Is there any more visibility on whether these lease liabilities were will be included at the time of the full year 2022 results. I'll pause there.

So part of our net debt definition does include lease liabilities. So basically, it says if we are, as an example, we are leasing not only office spaces, but also, for example, warehouses for our operations.

I'm losing the connection.

So you can still hear us?

Yeah. Oh, yeah. Sorry. My apologies.

So those liabilities are included in our net debt definition. And every time when we renew or extend such leases, they are included in the net debt definition. So I'm not exactly sure what other elements you're referring to. So maybe we need to take that in a separate call to see exactly what you're referring to in terms of certain leases that we don't capture because We are consistently applying last year, this year, and going forward.

I appreciate we can take offline, but the annual report states that potential future cash outflows of $67.8 million undiscounted have, quote, not been included in the lease liability because it is not reasonably certain that the leases will be extended. Does that mean that the lease liability could go up at the end of 2022 if they were included, or is it best we take this offline?

Well, like I said, so if that's the situation, there's no need for us to include it in a net debt definition because it is too remote. So there's always a different way how we can apply those leases. So it's probably better to take it offline because we need them also to look at the specifics of your question.

Okay. Thank you, Eddie. And the second question is on incubator. What are the costs? Is it about 10 to 15 million euro of non-DHA business-related costs in here? What are these for?

Yeah, so a big share of that, as we said, within the incubator, the LG platform, the LG Greens platform is the prime activity we have in there. Within LG, we always say that the prime focus is to be first turning break-even the DHA-related business. Now, that is where we have been making in the last one and a half, two years, very successful development through. And as per June, that has now turned into positive. That means we can now focus the R&D capability we have in the LG space to also look at other opportunities based on LG Green. So that is indeed a strong R&D capability, very much related to the acquisition we made quite some years ago in San Francisco as part of the Teravira acquisition. So yes, we have quite a strong R&D capability and that all cost of that group is captured in the incubator. Besides that, we also have some non-algae ingredients developments. The big component in this moment is this R&D capability in the US.

That is helpful. Thank you. And my last question is on capital structure and CapEx for 2023 more broadly. The company hasn't commented on what it wants to spend in terms of capex for 2023. And looking at potential investments, how much Corbion wants to allocate to a lactic acid facility expansion for PLA, be that in Thailand or France, the range of outcomes here is probably something between 100 million and 210 to 220 million euro. So I have two questions. Firstly, are there any indications on which of those numbers is the more reasonable? And secondly, if it turns out that the projects the company has to invest in in 2023 are very compelling, Olivier, what does your gut tell you about the potential to raise equity to make the net debt situation more comfortable? Is this something you would consider? Thank you.

And so I think for CapEx, we are, of course, working on our projections. But as you know, the biggest project we need to complete is the TAR operation. And we are in the middle of it. And there is still, I mean, of course, an important challenge having to be spent next year to complete the investment and start. So we understand and we know that the biggest share is... is, of course, I mean, again, a bit behind us, but they are still, indeed, a discompletion to realize. And then, okay, we have to make, of course, some choices primarily on some of the derivatives and what we're going to do further if, indeed, we want to do further. At that stage, we are not considering any massive equity raise unless we would have a transformation of M&A, you know, coming on stream or something similar. We don't see that immediate need as we see, I mean, the situation on our net debt, as Eddie just mentioned, you know, improving as we are going forward. So this is not something we are considering shorter.

And in terms of, would you consider dipping your toe, i.e. something a bit smaller but that makes the balance sheet a little more comfortable in 2023, or it's too early to say?

I think it's a bit too early to say, I mean, today.

Okay, that is helpful. Thank you for taking my questions.

We will now take our next question from Patrick Rukus from Kepler. Please go ahead.

So good morning all. I've got three questions. The first one is on inflation. And just to check, in order to fully recover all of the cost increases, you obviously need further price increases in the second half. But to what extent do you also need it in the first half next year or even in the second half next year? And then on PLA, previously the JV was expected to run at full capacity this year. What should we now expect? And related to that, you will not or hardly supply lactic acid to the JV in Q3. Would you give any indication on the magnitude of the volume decline for lactic acid and specialties overall in the second half? And then finally on SFS, you indicated in the press release that the market for processed meat was in decline. Any indication on your volume performance in Q2? What we should expect for processed meat in the second half?

Thank you. Thank you, Patrick. So maybe starting with inflation and the pricing, so as you stated, we have to continue our efforts, although what we see now is that the level of price increase are more modest than what we had to do in the first part of the year. So this is, of course, we see now in terms of inflationary costs, things are leveling off. So We do not see that across the board fully. What is becoming clear, of course, to us, primarily relates to your questions on 2023, is that we will have to go in, I mean, anyhow, further in terms of, you know, covering some basic inflation as well in the 2023 pricing round. So... So we are monitoring very closely this type of dynamic. We are looking exactly to the key variable cost components to see how this might develop. Right now, we have to say that we have still little visibility because we see, for instance, as I said, some relaxation on freight, but this is on certain routes. When obviously, to take a couple of real examples, You ship your entire algae business from Brazil to Norway. This is a very specific route where you do not see any relaxation. But we expect to see primarily the freight from Asia to Europe and to the U.S. to relax in the coming months. But again, let's not speculate. There is still very little and short-term visibility on this. So we want to stay very focused and be as close to the ball as we can to pass that route. But, yeah, we are already, I mean, you know, considering what we're going to do as from Q1 2023 on this. Just on the SFS process needs, there are a couple of things that we see because one thing is, of course, to see the entire category development, but also what is the current dynamic within, you know, the move to pre-enable. And on that, we see still, I mean, quite a lot of activity. If you look to the volume momentum that was impacting us, again, without going into too many detail, for SFS, part was related to meat, but the biggest part of the volume, you know, the negative volume impacting SFS came primarily from the beverage industry, and to be more specific, the brewing industry, which is not a key category for us, where we deliberately decided to abandon some of these businesses who favor the price increase. I already mentioned a couple of times, when you have to go to the market with such a substantial level of price increase, what I've experienced in the past is that you need to be very disciplined on not chasing for volume, but making sure you prioritize pricing. And this is what we've done. And in categories like the brewery industry, which is usually at the low end of our marketing profile, this is what we have in the tail. We prefer to just step out of that business. This is another business you can come back, I mean, tomorrow morning if you want to. It's just a price play. But we said, yeah, let's not compromise anything on pricing in that current period. So this is a business we deliberately let go. And I'm not concerned that they will need to have more volume. You can go back anytime. In the meat industry, it is more mixed things. And also, we still have, if you remember, some negative impact from the Blair incident that was more affecting us Q1 and a little bit Q2. That was also what is a pain in the meat sector. But I'm pretty confident that as we speak, we are recovering most of this, let's say, shortfall we've seen. across the first half of the year. On the PLA, to just end on that one, as you said, we were planning to be running close to full capacity. Now we are reassessing in terms of plant balance. As you know, Thailand is our most cost-effective and efficient plant. So for us, what's important is to see exactly how we can maximize our network You know, that's also the beauty of our network is that as we face a significant increase in carbohydrate cost in Europe, we are prioritizing production in Thailand versus Europe. To give you an example, to make sure we max out our profit and do not compromise our profit simply because we might have a short-term, you know, softness in PAA. So this is what we are doing. Now, it's about looking very closely at, as I said, the pipeline in PLA looks still pretty good. It's the speed of recovery and new category materialization that's going to tell us the capacity incubation over the next month. But again, no very big worry on that front to date.

Just as a follow-up, Olivier, so if the situation in China and trade costs would stay as it is today, would that imply that you would also not need to supply lactic acid to the JV in Q4? No, I don't think that would be that extreme, no. Okay. Okay. Pierre, thank you very much for your answers.

We will now take our next question from Greg Watson from ING. Please go ahead.

Morning all. I just have a quick question about the Total JV proposal to build the PLA plant in France. I noticed that steel prices in France have risen dramatically in the last year. And I was just wondering if you could update us, please, on the latest capex estimates for that project.

Sure, Reg. So, actually, if you remember what we said in the Q1 and the results announcement is that seeing the highest inflation on steel, stainless steel engineering costs and rates, when we look at the project in Grand Prix, we said, again, it's probably a better and wiser decision to wait and postpone the decision, knowing that we were still very much on time according to our development scenarios and strategy. So we've had a very constructive and we are very well aligned with Total Energy on this type of decision. In the meantime, we continue to work really hard on a couple of different scenarios, whether we can also maximize the capex level and look for different optionalities in terms of the scope of the product mix that these plants will produce in the future. Because you can go more or less complex or decide to do certain products in Thailand and others in France looking forward. But we said, okay, let's not, let's say, go too fast if you see the current inflation because it's the worst moment to take a decision. You know, as everything costs 30-40% more than in normal times. So, and also what we are expecting, and we start to see that in some of the other projects, is that the steel prices are softening as well. So, we are really well aligned. I mean, continuing the work as, I mean, again, we had to do. but saying, yeah, we have a bit more time before making a final decision. So that is done in full agreement with Total. And, yeah, so we're going to keep you posted on the next steps. But so far, you know, we've tasked the team to continue to work on pre-engineering and everything, you know, with the different functionalities for this site, knowing that we gave ourselves, you know, some flexibility in terms of dates. So that will come probably in the course of next year. So we have ample time to make a final call.

Okay, understood. Because I guess what I'm trying to get at is that there's clearly a balancing act between the delays to that project pushing further price increases into the PLAN market, which then starts to make the IRR on the project look more acceptable despite the increased steel costs, et cetera.

Yeah, no, and this is correct, Reg. And also, you know, let's not forget that if you look at the size of investment, I mean, for Corbion, when we take a PLA2 decision, it means we need also to take a lactic acid capacity decision for Europe, which in the current market environment wouldn't be wise to take. Because for us, you know, the impact is not just, I mean, when you look at inflation, the impact is not just on PLA2. But it would be also on what do you do to serve these PRA2 plants in terms of lactic acid capacity. And the risk level to take these decisions combined is too high in the current volatile market environment. So this is not a risk we are willing to take as we speak because the visibility is too low. So we would have exactly the same impact. If you believe you have to build a new lactic acid in Europe, as we've said, intentionally, you can see that the cost of a lactic acid plant in Europe is much bigger than a PLA2 investment in Europe. And then we are not ready to make that type of decision in these environments.

Okay. Understood. Thank you very much.

We will now take our next question from Robert Ross from ABN Ambro. Please go ahead.

Yes, hi, good morning. I have a couple of questions. First, on non-core, the EBITDA margin was 17%, and despite inflation and the dilutive impact of price increases, as far as I can see, based on your provided disclosure, this is the highest margin in the second quarter. Are you not pushing this a bit too much with pricing? That's a question. And secondly, 14 million EBITDA in the first half. Any reasons to assume that it will be completely different in the second half, the EBITDA contribution of non-core? That is my first question. Secondly, working capital investments were some 60 million in the first half. Will there be any reversal in the second half, or can you say anything on working capital going forward? And thirdly, Sorry to get back on CAPEX for next year, but based on the old guidance of maintenance CAPEX of 60 to 70 million per year on average, and the 50 million that is still in the pipeline for the lactic acid plant in Thailand, so that adds up to 110 to 120 million. Are there any main components that we should be aware of for next year? And related to this, what about general inflation for your investments? Is the 60 to 70 still a valid number? Thank you.

So if I can take these questions, Robert-Jan, so first on the non-core, so you're right, the margin profile development looks very favorable. I don't think we are pushing prices too much, that's your question, because really the volume development, yes, there is a small negative, as you can see in our sales table, but that has no consequence because of our pricing dynamics. It's much more that there are were a few earlier in the year, a few disruptions in supply chain. Some of our suppliers having also some temporary issues. So that is more explaining the Boeing retraction versus the last year and also without pricing. The margin is, I would say in this part of the year, also slightly supported by still some favorable procurement contracts that we could roll out from last year into this year. Again, related to this, some of the supplier discussions we've seen. Going forward, I cannot give the indication here that we hold on to this margin profile for the full year. With that being said, the robustness of these businesses is very comfortable. We do expect, of course, positive contributions also in the second half of this year. When it comes to working capital investments, yeah, a couple of dynamics are there. The reversal, the big reversal, I would say, is really when inflationary cost environment really reverses globally. So, talking about REI, EUROMAS, whatever, in terms of pricing. So, yeah, the big question is, when will that happen? Like you've seen with our... By Corley update on the input cost, variable cost dynamics, we don't see that yet. So at least not for this year. Will it happen next year potentially? But that's one question. I would say underlying the volume component in our work, especially inventory, There we did step up a bit in terms of reducing the risk of supply. So yes, we stacked up a bit in our safety stock levels, and I don't think it is wise to reverse on that, given the continued volatility in the global dynamics. So that I would say we hold on for structural reasons for the time being. And the debtor component, I think, holds pretty nicely. There's some reduction that we can still get in collecting the tail end of debtors in terms of aging. But I would not expect, unless the input cost inflationary environments really develop more favorably, I would not expect big reversals in the foreseeable quarters. And on the CAPEX, yes, those are indeed the indicators. So on top of the recurring level, you're absolutely right. The tile electric asset plans, we're just beyond halfway the total CAPEX outlays. About half of the remaining CAPEX is still projected this year, about half still next year. So that's a 50 to 60 million outlay for next year on top of the recurring level. Yeah, and then there are other indicators opportunities for us to invest in for supporting our growth, but those are more that we have to take a decision on one by one to see is the market development such and the growth outlook such that we will push those buttons. So that's also potentially going to be a sizable component of the total CAPEX program. Probably there's a better moment in time to further discuss that later this year when we come back with the capital markets base projections. That is probably a better moment in time to give indications for next year in terms of total CapEx program.

Okay, thank you. And if I can come back on the non-core, I was not exactly referring to EBITDA margin, but Are you, well, the EBITDA absolute level was also quite encouraging. Is there any reason to assume a big difference second half, first half, or what can you say on that?

No, no big reason, but you never know exactly how that margin develops for us. So like I said, we had some support from favorable procurement contracts in the first half, which will not fully translate in the second half this year. And so in that sense, I would not automatically double the current level.

Okay, that's very clear. Thank you.

As another reminder, to ask a telephone question, please signal by pressing star 1 on your telephone keypad. We'll pause for just a moment to allow Evan an opportunity to signal for questions. Mr. Riggle, there are no more questions. Please continue with any points you wish to raise.

Okay, so I want to thank everyone for joining this call, and obviously we give you an opportunity rendezvous to the Q3 results announcement. And as Eddie just alluded, also, as you might have seen, we will host the Capital Market Day early December. But more information to come around that. Thank you, everyone, and speak to you soon. Bye-bye.