Corbion NV

Good morning and welcome to the Corbion full year and fourth quarter 2024 conference call and webcast. This morning we published our full year results and the press release and presentation can be found on the website at www.corbion.com, investor relations, financial publications. Before we begin, please note that today's discussion will include forward-looking statements based on current expectations and assumptions. These statements will involve some risks and uncertainties that may cause actual results to differ materially from those expressed. Factors beyond our control, including market conditions, economic changes, and regulatory actions can impact outcomes. Cormian does not undertake any obligation to update statements made in this call or contained in today's press release and presentation. For more information on assumptions and estimates, please refer to our annual reports. This is Alex Sokolevski, Head of IR, and with me on the call are Olivier Rigaud, Chief Executive Officer, and Peter Kazius, Chief Financial Officer. I would like to now hand over the call to Olivier.

Good morning, everyone, and thank you for joining Corbeon's full year 2024 earning call. I'm pleased to share that in 2024, Corbeon successfully met its upgraded targets for sales and adjusted EBITDA while significantly surpassing our free cash flow targets. We achieved organic sales growth and double digit increases in both adjusted EBITDA and adjusted operating profit. Our strong volume mix performance, our focus on operational efficiencies, the successful implementation of our research program and our CAPEX discipline resulted in this significant increase in free cash flow. Taking a closer look at our 2024 highlight, we achieved positive organic sales growth of 2.2% driven by a volume mix increase of 5.2% and a pricing decline of 3%. Our organic adjusted EBITDA grew by an impressive 23.3% and we generated a free cash flow of 98.3 million euros from continued operations. In our health and nutrition segment, we saw strong growth in both sales and adjusted EBITDA driven primarily by our nutrition business. Our functional ingredient solution segment also experienced positive volume mix growth, particularly from our food ingredients and the lactic acid cells to the joint venture businesses. Looking ahead to 2025, we remain really confident in our strategic targets and expect to continue delivering strong performance. More on that later when we present our 2025 outlook. Now, let's move on to the opportunities for differentiation in key markets. We've made significant strides in differentiating ourselves in key markets. Our sales into the mature bakery and meat markets have grown thanks to our innovative and differentiated solutions as food ferments and clean label preservatives. By targeting these growing market subsegments, we've been able to capture new opportunities and grow with trends in food markets. Additionally, our value proposition in the strongly growing health and nutrition market has been confirmed with strong sales and earning growth. This success underscores our commitment to delivering value to our customers and stakeholders. Turning to the challenges we face, raw material and freight prices were volatile over 2024. While we've seen some relaxation in input prices, such as sugar, On the other side, freight and energy costs remain unpredictable in the near term. However, we anticipate an improvement in overall input costs in 2025, which should provide some relief. We're also obviously closely monitoring the potential impact posed by tariffs on goods into the US. Health and sustainability continue to be at the forefront of our strategy. The trend towards clean labels and natural preservatives is accelerating, outpacing the overall food market growth. The proliferation of GLP-1s, the increased scrutiny on ultra-processed foods, and latent regulation in both the European and the US ingredient space could create increased demand for natural and healthful food ingredients. Furthermore, our sustainable omega-3 solutions offer structural growth driven by higher adoption in aquaculture and the supply constraint long-term outlook for fish oil. We're really well positioned to capitalize on these trends and drive sustainable growth. Before I turn things over to Peter to present our financial performance in 2024,

i like really to emphasize that we are confident in our strategy direction and in our ability to continue delivering strong performance in 2025. peter the flow is yours thank you olivier and good morning all in 2024 our sales increased by 1.9 compared to 2023 this growth includes an overall growth rate of 2.2 percent Currency impacts, particularly due to the depreciation of the Japanese yen and Brazilian reais, slightly countered the sales growth, while the US dollar remained flat year over year at $1.08 per euro. Our health and nutrition segment drove our organic sales growth, with an impressive 18.5% increase. In the functional ingredients and solutions segment, we saw positive volume mix growth, although this was offset by price declines following input cost relaxations. Turning now to our adjusted EBDA, we achieved a remarkable growth of 24.8% year over year, with 23.3% of this growth being organic. The key contributor to this strong performance was our health and nutrition segment, which benefited from robust volume growth as well as favorable pricing. On the other hand, our functional ingredients and solutions segments experienced a slight negative impact. It's important to note that our EBDA was affected by some phasing of cost SQ4, as earlier indicated, including delayed transport cost increases from mid-year, maintenance expenses, as well as variable compensation. Looking at our profit and loss from continued operation, our depreciation and amortization increased year over year. This is primarily due to the completion of our ERP implementation and several capital expenditure projects. Moving on to adjustments, these have been mainly driven by the restructuring program, which resulted in a reduction of approximately 180 FTEs compared to the end of 2023. It's important to note that the adjustments in 2023 were influenced by the reversal of an impairment of our algae fermentation assets in the nutrition business. Regarding financial income and expense, we've observed a decrease compared to last year. This is attributed to the divestment of our emulsifier business, as well as some non-cash foreign exchange items. In terms of our joint venture, the results have been negative. Although we achieved a positive EBITDA of €12 million, this was offset by depreciation, as well as interest paid to shareholders and tax obligations. Our effective tax rate stands at 26.6%, which aligns with the jurisdictions in which we operate. Finally, our results after tax have seen a positive impact of 6.5%. Looking at the functional ingredients and solutions business, for the full year, we experienced a positive volume mix growth of 3.3%, and we achieved 3.4% in Q4. This growth was primarily driven by our food business, particularly in bakery, meat, and dairy markets, as well as key products and market adjacencies. Additionally, we observed growth in lactic acid volumes to the joint venture, driven by increased PLA demands. Moving on to our biomedical segments, this segment was down compared to last year, primarily driven by weaker demand in agrochemicals and softness in the semiconductor market. Regarding pricing, we faced a negative impact of 4.9% for the full year and 4.1% for Q4, following the relaxation of input costs. Our EBDA margin for the full year stood at 8.8%, with Q4 at 7%. The adjusted EBDA includes the absorption of the stranded cost from the emulsifier divestment, which impacted margins by approximately 200 basis points. Compared to Q3, the Q4 margin was softer as expected. due to seasonality and the phasing of expenses, including the mentioned temporary freight costs, maintenance costs and variable compensation. Looking ahead to 2025, we see continued positive growth and margin improvement as of Q1, as we fully compensate for the standard costs. We're implementing a series of initiatives to achieve that as earlier communicated, including process efficiency, complexity reduction, procurement saving, further insourcing, as well as savings from the lactic acid plant entirely. Moving on to health and nutrition and starting with our organic sales growth, we achieved an impressive 18.5% for the full year, with Q4 contributing 8.8%. This growth was driven by a strong performance in our nutrition business, particularly in the aquaculture and pet food markets. Our volume mixed growth for the full year was 13.9%, with Q4 showing a modest increase of 0.2% due to strong phasing effects in Q3. The substantial growth was primarily due to robust demands for our algae fermentation DHA products, which supports both aquaculture as well as pet nutrition markets. in the pharma business we experienced volume mix growth although this was partly offset by reduced sales prices despite this we continue to see positive momentum in this segment our biomedical polymers for the year remains flat with slight sales degrowth of one percent however we anticipate sales growth in 2025 driven by business development mainly in drug delivery Moving on to our EBDA margin, we achieved a full year margin of 29.9%. We've maintained high EBDA margins consistently throughout the year. The increase compared to last year is attributed to a combination of increased operational leverage, strain optimization, as well as a favorable product mix. In summary, our health and nutrition segment has demonstrated strong performance with double-digit volume and mixed growth, sustainably high EBDA margins, and positive momentum across our key businesses. We remain confident in our ability to continue this growth trajectory into 2025 and beyond. Moving now to the performance of the Total Energy Scorpion joint venture. The JV achieved an organic sales growth of 13.2% for the full year, with Q4 contributing 7.1%. This growth was driven by continuous recovery in volumes. However, the business faced significant pricing headwinds, which partially offset their volume growth. Despite these challenges, the robust, long-term drivers for the PAA market remain intact. Moving on to the APDA margin, the joint venture achieved a full year margin of 8.7%, with Q4 being at 2.1%. The margin contraction versus last year was primarily driven by negative pricing dynamics and commoditization in certain applications, which impacted regional and product mix. It's important to note that we anticipate high single-digit EBDA margins for 2025. I'm pleased to report that we have achieved our seventh consecutive quarter of positive free cash flow. This positive free cash flow generation is a testament of our EBDA development and disciplined approach to capital expenditures. We've continued to invest in our key priorities while carefully managing our overall capital expenditure levels. In 2024, we spent around 80 million and we anticipate maintaining this level of investment for 2025 as well through our CapEx discipline in both maintenance and expansion CapEx. Our free cash flow in 2024 has been partly impacted by other working capital factors. These include the phasing of customer rebates, the monetization of VAT receivables in Brazil, and variable compensation. While we've made progress in reusing our operating working capital, it has not yet reached our target levels. This had been partly driven by ongoing challenges in the Red Sea region and an increase in inventory in anticipation of the potential harbor strike in the US, which ultimately did not materialize. Looking ahead, we plan to further reduce our working capitals in 2025 and we're confident that our strategic initiatives and disciplined financial management will enable us to achieve this goal. In summary, our continued positive free cash flow generation, disciplined capital management and strategic investments position as well for future growth. Our dividend policy is designed to be progressive, with the ambition to annually pay out a stable to gradually increasing absolute dividends. This year, following our positive net results and strong free cash flow developments, we're proposing a 5% increase in the regular dividend, bringing it to 64 euros per share. This proposal reflects our commitment to delivering consistent and growing returns for our shareholders. The proposal is subject to approval at the annual general meeting, which is planned for May 15th. If approved, the ex-dividend date will be May 16th, with the record date set at May 19th. And then cash dividends will be payable at May 27th. In summary, our proposed dividend increase underscores our confidence in the company's financial health and our dedication, providing value to our shareholders. We believe this approach aligns with our long-term strategic goals and support our ambition to maintain a progressive dividend policy. For now, a bit on ESG accomplishments and ambitions, starting with revenue contribution to sustainable development goals. We've seen a notable increase in 2024. in 2024 74 of our revenue contributed to sdgs 2 3 and 12 which was up from 2023 this improvement is partly due to the divestment of our emulsifier business which did not align with our sustainability goals related to preventing food waste health circular economy and biodiversity our commitment to the life cycle assessment has also been strengthened In 2024, 92% of our products were covered by LCA, compared to 79% in 2023. This comprehensive assessment ensures that we are continuously improving the environmental impact of our products. Our scope 3 CO2 emissions increased in 2024 compared to 2023, but are still down from the 2021 levels. The increase relates to higher inputs and supplier mix. We're proud to have received high ratings from CDP, recognizing our implementation of best practices in climate change and a gold score from EcoVadis for our leadership in sustainability, both achieved in 2024. And now back to you, Olivier, for the outlook.