Corbion Nv Unsp/Adr

Good morning and welcome to Corbian's first quarter 2025 interim management statement conference call. This morning, we published our Q1 2025 results. The press release and presentation can be found on our website at www.corbian.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 involve 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. Corbian does not undertake any obligation to update statements made in this call or contained in today's press release and presentation. For more details on our assumptions and estimates, please refer to our annual reports. This is Alex Sokolsky, head of IR, and with me on the call are Olivier Rigaud, chief executive officer, and Peter Kazius, chief financial officer. Now, I'd like to hand over the call to Olivier.

Good morning, everyone, and thank you for joining us today for Corbeon's Q1 2025 earning calls. Let's start with some key highlights from our latest results. I'm very pleased to report that this quarter, we've seen accelerated organic sales growth 7.9%, driven by strong performance across our two business units. Our adjusted EBITDA reached €54.4 million with a margin of 16.5% for the group. Our free cash flow for the quarter was €8.6 million. This is a great set of results, and I would like to acknowledge the great effort of the Corbium team in delivering it. Going a bit into the divisions, Starting with functional ingredients and solution, we achieved organic sales growth of 5.8%, driven predominantly by a strong volume growth of 7.3%. This growth was seen across all three businesses within the segment, food ingredients, biochemicals, and lactic acid . The adjusted EBITDA margin in functional ingredients and solution increased substantially to 12.1%, up from 7.5% in Q1 2024, and up sequentially as well. This improvement illustrates the benefits of our efficiencies and cost-saving measures. In our health and nutrition division, we delivered an impressive organic sales growth of 16.2%, with an adjusted EBITDA margin of 32.2%. This growth was driven by strong volume mix performance, particularly in the nutrition business, as well as positive pricing impact. Our health and nutrition division has shown remarkable growth in both sales and adjusted EBITDA, thanks to volume mix growth in all three businesses. This growth is a testament to our commitment to innovation and the unmatched value of our product offer. Our total energies, Corbion John Venture, also saw robust organic sales growth of 21.9%, despite the adjusted EBITDA margin contracting to 7.8%, although it increased sequentially from 2.1%. Overall, Corbion's group level adjusted EBITDA increased by 53.9% versus Q1 2024, reaching 54.4 million euros. Our positive free cash flow for the quarter was 8.6 million. I'm very pleased to affirm our outlook for the remainder of the year. We maintain our full year 2025 guidance of our organic adjusted EBITDA growth of over 25%, driven by continued sales growth and margin improvement in both business units. We anticipate organic volume misgrowth in the range of 2% to 6%, supported by ongoing positive momentum in health and nutrition and in the functional ingredient and solution business units. Investments in our business will remain disciplined, with capital expenditure estimated between 80 and 90 million euros for the year. We are committed to delivering a positive free cash flow in excess of 85 million euros for 2025. As we navigate the macroeconomic and geopolitical uncertainty, We remain focused on executing our strategy and delivering value to our stakeholder. Corbion continues to provide essential, natural solutions that meet our customers' preservation and attrition needs. The Q1 2025 results highlight the resilience of our businesses and our ability to adapt and thrive in changing market conditions. We are confident in our ability to achieve our fiscal year 2025 guidance with strong growth in volume mix, adjusted EBITDA, and free cash flow. We appreciate your continued support and are looking forward to updating many of you in the next weeks at conferences and roadshows. And now, Peter and I are happy to take your questions.

Okay, thank you, Olivier. Call participants. If you'd like to ask a question on the call this morning, please press star 11 on your telephone and you'll be placed in the queue. If you'd like to remove yourself from the queue, press star one one again. Also, kindly mute your line while your question is being answered. Our first question this morning comes from Setu Sharda from Barclays. Setu, whenever you're ready, please go ahead.

Hi. Yeah, good morning and congratulations on good set of results. Three questions from my side. The first one on the volumes. like strong Q1 volume growth ahead of your full year target range. So to what extent do you think Q1 benefited from any order phasing? And would you expect to see any material change in trend in Q2? My second question would be around one of the news flow, that is one of your largest shareholders argued that you should consider splitting up the business to realize value. would there be any material dis-energy separating health and nutrition and fresh division? And the third question is on the fresh oil prices, which has come down from peaks. So does that impact any contract renewal in your algae nutrition? And how should we see pricing development in health and nutrition in general?

Okay, thank you, Setu. I will take, I mean, you know, the The latest news flows on inclusive capital and official, and Peter will answer the volume on order phasing and Q2. So starting with the news from yesterday on inclusive capital, basically, I think the short answer to the question is that we are in the midst of our strategic review, as you know. We are basically going through the end of our advanced 2025 strategy by the end of this year, and it's really a natural moment for us now you know, to really look to the next five years. So the 26, 2030 period. And as I said, we are in the midst of reviewing that and are planning to go back to the market in H2 this year. There is not really a lot more to comment than that. And as part of any strategic review, we are reviewing the entire portfolio. So on your second question about fish oil price, actually, indeed, we've seen some really fish oil price drop. Recently, as we've discussed a few times, we have a sizable part of our business that is on longer term contract, but not all. So we are expecting some pricing pressure on what is not contracted. At the same time, you know, we still see that there is a structural deficit on the market. So we still see, I think, the consumption of algae derived products and omega-3s primarily going up in the year to come and in the years to come, as well driven by this structural shortage. So our strategy has been indeed to lock some longer term contract volume, to offer also price stability to our customers, which is something they do value. And we are intending to continue this strategy on locking some longer term deals as we are going, and not being subject to every or the quarter fishing season outcome, you know, to set up a pricing strategy.

On the Q2 volume and the order phasing, Peter, I would like to add that to you. Yes, thank you. Thanks for the question. And I mean, a couple of things to know. I think, first of all, it has been a really strong quarter. And you are right if you break down a bit to the different elements and give you some flavor. I mean, Olivier alluded to it. If you look in functional ingredients and solutions, all three businesses did grow, which is food, biochemicals, and lactic acid to PLA. If you look to the food business, this is growing quite consistently already over the last five quarters, and there we also plan to consistently grow throughout the rest of the year. If you look in biochemicals and lactic acid into PLA, This has amplified, I would say, the growth in Q1, and therefore you can anticipate a bit of a reversal during the rest of the year, but still confident to deliver the full year amount. So if you look to functional ingredients and solutions, there is no intent. I mean, always hopeful that we continue to grow 7% per animal. If you look into health and nutrition, Also, that's nice to see volume growth of 12.8%. And let's reflect a bit back in the year 2024 as well. I mean, we've seen 14% in H1. It went up. Then it was returning to mild growth in Q4. And we're really nice to see this being on track from that perspective. So that's a bit, I think, Q1, really nice to see it. Will we potentially have a softer Q2, but still be positive? The answer is yes, because there is some phasing effect.

Thank you. That's helpful.

Okay, thank you. Our next question this morning comes from Fernand Deboer from DeGroff Patriot Camp. Fernand, please go ahead.

Thank you for taking my questions. First, Olivier, did I hear you saying that both segments do have margin potential to improve this year? Because I thought in the previous discussion we had with Peter that he was actually cautioning a little bit on the margins for H&N. So that's the first question. Then the second one on the capacity of PLA. You had a very strong volume quarter. So could you give a little bit of an indication how much capacity it is running now? Because when is a risk that you have to de-bottleneck for the PLA? So that's another question. And then to come back on the phasing, Peter, did I hear you correctly saying softening potentially in Q2? Was that specifically for H&N or for the group as totals?

Yeah, maybe you want to address this last one, Peter, and I will take the other two.

Yeah, no, I can take that one. So I mentioned specifically for functional ingredients and solutions, Fernand, and also within FIS, it's biochemical and it's lactic acid to PLA. Of course, that then has an overall impact on the trophic orbeum.

Okay, very clear.

On the margin, Fernand, so basically, I think on H&M, you know, we feel really confident on maintaining the current margin level, you know, as we indicated earlier, around 30%. So that is, I mean, again, something we feel, again, confident about for the rest of the year. In functional ingredient solution, as you know, We are really very active into basically compensating from some of the costs. And as you might remember last year, following our restructuring and some efficiencies and cost-cutting measures, we are continuing on that journey. Basically, you know, to go, as you've seen, a strong re-raising now in Q1 to above 12%. So we are in our journey over the next couple of years, you know, to re-rate up to 15% this division. And so we are well on track also to continue there in FIS. In PLA, indeed, you've seen a strong volume in Q1. What we see is that, as also we discussed a few times, the momentum is good and is primarily good in Asia and within Asia. In China, this is what is driving the majority of the growth today. with a couple of sub-segment being 3D printing growing very strongly, as well as everything related to what we call food service ware. Now, so the John Denture is able to indeed grow to closer to full capacity, but we are not yet there. So we do not expect to have to de-bottleneck the plant at the current pace. when we look at our projection for the year, either this year or next year, by the way. So there is still a lot of room to basically go for even more growth over the next two years into the current footprint. So nothing to be expected the short term on that side.

Maybe one last question on the input there, as you say, to see little impact. Could this also have a significant impact on, let's say, the Chinese export to the US and then on the PLA joint venture?

You are specifically referring to PLA or more broadly?

Maybe you could elaborate a little bit more where you see this impact from the import services specifically and what you do to meet this impact.

So on overall tariff, why do we think and we say it is limited? If we look to basically maybe four different items in there, so the imports of raw material into the U.S. is one. The second is all the flows we have that are intra-company flows of, let's say, products we manufacture in Europe or in Thailand that goes into the U.S. market. That's the second. We look, of course, at the third element being the competitive dynamic, positive or negative, that might affect impact the US market, but the broader market. And the fourth, which is, I think, the more uncertain is, is that going to trigger any demand destruction? So starting with the number one, if you look to other material, this is relatively limited. Yeah, we have some imports from EU We have some imports from China, Australia, so different geographies. However, when we look at mitigating actions on alternative sourcing options, there are a lot. And in some categories, you know, where we are using that in our nutritions, for instance, business fortification, these products are exempted from any tariffs. So this is why the impact on raw material. Although there is an important flow of roadmap going to the U.S. is not that big. On the intra-company businesses, we supply from our Dutch and Spanish operation into the U.S. Quite a lot, basically, to serve our customers in North America. But there, primarily in the health and nutrition space, think about all the products we are selling from you know, our biomedical business, our pharma products, they are on the exempt list. So we have over 70% of the intraflow business that is exempted today. So this is quite a minor impact for us. Now, the other aspect, back to the competitive situation, is if you think about the carbon footprint, you know, we are market leader in lactic acid and we are the only player having plants in all geographies. And this is quite helpful as we are looking to supply chain and manufacturing because it helps and enables us to maybe change some flows in terms of what are we producing where. And, for instance, we can leverage the fact that, yeah, we have a very nice footprint in the U.S. with four plants in total covering different aspects of our business. So we are reallocating productions and moving some stuff around in terms of where we're going to produce what. Obviously, it gives us a competitive advantage in the domestic market that we are intending to leverage. But at the same time, we know that some of the Chinese volume might be redirected to other regions. And that's also something we are watching out very closely. Now, the broader themes, the last one about demand destruction is very difficult to assess. Short term, we do not see any major or if any negative impact, but we are really watching that out very closely. Obviously, you know, there are some markets that could be more sensitive than others. We don't believe at that stage that if you take the bigger business we are in, I'm thinking about natural preservation, that this would trigger people to go back to synthetic alternatives. We are not yet there. We don't believe as well, you know, that the salmon market is going to be impacted because most of the U.S. supplies are coming from Chile, not from Norway, where we are already present. So more to come on that, but this is probably the part where there is more uncertainty of what might happen. Sorry, I made it be long, Fernand, but yeah, this is a bit the way we tackle these tariffs and why we believe it's not having a material impact on this.

Thank you very much for this exchange event. Thank you. Very clear.

Thank you, Fernet. Our next call this morning comes from Wim Hosta from KBC Securities. Wim, sorry, please go ahead.

Yeah, no problem. Good morning. I also have a couple of questions, please. Maybe first, there is quite some FX volatility. Can you maybe elaborate or give an estimate what would the current FX rate, the negative impact might be on your full-year guidance adjusted EBITDA? So that's the first question. The second question, can you be a bit more specific on the efficiency contribution or the impact from efficiency measures on first quarter EBITDA and also give a bit of a timeline in building up towards the remainder of the year? And then a third question would be on the pricing in PLA. I think the president mentioned that price erosion has halted. Can you maybe elaborate on the outlook for pricing? Is there any chance that prices will go up anytime soon in PLA or not? Those were the questions.

Okay, let me take the last one and Peter will cover the first two. On PLA pricing, as we stated, yeah, we've seen a And the joint ventures have seen erosion on the back, primarily also of the fossil-based products going down sharply. So we've seen that. Actually, of course, it comes at a time where also the input costs for the joint venture are going down as sugar is substantially down, as freight cost is also substantially down. However, you've seen this margin contraction at slightly above 80%. So it's about continuing, of course, efficiency improvement in the plant, which they have already done, partly. But it's also looking at the future on sugars, because as you've seen, sugar prices went down substantially. And when we look at 2026, we start to cover even 26 now at even much lower prices than the one we have for 25. So that will also, I think, bring a kind of you know, security on that input cost as well, if you look to the 2026 year as well. When we discussed with the John Venture, they do not see price recovery, you know, in the short to near term for PLA. So the basically active, you know, mitigation plan they do have, but this is not new. And this takes long. You might have seen in the press the last weeks and months they are really active in the launching, you know, these differentiated product offering. And again, there is nothing new there, but you might have seen, you know, expanded PLA to new categories, quite a lot of partnership, but this is a longer term project they've embarked on, which is to build up more differentiated that could enable, you know, a mix improvement over the years to come. So I will not speculate on that having a strong impact in 25. Peter?

So happy to take the other one, Wim. Now, give me a bit of color around Forex without trying to predict the Forex moving forward, Wim. So if you look on the US dollar, I mean, we're quite exposed in terms of translation impact to the US dollar. And in our annual report, we disclose the sensitivity quite explicitly. which is 1% of the US dollar is having an impact of 2.3 million. If you look in Q1, by the way, it's a positive impact because the US dollar in our Q1 results is something of 1.05, whilst last year it was 1.09. So if you carefully look to Q1, then the US dollar actually became stronger versus Q1 2020-24. I did call out in the results call for the full year that our US dollar rates, which is the most sensitive one, is 108 basically for the full year of 2020 and 2024. So that's on currencies. If you look on the building up of all the efficiencies we do, if you compare year over year, as you know that we started the most sizable restructuring program by the end of Q1. So therefore there is a sizable contribution from the step up of 7% to 12.1%, which is nice to see and also in line with our plan. If you look to the full year outlook, there will be a lesser extent with still a sizable impact in Q2 to Q4. And that leads, I would say, to the full year outlook of more than 20% or 25% in adjusted.

OK, that's good. Thank you.

OK, thank you. Our next question this morning comes from Robert Jan Bos from ABN AMRO, AutoBHF. Robert Jan, please go ahead.

Yes, hi, good morning all. Thanks for taking my questions. My first one is on pricing in health and nutrition. In the press release you mentioned that the positive pricing is the comparable effect of pricing realized late Q1 2024. So my question is, now that this has annualized, should we anticipate lower pricing in the coming quarters or maybe even negative? That's my first question. Yeah, I'll continue. Okay. Yeah, my second question is on free cash flow. You mentioned free cash flow in the quarter was positive 8.6 million. Of course, you have this target of at least 85 for the full year. So can you elaborate a little bit on what are the components in Q1? Is that normal seasonality? Is that working capital? Maybe a few words of clarification there. And then my final question is on ELA. I remember, if I'm not mistaken, that Olivier, you said that You expect some changes made by the Chinese government that could benefit the business. You reported a very strong Q1, more than 20% organic growth. Is there any changes in legislation included in that already, or is that still pending? Those were my questions. Thank you.

Thanks, Robert-Jan. Let me jump on the PLA straight before giving the floor to Peter. Indeed, on PLA, I mentioned that in the past, and actually I was on a business trip in China a few weeks ago, just checking also what is happening, not just on the market, but regulatory-wise, and the government is indeed looking to officialize their directive by the summer. And there is a strong recommendation slash incentives to increase usage of PLA in certain categories. So not to go into all details, but basically they go for, you know, a strong recommendation of even percentage of incorporation into various categories, whether these are the food service ware or the plastic bags or, you know, even all the postal Chinese services. So that is something that is indeed happening and will happen across the summer for implementation in 2026. So we've not seen in Q1 any impact yet of this. What we've seen really happening in Q1 is, as I said, really a very strong drive in a couple of leading categories being primarily 3D printing. And that's a very interesting one because this is, the category where PLA is primarily used because of its functionality. It's really working very well in terms of hardness and resistance into the, you know, filament industry for the 3D printing machines. And there is a big shift in China that is probably going to extend globally on moving in the way you produce, you know, plastic spares, pieces through 3D printing instead of traditional molding and injection. So you have a big development of the so-called 3D printing farms in China that are already changing the way these products are being manufactured with very low basically capex, a lot more agility in being able to change also frequencies of production rates and so on. So that's one big driver. And the second is the food service where the Chinese market also is obviously exporting outside China, but also changing and moving, you know, everything related to straws, cutlery, from fossil-based to bio-based products. So Q1 is really, I think, driven by increased, you know, in these two categories primarily. We expect really the new Chinese government directive to have an impact more on the 26, you know, volume, not in 25.

Let me answer the other two topics, Robert-Jan. So in free cash flow, you're right, it's really driven by a seasonality pattern in working capital and nothing specifically. If you look to the components, I mean, CapEx is really in line with what we guidance, quite stable. If you look at interest and tax, also nothing to note. So it's really the kind of working capital components I would see the same dynamic as last year a bit in Q2. So will we see also this year a phase in between H1 and H2? Like we've seen last year, the answer is yes, but still confident to deliver this more than 85 million for the full year. If you look in pricing in health and nutrition, and let me go to algae and dissect basically in two different components. One is the longer-term contract, and the other one is the more shorter-term or spot contract. So you are right that from a longer-term contract, we entered into this contract by the end of Q1 with nice price increases, and therefore this positive price impact will stop by the end of the year. And positive price impact is year-over-year of course. So from a Q2, Q3, and Q4 perspective, it's therefore relatively flat. From the other parts, which are kind of more spot-related, there we did follow more the fish-oil pattern than the other ones, because we wanted to move more to longer-term contracts. And therefore, with these longer-term contracts, we say, look, we do a relatively low price, really disciplined, but a longer-term one on the kind of more spot related, you might see indeed a bit of negative pricing in Q2. But overall, leading to the margins, which we alluded to, of around 30% of health.

That's clear, Pieter. Maybe an add-on. If you say that the contracts part of the business for the coming quarter is relatively flat, and the more volatile short-term contracts may be a bit negative, then overall the pricing for that part of the business could turn negative in the coming quarters. Correct.

Okay. Thank you.

Thank you. Again, a reminder, if anybody would like to ask a question, press star 1-1 on your phone to be added to the queue. Our next question this morning comes from Sebastian Vrij from Berenberg. Sebastian, please go ahead.

Hello, good morning and congratulations on the results. My question is on food and pricing in food preservation. This looks like it's gotten better between Q1 and Q4 without having a volume drag associated with protecting and improving the spreads. What has happened in this business over the last nine months? Has most of the more price-sensitive business already gone away? And could this be expected to continue for the rest of the year? Thank you.

Good morning, Sebastian. So on the food pricing, basically we went, you know, for, as you remember, on the stranded cost discussion for basically a few initiatives that one was primarily on portfolio rationalization and SKU optimization. So we've been looking at the tail of our business and either phased out some of the products or address the pricing and the margin on the tail and removed quite some complexity in SKU so you can see an improvement related to those initiatives. The next initiative that we did, you know, basically when we negotiated Q1 pricing is that we went for Q1 correction. That did work to some extent in some geographies, not in all geographies, but basically we've been really also for stronger price management earlier this year in the food business. And we intend, looking forward, to stay very disciplined on pricing as we go.

That's helpful. Thank you.

Thank you. Our next question this morning comes from Red Watson from ING. Reg, please go ahead.

Morning, all. Morning, all. So, Peter, I'd just like to come back to the first quarter boost in biochemical and the lactic acid sales to the JV. Please can you quantify the percentage points of growth boost you received in Q1? Because I'm presuming you're going to hand that back in Q2 if this is just a phasing issue.

So without getting the full details, but if you look a bit to food was positive, biochemicals and lactic acid was even more positive than in the normal flow. I mean, if you look to what we guided it overall for functional ingredients and solution, if you remember in this capital market data, around 4%. So if you take that, that kind of philosophical, then the plus, what is it, 7.3% is significantly higher. I think that's how you need to do it, Reg.

Okay, so we should basically take the first half as an average for between the two quarters. That's a fine guess. Okay, thank you.

Okay, we have one more. Caller on the line, Eric Wilmer from San Lanscott Camping. Eric, go ahead.

Thanks very much. Good morning, everyone. I had one question. Can you talk a little bit about your sensitivity to freight rates, particularly from Europe to the US? One could argue that these rates may go up if more global trade volumes are being directed through Europe to the US instead of from China. Thank you.

Yeah, that's, I think, of course, I mean, a critical one also for us. And to be very transparent on that, we've been, of course, attenuating all our freight the last month. As we also discussed, that was a big initiative in terms of efficiencies, improvement, and cost reduction. Now, there is, I mean, maybe several streams to take into account if you look to our uh, flow, um, out of the, you know, the, the 1.3 billion business we have in total, there is, I mean, something around about 100 million flow we have from Europe to the U S, uh, so it is big, but it is not, you know, massive to the point it would disrupt our, our cost. Now, um, we are so far well contracted, I mean, on our freight for the rest of 25. Yeah. So, uh, We are not extremely concerned about that. The only disruption that could happen, I mean, honestly for us is if something would happen as to further in the Red Sea, things would relax, because it could sound positive at the first sight, but when we discuss with experts and specialists, a reopening of the Red Sea it's really counterintuitive this year, would mean a massive port congestion, you know, basically in Europe. And that would have really negative side effects on the short term. That's the only thing I'm afraid that we cannot anticipate, but that potentially would come when you discuss with experts. So far, we do not have any negative noise on the U.S. route. And again, for us, it's quite limited.

So that means that your hedging policy in place would also not cover any scenario which would include a reopening of the Red Sea, I assume?

Not this year. This year, basically, everybody we are discussing with, I mean, do not expect a reopening this year. When this would reopen, whenever that would happen, it would entail a massive disruption, at least for six to eight months, You know, in terms of port congestion in Europe, this is what the experts in the field are telling us, but nobody sees that happening this year so far. Of course, look, again, that's something we don't control.

That's very helpful. Thank you so much.

You're welcome. Okay. Thank you all for your questions. It looks like there's no more questions or requesters on the line. that, we'll end the Q&A session. And I'd just like to say this concludes our conference call this morning. Thank you for your attendance. We look forward to discussing at upcoming roadshows and conference in the next weeks. Please note that we will report our second half year results of 2025 on July 31st. Information to attend is available on the investor relations page of our website. And we look forward to engaging with you all again. Operator, you may end the call. Did you want to say anything?

No. Goodbye. Thank you all.

Thank you. Bye-bye.