Corbion Nv Unsp/Adr

Good morning, everyone, and welcome to Corbian's first half 2025 results conference call. This morning, we published our half-year 2025 results, press release, and presentations. These can be found on our website, www.CorbianRelationsFinancialPublications. 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 condition, 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. With me on the call today are Olivier Rigaud, Chief Executive Officer, and Peter Casius, Chief Financial Officers. Now, I would like to hand the call over to Olivier.

Thank you, Alex, and good morning. And thank you all for joining us today. corbin's half year 2025 earning calls let's start with some key highlights from our latest results i'm pleased to report for the half year we achieved an increase in sales driven by robust demand and delivering on our strategic initiatives we achieved an organic sales of 645 million euros for the half year results corresponding to a plus 2.9 organic sales growth rate As anticipated at Q1 2025 reporting back in April, phasing of sales into Q1 resulted in a lower sales level in Q2. Our volume mix growth came in at plus 3.3% for the half year, with a Q2 growth at minus 1.3%, again, reflecting the phasing effects. In terms of EBITDA development, we've seen significant improvements. Our adjusted EBITDA reached 106.6 million for the half year, with a Q2 number of 52.2 million euros. This represents an adjusted EBITDA growth of almost 24%. Our adjusted EBITDA margin improved by plus 300 basis points to 16.5%, demonstrating our operational efficiencies and cost measurement, as well as growth in higher margin product categories. Free cash flow was positive for an eight consecutive quarter. We feel very confident and reaffirm our fiscal year 2025 outlook, which I will discuss in more details when we cover the outlook section. So now diving a bit deeper into our segments and starting with our functional ingredients and solution. In this business unit, we showed positive volume mix in two of the three businesses, our specialty food ingredients and the lactic acid to the P&L agent venture. The healthier volume mix growth in food ingredients was in meat, dairy, and culinary markets as demand for Corbion's natural preservation solutions remained healthy. Our focus on strong customer collaboration and leveraging our broad natural portfolio is paying off there, whereas in the biochemical businesses, some demand softness persists. Looking at our growth initiatives, continued success in focused areas like food ferments, natural mold inhibitors, and their stabilizers continues. We also experience strong growth in adjacent culinary applications with our natural mold inhibitor portfolio. Another interesting growth driver has been in high-protein bread fortification in the U.S., driven by strong consumer demand for high-protein diets and also for fortified foods. As recently announced, Corbion is participating in the Ferment for Health project, A research initiative focused on understanding the health benefit of fermented foods and postbiotics, particularly their impact on gut health and inflammation. So Corbion's involvement there will leverage our expertise in fermentation-based ingredients to contribute to the development of functional food solution. From the operational and manufacturing front, our circular thylactic acid plant is wrapping up gradually. And looking forward, we are confident about delivering the full value creation from these investments. Next, our new vinegar plant in Montgomery, Alabama, is also ramping up, bringing substantial insourcing benefits as we are backward integrating this critical building block in our portfolio of natural preservatives. Nonetheless, we continue to positively impact Arabida with cost savings benefit from other initiatives, such as operational excellence and complexity reduction, and volume mix growth in higher margin categories. Now, turning to our health and nutrition segments and our three businesses therein, starting with nutrition and omega-3s. Despite quarterly fluctuations, there's been continued strong demand for algae-derived omega-3 DHA in aquaculture, pet nutrition, and we have some promising new contracts in human nutrition as well. Additionally, there is also positive momentum in our biomedical polymer business in the two important key sub-markets being drug delivery and orthopedics. Also, our pharma business containing our high purity lactic acid derivatives has shown strong double-digit volume mix growth, mainly in the kidney dialysis market in China. As for our exciting growth initiatives, starting first with our biomedical polymers, Our products are increasingly being used as a biostimulatory treatment agent to support tissue growth and natural collagen production in the aesthetics markets. This is next to the two historical subsegments of orthopedics and drug delivery. Secondly, about omega-3 DHA, referencing and first contracted volume in human nutrition and markets will materialize in the course of the second half of the year. and finally on omega-3 we continue to pursue opportunities to broaden our customer base in aquaculture in penetration but also recently in some attractive new terrestrial categories a highlight for the nutrition business in the quarter was recent carbon's announcement that the company successfully secured multiple regulatory approvals for china general administration of customs this is paving the way for offering carbons, high-quality, sustainable, algae-derived omega-3 DHA solutions in the Chinese fast-growing human and animal nutrition and market. This is opening great opportunity for us going forward into 2026. Last but not least, on efficiencies initiatives, our investment program is delivering the expected capacity increase to secure growth into omega-3s for 2026 and beyond, but also in the biomedical polymer business. Through the microalgae strain optimization, we can further increase yields from the existing asset in Brazil. And with that, I'd like to give the stage to Peter to present our outfield results in more detail.

Peter, back to you. Thank you, Olivier. In the first half of 2025, our sales increased by 1.3% compared to H1 2024. This growth includes an organic growth of plus 2.9%. Currency impacts, particularly due to the depreciation of the US dollar in the second quarter, resulted in a negative minus 1.2% impact on sales. The organic sales growth was driven by volume mix growth in functional ingredients and solutions of plus 2.9%, and in health and nutrition of plus 5%. In the second quarter, mainly due to phasing effects, organic sales growth was minus 1.8% for functional ingredients and solutions, and minus 0.6% for health and nutrition. I will come back on the dynamics when presenting the individual businesses. Turning to our adjusted EBDA, we achieved a remarkable growth of plus 23.8% increase versus age one, with an organic growth of plus 29.3%. This increase was driven by sales growth, as well as cost-saving measures within functional ingredients and solutions. The adjusted EBDA margins improved overall by 300 basis points to 16.5%. This resulted in a 25 million benefit on an organic basis. The currency effect, largely deriven by depreciation of the US dollar in the second quarter, impacted the EBDA negatively by 2.2 million. The non-recurring transitionary service agreement benefit last year is minus 2.5 million. On an adjusted EBITDA, we've seen growth both in Q1 as well as in Q2. Looking further down the line in our profit and loss statements, depreciation and amortization decreased year over year following the depreciation of the US dollar as well as the Brazilian real. Some assets were fully depreciated, and this was partly offset by an increase of depreciation from our new direct asset plan. Adjustments were mainly driven by restructuring costs, as well as some costs related to the planned settlement of a defined benefit scheme. Financial income and expense came in higher than last year, mainly driven by translation effects of intercompany positions. The interest expense on our debt is 6.5 million, which is an interest rate of around 3%. The 50% of the net results of the total energy-scorium joint venture were 1.1 million negatively. The positive EBDA of 6.7 million is offset by interest paid to the shareholders as well as tax. Our effective tax rate stands at 18%, which is relatively low. This is due to tax effects related to currency results. For the full year 2025, we anticipate an effective tax rate between 23 and 25%. Finally, our results after tax have seen a positive impact of 86.8% versus H1 2024. Looking at the functional ingredients and solutions business units, we experienced a positive fully mixed growth of 2.9% for the first half and minus 1.2% for Q2. This growth was primarily driven by our food business units, particularly in meat and dairy markets, as well as growth in our key product and market adjacencies. Additionally, we observed growth in lactic acid volumes to our joint venture. In H1, our biochemical business unit was down compared to last year, primarily driven by weaker demand in some categories like agrochemicals, which especially impacted Q2, This was amplified by phasing of some key customer orders into the second half of the year. Regarding pricing, we saw a negative impact of minus 1% for the first half and minus 0.6% for Q2, following the decline of input costs mainly passed to the joint venture. Our EBDA margin for H1 stood at around 12%, with Q2 at 11.7%. This represents an increase of nearly 300 basis points versus the first half of 2024. Variable margin improved following the implementation of cost reduction measures and input cost decline. Offsetting negative mix from growth in lactic acid to the PLA joint venture. Moving on to health and nutrition and starting with our organic sales growth. We achieved plus 6.8% for the first half of the year, with Q2 contributing minus 0.6%. Our volume mixed growth for H1 was 5%, with Q2 showing a decline of minus 1.1%, due to customer phasing within the nutrition part of the portfolio. The H1 growth was driven by all three business units, nutrition, pharma, and biomedical polymers. In the pharma business, we deliver double-digit fully mixed growth, mainly due to addressing the kidney dialysis market in China. In the biomedical polymer business, sales grew high single-digit, supported by increased sales in our three key markets, orthopedic, drug delivery, and aesthetics. Moving on to EBDA, H1 adjusted EBDA grew from 41.5 million to 47.5 million, driven by volume mixed growth in all three businesses. The adjusted EBDA margin grew 240 basis points to 32.1%, driven by leverage of fixed cost and positive pricing. In summary, our health and nutrition segment was impacted by some phasing in Q2, whilst having a positive momentum across the three key business areas. And finally, If we look to the results of Total Energy Scorpion Joint Venture, the joint venture achieved an organic sales growth of 5.6% for the first half year, with Q2 showing a year-over-year decline of minus 9.3%. The growth in the first half of 2025 was driven by volume growth of banks at low PLA prices. The JV achieved a margin of 9.7% for H1, with Q2 at 11.7% in line with expectations. We continue to expect high single-digit EVDA margins for the full year 2025. And with this, I would like to hand over back to Olivier.

Okay, thanks, Peter. So moving on to the outlook for the rest of the year, we are confident to achieve our previously given ambitious targets for full year 2025. targeting a volume X growth of between 2% and 6%. Moving on to organic adjusted EBITDA growth, we maintain our target growth rate of over 25%. This reflects our confidence in the strength of our business and our capacity to deliver on our cost efficiency program. We target free cash flow of over 85 million and continue to anticipate a covenant debt to covenant EBITDA ratio of approximately 1.6 times by the end of the year. This reflects our commitment to maintaining a strong balance sheet. And now, on this, Peter and I are happy to take your questions. Operator, back to you.

Okay, before going into today's Q&A, I would also like to announce that we are planning to host the Corbian Capital Market State 2025 on November 20th at our Horkum site in the Netherlands. Email invitations to register to attend the event in person or to log into the live webcast from your computer will be sent out shortly. So please keep your eyes on your inbox. Call participants. If you'd like to ask a question on the call this morning, please press star one one 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. This morning, our first call comes from Setu Sharda of Barclays Bank. Setu, please go ahead.

Week and Q3 is expected to be negative. So how confident you are able to deliver the volume growth for FY25 of 2 to 6% range? Any risk we should consider? And also if you can give any color on how has been the trading so far in Q3. My second question is on the nutrition volumes. They have been quite volatile since the fish oil prices have come down. So what is your outlook on nutrition volumes in H2? And have you seen any impact of lower fish oil on contracting? And my third question is on the cost savings. If you can update us on the progress on cost savings and how much of target is achieved, and if anything is pending, we should be incremental in H2.

Yeah. Okay, thank you, Setu. So I'll repeat the first two, and I will let Peter, you know, handle the cost savings one. So when looking at, indeed, the Q2, but on your question about confidence in delivering the fiscal year, indeed, we reiterate our target to 2% to 6%, so we feel confident there. Now, as we explained here, we already discussed about the phase in Q1, Q2. It's different from a business to another. If I start first with a functional ingredient and solution, if I look at the current momentum starting Q3, the food ingredient continues in a nice momentum, and we do not expect that really to change in the rest of the year. We have also some visibility, obviously, on the lactic acid intake to the PLA John Venture, where also we confirm the growth ambition of the John Venture for the full year. I think the nutrition question, your second question around, indeed, the fish oil price dynamic and outlook on H2 is, I think, worth really diving into. We explained that indeed we had a very strong Q1 and with some phasing into Q2. When we look forward, basically on volume outlook, first of all, we do not expect an outstanding Q3 just because we have a very high comparable if you compare to 24. If you remember, we grew this business with 30% last year. So Q3 will be good, but obviously we face a very strong comparable. At the same time, we have a very good visibility on our Q4, and we expect a very strong Q4 in animal nutrition. I think it's also worth explaining a bit the dynamic in that business, because when you speak about omega-3s, obviously, in the three segments, being aquaculture, pet nutrition, and human nutrition, they have very different dynamics. In aquaculture, basically, you serve some major global accounts that are less than a handful. where you are phasing order from a quarter to another, but basically what's important in that dynamic is that we supply on one side the contracted volume, and that we have very good visibility. And we said last time, we have basically 30% of our business that is not contracted where we have lower visibility, and that is more exposed to official price dynamic. So when we look again at H2 for our nutrition omega-3 business. We anticipate a low Q3 based on very high comparables last year and a very strong Q4. And we maintain our double digits for the full year. And we also maintain a very strong EBITDA margin for that division. obviously also sustained by a good performance in the biomedical polymer and pharma business on top of the omega-3. So, Peter, maybe you take the cost savings now?

Yeah. Thanks for the question. So, overall, on cost savings in our program, we are online and therefore also happy to see the margin delivery mainly in our fifth business unit, which increased 290 basis points for us this last year. And if you translate the 290 basis points, then that's roughly 50 million euro. And therefore, we are also confident in reiterating our outlook in terms of EBDA delivery for the food.

Thank you. That's quite helpful. Yeah.

Okay, thank you, Setu. Our next question this morning comes from Robert Jan Vos from ABN AMRO, AutoBHS. Robert Jan, please go ahead.

Yes, hi, good morning all. I have a couple of questions as well. First one is on free cash flow. You delivered 12 million in the first half. The target, if I'm not mistaken, is still more than 85 million. Reiterated today, so yeah there's a lot of uh facing first half second half is that purely working capital or are there any other factors that we should take into consideration that's my first question then the second one um you talked in the prepared remarks but also in the q a you already talked a bit about the pricing of the non-contracted portion in agriculture in H2 following the fish oil prices that are quite low. Yeah, in 2025, you just said that this noncontracted part is 30%. So relatively small in the total portfolio. But for 2026, I assume that all the contracts, which is 70% apparently currently, needs to be renegotiated. My question is not so much on 2025 second half, but what is your first view on new contracts for the upcoming year in this business? In other words, do you still expect to be able to achieve this 30% plus EBIT margin in the division? My third question is on PLA. What exactly was the reason that the organic sales growth dropped so much in Q2? And at the same time, the EBITDA margin was much higher than in Q1. Maybe you can elaborate a little bit on that. That's it for now. Thank you.

Thank you, Robert-Jan. And I will let Peter handle the free cash flow and I will handle the other questions. So maybe we start with the free cash flow, Peter.

Yeah. So, Robert-Jan, you're right. If you look to the free cash flow delivery, then there is a phasing between H1 and H2. By the way, also pretty much in line with last year, because last year, if you recall, we did also 12 million in H1. And then in H2, we ended up in a full year of around 100 million. So it's really the seasonality in our working capital, which is the prime reason behind that.

Okay. So let me start with the PLA, and then I think elaborate more on the fish oil question. So on PLA, again, when we look again to the phasing, In the full year, we see a reduction on some of the key markets, primarily China in the Q2. But this has been also phasing because we see, till the end of the year, a consistent forecast on the PLA joint venture outcome. So I would say the joint venture is sticking to its target for the full year. Now, as we've discussed many times, The portfolio is still quite widely exposed to what's happening in Asia and primarily in China. So this has not changed. But there is no structural changes suddenly from a quarter to another on the PLA that are leading us to say, yeah, we're going to change the outlook for the joint venture for the year. Now, as we said earlier, the pricing remains depressed. Also back on the, you know, the fossil based polymer competition. That is also really low right now. So what we see is that the margin are being impacted by pricing. At the same time, as you know, the major input cost being lactic acid, and we have a pass-through in terms of price formula to the John Venture. The John Venture is benefiting largely from the relaxation in input cost coming from sugar, which is also, of course, benefiting the wider corbium. as this is one of our major input costs. And you might have seen the dynamic around sugar over the last month that is trending very positively for us because in some extent we are back to some pre-COVID level in sugar and even lower. So that's a different point, but we are taking indeed advantage of the current situation to basically edge longer-term sugar for Corbion. And of course, we're going to start to benefit from that in the second half of the year. but really, moreover, a lot more in 2026. As we are now, I can say, fully covered for 2026, and our sugar needs a much lower price. On the fish oil and non-contracted questions, we've all seen the fish oil price dynamic, and the strategy, having indeed longer-term contracts, did pay off. Now, on this 30% non-contracted, we had to, of course, adapt our pricing, there in line with the official trend. To your question on 26, and this is a very critical one, and let me a bit elaborate on the current dynamic. Although it's very early, but you might know that Peru just concluded the first, you know, anchovies fishing season, and they put a quota target of 3 million tons, and they decided to stop, you know, at 82% of these 3 million tons last week, actually, July 23rd. It's also important to understand that if you look at the numbers, of course, Peru to a large extent is setting the price official. But you have to look at, you know, the 13 countries that matters and you have the big countries being Peru, Chile, Denmark, UK and US. They do represent roughly 50 percent of the global official output. And this is what making the price trend. When you look to what's happening, obviously, They didn't match the quota. What's going to happen on price still to be seen, but we are still very much in the balance of supply and demand where, you know, things might turn with a slight surplus or a slight deficit on the pricing dynamic because this is a commodity. And there is another important element is that in the same time, you know, China being also an important, you know, player there in terms of fishing and what they call marine ingredients. the domestic production of marine ingredients in China continues to be limited due to really ongoing fishing bans along the coastline. And we can see that, of course, in the first half of 25, the Chinese domestic marine ingredient output has been really decreased substantially. So we see some very slight signals of potential rebound in price, but it's minor. You speak about 2.5% right now on fish oil. but we cannot make any conclusion yet. What we have seen is that basically the increased stocking activity, the declining cost of feedstock, feed costs, sorry, and the more positively profitability outlook for the fish farmers suggest that, you know, the aquafit demand by the end of the year may surpass the 2024 level. So, and that could point out to potentially a stronger demand for marine ingredients as the year progresses so so now uh we are not in a position to make any speculation for 2026 official back to the the contract discussion we still have contracts running till the end of 26 for the contracts that are to be uh you know renegotiated by the end of the year because we have some ending 2025 we have already initiated discussion you know, to renew these contracts already, you know, in the course of Q2, because we are not waiting last minute, but we are in the middle of negotiation rounds on these contracts that are going to end by the end of the year. Structurally, we believe that at one point with everything, you know, that we are seeing in terms of fishing quotas and fishing dynamic, that the market is really structurally short anyhow. And whether the quota, you know, going to lead to you know, at 1.2 or 1.3 million tons of fish oil, that's gonna make either, you know, a shortage or a slight surplus, but structurally, we are seeing this year where there is no more fish you can catch, and structurally, the fundamentals of the business remains really strong. So let's see how it moves over the last, you know, month. You still have a small fishing season, you know, in October, and that will tell a lot more whether you know the 26 is going to be really a shortage or a slight surplus, but if a surplus is going to be really tight. So that's our current analysis of the market dynamics.

Okay, that is quite clear, but maybe if I may ask an add-on, what is the general, let's say, outcome of the discussions you currently have with customers for whom the contracts end at the end of this year on the pricing?

It's difficult to discuss, of course, the details, as you understand, but basically, you know, our aim is not to align, of course, right now to the current official price because, you know, when you negotiate multi-year, and that's what we are looking for, the aim is really to see what is, of course, you know, the right price Basically, what we offer that Fishol cannot offer is security of supply and zero volatility. And some customers do approach it not as Fishol being a commodity, but as a security of supply and a risk mitigation supply because they know structurally, you know Fishol is going to be short. And if you want to stay in the omega-3 market and you guarantee the omega-3 level in salmon, you have to secure a minimum amount of omega-3. So we are more keen to discuss and favor these customers that do not speculate on fish oil, but see that as a risk management and supply guarantees over long-term than the short-term players. And just to end on that topic, this is why also the diversification strategy going more to pet, moving to terrestrial, but also primary human nutrition is crucial in our ongoing strategy for Mayas.

Very clear. Thank you. I have one small question for Peter, I think. You elaborated briefly on depreciation. Is it fair to assume that depreciation will increase with the lactic acid plant in Thailand now coming into stream?

So that's the right assumption, Robert-John. So, and especially if you look moving forward, if currencies do not fluctuate, because there's quite some assets in US dollar and Brazilian Rear, then you are right.

And what is the step up approximately?

So if you look to the step up, and I look a bit back, so in total, if you look to the CapEx amount, then you talk about roughly 240 million euro. you have a depreciation between 15 to 20 years. So if you calculate that back, then it is quite a significant amount which will come. The depreciation, by the way, we will do in a unit of measures, another straight line depreciation. So it's ramping up in line with the ramp-up of the tire electric acid plant. All right, thank you.

Okay, very good. We have three call participants in the Q&A queue. Participants, if you're interested in asking a question, please press star 1-1 to be placed in the Q&A queue. Our next question this morning comes from Fernand De Boer from De Grof Petercam. Fernand, please go ahead.

Yes, good morning. Fernand De Boer from De Grof Petercam. Two questions from my side. One, Olivier, did I hear you saying that you had again an yield improvements coming in for the omega-3 that's the first question and the second one is I remain a little bit puzzled on the pricing in the human and health because 30% of the omega-3 is non-contracts there you should expect a big decline in the prices well the price stayed positive in the quarter so i think that if you look at fish oil prices omega-3 prices on the spot price that already should should take this pricing down for the whole segment but it is still positive in the second quarter so could you explain a little bit yeah no so first on on improvement yes the the fact is that you know this process is still relatively new as we explained

We had two years ago this massive yield improvement in terms of getting more oil out of the biomass and then of course more omega-3s. And now we are benefiting from a kind of a second row of yield improvement on omega-3 content. That's a kind of trade secret here. We don't disclose in terms of percentage, but obviously with the same asset and the same ton of sugar, we produce a lot more omega-3 and we are pricing the omega-3 percentage to customers. the full ton of oil. This is where the profit lies. And the plant, obviously, as we are getting more experienced, is making really great efficiency progress in terms of yield improvement. Sometimes these are small bottlenecks or improvements. Sometimes they are massive. So we are really still learning as we go. The other thing is that we have a much better operational leverage because, of course, the volume is going up and the It's like in many situations where we see that we can get a lot more throughput from existing assets as well just by having small improvements on various parts of the process being refining but also fermentation and moreover by reducing fermentation time. So this is where the major project comes because it's really where the secret lies. is also the efficiency and reducing the fermentation cycles in the plant. So the team has done great progress, and this has really enabled us to, first of all, get more throughput, but also get much more operational leverage on our fixed cost there in Brazil. On pricing, Peter, do you want to comment?

Yeah, no, happy to take the pricing. And you're right. I mean, if you look on a yearly basis, the percentage is roughly 70%, 30%. In the quarters, it changes a bit, fair enough, from that perspective. And if you currently see where we are in terms of contracts, then there is stability of the contractor part of the business. If you look to the non-contractor part of the business, I anticipate pricing to be reduced in the second half of the year and not so much in the first half of the year. And then if you look to overall in the margin profile, because that I articulated, I think, in a previous call, we still think we will reach margin levels of around 30% of EVN.

OK. But coming back on the question on the yield improvement, because you said that you do not need capacity increases in Brazil

for 26 and beyond yeah that's correct yeah so if you recall when we presented the capital plan we had a 50 50 million euro investment over three years for omega-3s and now we are really at the in the middle of that program so and we said with this 50 million we can really materialize the numbers we gave at a time you know to go till the end of 27 and secure growth till the end of 27. So we are well on track there. So even though we are ahead, I would say, on this capacity, because we are spot on in this 50 million investment, but we paid more throughput when we paid it for the 50 million, actually. So this is the good news on algae. And obviously, we would have to make a decision. So next step, probably in the first half, of 26 of what do we need to do to grow beyond, you know, as from 28. But as I also said previously, we've eliminated the option of building a brand new greenfield operations because with what we've learned from the process, we think that further incremental lower capex options are really better than, you know, moving into a new factory, whether it is a greenfield or a brownfield.

Thank you, Ferna. Our next question this morning comes from Eric Wilmer of Sanlanscott Kempin. Eric, please go ahead.

Hi, good morning, all, and thanks for taking my questions. I believe you saw volumes come down in functional ingredients by a little over 1% in Q2, which seemed primarily driven by softness on the biochemical side, which I believe is around 15% of your functional ingredient sales. You also highlighted that meat and dairy was up, where bakery was slightly down. I was wondering about the sequential performance of your bakery business. Did this go down sequentially in Q2? And where does the softness come from in bakery during both Q1 and Q2? Are you seeing customers or consumers perhaps switching into synthetic potentially as a result of down trading? Or is this primarily related to a stronger focus on protecting pricing, resulting perhaps in some margin market share losses. Am I right to assume that the phasing that you alluded to was primarily geared to the biochemicals business within functional ingredients? Thank you.

Yes, Eric. I think this is indeed the case. Basically, the biochem is where really we have this softness. And we've seen even further deterioration. If you look at that business, indeed, Roughly 15% of fees you you have sub segments like semiconductors agrochemicals and the animal feed which usually you know Are volatile by nature, but also there are some underlying markets trends for instance in agro Where this type of products are being formulated out and the more stringent regulation so and and we we have also decided to be a much more discipline on pricing there even if we have to let some business goes because these are not really within our strategic priorities. So and that is indeed explained the largest part of the softness in Q2 is coming from these biochemical part of the portfolio. In terms of food, indeed, I mean, as you just said, we see meat and the adjacent categories, culinary, savory, growing nicely with natural preservatives, dairy as well. Bakery, the category is flattish. Now in this category, you have different dynamics. We have, of course, a strong presence in the US, but we have also a strong presence in Latin. And actually, we had some downsides in Latin, just with a couple of customers, and probably one reformulating one product, which is a one-off event. At the same time, we have a good pipeline. But to your questions on people moving back to synthetic, we've not seen that. Now, I think it's a great question in the sense that we have still to see what the new tariffs in fact gonna be in that category, because obviously there is still quite a lot of ingredients being imported from outside the US that might be formulated out to the benefit of products produced in the US. And this is where we intend to leverage our manufacturing at present, primarily on natural mold inhibitors. Today, basically, the major competition we do have in the U.S. bakery market is coming from outside imports, amongst others from China. And I think we have a competitive advantage if this is going to be confirmed in the next negotiation to benefit from that with our U.S. footprint, because we manufacture there. But so, yeah, there is no move right now to synthetic, you know, in the short term.

Okay, that's very helpful. And maybe if I may squeeze in one more question. I'm pretty excited to hear about the Captain Marks Day on the 20th of November. Yeah, the question here is regarding perhaps natural flavors. Also, given your background, your previous background at Naturex, I believe it's also, I mean, there's pretty clear focus within the industry, within the flavors industry on natural flavors, also through fermentation. It's also something you can make through lactic acid. Is this something, spoiler alert, but is this something that, is this an area of growth potentially for Corbion going forward?

I would say yes, in terms of the principle, not becoming a flavor house. This is not where we are going, but you know, again, to make it simple, if you have primarily, when you look to the world of additives or ingredients and whether additives are natural, you know, they need to be labeled as additive with the numbers, or if you have natural flavors that has a more friendly, cleaner label attributes, When we look at preservatives today, we already have some lactic acid derivatives that are labeled as a natural flavors. And this is really what I'm a strong believer is that Corbiant should invest and really invest more into this avenue of cleaner label. Partially, if you look at what you can do with natural antioxidant for preservation, quite a lot of these natural antioxidants could be botanical extracts or fermented products. That could be labeled as natural flavors, although they bring a functionality of natural preservation. So this is clearly an avenue we are really working deeply on that we will discuss more about in the upcoming CMD, Eric, for sure.

Very helpful. Thank you.

Okay, we have one more question, one more participant in the queue, so let me remind all participants, if you'd like to ask a question, please press star 11. Our last question comes from Reg Watson at ING. Reg, please go ahead.

Morning, all. So I had a follow-up, please, Peter, on the sort of depreciation question. Thank you for highlighting that it's based on unit of measure on the gypsum-free plant.

to help us calibrate this for the depreciation charge for this year can you tell us where you are on the utilization of that plant please i will not fully tell you where we are but if you look to the depreciation which we have done in the early part of the of the year it's a couple of it's a couple of millions

Okay, but would that increase through the year? Is that an expectation? Because presumably the utilization is changing all the time.

That's correct. So it will change during the year and then running up to the amount which I indicated earlier.

Okay, thank you. And then my second question relates to the Q3, Q4 seasonality. So thank you for highlighting that Q3 is going to be down year on year. but I'm acutely aware that Q4 is normally seasonally the weakest quarter, both from a revenue and EBITDA perspective. Do you still expect that to be the case this year with the weakness in Q3, or is Q3 still going to be stronger than Q4?

So if you look overall to the seasonality impact, and if you look to let's disseminate functional ingredients and solutions and health and nutrition, And then in health and nutrition, I would say the seasonality impact was really proliferated last year because we had this plus, what was it, 30% in Q3. And then it was around flattish in Q4. And I assume that will turn around in this year. Having said that, with the order pattern which we see in the contractor part of the businesses, I see some shift from Q3 to Q4 as well. So I don't anticipate Q4 being weaker. In functional ingredients and solutions, you will roughly see, indeed, the same pattern as we have seen previously.

Okay, that's really helpful. Thank you.

Okay, as there are no more questions, this concludes our conference call this morning. Thank you all for your attendance and questions, and we look forward to discussions at upcoming roadshows and conferences in the coming weeks. Transcript of today's call will be available on the investor relations page of Corbian.com in the next days.