Corbion NV

Good morning and welcome to Corbian's third quarter 2025 results conference call. This morning we published our Q3 2025 interim management statement press release and presentation. These can be found on our website at corbian.com investor relations financial publications. With me on the call today are Olivier Rigaud, chief executive officer, and Peter Kazius, chief financial officer. 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. Now, I would like to hand the call over to Olivier Rigaud. Olivier?

Thanks, Alex, and good morning, everyone, and thank you for joining our Q3 2025 earnings call. We are pleased to report solid results for the first nine months of the year, which underscore the fundamental strength and resilience of our businesses. Our third quarter performance was in line with expectations, especially considering the strong comparable basis for Q3 2024 across both functional ingredient and solution and health and nutrition. We delivered meaningful margin expansion with adjusted EBITDA margins improving by 240 basis points year-to-date and 110 basis points in the quarter. These gains reflect the successful execution of our cost reduction initiatives, lower input prices for key materials, and our continued focus on operational efficiency. In our functional ingredients and solution segment, we maintain strong sales momentum in both year-to-date and quarterly results. As anticipated, pricing was slightly lower due to the passing through pricing mechanism in lactic acid to the PLH adventure. Although pricing declined due to reduced input cost, the decline was limited as our teams continued to capture the value of our differentiated products in the market. Turning now into the health and nutrition division, we achieved excellent adjusted EBITDA growth despite a temporary decline in volume mix in the third quarter. This decline is mainly due to the exceptionally strong Q3 2024, particularly in the nutrition sales to agriculture. Sales in the segment in the third quarter continued to the momentum from the first half of the year. So our pharma business also delivered positive sales growth driven by increased volume mix both year-to-date and in Q3. Looking ahead, we expect strong volume mix growth in health and nutrition in Q4 to more than offset the Q3 dip. Based on the robust year-to-date performance published today, we are reaffirming our full year 2025 guidance and narrowing the range for the full-year volume mix growth target. This concludes our prepared remarks. Peter and I are happy to take your questions. So, Alex, let's start the Q&A now.

Thanks. So, participants, if you're interested in asking questions this morning, please press star 11 on your telephones to be moved to the queue. So, our first question this morning comes from Wim Hosta at KBC.

Yes, good morning, everybody. I would like to ask two questions, please, on functional ingredients and solutions. The first one is on the food business. Can you elaborate a little bit more on the dynamics you see in the various markets? And I'm specifically interested in bakery, which was down. I recall from the H1 conference call that you mentioned at that point in time that there was some reformulation in Latin America occurring, but I'm wondering if you can elaborate on the various market segments within food and especially on bakery in the various geographies and how that will pan out in Q4. And then a relatively similar question on the biochemicals business. Both agrochemicals and semiconductors were improving in the third quarter after weaker performances, top-line-wise, in the previous quarters. So I'm wondering if you can elaborate a little bit. Is that a structural improvement? Is that just temporary restocking you see? If you can also elaborate on that, that would be interesting, those were my questions. Thank you.

Okay, thank you, Wim. I will take both questions. So on the fees, so indeed, I mean, on the dynamic, we have to differentiate, of course, regional impacts and knowing that we have our largest exposure into the North American market, amongst others in bakery, but also in meat and culinary. But bakery is a big chunk. What you see happening in the US is really two things. One is really customers focusing on cost optimization and recipe optimization. So really reaching out to look with us how to reduce cost by replacing some ingredients or reformulating or reducing waste. At the same time, you see on the other side still a continued trend on one side cleaner label. So this is really underlying already for a few years. but also some impact of the GLP-1 reformulation consequences with the nutrient-dense, high-protein stuff. So if I dive into bakery, we see these two things. We see on one side some of the bulky market on basic bread type of products where the market is suffering, and discussing with the major industry players, they both see you know, volume decline in the quarter and until the end of the year. And on the other, on some more specialties, if you think about high protein breads or keto breads, they are still experiencing a very strong underlying growth there. So overall, this is compensating some of the shortfall we see in the bulky part of the market, but not fully. The second trend we see in bakery that is also not new but progressing nicely as we speak is the conversion from primarily synthetic artificial mold inhibitors to natural alternatives. So this is where we are nicely positioned, where you see that the conversion to natural mold inhibitors is continuing. Having said that, you see these different dynamics, but the overall bakery market in North America remains really soft and in decline actually on the second part of the year. Referring to also the point you made in Latin America, Indeed, what we discussed a couple of quarters ago was that at that time we had some reformulation in LATAM, but we've been able to successfully replace the business impact we had following this reformulation. So that's not something that is coming in as a negative anymore. So that one is behind us and has been fully compensated. What also we see in food and beyond bakery where we are making good strides is on the culinary. As you might remember, we've been working on adjacencies. One was going to dairy with functional systems and shelf life extension value proposition. Another is really to expand from the basic meat market into more meat snacks and more culinary preparation. And although you see the major meat market, the more commoditized also being impacted negatively, like you might see, you see in bakery, you see some pocket of markets that are more niche, but higher margin growing very nicely like meat snacks. Also based on some of the GLP-1 reformulation, because these meat snacks are a great way to get a protein shot within brackets, you know, and protein intake, but also culinary. So these are the two sub-segments where we see very nice growth right now, but also going forward. On your second question around biochem and this agrochemical, it has been improving, but coming from quite low, you know, over the last month. So there is some recovery, but it's not massive. And we are not sure this is really structural today in the We've mentioned that in the past. This is not where we are putting any focus right now. Obviously, these are good business making good margin and cash, but we do not see a big turnaround in semiconductor area or in the agrochemical. We even know that agrochemical longer term is on structural decline as well. You know, this is really being, you know, markets being challenged by regulatory pressure. So again, not where we put any focus. So we don't believe there is structural fundamental turnaround there. Hope it answers your question.

Yeah. Yes, very clear. Thank you very much.

Okay, thanks. Our next question this morning comes from Setu Sharda of Barclays. Setu, please go ahead.

Yeah, hi, thanks for taking my question. I've got two questions. So the first one is about you mentioned about the strong order book in your commentary. So can you help us understand like how the Q4 order book today compares to the same period last year? And how much of the implied like 7% volume growth at the low end of your three to five year full year volume guide do you have visibility on today? And my second question is about, again, about the volume. Given if your Q4 implies quite strong volume growth, what does this imply for Corbion's exit rate into 2026? Should we interpret this as a signal of sustained momentum or more of a timing-related uplift? Any early view on 2026 in terms of volume growth outlook as compared to the 3% to 5% in 2025 would be great.

Okay, thanks, Setu. And let me ask or answer the question. And I do them all in one. So if you look the order book, then the great visibility we have is in the order book of the health and nutrition part of the portfolio. And by the way, we already had that in the call we did last quarter. And if you look to the dynamics, then last year Q3 was really high and Q4 was a bit lower, as you can recall. This year it's the other way around, which means Q3 a bit lower and Q4 a bit higher. This is really temporarily phasing of our key customers in the nutrition part of the portfolio. So I think there is, you can't take on that, say nothing on the exit rate from into 2020, 26. It's a bit premature to give an outlook, but I think nothing has significantly changed versus all the earlier announcements, which we did on a kind of multi-year guidance.

Cool. Thank you.

Okay. Thanks for the question. Our next question this morning comes from Robert Jan Bos from ABN Amaro Auto VHS. Robert Jan, please go ahead.

Yes. Hi. Good morning. I have a couple of questions. You provided guidance for the currency translational impact at the current spot rates for the remainder of the year of 12 million. Thanks for that. Can you do the same for the deconsolidations? I saw 4 million negative impact year to date. What will this amount be for the full year? That's my first question. If I look at pricing in H&M, it was only marginally negative in the quarter. I thought it would be more negative because of the non-contracted part of the business and expiration of some contracts in algae. So it appears now that pricing will be materially more negative in Q4. So is it postponed to Q4, this effect that we talked about in the past? Or can you elaborate why the metrics moved in these ways? So hardly any impact in Q3, and apparently a more material impact in Q4 for pricing. And my final question, my last question, in your outlook comments, you talk about The profitability in H&M, the year-to-date, almost 33%. So that is quite a bit above the 30 that you mentioned. Yet in the guidance comments, you specifically mentioned that negative pricing in Q4 will not reduce EBITDA profitability to below levels of 30% for the full year. That sounds a bit worrying as if we should anticipate a materially lower EBITDA margin for H&M in Q4 compared to Q3 and maybe also year on year. So can you elaborate on this, please? Thank you. Okay.

Thanks, Robert-Jan. Let me answer the question. So the first one is indeed on Forex. It's 12 million based on a continuous rate of the US dollar. And currently it's at 116. And last year, by the way, in Q4, it was 107. The other one related to the transitional services of the emulsifier business in last year. That's behind it. I think Q4, it was only 0.6, 0.7 million euro or something like that. So year on year in Q4, no impact from that perspective. If you then look indeed on the health and nutrition part of the portfolio, and let me answer the combined questions, because it indeed has to do with phasing of non-contracted business on the oneness, which is phased in more into Q4 than in Q3. And this is really a timing difference from that perspective. And therefore you did see indeed quite a stable margin or even increased margin in quarter three, which we anticipate to slightly reduce in Q4. By the way, this margin pattern has been amplified by the buildup of stock. So we've built up stocks in the course of Q3 in anticipation of delivering the orders in Q4. And then you also have a bit of absorption effect in debt, which is then positive in Q3 and will be reversed in Q4 from that perspective. And that's why we kind of gave the outlook. So you are right that in terms of Q4, We anticipate a price erosion and also a margin reduction, which also in this case doesn't say anything for the full year 2020-26.

Maybe a small addition on next year, as you might recall, and we will expand that more in the upcoming Capital Market Day. We continue to work on the portfolio. with basically also our human nutrition, you know, effort accelerating in the course of next year. So that's also some of the initiatives that we start to see yielding a nice, let's say, results in H2, but we intend to accelerate across 26 robots.

Okay. Thanks for those answers. Pretty clear. Thank you.

Thanks for the question. Okay, our next question this morning comes from Fernand de Boer from the Growth Petercam. Fernand, please go ahead.

Yes, good morning. It's Fernand de Boer from the Growth Petercam. Two questions from my side. I'd like to come back on 26 in the algae because I think for most of us that's the big question mark and certainly if it looks now that the pricing impact of the lower algae prices is coming through more in Q4 and also then more next year. So could you give us a level of comfort that you could say, okay, next year we will see, and also the remarks of Olivier, we will at least see the same kind of results in H&N as we have in 2025. That's the first one. And then the second one on fish, the margin is still a little bit up, but of course, given the comparison, it's less. But on the other hand, it also looks to stabilize if you look quarter on quarter. So do you still believe that fish could go to a kind of margin of around 15%, let's say, in one of two years' time?

Yeah, so thanks, Fernanda. I will answer the first analogy, and Peter will take up the fees margin. So maybe just to recap, of course, on the fish oil price momentum, we all know what did happen, you know, with this sharp reduction on fish oil. As you know, we were protected in this period by longer-term contracts, you know, for two-thirds of our business, and one-third being open... where we did follow a official price but um looking forward for 26 there are a couple of things to say first of all the the contract that was uh ending that is ending uh by the end of 25 has been renewed you know during the course of the summer already at uh at uh you know prices that uh are lower than the one we used to have before, but really not at fish oil price as well. So that's also a very important element because actually it's a strong signal that we see and we get from the market that the structural shortage is there whatever happened to the recent hike, you know, up and down where this fish oil price went up through the roof, you know, back in late 23, 24, and then down back to the $3,000, $3,500. But the large users in that field do all agree that the shortage is really structural. And that gives us really a lot of optimism going forward. So that's one thing. The other thing is that we've been able to basically convert additional new customers in aquaculture for 26 that we didn't have this year. And that also, I think, is giving us a nice visibility and outlook both on volume and on price for 26. And the last point is what I just said. You know, on one side is how do we grow also our customer portfolio beyond the DHA in aqua, meaning further continuous momentum in pet nutrition and obviously humans now. So Newman, it's still small on this year because we start to have commercial business on H2, but we have now the first repeat cell, so it's going up very nicely. And there is really further acceleration we are planning next year. Having said that, aquaculture are going to remain the largest chunk of our omega-3 DHA cells next year. But when you start to combine pet nutrition and Newman, In 26 years, we are really going and basically also adding another nice leg to the portfolio there. So that's what we have in play as we speak. So now the big difficulty is what will happen to fish oil price next year. We stay very close. You see that right now, lately, it has been slightly increasing. not massively, but slightly increasing. Obviously, the next catch season, spring next year, will give us more insight on what's going to happen. But again, all the signals we get from industry association and discussing with major players are all telling that the structural supply and demand is in deficit mid-term. So the big question is when are we going to see the market, you know, turning around? So is that in H126, in H2? I mean, we just don't know. Nobody knows. But this is why I think de-risking with longer-term contract, upgrading the portfolio into pet and human are the two big measures we've embarked on to also, you know, mitigate any volatility we might see in the aquaculture business. On the fees margin, Peter?

Yeah, no, so thanks, Fernand. So the ambition level is still to reach the mid-teen levels and a couple of without all granularity for the coming period, because I think that's better to do in the CMD. I mean, we see some further optimization in terms of efficiencies. And also keep in mind, if you look at the sugar development and the way that we are hatched, you will see that also into next year, there is quite a favorable benefit in that. So the answer is clearly yes or no.

Come back on algae. Could you say, because you did mention human, could you say now how much pet food, I thought it was around 10% of revenues in algae, how is that progressing?

Pet food is indeed from this 10% slightly up. But we know pet food at one point is quite a concentrated market. So this will never be 25% of total sales. So just to put things in perspective, but we are grasping a few percent up, you know, in the total. And human, yeah, the ambition is to get quickly to this similar level. We are not yet there. We are not yet at 10%, but it's ramping up very fast. And, you know, for us, it's also important, if you remember on the capital investment program at the time we discussed on algae, One was to have ability to produce a human nutrition grade, which was important to basically, first of all, prove technology, but also reference into the market, which is the steps we've been through in the course of 25. And once, you know, these approvals were made in H1, we've started commercial business in H2. So, and this is where we stand in the whole process. But what was important was to, first of all, have the first contract in hand, but then to have repeat because it's, of course, you know, algae in human nutrition nutraceutical is still relatively, you know, small as a market. The biggest chunk of the market is still based on fish oil for food supplement. So it's about making sure that we capture our fair share whilst the market is converting. from fish oil-based to algae oil-based. But yeah, we expect to really continue the strong momentum in 26 by converting more customers and capitalizing on the one we have today. Okay.

Thank you very much for the comforting answers. Thank you.

Okay. We currently have two more questioners in the queue. So our next question comes from Sebastian Brey at Barenberg. Sebastian, please go ahead.

Hello, good morning, and thank you for taking my questions. Could I start with the cash flow and investments required for Corbion for the next two or three years? How has cash flow been behaving through Q3 and on a longer-term basis? Can you remind me of what investments are currently planned for algae, if any? Is it just fully invested, and there are a few bits and pieces of the bottlenecking, but any color on that is helpful. And secondly, can you distinguish a little bit about the definitions of pharma and biomedical as Corbyon? Because I sometimes get these two confused. What is the fast-growing, exciting part of this business that is mentioned, and what is the order of magnitude of size at the moment as far as drug-delayed drug release is concerned? We're talking 20, 30 million euro, but any color on that is helpful. Okay.

So let Peter answer the first one, and I will take the second, Sebastian.

Yeah. So in terms of free cash flow, I think, Sebastian, let's do the longer-term outlook in the CMD. But if you look to the free cash flow delivery in this year, there is always a seasonal impact between Q3 and Q4. Or actually, Q4 is normally the highest one. We've seen that last year in Q4 and also in Q4 2020-23. if you look in terms of our our kind of key metrics and also articulated in the uh the previous cmd it's really on kind of organic sales growth margin as well as free cash flow delivery so don't expect a significant kind of uptick in in terms of contacts over the over the coming coming years and the details i think we will do on the on november the 20th

On your questions around pharma and biomedical, so we have two different type of businesses there. What we call pharma primarily is our lactic acid derivatives we sell into the dialysis market. So this is a long-lasting historical business of Corbion that is really progressing on the back of indeed the increased number of diabetics globally. And knowing that unfortunately it is diabetics when they are in terminal phases very often do need dialysis and where we play there is that indeed the functionality of our product is based on the high purity level on one side and the fact that the design of our product is really fit for purpose for a big new trend related to home dialysis that we see developing so there is an underlying momentum this business is It's a high margin business with a very nice underlying growth year over year on these drivers. On the biomedical, which is also a health value proposition, but a different angle, there, as you know, we have three underlying pillars around orthopedics, slow release, drug delivery, and aesthetics. We will also deep dive a lot more in the next CMD around this business because, again, it has been a business with a very strong growth momentum. It was a small business five years ago. It has more than doubled now. And as you know, we intend to double it again with high profit, high growth. And we have very encouraging news you might have seen in the press the last days from basically our partner Made in South. in association with TIVA, launching a lot of this slow-release drug delivery on schizophrenia. With, you know, now next to the U.S., they got approval in Korea and in Canada for the first product they launched, the UZI, but they're going to launch it in 26 Olanzapine, which is a second drug on the schizophrenia that is very promising. And every time, you know, this is carbon polymer behind the formula. And so, and recently there is also a big news is that they got also a new medical treatment approval from FDA, which is this drug can be used for bipolar treatment, which is even a wider opportunity. So that's one thing where we have a great visibility of what is in the pipe on the slow release drug delivery. An emerging segment also we will detail in the CMD is aesthetics. So it's a sector in between the regenerative medicine and cosmetics where basically the mechanism of action is pretty nice and attractive where we see a big player to go and replace, you know, everything related to hyaluronic acid, you know, in this type of applications. And we didn't mention a lot so far because it was emerging with a few customers, but we see customer base now enlarging. And again, more to come in the CMD on that. on these segments, but very exciting segments, very attractive, high margin, and with a very strong R&D pipeline, actually. So, we'll come back on that, Sébastien.

That's helpful. Thank you for taking my question.

All right. Thank you, Sébastien. Our last call today comes from Eric Wilmer at St. Lance Scott Campaign. Eric, please go ahead.

Thanks. Good morning, everyone. Yeah, I also had a question on the wording you provided regarding a strong Q4 you're anticipating for nutrition. It sounds like you've landed quite a material deal on the algae side. So I guess some sort of a similar question to the previous questions. I believe your algae business is running at a margin of roughly 25%. So given what is going on on the fish oil pricing side, despite some stabilization now, Would you expect this margin to trend more towards, let's say, I don't know, 20% a bit above during 26? And then lastly, I had a question on what you just mentioned on the fact that Menacell recently announced to have received approval from the FDA with Zeti treatment related to bipolar disorder. Would you be able to quantify or perhaps maybe qualify this a bit further? Thank you.

I will let Peter answer the algae. I will take the biomedical. Just on the biomedical quickly, because it's, of course, difficult to quantify, but when, obviously, just to put things in perspective, when, you know, Teva, I mean, the end user, speaking about billions of, of course, cells for UZD or Lanzapine, because if I recall well, I think UZD was 340-ish million cells, you know, on the first year of launch. Yeah, relatively to... the polymer amount, you know, in such a product, you really have to divide a lot. So, you know, these are things between, for us, you know, 3 and 5 million, but a very decent EBITDA. So just to put things in perspective, now there is, I mean, quite a lot in the pipe because, you know, we know Tiva has a 6 in the pipe in terms of launches. You know, also in the next 10 years, you might remember, maybe Incel also announced a very nice partnership with AbbVie. Going forward so basically, this is the way this business works, but you don't speak about hundreds of millions, these are more blocks between three and 5 million it be there for each of these launches for us incremental yeah. Okay.

Let me give a bit of the answer, Eric, and it's in line with the previous answer. So Q4, because there is quite some impact in terms of customer mix from that perspective on non-contracted and contracted business. So always be careful around taking certain percentages. But if I do a bit of the longer term outlook, then Olivier already alluded to that we have feasibility of contracts into 2026 as well, not fully covered. And also keep in mind that what I mentioned on sugar prices moving forward is impacting both the fish business as well as the H&N or the algae business, because also there we do fermentation of sugar. So sugar is an input cost in that one as well. I hope that helps on the question, Ian. Yes, that's helpful.

Thank you.

Actually, we have one last minute addition to the question queue. So this is from Reg Watson at ING. Reg, please go ahead.

Thank you. Apologies for the late addition. I was experiencing technical problems. Peter, if I can just cast your mind back to the first half call. I asked about the seasonality of EBITDA into Q4 and your expectations at that time. And reviewing the transcript, I think you suggested that FIS EBITDA seasonality would be normal this year, but that H&N would see a strong rebound in Q4 relative to Q3. Given what you've told us today, is that still likely to be the case, or would you revise that expectation?

If you look a bit high level, the only thing where I've seen a difference is in terms of face margin, in terms of seasonality, which is in Q3, it went, I mean, mildly down around the same level. And normally seasonality-wise, you see a bit of dip in Q4. But given where sugar currently is trading and how it impacts in the P&L, I don't see basically that reduction in Q4. because sugar actually starts to help in our EBDA delivery as of Q4. The other one, but that's in health and nutrition, and that's also following the previous answers. We've seen a bit of shift of orders between Q, kind of Q3, Q4, but overall perfectly in line if you look to the kind of H1, H2 dynamic rate.

Okay, thank you. And then can I take that a bit further forward and sort of look into next year? If I look at your guidance for the H&N margin this year of more than 30%, based on nine months to date, that means that Q4 margin is going to be more than 23%, and therefore second half more than 27.8%. Given that we don't have the full effect in the sector, and based on your loading and your explanation earlier this morning on the call, it feels fairer to take the second half margin of 27.8%. Is that realistic going forward into next year then as a sort of suitable run rate, even though we haven't fully annualized all the decline in the spot contracts?

The only additional, or there are two additional comments to make, Reg, on that one. One is sugar, as I indicated. We clearly see that trending down also into next year. And the other one is the underlying mix improvement into next year into human nutrition.

Okay, okay, thank you. And then on that sugar question, apologies if I missed it on the last bit because I had to dial in for technical reasons. How confident are you that you can retain the benefit of that? Because obviously, I think we've seen some pricing pressure already this year due to lower sugar prices.

Maybe just to answer quickly on the... Because it's a different dynamic in algae fermentation range than in lactic acid, yeah? Yeah. But as you know, I mean, we compete against fish oil that has nothing to do with sugar as... as a feedstock. So there we have a disconnect, which makes us feeling pretty good. Because as you know, we are fully edged for 26 and even seen the very low price, now partly early 27 as well. So we have great visibility at very low prices for the next 15, 16 months. They're going to really be also a very nice asset for the algae business.

Okay. Thank you. And then, final question, thank you for your patience. Gypsum-free lactic acid, how is the ramp-up of that progressing?

So, we are, I mean, you know, according to our plans, so, as you know, this is really the new-to-do-world type of processes, so we have had some stop-and-go in the course of time. of the year, but we've been running now really steadily. Actually in August, we beat our best 14 days throughput there. So we are aiming still to continue in the course of 26 to go to a, you know, a much higher level. But at the same time, you know, we've not been constrained by capacity because we have enough lactic acid invested in network. So, so yeah, so, so far, look, I mean, the major thing for us was to qualify this product into the John Venture because this is of course an easy outlet next door. And as you might have seen, okay, we didn't discuss the John Venture, but yeah, the John Venture is nicely up on volume, not on price, but on volume this year. Because if you see the volume of the John Venture, they are up 11% this year. So this is a nice outlet, you know, over the fence for the plan.

Okay, that's great. Thank you. And Peter, on that, are you able to give us some guidance on the depreciation charge associated with that? Yeah, because again, at the first half, it was dependent on sort of the run rate of throughput.

Yeah, no, so it's still dependent on the run rate of throughput. So if you look to the kind of phyletic asset alone, that

uh might go slightly uh slightly up uh more into next year i think than into this year okay super thank you thank you very much yeah thank you richard all right thank you to all the call participants this morning um i look forward to engaging with you all again at our aforementioned upcoming capital markets day 2025 on november 20th A link to the live webcast is available on our website, corbian.com, Investor Relations, Capital Markets Day. So thank you all for participating and your attention. Operator, you may close the call.