Dsm-Firmenich Ag S/Adr

Good morning and thank you for joining today's call. I'm sitting here with Dimitri de Vreze, our CEO, and Ralf Smijts, our CFO. This morning we published our first half 2025 results together with a presentation to investors which you can find on our website. Here you can also find our disclaimers about forward-looking statements. Following Dimitri's and Ralf's opening comments, we will open the line for questions. Importantly, and as a reminder, self-help analysts who want to ask questions will need to register via the questions link, which they can find on our website in the financial calendar. If you have not done so yet, you can still switch now. And with that, Dimitri, please go ahead.

Thank you, Dave. And indeed, welcome to everybody on this, I think, very busy day for you guys. Appreciate your dialing in. And I want to start with a little bit of the journey we're at before we're diving into H1 and 2025. So you know that we have depicted our journey, and we are moving rapidly towards the accelerate phase. I'm very happy to see that we made quite some progress during the first half, and we've also seen that we've closed the feed enzyme business in the whole exit of animal nutrition and health, and also something in the tuning portfolio. You've also seen that we've made quite some progress on the integration synergies. We promised 200 million, 100 million last year, 100 million this year. We're delivering on that. The same for the vitamin transformation, two times 100. Also, that is in progress to deliver another 100 million this year, and we made quite some progress on the portfolio. On the tuning, the agro-ingredients still left. We're going to do that this year. and you've also seen the A and H separation, that exit process is advancing. And that's also the only comment I'm going to make on the A and H separation. I know you have lots of questions, but my comment will be, it will be the only thing I'm going to say is that the exit process is advancing, already to make that clear up front. We move to the accelerate phase, building a company where we will be consumer, human-focused around well-being with the micro-trends around nutrition, health, and beauty, bringing progress to life by combining essential, desirable, and sustainable. And we are a people, planet, profit company. But moving in that accelerate on the core, very clear vision. that the next priorities will be that we will grow what we have. So we'll show the potential of the portfolio we have in the consumer space. We'll anchor what we do. Remember, we are two years on our journey. Well, we'll anchor what we do to build a house for the future with strong foundation. And we're going to deliver on our promises. And just as a reminder, those promises are linked to sales with 5% to 7% organic sales growth and just 3% in range, and a cash-to-sales conversion of above 10%. And for the ones who think that's conservative, we also said that we'll review that after the exit of ANH. With that, let's give you some color on the three business units in the consumer space. Let me start with perfumery and beauty. Go to the next slide. You see three fantastic examples of innovations, of fantastic developments in our brief and innovation pipeline. And just remember that Perfumer in Beauty has a unique business model. And this business model has to do with a fantastic ingredient toolbox coupled with creation capability. So we strongly feel that the future of Perfumer in Beauty is anchored in two competencies. One is the quality of the palette, so that the ingredient toolbox, the palette, and one is the quality of the creation capabilities. Fragrance development managers, perfumers, very close to our customer. I think we've done a fantastic job on both. We have invested in our creation capabilities, but we also invested in the journey of ingredients. This lets you remind that we have an ingredient portfolio of 1.1 billion in perfumery and beauty, where we have last year deliberately decided not to rebuild Pinova and exit that low-margin business. We also said that we will refocus our terpene business at the same time, And you also know that we're working on finding a new home for the agro business, as well as the aroma ingredients to go with the A&H. That means that that portfolio on the ingredient toolbox, one of the two anchors of this unique business model, has been tuned to around 800 million of high-quality, high-margin ingredients, which we sell externally. And let me remind you, that is coupled with around 700, 750 million of fine fragrance ingredients, also in the space of these amphibians. So, overall, we are pretty much an ingredient, palette, unique case, coupled with creation capabilities as we have. So, very happy to see that for the future. If we look at the fantastic ingredient which we have developed, I just want to highlight one. That's the middle one. It's Ember Ever. It's a fermentative ingredient which we have developed and we have launched in the market. It's a dry, woody ingredient. Sensual ember smell is one of my favorites, and it's absolutely long-lasting, and it's really helping to grow and to win with our customers. So, for the first half, we saw continued momentum in fine fragrance, consumer fragrance, as well as in the ingredients. We saw UV and aroma not helped by the force majeure of the supplier. We expect that to normalize for the second half of the year, and that means that for perfumery and beauty, we feel very confident that we have a mid-single-ditch growth level for the second half. Then let's move to taste, texture, and health. Also there, quite some innovations in the pipeline. If you go to the next slide, you can see that on the slide on the innovation. Also here, the same unique business model. Creation, uniqueness, customer intimacy, coupled with a fantastic ingredient toolbox. And that ingredient toolbox is also banking on what we call the blue ocean space. So a business where we see a lot of requests from our customers to reduce sugar, to reduce salt, to reduce all types of ingredients, to add healthy ingredients to food. And we do see that those food markets are on the move. If you look at the brief, if you look at the innovation pipeline, the reformulation from healthier products while keeping the fantastic taste and texture profile, because consumers are not willing to compromise on that. That is where I think the strategic rationale of the merge of these and family absolutely come to play. And you see that happening in the synergies with the 2% growth, which we have reported. A nice example here on the left side, we have developed an alcoholic flavor that is non-alcoholic. So, I mean, also here, consumers not willing to compromise. They would like to cut down on alcoholic ingredients in their drinks, but they would like to remain having that taste. So, InnovaSense is that innovation which we've put to market, and it's helping us to grow in the TTH area. Looking at our brief and our innovation pipeline going forward from H1 into H2, also here, we're confident we can continue the mid-single-digit growth for TT, TTH, base spectrum, and health. And that brings us an inroad into health, nutrition, and care on the next slide. Also here, I'm very happy that we booked the fourth consecutive quarter of growth, as well as an improvement on EBITDA. That's by growth through recovery and dietary supplements and in early life nutrition. Here, an absolutely increasing awareness of consumers and customers of the importance of preventative health, also coupled with the aging population. People do care more and more about their immunity, and we see that reflected in our innovation and brief pipeline. Also interesting to see that weight loss management trends are boosting our innovation pipeline. Good health, high fiber content, muscle buildup, fatigue, probiotics are areas where we do see health, nutrition, and care are well positioned to continue their growth. And we see that if we look at our brief and innovation pipeline. A nice example here, fueling health from within, we all know that GOP1, is a popular trend. However, you do see that that creates good health problems as well as probability of lesser muscle pickup. So protein drinks, and you see that if you go to the shelf at supermarkets, while remaining the taste, absolutely key, adding probiotics to improve your gut health. is absolutely an area where we do see growth. So with that brief and innovation pipeline in health, nutrition, and care really full of these innovations, we are confident we can continue the mid-single-digit growth also for the second half in health, nutrition, and care. And that brings me to the financial highlights for the group. If you go to the next slide, happy to say that we have booked 7% organic sales growth, that we have a step-up in EBITDA, also on a journey to improve on the adjusted EBITDA margin with, I think, a good trajectory going forward. The cash flow was a bit modest, but Ralph will highlight that a little bit, mainly because of timing of payments. Inventory was under control, so I think that's good news, and we are fully confident that we can deliver on our cash flow target for the full year. And with that, Ralph, over to you for a bit more comments.

Good. Well, thank you, Dimitri. And you covered already quite a few highlights. But let me zoom in in a bit of detail and immediately zoom in. You already said it's a busy day. So really appreciate everybody online. And I think it's not only a busy day, but a busy week for you guys. So let's zoom in. Yes, overall, a good performance in the first half year. Overall, 7% organic growth as highlighted on the slide you've just shown. with a continuation of a good performance in a taste, texture, and health business, and health, nutrition, and care, both reflecting a 6% growth throughout the half. And also in animal nutrition, a continuation of an improvement of the underlying business conditions, which is something that we have been focusing on on the back of normalized pricing in the industry. And, of course, the business was supplemented or supported by the temporary vitamin effect in the first half, And I'll comment on that a little later. Also, our perfumery and beauty business continue to see good conditions with good growth, as Dimitri highlighted, in our perfumery business, our fine fragrance, consumer fragrance, and ingredients. And in our beauty and care business, we've seen the destocking effect of the UV filters. We guided for that. We also explained the reasons and the rationale behind for that destocking effect in a Q1 call, and we've seen that in continuing into the second quarter. But with that fading out, we'll see that single-digit growth also on a reported basis in our perfumery and beauty business going into the second half. From a margin perspective, a 3% step-up in margin. We're now well into the 19%, both in Q1 and Q2. but also the absolute EBITDA step up is very encouraging with an over 20% step up in our organic performance, supplemented with the benefits of the temporary vitamin effect. If you look at that organic performance of over 20%, over 100 million is coming from organic growth in our businesses, and then there's another 95 million contributing in the first half, which is perfectly in line with our committed contribution from the synergies from the merger and our vitamin improvement program. As I said, the temporary vitamin effect in the first half is around 125 million. And at the same time, we've seen ethics deteriorate into the second quarter. So we had a hit of about 25 million, which was a bit bigger than what I originally guided for, which was around 15 million, but we've seen the rates worsen further. And also the deconsolidation effect of the divestment has an impact of about 30 million in the half. Let me remind you there, this relates to the yeast extracts business that we sold in our taste, texture, and health business, the marine lipids that we divested in our health, nutrition, and care, and also the deconsolidation of the feed enzyme business that we sold to NovoNesis, which completed as per the start of June. Then zooming in a bit more on the dynamics of the most recent quarter on the next stage, looking at Q2. And we've seen very much broadly consistent dynamics across all of our business into the second quarter. So same growth momentum and same elements supporting that growth. Overall, the quarter has shown a 6% organic growth, so very much consistent throughout the half. And the main difference really versus the first quarter is the headwind from FX that started to play. And at the same time, we've seen the temporary vitamin effect leveling off throughout the quarter. In Q1, we had a contribution of 85 million to EBITDA. In the second quarter, 40 million on the back of the unwind of that price uplift related to that force majeure. Also from a margin perspective, A strong step up on margin. Overall EBITDA margin is up 19%. Now, coincidentally, that's also the EBITDA margin. We see a continued improvement on that front. We guided earlier, expect about a percent step up in margin over the years, and this is perfectly in line with that plan. Again, looking at the building blocks of that step-up in margin, again, here on the page you see at the bottom left the 20% organic performance. Again, over half driven by our organic top-line performance, the other half coming from our commitment around synergies and vitamin improvement program, and the temporary vitamin impact in Q2 of about 40 million. was basically offset by the negative impact of FX. The 25 million that I alluded to earlier was fully recorded in the second quarter. And also here we see an M&A effect of about 20 million in the quarter. As I said, margins stood at above 19%, which is an encouraging trajectory and in line with where we want to go. But let's zoom in into the businesses on the next page, starting with perfumery and beauty. And here we've seen a good demand across fine consumer fragrance and ingredients as alluded to earlier. We saw the weakness in beauty and care on the back of the destocking and sun filters, so that has been impacted. We talked about that at our Q1, and we've seen a similar dynamic into the second quarter. Hence, our reported organic growth is 1%, and you see that the impact of a fix is marginal in the first half of the year. Adjusting for that desucking effect in UV filters, our reported organic growth would be mid-single digit, in line with the strong dynamics that we've seen in our fragrance and ingredients business. Then zooming in a bit on Q2. Now, the investor presentation has all the quarterly bridges for ease of reading, so it's nicely built up on the halves and quarters. In the interest of time and leaving enough time for Q&A, I'll just voice it over in this presentation. Looking at the second quarter, again, favorable conditions in perfumery. Beauty and care was impacted by UV filters, as I said before. What we also saw was that following the force majeure at a supplier, also our aroma sales were impacted by lack of availability of material. Again, when you adjust for that, we have a mid-single-digit performance in our perfumery and beauty business. Margins, nothing to mention, largely in line with last year, despite the negative impact from FX and some one-off costs related to that force majeure. So encouraging results. Now, with the normalizing effect of the aroma, given that the phosphogeal is lifted, at the same time that the stocking effect of UV filters will not come back, You have Dimitri say that we are comfortable with an outlook of a single digit for perfumery and beauty. Going into the second half, we'll be able to also then show that as recorded organic sales growth with a continuation of a strong margin performance in P&B. Then looking or moving on to Teeth, Texture and Health on the next page, please. Continued strong growth. As a reminder, last year we've seen a 9% growth throughout the year. Q2 had even 11% growth with even stronger volumes. Looking at the overall growth in taste, texture, and health, a 6% organic growth continuing, reflecting also the benefit of the combination and the benefits of the merger. In that growth of 6%, 2% is coming from synergies. We see that nicely coming through. As a matter of good practice, I keep on repeating the pipeline, two-thirds of our synergies will be delivered by our taste, texture, and health business, and that is growing very nicely. Meanwhile, that pipeline has increased to over 375 million of leads. The win rate, I commented on that earlier. We see that above average in the pipeline. So with a very good win rate, the wins are well over the 135 million, and we meanwhile invoice over 125 million. And just to put that in perspective, we meanwhile delivered about 40% of the targeted synergies in taste, texture, and health in this period, which is very encouraging to see, and it's great to see the confidence in the sales teams in our business. Now, looking at the overall dynamics in the market, strong growth in beverages and dairy, and again, local and regional accounts are fueling our growth. Q2, same dynamics, a 5% growth. Again, keep the comps in mind. We had 11% growth in the second quarter of last year. So, again, continuation of the good dynamics in our taste, texture, and health business. and encouraging to see the constant margin development as well. There we also wanted to see a constant upgrade of margin. We've seen that with a step up of a percent year over year. Overall, the margin in the second quarter landed at 20.2, 0.5% on a reported basis. I do want to stress that we're still selling the material to Le Saffre at cost, which will be ended by the end of the year. If you discount that sales that don't add calories to the bottom line, the margin is actually exceeding 21%, which is nicely in line with the guidance that we gave, and it fits the plan that we have for this business. So continued good conditions in taste, texture, and health, and also there we made a good start of the third quarter in July. Then moving on on the next page to health, nutrition, and care. Also here, strong conditions. Dimitri stole a bit of my text with four consecutive quarters of good growth and strong growth, where you see dietary supplements moving up and also early life nutrition on the back of a good demand for our HMOs. Dietary supplements are very driven by preventative health. But also here you see the conversion of marine lipids to algal-based oils getting good traction and supporting that overall growth. So in the first half, 6% organic growth, all volume-driven in health, nutrition, and care. And we see a constant margin improvement as well. The half was at 18%. We then look at the dynamics for the second quarter. Again, you have the details in the investor presentation. Same growth profile, good growth across all the categories and regions. Also a 6% organic growth in our health, nutrition, and care business, and margin was at 18.5, and that will continue to improve going into the second half, where we will hit the 19th as well. And again, Here, a great trajectory in terms of margin improvement. We said with the volume coming back in the business, we'll also see that moving upwards. As a reminder, we started at 15% at the start of 24, and we're meanwhile moving into the 19% into the second half of the year. So a good continuation of the journey in health, nutrition, and care. Then last but not least, on the next stage, animal nutrition and health. Overall very strong growth as one would expect. I always look at the pricing factor through a different lens. I look at it how much is related to a restoring and a normalization of pricing and how much is supported by the temporary vitamin effect. In the half that's about 50-50 and you see that shifting into the second quarter where that impact of the force majeure is fading out, but you see also a continued strong performance in the second quarter on pricing. Now, overall, we also see a good volume uptick, and I do want to call out performance solutions continues to deliver a high single-digit growth on the back of a high single-digit growth last year, so another strong performance in the first half of that business. Margin-wise, an absolute EBITDA, a great step up overall. The percentage is something that is difficult to pronounce in terms of an EBITDA step up. I look at that in terms of absolute numbers, over 250 million step up in EBITDA, of which half is related to the force majeure, but the other half is really about improving the underlying conditions in the business. Overall, the margin profile is healthy. If you discount the impact of the force majeure, margins have meanwhile restored to 14%, and we continue to improve on that front too. Maybe also as a voiceover, dynamics there, very much similar conditions in the second quarter, as we have seen in the first quarter, with a strong organic growth as well, and as said, a pricing effect of 15%, of which two-thirds is related to the underlying business. Then on the next page, what does that mean for our KPIs across the board? You see strong improvement there as well. And what you see is that the increase in sales and organic growth and the resulting EBITDA step-up have found its way in all of the metrics. You see that step-up with EBITDA nicely flowing through into EBITDA. We don't have any leakage on that front, so a good step up, and that has also flown through into the net profit line. Now, we do want to make a comment on the earnings per share. There is about a 30-cent impact there related to an accounting entry at the Associates, KD Pharma. I remember that we sold the marine lipids business to them. Now, they had a delay in processing everything at their end, and hence we took some accounting and non-cash adjustments. That's a one-off adjustment in terms of some value adjustments at their side, but we had to reflect that in our numbers as well. So it's a non-cash adjustment. It's not recurring, but it did have an impact on the earnings per share in the first half. So we just want to make sure that that was understood as well. But the rest, you see the nice business results flowing through all the way down to the bottom. That also improved our ROCHI substantially. So overall, our core ROCHI is up into the double digits. We mentioned that in the voiceover that we saw that improvement at the start of the year, and it's all related to our improvement of our EBITDA and margins. And also, when you adjust for the force majeure, we're close to the double-digit core ROCHI performance for our business. Now, cash flow was a bit softer than last year. Dimitri highlighted that and gave you a few insights on that on the next page. Overall, our operating fee cash flow was about 200 million below prior, and it was merely around timing of payments where we saw some payment runs that got accelerated into the half, not necessarily, but we don't actively stay on that. So that will unwind throughout the year, and also our SDI payments are usually made in the first half of the year, and that obviously reflected the strong performance over 24, whereas 24 was only reflecting three quarters because that related to the short-term incentive payment for employees for the period after the merger. Now, that effect will normalize throughout the year. If you look at some of the underlying drivers, all very much under control. You've seen that working capital as a percentage of sale improved versus prior year, but it's somewhat elevated versus the year end. Now, part of that is seasonal. We always see that. We land at the end of the year below 28%, and I wouldn't see a reason why we would not be at that point. So you'll see all these effects normalizing. We control our cash out around CAPEX. whilst we continue to invest for the future, and that came in also in line with the guidance of 6% of sales. So the underlying metric is good. I do want to highlight that we make continued progress in reducing our inventory, although in the first half we did allow ourselves a somewhat higher level to make sure that we deliver better. upon our commitments to our customers and help them navigate through a bit of a volatile economic environment. But as I said, also that will unwind again in the second half, and we've seen the first effects of that already at the end of June. Then for good housekeeping, also on the next page, a bit of net debt. Overall net debt continues to decrease as well. Now you would expect that on the back of the merger proceeds The measure proceeds are the divestment proceeds from the sale of the feed enzyme business. So overall, we collected $1.4 billion in line with guidance. At the same time, as you know, H1 is characterized by a good dividend payment because we maintain that as well. And at the same time, we've seen the first outflow for the share buyback, and we bought back the minority stake of our under-infecting business. So all in all, a continued progress in that debt as well. Looking into that, going into the second half, we'll see a continued good step up in our operating performance. I remember last year as well, where we delivered over a billion of operating cash performance in the second half. But I also do want to call out that we will be paying for the remaining part of the share buyback in the second half. So when you model that, please take that into account. A housekeeping notice, when I look at NetDebt, I include the hybrid. IFRS doesn't always listen to me, so they classify that as equity. But we will be revealing that in August. So when you look at here, when I talk about NetDebt, I always include the hybrid. So our leverage is then around 1.3%, 1.4%. But don't be surprised that in Q3 or when we come out with the full year, that 0.8 redemption will then also be reflected in IFRS definitions of net debt. Last but not least, our outlook on the next page. Outlook unchanged. We're targeting around 2.4 billion. Now, the careful reader this morning has seen that we changed at least to around And that's purely related to the volatile environment around our currencies. As said, I guided for about 15 million of impact in Q2 that came in at 25. If that were to materialize for the rest of the year, then we're looking at an impact of a little over 75 million for the year, which is bigger than what we guided for at Q1. Hence, if that were to materialize, we could be slightly below 2.4%. Hence the change in wording. But I want to stress that the underlying business conditions have not changed. So we're perfectly in line with the guidance that we started the year. In Q1, we technically updated it for the increase in the force majeure, in line with our commitment and transparency around that. At the same time, we sold our feed enzyme business. So we deducted that. That leveled off. And now in the second quarter, it's only the FX that is a bit uncertain. And again, you can see how volatile it is. On the back of the trade deals, they started moving again, but we expect for the quarter a bit of a similar impact. Housekeeping is there for your convenience, but the models can stay as is. There's no change. Very consistent delivering in line with that. Maybe with that, Dave, we leave enough time for Q&A.

Okay, thanks, Ralph. As I said at the beginning of this call, the sales and analysts who want to ask questions in the Q&A session need to be registered via the questioner's link, but I think that's what we all know by now. So with that, I think we can start to operate, but please let us have the first question.

Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Once your name has been announced, you can ask a question. If you want to withdraw your question, please lower your hand using the raise hand function in the Zoom app. Thank you. Our first question comes from Alex Sloan with Barclays. Please unmute your line.

Yeah. Hi, gentlemen. Good morning. Thanks for taking the questions. Two from me, please. The first one's just on perfumery and beauty. Clearly some exceptional impacts in the first half you highlighted and also tough comps in Q2 in particular, weighing on the reported organic sales growth. Could you maybe give a bit more context on what's driving your confidence levels in P&B returning to mid-single digit organic in the second half and 26 and maybe key end market assumptions You also talked about a good start to July in TT&H. I wonder if the same is true in T&B. That would be the first one. The second one, you know, appreciate you not going to talk more on the ANH process, but as that enters final stages, is it still fair to assume you have no material plans for acquisitions in 2026? Thanks. Yeah.

Thanks for those questions, Alex, and indeed good morning. Let me take P&B and then Ralph May for the second part. The P&B, indeed, let me give some context here. So what we've seen is good growth for fine fragrance, consumer fragrance, and for ingredients, and indeed, as we explained, Muting care was a bit soft due to UV and the force majeure of the supplier in aroma. So if you look at the growth of H1, about 1%, then you would correct for that on the normalization of UV and for aroma, you will be around 5%. And that is, again, as you indicated, indeed, a high comparison of 10% volume in the first half, 70% even in Q2. So what we look at in our brief and innovation pipeline, and you know that our brief pipeline is sort of a synergy check on what we see for the second half. We have the normalization on UV. Remember, UV was destocking because it was our customers were stocking really on the bank of a very strong 2023. Going into 24, they were a very good half year of a double-digit growth in the first half, and then it slowed down in the second half. So they were preparing for a continued growth, and they took action in the second half last year. You've seen that Q1 and Q2 have the last bits and pieces of it. So the second half, that will moderate. Same on the aroma on the fourth measure. That will also be solved throughout the second half. So if we take that, we're back in the as-is comparison to around 5%, so mid-single digit. And we see that being reflected in our brief and innovation pipeline going forward. And to your point on July, yeah, we can also confirm that next to TTH, also Perfumer & Beauty have seen a good July going forward. So overall on Perfumer & Beauty, we're indeed confident on the mid-single digit. A bit to the trends. Fine fragrance, consumer fragrance, ingredients. We do see that the younger generation is really pushing that growth. I think compared to pre-COVID, we see quite a change in how people look at fragrances. Maybe also to do a little bit with more attention to well-being. In this strange world today, people are going back to themselves and looking for well-being in themselves and fragrances. do play a key role there. You see the use of fragrances in end products going up, so the concentration of it, which obviously helps our growth. So we feel confident that that continues for the second half, and therefore you've seen that we are confident on the mid-single-digit for the second half. Then about cash, the owner of cash is Ralph, so I'll give it back to you.

All right. No, I appreciate the question, Alex. If you look at the company that we're building, and Dimitri did that at the start of the presentation as well, we're very happy with the portfolio that we created. We said that before. We've got everything we need to deliver a strong growth and a strong margin profile, and that is something that we are committed to. That's a promise, and we will deliver upon that promise, and we also want to focus on that. That's also the reason why we said we will focus on growing our business and delivering upon the targets that we set ourselves. And M&A, therefore, is not a big focus area for us. I think there were questions around that you're not going to do M&A in 25, but, well, 25 is nicely progressing, so we trust you on that. But going into 26 will be the same. So it's not a focus area for us. Internally, I sometimes make the joke if I stumble across something nice and it has the right nice profile, then it's a smaller bulldog and we'll look at it. But like I said, this is not a priority for us. We've got a great portfolio and we'll focus on delivering the growth and the margin ambition that relates to that also in 26.

Very clear. Thank you.

Our next question comes from Nicola Tang at Exane BNP Paribas. Please unmute your line.

Hi there. Thanks for taking the questions. First of all, on the outlook, I think you're very clear that the slight change in wording is not due to any change in underlying business conditions. I know some of your peers have been citing slightly weaker end market trends. So I was wondering if this is something that you're seeing as well, and if that's also baked into the guidance despite the fact that you're still able to reiterate that kind of mid-single digits for the second half. And the second question, I was keen to understand a little bit more the trends in the H&C business. So I was just trying to understand how much is due to the end markets themselves and decent growth there versus sort of DSM-specific dynamics, whether it's around HMOs or algorithms, as you called out. Thanks.

Well, if you take the outlook, I will give you some color, Nicolas, on H&C.

Yeah, thanks for the question, and good morning, Nicolas. So overall, if you look at the overall dynamics in the market, I voiced it over a bit. Dimitri just responded to Alex's question around P&V, so I think the dynamics are there. There are some specific events in H1 that are not recurring. And we also see the development of the order book. And if you look at it in P&V, that's developing nicely. And meanwhile, we have July under the belt, although today is the last day. But we know how that is going to look like, and we made a good start on that front. TTH very much driven also by the synergies. So we have a 2% contribution of synergies. You hear me speaking with confidence around the pipeline, but I always remind everybody it's more important that Patrick and the team are talking about that with confidence. We had the business review with them. I mean, the number of examples are numerous, so very strong dynamic. And that makes us confident that we see that single-digit growth confirmed also going into the second half. An agency is a recovery. Dimitri will zoom in a bit of the end market dynamics there. We're very much focused on growth. Part of that is market-related, but also the actions that we're taking. And the momentum in HMO is good. We said that we're well-placed for the second half, but I'll leave that to Dimitri to comment a bit more. But these dynamics are baked into Outlook, and Outlook is always balanced, but I also want to remind ourselves that if you look at the build-up of the original outlook that we did, there's also a contribution from the vitamin improvement program and the synergies. And I think that is something that is fully within our control. And we continue to focus on the delivery of that. And that is obviously supporting our outlook statement that we made. And with that, Dimitri.

Thanks indeed, Rolf. And I think, Nicola, what I think you need to be aware of that we are a company that will be focused on well-being with nutrition, health, and beauty. And we made deliberate choices to grow in the area where there's growth. So on well-being with fragrances, on health with more healthy food, and also on nutrition with more healthy ingredients while not compromising on the taste. And we do see that happening. I think we gave some color on the perfumery and beauty. Let me add a little bit to TTH before I go to H&C. So also TTH, I think, with a 6% growth, We clearly outperformed the market. It has to do with the synergetic effects we've seen. So adding healthy ingredients while not compromising on the taste and the texture. And that's almost like an art. It's something where consumers and our customers are not willing to give in to. And that is fueling also the synergies. It's been one of the strategic rationales of the merger. We do see that growth yet again also for TTH, again, a very high comparison. So if you look at the comparison for H1, it was 8% and 11% for Q2. So it's really solidifying beverage and dairy segments very well, and we see also that continuing in H2. Almost in all regions, and maybe the only one was maybe the U.S. was a bit soft on our global key accounts. although I also say that our regional accounts and our regional customers are growing very confidently over the first half and into the second half. So coupled back, you see the confidence for mid-single digit and to be continued. Then on H&C, indeed good growth, 6%. Organic sales growth, we're building enough in parallel with an improving on the EBITDA. So it's not only top-line growth, it also comes with an improved EBITDA from 16.8% in 2024 to 17.9% in H1, of which 18.4% in Q2. And we're confident we will be in the 19% range to the end of 2025. The growth, indeed, supported by early life nutrition. Obviously, with HMOs as a key category, we are well-placed. I would say we're more than well-placed. I will not give too much background because there's some competitive reasons for customers are very close to launching their products. So I hope you appreciate and accept that. Part of that question, I will give you more background on the HMO launches going forward. We are very well positioned in the stage one to three products in early life nutrition to grow that category to over 100 million of sales in the coming years. Then dietary supplements, also here, interesting synergy. Dietary supplements are great, but sometimes those are pills or any other formats out there in the market. Now with the taste and flavor experience we have, we're building dietary supplements, gummies with the flavors, on different age categories we can help. So we do see that is also helping the health nutrition and care growth, as well as all the segments, pharma, medical, based on aging population and the like. So it's across the board with early life and dietary supplements in recovery with a good brief and innovation pipeline. So overall, to your point, Outlook maintained. It's just like Ralph was saying on the technicality on Evics. And because we've chosen to play in the segments where there is growth, I sometimes mention that blue ocean growth, but Dave, our head, is saying nobody understands what blue ocean growth is, so I need to explain that. That is growth where you don't compete on market share, that we call the red ocean. We also like that, and we do that. But blue ocean is playing the space where there will be growth going forward, new growth, new innovation, and I think we do both. And with that, I think let's go to the next.

Our next question comes from Charles Eden with CBS. Please unmute your line.

Hi, good morning. Thanks for taking my questions. First one is, if I look at your organic growth, and I'm looking on an XNH basis, so I think it's about 3% in Q2, maybe 4% for the half. Given concerns around the volume challenges, some of the or many of the listed staples companies continuing, Could you remind us of the split of your sales on an X, A, and H basis between global customers and local and regionals? And if you can, what the growth looks like by customer type so far this year? And then my second question is more of a follow-up on PMB. I guess it's probably a two-part question, but both quite short. Could you give us an indication of what the growth is in fine fragrance, either in Q2 and the first half? And then secondly, obviously you're looking to exit the Roma business, but given your opening commentary, Dimitri, I wonder whether further down the line there may be other components of that division that may not be viewed as core. So could you just confirm whether that was the intention or not? Thank you.

I did miss the last question. Could you repeat that third question?

Yeah, sorry, I was just wondering, given your opening remarks, and obviously you're exiting a Roma business, but within P&B, I just wonder whether there's any other components of that business which may not be core further down the line.

Yeah, okay. Yeah, so let me respond on the organic sales growth. Indeed, we are 3% to 4% if you take the core part of it, by the way. That's also, I think, the EBITDA quality will move towards it. years. I think it's in line with the steps we're taking. What you need to be aware of is that staple companies are not always the right reference for us. We can even grow if there's no growth of the overall market. Let me explain that. I would rather have growth in the overall market because it makes it easier to grow. But we are supplying ingredients to a customer. So even in a space where there's no growth, we see substitution of different ingredients with our ingredients. I'll give you an example on food and beverage or dairy on yogurt. If we can replace sugar or salt or any other ingredients by our ingredients, we still grow. So the innovation and change appetite is for us a better metric to see if we can grow. So obviously if staple companies and our customers are growing, it's a bit easier. But it helps the innovation power. So let's also see why we are still growing and maybe sometimes even growing faster than some of the references. Then in terms of global and regional accounts, let me not go through all the details ago, but I think one clear indication, I think I hinted on it, the regional customers, the localization of the proposition and the briefs are going very rapidly. So these customers are growing faster than our global accounts. and therefore the local to local presence with application labs, with creation labs is absolutely key. And I think we have built that over the last five to 10 years and that helps our growth in our three businesses going forward. Then fine fragrance. Yeah, I think we clearly indicated that we're happy with the growth in consumer fragrance, fine fragrance, as well as ingredients. We clearly indicated that if you correct If you don't take into account the EVX and the hyperinflation, I think we have a very good organic sales growth. It means that we are growing in line with industry on consumer, on fine, and on regions in itself. And then last but not least, on aroma, and you linked it a little bit to the portfolio of ingredients. Let me go back a little bit to the ingredients portfolio when we started. So, first of all, we have ingredients for fragrances, which we use as input material for our fine and consumer fragrance division. We call that internal ingredient sales. That's about 700 million. That is top end and which differentiates ourselves to customers and help them to win in the market. Second, we had about 1.1 billion sales of ingredients when we started the merger. You can deduct about 100, 150 million for the PNOVA event one and a half years ago, which were commodity-like of ingredients. So we also delivered inside the strategic bid not to rebuild that. we will divest our agro-ingredients. It's about 50 million, 40, 50 million on sales. And we will bring Aroma into the ANH exit. And they will bring the external sales of the ingredients from 1.1 close to 800 million. And that 800 million is really high specialty, high-end margin business. So we feel completely comfortable, and it's absolutely key to keep that. So within that 800 million, There is about 20%, which is what we call industrial. And that is something where we will phase out over the period by growing the fragrance ingredients. Because it has to do with scale. It has to do with security supply. It has to do with the assets. So we will keep that, but we will grow faster in the fragrance ingredients. But the portfolio we have after all the bits and pieces done on aroma, on agro, and on the Pinova part, we feel very comfortable and then we go into the accelerate region and that means that we want to grow that business and that we are happy with what we have. So that's to your point, is there more to be tuned? The answer is no, we want to grow what we have for the next coming years.

For me, Charles, when you said what's roughly the split, so if you look at the underlying, if you also adjust for that UV effect and we're more mid-single-digit volume growth, But I think where you see is the big growth and the volume drivers is in the regional and local accounts. Remember that when we started the journey, we explained that 70% of perfumery is corporate accounts, 30% local. You see that move to 60-40%. And the opposite is in taste, texture, and health, very much local and regional drivel, where 30% is corporate and 70%, you see that actually moving into a 20-80%, reflecting that strong volume growth in regional and local accounts, which is already with us for quite some time.

It leaves us limited time, so let's do a last questioner, yes, a last person, and then we move and close the meeting, yes? So last question, please, operator.

Our last question comes from Artem Shevarov with Rothschild and Co. Redfern. Please unmute your line.

Hello, good morning. Thanks for taking my question. Just as a follow-up on the previous one, just to double-check that, so aroma ingredients will go together with the A&H divestment. Is that because they actually share the same production infrastructure? So you're selling vitamin assets, which in legacy DSM used to also produce aroma ingredients as a byproduct. Just to confirm my understanding here. And also, could you explain why the force majeure in aroma was a negative. So is that also referring to the BASF situation? And if it was a negative, why was that the case compared to the vitamins, which was more of a positive? Forgive me for that question, but that would be helpful to understand the moving parts.

Thank you. Yeah, no problem. So everything you said under question one is correct. So that brings me to question two. Aroma has nothing to do with BSS, neither on the vitamins. Aroma has to do with a supplier who supplies us for ingredients to make aroma, and they went into force majeure, and therefore they couldn't deliver some of the ingredients, and therefore we couldn't make the aroma, and therefore we couldn't sell the aromas going forward. So that is that effect, and that will unwind in the second half. We'll be back on track. So with that, back to you, Dave.

You know, we basically... Operator, we conclude now the Q&A session. And maybe, Dimitri, you can make a few closing remarks before we close the whole session.

Yeah, with pleasure. So, and also respectful of your time in this busy period. I did want a few key points. You see it on the slide. Let me not go through all of them. We'll continue our journey on 2025. I think H1 is a sort of a evidence of the fact that we are on track. We are building a future-proof growth company. We are fully committed in the accelerate phase to grow what we have, anchor what we do, and deliver on our promises with innovation, with synergies being delivered, focused on the right segments, the blue oceans, the market trends. That's our focus with growing what we have, anchor what we do, and delivering on our promise. With, I think, a very clear and transparent path forward, we'll continue to do so. That's also part of the company we're building. With transparency, with the discussions we all have, and we appreciate that. And I think, finally, with a confident outlook for the second half of the year, which is being reflected in our outlook for 2025, around $2.4 billion. And with that, I think...

Back to you again, David. Thank you. That leaves me to thank you all for attending today's call, indeed, on a very busy day. Please reach out to us if you have any additional questions. We're there to answer your questions. Maybe a reminder, we have updated our ESG factbook. For those maybe who have seen it, we make a very extensive factbook that can easily help you understanding our sustainability position that was published earlier month, and I think it's worth checking that out. With that, let's conclude today's webcast. So back to the operator.

This concludes today's call. Thank you, everyone, for joining. We now disconnect.