Dsm Firmenich Ag

Good morning and thank you for joining today's call. I'm sitting here in our new Maastricht offices with Ralf Smijts, our Chief Financial Officer. We published this morning our first quarter trading update together with a short presentation to investors, which you can find both on our website. Here you can also find our disclaimers about forward-looking statements. Ralf will start by making some introductory comments on our trading update before we will open the line for questions. We've planned today for about 45 minutes for this call, realizing, of course, that for everybody, this is going to be a very busy earnings day. Sell-set analysts who want to ask questions, as usual, have to register via the questioner's link, which they can find on the website. It's the same as we always do. So for those who are familiar with it, it's the same procedure. By the way, those who have not done yet can still do that. And with that, let me hand it over to Ralf. Ralf, go ahead.

Well, good morning and thank you, Dave. And welcome to all on what appears to be a beautiful day, at least here in the Netherlands. Pleasure that you're taking the time this morning to spend some time with us. It's a bit short a call, as Dave alluded to. It's a trading update, so we want to just give you our perspective on how the business is doing. And at the same time, we're gearing up for Capital Markets Day, which is just only a couple of weeks away. And I look forward to seeing many of you on that day. Now, as said, the purpose of today's call is the trading update. So let's look at how our Q1 results have developed. And let me first zoom out before we go into the businesses. So overall, we had a very good start to the year. We saw the business overall return back to growth after a somewhat difficult 2023. That's very encouraging. But what's even more encouraging is the good sequential step up, both in absolute EBITDA and EBITDA margin. And that is what we've been guiding you for and been managing towards. So we're very pleased to see that that come come through. Also, what is very helpful in the whole context is that we're seeing an improvement market environment and that that you'll see reflected in our numbers and in our comments there, too. Perfumery and Beauty had a very good start of the year with a very strong sales in both fragrances and personal care. And as I said in the introduction comment, if you look at TTH after a lot of destocking in 2023, we're pleased to see good growth back in our taste division and also in our ingredient solution. HNC and ANH, there you see still a vitamin impact, especially comparing to Q1 last year. Now that should fade out going into Q2, where the combs are different, but that is very much reflected in the number set that you've been looking at since this morning. Correcting for that vitamin effect, Q1 shows a very encouraging picture with an about 5% volume growth and a 7% step up in the underlying EBITDA on a like-for-like basis. We're well on track also with our improvement program. Remember that we had twice 100 million underpinning our outlook for the year. We're well on track with that. And as included in the press release, we have a contribution of about 45 million. Remember that we already had some benefit in the second part of last year, which was estimated around 20, 25 million. And you can see that step up to about 45 million in the quarter. quarter and also since April 1 we're starting to prepare for the animal separation we announced that at the year end we also said that we're forming a team and that has meanwhile kicked off so that process has started as well Now let me zoom in into a couple of the business and moving to the next slide. We start with perfumery and beauty. We're very happy with the performance as highlighted of our perfumery and beauty business. The business saw a very strong volume growth in our fragrance business. particularly in the consumer fragrance. Overall, we recorded in this segment a high single-digit growth in our fragrance space with volumes even slightly higher because there was a negative pricing effect of about 1% to 2% on that. When you look at our reported growth, you have to factor into account our ingredients. plus the effect of Pinova. Remember that we had the fire in the plant in April last year, so Q1 is still very much impacted. Overall, that has about a 2% impact on perfumery and beauty in total, but the growth as reported is very much driven by ingredients, which is actually reflecting a negative growth, a double digit negative growth, because they were steering the business to value and not to volumes. And that is actually very nicely reflected in the margins and the absolute step up of EBITDA. Compared to a run rate of a little over 200 in the second half and Q1 last year, we actually see an absolute EBITDA of 234 million and also a very nice 2% step up in margin to close to 24%. Again, coming from a 22% level in both Q1 and the second half of last year. Overall, a very strong performance in perfumery and beauty, and we see a good momentum continuing into Q2. Then if we move to the next page, our TTH business. Also, they had a strong start of the year with good volume growth, both in taste and in ingredient solutions, with taste even being a bit better, reflecting high single digit growth. And I think both businesses benefited from an improved environment, but also with destocking effects fading away. Also here, a very good sequential step up in EBITDA. If you look back at the previous three quarters, we were at around 135 million level. we're back at 150 million level, more or less in line with Q1, but we're offsetting a small negative vitamin effect and a negative foreign exchange effect in these numbers as well. So we're very much encouraged, also reflecting in our EBITDA margin. So if you look at it, H1 2023 was around the same level as we now currently see back, and that's a percentage step up also versus the second half of last year. Very encouraged and very good results in taste, texture and health as well. Then on the next, moving to our H&C business. H&C had a bit of a soft Q1. Sales growth was negatively impacted with the vitamin effect, of course, versus prior year. You see that back both in our top line and into our EBITDA. But also we... We were impacted by the shortage of fish oil in the market on the back of the El Niño storm. Overall, the fishery harvest is low and that is obviously impacting on availability, but it also has a pricing impact. If you look at the overall fish oil, the pricing is up and we're trying to pass that on, but obviously it does have an impact on the overall business. If you look at some of the other segments as well, early life nutrition is still very much impacted by destocking, especially comparing to prior year. Dietary supplements, on the other hand, we reported a bit of a stabilization of growth at the end of last year. We see that momentum kind of continuing in Q1. But what is encouraging to see that towards the end of the quarter, we actually saw an improved momentum on that front as well. Now, you heard me already say that top line impacted by vitamins, and you actually see that back in EBITDA, especially comparing to prior year, the step down in EBITDA is fully driven by the ethics and the vitamin effect, whereas the benefits from the programs and the vitamin improvement program is somewhat offset by these costs that I highlighted. Then last but not least on the next page, our animal nutrition business. It's still a tale of vitamins where we saw them bottoming out in the beginning of Q1, but still impacting the quarter. And notably, the performance solution is keeping up. uh last year 2023 on average we had a high single digit growth and we actually see a good growth continuing in in q1 in this uh in this space as uh as well um and like i said the ebida impacted by those ethics and vitamins effect offset by an organic performance which is largely driven by our step up in in cost in improvements Now, summarizing that all together, that brings us to the outlook. The outlook is unchanged. Let me repeat what we said at the beginning of the year. We're guiding for at least 1.9 billion and very much driven by our self-help action, well on track, contributing 45 million in Q1. So the right moment for us to once more look at our outlook is at the half year. Then we have seen whether the current positive momentum in our markets and the recovery in demand is robust and continues in Q2. But moreover, it will give us good visibility on the second half. So we'll be looking at that later in the year. Now, for modeling purposes as well, we've included in this slide also our housekeeping rules. We communicated them at the beginning of the year. They haven't unchanged. And Q1 came in line with that. And especially on the net debt, because I think that is important as well. We guided you on the key elements impacting our net debt position in 2024. We do want to point out that some of these have or actually will materialize in the first half, where we are about to complete the squeeze-out process for the minority shareholders, having an impact of around 0.7 billion. We issued already a press release earlier in the year where we already bought back 4 million shares and we're completing that in H1. And the same thing is around the dividend payment and we've got our AGM coming up next week and following that we will be paying that in the first half as well. And we concluded our share buyback to underlying the management share plans. And I think that covers the overall note. So a very good start of the year for for us. And with that, Dave, maybe over to Q&A.

Yeah, let's time for Q&A. I already said at the beginning of the call had the cell set analyst basically can ask the questions via the questioners link and all the other participants are in the listen only mode. So I think we can start. Operator, can you pass the first questions through?