Dsm Firmenich Ag

Good morning and thank you for joining today's call. I'm sitting here with Dimitri de Vreese, our CEO, and Rolf Smijts, our CFO. We published this morning our first half 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. Dimitri and Rolf will start by making some introductory comments on our results before we will open the line for questions. Important to remind that sell-side analysts who want to ask questions have to register via the questioner's link, which they can find on our website in the financial calendar. If they've not done so yet, you can still switch. And with that, let me hand over to Dimitri.

Yeah, thank you, Dave, and good morning to everybody. A pleasure to see and hear you on this call. Before we zoom in on the results, I would like to zoom out a little bit first to put things in perspective. within our journey to bring progress to life. Let me start with the journey, and I'm not going through the whole capital markets presentation, but I want to say a little bit the coloring of the context where we are today. So merging two iconic companies together, we're starting the integration and also the start of the vitamin transformation program. And you've seen in our first half results that we are quite well progressing according to plan. The integration booked for 50 million in the first half and the vitamins in the first 45 million in the first half, helping our results for the first half. So we're really on track with these two important programs. Then the focus, as we've announced earlier this year, carving out ANH. I'm happy to say that we are making really good progress in 2024. Remember, 2024 we'll use to carve out ANH to be ready for a transaction to be executed in 2025. And on tuning, remember in the Capital Markets Day, we highlighted five segments where we feel that they would benefit in a different setting, where we really focus on the consumer businesses with higher growth, resilient margins. We have announced two deals, the yeast extracts and marine lipids. in a way that we think we can capitalize on the value. A yeast extract deal with a good deal with a player in yeast extracts, the software securing ingredients for us in a capital light way. And with marine lipids, really working together with KD Pharma, where we continue to have a 29% stake, where we can capitalize on the synergies and prepare for a stage exit, really valorizing on the value of that business. Then we have a third segment, which we have pointed out with the agro-ingredients. We'll continue to work on that and obviously we'll communicate when we have a final outcome there. And then we have aroma ingredients and non-differentiated vitamins. These two segments will go with the animal nutrition and health scope. so quite some progress also on the tuning actions which will mean that we could accelerate our businesses and we've said earlier we will grow what we have i think q2 is a good reference for that we anchor what we do and we're going to deliver on our promises and i'm very happy to say that q2 in terms of growth and an eboda is a good reference on what we're trying to build and then if we go through a little bit the group financial highlights On the next page, you get the highlights on the overall first half. You see a strong improvement of the financial results with exceptional strong growth in perfumery and beauty, including a good contribution from recovery and ingredients. Strong performance on taste, texture and health. Health, nutrition and care return to volume growth on higher demand of dietary supplements and a significantly improved results in animal nutrition and health with good growth, strong growth and performance solutions and higher vitamin profitability. Well, having said that brings me to our outlook. Based on this positive momentum continuing as well into the third quarter and our commitment to deliver the 200 million adjusted habitat contribution from the synergy program and the vitamin program in 2024, Although we need to remain cautious if we look at the end user data towards the end of the year and where our customers operate and shoot reference to, we do feel with that momentum that we should upgrade our full year outlook and we've done that by bringing it from at least 1.9 billion to an adjusted EBITDA of around 2 billion for 2024. And with that, I hand it over to Ralph to give a bit more color on the financials and the businesses.

Thanks Dimitri and good morning to all of you and happy to see you virtually just ahead of the summer break. Let's start with H1 results as usual. We provide the splits around top line and bottom line and give you some insights on the moving pieces. And what is worth highlighting here is that whilst H1 is still impacted by a vitamin effect, we actually saw that turning to a positive contribution in the second quarter, where you see a reduced impact, negative impact, where Q1 was still impacted by 80 million. We see a less impacting Q2, which is supporting our results on the back of the good and positive momentum in vitamins. Now, looking at top line, let's start at the first line in the P&L. So overall organic growth for the half at 4%, 6% volumes. And again, in the first half, we have the impact of Pinova, the site that got lost last year. It will be the last quarter where this impact is there. If you factor that in, volumes would be up 7%. That has translated into a step up in into EBITDA as well, supported by also the benefit from the programs coming through. So both the synergies and the vitamin transformation program added 95 million in terms of EBITDA in the first half. And we also saw a step up in margin. So if you look at the half and we'll look at the quarter in a second, you see a sequential step up in margin of about a percent. But also comparing into the second half of last year, you almost see a 2% step up in margin. Like I said, the overall half is still impacted by a negative FX overall about minus 25 million versus prior. And the net vitamin impact in the quarter is about 65 million negative, leaving a good step up organically with a very good contribution from PNB and TTH. And we see the momentum turning in H&C and A&H with a good step up in profitability. But we'll zoom in on the BUs a little later. Then let's look at the quarter, the most recent one on the next page. Overall, P&B and TTH have very strong performance, and I'll come to that in a second. Overall, as a group, we had the 7% organic growth, fully volume-driven. Volumes were up 9%. Again, adjusting for P&O, they were up 10%. which is a very nice step up. And also the EBITDA is 26% up versus prior year and margin is to 16%. Continued positive momentum and positive development on that side as well. The overall FX impact is about minus 10% for the quarter, but like I said, the positive momentum and vitamins offset that fully in the quarter. Now let's look at the individual BUs for a bit more color on the individual performance and how we landed each of the quarters. Starting on the next page, please, we start with P&B. And P&B had a very strong performance in the second quarter, especially as this is normally seasonally a little quieter quarter. Overall, very strong volume growth. Volumes were up 17% in the P&B unit, adjusting for Pinova even higher. There's a 2% impact from that. Somewhat lower pricing, predominantly in the ingredient space. on the back of the pass-through of some lower input cost. But all in all, a very strong quarter from an organic growth perspective. That has translated into a step up in EBITDA on the bottom line. So overall, we landed the quarter on 220 million of EBITDA, a step up of 30% versus prior year, which is a very satisfying outcome. Overall, the margin in P&B also very strong. The half landed on 22.6 with a somewhat lower margin in the quarter on the back of mix, but also some cost phasing between the quarters. And we also experienced a one-off cost in the range of 5 to 10 million, impacting the margin in the second quarter. But all in all, a very strong performance for our perfumery and beauty business. Then turning to taste, texture and health on the next page. Also a strong quarter in the second quarter. Also very strong volume increase. So the organic growth for our TTH business was 11%. With 12% volumes, overall price is fairly stable. And also here, both divisions performed very well. So both the taste and ingredients divisions delivered a double-digit increase, benefiting from a strong demand and catch-up effects following the destocking of last year. And here we also see the first benefits of the sales synergies actually coming through. Overall, EBITDA was up 16% in TTH, driven by the strong top line and cost synergies, up to almost 160 million. And also here, the margin is back up to 19%. You heard Dimitri say, here we also concluded... The deal around yeast extracts giving us a strategic benefit on that side and a capital efficient structure going forward. And it will be also supportive to the margins of TTH following closing, which is expected prior to the end of the year. Then turning to H&C on the next page. Here we highlighted an improved momentum at the end of Q1. We also see that into Q2 with a good step up in profitability, but also we're back to growth in H&C after a few quarters of negative growth. So overall organic is 1% with volumes up 2% led by dietary supplements, which is showing good growth, especially in the algae omegas that we see strong demand. early life nutrition is still characterized by a bit of softness and and destocking and i health continue to deliver a strong quarter in in the second quarter as as well overall ebitda versus prior adjusted for fx is is flat where the benefits of the programs and synergies are offset by cost increases however important is the sequential step up in ebitda and there we saw a nice step up to 94 million coming from 79 in in q1 overall in in hnc also here as dimitri said the tuning well advanced concluding the deal on marine lipids and also that will be positive towards the margin following closing when we go into 2025 Then last but not least, animal nutrition and health. Here we see a continued strong performance in performance solution. Again, a quarter of double-digit growth on the back of a very strong 2023 and also start of the year. So that is very encouraging. And we see nice growth in that business. Premix showing growth as well. On the vitamins, we remain cautious. We continue to prioritize our cash performance as well and control inventory levels. However, we're encouraged by the positive momentum in vitamins as well. So we see that. But let me at least make a few comments around that as well. Pleased to see vitamin E stepping up. That is a contribution when some of the other vitamins, it's still a mixed bag. And prices are not yet at the level where they should be. And we expect a continuation on that front. Profitability increased nicely as well within the quarter. So overall EBITDA is up to 63 million, a good step up sequentially from Q1, but also versus prior at a low of 17 million. And here you see the benefit of the programs coming in, as well as for better word, easing of the vitamin impact. We see the tight turn. uh had the we hit the bottom and we're climbing our way back up on on the back of positive momentum here as well overall it translated into a margin of eight percent and continued recovery to be pursued in animal nutrition and health now uh looking at the four businesses how does that then translate into the overall p l and you see that on this slide and we see a nice flow through of the step up in ebitda all the way down to two earnings per share And we have a little lower depreciation and amortization as well in the half. In H1, we had a few small impairments. So obviously that is contributing to a nice step up in earnings per share as well. And also our Phenix is very much in line with the guidance, actually a little below. And again, we have a benefit versus prior. Prior was impacted by the energy derivative. So we see a nice step up in earnings per share for the half. up more than 50% versus prior. Now, then how have we done on cash on the next page? Overall, continue to pursue on our cash ambitions. We're committed to that. Let's start with working capital. We see a reduction in working capital. So the percentage landed a little over 30%. Now, in all honesty, there is a bit of tailwind from the shift of the two businesses to animal health for sale. Adjusting for that, we would have landed in the low 31s, which is an encouraging step up. And you have to keep that in mind whilst we're growing the business. We have a very strong organic growth, especially in the second quarter. So around receivables, we see a nice step up. Our DSO is very much under control. But obviously, when the receivables go up, fueled by growth, we don't necessarily have an issue with that. Inventories remain under control. You have the seasonal build up in the first half as well. We're getting ready for the summer stops, especially in the vitamins where we might also prolong the stops a little. So there you see some inventory build up. But compared to the year end position, inventory is very much at a similar level. Now, that all translated. Before I comment on the overall cash flow, let me highlight also CapEx. Overall, CapEx landed at 5% of sales. We remain prudent and disciplined on that. But here also, typically, our H2 is a bit higher than H1. that then translated into a good step up in cash flow in the half. So we landed at 460 million of adjusted free operating cash flow, which is 175 million more than last year, 60% up, a cash conversion of just under 50%. And again, usually we see a better step up in the second half, given that we then see the unwind of the inventory bill that we have typically in our businesses in the first half. That brings us to the overall outlook for the year, around 2 billion. I'm not going to repeat Dimitri, but we see the continuation of the benefits of the programs, 95 million in the first half, 200 million for the year. and also the positive momentum allows us to increase the outlook overall to around 2 billion. Some housekeeping rules as well, very consistent, no change there, all coming in in line as the previous guidance indicated. And let's then see how that translates into the overall debt position and the outlook for the year on that front. On the next page, we've seen an increase in net debt to 3.4 billion, very much in line with expectation as in the guidance for the year. The big cash outs are typically in H1. Last year, we saw the dividend actually move to July. But here we're back to the normal rhythm. It's paid in H1. which represents the largest cash out in the first half. But also we completed the squeeze out for the minority buyout, leading to a further cash out and some hedges. So very much in line. And we also guide for rebounds in the second half on the back of strong operating cash flow, as discussed before. Overall, our debt will land within the guidance of 1.5 times EBITDA, as highlighted before. Let me pause there and Dimitri, give it back to you for a few words on sustainability ESG.