Dsm Firmenich Ag

Good morning and thank you for joining today's call. I'm sitting here with Dimitri de Vreese, our CEO, and Ralf Smijts, our CRO. This morning we published our full year 2025 results on a restated basis, 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. And as usual, as a reminder, the sell side analysts who want to ask questions will need to register via the questioners link, which they can find on the website in the financial calendar. Dimitri, the floor is yours.

Thank you, Dave. And welcome to everybody here in this call. Nice to see you yet again. Busy week for us, busy week for you. The NH call last Monday, now the full year results. And you've seen that there are a lot of numbers there. So, Ralph, we'll lead you through in a minute. And then next week, our integrated annual report. And as you've seen in the press release, we're also looking forward to host our investor event on March 12th. the next phase of DSM3 as a consumer company. Now, let me go through a few of the highlights of the divestment of ANH to CVC. We explained that on Monday, but it was an important piece of our journey. And I think it's clear to say that it's really focusing on these amphibians to become a key player in nutrition, health and beauty. And that's also where the value creation is. So an important point was the signing of the divestment of ANH to CVC. And we constructed a deal where we have mitigated the downside risks in the ANH business, as well as the volatility. One of the strategic reasons that we announced that we wanted to divest and we have implemented on that. Now, we have created a deal structure that is not only mitigating those risks on downsides, but also creates an opportunity on upside. And that is also what we have announced last Monday, together with a favorable long-term supply agreement on Biden. The 2.2 billion, we found a fair value for the A&H business. I think it's a great business, but it has its volatility. We'll get proceeds at closing of 1.2 billion and remained at 20% retained stake because we wanted to cater for a possible upside. The solutions core business, the specialty business, is a really good resilient business going forward. So that whole multiplier on value we'd like to capture, as well as the essential core, which is predominantly the vitamins business. where I think CBC Capital Partners are a partner we work on different businesses with and they are very much catered to make that business grow and add value and want to capture that 20% as well. In the grand scheme, I think 20% of a 2.2 is around a half a billion. So it is also in terms of risk mitigation, not the biggest number. So please don't see the 20% as something where there's a direct link to our business. Not anymore. It's deconsolidated. It has been out of our numbers. The 9 billion is the decent fee and the consumer scope that we're talking about. Now, the Earn out, the earn out is linked to business on solutions call, very good business. So in that sense, I think the earn out is pretty much the core and the part of the earn out is linked to a central call. And then if that's half of the earn out, I think it's all been mitigated with the GVC to bring that business up to thrive. And I think there are lots of opportunities with normalization over the business as we speak. Now, what are we going to do with the money? Although let's make that very clear, the money only comes in towards the end of the year. As a sign of confidence, we will start our share buyback already in quarter one, in addition to the 1 billion that we have started and executed and completed for the feed enzyme business. And at the same time, not resetting the dividend. It remains stable also after the carve out of ANH at 250. Now, if we then go to the next slide that shows with ANH out of the way, we are on our journey where we merged the company, we delivered on the synergies. We have tuned our portfolio and we have assigned the deal to the best ANH. We're now into the next phase of the ISM family, have when I think of what we do and going to deliver on our promises on March 12th we will give you that accelerate route with our view presidents to get a bit of a feel on what we what we growing and how fast we were growing under that journey we've grown organic sales growth of 6% in 24 in the scope of these and family consumer related and this year we have announced the three years full on 2025 for that business in the environment we are in so we're we're surely showing the resilience of that portfolio going forward now we then go to the next slide a little bit the financials of that decent female consumer scope if you move to the next slide i'm going to show you a few numbers yep here we go so here are the numbers um here you can see we're a nine billion company We have grown that company 3% in 25, as we said, 6% in 24, if you go through the restate apples with apples comparison. An adjusted EBITDA of 1.7, 1.8 billion, which was a 5% setup, like for like. By the way, that's the same from 23 to 24. So it shows the resilience of that portfolio that we've built with a trajectory of EBITDA margin. I think many of you asked the question, how do you come to the 22-23 mid-term targets? Well, we started with 18. We moved it up to 19, 19.6 for 2025. If you take the last two quarters, we're more closer to 20. So also that trajectory will continue with a good generation of cash flow, the 10.5% conversion over sales in 2025. Now, I already alluded on the dividend and on the share buyback and on the investor event on March 12th, where we're going to give you some insight on what the next phase of the ISMFIM is all about. Now, last slide before I hand over to Rolf. In that whole trajectory, we stay true to our sustainability program. If you can go to the next slide, please. Then it's clearly that we... also have made quite some progress on sustainability. It's important for our customers. Some people will say, oh, why do you still work on sustainability? But apart from the fact that it's part of who we are, it is in the market we play in with customers important, 100% renewable ahead of plan, and also some reasoned ratings of a CDP AA for climate and water, but also a platinum medal for Ecofathers. It does matter. It is the company we're building and we are proud that we also continue that during that merger. So we will position to go into the next phase, which we call internally the accelerate phase with growing what we have, anchor what we do and deliver. But before we go there, Maybe let's look back for one more time in what we've done on 2025 before we move forward. And with that, I hand over to Rob.

Well, thanks, Dimitri, and good morning, everybody. Before diving in into all of the numbers, every number presented is, as Dimitri said, in accounting terms, continuing operation. It represents the company we've been building over the past two years. And it's all about perfumery and beauty, taste, texture and health and our health, nutrition and care business. As you'll see, A&H is not very much coming forward in the slides. It's now part of discontinued. And Dimitri and myself will be managing that business for cash until the closing has finalized, which we anticipate towards the end of the year. It will be positive in cash flow generation as well. And that's what we'll steer upon and we'll continue to report on the cash performance going forward. Now, a few things. Happy with the announcement on Monday, where obviously triggered the whole event of all of the restatements and we've been releasing the new numbers on Monday afternoon. So it is a lot to take in. We appreciate that. I think also if you look at our press release, we have been as elaborate as possible, giving you the full P&L, the balance sheet and the cash flow ahead of our annual report. In the Annex, we've tried to bridge also between the total group and the continuing operations and show you all of the moving pieces. But we also appreciate that in a busy reporting season, maybe not everybody has restated it. In the Annex on page 21 and 22, we've basically also included a reporting as per the old world, including the divisions before restatement to accommodate you as much as possible. Now, Dave and the team are happy to take your questions. The annual report next week that Dimitri alluded to will also be based on continuing operations that will allow you also to all adjust to the new world and then we move from there. Now, let's dive in a bit how that new world has performed. But before we move there, I think this slide is an important one for me where overall you've seen the work and the outcome of all the activities around tuning of the portfolio where on a group perspective, We've developed the group towards a 22% margin. It's very much in line with the trajectory that we envisage. But also you see the three BUs with P&B, TTH coming towards the lower end of our guidance. Also very nice progress on those fronts. And H&C really showing a strong recovery towards that trajectory as well. And I'm happy, although that the restatement is a lot to take in, it does show. And then also going into 26, we've got the right reference on how we're doing as a company. Now, let's dive in on the next page, please. Overall, the group, Dimitri already highlighted it. For full year, overall, 3% organic sales growth in... Not the easiest environment with a stronger H1 than H2, but encouraging growth throughout the year with the leverage in EBITDA. So a 5% step up in EBITDA and as set the margin of 19.6. Very nice. But for me, it's more relevant as we're on a trajectory that the second half is at 20%. So and that's something that will continue to improve on. If we look at Q4 specific for the group overall, a 2% organic growth and 3% step up in EBITDA and a margin very much in line with prior. But I think it's more relevant to zoom in into the business units. But before we go there, also a highlight on cash. We delivered overall. Remember that when we guided for a 10% target that that was for the group. We've delivered upon that for the total group. So the total group was just over 10%. but also in the continuing operations we've delivered upon that, and I'll comment that towards the end of my voiceover. Another metric that I want to call out is that we talk about our capital returns. Overall, the core roadsheet for continuing operations stood just over 11%, showing also the quality improvement on that front over the period. Now, let's zoom in on the next slide, please, into the businesses, starting with perfumery and beauty. Overall, a 3% organic sales growth. Keep in mind that throughout 25, we obviously had the Edwin and Sun filters where we've seen some softer conditions. Overall, adjusting for that, the sales growth is 1% to 2% higher throughout the year. And going into Q4, we've seen an improvement in sequential conditions with an overall 4% organic sales growth with a strong contribution of fine fragrance with a high single digit growth. more mid single digit growth in our consumer fragrance and ingredients business whilst the recovery in bnc did not come through yet overall delivering a solid performance in our perfumery and beauty business margin overall uh slightly impacted by fx and the mix effect as a result of that on a full year basis very much in line 22 on average despite a difficult exchange rate environment um Moving then on to the next page, please, to taste, texture, and health. um overall here uh is very strong uh year again four percent organic growth keep in mind uh the comms of of last year on the back of a very strong 2024 that translated again in a very nice step up inhibitor of seven percent year over year when adjusting for the fx and also here the margin is something uh we continue to improve margin uh positively um as set towards the 21 percent the lower end of the range, and we continue to progress from there. If we look at Q4, a bit impacted by softer conditions in the US mainly. Overall, a 2% organic sales growth. Still reflecting the contribution of synergies and very well positioned in the market. But we see, especially with our key accounts in the US, a bit of a weaker overall. If you look at it from a segment basis, beverage a bit softer, but dairy, baking, pet very strong and that continues. EBITDA quality, very profound Q4, a very nice step up overall, a 10% step up in EBITDA when adjusting for currencies and also the margin showed a very strong step up versus prior in line with the ambition that we have for this business overall. Then moving to health, nutrition and care on the next page, please. Overall there, we often talk about the journey of health, nutrition and care and also that journey continued. So on a full year basis, continued growth of around 3% organic, continued strong performance at the EBITDA side, a 4% step up when adjusting for currency. and also the margin continues to improve. You also see that in Q4, we again delivered a 20% margin for the business. The growth was somewhat impacted by timing of a big, more lumpy order in our pharma business. There is a bit of a shift there that overall adjusting for that, the organic sales growth stood at 1% for the quarter, where we see a continued strong environment for early life nutrition. and our HMO business, but we also see the uncertain consumer behavior impacting a bit our Thai Dairy Supplements and iHealth business in the fourth quarter. Overall, margin more or less flat as set in Q4, but overall a continued trajectory of growth also in health, nutrition, and care. Maybe then last but not least, looking at cash, overall important on the next page, please. Our cash performance, sorry, before we go there, there was one more slide. I think here, a lot of detail. I did want to come back on the overall performance of the group as well, because I think that's important. It's a bit of a busy slide, but it's coming out of the press release. I think the key highlight here, Two things on the one hand, our adjusted EBITDA for the group overall, we landed just below 2.3 billion in line with the guidance that we gave, set aside for a bit of weakness in animal nutrition in the fourth quarter and a deteriorating ethics environment. Overall, we came in at 2280 for the total group. So very much in line from an overall perspective as well. And also on the tax side, you see that our rate is normalizing at 21% for the continuing operations, where we aim to improve it a bit further. I think that's relevant going forward. Then to the next page, to our cash conversion. So overall, I think looking at a few drivers, overall working capital was below 29%. A little up versus prior when we talked about cash and the unwind of inventory in the second half. I'm pleased to report that our second half performance was very strong. Remember that we came out with the half year numbers with a softer performance in the first half. So happy to see that rebound. However, in the current environment, we were not able to fully absorb the uplift of inventory on the back of the tariffs and the carve out activities that we've done. So that is to further unwind in 26 and causing us a bit of a percent in working capital. Overall, our sales to cash conversion for the continuing operations was also well above 10. And there we alluded to that in the first half, a bit of a shift where in 24, you had a bit of a benefit from some timing of payments, including incentives, which is obviously then impacting 25. But across the two years, a 12% performance, and we'll come back on that in the March 12th event, where we will be stretching ourselves a bit further in terms of target setting on that front. But overall, an encouraging performance. And a good momentum going into 26. Maybe with that, Dave, we pause with the voiceover and move to Q&A.

Yeah, thanks, Rob. Indeed, it's a good moment to start with the Q&A. Remember, the Q&A is done with a CELCET analyst who can ask their questions if they're registered via the questions link, which they can find on our website in the financial calendar. And all the other participants can listen in to this Q&A simply staying on this channel. And with that operator, we can start.

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 Nicola Tang with Exane BNP Paribas. You may now unmute your line.

Hi everyone, thanks for taking the questions. I want to start a bit with the outlook. I know you didn't give an outlook and we have to wait until 12th of March to get a bit more colour, but I was wondering if you could talk a little bit about how the year has started across each of your continuing divisions. And you've given us the restatement for the past year, but is there anything to be aware of in terms of any changes in season? personality versus what we're used to for old DSM family. I'll leave it there. Those would be my questions. Thanks.

Okay, let me respond on that. Indeed, on March 12, we'll give the formal outlook, but I can give you a little bit of color, and then you can prepare your sub outlook yourself before we go on March 12. What you can expect from us on March 12 is that we'll go a little bit to industry standards, so we'll give you a bit of a range on where we see organic sales growth, the EBITDA quality as a percentage, and obviously the cash percentage, of which you were clearly indicating, all of you, that you felt that the 10% was right conservative. So we're going to review that and come back to you in March on that. Well, a bit of color. What we have seen overall, before I dive in a little bit to the three business units and the three businesses, we've seen a bit of a cautious consumer behavior around the globe, but predominantly in North America, which is an impact on the taste part of TTH and certainly dietary supplements and the eye health part in HMC. We'll come back to that in a minute when I give you a bit of call up at the EU. I think a 3% growth of the consumer in scope business for the SM family is a good growth in the current market context, considering also the 6% growth we've done in that same scope in 2024. Organic sales growth 3%, if that is in this current setup. We didn't see any change in trends from Q4 into Q1. So I think you can see that Q1, certainly we're now half of February. We will not see a huge change from Q4 to Q1. We will know a little bit more in March. We'll give you the input, I think, at the end of the day. 3% in a year of 2025 is a little bit the range where we've seen in a difficult market context is what our business can bring. with a nice pipeline and growth going forward still to the mid-term targets of 5% to 7%. And the BU presidents will also be there at March 12th to give you a bit of a feel of what is in the pipeline, what are the drivers. The fundamentals of the businesses are absolutely the same. We've all seen human mankind, when uncertainty is there, they always start to be a bit more cautious. And there are two things out of it. They're either pile stock or they be stock. Now, pile stock we saw during COVID. Now we see that destocking happening and then it normalizes over time. When it exactly will normalize, we don't know, but that normalization will take place. I think that is clear. Now, some color per business, perfumery and beauty. I think a good result in fine fragrance, high single-digit. We see that continued. Mid-single-digit growth in consumer fragrance, also there. With that trending, doing well. Ingredients, for us, very good. Remember, mid-single-digit growth after we've tuned the portfolio. We had a 1.2 billion portfolio. We've tuned it, made deliberate choices where we want to grow. The ingredients we have are a big part, our specialty ingredients. with mid-single-digit growth in Q4, and beauty and care, the destocking effect fading out in Q4 and moving that into 2026, where we will see normalization going on. Now, taste, texture and health. Here, overall, a 2% growth in Q4, 4% for the full year with a 10% growth in the year before. So let's look a little bit about the one to two years trending with the comparison. Very good growth in pet food, in bakery and dairy. Also dairy as a segment linked to healthy food. GOP, we really see a pickup there. A bit slow in beverages, but above all in the North American region, that uncertainty has caused cautious behavior of consumers and therefore also our customers. So we have seen North America being soft with destocking. Then health, nutrition and care. Health, nutrition and care grew 3% for the full year. Minus one for Q4, but you have to correct for that specific pharma order, which is sometimes in one quarter to another, it would have grown with 1%. Also here, predominantly the North America bit, dietary supplements and iHealth, early life nutrition, pharma, really, really, really doing well. with good growth also on biomedical. So the fundamentals are still there. We've shown, build on what Ralph said, a 3% growth in a difficult market is creating a bit of confidence. So we're not giving you an outlook, we're not giving you a love color to understand where we are heading for.

Second question, Rolf.

Okay, yeah, no, supplementing. I think Dimitri gave a bit of call. I think overall, Nicola, I think also if you look at the annex, then the impact of the restatement is very limited. So the regular seasonality will remain in place. Not that that is very big, but on the back of the restatements, there's no fundamental change on that. Other than that is that you now see the quality of the tuned portfolio. And if you look at the overall margin, fairly stable throughout the year. And also from a growth perspective, not much of a deviation, other that some of the more volatile and weaker segments have now been restated. So that generally lifted the performance a little up.

All right.

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

Hi, good morning. My first question is more of a follow-up around sort of comments on Monday around the stranded costs of 75 million that you mentioned. Would you expect this to mean that you start 27, I guess if we assume the deal closed at the end of 26, with a 75 million headwind to continue in Ops, or do you expect to announce sort of another sort of top-up cost savings programme to offset this amount either fully or partially? And then second one, I'm just going to follow up on the 26th guidance. And can I pressure you a bit on the decision not to provide the guidance today? I guess given the initial plan was to announce last summer, you've known the scope for a while. And Ralph, as you mentioned, the restatements are pretty small for the continuing ops. So I'm slightly surprised you're waiting until March to give us that outlook. It just feels like it adds another period of uncertainty for your shareholders who've been patient and waiting for the disposal. So can you just help us understand that? Thank you.

Let me do the first one and Ralph could explain the outlook. By the way, 12th of March is three weeks away. But apart from that, that's Ralph to respond. On the stranded cost, thanks for giving me the opportunity to elaborate on that. The stranded cost will have zero effect on our EBITDA. So we will compensate for that. We have programs ready. We know when the TSA will run out. We'll take action before. We've done it several times with many of the divestments we've done. So the 75 will be fully compensated for that. Maybe you see some small effects from one month to another, but we have a roadmap, a roadbook where we exactly know what to do and how to face that out. So that will not have any effect on our bottom line throughout the period.

right then let me then comment a bit further on the guidance uh the short answer was of dimitri it's only three weeks away now but uh on a serious tone uh charles uh it's something that we looked at as well but as you'll appreciate we just closed the transaction a little bit over the weekend and then did the restatement and the announcement of the deal obviously when we want to guide we want to guide for continuing operations but i think also through the color that dimitri gave is that we will be giving that that guidance in full including the bus but also about what is comprising of the businesses. I think also a guidance today would kind of land in the territory where there's a lot of people still digesting all of the changes and going through. I mean, if you look at it, there's not even a consensus out there in terms of that around that new company. But rest assured, we are managing the business for growth. You said it adds a period of uncertainty. I don't think so. I think with the voiceover of Dimitri, I mean, the color that we gave is in a difficult environment in 25. Have we managed to deliver at least 3% growth? We will be managing the business for growth going forward. We will be tilting. What Dimitri clearly said is that our guidance will be very much around organic growth, EBITDA quality and cash, where the cash target we will be uplifting. I think that is clear. And at the same time, the margin is a continued improvement story as well. We are happy with that. The actions of tuning also, if you look at the bridges that we presented at Capital Markets Day, that was a step up of 2% of that. We have delivered on that. We are now at a 20% margin, but it's clear that we want to continue that trajectory also going into 26. So I think Overall, there is comfort around that, managing the business for growth. We continue our margin trajectory and we'll be uplifting our cash performance. But then zooming in onto the full details and everybody had time to digest also the new reality. And then we'll be bringing also the BUs that can then elaborate a bit more on our growth ambitions or innovation driven ambitions. And with that, I think then there's more purpose of giving you the outlook then on March 12th.

I appreciate the color. I guess my point would just be, we're going to recalibrate consensus now, and then maybe in three weeks it needs to be recalibrated again. So it just creates, but anyway, thanks, Lou. I appreciate the comment. Yeah, all right.

Our next question comes from Matthew Yates with Bank of America Merrill Lynch. Please unmute your line.

Okay, good morning, gentlemen. A couple of questions, please. The first one on the perfume and beauty business, If I take the sort of continuing operations, I think the margins were down 80 basis points year on year. Can you please help us disaggregate that a little bit? You know, what was the FX impact on that? You talked about negative mix, but, you know, fine was actually growing quite well. So I guess the mix isn't obviously a headwind unless you're suggesting that beauty is very, very high margin. And then the second question for Ralph around the cash flow, and I apologize, I'm not really sure how to phrase it because I haven't been through the accounts in a lot of detail. Your cash conversion was down about three percentage points year on year. It looks like about half of that is probably explained by working capital. And then there's another half that I think in your introductory remarks, you talked about timing. I'm just trying to understand You're saying you're aiming to raise the cash flow conversion target. You've just done 10.5%. How would you honestly assess the cash conversion last year? Are there things that you think was depressing that conversion that we wouldn't necessarily extrapolate going forward? Just trying to get an assessment really about how much cash the business is generating. Thank you.

You want to take PMB? I'll take the cash.

Oh, yeah, I think on B&B it's rather clear. You basically say it's epics and it's mixed. So remember that fine fragrance is around 600 out of the total. So obviously we had a growth there. But beauty and care was lagging behind, softening, waiting for normalization. So it's a mixed effect. That's about half and the other half is epics.

All right. And I'm building on the cash and appreciate the question, Matthew. Let me I think your assessment, your quick assessment is a good one. So there's a few moving pieces around around working capital. I commented on that in the opening words around inventory that we were not able to manage everything through. So we're carrying a bit about an elevated level. Inventory is about 1% differential. Last year, we continued to make good progress. This year, whilst the efforts were there to reduce it, I think overall the tariff environment and our carve-out activities caused an elevated level, obviously with a somewhat softer demand environment in the second half. That's about 100 million and calls for half of it. The other moving pieces in working capital, generally on the payable side, I'm happy. If you look at our DPO, it's slightly above 100. We're very much in line with prior. Receivables a bit elevated as well. I think everybody is carefully managing their cash flow and that costs us a bit of half a point as well. So I think that assessment is absolutely fair. Half is working capital and I'm confident that we will be able to rebound that and That's how I'm also looking more at the cash flow over the two year period. If you look at the continuing operations, we included that in a press release was 13% last year. Now with the 10 and a half now on average, that blends very much at a 12% rate over this period. Now, what do I mean in terms of timing of payments? There's always a bit of an overflow from year to year, and sometimes that allows you to slightly perform better in one year, and then you see the rebounds next year. That's what we've seen. But if you go back to a half-year call, I also explained that the incentives had an impact on that as well. On the one hand, 24 was a strong year, but the actual cash out is actually the year thereafter. So whilst at the same time you have a bit of an elevated level of cash generation in 24, because you've got the strong business results, but then obviously you see a bit of a higher outflow in the first half of the year thereafter. So I think that's why you need to balance the cash over the two years to really see the current earnings performance. But at the same time, We have a continued step up that we want to do in terms of working capital, but also CapEx. If you look at it, when we gave the prior guidance was always for the full group. We guided for 6% of sales. We landed spot on that figure. if you look for the continuing operations it's slightly elevated there because we're finishing the bouvert plan so that has uh still a cash outlet this year and next year but there's a there's a potential that that will normalize back to the five percent for the continuing operation so uh that in itself is also a percent and a half improvement so i think we've got the levers we'll elaborate a bit more on that in march 12 as well on what the programs are in place and where Dimitri and myself are focusing on and steering on, but there is a potential uplift for that target and we know where that needs to come from.

Thank you, Rafa. Super helpful. Thank you.

Our next question comes from Alex Sloan with Barclays Bank PLC. You may now unmute your line.

Yeah, hi all. Hopefully you can hear me. Two questions from my side. First one on HNC. Could you remind us roughly how much of the division ARA oil sales make up? And if you were to see significantly increased demand there from market share gains, given everything that's been happening, You know, can you talk to, you know, your capacity to service that demand and what that could potentially mean for HNC in 26? And then just the second one, just going back to perfumery and beauty and Matthew's question on the margin. Was there any of that margin there? pressure that you know maybe related to the kind of increased price competition in perfumery ingredients that we have seen at some of your peers I think so far you you hadn't really called that out but just wondering if you can maybe touch upon that are you seeing any pressure on that front or do you expect to see any pressure on that front thank you

Thank you for those two questions. Let me elaborate on that. Thanks for the ingredients China part. You didn't hear us calling that out because it's not an issue for us. Then you could do a follow up question. Yeah, but why are the others talking about it? Because we have tuned our portfolio already two years ago. Remember, we had a 1.2 billion ingredient portfolio where we have made deliberate decision not to rebuild Pinova. We have sold the aroma business. We have tuned down our portfolio. We've upgraded our portfolio and we have an 800 million portfolio left in the ingredients apart from the captive. So that 800 million is predominantly specialties, fragmented small molecules. And the pressure on China is on the big molecules, the menthol, the citral. And we're not in those big molecules because these big molecules scale is important. Cost is important. commodity type of elements are there. We don't want to play there. It's not our profile. We are in the, in the fragrance ingredients and the fragmented ingredients, and therefore you don't hear us call us out. And if you see it at the results, the ingredients grow in mid single digit, and we're very happy with that. So that's why you didn't hear us calling it out because it's not an issue for us. Now then on your H and C part here, I will be less specific because obviously this is also customer as well as competitive and sensitive. We are the best placed player in early life nutrition. I think nobody would be better. We are in ARA. We are in DHA. We now are absolutely the first entrance in HMO in China, but also more than seven HMOs in the pipeline to follow. And obviously what we have seen on ARA is helping the story we tell in early life nutrition. Innovation is super important. Quality is super important. Credibility and reliability is super important. And I think DSM Family have always been that type of partner for our customers. And obviously what is happening on the early life nutrition market is helping us a little bit. We will see a little bit of tailwind for that because I think it hints to what we want to be for the early life nutrition phase. Now, HMOs, I've spelled it out earlier. That's a category where we see more than 100 million plus segments moving towards. And early life nutrition as part of our agency business is around 25 plus percent of the portfolio. So it's definitely an area where we want to play, where innovation is important, where premiumization is important. Just to give you a bit of reference, everybody is always asking, oh, early life nutrition is bad because birth rates are going down. The issue is that the premiumization with new ingredients is going up. The ingredients play into the life nutrition has seen very, very healthy growth in the last two, three years. If you're there with the right innovation. I mean, let me pause here.

Thank you.

Our next question comes from Ferdinand de Boer with De Groot Peter Graham. You may now unmute your audio.

Yes, I also had a question on early life nutrition, but that was answered. But on the new company or the continuing operations, how much of your cost base is actually in Swiss francs?

All right. Great question. Overall, our ethics profile improved. Well, normally you get a slide from me with the housekeeping indicating that a bit as well. I think overall, the dollar exposure came down to about 13 million per dollar cent. So that was previously closer to 15, 16. So that has somewhat improved. And on the Swiss franc, our overall exposure was 800. It's now 600 million Swiss franc exposure. Overall, the impact of Rappen is about 6 million. I think there was previously eight. So somewhat improved profile on the FX side. Obviously, the current environment is not very helpful. So we will see an impact of that. But overall, the sensitivity has improved with the separation of ANH.

And maybe to come back on the guidance question, the fact that you don't give a guidance today for 26 absolutely does not mean that you are going to change your midterm guidance of ambitions.

The answer is for two, yes. And for three, no. OSG, no change, midterm. EBITDA, no change, midterm. And you wanted us to change the mid-term guidance on cash. We said above 10. And we got so much comment that that was absolutely conservative, etc. And Ralph and myself said, listen, we're also building a company. So we start with more than 10%. And I think during that event, I also asked for a little bit of patience. Now, we have delivered two times above the 10%. And I think I heard Ralph saying that we would upward adjust that cash target. uh but i mean let's let's let's have that for march 12. so uh two out of three absolutely yes and the third one a yes but it will be uh changed upward but with midterm still the starting point is 24. the midterm starting point is 24. well because actually in 2022 you gave you gave the guidance for me to him and then in 24

you did actually the same for a smaller company, but not that you now mean with mid-term, okay, we're going to have mid-term targets and then the starting point is 26.

No, we're already in 26. By the way, we've always said mid-term targets starting run rate into 28. So that is what we said and that's still consistent.

It's not a moving target.

No, thank you. It's not like my son saying I will pass my exam, but not this year, but next year. Okay, thanks. You don't sound very convinced.

Well, what I said, we had 22, and then it was midterm, and then in 24, it was also still midterms. And that's why I'm asking. The answer is very clear. Thank you.

22, the company didn't exist as we asked today. It started in May 23, but let that aside. Next question. Thank you.

Our next question comes from Chetan Udeshi with JPMorgan Securities. Please unmute your line.

Hi, morning. Thanks for taking my questions. I have two. The first one is great. Is there any implications on your tax rate, excluding animal? I mean, I suppose animal wasn't making much money anyway. So I would guess, but just to clarify, the second question is, you know, your cash target, and I appreciate you probably upgrade that conversion target, which is good to see. But, you know, it's based on your adjusted numbers. And I'm just curious as we go past this phase of, you know, restructuring and, you know, separation, what is the level of APM that we should have in mind that sort of leaks out from your adjusted cash? Because when I look at what you give us in terms of adjusted free cash flow versus what we can derive just taking your cash flow statement and numbers up at the different. And I would hope, you know, over time that gap reduces. So I'm just curious, what would be the normal level of APM that we should have in mind?

Yeah, no, thanks for four questions. So on the tech side, overall, I made a quick comment in the in the opening statement. So overall, our effective tax rate for the continuing operations is at 21 percent. I think previously we guided for 21 to 22 for the total group. Happy that we came in on 21 and we continue to aspire to minimize the leakage on that front. But this is very much in line with the guidance that we gave before. So the impact of the separation of A&H, despite having, of course, its base in Switzerland, didn't adversely impact the company, which is good. And again, I think that's also going to be the guidance going forward in that same range. that the tax will be around that 21% level. Now then with respect to your APM questions, I think in the annexes of the press release you can actually see the APM development as well. Now obviously throughout these tuning activities you're rightly so We had a bit of leakage. Normally, when you transform, there is a bit of a cost associated to that. We took that into account in the company that we want to build. But over time, from a cash perspective, you see it coming down. It's a constant point of attention also for Dimitri and myself. We don't want any leakage on that front. We have substantially reduced it over the years from 23 to 24 to 25. Also, with some of the merger costs flowing out. And the guidance for 26 is that it should come down to below 100 million, but we continue to stay focused on it, to reduce it as much as we can. So the adjusted number comes closer and closer to the non-adjusted figure.

Thank you very much. We're now at the end. I think we are at the end of the Q&A session. Any closing remarks, Dimitri, you want to make?

Thanks, Dave, indeed. Thanks for your time. Thanks for your understanding. Let's dive into the numbers. Please reach out to IR to really understand. I think I understood there's a little bit of pushback why we don't give an outlook. Now, you need to establish a full understanding of the base before you give an outlook. Imagine if we'd given an outlook, you would have asked, well, based on what? So let's do step one first. March 12 is around the corner. We gave color on the business. I think a 3% in a difficult year. That's what we inspire to. So even to the mid-term targets when business is normalizing is absolutely in play with an EBITDA trajectory starting from 18 to 19, close to 20. And we will not stop after 20. We move towards the 20 to 23. And I think with the cash, we clearly indicated that we'll listen to you and that we'll come with a new mid-term target on the cash, as well as in the outlook for 2026. Now, with all that, over the last two and a half years, I think we worked diligently to bring these into the next phase. A $9 billion business with today already around 20% EBITDA with good cash flow generation. To the point on what's a normalized APM is also linked to what is the next phase. The next phase will be accelerated. We will We'll not go for big M&As. We're going to grow what we have. So we're happy with that portfolio. We're going to show that potential with an improved step up still from the EBITDA from 20 to the range of 22 to 23 with good cash flow generation. And with a clear understanding for our investors, we have paid around 2 billion of dividend over the last two years. It is important to us. If we have additional leverage on the balance sheet, we are doing share buybacks. We finished at 1 billion. We'll have another half a billion already in anticipation of the close to the end of the year. So we also take that very seriously. And I hope we all see you on March 12th to show that what we have built has huge exploration potential. And with that, let's close the call.

Okay. Thank you, Dimitri. Thank you all for attending today's call. And with that, we conclude the webcast. Any questions, as the gentleman already said many times, please reach out to Investor Relations. We will pull a consensus ahead of 12 March, so that also we will then give basically an outlook on the basis that you've referenced to your estimates. Back to the operator, please.