Novonesis A S

Yes, thank you, operator, and good morning, everyone, and welcome to NovoNesis' conference call for the first quarter of 2024 trading statement. My name is Tobias Björklund, as mentioned, and I'm heading up our investor relations here at NovoNesis. During the call, our CEO, Esther Barget, and our CFO, Reino Lehmann, will go through NovoNesis' performance sales performance for the first quarter of 2024 and provide commentary on the full year outlook. Attending today's call, we also have Jacob Wisof-Polsen, EVP of Food and Beverage Biosolutions, Emmy Baric, EVP of Human Health Biosolutions, Tina Ferner, EVP of Planetary Health Biosolutions, and Klaus-Krone Fuglsang, Chief Scientific Officer. The conference call will take about 45 minutes, including Q&A. Turn to the next slide. As usual, I would like to remind you that the information presented during the call is unaudited and that management may make forward-looking statements. These statements are based on current expectations and beliefs, and they involve risks and uncertainties that could cause actual results to differ materially from those described in any forward-looking statement. With that introduction, I will now hand you over to our CEO, Esther Bashe. Esther, please.

Thank you. Thank you, Tobias. And welcome everyone. Could you please turn to slide number three? Today we have published the very first trading update for NovoNesis, and it's for the first quarter of 2024. Looking at the overall performance of NovoNesis, we performed well, against a strong comparable and in line with our expectations. In our recent pro forma and 2024 outlook announcement, we indicated that we expected the first quarter sales performance to be somewhat below the full year outlook range. Organic sales growth reached 4% in the first quarter, and it was driven by both divisions. Food and health biosolutions made up 44% of total sales, and planetary health biosolutions made up 56% of total sales. Overall, volumes increased by around 2%, and the impact from pricing was also around 2%. Organic sales growth in emerging markets reached 14%, while developed markets declined 1%. Excluding the cap of hyperinflation, the total organic sales growth would be higher, at around 8%. Integration is progressing very well. Business continuity has remained a top priority for all of us, and we see continued good momentum carrying us forward. We are in good control, and with an increasing interest for our solutions from a strengthening customer base, we feel confident on the synergy targets. With the work on the new organizational structure progressing very well, The engagement level from employees is high across functions and across geographies, at an index level of 84. The employee engagement is very strong, also when compared to other companies. Additionally, we see key talent being excited to be part of NovoNeses. We launched eight new products in the first quarter across multiple industries, with the most significant ones in household care, in bioenergy, dairy and baking. We are making good progress on the three-year cost synergy target of 80 to 90 million euros. And we are, as mentioned before, already close to a 50% run rate. We see strong progress also on revenue synergies, and we confirmed the four-year revenue synergy target of 200 million euros post-closing. NovoNesis is very well on track to deliver on the financial expectations for the year, and we maintain the 2024 outlook of 5% to 7% organic sales growth and an adjusted EBITDA margin of around 35%. Please turn to slide number four. Looking at the divisions, food and health biosolutions deliver 3% organic sales growth. Within food and health, food and beverages represent 75% of sales and grew 6% organically. Human health represents the remaining 25% and declined by 5% as expected. We maintain our indication that food and health biosolutions will deliver mid to high single digit organic sales growth for the year. Now, let's look in more detail at the performance of the different sales areas. And if you could please turn to slide number five for food and beverages. Thank you. Food and beverages deliver 6% sales growth in the first quarter. The solid growth was driven mainly by dairy, supported by solid performance in baking, and a softer development in beverages. The stocking impact last year performance has leveled off. The strong growth in dairy was supported by both fresh dairy and cheese, driven by pricing, upselling, and strong customer adoption of new innovation. Dairy growth was anchored across all regions, including also a positive growth contribution from China. Baking delivered a solid start to the year and benefited from increased penetration of innovation. And the relatively soft performance in beverages was mainly due to timing. On the innovation front, we continue to see good traction on solutions for baked goods with focus on texture, on health, cost and process optimization. In Dairy, we launched a new culture for high-protein fresh dairy and a new culture for the growing pasta-filata cheese segment. For 2024, growth in food and beverages is expected to be driven by broad performance across all sub-areas. Please turn to slide number six. Thank you. Moving on to human health, the sales area reported a decline of 5%, which was in line with expectations. The soft quarter was impacted by a strong comparable and order timing in HMO and in dietary supplements. Performance of dietary supplements in Asia Pacific was strong, driven by good growth in probiotic for infant and children as well as for women. The first sales of advanced protein solutions Anchor customer were realized in line with expectations, following a successful and unscheduled startup of the plan. For 2024, we expect strong growth in human health, driven by dietary supplements supported by sales of advanced protein solutions to the Anchor customer. Please turn to slide number seven. Thank you. Planetary Health BioSolutions delivered 5% organic sales growth in the first quarter. Household Care represents 35% of the division and grew 15% organically. Agricultural Energy and Tech represents 65% and had a flat performance. The indication for Planetary Health BioSolutions is to deliver mid single digit organic sales growth for the year. And please turn to slide number eight for further comments on household care. Household care delivered 15% organic sales growth in the first quarter. This was very strong. The double-digit growth was driven by all regions, from increased penetration, innovation and including benefit from timing. The underlying industry volume growth, especially in Europe, supported the strong performance in the quarter. Additionally, new customer wins, mainly in emerging markets, added to the double-digit growth development. On the innovation front, we launched Luminous in Laundry. The solution addresses the needs for increased whiteness and freshness and also supported the strong performance of the quarter. In household care, we're seeing signs of the end market growth normalising. For 2024, growth in household care is expected to be driven by increased penetration in both developed and emerging markets. And please, turn to slide number nine. Thank you. Agricultural energy and tech delivered flat organic sales performance in the first quarter, in line with expectations. The performance was based on a demanding comparable, as animal nutrition had a very strong first quarter last year due to order timing. Plant was softer and impacted by continued stocking. Bioenergy grew double digit, supported by favorable market conditions and increased penetration, especially in North America. Bioenergy also performed well in Latin America, driven by capacity expansion of ethanol production, including volumes for second-generation ethanol. In addition, biodiesel was supportive. In tech, the slight growth was driven by both grain and textile, as well as pulp and paper. For 2024, growth in agricultural energy and tech is expected across all super areas and led by energy. And now, let me hand over to Rainer for a review on the outlook for 2024. Rainer.

Thank you, Esther, and also good morning, everyone. Please turn to slide 10. For the sake of good order, please note that all historical figures presented today have been calculated on a pro forma basis, including three months of both legacy Novozymes and Christian Hansen sales, and the outlook 2024 is based on 12 months pro forma numbers for the consolidated business. For further details, please refer to the company announcement published on March 21st, 2024. As part of the combination with Christian Hansen, on April 30th, we finalized the divestment of part of our lactase enzyme business to Carey Group, following the European Commission's earlier findings and requirements. The divestment had a negative 4 percentage points impact on reported growth in the first quarter since this business is no longer shown as revenue in 2024. As Esther mentioned at the beginning of the presentation, we maintain the full-year 2024 outlook for both organic sales growth and profitability following a solid start to the year. The adjusted EBITDA margin is expected to be around 35%, supported by a solid gross margin development driven by reduced input and energy costs, as well as productivity and efficiency improvements. As mentioned before, we have included cost synergies, contributing close to half a percentage point to the adjusted EBITDA margin. For modeling purposes for 2024, we maintain the assumptions provided in relation to the outlook announcement on March 21st. When it comes to the dividend for the last four months of 2023, the proposed ordinary dividend of 2 Danish kroner or 27 euro cent per share was approved at the annual shareholders meeting held earlier this week on April 30th. The dividend will be paid out today on May 3rd. With this, I will hand back to Esther for a wrap-up.

Thank you. Thank you, Rainer. Please turn to slide number 11. To sum up, NovoNesis had a solid start to the year and in line with expectations. I am very confident about the exciting year we have ahead of us, and NovoNesis is very well on track to deliver on the financial outlook. I'm extremely pleased with the progress we have made on the integration and the determination and focus of the entire organization, both on the short and on the long term. We continue to focus on prioritisation and capital allocation and we're truly excited about what this amazing company will be able to generate for our customers, our employees, our investors and the planet. We look forward to seeing you at our Capital Markets Day in Central London on June 18th. The full management team of NovoNesis will present and the full management team will be available during the event which will start at 1pm and end at 5.30pm. This will be followed by a reception. The invitations have been sent out and please contact our IR department if you need any registration details to the event. And with that, we're now ready to open for the Q&A. Operator, if you could please.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. The first question is from Alex John with Bank of America. Please go ahead.

Thank you. Good morning. Two questions, if I can. The first, you talk a number of times about being very well on track for the full year guidance. Can you give us a bit of color on what you've seen in April and your order book into May and whether that supported your confidence in sort of accelerating the growth compared to the 4% delivered in Q1? And then the second question specifically on the dietary supplements market. I think some of the end market data, if you look at things like Nielsen, has suggested underlying volumes are relatively weak, especially in the U.S. Can you talk a bit about what you're seeing there and what gives you confidence in still delivering strong growth for the full year? Thank you.

Thank you, Alex. I'll answer your first question and then I'll let also Amy build up on the dietary supplements. To the confidence on the full year, yes, we're extremely confident. We delivered in very much in alignment with expectations in Q1. We knew that particularly human health will be softer due to timing and we are moving on track on what we said. Then also we see and we're very pleased also with the momentum in Q2 and that gives us Very, very – puts us in a very good place of comfort to delivering on the full-year guidance of both on revenue growth but also on EBIT margin. Another area that gives us the comfort that we are in a good place is the solid progress and momentum on the integration of the two companies. We are not only delivering on the results. We're also setting the foundation of an amazing company. We see high employee engagement. We are very much on the right on the cost synergies with 50% of the run rate already. That's going to be half of a point on the EBIT margin expansion for this year already. And also with a reassured and validated pipeline for the 200 million synergies with also first sales already in place. So slowly moving in the right direction and on good track for deliver on the year expectation.

Sure. And if I take the dietary supplements market question, you know, indeed, yes, we see that the North American, in particular, dietary supplements market is not quite returned to the previous growth rates, although it is very dependent on channel. And I think one of the positive signs that we see is a pickup of in-market sales into the health care practitioners channel. in particular. I think part of our confidence to return to growth is also our broad exposure globally with the customer base that we have, where we see in particular strength in Asia Pacific, particularly in some of the categories that we are strong in, particularly in infant and in women's health, as we commented during the And also we do see some strengthening in Europe in some of the key markets, particularly I would call out Italy and Germany, which have been weak in the past years and have returned to single-digit growth from a market perspective. So, you know, really I think the key is the breadth of our exposure here that gives us confidence in the ability to get back to growth for the year. Thank you.

Thank you. The next question is from the line of Charles Cheaton from UBS. Please go ahead.

Hi, thank you. Two questions from me also, please. First one is a quick one. Could you quantify the order timing impacts you referenced in household care? As you mentioned, sort of strong underlying market. Just trying to get a sense of how big that order timing impact was in Q1. And then my second question is, how should we think about the margin phasing through 2024? Obviously, your guidance is for gross margin expansion year over year and an EBITDA margin around 35% for the full year. But given the organic growth and certainly the volume growth, except to be more second half weighted, is it fair to assume that we'll see the same in terms of the phasing of your margins as well, i.e. more second half weighted? Thank you.

Thank you. Thank you, Charles. I will let Tina build up on the household care and then Rainer on the question of margin. And we're very pleased with the 15% growth on household care. Maybe, yes, it's a little bit higher, stronger than what we expected because of the order timing. But overall, we feel very, very pleased with the results and the fruits of the work and the strength of this business. Tina?

Yeah, so if I look at the 15% for household care, it is a very strong performance. Most of it is coming from penetration and innovation. And for example, we are highlighting Illuminus here, but also a number of other launches is contributing to it. So penetration and innovation is the biggest part of it. Pricing is also supporting. We have talked about that pricing in household care would come later, and that we see as well. And then timing impact from inventory buildup was more modest. So I hope that answers your question.

And Charles, regarding the margin, yes, it's a fair assumption that you can say that the second half of the year is contributing with more. Keep in mind that the synergies obviously will happen now, starting with Q2, really be full effect in Q3, Q4. Of course, some of them also reinvested. But your assumption here is fair that the second half is a bit stronger.

Thank you.

Thank you. The next question is from the line of Soren Samso from SEB. Please go ahead.

Yes, good morning. Two questions. First of all, you deliver a pricing of around 2%. Q1, is that also the level we should look for for the rest of the year? And then secondly, you deliver 4% organic growth. However, You used the IRS reporting, of course, but if you had used the same reporting as the old Christian Hansen, what do you think the organic growth would then have been in regards to inflation and so on? Yeah, that's my two questions.

Reiner, higher? How much higher?

Yeah, so basically, to your first questions, the pricing, fair assumption, it's basically if you take these around 2% also for the whole year contribution. And in regard to the organic sales growth, if we wouldn't have capped for hyperinflation, then our organic sales growth on a group level would have been 8% instead of the 4% that we have. So it's around 8%.

Thank you. The next question is from the line of Lars Thorform with Carnegie Investment Bank. Please go ahead.

Yes, also two questions and me following up on insurance. Can you comment on pricing across the various divisions, please? And a second question goes to household care. So We are now seeing a change in pricing for your biggest customers. They're suddenly seeing price erosion, of course, because some of the petroleum-based ingredients are coming down in price. How does this affect, A, your ability to sustain positive pricing in household care, and, B, is this a threat to... formulations in favor of petroleum-based ingredients instead of enzymes.

Thanks. Thank you, Lars. I would let Rainer build on the pricing and then Tina answer your question on household care.

So, Lars, pricing we actually see positively across all sales areas and, of course, a bit more on the household care side than on the average, compared to the average group. And for the detailed household care, Tina?

So we expect pricing to remain throughout the year a positive contributor to household care. And in terms of how it is the SOPAs look at the world, we do see a shift from the cost-out focus to more focus on additional value and thereby also on innovation. And I would say, for example, when we look at luminous, which, for example, can be used as a replacement for optical brightener and so forth, that is, in fact, driving the industry as well, because as, you could say, the sobers get a bit more freedom in their mix, they want to be certain to keep their shelf space, and thereby we feel an increased interest in the innovation we are contributing.

Very clear. Thank you.

Thank you. The next question is from the line of Alex Sloan with Barclays. Please go ahead.

Yeah, morning all. Thanks for taking the questions too from me. Just the first one on the food and beverage side, you call out strong growth in dairy in the quarter and I think the statement also notes positive growth in China, which is obviously an area where Hansen had been struggling in recent years. So, yeah, interested, is that related to market growth, or is that more about the probiotic solutions for ambient yogurt gaining traction, and do you think growth there is sustainable? And then the second one, just on HMOs for the balance of the year, I appreciate it's a relatively small business in the pro forma context, but any color on what you're expecting here after the order phasing impacted Q1. And I think, you know, you have made some progress in terms of the sort of stage gates to getting approval in China, but just interested in any update in terms of when you expect sales in China from HMOs to start meaningfully contributing. Thanks.

Thank you, Alex. Jacob, if you could share the self-help efforts we have been leading in China that lead to this positive result. And Amy, build up then on the progress on HMO also. Thank you.

Overall, of course, food and beverage, we see a continued strong growth from the efforts. Globally, we did also last year introducing a number of good launches with customers, but also a general productivity campaign touching upon the major challenges they've had with the recent increase in cost and uncertainty of actually getting the raw materials needed. That also flows into China, where we see an underlying good performance across a number of customers, But, of course, the implementation of the new innovation of live and ambient has boosted the performance, in particular here in Q1, as we see the customer actually driving an enormous marketing campaign to the market. So good growth, good comfort in China for this year also.

And if I pick up on the HMO question, I think what we see in 2024 is actually modest growth. We had very significant growth in 2023, and we do see some inventory balancing in our expectations for this year. So more modest growth in 2024. A piece of that, linking to your question on the HMO approvals in China, is we don't have an expectation for sales this year in China. We did, as you mentioned, receive another good milestone in terms of approval for the right to produce our HMOs in China, which is great traction and progress. But again, 2024... is going to be a year of the regulatory journey in China. I think in terms of timing, it's always difficult to tell, but our expectations would be to start to see opening up to start seeing 2FL sales in China hopefully next year. But again, that's subject to the regulatory journey that we have ahead.

Very clear. Thank you. Thank you. The next question is from the line of Chetan Odeshi with JP Morgan. Please go ahead.

Yeah, thanks and morning all. Maybe this is for Esther and till the other team members can chime in as well. Esther, when I talk to investors, one of the struggles people have is to reconcile the growth targets that you have, 6% to 8%. Of course, these are until 25% versus what is the end market growth? Because some of the end markets you guys play in, whether it's household care or dietary supplements, Just people saying these are inherently very low-growth markets. Is there a way you can disintegrate the growth ambitions that you have in terms of what is the underlying market growth versus maybe how much is coming from innovation versus new product launches? I guess this could be a topic for discussion. for CMD, but anything that you can help people get a bit more comfort in terms of how to disintegrate those growth numbers, especially given that in the last few years, we've seen bioenergy as a huge driver for NOAA science, and it may not continue at that pace. So, just something around that will be useful. And just going back to the second question is just on the phasing of H1, H2, did I hear that the margin second half should be only slightly better? So you're not talking about a big jump needed in second half to get to 35. It's just maybe half a percentage point, one percentage point gap between first half and second half. Is that the way to think about it? Thank you.

Thank you, Chad. I'll try to bring some color on your question, on the first question, and then I'll let Reiner build up on the margin. Probably the best way to answer your question is by keep delivering. covering the first now, the five to seven, and then the six to eight, and moving forward in that direction, and show that bio solutions, they grow faster than the markets that we present. Because we answer better and more effectively the needs of our customers by generating value, accredited value for them. And that trend, it's seen across many markets. In bio energy, we grow way ahead of market because of innovation. because of penetration of our solutions, bringing unmet needs of the market. In household care, we grow faster on the market because of innovation. In baking, we grow faster. In dairy, we grow faster because of innovation and customer intimacy. And I will let the best person to build up on this common trend across all the areas of this magic weapon to ensure we grow above the market, which is Klaus, and bring in on the innovation. Klaus?

Yes, thank you, Esther. And the magic weapon is indeed innovation. So this is not only contemplating the underlying market growth, but actually expanding the value pie, as you've seen and Esther explained, in bioenergy. And then there's additions to new markets coming online with effects, for example, bioethanol. Same goes also across the other categories, like household care, increased market penetration in emerging markets, added with innovation on top. We also see, as Tina alluded to, an uptick with our larger customers in developed market on innovation. So innovation plays a large part in that as both expanding market, but certainly also keeping our lead and gain share as well as our pricing performance.

And more in Capital Markets Day, as you said. Reiner?

Yes, Chetan, basically, as I mentioned before, the second half will be slightly stronger than the first half due to the fact that I also mentioned before with synergies then kicking in. We'll see some in Q2, but the second half overall is probably a bit stronger than the first half of the year.

Thank you. Thank you. The next question is from the line of Nicola Tang with BNP Paribas Exxon. Please go ahead.

Hi, everyone. Thanks for taking the questions. The first, I appreciate we won't get this detail until H1, but I was wondering if you could give more steer in terms of the profitability between the two segments, two main segments. And then I guess tagging on to Chetan's question, I was just wondering if you could give us more detail on what we can expect in terms of the agenda for your capital markets day in June. Can we expect an update or an extension around your midterm targets, which currently run to 2025? Yeah, thanks.

Thank you, Nicola. I'll let the CFO repeat or reinforce. Maybe I'll give you a short answer. We'll have to wait for H1 and we'll have to wait for Capital Markets Day. But, Rainer?

That is pretty much my answer as well, Nicola, here. World4H1 will do for the first time. It's our aim to disclose segment profitability. Bear with us. We're here three months into the combination. And stay tuned for Capital Markets Day, I can only say. We'll have interesting topics to discuss, and I'm looking forward to see you all there.

Thank you. The next question is from Sebastian Bray with Berenberg. Please go ahead.

Hello. Good morning, and thank you for taking my questions. I have two, please. On bioenergy, the press release makes reference to relatively favorable market conditions, but it looks as if U.S. 1G ethanol margins have collapsed. What exactly is driving the growth in this segment primarily? Is it conventional bioethanol? Is it 2G? or is something else? I've also seen that there have been some openings of 2G biophonal facilities in Europe. I think Rayanir recently opened one. Is Nolazine exposed to this? And the second question is on the household care segment. The reference was to innovation as the primary driver of growth in this quarter. Is this primarily the freshness platform, or was it something else? Thank you.

Thank you, Sebastian. Tina?

Yeah, so it is true compared to how, for example, the margins were for U.S. bioethanol producers. Q1 was not as favorable as it was, for example, last year. So prices have come down, but still we do see good performance. And overall, we expect roughly 1% growth, according to EIA in the U.S. ethanol market. But I do think this is a testimony to some of the things we have talked about a number of times on this call. It is the diversification of the bioethanol business. It is the geographical expansion we also call out in the release about the performance in Latin America, but we also see strong performance, for example, in India or in MIA, but specifically in India, in this area. So this is a broad-based growth, which is supporting our numbers and thereby enabling us, even though you could say the margin development in the US, at least here in Q1, to deliver a strong performance. You also asked specifically about 2G, and 2G is also part of the growth. But as you have to remember, it's coming from a small base. And we are geographically also broad exposed on the biomass scene. And then in general, you have to also take into consideration the broadening of the various value streams we have supported our customers in. And then last but not least, there's also biodiesel. So it's that diversification which helps us grow beyond the market conditions in the US. Then you asked also into household care and whether freshness is also part of it. Yes, freshness is also doing well. We do see, but more generally, I would say innovation and penetration is supporting the growth in household care. But freshness specifically is also growing nicely. Thank you.

Thank you. The next question is from the line of Andre Thormann with Dunks Bank. Please go ahead.

Yes, good morning, everyone. Thanks for taking my questions. So the first is about advanced protein solutions. So I wonder if you can give some flavor on how much that contributed in the first quarter and how that's going. And the second is in terms of human health issues. and the order timing, negative order timing effects you see in Q1. Does this mean that you will see a positive order timing effect in the second quarter, especially on dietary supplements? Or how should I understand it? Thanks.

Tina, I may please? Yeah, sure. So in protein solutions, as we say, we've started at the plant. We have first sales going out. We're not commenting on the specific sales, but it is absolutely a very meaningful contributor, which is driving our outlook for strong growth in human health for the year. In terms of order timing in dietary supplements, and I guess maybe just to call out dietary supplements and HMOs. So, yeah, we do see and actually April confirms, you know, aligned with slightly ahead of our expectations and that we do see a pickup. I think the one thing I would call out, which is in some of these businesses, particularly the HMO, you know, it is a bit lumpy in terms of, you know, very big orders that come and go. So if one order shifts from quarter to quarter, you know, it can be a bit lumpy in terms of sales. So it's just to manage those expectations. But in terms of the trajectory of the business, we absolutely see see that improving as we go into the second quarter.

Cool. Thanks.

Thank you. The next question is from the line of Georgina Fraser with GS. Please go ahead.

Hi. Good morning, everyone. Thank you for taking my questions. Firstly, you've delivered incredibly well and as you promised on pricing. I was wondering if you could share a little bit about which of the business segments are a bit more volume and a bit more pricing driven and how you think that will trend into the second half, as well as if you could give some color on how your input costs have been evolving year to date. And my second question, still on pricing, but a bit higher level. Could you give us some insights into how the typical pricing contract structures were for the legacy Novozymes and Christian Hansen portfolios and how you're thinking about integrating any best practices going forward? Thank you.

Thank you, Georgina. Very good questions and something which is dear to all our hearts on ensuring we capture the right value, the fair share of value of our solutions. Pricing, it is a contributor across all areas. And as we mentioned last year that we were seeing a slower in household care or later to come, this year we see the impact on pricing in household care stronger as the contracts are longer and then we're seeing a stronger impact. And that also leads into the area that you describe on how are we learning from each other and becoming even stronger and even better on pricing. Contracts is a strong, it's a good component of that. And here with the integration, we have a beautiful gift that gives us the right to pause, to take a deep dive, and to learn on what would be best practices. And that goes not only on how we do contracts contracts with our customers. That also goes how we do contracts with our suppliers. It goes both ways. We had a supplier agreement here in Denmark that we had really very good conversations with our suppliers on how we also can learn from each other and how we can contribute, continue to be a better partner for our suppliers in the future and then moving on the best foot forward and we're learning from the best practices from both companies and that's on value that's on payment terms that's on the uh structure of the of the contracts and that it's a whole team as uh coordinated by the commercial excellence that drives the right conversations and we it makes us stronger and reiner

So regarding your question regarding input costs, of course, we see coming them down overall. Probably more a question we're going to speak a bit more in detail for H1. And then the nature of it, since these effects roll into a year, that input cost for second half will be, of course, lower than for the first half. But again, more when we really talk about profitability after H1.

Thank you both very much.

Thank you. We have a follow-up question from the line of Soren Samson with SEB. Please go ahead.

Yes, thank you. It was more in relation to bioenergy. If we just talk about the North American market, given that we see low single-digit volume growth and that the ethanol production market has come down, it's quite impressive that you continue to grow this much. But maybe you can go dive a little bit into bioenergy. sort of when you talk about increased penetration, what you mean by that, and also whether there's still the same sort of demand for enzymes that can help make production more efficient for the ethanol producers. And then finally, if you can just quantify sort of the mix component in your growth in bioenergy in North America. Thank you.

Thank you, Søren. Dina, please. Yeah.

So you are right that margins have come down in North America. And the increased penetration we see there, as I talked to you, is also driven by the launches. So as you maybe saw, we launched a new yeast during here Q1 in Nova Delta. So that's what in the industry is called an ADY, so meaning a dry yeast. And that is supporting our general rollout. So it's many different things which is contributing to the strong performance. If I look at the growth for bioenergy for Q1, a lot of it is coming from North America. A lot of it is coming from Latin America. but then also with contribution from both biomass and biodiesel. We also still see good pickup of yeast and fiber, which we also have talked about, and that is what is driving the performance. We talked about a number of times that we do expect to continue to outgrow the market, given the geographical expansion, given the innovation, and given the breadth of our portfolio and also closeness to our customers. I hope that helped a bit. Søren, if not, we can maybe take it a little closer.

A little expansion on this. Indeed, as Tine alluded to, this is about improving the margins with our products. So it's not only the ethanol margins. It's also protein. and, of course, the extraction of oil. So there's really different value drivers from the current ethanol facilities. So you can't just look at the ethanol crush margin, but you have to take into account pricing on protein as well as oils.

It's the value of the carbons, maximizing carbon value. Is that answering your question, Soren?

Yeah, thanks for the call. Thank you.

Thank you. One last question, operator.

The next question is a follow-up from Andre Thorman with Dunks Bank. Please go ahead.

Yes, thank you. I just had one more question, and that's in terms of household care. I just wonder how we should think about growth for the rest of the year in this business. And I realize you don't guide specifically, but this is a very high growth rate. So can you give any inputs on what will also be driving growth for the remainder of the year? Or, yeah, how should we think about this?

Tina. Yeah, so we do expect that the underlying market growth will come down to the 1% to 2% globally in line with the historical average. We expect that innovation and pricing is going to support us and penetration is going to support us outgrowing that number. But it does mean that you should not expect the 15% throughout the full year. We do expect that growth rate to come down also as comparators become more challenging. Excellent.

And pricing will be the same level for the remainder of the year?

Pricing roughly the same level, yes.

Okay, thank you. Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference back over to CEO Esther Bache for closing remarks.

Thank you very much. Thank you all for joining us on today's call. Looking forward to continuing the conversations with many of you in the next days. And then especially looking forward to seeing you at Capital Markets Day in central London on June 18th. Thank you.