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.