Novonesis A S

Thank you, Operator, and welcome everyone to this NovoNesis conference call relating to the nine months trading statement of 2024. My name is Tobias Björklund, as mentioned, and I'm heading up investor relations here at NovoNesis. In this call, our CEO, Esther Berger, and our CFO, Rainer Lehmann, will review our performance sales performance for the first nine months of the year, as well as the outlook for the full year. Attending today's call, we also have Jakob Poulsen, EVP of Food and Beverage Biosolutions, Amy Byrick, EVP of Human Health Biosolutions, Tina Fehrner, EVP of Planetary Health Biosolutions, and Klaus-Krone Fuglsang, Chief Scientific Officer. The conference call will take about 45 minutes, and that includes time for Q&A at the end. If you look at the next slide, as usual, I would like to remind you that the information presented during the call is unaudited, that management may make forward-looking statements. These statements are based on current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in any forward-looking statement. With that, I'm now pleased to hand you over to our CEO, Esther Bashi. Esther, please.

Thank you. Thank you, Tobias. And welcome, everyone. Could you please turn to slide number three? Thank you. NovoNesis delivered a strong organic sales growth of 9% in the first nine months of the year. Volumes increased by some 7% and prices were positive across all areas and up by around 2% in total. In the third quarter, organic sales growth stood as a strong and broad base 11%, with pricing also up by around 2%. Our cadence of product launches has been high, and we launched 29 solutions in total during the first nine months, including eight here in the third quarter. To mention a few, in the third quarter, we launched a new yeast in the energy space and a powerful new solution for laundry soap bars. Additionally, we continue to extend our portfolio of customized solutions across the businesses. We see strong demand for our solutions across the businesses with a solid momentum driven by innovation and increased penetration. This development clearly continued in the third quarter. We expect solid demand in the fourth quarter and we're seeing growth accelerating in the second half of the year compared to the first. Included in our second half view, we believe there have been some positive timing and early orders benefiting the health quarter on behalf of the fourth quarter. This is particularly true for planetary health biosolutions. With a solid nine-month performance, we now expect organic cells growth for the full year at the upper end of the 7% to 8% range, including a stronger second half performance. Both reporting segments are expected to deliver around this level. The adjusted EBITDA margin is confirmed to be within the range of 35.5% to 36.5%. The leadership team and I have been recently spending time visiting customers and Noboness' colleagues and facilities around the world. I am humbled. I am impressed by the high and increased activity level together with customers. I am particularly excited about the high employee engagement, our focus on business continuity, and the ongoing work on synergies. As such, I am very confident on our ability to deliver not only on the cost synergies, but also on the path to deliver on the sales synergies, including adding a plus 1% CAGR over the next three years. I also attended the United Nations General Assembly at the end of September. Here, business and governments come together, focusing on the value of collaboration as the path forward to drive sustainable development and climate action. NovoNesis has an integral part to play for a new era of global cooperation with technology at its core. Our bio solutions are key tools enabling healthier lives and a healthier planet. We offer solutions that are readily available at commercial scale, and we invest significant resources to develop future solutions. There is no doubt that the interest for what NovoNesis already offers, and what we will be able to offer in the future, is as high as ever. With this, let's now look at each of the divisions in more detail, starting with food and health biosolutions. Could you please turn to slide number four? Thank you. Food and health biosolutions delivered 8% organic sales growth in the first nine months and 11% in the third quarter. Within food and health, food and beverages represent 74% of sales, and human health represents 26%. Food and health bio solutions is expected to grow organically at around the group level supported by both business areas. Please turn to slide number five for food and beverages. Food and beverages deliver 9% organic sales growth in the first nine months of 2024. Growth was broadly anchored across geographies and sub-areas, driven mainly by dairy and supported by a solid performance in baking. We have seen a normalization of end markets as the destocking impacting last year's performance has leveled off. The strong growth in dairy was driven by both fresh dairy and cheese, supported by upselling and a strong customer adoption of innovation. Dairy growth was anchored across all regions. This includes Asia Pacific, where our relatively small Chinese dairy business was flat, as the innovation momentum offsets the declining Chinese dairy market. In fresh dairy, we see an increasing demand for our tailored solutions in the high-protein space. And cheese is benefiting from good momentum in conversions and adoption of our solutions for productivity improvements. Baking delivered a solid performance and benefited from increased penetration and innovation. Across the other sub-areas, we also saw positive development. Plant-based solutions are showing a stronger growth momentum with an increasing activity level together with our customers and supported also by our strong value proposition in both cultures and enzymes. Looking at the third quarter, organic growth was 11%, with a strong performance across soup areas and supported by favourable end markets. On the innovation front, we launched two new products during the third quarter for food and beverages, making it 10 in total for the first nine months of 2024. For the full year, growth in food and beverages is expected to be driven by all soup areas. Please turn to slide number six. Thank you. Human health delivered 3% organic growth in the first nine months of 2024. We have seen the expected sequential growth improvement over the quarters. Advanced protein solutions contributed strongly and in line with expectations as we continue to scale up production and supply to the anchor customer. Additionally, sales included a mid-single digit million euro amount of deferred revenue in the first nine months. following the updated contractual agreement. Dietary supplements was flat, with a strong performance in Asia Pacific, as we see increased demand of our solutions in this growing market. The infant nutrition and women's health categories showed the strongest growth. HMO faced high comparables and decline, as expected. In the third quarter, delivered 11% organic growth with a solid acceleration over the first half, also as expected. Growth was driven by a strong development in advanced protein solutions, including a low single-digit amount of deferred revenue and good growth in dietary supplements. Overall, we have seen accelerating growth momentum through the year, and we expect that to continue into the fourth quarter. Additionally, we're seeing good traction on our cross-selling opportunities and have already launched our fourth merger-related commercial synergy solutions in dietary supplements, leveraging our innovation in the complementary go-to-market channels. For the full year, we expect a strong growth in human health. This will be driven by dietary supplements, where we have seen positive momentum over the recent quarters. In addition, growth is supported by strong sales of advanced protein solutions to the Anchor customer, including a mid-single-digit million-euro amount of the full revenue. Please turn to slide number seven for a look at planetary health. Planetary Health BioSolutions delivered 9% organic sales growth in the first nine months and 12% in the third quarter. Household care represents 35% of the division and agricultural energy and tech represents 65%. The indication for Planetary Health BioSolutions is to deliver organic sales growth at around the group level for the year. The stronger than initially expected growth, it's mainly due to the performance in household care. And please turn to slide number eight for further comments in household care. Household care delivered 15% organic sales growth in the first nine months of 2024. All regions showed double-digit growth, which was driven by increased penetration and innovation across both emerging and developed markets. Additionally, a strong industry volume growth as well as pricing supported the performance, and positive timing also was beneficial. In emerging markets, we are benefiting from earlier years commercial investments, enabling our solutions to cater for local demand. Developed markets were driven by innovation with a solid impact of the freshness platform, including the recently launched Luminos. In the third quarter, organic sales increased 13%. This was stronger than expected, driven by the same factors as in the first nine months and partially due to continued positive timing, benefiting Q3 over Q4. During the quarter, we launched a new solution for the untapped soap bar market, enabling high wash performance at low temperatures through better stability and less chemical usage. We are seeing end market growth normalising in household care in the fourth quarter, which will also be impacted by the positive timing that benefited the third quarter. For 2024, growth in household care is expected to be driven by a strong underlying end market volume growth. In addition, growth will be driven by innovation and increased penetration in both developed and emerging markets and by pricing. Please turn to slide number nine for agricultural energy and tech. Agricultural energy and tech delivered organic sales growth of 7% in the first nine months of 2024. This was driven by double-digit growth in energy and supported by solid growth in tech. Agricultural was flat, impacted by a demanding year-on-year comparable in animal due to order timing, while plant was impacted by destocking. The strong performance in energy was led by Latin America and India, driven by capacity expansion of corn-based ethanol production and supported by the ramp-up volumes of second-generation ethanol. The solar performance in North America was driven by increased penetration and innovation, including ethanol production growth of 3 percent, according to EIA. Additionally, biodiesel contributed positively, driven by emerging markets. Growth in tech was driven by bioprocessing, including processing aids for biopharma production, as well as grain processing. In the third quarter, organic sales growth was 12%, led by double-digit growth in energy and tech, which was driven by the same factor as in the nine months' performance. Both areas were supported by positive timing. Solid growth in agricultural was led by strong growth in plant, supported by growth in animal. This was driven by penetration and innovation, where timing also benefited the performance in plant. In the quarter, we launched a new yeast solution for the ethanol industry, giving additional yield benefits to customers as it unlocks new levels of efficiency and decreases the carbon intensity score. Our innovative solutions lead to higher profitability and enhanced plan flexibility for our customers. This new year is another testament to our continued commitment to creating value for our customers through innovation and application understanding. For the full year, growth in agricultural energy and tech is expected across all sub-areas led by energy. And now, let me hand over to Rainer for a review on the outlook for 2024. Rainer.

Thank you, Esther, and good morning also from my side. Please turn to slide number 10 for an update on the 2024 outlook. Please note that all historical figures presented today have been calculated on a pro forma basis, including nine months of Novozymes and Christian Hansen's legacy sales. Also note that the outlook for 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 third quarter announcement is a trading statement, we only provide details and comments on the sales development. Additionally, as you are aware, we are applying since the beginning of 2024 a hyperinflation cap of our organic sales growth. Without this cap, the organic sales growth for the first nine months and for the third quarter would have been around three percentage points higher. As Esther already mentioned, for the full year we now expect organic pro forma sales growth and a higher end of the seven to eight percent range. We're seeing growth accelerating in the second half of the year compared to the first and also see some timing impacts between the third and fourth quarters. Growth will be driven mainly by volumes and with a positive pricing of around two percentage points. Both segments are expected to grow at around the group outlook level. The outlook for the adjusted performer EBITDA margin is confirmed to be within the range of 35.5% to 36.5%. The margin will benefit from pricing, productivity improvements, and leverage on a fixed cost base. It also includes cost synergies at a current run rate of around 80%, which translates into a positive 2024 margin impact by around one percentage point. to round off based on what we have delivered so far into the year, we're confident about the full year outlook. And now I'll hand back to Esther for a wrap-up before we open up for Q&A.

Thank you. Thank you, Rainer. Please turn to slide number 11. Thank you. Let me summarize our message today. We delivered a strong and broad-based 9% organic sales growth for the first nine months. Nobonessi's diverse portfolio of innovative biosolutions, broad market reach, and unique scalable production setup drives the performance. We are seeing growth acceleration in the second half of the year, and we see an element of positive timing and early orders benefiting third quarter organic sales growth. Momentum continues to be solid with supportive end market demand. As a result, we now expect the outlook for organic sales growth at the high end of the 7% to 8% range. When it comes to the ongoing work with integration, we continue to be very well on track, with strong employee engagement and with a full organization structure in place. We have the right momentum, with a focus on both the long-term and the short-term agendas, including the execution of cost-sell synergies. We are already at 80% run rate on cost synergies, and we are on a solid path to realize sales synergies with expected growth contributing starting in 2025. Actually, we're already seeing in the first commercial launches and first cross-selling synergies in the food and health space. With increasing demand for our solutions, we stray through to our strong rationale on prioritization. We allocate resources and efforts where they matter the most as we continue to focus on business continuity and bring together our unique innovation and production capabilities, our strong market reach, and our broad product portfolio. NovoNesis is setting the foundation for further value creation ahead. And with that, we're now ready to open for the Q&A. So, operator, please, if you could move ahead with the Q&A.

Certainly. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. The first question comes from the line of Alex Jones from Bank of America. Please go ahead.

Thank you. Good morning and thanks for taking my questions. The first one on the margin guidance, you've raised the sales guidance but kept the margin guidance fairly wide given there are only two months left in the year. Can you talk about what the key sensitivities are to whether you end up at the low or high end of that margin guidance, please? And then the second question on bioenergy. I know it's early days, but any initial thoughts you have on the impact of your selection on that business, particularly the non-first-generation parts, would be very helpful. For example, if IRA was repealed and the 45Z tax credit on biofuel production was removed, would that impact at all sales of fiber conversion enzymes? Thank you.

Thank you, Alex. I will pass the word to Rainer to build up on the comments on margin and then Tina on bioenergy.

Yeah, thanks. So regarding the margin, basically, we kept the range at this, which indicates that we're striving here for the midpoint. Keep in mind that this implies actually an increase in the cost base on the fourth quarter. We harvested the cost synergies in the first, let's say, six, nine months, but also always said that we need to invest going forward. So therefore, we expect the margin to be at the midpoint of the range at year end. So we're investing.

And on the bioenergy comment, so when we look at bioenergy and when we look ahead, in general, we have talked about the EIA outlook for the volume growth in North America. That is going to be flattish, and that's what we have included. So we have not expected any growth. And also, if you look historically, Novonesis and the biofuel industry have a history of collaboration, no matter what presidency they are in the U.S. or you could say even globally, no matter what political regime they are. If we think about bioenergy specifically in North America, what bioenergy is, it's good for rural areas. It's good for job creation. It is also good for lower prices at the pump, which is a key driver in North America. And at the same time, it gives a more sustainable driving. So all of that, no matter what the presidency is, we're quite confident.

Thank you. The next question is from the line of Thomas Lynn Peterson with Nordia. Please go ahead.

Good morning, everyone. Good morning, Esther and Rainer. Two questions from my side, both on guidance. The first one is on the full year 24. I think you delivered 9% organic revenue growth in the first nine months, and you're guiding for 8%. So a decline here or at least a deceleration in growth in Q4. Maybe if you could just help us a little bit understanding where exactly this lower growth is coming from. Is it 100% household care? And then the second question would be looking into 2025. Esther, you're saying that you have set the foundation for further value creation going forward. So maybe if you could just try and help us a little bit with the variables in the growth outlook for 2025 without saying exactly what it's going to be, if any help there would be appreciated. Thank you.

I love the way you made the question, Thomas, without saying exactly how is it going to be. And let me put color on the rationale on the drivers of the Comfort. But first, also answer your first question for the full year. We stated at the beginning of the year that we'll have a stronger second half than the first one. We were aiming for that. And here's exactly where we are, with a stronger second half than the first one and a very good underlining momentum across all areas. It is true that in Q3, we see the effect on timing. particularly on household care and on planetary health, that leads to a stronger Q3 and then contributing overall for the strong second half that we were aiming for. So that all the underlying drivers that triggered the foundation of our expectations for the year, they continue to remain intact. Also, when we move forward, that's exactly the case. Let me put a little bit of color on what gives the drivers of the comfort. From one side, our solutions bring increased yield, increased efficiency, higher productivity, enable clean label in food. All those drivers remain intact. The value that we drive and enable for our customers, the pull that we see for our solutions, now with a stronger toolbox, it stays as strong as ever. So I would invite you to read a second half, a stronger than the first half, with timing effect on the first quarter, and then moving. and continuity on good conversations with all our customers, pull from our solutions, and then also growth synergies already starting to materialize. We already see today, not contributing to the revenue growth for this year, but we see the pull from our customers and the materialization for the growth synergies that are going to be an accelerator also for next year.

Thank you. Thank you. We now have a question from the line of Charles Eden from UBS. Please go ahead.

Hi. Good morning, everyone. Thanks for taking my questions. The first one is sort of a bit of a follow-up on an earlier one around U.S. election results. But I guess the U.S. is a little under 30 percent of sales for Novanesis. But I guess with the potential for tariffs on imports, I guess potentially I'll stress, can you help us understand how this how much of your products generating these sales in the U.S. are produced in the U.S. versus imported, I guess, from Europe? And then the second question, just to follow up on the household care point and the expected sort of volume growth normalization in Q4, obviously the performance is significantly above that reported by your large listed customers. Do you think they've built up inventory of enzymes here, which can explain this, or is it rather that the enzyme intensity in these household care products is going up and therefore this growth should be above the end market category growth? Thank you.

Thank you, Charles. I'll answer your first question and then let Tina build on household care. Regarding the U.S. election, collaboration and partnerships is in our DNA. We know, and we have shown through our collective 100 years of history, how we know how to partner, collaborate with governments, institutions, and all the regions that we play. And that will continue to stay true. The value that our solutions brings in, jobs creation, improvements, efficiencies, value creation for our customers, that we have seen it as a strong driver of the conversations also in U.S., in a bipartisan party, no matter who is at the presidency. So we feel very comfortable on the underlying collaboration and the situation with U.S. Your second question or item regarding the exposure in U.S. U.S. is a strong market for us. We have presence in U.S., production assets in U.S., R&D capability in U.S., extraordinary customers in U.S., and the majority of the demand in U.S., it is produced locally. At the same time, I would invite you to seek for the resilience that we have demonstrated every single quarter with our global portfolio. The capability we have shown every time there has been a volatility on Texas Friis, Canals West, whatever it has been that has triggered a trigger on supply, we know how to muscle and exercise our global portfolio and continue to supply our customers. So Tina?

Yeah, and then on household care. So when you look at full year 2024, it's in fact important to start by looking at 2023. Because if we look at 2023 in household care, second half was in fact 8% higher than first half. Also here in 2024, as we have alluded to, we see some timing effect, normal order timing, as well as build up to launches between Q3 and Q4. And that we expect to reverse in Q4. If you think about planetary health in total, Then we look at planetary health to deliver growth at group level, with household care being stronger than agriculture, energy, and tech. So overall, I would say it's not so much about the inventory build. There is a bit between, you could say, order moves between Q3 and Q4, but we do not expect extraordinary inventory build. There is some build for the launches, as we have talked about, both for Q2 into Q3 as well as Q3 into Q4. But I would say the main element which we are looking at in household care is more that we have seen a stronger 2023 in second half than first half.

Very clear. Thank you so much both.

Thank you. The next question comes from the line of Soren Samsoy from SEB. Please go ahead.

Yes, good morning, Esther and the team. So I have two questions. One was in regards to the advanced proteins opportunity. You say you have a very good traction on the sales to the customer, but maybe you can quantify just a little bit. Perhaps tell us how a big part of the 11% growth in human health came from the advanced proteins opportunity. And then second question is regarding to the bioenergy opportunity in India. You have mentioned it a few times now. It looks like that's very good traction. Maybe you can talk a little bit into what we should expect from this region. Thank you.

Thank you, Soren. Good morning. I will let Amy build on advanced proteins and then Tina. Back to you on bioenergy.

Yeah, thanks, Sir. And so, you know, as we said, the sales to the Anchor customer continue to ramp up and we're seeing solid growth. You know, there is some volatility in terms of, you know, large order volumes, you know, which continues to drive volatility in human health growth overall. But we see that business continuing to scale up well. It's not the only source of growth in human health at all. So we also see the dietary supplements business growing well. We commented in particular on really solid growth in Asia-Pacific, both in women's health and in probiotics for infant nutrition, where we see the continued premiumization of the infant formula segment in China continuing to be a strong driver of growth for us. So we see growth in both of those components of human health.

And then on India, and thanks for the question, Søren. So on India, it's in fact a very, I would say, impressive development we have seen. So India has moved into, originally they were doing a 20% ethanol blending mandate, and that should be in place by 2030. That they moved up to 2025 and they do see to be on track in order to at least run rate wise get to 20% inclusion in 2025. So a significant push for ethanol inclusion in the Indian blend. The origin is what we would call first-generation ethanol or grain-based ethanol, and it can be various substrates, both corn as well as rice or also other kinds of inclusions. And then there is also, I would say, beginning attempts on the second-generation ethanol. We have talked about the first plant, which is based on rice straw. And then a second plant is in fact getting online based on bamboo. And there are more to come. So it is an interesting development also for grain-based ethanol. Second generation ethanol is still in its infancy. It is bumpy because it is a small business and it takes time to get the plants up and run. But the first generation ethanol is really gaining momentum in India. And also already now there are talks in the Indian society around going beyond the 20% inclusion rate, which they are set to reach in 2025. So quite a fascinating development. That being said, India is still a smaller part of the growth. So North America still is the main contributor to our growth.

Thank you for that.

Thank you. The next question comes from the line of Chetan Uddeshi from JP Morgan. Please go ahead. Chetan Uddeshi, your line has been unmuted. You may proceed with your question.

Hi, can you hear me?

Yes, we can, Chetan.

Hi. My first question was just going back to the point you made about 29 new product launches so far in 2024. I was just wondering if you had a number for prior year. What I'm trying to guess or assess is, is the growth this year supported by higher number of new product launches and, you know, as we all know, there is some sort of, you know, cyclicality or volatility in terms of the timing of the launches, and can that be an issue at some point next year or the year after when the sort of cadence starts to moderate in terms of new product launches? And just on the second part, you know, I saw recently Danone made this comment that the yogurt market in North America is booming, and I was just wondering how that touches no one else's across your food and health business. Thank you.

Thank you. Thank you very much, Shira. I'll let Klaus build on the question on R&D and then Jacob on yogurt. Maybe let me put a little bit of color also on the innovation. And I would invite you also to see the launches as the seeds for future growth, same as we're doing with the cross synergies. And then don't forget that 30% of our revenue is coming from solutions that we launched in the last five years. So R&D is a strong contributor of today and the future of growth of Nobonesses?

So first and foremost, we are very happy with the cadence of the launches. 29 is high. It is a little over average, I would say. If you look back in history, you could at least look for Novozyme's legacy. We were running at a 15 to 20 year launch rate. Now we are past just Q3 with 29. So we are very happy with the cadence, actually very happy that in a year of merging and synergy activities that we can keep the momentum and continue like this. It, of course, covers a wider range of different types of product launches, from larger to smaller, from incremental to more transformative. But, yeah, and we talked to some of those, luminous and, for example, yeast, and then a lot of customer-specific activities.

On the global yogurt market, we see a positive momentum overall. Also that the solutions they're looking for are just a perfect match to our BioSolutions toolbox. So they're looking for new innovations with high protein levels, healthier yogurts with lower sugar. a cleaner label. They're looking for expanding their shelf life and protecting it, luckily, with bioprotection solutions. So we are seeing a very strong momentum. Also recently, we are seeing with the combined efforts across combo solutions with the microbials and enzymes that we can cater even better to this increasing trends. So definitely, when you look into the numbers this year, this is a material component of the growth we are seeing in food and beverage overall.

Thank you. Thank you. The next question comes from the line of Lars Stopholm from Carnegie Investment Bank. Please go ahead.

Yes, congrats with a very impressive quarter. Just two questions on my part. One is on the status of obtaining HMO approval in China. I just wonder if there's any progress or timeline there. And then a second question goes to the new yeast you mentioned you launched. Could you possibly put some numbers on the value proposition and how that translates into pricing? Because adopting value-based pricing, I assume that means the new yeast sells better than the old yeast from a price point. So can you quantify that? Thanks.

Thanks, Lars, for your warm congrats. We feel very good too. And Amy, if you could please build on HMO and Tina on yeast and the value we bring to our customers.

Sure. Thanks for the question, Lars. So we're making good progress and we're pleased with the progress of the regulatory approvals for HMOs in China. In particular, if we look at the first molecule, the 2-FL molecule, we've completed the public hearing phase of the regulatory process and we are on track to see the nutrition fortifier approval here in Q4. So we remain on track to see first sales into China at some point in 2025. Also of note, which is interesting, is that we've actually also completed the production, achieved the production approval of all five strains of the 5-HMO mix. So that's obviously a longer timeline, but we continue to make good progress and see positive momentum in the regulatory process in China.

And on the new yeast, so the whole yeast platform is part of our innovation effort and has been a key growth driver for us in the bioenergy space. It gives more yield. It secures also faster fermentations. And these two elements, and it's very robust, these elements bring value and more sustainability to the producer. And as we are doing value-based pricing, we are, you could say, taking our share of that value being created. In terms of quantifying it, I think I would like to leave it with this, but saying that we do value-based pricing and we take our share of the pricing last.

That's fair. Just to follow up to you, Amy, so if you look at the 2FL, what will be the total time between getting the production approval and generating the first revenue? And is that a timeline we can also apply to the other four HMOs in China?

Yeah, I mean, it's actually a bit difficult to give you a clear answer on that because it's largely also linked to customer negotiations. And so the next phase, once we have this, the nutrition fortifier approval requires customer approvals. So that isn't entirely within our control, but we see that as being, as I said, would put us on track to first sales within the year. So, you know, less than a 12 month timeline. And that would be a similar timeline that you could build on with the other HMOs as they come through.

So does this imply revenue on the other HMOs from China could also materialize in the end of 2025?

No, not at all. Those are still earlier in the process. So I think we've communicated before and we continue to see end of 2026 to early 2027 for sales from the other five HMO mix because there's still a few extra stages of the regulatory process that they need to go through.

Thank you very clearly. Thanks for taking my questions.

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

Hi, everyone. Thanks for taking the questions. The first is on dairy in China. As I think in the remarks you mentioned, it was relatively small, but I was wondering if you could size it. It sounds like there's good growth driven by innovation and upselling. I was wondering if you could give some examples and also explain what you think is driving this, bearing in mind, you know, driving willingness for the dairy companies to innovate, bearing in mind the weak market conditions. And then the second question is on plant health. To be honest, I'm a bit lost in terms of where we are on the kind of stocking cycle, both in terms of the market and for Nevenesis. Do you think that the favorable timing of orders in Q3 is perhaps a sign of restocking or was it something very specific? And do you have any, can you give us any help in terms of levels of customer inventory and when you think the destocking might be done in plant?

Thanks. Thank you, Nicola, on bringing detailed questions on the smallest of the both segments. And I will let both Jacob and Tina build on it.

Yes, overall, you're right that the dairy market in China has diminished in size for us. It's lower than 5% of our total global dairy sales. It's still meaningful, and we expect a positive contribution overall looking forward for this market. The sentiment overall for dairy in China is strong. However, we've seen in some of the categories we historically have been in, they have been declining. However, we have managed with high innovation, particularly this live and ambient launch we did, to offset the decline in some of our historical business and are seeing a flat development this year. We are continuously investing in dairy with the recent application center announcement. we put into place, and also some more cheese applications that we are seeing some positive developments in cheese in China that we are also taking advantage of going forward.

And on plant health, you are right. We have seen some destocking. We see inventories are normalizing. We have a strong Q3, and we believe that is due to just timing between the quarters, so not stocking up.

All right, thank you.

Thank you. The next question comes from the line of Georgina Fraser from Goldman Sachs. Please go ahead.

Hi, good morning, everyone. Thanks for taking my questions. My first question is just on household care and the normalisation guided for the fourth quarter. Can you talk about if that's a good exit rate to think about growth for next year in that segment? My second question is a little bit more on China dairy. There were some stimulus measures announced in recent weeks related to the China dairy market. If you could give a view on whether that provides some potential upside for Novanesis. And then final question is a bit broader. How are you thinking about the growth that you've delivered year to date in the context of your midterm targets? We're all eagerly awaiting what accelerating beyond the 2025 target means. But as Chetan kind of alluded to as well, we're trying to get a sense if 2024 is more of a standout year because of specific customer patterns or a broader end market cycle, or should we think that this is a year of integration and it's actually something to build on? Thank you.

Wow, this was an amazing question, Georgina. Let me try to bring color on the second part of the question, and then I will let Tina bring further commentary on the normalization we see in household care. And also, Jacob, please build on Derry. So this is, yes, a year of integration. This is, yes, a year of growth. Yes, this is, yes, a year of innovation. This is a year of customer focus. This is a year of strong employee engagement. This is a year of all of that. And this is a year of delivering again on our promises that we committed to. We started with a guidance of five to seven. We saw the momentum in the industry and we once more showing that we can capitalize and we can deliver and respond to the demand in the market. And we increased the guidance and we are guiding now to the upper range of the guidance. So I would invite you to see continuity in the momentum, continuity on the extraordinary good conversations with our customers, that they're seeking for solutions that lead to higher yield, higher efficiency, higher productivity, higher shelf life expansion, clean label, healthier solutions. This is as strong as it's ever. Then it's true that in household care, we're seeing a normalization in Q4 of a demand that was market demand that was higher than originally expected. And we're seeing that normalization. And Tina will come with further calls there. But all the underlying drivers of the demand that we have seen will continue to be there. We also see pricing this year on the range of 2%. We said that pricing will stay. Not necessarily always at that level, that pricing will continue to stay as a driver of growth. So we're not moving into guidance period. The message I'm sharing is a message of comfort, a measure of trust that we have an extraordinary organization put in place with strong employee engagement index, trips rallied around, focusing on customer centricity at the core, and then responding to the demand of the market with amazing solutions and a very healthy pipeline to deliver even more. Tina?

And on household care, so for 2025, the growth drivers will remain to be innovation, giving a deeper clean experience, freshness, the feeling of new tailor-made solutions, as well as replacement of chemicals. So a lot on the innovation front, but also a lot of it of emerging market growth. So if you look historically in the last five years, Household care has grown twice as much in emerging markets as it has in developed markets, so there we are harvesting the fruits of earlier investments. As Esther has already alluded to, we are not guiding yet, but I can say that I do not expect a repeat of the very strong household care performance, but I do expect growth. If we look at what is unique for, you could say, household care in 2024, it is the elements we have talked to. But it's also that pricing has been a stronger contributor because there has been that catch-up, as we have talked about earlier. So 3% to 4% is the level we have talked about historically. And remember, we are not guiding yet. But I think it's also important to remember that the underlying market in household care is 1% to 2% growth, and our plan and expectation is to continue to outgrow that.

And on dairy, China, I can tell you that the sentiment is really strong, both from government, from all the dialogues we have with the main players. And that's why we still keep very confident about the mid- to long-term future of us for dairy in China.

Excellent. One last question, operator, please.

We have the last question from the line of Charles Bentley from Jefferies. Please go ahead.

Great. Thanks so much for taking my questions. So just on pricing in 2025, I think you previously mentioned you're going through agreements with customers through the back half of the year. Are you able to give kind of any steer as to how they've gone? Do you think kind of the level you've delivered in 2024 is something you can be repeated on? And if I can just kind of try again on 2025 overall, I mean, the midterm guidance is a two-year CAGR. You're going to do around 8% this year. So kind of the minimum we should be thinking about for 2025 and the 6 to 8 range would be a 4, so something in a 4 to 8 range. Is there anything wrong with that thinking? And then finally, you gave the subdivisional split on planet for the full year. I mean, human health is obviously tangibly below the kind of divisional for the 8% for the division for the full year. You need to do something like 20% in Q4. Is that something that is completely unrealistic? Is there any reason to believe we should be seeing an acceleration in human in Q4? Thanks.

I would let Amy go build on your second question, and then I'm afraid I'm going to repeat myself on pricing. Pricing is a tool that's going to continue to stay in NovoNesis as a driver of growth. It will be there as a... as a complement of all the other tools we have in Obonesis. The main driver of growth, it's volume growth. And then volume growth at the right fair share of value where pricing is going to continue to be there. And then the way that we grow on volume growth, it is by continue to growing the pie, continue to drive in penetrations of bio-solutions with innovation, in emerging geographies, and continue to be working very close with our customers. So we'll be pricing, not necessary at the level we have seen at this year, but yes, as a contributor of sustained growth moving forward.

Amy, please. Yeah, on the human health business, I think what we expected and what we see, again, is the strong H2 and continued accelerating underlying momentum, H2 over H1. We remain confident about double-digit growth in Q4. And maybe I just call out, you know, again, this is a market where we're continuously going to see some volatility given some of the very large order sizes that can really move, you know, any single quarter significantly one way or the other. But we really see this, they're confident about the underlying momentum, double-digit growth in Q4 and solid H2 over H1 as we go into 2025.

And to your last comment, Charles, on how to read the long-term guidance, we're not, again, on the guidance period. We're not changing our guidance that we put in Capital Markets Day. That should give you the comfort that we're moving on the right direction. And again, I'm sorry, I'm repeating myself. The momentum... continues to be there. The underlying demand of the solutions that we supply to our customers continues to be strong. And that drives the comfort that we're moving on the right direction, coupled then with all the areas that we saw the beautiful examples that Tina, Amy, and Jacob shared today.

Wonderful. Thanks. Thanks, Esther.

And with that, maybe we're wrapping it for today. Looking forward to continue the conversation with many of you. And thank you for joining us in the call. Thank you.