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.