Novonesis A S

Ladies and gentlemen, welcome to the NovoNazis Q1 2025 conference call. I am Healy, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Tobias Cornelius Björklund, head of investor relations. Please go ahead.

Thank you very much, operator, and welcome everyone to the NovoNesis conference call for the first quarter of 2025. My name is Tobias Björklund, and as I said, I'm heading up our investor relation activities here at NovoNesis. In this call, our CEO, Esther Baggett, and our CFO, Rainer Lehmann, will review our performance for the year, as well as the outlook for 2025. Also attending today's calls are Amy Byrick, EVP of Human Health BioSolutions, Tina Feiner, EVP of Planetary Health Biosolutions, and Klaus-Krone Fuglsang, Chief Scientific Officer. The conference call will take about 45 minutes, including Q&A. Please change to the next slide. And this is, as usual, a slide where 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, I will now hand you over to our CEO, Esther Baggett. Esther, please.

Thank you. Thank you, Tobias. And welcome, everyone. Thank you for joining us in this morning. If you could please turn to slide number three. Thank you. We continue to build on the strong 2024 performance. And here in the first quarter of 2025, we delivered a strong 11% organic sales growth. We execute swiftly across our well-diversified business, both geographically and industry-wise. The performance was very much in line with expectations and all our four sales areas delivered double-digit organic sales growth. We delivered around 10% volume growth and pricing contributed around 1%. Sales synergies are well on track and contributed close to one percentage point. Emerging markets were particularly strong at 15% growth and developed markets were also up 9%. We launched six new biosolutions in the quarter, predominantly in household care and in food, and we expect further acceleration of launches during the coming quarters. Over the last month, the geopolitical environment has been dynamic. Our regional presence and diversified end-market exposure, including our ability to pass on incremental costs driven by tariffs, enables us to effectively deal with changes in the markets. As such, net, we expect no or only marginal impact from current trade tariff levels. The strong sales growth coupled with cost synergies and operational excellence led to 38.3% adjusted EBITDA margin for the quarter, an increase of 3.1 percentage points compared to last year. In February, we announced the acquisition of DSM-Furmanix part of the Feed Enzyme Alliance, unlocking further value in a core business. We now expect to close this deal in the second quarter of 2025, allowing us to drive the full value chain in animal biosolutions, delivering a stronger revenue growth and earnings accretion for NovoNesis. We recently announced Andrew Taylor as the new executive vice president for our food and beverages business. He brings deep industry knowledge, a strong commercial expertise, and a proven history of driving growth. Andrew will join us no later than September 1st, and we're excited to welcome him to the team. All in all, we have a very strong start to 2025. While we recognize the increased level of market uncertainty, we remain well positioned for growth and strong margin expansion. We are confident, confident in the full year outlook with 528 organic sales growth, which includes around one percentage point negative effect from the exit of Russia and Belarus for the legacy Christian Hansen business. The adjusted EBITDA margin is still expected to be between 37% to 38%, despite recent currency headwinds. Our performance for the year continues to be supported by a resilient and well-diversified portfolio of buyer solutions across more than 30 end markets, combined with a strong focus on customer centricity, state-of-the-art innovation capabilities, and a unique scalable production setup. Let us now dive into the solutions performance in more detail, into the regional performance in more detail, starting with food and health biosolutions. Could you please turn to slide number four? Thank you. The Food and Health Biosolutions Division delivered 12% organic sales growth in the first quarter of 2025. The adjusted EBITDA margin was 37%, an increase of 3.8 percentage points. For 2025, we continue to expect this division to deliver organic sales growth within the same range as for the group, with relatively stronger growth in human health. Please, turn to slide number five for food and beverages. Thank you. Food and beverages delivered 11% organic sales growth in the first quarter of 2025. This was mainly driven by volume, while pricing contributed positively in line with group level. Growth was strong and broad-based across geographies and industries. Growth in dairy was driven by both, fresh dairy and cheese, supported by a healthy underlying market, upselling, and a strong customer adoption of innovation. Dairy growth was anchored across all regions. In fresh dairy, we see an increasing demand for our tailored solutions in the high protein space, as well as in bioprotection. Cheese is benefiting from good momentum in conversions and adoption of solutions for productivity improvements. Baking delivered a strong performance and benefited from increased penetration and innovation. For the remaining industries in food and beverages, the strong development was led by meat as well as plant-based solutions. synergies contributed to growth in line with expectations, supported by increased commercial scale across food and beverages. In Dairy, I would like to highlight the solid traction we see on bringing further productivity and performance improvements to customers through a broad set of enzymatic solutions. For instance, our Spice IT and yield max solutions allow customers to drive higher efficiency and yield. And the pipeline of new solutions continue to look very solid. Growth in 2025 in food and beverages is expected to be driven by all industries, including a positive impact from synergies. Momentum is expected to continue to be strong and only partially impacted by the exit from certain countries during the second quarter for the legacy Christian Hansen business. The exit of those countries is expected to impact full year organic sales growth in food and beverages by around three percentage points. Please, turn to slide number six. Thank you. Human health delivered 13% organic sales growth in the first quarter of 2025. Growth was mainly volume driven. The release of deferred revenue contributed around one percentage point to the growth. The development was driven by strong performance in dietary supplements in both North America and in Europe. Performance in advanced health and nutrition was driven by advanced protein solutions as we continue to scale the supply to our Anchor customers. solutions for early life nutrition were softer, impacted by timing. Synergies contributed positively to growth, as we begin to see the impact of cross-selling strains and solutions into new channels. For 2025, growth in human health will be driven by a continued positive momentum in dietary supplements, supported by a positive impact of cross-selling synergies, and by advanced health and nutrition, including the ramp-up in sales, of advanced protein solutions to our ANCOR customer. The full revenue is going to continue to contribute around one percentage point to the growth for the sales area. The exit of Russia and Belarus is expected to impact fully organic sales growth in human health by around one percentage point. Could you please turn to slide number seven? Thank you. Planetary Health BioSolutions delivered 11% organic sales growth in the first quarter of 2025, and the adjusted EBITDA margin was 39.4%, an increase of 2.7 percentage points. For 2025, we expect this division to deliver organic sales growth in the same range as for the group, with relatively stronger growth in agricultural, energy, and tech. Please turn to slide number 8. Household care delivered 12% organic sales growth in the first quarter of 2025. Growth was mainly volume-driven, with a positive contribution from price, on par with the group level. The strong development was anchored across both developed and emerging markets through increased penetration and innovation. Emerging markets saw a relatively stronger development where our increased local presence enables us to drive faster penetration as we are offering more value to our customers through innovation tailored for their specific needs. Additionally, growth in the first quarter was supported by timing. During the quarter, we launched two new protease solutions enabling superior strain removal at low temperatures, coupled with increased formulation and format flexibility for our customers. After a very strong 2024 and start to 2025, we expect growth in household care to normalise. Key goal drivers continue to be innovation, increased penetration in both developed and especially emerging markets, as well as continued support from pricing and industry volume growth. at a more normalized level. Especially for the US market, where the detergent category is more sensitive to down trading, we're currently not seeing changes to consumer order patterns. However, our expectations, we have included a more careful view for the full year development. Please turn to slide number nine. Thank you. Agricultural energy and tech deliver organic sales growth of 10% in the first quarter of 2025. This was driven by double digit growth in energy and tech and supported by agricultural. Growth was driven mainly by volume and pricing contributed positively in line with the group. Growth in energy was led by Latin America and India, driven by capacity expansion of corn-based ethanol production and supported by the ramp up of volumes for second generation ethanol. Performance in North America was driven by increased penetration of innovation, supported by growth in ethanol production. Additionally, biodiesel contributed positively. The strong performance in tech was driven by bioprocessing, led by increased demand for solutions for biopharma production. as well for oils and fats. Growth in agricultural was driven by plant, while animal was negatively impacted by timing. Overall, for the sales area, synergies contributing to growth in line with expectations. For 2025, growth in agricultural, energy, and tech is expected across all industries, supported by a positive impact from synergies mainly in agricultural. Growth is expected to be led by energy driven by continued capacity expansion in emerging markets and penetration of innovation in North America. Our expectations include the recently updated external forecast for US ethanol production in 2025, which has been lowered from around 1% growth to now flat. Now, let me hand over to Rainer for a review of the financials and the outlook for 2025. Rainer, please.

Thank you, Esther. And good morning, everyone, also from my side to today's calls. Let's turn to slide number 10. Please note that for the year-on-year comparison figures presented today, we have used pro forma figures as our baseline. The corresponding IFRS-based figures are available in the statement released this morning. In Q1, sales grew 11 percent organically and 12 percent in the reported euro, as currencies provided around one percentage point tailwind. Let me point out here that compared to 2024, in the first quarter of 2025, we do not have any capping effect from hyperinflation on our organic sales growth. Let's now have a look at our profitability. The adjusted gross margin was 58.9%. This is an improvement of 330 base points year on year. Lower input costs, including a cost of energy, as well as economies of scale led to this improvement. Productivity improvements, pricing, and synergies also had a positive impact. The adjusted EBITDA margin was 38.3%. This was 310 basis points higher than the first quarter of last year and explained by the improved gross margin, synergies, and then expected underproportional growth in our operating expenses, leading to lower net operating costs relative to sales. Special items amounted to €10.2 million, and primarily consist of integration costs, as well as costs for a new global ERP system related to the combination with Christian Hansen, and initial transaction costs from the acquisition of DSM-Firminic's share of the feed enzyme alliance. The diluted adjusted earnings per share was €0.42, an increase of 27% compared to first quarter of last year. If we adjust for the merger-related PPA amortization, the earnings per share was 53 euro cents, an increase of 36% compared to the year before. Operating cash flow amounted to 106.4 million euro in the quarter, benefiting from higher net profit, which was offset by increased net working capital, mainly from lower trade payables and higher receivables following the stronger sales. CapEx was in line with expectations, and free cash flow before acquisitions was 68.1 million euro for the quarter, compared to 132.4 million in Q1 of last year. With this, let us now turn to slide number 11 to talk about the 2025 outlook. Please note that the outlook and modeling assumptions presented today still don't include any impact from the acquisition of DSM-Firminic's part of the feed enzyme alliance, which is now expected to close in the second quarter of 2025. The outlook is also based on current levels of global trade tariffs. As Esther mentioned at the beginning of the presentation, we're confident in our full-year outlook. We maintain our guidance for both organic sales growth and profitability, following a strong start to the year, well in line with our expectations. Demand for our biosolutions remains strong, with continued healthy key indicators as we continue to monitor the ongoing macroeconomic development. Our regional presence, operational flexibility, and diversified end-market exposure position us well to navigate changing dynamics. Additionally, we have confidence in passing on incremental costs driven by tariffs. As a result, we expect no or only marginal net impact from tariffs. Sales synergies are still expected to contribute around one percentage point to the organic sales growth for the year. And in regards to the adjusted EBITDA margin, we still maintain the outlook of 37% to 38%. This includes expected headwinds from currencies, as our adjusted EBITDA is fully impacted by currency fluctuations. Note that we show the FX hedging gains and losses as part of net financial items below the EBIT line, protecting our net profit. For modeling purposes for 2025, we maintain the assumptions provided in relation to the outlook announcement on February 26, except for net financials, where we now expect an improvement in currency hedging gains. This leads to an expectation for net financial cost of around 50 million euro compared to previous indication of around 80 million euro for the year. And with this, I will hand back to Esther for a wrap-up. Esther.

Thank you. Thank you, Rainer. Please turn to slide number 12. Let me summarize our message here today. We deliver a strong and broad-based 11% organic sales growth for the quarter, mainly volume-driven and with positive pricing in both divisions. Earnings follow along with 38.3% adjusted EBITDA margin and included the benefit from synergies. Nobonesse's strong focus on customer centricity, diverse portfolio of innovative vital solutions, and unique scalable production setup drives the performance. We expect a broad-based 5-8% organic sales growth. mainly volume-driven, and with positive impact pricing across both divisions. If we exclude the impact from the exit of certain countries, organic sales growth for the year would be 6-9%. For the adjusted EBITDA margin, we see underlying expansion versus previous guidance. However, including the recent currency developments, we still maintain the 37 to 38% percentage range. Focus is both on short and long term performance. And in the presented outlook, we have left room for reinvestments to support the business. The start of the year has been very strong, and we currently see no signs of softening in demand that impacts our business. In the current more volatile macroeconomic environment, customers' demand for our buyer solutions, driving productivity, cost savings, clean label and healthier nutrients, continues to be solid, leading to comfort in regard to the full year outlook. And with that, we're now ready to open for the Q&A. Operator, please.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. In the interest of time, please limit yourself to two questions. Anyone who has a question may press star and one at this time. The first question comes from the line of Alex Lane from Barclays. Please go ahead.

Yeah, hi, morning all. Thanks for taking the two questions from me. Just firstly on household, obviously very strong performance in quarter one. Could you help us? quantify the timing benefit that you talk to, maybe give a bit more context on what's driven that and phasing of how that might unwind over the course of the year. And I guess beyond that, you know, penetration in emerging markets seems to be a strong driver of growth. I mean, I appreciate that may not be linear, but should we assume that penetration contribution is kind of broadly sustainable on a full-year basis. That would be the first one. The second one, just in terms of comments, I think you mentioned that the growth in dairy was across all regions. Can we infer from that that China was in growth and maybe you could give a bit more color on the dynamics in that market historically, a key growth engine for Christian Hansen that's maybe stalled a bit in recent years? Thank you.

Thank you very much, Alex. Let me answer your second question. Also bring maybe a little bit of color of the whole company because it's not only for household care. And I would like to bring a little color then also having Tina building up on household care. So particularly on your comments on timing and order. We have already came into the year embracing a stronger first half of the year. as the driver of our outlook. And we're very, very pleased with the good and solid, strong start of the year with a really good Q1, including also household care. We're not seeing changes of our customer order patterns, and that's across the whole enterprise, as we're watching it very carefully, also the dynamics in the market, in the current environment that we're living in. Particularly in dairy, yes, we have seen in food and beverages markets It's double-digit growth across almost all segments, industry areas. And dairy, it is a strong driver of that across both cheese and fresh dairy. And also, we have been seeing growth in China. It's still small. In China, it is less than 5% of dairy. Well, we see the growth in China mainly from cheese and from innovation in a market that is not growing. So we are very, very, very well positioned. We're driving growth in a market that is not growing. We're very present with our customers and we're very confident that when the trend changes and it moves back into growth, then we will be capitalizing on that momentum. Tina?

Yes, so let me give some perspective of planetary health and more specifically on household care. So what we have said is that planetary health will grow in line with group and that agriculture, energy and tech will grow faster than household care. And what is then the growth consisting of in household care and how come I say this? So first of all, I would say in the outlook we are having for the full year, we are looking at, as Esther said, some softness in the second half, which we have included in our outlook. As we also have said is that we don't see, we see some timing effects, but it's not a matter of pre-ordering as such. What we see is and what we hear from our customers is a declining consumer confidence and softer demand rest of the year. If you think of what are then the elements of this, I think it's also important to look at 2024. Because if you look at 2024, absolute numbers, second half was 3% stronger than first half. The biggest driver of the 12% growth is penetration. That is the way biggest, and there we are very happy with where we are in emerging markets. Relative to group, we have a quite strong performance and share from emerging markets, and that keeps to be strong, and that is also what I would expect for the full year. We have a bit of timing effects, which is the second, and then we have the end market and price at group level contributing. I hope that answered your question, Alex, and also give some extra flavor to how it is we expect household care for the full year.

Thank you, Tina. It gives comfort not only the first, the good quarter, but also the good momentum that we also see in April. We feel in a good place with the guidance that we've put in place. Next question, please.

The next question comes from a line from Matthew Yates from Bank of America. Please go ahead.

Hey, good morning. I'd like to ask about human health. I think it was 13% organic growth, admittedly on, I think it was a minus five comp. And that comparison base gets different as we go forward. Can you just talk a bit about how you see the underlying market growth rate? And then I guess, as Tina alluded to, your ability to outperform that through penetration and solutions. I think, Esther, you said in your introductory remarks that the sales synergies were relatively modest. So it gives me the impression it's much more innovation-driven. And if so, can you maybe just highlight anything in particular, be it category or form factor, that's really driving growth in the human health business? Thank you.

Amy, please. sure yeah thanks very much for your question matthew um so you're right we see the the 13 growth on the back of a week comparable but i think where um we really see going forward is the positioning of the business to grow um ahead of market growth If you look at Euromonitor, I mean, market growth rate globally would be around in the six percentage range, and that's sort of the standard view, where we are positioned, of course, in both from a channel perspective with our exposure into the HCP channels as well as the B2B channels, but also from a category perspective where we are focusing our innovation, our investments, and also a lot of the synergy launches in both categories which are growing higher than market growth rates. So that's our exposure to women's health, infant health, mental health. And these are really the focus areas for investment, both now with the launches of our Synergy portfolio, but also forward if you look at the innovation pipeline that we're building. And so we believe those are the key drivers that position us to be able to continue to grow ahead of market growth rate. And I think maybe one of the things in the current environment, which is particularly interesting, and we see a really strong start to the year in our health care practitioner channel in the U.S., you know, as we look into the volatility of the market, having that exposure to science driven HCP activity. recommendations, we see that as being a very resilient channel, particularly in the volatility of the current market environment. So it's really the positioning, as I say, both channel and categories, which positions us to outgrow market performance going forward.

Thank you, Amy.

The next question comes from a line of Thomas Lint-Peterson from Nordea. Please go ahead.

Hi. Good morning, everyone. Thanks for taking my questions. The first question around dairy, food, and BEV is that you mentioned here that the pipeline for new solutions look very solid. I was just wondering if you could elaborate a little bit on the pipeline. Is that the product launch, the public official one that you write here in the report, or is there more to come here? Also regarding the momentum here, you're saying continue to be strong. Is it fair to assume that this strong double-digit organic growth rate in food and BEV can continue if we sort of exclude the exit from Russia and Belarus? Yeah, that's the question.

Excellent. Thank you very much, Thomas. Let me put a little bit of color on the component of the growth and then also have Klaus bringing even more color on the innovation. We are in a really good place in our food and beverage segment across all areas, from penetration, growth, and traction with our customers, bringing answers that they are responding to the increasing consumer needs. of healthier nutrients, clean labor, low sugar added, lower salt, high protein, and also bioprotection and freshness and extended shelf life, leading to savings for our customers in dairy. With that, the innovation pipeline and the penetration of those solutions, they are making many, many, many small contributions, contributing, leading to a creative, compounded, consistent growth. And that momentum continues to be there. Then regarding your question on the continuity of the growth, thank you for including the impact of exit customers, which is going to have expected to have a three percentage impact to food and beverages and mainly on the second half. So excluding that, this business will be driving a strong growth. And again, we continue to see the drivers for our customers, the really good conversations across all areas, and also penetration in emerging geographies as a driver of growth. Klaus?

Yeah, sure. So innovation is a growth driver across the food and beverage space, but in particular in dairy. Some of the things you know, it's a bulk conversion to DBS, especially in the cheese segment. And not all of what you see is, you could say, public launches, also customer-specific launches. Then we have a number of activities in biopreservation sectors. And furthermore, the area of high-protein dairy is an innovation driver for us as we bring technologies beyond the cultures, also on enzymes that allow for better texture in high-protein dairy. And there we both have products already in the market and more coming.

Sounds great, Klaus. Thank you. Next question, please.

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

Hi, morning, everyone. Thanks for taking my questions. So just coming back on Q2, you mentioned sort of encouraging trends in April, and I acknowledge the comments about the first half organic growth being above the full year. But can I just ask, would you expect Q2 to be back in the full year range or remain slightly ahead of that 5% to 8% that you're guiding to for 2025? And then second question, again, on the organic growth, but for the full year guide, You mentioned the macro uncertainty, and I'm sure that played a part in the decision to leave the 5% at the bottom end of the four-year organic range at this stage, despite obviously a very strong 11% in Q1. Can you just sort of talk to us in terms of your end market exposures, where you would expect to see potentially some volume elasticity or volume softness, were we to have a slowdown in global growth rates? Thank you.

Thank you, Charles, for your question. Yes, we have a very good start of the year, really solid numbers in Q1 with 11%. And we are in a place of comfort with this very good start of the year, including April. And that's where we sit today. And also with the conversations with our customers, the order patterns, we don't see any change on the ordering. patterns or pre-buying, having said that. There is timing effects, as Tina mentioned, in household care, which happens many times from one quarter to the other. Then we're watching the market very, very closely. We live in a very dynamic environment. And we're watching it very, very, very closely. We see some indications. We talk about EIA reducing its forecast on North America bioethanol demand from 1% to flat in U.S. So that's a driver and an indication. We see changes on consumer confidence in U.S., leading also to a potential increase for the dynamics. We're watching that very, very carefully and that it's included also our read today in our guidance and reflecting the commitment also the strong start of the year on our comfort on delivering. Also, it's coupled with the robustness of our portfolio. We're present in 30 different markets. We have a global asset footprint. We see tremendous penetration in emerging geographies from our innovation and existing solutions continue to win traction with our customers. When you couple all that in the world that we live today, we feel in a comfort place to conform our guidance from both top line growth, but also EBITDA margin, including the headwinds that we see on currencies.

The next question comes from the line of Reinulf or from Citibank. Please go ahead.

Hi. Thanks for taking the questions. Two pieces. The first one is just sort of following on from Charles' and maybe from a slightly different perspective. But if we do see continued deterioration in consumer confidence, can you give an idea of what proportion of sales you would think would be in more discretionary categories and which segments might be most exposed? So high-protein dairy, supplements like that will kind of come to my mind. And secondly, you know, please, could you give some perspectives on how you see your support for growth, you know, in a $60 oil environment, you know, versus an $80 environment as you were earlier in the year? You know, is that, you know, 50, 100 basis points of tailwind that's gone? Thank you very much.

Thank you. And we read the markets and we read the conversations with our customers. And as I mentioned, I apologize if I'm repeating myself, we continue to see very solid attraction from our innovation. We have seen us also in the past in previous environments when the dynamics have changed of the resilience of our offering. We see, I mean, even in changing consumer dynamics, Spaces like food showing a strong resilience. Dairy being, even in many cases, a stronger driver for fulfilling the consumer needs from providing competitive solutions with high protein and nutritional value. Trends are such high protein. Trends are such lower sugar added. Trends are such no salt on clean label. We see no change in this aspect and continue really good momentum with our customers. Same in household care, where trends as compacting, which also can lead to lower costs, or lower washing and lower temperatures, which also are helping consumers to drive energy savings. Trends such as replacing microplastics. You cannot make microplastic replacement with cheaper microplastics. So many of the solutions that we provide, they are not price substitutional. They have value added. And when you couple the resilience of our offering, the global footprint, the penetration in emerging geographies, and the value-added solutions that we provide to our customers, that's what gives us the comfort on the guidance that we've put in place of the 528, also with increasing EBITDA margin, with also the confidence on the EBITDA margin, including also the negative headwinds from currency.

The next question comes from a line of Sir Ensamso from SEB. Please go ahead.

Yes, thank you. question on your DA margin guidance. It's quite strong that you actually keep it. Maybe you can elaborate a little bit on the impact from productivity improvements in 2025 that you expect. Is it sort of at a higher level than what you normally see? And also, if you can quantify the negative currency impact to the EBITDA margin in 2025. Thank you.

Thank you, Soren. Rainer?

Yeah, so thanks for the question. So you're right. It's a strong signal that we're actually keeping the range despite these currency headwinds, right? Q1 still positive, turning down or turning completely around in April. And based on that development, based on today's development, so being the U.S. dollar around, what, $1.135, $1.139 around there, we basically absorb that in our guidance right now, which implies really, of course, an operational strong performance at the end of the day. To quantify it, it's basically, it's probably around, it's tough to say because currencies fluctuate, but let it be around half to three quarter of a percentage point. That's probably what we're talking about there. You can also see that in the net financial result where we really, where we basically, we mentioned that impact down from 80 to 50 million. Of course, the 30 million change is not only related to currency, right? We also have a little bit of better interest and other topics that are in there, but the far majority is related, of course, to hedging. So that gives you an indication of where we are in this regard.

Thank you.

We now have a question from the line of Nicola Tang from PNP Paribas. Please go ahead.

Hi, Ron. I'm asking the questions. Firstly, just on bioenergy, I wonder whether you could talk a little bit more about or quantify in a bit more detail your expectations for full-year growth. You mentioned slightly lower EIA forecasts, but I suppose you've managed to significantly outperform that end market for a long time, so I'm not sure how relevant that is. So could you talk a bit more about the drivers for the full year? And then on tariffs, you clearly mentioned there's a very limited impact, if any, but could you just sort of explain where the risks are, sort of impacted areas are? Is it sourcing of raw materials, and what are you doing to mitigate it And are all of your end products actually exempt from tariffs?

Thanks. Thank you, Nicola. I love it when the question comes implicitly with the answer. And I would let both Tina and Rainer put more color here.

Okay, and I'll start with the bioenergy. So what I can say on the quarter is that bioenergy grew roughly in line with AET. What I also can say for the full year, Nicolai, is that we have said that planetary health will grow in line with group, and AET is going to grow faster than household care. But you are also right that we have been on a diversification agenda where it is that the feedstock diversification with oil, biomass on top of the corn feedstock we have had for quite a while. But just as important, or maybe even more important, the geographical diversification is a very big driver of our expectation for the full year, as well as for the quarter. However, I wouldn't be as bold as saying that the... The U.S. and the decline in from one to zero percent is not relevant because U.S. is still we have a very large present. We have talked about how it is. It has been decreasing and it has. However, it is still a big and the biggest part of the business.

So in regarding to tariffs, Nicola, keep in mind that, especially in the US, we also, a large part of the products that we actually sell in the US are produced in the US, right? So that already gives us a little bit of, let's call it, natural hedging in this case. And on top of that, the remaining part of the, let's say, gross impact. We're able to mitigate really by optimizing our supply chain. That's the beauty about having a global manufacturing footprint that enables us to really also fine-tune continuously and optimize where we produce what in the different sales areas. It's not just pertaining to one single one. Again, that's the beauty about the multipurpose one. And last but not least, we also then have the ability to pass on cost. to the market at the end of the day. So there were, we say, as a net impact. So, of course, gross tariffs impact us, but we have mitigation actions in place, net impact we really don't expect, and an impact on the profitability, and if so, it's a marginal one.

Thanks so much. Would you mind if I just followed up with another one on... The impact of timing, you talked a lot about household care and the favorable impact, but I think there was also some unfavorable impact in animal and early life nutrition. Was that just lumpiness of orders or was there something specific going on? Because it's clearly not pre-buying, as you were saying. Thanks.

Again, yes, good question implicitly with the answer. Yes, timing, it's just that, timing from one quarter to the other. It's a big company. There's 30 different markets, and one order slips in one day of the end of the month versus the other. That's just timing.

We now have a question from Chitan Udeshi from GP Morgan. Please go ahead.

Hi. Thanks for taking my question. I had a slightly broader question. Esther, you talk about penetration, new launches. I'm sorry, but it doesn't feel like many of these things that you're highlighting are new for Noah Zayim or Christian Hansen from the past. I mean, we've heard that probably for 10 years, 15 years. But what is different is your growth. is much higher than what it used to be. And I can't help but wonder what has changed from your view from, let's say, four years, five years back to now. Is it just that the markets are coming to you in terms of trends? Is it just the competitive environment has perhaps become more benign? Because I think the concern some might have is this is as good as it gets. And maybe there is some There are some special effects which might not repeat. But just curious. Thank you very much.

It's a beautiful question, Ashida. And yes, Nobonese is an amazing company with three pillars that make it unique and special. It is our innovation muscle. It is our customer centricity. And it's our capability to translate those needs from the customer with innovation value-accreditive solutions at scale. And these three, they've always been there. Maybe what is special or what is different is our ability to run them swiftly and build them on each other continuously. And there has been a lot of self-help here. We have been investing in emerging geographies significantly in these last years. We have been enhancing the capability from being as closer to our customers with customer co-creation centers, with the ability to play and translate those needs into inputs for the amazing R&D machine. And I'm going to let Klaus build here on our muscle and capabilities in place. But also from a scale-up capability and translating them and bringing them into competitive solutions, we have also been investing in our assets. on resilience, on dutility, on the capability to flex and adapt on volatile markets. So it's not a magic formula. It's not one single aspect. It's a combination of many, many, many efforts that strategically we have been investing in these last five years that, yes, we are collecting the fruits. And all that together, it gives us the comfort also of continuing to putting dots one quarter after the other of the solid performance that we're delivering. Klaus?

I think you can make, of course, a direct comparison to what we launch in a given quarter to what we also thrive on from innovation perspective, as we would say we benefit from innovations over the past years, of course. What has also changed is that we've been a lot more focused to the growth contribution and value add to what we do. So you see the examples of being able to outgrow the volume market in bioenergy in North America through solutions, yes, incremental, but actually adding additional value to be shared with our customers. The same goes for our food and beverage business, especially in dairy. But in there, you also see a new innovation allowing customers to do entirely new positioning of products. You have a tremendous growth driver, for example, in baking with a new best bite, and so on and so forth. So I think it's a mix of things, certainly with presence in the market, as Esther's talking to, but also having a focus that our innovations need to be value-accurate and then bring growth, not only profitability, which it also does.

Last follow-up from me would be, can you remind us your household care geographical mix and how much of your household care is actually North America, just given that there has been more, let's say, slowdown we've seen with North America than most of the other regions. Thank you.

Yeah, I can maybe answer that. So if you look at emerging markets versus developed market, household care is roughly 50-50. And in the developed market, U.S. is less than half. I hope that answered the question.

Very clearly, Dina. One last question, please.

The last question comes from the line of André Thormann from Danske Bank. Please go ahead.

Yes, thanks for taking my questions, and good morning. So my question is really about the cash flow and whether you consider this cash flow satisfactory, because I know that there is some one-off effects, but even adjusting for this, it looks roughly flat. So is it really satisfactory to grow so much on the P&L, but not really seeing it turning into cash flow growth? Thanks.

Rainer.

Well, thanks, André. Of course, let's say the Q1, I would say that it's really a timing impact, right? We have a 200 million euro, let's say, negative impact on the networking capital, purely due to the fact that actually we have strong sales growth, right? That, of course, leads to higher receivables. And keep in mind, in Q4, we had quite an acceleration about also our capex that translate to payables that are now due being paid. So that is this double whammy, almost increase in payables, sorry, decrease in payables, increase in receivables, that of course had quite a significant impact on our cash flow. I expect that, really if you're looking ahead of the year, to be really, to normalize completely. This is really a one, I mean, you look at it at one date in a year. So am I happy with the first quarter development? No, but it's really what it is. At this point in time, it's nothing structural. Do you know, and you've seen in the past, and you saw also our ability to deleverage us, we are actually a strong cash flow generating company.

Excellent. Thank you. And with that, we would consider this call as finalized. Thank you very much, all of you, for calling in and your questions. I'm looking forward to seeing many of you within the next coming days. Thank you.