Novonesis A S

Ladies and gentlemen, welcome to the NOVESIS interim report for the first nine months of 2025 conference call. I'm Lorenzo, the chorus call operator. I would like to remind you that all participants will be in listen-only mode. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Tobias Cornelius Bjorklund. Please go ahead.

Thank you, operator, and welcome everyone to the NovoNesis conference call for the first nine months of 2025. As mentioned, my name is Tobias Björklund. I'm heading up investor relations here at NovoNesis. In this call, our CEO, Esther Barchett, and our CFO, Reiner Lehmann, will review our performance for the first nine months of the year, as well as the outlook for 2025. Attending today's call, we also have Tina Fehrner, EVP of Planetary Health Biosolutions, Henrik-Jörg Nilsson, EVP of Human Health Biosolutions, Andrew Taylor, EVP of Food and 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. As usual, I would like to remind you that the information presented during the call is unaudited and that management may make forward-looking statements. These statements are based on current expectations and beliefs, and they involve risks and uncertainties that could cause actual results to differ materially from those described in any forward-looking statement. With that, I will now hand you over to our CEO, Esther. Esther, please.

Thank you. Thank you, Tobias, and welcome, everyone. Thank you for joining us this morning. Please turn to slide number three. Thank you. We continue to deliver on our promises, and on the back of a strong first half of 2025, we deliver organic sales growth of 8% in the first nine months. The third quarter was stronger than expected, including some positive timing effect, and grew by 6%. Growth was broad-based and mainly volume-driven, as pricing contributed by around 1%, both in the first nine months and in the quarter. The exit of certain countries impacted organic sales growth negatively, by around 1% in the first nine months and by around 2% in the third quarter. Emerging markets were particularly strong at 12% growth, driven by increased local presence and tailored solutions for different customer needs. We continue to invest in these markets to further drive growth and fulfil our strategic goals. Since late 2024, we have made significant investments in customer-facing activities, with commercial resources in emerging markets growing at more than twice the rate of developed markets. Growth in developed markets reached 6%, with solid performance in both Europe and North America. Sales synergies are well on track and contributed close to one percentage point, with positive impact across the businesses. The integration of the FIT Enzyme Alliance acquisition, which closed on June this year, is progressing as planned and we are already now seeing the benefits from a strong BioSolutions portfolio and being closer to customers. Performance since closing is in line with expectations. We launched four new BioSolutions in the quarter, bringing the year to 19 in total. As an example, in food and beverages, we have lunch innovation that tap into higher consumer demand for healthier and more nutritional products, including high-protein solutions. Another example of innovation tapping into growing consumer demands includes high-performance solutions for quick and cold-wash cycles in household care. The adjusted EBITDA margin for the first nine months of the year was 37.3%, an increase of 1.3 percentage points compared to last year. The margin includes significant currency headwinds, showing the strong underlying operational performance, while also we continue to invest for growth. Central to our growth performance and strong performance is NovoNess' unique ability to deliver solutions that enhance productivity, enhance efficiency, quality, bring health benefits and sustainability for our customers and consumers. While our bio-solutions typically account for a small portion of our customers' cuts of goods sold, they play a significant role in enabling value creation. Additionally, our well-diversified presence across industries and geographies provides resilience and strength to our overall performance. After a strong nine-month performance, including favorable timing in the third quarter, we leave the bottom end of the range and now expect organic sales growth to be between 7% to 8%. This includes an indication of mid-single-digit organic sales growth for the fourth quarter. We expect the adjusted EBITDA margin to be at the lower end of the 37% to 38% range, continuing to absorb the significant currency headwind compared to the initial outlook for the year. I'm also pleased that the strong earnings translate into healthy cash generation. And with that, with this, let us now look at the divisional performance in more detail. Let's start with food and health biosolutions. If you could please turn to slide number four. Thank you. The Food and Health Biosolutions Division delivered 9% organic sales growth in the first nine months of the year, and the adjusted EBITDA margin was 35.6%, an increase of 30 basis points. In the quarter, organic sales growth was 6%, including the negative impact of around 5 percentage points from the exit of certain countries. For 2025, we 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. Thank you. Food and beverages deliver 8% organic sales growth in the first nine months and 5% in the quarter, including the impact of exiting certain countries. Growth was mainly driven by volume, where pricing contributed positively and in line with group level. Growth in the first nine months as well as for the third quarter was anchored across most categories with continued strong momentum in daily, including positive impact from timing. Performance was mainly driven by upselling and a strong customer adoption of innovation. In fresh dairy, we continue to see increasing demand for our Tyler solutions in the high protein space and in bioprotection, supported also by healthy underlying global demand for yogurt. Additionally, in cheese, customer conversion contributed to growth. Baking, meat, and plant-based solutions also saw strong growth, mainly driven by innovation and increased penetration. The beverage segment decline impacted mainly by lower end market volumes. Synergies contributed to growth and in line with expectations, supported by cross-selling and increased commercial scale across food and beverages. On the innovation front, we launched two new products in the quarter, making it 10 in total for the first nine months. Growth in 2025 in food and beverages is expected to be broad-based, including a positive impact from synergies. Please turn to slide number six. Thank you. Human health delivered 10% organic sales growth in the first nine months of the year and 8% in the third quarter. Again, growth was mainly volume-driven and negatively impacted from the exit of certain countries. The release of deferred revenue contributed around one percentage point to the growth for both periods. In the first nine months, the development was driven by a strong performance in both dietary supplements and advanced health and nutrition. Synergies contributed positively to growth and in line with expectations. Dietary supplements grew across regions, led by solid momentum in North America. Performance in advanced health and nutrition was supported by advanced protein solutions as we continued to ramp up revenue with our anchor customer. Growth in early life nutrition was led by HMO. In the third quarter, growth in dietary supplements was driven particularly by strong performance in North America across subcategories, with women's health and the healthcare practitioner channel as strong contributors. In advanced health and nutrition, the drivers for the third quarter were similar to those for the first nine months. For 2025, growth in human health will be driven by a continued positive momentum in dietary supplements, supported by a positive impact from synergies, and by advanced health and nutrition, including the continued progress with our Anchor customer. The first revenue is expected to contribute around one percentage point for the growth for the sales area. Please turn to slide number seven, and let's look at planetary health. Thank you. Planetary health biosolutions delivered 8% organic sales growth in the first nine months of the year. The adjusted EBITDA margin was 38.7%, an increase of two percentage points. In the third quarter, organic sales growth was 6%. For 2025, we expect this division to deliver organic sales growth around the low end of the group with relatively stronger growth in agricultural, energy and tech. Please to slide number eight. Thank you. Household care delivered 7% organic sales growth in the first nine months of the year and 6% in the quarter. Growth was mainly volume-driven and with positive contribution from price on par with the group level. Emerging markets contributed significantly to the strong performance, both in laundry and dish, supported by solid growth in developed markets. Performance was driven by increased market penetration as well as innovation. Growth in the third quarter was positively impacted by timing, easing the impact of end-market normalization in developed markets. On the innovation front, we launched one new product in the third quarter, Pristine Advance, as part of the Freshness Platform. This launch targets consumers seeking energy-efficient, time-saving laundry solutions, as it delivers deep cleaning and fresh results, even in quick and cold washing cycles. Key goal drivers for the year continue to be innovation, increased penetration, pricing, as well as industry volume growth, where we see a normalisation in developed markets through the second half of the year. Please turn to slide number nine for agricultural energy and tech. Thank you. Agriculture, energy and tech deliver organic sales growth of 8% in the first nine months and 7% in the third quarter. This was driven by a strong growth in energy and supported by tech and agriculture. 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 increased ethanol production capacity and a strong growth in Europe. Growth in North America was also supportive, driven by greater adoption of innovation and growing ethanol production volumes supported by increasing exports. Additionally, a ramp-up in second-generation ethanol and penetration of biodiesel solutions also contributed positively across geographies. Growth in agriculture was driven by both animal and plant, while performance in tech was led by increasing demand for solutions for biopharma production. Growth in the third quarter was driven by similar factors as those for the first nine months, including a strong performance in energy supported by agriculture. For 2025, growth in agricultural, energy and tech is expected across all industries, supported by a positive impact from synergies. Growth is expected to be led by energy. And now, let me hand over to Rainer for a review on the financials and the outlook for 2025. Rainer, please.

Thank you, Esther, and good morning, everyone, and welcome to today's call, also from my side. Let's turn to slide 10. Please note that for the year-on-year comparison figures presented today, we have used performer figures as our baseline comparison for year-to-date nine-month numbers. The corresponding IFRS-based figures are available in the statement released this morning. Q3 year-on-year figures are IFRS-based and fully comparable. In the first nine months, sales grew 8% organically and 7% in reported euro, as currency provided a 3 percentage point headwind, while M&A impacted development positively by 1 percentage point, driven by the Feed Enzyme Alliance acquisition we finalized in June. In the third quarter, sales grew by 6% organically and by 4% in Euro. Currency headwinds continued to be significant and amount to 5%, but were offset partly by the 3% positive contribution from the Feed Enzyme Alliance acquisition, which was in line with expectations. Turning to our profitability, the adjusted gross margin was 58.9%. This is an improvement of 250 base points year on year. Lower input costs, including the cost of energy, as well as economies of scale and productivity improvements, led to the strong development. Pricing and synergies also had a positive impact, while currencies impacted negatively. The adjusted EBITDA margin was 37.3%. This was 130 base points higher than the first nine months of last year and explained by scale the improvement in gross margin and synergies, countered by strong negative currency effects as well as expected reinvestments to support growth. Please note that the divisional adjusted EBITDA margins for the quarter are slightly impacted by minor year-to-date adjustments reflecting the divisional performance. Needless to say, though, that both divisions continue to deliver strong profitability. We continue to invest in our business, and as I mentioned, we're further stepping up our commercial presence and customer-facing activities, particularly in emerging markets. Special items weigh around 50 million euro and primarily consist of transaction costs related to the Feed Enzyme Alliance acquisition. It also includes integration expenses, as well as some initial expenses for the new global ERP system related to the combination. The diluted adjusted earnings per share was €1.19, an increase of 20% compared to the first nine months of last year. If we adjust for PPA amortization, the earnings per share were €1.54, which also represents an increase of 20% compared to the year before. Operating cash flow amounted to €193 million in the first nine months, which is an increase of around €90 million compared to last year. This was driven by the improvement in net profit, partly offset by an increase in net working capital, mainly from higher inventories and increased receivables, resulting from the strong sales performance. Due to the still low CapEx activities, which we plan to ramp up in Q4, free cash flow before acquisitions increased by 16% to €668 million for the first nine months of the year, compared to €576 million last year. With this, let us now turn to slide number 11 to talk about the outlook. Please note that the outlook is also based on current levels of global trade tariffs and current foreign exchange rates. And as Esther mentioned, we're lifting the bottom end of the range of the organic sales growth outlook and now expect 7 to 8% for the full year, with an indication of mid-single-digit organic sales growth in the fourth quarter. This is the result of a strong first nine months performance, including favorable timing in the third quarter. Growth will continue to be driven mainly by volumes and with a similar positive pricing impact of around 1% across both divisions. Sales synergies are still expected to contribute around one percentage point to the organic sales growth for the year. For the adjusted EBITDA margin, we expect to be at the lower end of the 37% to 38% range. This includes significant currency headwinds of around one percentage point compared to our initial expectations, as our adjusted EBITDA is fully impacted by currency fluctuations. As a reminder, please note that we show the FX hatching gains and losses as part of the net financial items below the EBIT line, protecting our net profit. In conclusion, and based on the results from the first nine months of the year, we are in a strong and confident position in our ability to achieve our full year outlook. With this, I will hand back to Esther for a wrap-up. Esther?

Thank you. Thank you, Rainer. Could you please turn to slide number 12? Let me summarize our message here today. Nobonessi's diverse portfolio of innovative bio-solutions, broad market reach and unique scalable production setup continue to drive strong performance. With the results we're presenting here today, we show that we continue to deliver on our promises, with the strength and the resilience of our business model. we continue to execute successfully on our strategic priorities, positioning ourselves firmly to deliver on our 2030 targets. And with that, we're now ready to open for Q&A. Lorenzo, if you could open the Q&A, please.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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. Questionnaires on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Thomas Lind from Nordea. Please go ahead.

Hi, good morning, everyone. So, two questions from my side. The first one is regarding pricing at the CMD. Last year, you said that you were aiming for pricing up until 2030 of 1% to 2% annually. This year, it's 1%. But given the tariffs impacting your business... I would assume that you would take price to sort of offset some of the impact here. So maybe going into also to 26, is it fair to assume that a 2% pricing in 26 is more likely than the 1%? And then the second question is just regarding your 19 new product launches here in 25, which is impressive, but still it seems a little bit like a slowdown, at least when comparing obviously to the impressive 45 product launches last year. and then just fall here in Q3. I would assume that given the revenue synergies, we would see sort of a ramp-up in product launches, or at least that's just my expectations. But, yeah, if you could put a few words on that, that would be great. Thank you.

Excellent. Thank you very much, Thomas, for these very good questions. Let me start with the comments and question on pricing, and then I'll pass it also to Klaus to bring further colour on innovation. It is true we're very pleased with our 8% growth year-to-date, robust growth, mainly volume growth, and also from pricing. And this is a growth, a quality of that growth year to date. It gives us a very high level of comfort. We grow across all geographies, across all segments, also with WWG growth in emerging geographies. The 1% price, it is an area that we committed to. We see the impact translating down in the bottom line. And regarding your question on tariffs, it's important to mention that most of what we produce that we sell in North America, it's produced in North America. And then what it's not, then we see also pricing as a driver of ensuring that it's a net neutral effect for the year, which we continue to stay committed to. Moving forward, we are in a really good place of comfort, mainly or particularly on the volume growth, the underlying strength of our business model, where pricing will continue to be a driver of growth. And yes, on the 1% to 2% category for the period on pricing that you indicated too. for the strategic period. Then regarding innovation, before I pass it to Klaus, I would like to remind you that, and please let's all remind us that the solutions that are less than five years old, they continue to contribute to whom we are with more than 20% of our revenue is for new launches and the quality that we bring in. continues to be the driver of growth. We enable value growth for our customers through innovation, through solutions that they lead to higher yield, higher efficiencies, higher productivity, differentiated claims. And then I would invite you to look, yes, at the 19 year to date, but for sure the continued contribution that innovation puts on the strength and the quality of our growth.

Yes, thank you, Esther. The 19 launches year-to-date is actually on plan and what we expected. We expect some acceleration here in Q4. It's not about hitting the same number as last year, but the impact, of course, it makes in the market in terms of sales growth and contribution to revenue. So we are pretty happy with the performance. As Esther said, we are well above the 20% of sales from new products. So thank you.

Thank you. Very clear.

The next question comes from the line of Thomas Briggersworth from Morgan Stanley. Please go ahead.

Thanks very much for the presentation, opportunity to ask questions. Two from me, if I may. But firstly, on household care, could you break out the difference in performance between emerging markets and developed markets? Obviously, all the data we see in developed markets from your customers obviously looks very volume negative. So, it would be great to know the kind of split of growth between those two. And secondly, on the dairy performance, how much of the growth in dairy do you think was a function of pull forwards? And associated with that, As you win a customer adoption, is there a kind of a preloading sale that takes place that means that growth becomes harder and harder? Because as adoption rates and penetration increases, you effectively have a high base and there's less people to adopt in the future. So I'm just kind of trying to get a sense of where we are in that high protein adoption phase as you see it today.

Thank you very much, Thomas. I will let Tina bring color on your question on household care and then Andrew on dairy. Thank you.

Yeah. Thank you so much, Thomas. So the performance in emerging market is a key growth driver in household care. And it is a result of the strategy we have had for a number of years where we have been investing in order both on innovation and also on feet on the ground. in order to cater for these markets. So household care is significantly outgrowing the developed markets in household care. In terms of their relative size, I assume you know the split between emerging markets and developed markets for the group, and household care is a bit more exposed than group to the emerging markets.

Thank you. And then thank you, Ms. Andrew, and thank you in terms of your questions on dairy, a couple of things. So we did see some positive timing effects in Q3 as some of the ramp-ups from our customers, especially in North America, came a bit quicker than we had expected. And then if you kind of take the second piece of the question, because they're clearly related on the loading, I would separate it into two types. So there's sort of the new innovations that you're driving across the dairy value chain. So things, for example, solutions for high-protein yogurt, those tend to have a natural cycle, but there's many of them over time With regards to productivity and then also DVS conversions we've talked about before, those do have a bit of a loading, but none of them is big enough to really drive a huge preloading effect overall for the business. And the exciting part is we see a continued pipeline of those opportunities over time.

Very clear. Thank you both.

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

Hi, good morning. Thanks for taking my questions. One of them is a follow-up, if we could hear a little bit more about dairy. Strength there is particularly impressive, and I'd love to hear a bit more about what you're seeing in emerging markets and the sustainability of those trends medium-term. And then second question is on beverages. So I think it's the only market that you're seeing that looks a bit weak. It's declining. Should we expect these trends to continue or do you have any product launches or customer wins up your sleeve? Thank you.

Thank you, Georgina. We feel also very pleased about where we are, and particularly on starting to see the fruits of the seeds that we put in the past. We have been investing in emerging markets, we have been investing in innovation, and we see, reflected in the numbers, the translation of those investments into growth. And now I'll pass it to Andrew.

Yeah, thank you, Esther. So taking those two things in turn. So with regards to emerging markets, the drivers there are a few things. One is just the fundamentally quicker underlying volume growth of emerging markets vis-à-vis domestic markets-or, sorry, developed markets. The second thing that I would call out specifically is we have been investing in emerging markets over the years, and we are seeing the benefits of having local presence, being able to go more direct because that actually just leads to quicker share as well as the overall market growth. And the third thing I'd highlight, which is a bit different, is there's parts of the dairy market that are relatively newer in big parts of Asia. So, for example, cheese in China. Cheese in China we're seeing good growth in off a small base, but because we have leadership in that technology, we're able to be that partner of choice in China. So the combination of those three things is really what we're seeing. With regards to beverages, I think everyone's seen there's challenges in the alcoholic beverage market across the piece. We are not immune to those volume challenges. We're working really hard, though, to actually drive better both penetration of the existing solutions but launch the next generation of solutions. That, of course, takes time, but we're working really hard to continue to grow in beverages.

Thank you.

The next question comes from the line of Alex Sloan from Barclays. Please go ahead.

Yeah, hi, morning, all. Thanks for taking the questions. The first one, actually a follow-up on dairy. In the first half... You talked about new enzyme solutions to help maximize whey by-product value streams for cheese customers. I mean, clearly we're seeing very strong demand for whey right now given added protein formulation trends in food. So I'm assuming there's quite a lot of customer appetite on this. I appreciate it's probably quite early days. Maybe, Andrew, you could talk to the traction you're having here in terms of customer engagement and timing around this commercialization opportunity. It would be great. And you did flag some cheese conversion tailwinds in the U.S., so it would be great if you could remind me where you are in terms of kind of global conversion to DVS cultures in cheese, which I think has more headroom than yogurt. And then if I could squeeze in one more for Rainer, just in terms of the cost outlook into 26th, How's that looking on energy and sugar, please, based on the sort of hedging you have, assuming the latter may be some tailwind? Can that offset residual FX pressures that you might be facing on the margin side in the first half? Thank you.

Thank you, Alex. Those were three questions the way I count them. But let's move ahead with that. Beautiful that you double click on dairy and the impressive results that we continue to outgrow the markets that we present. And this is a simple formula. We enable value outgrowth. creation, value growth for our customers through yield, through productivity, and also through differentiated claims on health, on high protein. And by staying very close with our customers, also in emerging geographies, I mean, we're out in China, for example, we're growing and declining market. That's the formula that's driving the growth. But I'll pass it to Andrew and Klaus to build up on your first question and then on Rainer afterwards.

Thank you. I'll take the first part of the question and then turn to Klaus. So, in terms of waste solutions, I think the way that Esther put it is exactly how we see it, which is our customers are looking for increasing productivity and increasing valorization of some of the things that historically have been treated more as offtakes. We have a lot of interest from our customers around the world on this, and this is where being that preferred partner is so important. The best customer is only going to work with one player on this, and we really have invested heavily over the years to be that one player. Maybe, Klaus, you can talk a little bit about the status of the technology? Sure.

Sure. It's still an early day. While we do have technology that will modify solubility of proteins, this way is about protein and protein solubility and functionality, it's still early days. We see the customer pull and interest in collaboration on innovation, but we also expect that we will need to develop new solutions while we start, hopefully, getting traction on existing.

And then taking your second question before turning it back to Esther, we do see significant headroom still in the DVS conversions. That conversion rate is about 60% around the world, obviously higher in developed markets, lower in emerging markets, and that's where our direct presence in those markets is so important.

So, Alex, coming to the... Of course, I can't give you a guidance for 2026, right? We're all aware of that part. But if you think about it, right now we've of course benefited from quite some lower energy. I don't think this is going to go any lower, to be honest. So that gives you an indication there. And actually, we do not hedge raw materials on our normal production. So there we basically... are buying on the on the on the normal market and uh we have to see how this develops to be honest in these uncertain times but of course also we mentioned the effects the us dollar which came down quite significantly and actually in the last days let's see how this uh it's it's quite a volatile environment but we will be able with our also scale to actually counteract that

Thank you. Maybe a quick comment. We can also, that's a good thing about our technology. It's versatile and we can actually change between certain types of raw materials. So it's not necessarily glucose. It cannot be other input costs in terms of carbon production.

The next question comes from the line of Lars Topholm from DMV Carniche. Please go ahead.

Yes, congrats with a very good quarter. Two questions from me, please. I wonder on household care if you can comment on how coming bans on microplastics is affecting your business now and maybe... For now, this is mainly Europe, I guess, but also how you see this as a potential driver for the U.S. And then I wonder what the status is on HMO approval in China. Thank you.

Excellent questions, Lars. Tina and Henrik, please.

Yeah, so let me start with the household care. So in general, as you also know, Lars, and we've talked about a number of times, the strategy in household care is, I would say, that three elements. Differentiation, allowing new claims for our customers. It is a matter of replacing chemicals. And then it's a matter of the investment in emerging markets. And you're hindering on number two here with replacement of other ingredients. And a ban on microplastics is exactly talking to that tendency. So with our technology base, we are capable of replacing a number of compounds in the detergent matrix, including things leading to microplastics. And that is also one of the key growth drivers we have seen, not only in developed markets, but in fact also in emerging markets, because there is a wish to go for more cleaner formulas, to go for quicker and faster and at the same time lower temperature washing.

Tina, in terms of penetration by those technologies, where are you on the curve? Is this in its infancy or are you already there or how should we think about this looking maybe three or five years ahead, please?

It is in the early days. And it keeps evolving also what it is we can replace. As you know, I've been in the industry for many years. And if you think about what we thought we could replace 20 years ago, this is completely different. So it is in its infancy.

A new question on HMO in China. Good question. It's the largest market in the world on infant, as you know, and the most premiumized. Recently, we have seen now recipes approved, which is what everybody in the industry was waiting for, with HMOs. So now HMOs can actually make their way into infant formula and into the market. We are the only player that has five HMOs approved in China. We are not yet in a recipe in the market, but we're working with all the leading players in China to get into products. It's difficult to say now when that will happen, but the good news is that the market is now open. Thanks.

The next question comes from the line of Nicola Tang from MBP Paribas. Please go ahead.

Hi, everyone. Thanks for taking the questions. First, I was wondering if you would be able to quantify this impact from the pull forward of orders in Q3. I was just trying to have a better understanding of the underlying growth. And how do you actually know, particularly in households, that it was a pull forward rather than just an indication of better demand? And do you have a view on current inventory levels? for your customers across the wider business. I was wondering if there's any areas where customers might have built more safety stock given the tariff uncertainty. But equally, have customers actually reduced inventory too much and so are having to pull forward orders as a result of that? And the second thing I wanted to ask about, I think now there's about 300 basis points difference in EBITDA margins between the two divisions on a year-to-date basis. I was wondering if you see any structural reasons why the food, beverage, and human health profitability will be lower going forward, or do you expect both divisions to hit your 39% target by 2030? Thanks.

Thank you very much, Nicola. We're really pleased on the performance that we had year to date with 8% growth. And yes, this is including some timing effects in Q3. And with that, we also aim to meet single digit growth for Q4. It's important to mention what we feel very pleased about is that we continue to deliver on our promises and what we said we would do. We said we would have a stronger first half than the second half, and that's what we are in. And also we said, and we continue to say, we are very close to our customers, and we are there to enable their growth. We have been investing across the whole globe and particularly in emerging geographies on driving growth. And we see some timing effects from one quarter to the other. It has been in dairy, maybe in cheese, on the transformation being a little bit ahead. From one quarter to the other, it's okay. We are there close to our customers and we never let it happen. Also in emerging geographies, maybe a little bit faster than one quarter to the other. We don't look for the quarter. We're here for the full year. And the lifting of the low end of the guidance and the comfort of how we're going to finish the year strong, including... the impact of a merging, of exiting certain countries. All in that together, leading to your second point of the dynamics in the market, we live in the same world that you live. But at the same time, we continue to see the strength of the drivers that trigger the underlying growth of our business. We enable value growth for our customers. And that's strong. That's today, and we feel very comfortable. We're not going to go into the guidance for next year, but we feel very confident on delivering on the strategic targets that we committed on the 6% to 9% growth till 2030. Then the profitability of the business, strong and bold across all areas, and I will pass it to Rainer to build on that.

So regarding the differential in the two divisions regarding profitability, yeah, I mean, you basically answered your answer was in your question, right? Because it's clearly on the human health and HMO side that we have a dilutive impact that is known that, of course, over time and then with scale, we will improve the profitability. But let me remind you that really both divisions run in a very high profitability category. especially compared also what what else is out there so yes we're going to improve it's going to improve and it's going to the gap is going to narrow i would say the next question comes from the line of sebastian bray from berenberg please go ahead

Hello, good morning and thank you for taking my questions. Can I start with the financial items line and what would be expected for 26 because the consensus seems to only have a modest step up in this and my understanding is that there are 20 to 30 million of FX hedging benefits and you have the annualization of the 1.3 billion of debts that was placed to purchase for DSM feed enzymes business stake and What level of financial items cost step-up would be reasonable in 2026? Could it go from, let's say, 75 all the way up to 105, 110? And my second question is on the bioenergy market. This seems to have been fine in Q3. It's not really commented upon in the release. But is anything changing there? Basically, Novanese is still taking market share off everybody. Is 2G ramp-up proceeding as expected? Any changes incrementally on what's expected as we move into 2026? Thank you.

Thank you, Sebastian. And Rainer will answer your first question, and then Tina, Build on Bioenergy.

So my answer is actually going to be only very limited because I'm not going to give you or can give a guidance for a specific 2026 on the financial items. We'll do that once we finish the year. And then, of course, publishing in February and then giving the outlook will, as we do, always give an indication of our finance line items. But generally, your line of thought goes in the right direction.

And on bioenergy, you are right on the market in Q3. And also, if you look in the beginning of the year, there is growth in the North American market. I assume that's the one you are referencing, Sebastian. But overall in that industry, I think it's important to think about growth. the diversification story we have talked about so many times. So it's the geographical diversification, which is helping us both in the quarter and year to date. You have heard me talk about India as well as Latin America as key growth drivers. We have also talked about the feedstock diversification, where we, and also both year to date and especially in the quarter, we see good growth from biomass or second generation ethanol, as well as biodiesel. So all of that is contributing to the growth. North America is a big part of our business, but it is a more slowing growing where we are growing roughly in line with market. If you think about specific market developments, I would say the fundamentals remain the same. We do see both India and Brazil talking about higher blend rates for first-generation ethanol. 2G is also continuing to get online. You know we have plants both in Brazil, India, and also in Europe. and biodiesel plants is also coming on. So the growth drivers remain intact, and they are all supporting the growth year-to-date.

Thank you. The next question comes from the line of Sheeta Udashi from J.P. Morgan. Please go ahead.

Hi, thanks for taking my questions. I had actually two. Both are related in a way. You know, one of the things or one of the trends we've seen over the past year in the broader specialty chemical ingredient market is, you know, increasing competition from China, India. And whereas, you know, you guys are growing very, very fast in emerging markets. And I mean, I'm sure, you know, based on what I've seen, you know, there are regional players that you compete with in both India and China. So I'm just curious what sort of... regional competitive dynamics do you see across your businesses? Because it's quite interesting that you're growing so fast in emerging markets where others are actually seeing much more competition. The second question related is, you know, we saw IFF announce a collaboration with BSF on the detergent enzymes and solutions side of things. Do you have a view on what that might mean in terms of competition for novenesses in the household care market down the line? Thank you.

Thank you, Chita. Very good questions. We're pleased on our growth in emerging geographies. And we see it as an outcome of self-help efforts that we have made in the past. And we also see it as a... Simply the outcome of the strength of our solutions and being close to our customers in a market which is in demand of new answers. Our solutions enable higher yield and productivity, also in emerging geographies. and also differentiated claims for consumers that they are seeking for new answers. And we have been investing in the last years on more booths on the ground to be able to play and co-create with our customers, particularly in emerging geographies. Powder lab in India for household care or in Latin America or baking lab in Turkey or more capability for dairy in China. These are self-help efforts that we have made that we see them reflected now in growth. We see, of course, we live in the same world that you see, and we see other players in the industry, but the formula of success for our customers, it is listen, understand their needs, and then provide them with bio-based solutions that enable them growth. through high efficiencies, through bringing health claims, through bringing solutions that they would not be able to do without our products. And that's the model that we are investing, co-then combined with a robust global asset footprint that we supply reliably. And we are there with our customers to deliver that growth in a resilient and predictable way. And I'll pass it to Tina on household care.

Yeah, and I'll be relatively short. As we talked about also in the question from Lars Topholm earlier, what we are doing, and let me focus in on that compared to what others are doing. So what we are doing is we invest in innovation. We invest in innovation with our customers, and that includes replacing chemicals. So we go in and replace polymers, we go in and replace brighteners, microplastics, and so forth. And that is one of our growth drivers in household care. That is the winning strategy as we see it.

Thank you. Thank you, Shara. One last question, please.

Our last question comes from the line of Shoren Sansui from SEB. Please go ahead.

Yes, good morning and congrats with the result. So first on dairy, just if you can indicate a bit more on how your growth is, because it must be quite strong double-digit given that you have almost 10% growth in Q3 and that brewing is negative. Then, also, given that milk prices are very low, then we have historically seen sometimes cheese manufacturers producing for inventory. Is that giving you a temporary boost in dairy at the moment? And then, secondly, on sales distribution costs, they're going up quite a lot. But maybe you can give us or quantify how much it is up if you adjust for DSM and also what it is that you're investing in commercially. That could be interesting. Thanks.

Thank you so much, Soran. Andrew, Rainer, please.

Yeah, on dairy, the exciting part is our growth is broad-based. So if you look across both geographies as well as the large applications, so cheese or fresh dairy, we are seeing good growth in most places. That's really driven by a couple things, one of which we talked about earlier, which is nutrition. penetration essentially in underlying market growth, especially in the emerging markets. The second is some of the trends that we're seeing on things like high protein. And the third is, of course, the continued productivity. So we remain excited about the growth coming into the Rainier part of this year and into the next several years. But of course, we're trying to drive that market penetration through new innovations we have with our customers on all those places and really position ourselves as the market leader.

So regarding the increase on the S&D cost sales ratio, of course, there is a part of DSM in there. We're not going to specify it directly, but keep in mind that really, this is a result out of continuous investing in emerging markets, right? What we said we did in the past and we're going to continue to do so throughout the strategy period. We give you an indication what the overall inorganic contribution is, and it's accretive to the overall EBITDA. So basically, they also can back into what you think might be the impact on the operational expenses overall. It's not just S&D.

Excellent. Excellent answer. Thank you very much all for your questions. We're closing the day and looking forward to continue to interact with you within the next days moving forward. Thank you so much.