Novonesis B Unsp/Adr

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 Fehrner, 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 bio solutions 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 for Manix part of the FitEnzyme 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 biosolutions 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 divisional 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 YieldMax solutions allow customers to drive higher efficiency and yield, and the pipeline of new solutions continues 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 customer. 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 Anchor customer. The full revenue is going to continue to contribute around 1% to the growth for the sales area. The exit of Russia and Belarus is expected to impact full-year organic sales growth in human health by around 1 percentage point. Could you please turn to slide number 7? 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 normalize. 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 U.S. market, where the detergent category is more sensitive to downtrading, 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 U.S. 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% organically and 12% 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 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 costs 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?