Novonesis B Unsp/Adr

Thank you very much, operator, and welcome everyone to NovoNesis conference call for the first quarter of 2026. As mentioned, my name is Tobias Björklund, and I'm heading up Investor Relations here at NovoNesis. In this call, our CEO, Esther Baggett, and our CFO, Reino Lehmann, will review our performance as well as the outlook for 2026. Also attending today's call, we have Tina Feiner, EVP of Planetary Health Biosolutions. We have Henrik-Jörg Nilsson, EVP of Human Health Biosolutions. Andrew Taylor, EVP of Food and Beverages Biosolution, and Klaus-Krone Fuglsang, Chief Scientific Officer. The conference call will take about 50 minutes, including Q&A. Let's 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 Bachett. Esther, please.

Thank you. Thank you, Tobias, and welcome everyone. Thank you for joining us this morning. The year started strong with 7% organic sales growth against a high comparable, including around 1.5 percentage point effect from exiting certain countries and a good 1 percentage point from inventory build-up in animal. We deliver growth across all sales areas in both developed and emerging markets, while achieving an adjusted EBITDA margin of 37.8%. Developed markets grew 8%, with solid performance in both Europe and North America. Emergent markets grew 4%. We continue to drive growth through innovation and a stronger market presence with tailored solutions. We launched five new buyer solutions in the first quarter, and we are well on track for our full year expectation. These launches are responding to an increasing consumer and societal needs, from higher yields in food to replacing fertilizers in agriculture. Ten months into the Feed Enzyme Alliance acquisition, we are delivering in line with our initial expectations. And more importantly, we are continuously seeing increased traction with our customers through a broader and integrated offering of enzymes and probiotics. As a complement to our global footprint, we acquired an attractive production facility in Thailand in early April, and it's expected to be operational in 2027. The facility holds optionality to produce different biosolutions, including the scaling of HMO production, which would require additional investments. Such investments are already included in our communicated CAPEX plans towards 2030. We are operating in a world with increasing global uncertainty, with rising pressure on economies in many different ways. Countries are seeking for homegrown solutions to strengthen energy and food security supply. Bio-solutions are increasingly becoming central answers to resilience and productivity agendas, reducing exposure to global disruptions while enabling the creation of local jobs. In our dialogues with customers and policymakers, particularly in the energy area in Southeast Asia and in India, we see this momentum accelerating. And NovoNesis is uniquely positioned to support this shift. With a strong start to the year, we feel very confident about our full-year outlook. Growth is expected to be mainly volume-driven, supported also by pricing. The outlook includes a close to one percentage point effect from exiting certain countries. For the adjusted EBITDA margin, we maintain the outlook at 37% to 38%, with an expected margin expansion compared to 2025, more than absorbing currency headwinds and increasing raw material costs. With that, let us now look at the divisional performance in more detail, starting with food and health biosolutions. Please turn to slide number four. Thank you. Food and health biosolutions delivered a strong organic sales growth of 9% in the first quarter. The adjusted EBITDA margin was 35.7%, 130 basis points lower compared to last year, mainly driven by the ramp-up in commercial resources we did over the course of 2025, product mix effects from stronger growth in HMO, and strong currency headwinds. These were partially offset by cost synergies and economies of scale. During the quarter, we launched three new products in food and health, including a new yogurt culture solution that improves taste and texture, while also delivering higher yields and productivity benefits. For 2026, we expect the division to deliver organic sales growth in line with the group, primarily driven by food and beverages and supported by growth in human health. Food and beverages deliver a strong organic sales growth of 11% in the quarter. Growth was mainly volume-driven, with pricing contributing a good 1 percentage point. Synergies contributed to growth and in line with expectations, supported by cross-selling and increased commercial scale. Growth was well anchored across geographies and industries. Performance was driven by increased market penetration, a strong adoption of innovation, and positive market development. Despite muted consumer sentiment, we continue to see high demand for higher protein for clean label products and healthier solutions, supporting and increasing demand for biosolutions. Momentum in dairy continued to be strong and was led by North America and emerging markets. In fresh dairy, demand for efficiency, higher yields and high protein continues to drive strong demand, including bioprotection and probiotics. In cheese, customer conversion to higher yield solutions remains a key growth driver. Growth across the remaining industries was driven by innovation and increased penetration, led by plant-based solutions and beverages, with solid performance from recent launches. Solid growth in baking and meat also contributed to growth. For 2026, growth in food and beverages is expected to be broad-based, supported by both synergies and pricing. Human health delivered organic sales growth of 5% in the first quarter. Growth was primarily volume-driven, while pricing and synergies contributed positively. Performance was driven by strong growth in advanced health and nutrition, supported by both early life nutrition and advanced protein solutions. Early life nutrition was led by HMO, with growth across regions, including cross-border trade into China. Advanced protein solutions grew alongside the Anchor customer. Dietary supplements was impacted by a softening North American market where our sales to women's health category continue to be strong. For 2026, growth in human health is expected to be supported by dietary supplements as well as advanced health and nutrition led by HMO. Pricing is expected to contribute positively and the full revenue is expected to add around one percentage point to growth. Please turn to slide number six. Thank you. Planetary Health Biosolutions delivered organic sales growth of 5% in the first quarter against a high comparable. The anticipated inventory build-up at the key customer in animal contributed a good 2 percentage points to growth. The adjusted EBITDA margin was 39.5%, up 10 basis points year-on-year driven by the feed enzymes. Alliance acquisition and cost synergies, including the ramp-up in commercial resources, we did over the course of 2025, as well as currency headwinds. We launched two new products in Planetary Health in the first quarter. In animal, we introduced the vovovacillus probiotic for cattle, benefiting from a faster route to market following the formation of nobonesis. This solution enhances digestion and strengthens cattle immune system, resulting in an increase of up to a kilo of milk per cow per day, while also improving the feed efficiency. In plant, we launched the first product based on our new enzyme platform, a phytase that enhances nutrition uptake in soil, improving the yield from acre of corn by around 3%. The solution initially targets corn in North America and is supported by several years of strong field trial data. For 2026, we expect the division to deliver organic sales growth in line with the group with relative stronger contribution from agricultural, energy and tech. Please turn to slide number seven. Thank you. Household care delivered organic sales growth of 4% against a high comparable. Growth was mainly volume-driven, supported by positive pricing. Performance was driven by increased market penetration and adoption of new innovations across laundry, dish, and other cleaning categories in both developed and emerging markets, with particularly strong traction among local and regional customers. For 2026, we expect solid performance in household care in a market that carries some uncertainty related to weaker consumer sentiment. Growth will be driven by continued innovation, increased penetration in both developed and emerging markets, and continued support from pricing. Agricultural energy and tech deliver organic sales growth of 5% in the first quarter, driven by energy and agricultural, while tech declined due to order timing in biopharma, processing aids, and high comparable. Strong growth in energy was driven by Latin America and Asia Pacific, particularly India, reflecting continued growth in corn ethanol production. North America also supported growth through increased adoption of innovation and higher ethanol production volumes, supported by growing exports. Additionally, increased penetration of biodiesel solutions and the ramp up of second-generation ethanol production contributed to the strong growth. Following the increasing need for energy security and supply, as countries are seeking further diversification from fossil fuels, we see an increasing strategic global interest for higher biofuel blending. Strong growth in agricultural was mainly driven by inventory build-up at the key customer in animal, contributing by around 4% to the organic sales growth for agricultural, energy and tech. As mentioned, integration of the feed enzymes acquisition continues to progress in line with expectations, with synergy milestones materialising as planned. Our planned business declined during the quarter due to timing and high comparable. For 2026, growth in agricultural, energy and tech is expected across all industries, led by energy and supported by synergies and pricing. Now, let me hand over to Rainer for a review of the financials and outlook for 2026. Rainer, please.

Thank you, Esther. And also, good morning, everyone, and welcome to today's call from my side. Let's turn to slide number eight. In the first quarter, sales grew a strong 7 percent organically and 4 percent in reported euro, including around 1.5 percentage points effect from exiting certain countries. Sales synergies across both divisions and pricing each contributed around 1 percentage point, while the inventory buildup in enamel contributed a good 1 percentage point. Currencies provided 6 percentage point headwind, while M&A contributed positively with 3 percent, reflecting the Feed Enzyme Alliance acquisition. The adjusted gross margin improved by 120 basis points to 60.1% versus Q1 of last year. Pricing and productivity improvements, as well as the feed enzyme alliance acquisition, supported the development, while currency and product mix had a negative impact. Total operating expenses adjusted for PPA-related depreciation and amortization were 29.1% of sales, compared to 27.3% in Q1 last year. This development mainly reflects the planned increase in commercial resources over the course of 2025, driven by both organic expansion and the Feed Enzyme Alliance acquisition. The adjusted EBITDA margin for the quarter was 37.8 percent, compared to 38.3 percent in Q1 2025. The margin benefited from the higher gross margin, cost synergies, and around 50 base points from the Feed Enzyme Alliance acquisition in line with our expectations. This was offset by higher operating expenses and currency headwinds. Let's keep in mind also that last year's operating expenses were quite low in the first quarter. Adjusted earnings per share, excluding PPA amortization, were 57 euro cents, corresponding to an 8% increase compared to last year. Operating cash flow amounted to 167.1 million euro in the first quarter, an increase of 60.7 million euro year on year. that was mainly driven by improved net profit and a more favorable working capital development compared to Q1 last year. CapEx in the quarter amounted to 93.1 million, equal to 8.3% of sales. Despite higher investment levels, free cash flow before acquisitions increased by 9% to 74 million euro. On March 12, we successfully issued 1.7 billion euro of senior unsecured notes to refinance the existing bridge loan related to the Feed Enzyme Alliance acquisition. Relating to this, I'm also very happy that S&P Global Ratings issued an A- stable outlook rating for NovoNesis. With this, let us now turn to slide number nine to talk about the outlook. Please note that the outlook presented today is based on the current level of global trade tariffs and the prevailing foreign exchange environment. As Esther mentioned earlier, we're very confident in the full-year outlook and confirm our guidance for both organic sales growth and profitability. on the back of a strong start to the year. The outlook for organic sales growth is maintained at 5 to 7 percent and includes close to one percentage point effect from exiting certain countries. Growth is expected to be mainly volume-driven, supported by around one percentage point from sales synergies and a good percentage point contribution from pricing across both divisions. The outlook also reflects some uncertainty related to consumer sentiment for the year. The recent situation in the Middle East and its broader implications to global market dynamics is difficult to fully assess and leads to increased uncertainty. However, based on our diversified end market exposure and flexible regional production footprint, including our pricing capabilities, we currently do not expect a material impact on our adjusted EBITDA margin. We continue to monitor the development closely. We expect a smaller positive timing impact also in the second quarter from the annual business related to inventory buildup at a key customer. I want to reiterate, though, that for the full year, this effect is expected to be neutral. We continue to expect the adjusted EBITDA margin to be in the range of 37 to 38 percent, reflecting continued margin expansion compared to 2025. This improvement is expected to be driven by a stronger gross margin, defeat enzyme alliance acquisition and synergies, partly offset by currency headwinds of around half a percentage point, and including somewhat higher input costs. As previously communicated, we'll see a temporary step up in CAPEX as part of our strategy to enable growth through 2030 and beyond. This includes continued expansion of our resilient global enzyme production footprint, completion of the doubling of our U.S. dairy culture capacities here in 2026, and investments related to the recently acquired facility in Thailand. In addition, we continue to invest in the implementation of our new ERP system, which will impact CAPEX by around one percentage point annually over the next few years. As a result, CAPEX is expected to be 12-14% of sales for 2026. Finally, net debt to EBITDA is expected to be around 1.7 times at year-end, supported by strong cash generation and continued deleveraging despite the increased CAPEX level. We had a strong start to the year and remain very confident in the 2026 outlook. With that, I will hand back to Esther.