Earnings call transcript: DSM Firmenich AG beats EPS forecast in Q4 2024

DSM Firmenich AG reported its fourth-quarter 2024 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $0.9942 against a forecast of $0.9557. Despite slightly missing revenue forecasts, the company’s stock rose by 1.29%, reflecting investor optimism. The firm reported a revenue of $3.26 billion, just shy of the anticipated $3.28 billion. According to InvestingPro analysis, the company currently trades near its Fair Value, with an overall financial health score rated as "GOOD" based on comprehensive metrics.

Key Takeaways

• EPS surpassed expectations, coming in at $0.9942.
• Revenue fell slightly short of forecasts, at $3.26 billion.
• Stock price increased by 1.29% following the earnings announcement.
• Strong performance in organic sales growth and EBITDA improvement.
• Continued focus on innovation and strategic divestments.

Company Performance

DSM Firmenich AG demonstrated robust performance in 2024, achieving a 6% organic sales growth and increasing EBITDA by over $350 million. The company generated more than $1.5 billion in cash flow, with a net debt reduction of $500 million compared to previous guidance. InvestingPro data reveals impressive revenue growth of 42.4% in the last twelve months, with the company maintaining a healthy gross profit margin of 27.2%. For deeper insights into DSM Firmenich’s financial metrics and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro. The firm also maintained a dividend of $2.50 per share and announced a $1 billion share buyback, signaling confidence in its financial health.

Financial Highlights

• Revenue: $3.26 billion (slightly below forecast)
• Earnings per share: $0.9942 (above forecast)
• Cash flow generation: Over $1.5 billion
• Net debt: $2.5 billion
• Core ROCE: Increased to 7.6%
• Dividend: $2.50 per share

Earnings vs. Forecast

DSM Firmenich AG exceeded EPS expectations with a result of $0.9942 compared to the forecast of $0.9557, marking a positive surprise of approximately 4%. However, revenue came in at $3.26 billion, slightly under the expected $3.28 billion, reflecting a minor miss of 0.6%.

Market Reaction

Following the earnings release, DSM Firmenich AG’s stock rose by 1.29%, closing at $102.35. This increase reflects positive investor sentiment towards the company’s earnings beat and strategic initiatives. InvestingPro analysis shows the stock generally trades with low price volatility, with a current market capitalization of $27.8 billion. Analyst consensus remains bullish, with price targets suggesting potential upside of 27%. The stock has demonstrated resilience with a positive one-year total return of 11.45%, despite recent market challenges.

Outlook & Guidance

Looking ahead, DSM Firmenich AG projects at least $2.4 billion in EBITDA for 2025, incorporating $100 million from temporary vitamin effects and another $100 million from synergies. The company anticipates mid-single-digit organic growth and no major mergers or acquisitions, focusing instead on anchoring its current business operations.

Executive Commentary

CEO Dimitri de Vriese emphasized the company’s commitment to growth and transparency, stating, "We grow what we have. We anchor what we do, and we’re gonna deliver on the promises." CFO Ralph Smites added, "We want to provide you as much guidance as we can on how we see that business develop."

Risks and Challenges

• Input inflation projected at 1.5-2% for 2025 could pressure margins.
• Rising prices of natural ingredients may affect cost structures.
• Softness in the beauty and care segment, particularly sun care products, could impact sales.
• Market normalization in the perfumery and beauty segment may slow growth.
• Divestment of the Animal Nutrition and Health business could lead to transitional challenges.

Q&A

During the earnings call, analysts probed into the company’s strategy for the A&H divestment and its innovation pipeline, particularly concerning GLP-1 and health trends. Executives clarified the impact of vitamin pricing on future earnings and addressed concerns regarding market normalization in key segments.

This comprehensive performance review highlights DSM Firmenich AG’s strategic advancements and financial resilience, positioning it well for future growth amidst evolving market dynamics. InvestingPro subscribers can access additional insights through exclusive ProTips, including detailed analysis of shareholder yields and management’s share buyback strategy. The platform offers real-time updates and in-depth metrics that help investors make more informed decisions about DSM Firmenich AG and over 1,400 other stocks.

Full transcript - DSM Firmenich AG (DSFIR) Q4 2024:

Dave, Moderator/Investor Relations: Good morning. Thank you for joining today’s call. I’m sitting here with Dimitri de Vriese, our CEO and Ralph Smites, our CFO. We published this morning a press release with our 2024 full year results together with a presentation to investors, which you both can find on our website. Here you can also find the disclaimers about forward looking statements.

Following Dimitris and Ralf’s presentations, we will open the line for questions. Important to remind, the sell set analysts who want to ask questions have to register via the questioners link, which they can find on our website in the financial calendar. And with that, Dimitri, you can start.

Dimitri de Vriese, CEO: Thank you. Thank you, Dave, and welcome to all 2024. But I would like to put that into perspective. And I think this slide you’ve seen before from all of us and it is our journey slide. We started with the dream.

We merged two iconic companies. Do I need to mute myself?

Ralph Smites, CFO: Okay. Can you hear me?

Dimitri de Vriese, CEO: Alright. So we merged the companies, and then we decided to focus to be a consumer oriented company, finding a new owner for Animal Nutrition and Health. I’ll come back to that in a minute. We also took the opportunity to tune a portfolio and look at the high growth, high margin segments and then at the accelerate bit, where we really are growing what we have, anchor what we do, and deliver on our promises. And before we give you a bit of color, and I will ask Ralph to really join and give some color on the 2024 numbers, I would like to lead you through some of the elements and the components of that journey.

Where are we on that journey? We can go to the next slide. These are a few elements which you all have asked me and Ralph and Dave several, several times. And I just want to give you a bit of a progress track where we are on that journey. Those are elements in our journey frequently asked by you, also share sometimes a bit of concern.

I want to be very transparent on how we look at that. So we started with the dream and the merger and bringing the essential, the desirable and the sustainable together. And I think we all got really the positive connotation that that is something what could add value. We started the execution of the merger in May 2023, and there were some concerns about mergers. How do you integrate it?

And I think we made a deliberate choice to do that very focused on taste, texture and health and then take that along in a phased and a controlled way. Very happy to say that I think we’ve done that pretty smoothly. And we’ve landed the integration target also in our businesses. I’m very happy to see that these businesses took that very seriously and are delivering accordingly. Then after the whole merger part, we presented the deliver of the synergies.

Remember the $350,000,000 EBITDA, of which half were cost synergies and half from top line synergies. I hope you agree with me that we are delivering on the cost synergies. I think the last bit is in our 2025 outlook, where we deliver on the cost synergies nicely on track. Top line synergies are gaining momentum. Ralf will say a little bit more about it later, but we have a full pipeline over 300,000,000 filled with top line synergies towards the 500,000,000 top line, which we’ve promised you with the bottom line of 175,000,000.

During that process, in the beginning of the process, we had our vitamin volatility. We’ve launched our transformation program to counteract that. We are full on track in delivering that. We delivered 100,000,000 last year. We will deliver another 100,000,000 in 2025.

With the vitamin volatility at hand, we took the opportunity to accelerate the upgrade of portfolio discussion, the tuning. As you’ve seen, we presented during the Capital Markets Day a little bit a few of the segments and there were a few segments that we wanted to deprioritize. In the meantime in 2024, we’ve announced the deal with yeast extracts with marine lipids and we have capitalized on our Robert Taystek. We still have left the agro intermediates, which is on track although not fully green because we hope we do a little bit earlier, but it’s on track for delivery in 2025. And the aroma ingredients and the non differentiated vitamins are in the perimeter of the A and H scope, where we have announced Tuesday, we will start the commercial transaction process.

We’ve also announced last year in February the vesting of Animal Nutrition Health in line with the portfolio review. We have carved out Animal Nutrition and Health. It is separated from these and Feminish. It is ready for the commercial transaction. This is done in 2024.

We are on track. That’s also why we could announce that we will start a commercial transaction process next week. And we have, as announced on Tuesday, sold the stake in our feed enzyme alliance for 1,500,000,000.0. So divesting ANH at the right value, I consider to be fully on track. Then there was a second concern you have shared with us quite from the beginning.

So Dimitri, how are you going to organize that people remain focused on the business, on the growth.

Ralph Smites, CFO: And I

Dimitri de Vriese, CEO: think I’m very happy to say to announce the 2024 full year results with an organic sales growth of 6%, a step up in EBITDA with good cash to sales conversion with a cash generation of more than 1,500,000,000.0 and that we are also very confident on the outlook for 2025 with an outlook of at least 2,400,000,000.0. And we bring these Infiminiq in an area of more consumer customer focused businesses. The three business units Perfumery and Beauty, Taste, Texture and Health, and Health, Nutrition and Care are really fueling growth with their innovation pipeline based on two trends. One is more attention for preventative healthcare. You know that 80% currently is spent on curing.

That will move to more preventative healthcare. We are in the midst of that. We have the competence to capitalize on that. The trend for more healthier food. Everything we do lower sugar, lower fat, lower salt is into healthier food.

We have the competence to capitalize on that trend. And then last but not least, the focus on well-being. I mean, the world today is at an enormous pace of change. People look for their well-being, their own identity, also the younger generation, and I think in our well-being, personal care and fragrance segments. A few of you also asked what is the impact on the ultra processed food and GLP one.

We can spend a little bit more time on Q and A, but we do see that our customers requiring more innovation in that field. And with our fantastic toolbox of ingredients, our fantastic creation centers with perfumers, flavorists and application specialists, we really see the innovation pipeline is ramping up quite a bit around those changes. So the whole context of market trends, I think we are uniquely positioned to take advantage of that. Strength and leadership for people and planet. We are a company where sustainability is in the heart of what we do.

Not only for us, but also because our customers require it. Therefore, we have set ambitious climate targets validated by SBTI. We are working quite a bit on employee engagement because you can have a fantastic toolbox, a fantastic engine, but the people make that happen. And I’m very happy to say that throughout this whole journey, the employee engagement remained very high. The last test was 79%, where people were really engaged in what we were building.

With safety as one of our foundation efforts, it is safety performance, we want to make sure that people work in a safe environment. And I’m super proud that for 2024 we made huge step ups and we have improved our safety performance quite a bit. With that context, with the integration well underway, with the engines brought together where we are bigger, smarter, tuned engine, we are very confident on the future. You’ve seen that in the cash flow generation, You’ve seen that in the outlook. Coupled with a strong balance sheet, coupled with the deals we’re making, we’ve decided to go for a share buyback of $1,000,000,000 and that we also announced this morning.

Then on M and A, I frequently been asked Dimitri, are you still considering big M and A? And is that not too early too soon? Let me make it very clear. We are on a journey to build a fantastic company and grow what we have. In 2025, we have no priority to any big M and As.

We will focus on what we have. We focus on the consumer part, the focused human part of our business, the three business units Perfume and Beauty, Health Nutrition and Care, and Taste, Texture and Health. And we accelerate that core. We grow what we have, we anchor what we do, and we deliver on our promises. And before I hand over to Rolf, maybe a bit of background on, I think, one of the deals which we made on Tuesday, so to bring you fully up to speed with the sale of the stake in the FeedEnzyme Alliance, maybe the next slide.

It’s clearly that this is part of the ANH divestment process. This was a stake where we had an alliance with NovoNisys. We agreed to sell it for $1,500,000,000 It is about $300,000,000 of sales, which is originally reported in Performance Solutions. Remember, we had premix, we had vitamins and we have Performance Solutions. The $300,000,000 fitted in that and we got $1,500,000,000 for it.

Together with other tuning elements like Marine Lipperts, Yeast Extracts and the Robert Day steak, we have valorized around 2,000,000,000 and I think that is also an encouragement of the value of the businesses which we are deprioritizing. And with that, I hand over to my dear CFO, and as you’ve known, he has a peculiar interest and a secret passion on numbers. And with that secret passion revealed, Ralph, on to you for twenty twenty four full year results.

Ralph Smites, CFO: Well, thanks, Dimitri. And you always make me smile when you say I like the numbers, and I do, especially when they’re good and easy to present in that sense. You already covered quite a few headlines, but I think it’s important to dive a little deeper as well. I think here you see a slide with what basically holds the key metric relevant for the performance. Overall, a very strong performance in 2024, an absolute step up in EBITDA of well over 300,000,000, a strong organic growth.

And what is nice to also see not only that the EBITDA step up, the absolute EBITDA step up translates into margin, and I’ll come to that in a second, nicely flows through into our EBIT, resulting in a significant step up in the core ROCE. It’s not on the page here, but that moved up to 7.6% in line with our cost of capital, up almost 2.5% versus prior. And also the flow through into net profit where you see a step up in the core earnings per share of over 50%. Dmitri alluded to a strong cash performance, well above our initial target, and we are maintaining a dividend of $2.50 for the year and a 1,000,000,000 share back, reflecting our confidence in earnings. But let’s zoom a bit deeper and let’s start with the group on the next page.

So on a full year basis, overall 6% volume growth with the adjustment for FX and the carved out entities, both marine lipids and yeast extracts were deconsolidated in the fourth quarter, bringing the total growth to 4%, but a strong volume growth throughout the year and reflecting not only in a significant step up in the organic step up in EBITDA, but there we also see the overall improvement in the performance and the benefits from the synergies and the vitamin improvement program flowing through, driving an almost 20% step up in EBITDA, fueled with further with the impact of the temporary vitamin effect, which clearly impacted Q4 positively in line with our guidance, but also offsetting a negative headwind from FX and divestment of over sixty million in the year. When we look at the margin itself, overall, a very nice step up for the full year. But what is more encouraging, and that’s the consistency in the story that we’ve been sharing with you, is the continued build up of that margin throughout the year, starting at a level of 50% and growing that consistently every quarter with more than 1% to over 18% at the end of the year.

Speaking of the end of the year, on the next page, a few comments around our Q4 for the group. Overall, you see the same growth, 7% organic growth in the quarter itself and a very significant step up in EBITDA. We just topped 600,000,000 in Q4 with a very strong organic growth reflecting the overall positive dynamic in all of the businesses and a step up from the temporary vitamin effect. Also here, you see a continuation of the momentum in the different BUs reflected in the overall strong growth. I think overall with these results, a very strong performance for the group for 2024, Strategic initiative positioning us very well and setting ourselves up for yet another successful 2025, which is reflected in our outlook.

But let’s zoom in into the PUs. And on the next page, let’s start with PNB. PNB had an excellent year in 2024. You can see that from the top left part on the slide. Overall, a 9% growth in the year, fully volume driven with an even stronger performance into double digits in fragrance with a very strong performance in fine fragrance and consumer fragrance.

Also consumer ingredients saw a good growth throughout the year, very consistent. Beauty and Care had a strong 2024 as well, albeit a somewhat softer finish of the year, predominantly on the back of lower demand for our Sun Care products. Now the strong growth obviously translated into a very good step up in EBITDA as well. Overall, a 13% step up in EBITDA and a consequential improvement in margin as well to well above 20%, twenty two % for the year. That’s something that’s in line with also the journey we envisaged.

And we’ve seen that momentum also at the end of the year in our perfumery and beauty business with an overall growth of around 5%. Again, here a stronger performance in our fragrances space, somewhat offset by a lower performance in beauty and care on the back of that weaker demand for sun care products. But overall, if you look at PNB, a fantastic year in 2024, and that is translating into a continued good start in 2025 with a good sales pickup in January. Moving on to our second business unit on the next page, Taste, Texture and Health. Yeah.

It’s almost sounds a repetitive story, but also here a very, very strong performance, 9% volumes consistently in the first half and the second half. You see a somewhat negative impact from FX and divestment in the top chart as well, but a very strong growth. And both the taste and the ingredient division are contributing to that growth equally. And also here, you see a very nice flow through in the organic EBITDA step up, also here 13% to well above 600,000,000 and also a continued margin improvement in the TTH business. The year landed at 90% and with the divestment at the end of the year of the East Economics business that will step up further in 2025.

But keep in mind that we’re still supplying the software with the product whilst they go through the regulatory approvals before they take it over fully. I want to mention here that on the EBITDA step up, the absolute step up is very encouraging to see in TTH as well. And there’s about a headwind of around $10,000,000 15 million dollars from FX, the divestment of the extract business. Then moving on to Health, Nutrition and Care on the next page. Here’s a story of two tales and we’ve been also sharing that before is that it’s a story of recovery.

And we’re very pleased that the return to growth in Q3 continued into Q4. The performance in H2 is very encouraging while we go into 2025. Overall, a six percent volume increase in the second half, we’ve seen that same performance into the fourth quarter, and that translates also into a good step up in EBITDA in H and C. If you look at it on an annual basis, an organic growth of about 5%. But when you adjust for the headwind of the FX and the divestment of the Marine Lipids business, you see that the overall EBITDA is somewhat below prior year.

Again, here it’s relevant to look at the second half and the fourth quarter. Fourth quarter EBITDA is up 9%. However, if you adjust for that negative impact from FX and the divestment of the Peruvian Lippets, the EBITDA is actually up over 20% and also the margin quality is improving sequentially. Also in HNC, we started the year at 15%. We’ve been gradually improving that and we landed the year also above 18% in health, nutrition and care.

In Q4, at the beginning of Q4, we completed the sale of the Marine Lipid business. That has an annualized impact on top line of about $170,000,000 We’ll see that having an impact as an M and A effect in the three quarters that are ahead of us similar as TTH. Then last but not least from the businesses on the next page, we’ve got our Animal Nutrition and Health business. Obviously, as a CFO, also very pleased with the deal that we announced two days ago. I think it’s a reconfirmation that we’re well on track with the carve out process on that.

But nonetheless, the animal nutrition and health team is very much focused on continuously improving the business dynamics as well. And you’ve seen that every quarter a step up in the underlying EBITDA. Q4, we have realized a very high EBITDA overall. We came in at $176,000,000 of EBITDA, obviously supported by the temporary vitamin effect of $85,000,000 somewhat above our guidance in the fourth quarter. But if you back that out, you see the continued buildup of and restoration of the EBITDA performance of the Animal Nutrition and Health.

We’re back to growth on the back of a normalized conditions and the contribution of the programs. Overall, Dimitry said that the programs have contributed about 100,000,000 in 2024, which of course is largely benefiting the Animal Nutrition and Health business. Margin in Q4, almost 90%. So I think a very strong performance of the team in the midst of all of the transactions. So when you would talk about keeping the eye on the ball, I think the team has done an excellent job on that front as well.

If you look at the segments within Animal Nutrition and Health, Performance Solutions continuing at a high single digit pace throughout the year. So the momentum keeps on going. The team is doing an excellent job in continuously growing that business across all segments. So both the enzymes alliance that now has divested to NovoNisys, but all the other elements, it is very strong product portfolio and that continues to grow across the board. And the dynamics in the vitamins space and the premix are known continued normalization, improved pricing and, obviously, positively impacted by the digital impact.

If we then look at the next page, it’s again a summary of the key financial metric. And here you can actually see the nice flow through of the step up in our overall performance, supported and fueled by the contribution of synergies of SEK 100,000,000, the vitamin improvement program of hundred million dollars and the organic growth, bringing the absolute EBITDA step up to $350,000,000 and you see that nicely flowing through resulting in that step up in EBIT ROCE and earnings per share. Cash flow well above the 1,500,000,000.0. I didn’t want to make the same mistake as last year when my CEO was upset that I missed a million to make it a billion round. So this time we took good care and made sure that it was well above the 1,500,000,000.0.

With all jokes aside, I think 12% is a very nice performance. And I’ll zoom in the details and the drivers of that a bit because it’s a sustainable performance as well. Net debt came in very nicely as well at 2,500,000,000 about $500,000,000 better than the last guidance that we gave, of course, largely driven by the capitalization of our robotics stake, which gave us about $400,000,000 of cash in the fourth quarter. And on the back of that, we continue our dividend and obviously very pleased with the share buyback. You heard me talk about it last time, I’m not a fan of a lazy balance sheet.

So we maintain our discipline around our capital allocation policy and in line with that, happy to start that program as well. Now zooming in on cash, because I think it is a very good performance for us as a group on the next page. Some of the key drivers, so mainly driven by step up in business performance. So very good to see that EBITDA translated into a significant step up in our cash performance. So that is one of the key drivers.

At the same time, we maintain our investment pace and we continue to invest in future proof in our growth. So our cash CapEx came in at 6% of sales in line with guidance and our ambition, and that is largely invested in securing the growth in predominantly our P and D and TTH business. At the same time, we maintain a good discipline around working capital. We continue to have a good performance at the receivables and payable side. Overdue is under control.

The DSO is under control. And also inventory came down despite the significant growth that we’ve witnessed in our business. Not yet fully happy where we are at the inventory level as an absolute number and the month on hand. To some extent, also a deliberate choice because we also wanted to make sure that we had the right level of inventory to make sure that we can deliver on a Q1 growth ambition as well. But overall, with working capital dropping to 28% and almost 3% step down versus prior, I think that continues to move in the right direction in line with the ambition that we also had on that front.

So financially, very strong year. Very pleased as the CFO with that performance. Now if we go to the next page, not only good news on the financial side, also on the sustainability side. Dmitri commented already on that around our safety and our engagement index. You see that on the page as well, the point 24.

Was every incident is one too many. I think that’s also the attitude that we have within the company. Overall, this is a a low for the group, and we’re very pleased with that performance as well because it’s important that everybody gets home safe at the end of the day. That obviously translates into a continued engagement. It contributes, and that remains high at around 80% level.

Our ambitious targets around timing have been defined in ’24 as well. As Dimitry said, that vetted and validated by SBTI, we see a good reduction in our scope one and two emissions as well as the three and we’re comfortable in the journey towards 02/1930 that we set ourselves. And also on the relevant metric, we’re doing well on the sustainability front. And we’ll come back to that a little later with the invitation for the event a little later this year. Now let me wrap up the finance.

So we also have enough time for Q and A. On the next page, our outlook for the year, our strong performance in 2024 made us also confident around $25,000,000 We have a positive outlook for the year, backed by continued growth in our businesses, a continued contribution from synergies of about 100,000,000 again, continuation of the vitamin improvement program. We’ll finish that off next year with another SEK 100,000,000 contribution to the EBITDA. And in that guidance, there’s about SEK 100,000,000 for the price effect from the force majeure. We also included some housekeeping to allow you to model.

Should there be any further questions, we’re happy to take those. Let me pause there and see what’s on your mind and get it back to you, Dave.

Dave, Moderator/Investor Relations: Yeah. Thank you, Arald. Indeed, time to start with the Q and A. As I said at the beginning of this call that the sell side analysts who want to ask questions in the Q and A session have to be registered via the questioners link which you can find on our website in the financial calendar. If you have done so yet, you can still switch.

All other participants can listen into this Q and A session via the Zoom (NASDAQ:ZM) meeting. With that, operator, we can start.

Operator: Ladies and gentlemen, we will now begin our q and a session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Once your name has been announced, you can ask a question. Thank you. Our first question comes from Nicola Tang at BNP Paribas (OTC:BNPQY), Exane.

Please unmute your line.

Nicola Tang, Analyst, BNP Paribas, Exane: Hi everyone. Morning and thanks for taking the questions. Firstly, congratulations on the feed enzyme steel. I appreciate it’s still early in the process for the rest of A and H, but I was wondering whether the NICE valuation for the enzyme steel and the timing, changes your views at all in terms of valuation and the timing for the the, exit process for the rest of A and H. And, you talked about no big M and A in 2025 and you have a CFO that likes numbers and dislikes lazy balance sheet.

So I was wondering if you could talk a little bit about potential use of proceeds for the rest of A and H beyond this buyback related to the feed enzymes deal. And then the second question, looking at your outlook, the two at least 2,400,000,000.0. If I adjust for the temporary vitamins effect, the restructuring and the synergies, I think it implies only sort of low single digit kind of underlying organic growth ex synergies. I was wondering if you could give us some color on your expectations by division, you know, besides seasonality, any notable changes in trends that you’ve seen in Q4 or that you’re seeing so far in Q1? Thank you.

Ralph Smites, CFO: Okay.

Dimitri de Vriese, CEO: I will I will take the the first one on A and H and give some call on on on m and a, and then I hand over to Rolf for for the numbers, and they can e immediately correct me on m and a if you wish. And then maybe you can say something about the outlook. And then maybe already jumping in to give some color on the businesses, but let’s leave other codes. So A and H, maybe you do remember that we were questioned on the A and H carve out because we said it doesn’t fit the journey which we’re going to create for Decent Finley, be more consumer, customer focused, and the volatility and the capital intensity of A and H is better suited in a new owner. That doesn’t mean that this business is not a good business.

And I’ve said that many, many times before. I said there’s more volatility than we have in the core of this Infimini. And I hope that with the Enzyme Alliance valorizing of the $1,500,000,000 it shows a little bit the confidence we have that we get good value for the A and H business. Let me just go back a little bit. Remember, we have said A and H is a 3.5 around ish $3,500,000,000 business of which one third is vitamins related, which has volatility.

Vitamin is a great category of product, but it has volatility into it. One third of the A and H business is premix, which is an unparalleled premix infrastructure which we have, which creates synergies for end vitamins as well as Performance Solutions. And that Performance Solutions part is the third bit we have depicted. The Enzyme Alliance was part of that Performance Solutions business. So $300,000,000 out of that one third, we now have valorized and it was also an alliance.

So we also have simplified the way forward. So I hope you see that it’s a proxy of the value of A and H. And it didn’t change our timeline. We basically said, we’re going to carve out A and H. We’re going to build the house which is separate, which we can invite people to look at this beautiful house.

And secondly, we will make that ready at the end of twenty twenty four. We’ve done that. And therefore, the announcement on Tuesday, aligned with the Novanace’s Alliance, Feed Enzyme Alliance sale, we also announced that we’ll start the commercial process. So I think it’s nicely aligned, and we’re going to execute that throughout 2025. I hope you appreciate it.

I will not give detailed milestones. Obviously, we have a plan with detailed milestones, we also know in this type of process, with Guelph and myself have done several times, you never know exactly which milestone will be hit, but we’re definitely on schedule with the plan to execute it throughout 2025. M and A, yes, let me make it very clear. I think I was asked several times and maybe had to do a little bit with the concern what we would do with the money, that we would do silly things on M and A. But doing silly things is never a good thing.

But we also have said that we need some time to anchor the merger. So remember, we are on just two years on the go. We have merged two engines. We made this engine bigger. We made it faster.

We made it more agile. We tuned part of the engine. We made deliberate choice which component we would like to have in the engine. And this engine is delivering the growth, the results in 2024. So we need to anchor that engine.

So we’re not jumping into other elements to strengthen that engine yet, although the engine is already very, very strong. So we’ll also take time to anchor it and to show what this engine can deliver. And we’ve gave you a bit of a sneak preview on what it delivered in 2024 with the results. We are full confident that we’ll do that in 2025 as well. So no big M and A was also a bit to take away your concern that we, A, hope you understand we’ll not do silly things.

But even if we were doing intelligent things, we’re also aware that we need to anchor it. With the share buyback, obviously, it was linked to some of the valorization of the business we’ve done, not only on the enzyme alliance, but also the tuning segments, and where we made quite some progress. But it’s also coupled with the fact that we have seen really good cash flow generation in 2024, and we’re confident that we continue that cash flow generation engine for the next years to come. Coupled with a conservative balance sheet, I think we decided to go for that share buyback. I think it’s too early to anticipate on what we’ll do with the money on A and H.

We just opened the house for visitors. But I just wanted to make it very clear that we focused on growing what we have and show the beauty in nutrition, health and beauty of that engine. And with that, maybe Ralph, a little bit on the outlook and if you have any other ideas to do, what to do with the money.

Ralph Smites, CFO: I think that summarizes it well, and let’s see whether there’s further questions around that. But I think it’s very consistent in line with our capital allocation policy, and that’s something that that is important to us is that we make promises and then we do what we promise. I think that is absolutely key in this journey. Back to the outlook question. Thanks for that, Vikram.

Good morning. Overall, at least 2.4. I think the underlying question is what is the performance of the other three business units, PNB, TTH and HNC? And the short version of the story is that we see a mid single digit growth going into 2025, each with their own dynamics and their own dynamics in the segments that they operate. Across the board, at this point, we have the momentum coming in from the end of the year.

We made a strong start in January again with 2025. And I’m confident that we will see a mid single digit growth in all of the three business units with the corresponding flow through in EBITDA. So current outlook is assuming around single digit step up in EBITDA in all these three business units as well.

Nicola Tang, Analyst, BNP Paribas, Exane: Thanks so much.

Operator: Our next question comes from Charles Eden at UBS. Please unmute your line.

Charles Eden, Analyst, UBS: Hi. Good morning. Just checking if you can hear me okay.

Ralph Smites, CFO: Good morning.

Charles Eden, Analyst, UBS: Super. Thanks both. Morning both. Yeah. So two questions for me, please.

And they’re sort of both slight follow-up, to Nicholas’ questions. Firstly, on on the A and H division, can you just help us understand? You’ve got 85,000,000 sort of one off benefit from the higher vitamin prices. Is that are you saying you get an incremental 100 in 2025? So another 100,000,000, so there’s 200,000,000 total?

And if so, can you help us sort of follow that through in terms of by quarter, you’re expecting 100,000,000 in Q1, ’1 hundred million in Q2 and then the Q4 reverses? So just a bit of clarity on that, if that’s okay. And then just on the the transaction you announced on Tuesday, what is left? Is it clear to say it’s easier to sort of market that as a single unit now that the alliance is not involved in that? Or is it still sort of a all options open?

If you could just give some color on that, it would be helpful. Thank you.

Ralph Smites, CFO: So I’ll take the vitamin and I’ll comment on the transaction as well. So in the guidance that we said one hundred million vitamins, it’s basically not incremental. It’s our guidance now. Now it largely reflects the vitamin effect into the quarter in line with the comment that we made last year. Very difficult to predict how long it will be lasting and we’ll update you as we go.

So what we’ve done in the outlook is that we said, look, we will deliver at least 2,400,000,000.0 with 100,000,000 temporary vitamin effect. In the previous discussions, we guided that the impact in Q1 will be similar as what we’ve seen in Q4, and that’s now baked into the guidance. If we see a prolonged impact from the vitamin effect, then that contribution could be above 100,000,000 for next year. So it’s not incremental. It’s not phased over the years.

It’s largely reflecting the dividend effect that we expect in the first quarter. Then on the transaction side, I mean, there’s a few things that played into this. Obviously, as a partner, you always have a conversation, so we did also with overnices around the impact on the alliance in the transaction. And they actually approached us with the desire given that they have also changed as a company to actually take full ownership of that. We continue to source enzymes from them.

So that is something that we will continue to be able to blend in. The reality is also with a part carved out, the overall deal size might be somewhat lower and in that sense, always more accessible to more players. But we’re confident in the asset that we overall have. I think it plays nicely into the valuation of our A and H business. Remember when we talked about the A and H, Dmitry commented that earlier that we had these three distinct buckets, which all come with their own valuation.

I think it underpins the overall performance solutions. Now, if you look at that Performance Solutions piece, that remains a high quality part of the ANH asset. So overall, we were close to 1,000,000,000 in sales. Take the 300,000,000 of the deal out and drops to about 700,000,000, but EBITDA quality is exactly the same for the remaining parts. So in that sense, I think it will be beneficial.

It also shows that there’s good appetite for the asset itself. So we feel that this is also positive to the overall transaction in terms of time and value.

Charles Eden, Analyst, UBS: Brilliant. That’s very clear as always. Thanks, Ralph.

Operator: Our next question comes from Lisa Denis at Morgan Stanley (NYSE:MS). Please unmute your line.

Lisa Denis, Analyst, Morgan Stanley: Hi, everyone, and and and thank you for taking my questions. I would just like to first and foremost come back to the 2025 adjusted EBITDA guide. So from the comments that were made under the previous questions, it seems that you guided to an incremental hundred million for the optimization program, hundred million synergies, and a hundred million price effect for vitamins in the first quarter. And given you’ve reported 85,000,000 temporary vitamin effect in the fourth quarter of last year, it seems you’re guiding to about 200,000,000 underlying positive developments for this year. Can you just share where you expect this to come from?

Is it volume growth? Is it pricing? It would be helpful to shed a bit of light on that if that’s possible. That’s my first question. Secondly, can you provide what your expectations are for input inflation this year and how you expect pricing to contribute to the like for like growth for this year, especially excluding the vitamin prices effect?

And lastly, can you share how your 500,000,000 revenue synergy program is evolving? And how much of that pipeline synergies you’ve mentioned a number of times are sort of moving towards real life revenue synergies and maybe specifically in which segments you’re seeing the most momentum? Thank you.

Dimitri de Vriese, CEO: Let me guide through a few of them, and I should jump in later. I think synergy for for Rolf. Just to repeat a little bit the components of the outlook, and I think those were questioned a few times. So let me start with the at least $100,000,000 temporary vitamin effects. That’s more or less in mind with ’24.

It’s also to make the comparison easy. And also on the temporary vitamin effect, we said at least 100 because at the end of the day, we I mean, we’re not speculating on what’s happening and we’ve been transparent on it as we speak. So, therefore, the $100,000,000 vitamin temporary. So that compared to last year, I would say is more or less equal. And then you have the vitamin transformation program.

And indeed, we will deliver $100,000,000 extra in $25,000,000 and therefore delivering on the whole vitamin transformation project. Then we included $100,000,000 for synergies, also what we promised. Remember, $100,000,000 in 2024 and $100,000,000 in 2025. And then you need to remember that we did some tuning. I said that in my initial slide.

So that has a negative impact if you tune. We sold off marine lipids and yeast extracts. I think that’s about 14,000,000 or so on EBITDA. So you need to take that into account. And then indeed, you have good organic sales growth around our mid term target, mid single digit, making the outlook at least $2,400,000,000.

That is a bit of a most probably you had that, but just to confirm. Then on the input inflation, we have we are thinking about 1.5% to 2% for 2025 and as an assumption, that is without any consequences on the tariffs. The 1.5% to 2% is a little bit of an effect of the salary increases we’ve seen in the years before. If you look at the pricing where on the input prices, we see an uptake, it’s on naturals. But net net, we see a bit of a stable portfolio going forward.

You know our business well. I think if the input prices go up, we are able to to increase that in our prices going forward with a bit of a delay. So if it’s a plus, we’ll benefit from it for a while. If it’s a minus, we we give it away for a while and we increase it in prices. So not too concerned on 2025 there, although the natural ingredient prices are going up.

So we need to watch that a little. And then on synergy, maybe, Ralf, you can give a little bit of highlight. I think the cost synergies, we’ve ticked off. I think maybe a little bit background on the revenue synergies.

Ralph Smites, CFO: Yes, let’s do that because that will also you’ll see that momentum flip over there from costs where it’s merely in a follow through and an execution of the program. The revenue synergies will start contributing more in 2025 and beyond. Maybe one step back, what we initially said is that we continue to track that pipeline. We’re regularly reviewing that every month, we sit down with the PUs, how is that pipeline developing. What you also now see is that it starts to contribute.

And in the Q3 earnings call, you alluded to the strong performance in TTH and the contribution of synergies. That’s something what we continue. With the lapsing of time and that we see more of that pipeline translating into contracts and invoices, we actually fine tune the overall tuning. So the pipeline remains well above the 300,000,000 across all of the businesses. But for example, when I zoom in on TTH, where there’s almost two thirds of the synergies are coming from, we actually go one level deeper in terms of our tracking.

So we not only look at the overall lead pipeline, which is overall 300, but within that, we actually start looking at how much is now contracted. The first time I talked about that was in the Q3 call. I think at that point, we had about 60,000,000 contracted. That meanwhile has evolved to 90,000,000 contracted. And also the invoice synergies is increasing nicely.

Like the reference back then to about 50,000,000 a quarter, that is something that we see continuing. So what we now see very nicely is that pipeline translating into contracting and contract into invoices. That last piece is obviously what has my biggest interest because that is something that ultimately we can take to the bank. So a very positive development there. If you look at TTH, it’s actually very nice.

We included again some three new examples to continuously feed you with new things that we are bringing to market. But it’s very strong across all of the regions and across all of the segments actually in TTH. And also the cross sell is actually even going better than originally planned. The fact that we are one uniquely positioned company in the space that we operate is actually giving us quite good access. And I think the performance in TTH throughout the year is showcasing that as well.

So, yeah, we’re looking at that number with very good confidence.

Lisa Denis, Analyst, Morgan Stanley: Thank you very much.

Operator: Our next question comes from Martin Verdiga at Kepler Cheuvreux. Please unmute your

Ralph Smites, CFO: line.

Martin Verdiga, Analyst, Kepler Cheuvreux: Hello. Good morning. First question is on Animal Nutrition. The organic sales growth in the fourth quarter was plus 16%, of which 15% was vitamin pricing and 1% was volume growth. Why was volume growth so low, although the vitamin related feed additives market was rather tight?

Did clients delay orders? Or did they switch from short term contracts to longer term contracts with a later delivery? And if so, what is now the split between spot market business and longer term duration contracts? And the second question is more a follow-up question on the, let’s say, upcoming disposal of the remaining business of Edmonton Health. Do you prefer to split up the this remaining portfolio, to get an even better price or a bit higher value?

Because I guess the potential predators for the Ergo group assets might be different versus the predators for the vitamin production assets. Or do you prefer to go to get rid of it in one go because it’s easier to handle? Thank you.

Dimitri de Vriese, CEO: Martin, thanks for that question. And indeed, animal nutrition and health, sixteen percent, super happy with that. Indeed, well spotted the 1% volume. I’m pretty okay with it. At the end of the day, remember that we had in q four our extended shutdown in Sysil.

And if you start up that plan, obviously, you need to fuel a little bit the flow and the value chain of your supplies. So Q4 is low on volume, but pricing is absolutely in line with what we expected. So you will see a pickup of the volume in Q1. It’s more linked to the seasonal next time that shutdown and when you have that operation running, it will take a while. So it has nothing to do with the pricing or changing pricing system in itself from longer term or spot and as well.

So just to reconfirm, pricing and animal nutrition is predominantly made on a quarterly basis, as you know. Then I think your second question was on finding

Alex Sloane, Analyst, Barclays (LON:BARC): a

Dimitri de Vriese, CEO: new owner for A and H. So we deliberately announced on Tuesday that after having the alliance sold to NovoNisys, it is simpler to go out and we have the house carved out and ready for visitors. So I think you need to be aware that the business model of premixed vitamins and the specialty performance solutions is synergetic. So you were referring to the Erber business, the mycotoxin absorbers. The mycotoxin absorbers have shown fantastic growth because of the premix infrastructure we have, very synergetic.

I mean, Urban Heart, any premix, we added our premix structure, very synergetic. And then adding with your vitamins into the premix really started off the growth of Performance Solutions. And I think we have seen the growth of Performance Solutions. And that really is because of the synergetic effect between vitamins, premix, and the performance solutions. So we think that that unit has a synergetic effect in itself.

That’s why we go out with the market as a whole. And it also in terms of how we want to focus the company, it is easier to go forward in one go. So we feel that that value is reflected in the setup, and I hope you will appreciate that we can’t give you any further details on the process, but we really have a timeline to exit that and to finalize that in 2025.

Martin Verdiga, Analyst, Kepler Cheuvreux: Thank you.

Operator: Our next question comes from Alex Sloane at Barclays. Please unmute your line.

Alex Sloane, Analyst, Barclays: Yeah. Hi. Good morning all. Thanks for taking the questions. Sue from my side, please.

Just the first one on the 100,000,000 exceptional tailwind for vitamins. Sorry to label a point, but just to be totally clear, I think you said it’s not incremental. So underlying, you’re essentially guiding to 2,300,000,000.0 EBITDA. Is that right? And can you share with us what sort of rough price levels you consider normalized for vitamin E and A in making that calculation?

Or maybe another way, what do you see as the kind of normalized vitamin margin? And how much of that tailwind, if any, is expected to be in HNC versus ANH? That’s the first one. Second one, very interested in your comments on innovation pipeline ramping on GLP-one and UPF concerns. Is that specific to The US or is that a kind of broader dynamic?

And I’d be interested to hear within TTNH, what solutions are seeing the most momentum on that front? Thanks.

Ralph Smites, CFO: All right. Shall I take the vitamins and do the second question? So on the vitamins, no worries, Alex, and appreciate the question. So I’ll be clear. So commercial would not be sensitive to start speculating on what I find a normalized valuation or pricing for some of the vitamins.

And with the three people around the table, you might get different answers. But let me be very specific. So we see a similar contribution in Q1 as in Q4. We have seen a restoring of the underlying conditions and vitamins and also the underlying EBITDA has improved on the back of that, supported by the vitamin improvement program. That’s what we continue to work on.

So we will call out that special vitamin effect as we do expect over time things to normalize. So we want to provide you as much guidance as we can on how we see that business develop and how that underlying performance is developing, also in light of the business unit is on the transaction. So in that sense, we want to be transparent on what is driven by the underlying business and what is coming from the dividend impact in the first quarter, but also the following quarters.

Dimitri de Vriese, CEO: Yes, maybe on the innovation pipeline, thanks for that question. Funny is, and I couple a bit the process for discussion with GLP-one. So GLP-one creates reduced appetite and has an impact for people who take GLP-one on your good health situation. And the good health really is impacted by taking that. And it also has to do with muscle pickup.

So proteins are absolutely key for people who use GOP1 as well as gut health problems. And there, we come into play with prebiotics, postbiotics immune improving ingredients. And we really see a request for products with probiotics going into it, but also more protein and fiber going into it. And a little bit coupled with, from a different angle, the processed food discussion, we already know and it’s part of what we call the Blue Ocean strategy we have. So we’re not only growing the markets we are in, we’re also developing new markets with our customer with lower sugar, lower fat, lower salt on the lower side, but also the higher demand for fibers, higher demand for proteins, a higher demand for minerals and vitamins in those products linked to food.

So that really is helping our innovation pipeline in the area where we’re strong. And specifically, what we’ve seen over the period is that the dairy segment is benefiting from that and especially yogurt. And if you go to your supermarket and you look at the yogurts, the category of yogurts, you see high protein yogurts, You see low sugar yogurts. You see yogurts with vitamins into it. You see yogurts with probiotics into it.

So we really see product launches there. To your point, the innovation is started in The U. S. So that’s definitely leading the innovation pack, but I’m very happy to say that we now see spillovers to Europe. So if you go to European supermarkets, you also see high protein yogurts.

You also see probiotic immune improving yogurts. So specifically in those products, we do see that America started, but we now see for us, which is good news, also spill over to Europe, and we do see that in our growth figures.

Dave, Moderator/Investor Relations: We’re approaching 10:00, so let’s do one other question. Yeah. So basically, one other person to ask questions before we round off. So we give ourselves a few extra minutes. Operator?

Operator: Our last question comes from Stefano Stefano at ABN AMRO (AS:ABNd) Auto. Please unmute your line.

Stefano, Analyst, ABN AMRO: Yes. Hello. Can you hear me?

Dave, Moderator/Investor Relations: Yep. Yep.

Stefano, Analyst, ABN AMRO: Yeah. Guten Morgen. So a few questions left, from me. One is on, PMV. I was just wondering, we’ve seen 5% volume growth.

Obviously good, but quite a slowdown compared to the past few quarters. Are we seeing a little bit of normalization here in the end markets, which have been obviously really, really strong? Then another question related on the PNB, five percent organic performance on the adjusted EBITDA, so no operating leverage, it seems. Maybe a little bit explaining what is going on here exactly. And then my last question, I mean, I have many left, but let me just one general one.

On the Q1 business conditions, how are we doing so far?

Dimitri de Vriese, CEO: Yep. Stefano, and thank you all for the project. So we go to PNB specifically. Right? So your question was more linked to PNB.

Did I got that right?

Stefano, Analyst, ABN AMRO: Yes.

Dimitri de Vriese, CEO: Okay. Yeah. So, let me start with PNB. So what you need to understand is that we have fine fragrance, consumer fragrance, and we have our ingredients and our, what we call, beauty and care. So what we’ve seen on fine fragrance, very good growth in Q4, and we see that momentum continuing also in 2025 with a full briefing boost innovation pipeline.

Consumer Fragrance, very good performance in Q4 as well. But we do see that going into 2025, you will see some normalization on that pipeline because I think it’s versus a very tough comparison going forward. So there we see some normalization of business condition, but it will mean that it goes more into the mid single digit growth. Then that is also applicable for our Ingredients business. And then our fourth business is Beauty and Care, which is a considerable part of our business.

So if you make comparison with others, Beauty and Care is an important business for us. It’s over half a billion of it. That has been soft in Q4, predominantly in Asia and specifically in the sector of Sun Care. That softness continues into 2025. Our customers are saying that they are seeing an improved measure in the second half, but let’s see.

So we don’t really see changed momentum of of perfumer and beauty. We see a good start of the year for 2025 if you look at our order portfolio, but only beauty and care remain soft certainly in the first half. And let’s see what the second half will bring. I will give Ralph the word on the other leverage, but I want to close off on Q1 in general. So what we see in Q1 in general in terms of business momentum, we see no big change.

If you look at our order portfolio, January is done. I’m not guiding you for month after month, but we see a continuing good business momentum. You need to be aware, and I think you will follow-up with detailed questions with IR. There’s some seasonality in the H and C business with Eye Health, but overall, we don’t see change of pattern. And if you look at our briefs and if you look at our innovation pipeline, I think we can say we had a good start of the year.

Then Ralph, last for you, the EBITDA leverage, why don’t we see that coming back in an EBITDA leverage? So good question, by the way.

Ralph Smites, CFO: Yes, absolutely. And it’s something that we monitor as well. Margin is very much in line with prior, I’d say, by the seasonal effects. Usually, Q4 is the lowest quarter within the year. And at the same time, we’re making necessary investments, not only in terms of upgrading our cost and commercial organization to make us ensure that we continue to fuel the growth and the momentum that we have, but also our asset base to make sure that we’re well set for delivering the volumes that we plan to sell going into the year.

So no concern there. It’s not necessarily a quarter to quarter trend, but we overall see a continued improvement in the margin as well. And that is something that we will be working towards in 2025.

Dave, Moderator/Investor Relations: Okay. Thanks, Rolf. That concludes the Q and A session. So let’s go maybe, Dimitry, you want to make a few closing remarks?

Dimitri de Vriese, CEO: Yeah, I will make it brief also to respect your time. So we will continue our journey for 2025. It’s summed up in the next slide. We grow what we have. We anchor what we do, and we’re gonna deliver on the promises as you as you are expecting from us.

We’ll focus on the synergies. We’ll finalize the vitamin transformation program. We’ll keep you up to date on the animal nutrition process. We’ll start the process of returning a billion to shareholders as of April. We’ll continue to strengthen our people and planet ambition because it’s part of who we are.

It’s part of what customers expect from us. And we will work on our 2025 outlook to make that reality for at least 02/2004. I know you will focus on the word at least, me too, but at least 02/2004. And before we close off, just a reminder that you are all invited as well as your ESG experts for our special event in Kaeserauch in Basel on March the twenty fifth of twenty twenty five. And with that, I think we can close the call.

And thank you everybody for your intention and your interest in these infirmities and its beautiful journey.

Dave, Moderator/Investor Relations: Yeah. And let me add that if you have any additional questions, you know how to reach out to the investor relations team. We’re happy to take all your questions. And with that, let me hand back to the operator.

Operator: This concludes today’s call. Thank you everyone for joining. You may disconnect.

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