iShares MSCI ACWI Low Carbon Target ETF Price & Performance (CRBN)

Good morning, and welcome to the CorbionFullYearandFourthQuarter2024conferencecallandwebcast.wepublishedourfullyearresultsandthepressreleaseandpresentationcanbefoundonthewebsite@www.corbion.com, Corbion Relations, Financial Publications. Before we begin, please note that today's discussion will include forward looking statements based on current expectations and assumptions. These statements will involve some risks and uncertainties that may cause actual results to differ materially from those expressed. Factors beyond our control, including market conditions, economic changes and regulatory actions can impact outcomes. CorMed does not take undertake any obligation to update statements made in this call or contained in today's press release and presentation. For more information on assumptions and estimates, please refer to our annual reports. This is Alex Sokoliewski, Head of IR and with me on the call are Olivier Rigaud, Chief Executive Officer and Peter Kazias, Chief Financial Officer. I would like to now hand over the call to Olivier. Good morning, everyone, and thank you for joining Corbion's full year 2024 earnings call. I'm pleased to share that in 2024, we successfully met its upgraded targets for sales, [indiscernible] adjusted EBITDA, while significantly surprising our free cash flow target. We achieved organic sales growth and double digit increases in both adjusted EBITDA and adjusted operating profit. Our strong volume mix performance our focus on operational efficiencies, the successful implementation of our restructuring program and our CapEx discipline resulted in this significant increase in free cash flow.

Taking a closer look at our 2024 highlights, we achieved positive organic sales growth of 2.2%, driven by a volume mix increase of 5.2% and a pricing decline of 3%. Our organic adjusted EBITDA grew by an impressive 23.3 and we generated a free cash flow of €98,300,000 from continued operations. In our Health and Nutrition segment, We saw strong growth in both sales and adjusted EBITDA driven primarily by our nutrition business. Our Functional Ingredients Solutions segment also experienced positive volume mix growth, particularly from our food ingredients and the lactic acid sales to the joint venture business. Looking ahead to 2025, we remain really confident in our strategic targets and expect to continue delivering strong performance More on that later when we present our 2025 outlook. Now let's move on to the opportunities for differentiation monkey markets. We made significant strides in differentiating ourselves in key markets Our sales into the mature bakery and mid markets have grown thanks to our innovative and differentiated solutions as food formats, and clean label preservatives. By targeting these growing market sub segments, we've been able to capture new opportunities and grow with trends in food markets. Additionally, our value proposition in the strongly growing health markets has been confirmed with strong sales and earning growth.

This success underscores our commitment to delivering value to customers and stakeholders. Turning to the challenges we face. Raw material and freight prices were volatile 2024 While we've seen some reduction in input prices such as sugar, on the other side, freight and energy costs remain unpredictable in the near term. However, we anticipate an improvement in overall input costs 2025, which should provide some relief. We're also obviously closely monitoring the potential impact posed by tariffs on goods into The U. S. Health and sustainability continue to be at the forefront of our strategy. The trend towards clean labels and natural preservatives is accelerating outpacing the overall food market growth the proliferation of GLP-one's increased scrutiny on ultra processed foods and aid of regulation The European and The U. S. Ingredient space could create increased demand for natural and health food ingredients. So furthermore, our sustainable omega-three solutions offer structural growth driven by higher adoption in aquaculture, and the supply constrained long term outlook for Fischel. We're really well positioned to capitalize on these trends and drive sustainable growth.

Before I turn things over to Peter to present our financial performance in 2024 Corbion, I like really to emphasize that we are confident in our strategy direction and in our ability to continue delivering strong performance 2025.

Thank you, Olivier, and good morning, all. 2024, our sales increased by 1.9% compared to 2023.

This growth includes an overall growth rate of 2.2% Currency impacts, particularly due to the depreciation of the Japanese yen slightly countered the sales growth while the U. S. Dollar remains flat year over year at $1.08 per euro.

Our 18.5% increase.

In the Functional Ingredients and Solutions segment, we saw positive volume mix grow although this was offset by prior declines following input costs. Relaxation.

Turning now to our adjusted EBITDA. We achieved a remarkable growth of 24.8% year over year, with 23.3% of this growth being organic. The key contributor to this strong performance was our Health and Nutrition segment, which benefited from robust volume growth as well as favorable pricing. On the other hand, our Functional Ingredients and Solutions segment experienced a slight negative impact. It's important to note that our EBITDA was a affected moist and phasing, of course, this Q4, earlier indicated including delayed transport cost increases from midyear, maintenance expenses as well as variable compensation. Looking at our profit and loss from continued operation, our depreciation and amortization increased year over year. This is primarily due to the completion of our ERP implementation and several capital expenditure projects.

We Moving on to adjustments, these have been mainly driven by the restructuring program. Which resulted in a reduction of approximately 180 FTEs compared to the end of twenty twenty three. It's important to note that the adjustment in 2023 were influenced by the reversal of an impairment of our LG fermentation in the Nutrition business. Regarding financial income and expense, we've observed a decrease compared to last year. This is attributed to the divestment of our emulsifier business as well as some non cash foreign exchange items. In terms of our joint venture, the results have been negative. Although we achieved a positive EBITDA of €12,000,000 this was offset by depreciation as well as interest paid to shareholders and tax obligations. Our effective tax rate stands 26.6% which aligns with the jurisdictions in which we operate. Finally, our results after tax has seen a positive impact of 6.5%. Looking at the Functional Ingredients and Solutions business. For the full year, we experienced a positive volumemix growth of 3.3%. And we achieved 3.4% in Q4. This growth was primarily driven by our food business. Particularly in bakery, meat and dairy markets, as well as key products and market adjacencies. Additionally, we observed growth in lactic acid volumes to the joint venture, driven by increased PLA demand.

Moving on to our Biomedical segments, This segment was down compared to last year, primarily driven by weaker demand in acrochemicals and softness in the semiconductor market. Regarding pricing, we faced a negative impact of 4.9% for the full year and 4.1% for Q4. Following the relaxation of input costs. Our EBITDA margin for the full year stood at 8.8 with Q4 at 7%. The adjusted EBITDA includes the absorption of the stranded cost from the emulsifier with Delta which impacted margins by approximately 200 basis points.

Compared to Q3, the Q4 margin was softer as expected. Due to seasonality and the phasing of expenses including the mentioned temporary freight costs, maintenance costs and variable compensation.

Looking ahead to 2025, we see continued positive growth and margin improvements as of Q1 as we fully compensate for the stranded costs. We are implementing a series of initiatives to achieve that as earlier communicated. Including process efficiency, complexity reduction procurement saving, further in sourcing as well as savings from the lactic acid plant Moving on to Health and Nutrition and starting with our organic sales growth. We achieved an impressive 18.5% for the full year. With Q4 contributing 8.8%. This growth was driven by strong performance in our Nutrition [indiscernible] particularly in the agriculture and pet food markets. Our volume mix growth for the full year or 13.9% with Q4 showing a modest increase of 0.2% due to strong phasing effects Q3, The substantial growth was primarily due to robust demand for our algae fermentation DHA products, which supports both aquaculture as well as pet nutrition markets. In the Pharma business, we experienced volume mix growth although this was partly offset by reduced sales prices. Despite this, we continue to see positive momentum in the segments. Our Biomedical Polymers for the year remained flat with slight sales de growth of 1%. However, we anticipate sales growth in 2025 driven by business development, mainly in drug delivery.

Moving on to our EBITDA Corbion, achieved a full year margin of 29.9%. We've maintained high EBITDA margins consistently throughout the year. The increase compared to last year is attributed to a combination of increased operational leverage strain optimization, well as a favorable product mix. In summary, our Health and Nutrition segment has demonstrated strong performance with double digit volume and mix growth. Sustainably high EBITDA margins and positive momentum across our key businesses. We remain confident in our ability to continue this growth trajectory [indiscernible] Moving now to the performance of the Total Energy Scorpio joint venture. The JV achieved an organic sales growth of 13.2% for the full year with Q4 contributing 7.1%. This growth was driven recovery in volumes. However, the business faced significant pricing headwinds which partially offset their volume growth. Despite these challenges, they're robust long term drivers for the PA markets remain intact. Moving on to the ABA Corbion. The joint venture achieved a full year margin of 8.7% with Q4 being at 2.1%. The margin contraction versus last year was primarily driven by negative pricing dynamics and a commoditization in certain applications, which impacted regional and product mix. It's important to note that we anticipate high single digit EBITDA Corbion 2025.

I'm pleased to report that we have achieved our seventh consecutive quarter of positive free cash flow. This positive free cash flow generation is a testament of our EBITDA development and disciplined approach to capital expenditures. We've continued to invest in our key priorities while carefully managing our overall capital expenditure levels. In 2024, we spent around €80,000,000 we anticipate maintaining this level of investment for 2025. As well through our CapEx discipline in both maintenance and expansion CapEx. We Our free cash flow in 2024 has been partly impacted by other working capital. These include the phasing of customer rebates, the monetization of VAT receivables in Brazil and variable compensation. While we've made progress in reusing our operating working capital, it has not yet reached our target levels. Had been partly driven by ongoing challenges in the Rev C region and an increase in inventory in anticipation of the potential harvest target in The U. S. Which ultimately did not materialize. Looking ahead, we plan to further reduce our working capital in 2025 and we're confident that our strategic initiatives and disciplined financial management will enable us to achieve this goal. In summary, our continued positive free cash flow generation disciplined CapEx management and strategic investments position us well for future growth.

Our dividend policy is designed to be progressive. With the ambition to annually pay out a stable to gradually increasing absolute dividend. This year, following our positive net results and strong free cash flow developments, we're proposing a 5% increase in the regular dividend bringing it to €64 per share. This proposal reflects our commitment to delivering consistent and growing returns for our shareholders. The proposal is subject to approval at the Annual General Meeting, which is planned for May, If approved, the ex dividend date will be May 16, with a record date set at May 19. And then cash dividends will be payable at May 27. In summary, our proposed dividend increase underscores our confidence in the company's financial health and our dedication providing value to our shareholders. We believe this approach aligns with our long term strategic goals and support our ambition to maintain the progressive dividend policy. For now, a bit on ESG accomplishments and ambitions. Starting with revenue contribution contribution to sustainable development goals. We've seen a notable increase in 2024. In 2024, 74% of our revenue three and twelve. Which was up from 2022. This improvement is partly due to the divestment of our MOSFI business which did not align with our sustainability goals preventing food waste Health Circular Economy and Biodiversity.

Our commitment to the large cycle assessment has also been strengthened In 2024, 92% of our products were covered by LCA. Compared to 79% in 2022. This comprehensive assessment and ensures that we are continuously improving the environmental impacts of our products. Our SCOPE three CO2 emissions increased in 2024 compared to 2023, but are still down from the 2021 levels.

The increase relates to higher inputs and supplier mix. We're proudly to have received high ratings from CDP recognizing our implementation of best practices in climate change and a gold score from Ecovaros. For our leadership in sustainability, both achieved in 2024. And now back to you, Olivier, for the outlook.

Yes. Thank you, Peter. So I'm excited to share ambitions for 2025, which are in line with our previously shared objectives. These targets reflect our commitment to driving growth, enhancing profitability, and delivering value to our shareholders. So first, let's discuss our organic sales growth. We are targeting a volume mix growth between 26%, This growth will be driven by our continued focus on expanding our market presence and leveraging our strong product portfolio. Moving on to our organic adjusted EBITDA growth, We're aiming for an impressive growth rate of over 25% from our continued operations. This target underscores our confidence in our ability to optimize operations improve efficiencies, and capitalize on market opportunities. And this is in line with the guidance shared previously at the Capital Market Day. [indiscernible] to be between €80,000,000 and €90,000,000 and this investment will support our maintenance and growth initiatives. Probably including capacity expansions for algae fermentation, the biomedical polymer business and also some product in source. Sourcing. In terms of free cash flow, we are targeting a figure of over €85,000,000 excluding divestments and acquisition, So this positive cash flow will enable us to reinvest in our business pursue strategic initiatives [indiscernible] return value to our shareholders.

Finally, anticipate a covenant net debt to covenant EBITDA ratio of approximately 1.6 times by the end of the year. This target reflects our commitment to maintaining a strong balance sheet. So we are confident in our strategies and our ability to achieve these ambitious goals and we really look forward to share our progress with you throughout the year. Now Peter and I are happy to take your questions. Thank you, Olivier.

Call participants, if you'd like to ask a question on the call this morning, while your question is being answered. Our first call this morning comes from Sethu Sharda, of Barclays Bank. [indiscernible] please go ahead.

I have three questions.

The first one is on the health and nutrition volumes.

These are flat in Q4 contrary to the expected high single digit growth expectation you guided in Q3. So what factors are contributing to this slowdown? And additionally, how has the Q1 started for Health and Nutrition? And in terms of my second question, despite the volume growth in Food Functional Ingredients and Solutions, margins have declined sharply like so how significant is the impact of fixed cost phasing in that decline? And what is your outlook on the margin development Like programs like you announced during the CMD.

Along with the recovery of stranded costs from the Immersive IR deal. So in terms of progress, like how much of the absolute EBITDA growth of $35,000,000 this year is attributed to the savings? And additionally, what is expected contribution from these savings in FY 2025?

Thank you, Sethu, for the three questions. And let me start answering them one by one. So first, Health and Nutrition, you're right that for this this business unit, we guided double digit growth for the full year. That's what we also delivered. If you look to Q3, Q4, there is really a phasing of order impact in that one. As we indicated, I think in the Q3 call as well. So if you look to the combination of H2, It's perfectly in line with our strategic ambition, which I'm phasing. [indiscernible] [indiscernible] actually that's in line with the commitments which we did provide to you. So from that perspective, see Q4 really at a phasing and not a kind of starting of decline.

Your second is on margins in French And there are a couple of things to note which we also indicated in the Q3 call because, therefore, it's not unexpected. So if you compare Q3 to Q4, there is always a seasonality impact meaning that the absolute sales level is lower in Q4. And if you look on variable margins, it's roughly at the same level. And that is indeed, as you said, impacted by some phasing of fixed costs. Including inventory movements, maintenance and variable compensation. If you look margins going forward, then we're on the right trajectory. And that's also reflected in the comment Olivier made on the outlook And we see that margin uptake already happening earlier in the year. Now if you then look on your Question on the fixed cost savings and the strength of cost A bit of color on that. And all these costs are really included in the guidance, which we provided both for 2024 as well as for 2021.

So a key part of the €35,000,000 of fixed costs has been driven by the redundancy of 180 people. You clearly can see in the FTE development, a decline from year end 2023 to year end 2024. The decrease is roughly the amount I just told And then on top of that, we don't have to be a middle supplier. So therefore, you see an even bigger reduction The other significant item was the closure of Peoria. Or the mothballing of Peoria which we did by end Q1, early Q2. And also, as indicated, this reduction of FTEs have been done by the starting the end of Q1 and then phased during, I would say, Q2 and a bit of Q3. The project articulated related to the stranded costs will have an effect as of Q1 next I hope that gives some color, Sethu.

Okay, very good.

Our next question comes from Robert Janbos from ABN AMRO.

Auto BHS Robert Yan. Please go ahead.

I'm here Good morning, all. Thanks for taking my questions. I have a few. To start with Functional Ingredients and Solutions, [indiscernible] remained quite negative throughout the year. Very small improvement in Q4, but still materially negative. Earlier, you said that has also to do with the easing of input costs. But what is your view on pricing for this unit in 2025? Because if I recall correctly, you also said probably at half year or Q3, I don't remember that, that going forward, you will focus more on your pricing towards your customers in order to to improve the profitability. And the related question indeed is year on year, you reported an EBITDA decline modest to 8.8% Why are you still confident that you can achieve mid teens And what is the [indiscernible] for achieving that. Can you remind us?

My second Question. Is on and that's more positive. It's on Health and Nutrition, the EBITDA profitability one notch shy of 30% in 2024. Taken into consideration the year the further plans for pet nutrition and also human nutrition for Omega three.

It fair to assume could be further upside in this margin or are there other factors to take into consideration and maybe be a bit more cautious there? And my last question it's on the PLA joint venture. Why do you expect a high single digit EBITDA margin following the Q4 margin of just above 2%? What's the background of that expectation? And related also also, why describe this business as long term attractive following the recent steep trend towards commoditization that we are seeing.

So those are my questions. Thank you. Thanks, Sebastian. And I would suggest that to answer the fees pricing in the PLN Peter will take on the H and M as well. So I think you're fully right. If you look at the trajectory of pricing in 2024, indeed that we've added this this price erosion. Basically related to input costs. Has been very Corbion, of course, is the last pricing round. This happens usually for chunk of the business in the course of Q4 for 2025. And we see, of course, less erosion We've been also even going for price increase in some markets. So what you're going to see in the Actually, on the fees [indiscernible] Obviously, we are scrutinizing, as we've said earlier, any potential tariffs impact you know that might happen and occur, but we are preparing for that. So to that stage, we still have, I mean, again, some pricing run to be done for Q2. And for H2. So there is also some flexibility to react in the course of the year on pricing and movements on the on the fees direction. At the same time, on the margin, we have indeed this plan to really also compensate for the stranded cost as Peter alluded to, which is primarily impacting the Fizz division.

So you know the compensation of the so called stranded costs that we committed to will really favorably impact also the margin recovery into for the fees, this is where the impact is going to be visible. So the initiatives we mentioned in the Q3 results, related to not only pricing, but also procurement initiatives, but also product portfolio simplification, SKU reductions. As well as some operational efficiencies related to the Thai plant ramping up and the also in sourcing initiatives that we've put in motion will really contribute to the margin recovery into fees towards the mid teens. Now I'm not telling we're going to achieve the mid teen in 2025. So maybe I jump to the PRNGV and then are going to come back on the health and nutrition. I think one of way we see and why we do see margin getting better than the Q4 one, which was really low, is that, yes, the plant is filling up, so we are seeing operational leverage. In the plant because you might remember the entire market and ours as well dropped by almost 50% back into mid-twenty twenty two. Now we start to see and rebuild volume recovery.

And we see that translated as a personal leverage into the plant on our cost. That's one. Thing that is important. The second element is that, yes, the joint venture is also benefiting to some extent from lower input costs related primarily to sugar price. So as you can expect, it's also favorable we mentioned that also in Peter's presentation, The PLA prices do remain depressed. So now when we say the fundamentals do remain intact, you look at the drivers, We also discussed previously that most of the growth today is happening across Asia. [indiscernible] And that is something we see continuing in 2025. Obviously, there is upcoming new regulation in China that we are expecting in the course of the year to really become official, to even strengthen the usage of PLA in some categories on the Chinese market, which is a very big market. So this is something where basically most of the signals so far are positive on the volume recovery of the peer market. The big question remains on pricing. So Peter, maybe you take over the H and N question. Yes. So I mean, you're right, Robert, Jan, that if you look to health and nutrition, I mean, a great success in terms of EBITDA margin, which was almost 30%.

And also quite consistently throughout the different quarters. You're right that we are going to these nice attractive markets and see some growth areas in there. I would be conservative putting any numbers higher than 30% on that one. So if you look to the EBITDA delivery into next year, that's more as Olivier alluded regarding FIS. Then it's a step up in margin in the health and nutrition part of the That's clear. I'm just wondering, Peter, why you advised to be conservative? Are there other factors that that could have an impact because I understood that margins on Human Nutrition Products can be significantly higher than the margins that you currently realize on the portfolio. Yes. So two things on that. The one is margins in current of dollar per kilo definitely. Margins in percentage also higher from if you invest in additional capacity, you sometimes need some operators here and there. So do I anticipate There's no, but I would be cautious Maybe it's on my end, but I'm losing connection with you, Peter. But thanks for what I could hear.

Yes.

Yes. Good I could hear you, Obitian, pretty well. Questions from my side. Can you talk a little bit on the outlook of the biochemicals part? Agro markets, semi markets, how do you see that evolving in 2025? And then also can you provide a bit more granularity on the status of the product adjacencies in Foods dairy stabilizers, etcetera, how much are they contributing to revenue in 2024 Corbion how much growth you are still seeing in 2025 and beyond for those projects? Those were my questions. Thank you. Yes, it does. Thank you very much. Yes. Hello, hello. Good morning and thank you for taking my question.

I would have two, please.

Can I just ask about why CorBeyond is staying in PLA at all? Because the explanation given at the moment is, well, maybe Chinese regulation comes to the rescue, but it feels like this business has a problem and one that could get worse when Cargill, PTTC bring on new capacity in the late 2020 in the late this year? What stops the company turning around and tomorrow putting a press release out saying we are exploring options to exit this JV? Why is it still an attractive business to be in? My second question is on the underlying volume growth in the Food segment. How is this actually developed if we exclude mix over the last three or four years? Has there been any volume development? And my third one is just on the the outlook as you see it for the biochemicals area, so the health semiconductors and so on in '25, it all looks pretty positive but any color on that is helpful.

So everything is fine on the audio side and Emma is just checking on the webcast side. Yes, please proceed.

Yes, indeed. I'm still here. That's helpful. Thank you. That's helpful. Could I just quickly follow-up with one on CapEx? The number is down on what was guided in 2024. Where has the €30,000,000 cut roughly come from? And can you make any comments on how you'd expect working capital capital to perform in 2025? It looks like it was pretty good in 2024. That's helpful. Thank you.

I believe Emma is looking into the side of the webcast site. Emma, please can you confirm? Alex, as it is confirmed, on audio side, the participants can hear you, but not on the webcast. Proceed with the audio side of the call.

Yes. I can hear you, but I think that I missed most of the call since Robbyjohn's questions, I hardly heard anything. So no answers at all. But so I don't know, I heard the question of Sebastian, but also didn't hear the answer.

So but fine, I'm not sure how you're going to solve that problem that we didn't get that information.

But I had a Yes, but then we still missed your other part. But Yes, that would be fine. In the meantime, And I look at your leverage guidance for 2025 from the 1.6 and you say, okay, and your EBITDA guidance of plus 25%, so that means an EBITDA of at least let's say roughly two twenty million Then I end up with net debt of around €350,000,000 which is confident net debt, which is similar to what is now So then the question is, where is all those free cash flow going to? [indiscernible] That's my first question. And I'm not sure But did you pay the taxes for the on the gain you had from the emulsified disposal already?

Okay.

My calculation is correct that your net debt is then expected to land at around $350,000,000 How did you call that last one? Boomi?

Okay. [indiscernible] [indiscernible] Yes. And yes, okay, very good. Yes. And the other question, I missed on the answer. So I think that I'm Khosse also had a question on the AH and N growth in Q4 and going forward. I think that's it. Okay.

Thank you.

Okay.

I've reconnected.

I can hear you loud and clear.

Hopefully, all participants can. I have another question in the queue. This is from Alex Sloan at Barclays. Alex, I hope you can hear me.

Please continue with your question. Again, that's Alex Sloan at Barclays. [indiscernible] All right. All right. There seems to be no further questions. Thank you all for tuning in. We'll make the replay available with audio if many participants did not hear. This concludes our conference call this morning. Thank you all for your attendance and questions and we look forward to having this Please note we will report out our Q1 twenty twenty five results on April 23, And we will speak with you all then at the latest. Operator, you may end the call.

That does conclude our conference for today. Thank you for participating