Statement by CEO Mauricio Graber: “The strong results for Q2 confirm the attractiveness of the markets we serve in FC&E and H&N, and the resilience of our customer-focused business model. Organic growth came in higher than expected and reached 11%, driven by both pricing initiatives and volume growth. EBIT b.s.i. increased by 8% despite higher input costs and a less favorable product mix, leading to an EBIT margin b.s.i. of 27.0%, which was in line with expectations. In light of the increased impact from EUR-based pricing we adjust our outlook for 2022/23 for organic growth to 8-11%, while maintaining the outlook for the EBIT margin b.s.i. of 26-27%. The outlook for the free cash flow b.a.s.i. is adjusted to EUR 180-220 million.
With the approval of the proposed merger from shareholders of both Novozymes and Chr. Hansen, we have reached an important milestone towards creating a leading biosolutions partner based on complementary technology platforms. Together with Novozymes, we continue the regulatory approval process with closing expected in the fourth quarter of the calendar year 2023 or the first quarter of the calendar year 2024.”
Q2 2022/23 highlights
Revenue amounted to EUR 338 million, up 11% from EUR 304 million in Q2 2021/22. Year-to-date revenue amounted to 647 million, up 13% from last year.
Organic growth was 11%, driven by a mix of price and volume growth. Food Cultures & Enzymes organic growth was 12% and mainly driven by price initiatives, but with good volume growth above underlying markets. Health & Nutrition organic growth was 9% and driven by volume, but with an increased impact from pricing initiatives.
The Lighthouses (Bioprotection, Fermented Plant Bases, Plant Health and HMO) were positively impacted by the timing of orders and delivered 38% organic growth combined in Q2, while the core businesses delivered 8% organic growth. Year-to-date Group organic growth was 10%. Lighthouses showed organic growth of 21%, while the core businesses delivered 9% organic growth.
EBIT b.s.i. amounted to EUR 91 million, up 8% from EUR 84 million in Q2 2021/22. The increase was driven by a positive contribution from exchange rates, pricing initiatives and volume growth, which was partly offset by the negative impact from higher input costs, and a less favorable product mix. Year-to-date EBIT b.s.i. amounted to EUR 168 million, up 12% from last year.
The EBIT margin b.s.i. was 27.0%, down from 27.7% in Q2 2021/22, as continuing inflationary pressure, the negative impact from the product mix and a high comparable in Health & Nutrition from Q2 2021/22 were only partly offset by a positive impact from pricing initiatives, scalability and exchange rates. Year-to-date EBIT margin b.s.i. was 25.9%, compared to 26.2% last year.
Free cash flow b.a.s.i. amounted to EUR 56 million year-to-date, down from EUR 86 million last year, as the cash flow from operating activities b.a.s.i. was negatively impacted by a change in working capital driven by inventories, and an increase in taxes paid.
Outlook September 1, 2022 – August 31, 2023
The current EUR/USD exchange rate level stands at 1.10 versus 1.07 at the time of the most recent 2022/23 outlook, provided on January 12, 2023. In light of the increased impact from EUR-based pricing, the outlook for organic growth is adjusted, while the outlook for EBIT margin b.s.i. is maintained. The outlook for the free cash flow b.a.s.i. is adjusted to reflect a change in phasing of operational investing activities.
The outlook for 2022/23 is based on actual exchange rates until April 12, 2023, and for the remainder of the financial year 2022/23 assuming constant exchange rates at the current level of EUR/USD rate of 1.10. For further details on the outlook for 2022/23, please refer to page 9 of the interim report.