Chr Hansen A/S : Q2 Aide memoire 2021/22

Q2 2021/22 AIDE MEMOIRE

This memoire sets forth public information previously provided by Chr. Hansen. The information provided below may prove helpful in estimating the financial performance for Q2 2021/22. Please note that the items listed below are not exhaustive and that other factors may affect the comparisons versus last year.

FY22 guidance (Company Announcement Q1 FY22, p. 9):

• "For 2021/22, organic revenue growth is expected to be 5-8%.Food Cultures & Enzymes is expected to deliver solid mid-single-digitorganic growth throughout the year, despite an insignificant contribution from EUR-based pricing. Organic growth in Health & Nutrition is expected to be supported by the businesses acquired in 2020."
• "EBIT margin b.s.i. is expected to be 27-28% as cost synergies from the probiotics acquisitions and production efficiencies will be offset by the continued ramp-up of activities post COVID-19, investments in the HMO business, and inflationary pressure on certain raw material and input costs."
• "Free cash flow before acquisitions & divestments and special items is expected to be around EUR 140-170 million as improved operating profit is expected to be more than offset by a significant increase in taxes paid as 2020/21 was impacted by acquisitions [approximately EUR 45 million in 2020/21]. The free cash flow outlook assumes a CAPEX level in line with 2020/21."

FX sensitivities (Company Announcement Q1 FY22, p. 9):

• "The most significant currency exposure relates to USD, which accounts for around 35% of revenue, while exposure to other currencies is more modest. A 5% decrease in the EUR/USD exchange rate would have a negative impact on revenue measured in EUR of around EUR 20 million. Organic revenue growth is sensitive to exchange rate fluctuations in currencies for which Chr. Hansen applies a EUR-basedpricing model. The EBIT margin is also sensitive to exchange rate fluctuations. Production in the US only partly offsets the impact on revenue from changes in the EUR/USD exchange rate. Therefore, the relative EBIT exposure is higher than the revenue exposure. A 5% decrease in the EUR/USD exchange rate would impact EBIT negatively by roughly two thirds of the revenue impact. This level of sensitivity also applies to the free cash flow."

Q1 FY22 comments (Conference Call Transcript Q1 FY22):

• Human Health: "Human Health exceeded our expectations for the first quarter and delivered a very strong start to the year supported by a rebound in the traditional sales channel in Europe and North America, and positive order timing from Q4. Further, […] we were able to mitigate supply chains successfully and win new business, which will have a positive impact in the first half of the year."
• Human Health acquisitions H2FY22: "I would just remind everyone that the low comparables in the second half of the year was for our Chr. Hansen business, but that our acquired business that were not part of organic growth in H2 had a very strong performance."
• HMO: "We are confident to deliver the above 20% growth for the year, based most of those orders being secured by our long-term contracts. […] The biggest next step will be the regulatory approval of HMOs in China. […] We expect that to take place in 2023-2024."

• Animal Health: "You could expect a normal momentum going into Q2. […] I'm very pleased with how the team has turned the innovation into market execution and commercialization."
• FC&E China 1: "China had solid growth against a low comparable from last year and that was mainly because Q1 of last year for FC&E was particularly soft."
• FC&E China 2: "The fermented milk market in China is still not developing favorably and our outlook for China is still to be flat to slightly positive in FY22."
• Lighthouses 1: "Our growth areas, which account for approximately 10% of Group revenue - Bioprotection, Fermented Plant Bases, Plant Health, and HMO - grew 35% [in Q1]. Lighthouses are expected to outgrow the core business for the year but please note that the very strong growth in Q1 was in part positive due to order timing."
• Q1 EBIT margin: "The EBIT margin ended at 24.4% for Q1, down from 25.2% last year. The drop was in line with our guidance, driven by, first, the full inclusion of HMO, which was only partly reflected in last year's numbers as the acquisition closed mid-October. […] If we exclude the impact from HMO, then the EBIT margin would have been above last year by approximately half a percentage point."
• FY22 outlook: "We also see good momentum going into Q2, but […] it is still a very volatile environment. […] we maintain our guidance for the year."
• H&N outlook: "We go into Q2 with a good momentum in H&N and […] the growth will be front-end loaded because we expect a solid first half of the year for H&N. […] For HMO, as Q1 benefited from customers ramping up for the US launches, the growth momentum will be lower the rest of the year, though still in a range above 20%."
• FC&E FY22 outlook: "Food Cultures and Enzymes is expected to deliver solid mid-single digit organic growth throughout the year and despite an insignificant contribution from euro-based pricing."
• FY22 EBIT margin: "When it comes to EBIT margin before special items, this is still expected to be around the same level as last year - between 27% and 28% - as cost synergies from the Probiotics acquisitions, production efficiencies, and a small positive impact from the US dollar exchange rate will be offset by continued ramp-up of activities, investments into HMO business, and the inflationary pressure on certain input costs. The latter we expect to largely recover during the course of the year as price adjustments become effective."
• Inflationary pressure / price increases: "We have a very strong methodology overall to reflect price increases with customers and we expect to fully pass on the inflationary price increases to customers. […] I think it's important to also call out that our price increases do come with some delay. The ambition is that we can increase the prices to offset not only just the cost, but also the margin impact. But it will come with some delay this year. […] It is very unprecedented times, so I think the overall conclusion is that what we're doing here is baked into our EBIT guidance for the year, which is a landing corridor between 27% and 28%."
• Long-termfinancial ambitions until FY25: "We updated our long-term financial ambition last quarter to reflect the divestment of Natural Colors and the acquisition of Jennewein. […] Chr. Hansen remains committed to delivering industry-leading profitable growth and a strong cash flow with focus on spending discipline and capital efficiency. Until FY25, we aim to deliver: mid to high single digit organic growth averaged over the period; an increase in EBIT margin before special items over the period to above 30%; and average growth in free cash flow before special items to grow faster than EBIT before special items."
• Carbon reduction targets: "By 2030, Chr. Hansen aims to reduce its Scope 1 and Scope 2 emissions by 42% and its Scope 3 emissions by 20%."

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Q2 FY21 comments (Conference Call Presentation Q2 FY21, p. 5-7):

Regions:

• EMEA (4% org growth): FC&E grew solidly whilst H&N declined due to softness in Human Health, Animal Health with very strong growth
• NA (7% org growth): FC&E and H&N with solid growth; in Animal Health growth accelerated in Q2, whilst Human Health declined due to softness in dietary supplements
• LATAM (32% org growth): Very strong growth in FC&E and H&N; EUR pricing accounted for approx. 2/3
• APAC (10% org growth): FC&E declined due to continued weakness in China, whilst H&N grew very strongly

FC&E (8% org growth):

• Very strong growth in enzymes and meat followed by strong growth in cheese and bioprotection and slight growth in fermented milk; probiotics declined
• Fermented milk end markets declined in H1 due to reduced demand in China and LATAM, partly offset by increases in EMEA and NA
• EBIT margin declined as production efficiencies and lower travel activity were offset by higher freight costs, unfavorable product mix and FX (and a one-off increase in depreciations in Q1)

H&N (14% org growth):

• HH with solid growth driven by strong growth in infant formula and probiotics for young children, while dietary supplements delivered good growth despite softer markets in Europe and North America
• AH with very strong growth driven by Cattle, whilst Swine & Poultry grew solidly; very strong momentum across all regions
• PH with very strong growth driven by LATAM
• Acquisitions contributed EUR 22m in revenue
• Decrease in EBIT margin related to recent acquisitions and FX (2%-pts. currency headwind)

Sources

• Company Announcement Q1 FY22
• Conference Call Transcript Q1 FY22
• Conference Call Presentation Q2 FY21

Forward-looking statements

This document contains forward-looking statements that reflect management's current views and expectations with respect to Chr. Hansen's future and potential financial performance. Those forward- looking statements are based upon data and information currently available to the company and upon a variety of assumptions many of which may be beyond our control and subject to risks and uncertainties that may cause the actual results of the Company or the industry to differ materially from such forward- looking statements. The information, opinions and forward-looking statements contained in this document speak only as at the date of it and the company is under no obligation to publish any updates thereof except for what is required by applicable law or stock exchange rules and regulations.

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