Interim report September 1 - May 31, 2021

Q3 2020/21 in brief

July 8, 2021 - announcement no. 9

Third quarter in line with expectations and outlook for 2020/21 unchanged

  • Q3 2020/21 organic sales growth was 4%, equally split between volume/mix and price. The Q3 organic growth was impacted by a reduced contribution from EUR-based pricing compared to the first half, and a higher comparable, as Q3 last year was positively impacted by COVID-19 related customer inventory build-up. YTD organic growth at 8% and on track to deliver 6-8% organic growth for the year.
  • Integration of commercial activities in UAS/HSO has been completed and integration of manufacturing is progressing with good sales momentum in Q3.
  • Q3 EBIT margin b.s.i. of 29.3%, bringing the YTD margin to 27.3% and well on track to deliver on the outlook for the year.
  • Profit for Q3 of EUR 682 million was positively impacted by recognized gain from the divestment of Natural Colors of EUR 636 million.

Q3

Q3

YTD

YTD

EUR million

2020/21

2019/20

Growth

2020/21

2019/20

Growth

Revenue

280.6

256.1

10%

784.1

715.7

10%

EBITDA before special items

106.6

105.7

1%

287.5

279.6

3%

EBIT before special items

82.4

88.3

(7%)

213.9

229.2

(7%)

Profit from continuing operations

49.5

63.6

(22%)

131.7

164.0

(20%)

Free cash flow before acquisitions and special items

85.0

94.4

(10%)

119.9

143.5

(16%)

Organic growth

4%

9%

8%

6%

Gross margin

57.3%

59.8%

56.6%

59.7%

EBITDA margin before special items

38.0%

41.3%

36.7%

39.1%

EBIT margin before special items

29.3%

34.5%

27.3%

32.0%

ROIC excl. goodwill

25.3%

38.0%

23.7%

34.0%

CEO Mauricio Graber says: "Organic growth in Q3 was lower than in the first half of the year, as expected. This was primarily due to a reduced positive effect from EUR-based pricing and a higher comparable as customers built safety inventories due to the COVID-19 lockdowns last year. Nevertheless, we did see an acceptable volume growth in FC&E driven by solid momentum in cheese in North America and a reduced negative impact from the Chinese dairy market. While not satisfactory, the flat organic growth for Health & Nutrition was partly driven by the higher comparable from Q3 last year for Human Health, while Animal and Plant Health delivered solid growth. The acquired probiotics businesses within Human Health delivered a strong sales performance in Q3.

As the world gradually re-opens we're focused on getting our sales force and innovation teams even closer to our markets and customers in order to fuel the innovation agenda of the markets we serve, in terms of both new applications and efficiencies. This is supported by the launch and implementation of new products addressing key challenges and opportunities such as bioprotection and fermented plant bases.

While keeping a firm focus on delivering on our outlook for the year, I'm pleased with the progress we're making in transforming Chr. Hansen into a fully-focused bioscience company based on our unique microbial and fermentation technology platforms. The completion of the NCD divestment was a key milestone, another being the integration of UAS and HSO. Despite the initial challenges, we're also progressing with the new long-term lighthouse within the emerging HMO market.

We remain on track to deliver on our ambition for the year and the outlook therefore remains unchanged. The overall outlook for Human Health remains positive but a changed mix between organic and acquisition driven sales which will keep Group organic growth below our original expectations in Q4."

Outlook for 2020/21

Organic revenue growth

6-8%

EBIT margin before special items

27-28%

Free cash flow before special items, acquisitions and divestments

EUR 140-160 million

The guidance for EBIT margin before special items and for free cash flow before acquisitions and special items assumes constant currencies from the time of this announcement and for the remainder of the financial year.

Chr. Hansen Holding A/S

www.chr-hansen.com

Page 1/28

Interim report September 1 - May 31, 2021

Financial highlights and key figures

Q3

Q3

2020/21

2019/20

Growth

Income statement, EUR million, cont. operations

Revenue

280.6

256.1

10%

Gross profit

160.7

153.2

5%

EBITDA before special items

106.6

105.7

1%

EBIT before special items

82.4

88.3

(7%)

Special items

(11.2)

(2.9)

-

EBIT

71.2

85.4

(17%)

Net financial expenses

(5.1)

(1.3)

292%

Profit from continuing operations

49.5

63.6

(22%)

Profit from discontinued operations

632.1

6.4

-

Profit for the period, Group

681.6

70.0

-

Cash flow, EUR million, Group

Cash flow from operating activities

88.6

128.5

(31%)

Cash flow from investing activities

749.5

(144.5)

-

Free cash flow

838.1

(16.0)

-

Free cash flow before acquisitions and special items

84.9

106.3

(20%)

Free cash flow before acquisitions and special items,

cont. operations

85.0

94.4

(10%)

Balance sheet, EUR million, Group

Total assets ¹

Invested

capital ¹

Net working

capital ¹

Equity

Net interest-bearing debt

Key ratios

Continuing operations

Organic growth ²

4%

9%

Gross margin

57.3%

59.8%

EBITDA margin before special items

38.0%

41.3%

EBIT margin before special items

29.3%

34.5%

EBIT margin

25.4%

33.3%

ROIC excl. goodwill

25.3%

38.0%

ROIC

11.8%

20.2%

R&D

8.2%

8.0%

Capital expenditures

7.9%

9.0%

Earnings per share diluted, EUR

0.38

0.48

(21%)

Group

Earnings per share diluted, EUR

5.16

0.53

Net debt to EBITDA before special items

YTD

YTD

2020/21

2019/20

Growth

784.1

715.7

10%

444.0

427.3

4%

287.5

279.6

3%

213.9

229.2

(7%)

(21.8)

(5.1)

-

192.1

224.1

(14%)

(16.1)

(9.1)

77%

131.7

164.0

(20%)

644.3

14.8

-

776.0

178.8

-

175.8

222.5

(21%)

343.1

(210.2)

-

518.9

12.3

-

107.4

147.4

(27%)

119.9

143.5

(16%)

3,066.5 2,267.2

2,794.1 1,971.6

227.6 252.9

1,548.1 840.7

950.6 902.2

8%

6%

56.6%

59.7%

36.7%

39.1%

27.3%

32.0%

24.5%

31.3%

23.7%

34.0%

11.1%

17.8%

8.4%

8.5%

12.4%

9.4%

1.00

1.24

(19%)

5.88 1.35

2.3x 2.1x

  1. The Natural Colors business was divested effective from March 31, 2021. In 2019/20, total assets, invested capital and net working capital included assets and liabilities related to the Natural Colors business.
  2. Organic growth: Increase in revenue adjusted for sales reduction, acquisitions and divestments, and measured in local currencies.

Chr. Hansen Holding A/S

www.chr-hansen.com

Page 2/28

Interim report September 1 - May 31, 2021

YTD 2020/21 results

Revenue growth by business - YTD

Revenue growth by region - YTD

45%

45%

38%*

35%

35%

30%

25%

25%

14%

21%

15%

15%

7%

9%

10%* 8%

2% 5%

7%

7%

10%

8%

5%

5%

0%

-5%

-1%

-5%

FC&E

H&N

Cont. operations

EMEA North

APAC LATAM Cont.

* includes acquisition impact

America

operations

EUR growth

Organic growth

EUR growth

Organic growth

Market developments

According to the Company's own estimates, the end markets for fermented milk declined globally in the first nine months of 2020/21 due to reduced production and weaker demand in China and Latin America, compared to the same period last year.

The global production of cheese is estimated to have grown by around 1% in the first nine months of 2020/21, driven by North America and Europe which both benefited from the re-opening of the food service channel in Q3.

The overall market for Human Health is estimated to have grown by 3-5% during the first nine months of 2020/21. While online sales channels have shown strong growth, the traditional sales channels continued to be impacted by among others elevated inventory positions in certain markets. A situation which is expected to continue in Q4.

The market for microbial-based solutions for animals developed favorably during the first nine months of 2020/21, supported by an expanding focus on reducing the use of antibiotics in livestock production. In the North American market, the economics of beef and milk production were stable during the period and supported demand for animal probiotics.

Revenue (cont. operations)

Organic growth was 8% and adjusted for a negative currency impact of 8% and a positive impact from acquisitions of 10% corresponded to a revenue increase of 10% to EUR 784 million. Revenues from acquired businesses amounted to EUR 73 million.

Organic growth was equally driven by volume/mix and price increases in local currencies.

Q3 organic growth was 4% and adjusted for a negative currency impact of 5% and a positive impact from acquisitions of 11% corresponded to a revenue increase of 10% to EUR 281 million. Revenues from acquired businesses amounted to EUR 30 million.

Revenue (cont. operations)

2020/21

Organic growth (vol/mix)

4%

Organic growth (price)

4%

Organic growth

8%

Currencies

(8)%

Acquisitions

10%

EUR growth

10%

Revenue by region (cont. operations) EMEA (Europe, the Middle East and Africa) Organic growth was 5% and adjusted for a negative currency impact of 5% and an acquisition impact of 2% corresponded to a revenue increase of 2%. Organic growth was driven by solid growth in Food Cultures & Enzymes, partly offset by a decline in Health & Nutrition.

Q3 organic growth was 3% and adjusted for a negative currency impact of 3% and an acquisition impact of 2% corresponded to a revenue increase of 2%. Organic growth was driven by good growth in Food Cultures & Enzymes, while Health & Nutrition declined. Growth in Q3 faced a higher comparable from last year driven by COVID-19.

North America

Organic growth was 7% and adjusted for a negative currency impact of 9% and an acquisition impact of 16% corresponded to a revenue increase of 14%. Organic growth was driven by solid growth in Food Cultures & Enzymes and Health & Nutrition.

Chr. Hansen Holding A/S

www.chr-hansen.com

Page 3/28

Interim report September 1 - May 31, 2021

YTD 2020/21 results

Q3 organic growth was 5% and adjusted for a negative currency impact of 8% and an acquisition impact of 17% corresponded to a revenue increase of 14%. Organic growth was driven by solid growth in Food Cultures & Enzymes, while Health & Nutrition declined slightly due to Human Health. The decline was partly offset by strong performance in the acquired businesses.

APAC (Asia-Pacific)

Organic growth was 0% and adjusted for a negative currency impact of 3% and an acquisition impact of 24% corresponded to a revenue increase of 21%. Organic growth was driven by very strong growth in Health & Nutrition, while Food Cultures & Enzymes declined as the production and demand for yogurt in China continued to decline.

Q3 organic growth was negative by 6%. Both Food Cultures & Enzymes and Health & Nutrition declined, but the drop in Food Cultures & Enzymes slowed down in Q3 compared to the first half of the year. The impact from the acquisitions was 30% and drove a total revenue increase of 24%.

LATAM (Latin America)

Organic growth was 30% and adjusted for a negative currency impact of 25% and a minor acquisition impact corresponded to a revenue increase of 7%. Organic growth was driven by very strong growth in Food Cultures & Enzymes strongly supported by EUR-based pricing, and very strong growth in Health & Nutrition.

Q3 organic growth was 19% and adjusted for a negative currency impact of 13% and a minor acquisition impact corresponded to a revenue increase of 6%. Organic growth was driven by very strong growth in both Food Cultures & Enzymes and Health & Nutrition, whereas the impact from EUR-based pricing was reduced.

Gross profit (cont. operations)

Gross profit was EUR 444 million, up 4% on the first nine months of 2019/20. The gross margin decreased by 3.1%-points to 56.6%, due to a more than 2%-point negative impact from acquisitions and about 1%-point negative currency impact. Production efficiencies were offset by a negative product mix and higher freight costs.

Q3 gross profit was EUR 161 million, up 5% on 2019/20. The gross margin declined by 2.5%-points to 57.3%, driven by the acquisitions and a negative currency impact, while the underlying gross margin was positively impacted by production efficiencies and lower freight costs.

Operating expenses (% of revenue, cont. operations) Operating expenses totaled EUR 230 million (29.3%), compared to EUR 198 million (27.7%) in the first nine months of 2019/20.

Total R&D expenditures amounted to EUR 66 million (8.4%), compared to EUR 61 million (8.5%) in the first nine months of 2019/20. R&D expenses (P&L impact) impacted the EBIT margin negatively by 0.2%-point.

EUR million

YTD

YTD

2020/21

2019/20

R&D expenses (P&L)

64.9

57.8

- Amortization

5.7

5.1

- Impairment

-

-

+ Capitalization

6.8

8.2

R&D expenditures incurred

66.0

60.9

Sales & marketing expenses amounted to EUR 112 million (14.3%), compared to EUR 101 million (14.1%) in the first nine months of 2019/20. The increase in cost level from the acquisitions was partly offset by reduced travel expenses due to COVID-19 travel restrictions.

Administrative expenses amounted to EUR 55 million (7.0%), compared to EUR 41 million (5.8%) in the first nine months of 2019/20, while the increase in cost level was primarily driven by acquisitions.

Other operating income/expenses were a net income of less than EUR 2 million, in line with the first nine months of 2019/20.

The Q3 the total operating expenses were EUR 78 million (27.9%) compared to EUR 65 million (25.3%) in 2019/20. The increase was driven by acquisitions and higher activity due to the gradual re-opening following COVID-19.

EBITDA before special items (cont. operations) EBITDA amounted to EUR 288 million, including a positive contribution from acquisitions of EUR 12 million, compared to EUR 280 million in the first nine months of 2019/20.

The underlying EBITDA margin before special items, excluding the acquisitions, would have been 38.7%, compared to 39.1% in the first nine months of 2019/20. The decrease (excl. acquisitions) was mainly driven by the increased activity during Q3 in both Health & Nutrition and Food Cultures & Enzymes. The reported EBITDA margin before special items (incl. acquisitions) was 36.7%, down 2.4%-points from the first nine months of 2019/20.

The Q3 underlying EBITDA margin before special items, excluding the acquisitions, would have been 40.0% compared to 41.3% last year, primarily due to the ramp- up of activities.

Chr. Hansen Holding A/S

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Page 4/28

Interim report September 1 - May 31, 2021

YTD 2020/21 results

EBIT margin b.s.i - YTD

40%

31.6% 32.9%

29.7%

32.0%

30%

27.3%*

19.0%*

20%

10%

0%

FC&E

H&N

Cont. operations

* includes acquisition impact

2020/21

2019/20

Net financials, share of JV and tax (cont. operations) Net financial expenses amounted to EUR 16 million, compared to EUR 9 million in the first nine months of 2019/20. Net interest expenses were EUR 17 million, up from EUR 10 million in the first nine months of 2019/20, the increase being due to the higher net debt.

The net impact from exchange rate adjustments was positive at EUR 1 million, in line with the first nine months of 2019/20.

The Bacthera JV produced a EUR 5 million loss to Chr. Hansen, compared to a loss of EUR 3 million in the first nine months of 2019/20.

Income taxes amounted to EUR 39 million, equivalent to an effective tax rate of 23.0%, compared to EUR 48 million and 22.6%, respectively, in the first nine months of 2019/20.

Operating profit (EBIT) before special items (cont. operations)

EBIT before special items amounted to EUR 214 million, including a negative impact from acquisitions of EUR 6 million, compared to EUR 229 million in the first nine months of 2019/20. The underlying EBIT margin before special items, excluding acquisitions, and including a negative currency impact of 1%-point, would have been 30.9%, down from 32.0% in the first nine months of 2019/20. The reported EBIT margin before special items (incl. acquisitions) was 27.3%.

The Q3 underlying EBIT margin before special items, excluding the acquisitions, and including a negative currency impact of around 0.5%-point, would have been 33.1% compared to 34.5% last year. The reported EBIT margin before special items (incl. acquisitions) was 29.3%.

Special items (cont. operations)

Special items were an expense of EUR 22 million compared to an expense of EUR 5 million in the first nine months of 2019/20, and the increase in expenses was primarily driven by costs in relation to the divestment of Natural Colors and the acquisition of Jennewein.

Operating profit (EBIT, cont. operations)

EBIT amounted to EUR 192 million, compared to EUR 224 million in the first nine months of 2019/20. The EBIT margin was 24.5%, compared to 31.3% in 2019/20. Adjusted for acquisitions, the EBIT margin would have been 27.9%.

Profit for the period from continuing operations Profit from continuing operations for the year decreased to EUR 132 million from EUR 164 million in the first nine months of 2019/20. The Q3 profit from continuing operations was EUR 50 million, compared to EUR 64 million last year.

Profit from discontinued operations

Profit from the divested business of Natural Colors amounted to EUR 644 million, compared to EUR 15 million in the first nine months of 2019/20. The increase was due to the gain on the the divestment of Natural Colors of EUR 636 million recognized in Q3.

Profit for the period

Profit for the period increased to EUR 776 million from EUR 179 million in the first nine months of 2019/20. The increase was due to the gain on the divestment of Natural Colors.

The Q3 profit was EUR 682 million compared to EUR 70 million last year.

Chr. Hansen Holding A/S

www.chr-hansen.com

Page 5/28

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Chr. Hansen Holding A/S published this content on 08 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 July 2021 16:24:01 UTC.