Chr Hansen A/S : Q1 Conference call presentation 2020/21

Chr. Hansen

Q1 2020/21 Results

January 14, 2021

1

Lise Mortensen

• Chr. Hansen's Chief Financial
  Officer since November 2020
• Experienced international leader with strong financial background
• Joined from Microsoft Germany
• Danish national

2

Safe harbor statement

This presentation contains forward-looking statements that reflect management's current views with respect to certain future events and potential financial performance. Forward-looking statements are other than statements of historical facts. The words "believe," "expect," "anticipate," "intend," "estimate," "outlook," "will," "may," "continue," "should" and similar expressions identify forward-looking statements.

Forward-looking statements include statements regarding objectives, goals, strategies, outlook and growth prospects; future plans, events or performance and potential for future growth; liquidity, capital resources and capital expenditures; economic outlook and industry trends; developments of the Company's markets; the impact of regulatory initiatives; and the strength of competitors. The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in records and other data available from third parties.

Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and may be beyond our control. Such risks, uncertainties, contingencies and other important factors could cause the actual results of the Company or the industry to differ materially from those results expressed or implied in this presentation by such forward-looking statements.

The information, opinions and forward-looking statements contained in this presentation speak only as at the date of this presentation and are subject to change without notice. The Company and its respective agents, employees or advisors do not intend to, and expressly disclaim any duty, undertaking or obligation to, make or disseminate any supplement, amendment, update or revision to any of the information, opinions or forward- looking statements contained in this presentation to reflect any change in events, conditions or circumstances beyond what is required by applicable law or applicable stock exchange rules and regulations.

By viewing this presentation, you acknowledge and agree to be bound by the foregoing limitations and restrictions.

3

Strong start to the year supported by all businesses

Financial highlights Q1 2020/21 (continuing operations)

ORGANIC GROWTH		EBIT MARGIN
	before special items

10%	28.5% underlying1
Q1 2019/20: 2%	25.2% reported
Guidance 20/21: 5-8%	Q1 2019/20: 29.0%
	Guidance: 20/21: 27-28%

1 Underlying EBIT margin b.s.i. excludes recent acquisitions. See Q1 2020/21 company announcement, p. 20 for reconciliation.

FREE CASH FLOW

before acquisitions &

divestments and special items

(EUR 6.9m)

Q1 2019/20: EUR 7.5m

Guidance 20/21: EUR 120-160m

4

Launching new innovations & advancing integration agenda during first quarter

Strategic highlights Q1 2020/21

	• FC&E strengthening core dairy range with new product innovations including YoFlex® Premium,
	nu-trish® Premium, F-DVS® Pure Appeal and SPICEIT® MPlus
	• Human Health with great momentum in women's health and adding oral care to its product portfolio
REINVEST	• Animal Health expanding route-to-market and further rolling out products globally

	• Expansion of Fermented Plant Bases product range with new bioprotection solution
	•	New Plant Health application center opened in the US to support sales activities on the ground
LEVERAGE	•	Strong project pipeline at Bacthera; momentum in live biotherapeutics industry accelerating

	• Integration of UAS Labs and HSO Health Care progressing as planned (finalization by end of FY21)
	•	Jennewein transaction completed in October 2020; delay in capacity built-up
EXTEND	•	Contribution from all three acquisitions now around EUR 100m revenue and around EUR 10m EBITDA for FY21

REVIEW	• Carve-out well under way; closing in spring 2021 expected

5

Pick up in growth in EMEA and NA offset by weakness in APAC

Regional highlights Q1 2020/21 (continuing operations)

EMEA 37% of revenue

+7%

organic growth

(Q1 2019/20: -3%)

• FC&E with solid growth; improved momentum in ME & Turkey
• H&N grew slightly driven by strong growth in AH, while HH declined because of delays in product launches and soft volumes

NORTH AMERICA 32% of revenue

+9%

organic growth

(Q1 2019/20: +8%)

• Solid growth in FC&E, primarily driven by cheese
• Strong growth in H&N driven by HH, while AH was on par with last year

LATIN AMERICA 13% of revenue

+40%

organic growth

(Q1 2019/20: +9%)

• Very strong growth in FC&E driven by both volume and EUR pricing (approx. 2/3)
• H&N grew very strongly across all three businesses

APAC 18% of revenue

-4%

organic growth

(Q1 2019/20: -2%)

• FC&E declined because of continued softness in the Chinese yogurt and probiotic market
• H&N delivered very strong growth driven by AH while HH declined because of infant formula

AH= Animal Health, HH= Human Health, PH= Plant Health.

6

Strong growth in cheese and enzymes offset by continued weakness in yogurt

Food Cultures & Enzymes Q1 2020/21

SALES PERFORMANCE

• Very strong growth in cheese, enzymes and fermented plant bases followed by strong growth in meat as well as solid growth in bioprotection, while fermented milk was on par with last year; probiotics and wine declined
• Dairy end markets remained soft globally with fermented milk declining slightly due to reduced output in China and LATAM, whilst cheese grew >1%

EBIT margin

		35.1%	38.0%			34.4%	38.4%
31.7%	32.1%		32.1%	32.2%		30.7%
Organic
growth
10%	11%	8%	3%	4%	5%	8%	5%	8%
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
18/19	18/19	18/19	18/19	19/20	19/20	19/20	19/20	20/21

MARGIN DEVELOPMENT

• EBIT margin decreased by 1.4%-pts. as production efficiencies, lower travel activity and cost management initiatives were offset by higher freight costs, unfavorable product mix, higher depreciation and FX

EUR million	Q1 19/20	Q1 20/21
Revenue	166.1	165.3
Organic growth	4%	8%
Volume/mix	3%	2%
EBIT margin	32.1%	30.7%
EBITDA margin	38.9%	39.4%
ROIC ex. goodwill	36.7%	33.4%

7

Strong quarter in AH driven by new wins, while momentum in HH slowed

Health & Nutrition Q1 2020/21

SALES PERFORMANCE

• Human Health (HH) with solid growth driven by very strong performance in supplements, mainly in US, while infant formula declined because of delays in product launches and softer volumes
• Animal Health (AH) with very strong growth driven by Poultry & Swine supported by new customer wins and global roll-out of GalliPro® Fit, while Cattle delivered good growth
• Plant Health (PH) with very strong growth driven by bionematicides business in LATAM
• Acquisitions contributed EUR 21m revenue

EBIT margin		37.4%			32.1%	34.7% 38.3%
	31.0%								13.6%
	30.8%							(22.1%
25.4%									ex. acq.)
				19.6%
Organic
growth
17%	6%	11%	4%			8%	12%	18%		15%
				-4%
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4		Q1
18/19	18/19	18/19	18/19	19/20		19/20	19/20	19/20	20/21

MARGIN DEVELOPMENT

• Decrease in EBIT margin related to recent acquisitions and FX; profitability of underlying business improved supported by strong volume growth (on easy baseline) and lower travel activities, partly offset by higher freight costs and FX
• Acquisitions contributed EUR 4m to EBITDA and a EUR 2m loss to EBIT

EUR million	Q1 19/20	Q1 20/21
Revenue	53.9	78.2
Organic growth	(4%)	15%
Volume/mix	(4%)	13%
EBIT margin (underlying1)	19.6%	13.6% (22.1%)
EBITDA margin (underlying1)	28.9%	28.9% (32.3%)
ROIC ex. goodwill	14.7%	7.2%

1 Underlying EBIT margin excludes recent acquisitions. See Q1 2020/21 company announcement, p. 20 for reconciliation.

8

Strong organic growth with equal contributions from volume and price

Continuing operations Q1 2020/21

REVENUE COMPOSITION				QUARTERLY ORGANIC GROWTH
		5%		9%	11%
	5%
					EUR
EUR	10% organic growth	(8%)		244m
220m

11%	9%	9%	3%	2%	6%	9%	9%	10%
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
18/19	18/19	18/19	18/19	19/20	19/20	19/20	19/20	20/21

• Organic growth was equally split between volume/mix and price
• FX headwind mainly related to depreciation of USD
• Acquisitions of UAS Labs, HSO Health Care and Jennewein contributed EUR 21m to Group revenue in Q1

9

Profitability reflects recent acquisitions & FX headwinds

Continuing operations Q1 2020/21

EBIT MARGIN B.S.I. BRIDGE	QUARTERLY DEVELOPMENT EBIT AND EBITDA MARGIN B.S.I.
								47.6%
	EBITDA margin b.s.i.		43.9%
			39.9%				41.3%
					39.1%
		38.1%
	36.5%			36.4%
							36.1%
				37.9%				38.4%
			34.0%			32.2%	34.5%
	30.1%	31.8%
				29.0%
	EBIT margin b.s.i.
									25.2%
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
	18/19	18/19	18/19	18/19	19/20	19/20	19/20	19/20	20/21

• Gross margin decreased by 4.4%-pts. to 55.9% due to acquisitions (>3%-pts.), FX (1%-pt.), higher freight costs and product mix that were partly compensated by production efficiencies and scalability
• Operating expenses as % of revenue decreased to 30.6% (compared to 31.2% last year) because of lower travel expenses due to COVID-19 restrictions and cost management

10

Cash flow reflects HMO investments; leverage to come down from elevated level

Continuing operations / Group Q1 2020/21

CASH FLOW STATEMENT (Continuing operations)

LEVERAGE RATIO in net debt/EBITDA b.s.i. (Group)

EUR million	Q1 19/20	Q1 20/21
Operating cash flow	29.9	38.8
Cash flow from op. invest. act.	(23.2)	(52.1)
M&A	-	(319.0)
JV	(5.5)	(5.1)
Financing cash flow	(6.3)	315.7
FCF b.a.d.s.i.1	7.5	(6.9)

	3.8
3.1		~2x
Q4	Q1	Q4
19/20	20/21E	20/21E

• Increase in operating cash flow driven by lower taxes paid and higher non-cash adjustments partly offset by a negative development in working capital
• Increase in operating investing cash flow driven (capex-to-sales ratio of 22.4%) driven by the acquisition of the Kalundborg site; capex-to-sales ratio ex. HMO was 12.1% (compared to 10.5% last year)
• Leverage ratio with 3.8x above ambition to be in line with investment grade credit rating due to recent acquisitions

1 Before acquisitions, divestment and special items.

11

A year of transition with higher uncertainty due to COVID-19

Guidance 2020/21 (continuing operations)

ORGANIC GROWTH		EBIT MARGIN B.S.I. 2

Outlook 2020/211	5-8%	27-28%

Long-term financial	Organic growth CAGR of	Underlying expansion in EBIT margin
ambition until 2024/25	mid- to high single-digit	b.s.i. before portfolio changes and FX

FREE CASH FLOW B.A.S.I.

before divestment2

EUR 120-160m

with capex of EUR ~150-175m

Free cash flow b.a.s.i.

to outgrow absolute EBIT b.s.i.

1. The outlook is based on constant currencies and assumes no further acquisitions. The outlook is also based on the current political and economic environment. The depth and duration of a potential global recession, or other negative macroeconomic events, triggered by COVID-19 may affect demand negatively in the medium term, especially in emerging markets, and a combination of quarantine measures and recession may change consumption patterns between eating out, on-the-go and in-home. The various quarantine measures and travel restrictions already imposed around the world make it more difficult to visit customers to advance projects with new innovative solutions, a very important growth driver for Chr. Hansen, and this will slow the progress of the commercial project pipeline in the medium term. The impacts of COVID-19 are continuously being monitored and evaluated for their short- and medium-term effects. Any deterioration in the political and economic climate might impact the outlook negatively. This includes, but is not limited to, the economic climate in several emerging markets, such as China, Turkey, Brazil and Argentina; the overall situation in the Middle East, including any potential sanctions; a deterioration in global trading conditions; and negative consequences of implementing Brexit.
2. 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.

12

Profitability outlook reflects recent M&A, FX and strategic investments

Guidance 2020/21

EBIT MARGIN B.S.I. BRIDGE (Continuing operations)PRELIMINARYAMORTIZATION SCHEDULE OF ACQUISITIONS

30

-0.5-1%
	-0.5-1%	27-28%
			20

10

0

FY21E FY24E FY27E FY30E FY33E FY36E FY39E

•	Decline in underlying business driven by normalization of cost base following	•	PPA amortizations of around EUR 15-20m until 2030 (preliminary estimate)
	one-offs in FY20 and return to normal spending patterns and 2025 Strategy
	investments

• Current FX rates suggest up to ~1%-pt. hit for FY211
• Special items of EUR 15-20m expected for FY21

1 Main exposure relates to USD and CNY: +/- 5% change in EUR/USD will impact the revenue by EUR ~20m and EBIT by EUR ~12m and a +/- 5% change in EUR/CNY will impact the revenue by EUR ~5m and EBIT by EUR ~4m.

13

Full focus on delivering on 2025 Strategy

to form a differentiated bioscience company with focus on microbial and fermentation technology platforms

Where to play

LEVERAGE

Microbial Platform to grow lighthouses and expand into new areas

REINVEST

EXTEND

microbialand fermentation technologyplatforms through M&A and partnerships

How to win

1. CUSTOMERS
2. INNOVATION
3. OPERATIONS
4. PEOPLE
5. PURPOSE

Further expand customer base and global reach and excel in customer centricity

Accelerate new product development and commercialization

Realize scalability benefits and operational efficiencies

Safeguard culture and invest in talent management

Drive sustainability agenda to grow a better world. Naturally.

in core platforms to defend and further strengthen market position

14

Let's grow a better

world. Naturally.

By pioneering microbial science

to improve food, health and productivity for a sustainable future.

15

Financial calendar	Contacts
April 15, 2021	Martin Riise
Interim Report Q2 2020/21	Head of Investor Relations
	[phone]
July 8, 2021	[e-mail]
Interim Report Q3 2020/21
	Annika Stern
October 14, 2021	Investor Relations Officer
Annual Report 2020/21	[phone]
	[e-mail]
November 24, 2021
Annual General Meeting 2021

16