Chr Hansen reports 7% organic growth for Q3

Chr Hansen reports organic revenue growth of 7% in Q3, corresponding to 4% EUR growth, with an improved momentum compared to 1H as expected – Food Cultures and Enzymes 8%, Health and Nutrition 12% and Natural Colors 1%, increasing the Group organic revenue growth in the first nine months of 2019/20 to 5%. Covid-19 impacts on revenues in Q3 were a net positive. In Q3, EBIT before special items increased by 5% to EUR 97 million (approximately Rs 800 crore), and EBIT margin before special items increased by 0.4 %-point to 30.8%. The full-year outlook on organic growth and EBIT margin is unchanged, while FCF is increased to above EUR 200 million (approximately Rs 1700 crore).

Demonstrated resilience

Chief executive officer Mauricio Graber says, “We are pleased with our Q3 performance, as our business demonstrated resilience during the first volatile months since the outbreak of Covid-19 thanks to our essential natural ingredient solutions for the food, nutritional and agricultural industries. Customers increased safety stocks of essential ingredients in March and early April, to carry them through potential supply chain disruptions. Then, inventories began to normalize late April and in May.”

“Our innovative solutions have proved their value. We were able to continue the strong momentum from recent product launches such as the dairy enzymes CHY-MAX Supreme and NOLA Fit, and bio-protection posted another strong quarter. Animal Health continued to perform strongly driven by BOVAMINE Dairy probiotics, and Human Health also delivered strong growth, supported by consumers’ interest in probiotics with indications for immune benefits. Natural Colors also delivered positive growth driven by FRUITMAX, despite challenging conditions from Covid-19 and low raw material prices.”

“Our Q3 EBIT margin before special items was up by 0.4%-point driven by scalability benefits in production and lower travel expenses due to Covid-19 travel restrictions – however, these positives were partly offset by higher freight costs that were also driven by Covid-19. Our strong business model and financial position allow us to sustain investments in growth opportunities and innovation. Free cash flow before acquisitions and special items grew by 117% in Q3 and is up 161% after nine months, primarily due to good management of working capital. The Q3 performance was in line with our expectations, and based on the business performance after nine months, we maintain our organic growth and EBIT margin guidance for the full year and increase the free cash flow before acquisitions and special items. However, macroeconomic and end-market uncertainty persists due to Covid-19.”

“We also completed an acquisition in Q3 and signed another early in Q4. HSO Health Care and UAS Laboratories represent important investments in our microbial platform, and we expect to continue to extend our platform through a disciplined acquisition strategy.”

“As part of the strategic review, the Board of Directors and the Executive Board have considered Chr’s portfolio. Hansen, and given that Natural Colors does not share the microbial and fermentation technology platforms, strategic options for the future of Natural Colors will be explored, including a potential sale of the business. We also announce August 25 as the new date for our virtual Capital Markets Day, where we will present all the results of the on-going strategy review.”