Q1 results as predicted with success in some areas
Organic revenue growth of 1% in the first three months of 2019/20, corresponding to 1% EUR growth, was in line with expectations: Food Cultures & Enzymes 4%, Health & Nutrition (4)% and Natural Colors (1)%. EBIT before special items decreased by 1% to EUR 70 million, corresponding to an EBIT margin b.s.i. of 25.7%, down 0.6%-point compared to last year. The organic growth outlook for 2019/20 is narrowed to 4-6% whereas the guidance for EBIT margin and free cash flow is unchanged. New preliminary long-term growth ambition of mid to high single-digit organic sales growth per year until 2024/25.
CEO Mauricio Graber says: “We have had a mixed start to the year, as expected. Food Cultures & Enzymes delivered good organic growth driven by all segments apart from probiotics, in line with our expectations. The recently launched enzyme for cheese making, CHY-MAX Supreme, has been very well received by customers and is off to a very good start. In Health & Nutrition, Animal Health showed very strong growth driven by the timing of sales in silage and good momentum in Cattle, whereas Human Health and Plant Health declined, as expected, due to the timing of orders. Natural colors declined due to continued negative raw material price impacts and challenging market conditions but showed a strong EBIT growth of 10% – and growth in the FRUITMAX range remained strong.
“Our Q1 EBIT margin before special items was down by 0.6%-point, due to the lower margin in Health & Nutrition caused by the lower revenue. The EBIT margin in Food Cultures & Enzymes improved, impacted by a continued positive development in gross margin, and the EBIT margin in Natural Colors also increased, driven by lower raw material prices. We continue to invest in growth opportunities and innovation across our three business areas.
“Even though Q1 was very much in line with our expectations, we are narrowing our guidance for 2019/20. We started the year with a cautious outlook due to the market challenges that we were facing, and those challenges have proven to be persistent. The end-market growth in Food Cultures & Enzymes is not improving, and we also see lower growth in dietary supplements. As a consequence of the lower end-market growth, and reflecting the preliminary conclusions in our on-going strategy review, which will be finalized in April 2020, we are issuing a preliminary long-term growth ambition of mid to high-single digit organic sales growth per year until 2024/25.”