Organic revenue growth
Based on the results for the first nine months of the year, the expectation for organic revenue growth is narrowed to the upper end of the range at 9-10%.
Food Cultures & Enzymes is now expected to grow slightly higher than the long-term ambition, while Health & Nutrition and Natural Colors are expected to grow in line with the long-term ambitions.
Ebit margin before special items (B.S.I.)
The EBIT margin b.s.i. is expected to be slightly above the 28.2% achieved in 2015/16.
Free cash flow
Free cash flow before acquisitions, divestments and special items is expected to be around the EUR 175 million achieved in 2015/16.
An increase in the cash flow used for investing activities is expected to offset an improvement in the operational cash flow.
Chr. Hansen is a global company serving more than 140 countries through subsidiaries in 30 countries.
The greatest exchange rate exposure relates to USD, which accounts for around 25% of revenue, while the exposure to other currencies is modest.
The organic revenue growth is sensitive to exchange rate fluctuations in currencies where Chr. Hansen applies a EUR-based pricing model, and changes in raw material prices for natural colors.
The EBIT margin is also sensitive to exchange rate fluctuations and to changes in raw material prices for natural colors. Significant production in the US and sourcing in USD means the exchange rate impact on EBIT is significantly lower than that on revenue.
The use of currency hedging of balance sheet exposures and future cash flows is described in note 4.3 in the Annual Report for 2015/16.
Financial ambitions through 2019/20Top
Organic revenue growth
Revenue for the Chr. Hansen Group is expected to grow organically by 8-10% per annum.
Food Cultures & Enzymes is expected to deliver average annual organic growth of 7-8%.
Health & Nutrition is expected to deliver average annual organic growth above 10%.
Natural Colors is expected to deliver average annual organic growth around 10%.
EBIT margin before special items
The EBIT margin before special items is expected to improve over the period compared to 2014/15 (27.1%).
The improvement will be driven by continued focus on strong cost discipline as well as productivity and efficiency gains across the organization, while at the same time investing in innovation, emerging markets and exploration of new growth opportunities.
The EBIT margins in Food Cultures & Enzymes and Natural Colors are expected to increase over the period. The EBIT margin in Health & Nutrition is expected to be around 30% during the period due to increased investment in future growth opportunities.
Free cash flow
Free cash flow is expected to increase over the period compared to 2014/15 (EUR 151 million).
Sustainability ambitions for 2019/20Top
In 2015/16, Chr. Hansen launched a new sustainability strategy, which focuses on how the Company can help address global trends and challenges with its natural products. The strategy focuses on three areas where Chr. Hansen has the biggest impact:
Help feed the growing population by promoting sustainable agriculture using Chr. Hansen’s biological plant health solutions and silage inoculants. For 2024/25, the ambition is to reach 25 million hectares of farmland with Chr. Hansen’s natural solutions.
Help customers reduce food waste through Chr. Hansen’s bioprotection solutions and enzyme technology. For 2019/20, the ambition is to reduce global yogurt waste by 2%, or 700,000 tons.
Improve global health through probiotics and healthier and safer food ingredients. For 2019/20, the ambition is to have launched five new products with a documented health effect.
As part of the strategy review and to reduce the environmental footprint of its own operations, Chr. Hansen revised its 2019/20 operational targets for health and safety, energy, water, CO2 and waste recycling. Compared to the base year 2013/14 Chr. Hansen is aiming for:
20% energy and water efficiency improvement
25% CO2 efficiency improvement
40% waste recycling
Reduction of lost time incident frequency to 2.0
A full report on sustainability and progress on commercial and operational targets during 2015/16 can be found at www.chr-hansen.com/sustainability/reporting-and-disclosure.