Outlook for 2017/18Arriba
Organic revenue growth
For 2017/18, organic revenue growth for the Group is unchanged and expected to be 8-10%, which is in line with the long-term target.
Food Cultures & Enzymes is now expected to grow above the long-term ambition, while Health & Nutrition is now expected to grow below the long-term ambition, and Natural Colors is expected to grow in line with the long-term ambition.
EBIT margin before special items (B.S.I.)
The EBIT margin b.s.i. is expected to be around the 28.9% achieved in 2016/17.
In the first half of the year, costs to start and ramp up production using the new capacity in Copenhagen will impact the EBIT margin unfavorably. The current level of the USD will also, if maintained, impact the EBIT margin unfavorably in 2017/18.
Free cash flow
Free cash flow before acquisitions, divestment and special items is expected to be around the EUR 188 million achieved in 2016/17.
The guidance for EBIT margin before special items and for free cash flow before acquisitions, divestment and special items assumes constant currencies from the time of this announcement and for the remainder of the financial year. The impact from currencies is largely unchanged compared to the announcement of 25 October 2017.
Chr. Hansen is a global company serving more than 140 countries through subsidiaries in more than 30 countries.
The most significant exchange rate exposure relates to USD, which accounts for around 30% of revenue, while the exposure to other currencies is modest.
Organic revenue growth is sensitive to exchange rate fluctuations in currencies where Chr. Hansen applies a EURbased pricing model, and to 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.
Production in the US and sourcing in USD only partly offset the impact on revenue from changes in the USD exchange rate. Therefore, the relative EBIT exposure is higher than the 30% revenue exposure.
The use of currency hedging of balance sheet exposures and future cash flows is described in note 4.3 to the Consolidated Financial Statements 2016/17.
Financial ambitions through 2019/20Arriba
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 2019/20Arriba
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 2016/17 can be found at www.chr-hansen.com/sustainability/reporting-and-disclosure.