Solid sales growth and profitability in Q3, but reduced organic growth outlook for the year

Solid sales growth and profitability in Q3, but reduced organic growth outlook for the year
Press Release | Jun 26. 2019 17:57 GMT

Chr. Hansen delivers a solid financial result of 9% organic growth for the first nine months, but adjusts full-year organic growth outlook from 9-11% to 7-8%

Solid organic revenue growth of 9% in the first nine months of 2018/19: Food Cultures & Enzymes 9%, Health & Nutrition 11% and Natural Colors 4%. Currencies impacted Euro growth negatively by 2%. EBIT before special items increased by 10% to EUR 241 million, corresponding to an EBIT margin before special items of 28.2% up 0.7%-point compared to last year. In Q3, organic growth was 8%, and EBIT before special items increased by 9%. Organic growth outlook for 2018/19 is adjusted to 7-8%, whereas the guidance on EBIT is unchanged and the guidance on FCF is adjusted upwards.

CEO Mauricio Graber says: “We delivered a solid Q3 result despite more challenging trading conditions, mainly in emerging markets. Performance in Food Cultures & Enzymes continues to be in line with expectations and we are progressing well on our strategic agenda of delivering new innovative solutions to customers, so we can continue to grow solidly and profitably, even in markets with lower volume growth momentum. In Q3, organic growth in Bioprotection increased to around 15%, an acceleration from Q2, and we’ve launched SWEETY®, a new culture that allows dairies to reduce added sugar by up to 20%. In Health & Nutrition, the business accelerated from Q2, and the 11% organic growth was driven by strong growth in infant formula and Plant Health. Organic growth in Animal Health was solid, although a higher momentum was expected in Q3. In Natural Colors, headwind from a poor economic environment in emerging markets was stronger than anticipated, and 3% organic growth in Q3 is below our ambition.

"Our EBIT margin before special items in the first nine months of the year increased by 0.7%-point and was driven by improved margins in all business areas. In FC&E, we’re well on track to deliver the scalability benefits from the ramp up of the new capacity in our facility in Copenhagen, while still increasing our investments in the business.

"As a result of the lower than expected growth momentum in Natural Colors and Animal Health, and a weaker growth environment in emerging markets, we are adjusting our full-year outlook from 9-11% organic growth for the group to now 7-8% organic growth. Guidance for Food Cultures & Enzymes is unchanged, Health & Nutrition is now expected to grow around 10%, and Natural Colors is now expected to grow 4-5%. The guidance on EBIT margin is unchanged. The free cash flow before acquisitions, divestments and special items is now expected to be above last year, as some investments have been moved into next year. Based on the cash-flow generation in the first nine months, the Board of Directors has decided to pay out an extraordinary dividend totaling EUR 110 million (DKK 6.24 per share).”

EUR million Q3 2018/19 Q3 2017/18 Growth YTD 2018/19 YTD 2017/18 Growth
Revenue 302.0 282.7 7% 855.2 800.9 7%
EBIT before special items 91.7 84.0 9% 241.3 219.9 10%
Profit for the period 66.5 60.5 10% 175.6 158.1 11%
Free cash flow before acquisitions and special items 48.9 64.4 (24)% 56.5 75.4 (25)%
Organic growth, % 8% 9% 9% 9%
Gross margin, % 56.6% 55.6% 55.4% 53.9%
EBIT margin before special items, % 30.4% 29.7% 28.2% 27.5%
ROIC excl. goodwill, % 37.1% 37.7% 34.3% 34.2%


OUTLOOK FOR 2018/19

The overall outlook for 2018/19 is adjusted compared to the announcement of April 3, 2019 as follows:

June 26, 2019 April 3, 2019
Organic revenue growth 7-8% 9-11%
EBIT margin before special items around 29.5% around 29.5%
Free cash flow before acquisitions, divestments and special items above last year around last year


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