Hailing the overall Q1 2019/2020 results as “in line with expectations”, Chr. Hansen revealed that the nutrition specialists saw 1% organic revenue growth in the first three months of 2019/2020, which coincides with the company’s 1% euro growth.
Along with the company’s health and nutrition segment witnessing 4% organic revenue growth, momentum has also improved in its food cultures and enzymes categories attaining 4% growth, while natural colors saw a 1% rise.
The operating earnings over operating sales figures, otherwise known as EBIT, before special items saw a loss of 1% to $77.6 million (€70 million), correlating to an EBIT margin before special items of 25.7%. This indicates a decrease of 0.6% compared to the same period in 2018/2019.
LATAM is strongest region for Q1
“Chr. Hansen had a very strong first quarter in Latin America,” a spokesperson from Chr. Hansen shared. “In fact, this was the region that delivered the most positive results in the Group in Q1.”
From the company’s Q1 financial report, which was published on 15th January 2020, the company noted it experienced 9% organic growth in Latin America and adjusted for a negative currency impact of 9%, which corresponded to revenue relative to last year.
Euro-based pricing helped with the positive organic growth seen, spurred by strong results in food culture and enzymes — positively impacted from the launch of coagulant CHY-MAX Supreme — as well as solid and strong growth in natural colors.
Health and nutrition, however, declined in Latin America also, resulting from the timing of plant health orders. Most of the sales in LATAM for 2019/2020 are expected to take place between the second and fourth quarters.
Yet growth in plant health for the full year is expected to be “very strongly driven by continuing growth in Quartzo and Presence in Latin America,” Chr. Hansen explained.
The former product, Quartxo, is a bio-nematicide solution protecting crops from nematode-lesions, while the latter, Presence, is a biological seed treatment solution, protecting seeds from root-knot nematodes and increasing plant health via integral actions such as increasing water use efficiency.
Organic sales growth
For the period 2019/2020, the organic growth projections have reduced to 4-6%, yet the outlook for the EBIT margin and free cash flow is expected to remain the same.
Due to the lower end-market growth and based on the preliminary conclusions in its ongoing strategy review, which its notes will be finalized in April 2020, Chr. Hansen is now issuing a preliminary long-term growth ambition of mid to high-single-digit organic sales growth per year until 2024/25.
A mixed growth start
“We have had a mixed start to the year, as expected,” shared Mauricio Graber, CEO, Chr. Hansen.
“While Food Cultures & Enzymes delivered good organic growth driven by all segments,” probiotics was the exception, which the bioscience company noted, was “in line with our expectations”.
New launch contribution
The nutrition name recently unveiled its enzyme for cheese making, Chy-Max Supreme.
Chr. Hansen’s latest launch is a coagulant that is designed to offer a higher yield, faster and more precise production, and superior functionality.
Defined as the change in the structure of a protein, in the instance of cheesemaking, enzymes cause protein coagulation. Chr. Hansen described “groundbreaking innovations” in the coagulant space as “rare”.
Soeren Herskind, Vice President of Commercial Development at Chr. Hansen went on to say: “We understand the challenges of modern cheesemakers who are under pressure to generate maximum value, increase flexibility, and meet customer demand for better functionality and convenient cheese formats.”
Timing is everything in plant nutrition
In the health and nutrition space, it was animal health that displayed very strong growth, influenced heavily by the timing of sales in silage and good momentum in cattle. Alternatively, though, the human health and plant health segments deteriorated due to the timing of orders.
Elaborating upon the issue of order timing in the plant health segment, Chr. Hansen’s spokesperson said: “It is correct that timing in terms of plant health is an element to be factored in. This is natural owing to the nature of the product; it is used when the fields are seeded which is dependent on factors outside our control.”
However, emphasizing the most important element involved, the nutrition-based business explained that: “The timing of orders in this segment is not as important as the certainty that they will be placed in either quarter of the financial year.”
In its Q1 results, Chr. Hansen revealed that its natural colors segment had deteriorated as a result of the ongoing repercussions of negative raw material prices and difficult market conditions.
However, despite these obstacles, it reported a healthy EBIT growth of 10%. In addition, the company’s growth of its clean label colors range, Fruitmax, continued to show popularity and strong results.
Caution and challenges continue
Moving forward with its health and nutrition, food cultures and enzymes, and natural color categories, Chr. Hansen explains that it will “continue to invest in growth opportunities and innovation across our three business areas”.
The company now plans to narrow its guidance for 2019/2020, commenting that it “started the year with a cautious outlook due to the market challenges that we were facing, and those challenges have proven to be persistent”.
As well as seeing a lack of improvement in the end-market growth of its food cultures and enzymes category, the natural ingredients developer is also witnessing lower growth in its dietary supplements ranges.