Corbion N.V. (CRBN) Earnings Call Transcript & Summary

Welcome to the Corbion Capital Markets Update on the 31st of January 2024. [Operator Instructions] Please note that this meeting will be recorded. I would now like to hand the conference over to Mr. Peter Kazius, Investor Relations Director. Please go ahead, sir.

Good morning, everybody. Welcome to the Corbion Capital Markets Update Call. With us today are Olivier Rigaud, our CEO; and Eddy van Rhede van der Kloot, CFO. My name is Peter Kazius. This morning, we published our Capital Markets Update. You can find the press release and presentation on our website. If you go to www.corbion.com Investor Relations, Financial Publications. Olivier and Eddy will guide you through the presentation, after which we'll move into Q&A. The presentation contains 2023 financial figures, which are unaudited at this stage. The final audited 2023 figures are anticipated to be released on March 1. I would now like to hand it over to Olivier.

Good morning, and thank you for joining the Corbion Capital Markets Day event today with several of you here in our office and many others joining online. At the time of the Q3 results in October, we indicated that we will be holding this event ahead of the 2023 full year results because of the need to update the investment community on the number of significant strategic developments within our business. We've issued a press release outlining our proposed discussion this morning, in which, firstly, we've confirmed that the key financial metrics for 2023 were in line with our latest guidance. Secondly, we've highlighted a number of significant strategic developments, which include the divestment of the Emulsifier business, which we announced last Friday, a restructuring program starting now to deliver significant free cash flow and the simplified re-purposed business unit structure, a review of the opportunity in the PLA market and our position in regards of the PLA joint venture. Going through our medical biopolymer business drivers and our overall ambition for this business, where we are targeting a doubling of our sales over the next 5 years and a confirmation of our Algae strategy and plans going forward with here as well outperforming our strategic plan and with the ambition to double our sales by 2028. All of these factors help to underpin our Advance 2025 objectives. We very much welcome questions today, and there will be ample opportunities to ask them. But I would just stress that as far as the 2023 results are concerned, we remain in a silent period and further detail will obviously be provided when we report the results in full on the 1st of March. So now moving to, let's say, the agenda of today and starting with the 2023 performance. I'm really pleased to show these results in line with what we stated last October with an organic sales growth of plus 3% and an organic EBITDA growth for our core activity of plus 16.2%. We've also generated almost EUR 19 million of free cash flow, and the performance was pretty good over the second half because we -- over the second half, we delivered over EUR 55 million. So that's, I think, a good trend also to spot out. As a consequence, our net debt on EBITDA was at 3.1 turns for the entire year '23 at the end of December. So total sales of EUR 1.4 billion for an adjusted EBITDA of EUR 192 million and core EBITDA at EUR 164 million. So we are at now 13.3% adjusted EBITDA margin. Also important to note that seeing the positive continuing trend on our Algae business, we reversed the Algae impairment we made back in 2019. There is only quickly one nonfinancial I would like also to spot out here that is not on the list, but is a remarkable safety trend record as this is one of the key also targets without -- we have within our sustainability scope, and we measure that on a total recordable index, and we achieved the best year ever in Corbion in 2023 with a total recordable injury rate of 0.51 and the lower the better, we started the journey above 1. Now back to the Emulsifier deal, and we're going to come back to that later. But we've closed that and we've announced that, sorry, last week, Friday. Basically, the closing is expected in the course of Q2, and we basically have a cash purchase price of USD 362 million and are estimating the net cash proceed of $275 million. So we will come back in more detail to that with Eddy. Now let me go through what's happening around us. And obviously, we are all aware about the macroeconomic environment we are operating in. But one of the positive we see is that primarily in our food business, we see customer destocking are largely behind us now. We had to face the severe destocking in most of our business in the course of 2023 following the supply chain normalization, but we can say that we've seen sequential improvement. And actually, as from Q4, primarily in our food business, we see, I think, this impact waning. So that's an important one, although we see continued soft macroeconomic climate, and this is primarily in some of the biochemical markets like semiconductors, agro and also obviously PLA. In these segments, we do not anticipate any strong recovery before the second half of 2024. In terms of input price, we see a positive trend, although we are not yet at pre-COVID level, but we see some nice relaxation in input price within the chemical ingredients we buy, freight, energy, sugar price being the only part that is still going up, although we are far from the high we've seen in Q4. And as you know, we have a constant hedge policy. So we are managing that very closely on a biweekly basis actually. But the good news is that, the impact anticipated earlier is a lot lower. So overall, when you look to the input cost, we are anticipating some good decline in 2024. On the sustainability angle, whether we look at our food business and primarily the natural preservative, we see a continued positive trend to replace more synthetic and artificial ingredients. And this part is growing much faster than the overall food market. Around omega-3, there, we offer a structural replacement solution to fish oil. We're going to also come back into more detail about that dynamic. But today, algae-based omega-3 is the only sustainable alternative to fish oil. And we see, I mean, of course, quite a lot of traction in terms of fish oil replacement going forward. Again, more to come later in the deck. The sweet spot of biomedical polymer, again, has strong underlying growth drivers, primarily related to aging population, more health focus, but also growth being driven by the new launches, and we will also develop that primarily on the slow-release drug delivery and anticipated also nice development in regenerative medicine. And finally, around PLA, although we've seen, I mean, some market headwinds in the overall plastic polymer area, we believe that the transition to reduce dependencies from fossil-based plastic towards bio-based alternative, and PLA is one of the option, is a strong underlying trend for the years to come. So now just looking at where we do play, important there to note that we play in very large addressable market. And this is where also we see nice growth area for the coming period and a lot of value creation also for the coming period. The first one being around natural food preservation and functional systems. As already highlighted, this is growing twice as fast as the overall food ingredient market, and we play on a large addressable market over EUR 3 billion. Within the adjacencies that we highlighted before in previous occasions, whether it is around natural antioxidants, dairy stabilizers, the natural mold inhibitors and the dough conditioners there as well, we have quite sizable markets. Most of these are new to us, and we are making very nice inroads into this part. Again, something I will come back at a later stage also in the presentation. And on the much higher growth opportunity, whether it is around PLA, the biomedical polymer and the algae omega-3, there, we have also very strong underlying fundamental growth driver on large addressable markets. So as we've announced, we embarked on a restructuring program to deliver business potential and to increase efficiency. So as part of this restructuring program, we are moving to a simpler, more focused and more efficient organization, basically resulting in a new business unit structure moving down from 3 to 2 BUs and also stopping reporting incubator as a separate reporting segment and basically making the business more accountable for R&D and more strongly connected to the business. So these 2 business units, the first one is around Health & Nutrition, focusing on high growth and high margin. And the second is on Functional Ingredients & Solutions, focusing on growth, enhanced operational efficiency and mix improvement. And I will come back into the identity card of these 2 business units a bit later. Next to the business unit structure, we reviewed all the support functions, basically starting with integrated supply chain and moving to a fully centralized end-to-end supply chain, also enabling us to share best practice across the entire company. We also moved back to a fully centralized R&D structure, driving cost efficiencies, generating synergies, but also increasing effectiveness and knowledge sharing, although we keep a decentralized application labs, primarily for our food business to ensure market proximity and agility. We've also reviewed the entirety of the support functions, have identified a lot of synergies as well following the new business unit structure and also looking at our overall process now that we are coming to the completion of our global ERP implementation, the last wave of this global ERP implementation being in the upcoming April, where we have the last part, the last wave impacting our blending operations in the U.S. and we would be done with a 4 years ERP implementation program. So that's going to be a major milestone, I mean, on our side as well. And we are intending really to get optimized process following that implementation. Now let's have a look to the ID card of the Health & Nutrition division. We are speaking there about EUR 245 million sales BU. So this is 19% of the Corbion portfolio, and it has experienced a very nice impressive organic growth over the last 3 years of 28% CAGR. So this is about nutrition, primarily omega-3 in aquaculture, but also stepping into pet nutrition and human nutrition, our biomedical polymer business and our pharma solution business. This BU is about focusing on this high-growth and high-margin business. It's about also sharing capabilities. We hold market leadership position in these 3 subsegments. We have either a #1 or a very strong #2 position in each of these segments. As I said, we are playing on high-growth addressable market with very strong barrier to entry. We have strong IP in the 3 of these subsegments. In this BU, we are committed to have continued innovation with high single-digit percentage of sales in terms of R&D spend. We speak about around 8% when we get also incubator back into this number. And we have capacity expansion options at existing sites, whether you speak about the Algae business, the pharma ingredient business or the biomedical polymer business. So we see this unit growing at around 15% per annum in terms of volume mix and above the 20% EBITDA margin going forward. When looking to the Functional Ingredients & Solutions business unit, there, this is a large business unit, slightly above the EUR 1 billion sales, represents 81% of the portfolio. And it has experienced also a nice organic sales growth with a 10% CAGR over the last year. So obviously, the lion's share, so over 2/3 is about our food ingredient business in there, 18% the biochemical business and then 6% being the lactic acid to the joint venture. So there, again, we maintain our key strength building on the fermentation powerhouse that we have and the tail of blending capabilities we have across the globe to produce blends, systems and solution. And again, we keep on with the strategy of replacing synthetic and artificial products by natural alternatives being into the food space or into the biochem space. And all this is being sustained by strong application and tech support all over the globe. So on, let's say, the way we look at this division, basically, we address and we have large position in stable market, we have also some great leadership position, again, speaking about the natural preservation or the functional systems, but we can say exactly the same for the, let's say, solvent, natural solvent within the electronics market. The way we do operate there from a base of various organic acids, being lactic acid, vinegars being acetic acid or propionic acid, but also functional ingredients, it's moving up and training up the value chain to go for organic acid derivatives where we are adding value or functional blends and combination of both to offer solutions to our customers. And we do that with a very strong tech service, tech support and application labs in the various industries where we are playing. So this is a business unit with a well-invested organization, well-invested lactic acid capacity, and we will maximize with this new setup also the shared lactic acid-based infrastructure. Maybe just also to highlight the way we've been operating in the last years and what we're going to continue to do. This is one of our strengths. If you look to the way -- I mean, we actually look at mix improvement, looking at the bottom of this chart where you have plain lactic acid, over the last decade, the intent and the strategic intent has always been to trade up plain lactic acid into more and more derivatives. As you can see on this chart, we've been accelerating that trend as from 2019, 2020. And in the Derivatives segment, this is where basically we are adding value. We are bringing more differentiation where we have also higher margin. You can see there reflected obviously the slowdown we experienced and the marketing did experience across 2023, but the underlying trend and the plans we have in terms of investment we've recently made and the investment we have also in mind, just a continuation of this strategy to trade up value from base lactic acid into more derivatives into more blends and solution. Now also in this division, we discussed earlier about adjacencies and where do we see upcoming value creation next to the big areas of natural preservation and functional systems. When you look at the adjacencies we described at last year Capital Markets Day, we are really pleased to see this really getting quite a lot of traction. These 4 initiatives do already represent 10% of our food ingredient sales. So we're going to really continue there to expand and launch new value proposition for our customers in these segments. At the same time, in this business unit of Functional Ingredients & Solutions, we are looking really to enhance our margin profile going forward. This is within this BU where we're going to have most of the efficiency improvement and cost reduction from the restructuring program. The target for us there is to have this unit growing on longer term at 4% per annum on volume mix and get back to mid-teens EBITDA margin. So important in terms of value creation really to realize within this BU, the benefits from all the recent investments we've made over the last 3 years. Now when we look at our asset footprint also related to this business unit, we are well invested in fermentation asset capacity across the globe with the new Thai lactic acid plant becoming operational this year, we've decided to stop the lactic acid fermentation in Spain. However, we are continuing the production of food ferments and other derivatives in the Spanish facility. But as a consequence, we are mothballing our U.S. Peoria operation. This is also part of the restructuring program we've put in place. And we can do that only because we have a unique and we are the only global player in lactic acid with plants all over the continents that allows for flexibility from both a demand standpoint but also an input cost perspective. So when you see today volatility in some of the input costs or sugar price, the fact that we have a global footprint is really allowing us to max out profitability by indeed allocating production where it makes more sense. I just want to end that footprint discussion with vinegar because this is also one part -- important part of the synergies and also, let's say, the EBITDA increase we've presented last year, and we are reconfirming here. We acquired a very small operation last year. And I'm pleased to say that this plant is now fully operational, driving cost efficiency by in-sourcing vinegar that we used to source externally. And vinegar for us is one of the building blocks that we are further modifying within our antimicrobial systems. So this plant is fully operational, is running in specification, and we have options to further expand to further in-source product at very limited CapEx amounts. Now some words about this world-leading lactic acid plant we've just mechanically completed in Thailand. It's important to know that this is the largest ever investment we've made in the company. So this plant basically is a very important milestone. You invest only in this type of capacities every 10 to 15 years. So as I said, we are now very well invested, and we are very well invested, I mean, with a plant giving us a very important competitive advantage, whether it is around, of course, I mean, cost but also significantly lower carbon footprint. And this is important for 2 reasons. One is obviously, I mean, also helping Corbion to match its sustainability commitment with a science-based target. But we also know that CO2 will have a cost and a much bigger cost also going forward. So we also think that this lower carbon footprint next to the lowest cost position is also bringing some more competitiveness going forward for the years to come. Additionally, it will really help our customers to reduce their Scope 3 emission and provide also for Corbion an additional competitive advantage. So when you look to that asset, obviously, we have the investment behind us now, but the value ahead of us. And we see the value on 2 major components. One we communicated already last year, which is the variable cost reduction of EUR 10 million EBITDA impact, but moreover, a volume growth that could represent and will represent over EUR 40 million additional EBITDA. So we've mechanically completed the plant in December. Now we are busy in the course of Q1 on efficient start-up so basically, the ramp-up is foreseen as we're going to have the first product being out in the course of the quarter and then further ramp up across Q2. So giving the floor now to Eddy to go through the financial numbers and in more detail about the restructuring plan. Eddy?

Thank you, Olivier. Good day to everybody. So a key objective of our restructuring program is really to accelerate our free cash flow delivery. In the graph, you can see the dynamics that we have seen in the last year. So we started in the period 2017 to 2020 with mild positive free cash flow delivery. And then the years 2021 and 2022, you see more than significant negative free cash flows. And that is really being caused by one is our investment program, especially the lactic acids investments that we've made of which the Thailand plant, as Olivier has just been talking about, is a key component. But on top of that, in that period, we've also been faced with global supply chain disruptions very much as an aftermath of the COVID dynamics, and that really increased our working capital significantly. So that were 2 main factors for the negative free cash flows in those 2 years. We're very happy to see the -- that we abandoned the trend in 2023. As you may remember, already from Q2 onwards last year, we were already in positive territory that further accelerated into the second half of '23, and that made us into positive territory for the full year of 2023 with EUR 19 million positive free cash flow delivery. And that's also the trend that we see ourselves continuing with into '24 and '25, a EUR 50 million cash flow delivery in '24 and EUR 75 million in '25. And that, by the way, talking about the year 2024 this year is excluding -- these figures are excluding the net cash proceeds of the emulsifier divestment as we announced that last Friday. So the next 3 pages, I will run you through the 3 key areas of our free cash flow delivery being operating expenses, CapEx program and working capital development. So starting with the operating expenses. We embarked on a restructuring program to structurally reduce our operating expenses by EUR 55 million on an annualized basis. That is composed of EUR 20 million annualized savings in variable cost savings and EUR 35 million savings on a fixed cost level. Now the variable cost savings, that's something we shared already a year ago with you in the Capital Markets Day, 2 main components. One indeed is the full utilization of this new Thai lactic acid plant. The moment we hit that full utilization, that will give us a EUR 10 million savings versus the conventional way of making lactic acid. It is a cheaper way of producing lactic acid in that sense. And then besides that, we have also announced we are in-sourcing a few products that we have purchased in the past externally that will also give us a EUR 10 million variable cost savings. And an important component of that is the earlier announced vinegar production capability that we have now in-house. So that is not really new news in that sense. What is new is the fixed cost savings. So the EUR 35 million annualized savings program that we have embarked on, it's really about simplification of our structure, of our processes, efficiency improvements. So very much also the new organization structure, business unit structure, Olivier has been talking about. A key component in that is the asset optimization resulting in mothballing one U.S.-based production plant. It's called the Peoria plant. So that's a component in that savings realization. And underlying, we are looking at a reduction of 200 positions globally. So that's across the board in all functions in all geographies. So that is the program that we are embarked upon and will execute this year. To make that happen, yes, of course, we have to incur one-off costs, restructuring costs. We give here an order of magnitude, EUR 15 million to EUR 20 million. There's still a range there because we still have, for example, to negotiate the severance packages, take the example here in the Netherlands, for example, with the unions. It's a mothballing cost of the U.S. plants. And that being said, it traded that the majority of these restructuring costs, cash out will be anticipated to happen this year. The second element of free cash flow delivery is about our CapEx program. On the left side, you see what we've been doing in the last 6 years. Anything in purple relates to lactic acid capacity expansions being in light purple, debottlenecking program on existing plants and in dark purple, this new Thai lactic acid plant that is now becoming operational. So you really see that we're coming now out of this more significant investment phase. And going forward, we are looking at a much reduced CapEx level with an indication of about EUR 110 million per annum. The composition of that is maintenance CapEx of about EUR 50 million per annum. Maintenance, by the way, is meaning anything but expansions. So that is not only maintaining the plant infrastructure, but also IT investments, for example, is captured in there. And then you see a EUR 60 million per annum expansion investments. And the breakdown of that, where that lands is in the -- on the right-hand side that to be found the investments we will make to expand our capacity and capability in Algae, biomaterials and what have you. So that's all on the purples -- on the blue box on the right. And I want to express again that these expansion investments typically come at very nice high returning rates of return of above 20% post tax. Then the last element on the free cash flow delivery is about working capital. So we see that we are returning our working capital metrics to pre-COVID levels, metrics we have here 2 of them. In the bars, you'll see it as expressed as days in the line, the purple line is expressed as a percentage of sales. And we are coming from a long period where we were trending very stable, 90 to 95 days or equivalent of close to 20% of sales. And really starting in the year 2021, we've been faced with these disruption -- global supply chain disruptions on the one hand, meaning we had to stack up our inventory in terms of kilos as to continue to well and able to supply our customers. But also on top of that, we had the input cost inflation wave, which we'll talk about later in the presentation, meaning more expensive kilos. So that was a double hit, really causing us to see higher working capital levels in '21, '22. We've reached the peak of those positions by June last year. So that's the H1 column you see there. And we have already bended this trend towards December last year, and we see a further continuation of reducing our working capital positions in the coming 2 years based on partly further reduction of inventory positions. So that's a continuation of the successes we already made in the second half of last year, but also increase of DPO because that was relatively a low payables level in December last year because of low procurement activity as we were winding down our inventory positions. So that concludes this part. I hand over back to you, Olivier.

So just back to this restructuring program and to end on that section. It's important to say that it's all about execution. So making sure we have a very strong and rigorous execution on this. We've set up a transformation office led by Jennifer Linsey that the people present here in the room will see just after the presentation. So the Head of Transformation is reporting directly to me. And I just want to emphasize, we do not want this exercise to be just a one-off cost-cutting exercise. The aim there for us is really to implement longer-term efficiency improvement across the entire organization. So next to this, of course, EUR 35 million that Eddy just presented, obviously, the next activity we're going to work on is how do we compensate for the emulsifier stranded costs immediately. So we're going to come back to that also in a minute, but that would be under the, let's say, management of the transformation office. So having said and been through that, now let's go through the 3 strategic initiatives we agreed detail today, starting with PLA. And on PLA, we've been through all options. We have considered all options from full exit to partial exit. We've been looking to all business drivers, outlook and basically, our decision following that thorough review has been to stay committed to the PLA business. So we can really state firmly that Corbion and TotalEnergies are committed to PLA. In terms of value creation drivers, we are very well invested in Thailand. I will provide further detail today, but there is ample of room to really get much more value creation from the current asset and max out the current assets we have in Thailand to serve in a very short term existing markets and the mid long term to build further differentiation. Now let me come back to what happened and give more granularity on what happened. No surprise, we faced a massive market slowdown due to the global economic downturn, simply just in line with traditional fossil-based plastic. I just put in there the example of EU, but we've seen the same pattern across the globe. If you see, I mean, basically on the joint venture journey, this joint venture was set up back in 2017, start to operate Q2 2018 at the time and has experienced a tremendous growth pattern. And then we've had this sudden slowdown mid-'22, as you can see on the chart there. Now when considering you speak about 175,000 tons current PLA market following the downturn, these do represent a loss less than 1% of the global polymer market. Think about the global polymer market fossil-based of 350 million tonnes. We are speaking about PLA of 175,000 tons there only. So today, the capacity occupation with all installed PLA capacity is around 55% to 60% at max. What we can say is that during this period, obviously, we experienced, as you have seen, the same downturn as the entire market. However, we've consolidated or even strengthened slightly our #2 position in this market across the period. Now also, if you go back to what we said last October, we see now the sales contraction bottoming out already now since a few quarters. And Q4 was a confirmation of that. So -- and that's an important also message I want to convey here today is that we've not seen and we do not expect any further erosion on the PLA market. With the pipeline we see, we expect recovery as from H2 later this year. Now looking to also more granularity, when you look at this 175,000 tons today, 2 important messages there. First, 2/3 of the PLA is being used in food packaging and food serviceware market and almost 50% is being sold in Asia with China being the largest market there and also the market with the most favorable regulatory environment. So when we look at short term and the capacity we have in Thailand, basically, the joint venture strategy will be to really max out the asset, and we believe this asset is ideally positioned from both the cost and the geographical perspective to serve the existing categories and the existing geographies where PLA is growing. Now back to basically the longer-term drivers. As we said, PLA is less than 1%, but we believe longer term, this market could represent up to 10% of the overall plastic market. So PLA plays today in a bio-based market of roughly 3 million to 3.2 million tons of bio-based plastic. However, if you look to the top right chart on the orange piece, it has quite important positions in both rigid and flexible food packaging into agricultural film and in food serviceware. What we see in terms of regulation is that some geographies are more advanced and primarily China and some countries in Asia and U.S. is getting there with the IRA program. The only places in the world where I think the situation is still, let's say, unclear is Europe. Europe is, I think, still very disjointed in terms of having a uniform and harmonized regulation regarding bioplastic and the bioeconomy despite all the announcement. Second thing to highlight there in terms of PLA technology. The PLA technology is moving about how do you differentiate the bio-based polymer, bringing more functionality. The most notable progress the joint venture has made is being able to develop a recycled PLA technology. And recycling PLA seems easy, but it's not easy to get a food contact grade. And so far, the JV is the only PLA producer having the approval for food contact on recycled PLA, and we start to market recycled PLA to have that part of the portfolio going forward. Next, to the point that basically innovation in terms of technology and end-use application are also moving, whether it is, and I will come back to that in a minute, heat-resistant PLA or get into new application, spanning packaging or textile or even medical device. So looking at the differentiation, the joint venture has embarked, it's also to have and build less exposure to, I mean, the wider cyclical polymer market and focus the fill up of the plant capacity into higher differentiated market. On this, I've put a few examples of what do we have in the pipeline. There are a few ones that could represent also a very important level of differentiation. I'm primarily thinking about the last one on expanded PLA, where basically there, we bring very nice functionality to replace expanded polystyrene. And the example of noodle cup is a nice one we are developing primarily for obviously the Chinese and the Asian market, where we see further development. So to conclude on PLA, yes, thorough review of our options, opportunities, conclusion to remain committed into that, basically now going into the next short-term phase to max out the current asset in Thailand, fill that capacity, and we have ample capacity without the need to invest there and continue to work on a longer-term pipeline to bring differentiation and get out of the cyclical nature of the wider plastic polymer market. Now moving to the sweet spot of our biomedical polymer business. This is a business that is highly functional, strongly differentiated with high double-digit margins. And we've been outperforming our own strategic plan there. We've experienced a very nice CAGR over the last years. We have a market-leading position, a highly differentiated business with a lot of IP and very high barriers to entry. When you develop a project, a product for a customer, basically, it's almost tailored for each customer. Once you get, of course, an FDA or pharma approval, basically, the effort and the cost to change is too important. I mean, again, to go back and go for alternatives. So what we are expecting in that business is to double our sales by 2028 to above EUR 100 million mark there. And this would be supported by, of course, strong growth within our existing business but also the high development of the key initiatives, I will come back on in a minute. So the other point to mention in that business, and this is a very important one for the market we serve is that we have a dual production footprint with one plant in Europe and 1 plant in the U.S. And this is fundamental and critical in terms of business continuity for these customers. As I think, again, you cannot take the risk to have a single sourcing. So basically, having also this dual footprint is a critical competitive advantage. We believe we can double our business above EUR 100 million in these 2 sites with rather limited investment. Now we address a very large market. It's over $1 billion. It's growing pretty fast, and we want to have a dual growth approach there. The first is to maintain our leadership position in wound closure and orthopedics and to accelerate the growth in the drug delivery segment. On this, I will come back into the new technology that was launched last year with MedinCell and Teva, but we see very nice opportunities there to further build better cost-effective therapies with our partners there. And last but not least, there are a few areas we are exploring today where we are developing prototypes. I'm thinking about regenerative medicine, and we have a few others that will secure the longer-term growth. But then you speak about a 5 to 10 years portfolio going forward. So let me come back to close with this drug delivery initiative. You might have spotted last year the FDA approval from Teva on this slow-release drug delivery that was co-developed with MedinCell, our JV partner there. And we are really happy to see the first proof of concept actually with this active drug for schizophrenia being Uzedy, that was approved, again, as I said, back last year in April and was on the market and is on the market since May 2023. But more important is that, yes, this proof of concept then enables Teva to really accelerate 2 other products that are now in Phase III clinical stages, and there are 5 more projects now in preclinical. So there is a full pipe happening now based on this massive breakthrough. So probably more to come later, but this is, I think, really also very promising and highly differentiated technology. Now moving to the Algae road map. Algae, you might remember the growth journey we presented in the early days of Advance 2025. Basically, looking back to the '19-2022 period, the aim was to fix the business and move it from a loss-making operation to a breakeven. And again, we achieved that back into the summer 2022, and we did that by expanding volume of AlgaPrime into the aquaculture sector. Now the current period is to leverage our technology and to grow beyond omega-3 in aquaculture into pet and human nutrition and we have the first very successful delivery there. Next phase is about really expanding our portfolio beyond omega-3 and to just further build our nutrition capabilities with the Health and Nutrition division with other algae oils with micronutrients and with natural antioxidants. So we've had a very successful 2023, continuation of growth, over 40% volume/mix growth, expanding the customer base and now serving over 20 countries with this business. The growth opportunities to generate higher margin, primarily pet nutrition and human nutrition is progressing very well. As an insight, pet nutrition today is already representing 10% of our overall sales of algae ingredient and is developing quite nicely at a high margin. So our intent is to have the same path for human nutrition going forward. So we've developed the technology. We've launched the product. So we are on that track now. Also very important achievement in the course of '23 was to be able with the R&D infrastructure in San Francisco to optimize our algae strain with over 15%, giving more efficiency, but also capacity investment -- enhancement, sorry, without having to put steel on the ground. And that's quite important as we believe there is still more to gain from a yield efficiency improvement, and that's important in the frame of our CapEx program. So next to this yield improvement, we've started a debottleneck program in the current facility. We presented earlier an overall EUR 50 million program that started already, let's say, back in 2023. So we still have another EUR 40 million to go to get to the EUR 200 million sales we presented earlier. And finally, obviously, we also strengthened the partnership with key customers to secure longer-term volume, primarily in aquaculture, but also in pet nutrition. So this is an important slide that you've seen before, but I'd like to come back in a minute. There are a lot of questions about fish oil dynamics and obviously, whether we're going to see some cyclicity in our business related to fish oil. Historically, if you could see the bandwidth, the gray dotted line, fish oil supply catches have been between 950,000 tonnes to 1.1 million tonnes historically with a peak back in 2018. And now you can see we are on the very low side, even below the 950,000 tonnes mark. So a lot of volatility in this market. However, we believe with global warming, with also more restriction in terms of sustainability and number of catches that are being allowed, structurally, yes, fish oil will, I mean, unlikely go above the 1 million tonne. And even if we would get back to the 1 million tonne level in the higher end of the range, this will not happen in '24. And as from '25, if you consider the supply gap with the omega-3 market structurally growing at 2% per annum, basically, there will not be enough fish oil structurally to fill this supply gap. And algae-based omega-3 is one of the few alternatives available at scale, but also on a competitive base. The last point I'd like to mention on this slide is that algae omega-3 taps contrary to PLA into an existing market there. There is an existing omega-3 market that we simply replace by algae-derived omega-3. And so that's also an important statement thinking about also the volatility of this market. Now this market is today already a large addressable market, over EUR 3 billion. We believe that algae does represent EUR 0.5 billion today, and we see this market growing very strongly, doubling in terms of addressable market up to EUR 6 billion by 2035. So in that respect, we believe our business could be a EUR 500 million business by this period -- by this time. Now looking at the current plant in Orindiúva, Brazil and the current facility, we are on track. We are even ahead of our strategic plan. We have sufficient capacity until 2028 at very attractive return. So we are planning EUR 160 million sales by '25 at a EUR 28 million EBITDA and up to EUR 200 million, so doubling our sales by 2028 over the next 5 years or over EUR 40 million EBITDA there. So this is, again, happening because of the yield improvement I highlighted before and the debottlenecking program I also just mentioned. So when you look to the, let's say, longer term, also important to stress that there is no need to have significant CapEx beyond the EUR 40 million, we still have to spend on the current facility, and there is no imminent decision to be taken for the next step. The next decision will come early 2026. For this next decision, basically, we are considering and we are actively working on 2 options. One will be to grow modular at the current facility in Brazil. Obviously, this would be a lower risk approach. Another would be to work on a greenfield operation on another site. Now having said that, no imminent decisions are there. We are still working very much on yield improvement on technology also to minimize or optimize CapEx cost in case of a greenfield. So we will come back in due time on the options we're going to select early '26. So back to summarize on this slide, yes, I think very strong growth trajectory, high level of confidence to reach the EUR 200 million mark by '28 and big business potential in the years to come in the decade to come for the Algae business. Now let me hand over back again to Eddy for the financial update. Eddy?

Thank you, again, Olivier. So I will take you through the financial update and the related guidance. So let's start with looking at the sales growth. So one of the objectives of Advance 2025 is to profitably grow our company at a higher pace than before Advance 2025. And in the graph on the left, you can see in gray that we really did step up in our growth dynamics. In the years 2014 to 2019, we were growing at 2% on average. And in the period under Advance from 2020 onwards, we are growing at 12% on average. Of course, we do know that this Advance period has been quite supported by steep price increases following the whole input cost inflation dynamics that we will talk about later. But if you subtract on all the pricing elements, then still the underlying volume mix development also has been seeing a step up to about 5% on average in the last 4 years. Within that, of course, the last year, so the year 2023, we did see a reduced volume mix development. Part of that has already been explained by Olivier on the destocking that we've been confronted with like lots of other businesses as well, I would say, and also softness in certain markets, think about electronics, agrochemicals, and lactic acid to PLA. Going forward, as you will see later on, we do anticipate a pickup again in the volume mix for the years '24 and '25 in the range of 2% to 6%. So talking about input cost inflation, I think that is nicely depicted on this sheet. So this graph shows the input cost inflation for the variable cost components for our core business activities, variable cost that comprises raw materials, packaging, energy and freight. So this is not showing labor inflation, for example. And what this clearly shows on the left side that starting somewhere in the course of '21, we saw an increase in this input cost inflation. It has peaked in H1 last year. So that is in the middle of the chart. And we did already see some relaxation happening in the second half of last year. And with the current visibility that we have and the current contract positions that we have for this running year '24, we do see a further relaxation of this input cost inflation. So this also includes all the dynamics of sugar that we see recently that sugar is on the rise, but that is all reflected already in this outlook for '24. I think it's also good to state here that although we do have a relaxation, by no means we are back to pre-COVID levels. So it's more or less if you take the end position in Q4 -- anticipated Q4 for this year, we've not even recovered less than 40%. So we still have quite some way to go if these raw materials and what have you will normalize back to where they came from. Then in this volatile environment, we've been able to grow our EBITDA by 8% per annum, both measured in absolute terms, but also on an organic basis. And on the right-hand side, you see that the reported EBITDA margins for core have recovered a bit in 2023 to a level of 13%. So that sits slightly stronger than the years '21 and '22. But if you would take the assumption that the whole input cost inflation would never have happened or if it fully reverses, then the underlying EBITDA margin is more or less sitting stable between 15% and 16% for the last 5 years. At the CMD in 2022, we guided on the EBITDA organic growth rate of 15% to 20% per annum. And again, we reconfirm this growth rate guidance. And in that, we delivered at the first year in the Advance period of 16% in 2023. And the graph shows on the right-hand side, the EBITDA 2025 outcome for the range at the low end or the high end of this guidance range at between 15% and 20%. And if you take the midpoint of that, so being at 17.5% growth for the years '24 and '25, we will land at EUR 226 million. And it's important to state here also, by the way, that this is assuming the same currencies as what we have experienced in year 2023. So we don't take a forward look on stronger or weaker currencies in the next 2 years. This sheet illustrates then the key components towards this midpoint EBITDA delivery in 2025. It's a very similar setup as what we shared at the Capital Markets Day a year ago. So on the one hand, we will have EBITDA growth coming from variable cost reductions. That's the EUR 20 million we talked about before, assuming a full utilization of the new Thai lactic acid plant and the cost reduction of this in-sourcing of production, vinegar being an important component there. So that's not new information. Then the business growth, very comparable also in terms of outcome compared to what we shared last year, but this is now already structured according to the new segmentation. So EUR 30 million contribution from omega-3. That's the algae-based omega-3 close to EUR 10 million in contribution from Health & Nutrition related to other, and that means biomaterials and pharma. What is really the difference from a year ago is the lactic acid to PLA contribution. If you take again the chart that Olivier shared on PLA delivery in the last 1.5 years or so, you do see that we had a year ago a contribution from EUR 10 million expected here, and we are sitting now at minus EUR 2 million for this 3 years period. So that's really the big change, I would say, compared to a year ago. And then Functional Ingredients & Solutions will contribute EUR 35 million, and that also includes a big share of the restructuring cost contributions. So that will bring us to a level of EUR 240 million. Then to bring it to 2026 on the right-hand side, we have been faced with currency headwinds. So if currency remains where they are for the next 2 years, then we will be faced by the end of 2025 with EUR 40 million, and that brings us to EUR 226 million. I do like to make a remark on the EUR 240 million. Last year, we made a similar sheet where we've been showing a road map to EUR 250 million. The EUR 10 million shortfall that you see compared to here is caused by 2 factors only. That is the starting point in the year 2022 is EUR 5 million lower than what we then anticipated because a year ago, we did not have the actuals of 2022 yet. So the starting point is EUR 5 million lower. And then also the growth rate in 2023 has been sitting at 16.2%, which is slightly lower than the 17.5% midpoint that, that sheet was based on. So those 2 factors are driving this EUR 10 million lower outcome. And I do want to repeat again that we are guiding for organic EBITDA growth rates of 15% to 20%. We're not guiding on the absolute amount because we cannot, of course, influence currency developments, as an example, in the next 2 years. So we're actively managing down our funding ratio towards the 1.5 to 2.5 range that we are striving for. On the right-hand side, you see the development where we have been peaking by June last year to a level of 3.4 turns. We are already bending the curve in that sense and came out with 3.1 for the December position last year. And if you would apply the Emulsifier divestment as if it was already fully closed by the end of December, then we call that the pro forma, then basically, we will already be sitting at a 2.4 based on the 2023 position. So that shows you the impact of this Emulsifier divestment, but we all know that, that will be closed out in Q2 rather than in December last year, obviously. From that basis, we still see some further room to improve our funding ratio to a level of 1.8 to 2.3 for this running year 2024. So that brings us more in the midpoint, I would say, of the guidance range that we set ourselves. On the left side, by the way, some remarks on the debt structure. You may remember, we have pretty good funding position with average interest rates by the end of December of just below 4%. And also when it comes to redemption of our debt, the first redemption will only arise by the end of 2025. So there's nothing short-term imminent that we need to refinance the company in any components. New group segmentation. Core. So we will continue with 2 units going forward. So as from this year, so that there are just 2 units, Health & Nutrition and Functional Ingredients & Solutions, and Olivier already shared what are the key components within those 2 units. And then on the right-hand side, yes, we maintain the old overview just to keep track of what we've been doing. So you see everything is pretty empty by now in noncore, really showing that we have lived up to all the intentions that we set ourselves 3 years ago. The one and last remaining noncore activity is, of course, this emulsifier business that we will expect to close out in Q2. So I think that's nice to close it out with this overview. The guidance framework, comparing last year's CMD to now. So organic sales growth, so this is volume mix again. So we take that a notch down in the coming 2 years. I think you also have that reach to 2% to 6%, the current environment, the macroeconomic environment, which still shows some volatility as we discussed before. We maintain the organic adjusted EBITDA growth, 15% to 20%. Free cash flow, that's a new one that we added. That was not there a year ago, but given the importance, and we want to give that extra focus, we really see that as a metric to guide on. So EUR 125 million cumulative for the next 2 years. And then the underlying ambitions, the margin, the ambition that we have there has already been captured earlier in the presentation, above 20% for the Health & Nutrition unit and for Functional Ingredients & Solutions in the mid-teens. CapEx, we reduced our CapEx intensity for the next 2 years to a level of EUR 110 million per annum. And again, the covenant net debt-to-EBITDA ratio, we maintain the original guidance in terms of bandwidth. Then on outlook for this year '24, organic sales growth for the core activities. First, focusing on volume and mix components. That's what we guide on. So that we anticipate to be in the range of 2% to 6% for the full year of 2024. Within that, we'd like already to signal that the first half H1 is likely to be flat, and that is especially related to the biochemicals and lactic acid to PLA activities in the Functional Ingredients & Solutions unit. And there is quite some strong comparables, for example, to beat, especially in the first half think about the electronics, agrochemical markets that came down after Q1, Q2 last year quite considerably. And we don't anticipate a quick recovery in the opening quarters for this running year. Continuation, volume mix, I'm still on, continuation of the upward momentum that we see in the volume mix development in Food. So we see a nice upward trend in the course of '23, and we see that continuing into '24. So this is again in the Functional Ingredients & Solutions unit. And then obviously, an ongoing growth in the Health & Nutrition unit. So that are all statements related to volume mix development. On the pricing side, we do anticipate a negative pricing impact, but that's really mainly in the Functional Ingredients & Solutions unit. And that, of course, has to be seen following the input cost relaxation, bring back in memory that chart which we shared before. Adjusted EBITDA organic growth higher than 15% for the full year. Then Olivier already talked about, yes, whenever you divest something significantly from day 1, you're always faced with dis-synergies or stranded cost, whatever you want to call it. What we want to do here is we will separately disclose that in the coming quarters this year because we really see this as a transition year. So we will separately disclose that. The current estimate is that out of that dis-synergies or stranded cost, we will have a net negative impact of EUR 15 million because part of those costs, we will be able to charge through -- to the new buyer because the new buyer, we will allow for a smooth transition, and we will service that new buyer for quite some periods this year in terms of IT, finance, HR and also we will help there on the commercial side as well. So the net impact is minus EUR 15 million for this year. For '25, we will fully recover this stranded cost going forward. Restructuring costs, we stated before, EUR 15 million to EUR 20 million as one-offs and then free cash flow delivery over EUR 50 million for this year. And within that CapEx between EUR 100 million and EUR 110 million. And the ratio, like I explained before, covenant that is between 1.8 and 2.3 turns measured at the end of the year. That's always what we guide for here. Olivier, then I'll hand it back to you.

Okay. So just to conclude, I think you've heard a lot from Eddy and I over the last hour. So I'd like to thank you for your engagement. And before going to Q&A, what are the key messages I'd like you to reflect upon. So I would stress the following, so that the 2023 full year outcome was in line with what we had indicated in October last year and at EUR 164 million EBITDA for our core activity, reflecting an organic EBITDA growth of 16%. The sales of the Emulsifier business not only addresses an outstanding strategic adjustment to our portfolio, but also significantly benefits our balance sheet position. As highlighted, this will be enhanced further by our restructuring program to deliver significant free cash flow and starting now in 2024. Given how 2023 developed and with an ongoing geopolitical and macro factors, although we see destocking now behind us, we believe we should remain cautious in our near-term expectation, particularly in the first half. But over the recent months, we've reconfirmed the growth opportunity in our addressable market in food, in algae and biomedical. So we've simplified our business structure to enhance efficiency, and we are very confident in terms of value creation for both '24 and the remaining of the Advance 2025 strategy. On this, I would open to Q&A.

The first question is from Robert Jan Vos.

Yes. I have a couple of questions. Do you want me to ask them one by one or…

Yes…

All at the same time?

One by one.

One by one. Yes. The first is on PLA. You updated us today with your mid short-term, midterm and longer-term outlook or expectations. But that has not really changed versus what you said last year. So my first question is why now the decision to continue? Is it in any way related to the successful disposal of Emulsifiers? And related to that, did you try to sell the stake to Total? Maybe you can elaborate on that.

Yes. No, so this is a good question. So answering straight, and I don't want to speak for Total. We didn't try to sell the stake to Total. The statement, the only statement we have there on Total is that they are committed to this business, yes. When you look to the overall, not just the recent downturn, but the overall JV performance over the last years, whether it is in terms of EBITDA delivery, I mean even in a tough year like '23, the EBITDA margin was above 15%, yes. So not, of course, related to the previous level, but still a decent margin. So the other thing and an important element is that if you look to the asset we have in the technology, the JV as in Thailand, if you look at the value creation, where we did end '23 in terms of sales and EBITDA, there will be a very important volume impact going forward to really enhance profitability of that asset. And we see now really, finally, we discussed about early signs of recovery last time. These are confirmed now, and we've been comforted by the Q4 delivery as well. So when we look to both the short-term drivers in the long term, yes, we have better visibility than what we had before on PLA. So this is primarily what has been driving the decision. We believe, yes, there is still, I mean, a lot of value we can create from that business. It's also important to understand in the bigger frame is that we still have a long-term supply agreement to the JV. And whatever would happen to not only the JV but to the wider PLA market as an influence on our lactic acid business, yes? And that's an important factor as well being part of that decision.

Very clear. Maybe a small related question. I think you kind of answered it already, but we saw a sequential improvement in sales in the PLA business. Does that also apply to the EBITDA in Q4? Was it better than in Q3?

I think…

I don't think we want to disclose now in '23. We're still in the silent period, and we already gave some key headlines financials, and that's what we shared today. And let's park if you're okay with that, for the '23 discussions a month from now.

Okay. Then I have a question on the algae update. You talked about 2 options to expand capacity beyond 2028. The modular one you said has lower risks. What then would be the reason not to choose for the modular option in the first place? What is the flip side of choosing for that modular option to increase capacity? And what are the costs roughly of a greenfield new plant?

So 2 different angles to answer your question. I think the reason why is that we do not want to miss any business opportunity in case we would have a faster growth. So for us, we don't want to lose the opportunity in case the market would even grow faster than what we are anticipating, yes. So basically, so that's one, I think, driver in terms of which type of option we would go after. And as I said, obviously, we would only commit to a greenfield with strong and firm customer commitment, yes. So that's number one. The other thing that is important also to state is that we are making great progress, even better than anticipated on this yield improvement as well. But also from the discussion we've had a year ago together on the technology side, in terms of CapEx, I think also to remind that when we acquired TerraVia, we also acquired at the time a plant that was designed for jet fuel, yes, oil, and not food or nutrition. So we've learned really across the last few years how to optimize that plant. If we would rebuild that plant today, we would rebuild it very differently. And we've been optimizing processes, technologies, and we see now with the pilot facility we have in San Francisco that we can come to a lot more efficient type of design process. So we are working on that. So because again, I see some numbers out there. We are trying really to optimize downwards these type of CapEx numbers, benefiting from the yield improvement on one side and the new technology we've developed in Orindiúva at the same time. And I think although we are not ready per se today, we think we're going to make good progress by the time we have to make the decision early '26. But again, a wider investment would come only when we have firm commitments and further validation steps of this technology we are working on.

Okay, yes. I have one financial question for Eddy, the working capital. If I look at the slides, the percentages that you project for or aim for, for the next 2 years, is it fair to assume that for 2024 and 2025, each, you expect in absolute euros working capital reduction of EUR 25 million to EUR 30 million? Is that approximately what you're aiming for?

No, maybe even more, but we are further reducing the absolute amounts, yes.

Okay, because you also give a guidance of free cash flow of at least EUR 50 million…

Yes, part of that is…

Is working capital.

Yes.

But it also includes of course, the stranded costs, the restructuring costs, the CapEx.

Yes. Yes.

But working capital still needs to be quite a significant contribution…

Working capital is a component in the free cash flow delivery in both in '24 and '25 indeed. The exact phasing, of course, '24-'25, that is not always easy to pinpoint. That's why we are guiding also on a cumulative basis for the next 2 years, the free cash flow delivery.

Okay, clear. And then my final question. You just showed the slide of the pro forma leverage guidance or guidance leverage for 2023. Is that including these stranded costs?

Yes, you will see in the footnotes that, that is assuming the net cash proceeds of $275 million, and then the underlying EBITDA, about USD 15 million. So we are showing stronger EBITDA. So that's indeed reflecting a big part of that stranded cost.

Okay, so it's negatively subtracted from the EBITDA?

Yes.

So that the…

Then the next question is from Fernand de Boer.

Yes. It's Fernand de Boer from Degroof Petercam. More than a question, one question. So I'll start with the first one, and it's all PLA related. I think you said that the startup of this new gypsum-free plant will ramp up in the first quarter, but they always understood that Lactic Acid starting up is quite risky. So what could be the risk there involved? It's not going that smoothly as you are showing here.

No, so I think, as I said, we started what we call mechanical commissioning and utilities commissioning already back in basically August, September last year on various steps. And the way you do this type of commissioning is you go backwards from utilities and wastewater treatment plant to the various chemical recycling. And the last part of the real commissioning is when you get sugar feedstock and you start to ferment. And this step still has to come. But we've, of course, been going through all the critical steps in terms of this new gypsum-free technology over the last weeks and months. So the concern or if you would have any risk is not necessarily the fermentation piece because -- yes, but this is more related to this technology around fermentation, not to have any gypsum. So we've done synthetic runs there. We are optimizing that as we speak. Then it's all about having the whole train able to produce the right quality. In our current plan, we've already foreseen that you don't get a standard product day 1. So basically, we have already prepared our business on how we're going to also market some B grade, A minus grade and come to A grade in the course of Q2. This is part of our plan because we are taking this risk into account already in the startup phase. So that's pretty important. We give you maybe a bit insight. We have options in terms of market reach to sell lower grade quality in some categories that we've already contracted for the startup phase to help get this risk away as any startup. Obviously, I think it's fair to say that any startup of this kind has a level of risk. I think we have, we believe, well prepared for it. But obviously, so we are, again, very much focused on -- this is the largest investment we've ever made, as I said. So I think you can think about all the key technical strengths, engineering strength of the company are focusing on this Thai operation as we speak.

And then on the pricing for PLA because you actually say it's an alternative for polystyrene and I think polystyrene prices are very much under pressure. So how do you look that forward because I think that is still a risk that price -- EBITDA is still okay because pricing is still healthy, but it's only a matter of time and certainly, if NatureWorks also start to set up its -- ramp up its production with PLA?

No. So we see -- of course, we've seen now already some pressure on PLA prices in the course of '23, yes. So we are -- the JV is not yet at the [ EUR 3,200 ] price level anymore. So they are below the [ EUR 3,000 ] mark already. So now what we can say, I mean, again, is that obviously, in terms of EBITDA delivery, it will be a matter of indeed pricing going forward. But the contracting for the first half of the year is something where we -- the JV has good visibility. The same is valid on sugar because we are hedging the sugar for lactic that triggers the transfer price to the joint venture. So now going forward, it will all depend also how sugar market is going to evolve later on the year as well because the EBITDA will be dependent on, of course, the lactic acid price. And there, as Eddy mentioned, there is a formula that reflects both sugar and energy price in terms of lactic acid price to the JV. So that's a big component of the PLA EBITDA margin.

Then on PLA again, the new launch innovations you have in mind. I think 2 years ago, you also had a number of new innovations in mind. I think coffee caps and all that kind of things, which I don't see back, which I by the way saw also with your competitors all. How are those new launches going? Is that driving the sales in Q4? Or is that still too limited and -- or not coming through?

It's still limited. There are some sales, whether it is coffee capsule and so on. But as you've seen in the -- and this way, I want to provide this granularity on the market. Still, the vast majority is in the food service ware, in the rigid and flexible packaging. And if you look at the pie chart, it's still limited in terms of other categories, although they are still very nice pocket of growth, higher margin like 3D printing. Now it's about -- and this is a bit what I said in comparison to the algae, it's about also creating this market that takes quite a lot of time in PLA. Maybe that's something we underestimate. So we just continue the efforts because we need to continually launch and try out and test out. Last year, we've announced this 5 partnership. Obviously, not the 5 of them are going to work going forward, but when we go for heat-resistant PLA or we are working on the biaxial PLA development, it's about how do we differentiate the PLA product portfolio mix as well. Not we have only a one single trick pony versus our competition. Again, back to the PLA environment, I think it's also important to note that indeed, there are a number of projects that, as you know, were announced for millions of tons of PLA 2 or 3 years ago. Most of them, not all of them have disappeared so far. It's important also to realize that.

Then a question for Eddy. How will the return on invested capital look like in '25? I can make maybe this calculation, but in your view, what's your target there? Because at the end of the day, I think if you look today, it's fairly low and I think it has to go up significantly. So I think that, of course, all these measures should lead to that but…

ROCE, you mean?

Yes.

Yes. We will come back with that once we have to spin out the whole divestment in emulsifiers. But emulsifiers as you can understand that the underlying EBITDA and this operating results, which is in the ROCE metric and the book value I think we are looking at a dilution in this more nearby years from that divestment as a consequence.

Because of the new plant, just your depreciation charge for your core activities will rise significantly, I guess?

Yes, depreciation. So the plans will be starting to depreciate the moment you turn out good quality lactic acid. So, coming back to that, so somewhere in the course of this year. And depreciation period you have to look at somewhere between 15 and 20 years, probably a bit more on the higher side.

Then I stop with the last question. You gave 2 options for Algae expansion, but I'm actually missing the licensing opportunity of option. Is that an option for you in your view or not at all?

We've revisited that. It's not on our list today. We believe we can capture most of the value on this one. And the real value of that business lies into the algae strain library and the yield we've developed. So this is the real jewel and the fact that we've been able to scale up. The moment you license that, you give away quite a lot. So if you think about licensing option on a few percentage compared to the EBITDA, we believe we will land in that business when you go to above EUR 500 million and above EUR 100 million EBITDA, you will never have this type of return with a licensing option.

The next question is from Wim Hoste.

Yes. Also a couple of questions from my side. Maybe to change subjects a little bit. First, a few questions on Food. The adjacencies are now 10% of your food sales, which, I guess, is roughly EUR 75 million or so. Out of the 4% growth in the category that you predict, how much -- how fast do you expect the adjacencies to grow? And then can you also elaborate a little bit on the underlying growth trends in the various food markets, bakery, meat, et cetera? I think these were all yes, subject to destocking, but also to underlying declines in '23. And so, how do you see trends going forward for those markets?

No, true. I think we've seen underlying trends, primarily in the large markets in the U.S. and Europe for bakery and meat being on the negative side. However -- and also experienced severe destocking there. However, when you look at, for instance, what we are doing and developing in the Bakery segment as an example in our Functional Systems, we are able to gain a lot of market share based on the different value proposition. We mentioned dough conditioning there. This is one of the examples where we are coming with a very nice and novel functionalities when we are using, for instance, enzyme cocktails instead of Emulsifiers or other hydrocolloids to extend shelf life or to strengthen dough. And this is places that despite the underlying negative trend in Bakery, we see also a nice growth. The same is valid when you move to natural preservatives, yes. There are still in food, a large amount of synthetic preservatives or artificial antioxidant. So we still see that underlying trend moving forward. I think the key for us as well is to reproduce the successful U.S. model into new geographies. Although we've made very strong progress in Latin America over the last couple of years, there is still a lot more opportunities we can have in -- I'm thinking about primarily Asia and Southeast Asia going forward. So these are the focused areas we have in Food. Now if you look at the adjacencies that you mentioned, a few of them, we were looking for proof of concept whether indeed the approach was convincing and successfully now we've validated that, whether it is on the natural antioxidant, yes, or on the dairy stabilizers. We've had a very good start from almost a scratch base in this segment. So now it's about how do we accelerate these segments, yes. So again, I think we have a solid position. We were really impacted by the downturn in the destocking was a lot more severe than what anticipated in '23. But it was good to see primarily also in Q4, the sequential improvement in terms of volume/mix on the Food part. And yes, you remember this is a 76% of the Functional Solutions division. So that's the lion's share. On this part, we have a much better visibility than what we had early in '23. So this is not only reassuring, but also makes us quite optimistic about the trend in these adjacencies development in the food business.

Okay, then a question on the algae business. Can you elaborate a little bit on the momentum that you have outside of aqua, so in pets and in human. What kind of contracts do you -- are you able to conclude with your customers' durations? Also, is it fixed pricing? Is it some [indiscernible] based clauses? Can you maybe elaborate a little bit on that as well?

No. Generally, obviously we go for a yearly contract in that industry. However, on some big accounts, we go for multiyear, yes. So there are no specific raw material-related clauses, if you may. There are sometimes some freight-related clauses, yes, because of the overall disruption we've seen in the supply chain in the last years. So you have this type of clauses around. Now typically, when you go for higher value markets like human nutrition or pet nutrition, these are yearly contracts. I think there is a couple of difference because pet nutrition is a market that is also a nascent market but growing very fast, where omega-3 was being used, but not to the extent where it's developing right now. So it's about also creating and developing a market from a small base. Human nutrition is a more established already existing market that is, of course, primarily served by fish oil supplies. So the move to algae-based with some vegan credentials as an example as well or plant-based source is an important driver there, but we are in the early days of human nutrition. What was important for us is to make sure we have the right technology. And last year was an important focus for us to basically scale up the technology from the pilot in San Francisco to the plant. And now we are able to produce this refined oil for human nutrition purposes in Brazil. And that was the important focus of last year, validating the technology and validating the products within the human nutrition and the pet nutrition application. But usually, there is not a big difference in terms of contracting terms in these 2 divisions. These are yearly contracts. In aquaculture, we are looking for longer-term commitments.

Next question is from Reg Watson.

It's Reg Watson from ING. Olivier, can you just clarify something you said in your opening remarks on Slide 6, please. You mentioned that the 2023 results shown on that page included the reversal of the algae impairments as well. Is that correct?

I can answer that, if you will. So yes, we will reverse the impairment that we made in 2019. And we say a full reversal, but what you can only reverse is the amount as accounting says, you need to depreciate. So we reversed EUR 22 million out of the more than EUR 40 million back in 2019. So it will be part of the net result of 2023.

Okay, so the figures on that page include the reversal.

No, because it is the net -- it's coming -- it is not part of the EBITDA...

Okay, that's what I want to check because the way it's…

It is lower. It is lower.

It's below the EBITDA.

Yes, I expected it to be below, but it sounded as if it was included in...

No, it's a kind of reversal of the depreciation line.

In some ways to bring it above the line.

Outside of the EBITDA. Otherwise, we would have shared different figures. Yes.

Okay, great. Then in that case, I too will move to algae as well. Why given the potential you have in algae and the potential market size and profitability are you now rolling it back into a subset of another reporting division so we won't get visibility going forwards on how algae is performing as a standalone business?

I think we have higher ambition in the nutrition segment to build on the platform. And basically, we look at algae as I think, a key building block to further develop a nutrition portfolio. So starting with omega-3, as we've said, but even within omega-3, as you know, we are marketing a DHA, but there is a lot more we can do. And when we look at the opportunities within the wider nutrition space, based on Algae, but also the other portfolio we have, finally, we can have a very nice critical mass we can build on and accelerate, yes. So far, we are not able to do that when we started Algae story, we had EUR 7 million sales and then EUR 31 million and so on. But now when we look to the entire division, we have critical mass share capabilities. So we can really accelerate that within algae but also beyond Algae, and that's the aim to create a sizable division going forward. So that's the key rational strategy -- rationale behind. It's not just that we went through because we will still give granularity every year as we go, I mean, on Algae. But the strategic business rationale is that now finally, with the growth momentum we have with what we have in the pipeline, we're going to have really critical mass to become, I mean, a player in the nutrition space building on that.

And can I just check technology? You've referred to the technology development from San Francisco. Are you now able to extract the oil from the Algae because my understanding is up until now, you've only really been selling Algae solids and Emulsified solids and that DSM and Evonik have an oil extraction process patented?

True. So basically, the step into penetration in Algae was, indeed, I mean, triggered by our ability to develop that technology and freedom to operate with more refined oil. So I think it's the beauty of our, I think, process today is that basically, when we serve aquaculture, we have a zero waste, no byproduct value proposition. And that's, I think, quite important. There is simply zero waste on that plant for aquaculture. And when, of course, you move to pet or human, you have biomass as a leftover that you need to valorize into feed applications, yes? But that's a big difference. So yes, the answer is indeed that the value of San Francisco has been really to scale up what we believe is a fantastic technology.

So are you using something similar to DSM and Evonik?

No, very different.

Totally different.

Yes.

Are you happy that it's more efficient than theirs?

I think we -- I mean, again, it's difficult to comment a lot more. I mean, on this technology, we believe that this is truly unique, yes? But yes, I will not comment…

You just appreciate that extracted oil comes at a much higher market price. So the revenues look better. But obviously, the costs of extracting it are also a lot higher.

It's true. I think when you produce through traditional methods, this is a correct statement that we do not produce with the traditional method. And the…

And then your yield improvements. My understanding is the Algae has about 60% oil in it and historically up to around 56%, 57% omega-3. I was led to believe previously that there was a technical limit to how much yield you could actually get out of the Algae.

We were much lower than the second that you mentioned earlier, so.

Okay, fair enough. And then the 15% you mentioned in the presentation that appears to be a combination of yield improvement of the organism itself, but also capacity debottlenecking. Can you…

So it was primarily related to the strain, the 15%, not to the debottleneck in the plant. So it was primarily related to the strain improvement. And so…

And then can you just please give us a set of a baseline for where you are at our capacity of the plant? Because my understanding was that historically, you had a sort of 50 kiloton nameplate capacity, but you were restricted to around 25 kilotons due to lack of drying facilities. So can you just reestablish for us where you are today, what the debottlenecking has achieved and what you hope to achieve with the additional…

No, we wouldn't disclose I mean, capacity. I think the simple reason, I mean, is, of course, for competitive purposes. But also in terms of strategy development at one point, yes, we might want on or to trade up the liquid suspension we sell into aquaculture into highly refined oil. And then capacity of a very different nature, yes. The more you decide to go for refined oil or not. So I think what's important is basically to get everything back to the omega-3 content we are selling into the market. So the only thing I can say is that, yes, we've improved significantly from the initial design, yes, that was mentioned at that time, which was, yes, that we've seen a lot of numbers around the 30,000 tonnes. We've improved massively on that. But yes, we won't disclose current capacity in the plant.

Okay, then -- but you have talked about an additional EUR 50 million of CapEx, what would that do to your capacity? Are we talking another 50% at doubling?

Well, actually, this is to get to the EUR 200 million sales mark, yes. So this is what we need and also to get to, let's say, the mix improvement we are looking for by accelerating further in pet and human nutrition. So this is both driven on capacity, debottleneck and mix improvement to get to the EUR 28 million EBITDA and the -- sorry, the EUR 40 million…

EUR 40 million…

EBITDA and the EUR 200 million sales.

Okay, next question is from Sebastian Bray.

Can I start with a question on the reallocated Emulsifiers cost. It's quite big relative to the size of the business divestiture to see an amount of cost akin to the EBITDA less being reallocated amongst the group. It's not shown in the 2025 EBITDA bridge. And is this another way of saying that incrementally cost savings will be made by the end of '25 that fully offset this because it's quite a lot to just simply absorb and move in 2 years? That's my first question.

That's exactly that. So indeed, we will recover that stranded cost, if you will, in '25. And we have already multiple initiatives running, I would say, to close that gap, but not in '24, but in '25.

What is the stranded cost in this case that is the EUR 25 million year-over-year associated with in practice, is it people sitting in offices or where does it come from?

We have followed an allocation mechanism already since the beginning of Advance between core and noncore, if you will. So part is to be found in the U.S. itself. So yes, the Emulsifier business that we divest has some dedicated costs, as we call it, think about all the costs associated with the 2 production plants. But anything or nearly everything related to the sales efforts or the support functions like IT, finance, HR, has not been dedicated to this and will not be sold as such of the transaction. So that is cost out of the U.S. where basically the Emulsifier business make use of, and that is not divested to the buyer. But yes, at the moment, we don't have to render any service anymore to the buyer, then we can reduce those. The rest is about central allocation keys. So that is outside of the U.S. So you can look, for example, to our G&A, P&L line item and that we have an allocation key, for example, on sales. So we always follow the same philosophy there in the years. And obviously, if you let a piece of business go, it's not an automatic leader, for example, one of the 3 of us is leaving. So that is how we have to look at it. So yes, we have to compensate, we will compensate, and we will do that in different drivers, so that can be further fixed cost measures, variable cost measures. It can be anything in those areas.

Will the buyer use Corbion to continue to sell the Emulsifiers? My understanding was that sometimes these solutions were bundled together. And I think there are even a few examples on Corbion's website of products containing these Emulsifiers that were sold. How does that work in practice? Is it just an arm's-length commercial relationship or does the buyer or the new standalone Emulsifiers entity under private equity ownership purchase or agree to sell to Corbion Emulsifiers in future?

Yes. So we have 2 arrangements in that respect. One that survives longer than this year, that is us selling lactic acid into the new buyer, if you will, because some of the Emulsifiers you'll make use of lactic acid. So that is indeed am arm's-length contract. And the mirror side is that Corbion sourcing certain Emulsifiers that we then use in our continuing business. So those are supply agreements that will survive beyond this year. Besides that, we have service agreements, and that is very much geared for this year, maybe some overrun into next year, but the majority will just be this year. Again, covering areas like support functions, IT, HR and finance, but also commercially, we want to have a smooth transition commercially because lots of the customers related to this business are not only customers for the new buyer that are also customers that we have for our continuing business. So we want to have a smooth transition. So for that service that we provide in transitioning over, we also get the proposition this year.

If I might turn to an element of this restructuring, which was the closure of the U.S. Peoria plant that was announced today. What was made there? I remember back from the 2022 Capital Markets Day, there was talk about expanding natural fermentation capacity at that site. What was initially made there? And did this CapEx investment go ahead that is now potentially being mothballed?

Yes. So I think it's a great question because we -- the reason why we announced mothballing and not full closure is that we want to keep and retain the assets, yes. So I think this is coming as a consequence of what we explained with Thailand coming up at a much more competitive cost, optimizing our lactic acid fermentation in Spain. So far, we were producing our food ferments both in Spain and in Peoria. In Spain, it was produced in campaign next to lactic acid in the same fermenters, yes. So obviously, now reallocating more lactic acid into Thailand is freeing up food ferments capability to Spain, who has a large installed capacity. And then I mean looking to also we can max out our profitabilities, I mean, again, in Spain versus Peoria. We made this call to mothball Peoria and then max out the former fermentation capabilities we have in Spain for food ferments. So this is how this asset optimization, let's say, restructuring is working, yes.

Can I ask a question on Food and the margin. I appreciate that this might be provided with the full year figures. So it's 2 questions. Number one, when do we have pro forma financials under the new segment structure? Is it at the full year results? Or is it just firstly at Q1? And what is the current Food margin EBITDA terms? Is it about 10% or slightly there or thereabouts?

Yes. So on your first question, the intention is indeed to share that by 1st of March to have the pro forma restated figures on sales. We already shared a few but also the margin profile. So that's the intention because it takes quite some work to adapt all the systems, as you can imagine. Again, on Food margins, we will not get further disclosures at this stage on Q4 delivery.

Understood. And final question. The Biomedical segment, I believe most of the sales now are relatively mature, even if they're still growing nicely, which is the wound care and orthopedics Olivier that you alluded to, to increase the sales in absolute terms by EUR 50 million by 2028. I cannot remember if this was touched on the 2022 Capital Markets Day, but the component of Advance related to the drug release, is that about EUR 30 million? Or is it not disclosed?

It is not disclosed, but it's not that as big as that. I mean, no.

Where does the growth come from?

No, actually, as we said, I think we have -- because if you look at that business, we've added one point. That was the only business within Corbion that was impacted in terms of growth during the COVID year back in 2020 because of people not being able to go to hospital for elective surgeries since then. We've seen this business picking up. So but basically, the traditional orthopedics market and wound closure has recovered to pre-COVID level and still has a very nice sustained growth. So there is further development primarily in the orthopedics markets that are also very promising. So we just capitalize on these existing 2 building blocks. What we see in Drug Delivery is that, yes, there is nothing new in Drug Delivery. However, what is new is this type of technology that we are bringing to market with even more sophisticated copolymers because you speak about many, many copolymers there, yes, based on organic acids. This is really taking off of our older technologies. And this is why I emphasized on the MedinCell one, now that per se, this, I mean is the only game changer, but the proof of concept on this type of drug delivery is an important milestone because next to schizophrenia, where basically the aim is to have long-lasting active drug to avoid crisis. You can think about many other drugs where you need a long lasting mechanism. MedinCell has a very close partnership with the Bill & Melinda Gates Foundation on contraception or malaria treatment, these type of things where -- so are quite promising, our mid- to longer-term projects. But we see a lot of very nice upside in this because of this proof of concept in the new technology of MedinCell. Now the other big new area is around this regenerative medicine. This is very early days. But yes, these are things -- as I said, this is quite a unique business where you have years and years of development and you have years to get to a clinical phase 3. Once you get FDA approval on this phase 3, then the business only starts, but you have a good normally 5 years to get to clinical 3. In an accelerated way, it could be 3, but usually, it's a good 5 years. So the MedinCell pipeline is looking good because there are a few things already in the pipe that are going to yield to business. But there is more to come, but then you speak about the 5 to 10 years, yes.

The next question is from Karel Zoete.

I have 2 questions. One, to be crystal clear on the EUR 15 million stranded costs. Phasing those out is not part of the EUR 35 million efficiency program, right?

Correct.

So it's only for 2024 and then they are out. And then the other one is the use of cash. You intend to generate EUR 125 million or so in free cash flow for the coming 2 years. That's meaningful. Net debt is now looking much more comfortable. How should we think about use of cash going forward?

Yes. I think there are -- first of all, the closing needs to be done, but that will be done. Of course, if you see the trend where we are with the covenant net debt to EBITDA, we are just coming in the range where we are striving to be. So the cash will clearly be apply to reduce the RCF. And the RCF, by the way, is the highest interest component in our debt structure. So the moment that cash comes in, that's what we will redeem first. Let us first operate soundly in the bandwidth. And also not forget, we still have also a long component beyond the covenant net debt because we have also this about EUR 100 million used for [indiscernible] which is supporting the debt. So if you would apply that then we're still higher than what we have for the covenants. So that's where we sit at the moment.

Okay. So I think we have no other questions on the -- or unless there is a last question.

I do have one if I may.

Yes. Please.

I have a question on the raw material input costs on Slide 49. Obviously, we talk about your sugar hedging. So we understand the mechanism of that quite well. But my understanding is that the vast majority of your bill of materials is not hedgeable and that you're pretty much exposed to spot pricing. So I'm wondering how you can provide any degree of certainty on Slide 49 with regards to the decline in your input costs?

So I think for '24, so whether these are usual chemicals we are using in our processes, yes, we have already good visibility on what we've contracted for '24, yes. So there, we have pretty good visibility. It's only on commodities where you speak about corn or in the case of Emulsifiers, soybean oil or sugar where we have this hedging policy where we have a strict policy in terms of risk management, but we can still play within these boundaries to stay pretty short when we see, I mean, the market on the upside or vice versa. So as I think you can imagine on the sugar, yes, right now, we've stayed very short, and I think that was the right decision because we never bought at EUR 0.28 per pound, yes. So at the peak, that everybody saw last year, and basically, we are still staying short on sugar. Now for the first time, the market speaks about a 3 million sugar surplus in '24, where only 3 months ago, everybody was speaking about a deficit with India being largely sugar is a good crop in Brazil as well. So yes, the sugar prices are higher. But yes, I think rightfully, we stayed short. So obviously, yes, we have a higher price on the next 2 quarters, Q1 and Q2 this year than last year. But yes, we are still very open in Q3 and Q4. So we monitor that very, very closely. On the rest, I think we have pretty good visibility. Obviously, the only thing that could happen and we've all seen the Red Sea impact. We have some traffic over the Red Sea and suddenly, you have a surcharge on the containers that go through the Red Sea, yes. So this is -- we are facing has an adverse impact in Q1, but in the grand scheme of thing in the overall procurement bill this is not -- I mean it's big, but it's not dramatic per se.

I recall previous instances where things like sulfur acid prices were even though you were contracted, you still had to buy by higher prices, et cetera, so yes.

Even the region specific…

Yes. Fernand? The mic.

Just to be sure on the definition of free cash flow, are we talking about free cash flow after tax payments, after interest payments and after lease payments?

Yes.

Operation lease payments. And then the second question on pricing. You said that it's going to be negative for Functional, et cetera. Any idea or could you give a little bit guidance on that one for our modeling?

That's a difficult one because we have different level of stickiness or impact. As we've said, yes, we have no stickiness on Lactic to the JV because there is a formula, yes. We have high stickiness in other segments like the Biomedical, we have prices, not necessarily discussion, so.

But you specifically mentioned Functional Ingredients & Solutions.

Yes.

So for that part, you have some visibility, yes.

Yes. We have in that segment, good visibility on the lactic acid to PLA, indeed, yes, where we're going to have some impact. But all in all, I mean, yes, we see, again, and we monitor pricing in line with what we see happening for the less differentiated product lines within good cost, yes. So we monitor that very closely in our pricing policy. So if I look to the Food Ingredients & Solutions, Fernand, we have, for instance, in our Functional Systems, generally speaking, higher stickiness than in some of the plain lactic acid supplies to the semiconductor industry, as an example, or into what we call a harvest intervention for food preservation, which are more commoditized market. So we adapt, I think, really to the end market quite a lot. What we see overall is that for Food Ingredients & Solutions, we're going to have, I mean, this pricing negative impact as in some markets, we have less stickiness than in others. But yes, we manage that very closely. Now giving you the detail is, I think, quite difficult, I mean right now publicly, yes and I think this is also quite sensitive in terms of the message outside.

Then one question on the centralization of R&D. How is that then algae is going to be integrated with lactic acid and then San Francisco to be closed or?

No, not at all. No, no. San Francisco is a key assets. So what we are doing is we had, I mean, so far, R&D functions being decentralized within the BUs. Now we've decided to recentralize all that, yes. So basically, the major impact is in our Dutch R&D facility. So San Francisco is part of our global R&D footprint, yes, with specificity on Algae but is there to remain. And so there is no impact on the Algae R&D there.

And last question, and then we'll stop. On the, let's say, executive team because with the new segment structure, change is going to be made, but that's for later announcement or?

So there are already some changes that did happen, as you know, last year with the departure of our CSO, yes. And basically, going to -- down to 2 business units, we have also Marco Bootz who's left the company to pursue other opportunities. So you will have the opportunity to meet the entire Executive Committee now in the break. They are all there to also have a separate conversation -- informal conversation with you all. So you will see the management team there. So, more to come there.

One thing before we come to the next question. On your previous question on the cash flow definition. So tax interest, absolutely, part of free cash flow, dividend payments and lease liability repayments are excluding, that's not in the free cash flow because that's in the financing cash flow. You can see that from the cash flow composition you can follow it.

Yes, lease payments, these rental payment.

Yes. But that's how IFRS accounting is determined.

Then a question on the Incubator pipeline. Can you maybe update what your key projects are still in there? And also what's then the R&D costs would be similar to the previous disclosure of 0.5% to 1.5%?

No. So it's a great question because, yes, we don't want by reorganizing R&D to compromise the mid- and longer-term growth opportunity. So if you remember, we had within the Incubator, the new biopolymers that were primarily dedicated to the Biomedical business. So that remains. The Algae portfolio expansion does remain. And then we had a series of food ferments for Food that also remain. And the last but not the least, was around net zero commitments. The whole initiatives we have around sustainability in our operations to reduce our carbon footprint to reduce energy costs. That also remains. So basically, this pipeline are transferred to the new one central global R&D. Okay, we don't want to compromise on, let's say, our mid- to long-term innovation pipeline in the future. Yes, also just to -- back to the latest part of your question. When you look to the overall spend, obviously, proportionally, the Food Ingredients & Solutions will have around about a 3% R&D spend whilst the Health & Nutrition division will have 8% R&D spend of sales, yes. So basically, we're going to have a higher R&D intensity in the Health & Nutrition division as it's understandable. Sebastian?

Just last one from me. Olivier, to contact the theme of the PLA joint venture, perhaps I misunderstood your earlier comments, but I think you alluded to the impact on the wider lactic acid market of Corbion were to pull out of the JV. What exactly does that mean? Does it just mean that there wouldn't be visibility on where the lactic acid volumes would go so the company would end up the fact they're having to dump capacity onto the market? Or because one of the big questions, I think, in my own mind about the lactic acid from Thailand is where exactly it all goes. I assume that most of it will end up going to the Corbion Total joint venture. But any comments you can provide are welcome?

No, it's a great question because, indeed, I think one of the strength, as I mentioned about Corbion is to have the opportunity to have a global footprint. And we are quite unique in that respect that we can really also, let's say, maximize our throughput and also profitability with the flexibility around the network. This is exactly what we are doing now in Spain. But we could do tomorrow, I mean, also according to the market conditions, increased backup or -- I think what's important is that in the frame of the new Thai lactic acid plant, this is something that are going to secure our growth in value for the 10 -- at least 10 years to come and give us a very competitive room to play in the market at a low carbon footprint. So the big interest and this EUR 10 million of, let's say, additional EBITDA from an operating cost standpoint that we presented in the bridge, yes, is about maxing out that capacity first from other more commercial process. Now obviously, if you think about the wider lactic acid market, and we could elaborate more on that, if you think about PLA prior to the downturn, the Lactic Acid to PLA was around about if you have a 1.4 ratio between Lactic and PLA. It's easy to understand how much of lactic acid is going into the 175,000 tonnes I've just mentioned before, yes. And this market has dropped by 50% over the last 15, 18 months. So you can easily calculate how much lactic acid is clearly downturn has freed up, yes. So this is why I think having such a competitive asset as the new lactic plant is really, I think, crucial and very important to us going forward. We have to secure our competitive position, our leadership position as well in lactic acid. Now the great strategic advantage of Corbion is that most of our lactic acid is going into derivatives. And this is also why and how we want to derisk any capacity we put on stream by moving to always, I mean, derivatives. That's our strength. The lower plain lactic acid volume, we sell directly to the market the better. And our strain -- our stream, sorry, of lactic acid to the PLA is a captive stream. It's an over defense business. Of course, we are suffering from the downturn in that respect. But mid -to longer-term, this is going to bounce back for sure. And then, yes, we have a long-term agreement with the joint venture on this one. So I think it's pretty much secured volume when the PLA joint venture is going to be back up to previous level.

Okay. So I think we need to close. Thank you all for your questions here in the room. Thank you for the people who are joining us online. And obviously, next touch point will be for the 1st of March when we're going to go into more detail about the 2023 results. Thank you, and have a good day.

This concludes the Corbion Market Update on the 31st of January 2024. Thank you for listening. You may now disconnect.