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

Good morning, everyone. Welcome to the Corbion Full Year 2023 Results. With us today are Olivier Rigaud, CEO; and Eddy van Rhede van der Kloot, CFO. My name is Peter Kazius, Head of Investor Relations. This morning, we published our full year 2023 results. 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 will move into Q&A. I would like to hand over to Olivier.

Thank you, Peter, and good morning, everyone. So on today's results, I'm pleased to report that 2023 full year outcome was in line with what we indicated earlier. We've reported organic sales growth and double-digit organic growth in adjusted EBITDA and operating profit whilst facing a challenging geopolitical and macroeconomic environment. We delivered a higher-than-anticipated positive free cash flow for the year due to our focus on operational efficiencies, optimizing working capital and CapEx discipline. As a result, we propose to increase the regular cash dividend to our shareholders with 9%, up to EUR 0.61 per share. Now, looking to the macroeconomic environment. First of all, around customer destocking, we can state that we see that now concluded. Although we faced this significant destocking across 2023, we've seen some improvement across Q4, and what we also see in the early part of '24 is that this is now behind us. However, we continue to see a soft macroeconomic climate, and this is primarily impacting some of the biochemical markets like semiconductor, agrochemicals, and to some extent, the PLA joint venture, although there, we have some better signs in terms of market development, and I will come back to that at a later stage. In terms of input price, we've seen normalization, and we expect some relaxation across 2024 in, of course, products like chemicals, freight, energy. We've also seen sugar market prices reducing from the highs in Q4 that we expect to materialize also in the course of 2024. So overall, our input costs are anticipated to decline in 2024. In terms of sustainability and our value proposition, we still see that as the forefront of our customers' priorities. Starting with Food, with the clean label trend and the shift to natural preservatives that is continuing and still growing faster than the overall food market. For our Algae-based omega-3 solutions, this offers really structural growth, driven by higher adoption in the aqua sectors, seen also the long-term fish oil outlook. We continue to see strong growth in our biomedical polymer business due to aging population and health focus, and have many new launches in the pipe. We're going to fuel further growth across '24 and beyond. And that will increase for the JV PLA business, the global transition away from fossil-based plastics is still something that is high on the agenda for the end customers. So now diving into the Sustainable Food Solution, and we're going to still report on the former business unit structure this time and move on to the new business structure as from Q1 results. But diving into the Sustainable Food Solutions. As we stated, we see the supply chain destocking now really concluded in Q4. And we've seen some very nice sequential improvement in volume mix versus previous quarter. And the first couple of months of '24 only confirms the trend we've seen across Q4. We still have some soft consumer demand in some end markets in line with macro conditions there. However, in the growth initiatives we embarked on a couple of years ago, we see strong growth in adjacencies like the dairy stabilizers business, the natural mold inhibitors and the natural antioxidant businesses. When we look to the portfolio, we have also been able to start on time our new vinegar fermentation plant, and this is starting really to drive cost efficiency as we speak as from early 2024, and we are ramping up these operations much further also as we speak. And last but not least, we've announced the divestment of our emulsifier business, and we are feeling really confident to close as we anticipated in the course of the second quarter this year. Moving now to the Lactic Acid & Specialties division. So we've had a strong Q4 with an improvement in volume mix versus previous quarters. So there, I mean, although I think we've seen that improvement in terms of cyclical downturn in the semiconductor industry, which is a key category for us, we do not see yet any recovery, and we do not expect any recovery prior to H2 this year. And of course, we've been impacted, as you all know, by lower full year lactic acid supply to the joint venture, although the business has nicely stabilized over the last 3 quarters. In terms of growth, again, very strong growth in the biomedical polymer business. So there, we simply continue the double-digit growth trajectory, and we see that continuing across the 2024 year. Portfolio-wise, we announced late last year, the mechanical completion of our new plant in Thailand for lactic acid. And as we speak, we've started basically, you know the full commissioning with fermentation and sugar in the system. So this is progressing as we speak in line with our plans. So we are expecting basically the first volume to get out of this plant by the end of this quarter and early Q2 as well. So good progress on that front. In terms of network optimization, we announced 4 weeks ago in the CMD update, the mothballing of the PLA alteration. And this is also happening as we speak. We are basically -- by the end of March, the plant will leave mothball. So -- and we are moving on later on as from Q2 for [ resaturation ]. Now the last business unit, Algae Ingredients. We still continue to experience a very strong momentum, a very strong growth in the segments we serve. So the sales growth across 2023 was over 50%. So we are really happy, I mean, to show now that we really passed the EUR 100 million in sales landmark. And basically, this is coming originally from continued very high growth in the aquaculture segment, but also very strong growth and evolving into the pet nutrition, where we are now best represent [ 50 ]% of our overall Algae Ingredients business with very nice margin. We are stepping into the human nutrition segment. They are building a pipeline, gaining customer approvals. So this is also progressing very nicely as we speak, and also in mind to improve our margin profile further for Algae business. The other important aspect of that is that we've been able to secure critical partnership on long term with key customers, and that also gives us a very good visibility for at least 2 years to come on our business going forward and our margin also going forward in that business. In terms of investments, we further debottleneck Orindiúva, and we are going on with this debottlenecking plant in Brazil. At the same time, we are upgrading the product mix to produce extracted oil to serve the pet nutrition market and the human nutrition market. We also benefited greatly in 2023 from an improved algae strain yield, and that really helped us to really increase efficiency and capacity without adding to invest massive CapEx in there. It's also important to note that the EBITDA margin was accretive in the second half, already at 15.7%. And if you look at Q4, EBITDA margin on algae, we were really close to 18%. So this is really also ramping up very, very nicely. So also, I just want to make a point on our progress on sustainability. We made also great progress across '23, just to say that we are in line with our target ambition across all fronts. So we are still pushing very much to deliver our commitment to the 1.5 degree in line with our science-based target commitment there. So on this, let me hand over to Eddy to go into detail about the financials. Eddy, floor is yours.

Thank you, Olivier. So this is the sales and EBITDA development over year 2003. On the left side, the sales line has decreased by about 1% to a level of EUR 1.44 billion revenues. And within that, you see an uptick in core basis of EUR 37 million, and that equates trades to 3% of organic sales growth for our periods. On the right-hand side, an increase of 4% on our adjusted EBITDA to a level of EUR 192 million, and again, the core activities have been contributing EUR 24 million increase, and that equates to 16.2% organic growth rate in adjusted EBITDA. Next page, we move to the P&L. So if you take the ratio, of course, between sales and EBITDA in the margins, you see that we've increased our margins from 12.6% in '22 to 13.3% in '23. A bit lower in the P&L, the adjustment line, there's quite a positive amount of EUR 10 million in '23. There has been recognized the reversal of the Algae based impairment that we did back in 2019, and that's really on the back of the nice progression we're making in this business. So we've made the reversal of that impairment. That's, by the way, not an EBITDA component. So that is about EUR 22 million positive. And on the negative side, we had the first cost related to the emulsifiers divestment process and also the earnout of the Algae joint venture because as we have better results of Algae, you still have to make some payments to the previous owner of the 50% of the joint venture that we have in the past. So all in all, EUR 10 million contribution there. Debt on the financial income expense line, quite an uptick versus '22, minus EUR 28 million. The majority of that is, of course, higher interest rates and also with higher debt levels. So that is the biggest component in that uptick. Results joint venture, associates minus EUR 3.5 million, there, you have to take into account that, that has been adversely impacted by the impairment that the joint venture has been made in the middle of the year as relation to the second PLA plant that we have stopped us, as initiatives. So those costs have to be impaired. If you would take that out, then underlying, we would have had, EUR 3 million positive rather than a EUR 3.5 million negative in our P&L. And then the tax line, a lower tax level than the '22, that's also to be seeing a lower result before tax and then the impairment reversal is not a flexible item. So all in all, that brings us to a result after tax of 19% lower than in '22, and that was expressed in earnings per share also of about 19% lower than in '22. Let me move into the individual businesses. Sustainable Food Solutions, so sales at EUR 769 million, organic growth of 0.7% for the year. And the composition of that is positive pricing impact of 5.4%, being offset by a volume mix development of minus 4.7%. But I'd like to highlight here that the trends, the underlying trends on a quarterly basis [indiscernible] was negative. And you see that the last quarter, at quarter 4, volume mix, for example, was minus 1.4%. For the full year, it was minus 4.7%. Margin profile, 11% for the year and also the last quarter, slightly above that, more or less flat, even, I would say, over these full year '22 versus full year '23. Lactic Acid & Specialties, sales of EUR 384 million and an organic decline of 2%. Again, positive pricing impact 5.4%, being offset, more than offset in this case, right, negative volume mix of minus 7.4%. And again, an improvement towards the end of the year in the underlying trend of volume mix development because in Q4, we had a minus 0.9% of volume declines. Margin profile, a nice step up for a full year, from 60.7% for '22 towards close to 20% for the year '23. Algae Ingredients, indeed, we have surpassed the landmark of EUR 100 million revenue level, we ended up with EUR 111 million for the year. Within that, indeed, 10% is contributed from the pet food, 90% from agriculture, very nice organic growth, very much volume mix driven, the total organic growth close to 54% and as a consequence, the adjusted EBITDA, we've really clearly surpassed now the negatives that we still have in the first half of '22. We turned into a positive by the middle of '22, for the full year, we still were at minus 3.3% for '22, with '23 now appearing nice step up by about EUR 50 million to a level of EUR 11.5 million, post net EBITDA. And that's also expressed in the margin profile, 10% for the full year in the second half of the year was close to 16%, and even slightly higher level in the last quarter of 18%. So a very nice progression development over there. Incubator, we continue to close within the indicated bandwidth between 0.5% and 1.15% of our core sales guided range there. Let's move to the joint venture, the PLA joint venture. So this is on a 100% basis, 118 million revenue base. There is an organic decline of close to 277% for the year, that also expresses in a lower EBITDA level of EUR 19 million, and we are looking at a 16.4% EBITDA margin profile for the full year, and a slightly higher level for the last quarter being close to 22%. I'd also like to highlight on this sheet that we do get as a 50% owner of the joint venture, quite some large cash proceeds close to EUR 10 million, and that's composed of 2 components. One is the dividend that we received of about $5 million, which equates to EUR 4.5 million. And also the interest that we get, another EUR 5 million related to the loan that we have provided to the joint venture. Noncore activities, EUR 180 million sales level. That's an organic decline of close to minus 9%. Again, pricing positive of 8% volume mix, low of 17%, and that brings us to an EBITDA level of EUR 28 million, which is a very nice outcome, I'd say because in the year '22 was a very strong year, and EUR 28 million is still a very good performance for this business, with a margin profile pretty flat in the range of 15%, 16% and 17%. And as you know, we have indicated that we have come to an arrangements for the divestment of this noncore business on the 26th of January, and we anticipate the closing of this transaction in the course of June 2, so in the upcoming quarter. Free cash flow delivery. On the left side, in the blue line, you can clearly see that we have come out of the negative free cash flow pattern in the last years. We are very happy that we have been able to close out the full year with a positive at EUR 19 million. And on the right-hand side, you see a bit of the rhythm that we have on a quarterly basis in 2023, where Q1 was still a negative free cash flow deliveries in that quarter. But since then, from Q2 onwards, positive closing free cash flow delivery and a very strong finish of EUR 15 million free cash flow delivery in the last quarter. And that has really been a consequence of controlled CapEx levels, controlled cost on EBITDA delivery, but also very much working capital improvements where we have a very strong development. So with that, we go to the outlook. Olivier, back to you.

Yes. Thank you, Eddy.

Oh, so sorry, there's one more, dividend, sorry. The dividend proposal. So we have a progressive regular dividend policy. We have -- we will convert the proposal through the AGM for approval to increase the dividend as for many years of being flat at 56%, to increased it by 9% to a level of EUR 0.61. And that you really have to see as a reflection while a positive free cash flow delivery, you're already starting last year, but certainly also strongly anticipated to continue into this year and next year. So that is what we will bring in the proposal to the AGM to be approved by midnight. With that, sorry. Now we go to the outlook.

Yes. Thank you, Eddy. So then to conclude and looking at the outlook for 2024 basically, we confirm the guidance we gave only 4 weeks ago. In terms of in the volume mix development and also adjusted EBITDA organic growth for the core activity there, above 15% for the year. And basically, also, I think there's a summary there. I'm really pleased on how the business is currently positioned in the short time since our CMD at the end of January. We've made good progress in implementing our restructuring program and several of our strategic initiatives. Moreover, there are some positive developments in our addressable markets. I mentioned the improved positive volume development in our food business. As an example, also the PLA momentum that we see slightly improving further now, and also the, basically, acceleration in the profitability increase of our algae-related business. So, next to the free cash flow delivery, reinforce our confidence in the strategy we've laid out. So let's move now to Q&A, and we are very happy to take your questions.

[Operator Instructions] And the questions come from the line of Setu Sharda from Barclays.

I have 3 questions. The first one is like on the competition, like with merger of Novozymes and Chr. Hansen, there might be more competition emerging in preservation technologies for bakery end markets. How do you assess this? And how is the competitive environment more broadly in preservation evolving? And my second question is on the guidance. Like your Q1 sales guide is flat, and you're seeing input cost relaxation, but your organic EBITDA guidance further decline. Can you guide here for the moving parts? And the third question is on the PLA margin guidance. Like you had guided one for like 10% to 15% EBITDA margin for FY '24. But after a strong Q4 margin of 20%, do you still stick to that? Or do you change that?

Okay. So thank you. So I will answer on the Novo, Christian and preservation questions, and Eddy will take over the other 2 questions. So on the first one, actually, what you look at, again, in the portfolio of the new company, the new merged company Novonesis, so what we do as Corbion is actually, we step into a different part of the supply there to customers. One of our strengths, as you might know, is we are very strong in solutions where we combined actually enzymes together. And we do what we call enzyme cocktails next to anti-microbials, and basically we source enzymes from multiple suppliers. And well, we know, and there are a few in the market. And we basically play into, let's say, the added value segment of these enzyme cocktails, sourcing the building blocks from companies as Novozymes, as an example. So the value we bring there is a step forward down the chain when we combine and we sell solutions, whether it is for preservation or shelf life extension solutions. So basically, we do not necessarily are head to head in terms of our portfolio. We are using some of their products actually to provide and manufacture our solutions. Eddy, do you want to take the guidance on Q1 and the PLA?

Yes. So indeed, on the sales side and the volume mix, we do expect a more flattish first half. For the full year, we have guided between 2% and 6%. So clearly, it's more back-end loaded, if you will. Also take into connotation there that we are still comparing to a relatively strong Q1 last year, and I think about semiconductor industry, for example, was still very strong in Q1 '23 and after that particular downturn. So that is on the top line, we do see that then expressed on the EBITDA line, EBITDA level for the quarter in decline for Q1 in terms of growth. And after that, from Q2 onwards, we do anticipate growth pattern for every single quarter, future onwards in the EBITDA level growth.

The last question was on PLA margin guidance.

PLA margin, yes, indeed, we ended up on a strong note in Q4. We will not change the guidance for this year because you know that on other cases, the lactic acid price that we will supply to the joint venture is very much related to the sugar price development. So the joint venture will be faced with a higher input cost, while PLA prices will move with it. So there will be some marginal contraction on that basis to be expected in the year '24.

We are now going to proceed with our next question, and the questions come from the line of Robert Jan Vos from ABN AMRO, ODDO BHF.

I have a couple of questions. I think the first one is for Eddy. You talked about the financial charges. They were 35 million gross charges, that implies EUR 22 million in the second half versus EUR 13 million in the first half. You mentioned higher interest rates and higher debt levels, but your net debt was actually lower in H2 than in H1. So my question is, are there other reasons for the steep increase we see in the second half? And what would be an indication for 2024? Then my second question, maybe a bit more clarification on PLA margin. So you just said that the 2023 Q4 margin of 22% should not be extrapolated. And from that level, you expect a bit of margin pressure for the reasons you mentioned. Is that correct? And then my third question, you said earlier, and we confirm that on the 31st of January and today that you expect a tailwind from input costs in 2024. But since your last communication with the markets, the sugar price went down further quite materially. Would you agree that's the outlook for the input costs is even better than what you thought it was back in the end of -- at the end of January, is that a fair conclusion? Those were my questions for now.

Okay. So on your interest question, so the EUR 28 million that you see in the P&L. So interest being paid and received from the joint venture, the net of that is EUR 22 million. Then we have some lease interest components is adding up in this line, EUR 2.5 million. And we have also the earn-out related to that algae purchase that we did on the joint venture 2 years ago, also there was an interest charge components adding up on this financial income on expense level. And that's another about EUR 3 million. And especially that last one, we accrue for that by the end of the year because then, we have the best readout on what we still have to pay as an earnout towards the former owner of 50% of the joint venture. By the way, there's one more year to go, that's '25 will be last payment in that, so then that will drop out of this interest income and expense line. PLA margins, again, so like the asset price to the joint venture will be at a higher pace than last year because in the supply agreement [indiscernible] material costs, if you will related to the sugar price and as sugar prices on average, and we hedged that, you know that. And so as we hedge those costs, the net impact of that will flow into the joint venture as an increased cost basis. So that will take off quite some margin from what you have seen in last year. By the way, the Q4 margin is really to be seen as a bit of a higher level versus the earlier quarters because there were also some [indiscernible] I'd say. So better look is -- take total margin level of a good 16% for the full year. And again, we do anticipate a slight margin contraction from that level into '24. Input costs, yes, you were asking what's the difference between now and end of Jan since, what is it, 4 weeks ago. You know we have a hedging policy on a couple of the key components of the input cost build that we have, got some open position for the year, so we are not fully hedged in that sense. So we will, indeed, benefit from further relaxation as, we call it, of the input cost. Sugar is one of them, but there might be others as well. So yes, it will be slightly more favorable in that sense compared to maybe Jan. On the other hand, there are also other components. I think about the Red Sea dynamics. That is, of course, also giving some offset in the other way, those charges for freight is increasing again versus maybe 1 or 2 months ago. So -- but all in all, we do see still an aggregate tailwind impact, I would say, from the input costs.

Okay. This is very clear. If I may come back on the financial charges. Is it fair to assume that for '24, based on what you know today, it will be materially lower than the EUR 35 million reported in 2023. Is that a fair conclusion?

Yes, yes, absolutely. Especially if you take it to connotation that we will have a strong free cash flow delivery this year. And then on top of that, we anticipated closing of the emulsifier divestment that will come in as proceeds in Q2 this year. So those effects by itself already give quite a relief on the interest expense line, correct.

Okay. I cannot persuade you to give some kind of indication for that number for 2024?

I think we've guided pretty explicitly that we have net cash proceeds of $275 million. So that should give you a component. And besides that, at least EUR 50 million free cash flow delivery for this year. So with those components, I think you can do some math on your loan reduction of this interest reduction.

[Operator Instructions] And the questions come from the line of Fernand de Boer, Degroof Petercam.

Fernand de Boer, Degroof, Petercam. A couple of questions on my side. To come back on this minus 1.4% volume mix in Sustainable Food Solutions, you say it's improving, but they also realized that last year, in Q4, actually volumes have fallen from the clear because of the destocking effect, et cetera. So how much is now, really, improvement versus if you look at the trend versus the previous quarter because there is also some seasonality. That's the first question. And then on the guidance. Previously, you had a guidance of 15% to 20% EBITDA growth. And now it's in excess of 15%. Does it mean that with -- yes, upside to this 20%? That's [indiscernible]. And then on your previous comments of this earn-out payments, how much in total is now accrued? And when is that going to be paid? Is that going to be paid in '25? The cash out or already is part of it in '24?

So maybe, I take the volume mix and SFS and Eddy will take the 2 other questions. So because in SFS, I think, we see happening in the feedback we get on this volume mix from the customers and from the market. And you're fully right on Q4 that we've seen already now having already 2 months in this year behind us, where we see that improved even further compared to what we've seen in Q4. And again, what we will see, although some markets are still very soft, is that the pipeline is also being reenergized, and that gives us quite -- some good confidence in terms of EBIT, I mean, this development going forward. Of course, we want to remain cautious about it. We are only 2 months in the new year, but this is building up on what the trend we've seen as well and the customer sentiment we get as well when we discuss with them their own forecast, and when we also discuss from new product launches and that pipeline in terms of new launches as well. So this is a kind of combined elements that makes us more confident about the, first of all, end of destocking and the kind of dynamic we've seen across 2023. Eddy, do you want to answer on the guidance?

The guidance. So Fernand, we did not change the guidance first what we stated a month ago, because we stated that for the year '24, which is this year, above 15%. So that is also what we reconfirm as per today. I think we need to leave it at that and then see how we open up the Q1. On the payments of the earn-out. And so again, this is an arrangement that we have, where we took out 50% of the joint venture, which is the origin of our plant, by the way, in Brazil. 2 more payments to go, 1 this year in Q3, the last payments to be done next year, both have been provided for in the balance sheet, as you can see on the payment for this year. You can find it on before the current liabilities. So there's that $10 million [indiscernible] again to be paid in Q2 [indiscernible] this year. And then for next year, based on the projections that we have, because the earn-out, so it means the better the algorithms develop, the higher the amount will go [indiscernible] we had another about EUR 11 million of this to be paid in the next year that we found on the -- of our long-term liability line on the balance sheet. That are the 2 remaining payments, and after that, nothing there in long-term payments [indiscernible].

And maybe one last question, if I may. The R&D cost for Algae Ingredients, is that now included in those results of Algae Ingredients or is that in the Solutions business, or any, in the let's say, start-up cost? Yes.

Yes, so in the segmentation that we have here today, so the majority of the R&D capabilities that we have is being recognized what we did already since the last years in the Incubator. And a part of that is already captured in the Algae Ingredients segment going forward. So with new segmentation that we will start reporting about from Q1 onwards this year. Then 100% of R&D hedge of these related to algae is in the Health and Nutrition units.

We are now going to proceed with our next question, and the questions come from the line of Sebastian Bray from Berenberg.

My first one would be on the way in which guidance is set and presented for 2024. I just want to make sure about the numerical value provided by the guidance. Corbion did EUR 164 million of EBITDA on a core basis continuing in 2023, is a reasonable estimate leaving aside FX and other impacts of the adjusted EBITDA to modify this number at the lower end by 1.15, and then deduct out EUR 24 million of estimated dissynergies falling into 2024? I have a related question on the cash flow guidance, but I'll pause there.

Sebastian, I can take your question there. So, indeed, the FX effects, in fact, set apart. So we came out at [ 164-ish ] last year on core. So indeed, with the guidance of at least [ 15% ] organic growth, you have to multiply 1.15 to EUR 164 million. And I can do the math there for you, so then you end up at EUR 188 million, if we were specific. And then you have to deduct, not EUR 24 million, but EUR 15 million. So we have stated clearly in the Capital Markets Day presentation that for the noncore segments, this is a transition year, you will have there a minus 15%, So if you deduct these 2, then you should end up somewhere in the EUR 73 million range for the [ total ] company on an adjusted EBITDA level.

That's helpful. And my second question relates to this, it's on what's the one-off headwinds to free cash flow are in the year 2024? Because if I take the guidance, this would seem to me that it's made underlying basis as per one-offs including the restructuring charges for the head count reduction [indiscernible]. And the cash effect of the [ EUR 15 million ] of the synergies that the company is guiding for 2024. Just to confirm, if I wanted to come up with an underlying cash flow figure, on a [indiscernible] basis, if no restructuring and no dissynergies were occurring, I take the EUR 30 million, which I believe the company is guiding to, and add EUR 15 million of this synergy, and then another EUR 5 million to EUR 10 million of restructuring charge on top of that. Is that the right way of thinking about that?

The line was not 100% clear, but the components on the free cash flow delivery for this year is, indeed, is adjusted EBITDA, it is indeed restructuring cost that you refer to, so that's correct. The CapEx level, when you look at that from a cash impact, will be higher than the EUR 100 million to EUR 110 million that we guided because EUR 100 million to EUR 110 million is the accounting impact of CapEx, but the cash flow is slightly higher because we're coming in from a higher CapEx program last year and going into a lower CapEx dynamics going forward. So we always have done some extra cash out in terms of phasing. And then, of course, the working capital reduction component where we stated at the Capital Markets Day, we anticipated about a 2% reduction [indiscernible]. So if you would add another components in your calculations.

That's helpful. And again, to come up to this feature of the impact of the divestment, what happens to the accounting and the continuing operations? Can I confirm that as at the full year 2023, so on a going-forward basis, there will not be an EBITDA contribution from emulsifiers in Q1? It would just move to the discontinued operations of the company?

Yes. What we expressed in that noncore of minus 15, there's a segmentation, that is composed of the EBITDA contribution of the emulsifier as long as the closing is not being done. And like we stated, we anticipate that in Q2, so at least Q1, there will still be a component of the minus 15%. And at the moment, the closing takes place, then that EBITDA drops out, and we will have them -- still the former standard cost be slightly offset by payments of the buyer of emulsifiers because we will still run some traditional services this year. And the net outcome of that whole dynamic will be this minus 15% that we disclosed. Into '25, by the way, also improvement. In '25, there will be no noncore anymore. So there will be no leftovers, if you will, of that segment.

Good to understand here, the guidance for the Q1 EBITDA that Corbion has provided, this is all referring to core or it's for the group, including the EBITDA contribution that is left in there from emulsifiers?

Sebastian, we've always, when we have been guiding EBITDA growth, it's always about the core. That's the consistent pattern we follow for over few years, it's nice.. So we never have been guiding on the noncore. So this, indeed, the 15% growth, at least this year, is about core, and it is measured on an organic basis, so excluding FX effects and noncore is outside.

That's understood. And last one, from a cosmetic basis, it would mean that the food margin is worse in Q2 than it is in Q1 or Q3 because it has to absorb these costs? Or there'll still be another segment that says emulsifiers that will have minus EUR 5 million of EBITDA in the quarter?

Sorry, I don't get your question. Is that about this year or next year?

It's for the year '24. So if emulsifiers goes, does all of the segment costs just effectively get reallocated to what was the old Food segment but is now being changed? Or is that just a minus [indiscernible] line that it stays there for 3 quarters and then goes away?

No. No, it's for this year, '24. So all the dynamics related to the noncore divestments, we have separately and we will separately disclose in this noncore segment. So it will not impact the rhythm or pattern or whatever on the core business, also not in the Food business core.

We are now going proceed with our next question, and the questions from the line of Karel Zoete from Kepler Cheuvreux.

Yes. I have one follow-up question and one other. The follow-up question is on sugar prices, as those have come down and the outlook is relatively favorable, it seems, at least for buyers of sugar. Can you please remind us how you've -- what's the hedging strategy here? And how you've entered 2024. Obviously, looking for, at some point, when it becomes a tailwind and when that's still a headwind? The other question is on the Solutions business, on the Foods business. You commented on it from a market's perspective. But what are you seeing from a geographical perspective? Reason all of us asking is that we've heard a different commentary from some of your clients and also other ingredients houses.

So maybe I jump on your second question, and Eddy will answer on hedging. From a geographical perspective, as you know, of course, in our largest market in the U.S. So what we've seen across the board in the course of '23, the most severe impact has been primarily in 2 regions, in Europe, and to some extent, Latin America. As well, which is where we've seen the most difficult market conditions on the low end also of our business. What we see today in terms of indeed better momentum and how also our business does perform is better outlook in the U.S. and North America, which is again our largest market. Europe is slightly improving where we still see quite tougher market environment in Latin America today. So -- but that's the current dynamic. If you look to the subcategories, obviously, you have the big categories, the meat, bakery, dairy, which is where we mostly play. And to some extent in confectionery, where we have a good presence. You see that is still, I think, again, much more difficult market in the mid and the low-end preservation area. This is what also we see right now. And we see first positive signals from distribution and that's always important in the way we look at market because they are the first to be hurt when the market is turning down, but also, they are the first to rebound and we see positive signals in terms of the subdistributors. So you know everything that is, let's say, dealing with the SME type of customers. So that's a bit of the current context we receive for our own business, our own portfolio. Maybe to give also a different angle and color. If you look at the 2 major blocks lines of our Food business, you know the traffic shifting between functional systems and preservation. We see basically a much stronger momentum in Functional Systems there, where basically, it's also a good signal that customers are back to new developments, and we see that in the number of ways in Functional System. In the preservation, it's, let's say, still quite -- in terms of [indiscernible] environment, muted and in the low end of the preservation business where you sell [ lactic ] acid. There, yes, we've been facing and still facing some competition there. And the volume is still not picking up in the low end part of the portfolio in preservation. So much better outlook, stronger in Functional Systems in shelf life extension solutions, [indiscernible] solutions, less in preservation and still really demanding you to be in low end of the preservation portfolio. So I hope it helps to give a bit more color to the Food business and momentum.

Yes, much appreciated. It does.

Okay. On your question on the sugar hedging, a couple of comments there. So yes, we do follow a hedging policy for sugar, and also some of the other key commodities that we're buying. That hedge policy is typically we'd like to be covered on the cost side for about half year. So normally, they are always at least covered for half year. And [indiscernible] we want to go to a level from 2 years in such situations. Like we stated on earlier occasions, given the dynamics of the market, we are relatively short, so indeed, see that we're well covered for the next 2 quarters. So this is our quarter and we still have open positions in the second half of this year. The second thing is maybe also going to highlight is we are never buying to the spot price. So people follow very often the spot prices, so that when they need from EUR 0.17, EUR 0.18, we were allowed to up to EUR 0.27 earlier case this year, and now it sits at EUR 0.21, EUR 0.22. But we have never been buying at levels of close -- anything close to EUR 0.27 because we never buy spot rates. We always buy futures or traded futures always because we need to match it to apply hedging to what is also in the physical sugar contract deliveries, and that's never [indiscernible] always futures. And those typically are lower than the spot prices because nearly always sugar market is in backwardation meaning future prices are lower than the spot. So don't get distracted by [indiscernible] so that's not really relevant for us.

We are now going to proceed with our next question, the questions comes from the line of Reg Watson from ING.

Eddy, as a follow-up question for you on hedging, particularly sugar. How much basis risk is there in your hedging? Because, I think, once gypsum-free lactic acid comes online in [ Real ], and you've rejigged your lactic acid production, estimating that almost 2/3 of your sugar demand will occur in Thailand, and there's a significant shortage there at the moment due to drought. So I'm interested to understand how the local sourcing costs differ from your hedge positions? That's question number one. And then question for both of you, Olivier and Eddy. The dividend, I'm surprised nobody has mentioned this already this morning. But it's a bold move after 7 years of maintaining a flat dividend. And I can understand, it's a sign of your optimism. But it's not even covered by the cash from 2023. But then it then leads to the question of, okay, how much more, if you're willing to raise the dividend, when you don't even have the cash to pay for it, how much more are you going to go forward? Because I noticed that there's no speculation that we will see buybacks or special dividends as a result of the sale of [indiscernible]. So if you could comment on that, I would be very grateful.

So on your question of the Thailand sugar price. I'm not sure if I understand your question. But what we are sourcing in Thailand is, again, [ new year 11 ] price, and that's a small premium in the Thai market because [i new year 11 ]is really determined by Brazil being the largest exporter of sugar in both markets as you know.

Okay. That's what I'm kind of asking, Eddy, because the basis risk is expected when your hedge is not perfect because your hedges are globally traded as a globally set price, but you're experiencing local prices rather than the globally traded prices, if that makes sense.

Yes. So our hedges in that time is, like I said, the hedges we take always have to mirror 100% what we have in our physical contracts with suppliers. So that's why we don't have a mismatch. Well, anything we do in our physical contracts, we never hedge beyond that. So that there's a match there. On your dividend, yes, you're right. Free cash flow was [ EUR 19 ] million. This increased dividend, that is a EUR 3 million higher than what we have paid before in the end of last year EUR 36 million. So if you take that perspective, it is indeed higher than free cash flow delivery. But don't forget, we're really in a ramp up phase of free cash flow delivery as per Q2 onwards last year. And again, we have -- let alone, the divestment proceeds were just outside that, we have over EUR 50 million free cash flow delivery this year. So keen indeed as there's a strong confirmation from our side and lot of confidence on the free cash flow delivery.

Okay. But would we expect then, once the proceeds of emulsifiers end, that you then pay out further as a special or buyback?

Let's first come to a closing of the deal, which we anticipate in Q2. So that will be in that sense, the next quarter coming up. I think we need to have the conversation done. And also, yes, we will have a look, and look at other distributions, we will take it in consideration. That's too early to make now, at this moment.

We are now going to proceed with our next question, and the questions come from the line of Wim Hoste from KBC Securities.

Yes, I wanted to have your feel on the momentum of a few of the business lines, and specifically on both human and pet food in the algae business? That's the first one. The second one would be on the food adjacencies in the Food business? And then thirdly, on the agro and semiconductor business in Lactic Acid and Specialties, if you could just outline how you see top line momentum and market demand in those markets? That would be great.

So starting on the algae business line. So basically, 2 differences because -- so obviously, I put aside the aqua market, yes. So if you think about pet nutrition, there it's about opening new markets because this market historically did not exist to a large extent. So it's about implementing omega-3s for pets, and basically, bringing a lot of health benefit to pet as well there. So it is something that we start to work quite some time ago, and that now is yielding as we are converting this basically R&D development programs with their customers into a real business. And now we are harvesting really the last 2 to 3 year intense development work into pet nutrition. And there, it's about creating market. In human, it's different because today, there is a huge established market of omega-3 to primary dietary supplement, which is what we speak about here. And the vast majority of this dietary supplement market is being supplied with official base omega-3. What we've seen over the last couple of years is an increasing trend of moving also our interest for algae based on [indiscernible] sustainability. Everybody is aware of overfishing of the constraint. Obviously, the high prices. We are also supported by the vegan trend because there is also this trend playing to some extent where people do prefer a plant-based type of omega-3, which is provided by algae than fish oil. And we also, this is maybe more marketing push, but it's a real attribute we do have with algae, contrary to fish oil, we provide a very clean product without needing any residual heavy metals and other pesticide likes that do accumulate in the chain when you process some of the fish oil. Now although -- but of course, using fish oil do clean their products. So -- and have refined products, but we offer straight way, very clean solutions. So we see a strong appetite for people to convert in this dietary supplement market from fish-oil based to algae-based omega-3. So -- and this is what we are basically really building now as a pipeline going forward. So in the other biochemical markets, you mentioned both agrochemical and semiconductor. Semiconductor is one where, as we explained before, we see every 4 to 5 years a down cycle. And we are in the middle of it now. The last time we saw a similar -- we faced similar down cycle was back in '18, '19. Usually this down cycle lasts a good year. Now it's also important to understand how do we play in the chain because in that segment, we supply green solvents. And the primary reason why they are using our type of solvent is not necessarily because they are green or bio-based, it's because we are able to provide very high purity product. That is really what matters in that category. And when you speak about very high purity, you speak about the parts per trillion of impurity. So you are already above the 99.9999 type of purity. So this is the functionality we bring. It's also important to understand in the value chain, we are 3 to 4 steps down from the final user, being the Samsung, the LG, the Apple type of customers because we sell to people that do compound different type of solvents, that do also provide food solution services. So usually, what's happening is that when there is a downturn, because we are further in the chain, we are the last one to suffer from the downturn. But when there is an upturn, we are also the last one to see the recovery. Now, again, we get mixed signals from the market that some of the big players do say, yes, we expect -- we have recovery now. Other says, yes, you can expect recovery as from H2. So we have a mixed feedback from these markets. Longer term, we see a very strong underlying trend because of artificial intelligence, more servers, more flat screens, whether it is in electrical cars or the tools we have every day. So we know that longer term, there is a strong momentum to come. So we are not really worried. The question is more, how fast are we going to see the recovery? And are we going to see the recovery as we expect from H2 or not? Yes, and that's the big question we have there. On Agro, this is a much smaller business for us. And basically, it's a limited number of global customers. It's also very much sometimes related to whether you see heavy rains and the need to treat in some plantations in the various regions, and this is quite difficult to predict. This is a more, I have to say, opportunistic business for us. This is not one where we are spending a lot of energy or R&D or science. So -- and that's probably -- and again, something that in terms of, indeed, priority, we consider as more opportunistic than anything else. So I hope it answers your question, Wim. And yes, sorry, on Food efficiencies, we decided also to make sure that we have new fields of growth, an area of growth for our Food business beyond the traditional markets we were serving. And what -- when we look to the, let's say, markets' approach, we said, yes, on one side, we need to expand the category reach with the functionalities we provide, and our key functionalities is in Food to help our customers move from scientific artificial ingredients to natural alternatives. And basically, it's about microbiological spoilage control or to reduce food waste and make sure people do not get poisoned or extend shelf life. So when we look at it, we said, okay, what are the other products we need in our portfolio to provide this functionality? And then we are looking to natural antioxidant. We mentioned, natural products like rosemary extract or acerola which is natural vitamin C extract. Rosemary is natural carnosic acid. So these are all ranges of organic acids that are really very close to our core business, although we don't produce by fermentation. And then the rest is about shelf life extension going into [indiscernible].

Thank you. Mr. Rigaud, there are no more questions. Please continue with any points you wish to raise. Thank you.

I just want to thank everyone, I mean, for the call today, for attending our full year results, and we are looking forward to reconvene for the Q1 results in April. Thank you all, and have a nice day