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

Good morning, everyone. Welcome to the Corbion H1 2024 Results Call. Today, the results will be presented by Olivier Rigaud, CEO; as well as myself, Peter Kazius, CFO. This morning, we published our H1 2024 results. You can find the press release and presentation on our website, if you go to www.corbion.com, Investor Relations, Financial Publications. As usual, our half year results call, Olivier and myself will walk you through the presentation, after which we'll move into Q&A. And with that, I would like to hand over to Olivier.

We delivered a strong performance in the first half of 2024, demonstrating the underlying strength of our business. I'm very happy with the continuation of our positive volume mix growth, adjusted EBITDA as well as free cash flow delivery. In Q2, we delivered a great volume/mix growth of plus 5.5 organically, leading to H1 volume/mix growth of 3.6%. On adjusted EBITDA, we delivered EUR 51.6 million in the quarter, which is the first quarter excluding the contribution of emulsifiers, which you might remember, we divested April 2. The resulting EBITDA margin in the second quarter is 15.3%, a significant step up versus Q1 and versus last year. In Health & Nutrition, we continue our path to grow sales at double-digit rate at very attractive EBITDA margin. In Functional Ingredient & Solution, we've seen positive volume/mix driven by Food. The EBITDA margin has been increased in Q2, whilst fully absorbing the allocated SG&A costs previously allocated to emulsifiers. In our PLA joint venture, we've seen now the third consecutive quarter-on-quarter sales growth. The free cash flow has been positive, which together with the divestment proceeds, resulted in a net debt-to-EBITDA ratio of 2.2x. I can also report that the restructuring plan we announced earlier this year is well on track. Since we anticipate the positive momentum to continue in the second half of the year, we maintain our full year guidance. So now moving to the next slide and looking to the Functional Ingredient & Solution business and dynamics. We see a much improved business momentum in the key categories we serve like bakery, meat and dairy across the regions and particularly in North America. The customer innovation in our Food Ingredients segment remains strong, particularly around recipes, cost reduction and clean label formulations. Whilst in our Biochemicals segments, we see a continuation of market softness in some markets such as semiconductors and agrochemicals. We continue to focus on our key strategic growth initiatives, such as natural mold inhibitors, dough conditioners for bakery, dairy stabilizers and natural antioxidant solutions. This is translating in an accelerated sales pipeline with high conversion rate. As you might have seen, we recently announced a bolt-on acquisition in India, supporting our Food Solutions business and aim to serve both local demand as our global key accounts in the region. And of course, the startup of our state of the art circular lactic acid plant in Thailand. After 3 years of construction, now ramping up gradually as per our plan. We've already produced and sold several thousands of tonnes in spec product to the market. This new plant, as you know, is one of the most important future value creation enabler for Corbion for the years to come. And last point, in terms of efficiency initiatives to improve our margins, we are well on track in this division, both on the industrial footprint optimization with the mothballing of our Peoria plant and FTE reduction. So now moving on to the Health & Nutrition business unit. I'm really happy to report that this division continues to perform very strongly. We benefit from a continued strong demand of omega-3, both in aquaculture and in pet nutrition whilst we also see a positive momentum in our Medical Biopolymer business, primarily in orthopedics and slow-release drug delivery. Highlighted here some of the growth initiative in our Omega-3 business, we benefit from secured longer-term contracts in aquaculture, whilst we are growing strongly in additional categories as pet nutrition and making solid progress in human nutrition customer approvals. As we speak, our capacity expansion plans in our Brazilian operation is progressing according to schedule and we see a continuation in process and yield efficiency to support growth for the second half of the year, but also for 2025. Now moving on to the next slide and discussing about our PLA joint venture. As stated before, we are now in the third consecutive quarter-on-quarter sales growth and we see this trend continuing in the second half of the year. Growth is primarily driven by China, piloting new market development initiatives. We are making good progress in building a differentiated portfolio such as expanded PLA to bring new functionalities to the market and reduce dependencies to the more volatile end markets. All of this is resulting in a very solid customer development pipeline for the joint venture. Now let me hand over back to Peter to go through the detailed financials. Peter, up to you.

Thanks, Olivier. Following the completion of the Emulsifier divestment by April 2, we've prepared the profit and loss statement, excluding discontinued operations in line with IFRS 5. You will find the profit and loss statement of discontinued operations in our press release on Page 20 and the EBITDA impact on Page 4. On Chart 9, you will see the bridge between last year's reported number where we've taken out discontinued business. In H1 2023, we reported sales of EUR 738 million, of which EUR 96 million related to the Emulsifier business. The sales on a continued basis was therefore EUR 642 million. In H1, we've seen a mild sales decline driven by lower pricing, but offset by volume/mix growth of 3.6% of which you have seen that the volume/mix growth in Q2 itself was plus 5.5%. On EBITDA, we did report an adjusted EBITDA level last year of EUR 97 million, of which EUR 28 million relates to discontinued operation. The adjusted EBITDA of the discontinued business excludes the allocated SG&A costs, which were previously allocated to the noncore emulsifier divestment. In H1, we've seen an EBITDA increase of EUR 17 million versus last year, driven by Health & Nutrition. If you look to the Functional Ingredients & Solutions on H1, it's flattish. If you look to Q2, it was a very strong performance. If we dive then to the profit and loss statement of continued operations, you recognize the sales and adjusted EBITDA level for H1. You can see in Q2, the sales increased with 2.3% and EBITDA increased with 54% to a level of EUR 41.6 million. This EUR 41.6 million includes the allocation of stranded cost in emulsifiers. If you go a bit deeper in the P&L, you see that the depreciation went up as a result of prior year investments. In H1, the adjusted number is EUR 8.7 million, and this includes the restructuring cost of around EUR 9 million. On financial income and expense, it's in line with last year, which is EUR 3.7 million. H1 joint venture result is flat. And last year numbers, as you might remember, includes the impairment of capitalized costs related to the cancellation of the Grandpuit project. The tax rate is 24%, which is in line with anticipation. You see that the results after tax of the discontinued operations of EUR 145.7 million includes the book profit of the sale of the emulsifier. If you then dive into the 2 segments, Functional Ingredients & Solutions, we've seen a continuation of the positive momentum. In Q2, volume/mix growth was plus 3.2%. As Olivier indicated, this is really driven by the Food segment with Biochemicals still showing some temporary softness. In Food, we've seen growth in our key markets like bakery, meat and dairy as well as a continued growth in our key initiatives. Q2 pricing was minus 4% -- sorry, minus 5.4%, in line with Q1 following the relaxation of input costs. The adjusted EBITDA includes the allocation of SG&A costs previously allocated to emulsifiers. Absorbing these costs, the EBITDA margin in Q1 was 10.4%, which is reflecting the positive volume/mix as well as the impact of our cost reduction initiatives. As indicated earlier, we will fully compensate these allocated costs in 2025 and are currently implementing a series of initiatives to deliver on this. Health & Nutrition is continuing the path of double-digit volume/mix growth at sustainable high EBITDA margin. The organic sales growth in H1 was plus 14.5%. Volume/mix in both Q2 and H1 were plus 14.1%, predominantly driven by our [ healthy ] DHA business, supporting both aquaculture and pet nutrition. The Biomedical Polymer segment is on track, delivering double-digit growth for the full year, with H1 sales being stable following phasing of some orders. The adjusted EBITDA margin is around 30%, and the increase versus last year is driven by a combination of increased operational leverage, strain optimization as well as favorable product/mix. These results are a great confirmation on our strategy. If we look to our PLA joint venture, as Olivier alluded to, we see the third consecutive quarter of sales growth with EBITDA margins in line with our estimates. H1 organic sales growth was plus 14.1% versus last year, with Q2 being 6.2%. The increase is driven by volume development. As indicated, margin [Audio Gap] 2023, driven by price input cost dynamics, primarily sugar. With that, I would like to hand it over to Olivier.

Yes. Thanks, Peter. So before getting into Q&A, and seeing the positive continued momentum in our business, we confirm our full year outlook for 2024. And also our medium-term outlook for 2025 as we are working on the full compensation of this emulsifier-related stranded cost. So for 2024, we anticipate to grow volume/mix within the 2% to 6% growth, pricing anticipated to be low single digit negatively. Adjusted EBITDA for continued operation above 18%, which is in line with the [ former ] over 15% on core activities. And on free cash flow, we feel confident to deliver over the EUR 50 million guidance we gave earlier. On this, thank you very much for your attention, and I'm now opening the floor to questions. Operator, back to you.

[Operator Instructions] The first question comes from Robert Jan Vos from ABN AMRO ODDO BHF.

Yes. A few questions. You realized organic EBITDA growth of close to 22% in H1, 46% in Q2. When looking at your guidance, is there any reason why H2 would be trending below H1? You're basically saying that H2 growth will be above 14% only. So that's my first question. I have a few others.

Okay. Thanks, Robert. I will let Peter take that one.

Yes. So Robert, yes, I think we feel very strongly about the outlook. If you look in the stack up of prior year, then keep in mind that the strain optimization in Health & Nutrition, you already see a significant [ ups ] between H1 2023 versus H2 2023.

Okay. And related to this one, you changed -- you've not increased but changed the -- the more than 15% number into more than 18%, and that is because of the changes in the definition. . Can you provide the absolute EBITDA base that is used for this guidance? So what is the 2023 adjusted EBITDA on which this guidance applies?

Yes. No, we can. So if you look to our last year reported number that was EUR 136.7 million, that's where we did apply this more than 15%. And if you then do this 18%, that applies then to a lower base because there we took out the allocation of this stranded cost. If you look in terms of the absolute number in terms of EBITDA growth, that means we are growing in excess of EUR 25 million. And as indicated, this is really -- we feel very strongly about delivering a higher number than the 15% growth.

But you said the old base was EUR 136.7 million, right?

EUR [ 136.7 ] million correct.

EUR 163.7 million.

Yes, yes. Exactly. What is the new number then for this EUR 163.7 million minus EUR 25 million, is that what you said?

That's correct. So if you say the number of the core reported EBITDA, it is EUR 163.7 million. What you roughly need to do because in the discontinued operation, we took out this EUR 24 million of stranded costs, so that's then the new base on which this 18% is calculated.

Okay. That's clear. And yes, I noticed in the reporting of today that also the base for the 2023 adjusted EBITDA was adjusted for as we now know then for Q1 and Q2. Can you provide the remaining quarters of the year as well, please, not in this call, maybe, but can you provide new restated figures for the quarterlies if that's possible?

Yes, that is possible. We're quite transparent on that. And as you know, we needed to be compliant with IFRS 5 and therefore, do this discontinued operations. So...

Okay. And then a question on -- if I may, a question on the PLA joint venture. It says -- on one of the slides, it says the adjusted EBITDA margin is in line with the 2024 estimate. Just to be clear, does that imply that you expect 14% EBITDA profitability for PLA in 2024?

Yes, so as we guided earlier, we anticipate in 2024 to be at a profitability level of EBITDA between 10% and 15% given the current price input cost dynamics of which sugar prices are relatively high in this year. We also indicated that it is in this year and with now sugar prices returning to a normal level and the increase of volume in the PLA that going forward, these margins should go up. So this 10% to 15% is the one which we guided earlier in the year.

Okay. Yes. So you're in that range, that's what you would set, actually. Okay, that's very clear. Maybe on the announcement for the acquisition in India, can you put a few numbers on it, for example, how big is it in sales EBITDA? And maybe also, what is the price paid?

Yes. So in terms of the acquisition itself, I think it's a nice bolt-on acquisition following our strategy. In terms of the numbers and acquisition price, it's a very limited amount. And Robert Jan think about the full amount, including kind of payout between EUR 1 million to EUR 2 million. So from that perspective, it's not significant.

If I may add, Robert Jan, on that what we are looking more with this investment is, as we've done in Mexico last year, is to have an anchor investment in which we can build on the same approach we've done in Brazil and Mexico last year. Primarily to follow our global key account in the regions, just moving recipes we have in other regions there. So it was to have just an anchor base on which we can build fast as we've done in Brazil or Mexico, so really same model, same approach.

Okay. That's clear. And then finally, if we talk about the cash -- taxes that you're still owed related to the disposal of emulsifiers in the second half. Is that simply the difference between what you mentioned as the net proceeds of EUR 323.8 million and the full year cash proceeds of EUR 255 million, i.e., close to EUR 70 million that you still need to pay in taxes in the second half. Is that correct?

Yes, that's the exact way to do that, Robert Jan. And by the way, this tax we will pay in Q3.

The next question comes from the line of Wim Hoste from KBCS.

A couple of questions. The first one would be on the new lactic acid's plant performance. And yes, the impact of the ramp-up scenario on the global footprint you have. So can you help us understand what is the pace of the ramp-up you foresee for the coming quarters? And at what stage or what timing would that impact production at the other sites and allow you to reduce production at some of the less efficient site or shift to then more specialties. Can you walk us a bit around that? So that's the first question. Maybe I'll let you answer that one first.

Yes. Sure. So on these plans, actually, as we told before, indeed, it's to maximize the lowest cost position there and reducing some of the highs. So that's already been initiated. For instance, so we repurposed our lactic acid production in Spain. So where we stopped to produce actually natural ferments, following the mothballing of the area in the U.S. So there is this indeed a kind of moves that are really connected where we stop lactic acid fermentation in Spain to produce in the lactic plant the food ferments, to compensate for the PLA closure. And this is bringing, by the way, a much higher margin on food ferments. And at the same time, it allows to ramp up the new Thai operation. We are playing also with the rest of the network whether this is our operations in Brazil or in Thailand itself with a former commercial process. So the plan actually is that, obviously, we are still in a ramp-up phase. What we are looking and preparing is because you also need to organize the whole supply chain and to some extent, some customer referencing behind as you bring this new technology in the plant. But basically, it's also to have a significant step-up next year. So most of the impact -- and you remember, we announced that already in the Capital Market Day, is to happen in '25. So this year, it's really also to make sure we have stable operation, we have customer referencing on this new plant, which sometimes you have to requalify, sometime not. So on this, we are well on track on this program. but most of the impact will come in 2025.

Okay. Understood. That's clear. And then my second question would be on PLA, yes, the better market momentum. I think, in the introductionary comments, it was stated that it's mainly China related. Obviously, China is a big market for you. But yes, can you maybe elaborate a little bit on what you see underlying. Are these packaging volumes? Can you also elaborate on what you're seeing in the higher end that you're targeting, how much contracts have you signed for that or an [ ID ], what kind of applications, what kind of contracts, how long are the durations? And also on the markets outlook in total and new initiatives, et cetera, capacity additions? I think one of your big potential competitors has withdrawn from its plans a number of weeks ago. So if you can, yes, just talk a bit around the -- the aspirations that you're seeing and maybe who is building, who's not building, I think Nature was probably building its plan? But can you maybe also give a bit of a feel on that?

No, sure. So on the first part of your question on the market, indeed, today, most of the recovery is coming from China and primarily from a specific category that we call industrial 3D printing. This is quite a trend now happening in China where 3D printing that, here, we're more familiar with a home-based printer, but now it's moving into some kind of -- some industrial, they call it a 3D printing farms for certain categories like plastic toys and all these similar type of products. And this is really growing pretty fast. And there, the interesting part is that PLA is being really utilized because of its functionality. It's one of the best, if not the best, polymer that fits with the 3D printing technology in terms of resistance and harness. So now as we said before, we want to reduce some dependencies on the more volatile categories and lower end like flexible packaging to move to more specialty ones like some rigid packaging. And in that, we are developing this foamed expanded PLA to replace foamed expanded polystyrene. Think about food trays and these type of things or microwavable noodle cups that are very popular in Asia. So we are making nice progress there, but it's not yet representing a significant amount of sales, although it's pretty promising. So I have to say, this is why today really the biggest part of recovery is in China, and to some extent, slight recovery in Europe, but really most of the recovery is in China. Back to the market environment, as you, of course, know, the market dropped by almost 50% in the last 1.5 years. And we've been able to in that -- these conditions to even slightly increase our market share with a couple of percent in that period. And this was related to the fact that we did for a large part of our business, long-term sales agreement, multiyear agreement that helped us to mitigate the impact of the market drop at that time. So -- and that's a policy we've had so far really to secure a large part of our volume through longer-term agreements and this could be 3 to 5 years type of agreement. So we are continuing that strategy with some really important strategic accounts globally. So that's important whilst we are moving indeed the portfolio to more differentiated product. And again, we are still, I think, in progress on that. So we are not yet at the end of the exercise, more to come on that front. You might have seen in the press, the joint venture has announced quite a lot of strategic partnerships over the last weeks. So we are pushing to that direction. About the market dynamic actually next to this big investment that was, let's say, withdrawn in the U.S. that you were referring to. There is another 6 projects that have been withdrawn or put on hold in China, so in the last 4 to 5, 6 weeks. So there is, of course, the project you mentioned going on in Thailand. But that's the only major ag project today where the plant is in construction. So I think, again, it tells really something that, of course, we came to that conclusion a bit before everyone when we decided to cancel the project in Grandpuit, seen the capital intensity and the return of such type of projects. So it's -- I think not a surprise to see others coming to the same conclusion now. For us, as we said, the aim is to max out the current plant and specialize it. We have room to grow that plant with very, very limited investments. And yes, we're just going to focus on the strategy to specialize as much as we can this plant on differentiated product.

Okay. That's very clear. Congratulations on good results.

Thank you.

The next question comes from the line of Sebastian Bray from Berenberg.

Can I ask firstly one on PLA? If Corbion is operating a policy where it has moved towards the lower end of the temporal range for hedging, meaning 6 months out, why do margins not accelerate aggressively in the second half of the year given the amount of cost relief that's available?

Sorry, I thought there were more. So let me take this one, Sebastian. So if you look in terms of the cost curve and the hedging policy, which, by the way, for the joint venture, we do collectively, so the joint venture knows exactly when we do this hedging policy. Then -- and you look to the sugar curve then what you see is during the course of Q2, Q3, and we see a bit of peak and after that, it should relax. So therefore, the margins should definitely go up in 2025, don't expect it yet basically in Q3 and there might be a mild impact in Q4.

That's helpful. And can I ask one on the contract structure for the Algae business. Is there a cliff edge moment sometimes in '25 when the contracts negotiated for the omega-3 come up for renegotiation or is this a stepped process?

No. I think it's a very, very fair question. So what we've done indeed is a plan, we have different end dates on the different contracts. So there is no cliff. But it's also about -- and they are quite longer term, you speak about either 3 or 5 years. And as we are growing the customer base because that's an important other element, is that we have 2 ways to derisk that. Obviously, in aquaculture, it's quite a concentrated market, but there is still room for us to open new avenues and new customers, which we are doing. And of course, it's opening new categories. We mentioned last time, pet nutrition is already up to 10% of our overall sales. So we have, let's say, also different business market dynamics. And as we said, we are working to open up the Human Nutrition business, that is also going to -- also in terms of risk be very, very helpful for the future. But so far, there is no short-term cliff to see or to be anticipated.

That's helpful. And just as a reminder on the stranded cost effects, my understanding is the company has restated its figures to adjust for the fact that the Emulsifiers business is no longer included in continuing operations. This has led to an incremental cost if I read through the report of about EUR 8 million in H1 on Functional Ingredients. I assume it will be a pretty similar number for H2. And then is the correct approach to modeling this just to say, okay, well, this stranded cost goes away in 2025? The reason I'm asking is that it is a pretty hefty step-up in EBITDA margins for that segment purely from the falling away of stranded cost. And I want to understand if I'm thinking about this in the right way?

So Sebastian, you think absolutely in the right way. So in terms of continued and discontinued operation, the kind of IFRS 5 rule, in the continued operation, we fully included the stranded costs. So therefore, also the EBITDA number, which we presented in Q2, is including that. As we said, we are in a kind of transitionary phase but have plans in place and are working on activities to fully compensate that in 2025. So the principles which we applied and which we did communicate earlier are exactly the same. The difference is -- a bit is split of core, noncore versus continued versus discontinued operation.

That's helpful. And last one from me. The CapEx at the group level and more broadly, the cash flow -- it looks like there's a little bit of work to do in H2, especially on the [ WC side ] to hit full year guidance. Is there any sense that you can squeeze CapEx or the company can squeeze CapEx downwards further in '24-'25 or is it one just the run rate that you need to grow and that is what it is?

No. So in terms of CapEx, we continuously look, of course, to the right CapEx level. You're right on the working capital part of the equation. Let me stress two things. The one is, if you look in terms of trade receivables, you see an uptake. And this is really driven by the increased sales level in Q2 as well and, of course, increase seen in H2. If you look in terms of inventories, there's a bit of combination. So if you look in the H1 number, there is an increase in our intercompany freight lines driven by [ Red Sea ], which is impacting adversely, also that increase you will not have, and I expect a further reduction of our working capital in H2. So those are, I would say, key components on that one. You're also right that CapEx itself, I mean, we are under this kind of more significant...

The next question comes from the line of Fernand de Boer from Degroof Petercam.

A couple of questions on my side, although have already been answered, but I'm still a little bit puzzled about your guidance because it still looks very conservative to me. And your answer, Peter, was quite short on the first question on that one. So could you explain with sugar prices becoming more favorable with Biomedical coming through in the second half. And also, I think the strong margins in omega-3 will continue, it's not that they will come down. So that should still mean a doubling in EBITDA from omega-3. So why so conservative? That's first one. And then on volume growth also in Food. Could you give us a little bit idea because if you look at U.S. market, grocery markets, volumes are not that strong yet, is there kind of inventory buildup restocking in the chain? And could you -- have you any idea about how much that is. And the last one on semiconductors of Biochemicals, you were not seen a recovery yet. When do you expect that to come through?

Yes, Fernand. So Olivier, I'm going to take the last 2 and Peter will take the guidance. So first, on volume growth in Food. You're right, and although we see some categories and when we look to the [ digital ] categories, primarily in the largest food market being North America being slightly negative like bakery or meat. But what we can see is that customers post inflation have been really focusing, first of all, on a lot of reformulation and cost optimization in products from pure innovation. So -- and we've had big success there. So with a very strong pipeline. So primarily in our Functional Systems area, where we've had a major customer and share gains there from these developments. So that, I think, has been driving and is still driving volume growth on the second half. And the other part is when I was mentioning clean label, we have a big initiative on natural mold inhibitors, where we are placing the synthetic current used product by this natural alternatives. One of the great move with the restructuring is that moving operations from Peoria to our Spanish operation makes us very competitive in the market because efficiencies in Spain are great. The plant is operating at a much higher yield level. So we've also gained quite some significant share being able to convert synthetic to natural. So this is really 2 elements driving also a strong volume growth and sustainable growth. On semiconductor, you might remember, we are anticipating some recovery as from Q3. And although there are some very early signs, now most of the customers says, yes, expect that more towards year-end. So the market is positive about the fact that things are coming back to normal. But as we are down in the chain quite far, yes, we don't see that yet. And we're expecting some signal early Q3 that we do not see and the market feedback is that it will be more towards the end of the year. Yes. On the guidance, Peter, I'll let you answer that one.

No, thanks on that. So you're right, Fernand, Q2 looks quite good. We feel good about the positive momentum. I think you are also maintaining some elements which are favorable. There is one which temporarily might be a bit less favorable, which is freight rates, which we have seen in a volatile economy creeping a bit up. And if you look to our guidance, I mean, we really maintained higher than 15% and that's, I think, how you need to look to it as well.

And if you look at, let's say, next year because you had the kind of guidance for several years of 15% to 20% on the core business, but now you actually changed the core business. So if I assume next year, this stranded cost will drop out. Is that then part of organic growth or is it then actually not part of organic growth. So can we still assume 15% to 20% also for next year?

Yes. So in the guidance metric, I think our outlook for 2025 does not change. That means the underlying, we say, expect this 15% to 20%, and we will absorb the stranded cost, which means organically, since we reduced the base, you will see a percentage, a higher number in 2025.

And then last question. To get rid of this trended cost, could we expect more nonrecurring costs in H2 or next year?

Yes, I can take this one. No, actually, we are implementing, as we speak, and we already started a couple of months ago, major initiatives that are being implemented as we speak to cover fully this stranded cost for next year. So this is around major initiatives around, I can name the 5 most important ones we are working on. Procurement initiatives, pricing initiatives, we have some further planned optimization in terms of efficiency and yield. And then we have a full product portfolio review in terms of SKU rationalization and tail cut, which is normally disciplined you have in any business, but then we are taking this opportunity to have a full review of the detailed product mix on looking at everything that is slow rotating moving, margin dilutive type of things. So that we are already implementing as we speak, to make sure we have the full impact of stranded costs kicking in '25. So that's -- to support that, we've set up an internal transformation office with a dedicated team that is helping us steering the activities there in the exercise.

The next question comes from Setu Sharda from Barclays.

I've got 3 questions. The first one is like at the start of the year, the EBITDA guide was based on flat volumes in H1, and you did 3.6%. Are you more optimistic for the upper end of the range or do you think H2 will be slower than you originally thought? And the second question is on the Health and Nutrition margin. It has been quite strong. Is this a cyclical high in Health and Nutrition margin or can you sustain a 30% margin medium term? And my third question is just a housekeeping question. What is the full year adjusted EBITDA impact from discontinued versus the EUR 27.8 million you guided in H1?

Okay. Not all the questions were loud and clear, but I think I did get them. So let me take them. So if you look to the Health and Nutrition margin, they would be strong, around 30%, that was in Q1, that's in Q2. And I would assume we are also, if you look in H2 around the same level. If you look in terms of the volume/mix element of this to 6%, given the strong growth, which we've seen in H1 in total, I think that you are right that in this bandwidth, we are at the higher part of the range. The last one, if you look to the emulsifier one, then you are right in terms of discontinued operations, [ emulsifier ] EBITDA and then taken out stranded.

Okay. And one more question, like on the PLA, you disclosed at the Capital Markets Day that PLA 2 JV was only 6% of the Functional Ingredient solution. Now this was depressed due to slow down. So where are we on that today and how much recovery can happen over there over the next 12 months?

So this will be the one we spoke about [ 8% ] retention. [indiscernible] What we see is in that the joint venture because of the bottom momentum is coming with increased forecast, which they did already in the first half, and they confirmed for the second half. So that proves the fact that we have a higher degree of confidence to [ customer ] outlook. So I think it's -- if you calculate, it's not that difficult in the sense that we supply that to lactic acid there. So capacity [indiscernible], we're running close to 50% capacity. When they would be full out, you could think this 6% will go above -- slightly above 10%. We're going to end the year in between something like this as they are growing volume back to not yet full capacity utilization, but nicely ramping up volume in the second half.

There seems to be no further audio questions at this time. If you wish to take your webcast questions? Mr. Rigaud, there are no more questions, please continue with any points you wish to raise.

No, so I think I would like to thank you, operator. Thank you all people in the call. Thank you for joining this. And obviously, we're going to reconnect for the Q3 results. Thank you very much, and have a good day. Bye-bye.