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

Welcome to the Corbion Full Year Results 2024 Conference Call. [Operator Instructions] Please note that this call will be recorded. I would now like to hand over to Mr. Alex Sokolowski, Head of Investor Relations. Please go ahead, sir.

Thank you. Good morning, and welcome to the Corbion Full Year and Fourth Quarter 2024 Conference Call and Webcast. This morning, we published our full year results, and the press release and presentation can be found on the website at www.corbion.com/investor-relations/financial-publications. Before we begin, please note that today's discussion will include forward-looking statements based on current expectations and assumptions. These statements will involve some risks and uncertainties that may cause actual results to differ materially from those expressed. Factors beyond our control, including market conditions, economic changes and regulatory actions, can impact outcomes. Corbion does not take -- undertake any obligation to update statements made in this call or contained in today's press release and presentation. For more information on assumptions and estimates, please refer to our annual reports. This is Alex Sokolowski, Head of IR, and with me on the call are Olivier Rigaud, Chief Financial -- Chief Executive Officer; and Peter Kazius, Chief Financial Officer. I would like to now hand over the call to Olivier.

Good morning, everyone, and thank you for joining Corbion's full year 2024 earnings call. I'm pleased to share that in 2024, Corbion successfully met its upgraded targets for sales and adjusted EBITDA, while significantly surpassing our free cash flow target. We achieved organic sales growth and double-digit increases in both adjusted EBITDA and adjusted operating profit. Our strong volume/mix performance, our focus on operational efficiencies, the successful implementation of our restructuring program and our CapEx discipline resulted in this significant increase in free cash flow. Taking a closer look at our 2024 highlights, we achieved positive organic sales growth of 2.2%, driven by a volume/mix increase of 5.2% and a pricing decline of 3%. Our organic adjusted EBITDA grew by an impressive 23.3%, and we generated a free cash flow of EUR 98.3 million from continued operations. In our Health & Nutrition segment, we saw strong growth in both sales and adjusted EBITDA, driven primarily by our Nutrition business. Our Functional Ingredients & Solutions segment also experienced positive volume/mix growth, particularly from our food ingredients and the lactic acid sales to the joint venture businesses. Looking ahead to 2025, we remain really confident in our strategic targets and expect to continue delivering strong performance. More on that later when we present our 2025 outlook. Now let's move on to the opportunities for differentiation in key markets. We've made significant strides in differentiating ourselves in key markets. Our sales into the mature bakery and meat markets have grown, thanks to our innovative and differentiated solutions as food ferments and clean label preservatives. By targeting these growing market subsegments, we've been able to capture new opportunities and grow with trends in food markets. Additionally, our value proposition in the strongly growing health and nutrition market has been confirmed with strong sales and earnings growth. This success underscores our commitment to delivering value to our customers and stakeholders. Turning to the challenges we face. Raw material and freight prices were volatile over 2024. While we've seen some relaxation in input prices such as sugar, on the other side, freight and energy costs remain unpredictable in the near term. However, we anticipate an improvement in overall input costs in 2025, which should provide some relief. We're also, obviously, closely monitoring the potential impact posed by tariffs on goods into the U.S. Health and sustainability continue to be at the forefront of our strategy. The trend towards clean labels and natural preservatives is accelerating, outpacing the overall food market growth. The proliferation of GLP-1s, the increased scrutiny on ultra-processed foods and heightened regulation in both the European and the U.S. ingredients space could create increased demand for natural and healthful food ingredients. Furthermore, our sustainable omega-3 solutions offer structural growth, driven by higher adoption in aquaculture and the supply-constrained long-term outlook for fish oil. So we're really well positioned to capitalize on these trends and drive sustainable growth. Before I turn things over to Peter to present our financial performance in 2024, I'd like really to emphasize that we are confident in our strategic direction and in our ability to continue delivering strong performance in 2025. Peter, the floor is yours.

Thank you, Olivier, and good morning all. In 2024, our sales increased by 1.9% compared to 2023. This growth includes an overall growth rate of 2.2%. Currency impacts, particularly due to the depreciation of the Japanese yen and Brazilian real, slightly countered the sales growth, while the U.S. dollar remained flat year-over-year at $1.08 per euro. Our Health & Nutrition segment drove our organic sales growth with an impressive 18.5% increase. In the Functional Ingredients & Solutions segment, we saw positive volume/mix growth, although this was offset by price declines following input cost relaxation. Turning now to our adjusted EBITDA, we achieved a remarkable growth of 24.8% year-over-year, with 23.3% of this growth being organic. The key contributor to this strong performance was our Health & Nutrition segment, which benefited from robust volume growth, as well as favorable pricing. On the other hand, our Functional Ingredients & Solutions segment experienced a slight negative impact. It's important to note that our EBITDA was affected by some phasing of costs [ this ] Q4, as earlier indicated, including delayed transport cost increases from midyear, maintenance expenses, as well as variable compensation. Looking at our profit and loss from continued operation, our depreciation and amortization increased year-over-year. This is primarily due to the completion of our ERP implementation and several capital expenditure projects. Moving on to adjustments, these have been mainly driven by the restructuring program, which resulted in a reduction of approximately 180 FTEs compared to the end of 2023. It's important to note that the adjustments in 2023 were influenced by the reversal of an impairment of our algae fermentation assets in the Nutrition business. Regarding financial income and expense, we've observed a decrease compared to last year. This is attributed to the divestment of our emulsifier business, as well as some non-cash foreign exchange items. In terms of our joint venture, the results have been negative. Although we achieved a positive EBITDA of EUR 12 million, this was offset by depreciation, as well as interest paid to shareholders and tax obligations. Our effective tax rate stands at 26.6%, which aligns with the jurisdictions in which we operate. Finally, our results after tax have seen a positive impact of 6.5%. Looking at the Functional Ingredients & Solutions business, for the full year, we experienced a positive volume/mix growth of 3.3%, and we achieved 3.4% in Q4. This growth was primarily driven by our food business, particularly in bakery, meat and dairy markets, as well as key products and market adjacencies. Additionally, we observed growth in lactic acid volumes to the joint venture, driven by increased PLA demand. Moving on to our Biomedical segment, this segment was down compared to last year, primarily driven by weaker demand in agrochemicals and softness in the semiconductor market. Regarding pricing, we faced a negative impact of 4.9% for the full year and 4.1% for Q4, following the relaxation of input costs. Our EBITDA margin for the full year stood at 8.8% with Q4 at 7%. The adjusted EBITDA includes the absorption of the stranded cost from the emulsifier divestments, which impacted margins by approximately 200 basis points. Compared to Q3, the Q4 margin was softer as expected due to seasonality and the phasing of expenses, including the mentioned temporary freight costs, maintenance costs and variable compensation. Looking ahead to 2025, we see continued positive growth and margin improvement as of Q1 as we fully compensate for the stranded costs. We are implementing a series of initiatives to achieve that, as earlier communicated, including process efficiency, complexity reduction, procurement saving, further in-sourcing, as well as savings from the lactic acid plant in Thailand. Moving on to Health & Nutrition and starting with our organic sales growth. We achieved an impressive 18.5% for the full year, with Q4 contributing 8.8%. This growth was driven by a strong performance in our Nutrition business, particularly in the aquaculture and pet food markets. Our volume/mix growth for the full year was 13.9%, with Q4 showing a modest increase of 0.2% due to strong phasing effects in Q3. The substantial growth was primarily due to robust demand for our algae fermentation DHA products, which support both aquaculture as well as pet nutrition markets. In the Pharma business, we experienced volume/mix growth, although this was partly offset by reduced sales prices. Despite this, we continue to see positive momentum in this segment. Our Biomedical Polymers for the year remained flat with slight sales degrowth of 1%. However, we anticipate sales growth in 2025, driven by business development, mainly in drug delivery. Moving on to our EBITDA margin, we achieved a full year margin of 29.9%. We've maintained high EBITDA margins consistently throughout the year. The increase compared to last year is attributed to a combination of increased operational leverage, strain optimization, as well as a favorable product mix. In summary, our Health & Nutrition segment has demonstrated strong performance with double-digit volume and mix growth, sustainably high EBITDA margins, and positive momentum across our key businesses. We remain confident in our ability to continue this growth trajectory into 2025 and beyond. Moving now to the performance of the TotalEnergies Corbion joint venture, the JV achieved an organic sales growth of 13.2% for the full year, with Q4 contributing 7.1%. This growth was driven by recovery in volumes. However, the business faced significant pricing headwinds, which partially offset their volume growth. Despite these challenges, the robust long-term drivers for the PAA market remain intact. Moving on to the EBITDA margin, the joint venture achieved a full year margin of 8.7% with Q4 being at 2.1%. The margin contraction versus last year was primarily driven by negative pricing dynamics and commoditization in certain applications, which impacted regional and product mix. It's important to note that we anticipate high-single-digit EBITDA margin for 2025. I'm pleased to report that we have achieved our seventh consecutive quarter of positive free cash flow. This positive free cash flow generation is a testament of our EBITDA development and disciplined approach to capital expenditures. We've continued to invest in our key priorities, while carefully managing our overall capital expenditure levels. In 2024, we spent around EUR 80 million, and we anticipate maintaining this level of investment for 2025 as well through our CapEx discipline in both maintenance and expansion CapEx. Our free cash flow in 2024 has been partly impacted by other working capital factors. These include the phasing of customer rebates, the monetization of VAT receivables in Brazil and variable compensation. While we've made progress in reducing our operating working capital, it has not yet reached our target levels. This has been partly driven by ongoing challenges in the Red Sea region and an increase in inventory in anticipation of the potential harbor strike in the U.S., which ultimately did not materialize. Looking ahead, we plan to further reduce our working capital in 2025, and we're confident that our strategic initiatives and disciplined financial management will enable us to achieve this goal. In summary, our continued positive free cash flow generation, disciplined CapEx management and strategic investments position us well for future growth. Our dividend policy is designed to be progressive with the ambition to annually pay out a stable to gradually increasing absolute dividend. This year, following our positive net results and strong free cash flow development, we are proposing a 5% increase in the regular dividend, bringing it to EUR 64 (sic) [ EUR 0.64 ] per share. This proposal reflects our commitment to delivering consistent and growing returns for our shareholders. The proposal is subject to approval at the Annual General Meeting, which is planned for May 15. If approved, the ex-dividend date will be May 16 with the record date set at May 19, and then cash dividends will be payable on May 27. In summary, our proposed dividend increase underscores our confidence in the company's financial health and our dedication to providing value to our shareholders. We believe this approach aligns with our long-term strategic goals and support our ambition to maintain a progressive dividend policy. For now, a bit on ESG accomplishments and ambitions, starting with revenue contribution to Sustainable Development Goals. We've seen a notable increase in 2024. In 2024, 74% of our revenue contributed to SDGs 2, 3 and 12, which was up from 2023. This improvement is partly due to the divestment of our emulsifier business, which did not align with our sustainability goals related to preventing food waste, health, circular economy and biodiversity. Our commitment to the life cycle assessment has also been strengthened. In 2024, 92% of our products were covered by LCA compared to 79% in 2023. This comprehensive assessment ensures that we are continuously improving the environmental impacts of our products. Our Scope 3 CO2 emissions increased in 2024 compared to 2023, but are still down from the 2021 levels. The increase relates to higher inputs and supplier mix. We're [ proudly ] to have received high ratings from CDP, recognizing our implementation of best practices in climate change and a gold score from EcoVadis for our leadership in sustainability, both achieved in 2024. And now back to you, Olivier, for the outlook.

Yes. Thank you, Peter. So I'm excited to share our ambitions for 2025, which are in line with our previously shared objectives. These targets reflect our commitment to driving growth, enhancing profitability and delivering value to our shareholders. So first, let's discuss our organic sales growth. We are targeting a volume/mix growth between 2% and 6%. This growth will be driven by our continued focus on expanding our market presence and leveraging our strong product portfolio. Moving on to our organic adjusted EBITDA growth, we're aiming for an impressive growth rate of over 25% from our continued operations. This target underscores our confidence in our ability to optimize operations, improve efficiencies and capitalize on market opportunities, and this is in line with the guidance shared previously at the Capital Market Day. Our capital expenditures for 2025 is projected to be between EUR 80 million and EUR 90 million, and this investment will support our maintenance and growth initiatives, primarily including capacity expansions for algae fermentation, the Biomedical Polymers business, and also some product in-sourcing. In terms of free cash flow, we are targeting a figure of over EUR 85 million, excluding divestments and acquisitions. So this positive cash flow will enable us to reinvest in our business, pursue strategic initiatives and return value to our shareholders. Finally, we anticipate a covenant net debt to covenant EBITDA ratio of approx. 1.6x by the end of the year. This target reflects our commitment to maintaining a strong balance sheet. So we are confident in our strategies and our ability to achieve these ambitious goals, and we really look forward to share our progress with you throughout the year. Now, Peter and I are happy to take your questions.

[Operator Instructions] Our first call this morning comes from Setu Sharda of Barclays Bank.

I have 3 questions. The first one is on the Health & Nutrition volumes. These are flat in Q4, contrary to the expected high-single-digit growth expectation you guided in Q3. So what factors are contributing to this slowdown? And additionally, how has the Q1 started for Health & Nutrition? And in terms of my second question, despite the volume growth in Functional Ingredients & Solutions, margins have declined sharply. So how significant is the impact of fixed cost phasing in that decline? And what is your outlook on the margin development for the next year? Can you share some insight on this? And the third one is on your cost-saving programs like you announced during the CMD, along with the recovery of stranded costs from the emulsifier deal. So in terms of progress, how much of the absolute EBITDA growth of EUR 35 million this year is attributed to the savings? And additionally, what is the expected contribution from these savings in FY '25?

Thank you, Setu, for the 3 questions, and let me start answering them one by one. So first, Health & Nutrition, you're right that for this business unit, we guided double-digit growth for the full year. That's what we also delivered. If you look to Q3, Q4, there is really a phasing of order impact in that one, as we indicated, I think, in the Q3 call as well. So if you look to the combination of H2, it's perfectly in line with our strategic ambition with some phasing. If you look to the opening into Q1 of this year, actually, that's in line with the commitments which we did provide with the outlook. So from that perspective, see Q4 really as a phasing and not a kind of starting of decline. Your second is on margins in Functional Ingredients & Solutions. And there are a couple of things to note, which we also indicated in the Q3 call because -- therefore, it's not unexpected. So if you compare Q3 to Q4, there is always a seasonality impact, meaning that the absolute sales level is lower in Q4. And if you look on variable margins, it's roughly at the same level. And then, it's indeed, as you said, impacted by some phasing of fixed costs, including inventory movement, maintenance and variable compensation. If you look margins going forward, then we're on the right trajectory, and that's also reflected in the comment Olivier made on the outlook. And we see that margin uptick already happening earlier in the year. Now, if you then look on your question on the fixed cost savings and the stranded costs, a bit of color on that. And all these costs are really included in the guidances which we provided both for 2024, as well as for 2025. So a key part of the EUR 35 million of fixed cost has been driven by the redundancy of 180 people. And you clearly can see in the FTE development, a decline from year-end 2023 to year-end 2024. So the decrease is roughly the amount I just told. And then, on top of that, we divested the Emulsifiers. So therefore, you see an even bigger reduction in [ January ]. The other significant item was the closure of Peoria or the mothballing of Peoria, which we did by end of Q1, early Q2. And also, as indicated, this reduction of FTEs have been done by the -- starting the end of Q1 and then phased during, I would say, Q2 and a bit of Q3. The project articulated related to the stranded costs will have an effect as of Q1 next year. I hope that gives some color, Setu.

Okay. Very good. Our next question comes from Robert Jan Vos from ABN AMRO - ODDO BHF.

I have a few. To start with Functional Ingredients & Solutions, pricing remained quite negative throughout the year, a very small improvement in Q4, but still materially negative. Earlier, you said that has also to do with the easing of input costs. But what is your view on pricing for this unit in 2025? Because if I recall correctly, you also said probably at half year or Q3, I don't remember that, that going forward, you will focus more on your pricing towards your customers in order to improve the profitability. And a related question indeed is, year-on- year, you reported an EBITDA decline, modest, to 8.8%. Why are you still confident that you can achieve mid-teens? And what is the time for achieving that? Can you remind us? My second question is on -- and that's more positive, it's on Health & Nutrition, the EBITDA profitability, one notch shy of 30% in 2024. Taking into consideration the further plans for pet nutrition and also human nutrition for omega-3, is it fair to assume that there could be further upside in this margin? Or are there other factors to take into consideration and maybe be a bit more cautious there? And my last question is on the PLA joint venture. Why do you expect a high-single-digit EBITDA margin following the Q4 margin of just above 2%? What's the background of that expectation? And related also, why describe this business as long-term attractive following the recent steep trend towards commoditization that we are seeing? So those are my questions.

Thanks, Robert Jan. And [ I'll suggest ] to answer the FIS pricing and the PLA, and Peter will take on the H&M as well. So I think you're fully right. If you look at the trajectory of pricing in '24, indeed, we've had this price erosion basically related to input costs. What has been very important, of course, is the last pricing round. This happens usually for a big chunk of the business in the course of Q4 for 2025. And we see, of course, less erosion. We've been also even going for price increase in some markets. So what you will see in the course of '25 is a lot less erosion in pricing actually on the FIS part. Obviously, we are scrutinizing, as we've said earlier, any potential tariffs impact that might happen and occur, but we are preparing for that. So to that stage, we still have, again, some pricing round to be done for Q2 and for H2. So there is also some flexibility to react in the course of the year on pricing movements on the FIS direction. At the same time, on the margin, we have indeed this plan to really also compensate for the stranded cost, as Peter alluded to, which is primarily impacting the FIS division. So the compensation of the so-called stranded costs that we committed to will really favorably impact also the margin recovery into -- for the FIS BU. This is where the impact is going to be visible. So the initiatives we mentioned in the Q3 results related to not only pricing, but also procurement initiatives, but also product portfolio simplification, SKU reductions, as well as some operational efficiencies related to the Thai plant ramping up and the -- also in-sourcing initiatives that we've put in motion will really contribute to the margin recovery into FIS towards the mid-teen. Now, I'm not telling we're going to achieve the mid-teen in '25. So maybe I'll jump to the PLA JV, and then we're going to come back on the Health & Nutrition. I think one of the way we see and why do we see margin getting better than the Q4 one, which was really low, is that, yes, the plant is filling up. So we are seeing operational leverage in the plant because you might remember the entire market, and ours as well, dropped by almost 50% back into mid-'22. And now, we start to see and rebuild volume recovery. And we see that translated as operational leverage into the plant on our cost. That's one thing that is important. The second element is that, yes, the joint venture is also benefiting to some extent from lower input costs related primarily to sugar price. So as you can expect, it's also favorably impacting the joint venture. However, we mentioned that also in Peter's presentation, the PLA prices do remain depressed. So now, when we say the fundamentals do remain intact, if you look at the drivers, we also discussed previously that most of the growth today is happening across Asia and particularly China. And that is something we see continuing in '25. Obviously, there is upcoming new regulation in China that we are expecting in the course of the year to really come official to even strengthen the usage of PLA in some categories on the Chinese market, which is a very big market. So this is something where basically most of the signals so far are positive on the volume recovery of the PLA market. The big question remains on pricing. So Peter, maybe you take over the H&M question.

Yes. So you're right, Robert Jan, that if you look to Health & Nutrition, a great success in terms of EBITDA margin with almost 30% and also quite consistently throughout the different quarters. You're right that we are going to these nice attractive markets and see some growth areas in there. I would be conservative putting any numbers higher than 30% on that one. So if you look to the EBITDA delivery into next year, that's more, as Olivier alluded regarding FIS, than it's a step-up in margin in the Health & Nutrition part of the business.

That's clear. I'm just wondering, Peter, why you advise to be conservative? Are there other factors that could have an impact? Because I understood that margins on human nutrition products can be significantly higher than the margins that you currently realize on the portfolio.

Yes. So 2 things on that. The one is margins in kind of dollar per kilo, definitely; margins in percentage, also higher from that perspective. What you will -- or what you might see at some moment in time is, if you invest in additional capacity, you sometimes need some operators here and there. So do I anticipate a nice impact on that one? Yes. Will it be less is no, but I would be cautious.

Also, next question comes from Wim Hoste from KBC Securities.

Yes. I could hear you a bit pretty well. A couple of questions from my side. Can you talk a little bit on the outlook of the biochemicals part, [ agro markets, semi markets ], how do you see that evolving in '25? And then also, can you provide a bit more granularity on the status of the product adjacencies in food, dairy stabilizers, et cetera? How much are they contributing to revenue in '24? And how much growth you're still seeing in '25 and beyond for those products? Those were my questions.

Yes. Thank you, Wim. So I will take that. So, on the biochem, it's quite many applications. Of course, you mentioned agrochemicals and semiconductors. These are 2 big ones, but there are also some businesses in green solvents, in HPCs and so on, so very different dynamic, but a couple of things. Starting with semiconductors, this has been indeed a downcycle category for now quite a long period because we are used to downcycle of 12-month, 15-month max. Now we are almost 18 months to 2 years in a downcycle there, but it has stabilized. So we've seen in the last part of '24, really some good stabilization. And if we look to our forecast for H1, we don't see any further also decline. So there are some early signals now, which make things greener than what we've seen last year in the semiconductor. Obviously, when you look at some of the announcements from the giant players in that space, and thinking about the Samsung of this world, you could see that it's really uneven according to some geographies as well, but no further decline into that space. Agrochemical is of a different nature. Agrochemical, basically, we are facing also a lot of negative regulation moves into this segment. And these are really not a sector we are prioritizing anymore. So we do not expect any rebounds or making any major difference. And also, this is a space where we are not investing either in terms of resource, new products or capabilities. Now back to FIS and the product adjacencies, we mentioned some initiatives around natural antioxidant, mold inhibitors. We have all the enzyme technologies around dough conditioning as well in there. So we came into, let's say, the total food roughly last year to approx. 10% of our sales into these initiatives, so -- which were, a lot of them, we started from scratch a few years ago. So I have to say that now we have confirmation on some of these product lines that it's time really to potentially accelerate, and this is primarily around what we call the food ferments and the mold inhibitors where we see the biggest size of the price there. And we are also looking whether we can in-source some of the products that we've been also promoting, developing in functional systems in the case of dairy stabilizers, as dairy is becoming now a new emerging category for us, de-risking what we do in meat and bakery. So these are really, I think, enabling us new area and pocket of growth going forward. So basically, on these 5 adjacencies, we are just moving on, on the current growth trajectory that we've seen in the last couple of years. So hopefully, it helps to answer your question, Wim.

Yes, it does.

Okay. Our next question this morning comes from Sebastian Bray from Berenberg.

I would have 2, please. Can I just ask about why Corbion is staying in PLA at all? Because the explanation given at the moment is, well, maybe Chinese regulation comes to the rescue, but it feels like this business has a problem and one that could get worse when Cargill, PTTC bring on new capacity in the late -- this year. What stops the company turning around and tomorrow putting a press release out saying we are exploring options to exit this JV? Why is it still an attractive business to be in? My second question is on the underlying volume growth in the Food segment. How has this actually developed if we exclude mix over the last 3 or 4 years? Has there been any volume development? And my third one is just on the outlook as you see it for the biochemicals area, so the health, semiconductors, and so on, in '25. It all looks pretty positive, but any color on that is helpful.

Yes. Thank you, Sebastian. So I will answer your PLA and the biochem, and Peter will take the FIS [ underlying growth ]. So no, it's a relevant question. If you remember, a couple of years ago, we've asked ourselves and we had a strategic review of that -- on that business. Obviously, it was at a time the market was heavily depressed. So the only thing I can tell now at that stage is that, as you know, we are coming to the end of the current strategic cycle on Advance 2025 by the end of this year. So Sebastian, are you still there? Can you still hear us?

Yes, indeed. I'm still here.

Okay. Yes. Sorry, apologies for that, so technical issues. So yes, I was thinking about -- so saying about PLA, actually, on this side, as I said, we are ending the strategic period. So obviously, we are getting into a new strategic exercise as from H2, and we are planning to come back to you by year-end, where obviously, PLA will be part -- as any other pieces of our portfolio, part of the review. So now, it's a bit premature to make any statement on that. We will, of course, work a lot over the coming months on our portfolio to again come back to you by Q4 this year, yes. So more to come on that front. On the biochemical outlook, I think, again, this is a part where we do not necessarily see a huge pocket of growth coming up from our portfolio. So again, in there, there are very sizable important piece of business that we have like this green solvent to the semiconductors. But on the other industries, we are small players. These are not necessarily industries we are prioritized or we intend to prioritize going further. So I would say where we're going to make really -- and we are looking to make a difference is in our food ingredients space or natural preservatives. This is where we are strongly committed to invest for growth and into our Health & Nutrition also BU. But this is where the priorities are today. The rest, obviously, we manage very efficiently. We manage it for cash, but that's a bit the trajectory we are taking.

That's helpful.

Let me pick up your question, Sebastian, what you had on volume/mix development in FIS over the last year or so. If you look over the last year, and let's pick 2020 like the early start of our Advance strategy, then the volume/mix, which we achieved, is indeed a combination of both volume as well as mix. So it's not one negative and the other significantly positive. It's really driving by 2 [ factors ].

That's helpful. Could I just quickly follow up on with one on CapEx? The number is down on what was guided in 2024. Where has the EUR 30 million cut roughly come from? And can you make any comments on how you'd expect working capital to perform in '25? It looks like it was pretty good in '24.

Yes. So if you look on the CapEx one, it's a combination of both in maintenance, as well as expansion. So what we have not done is reduce activities in expansion, but we put quite some disciplined and rigorous process in that. So the reduction is basically driven by both of these elements. And as Olivier alluded to, we anticipate the same level also in 2025. If you look in other -- in working capital and then split a bit the operating working capital part and the other working capital part, in terms of operating working capital, I anticipate a further reduction in percentage of sales. If you look to operating -- sorry, other working capital, that has been impacted by some phasing, I would say. So, that one would revert a bit into 2025.

Our next question comes from Fernand de Boer from Degroof Petercam.

Yes. I can hear you, but I think that I missed most of the call. Since Robert Jan's questions, I hardly heard anything, so no answers at all. So I don't know. I heard the question of Sebastian, but also didn't hear the answer. So -- but fine, I'm not sure how you're going to solve that, a problem that we didn't get [ the information ]. In the meantime, EUR 85 million, and I look at your leverage guidance for '25 for the 1.6x, and you say, okay, and your EBITDA guidance of plus 25%, so that means an EBITDA of at least, let's say, roughly EUR 220 million, then I end up with net debt of around EUR 350 million, which is covenant net debt, which is similar to what is now. So then, the question is, where is all those free cash flow going to? Because that's -- so, that's my first question. And I'm not sure, but did you pay the taxes for the -- on the gain you had from the emulsifier disposal already?

Yes. Let me answer them one by one. So the tax on the emulsifier piece, we did pay, I think, even in Q3. So that's fully paid and nothing outstanding from that perspective. If you look -- and happy to do it online, but if you look to the EBITDA contribution and then the working capital and the free cash flow, you end up with the positive free cash flow of EUR 85 million. Then you should come to the guidance of roughly 1.6x in terms of covenant net debt to EBITDA.

But is my calculation correct that your net debt is then expected to land at around EUR 350 million?

And the only 2 factors after free cash flow which can impact debt is, in financing free cash flow is this IFRS leases of roughly EUR 15 million. And there is the last outstanding [indiscernible] payment, which is also in there. That can be the only other factor.

How did you call that last one, [indiscernible]?

Yes, the [indiscernible] payment. So if you remember from the TerraVia acquisition, we do pay -- there is an earn-out mechanism, and the last payment is into 2025. And that's also in the kind of financing cash flow line. And otherwise, happy to help, Fernand, on this one.

Yes. Okay. Very good. Yes. And the other question I had...

Yes. We are going to find a way, either we publish it or we do it via webcast, but there -- we need to see how we can help.

So I think that-- because I also had a question on the H&N growth in Q4 and going forward, but I think that's it.

I have another question in the queue. This is from Alexander Sloane at Barclays. Alex, I hope you can hear me. All right. Currently, I have no callers in the Q&A queue. [Operator Instructions] All right. There seems to be no further questions. Thank you all for tuning in. We'll make the replay available with audio if many participants did not hear. This concludes our conference call this morning. Thank you all for your attendance and questions, and we look forward to having discussions in person on our upcoming road shows and conferences in the next weeks. Please note that we will report out our Q1 2025 results on April 23, and we will speak with you all then at the latest. Operator, you may end the call.

That does conclude our conference for today. Thank you for participating. You now may all disconnect. Have a nice day.