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

Good morning, and welcome to Corbion's Second Quarter and First Half 2026 Earnings Conference Call. Before we begin, please note that today's discussion will include forward-looking statements based on current expectations and assumptions. These statements involve 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 undertake any obligation to update these statements made in this call or contained in today's press release and presentation. For more details on our assumptions and estimates, please refer to our annual reports. This is Alex Sokolowski, Head of IR. And with me on the call this morning are Olivier Rigaud, Chief Executive Officer; and Peter Kazius, Chief Financial Officer. We published our press release and presentation this morning, and both are available on our website. Olivier will start with the business highlights. Peter will then take you through the financial performance, and Olivier will conclude with the outlook before we open the call for questions. Now I would like to hand the call over to Olivier to begin with business performance.

Thank you, Alex, and good morning, everyone, and welcome to our earnings call. So here are the headlines. Organic sales grew 2.1% in the first half. And the important point is the acceleration in Q2, up 8.5% to EUR 337.4 million. Volume and mix were positive at 4%, while pricing was minus 1.9%, mainly reflecting contract dynamics and prior year comparables. Adjusted EBITDA was EUR 88.8 million with Q2 at EUR 51 million. In Health & Nutrition, both Nutrition and Biomaterials delivered double-digit volume mix growth. And in Functional Ingredients & Solutions, we saw positive volume mix and sequential margin recovery. Free cash flow was negative in H1, but in line with seasonal patterns, and we are maintaining our free cash flow guidance while refining the EBITDA margin outlook. So Q2 was a step change in momentum and H2 has multiple levers already starting to be visible in Q3. Moving to the next slide. Starting with Functional Ingredients & Solutions. This segment showed exactly the kind of acceleration we wanted to see. H1 sales grew 3.6% and Q2 sales grew 8.4%, supported by better volumes and resilient demand. The markets stayed steady, and our natural preservation platform continues to win, especially as customers look for cleaner label, regulation-ready solutions. We also saw volume growth across all 3 businesses there and margin improved 250 basis points sequentially versus Q1. There is still input cost pressure, including effects from the situation in the Middle East, but the team is moving decisively on pricing and on cost efficiencies action. So here, food wins are real, momentum is positive and margin recovery has begun. Moving now to Health & Nutrition. Health & Nutrition is where the second half opportunity becomes very clear. Nutrition and Biomaterials both delivered double-digit volume mix growth and Q2 improved strongly as customer phasing did normalize. In Nutrition, tight omega-3 supply and resilient aquaculture demand are creating a better pricing environment already starting and visible as from Q3. We are also strengthening the platform through debottlenecking and yield gains at our factory in Brazil as well as progressing on our astaxanthin development milestones and a new DHA-rich algae patent. The Pharma segment was affected by phasing, but overall, the broader contracts and pipeline support a stronger second half there. The message here is straightforward. Supply tightness is not just a challenge for our algae omega-3 platform, it is a catalyst. And in the first half, Health & Nutrition delivered a small organic sales decline, but the second quarter showed a strong recovery. The volume mix was positive in the first half, but very strong in Q2, and we expect this to continue in Q3. Now moving to the fish oil dynamics. Let me take a step back now and explain what -- and why we are excited about the longer-term outlook for our algae omega-3 business. First, Peru, which supplies roughly 20% of the world's fishmeal and fish oil has significantly reduced fishing quotas. At the same time, the risk of another El Nino event continued really to threaten the stocks and disrupt supply. And the result is there, exactly what economics tells us should happen. Supply tightens, the prices are really moving up. Fishmeal and fish oil prices have been moving more than 60% year-on-year. But this is really bigger than a cyclical price spike. The demand for omega-3 continue to grow across aquaculture, but also penetration and human health, while wild catch fish oil supply simply cannot keep pace there. So the industry is running into a structural constraint, and this is where algae omega-3 change the equation. Algae omega-3 is not dependent on fishing quota. It's not depending on anchovy population, and it is not dependent on ocean temperatures. It provides our customers with a reliable, scalable and sustainable source of omega-3 exactly when security of supply is becoming more valuable than ever. In short, every quota reduction, every climate disruption, every tightening in fish oil supply reinforces the strategic value of Corbion's algae omega-3s. We believe the market has moved from asking whether algae omega-3 is a viable alternative to now recognizing that it is an increasingly necessary solution. So the future of omega-3 there cannot be built solely on what comes out of the oceans. It will increasingly be built on what we can sustainably grow and that positions Corbion exceptionally well. And with that, I would like to hand over to Peter to take you through the financial performance.

Thank you, Olivier, and good morning, everyone. I will now take you through the financial performance for the first half and the second quarter of 2026. I will start with the sales and adjusted EBITDA development at group level, then move to the profit and loss statement, the performance of the business units and finally, to working capital and free cash flow before handing back to Olivier. In the first half of 2026, Corbion sales were EUR 631.1 million compared with EUR 645.6 million in H1 2025. On a reported basis, this represents a decline of minus 2.2%. On organic sales basis, sales increased with 2.1%. The organic sales growth was driven by -- both volume mix of plus 4%, partly offset by pricing of minus 1.9%. The pricing effect reflects lower prices towards the joint venture in Functional Ingredients & Solutions as well as lower sales prices at omega-3, where pricing dynamics are expected to significantly improve as from Q3. Currency had a negative impact of minus 4.3% of sales, largely driven by the depreciation of the U.S. dollar against the euro. The average U.S. dollar rate in H1 '26 was 1.17 versus a rate of 1.09 in H1 2025. In Q2, sales were EUR 337.4 million compared with EUR 315.9 million last year. Organic sales growth was plus 8.5%, driven by volume/mix growth of plus 10.7% and pricing of minus 2%. Turning to adjusted EBITDA. We delivered EUR 88.8 million in the first half compared with EUR 106.6 million last year. This represents a reported decline of minus 16.7% and an organic decline of minus 8%. The year-on-year organic EBITDA decline was driven by reduced pricing in Health & Nutrition and product mix effects in Functional Ingredients & Solutions. In Q2, adjusted EBITDA was EUR 51.0 million compared with EUR 52.5 million (sic) [ EUR 52.2 million ] last year. Important to note, on an organic basis, Q2 adjusted EBITDA grew by 4.2%. Also sequentially, we've seen an adjusted EBITDA margin increase of 220 basis points Q2 versus Q1. Looking further down the profit and loss statement. Operating profit was EUR 42.1 million in the first half of 2026 compared with EUR 63.5 million in H1 2025. Depreciation, amortization of our fixed assets amounted to EUR 42.9 million compared to EUR 42.5 million last year. This was broadly stable on a year-on-year basis. The currency benefits offset the higher depreciation related to the polylactic acid plant. Adjustments in the first half amounted to EUR 3.8 million in operating profit. This includes advisory costs linked to a Spanish tax claim, which I already mentioned in Q1, advisory costs related to the joint venture divestments as well as some severance payments. The benefits of the tax claim are also recognized as adjustments in the interest and tax line. The tax charge in H1 2026 was EUR 7.3 million. This resulted in an effective tax rate of 19.7% for the first half. The relatively low tax rate was caused by the tax received related to the Spanish claim. For the full year, I anticipate an effective tax rate between 23% and 25%. If we now look into Functional Ingredients & Solutions. Sales in Functional Ingredients & Solutions were EUR 492.7 million in the first half. In Q2, sales were EUR 256.7 million compared to EUR 240.5 million in Q2 2025. Our organic sales growth was 3.6% in H1 and 8.4% in the second quarter. This was driven by volume/mix growth of 4.2% in the first half and 8.7% in the second quarter. The positive volume development was supported by natural preservation in foods, biochemicals as well as lactic acid to PLA. In Biochemicals, we've seen strong sales, both in H1 as well as Q2. And the same is applicable for lactic acid to our joint venture. Growth in Foods came particularly from bakery, pet food and seafood end markets. Pricing was minus 0.6% in H1 and minus 0.3% in Q2. This was driven by the pass-through mechanism in lactic acid to PLA, where pricing was positive in the food area. The adjusted EBITDA in FIS was EUR 50.7 million in the first half. In Q2, adjusted EBITDA was EUR 29.4 million compared to EUR 28.1 million last year. The margin in H1 was 10.3% compared with 11.9% last year. But we have seen a nice improvement in Q2 versus Q1, where we have seen increase in margin step-up of 250 basis points, disciplined -- or driven by disciplined cost reduction as well as higher sales leading to better leverage on fixed costs. Moving to Health & Nutrition. Sales in Health & Nutrition were EUR 138.4 million in the first half. In Q2, sales were EUR 80.7 million compared with EUR 75.4 million in Q2 2025. Our organic sales declined in the first half, but increased in Q2 by 8.7%. The H1 decline was due to some phasing effect in Q1, not being fully compensated in Q2, but we see a clear momentum and anticipate to further grow significantly in Q3 and beyond. Volume/mix was positive, 2.8% in H1 and a very strong 16.9% in Q2. Nutrition and Biomaterials both delivered double-digit volume/mix growth in the first half. The Nutrition business continued to show strong fundamentals, supported by robust aquaculture demand, diversification into new aquaculture customers as well as traction in Human Nutrition. Biomaterials delivered double-digit volume mix growth across all end markets, particularly in Drug Delivery. Pharma was impacted negatively by some phasing at key customers in North and Latin America. If we look to EBITDA in Health & Nutrition, this was EUR 38.1 million in the first half. In Q2, we've seen an EBITDA of EUR 21.6 million compared with EUR 24.1 million last year. The H1 adjusted EBITDA margin was 27.5% compared with 32.1% last year. The year-on-year margin decline was due to product mix within the segment as well as pricing, which is anticipated to reverse as of Q3. Margins are expected to be around 30% for the full year, supported by price increases in H1 or in H2 compared to H1. Turning now to TotalEnergies Corbion joint venture, and these figures are shown on a 100% basis. Sales were EUR 79.1 million in the first half. In Q2, sales were EUR 42.3 million compared with EUR 30 million last year. Organic sales growth was 21.6% in H1 and plus 44% in Q2, supported by a strong demand of PLA plastics, particularly in Asia. The adjusted EBITDA margin was 7.5% in H1. The process to sell Corbion's interest in the joint venture continues as planned. We continue to work closely with prospective buyers, TotalEnergies and advisers. Moving to investments, working capital and free cash flow. Our CapEx program remains disciplined and focused on supporting growth. The CapEx investment in H1 were approximately EUR 27 million, consisting out of EUR 17 million in maintenance and EUR 10 million in expansion CapEx. Expansion CapEx are focused behind projects in food, biomaterials and nutrition. This CapEx level is broadly in line with prior year H1 level and remains consistent with our disciplined capital allocation framework. Operating working capital increased by EUR 37 million in the first half. This was mainly driven by accounts receivable, reflecting sales phasing. We've seen a strong improvement in our accounts receivable position in July. Important to note is that overdues remains stable. Our overall free cash flow was negative with EUR 4 million. This reflects normal seasonality, but this year was strongly impacted by the movement in accounts receivable following the timing of sales. We continue to expect significant stronger cash flow in the second half of the year, and we maintain our full year guidance of EUR 85 million to EUR 90 million. With that, I would like to hand over back to Olivier.

Thank you, Peter. Let me now turn to the outlook for the remainder of 2026. For the full year 2026, we maintain our organic sales growth outlook of 3% to 6%. We also maintain our free cash flow guidance of EUR 85 million to EUR 90 million, and this reflects our confidence in stronger cash generation in the second half, supported by EBITDA improvement, disciplined CapEx and working capital normalization. For adjusted EBITDA, we are refining our outlook to above 16% compared with the previous indication of around 17%. So while we are taking a prudent view on full year margin, the underlying momentum in the business is clearly building. We entered Q3 and H2 already with a stronger sales momentum, improving margins, positive free cash flow and multiple levers already taking effect, giving us real confidence that the second half will show a clear step-up in performance starting in Q3. With that, now let us move to Q&A.

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

So I've got 3 questions. My first question is on the FIS volumes. Like how much of the FIS volume acceleration was driven by lactic acid sales to PLA versus the core food and biochemical business? And also, has the PLA demand benefited from any temporary competitive advantage versus petrochemical plastics? And if so, should we view this as sustainable? My second question is on omega-3 pricing. Like on Nutrition, what pricing do you expect for H2 and FY '26, given the sharp move in fish oil market? And does the 30% Health & Nutrition margin outlook fully capture your current omega-3 pricing? Or is there upside if spot price persists? And my third question is regarding the margin guidance. Can you help bridge the move from 17% to 16% margin guidance, specifically like how much of the downgrade reflects Middle East-related energy, freight and raw material costs? And how much flexibility do you have to offset these costs through pricing and productivity?

Thank you, Setu. And I will answer the fish volume and the PLA question and Peter, the Health & Nutrition pricing and the margin guidance. So let me start with PLA. You've seen indeed the volume of the joint venture as well growing over 20% in H1 and 44% in Q2. What the joint venture has experienced there is really a benefit what's going on primarily in China. And this is really across the board. And of course, this is translating, as you know, the conversion ratio between, of course, lactic acid and PLA is 1.3 to 1.4x. So you need 30% to 40% more lactic acid to produce PLA. So this is driving volume of lactic to the JV substantially up. What we see happening in the market is really a big shift in terms of 3D printing, but what we mean by 3D printing is really the industrial move to 3D printing, not just the home printers there. So that's a very strong underlying trend that we've seen in China for a while. That is accelerating. And basically, we see this is not only happening for Corbion, but for the overall industrial players. Everybody is seeing the same momentum. So we believe this is a strong underlying sustainable growth now back on PLA. I just want to add a caveat to that. Although you might have seen we had official communication from the joint venture that is going for price increase on the second half. Price remained depressed on the first half of PLA at low level. So now we are really working on -- and the JV is working on restoring some pricing across the second half of the year. But we -- so don't see that as a one-off from the JV. We see that the growth pattern is remaining really strong also on the second half on our basically lactic acid order book through the joint venture until the end of December. Now Peter, the second question.

Yes. So Setu, thanks for the question. So the first one is on omega-3 pricing. If you look to it, we anticipate a significant price increase if you compare H2 this year versus H1 this year. That is reflected in the guidance, which I just gave of around 30% because currently, if you look to our H1 number, it's 27.5%. And that reflects also the contractual situation and where we currently see basically fish oil prices being, and this is mainly in the kind of shorter-term contracted part. So from a pricing perspective, I would say Q2, the lowest one if you look sequentially and then moving up. Is there upside in your -- is your question, look, this is really reflecting all the contracts and terms which we have. And the order book or the vast majority of the order book is fixed for the second half of the year. If you look to the refinement of our EBITDA margin from around 17% to more than 16%, then it's predominantly driven by the Middle East. I think you do recall the call which we had in Q1, where, of course, Middle East was already starting. And at that moment, we indicated an impact of up to EUR 10 million. But since that time, mainly sulfuric acid has even further increased. And now we face a kind of gross bill of EUR 15 million to EUR 20 million, which is partly mitigated by cost disciplined actions and pricing, but not fully. So that's the kind of prime reason.

Just one follow-up, like on the algae oil, how much of these contracts are already done? And how many will come for roll forward in H2?

I think so as we said in Q1, Setu, so 2/3 of our business on major contracts that were longer term were already contracted, and we will not see a massive positive price impact on this fiscal year. And as we've said, basically, most of these contracts are ending by December '26, and will be renewed in the month to come. So we are, I mean, basically entering now in a phase of renegotiation for the next years on this longer-term agreement for aquaculture. Then on the rest of our business, where we usually negotiate either on a 6-month or a full year base, which is our pet nutrition sales, our human nutrition and the noncontracted aqua business, where we have really open terms where we are going, and we have already increased prices substantially in H2. So -- but you have to distinguish the longer-term aquaculture contract that are still running until the end of December and will be renewed for '27 at higher prices, from the current open business in pet, in human and in non-Aqua, long-term contracted. So this is how you have to see it. But already, the pricing impact on the noncontracted business, including Pet Nutrition and Human is really substantial on H2.

Our next question this morning comes from Wim Hoste from KBC...

I would like to come back on the omega-3 contract negotiations, sorry. Can you maybe talk a little bit about expected pricing levels? I think in the past, you hinted at confidence of $4,000 to $5,000. Is that still valid assumptions? And also, what kind of duration are you going for? And are your customers willing to discuss? Is this again 2-, 3-year contracts? Or is it even longer term? If you can offer a little bit of granularity on those negotiations? And then a question also on the PLA divestment process. Can you also update here on expected timing and maybe indicate the interest that there is in this business given that yes, momentum of the business seems to accelerate somewhat in the 3D printing parts. So a bit of update on that would also be interesting.

Okay, Wim. So I will take the omega-3 and Peter, the PLA divestment. So on omega-3, so as we also disclosed in the past, the current running longer-term agreements that are running until the end of December '26 were between $4,000 and $5,000 as we disclosed earlier. Obviously, the spot market now is much higher than that. And on our spot customers, we have much higher prices than that. Now I do not speculate on the price coming from '27, but obviously, the aim now with this longer-term agreement is that we are planning to renew that in the course of the second half as negotiation are starting now to be implemented as from January '27. And we will look again at a longer-term agreement in the range of 2 to 3 years at higher pricing. Now I don't want to speculate ahead of any negotiation because the plan was always to start right now, actually, with this large account to prepare a negotiation that will probably be concluded in early Q4 this year for most of these contracts. So still the outcome is ahead of us, and we cannot comment more in detail on price level. But obviously, we are looking to, of course, improved pricing on this longer-term agreement. Now what you see on fish oil price is that indeed this 60% price increase and of course, will also depend on volume and the ability also to have security of supply on longer term because we see that indeed in terms of supply gap widening. We already know that the second fishing season in October has quite a reduced outlook because of El Nino. So the next big fishing season will be back in March, April next year, '27 when El Nino is expected to soften. But let's not speculate about what might happen in '27. What we know is that now we have favorable conditions to renegotiate our longer agreement now in the course of H2 for the next years. Peter on PLA?

Yes. No. Thanks, Wim, for the question. I will do it at a relatively high level, unfortunately, because we continue with the process. We work really closely with prospective buyers, TotalEnergies and our advisers. So there is process -- or there is progress in the process. We will share more news, I think, when it's applicable to share more news because I don't want to interfere in the divestment process.

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

Fernand de Boer from Degroof Petercam. On your guidance for the second half, you actually say full year for Health and then 30%. Quick and dirty, that means that in FIS, you have to go to around 13% in the second half. So could you give a little bit the idea of what is driving that? Because maybe it's better volumes, but certainly, if you look at the second quarter, despite the cost increase, you should also expect a little bit more leverage with the strong volume growth. So could you give a little bit idea on that one?

Yes. No, thanks, Fernand. You always calculate indeed rightly. So let's start with that. So if I say Health & Nutrition around 30%, actually, it will be mildly higher than 30% that we're expecting there. If you look in terms of Fish, you indeed see a strong recovery in Q3 versus the Q2. And if you look on a bit on average for the full year in Fish, I anticipate to be, let's say, around last year's level.

Our next call this morning comes from Sebastian Bray from Berenberg.

I have 2, please. The first is on outlook for '27 and raw material costs. You've been quite clear in saying long-term contracts in fish oil, they might be beneficial in '27, we wait and see. I'm curious about what sugar costs would do in '27, if they're still modestly deflationary or flat given current hedges and spot prices? And my second question is on the food business. The volume growth seems to have gotten better in Q2. Is this an underlying development? Or is there any phasing or other type of effect to be aware of there?

Yes. Thanks, Sebastian. On outlook, as we communicated that we are really -- if you think about sugar input costs, we are really very well covered for '27 at attractive pricing in sugar. And obviously, we are also monitoring constantly, of course, the current spot price versus the longer-term outlook. But when we know basically what are the floors for sugar producers in the regions where we do operate, we took decision to almost fully hedge our sugar for '27 and early even '28 at attractive price compared to the average we would pay in '26. So now there is still a lot of things that can come in the way if you think about all the sugar equilibrium, with bioethanol in Brazil and in India now and obviously, what would be the impact of El Nino on some crops around the globe as there are some concerns that sugar crop or other crop might be also impacted by El Nino, but we are very well covered. So on there, we feel confident and good. The other input costs we discussed, of course, related to the Middle East situation is sulfuric, where we do not necessarily expect the situation to get better in '27 as you know, this sulfuric acid is produced from sulfur out of oil refineries in the Middle East. And we, of course, do not have any visibility on whenever this conflict might end. So we are still, I mean, planning to have an inflated sulfuric acid cost across '27. That is affecting only our lactic business, excluding also our new plant in Thailand that is fortunately using a technology that doesn't need sulfuric acid, giving us competitive edge against our competitors. But we expect sulfuric to be still at elevated cost in '27. On food volume, as Peter explained, we see 2 different momentum. One is our indeed food preservatives, where we see, I mean, again, on some of these antimicrobials natural, still the demand is really strong and the reformulation to clean label is still really strong. And we have basically also some major wins in our North American market in our functional system business, driving also very nice volume upside, primarily with high protein following GLP-1 reformulation. This is driving very nice upside across H1, but also H2 this year for the reformulated products with high protein content. And this is driven not only functional system, but also preservation as we are moving also our mold inhibitors into these categories. So -- and that's primarily U.S. driven, volume growth in food.