DSM-Firmenich AG (DSFIR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to DSM's conference call on the full year results of 2019. [Operator Instructions] Now I would like to turn the call over to Mr. Huizing. Please go ahead.

Thank you, operator. Ladies and gentlemen, good morning, and welcome to this conference call on DSM's full year 2019 results, which we published earlier this morning. I'm joined today by our 3 Managing Board members, being Feike Sijbesma, our outgoing CEO; and the 2 incoming CEOs, Geraldine Matchett and Dimitri de Vreeze, who, as you know, assume their position as co-CEOs on the 15th of February. Geraldine will give a short introduction, as usual, after which we will open the line for questions. As always, I need to caution you that today's conference call may contain forward-looking statements. In that regard, I would like to direct you to the disclaimers about forward-looking statements as published in the press release. And with that, I hand over to Geraldine.

Thank you, Dave. Good morning, ladies and gentlemen. It's my pleasure to welcome you to this call on DSM's full year results 2019. I will provide a few comments on the key slides of our investor presentation that we published this morning together with our press release, and then we'll open the line for the Q&A session. Before starting, I have to point out that our full year 2019 results are reported against a set of prior year figures that included a significant additional benefit from the exceptional supply disruption in some key vitamins that we clearly communicated all of throughout 2018 as the temporary vitamin effect. In order to provide as much transparency as possible, we continue to show this separately, calculating growth against 2018 total results including this special event as well as the comparison excluding this event. Of course, from the perspective of monitoring the progress of our business, the comparison to prior year's underlying business is the only meaningful one. For this reason, I -- in the remainder of this introduction, I will compare the 2019 results versus the underlying business as estimated and reported in 2018. One more comment on comparisons. Please note that we adopted the new IFRS 16 standard on lease accounting as per its effective date on the 1st of January, 2019, while our 2018 figures are not restated. You can find the full information on this on Page 25 of the press release. This said, let's start with the financial highlights on Page 2. We are pleased to report a good year 2019 despite the challenging macroeconomic environment. We achieved a high single-digit adjusted EBITDA growth of 10%, which includes a 3% IFRS 16 benefit, which is in line with our Strategy 2021 targets. Nutrition delivered a good performance with an adjusted EBITDA up 12%, including 3% IFRS 16 benefit. This was driven by solid performance from animal nutrition despite the African swine fever headwind, while human nutrition was softer and a strong performance in Personal Care and Food Specialties. Materials demonstrated again the relative earnings resilience of its specialty portfolio against weak market conditions in some of our end markets. We also delivered a very strong adjusted net operating free cash flow, up 47%, including a 10% benefit from IFRS 16. And finally, I'm pleased to report that we continued to step up our sustainability performance in line with our ambitions and our purpose-led organization. Now before commenting on our outlook 2020, let me first comment on the fourth quarter results and some of the individual business performance. And for that, let's move to Page 3. Q4 was a solid quarter, especially in light of the soft trading conditions in some of our markets. Adjusted EBITDA was up 7%, or 3% excluding IFRS 16. Nutrition saw a minus 1% organic sales development, with 2% organic sales growth in animal nutrition, despite the African swine fever, and a minus 6% organic sales in human nutrition due to softer markets in food & beverage and Early Life Nutrition. Personal Care and Food Specialties was strong with a 7% organic sales growth. Nutrition adjusted EBITDA increased 9%, or 6% when excluding IFRS 16. Materials top line remains soft with a minus 11% organic sales development mainly due to volumes down 9%, owing to ongoing weak market conditions in some of the end markets, together with some further destocking in Q4. Highlighting the relative resilience of the Materials specialty portfolio, however, the adjusted EBITDA for the fourth quarter was down only 1%, despite the weak top line, which includes a 2% benefit from IFRS 16. Let's move now to Page 8 for a few more comments on this year's performance in Nutrition. Overall, Nutrition delivered a good top line growth of 5% in 2019, with an organic growth of 2% driven by higher volumes and an overall stable price mix effect. This was achieved through a solid top line growth in animal nutrition as well as strong results in Personal Care and Food Specialty, while human nutrition showed some softness. In Q4, Nutrition reported a slightly negative organic growth with volumes up 1% and prices down 2%. As already mentioned, Nutrition realized a 12% adjusted EBITDA growth in the year, including 3% from IFRS 16. In Q4, Nutrition realized a 9% adjusted EBITDA growth, including 3% from IFRS 16. The adjusted EBITDA margin remained strong at 20.7%, including 50 basis points from IFRS 16 versus 19.5% in prior year. Before commenting more on the performance of each of our Nutrition businesses, let me first cover briefly the launch of Fit for Growth. For this, let's move to Page 9. As indicated here, in order to increase our agility in driving above-market profitable growth, Nutrition launched this week a Fit for Growth program. By simplifying our operating model and further improving business steering, this program aims to improve how we serve our customers. Nutrition will introduce 2 business lines in animal nutrition and human nutrition with differentiated go-to-market approaches. At the same time as enhancing our ability to drive growth, this new setup will lead to around 350 redundancies and create a more efficient organization, better able to respond to the evolving customer needs. Now moving to the performance of animal nutrition, let's go to Page 10. Overall, business conditions for animal nutrition were strong across all species and geographies in 2019, except for the swine business in Asia, where we saw a continued bigger impact of the African swine fever than originally estimated. The disease has spread across China and into Southeast Asia, which accounts for more than half of the global pork production, and the culling measures have affected in the range of 35% to 50% of pork production in region. Whilst the global demand for animal protein is gradually leading to increased production of other species and in other regions, the scale of this disease has led to short-term disruptions with reduced feed demand for swine in Asia, impacting our growth. In the fourth quarter, business conditions were unchanged, and animal nutrition realized a 2% organic growth, reflecting an estimated impact of the African swine fever of about 3%, same as in Q3. Having said that, we do believe that the measures taken to bring back pork production to the necessary levels in Asia as well as the new measures to increase biosecurity will eventually be beneficial for DSM. Let's now move to human nutrition on Page 11. Human nutrition reported a marginally negative organic growth for the year with a 2% increase in volume being offset by lower prices. Softer macroeconomic conditions started to weigh on demand in food & beverage partway through the year, whilst Early Life Nutrition, which showed a strong performance in first 3 quarters of the year, also had a softer fourth quarter. The other segments, such as dietary supplements, performed well and i-Health sales remained particularly strong. The minus 3% price effect was driven by mix and lower prices in our Chinese vitamin C. As always, please remember that due to our large portfolio of ingredients, changes in top line due to price do not necessarily equate to a change in our margins as you have seen with our margins being up in the year. As for the other nutrition activities, Food Specialties and Personal Care reported a very good growth. In Food Specialties, we enjoyed a good 4% organic growth in cultures and food enzymes. And in hydrocolloids, we recorded a 12% growth from the consolidation of Andre Pectin. Finally, Personal Care showed a very strong growth of 9% in sun and skin care. In Q4, human nutrition reported minus 6% organic growth driven by lower prices resulting from the softer Early Life Nutrition and the lower prices in our Chinese vitamin C. Moving on to Materials businesses, let's go to Page 13. In 2019, our Materials businesses were confronted with weak macroeconomic conditions affecting some end markets. Engineering Plastics saw persistent softness in China and in the global automotive segment, while business conditions started to stabilize in resins towards the end of the year. Dyneema continued to enjoy strong business conditions in 2019, especially in personal protection. These market developments resulted in our volumes being down 5% for the year, while the negative price development of minus 3% fully reflects lower input costs. The adjusted EBITDA closed at EUR 509 million in 2019, only 1% down versus prior year, including 1% from IFRS 16, demonstrating the strong resilience of our specialty portfolio in weaker market conditions. The strong performance of the higher-margin businesses, especially Dyneema, combined with our good margin management and proactive cost control, delivered an adjusted EBITDA margin of 18.5%, up versus 17.6% in prior year, including 30 basis points from IFRS 16. In the fourth quarter, we didn't see a material change in business conditions, although Functional Materials saw its sales of specialty coatings decline driven by a temporary slowdown in fiber optic cable sales awaiting the anticipated infrastructure investments in 5G networks. Now let me turn to Page 17 for some quick comments on our cash generation and working capital. Page 17. The adjusted net operating free cash flow increased by 47% to EUR 801 million, which includes 10% from IFRS 16, well above our strategic target of an average 10% increase year-over-year. Total working capital as a percentage of sales was up by 200 basis points to 26.3%, resulting from the combination of the negative effect of acquisitions, IFRS 16 and foreign exchange movements. Inventories, which are, over time, the key drivers of our desired reduction in working capital, declined towards the year-end when excluding the impact of acquisitions and FX. This said, we are continuing to actively push our programs, aimed at improving our overall working capital performance. Net debt closed at EUR 1.144 billion, up from EUR 113 million at the end of 2018, mainly resulting from our EUR 1 billion share buyback program, of which we executed EUR 600 million in 2019 as well as the adoption of IFRS 16 and acquisitions. Our return on capital employed, our ROCE, for our underlying business was down 130 basis points to 12%, including 30 basis points from IFRS 16, mostly driven by the impact of acquisitions. And now let's turn to Page 19 for some final comments on the outlook. For 2020, we expect to continue making good financial and strategic process, in line -- progress, sorry, in line with our Strategy 2021 plan. Our businesses are well positioned to capitalize on strong, long-term fundamental growth drivers related to the world's most pressing challenges, and we expect our large innovation programs to begin to contribute in 2020 and further expand during 2021 and beyond. Clearly, there exists in the near term some macroeconomic uncertainty, which is having an effect on trading conditions in some parts of our business. This has served to sharpen our focus on looking at our own strength in order to offset these impacts through initiatives aimed at driving growth, costs and operational excellence across the company. Finally, as is the case for many companies, we are responding to the coronavirus situation as best as we can, but the impact remains very difficult to estimate. As a result, our outlook for 2020 reads as follows: DSM expects to deliver a mid-single-digit increase in adjusted EBITDA for 2020 compared to prior year, together with an improvement in adjusted net operating free cash flow, in line with our Strategy 2021 targets. This outlook is driven by DSM's on-growth initiatives, innovation programs and self-help actions and does not assume any significant improvement in current macroeconomic environment. With regards to any potential impact of the coronavirus, DSM will monitor the situation closely. And with this, I would like to open the floor for questions. Operator?

[Operator Instructions] Our first question will be from Mr. Andrew Stott from UBS.

First one was on the new program, the restructuring of Nutrition. Just wondering if you could share a bit more on what the simplification of the sales operation really involves and the motivation behind that. Also, when you're talking in the press release about greater responsibility for the P&L at the management level, I assume -- is that new KPIs? Or maybe just some more detail on how that greater responsibility happens. And then staying with the same theme, the 350 redundancies, can you put a cost-saving number on that, please? So that's one question, but there's 3 bits to it. And then the second question is around the phasing of growth in 2020. So I get that you guided for a mid-single-digit EBITDA growth. But is it right to assume a slow start to the year, and so it's very much a back-end loaded growth?

Okay. Let me handle these ones to get us started here. Although, of course, I have Dimitri and Feike here as well with us. So -- okay. So let me say a few words first on Fit for Growth, which is I'm glad you bring it up because it's something that is -- that we are very actively working on as we speak. So basically, as we say in the press release, what we are wanting to do is respond to the fact that, as you can see, the markets out there for every company, growth is a challenge, and you just need to be sharper in the way that you go to customers. And for that, instead of having a generic way of approaching the market, we want to be a little more specific. Now what we mean by that is that we have, both in human nutrition and animal nutrition, businesses that require more or less attention when it comes to making a sale. And that is what we are going to be more specific about. So we will have teams that are more into selling the innovation-related products, which require more solution thinking, where relationships are really valued over time and where you capture not only growth but good value by doing that. And some other customers are a little more, let's say, transactional maybe, to describe it that way, and we're very much -- you focus on speed and efficiency rather than maybe investing in relationships. And that is really the purpose for this. So it's a very good thing. And that given how much we have grown in Nutrition over the years that there comes a point where you sort of think about your organizational setup and make sure that your go-to-market is sharp and differentiated depending on your customer base. So that's really the spirit behind this. So it's very much about driving growth. Now when doing this, it does result in some redundancies because of the way that we are reorganizing ourselves, and we're estimating about 350, which will, of course, at some point, have a financial benefit there. But this will take a bit of time because it's -- yes, it takes a moment for this to come through the organization, and we're talking a few tens of million, but we will have to see exactly how it pans out. The main driver here truly is growth behind the purpose of this Fit for Growth program. As for our outlook, the phasing, I think it's important to realize that we are really looking here at the current business conditions. So as we stated, we are not expecting -- or we're not relying on a significant change in the conditions, and therefore, there is no reason for this to be heavily weighted towards the second half of the year. Having said that, I do want to caveat that clearly with the coronavirus now, we have some increased uncertainty on the first quarter, and we will have to see how that pans out.

Next question will be from Mr. Thomas Wrigglesworth from Citi.

A couple of questions from me. Firstly, can we talk a little bit about the mix effects in the Nutrition business? Obviously, we're seeing good margins, certainly better than I was anticipating in this business, despite the headwinds. So -- and specifically, in human, where, I think, historically, we've seen the human business probably having higher margins than maybe Nutrition on average. So could you help understand -- is it -- the headwinds are low-margin products that are falling out? Or is there kind of underlying growth there that's driving an improved margin performance? And then secondly, on Avansya, you say the product is in test today. Could you help us understand a little bit more about the phase gates for that product and the time line when you might be able to announce either success or signing with the customer?

Okay. Dimitri, do you want to take the first one, human nutrition?

Yes. Let me take the mix effect question on human nutrition. Overall, I think before we dive into the human nutrition, it's also fair to say that we also have our Food Specialty business and our Personal Care business and our hydrocolloids business, which we don't report under the human nutrition piece. But let me zoom in on the human nutrition part because that was specifically your question. I think what we see, we have 4 segments there, dietary supplements and i-Health. And like Geraldine already said in her introduction, we see good growth there as well as in pharma. What we see in -- 2 specific events that impact our growth rate in human nutrition. One is the sluggish market for food & beverage, which basically we see predominantly in North America. It's also fair to say that with the current vitamin C price context, we have been less aggressive in sales to these large global customers for food & bev. Some good news within that context, I think the vitamin C prices has dropped up -- have dropped and can only come up as from the level that we see today. The second part is our Early Life Nutrition business. I think that's a high-margin business for us. There, we've seen a very good sales in the first 3 quarters, with a soft quarter 4. And it had to do with the fact that our global customers saw lower demand from China, which is an important part of the ELN, Early Life Nutrition, demand due to lower birth rates and some Chinese competitors who gained share. This was supported by government initiatives. This slowdown was not reflected in the first 3 quarters by our global customers, and therefore, they had to destock for quarter 4 as our customers needed to balance that reduction with lower demand. So all in all, I think for human nutrition, the growth drivers are in place, but we have these 2 special events which we've highlighted for quarter 4.

Thank you, Dimitri. And Feike, do you want to talk to Avansya?

Yes. I think Avansya is doing fine. We started up the factory. We have the collaboration and joint venture with Cargill, and we both targeted different customers in our sales force. So we look more to the flavor companies we go directly towards, and they go to the big food & beverage companies they anyway serve. So it's a very combined good sales force. We are now -- having started up the factory, we are in the testing mode for further, bigger volumes with our bigger customers, and that needs to work out in the course of this year. The taste profile of the product is very good. Factory runs, we can deliver the product. I think the product has much more stability in terms of supply chain than the natural stevia, which comes from plant extract and is more costly and more irregular on its supply side. So I think we are very well positioned here. And yes, the operation is there, the product is there with the right taste profile and the right cost profile. And so I have good hopes with further development in the course of this year. And need to see, I cannot -- by far, 2 potential biggest customers, I don't mention them by name, but all those big food & beverage companies are potential customers, and I don't want to speculate when they really start buying big volumes, but it looks good.

Our next question is from Mr. Mutlu Gundogan from ABN AMRO.

Well, first of all, congratulations on the move, Geraldine and Dimitri. And to you, Feike, all the best, and good to see that you will remain connected to DSM. I had a few questions. On Nutrition, I think that Thomas' question wasn't really answered, in my opinion, so maybe I'll have a swing at that as well. Can you explain to us how the EBITDA margin at Nutrition was so -- was strong despite human being so weak. I mean, usually, one would expect that human carries a higher margin, so there will be a significant negative mix effect. So if you can explain what offset that? That is the first question. And then secondly, on the share buyback. The EUR 1 billion is still there. Can you tell us what is withholding you of announcing another share buyback?

Okay. So let me start maybe with the share buyback because, as you know, the capital allocation has not changed in our policy, which is we want to predominantly deploy our capital on our organic growth. Secondly, we apply it to our dividend, and you saw the step-up in our dividend, which is the proposal went to the AGM, which is in line with our ambitions. And as you know, our dividend policy is stable, preferably rising. So that's a very strong commitment there from a capital allocation. Thirdly, M&A. And the share buyback is really the fourth element. Now when we announced the first EUR 1 billion, it's on the back of our confidence of the cash generation of the company, while retaining, of course, some financial flexibility to do some M&A. So at this point, we think that our focus should be on driving growth, driving performance of our businesses, complete the EUR 1 billion. So you can expect the EUR 400 million of share buyback to take us through about the middle of the year. And in that period, of course, we continue to look into potential M&A activities, primarily in our Nutrition part of the company. Now having said that, we never say never. It is the capital allocation policy, and we can always see later on whether further share buybacks would make sense. So that's really the position on share buyback. And in terms of the mix...

Yes, indeed, it's a little bit -- the questions are, I mean, did you saw some softness in the HNH business in Q4? Obviously, yes. Not so much in the ANH business, which, I think, against also the African swine flu, it did very well, to be honest, helping, of course, the overall margin also in the total Nutrition, where we give the margin for the total Nutrition business. And you're right, we, especially on the pricing side, lose there where it is not the most profitable product on vitamin C. I agree with you there. So that hurt us also on the EBITDA, a little bit less, although you see it in the organic growth, especially in HNH. And remind you that another part of the Nutrition business in i-Health, dietary supplements, Personal Care and Food Specialties, like with the hydrocolloids and pharma, like Dimitri was saying, in all those, we have been growing very well. And therefore, you see, indeed, a little bit weaker volume, you see -- overall. And you see a price decline, which you don't see it so much in our margins, as you correctly indicated. Yes, this vitamin C effect was likely -- I guess, you will see that also in the first and second quarter a little bit in our price movements because in the comp to last year -- although I admit, in terms of margins, it's not our highest-margin product. So in terms of the margins, you don't see that so much. And in the second half year, like Dimitri is saying, it's stuttering out, so in the second half year, it cannot go lower, you don't see that in the comp anymore. Where, indeed, the other parts of human nutrition in i-Health, dietary supplements, Personal Care, Food Specialties, hydrocolloids, pharma are going very well, and those are pretty high-margin products as well. So that explains what you see in the organic growth versus what you see in the margins, and therefore, also the EBITDA.

Our next question is from Mr. Matthew Yates, Bank of America.

The first question, just a clarification, please, around the buyback. When I look at your press releases, I think the latest one said you've done EUR 960 million. Obviously, within that is part of, I guess, exact comp and scrip dividend. Can you just disaggregate that for me in terms of the EUR 1 billion commitment versus what's been done as of mid-Feb? And then the second question is around the leadership change. I just wondered if you could share some insights, if I can -- maybe discussions at the Board in terms of a co-CEO idea is maybe not totally unheard of, but it is unusual. Did you look at certain case studies or examples where you thought that structure had performed well?

Okay. Thanks, Matthew.

And then Geraldine should start, and I can think how much I will reveal out of the supervisory Board meeting. But you start with share buyback.

Yes, Matthew, the share buyback, I don't have the split here with me, but we can provide you with that. But let me explain the dynamics of how it works. So what we do is, firstly, by the way, the execution of the share buyback is given out to the banks that are executing. And in order to have efficient transactions, we combine the share buyback for the EUR 1 billion program with the share buyback for the stock options and for the stock dividend. So you saw the same actually in 2019, which is that in those months around the incentive plans and the stock dividends, to get better hedging, we want to do it at about the same time. And therefore the shares, if you want a share as a share, but we allocate it to different buckets in order to de-risk the price. So for example, with the stock dividend, you want to be buying that at about the same time as the ratio is calculated. So that's really what's happening in there. The rest is very much a little bit at arm's length from us. And if we have a look at the volumes that are going through, we think that we will be completing the EUR 400 million in Q2, and we'll have to see whether it's mid or end of Q2. But it does maybe give me a chance to mention a clarification on the average number of shares in circulation because we did get that question a couple of times. It seems to stay high for the year 2019, but that is because, because of this dynamic, the EUR 600 million of buyback came late in the year because we prioritized getting the options and the stock dividend buybacks done first. And that's why you see that the average number of shares in circulation remained at 175 million when in fact the year-end position is lower, at 172.4 million. And you will, therefore, see the full benefit, from an EPS point of view, in 2020, starting from that lower position. So it's all the treasury mechanics that go behind these things, but it's fully in line with what we could have expected to see happen. So that's on the buyback. Now Feike, the leadership change.

We are listening.

Thank you for asking the question. And I need to be careful. You never know whether my Chairman also reads the transcript or calls in, and I should not speak on behalf of our Supervisory Board nor our Chairman. But I think we did not -- of course, we looked -- or they looked also to examples out there, and it's not the most common model. I totally agree. And there are examples out there. But this was not the point. The point was to look more to ourselves. And Geraldine and Dimitri and myself formed the Managing Board over the last 5 years. We worked very close together in building the company, putting the strategy out there, also the strategy we currently have, the 2021 strategy. So we are totally on board. We have built it together, and we want to continue. Continuation of the track record in terms of growth, in terms of innovation, in terms of managing costs, it was the most important element for the Supervisory Board. Can we continue that track and the track record which we had over the recent years? And then 2 elements played a role. If I look to the 2 persons, and sorry for saying something about both of them, but they are complementary to each other. So the fit between Geraldine and Dimitri was felt by me and also by our Board as very, very strong. And then secondly, maybe tell something about our company that a co-CEO-ship could maybe not fit in every company, but I think in terms of the culture and the nature of DSM, it fits with our company. And let me remind you, and it's also not that common in companies, we exist for 120 years, and we always had the succession internally. Not that we don't hire people from the outside world. We do at all kinds of levels, but at the highest level, the CEO, it came always from the internal. And this time, we played for -- the Supervisory Board also a very important role. Can we continue on the track record? And I'm talking about the 3 elements they mentioned the most: organic growth; and innovation, the big tickets; cost control and being -- add it to acquisitions when they are value creative. And they've made the choice. And I need to say that the transition is going very, very smooth. I don't want to call it relaxed, but you could almost call it a relaxed transition. In macroeconomic environment, of course, which we discussed, which is not that easy, but they are fully focused on the business and innovation and delivery. So I would feel comfortable. And we see the same reaction internally. People say, "Hey, their track record, which we have built, we need to continue." And that was, I think, their considerations.

Our next question is from Ms. Alexandra Thrum from Morgan Stanley.

Just a question -- a couple of clarification on your FY '20 guidance for mid-single-digit growth. At this point, given that you've seen some slowing top line in Q4, could you please talk through how much of that growth is driven by further price mix versus underlying volume? And also what contribution you're expecting from the acquisitions you've already done in that guidance? And then just further clarification on the impact from the coronavirus. I see that you're obviously monitoring the situation quite closely, but what impact have you seen so far? And could you remind us what percentage of sales are in China -- of your sales in China? And also how much of your manufacturing footprint is in China? Does this also mean that the guidance assumes no impact from the coronavirus?

Sure, let me cover these. So firstly, on the outlook. I think as was mentioned briefly earlier on the call, this outlook does include, if anything, the fact that the vitamin C low prices, which we perceive to be very much at the trough level at this point for all producers, will continue to be a headwind, certainly for the first half of the year versus comp, and that is factored in. Now the rest, I'm not going to break down in all the volume price mix. We have far too complicated a portfolio to go into that. But I think it's fair to highlight that, that vitamin C dynamic will continue in Q1 and Q2, and I think we need to bear that in mind. Now in terms of what is factored in? Yes, we do have our CSK acquisition that we were very pleased to close just before the year-end. It's not a very big acquisition, but we are happy to have it now part of the DSM family, and that is included in the outlook with all sorts of other elements which go in there. So we have some positives like this and things like vitamin C that will continue to be a challenge. And as a result, we will be focusing very much on our own self-help actions. So this is something that we have been doing now for many quarters, clearly, across the company, but with quite a strong focus, I have to say, on our Materials businesses that have been permanently keeping themselves very much in check in terms of their efficiency and their cost base. Now with Fit for Growth, we want to make sure that we can grow our Nutrition business very well, but it does also have an efficiency element to it, which will be gradually contributing within 2020. So that's really the different pieces in the outlook that we have. Now to your specific question: Does the outlook include coronavirus? At this point, it is so difficult to assess what the impact is going to be that I have to say that, no, it probably does not reflect that. It came a little bit late, and also, it's such a moving dynamic. Now let me give you a little bit of a feel for China. So we have around about EUR 1 billion of sales, both by origin and by destination, in China. Broadly speaking, it's about half Nutrition and half Materials, so quite a mix. We have 28 production locations in China, 5,000 colleagues there. And let's be clear, our focus has been on taking care of our colleagues, first and foremost. That was, by far, our priority. Now our most important sites are up and running. We have a few that are still down. The one that is in the Hubei province was down anyway. That was our vitamin E site in our joint venture partnership with Nenter, but that was already down for refurbishments. But it does mean that those -- the reopening of the site will probably somewhat delayed because no activity is taking place on the site there. So that's broadly the picture on China, as you should see it. And we will -- obviously, we have a team which is monitoring this every single day, particularly also because of the logistics. So it's one thing, our footprint, but it is also what is happening to our customers and what's happening to our supply chain and what's happening in the logistics flows. So I have to say, quite a complex situation to manage, and we'll see how it impacts us.

Our next question is from Mr. Wim Hoste with KBC Securities.