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

Hello, and welcome to the Deutsche Bank Depositary Receipts Virtual Investor Conference, dbVIC. My name is Zafar Aziz from the Deutsche Bank team. I'm pleased to announce that our next presentation will be from DSM-Firmenich from Switzerland. Before I introduce our speaker, a few points to note. [Operator Instructions] Also, all today's presentations will be recorded and can be accessed via the Deutsche Bank website, adr.db.com. At this point, I'm very pleased to welcome Anna Morello, Investor Relations Manager of DSM-Firmenich, which trades on the Euronext Amsterdam Stock Exchange under the symbol DSFIR and in the U.S. on the OTCQX as DSFIY. Over to you, Anna.

Hi, everyone, and welcome. I'm Anna Morello, I'm part of the Investor Relations team here at DSM-Firmenich. Good afternoon from beautiful Maastricht. Today, I will take you through a brief presentation about DSM-Firmenich, and I will be, of course, at your disposal for any follow-up questions you might have. Let's start by taking a look at what we do here at DSM-Firmenich. Together with our customers, we develop innovative solutions in nutrition, health and beauty. We are a leading consumer ingredient company that delivers the essential that is desirable and sustainable to make products that consumers love and use every day. We are pretty proud of our rich history and by combining DSM-Firmenich, we created like a powerhouse in innovation. We strive to make a positive impact with our unparalleled rich science and tech platforms. Indeed, as we came together back in 2023, we created a EUR 12 billion sales company and EUR 2 billion EBITDA reality, which is present in over 60 countries. Our 30,000 talented and passionate colleagues share the same purpose and commitment to science and sustainability. We bring progress to life across 4 business units. In Perfumery & Beauty, we deliver well-being by uniting delight and care to create more well-being for our consumers. In Taste, Texture & Health, we make food accessible, healthier and, of course, delicious. In Health, Nutrition & Care, we strive to make our work a little bit healthier at every stage of life by helping to shift the focus from curing to preventive. And finally, in Animal Nutrition & Health, we help the food systems transformation, making animal farming efficient and sustainable. So in the end, we help create products that consumers really want. But how do we do that? As I said before, we have combined the power of DSM and Firmenich, and we have created a science powerhouse. We start our products with science and innovations. We have 2,000 scientists, 40 creation centers, 80 labs and 15 R&D hubs across the world. This is the power of an annual spend of EUR 700 million across 4 main platforms. In fact, we invest to develop in biotech, in microbiome science, in receptor biology and also in data science and AI. But beyond science, we also have the ability to co-create with our customers. And we have developed a unique business model in order to do so and be successful together with them. Not only we have the best ingredient toolbox to play around with, but we also have a fantastic pool of creators, our flavorists and perfumers, who are working together with our application specialists to ever expand our consumer insights and customer intimacy, of course, that's backed by science and sustainability. The combination of the broadest palette of ingredients in the industry and our talent, our creativity in creating new flavors, new fragrances, new products and application solutions for our customers, help us to win more and more like briefs together with our customers. Ultimately delivering what our consumers ultimately want. But not only we are powered like by science and our unique business models. It is also very close to our heart and probably one of the immediate connection points that we had in between like DSM-Firmenich, like our commitment to sustainability. Our commitment to sustainability is also reflected in our targets in our remuneration prospects and exemplified also our partnerships. We strive to make the world a little bit better like for people all across our value chain and also we strive to achieve, overperform around our climate targets. A little bit more maybe about our business units in detail. Perfumery & Beauty is a EUR 3.7 billion revenue company, with sales well spread across EMEA, Americas and Asia, delivering organic sales growth between 5% and 6% annually, with 5,000 more employees that are committed to uniting delight and care for our customers and consumers and reaching an adjusted EBITDA margin of 22% to 24%. What do we deliver across our 3 business units of perfumery fragrance ingredients and Beauty & Care is a various combination of scent fragrances, own fragrances, beauty fragrances, together with our beauty actives in the Beauty & Care segment. In perfumery, we deliver fragrance solutions for our customers. In fragrance Ingredients, we have more than EUR 1 billion revenues, thanks to our ever evolving portfolio of synthetics, naturals and also biotech driven ingredients, really unparalleled across the industry. And lately, in Beauty & Care, which is where we see the true power of the combination between DSM-Firmenich, we have started to expand our solutions for customers by combining the active from the DSM legacy, together with the fragrance exposition and beauty industry understanding and intimacy of the Firmenich businesses. So in our Beauty & Care business, we already have seen the first successes of our integration and our synergy potential. We have innovation across these 3 business lines, whether in perfumery in Beauty & Care or in fragrance ingredients, we are constantly developing products that are used in everyday life. Whether it is to enhance your well-being through a new fragrance or to protect yourself with new suncare applications, et cetera, et cetera. In Taste, Texture & Health, we strive to create more delicious, more nutritious and healthier food that is better for the planet. Again, here, we have a EUR 3 billion revenue business with a profile of 6 to 8 organic sales growth, more than 6,000 employees, which delivers a 21% to 23% adjusted EBITDA margin annually. Our presence is global, and we have customers across the big multinationals, but also like local and regionally oriented. And we create solutions across different end markets, thanks to our broad portfolio of net flavors, but also nutrients, enzymes and cultures. We are present in various end markets spanning from beverages, dairy, baked goods, savory, we have a small presence in pet and we are developing like our plant-based solutions for like the customers to create delicious products for consumers, such as the following examples. In energy drinks we have created not only a flavorful energy drink solution for our customers, but also enhanced with essential health benefits to maintain high health, like in muscle function. In plant-based, we have created an array of solutions, whether to replicate chicken or salmon or other meat solutions in a plant-base form. Moving on to Health, Nutrition & Care. In this business, the focus is preventative health versus curing. So in Health Nutrition & Care, which is like a EUR 2 billion or so revenue business with 4 to 6 organic sales growth, like profile or 21%, 23% adjusted EBITDA margin delivered annually, our 4,000-plus colleagues across the world make like -- strive to make the world a better place by offering vitamins, biotic -- postbiotics solutions, HMOs for early life nutrition, but also nutraceuticals, enzymes and carotenes. All these type products are offered across various end markets, spanning from early life nutrition, dietary supplements like pharma and so on. We also have a small business that is like a B2C business, which gives us various insights about what consumer wants in terms of their own health and this business is high health. Across all these solutions, we have very tailored propositions for specific health concerns that people might have. But we are also at the forefront of sustainability by, for instance, offering a vegan as Omega 3 algal oil that are better for the environment, better for our immunity system and better for our brain as well. Not only, but we are at the forefront of early life nutrition by offering HMOs, the novel ingredient in early life nutrition which is like the -- being marketed starting from this year. And finally, our Animal Nutrition & Health business. In Animal Nutrition & Health, we tried to change the global food systems. It's a EUR 3 billion revenue business with organic sales growth profile of 6% and an adjusted EBITDA margin of 15%. Our 7,000 colleagues worldwide are offering vitamins, premix solutions, but also performance solutions across all sorts of products that are essential, that are desirable and they are sustainable for the planet. Starting from vitamins and premixes. Again also eubiotics and mycotoxin like recycle management innovations for farmers. We have a long history of innovating in the animal farming space by expanding our offerings from eubiotics and other performance solutions to sustain an efficient but sustainable growth like in animal farming. And we are further expanding our winnings and knowledge in the space by powering precision services like data collection and analysis to optimize even further the operations at the animal farming side. Of course, as of 2024, at the beginning of 2024, we announced our intention to separate A&H, as it doesn't fit the profile of DSM-Firmenich anymore and we would like to see this business thrive in other ends that are better suited to continue the excellent growth of this business. We are completing what we call the preparation phase in 2024. This phase will be followed by the execution phase of separation and determining which better options like the exit of business in H1 2025. The transaction will be completed in the second half of 2025. So by 2026 or the end of 2025, DSM-Firmenich will be a company of EUR 10 billion net sales with 3 focused business units in nutrition, health and beauty targeting 6% to 7% organic sales growth annually and with an average EBITDA margin of above 22%. Our new DSM-Firmenich company will be competing in the right space to bring progress to life and we are confident in achieving our midterm targets, thanks to our unique business model, our talented and passionate colleagues supported and inspired by science and sustainability. With this, I'd like to thank the Deutsche Bank team for this opportunity, of course, and I remind you that we are listed on the Euronext AMS Stock Exchange and we have a new sponsor Level 1 program in the United States with Deutsche Bank, and we are trading on OTCQX best markets. If you have any questions, you can reach us at investors dsm-firmenich.com. Thank you very much.