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

Good morning. Thank you for joining today's call. I'm sitting here with Dimitri de Vreeze, our CEO; and Ralf Schmeitz, our CFO. We published this morning a press release with our 2024 full year results together with the presentation to investors, which you both can find on our website. You can also find the disclaimers about forward-looking statements. Following Dimitri's and Ralf's presentations, we will open the line for questions. Important to remind the sell-side analysts who want to ask questions have to register via the questioners link, which they can find on our website in the financial calendar. And with that, Dimitri, you can start.

Thank you. Thank you, Dave, and welcome to all 2024, but I would like to put that into perspective. And I think this slide you've seen before from all of us, and it is our journey slide. We started with the dream, we merged 2 iconic companies. All right. So we merged the companies and then we decided to focus to be a consumer-oriented company, finding a new owner for Animal Nutrition & Health, I'll come back to that in a minute. We also took the opportunity to tune in portfolio and look at the high-growth, high-margin segments and then have the accelerated, where we really are growing what we have, anchor what we do and deliver on our promises. And before we give you a bit of color, and I will ask Ralf to really join and give some color on the 2024 numbers, I would like to lead you through some of the elements and the components of that journey. Where are we on that journey? You can go to the next slide. These are a few elements, which you all have asked me and Ralf and Dave several, several times. And I just want to give you a bit of a progress track where we are on that journey. Those are elements in our journey, frequently asked by you, also share sometimes a bit of concern. I want to be very transparent on how we look at that. So we started with the dream and the merger and bringing the essential, the desirable and the sustainable together. I think we all got really the positive connotation that that is something what could add value. We started the execution of the merger in May 2023, and there were some concerns about mergers. How do you integrate it? And I think we made a deliberate choice to do that very focused on Taste, Texture & Health, and then take that along in a phased and a controlled way. Very happy to say that I think we've done that pretty smoothly, and we've landed the integration target also in our businesses. I'm very happy to see that these businesses took that very seriously and are delivering accordingly. Then after the whole merger part, we presented delivery of the synergies. Remember the EUR 350 million EBITDA, of which half were cost synergies and half from top line synergies. I hope you agree with me that we are delivering on the cost synergies. I think the last bit is in our 2025 outlook, where we deliver on the cost synergies nicely on track. Top line synergies are gaining momentum. Ralf will say a little bit more about it later, but we have a full pipeline of over EUR 300 million filled with top line synergies towards the EUR 500 million top line, which we've promised you with the bottom line of EUR 175 million. During that process, in the beginning of the process, we had our vitamin volatility. We've launched our transformation program to counteract that. We are full on track in delivering that. We delivered EUR 100 million last year, we will deliver another EUR 100 million in 2025. With the vitamin volatility at hand, we took the opportunity to accelerate the upgrade of portfolio discussion with tuning. As you have seen, we presented during the Capital Markets Day a little bit of view of the segments, and there were a few segments that we wanted to deprioritize. In the meantime, in '24, we have announced a deal with yeast extracts, with marine lipids, and we have capitalized on our Robertet stake. We still have left the agro intermediates, which is on track, although not fully green because we hoped we'd do a little bit earlier, but it's on track for delivery in 2025. And the aroma ingredients and the non-differentiated vitamins are in the perimeter of the ANH scope, where we have announced Tuesday, we will start the commercial transaction process. We've also announced last year, in February, divesting of Animal Nutrition & Health in line with the portfolio review. We have carved out Animal Nutrition & Health. It is separated from DSM-Firmenich. It is ready for the commercial transaction. This is done in '24. We are on track. That's also why we could announce that we will start the commercial transaction process next week. And we have, as announced on Tuesday, sold the stake in our Feed Enzyme Alliance for EUR 1.5 billion. So divesting ANH at the right value, I consider to be fully on track. Then there was a second concern you have shared with us quite from the beginning, so "Dimitri, how are you going to organize that people remain focused on the business, on the growth?" And I think I'm very happy to say to announce the 2024 full year results with an organic sales growth of 6%, a step-up in EBITDA with good cash to sales conversion with a cash generation of more than EUR 1.5 billion. And that we are also very confident on the outlook for 2025 with an outlook of at least EUR 2.4 billion. And we bring DSM-Firmenich in an area of more consumer customer-focused businesses. The 3 business units Perfumery & Beauty, Taste, Texture & Health and Health Nutrition & Care are really fueling growth with their innovation pipeline based on 2 trends. One is more attention for preventative health care. You know that 80% currently is spent on curing. That will move to more preventative health care. We're in the midst of that. We have the competence to capitalize on that. The trend for more healthier food. Everything we do, lower sugar, lower fat, lower salt is into healthier food. We have the competence to capitalize on that trend. And then last but not least, the focus on well-being. I mean the world today is at an enormous pace of change. People look for their well-being, their own identity, also the younger generation, and, I think, in our well-being, personal care and fragrance segments. A few of you also asked what is the impact on the ultra-processed food and GLP-1. We can spend a little bit more time on Q&A, but we do see that our customer is requiring more innovation in that field. And with our fantastic toolbox of ingredients, our fantastic creation centers with perfumers, flavorers and application specialists, we really see the innovation pipeline is ramping up quite a bit around those changes. So the whole context of market trends, I think we are uniquely positioned to take advantage of that. Strengthen leadership for people and planet. We are a company where sustainability is in the heart of what we do, not only for us but also because our customers require it. Therefore, we have set ambitious climate targets validated by SBTi, and we are working quite a bit on employee engagement because you can have a fantastic toolbox, a fantastic engine, but the people make that happen. And I'm very happy to say that throughout this whole journey, the employee engagement remained very high. The last test was 79%, where people were really engaged in what we are building, with safety as one of our foundation efforts. It is safety performance. We want to make sure that people work in a safe environment. And I'm super proud that for 2024, we made huge step-ups, and we have improved our safety performance quite a bit. With that context, with the integration well underway, with the engines brought together where we are bigger, smarter, tuned engine, we are very confident on the future. You've seen that in the cash flow generation, you've seen that in the outlook, coupled with a strong balance sheet, coupled with the deals we are making, we've decided to go for a share buyback of EUR 1 billion and that we also announced this morning. Then on M&A. I'm frequently being asked, "Dimitri, are you still considering big M&A? And is that not too early too soon." Let me make it very clear. We are on a journey to build a fantastic company and grow what we have. In 2025, we have no priority to do any big M&As. We will focus on what we have. We focus on the consumer part, the focused human part of our business, the 3 business units, Perfumery & Beauty, Health Nutrition & Care and Taste, Texture & Health. And we accelerate that core. We grow what we have, we anchor what we do and we deliver on our promises. And before I hand over to Ralf, maybe a bit of background on, I think, one of the deals, which we made on Tuesday, so to bring you fully up to speed with the sale of the stake in the Feed Enzyme Alliance, maybe the next slide. It's clearly that this is part of the ANH divestment process. This was a stake where we had an alliance with Novonesis. We've agreed to sell it for EUR 1.5 billion. It is about EUR 300 million of sales, which was originally reported in Performance Solutions. Remember, we had premix, we had vitamins, and we have Performance Solutions. The EUR 300 million fitted in that, and we got EUR 1.5 billion for it. Together with other tuning elements like marine lipids, yeast extracts and the Robertet stake, we have valorized around EUR 2 billion, and I think that is also an encouragement of the value of the businesses which we are deprioritizing. And with that, I'm going to hand over to my dear CFO, and as you've known, he has a peculiar interest, secret passion on numbers. And with that secret passion revealed, Ralf, on to you for 2024 full year results.

Thanks, Dimitri, and you always make me smile when you say I like the numbers, and I do, especially when they're good and easy to present in that sense. You already covered quite a few headlines, but I think it's important to dive a little deeper as well. I think here, you see a slide with what basically holds the key metric relevant for the performance. Overall, a very strong performance in 2024, an absolute step-up in EBITDA of well over the EUR 300 million, a strong organic growth and what is nice to also see not only that the EBITDA step-up, the absolute EBITDA step-up translates into improvement of margin, and I'll come to that in a second, nicely flows through into our EBIT, resulting in a significant step-up in the core ROCE. It's not on the page here, but that moved up to 7.6%, in line with our cost of capital, up almost 2.5% versus prior. And also the flow through into net profit where you see a step-up in the core earnings per share of over 50%. Dimitri alluded to a strong cash performance, well above our initial target. And we are maintaining a dividend of EUR 2.50 for the year and a EUR 1 billion share back (sic) [ buyback ], reflecting our confidence in earnings. Well, let's zoom a bit deeper, and let's start with the group on the next page. So on a full year basis, overall, 6% volume growth with the adjustment for FX and the carved out entities, both marine lipids and yeast extracts were deconsolidated in the fourth quarter, bringing the total growth to 4%, but a strong volume growth throughout the year, and reflecting not only in a significant step-up in the organic step-up in EBITDA, but there, we also see the overall improvement in the performance and the benefits from the synergies and the vitamin improvement program flowing through, driving an almost 20% step-up in EBITDA, fueled with -- further with the impact of the temporary vitamin effect, which clearly impacted Q4 positively in line with our guidance, but also offsetting a negative headwind from FX and divestments of over EUR 60 million in the year. When we look at the margin itself, overall, a very nice step-up for the full year. What is more encouraging and that's a consistency in the story that we've been sharing with you is the continued buildup of that margin throughout the year, starting at a level of 15% and growing that consistently every quarter with more than 1% to over 18% at the end of the year. Speaking of the end of the year, on the next page, a few comments around our Q4 for the group. Overall, you see the same growth, 7% organic growth in the quarter itself and a very significant step-up in EBITDA. We just topped EUR 600 million in Q4 with a very strong organic growth, reflecting the overall positive dynamic in all of the businesses and a step-up from the temporary vitamin effect. Also here, you see a continuation of the momentum in the different BUs reflected in the overall strong growth. I think overall, with these results, a very strong performance for the group for 2024. Strategic initiatives positioning us very well and setting ourselves up for yet another successful 2025, which is reflected in our outlook. But let's zoom in into the BUs. And on the next page, let's start with P&B. P&B had an excellent year in 2024. You can see that from the top left part on the slide, overall, a 9% growth in the year, fully volume-driven with an even stronger performance into double digits in Fragrance, with a very strong performance in Fine Fragrance and Consumer Fragrance. Also Consumer Ingredients saw a good growth throughout the year, very consistent. Beauty & Care had a strong 2024 as well, albeit a somewhat softer finish of the year, predominantly on the back of lower demand for our suncare products. Now that strong growth obviously translated into a very good step-up in EBITDA as well, overall, a 13% step-up in EBITDA and a consequential improvement in margin as well to well above 20%, 22% for the year. That's something that's in line with also the journey we envisaged, and we've seen that momentum also at the end of the year in our Perfumery & Beauty business, with an overall growth of around 5%. Again, here, a stronger performance in our Fragrance space, somewhat offset by a lower performance in Beauty & Care on the back of that weaker demand for suncare products. But overall, if you look at P&B, a fantastic year in 2024, and that is translating into a continued good start in 2025 with a good sales pickup in January. Moving on to our second business unit on the next page, Taste, Texture & Health. Yes, it almost sounds a repetitive story, but also here, a very, very strong performance, 9% volumes consistently in the first half and the second half. You see a somewhat negative impact from FX and divestment in the top chart as well, but a very strong growth. And both the taste and the ingredient division are contributing to that growth equally. And also here, you see a very nice flow-through in the organic EBITDA step-up. Also here, 13% to well above EUR 600 million, and also a continued margin improvement in the TTH business. The year ended at 19%, and with the divestment at the end of the year of the yeast extracts business, that will step up further in 2025. But keep in mind that we're still supplying Lesaffre with the product, whilst they go through the regulatory approvals before they take it over fully. I want to mention here that on the EBITDA step-up, the absolute step-up is very encouraging to see in TTH as well. And there's about a headwind of around EUR 10 million, EUR 15 million from FX and the divestment of the yeast extract business. Then moving on to Health, Nutrition & Care on the next page. Here is a story of 2 tales, and we've been also sharing that before that it's a story of recovery. And we're very pleased that the return to growth in Q3 continued into Q4. The performance in H2 is very encouraging while we go into 2025. Overall, a 6% volume increase in the second half. We've seen that same performance into the fourth quarter, and that translates also into a good step-up in EBITDA in HNC. If you look at it on an annual basis, an organic growth of about 5%, but when you adjust for that, we know the FX and the divestment of the marine lipids business, you see that the overall EBITDA is somewhat below prior year. Again, here, it's relevant to look at the second half and the fourth quarter. Fourth quarter EBITDA is up 9%. However, if you adjust for that negative impact from FX and the divestment of the marine lipids, the EBITDA is actually up over 20%, and also the margin quality is improving sequentially. Also in HNC, we started the year at 15%. We've been gradually improving that, and we landed the year also above 18% in Health, Nutrition & Care. In Q4, at the beginning of Q4, we completed the sale of the marine lipid business that has an annualized impact on top line of about EUR 170 million. We'll see that having an impact as an M&A effect in the 3 quarters that are ahead of us, similar as TTH. Then last but not least, from the businesses on the next page, we've got our Animal Nutrition & Health business. Obviously, as a CFO, also very pleased with the deal that we announced 2 days ago. I think it's a reconfirmation that we're well on track with the carve-out process on that. But nonetheless, the Animal Nutrition & Health team is very much focused on continuously improving the business dynamics as well. And you've seen that every quarter a step-up in the underlying EBITDA. Q4, we have realized a very high EBITDA overall. We came in at EUR 176 million of EBITDA, obviously supported by the temporary vitamin effect of EUR 85 million, somewhat above our guidance in the fourth quarter. But if you back that out, you see the continued buildup of and restoration of the EBITDA performance of the Animal Nutrition & Health. We're back to growth on the back of normalized conditions and the contribution of the programs. Overall, as Dimitri said, the programs have contributed about EUR 100 million in 2024, which, of course, is largely benefiting the Animal Nutrition & Health business. Margin in Q4, almost 19%. So I think a very strong performance of the team in the midst of all of the transactions. So when you talk about keeping the eye on the ball, I think the team has done an excellent job on that front as well. If you look at the segments within Animal Nutrition & Health, Performance Solutions, continuing at a high single-digit pace throughout the year. So the momentum keeps on going. The team is doing an excellent job and continuously growing that business across all segments. So both the Enzymes Alliance that now is divested to Novonesis, but all the other elements, it's a very strong product portfolio, and that continues to grow across the board, and the dynamics in the vitamins space and the premix are known, continued normalization, improved pricing and, obviously, positively impacted by the vitamin impact. If we then look at the next page, this again, a summary of the key financial metric. And here, you can actually see the nice flow-through of the step-up in our overall performance, supported and fueled by the contribution of synergies of EUR 100 million, the vitamin improvement program of EUR 100 million and the organic growth, bringing the absolute EBITDA step-up to EUR 350 million, and you see that nicely flowing through, resulting in that step-up in EBIT, ROCE and earnings per share. Cash flow well above the EUR 1.5 billion. I didn't want to make the same mistake as last year where my CEO was upset that I missed EUR 1 million to make it EUR 1 billion round. So this time, we took good care and made sure that it was well above the EUR 1.5 billion. With all jokes aside, I think 12% is a very nice performance. And I'll zoom in in the details and the drivers of that a bit because it's a sustainable performance as well. Net debt came in very nicely as well at EUR 2.5 billion, about EUR 500 million better than the last guidance that we gave. Of course, largely driven by the capitalization of our Robertet stake, which gave us about EUR 400 million of cash in the fourth quarter. And on the back of that, we continue our dividend, and obviously, very pleased with the share buyback. I have talked about it last time that I'm not a fan of a lazy balance sheet. So we maintain our discipline around our capital allocation policy and in line with that, happy to start that program as well. Now zooming in on cash because I think it is a very good performance for us as a group, on the next page. Some of the key drivers, so mainly driven by a step-up in business performance. So very good to see that EBITDA translated into a significant step-up in our cash performance. So that is one of the key drivers. At the same time, we maintain our investment pace, and we continue to invest in future proofing our growth. So our cash CapEx came in at 6% of sales, in line with guidance and our ambition and that is largely invested in securing the growth in predominantly our P&B and TTH business. At the same time, we maintain a good discipline around working capital. We continue to have a good performance at the receivables and payables side. Overdue is under control, the DSO is under control. And also inventory came down despite the significant growth that was witnessed in our business. But yes, fully happy where we are at the inventory level as an absolute number and the month on hand, to some extent, also a deliberate choice because we also wanted to make sure that we had the right level of inventory to make sure that we can deliver on our Q1 growth ambition as well. But overall, with working capital dropping to 28%, an almost 3% step down versus prior, I think that continues to move in the right direction, in line with the ambition that we also had on that front. So financially, a very strong year, very pleased as the CFO with that performance. Now if we go to the next page, not only good news on the financial side, also on the sustainability side. Dimitri commented already on that, around our safety and our engagement index. We see that on the page as well, the 0.24 was every incident is one too many. I think that's also the attitude that we have within the company. Overall, this is a low for the group, and we're very pleased with that performance as well because it's important that everybody gets home safe at the end of the day. That obviously translates into a continued engagement it contributes, and that remains high at around 80% level. Our ambitious targets around climate have been defined in '24 as well, as Dimitri said, [ but tested ] and validated by SBTi. We see a good reduction in our Scope 1 and 2 emissions as well as the 3, and we're comfortable in the journey towards 2030 that we set ourselves. And also in the relevant metric, we're doing well on the sustainability front. And we'll come back to that a little later with the invitation for the event a little later this year. Now let me wrap up the finance, so we also have enough time for Q&A, on the next page. Our outlook for the year. Our strong performance in 2024 made us also confident around '25. We have a positive outlook for the year, backed by continued growth in our businesses, a continued contribution from synergies of about EUR 100 million, continuation of the vitamin improvement program. We'll finish that off next year with another EUR 100 million contribution to the EBITDA. And in that guidance, there's about EUR 100 million for the vitamin price effect from the force majeure. We also included some housekeeping to allow you to model. Should there be any further questions, we're happy to take those. Let me pause there and see what's on your mind and give it back to you, Dave.

Yes. Thank you, Ralf. Indeed, time to start with the Q&A. As I said at the beginning of this call that the sell-side analysts who want to ask questions in the Q&A session have to be registered by the questioners link, which you can find on our website in the financial calendar. If you have don't so yet, you can still switch. All other participants can listen into this Q&A session via the Zoom meeting. With that, operator, we can start.

[Operator Instructions] Our first question comes from Nicola Tang at BNP Paribas Exane.

Firstly, congratulations on the Feed Enzymes deal. I appreciate it's still early in the process for the rest of ANH, but I was wondering whether the nice valuation for the enzymes deal and the timing changes your views at all in terms of valuation and the timing for the exit process for the rest of ANH. And you talked about no big M&A in 2025 and you have a CFO that likes numbers and dislikes lazy balance sheet. So I was wondering if you could talk a little bit about potential use of proceeds for the rest of ANH beyond this buyback related to the Feed Enzymes deal? And then the second question, taking -- looking at your outlook, at least EUR 2.4 billion, if I adjust for the temporary vitamin effect, the restructuring and the synergies, I think it implies only sort of low single-digit kind of underlying organic growth ex synergies. I was wondering if you could give us some color on your expectations by division. Besides seasonality, any notable changes, trends that you've seen in Q4 or that you're seeing so far in Q1?

Okay. I will take the first one on ANH, give some color on M&A and then I hand over to Ralf for the numbers, and you can immediately correct me on M&A, if you wish. And I mean you can say something about the outlook and then maybe already jumping in to give some color on the businesses, but let's leave other core. So ANH, maybe you do remember that we have a question on the ANH carve-out because we said it doesn't fit the journey which we're going to create for DSM-Firmenich, be more consumer customer-focused, and the volatility and the capital intensity of ANH is better suited in a new owner. That doesn't mean that this business is not a good business. And I've said that many, many times before, is that there's more volatility than we have in the core of DSM-Firmenich. And I hope that with the enzyme alliance valorizing of the EUR 1.5 billion, it shows a little bit the confidence we have that we get good value for the ANH business. Maybe just go back a little bit. Remember, we have said ANH is a EUR 3.5 billion around-ish, EUR 3.5 billion business, of which 1/3 is vitamins related which has volatility. Vitamin is a great category of product, but it has volatility into it. 1/3 of that ANH business is premix, which is an unparalleled premix infrastructure which we have, which creates synergies for, and the vitamins as well as Performance Solutions and their Performance Solutions part is the third bit we have depicted. The enzyme alliance was part of that Performance Solutions business. So EUR 300 million out of that 1/3, we now have valorized and it was also an alliance. So we also have simplified the way forward. So I hope you see that it's a proxy of the value of ANH, and it didn't change our time line. We basically said we're going to carve out ANH. We're going to build the house, which is separate, which we can invite people to look at this beautiful house. And secondly, we will make that ready at the end of '24, we've done that. And therefore, the announcement on Tuesday, aligned with the Novonesis alliance, Feed Enzyme Alliance sale, we also announced that we will start the commercial process. So I think it's nicely in line, and we're going to execute that throughout 2025. I hope you appreciate it, I will not give detailed milestones. Obviously, we have a plan with detailed milestones, but you also know in these type of processes, which Ralf and myself have done several times, you never know exactly which milestone will be hit, but we're definitely on schedule with the plan to execute it throughout 2025. M&A, yes, let me make it very clear. I think I was asked several times and maybe it had to do a little bit with the concern what we would do with the money, that we would do silly things on M&A. But doing silly things is never a good thing. But we also said that we need some time to anchor the merger. So remember, we're on just 2 years on the go. We have merged 2 engines. We made this engine bigger. We made it faster. We made it more agile. We tuned part of the engine. We made deliberate choice which component we would like to have in the engine. And this engine is delivering the growth, the results in 2024. So we need to anchor that engine. So we're not jumping into other elements to strengthen that engine yet, although the engine is already very, very strong. So we'll also take time to anchor it and to show what this engine can deliver. And we've given you a bit of a sneak preview on what it delivered in '24 with the results. And we are fully confident that we'll do that in '25 as well. So no big M&A was also a bit to take away your concern that we, a, hope you understand we'll not do silly things, but even if we were doing intelligent things, we're also aware that we need to anchor it. With the share buyback, obviously, it was linked to some of the valorization of the business that we've done, not only on the enzyme alliance, but also the tuning segment, where we made quite some progress but it's also coupled with the fact that we have seen really good cash flow generation in 2024, and we're confident that we'll continue that cash flow generation engine for the next years to come, coupled with a conservative balance sheet, I think we decided to go for that share buyback. I think it's too early to anticipate on what we'll do with the money on ANH. We just opened the house for visitors, but I just wanted to make it very clear that we're focused on growing what we have and show the beauty in Nutrition Health & Beauty of that engine. And with that, maybe, Ralf, a little bit on the outlook. And if you have any other ideas to do, what to do with the money.

Well, I think that summarizes it well, and let's see whether there's further questions around that, but I think it's very consistent in line with our capital allocation policy, and that's something that is important to us, is that we make promises and then we do what we promise. I think that is absolutely key in this journey. Back to the outlook question. Thanks for that, Nicola. Overall, at least EUR 2.4 billion, I think the underlying question is what is the performance of the other 3 business units, P&B, TTH and HNC. And the short version of the story is that we see a mid-single-digit growth going into 2025, each with their own dynamics and their own dynamics in the segments that they operate. Across the board at this point, we have the momentum coming in from the end of the year. We made a strong start in January, again, with 2025, and we're confident that we will see mid-single-digit growth in all of the 3 business units with a corresponding flow-through in EBITDA. So the current outlook is assuming around single-digit step-up in EBITDA in all these 3 business units as well.

Our next question comes from Charles Eden at UBS.

Just checking, you can hear me okay?

Loud and clear, Charles.

Yes, so 2 questions from [Audio Gap] division. Can you just help us understand, you've got EUR 85 million sort of one-off benefit from the higher vitamin prices. Is that -- are you saying you got an incremental EUR 100 million in 2025? So another EUR 100 million, so that's EUR 200 million total. And if so, can you help us sort of follow that through in terms of by quarter, you're expecting EUR 100 million in Q1, EUR 100 million in Q2 and then the Q4 reverses. So just a bit of clarity on that, if that's okay. And then just on the transaction you announced on Tuesday. What is left? Is it fair to say it's easier to sort of market that as a single unit now that the alliance is not involved in that? Or is it still sort of a all options open. If you could just give some color on that, would be helpful.

So I'll take the vitamin, and I'll comment on the transaction as well. So in the guidance that we said EUR 100 million vitamins, it's basically not incremental. It's our guidance now. Now it largely reflects the vitamin effect into the quarter, in line with the comment that we made last year. It's very difficult to predict how long it will be lasting, and we'll update you as we go. So what we've done in the outlook is that we said, look, we will deliver at least EUR 2.4 billion with EUR 100 million temporary vitamin effect. In the previous discussions, we guided that the impact in Q1 will be similar as what we've seen in Q4, and that's now baked into the guidance. If we see a prolonged impact from the vitamin effect, then that contribution could be above EUR 100 million for next year. So it's not incremental. It's not phased over the years. It's largely reflecting the vitamin effect that we expect in the first quarter. Then on the transaction side, I mean, there's a few things that played into this. Obviously, as a partner, you always have a conversation. So we did also with Novonesis around the impact on the alliance in the transaction, and they actually approached us with the desire given that they have also changed as a company to actually take full ownership of that. We continue to source enzymes from them. So that is something that we will continue to be able to blend in. Now the reality is also with a part carved out, the overall deal size might be somewhat lower and in that sense, always more accessible to more players. But we're confident in the asset that we overall have. I think it plays nicely into the valuation of our ANH business. Remember, when we talked about the ANH, and Dimitri commented that earlier that we had these 3 distinct buckets, which all come with their own valuation, I think it underpins the overall Performance Solutions. Now if you look at that Performance Solutions piece, that this remains a high-quality part of the ANH asset. So overall, we were close to EUR 1 billion in sales, take the EUR 300 million of the deal out, that drops to, what, EUR 700 million, but EBITDA quality is exactly the same for the remaining part. So in that sense, I think it will be beneficial. It also shows that there's good appetite for the asset itself. So we feel that this is also positive to the overall transaction in terms of time and value.

Our next question comes from Lisa De Neve at Morgan Stanley.

I would just like to, first and foremost, come back to the 2025 adjusted EBITDA guide. So from the comments that were made on the previous questions, it seems like you guided to an incremental EUR 100 million for the vitamin optimization program, EUR 100 million synergies and EUR 100 million price effect for vitamins in the first quarter. And given you've reported EUR 85 million temporary vitamin effect in the fourth quarter of last year, it seems you're guiding to about EUR 200 million underlying positive developments for this year. Can you just share where you expect this to come from? Is it volume growth? Is it pricing? It would be helpful to shed a bit of light on that, if that's possible. That's my first question. Secondly, can you provide what your expectations are for input inflation this year and how you expect pricing to contribute to the like-for-like growth for this year, especially excluding the vitamin prices effect? And lastly, can you share how your EUR 500 million revenue synergy program is evolving? And how much of that pipeline synergies, you've mentioned a number of times, are sort of moving towards realized revenue synergies and maybe specifically in which segments you're seeing the most momentum?

Let me guide through a few of them and I should jump in later, I think, synergy for Ralf. Just to repeat a little bit the components of the outlook, and I think those were questioned a few times, so let me start with the at least EUR 100 million temporary vitamin effect, that's more or less in line with '24, is also to make the comparison easy. And also on the temporary vitamin effect, we said at least EUR 100 million because at the end of the day, we -- I mean we're not speculating on what's happening, and we've been transparent on it as we speak. So therefore, the EUR 100 million vitamin temporary. So that, compared to last year, I would say, is more or less equal. Then you have the vitamin transformation program. And indeed, we will deliver EUR 100 million extra in '25, and therefore delivering on the whole vitamin transformation project. Then we included EUR 100 million for synergies, also what we promised, remember, EUR 100 million in '24 and EUR 100 million in '25. And then you need to remember that we did some tuning. I've said that in my initial slide. So that has a negative impact, if you tune. We sold off marine lipids and yeast extracts. I think that's about EUR 40 million or so on EBITDA. So you need to take that into account. And then indeed, you have good organic sales growth around our [ midterm target ], mid-single-digit making the outlook at least EUR 2.4 billion. That is a bit of a -- most probably you had that, but just to confirm. Then on the input inflation, we have -- we are thinking about 1.5% to 2% for 2025 and is an assumption. That is without any consequences on the tariffs. The 1.5% to 2% is a little bit of an effect of the salary increases we've seen in the years before. If you look at the pricing where on the input prices, we see an uptick, it's on naturals. But net-net, we see a bit of a stable portfolio going forward. You know our business well. I think if the input prices go up, we are able to increase that in our prices going forward with a bit of a delay. So if it's a plus, we'll benefit from it for a while, if it's a minus, we give it away for a while and increase it in prices. So not too concerned on 2025 there, although the natural ingredient prices are going up, so we need to watch that a little. And then on synergy, maybe Ralf, you can give a little bit of highlight, and I think the cost synergies we've ticked off. I think maybe a little bit background on the revenue synergies.

Yes, let's do that because that will also -- you'll see that momentum flip over from costs where it's merely a follow-through and an execution of the program, the revenue synergies will start contributing more in '25 and beyond. Maybe one step back, what we initially said is that we continue to track that pipeline. We're regularly reviewing that every month, we sit down with the BUs, how is that pipeline developing. What you also now see is that it starts to contribute. In the Q3 earnings call, I alluded to the strong performance in TTH and the contribution of synergies. That's something what we continue. With the lapsing of time and that we see more of that pipeline translating into contracts and invoices actually fine-tunes the overall tuning. So the pipeline remains well above the EUR 300 million across all of the businesses. But for example, when I zoom in on TTH, where almost 2/3 of the synergies are coming from, we actually go one level deeper in terms of our tracking. So we not only look at the overall lead pipeline, which is overall EUR 300 million, but within that, we actually start looking at how much is now contracted. The first time I talked about that was in the Q3 call. I think at that point, we had about EUR 60 million contracted. That meanwhile has evolved to EUR 90 million contracted. And also, the invoiced synergies is increasing nicely. I made the reference back then to about EUR 50 million a quarter, that is something that we see continuing. So what we now see very nicely is that pipeline translating into contracting and contracting into invoices. That last piece is obviously what has my biggest interest because that is something that ultimately we can take to the bank. So a very positive development there. If you look at TTH, it's actually very nice. We included, again, some 3 new examples to continuously feed you with new things that we are bringing in to market, but it's very strong across all of the regions and across all of the segments actually in TTH. And also the cross-sell is actually even going better than originally planned. The fact that we are one uniquely positioned company in the space that we operate is actually giving us quite good access. And I think the performance in TTH throughout the year is showcasing that as well. So yes, we're looking at that number with very good confidence.

Our next question comes from Martin Roediger at Kepler Cheuvreux.

First question is on Animal Nutrition. The organic sales growth in the fourth quarter was plus 16%, of which 15% was vitamin pricing and 1% was volume growth. Why was volume growth so low, although the vitamin-related feed enzymes market was rather tight? Did clients delay orders? Or did they switch from short-term contracts to longer-term contracts with a later delivery? And if so, what is now the split between spot market business and longer-term duration contracts? And the second question is more a follow-up question on the, let's say, upcoming disposal of the remaining business of Animal Nutrition & Health. Do you prefer to split up this remaining portfolio to get an even better price or higher value because, I guess, the potential predators for the Erber group assets might be different versus the predators for the [ Mycobactin ] assets? Or do you prefer to go -- to get rid of it in one go because it's easier to handle?

Martin, thanks for that question. And indeed, Animal Nutrition & Health, 16%. I'm super happy with that. Indeed, well spotted, the 1% volume. I'm pretty okay with it. At the end of the day, remember that we had in Q4, our extended shutdown in Sisseln. And if you start up that plant, obviously, you need to fuel a little bit the flow and the value chain of your suppliers. So Q4 is low on volume, but pricing is absolutely in line with what we expected. So you will see a pickup of the volume in Q1. It's more linked to the Sisseln extended shutdown and when you have that operation running, it will take a while. So it has nothing to do with the pricing or changing pricing system in itself from longer term, more spot and as well. Just to reconfirm, pricing in animal nutrition is predominantly made on a quarterly basis, as you know. Then I think your second question was on finding a new owner for ANH. So we deliberately announced on Tuesday selling the alliance, sold to Novonesis. It is simpler to go out, and we have the house carved out and ready for visitors. So I think you need to be aware that the business model of premix vitamins and the specialty Performance Solutions is synergetic. So you were referring to the Erber business, the mycotoxin absorbers. The mycotoxin absorbers have shown fantastic growth because of the premix infrastructure we have, very synergetic. I mean, Erber had [ and they had ] any premix, we added our premix structure, very synergetic. And then adding with your vitamins into the premix really started off the growth of Performance Solutions. And I think you have seen the growth of Performance Solutions. And that really is because of the synergetic effect between vitamins, premix and the Performance Solutions. So we think that that unit has a synergetic effect in itself. That's why we go out with the market as a whole, and it also in terms of how we want to focus the company, it is easier to go forward in one go. So we feel that that value is reflected in the setup. And I hope you will appreciate that we can't give you any further details on the process, but we really have a time line to exit that and to finalize that in 2025.

Next question comes from Alex Sloane at Barclays.

Two from my side, please. Just the first one on the EUR 100 million exceptional tailwind for vitamin, sorry to labor the point, but just to be totally clear, I think you said it's not incremental. So underlying, you're essentially guiding to EUR 2.3 billion EBITDA, is that right? And can you share with us what sort of rough price levels you consider normalized for vitamin E and A in making that calculation? Or maybe another way, what do you see as the kind of normalized vitamin margin? And how much of that tailwind, if any, is expected to be in HNC versus ANH? That's the first one. Second one, very interested in your comments on innovation pipeline ramping on GLP-1 and UPF concerns. Is that specific to the U.S.? Or is that kind of a broader dynamic? And I'd be interested to hear within TT&H, what solutions are seeing the most momentum on that front?

I'll take the vitamins and you, the second question. So on the vitamins, no worries, Alex, and appreciate the question. So let's be clear, so commercial would not be sensitive to start speculating on what I find a normalized valuation of pricing for some of the vitamins. If you've got 3 people around the table, you might get different answers. Well, let me be very specific. So we see a similar contribution in Q1 as in Q4. We have seen a restoring of the underlying conditions in vitamins and also the underlying EBITDA is -- has improved on the back of that, supported by the vitamin improvement program, and that's what we continue to work on. So we will call out that the special vitamin effect as we do expect over time things to normalize. So, what, we want to provide you as much guidance as we can on how we see that business develop and how that underlying performance is developing, and also in light of the business unit is on the transaction. So in that sense, we want to be transparent on what is driven by the underlying business and what is coming from the vitamin impact in the first quarter but also the following quarters.

Yes. Maybe on the innovation pipeline, thanks for that question. Funny is, and I couple a bit the processed food discussion with GLP-1. So GLP-1 creates reduced appetite and has an impact on people who take GLP-1 on your gut health situation. And the gut health really is impacted by taking that. And it also has to do with muscle pickup. So proteins are absolutely key for people who use GLP-1 as well as gut health problems. And there we come into play with prebiotics, postbiotics, immune improving ingredients. And we really see a request for products with probiotics going into it, but also more protein and fiber going into it. And a little bit coupled with, but from a different angle, the processed food discussion. We already know, and it's part of what we call the blue ocean strategy we have. So we're not only growing the markets we are in. We're also developing new markets with our customer. We have lower sugar, lower fat, lower salt, on the lower side, but also the higher demand, the higher demand for fibers, higher demand for proteins, a higher demand for minerals and vitamins in those products linked to food. So that really is helping our innovation pipeline in the area where we're strong. And specifically, what we've seen over the period is that the dairy segment is benefiting from that and especially yogurt. And if you go to the supermarket and you look at the yogurts, the category of yogurt, you see high-protein yogurts. You see low-sugar yogurts, you see yogurts with vitamins into it, you see yogurts with probiotics into it. So we really see product launches there. To your point, the innovation is started in the U.S. So that's definitely leading the innovation pack, but I'm very happy to say that we now see spillovers to Europe. So if you go to European supermarkets, you also see high-protein yogurts, you also see probiotic immune-improving yogurt. So specifically in those products, we do see that America started, but we now see for us, which is good news, also a spillover to Europe, and we do see that in our growth figures.

We're approaching 10:00. So let's do one other question, yes. So basically one other person to ask questions before we round off. So we give ourselves a few extra minutes. Operator?

Our last question comes from Stefano Toffano at ABN AMRO ODDO.

Can you hear me?

Yes.

So a few questions left from me. One is on P&B. I was just wondering, we have seen 5% volume growth. Obviously good, but quite a slowdown compared to the past few quarters. Are we seeing a little bit of normalization here in the end markets, which have been obviously really, really strong. Then another question related on the P&B, 5% organic performance on the adjusted EBITDA, so no operating leverage, it seems. And maybe a little bit explaining what is going on here exactly? And then my last question, I mean, I have many left, but let me just one general one, on the Q1 business conditions. How are we doing so far?

Yes. Stefano, gracia. Thank you all for -- so we go to P&B specifically, right? So your question was more linked to P&B. Did I got that right?

Yes.

Okay. Yes. So let me start with P&B. So what you need to understand is that we have Fine Fragrance, Consumer Fragrance, and we have our ingredients and our, what we call, Beauty & Care. So what we've seen on Fine Fragrance, very good growth in Q4, and we see that momentum continuing also in 2025 with a full breathing boost innovation pipeline. Consumer Fragrance, very good performance in Q4 as well. But we do see that going into 2025, you will see some normalization on that pipeline because I think it faces a very -- a tough comparison going forward. So there, we'd see some normalization of business condition, but it will mean that it goes more into the mid-single-digit growth. And that is also applicable for our Ingredients business. And then our fourth business is Beauty & Care which is a considerable part of our business. So if you make comparison with others, Beauty & Care is an important business for us. It's over EUR 0.5 billion of it. That has been soft in Q4, predominantly in Asia and specifically in the segment of suncare. That softness continues into '25, our customers are saying that they are seeing an improved measure in the second half, but let's see. So we don't really see changed momentum of Perfumery & Beauty. We see a good start of the year for 2025, if you look at our order portfolio, but only Beauty & Care remains soft, certainly in the first half, and let's see what the second half will bring. I will give Ralf the word on the EBITDA leverage, but I want to close off on Q1 in general. So what we see in Q1 in general in terms of business momentum, we see no big change. If you look at our order portfolio, January is done, I'm not guiding you for month after month, but we see continuing good business momentum. You need to be aware, and I think you will follow up the detailed questions with IR, there is some seasonality in the HNC business with i-Health. But overall, we don't see a change of pattern. And if you look at our briefs and if you look at our innovation pipeline, I think we can say we had a good start of the year. And Ralf, last for you, the EBITDA leverage. Why don't we see that coming back in an EBITDA leverage, good question, by the way.

Yes. No, absolutely. And it's something that we monitor as well. I mean, margin is very much in line with prior. It's impacted by the seasonal effects, Usually, Q4 is the lowest quarter within the year. And at the same time, we're making necessary investments, not only in terms of upgrading our cost and commercial organization to make us ensure that we continue to fuel the growth and the momentum that we have, but also our asset base to make sure that we're well set for delivering the volumes that we plan to sell going into the new year. So no concern there. It's not necessarily a quarter-to-quarter trend, but we overall see a continued improvement in the margin in P&B as well, and that is something that we will be working towards in 2025.

Okay. Thanks, Ralf. That concludes the Q&A session. So let's go -- maybe Dimitri, you want to make a few closing remarks.

Yes. I will make it brief, also to respect your time. So we will continue our journey for 2025, it's summed up in the next slide. We grow what we have. We anchor what we do, and we're going to deliver on the promises, as you are expecting from us. We'll focus on the synergies. We've finalized the vitamin transformation program. We'll keep you up to date on the Animal Nutrition process. We'll start the process of returning EUR 1 billion to shareholders as of April. We will continue to strengthen our people and planet ambition because it's part of who we are, it's part of what customers expect from us, and we will work on our 2025 outlook to make that reality for at least EUR 2.4 billion, I know you will focus on the word at least, me too, but at least EUR 2.4 billion. And before we close off, just a reminder that you are all invited as well as your ESG experts for our special event in Kaiseraugst, in Basel on March 25, 2025. And with that, I think we can close the call. And thank you, everybody, for your attention and your interest in DSM-Firmenich and its beautiful journey.

And let me add that if you have any additional questions, you know how to reach out to the Investor Relations team. We're happy to take all your questions. And with that, let me hand back to the operator.

This concludes today's call. Thank you everyone for joining. You may disconnect.