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

Good morning, and thank you for joining today's call. I'm sitting here with Ralf Schmeitz, our CFO. This morning, we published our first quarter 2025 trading update together with a presentation to investors, which you can find on our website. Here, you can also find our disclaimers about forward-looking statements. Following Ralf's opening comments, we will open the line for questions. Importantly, and as a reminder, sell-side analysts who want to ask questions will need to register via the questioners' link, which they can find on our website in the financial calendar. If you have not done so yet, you can still switch now. And with that, Ralf, please go ahead.

Well, thanks, Dave, and good morning. Good morning from a sunny Maastricht. So at least sun is shining and happy that it's coupled with today. We'll take you through our quarter 1 results and a few of the strategic updates along the way as well, and we'll zoom in into the business units as usual. But let me start with the overall picture and framing of our performance to date. We started the year in a good way. Overall, you see already a couple of numbers on this slide. Overall, 8% organic growth, very encouraging start of the year. And obviously, that translated into a very nice step-up in profitability. We've seen a 40% step-up in EBITDA and a margin of 20%. And we'll come back with some more detail, both for the group and the BUs in a little while. So bear with me on that. But very pleased with that start of the year. On the strategic side, we also made good progress at the full year results. We already talked about the sale to Novonesis of the Feed Enzymes business. We're well underway in completing that. We're waiting on the final go of 2 smaller jurisdictions. So confident that, that will close into the second quarter. A reminder, we sold the business for EUR 1.5 billion, which will translate into a net cash of somewhat above EUR 1.4 billion and will obviously drive a substantial book profit as well. We'll communicate that upon closing of the transaction. And at the same time, we continue the exit of our Animal Nutrition & Health business. Very encouraging results. I'll come back to that a little later when we talk the business units, but also from an exit process, we continue. I think it's been a public secret that we had the bids come in towards the end of April, and we're very encouraged by the interest and the conversations we have with investors. And we're now moving into the next phase where we start preparing for due diligence, our management presentations, and at the same time, we've narrowed the number of participants given the competitiveness of the process. So we're confident that we'll sell the business in 2025. Now on the back of the sale of the Feed Enzymes, we also -- and full year results, by the way, given our strong balance sheet, we also communicated the EUR 1 billion share buyback program. We've meanwhile started. I think up until today, we bought about 650,000 shares and spent a bit more than EUR 60 million. So it's well underway. We're buying as much as we can within the limits provided, and we'll continue to complete the process in 2025. Also from a balance sheet perspective, you've seen us active in the debt markets. I think timing was nicely timed just ahead of the volatility, and we managed to secure a EUR 750 million bond at attractive rates, basically ahead of all the maturities, and we don't need to be in capital markets for the short time ahead. With that, I think the good start of the year, the contribution of our self-help programs, I'll allude to that when we deep dive on the numbers. Overall, EUR 45 million of contribution in the first quarter. So self-help, coupled with a good start, basically makes us confirm the outlook for the year at, at least EUR 2.4 billion of EBITDA, and I'll show with you a few of the moving pieces in a little while. Now and I've said at the beginning, let's zoom in, in a bit more detail on the next page. Looking a bit at the group. So overall, let's start with top line. Overall, we've seen 8% organic growth, nicely split between volumes and price, but you need to look a bit closer to that. The volume part is predominantly driven by the core business at Perfumery & Beauty; Taste, Texture & Health; and HNC, where the underlying growth is actually 6% and the price is fully coming from ANH, as we'll see in a bit, where we see a normalization of the underlying conditions in the vitamin market, but at the same time, we also see contribution from the temporary vitamin impact that of -- which is estimated at an EUR 85 million for the quarter, in line with the guidance that we gave. You also see a minus 2% from M&A. As a reminder, those are the divested yeast extracts business and marine lipids business. You'll also see that in the BU bridges on sales. So we'll continue to report transparently on the effect of that. You also see, by the way, that flow through in the EBITDA bridge because on the back of that strong growth, very nice step-up in EBITDA, and we've put the walk in at the left bottom of the slide. So overall, very nice increase on the back of the growth. We've seen a 24% increase in EBITDA, offset by the minus 2% from the deconsolidation of yeast extracts and marine lipids. So in the business, a 22% step-up, then supplemented with that temporary vitamin effect of EUR 85 million, which is another 18% step-up in EBITDA versus prior, bringing the overall step up to 40% and, as said, with a margin that is -- continues to improve as well and encouraging at 20%. Now let's look a bit at the dynamics per BU because I think that's going to be helpful also for you. Starting on with Perfumery & Beauty. Now on the back of a strong 2024, where we've seen continued good demand for our products, resulting in a strong step-up in sales, we basically continued the year with another strong quarter in Perfumery. We've seen again a high single-digit organic growth in that part of the business, with Fine Fragrance continue to do very well with that, even up to double-digit step-up again, while also Consumer Fragrance is continuing a very encouraging growth, coupled also with a strong Ingredient portfolio. So also there, we've seen a very good growth in the first quarter. So overall, very encouraging results in Perfumery & Beauty. Now you'll see the overall growth is 3% in volumes, and that is driven by Beauty & Care. We already flagged weakness in the sun filters at the end of last year. And we also said that, that is going to continue into 2025. And I'll elaborate a bit on that. In the sun filter business, we were -- have seen an acceleration of demand in 2023 and the first half of 2024. And however, 2024 was a disappointing year from a consumer demand for sun filters, resulting in quite some inventory in the chain. And the unwind of that is something that you actually see in the first half of this year. And unfortunately, Q1 last year was a record sales for us in terms of sun filters. So the impact in the first quarter is the biggest one that we'll witness in this year. If you exclude the negative impact of sun filters, the actual underlying volume growth is 6%, which is in line with the strong performance I just alluded to. Overall, from a margin perspective, P&B, a very good margin as well, close to 23% in the first quarter. Now if you compare it versus prior, you've seen a somewhat lower margin. I want to point out that last year, we highlighted that Q1 was an exceptional margin, which also normalized in Q2 in that year, but also, obviously, the lower sun filters had pushed the margin somewhat below 23% for P&B, but it's an encouraging trajectory, and it continues to improve as well. Then moving on to Taste, Texture & Health on the next page. Again, here, continued strong volume growth. What we've seen last year, both in the first half and second half, a 9% volume growth actually continued nicely into 2025. And encouraging to see that it's both the Taste division and the Ingredients division, both equally contributing to that 7% step-up, which is also supported by synergies we see and about 1% to 2% contribution from synergies starting mid last year. We've also started to call that out, and I'm very pleased with this performance, where you basically see another 2% of synergies contributing to an above-market growth in Taste, Texture & Health. And I'll come back to the synergies in a bit. Now obviously, that volume growth translated nicely in some leverage on the EBITDA side. So overall, a 12% step-up versus prior in terms of EBITDA, and also the margin moved nicely towards the 20%, and that continues to improve in TTH, in line with plan. Keep in mind, you'll see here a smaller part in the M&A effect in the top line because we're still providing Lesaffre with the yeast extracts volume. So there's still top line, but you don't necessarily see that in the margin, and the 12% step-up in EBITDA is net of the deconsolidation of the yeast extract business from a margin point of view. Now looking at the regional lens for the business to give you a bit of color on that front as well. Overall, we see strong growth across the globe. However, U.S. is weaker. We've seen that already towards the end of last year and Q1, the softer U.S. in those numbers. So we're very encouraged by the global business. You see here the strength of having a global business with a very strong local footprint. Now I did want to come back to the synergies, as I said. The pipeline continues to build very nicely on top of the actual sales that we're invoicing. And on the next page, I wanted to bring back a couple of examples. And the first one, CocoaCraze, I wanted to back to -- bring back to a wider audience. We also showcased it at the Sustainability Investor event we had earlier in the year where we see sustainability as a clear value driver, and this is clearly contributing to that, and it's getting some nice traction. It's replacing traditional cocoa in the food solutions of our customers, but it also comes with a much better footprint where it reduces both the carbon and the water emission. So a very nice product. Then in the middle, yet another recovery hydration drink. As you know, beverage is an important segment for us. It's about EUR 1 billion in size. And the picture is one that we took from an image bank because we couldn't show the actual athlete, but a high-profile athlete is launching it, and yes, we were still a bit on the confidentiality. So we're happy to disclose that in the period ahead, but it's yet another example where we bring the solutions, not only the Taste, but also the Ingredients together in the launch of new products. And last, some instant noodles, I also wanted to show wherever I get excited about synergies, it's a global opportunity, and this is clearly with a big customer in Asia, where we combine again the Taste and Ingredients Solution in a new offering, and that is also a very nice win for us. Then moving on, looking again a bit at the financials. If we then go to the next page to Health, Nutrition & Care. Also here, a continuation of the growth. We've seen the growth coming back as of half of last year, where we had 2% growth in the third quarter, 5% in the fourth quarter. Now you see an 8% volume growth in Health, Nutrition & Care. Pleased to see the volumes coming back with a continued recovery and good growth in Dietary Supplements, also driven by the algae lipids and the vitamins. And at the same time, a strong performance in Early Life Nutrition where we also went back to growth already starting last year, and that is continuing, including contribution from HMO. But if you generally look at the HNC portfolio, it's actually encouraging. All of the segments are showing good growth, contributing overall to an 8% performance. Also from a margin perspective and an EBITDA, so you've seen an absolute step-up of 16% in EBITDA. You see that the volume is triggering the leverage. Keep in mind that the 16% step-up is clearly net of the deconsolidation of the marine lipids business. You've seen that in the top line at the bottom -- sorry, at the top left, where you see a minus 7% for M&A. Obviously, that had an impact on the EBITDA as well. Overall, the deconsolidated EBITDA in the first quarter is somewhat around EUR 10 million. From a margin perspective, continued recovery. Keep in mind that Q1 is never the strongest quarter for HNC. So it's an encouraging path, and we'll continue to see an improvement on the margin side in HNC as well. Then maybe last, but not least, on the next page, Animal Nutrition & Health. Whilst we're continuing to make good progress on the sales side, as I commented in my introductory comments, I'm very pleased to see that the business is performing very well as well. So overall, a quarter with strong growth. Overall, 19% of organic growth. Now if you look at the pricing effect, you see a step-up in pricing of 17%. If you back out the impact of the temporary vitamin effect of about EUR 85 million and you allocate that fully to price, which is largely the case, but if you were to back out that fully, then you'll see that 2/3 of that price effect is related to that effect. But 1/3 is really about normalized conditions in the space. At the same time, at the volume side, you see a continued good growth in our Performance Solutions business. The high single-digit growth on the back of a strong 2024 continues, with the mycotoxin solutions contributing but also precision nutrition firing on all cylinders on that front. The volume growth in the Essential Product is somewhat lower, where on the one hand, there is a clear focus on value. At the same time, what we've seen and we've already seen that starting last year is that we resell less volumes given the volatility, so we focused on produced in that sense. Now on the back of the strong growth and the vitamin impact, you see a massive step-up in EBITDA. So overall, we've done EUR 186 million in the quarter, a step-up versus Q4 again. Whilst the vitamin impact is more or less the same at EUR 85 million and the absolute step-up in EBITDA is over EUR 150 million in the business, meaning also that the underlying business is now above EUR 100 million, and that is something that we wanted to target as well and grow from here, also driven by the contribution of the vitamin improvement program. So I do want to compliment the ANH business with that trajectory and performance as well. Then let's look at how that all translates into an outlook on the next page. Given that we had a good start of the year, a continuation of business conditions in April and a solid order book for May, we maintain our outlook of at least EUR 2.4 billion. And if you look at our portfolio, we're uniquely positioned and well placed to deal with the current volatile economic environment. If you look at it from a tariff point of view, we're well placed to mitigate those effects. We're working together with our customers and suppliers to mitigate it to a minimum, looking at alternative supply chains and other measures. And where we can't mitigate it, we'll pass it through. I think that is something that is within our abilities. So hence, we're confident in being able to mitigate that. And that, combined with the self-help measures where you see the synergies contribute from a top line, we see the synergies contribute from a cost line and we have good traction in the vitamin improvement program, all that leads up to an outlook of at least EUR 2.4 billion. Having said that, in that EUR 2.4 billion, there's now an upgrade of the temporary vitamin impact. We guided at the beginning of the year for an at least EUR 100 million. Given the performance in Q1 of EUR 85 million and our commitment that we would update you as we go, we're now increasing that to EUR 150 million, so a step-up of EUR 50 million. At the same time, given that we now have visibility on the closing of the Feed Enzymes business, we've also done the technical deconsolidation of that EBITDA, which is about EUR 40 million. So technically, it's a plus EUR 50 million from vitamins and a minus EUR 40 million from the deconsolidation of the sold business, more or less a wash and hence, maintaining our at least EUR 2.4 billion. And with that, let me pause there. I'm sure there's questions out there. So Dave, maybe time to open for Q&A.

Indeed. [Operator Instructions] And with that, I think we're ready to start. So operator, please let's have the first question.

[Operator Instructions]. Our first question is from Lisa De Neve at Morgan Stanley.

The first one I have is on raw materials. Can you provide us with an update on input inflation for 2025 and, as things stand today, to which extent you may have to apply any price adjustments and whether you have already engaged with customers on this? And perhaps in the bigger light, can you just -- I know we have high local production to sales, but just highlight where current tariffs may provide any challenges around procurements and so forth. And then can you just, a small one, tell us what's baked into the guide on FX for this year in terms of the EBITDA guide?

Yes, Lisa, thanks for question. So first, generic on the raw materials. When we started the year, we guided for an inflation of around 1% to 2%, and that is continuing. So we don't see much deviation on that front. At the same time, we're closely monitoring it and see what the developments are. You see some energy coming down. At the same time, we typically have about 60%, 65% hedged on that front. But that's something that we're closely monitoring. But the raw material development as such is kind of coming in, in line with plan that we had at the beginning of the year. I think your question is probably also coupled with, what do you see now in terms of dynamics around the tariffs? And maybe that is a good moment to be a bit more elaborate on that. Now we're all confronted with the tariffs, and we're finding ways to address them. So what we've done is we've clearly looked into what is the overall impact. And maybe before we dive into what are the actions that we're actually doing about it, let's zoom out for a minute and scope the overall tariff impact a bit. So overall, if you look at our business, we're importing about EUR 1 billion into the U.S. Out of that EUR 1 billion, approximately 20% is coming from China. Now what you also see is that in our categories, there's quite a lot of exemptions. So across the board, somewhat above 50% is actually exempted from tariffs today, and that is something that we've been looking at, and it's where there's a lot of effort and cooperation with the customs team and the business to actually see where we're impacted. Now we've done all of that analysis, and then we also started looking at, okay, talking together with our customers and suppliers, how can we overall mitigate that? And if you then look at the overall impact of tariffs on an annualized basis, it's somewhat around 1% of sales, max, in terms of impact. However, if you can look at some of the mitigating measures that we do, on the one hand, we have inventory, local inventory that is addressing part of that situation, and we already have 4 months on the way into the year. But at the same time, we're looking at other ways to redirect some of the supply chains, looking at formulation and finishing opportunities to basically mitigate the overall impact to our customers. And where it's not possible, we are passing that on. We're passing on what we can't mitigate and what we're confronted with. And that is something that we already started. So I must salute the business teams. They've immediately been actioning it together with procurement, tax and the whole organization really to minimize the impact. But where needed, we also started passing it through to our customers already in April. Now maybe then from an FX point of view, I think there, we live in a volatile world, and it depends a bit on the flavor of the day. So let's not speculate on the development of the exchange rates. We're looking a bit at a more shorter term. If the rates or, let's say, the negative picture of last week would continue into the quarter, then you're looking at a risk of about EUR 10 million, EUR 15 million for Q2. But for the rest of the year, I think the current spread predominantly between the dollar and the Swiss [ C ] is not representative, but let's see how things will unfold in the year on that front.

The next question is from Alex Sloane at Barclays Bank.

First one, you had talked about mid-single-digit organic sales growth for the core go-forward business in '25 overall. Obviously, a decent start on that front, 6% in Q1 underlying, but it is a more uncertain macro environment since those full year results. So is that mid-single digit still valid as a target for the year within the overall guide? That would be the first one. And secondly, you referred to some challenging market conditions in North America, specifically with TT&H. Is that also relevant for P&B and HNC or just isolated to TT&H? And how do you see market conditions playing out into Q2 and for the balance of the year there in North America?

Yes. No, thanks, Alex, for questions. Now let's start with the organic sales growth. Indeed, an encouraging start, and the 6% is helpful. And I want to stress as well that the effect of sun filters will fade out, and we'll see -- we expect better conditions in -- going into the second half. I think it's good if we immediately address the BU lens on that front. So if you look at it from a P&B perspective, we expect similar conditions going into the second quarter where, I think, sun filters might still push the overall organic growth somewhat down. But also there, we're expecting better conditions, as I said, going into the second half. So we're still guiding for mid-single digit on that front, maybe somewhat a bit more to the lower end given where we overall started. Now the underlying fundamentals are definitely mid-single digit, but given the weakness in sun filters in the first 2 quarters, then that will bring us overall for P&B probably closer towards the lower end of mid-single digit. If you look at TTH, a very good start with the 7% growth. So well on the way to deliver that mid-single digit, and we actually see same conditions going into the second quarter, with April having the same dynamic as we've seen in the first quarter. But keep in mind that we're now starting to lapse Q2, Q3 last year with double-digit growth quarters for TTH, so we continue to guide for mid-single-digit in 2025 for the TTH business whilst taking into account the tougher comps of last year. And HNC is seeing good conditions across the board. In my opening comments, I said we see all the businesses contributing to that growth. So there, we continue to expect a mid-single digit as well, maybe a bit to the higher end on the back of early life and HMO, so let's see how that unfolds. But from a group perspective, we're still on a mid-single-digit trajectory. Now then tilting to your question on TTH in North America. I think generally, also, if you look at the earnings releases of some of our customers, I think they're flagging a bit the weakness. I think it's linked to consumer confidence where the orders might be a bit lower. People are keeping a little lower inventory. Let's see how that overall unfolds. I think we're just being a bit more careful. What you see is also that in TTH, it's a very much local business with 70% local customers. So -- and there, we see continued growth, but at least in the short term, I think given the sentiment and the uncertainty, we would not be surprised if there's a bit more careful ordering. On the other hand, if you look at -- in the other businesses, I think we've seen a somewhat stronger performance in the U.S., but we're monitoring that closely. But given the local presence and the strong growth also in other regions, we're confident around the mid-single-digit guidance for the year on that front.

The next question is from Nicola Tang at BNP Paribas Exane.

I hope you can hear me.

Yes.

First question would be on the ANH divestment. I'm not sure, Ralf, to what extent you can talk about this, but you talked about it being a bit of a public secret, I think you said. I think in some of the Bloomberg headlines, there was a reference around the valuation of around -- about EUR 3 billion. I was wondering whether you would be able to make any comments around whether or not valuation is progressing as you expect based on what you referred to as a competitive process. And whether or not -- it sounds like no, but whether or not you see any risk of delays just given the kind of market volatility and the market uncertainty. And then the second question perhaps on Perfumery & Beauty on Fine Fragrance, it sounds like double-digit growth in Fine. Can you talk a little bit more about drivers and whether you expect it to continue at this rate for the rest of the year?

Yes. No, I think 2 great questions. I think everybody would love to take out their pens and notebooks or record as if I would be commenting on the valuation of ANH. So let me now do that given where we are in the process. But as I said, encouraged by the conversations we had, and we go into the next phase with confidence, and it's a competitive process. So -- but throughout this phase, I don't think it's wise to comment much further on ANH. So for those preempting the questions, can you give a bit of color on the type of buyers and the like? It will be all the same answer. Let me refrain from that. Other than that, we moved into the process where we narrowed the number of participants, and we're moving now into the phase, and we remain confident in selling the business in 2025. In terms of your question on Fine Fragrance, yes, no, it's encouraging to see that, that strong growth, to your point, continues. We recognize that. We've seen that last year. And I think here, what you also see -- because your obvious question is, how does that continue going forward, and does consumer confidence play a role into that as well? I think over the past period, it's proven to be a very resilient part. It's also part of affordable luxury that continues, but the trends that we alluded to also when we did the full year results are very much still there, whether the impact of social media, the new generation buying perfumes, and that is driving the overall growth. You see that wider in the space and also some of our customers actually reporting decent growth numbers, which are the underlying driver for that growth. Now I said it at the full year and I'm going to repeat it, I think that's my job as well that I don't think there's any business in the world that can continue to grow double digit until eternity. And obviously, the comps are becoming more and more difficult, but at the same time, also going into April and looking at the order book that is solid, we see same conditions continuing. So from a market dynamic, I'm pleased with the Fine Fragrance performance.

The next question is from Chetan Udeshi from JPMorgan.

Can you hear me?

Yes, loud and clear, Chetan.

I was just going back to P&B. If I'm not mistaken, your Beauty & Care part within P&B is roughly 20% of total P&B. So if you are saying the business ex Beauty & Care is up high single digit, it sort of implies the Beauty & Care part down 15% to 20% year-on-year. Firstly, is the math correct? The second part, is that 15% to 20% decline all market driven? Or is there some competitive changes that you see in the market? And one basic question, and apologies if this is ignorance on my side, but why is the Beauty & Care margin higher than your Perfumery business? Because one would have thought the Perfumery, Ingredients -- not so much the Ingredients, but the core fragrance part should be higher margin than the sun filters market. So can you maybe talk about why there is a higher margin in the sun filter part of the business? And sorry, last question. P&B, you did 2% organic growth on comps, which were plus 4% year-on-year last year -- or was it plus 2%, I think. But now the comps are plus 13% in Q2. So I'm a bit surprised you're saying it will still be similar growth given such a high competitive base. Are you expecting any underlying businesses to improve in second quarter in P&B?

Yes. No, great questions, and thanks for asking those. So yes, so the 20% is somewhat at the high end, high side of estimates in terms of the portfolio of Beauty & Care within P&B. But maybe let's scope because I think your questions are more around how big is sun and that. So sun filters is around a EUR 200 million business. And I said, Q1 was a peak, and now you see actually the unwind. So it had quite a big impact, and that's why we're also saying that, that effect will become smaller as we progress from here, given the dynamics that we're just comparing in the first quarter against a record quarter last year. Now overall, if you look at those dynamics because it's something that we clearly looked in as well. And what you've seen is that in 2023, Chetan, you've seen a steep increase in the sale of sun filters. I think you've seen the increase in travel all after COVID and the like. And I think generally, the business was doing well, and that even continued into the first half of 2024. However, also on the back of a -- how do you say that, not-so-great summer, you've seen across the board globally actually a slowdown in consumer demand for those sun filters. And that market works such that in the end, there is also a stocking effect where if the retailers end up with inventory, basically, our customers are exposed to that, and that's the unwind that you actually see now. And it's -- yes, for a better word, a temporary effect because now you've seen that unwind, which is basically unwinding the strong sales in the first half that didn't find its way to consumers. But we also expect that to be out of the way. And actually, the quotation season is now starting for the new period in sun filters. So it's an impact that we'll see in the first half. We've seen that coming. That's why we also guided for it that it wasn't a surprise, but it's a sizable impact overall, but it's one segment. The overall dynamics in Beauty & Care, in skin and the like are actually good and continuing. Now to your margin question, Beauty & Care is a good margin business for us. Now what you typically see, and I know that you have to look at the P&L in a bit more detail and the like, the minute you lose a bit of segment in terms of sales, the underlying costs and the like are still there. So the absolute impact, you always have to compare that is the loss in business contributing to the overall profitability of the segment or not. Now and also sun filter is a profitable segment. But if that base sales is down there, you're missing a bit of leverage. But overall, P&B has a margin of close to 23%, and that's something that we're saying. That's also the trajectory that we continue. So there is a somewhat impact in the quarter, but nonetheless, a continued strong performance from a margin perspective, and we'll bring that. It's already within the '24 -- the '22 to '24 CMD guidance, but yes, I'd like to see the second number starting with a 3. So that is something that we'll continue to work on.

The next question is from Charles Eden from UBS.

Just 2 quick questions for me, please. So firstly, just on the ANH disposal. Can I just confirm that you'd still expect to communicate the selected acquirer in the summer? So I guess that means June, July. Is that still a fair time line? I think that's what you mentioned, sort of summer, at the ESG event a month-or-so ago. And then just to follow up on sun filters, am I right to say Q1 is the big quarter for this business, so around half of those EUR 200 million annual sales are typically generated in Q1, which in part explains the magnitude of that drag this quarter?

Yes. No time line yet, so don't quote me on the exact week or month, but that's the process that we're targeting. And you heard me say, it's a competitive process. So we're now moving into the next phase with fewer parties, and we need to see how we manage that through because as I said, it's competitive and that might take them 1 or 2 weeks more. But the aim is still to complete it within the time frame that you indicated. And again, not pinpointing on the exact month, but that's the intention. And that hasn't changed from earlier communications. So happy with that. And to the sun filters, sun filter business is more -- once a person explained it to me that I was running it and saying it's like an M. You have a strong Q1 and a strong Q4, and obviously, that's where the peak sales are in this business, but it's not half of the business that is sold in the first quarter. It's more -- if you look at it, it's about, I would say, just a little under 1/3 around that impact. So but keep in mind that Q1 last year was a bit of an elevated level and Q1 this year has really at a soft level, and that's why it's causing such a big gap. But other than that, yes, no other dynamics.

The next question is from Matthew Yates at Bank of America.

I had a specific question around your terpene business in light of Symrise yesterday announcing a strategic review of their asset. I believe DRT was, by some distance, the biggest deal Firmenich ever did at close to CHF 2 billion. So 2 questions around this. One, can you generally comment on how that terpene business is doing? I guess the fact you didn't rebuild your U.S. plant didn't send a very positive signal. Is there any impairment risk as to your carrying value of that business? And more broadly, to the extent the Firmenich team have come to you with further acquisition ambitions in due course to help them build out the platform, does this give you any pause and affect your comfort in allocating capital to what they may want to do, given that track record on the DRT deal?

Yes. Matthew, thanks for those questions. Now let me not comment on what competitors are doing, but look at ourselves. We actioned already last year. When we did the strategic review, we also commented at that point. And we said, look, Pinova is, for us, not a strategic ingredient. We worked on a solution with our customers, and actually, we decided not to rebuild the plant after that fire. And that was the synthetic part. Now if you look at the majority of DRP -- the DRT business is actually into naturals where we have extracts from pine and the like. And that is an essential ingredient going into our solutions. So if you look at the overall Ingredients because I think you have to zoom out and look at that. So overall, Ingredients is about EUR 1 billion. And on top of that, we've got quite a sizable portion, about 2/3 of that in size which is backward integrated for our own business. And of that EUR 1 billion, 2/3 somewhat higher is actually sold to the industry in terms of ingredients to third parties. Now there's a small piece left, and there, also as part of the strategic repositioning, we decided to focus on value over volume. So actually happy with the way the business is performing. P&B has done a good job in terms of integrating it and improving the performance. And you see that in the overall margin profile from a P&B that continues to increase, including also a contribution from DRT on that front. In terms of the actions, Pinova, we already exited. The alg oil ingredients are part of the tuning action. So that is for sale. And we also said we hope to be able to communicate a deal around that shortly as well. So within our business, we already addressed that. But with the part that we've kept, it's clearly focused around naturals, and that is something that we're very happy with as part of the portfolio. Now if you look at the M&A, you heard Dimitri say also no M&A in '25. We want to be prudent with that. So we'll do that carefully. We've got our clear priorities for 2025, which is executing the synergies, executing the vitamin improvement and executing the sale of ANH and completing the tuning actions. And that is what we're currently focused on. Now following that, we might look into that and some smaller bolt-on acquisitions. Now you made reference to the Firmenich family. I think that is not relevant. I think they're just any shareholder just like any. In the end, if there would be acquisition targets, then that is something that we'll assess over time. But like I said, it's currently not a priority for us at this point.

The next question is from Sebastian Bray from Berenberg.

Can you hear me?

Yes. Now we can.

It's on Ingredients, please, and built on some of the questions that Matt asked earlier. If we take this roughly EUR 1 billion, my understanding is that a little bit of it might either go with ANH or be divested separately. But if we take the remainder of the annual sales, what exactly are the primary drivers in there? And how has the profitability developed on -- in an absolute basis as opposed to just a relative margin basis between Q1 this year and Q1 last year? The slides don't reference it, but it's a pretty large sales component. In fact, it's bigger than beauty by some margin. And I was wondering how exactly the absolute EBITDA has performed and what the primary products driving this are.

Yes. No, what I said earlier, 2/3 is actually going into the fragrance space where we basically sell ingredients to the industry. We have the widest portfolio of strategic ingredients. And with that, we see this as a value-add in our portfolio and a differentiating element going forward. And that continues, and that is the driver. So it's also linked to the overall dynamic in fragrance. And as said, there are some side products that come out of the plant as load, and we continue to monetize those. You can look at the absolute EBITDA, but then you would have to go into every single segment, which is not the point. We steer our business on a portfolio, and with that, we steer the overall growth. And if you look at it from an organic growth point of view, we've seen an encouraging growth also in the Ingredients part of the portfolio, in line with generally perfumes. And from a margin perspective, that if a segment would not be performing, we could not see a continued step-up in terms of margin profile. And that is what we're focused on. And that's what I said is that, I mean, we did 22.7% as margin in Q1, with the aim to continue to improve that going further, including Ingredients. So both in terms of margin and in absolute, you'll see a continued step-up in that business, too.

Operator, we have time for one last question, looking at the -- that we are approaching the hour.

The final question is from Martin Roediger from Kepler Cheuvreux.

Yes. Firstly, can you explain the negative price effect in Perfumery & Beauty and in Health, Nutrition & Care in Q1? Is it just a pass-on of lower input costs to your customers due to contract design? And secondly, one clarification question. Did you say that the disposal of marine lipids in HNC had a minus EUR 10 million EBITDA effect in Q1?

Yes. No, happy to comment, Martin. No, so the overall pricing is, as you say, also, if you look at the breakdown on the segments, this is typically in the Ingredients space, so where we pass it on. And you also see that in terms of the margin. We don't have any loss in terms of pricing on the contrary. I think looking at our portfolio and the segments where we are, we are in a position where, if needed, we can pass that on. I also made that comment in relation to the tariffs where we're trying to mitigate the impact. But overall, where needed, we are able to pass that on. But where not needed -- and in terms of the pricing in some of the ingredients, we also saw that at the end of last year where we said, look, it doesn't have an adverse impact on margin. But in some of those contracts, you have a contractual agreement that you pass on the benefits from procurement. The same effect in HNC. That's more a bit of a mix. You don't have a passing-on of the materials and the like, and it's often where the rounding is. So it's a minor thing. It's not a concern for us in terms of pricing. We're also not losing pricing strength on that front. But sometimes, you have a bit of a slightly different mix where you have a rounding. So we're also not guiding for further negative pricing on that front for the year. Then to your question, the EUR 10 million. Now the EUR 10 million is for overall, so yeast extracts and marine lipids. That's also what we said, factored in about EUR 10 million a quarter for the carve-out of these businesses. So the impact would be roughly half-half, but obviously, it depends a bit on quarter-to-quarter. And instead of guiding you for the overall EUR 1 million per business, we said, look, it's EUR 10 million overall from a group perspective for the 2 divestments combined, yeast extracts and marine lipids, so it's not a minus EUR 10 million only in HNC. Although in Q1, there was a bigger part of that EUR 10 million actually in HNC, to your point.

This concludes the Q&A session. I will now hand back to Mr. Huizing.

Thank you, operator. But before we finish, let me first hand back to Ralf to make a few closing remarks. Ralf?

Yes. No, happy to do that. Thanks for that, Dave. Maybe summing up and repeating a bit, but we had a good start of the year with strong organic sales growth and earnings growth. And we started Q2 well, with the business conditions continuing into April. We're well placed with our portfolio to mitigate the impact of tariffs. And we're taking the necessary actions with our suppliers and our customers to mitigate it where possible and, if needed, pass on those effects. And with that, I think we have a clear path on 2025 priorities, and I want to repeat them. We will drive organic growth through innovations. At the same time, we will focus on the delivery of our synergy commitment, EUR 100 million step-up in EBITDA, driven by both cost and sales, and we'll continue to focus on the vitamin improvement program, improving the underlying business performance of vitamin business that we're divesting. On that front, we stay the course as well. We're confident to sell the business in 2025, and we will also complete the tuning actions in 2025, such that we can focus on anchoring what we've got and growing the businesses that -- of the portfolio that we have built. And as a last reminder, we continue to execute the share buyback. We're leveraging our strong balance sheet. So we'll try and finish that as soon as we can as that. And I think it's nicely summarized in the title on this slide. We continue our journey. And with that, back to you, Dave.

Okay. Thank you, Ralf. Thank you all for attending today's call. And with that, we conclude today's webcast. And of course, please don't hesitate to reach out to the Investor Relations team for any follow-up questions you have. And with that, I hand back to the operator.

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