Firmenich International SA (DSFIR) Earnings Call Transcript & Summary

[Audio Gap] Ourselves on our capacity to work in partnerships with customers and other parties to create new products and solutions as well as entirely new product categories and science-based innovations. Ours is a business that has continuously evolved. And over the past 20 years or so, we have made bold strategic moves to focus ever more on health and nutrition. As we have done so, a purpose-led, performance-driven mindset has been our guiding spirit. Over the last few months, I've gotten to know Firmenich much better, and I see many similarities to DSM. A proud business with science at its core with an equally impressive history of innovation, investment and growth and which has the same deeply rooted commitment to sustainability. This gives me enormous confidence in the great potential of our combination. Because successful mergers in my mind depend not only on complementary capabilities or compelling financials, which we certainly have. And they not only demand a balanced governance and the respect for the interest of all stakeholders, but they crucially require shared values. My colleagues and I are convinced that we have all those elements together here. And it is for this reason that after extensive and careful consideration, the whole Supervisory Board of DSM concluded that this is truly a merger which is in the interest of our stakeholders. I just believe that we have a tremendous opportunity ahead of us, and I'm personally committed to make this combination realize its full potential, together with Patrick to whom I'm now pleased to hand over.

Thank you very much, Thomas, and good day to everyone. I am Patrick Firmenich, the Chairman of Firmenich, the role that I have held since 2016. Prior to 2014, I was Firmenich CEO for more than a decade. Thomas, without a doubt, I share your excitement for the future of DSM-Firmenich. Firmenich is a fifth-generation company, which started in Geneva in 1895. Since then, our company has evolved into a global leader in the taste and perfumery industry. We employ more than 10,000 people across the world, including the largest creation community of price-winning masters in perfumery and taste. Firmenich has always been a leader and has never been afraid to take bold decisions. Firmenich and its shareholder have never held back and have always done the right thing for our customers. Since the very beginning, we were very quick to develop key customer relationships in major cities such as Paris, New York and London. Today, we operate in over 100 markets around the world, including a significant presence in China and India, among others. We have always been and continue to be a pioneer in science and leading innovation. In 1939, a Nobel Prize in chemistry was awarded to our Director of Research and Development, Leopold Ruzicka, for his revolutionary work cementing our legacy as a perfumery ingredient leader. And once again, this past year, we were associated with a second Nobel Prize. We were also the first company to set groundbreaking standard on ESG commitments, and we have been operating in accordance with public and international company standards as a [indiscernible] company for decades. In DSM, we see a company which share our purpose-led approach, a company which strive to lead in science and break new ground like we do and a company that shares our deeply held value about how we engage with our various stakeholders around the world. With this merger, we are combining ourselves with a highly complementary partner that brings together Firmenich's unique industry-leading perfumery, ingredient and taste business and its associated co-creation capability together with DSM unmatched health and nutrition portfolio, capabilities and expertise that will enhance the experience and the proposition for all of our current and future DSM-Firmenich customers. I'm confident that the creation of DSM-Firmenich will accelerate growth. for both us and our customers and provide many new opportunities for our employees. Our people have been at the heart of the success of Firmenich for more than 125 years. And I have no doubt that the combination of colleagues across Firmenich and DSM will help shape an exciting new journey with much success for years to come. The most exciting times lay ahead of us as DSM-Firmenich. And this is a development that all of our stakeholders can be excited about. Speaking personally for a moment. I would be excited to serve as Vice Chairman of DSM-Firmenich alongside Thomas as Chairman and my fellow Board colleagues. The various Firmenich shareholder are also excited and committed to be long-term shareholders of the new company with a focus on long-term value creation. I will now hand it over to the co-CEOs of DSM and the CEO of Firmenich to [indiscernible] you how this transformational combination will be delivered. And while together, DSM-Firmenich will build on iconic [indiscernible] and accelerate progress. I will now hand it over to you, Geraldine.

Hello, everyone, and nice -- thank you very much for these introductory statements, and welcome from me as well to this investor call, which, today, of course, we're going to -- although there's been 2 announcements, as they said, we're actually going to be focusing predominantly on the merger. Now this is an exceptional way in many respects. Now normally, when 2 companies come together, you get to hear from 2 CEOs, but this is a special [ base ], so you're going to hear from 3 CEOs. And so it's my honor and pleasure to be the first voice today. Now why are we here on this call? Well, as you have read, we have announced today that DSM and Firmenich will be merging. And these are 2 great companies. On the one hand, you've got DSM. We are the innovators in the health, nutrition, bioscience space. And Firmenich is really the creator when it comes to flavors and fragrance and taste, also extremely strong on data analytics, for example. But not only are we 2 leaders, 2 strong companies getting together, we also have a very strong track record of having individually delivered on our results, always with above-market growth at good margins. And in fact, we both have a lot of upside on a stand-alone basis. Now the other things that we have in common is, of course, a core of science. And the science has led to a very strong pipeline of innovations, innovations that have been underpinning our long-term growth all of these years, and we'll continue to do so. The other thing that we have in common is for sure that we are purpose-led. And as you know, certainly in the words that we use, purpose-led, performance-driven, we know that Firmenich feels the same and that we know that when you have a very strong input to bring a positive impact, that actually underpins your performance in the long term as well. So in short, as is recapped on the slide, we're pretty convinced that today, we are on the way to creating a real industry leader, an industry leader in nutrition, beauty and well-being. But it's one thing for me to say is but why not find out a little bit more as to the why. And for this, I hand over first to Gilbert. Gilbert, over to you.

Thank you very much, Geraldine, and good morning and good afternoon, everyone. It's like Thomas, Patrick, Geraldine and Dimitri, I am extremely excited that through the combination of these 2 iconic companies, we will establish the leading creation and innovation partner in nutrition, beauty and well-being: DSM-Firmenich. This merger brings together Firmenich unique industry-leading perfumery, ingredients and taste businesses with DSM outstanding health and nutrition portfolio. DSM-Firmenich will comprise 4 high-performing and complementary businesses, each with pioneering leading positions and underpinned and empowered by world-class science. First, Perfumery & Beauty. Here, Firmenich, the leading creator of positive fragrances and beauty products undisputed leader in naturals and renewable ingredients will expand into beauty through DSM's Personal Care & Aroma business as a perfumery and beauty. Second, Food & Beverage / Taste & Beyond will form a global scale partner to food and beverage industry with extensive capabilities in taste, nutrition and functionality. Human Nutrition & Care will continue development as an end-to-end partner providing customized quality solutions that support the health of people at every life stage. And the fourth business unit, Animal Nutrition & Health business will continue to focus on specialty science and technology-driven solutions to make animal farming radically more sustainable. The new company will be supported by world-class foundation in science and technology, vertically integrated portfolio of nutrition, naturals and renewable ingredients as well as best-in-class business functions. Together, DSM-Firmenich can better anticipate and address needs of today's conscious consumers, prioritizing sustainability, hygiene, sanitation, health and well-being. And here, I hand it over to Dimitri.

Thank you, Gilbert. Let me build on what you just eloquently explained. Let me build on that, leading creation and innovation partner in the space of nutrition, beauty and well-being. This merger will establish that leading partner. It is an unparalleled unique combination with unique skill sets. And that merger, DSM-Firmenich, can address what the world needs in terms of solutions around health and nutrition, around sustainability, around hygiene and sanitation as well as well-being. And we will have 4 high-performing businesses uniquely positioned to anticipate and address these consumer needs, as Gilbert just already explained. The company itself will be around EUR 11.4 billion in sales and a EUR 2.2 billion in adjusted EBITDA, surely one of the largest players in our industry. With a strong 5% to 7% sustainable organic sales growth and a mid-term adjusted EBITDA margin of 22% to 23%. This will be driven by a EUR 350 million run rate of EBITDA synergies, of which more than 50% will come from revenue synergies and especially from combining DSM's Food & Beverage with the Firmenich Taste & Beyond business. Together, we will strengthen our potential for a purpose-led creation and an innovation company. A Swiss-Dutch global company listed on the Euronext Amsterdam that at the inception will be owned by 65.5% of DSM shareholders and 34.5% by the various Firmenich shareholders. And you in the call, you already know quite a bit about DSM. And if not, then I think Geraldine and myself didn't do a good job. So we just assume you already know quite a bit about DSM. But let me ask Gilbert as CEO of Firmenich, to explain a bit more of what a fantastic company Firmenich is and what it stands for. Gilbert?

Thank you, Dimitri. Firmenich is the hidden jewel of the fragrance and taste industry. It is the world's largest privately-owned fragrance and taste company and a pioneer in our industry, having been founded in Geneva back 127 years ago. And we are here today because our shareholders who have long been visionaries in our industry, have recognized that we must open up our capital if we are to continue to lead. After careful evaluation, we concluded that a merger with DSM, a highly complementary and like-minded company will enable us to accelerate the delivery of our strategic ambitions, creating greater value for all our shareholders. For those of you who have not had the opportunity to get to know us before, I'm excited to introduce you to the world of Firmenich. Our ingredients touch the lives of 4 billion consumers around the world every day. The Firmenich brand is synonymous with excellence in innovation, pristine reputation and intimacy with the world's highest quality customers. Our longevity and success are due to 4 key elements: Firstly, our passion to innovate with our customers. Our business is consumer-driven, building on clear consumer insights and anticipating consumer needs. We leverage these insights through our industry-leading R&D capabilities to help our customers win; secondly, we lead with differentiated and proprietary ingredients. We have the widest and broadest pallet of natural, synthetic, renewable, biodegradable and biotech ingredients. And as the most vertically integrated player in our industry, we were able to weather the supply challenges of the recent years and maintain top service for our customers. Thirdly, we have demonstrated passion for performance. We have led the fragrance and taste industry growth over the last 15 years, and we have delivered industry-leading profitability through the cycle. We consistently provide best-in-class service to our customers, delivering the highest quality products in a timely manner; finally, we are defined by our values. Firmenich is a company that cares about all its stakeholders and our leadership credentials in this space are widely recognized. Let's turn now to the details of our business. Our innovation enabled us to deliver a track record of attractive organic growth of 5% per annum since fiscal 2013, while maintaining a strong profitability profile of 20% EBITDA margin lately. We are a leader in our industry and specifically, in perfumery and ingredients and with a very strong global taste business. We are a research-driven, innovation-led organization dedicating more resources to R&D as a percentage of revenue than any of our competitors, and this gives us a significant competitive advantage. We are a global player of scale serving over 100 markets with around 10,000 colleagues and 47 manufacturing facilities around the world. And we are defined by values that are aligned with a strategic commitment to deliver long-term sustainable growth, and we lead the industry in responsible business. Let me now turn to our businesses. We are a global leader in the fragrance and taste industry. Our Perfumery & Ingredients business contribute 2/3 of our revenues. We live across all perfumery and ingredients segments. Our #1 in fine fragrance, partnering with perfumery customers to design and customize their unique fragrances. We are global #2 in the personal, body and home care segment, and we are the global #1 in fragrance and taste ingredients, with a broad portfolio that includes proprietary molecules and the world's leading portfolio of naturals, renewable and biodegradable ingredients. And our master perfumers and master flavorists drive differentiation for customers through superior science, innovation and local consumer sites. Our Taste & Beyond business represent 1/3 of our revenues. We are a leading global player in taste with a great portfolio of products across all subsegments, sweet goods, beverages and [ savory ]. And our global scale is a key advantage that we have developed over decades of partnerships with key customers around the world, global customers, regional customers, local customers and successful start-ups, and we figure out a model to win with the winners. And we have expanded our commercial reach by investing disproportionately behind the new emerging categories, applying our innovation capabilities to build proprietary solutions and secure a leadership position on major structural mega trends. And just to name a few, in plant-based protein, we are recognized as a leader in our industry, started working and investing behind this category 7 years ago and working and supporting the key start-ups that became leaders in this space. We are the leading player in sugar reduction in our industry with the most developed ecosystem that will secure this leadership position for decades to come, and we have a leadership position in naturals and clean label ingredients. We are well positioned to capitalize on structural growth trends in both developed and growth markets, and our revenues are split roughly evenly between the two. The U.S., China and India are 3 of our top 4 markets globally, and we are recognized as a local company in each of these markets. We have demonstrated our resilient long-term financial performance, growing organic revenue ahead of the industry at 5% CAGR and gaining share as well as weathering the COVID crisis solidly. Fragrance and taste is an attractive industry, which enjoys the tailwind of very strong structural growth drivers and fundamentals. We are focused on delivering sustainable and profitable long-term performance by aligning our innovation capabilities against the highest growth segments and consumer trends. Our consistent performance is a [ testimony ] to the strength, diversification and resilience of our business as well as our commitment to execution excellence. In addition, our business model has proven its ability to serve a broad range of customers, globals, regionals, locals and successful start-ups around the world and we are winning with the winners. Our fiscal year '22, which ends on June 30, 2022, so our fiscal year starts on July 1, and finishes on June 30 has been a year of growth, leadership and excellence in execution. We expect to close the fiscal year, so in a month's time with over 9% organic revenue growth reaching more than CHF 4.6 billion and adjusted EBITDA of more than CHF 900 million, including the pro forma impact of completed acquisitions we expect an adjusted EBITDA of more than CHF 910 million. As I shared with you already, and you heard from Patrick in his opening words, we have a strong track record of innovation-driven growth underpinned by world-class science. We are a research-driven organization and our relentless commitment to innovation is at the heart of our continued success. We proudly carry the legacy of a Nobel Prize received back in 1939. And today, we are honored to be the only fragrance and taste company recognized in the LexisNexis Global Top 100 companies in the world for their innovation alongside the likes of Apple or Google, just to name a few. Our innovation is focused on addressing the structural trends that are driving growth in our industry. And we devote a larger proportion of revenues to R&D than any of our key peers. We employ 450 scientists around the world in 6 major R&D centers with a portfolio of over 4,000 life patents. We have deep expertise in a broad range of disciplines, including cellular biology, organic chemistry, sensory or cognitive science as well as biotechnology among other areas of expertise. Leveraging superior consumer insights, our research supports our ability to develop creations and applications that delight consumers across both Perfumery & Ingredients and Taste & Beyond. As Patrick has mentioned and I mentioned already to you, sustainability has been ingrained in our history and in our DNA as an organization, and we are extremely proud to be the clear leader in ESG in our industry. As you could see on this slide, we are a company that [ wants ] to talk on the responsible business. This is a source of trust and differentiation for our customers, investors and all our stakeholders. Sustainalytics ranked us as leaders in our industry and the broader chemical sector. but also in the global top 50 of over 15,000 companies. We are 1 of only 2 companies in the world alongside L'Oreal to have received a AAA rating from CDP in climate, water and forest for the fourth year in a row. And since February 2020, we have run all our operations around the world on 100% renewable electricity, which is again an industry first. To wrap up, we take great pride in being a trusted partner to our customers and have a passion to innovate with them. These are deep relationships that we have nurtured for decades. Our results demonstrate our passion for performance with consistent profitable growth, driven by our digital transformation, deep consumer insights and our leadership in science that allows us to capture growth opportunities. We are clear leaders in naturals and renewable ingredients, and we have a differentiated portfolio and distinctive technology. And we innovate in the highest growth segments, naturals, clean labels and origin traceability as consumers increasingly focus on well-being and healthy food and beverage choices. We are proud of our 127 years legacy of responsible business which is a core part of our heritage and is consistent with our values and company purpose, and we continuously raise the bar in our industry. I am excited that the legacy of Firmenich will carry on proudly in the creation of a new industry leader that will continuously innovate for a better world, DSM-Firmenich. And with that, I will hand it back to Dimitri and Geraldine.

Thank you, Gilbert, for the fantastic story and what a fantastic company. And you started your presentation with Firmenich being a hidden jewel. But after this, I think a hidden jewel no more. It's out there in the public. And I think something new, but also us as merger partner, are proud of and thank you very much. So let me just to complete the picture of the story before we go into the DSM-Firmenich merger. A recap a little bit about DSM, just to refresh your memory. And if we go to the next slide, a bit of the company DSM was and where we stand for and how we have transformed into becoming a leader in health, nutrition and biosciences. And I would like to say that we have a rich heritage of that transformation. And we started, as you perhaps know as a coal mining company. We added a fantastic yeast enzyme production at scale by Gist-brocades. And in the 1930s, I think the company of [ Roche ], which we basically have merged into our portfolio 15 years ago, became the platforms of our science based as we are as a company. The last 20 years, there was a clear shift towards health and nutrition. Last year, we announced the full focus to accelerate that company towards health nutrition and biosciences. And at the same time, we explained that we were reviewing strategic options for all our 3 materials businesses. Well, here we are. At today, where we also have announced -- Geraldine said in the beginning, also the last bit of finding a new owner for our third materials business, Engineering Materials. And I think that also closes a whole of a transition on the materials front. And that was on the one hand side. On the other hand side, our health nutrition business continued to accelerate. Our science continue to be at the core and the driver of our market growth with attractive markets. Addressing major challenges as they exist in our food system. And we have positioned ourselves in very highly attractive markets with differentiation. And if we then go to the next slide. This is, as you are used to by DSM by now, we always have our strategy on the one slider, although sometimes it looks complicated, but in fact, it's not, it has just 4 steps where we go from macro and what's happening in the market into our unique business model towards commitments to the world, but also towards improving our own footprint to building that growth company with an ambitious target, which we have been delivered against year after year after year. But with that fantastic story on Firmenich, with, I think, a recap of the transition journey of DSM, I think now it's time to lay out a little bit the strategic vision of DSM-Firmenich. And let's do that. Let's reflect on what DSM-Firmenich would like to stand for. If we go to the next slide, we want, and I will make it a bit of a repetition. We will lead creation and innovation to become a nutrition, beauty and well-being company. The outcome is that the combination of these businesses is a well-balanced business across 4 core divisions. And I think we already alluded to it. All these businesses will be powered by digitally-enabled business models with science at its core. The science of Firmenich, coupled with the science of DSM is absolutely an unparalleled combination. And we will have global capability to meet the needs of our customers locally. We'll be EUR 11.4 billion in size in terms of turnover with a EUR 2.2 billion adjusted EBITDA, approximately EUR 350 million total run rate synergies. And this combined group is uniquely positioned to address the consumer trends of today around health, nutrition, hygiene and well-being. Coupled with a strong science base and a [indiscernible] integrated portfolio of naturals and renewable ingredients, what the world is asking for. And doing so, that company would be retaining, very passionate and talented and diverse people who wants to work for this really fantastic company, which then is called DSM-Firmenich. Let me give you some highlights on the 4 businesses. 4 complementary and high-performing and resilient businesses, Perfumery & Beauty. We will continue the strong leadership position in perfumery, and it will be combined with DSM's Personal Care & Aroma business. And this combination will open further opportunities to grow the business in beauty. And the combination in itself as a business group will be a EUR 3.3 billion business. Food & Beverage and Taste & Beyond will undergo the biggest transformation with both parties. DSM's Food & Beverage business and Firmenich's Taste & Beyond business will create a business group good for EUR 2.7 billion business top line. And it will all be about delicious, nutritious and sustainable products. And you might wonder about the name, Food & Beverage/Taste & Beyond. Don't worry, this is not the new name that is still to come. Then the third business group, Health, Nutrition & Care will continue to focus on keeping the world's growing population healthy. And Animal Nutrition & Health, where we'll continue to focus on providing sustainable and affordable animal protein solutions for a growing population. And as you know, animal protein is a critical part of a healthy diet. And therefore key to our overall mission of nutrition, beauty and well-being in a sustainable way. If we then go to science, I already said it a few times. And if you go to the next slide, you get a bit of a feel what it will mean in the combination. It will definitely be a science leader. It will have unique capabilities that both bring Firmenich and DSM, and it will be complementary to each other as well as broadening the offering. We will have over 2,000 employees in science and innovation across 15 R&D facilities, 40 creation centers and levering a portfolio of more than 2,600 patents. Both companies run successful R&D programs, addressing the most pressing needs of consumers and society with really transformational innovation. And as DSM-Firmenich, we will continue our commitment to that innovation because that's what we built on, creation and innovation. Building on a pipeline and a track record of delivery and supported by more than EUR 700 million of annual R&D investments. A business that will deliver breakthroughs and captures the value of innovation from discovery throughout commercialization. Then a little bit about the vertically integrated supply chain, a key issue of a successful company over the last 2 years. And I think DSM and Firmenich basically have done very well in their integrated supply chain in a disruptive supply situation over the last 2 to 2.5 years. It's an incredible footprint of capabilities which we have as a combination. And we will be able to address customers locally in our creation centers, in our application labs, but also with about 70 premix sites and 88 manufacturing sites around the world. The recent events of the last 2 years show how important that is for our customers. And we, as a combination, provide even greater resilience and deepen trust with customers to make sure that we are there for our customers when it really matters. So overall, a global company really where our people will thrive because our people will make the difference. Our people will drive that future success above anything else. And I'm very happy and very proud to say that we have highly cultural line businesses, driven by purpose, caring for our people, and we've seen this in the discussion over the last months. And we also know this is a major driver for the engagement of all of our people across the 2 companies. A company with learning and career development opportunities, a growing company and a business where anyone globally and locally wants to make a positive impact. Let me finalize on [ what ] we stand for. Gilbert already stated that Firmenich is a purpose-led company. You know from DSM that we are a purpose-led company. We will continue our purpose-led commitment to people and planet. We are purpose-led at key and at core of both businesses, and we have had wide recognition and worldwide leading partnerships to build on this. Together, not only we can achieve more for shareholders, we can achieve and will achieve more for all stakeholders, delivering a positive and a measurable impact for people, climate and nature. And with that, handing over to Geraldine to give you some insights on the governance and the financials. Geraldine?

Thank you -- yes, I did unmute. Thank you, Dimitri. Thank you, Gilbert. And I hope that you are all on the line realize why we're so excited about creating DSM-Firmenich. Now there's, of course, a lot of information and my red pen is ready for the Q&A. However, I'm also aware that our press release was 13 pages long and that there is quite a lot of information in there. So probably worth running through a few more pieces, before we open the Q&A, on governance, on deal structure and on financials and synergies. So let me dive in, and it will not be an exhaustive from end-to-end explanation, but still the main point. So let me start with governance. Now of course, a new company requires a top structure. And what you will have seen in the documentation is that the Board of Directors of DSM-Firmenich will be basically made up of 12 Board members. Our Chairman and our Vice Chairman, you have heard already today. So Thomas Leysen as the Chair; and Patrick Firmenich as the Vice Chair. Now also, we will have on the Board 3 representatives of Firmenich, and actually an independent coming from the Firmenich Board as well. And then that leaves basically 8 independents, of which 7 will be coming from DSM Board. So basically, a very balanced board because we really want to retain in this merger of equals the knowledge and the legacy that's coming from both sides to drive forward this company together. And as well, I want to point out, of course, a long-standing commitment to best practice when it comes to governance, which is already in place to be fair in both boards today. So very, very solid board coming together. Now when it comes to the executive team. Here, we are looking at an 11-member executive team. And today, we are only able to mention a few names. Firstly, of course, Dimi and I feel honored, excited, privileged at the prospect of continuing in our CO-CEO model to lead DSM-Firmenich. And we're very glad that Emmanuel, who is currently the business leader on the Flavors and Taste business has agreed to be leading the integration. It will be a very key role. And again, in a merger of equals, it's extremely important to have a very balanced and fair structure when we're thinking about integration. So Emmanuel will be taking this critical role. As for the remainder of the top team, we are not in a position to announce it today, which is actually quite normal. But please believe us when we say that we have a very deep pool of talented senior executives and that we will be communicating this in the near future. It will be a very balanced team as well. Again, this is a merger we call so that is a very logical step. So that's in terms of the top structure of the organization. Now let me run through a couple of slides that you have seen in the deck and hold a lot of information. So again, I will not run through it from top to bottom. But let me use this slide to point out a few key things as to why is this truly a merger of equals? Well, firstly, it's a structure that we've put in place, which really fits that concept. So it will be a new co within which we will be contributing DSM and Firmenich. So in the case of DSM, of course, we are a listed company. So that will be a public offer, tendering the shares and basically a one-for-one exchange for DSM share to a DSM-Firmenich share. Now once this is in place, we will be seeing basically the shares of Firmenich being contributed as well and with a EUR 3.5 billion of cash in addition as consideration. So that is the structure. Now what does this structure lead to in terms of location? Well, importantly, on an investor call, DSM-Firmenich will be listed on the Euronext in Amsterdam. The domicile or the seat of the principal company will be in Switzerland, in Kaiseraugst, which makes it a Swiss domiciled company with Swiss governance rules. And operationally, we will have a dual headquarter. So 1 headquarter, dual location because we really want to leverage our existing strength, both in Kaiseraugst and in the Netherlands in Maastricht. So dual headquarters. When it comes to where will the businesses be led from, I think it's worth also pointing out that here, we are basically using our established strengths. So our Animal Nutrition business and HNC, who are current -- that are currently laid out of Kaiseraugst in Switzerland will continue to be led in that location. The Perfumery & Beauty will be led out of Geneva, and this temporary named Food & Beverage/Taste & Beyond will be led out of Delft where, by the way, we will also be leading -- from which we will also be leading the global biosciences network that is so exciting about for both of our companies coming together. Also, when it comes to the research & innovation, I want to point out that the research behind the perfumery business, behind taste will be remaining in Geneva and behind ingredients as well, of course. That has lived and [indiscernible] of a very rich ecosystem in Geneva, and that will continue. So that's from a location point of view. And I would like to then move briefly to what kind of structure do we end up on the tendering. Well, just pointing out here, that at inception, we expect the shareholders of DSM to hold 65.5% of new co, DSM-Firmenich shares, and that the various shareholders of Firmenich will, in aggregate, hold 34.5% at inception. Now last but not least, you've seen some figures on this slide that are -- if you go back one, just briefly, looking at enterprise value, I just want to point out here, this was last night or first thing this morning, but before the announcement. So this was run off a very different share price than you have right now for DSM. So in short, what we're bringing here is 2 companies together, and I will be touching on the synergies. But I just want to here finish off with value creation. Of course, we have been looking and spending 99% of our time looking at how do these businesses not only continue to be strong in themselves, but how do we create synergy value. And you have seen figures that I'll come back on with basically EUR 500 million of top line, EUR 350 million of adjusted EBITDA. Now when you bring all of that together, this very much creates a picture of EPS accretion at least double digit. And that is why we are so convinced that this is a great, great news for all shareholders today. Now moving to the next slide, quite a bit of information in here as well. Some I have covered. That is the governance. I will not really touch on that again. But let me just talk about what are broadly the next steps. And really here, I am not a lawyer, so I'm going to simplify. But as I said, the process will require a tender offer. And it is, therefore, necessary for us to issue all the documentation around that, the prospectus. And that will happen in the course of the second half of this year over the summer or early autumn. From the moment, this documentation is available. The tender period will start. And during that period, we will have an EGM. The EGM is there to approve all different pieces of this transaction. And that is a necessary step that will then enable the actual tendering itself once the DSM shareholders have been done with the tender process then we will have the contribution of Firmenich. Now these are multiple steps, which does put us on a timeline of looking at a completion of probably somewhere in the first half of 2023. Now moving to a few financial informations. Here, of course, you've heard me talk already about the synergies. So if we go down 1 slide. This is very critical and a big part, of course, is the value creation, although not the only part because there's also an overall valuation of the combined company that will come into play. But we have spent a lot of time looking at this. And this is very much a growth story. And you see that from the figures. So we expect that the EUR 350 million of synergy will come 50%, 60% from top line. So a real step-up of EUR 500 million. And also, like always, when you combine companies, you have an element of efficiency. Now when I come to the top line, of course, we've been talking about Food & Beverage and Taste & Beyond as being a very logical area where our capabilities are going to be very complementary, but it's not the only part. And you see here on the right-hand side that in the Health Nutrition & Care business, taste also matters. So if you think about medical nutrition, or if you think about dietary supplements where we know the trend towards gummies, for example. These are areas where we definitely see some synergies. And of course, we have our Personal Care and Aroma business that Dimitri mentioned, will be then combining very strongly with the perfumery business leading to this Perfumery & Beauty pillar. So multiple revenue synergies. When it comes to the cost synergies, here, we have to think about, of course, scale, whether it be end-to-end supply chain elements, whether it's direct and indirect sourcing, logistics, et cetera, et cetera. There's lots of areas where we will be seeking to, of course, be as efficient as possible. And when you bring 2 companies together, of course, you get also some scale benefits in terms of all of the functions that support all of these businesses. Now in terms of the cost to implement these synergies, you saw it in the documentation. We expect about EUR 250 million. [Technical Difficulty] Okay. I believe we are back live. There was a slight technical glitch. So let me just then finish off on the synergies. I was just at the point of saying that there will be a cost to deliver those synergies. We've estimated this EUR 250 million, most likely over a couple of years. And the kind of costs here are, of course, all of the integration costs around the systems, around our footprint, et cetera. So all in all, of course, very positive value creation here. Now if we take it to the next slide, you have here basically the pro forma financials. Yes, that is it. So you have the financials of 2021 on the left-hand side. As you can see, we become clearly an EUR 11 billion-plus DSM-Firmenich company. On top of that, you can expect the sales synergies. And that also underpins the midterm ambition of going to a 5% to 7% organic growth midterm ambition. The synergies on the earnings line, of course, will help us in terms of margin as well. So you have seen that we're indicating a midterm ambition of a 20% to 23% adjusted EBITDA because we do intend also to reinvest. This is a growth story as well. A couple of points to highlight. Of course, cash generation, I think it's very key to know that due to the structure and partly due as well to the announcement today of the divestments, this new company will have a very strong balance sheet, which is also a very healthy place to start and an effective tax rate broadly in line with the DSM one of today. So last but not least, 1 last slide, and we will open the Q&A just to finish off the financials. Let me touch on some financial policies. Back to the strong balance sheet. Here, we are really committed to a strong investment grade. That has been very helpful to us in the past. We think it's a good thing to have in the future. So we're really looking here at a leverage of 1.5x to 2.5x as a benchmark, and our dividend policy will be a payout ratio of 40% to 60% as a newco. And I have already commented on the EPS accretion, value creation. That is a very clear picture beyond any sort of overall valuation uptick linked to the quality of the business together. Now with that, Dave, I think it is time to open the Q&A. So let me grab my pen while you introduce it.

Okay. Thanks, Geraldine. This one can start. [Operator Instructions] And since we have already a lineup, I suggest that we start. So operator, please let us have the first question.

[Operator Instructions] The first question is coming from Mr. Matthew Yates, Bank of America.

Congratulations on the deal. The first question is really around the integration of the respective businesses. And in particular, Emmanuel's role. He's been appointed Chief Integration Officer. Was it important to you that this role comes from the Firmenich side, given they're the ones that are going to be absorbing the majority of the DSM assets? But in particular, on Emmanuel, is there experience during his time at Firmenich in terms of assets that he's integrated or anything in the prior points of his career that can give us a sense as to his experience and capabilities in this very important role? The second question is around framing the revenue synergy because I think Dimitri said a few times on this call, it really is a unique combination of assets. So the EUR 500 million is about 4.5% of pro forma sales, perhaps 5% if we strip out the animal side. Any more context as to why you think this is a reasonable working assumption? And as we think about the event you've got lined up on the 13th of June, is the intention to elaborate more on the combination benefits at that event? Or is it more just to familiarize ourselves with the Firmenich portfolio?

Matthew, thank you for joining us. And let me answer your last question very first, before I hand over to both Dimitri and probably Gilbert as well on the integration because this is a critical, critical topic, for sure. Yes, the answer is the Capital Markets Day, and I was going to keep that to the end of the Q&A is on Monday, the 13th of June. And we would love to have all of you there because it's exactly the purpose. We knew that over a call like this, we can't provide the quality and the depth of information around where the synergies are going to come from, from a product development, going to market, customer, et cetera. So it's a big resounding, yes, and I hope we're going to see you there, Matthew. But let me hand over -- Dimitri, do you want to kick off on integration and then maybe, Gilbert?

Yes. Maybe I say a little bit about the synergy and how we came about EUR 350 million number. So we clearly went through all the businesses. We've looked at the combination. I think we said it before, I think DSM is strong in Health & Nutrition. I think Firmenich is very strong in everything that has to do with sustainability, natural ingredients and flavors and fragrances. And the interesting is that in today's world, it can be very healthy. It can be very sustainable but if it doesn't smell or taste nice, it's not going to work. And I think, therefore, it makes really a unique combination with the science at hand. And I think Gilbert alluded to it very, very eloquently on how strong that science base is in flavor and fragrances. So that's one. So what you're going to be looking at is that we have all types of products like, for instance, the plant-based burger. I mean we all know that nutritional value of that plant-based burger is important. It is more sustainable because it's using natural ingredients. However, it also needs to taste well. So this is a nice example where it all comes together. Also on dairy products with yogurts, where we bring in vitamins, but also the probiotics, which is good for your good health; where we use dairy products, and hopefully, in the future, also be used from milk from cows who have Bovaer with the reduced methane profile; but also having a plant-based yogurts and milk, it needs to have the right taste and flavor. So I think it's a unique combination which we bring again, and we've looked at it. And I think part of that synergy, the dominant part of that is really bringing products to market where consumers are asking us today to develop. And I think the combination of DSM and Firmenich makes that a unique combination. Then lastly, and then I hand over to Gilbert. On the Chief Integration Officer role, a hugely important role, and we had made a very validated decision that we wanted to have, in the leadership team, a balanced representation of this merger of equals. Therefore, first, we look at capability. I mean don't get me wrong. It's first the capability set, and Gilbert can allude to it because he already worked for quite some years with Emmanuel. But it's clearly capability, but we also had a preference to have someone from Firmenich to help that because it needs to be balanced. So the Co-CEO is coming from DSM, can learn quite a bit from Emmanuel in integration and the other way around. So it was a very validated upfront-made decision. And maybe Gilbert, you can explain a little bit on your experiences with Emmanuel.

Yes. Thank you very much, Dimitri. Look, Matthew, it's a very good question. Actually, to build on what Dimitri was saying, when we have looked at thinking about management of the company, it was all driven by meritocracy. And when we will be able to announce the exec, you will see that it's a balanced exec and it is driven by meritocracy. And you will be impressed by the names that will be sitting on the exec, coming from both companies and a very well-balanced exec to reflect this merger of equal. Now going to Emmanuel. Emmanuel is a very highly respected and a full year-rounded executive in our industry. He worked previously at BASF with good experience in managing Animal Nutrition. He had a great career on managing the personal care and aroma business at Solvay. And when he joined us over 3 years ago, he is behind the transformation of our Taste & Beyond business. And just to put it in perspective, our Taste & Beyond business has been outperforming in top line growth the industry for the last 7 consecutive quarters. So Emmanuel comes with credentials. He understands well the industry inside out. And also when we were having these conversations with Geraldine and Dimitri and with conversations that we had with the -- externally, too, we realized that the integration will have to take place mainly in Food & Beverage and Taste & Beyond. And him, being the architect of the transformation and the turnaround of the Taste & Beyond business with a very good customer intimacy, very good understanding of consumer trends, he could play the best role in this integration. So we are confident that we have the right leader that has the global experience, the industry experience and the industry credibility. And at the same time, the attitude to be able to be inclusive and work with the other members of the future DSM-Firmenich exec to make sure that he brings in the synergies that are expected. And from my experience with Emmanuel, Emmanuel, over-delivers because he is someone that is extremely driven and extremely committed to doing the right thing by the company and by all his stakeholders.

And the next question is coming from Mr. Andrew...

Andrew, we're not hearing you. Are you on mute?

Can you hear me now?

Yes, we hear you now. All good.

Great. Congratulations on the transaction. The first thing is around the food and beverage comment. Geraldine, in your presentation, you pulled out the detail of 60% of synergies coming from Food & Bev. I wonder if you could just walk through maybe the categories and the geographies where you think that's most deliverable and why? And maybe that's a question to Gilbert as well, I don't know. And then the second question was a bit more technical. Thinking about the midterm stability of the share price under the new merged entity and the 35% that's obviously owned by Firmenich Beyond, is there a lockup agreement by the shareholders of Firmenich in the new entity? Also, could you use that 35% to buy back stock from, would that be an option? Thinking about your comments on the balance sheet from day 1.

Okay. Let me maybe start with the technical questions. And then I think, Dimitri, you had partially answered the 65% synergy. So maybe we can top up there between you and Gilbert. Firstly, on the stability of the percentages of shareholding. So obviously, clearly, at inception, this is the percentage that we're going to get. Depending on how the tender offer goes, at some point, we may have a squeezing out sort of back-end structure type thing, which would mean that we may buy some of the shares on the market. And you will see already in the documentation that, that, we already commit to bring back to the market so as to arrive at that structure that we're indicating here of 34.5% and 65.5%. Now there is an element -- there is in the DCA orderly marketing arrangements, and you will see that when we put all of that information, it will be -- and of course, everyone will have to go and read through all of the fine print, but there is orderly marketing rules that are within this structure to ensure that there isn't any effect on share price of any material changes or any unexpected changes to these ownership levels. Now as for that, Beyond, we haven't gone into -- should we use the balance sheet to do any other big moves on the capital structure. I think it's very important to say that the Firmenich shareholders are very long term-minded shareholders and have been very excited about the value creation that this brings. I mean I'm saying double-digit EPS. I've seen other numbers printed today, which are very valid as well, which go well beyond that, when you look at the quality of the company that we're building. And we know that there is a very strong commitment to be part of that value creation that's going to take place over time. So I would really urge you to think this is a very stable setup with a few mechanisms behind to ensure that, that is the case. So that is on the legal structure. Dimitri, do you want to start on the revenue synergies on F&B?

Yes. Maybe I don't want to work on it too much, but I think maybe 2 things used to confirm. So Emmanuel has been part of that exercise, and he also confirmed the synergy. So I think that's important on the way forward. We're very confident that, that synergy is built up. By the way, this is not just one number. This is whole list. I will spare you the Excel file, a whole list of opportunities where we've looked at special end-use segments where this health, sustainability in flavor and fragrance could help in terms of innovation scientifically based. So for savory, for bakery, for all types of enzyme and cultures, probiotic, plant-based material, dairy products where we can really accelerate our solution capability to the customers using this fantastic capability set at Firmenich and DSM. So this is line item by line item. I think it will not be wise to explain exactly where, how, et cetera. The only message I want to get across that we went through it line item by line item, functionality by functionality and also customer by customer, where we feel that the revenue could be generated. So let me leave it there. And certainly, between signing and closing, we'll do a little bit more work on the plan of approach. Although we need to also expect the legal boundaries too until we start as 1 company, so in that whole responsible way of approaching it. We still have some work to do between signing and closing. But this is not something which is an aspiration. This is backed up by real content work.

Gilbert, you want to jump in?

No, I completely concur with Dimitri. Emmanuel has been involved in grounding these numbers, and he came with great ideas. At the same time, if the -- if you could refer to the deck that has been posted on the micro site, Page 75 of the Paris document. So you will see some of these items fleshed out. So I can mention a few of them as I have the page in front of me, Function & Nutrition, plant-based food, dairy, savory, pet food. So it was grounded as Dimitri has just mentioned. And you will hear more, I guess, on this one, and we will see you in Paris. So it's a good teaser.

Very good teaser. And maybe, Andrew, I would just throw in, that's what you get for having years on the same call. Dimitri run through the map. And one thing that, most definitely by combining our footprint, we're going to be able to accelerate is the ability to cater not only to global customers, but regional and local. And we know that the trends are becoming increasingly local. So the footprint in itself is going to be a real asset when it comes to creating those revenue synergies. Thanks for your question, Andrew, and back to the operator.

And the next question is coming from Mr. Charlie Webb, Morgan Stanley.

Can everyone hear me?

Yes, we can hear you now.

I was just wondering if it's kind of on and off the line, so glad to see that got through at the end. Maybe just first one around the -- and apologies if I missed it. I think Geraldine, you were talking about it in terms of the balance sheet position post-merger, but it kind of came out of as I came on and off in terms of being able to hear all of it. So just given you've got a targeted leverage range of between 1.5x and 2.5x net debt to EBITDA and kind of post-merger, it looks like the balance sheet will be pretty clean and certainly below that, the midpoint of that. How do you see capital allocation policy for the merged entity? And what could -- what would you be favoring buybacks, special dividends or M&A to kind of move into that range? That's the first question. And then maybe just secondly, on the kind of regulatory approval process, presumably, but just out of interest, how many approvals or regulatory approvals are you seeking? How many jurisdictions, how many regions kind of time line for that? And do you see any kind of points where there could be dissynergies or there is a kind of a potential for excess of overlap? Or is it pretty clear from what you can see?

Absolutely. Thanks, Charlie. And so when it comes to the balance sheet, indeed, the good thing with this merger of equals, is the fact that we will be entering as a new co with a pretty nice balance sheet. In the meantime, of course, we have a bit of a timing element. So I have got in place a bridge facility for EUR 3 billion, because there is getting the proceeds in from materials divestment and the deal actually completing, which will be sometime in the first half of next year. And then we will be seeing where we are from there. Now the capital allocation policy is likely to be very similar to effectively ours that you know well, but I happen to know has also been the capital allocation policy of Firmenich. And that is very much let's invest in our organic growth and our innovation, first and foremost. And you have seen in Gilbert's presentation that the investment in continuing a very strong science base has been strong, and we intend to continue that. You know that we also have our big ticket innovations. All of that needs to continue. So first and foremost, organic growth, innovation, science. The dividend policy, I mentioned, 40% to 60% will be our payout ratio on a dividend. And then it does mean that we have basically the financial means to potentially, at some point, continue on some additional M&A. And if we think about the integration, of course, there's a big piece of work to be done as a big company. There's clearly Food & Beverage, Taste & Beyond, which will be the major construction site, as we like to think about it. But our other 3 businesses may wish to deploy some capital. Although we're going to have to be careful in terms of workload, of course, and make sure that we're able to digest. So fourth, some cash back, but there, let's give us ourselves some time and see where we are in terms of our balance sheet by that point in time. Now as for the regulatory process, in fact, our businesses are very complementary, and there is very little basically overlap. So from an antitrust, we really don't foresee much at all. It's very going to be pretty straightforward. Here, the time frame around regulatory has actually more to do with the tender offer process. And then here, there's a few hoops we need to go through, including the lead times from the moment that we issue the documentation, et cetera. So the reference to the regulatory approvals have actually more to do with that and the listing and all of these good things than an antitrust.

And the next question is coming from Mr. Gunther Zechmann, Bernstein.

A couple from my side as well, please. The first one, so around the whole concept of integrated solutions, could you just highlight what makes the combination unique? Because you're not the traffic mover in integrated solutions, but what makes you comfortable that you can continually outgrow the -- your competitors to the 5% to 7% organic sales growth target, please? And the second one is around management payout as a result of the deal. Could you share with us what the incentive ARR path for the 2 management teams as a result of the merger?

Let me start, first of all, with the second question. Now any kind of remuneration and such structures, of course, are not something that we disclose broadly, although they will be in the prospectus. So this will come as part of the print. The one thing that I'm happy to say today is that it is included in the integration and deal costs. So this is all included, and further information will be provided at a later stage. Now when it comes to the integrated solutions, underpinning the 5% to 7% growth, let me give my first view and then I could see Dimitri is unmuted. One thing that's super important is that all of our capability sets are what we like to refer to as front-of-pack information, and really what makes customers, consumers make a decision. I know that when I choose something, the first thing I do, actually, is not taste, is smell it. And so, okay, does that look appealing, then there's taste and then there's is it good for me? Is it sustainably produced, et cetera. These are all consumer-relevant features of a food or drink, et cetera. And that is why we're so confident is that we know that the capability set of DSM and the Firmenich are all consumer-relevant. And that's why it's exciting. But Dimi, do you want to add something because I saw you unmuted?

Yes. And then I think we should also ask Gilbert, then we have 2 sides of the coin. At the end of the day, I think, like I said, I strongly believe, and I went through all the line items on the synergy, that DSM being very strong in their capability set on Health & Nutrition. And certainly, we're working at flavor and fragrances and taste because at the end of the day, it can be healthy, it can be nutritional but if it doesn't taste well, it's very difficult to sell or when it doesn't smell well. And I think that scientific background with these 4 businesses, which are leaders in the field, are reinforcing that science and application for these 4 businesses. And that is definitely unparalleled. There's no copy of that outside the DSM-Firmenich combination. Secondly, if you look at the natural ingredients and renewable ingredients, it's fair to say that Firmenich is absolutely a key leader in that field. And DSM and DSM customers will benefit from that. We're just entering in that field. So merging that together will create absolutely additional sales in a fast-growing market. And then last but not least, I think it's fair to say that in today's world, breakthrough innovation, bioscience is absolutely the preferred route. And I think bringing these scientific giants together, I think we will be faster, we will be stronger and we'll also commercialize faster towards the route to market. And I think that creates a faster-growing company. And that's why we also said that the organic growth will be above 5% to 7%, accelerating that growth based on all these elements together. But maybe Gilbert, you want to put some more flesh on the bone than I just did?

Thank you. Thanks, Dimitri. And Gunther, it's a very good question. I think it's important that you go back at the starting point. If you look at the starting point, the opportunity here is that we are putting together 2 successful companies, 2 companies that have been growing mid-single digit in top line growth, gaining market share, outperforming the industry. So this is the starting point. So the starting point is not lagging behind industry performance. The starting point is already in mid-single digits. We're moving it from mid-single digit to high single digit. So that's a little bit of the philosophy. And 3 areas to emphasize, obviously, science and science is core. And here, by putting together DSM and Firmenich, we're creating a powerhouse in science and innovation. Think about 16,000 life patents, 2,000 people working in science and innovation and at the same time, the firepower of over EUR 700 million every year invested behind R&D. What made Firmenich who it is today is the disproportionate investment behind R&D. One element and obviously, bioscience was highlighted by Dimitri, and bioscience will be transformational to our industry. And here, combining both capabilities and not only science creation and at the same time, the manufacturing and production. So being able to control it across the value chain end-to-end is extremely powerful here, and that's what all our customers demand. Also, think about benefits to other businesses. Geraldine was talking about smell and taste. The people who cover our industry know this very well. The 0 moment of truth for all the brands on the shelves is when you open the bottle of perfume, you open the pack, you smell it. You like the smell, you like the taste, 70% to 80% of the purchases are driven by the 0 moment of truth. And the learning and the expertise that Firmenich has in this space, the knowledge about how receptors in the nose work, how the receptor-based technology work and how we could potentially replicate this also to animal nutrition could be extremely powerful. So combining these 2 companies is really mind-blowing because of the expertise, because of the knowledge and also because of the complementarity. And at the same time, it's a low-risk merger. When having conversations with notation agencies, all of them came back to us and said, it's a low-risk merger. You have a real merger in Food & Beverage and Taste & Beyond, and that's where we have the best experts to figure this one through. [Technical Difficulty]

Okay. Apologies, everyone, for, again, a technical interruption, but back to the KPN line.

And the next question is coming from Mr. Martin Roediger, Kepler Cheuvreux.

Congrats to the deal. First question is for Gilbert. Firmenich EBITDA margin was 19.1% by June 2021. And based on the data and the handout, it seems to be that the fiscal year 2022 will be also at around 19.5%, so not much better. What is the reason for the lower profitability than the 22% EBITDA margin you have achieved in the past years? And what makes you confident that Firmenich is able to achieve a 21%-plus EBITDA margin in midterm excluding the synergies? And the second question is for Dimitri. You touched a little bit on it, but maybe you can talk a bit more about the cultural fit of both companies, and especially the cultural differences between DSM and Firmenich.

Thank you, Martin, so Gilbert, over to you.

Yes. Martin, thank you for asking me this question, and it's a very important question. And as you saw on the Slide 13, historically, we have been in this 22% EBITDA margin band up until fiscal '20. Fiscal '21, there is 1 event that happened, which is we have acquired DRT. DRT is a strategic acquisition for Firmenich. If you go and speak with our customers and the global customers, everyone will tell you, "What we need, we need biodegradable and renewable ingredients." And by acquiring DRT, Firmenich became the most vertically integrated player in our industry, the #1 by a long mile in ingredients for fragrance and taste. And at the same time, with the broadest palette of ingredients, naturals, synthetic, biotech, renewable, biodegradable. So this was a strategic acquisition that we have made, and it is reflected in our performance today because all our customers are reformulating their brands using these renewable ingredients. Now if you have covered our industry, and I guess you have covered our industry, you saw that when Givaudan in the past acquired Naturex, they had a dip in their margin. Because we have acquired this DRT business, we knew we were buying a company that is strategically a spot-on of where consumer trends are going and what our customers' briefs are asking but we knew that the profitability of this company was below our average profitability. We are confident that with the actions that we are putting in place and you have to take into consideration that this DRT business was disproportionately impacted by COVID. So take into consideration, fine fragrance, the key -- chewing gum, rubber, adhesive. So this was disproportionately impacted by COVID. Hence, the decline of our profitability. We -- based on the information we have and we have shared, we've issued our trading statement today, I think our EBITDA margin will be higher than the number that you have mentioned. But when we will announce our results on August 5, we will see what the number will be. And this is why we are extremely confident that we will go back to 21% in fiscal '24. And there is no reason that we -- why we will not go back to 22% in fiscal '25. And if you look at Givaudan, this is exactly what happened with them when they have acquired Naturex. It took them a few years to digest the company and get back to their normal margin within the range that we operate as leaders in this industry.

Thank you, Gilbert. And Dimitri, cultural difference?

Yes. Thanks for that. I think very interesting to tell maybe here on 32 years with DSM, and when I was really young, I mean I'm still young, right, so. But when I was really young, 32 years ago, my first customer to visit was Firmenich. So for me, it feels like the circle is rounded again. So I think we all know each other very well. But just to elaborate a bit on your question, I think if you look at the culture and the field at Firmenich, and it's difficult to say. I think Gilbert should basically say and I'm looking at the screen and if he's nodding or saying, no, then I will correct myself. But Firmenich has a passion for innovation, and it has a passion for performance, really, really big time. And the values are guided by ESG norms. If you then compare with DSM, I think we have passion for innovation. We are purpose-led, performance-driven. And those were terms and words we use which were not aligned. I mean this was not something which already has been prepared over the last 5 years. I think it was aligned because the culture itself have a natural fit. It's one of the reasons why we are so confident that this merger is a fantastic success. If you then also look at taking responsibility for the environment. From a scientific perspective, I think Firmenich has already done that. I mean Geraldine and myself are very proud on the success and the progress DSM has made. But in all fairness, when we saw that Firmenich already at 100% renewable energy in February 2020, some modesty needs to be applied because we are at 75%, 76%. So there is a real cultural ambition to really do what it takes. So I think it's a fantastic fit. Maybe I'm a bit biased because I really think that this is a fantastic, unique combination. Where there could be differences, I think it's fair to say that Firmenich is a privately owned company and DSM is stock-listed. Although in all fairness, I think to a certain extent, DSM is also a bit of a family. We do care about people. We do care about the environment, which in that sense, I would hardly dare to say it with all the investors and analysts on the call, but we do care about our people. And we are a stakeholder company. So in that sense, maybe there is a difference to it, but maybe a difference is not even that big.

Thank you very much, Martin. Operator?

And the last question is coming from Mr. Ranulf Orr, Citi.

Firstly, just I apologize if these have been addressed. I also haven't had sound from -- parts of this presentation. But the first question is just on your partner of choice in Firmenich. And I'm curious to understand why a business with, I think, 2/3 of its revenue coming from the fragrance side was the best partner for you given so such a small part of your portfolio today. And do you think it has a long-term future in the DSM portfolio? What kind of -- maybe what is the strategy for it? And the second one is just on customer overlap. Could you please give an idea of that as well?

Okay. I think probably Dimitri, do you want to comment on the first question?

Yes, I'll do the first. So let me say that it's clearly that Perfumery & Beauty is core of the company, which we're going to build. As for Food & Beverage and Taste & Beyond, as for Health, Nutrition & Care as well Animal Nutrition & Health. And why is that? Because all these businesses benefit from highly synergetic overlap in technologies and science. Creation skills, consumer trends, let me also explain and I think Gilbert said it, that about EUR 500 million of sales in our Personal Care & Aroma business will really nicely fit into the Perfumery & Beauty unit. A really fantastic place, which will create synergies in itself. Then also, let's be aware that in the Perfumery & Beauty trending, the trend to natural and renewable ingredients is absolutely key. And sometimes they're even far ahead of the industry. And we will -- can use that know-how and that learning into the area of Food & Beverage and Taste & Beyond, even in Animal Nutrition & Health. So it's hugely synergetic. You should not misunderstand that there's quite some overlap on these giants of scientific know-how, which will emerge to create faster, bigger, stronger propositions to our customers. And then last but not least, Health & Nutrition is key capability set for DSM, with sustainability at its core. Flavors & Fragrance is key for Firmenich with science and innovation creation at its core. Yet let me explain yet again. If we have healthy products and nutritional products, healthy solutions, nutritional solutions, which don't taste well, don't smell well, that's not the future. You need to have it all in the same basket, end, end, end. And there, the elements of perfumery ingredients are key to building that knowledge. So I'm creating a bit more background on it because I fully appreciate the question. I even understand why you asked that question, but I feel very strongly about the 4 setups as you've seen on this slide. It is really the science base, which could make a difference to all these 4 fantastic businesses, which, by the way, on all fronts, we will be leaders.

Thank you, Dimitri. And that's probably another good hook for come to our Capital Markets Day on June 13 because this is where we will be able to demonstrate a lot of this. And when we did the due diligence conversations, I mean, the energy in the room, because of these overlaps and these synergies, was really palpable and has been driving us the whole way. Now to your second question on customer overlap, of course, we are in parallel going to some similar clients. Some of our big food and beverage customers are the same, et cetera, which by the way, means that we're well known by the customer base. And I have to say today, we all 3 have been receiving some extremely supportive and smiling messages of wow, great, fantastic, look forward to it. So it's landing very well. There's very little where there is -- and I think the question was asked indeed earlier, is there some overlap that could be concerning and it's very minimal. So it's more that we go in parallel, and now we're going to be able to be much more blended in our offering to customers. Well, I have to say Firmenich is very strong muscle when it comes to responding to customer briefs and customer demands, et cetera. So we have a lot to learn in the go-to-market, and that's why we are very excited. Now moderator, I think I heard you say this was the last question, but let's still check.

There's one last question coming in from Mr. Chetan Udeshi from JPMorgan.

I had a couple of questions. I'm going back to the slide, which discussed the R&D to sales of different players in the industry. And it is interesting to see Firmenich have a 9% R&D to sales, is clearly higher than most peers in the industry. And I'm curious why is that not reflected in any better financial metric? The growth of 5% has been more or less same as the other players. The margin is not necessarily much better. So is there a structural reason why Firmenich has higher R&D to sales for the same sort of financial profile like the other players in the industry? And the second question was more just speaking broadly around the return profile of the combined entity. How should we think about the return on capital employed? Because again, admittedly, I haven't done a lot of work to look at the financials of Firmenich but just going -- taking a cursory look at their annual report, it seems they have a pretty high working capital to sales ratio of 35% just core working capital. But I'm just curious, how should we think about the return profile of the combined entity going forward?

Okay. Let me start by handing over to Gilbert on the R&D to sales question.

Yes. Chetan, this is a good question, and thank you for asking it. Look, there will be a slide. There is a slide in the Paris deck. I don't have the number of the slide. But if you look at this slide and this tracks over the last 10 years, you will see that we were outperforming some of our key competitors in terms of top line growth. And you will see the names that you see there, and you will see that we are doing better in terms of organic top line growth. In terms of profitability, also if -- now we have opened our website that we had for bondholders, we've opened it to investors as of today. If you go on it, you will see that the margins that we used to have before the DRT acquisitions in terms of EBITDA and also in terms of gross margin were even higher than the leader in our industry. So -- and this is the -- this is what we will be able to restore after we absorb the DRT acquisition.

Thank you, Gilbert. And maybe on the return on capital employed, I will make a comment more that's linked to the time. If you have a look at the last 2 years, the massive supply chain disruptions that have been coming both with the pandemic and all kinds of things and of course, the situation that we're all living, this probably -- these numbers are on the high side for most companies. Because, in fact, what we are both companies very proud of, and we've had those conversations, is how we haven't let down our customers ever during these 2.5 years of extremely hard work. And if there are teams that are absolutely exhausted right now, are the whole supply chain colleagues both in terms of sourcing, but also in terms of logistics to deliver to customers, et cetera. So I would say that the figures that we see now are clearly not aimed at maximizing working capital over sales. Having said that, your point is actually fair, which is that will this be an area where we will, in slightly more normalized times, have to be putting a lot of attention? The answer is yes. But if I look at the cash generation of the company, it's actually got a very healthy free cash flow. And of course, we're going in with a very healthy balance sheet. So in that sense, I feel that this is actually a very solid proposition. But with my CFO hat on, I never gave the businesses a break on working capital by definition, and that will continue. Now back to the operator, any other questions?

There are no further questions. Please continue.

Okay. Then I think, Dave, any contribution from you? Or should I just close off the call?

No, you can close off the call. Maybe apologies for basically people who have been struggling with the audio line. And we will figure out what happened here. So Geraldine, you can close, yes.

Yes, indeed, that was a little less reliable than we've had actually for many calls, so I don't know what happened. But -- so I would say thank you very much for your patience. Thank you for your time this afternoon. Thank you for your questions. Now we have already mentioned a few times the Capital Markets Day. It's on Monday, June 13, in Paris. In fact, on the edge of 2 big consumer ingredient conferences. So we hope that, in many ways, will be convenient as well. And we really look forward to seeing hopefully as many as you as possible to join us there. And with that, we are closing the call. Thanks, everyone, and goodbye.