Givaudan SA (GIVN.SW) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Givaudan 2020 Half Year Results Conference Call and live webcast. I am Alessandro, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Gilles Andrier, Chief Executive Officer; accompanied by Mr. Tom Hallam, Chief Financial Officer of Givaudan. Please go ahead, gentlemen.

Thank you. Ladies and gentlemen, good afternoon as well as good evening to Asia and good morning to the Americas. Welcome to this conference call on our 2020 half year results. I'll make this call together with Tom Hallam, our CFO. We'll take you through the presentation before answering your questions at the end. The investor news on our half year results 2020 was published on our Givaudan website at 7:00 Swiss time this morning. This is where you will also find the slides for today's presentation. Along with the investor news on our website, you will find our 2020 half year report as well. I'd like now to start going through the presentation, and I invite you to turn to Slide #3 to go through our performance highlights. So in the midst of this unprecedented global pandemic we are all going through, I am happy to announce both an excellent sales growth and a strong financial performance for the first half of 2020. With these strong results, I'm confident we will achieve by the end of this year our ambitious 2020 goals set 5 years ago. Furthermore, we made good progress with the integration of our recent acquisitions over the last month. In such a difficult environment, these strong results demonstrate our market leadership and the important role we play in sustaining the global supply chain in food and beverage as well as in household, health and personal care products. I'm very proud of the entire Givaudan organization for their dedication and their agility during this challenging period and for enabling us to continue to support our customers to keep those essential products available to billions of consumers throughout the COVID-19 crisis. In the first half of 2020, we reached sales of CHF 3.2 billion, a growth of 4% on a like-for-like basis and 4.1% in Swiss francs. This was achieved thanks to the excellent performance of those parts of the portfolio which were not impacted by the COVID-19 pandemic, namely our consumer product fragrances and the vast majority of our Flavours business, representing over 83% of group sales combined. The strong demand of these products more than compensated the less resilient part of Givaudan, namely Fine Fragrances and food services, 17% of our group sales, which experienced a very strong decline from March to June. We achieved an EBITDA of CHF 734 million, up 11.3% compared to 2019, representing an underlying EBITDA margin of 23.7% compared to 22.3% in 2019. Free cash flow reached CHF 178 million, up 20%, representing 5.5% of our sales compared to 4.8% in 2019. So we are very happy with the overall performance in the first half year of 2020, making us confident to deliver on our 2020 targets. Let's turn now to Slide #4. On a like-for-like basis, our Fragrance division grew 4.5%, and our Flavours division grew 3.6%. In the context of the COVID-19 pandemic, we managed to deliver this good growth by maintaining our operations and global supply chain with minimal disruptions. The good growth was achieved across most product segments and geographies, with particularly strong performance in Household, health and personal care segments within the Fragrance division as well as in packaged foods, savory, snacks and nutraceuticals for the flavor division. Once again, all our strategic focus areas, complemented by acquisitions, have contributed to our growth, namely high-growth markets, Health and Wellness, Naturals, local and regional customers, while sales with our multinational customers showed a good momentum. Let's turn to Slide 5. In the first half of 2020, high-growth markets delivered a 9% growth, continuing to show a regained momentum as we already saw it happening in 2019, and despite the current pandemic situation. Latin America performed strongly, led by Brazil, Argentina and Chile. Africa, Middle East and Russia contributed with strong growth level as well, as did most parts of Asia Pacific, including China, which recovered in the second quarter from a COVID-19 affected first quarter. The only market which was almost flat was India, given that the country has been heavily affected by the COVID-19 crisis. In the mature markets, we grew 0.5%, led by a strong development in Central Europe, Korea and a single-digit growth in North America. This was offset by single-digit decline in Western Europe as the result of travel bans and severe lockdown measures. High-growth markets make up 42% of our overall sales, still below past levels. This is the consequence of the acquisitions we made in mature markets, combined with the currency situation in the high-growth markets. Our presence in high-growth markets has always been a key driver of our growth and continues to be one of our key strategies for 2020 and beyond. Midterm, the demographics, the ever-growing middle class and the strong urbanization trends will continue to support the growth of these markets, especially in Asia, where urbanization and the middle class are still below average. Our size and our operations footprint give us a unique exposure to the diversity of these high-growth markets in which we continue investing both with additional talent and new facilities to service the wide diversity of our clients. We have seen in the first half of 2020 how critical our geographical balance is, creating natural hedges against a crisis like the COVID-19, where the timing of the pandemic has been quite progressive and with a different intensity depending on the geographies. Please now turn to Slide 6. Now I'd like to highlight the sales development by region for the group. As you can see, all 4 geographies have contributed to our overall growth, albeit at different rates. Sales in Latin America and Asia Pacific continued to perform well and remained ahead of the other regions. Latin America recorded another outstanding growth with 15.5%, driven mainly by Argentina, Brazil and Chile, volume growth contributing to half of this growth. The growth in Asia Pacific was 3.9% with double-digit growth in China and high single-digit growth in Southeast Asia. North America grew 2.7%, a good result considering last year's higher comparable and the consumer effect of the pandemic situation. EAME grew 1.7% with higher growth in Central and Northern Europe than in the Southern and Western part of Europe due to the weight of Fine Fragrance. Let's turn now to Slide 7. In this challenging COVID-19 environment and in line with the company's purpose published end of last year, Givaudan has been and will continue to be strongly focused on: first, protecting and supporting our employees, be it those on sites or those who are still working from home. I'm very proud of how the entire Givaudan organization responded with agility and dedication during this challenging period by enabling us to continue to supply our customers to keep essential products available on the shelves to consumers throughout the COVID-19 crisis. The majority of our manufacturing sites have been kept almost at full capacity, and our teams did a fantastic job as well as managing the whole supply chain from sourcing raw materials to responding to delivery challenges in order to meet our customers' needs. Finally, taking care of the communities in which it operates. In the very early stages of the COVID-19 pandemic, the company established a communities fund to enable our sites to support local communities that are being affected around the world. Givaudan committed to donate at least CHF 1 million to this fund. And to date, the fund was benefited -- has benefited over 120 initiatives across 40 countries. Let's turn now to Slide 8. The Fragrance division grew 4.5% on a like-for-like basis and 7% in Swiss francs. Fine Fragrances decreased 16.4% like-for-like. This part of the business has clearly been the most affected by the COVID-19 crisis due to the almost global lockdown and sharp reduction in all retail activities in many countries around the world. And this was combined with an almost complete standstill in air travel, closing most of the business done through travel retail channels. Only marginal e-commerce activity has been able to continue. On the other hand, consumer products grew an impressive 11.8% like-for-like. We delivered this strong growth in both high growth and mature markets. Growth stemmed from all regions and customer groups with a remarkable momentum of local and regional customers. Consumption led demand for hygiene and pandemic-related products like household. Health and Personal Care was the most significant. Lastly, fragrance ingredients and Active Beauty was broadly flat on a like-for-like basis. Active Beauty performed relatively well in such a difficult market conditions, thanks to a well-balanced portfolio of customers and products. In the meantime, sales of fragrance in regions grew low single digits. Now let's turn to the next slide, #9, on Flavours. Sales of the Flavours division grew 3.6% on a like-for-like basis and 1.9% in Swiss francs. The division has proven to be very resilient despite the impact on the sales to foodservice and the reduction in out-of-home dining. It is worth highlighting that all of our strategic focus areas, namely Naturals, health and well-being, Integrated Solutions as well as local and regional customers, contributed strongly to the overall performance of the division. Sales in Asia Pacific increased by 2.4% on a like-for-like basis. China and Thailand recorded double-digit growth, whilst India and Indonesia have seen decline in sales. In the mature markets, Japan, Korea and Singapore were leading growth. Savory snacks and sweet products were the leading segments overall in Asia Pacific. EAME increased 3.4% like-for-like, led by double-digit growth in North Africa and the Levant and a good single-digit growth in the Middle East. France, the Benelux and Northern Europe have seen also a good momentum. North America increased 2.8% on a like-for-like basis, with a good performance from both global and local and regional customers in the Beverages, Snacks and Sweet Goods segments. Finally, Latin America increased 10.6% on a like-for-like basis, driven by a very strong growth in all markets and segments, notably Brazil, Argentina and Colombia and segment-wise, in Dairy, Beverage, Savoury and Sweet Goods. Let's turn now to Slide 10. When we presented our 2020 strategy in August of 2015, we clearly stated that acquisitions would be an important part of our 5 years' growth path. Since 2014, we have acquired 16 businesses for a total of over CHF 3.6 billion, including most recently, Ungerer, Indena Cosmetics and Alderys, each one with a very strong and natural strategic rationale as well as a perfect cultural fit to Givaudan. These businesses have a combined annual real contribution of more than CHF 1.5 billion to our group -- to our total group sales. Across all activities, our success in providing winning solutions to our customers and creating value is also a demonstration of our efficient acquisition strategy. We aim at further value accretive acquisitions to complement our core capabilities and increase the portfolio of Naturals, Health and Well-Being, Active Beauty, Integrated Solutions and local and regional customers as well as new adjacent business areas or technologies like biotechnologies, with which we believe we can further provide value to our customers and shareholders. Let's turn to the next slide, #11. What you can see on this slide is a recap of those 16 acquisitions mapped against our strategic priorities, namely Naturals, Active Beauty, local and regional customers, Integrated Solutions and ingredients to support our Fragrance and Flavours combined business. You can see that each of those acquired companies contribute, and for some of them, such as Naturex and Ungerer, contribute in multiple parts. Let's turn to Slide 12, with a focus on Ungerer. As we explained at the time of the acquisition in November, Ungerer is a leading independent company in the F&F specialty ingredients business, headquarters -- headquartered in New Jersey in the U.S., offering a rich palette of natural ingredients and a strong position with L&R customers, especially in the U.S. Sales in 2019 were more than $250 million. This acquisition perfectly fits our strategic priorities such as specialty ingredients, local and regional customers, and we have enjoyed from day 1 an excellent cultural fit. I'm happy to report that the acquisition is now completed. Integration streams are fully engaged in all functions and regions. And quite importantly, growth and synergy targets have been established and are in progress to be delivered. Finally, we have had extremely positive feedback from customers. With this, I'd like to hand over now to Tom, who will give you more granularity on our financial results. Tom, your turn.

Thank you, Gilles. I would also like to welcome all of you to our conference call. Gilles has taken you through the main aspects of the market development, the business performance of the group as well as the recent acquisitions. On the following slide, I would like to focus on the operating performance of the group and the 2 divisions. Let me start with the performance highlights on Slide 14. Group sales increased by 4% on a like-for-like basis, which excludes the impact of acquisitions as well as any currency impact. In Swiss francs, sales increased by 4.1%. The absolute EBITDA increased to CHF 734 million compared to CHF 660 million in 2019, and the underlying EBITDA margin remained strong at 23.7%. The free cash flow as a percentage of sales was 5.5% compared to 4.8% in 2019. In the following slides, we will cover the group's performance in more details. Please turn to Slide 15, which shows the exchange rate development. Once again, in moments of crisis, the Swiss franc has again strengthened against all major currencies in which the group operates. The impact is less pronounced in major market -- major mature market currencies and more pronounced in some emerging market currencies. However, once again, our operational and geographical spread continues to provide good natural hedges and our EBITDA margin remains well protected against these currency fluctuations. Please turn to Slide 16, which shows the group performance. In 2020, the group continued to achieve productivity gains and demonstrate a strong cost discipline. We also delivered on the final CHF 15 million of GBS savings, all accumulating in a gross margin, which improved to 42.2% in 2020, compared to 41.2% in 2019. The EBITDA increased to CHF 734 million in the first 6 months of 2020. In this period, the group incurred costs of CHF 24 million related to acquisition and restructuring costs compared to CHF 11 million in the previous period. We also incurred CHF 4 million related to our GBS project compared to CHF 19 million in the same period in 2019. As you see on the bottom right of the chart, our underlying EBITDA margin was 23.7% in 2020 compared to 22.3% in 2019. The increase is driven by the productivity gains and the cost discipline, as explained before. On the next 2 slides, I would like to spend a moment on the operating performance of the Fragrance and Flavour divisions. Please turn to Slide 17. We will start with the Fragrance division. The Fragrance division recorded a sales increase of 7% in Swiss francs and 4.5% on a like-for-like basis. The division recorded CHF 333 million of EBITDA compared to CHF 270 million in 2019. The margin showed a good increase compared to last year, driven by higher sales as a result of the recent acquisitions in the division and our actions taken to contain expenses as mentioned before. The EBITDA margin was 22.9% on a reported basis and 23.4% on an underlying basis, bringing us back to historical levels, and a reflection of the high levels of innovation and consumer insights that we bring to our clients. If you now turn to Page 18, I will comment on the Flavours performance. The Flavour division recorded a sales increase of 1.9% in Swiss francs and 3.6% on a like-for-like basis. The reported EBITDA increased to CHF 401 million from CHF 390 million in 2019, again, as a result of continued productivity gains and cost discipline. The reported EBITDA margin in 2020 was 22.7%, and on an underlying basis, the EBITDA margin was 23.8%. Please turn to Slide 19, which shows the net income of the group. The income before tax increased to CHF 480 million from CHF 437 million in 2019. And the nonoperating expenses were flat compared to the prior year, CHF 52 million in 2020 compared to CHF 54 million in 2019. The net income was CHF 413 million or 12.8% of sales. The group's effective tax rate increased to 14% in 2020 compared to 13% in June 2019. Basic EPS increased to CHF 44.81 compared to CHF 41.24 in the first semester of 2019. Please turn to Slide 20 for the cash flow performance of the group. During the first half of 2020, Givaudan generated a free cash flow of CHF 178 million or 5.5% of sales compared to CHF 148 million or 4.8% of sales in 2019. The operating cash flow for the first 6 months of the year was CHF 359 million, an increase of 33%. The group continued its investments to support the growth in high-growth markets, most notably in China. As such, total net investments were CHF 139 million, and as a percentage of sales, net investments were 4.3% in 2020, compared to 4.6% in 2019 if we exclude the impact of the sale of the Zurich Innovation Center. Working capital increased to 27.9% compared to 27.3% in 2019 due to slightly higher temporary inventory increases and accounts receivable levels related to the COVID-19 pandemic. Despite the ongoing crisis, I'm very happy with the overall financial performance of the group, and the free cash delivery in the first 6 months of the year. Please turn to Slide 21 to look at the debt profile of the group. During the first semester of 2020, the group issued 2 new bonds for a total of EUR 1 billion, increasing the net debt position of the group as well as its leverage ratio. However, the group continues to have a well-balanced debt portfolio with a weighted average effective interest rate of 1.43%. Furthermore, on this slide, you will be able to find the majorities of our debt profile as well as the respective average interest rates for each debt maturity. With this, I would like to conclude my part of the presentation for the first 6 months of 2020 and hand back to Gilles.

Thank you, Tom. So our growth outlook. We have delivered a strong first half in 2020, and we are proud of our achievements in this period, all the more given this unprecedented context that we are all going through. Once again, the resilience of our business and the consistency of our results have been demonstrated. All our strategic areas are growing to our expectations, high-growth markets, L&R customers, Health and Well-Being, Naturals, Integrated Solutions and recent acquisitions add to the breadth and the resilience of Givaudan. Visibility is limited for the remainder of the year, both on the ongoing pandemic, still very active in many parts of the globe and its potential economic consequences. Nevertheless, our half year results put us in a good place to confirm our 2020 guidance, on which the entire organization is focused on delivering. Short term, our focus remains on keeping our operations, supply our customers, leverage our business continuity action plans as required, whilst our first priority is to protect and support our employees. And of course, keeping our current discipline on costs throughout the business. Our focus is also to continue integrating the recently acquired businesses in our Givaudan operating platform. Integration costs of CHF 50 million are confirmed in 2020, half of which have already been spent in the first 6 months of 2020. And finally, we are finalizing our new strategic road map for '21 to '25, in line with Givaudan's purpose, which we confirmed [ unveiling ] on August 27, both live in Zurich, for those of you who will be able to travel and via a live webcast for the others. Let's now turn to Slide 24. Our 2020 road map is centered on responsible growth, shared success. Our ambitions and the road map have sought to ensure responsible growth and shared success for shareholders, customers and all key stakeholders. Building on the success of 2011 to 2015 strategy, we wanted to create further shareholder value through profitable, responsible growth with the additional contribution of acquisitions. To create long-term value, we will capitalize on our market leadership and most importantly, continue to build close partnerships. Givaudan's 2020 strategy is built on the pillars of growing with our customers, delivering with excellence and partnering for shared success. After 9 semesters and still 1 to go, we are fully on track with our ambitious financial targets, thanks to an average of 5.1% like-for-like growth and an average free cash flow of 12.5% at the end of 2019. And the strong results we announced today for the first half of 2020, that gives us confidence that we will deliver on all aspects of our 2020 strategy. Flavors and fragrances are consumed every day around the world, and they are an essential part of successful consumer products for our clients. I'm confident about Givaudan's strength and our DNA built over the last 250 years to continue to create value for our customers, our shareholders and all our stakeholders. With the significant contribution Givaudan's employees around the world make every day, I'm convinced that we have the right people, the right strategies and plans in place to continue on our successful path. Ladies and gentlemen, many thanks for your attention. Tom and I are looking now forward for your questions.

[Operator Instructions] The first question comes from Celine Pannuti from JPM.

Yes. My first question is on the trend throughout the quarter. So if you delivered a balanced quarter, but with 85% with good growth, but then you had a 15% of Fine Fragrance and Foodservice or 13% that was down sharply. Could you give us a bit of a feel how this has progressed throughout month by month? And how we should look at the balancing of those 2 extremes, if I may say, in the third -- in the second half of the year? My second question is on the EBIT performance, which was quite strong. So you mentioned productivity gain a few times but -- and as well as the CHF 15 million savings from GBS. Could you give us a bit more granularity on the different building blocks that helped deliver that performance? And finally, the FX has been quite negative in the first half of the year. I was wondering whether we should expect pricing or if you have already seen a pricing implementation in -- especially in Latin America.

Okay. Thank you, Celine. Good afternoon. So I guess that you're referring to the trend in the second quarter because essentially, the first effect of the lockdown we observed in the second half of March. That was clear when we announced our first quarter results, and we saw that hitting basically the Fine Fragrance business. That was the second half of March. But then essentially, April, May and June, we've seen a very, let's say, consistent decline, I would say, across the 3 months for Fine and Foodservice, the only thing is we've seen in the month of June, a recovery of Fine in the U.S. simply because retail stores, especially on the specialty retail business, have reopened quite aggressively, and we saw the immediate positive effect on our Fine Fragrance business in the U.S. but essentially, this is, I would say, a direct consequence of the stores which were closed during those 3 months in many countries around the world. And Foodservice, essentially, has followed the same trend. So very consistent balance across the 3 months, except for the month of June, where we saw an improvement in the U.S. And then on the 85%, the one which is growing nicely, consumer products and the rest, it's also been very consistent on Flavours. There is no peak and valleys for Flavours and in the same way for consumer products across the second quarter. Tom will add to it. But the improvement of the EBITDA, yes, productivity gains, but you have also, obviously, the synergies, which are carved out from the acquired companies. We have always very clearly stated that we would bring step-by-step the acquired companies to the levels of Givaudan. The third element, obviously, is I don't consider the level of EBITDA of the Fragrance division in '19 being the norm. So that's basically being improved, thanks to price increase and a number of measures. And finally, people have not been traveling at all. So that also helps around the world. So that basically explains the 1.5% improvement. You also obviously had an operational leverage. The growth of 4% is all volume, so that also helps on improving the EBITDA. I'm not so sure about the pricing, what you mean the pricing implementation. So the pricing, basically, as we said, there was a lag of pricing for Fragrances in the first quarter. That was clearly communicated at the time of full year results. And then we have a pricing effect in Latin America. We said that the growth in LATAM is roughly half of -- half of the growth in LATAM is volume. So that's basically -- the other half is pricing.

Yes. I was -- on the last question, I was referring to the weakness in FX of -- in Latin American currency, whether we should expect further pricing benefit in the second half of the year?

Well, in the end, that's really depends very much on the currencies, I mean we have pricing mechanisms in these countries, particularly in Argentina and in Brazil. And as the currencies fluctuate, we have agreements with our customers to pass price, which we're doing on a constant basis. And just to come back a couple of incremental items on the EBITDA, as Gilles mentioned, I mean, I think as he said, our facilities are operating -- most of our facilities are operating at 100%. So we're getting very, very good capacity utilization. As Gilles also mentioned, we have less travel, less discretionary expense. On the other hand, I mean, clearly, our freight costs are up. I mean, as you know, in general, the tariffs for freight are higher in the first 6 months of the year. But very happy with what we've done in the first 6 months. Some of it is really, let's say, short term. And some of it is as a result of, as Gilles says, of the acquisitions and the investments we've made on things like GBS.

The next question comes from Heidi Vesterinen from Exane BNP Paribas.

I first wanted to ask about Fine Fragrance, please. If travel retail, which is a big channel, remains depressed for quite a long period of time. Do you think it will take longer for this business to recover to pre-pandemic levels? Or do you think consumers will just shift to other channels? What is your view on the future of Fine Fragrance?

So Heidi, thank you for the question. Well, that's the $1 million question. Basically, yes, for sure, yes, the travel bans, travel traffic is having a big impact. Now depending on the source of what you hear, it's estimated that 20% to 30% of Fine Fragrances are being sold through Duty Free. So that obviously has an impact. If it's not -- if consumers don't go elsewhere. So the elsewhere can be obviously stores. Let's see how consumers behave. But I would say the online sales on the Internet is something that has clearly been growing quite strongly, even if it represents to -- a small amount. But that could certainly be the alternative, which not only replaces the Duty Free but also prevent -- I mean, allows consumers not having to go to stores when you have all those measures, which are there to protect the consumers in the stores and so forth, which is not made easy, especially to smell Fine Fragrances. So let's see how things go. To go back to the pre COVID-19 levels in terms of 2019, it's certainly going to take a little time.

And then I have another million-dollar question then, next on Foodservice. Just based on what you know now and the conversations you have with customers, do you expect this to bounce back? Or do you think that it could be worth deemphasizing this perhaps as you think about your new strategy? I'm just wondering about your current thoughts.

Well, I would say that Foodservice is less, in a way, less by nature, less volatile than Fine Fragrances because it's less discretionary. And in a way, where Foodservice is different than Fine Fragrances is that you could argue that people are not going to foodservice points of sales, replace that by eating at home and maybe buying packaged foods and so forth. Has there been a shift from one side to the other? Well, I can't say the same for Fine Fragrances. If you miss a sale of a perfume bottle, you won't compensate by something else, maybe a deal. So I'm quite confident that the foodservice will come back. At what speed, I don't know. But certainly, will come back strongly as stores and shops and restaurants open.

The next question comes from Patrick Rafaisz from UBS.

I have 3 questions, please. The first would be around working capital. And Tom, you talked about the impact of COVID-19 on inventories and receivables. How much of that would you expect to unwind in the second half of this year? And then the second question would be on synergy potential. You talked about the integration charges for this year. We talked about the revenues of acquired businesses. But if we think about cost synergies over the next 2 to 3 years, how much do you think these acquired businesses could add just from integrating the assets? And then the last question on M&A strategy. I'm sure this will again feature prominently in the next strategy cycle, where we'll hear more about end of August. You also talked about adjacencies. What do you think about natural colors here? Is that maybe a business that could feature more prominently in your portfolio at 1 point?

So maybe I can start, Patrick, on the working capital, and I'll hand over to Gilles. So on -- typically, our working capital is higher anyway, at the midpoint of the year, just because of the availability of materials, crops and so on. And then traditionally, what we do is we decline in the second half. And as I mentioned in my notes earlier on, we certainly have seen that we are being very, very conservative with our inventory levels. The situation continues to be tense from a supply chain perspective, as Gill mentioned. Just as a couple of examples, India continues to be a big supplier on the fragrance ingredients side. And of course, the situation is difficult. And of course, none of our customers want to miss on this opportunity today of when consumers were in shops and buying. So we have increased our levels of inventory. Where would we expect to be is probably around 25% of sales by the end of the year, which is where we've been traditionally. So clearly, we would expect to come down over the next few months. Then on the cost synergies, I mean, typically, the way that we think about the businesses, and you remember what we said we would do with Naturex is we would bring the whole Flavours division back to pre-acquisition levels by 2021. You -- I think our half year results are clearly a good demonstration of that. And that's typically what we would expect with any of the acquisitions. We -- some of the companies that we've acquired have margin levels that we would expect to increase to Givaudan levels. Others have very, very strong margin levels, and we would actually expect to continue to get synergies anyway. So we have targets for each of those companies. And then maybe just on the M&A point, I hand it back to Gilles.

Yes. So certainly, in terms of M&A, we will continue to be what we have been over the last few years, which means being opportunistic, disciplined and diligent and making sure that every acquired company fits both the -- basically the strategy of Givaudan but also the cultural fit. We are not going for size at all costs. So certainly, whether it's the COVID-19 or post COVID-19 or beyond, we'll create opportunities, I don't know if it's going to be more opportunities or less. But we'll still be opportunistic. So as it relates to natural colors, there is no mystery that Naturex actually provided roughly a 50 million business of natural colors, which is doing well. And that could be obviously a space in which we could be interested to expand to be the leader, for example. But that would be, obviously, for what it is, meaning that integrated solutions is not necessarily always the primary reason to buy an adjacent business. The adjacent business needs to be meeting our requirements in terms of growth, profitability meeting also our purpose, I would say, in terms of clean label also on the label. So -- and integration solutions is basically an additional benefit. So yes, natural colors could be a way to expand to basically be in the leading position around this space.

Your next question comes from Tom Wrigglesworth from Citi.

A couple of questions, if I may. Just kind of points of clarification largely. Firstly, on the Ungerer deal. Can you -- I don't have -- fully understood what's kind of unique about that. And if you could help understand that, what that's going to do for your business that you weren't able to do yourselves would be super helpful as the first question.