Novozymes A/S (NSISB) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Novonesis Q1 2025 Conference Call. I am Healy, the Chorus Call operator. [Operator Instructions] 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 Tobias Cornelius Björklund, Head of Investor Relations. Please go ahead.

Thank you very much, operator, and welcome, everyone, to the Novonesis conference call for the first quarter of 2025. My name is Tobias Björklund and, as said, I'm heading up our Investor Relation activities here at Novonesis. In this call, our CEO, Ester Baiget; and our CFO, Rainer Lehmann, will review our performance for the year as well as the outlook for 2025. Also attending today's calls are Amy Byrick, EVP of Human Health Biosolutions; Tina Fanø, EVP of Planetary Health Biosolutions; and Claus Crone Fuglsang, Chief Scientific Officer. The conference call will take about 45 minutes, including Q&A. Please change to the next slide. And this is, as usual, a slide where I would like to remind you that the information presented during the call is unaudited and that management may make forward-looking statements. These statements are based on current expectations and beliefs, and they involve risks and uncertainties that could cause actual results to differ materially from those described in any forward-looking statement. With that, I will now hand you over to our CEO, Ester Baiget. Ester, please.

Thank you. Thank you, Tobias, and welcome, everyone. Thank you for joining us in this morning. If you could please turn to Slide #3. Thank you. We continue to build on the strong 2024 performance. And here, in the first quarter of 2025, we delivered a strong 11% organic sales growth. We executed swiftly across our well-diversified business, both geographically and industry-wise. The performance was very much in line with expectations, and all our 4 sales areas delivered double-digit organic sales growth. We delivered around 10% volume growth, and pricing contributed around 1%. Sales synergies are well on track and contributed close to 1 percentage point. Emerging markets were particularly strong at 15% growth, and developed markets were also up 9%. We launched 6 new biosolutions in the quarter, predominantly in Household Care and in Food, and we expect further acceleration of launches during the coming quarters. Over the last month, the geopolitical environment has been dynamic. Our regional presence and diversified end market exposure, including our ability to pass on incremental costs driven by tariffs, enables us to effectively deal with the changes in the markets. As such, net, we expect no or only marginal impact from current trade tariff levels. The strong sales growth, coupled with cost synergies and operational excellence, led to 38.3% adjusted EBITDA margin for the quarter, an increase of 3.1 percentage points compared to last year. In February, we announced the acquisition of dsm-firmenich part of the Feed Enzyme Alliance, unlocking further value in our core business. We now expect to close this deal in the second quarter of 2025, allowing us to drive the full value chain in animal biosolutions, delivering a strong revenue growth and earnings accretion for Novonesis. We recently announced Andrew Taylor as the new Executive Vice President for our Food & Beverages business. He brings deep industry knowledge, a strong commercial expertise and a proven history of driving growth. Andrew will join us no later than September 1, and we're excited to welcome him to the team. All in all, we have a very strong start to 2025. While we recognize the increased level of market uncertainty, we remain well positioned for growth and strong margin expansion. We are confident, confident in the full year outlook with 5% to 8% organic sales growth, which includes around 1 percentage point negative effect from the exit of Russia and Belarus for the legacy Chr. Hansen business. The adjusted EBITDA margin is still expected to be between 37% to 38% despite recent currency headwinds. Our performance for the year continues to be supported by a resilient and well-diversified portfolio of biosolutions across more than 30 end markets, combined with a strong focus on customer-centricity, state-of-the-art innovation capabilities and a unique scalable production setup. Let us now drive -- dive into the solutions performance in more detail -- into the divisional performance in more detail, starting with Food & Health Biosolutions. Could you please turn to Slide #4? Thank you. The Food & Health Biosolutions division delivered 12% organic sales growth in the first quarter of 2025. The adjusted EBITDA margin was 37%, an increase of 3.8 percentage points. For 2025, we continue to expect this division to deliver organic sales growth within the same range as for the group with relatively stronger growth in Human Health. Please turn to Slide #5 for Food & Beverages. Thank you. Food & Beverages delivered 11% organic sales growth in the first quarter of 2025. This was mainly driven by volume, while pricing contributed positively in line with group level. Growth was strong and broad-based across geographies and industries. Growth in dairy was driven by both fresh dairy and cheese, supported by a healthy underlying market, upselling and a strong customer adoption of innovation. Dairy growth was anchored across all regions. In fresh dairy, we see an increasing demand for our tailored solutions in the high protein space as well as in bioprotection. Cheese is benefiting from good momentum in conversions and adoption of solutions for productivity improvements. Baking delivered a strong performance and benefited from increased penetration and innovation. For the remaining industries in Food & Beverages, the strong development was led by meat as well as plant-based solutions. Synergies contributed to growth, in line with expectations, supported by increased commercial scale across Food & Beverages. In dairy, I would like to highlight the solid traction we see on bringing further productivity and performance improvements to customers through a broad set of enzymatic solutions. For instance, our SPICEIT and YieldMAX solutions allow customers to drive higher efficacy and yield, and the pipeline of new solutions continue to look very solid. Growth in 2025 in Food & Beverages is expected to be driven by all industries, including a positive impact from synergies. Momentum is expected to continue to be strong and only partially impacted by the exit from certain countries during the second quarter for the legacy Chr. Hansen business. The exit of those countries is expected to impact full year organic sales growth in Food & Beverages by around 3 percentage points. Please turn to Slide #6. Thank you. Human Health delivered 13% organic sales growth in the first quarter of 2025. Growth was mainly volume-driven. The release of deferred revenue contributed around 1 percentage point to the growth. The development was driven by strong performance in Dietary Supplements in both North America and in Europe. Performance in Advanced Health & Nutrition was driven by Advanced Protein Solutions as we continue to scale the supply to our anchor customer. Solutions for Early Life Nutrition was softer, impacted by timing. Synergies contributed positively to growth as we begin to see the impact of cross-selling strains and solutions into new channels. For 2025, growth in Human Health will be driven by a continued positive momentum in Dietary Supplements, supported by a positive impact of cross-selling synergies and by Advanced Health & Nutrition, including the ramp-up in sales of Advanced Protein Solutions to our anchor customer. Deferred revenue is going to continue to contribute around 1 percentage point to the growth for the sales area. The exit of Russia and Belarus is expected to impact full year organic sales growth in Human Health by around 1 percentage point. Could you please turn to Slide #7? Thank you. Planetary Health Biosolutions delivered 11% organic sales growth in the first quarter of 2025. And adjusted EBITDA margin was 39.4%, an increase of 2.7 percentage points. For 2025, we expect this division to deliver organic sales growth in the same range as for the group with relatively stronger growth in Agriculture, Energy & Tech. Please turn to Slide #8. Household Care delivered 12% organic sales growth in the first quarter of 2025. Growth was mainly volume-driven with a positive contribution from price, on par with the group level. The strong development was anchored across both developed and emerging markets through increased penetration and innovation. Emerging markets saw a relatively stronger development where our increased local presence enables us to drive faster penetration as we are offering more value to our customers through innovation tailored for their specific needs. Additionally, growth in the first quarter was supported by timing. During the quarter, we launched 2 new proteases solutions, enabling superior strain removal at low temperatures, coupled with increased formulation and format flexibility for our customers. After a very strong 2024 and start to 2025, we expect growth in Household Care to normalize. Key growth drivers continue to be innovation, increased penetration in both developed and especially emerging markets as well as continued support from pricing and industry volume growth at a more normalized level. Especially for the U.S. market, where the detergent category is more sensitive to down trading, we're currently not seeing changes to consumer order patterns. However, our expectations, we have included a more careful view for the full year development. Please turn to Slide #9. Thank you. Agriculture, Energy & Tech delivered organic sales growth of 10% in the first quarter of 2025. This was driven by double-digit growth in Energy & Tech and supported by Agriculture. Growth was driven mainly by volume and pricing contributed positively, in line with the group. Growth in Energy was led by Latin America and India, driven by capacity expansion of corn-based ethanol production and supported by the ramp-up of volumes for second-generation ethanol. Performance in North America was driven by increased penetration of innovation, supported by growth in ethanol production. Additionally, biodiesel contributed positively. The strong performance in Tech was driven by bioprocessing, led by increased demand for solutions for biopharma production as well for oils and fats. Growth in Agriculture was driven by Plant, while Animal was negatively impacted by timing. Overall, for the sales area, synergies contributing to growth in line with expectations. For 2025, growth in Agriculture, Energy & Tech is expected across all industries, supported by a positive impact from synergies, mainly in Agriculture. Growth is expected to be led by Energy, driven by continued capacity expansion in emerging markets and penetration of innovation in North America. Our expectations include the recently updated external forecast for U.S. ethanol production in 2025, which has been lowered from around 1% growth to now flat. Now let me hand over to Rainer for a review of the financials and the outlook for 2025. Rainer, please?

Thank you, Ester, and good morning, everyone, also from my side to today's call. Let's turn to Slide #10. Please note that for the year-on-year comparison figures presented today, we have used pro forma figures as our baseline. The corresponding IFRS-based figures are available in the statement released this morning. In Q1, sales grew 11% organically and 12% in the reported euro as currencies provided around 1 percentage point tailwind. Let me point out here that compared to 2024, in the first quarter of 2025, we do not have any capping effect from hyperinflation on our organic sales growth. Let's now have a look at our profitability. The adjusted gross margin was 58.9%. This is an improvement of 330 basis points year-on-year. Lower input costs, including the cost of energy as well as economies of scale, led to this improvement. Productivity improvements, pricing and synergies also had a positive impact. The adjusted EBITDA margin was 38.3%. This was 310 basis points higher than the first quarter of last year and explained by the improved gross margin, synergies and an expected under-proportional growth in our operating expenses, leading to lower net operating costs relative to sales. Special items amounted to EUR 10.2 million and primarily consist of integration cost as well as cost for a new global ERP system related to the combination with Chr. Hansen and initial transaction costs from the acquisition of dsm-firmenich share of the Feed Enzyme Alliance. The diluted adjusted earnings per share was EUR 0.42, an increase of 27% compared to first quarter of last year. If we adjust for the merger-related PPA amortization, the earnings per share was EUR 0.53, an increase of 36% compared to the year before. Operating cash flow amounted to EUR 106.4 million in the quarter, benefiting from higher net profit, which was offset by increased net working capital, mainly from lower trade payables and higher receivables following the stronger sales. CapEx was in line with expectations, and free cash flow before acquisitions was EUR 68.1 million for the quarter compared to EUR 132.4 million in Q1 of last year. With this, let us now turn to Slide #11 to talk about the 2025 outlook. Please note that the outlook and modeling assumptions presented today still don't include any impact from the acquisition of dsm-firmenich part of the Feed Enzyme Alliance, which is now expected to close in the second quarter of 2025. The outlook is also based on current levels of global trade tariffs. As Ester mentioned at the beginning of the presentation, we're confident in our full year outlook. We maintain our guidance for both organic sales growth and profitability following a strong start to the year, well in line with our expectations. Demand for our biosolutions remains strong with continued healthy key indicators as we continue to monitor the ongoing macroeconomic development. Our regional presence, operational flexibility and diversified end market exposure position us well to navigate changing dynamics. Additionally, we have confidence in passing on incremental costs driven by tariffs. As a result, we expect no or only marginal net impact from tariffs. Sales synergies are still expected to contribute around 1 percentage point to the organic sales growth for the year. And in regards to the adjusted EBITDA margin, we still maintain the outlook of 37% to 38%. This includes expected headwinds from currencies as our adjusted EBITDA is fully impacted by currency fluctuations. Note that we show the FX hedging gains and losses as part of net financial items below the EBIT line, protecting our net profit. For modeling purposes for 2025, we maintain the assumptions provided in relation to the outlook announcement on February 26, except for net financials where we now expect an improvement in currency hedging gains. This leads to an expectation for net financial cost of around EUR 50 million compared to previous indication of around EUR 80 million for the year. And with this, I will hand back to Ester for a wrap-up. Ester?

Thank you. Thank you, Rainer. Please turn to Slide #12. Let me summarize our message here today. We delivered a strong and broad-based 11% organic sales growth for the quarter, mainly volume-driven and with positive pricing in both divisions. Earnings follow along with 38.3% adjusted EBITDA margin and included the benefit from synergies. Novonesis' strong focus on customer-centricity, diverse portfolio of innovative biosolutions and unique scalable production setup drives the performance. We expect a broad-based 5% to 8% organic sales growth, mainly volume-driven and with positive impact pricing across both divisions. If we exclude the impact from the exit of certain countries, organic sales growth for the year would be 6% to 9%. For the adjusted EBITDA margin, we see underlying expansion versus previous guidance. However, including the recent currency developments, we still maintain the 37 to 38 percentage range. Focus is both on short- and long-term performance. And in the presented outlook, we have left room for reinvestments to support the business. The start of the year has been very strong, and we currently see no signs of softening in demand that impacts our business. In the current more volatile macroeconomic environment, customers' demand for our biosolutions driving productivity, cost savings, clean label and healthy nutrients continues to be solid, leading to comfort in regard to the full year outlook. And with that, we're now ready to open for the Q&A. Operator, please?

[Operator Instructions] The first question comes from the line of Alex Sloane from Barclays.

Two questions from me. Just firstly, on Household, obviously, very strong performance in quarter 1. Could you help us quantify the timing benefit that you talked to, maybe give a bit more context on what's driven that and phasing of how that might unwind over the course of the year? And I guess beyond that, penetration in emerging markets seems to be a strong driver of growth. I mean I appreciate that may not be linear, but should we assume that penetration contribution is kind of broadly sustainable on a full year basis? That would be the first one. And second one, just in terms of comments, I think you mentioned that the growth in dairy was across all regions. Can we infer from that, that China was in growth? So maybe you could give a bit more color on the dynamics in that market here, historically, a key growth engine for Chr. Hansen that's maybe stalled a bit in recent years.

Thank you very much, Alex. Let me answer your second question, also bring maybe a little bit of color of the whole company because you -- it's not only for Household Care, and I would like to bring a little bit of color then also having Tina building up on Household Care. So particularly on your comments on timing and order, we have already came into the year embracing a stronger first half of the year as the driver of our outlook. And we're very, very pleased with the good and solid strong start of the year with a really good Q1, including also Household Care. We're not seeing changes of our customer order patterns, and that's across the whole enterprise as we're watching it very carefully, also the dynamics in the market, in the current environment that we're living in. Particularly in dairy, yes, we have seen in Food & Beverages double-digit growth across almost all segments, industry areas and dairy. It is a strong driver of that across both cheese and fresh dairy. And also, we have been seeing growth in China. It's still small. In China, it is less than 5% of dairy, while we see the growth in China, mainly from cheese and from innovation in a market that is not growing. So we are very, very, very well positioned. We're driving growth in a market that is not growing. We're very present with our customers, and we're very confident that when the trend changes and it moves back into growth, then we will be capitalizing on that momentum. Tina?

Yes. So let me give some perspective of Planetary Health and more specifically on Household Care. So what we have said is that Planetary Health will grow in line with group and that Agriculture, Energy & Tech will grow faster than Household Care. And what is then the growth consisting of in Household Care and how come I say this? So first of all, I would say in the outlook we are having for the full year, we are looking at, as Ester said, some softness in the second half, which we have included in our outlook. As we also have said is that we don't see -- we see some timing effects, but it's not a matter of preordering as such. What we see is and what we hear from our customers is a declining consumer confidence and softer demand rest of the year. If you think of what are then the elements of this, I think it's also important to look at 2024 because if you look at 2024 absolute numbers, second half was 3% stronger than first half. The biggest driver of the 12% growth is penetration. That is the way biggest. And there, we are very happy with where we are in emerging markets. Relative to group, we have a quite strong presence or quite strong performance and share from emerging markets, and that keeps to be strong, and that is also what I would expect for the full year. We have a bit of timing effects, which is the second, and then we have the end market and price at group level contributing. I hope that answered your question, Alex, and also give some extra flavor to how it is we expect Household Care for the full year.

Thank you, Tina. It feels -- it gives comfort not only the first -- the good quarter, but also the good momentum that we also see in April. We feel in a good place with the guidance that we've put up in place.

The next question comes from the line from Matthew Yates from Bank of America.

I'd like to ask about Human Health. I think it was 13% organic growth, admittedly on I think it was a minus 5% comp, and that comparison base gets different as we go forward. Can you just talk a bit about how you see the underlying market growth rate and then, I guess, as Tina alluded to, your ability to outperform that through penetration and solutions? I think, Ester, you said in your introductory remarks that the sales synergies were relatively modest. So it gives me the impression it's much more innovation-driven. And if so, can you maybe just highlight anything in particular, be it category or form factor that's really driving growth in the Human Health business?

Amy, please?

Sure. Yes. Thanks very much for your question, Matthew. So you're right, we see the 13% growth on the back of a weak comparable. But I think where we really see going forward is the positioning of the business to grow ahead of market growth. If you look at Euromonitor, I mean market growth rate globally would be around in the 6 percentage range, and that's sort of the standard view where we are positioned, of course, in both from a channel perspective with our exposure into the HCP channels as well as the B2B channels, but also from a category perspective where we are focusing our innovation, our investments and also a lot of the synergy launches in categories which are growing higher than market growth rates. So that's our exposure to women's health, infant health, mental health. And these are really the focus areas for investment, both now with the launches of our synergy portfolio, but also forward if you look at the innovation pipeline that we're building. And so we believe those are the key drivers that position us to be able to continue to grow ahead of market growth rate. And I think maybe one of the things in the current environment, which is particularly interesting and we see a really strong start to the year in our health care practitioner channel in the U.S., as we look into the volatility of the market, having that exposure to science-driven HCP recommendations, we see that as being a very resilient channel, particularly in the volatility of the current market environment. So it's really the positioning, as I say, both channel and categories, which positions us to outgrow market performance going forward.

The next question comes from the line of Thomas Lind Petersen from Nordea.

The first question around dairy, Food & Bev, Ester, you mentioned here that the pipeline for new solutions look very solid. I was just wondering if you could elaborate a little bit on the pipeline. Is that the product launch that you -- the public official one that you write here in the report? Or is there more to come here? Also regarding the momentum here, you're saying continue to be strong. Is it fair to assume that this strong double-digit organic growth rate in Food & Bev can continue if we sort of exclude the exit from Russia and Belarus? Yes, that's the question.

Excellent. Thank you very much, Thomas. Let me put a little bit of color on the component of the growth and then also have Claus bringing even more color on the innovation. We are in a really good place in our Food & Beverage segment across all areas from a penetration, growth and traction with our customers, bringing answers that they are responding to the increasing consumer needs of healthier nutrients, clean label, low sugar added, lower salt, high protein and also bioprotection and freshness and extended shelf life, leading to savings for our customers in dairy. With that, the innovation pipeline and its -- and the penetration of those solutions, they are making many, many, many small contributions contributing -- leading to accretive compounded consistent growth. And that momentum continues to be there. Then regarding your question on the continuity of the growth, thank you for including the impact of exit customers, which is going to have -- expected to have a 3 percentage impact to Food & Beverages and mainly on the second half. So excluding that, this business will be driving strong growth. And again, we continue to see the drivers for our customers, the really good conversations across all areas and also penetration in emerging geographies as a driver of growth. Claus?

Yes, sure, Ester. So innovation is a growth driver across the Food & Beverage space, but in particular in dairy. Some of the things you know, it's a bulk conversion to DBS, especially in the cheese segment. And not all of what you see is, you could say, public launches. There are also customer-specific launches. Then we have a number of activities in biopreservation. And furthermore, the area of high-protein dairy is an innovation driver for us as we bring technologies beyond the cultures, also on enzymes that allow for better texture in high-protein dairy. And there, we both have products already in the market and more coming.

Sounds great. Thanks.

We now have a question from the line of Charles Eden from UBS.

So just coming back on Q2, you mentioned sort of encouraging trends in April, and I acknowledge the comments about the first half organic growth being above the full year. But can I just ask, would you expect Q2 to be back in the full year range or remain slightly ahead of that 5% to 8% that you're guiding to for 2025? And then second question, again, on the organic growth. But for the full year guide, you mentioned the macro uncertainty, and I'm sure that played a part in the decision to leave the 5% at the bottom end of the full year organic range at this stage despite obviously a very strong 11% in Q1. Can you just sort of talk to us in terms of your end market exposures where you would expect to see potentially some volume elasticity or volume softness were we to have a slowdown in global growth rates?

Thank you, Charles, for your question. Yes, we have a very good start of the year, really solid numbers in Q1 with 11%. And we are in a place of comfort with this very good start of the year, including April. And that's where we sit today. And also with the conversations with our customers, the order patterns, we don't see any change on the ordering patterns or prebuying. Having said there is timing effects, as Tina mentioned, in Household Care, which happens many times from one quarter to the other, then we're watching the market very, very closely. We live in a very dynamic environment, and we're watching it very, very, very closely. We see some indications. We talk about EIA reducing its forecast on North America bioethanol demand from 1% to flat in U.S. So that's a driver and an indication. We see changes on consumer confidence in U.S., leading also to a potential further dynamics. We're watching that very, very carefully and that it's included also our read today in our guidance and reflecting the commitment also the strong start of the year on our comfort on delivering. Also, it's coupled with the robustness of our portfolio. We are present in 30 different markets. We have a global asset footprint. We see tremendous penetration in emerging geographies from our innovation and existing solutions, continue to win traction with our customers. When you couple all that in the world that we live today, we feel in a comfort place to confirm our guidance from both top line growth, but also EBITDA margin, including the headwinds that we see on currencies.

The next question comes from the line of Ranulf Orr from Citibank.

Two, please. The first one is just sort of following on from Charles and maybe from a slightly different perspective. But if we do see continued deterioration in consumer confidence, can you give an idea of what proportion of sales you would think would be in more discretionary categories and which segments might be most exposed? So high-protein dairy, supplements like that will kind of come to my mind. And secondly, please, could you give some perspectives on how you see your support for growth in a $60 oil environment versus, say, an $80 environment as you were earlier in the year? Is that 50, 100 basis points of tailwind that's gone?

Thank you. And as -- we read the markets and we read the conversations with our customers. And as I mentioned, and apologies if I'm repeating myself, we continue to see very solid traction from our innovation. We have seen us also in the past in previous environments when the dynamics have changed of the resilience of our offering. We see -- I mean, even in a changing consumer dynamics, spaces like food showing a strong resilience; dairy being, even in some many cases, a stronger driver for the fulfilling the consumer needs from providing competitive solutions with high protein and nutritional value. Trends as such high protein, trends as such lower sugar added, trends as such low/no salt, on clean label, we see no change in this aspect and continue really good momentum with our customers. Same in Household Care where trends as compacting, which also can lead to lower cost; or lower washing at lower temperatures, which also are helping consumers to drive energy savings; trends such as replacing microplastics, you cannot make microplastic replacement with cheaper microplastics. So many of the solutions that we provide, they are not price substitutional. They are value added. And when you couple the resilience of our offering, the global footprint, the penetration in emerging geographies and the value-added solutions that we provide to our customers, that's what gives us the comfort on the guidance that we've put in place of the 5% to 8%, also with the increasing EBITDA margin -- with also the confidence on the EBITDA margin, including also the negative headwinds from currency.

The next question comes from the line of Soren Samsoe from SEB.

Just a question on your EBITDA margin guidance, quite strong that you actually keep it. Maybe you can elaborate a little bit on the impact from productivity improvements in 2025 that you expect. Is it sort of at a higher level than what you normally see? And also, if you can quantify the negative currency impact to the EBITDA margin in 2025.

Thank you, Soren. Rainer?

Yes. So thanks, Soren, for the question. So you're right, it's a strong signal that we're actually keeping the range despite these currency headwinds, right? Q1 is still positive, turning down or turning completely around in April. And based on that development, basically on today's development, so being the U.S. dollar around, what, 1.135, 1.139, around there, we basically absorb that in our guidance right now, which implies really, of course, an operational strong performance at the end of the day. To quantify that, it's basically -- it's probably around -- it's tough to say, but because currencies fluctuate, but let it be around 0.5 to 0.75 percentage point. That's probably what we're talking about there. You can also see that in the net financial result where we really -- where we basically we mentioned that impact down from EUR 80 million to EUR 50 million. Of course, the EUR 30 million change is not only related to currency, right? We also have a little bit of better interest and other topics that are in there, but the far majority is related, of course, to hedging. So that gives you an indication of where we are in this regard.

We now have a question from the line of Nicola Tang from BNP Paribas.

Firstly, just on bioenergy, I wonder whether you could talk a little bit more about or quantify in a bit more detail your expectations for full year growth. You mentioned slightly lower EIA forecast, but I suppose you've managed to significantly outperform that end market for a long time. So I'm not sure how relevant that is. So could you talk a bit more about the drivers for the full year? And then on tariffs, you clearly mentioned there's a very limited impact, if any, but could you just sort of explain where the risk area -- sort of impacted areas are? Is it sourcing of raw materials? And what are you doing to mitigate it? And are all of your end products actually exempt from tariffs?

Thank you, Nicola. I love it when the question comes implicitly with the answer, and I would let both Tina and Rainer put more color here.

Okay. And I'll start with the bioenergy. So what I can say on the quarter is that bioenergy grew roughly in line with AET. What I also can say for the full year, Nicola, is that we have said that Planetary Health will grow in line with group and AET is going to grow faster than Household Care. But you are also right that we have been on a diversification agenda where it is that the feedstock diversification with oil, biomass on top of the corn feedstock, we have had for quite a while. But just as important or maybe even more important, the geographical diversification is a very big driver of our expectation for the full year as well as for the quarter. However, I wouldn't be as bold as saying that the U.S. and the decline in -- from 1% to 0% is not relevant because U.S. is still -- we have a very large presence. We have talked about how it is it has been decreasing, and it has. However, it is still a big -- and the biggest part of the business.

So regarding to tariffs, Nicola, keep in mind that especially in the U.S., we also -- a large part of the products that we actually sell in the U.S. are produced in the U.S., right? So that already gives us a little bit of, let's call it, natural hedging in this case. And of course, on top of that, the remaining part of the, let's say, gross impact, we're able to mitigate really by optimizing our supply chain. That's the beauty about having a global manufacturing footprint that enables us to really also fine-tune continuously and optimize where we produce what in the different sales areas. It's not just pertaining to one single one. Again, that's the beauty about the multipurpose one. And last but not least, we also then have the ability to pass on cost to the market at the end of the day. So there were, we say, as a net impact. So of course, gross tariffs impact us, but we have mitigation actions in place, net impact, we really don't expect an impact on the profitability; and if so, it's a marginal one.

Would you mind if I just followed up with another one on the impact of timing? You talked a lot about Household Care and a favorable impact. But I think there was also some unfavorable impact in Animal and Early Life Nutrition. Was that just lumpiness of orders? Or was there something specific going on because it's clearly not prebuying as you were saying?

Again, yes, good question, implicitly with the answer. Yes, timing, it's just that timing from one quarter to the other. It's a big company. There's 30 different markets. And one order slips in 1 day of the end of the month versus the other, that's just timing.

We now have a question from Chetan Udeshi from JPMorgan.

I had a slightly broader question, Ester. You talk about penetration, new launches. And I'm sorry, but it doesn't feel like many of the things that you're highlighting have or are new for Novozymes or Chr. Hansen from the past. I mean we've heard that probably for 10 years, 15 years. But what is different is your growth is much higher than what it used to be. And I can't help but wonder, what is -- what has changed from your view from, let's say, 4 years, 5 years back to now? Is it just that the markets are coming to you in terms of trends? Is it just that competitive environment has perhaps become more benign? So because I think the concern some might have is this is as good as it gets. And maybe there is some -- there are some special effects, which might not repeat, but just curious.

It's a beautiful question, Chetan. And yes, Novonesis is an amazing company with 3 pillars that make it unique and special. It is our innovation muscle, it is our customer-centricity and it's our capability to translate those needs into the -- from the customer with innovation, value-accretive solutions at scale. And these 3, they've always been there. Maybe what it's special or what it's different, it's our ability to run them swiftly and build them on each other continuously. And there has been a lot of self-help here. We have been investing in emerging geographies significantly in these last years. We have been enhancing the capability from being as closer to our customers with customer co-creation centers with the ability to play and translate those needs into inputs into -- for the amazing R&D machine. And I'm going to let Claus build here on our muscle and capabilities in place. But also from a scale-up capability and translating them and bringing them into competitive solutions, we have also been investing in our assets on resilience, on ductility, on the capability to flex and adapt on volatile markets. So it's not a magic formula. It's not one single aspect. It's a combination of many, many, many efforts that strategically we have been investing in these last 5 years that, yes, we are collecting the fruits. And all that together gives us the comfort also of continuing to putting dots one quarter after the other of the solid performance that we're delivering. Claus?

I think you can make, of course, a direct comparison to what we launch in a given quarter to what we also thrive on from an innovation perspective as we, you could say, we benefit from innovations over the past years, of course. What has also changed is we have been a lot more focused to the growth contribution and value add to what we do. So you see the examples of being able to outgrow the volume market in bioenergy in North America through solutions, yes, incremental, but actually adding additional value to be shared with our customers. The same goes for our Food & Beverage business, especially in dairy. But in there, you also see new innovation, allowing customers to do entirely new positioning of products. You have a tremendous growth driver, for example, in baking with Novamyl BestBite and so on and so forth. So I think it's a mix of things. Certainly, with presence in the market, as Ester is talking to, but also having a focus that our innovations need to be value accretive and then bring growth, not only profitability, which this also does.

One last...

Can I just follow up -- last follow-up for me would be, can you remind us your Household Care geographical mix? And how much of your Household Care is actually in North America just given that there has been more, let's say, slowdown we've seen in North America than many -- most of the other regions?

Yes, I can maybe answer that. So if you look at emerging markets versus developed market, Household Care is roughly 50-50. And in the developed market, U.S. is less than half. I hope that answered the question.

Very clearly, Tina. One last question, please.

The last question comes from the line of André Thormann from Danske Bank.

So my question is really about the cash flow and whether you consider this cash flow satisfactory because I know that there is some one-off effects. But even adjusting for this, it looks roughly flat. So is it really satisfactory to grow so much on the P&L, but not really seeing it turning into cash flow growth?

Rainer?

Thanks, André. Of course, let's say, the Q1, I would say that it's really a one -- it's a timing impact, right? We have a EUR 200 million, let's say, negative impact on the net working capital purely due to the fact that actually we have strong sales growth, right? That, of course, leads to higher receivables. And keep in mind, in Q4, we had quite an acceleration about also our CapEx that then translate to payables that are now due being paid. So that is this double whammy, almost increase in payables -- sorry, decrease in payables, increase in receivables that, of course, had quite a significant impact on our cash flow. I expect that, really if you're looking at ahead of the year, to be really -- to normalize completely. This is really a one -- I mean you look at it at one date in the year. So am I happy with the first quarter development? No, but it's really what it is. At this point in time, it's nothing structural. You know and you have seen in the past and you saw it also our ability to deleverage us, we have -- we are actually a strong cash flow generating company.

Excellent. And with that, we would consider this call as finalized. Thank you very much all of you for calling in and your questions, and looking forward to seeing you, many of you within the next coming days. Thank you.