Tessenderlo Group NV (TESB) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Tessenderlo Group Half Year Results Conference Call. I am pleased to present Mr. Stefaan Haspeslagh, COO and CFO; Mr. Kurt Dejonckheere, VP of Finance and Investor Relations. [Operator Instructions] Questions will be strictly limited to analysts covering Tessenderlo Group. I'll now hand over the floor to Mr. Stefaan Haspeslagh. Sir, please go ahead.

Good afternoon to everyone. Welcome to our conference call in respect of the Tessenderlo Group first half year '20 results. As usually, we will start with the key events during the first half year. The first one is in respect of the Agro segment, where we have signed a long-term partnership agreement with Kemira Oyj, whereby Kemira will produce premium SOP fertilizer, both standard and water-soluble grade; and whereby we will market these products as of 2021. In this way, we will be able to increase our volume and also enlarge our portfolio of product offerings. In the Bio-valorization segment, PB Leiner has inaugurated in February a new collagen peptides line in Santa Fe, Argentina. This additional production facility will allow us to increase considerably the production volume of SOLUGEL collagen peptides. And we are really proud of this investment with our own technology and we are now in a ramp-up phase. With COVID, it will not go as fast as planned, but we are confident that we have the right product for the right future. In respect of the Bio-valorization segment, we have the pleasure to announce that we have established a joint venture with Zheijang Shengda Ocean Co. in Xiaoshan in China. This company, which is the joint venture, will produce bone and marine collagen peptides based on PB Leiner's technology and PB Leiner will do the commercialization of these products in the market. We are really glad because with this product, we will be able to increase our portfolio also with fish collagen. And in this way, we will be able to play a more important role in the collagen business. In the Industrial Solutions segment, in the second quarter, DYKA Group completed the acquisition of the production plant of REHAU Tube in Bourges from the German REHAU Group. Bourges is situated 200 kilometers south of Paris. And we believe that from there, we'll be able to increase our offering and sales of products in the southern part of France. Also in the industrial segment, we have to announce that S8 engineering has ceased to exist. As you know, a couple of years ago, we had decided to try and do engineering projects for third parties. However, we decided now to reintegrate the engineering company back into our activities. So it will be integrated into the mining and the Crop Vitality business, as we believe that they will be able to generate more value working for internal projects. Then we come to the next, the T-Power segment. In the T-Power segment, we started filing the relevant applications in order to participate to the Belgian capacity remuneration mechanism tender. And this for the construction of a second gas-fired power station, and this in our Belgian municipality of Tessenderlo, where we hope, if we are successful in this tender, to construct it next to the existing gas-fired power station. So right now, we are preparing everything to participate to this tender. However, the outcome of the tender will decide if we have been selected to construct and to continue this whole process. We want to update you also on the COVID-19 situation. We can tell you that, as a group, we are taking the necessary steps to ensure that our people are safe in the plants and offices and that we have the right environment, we have the right protections and the right measures to keep our business running, respecting the health and safety of our people. Through this whole period, we have been able to keep on running most of the plants because basically we are producing basic chemicals for the production of drinking water based on side streams in the form of hydroponic acids from the production of SOP in Ham. This is basically our factories in Tessenderlo or Loos, if you -- Performance Chemicals, whereby we produce this type of product for disinfection, [ like travel ]; production of drinking water, which is ferric chloride, and production of drinking water, which is another type of ferric chloride. We are also producing gelatin for medical and food applications. We are producing electricity. We are producing nutrition and protection products for agriculture, which have also been considered a vital sector by various governments all over the world. We are producing pipe systems for maintaining drinking water supply and to drain polluted water. Here, however, we have to inform you that our JDP distribution network has been down for some time in the U.K. because of COVID-19. And also the factory in the north of France has been closed for a while, also due to COVID-19. We are also -- are involved in services and in the treatment and conversion of products from the meat chain in France, where we have the obligation under our contracts to protect the meat chain. So all by all, our activities inside the group have been most of the time been going on during the crisis of the last months. In the coming weeks and the coming months, we are very careful to make sure that our people can continue work in safe conditions, that we take all measures as required by governments, and even if required by us more stringent, to make sure that: One, people are safe; and two, we have the maximum changes to continue our operations. However, we are depending on supply of raw materials and auxiliary materials. We are depending on third parties doing maintenance in our plants. We are depending on transportation services. And we are depending on customers who should be able to receive, process and resell our products into the market. So we are very cautious from our side to make sure we have the best possible understanding with our suppliers and our customers and our people to guarantee as good as possible the continuation of our operations. But in these circumstances of today, no one really knows. Kurt, maybe you can explain us a bit more on the half year 1 '20 results.

Thank you, Stefaan. If we look at the half year results, we see that the revenue has, in fact, remained stable compared to prior year, which is a good result as we saw due to the corona pandemic also a decrease of the revenue at DYKA Group, but in total, the revenue of the group remained stable. For the adjusted EBITDA, we saw an increase. We saw an increase of the adjusted EBITDA by 25% to EUR 182 million. And in fact, the foreign exchange impact in the first half was rather limited. We expect more impact in the second half due to the weakening U.S. dollar. But in the first half, the foreign exchange impact was rather limited, plus EUR 1 million. So in total, adjusted EBITDA had an internal growth of about EUR 36 million. The profit/loss for the period stood at EUR 86 million compared to 48 million last year. It includes also net foreign exchange losses, as already mentioned also in previous periods, which is more an accounting impact. It's on intra-group loans which are not hedged. So without those exchange losses, the net result would have amounted about EUR 93 million. Capital expenditure is more or less in line with prior year, EUR 41 million. It includes, amongst other investments in the valorization of gelatin side streams and in the optimization of the valorization of animal byproducts. So here, we talk about the segment Bio-valorization. It also includes additional storage capacity, mainly within the Agro segment. It also includes the replacement of leasing contracts by the acquisition of assets. So it includes a lot of investments and a lot of projects. The operational free cash flow stands at EUR 141 million compared to EUR 100 million last year, mainly impacted by the increase of the adjusted EBITDA. The net financial debt of the group, we were able to decrease the net financial debt to EUR 240 million. Last year, at the end of June, it stood at EUR 360 million, so quite a substantial decrease of the net financial debt over the last 12 months. Compared to the end of 2019, the net financial debt at that moment stood at EUR 350 million. The EUR 240 million net debt also includes the net debt related to the lease liabilities for an amount of about EUR 60 million. If we look at the group revenue per segment. In fact, the splits over the different segments is quite in line with prior year. Agro is good for 39% of the group revenue; Bio-valorization, 31%; Industrial Solutions, 27%; and T-Power remained stable at 4%. If you look at the split of the group adjusted EBITDA, the EUR 182 million. There, we see that the Agro segment is good for almost half of the adjusted EBITDA, EUR 84 million. Bio-valorization has increased substantially compared to prior year. Prior year EUR 25 million, it goes to EUR 45 million. Industrial Solutions remained stable, EUR 25 million. And T-Power also slightly increases to EUR 27 million. If we briefly look at the results of the different segments separately, then we see that for the Agro segment, revenue has remained stable when excluding the foreign exchange effects. Where Crop Vitality revenue in fact increased thanks to higher volumes. The adjusted EBITDA increased by about 17% compared to prior year. We saw an increase within Crop Vitality and Tessenderlo Kerley International thanks to favorable market circumstances, while the adjusted EBITDA of NovaSource remained stable. For the Bio-valorization segment, we see an increase of revenue by 8%, mainly thanks to favorable market conditions and also an improved product mix. The adjusted EBITDA almost doubled to EUR 45 million, mainly thanks to favorable market circumstances and realized efficiency improvements. For Industrial Solutions, we saw a high decrease -- a large decrease of revenue, minus 8%, mainly due to lower DYKA Group revenue. The volumes in DYKA Group were negatively impacted by the corona pandemic in the period March to May, mainly also a consequence of the disruption of production at our French plant and also the temporary closure of a number of John Davidson Pipes sales branches in the United Kingdom. The Performance Chemicals revenue slightly decreased as the volumes of sulfur derivatives were negatively impacted by reduced activity at tanneries. The revenue of the Others activities included in this segment remained stable. Despite the decrease in revenue, adjusted EBITDA remained, in fact, stable. It only decreased slightly. And the adjusted EBITDA of the DYKA Group decreased as a result of the lower volumes, but this was partially offset again by the favorable development of input costs and also cost-saving measures which were taken to mitigate the impact of COVID-19. The adjusted EBITDA of the Other activities remained stable. For the T-Power segment, revenue was in line with prior years. In fact, the group fulfilled all the requirements related to the tolling agreement. The adjusted EBITDA improved thanks to a further cost optimization. If we look at the reconciliation between the adjusted EBIT of the half year to the net result of the half year, then we see the adjusted EBITDA, we have EUR 116 million. EBIT adjusting items were a positive EUR 4.2 million, mainly related to the gain realized on the disposal of the former Tessenderlo Kerley headquarters building. We also recognized a bargain purchase gain following the acquisition of the activities of REHAU Tube. We had a storm in the U.K., which resulted in the write-off of inventories and damaged equipment as there was a flood in our plant in the month of February. And finally, we also had impact in the revaluation of an electricity purchase agreement. This brings us to an EBIT of EUR 120 million. Net finance costs amount to EUR 12.3 million, including net foreign exchange losses for EUR 7 million. Income tax expense amounts to EUR 21 million, mainly related to taxes for our operations in the United States. And in total, this brings us to a net result of EUR 86 million . If you look at the outlook for the full year. And of course, the statements that we make are forward-looking and actual results may differ materially. The group, in fact, anticipates a continued high level of uncertainty in the second half of 2020 due to the ongoing corona pandemic, where the development of customer demand and margin is exposed to an increased risk. However, based on the current available information, the group expects that the 2020 adjusted EBITDA will be between 10% and 20% higher compared to the adjusted EBITDA of last year. To end also the financial calendar, the publication of the annual results 2020 is foreseen on March 25, 2021.

Thank you, Kurt, for the brief but clear explanation of the most important numbers. In this COVID times, we are really focused on making sure that we keep our strategic projects going on as we are continuously debottlecking. We are looking to introduce new products or new applications. We are also trying to make more storage close to the market in the business where applicable. And we continue to look for further process improvements in all the businesses we operate. You can imagine that in these times, it's more difficult to make new customers and to introduce new products or applications. Most customers, we have to reach them only through video contact, digital contact, which makes the contact more difficult. And it's more difficult to convince customers to make changes and to believe in the nice story and the value we can propose them. During these times, we also keep a strict cost management, and we continuously look for further efficiency increases in our operations and the way how the group operates. I can tell you Every Molecule Counts stays at the heart of our business, whereby we try to give the maximum value to side streams that we are able to get into our company. Also, this performance that we can share with you is the result of so many people in the group who have been working very hard during these difficult times to achieve the best possible service for our customers within the standards that our customers are used to. And I think this is a great achievement and whereby we thank all our people. This is basically what we have to share with you in respect of the first half year and the outlook for the full year. So now we wait your questions. Please, you can start.

[Operator Instructions] Our first question comes from Mutlu Gundogan, ABN AMRO.

If you're fine with it, I would like to ask my questions one by one, should be easy for you to remember. So the first question is on Agro. You recorded a fairly high margin in the first half, and you talked about favorable market circumstances in Crop Vitality and similar in Tessenderlo Kerley International. Can you tell us which product was the main driver behind this increase? i.e., is it ATS, KTS or SOP? That's the first question.

We can tell you, Mutlu, that we had good conditions for the 3 products.

All right. And then the second question is on Bio-valorization. So revenues in constant currencies were up 8% year-on-year. Can you tell us how much of that is driven by volumes and how much by higher price/mix?

In that respect, the -- it's difficult to make a difference between the various aspects. But basically, what we have been achieving is, through all our investments, we have been able to have more stable, more reliable factories, whereby we've been able to produce better qualities. And at the same time, we've introduced new products, which have created a higher value, both for us and for the customer. And at the same time, we have been debottlenecking factories. So basically, the whole concept of reliability, better products, intrinsic products and also better-value products has led to the overall increase of sales of 8% over the total Bio-valorization business unit. It's very hard to say this is just a product, this is the value. This is hard to say. It's the total aspect, whereby mainly today, we are able to sell to customers who are more demanding and where we can meet their stricter demands.

Right. But doesn't your answer mean that the majority of your higher revenues are driven by a better price/mix and less through volume? I mean, if we solely look at tonnage, was that up year-on-year?

Well, what you do, Mutlu, you shift product from one type of value to products of another type of value. And this is depending on how the market moves that we can make now the switch between, for example, collagen, SOLUGEL and gelatin, depending on what the market wants, all about the value we can create. So we have a more flexible production that we can adapt to the needs of the market.

Okay. That's very helpful. And then just sticking to Bio-valorization, obviously, a very strong increase in your EBITDA margin. I assume that it's largely driven by this product shift that you alluded to. I also hear that you talk about efficiency gains and better processes. So if you look at the increase of, what is it, more than 6% or 600 basis points year-on-year in your EBITDA margin, how much of that is driven by better product mix? And how much of that is driven by efficiency gains?

We do not keep track on this because to make a new product, it can be that there, you have an efficiency gain because you changed the process, Mutlu, to have a new product. So again, we have a flexible production right now, whereby we can optimize the process according to the need of the market, so it's very hard to say exactly what it is. The most important thing is we have put yourselves -- we informed yourselves a couple of years ago that we move -- would move to higher-value products and this is exactly what we are now doing.

Yes. Yes. Maybe to rephrase the question then. The fact that you've been able to increase margins so significantly in Bio-valorization, and it seems that the argument you are giving are more structural in nature than short term. So would you say these margins are sustainable going into the second half and going into 2021?

As I informed you, this structural aspect, whereby we indeed have more efficiency, we have -- we are working in a better product range, we are able to serve more demanding customers. And on the other hand, there is also some market impact. But it's difficult to make a split between the 2 because we have made all the movements at the same time.

Okay. Just 2 more questions, if I may. On Industrial Solutions, seems that this segment was mainly impacted by the corona crisis. Can you tell us what the impact was on sales and EBITDA?

To give the exact number, what is the COVID impact, is quite reduced. We don't have a big impact on the EBITDA. So it's marginal, not material impact that we had on EBITDA. We've been able -- because there was -- there were government programs to support this type of situations, the EBITDA impact has been quite limited.

Okay. Okay. And then final question, apologies for taking up so much time. I'll leave the floor to someone else. Final question on the balance sheet. Your leverage is coming down rapidly. I mean, if you continue with these earnings and this these the CapEx, it seems that you're going to have a net cash position at the end of next year. Your gross debt, however, is still relatively high at some EUR 470 million. Can you tell us what your plans are? I mean, do you plan to pay down debt? You were looking at the T-Power financing? Just your thoughts there.

Well, as you know, the bond is coming due partially in 2022 and the other part in 2025. So indeed there, we have the option to renew the bond. Or if we have new projects, then we could look at it differently. But we are -- in this situation, I believe today, it's important to have a cash buffer. You never know how you are hit with this COVID-19 crisis, how it might, in the end, affect us. So we believe that a cash buffer in these days is very important. And then we are not in a hurry to do big transactions whatsoever because we, in the current situations, do not want to increase tremendously the risk profile of the company.

Our next question comes from Christophe Beghin, Kempen.

I have as well a bit of a follow-up question on Agro. You stated that you have good conditions for the 3 products. But what do you mean with conditions? Is it mainly -- we know that their volume development should be positive, but was this as well on pricing?

It's on value creation. So we have been able, again, there in Ag, to create value to the customer by being able to supply at the right time, by being able to supply a reliable quality. So we've been able to really create favorable conditions, whereby we could have, for our customers at the right time, the right product. And we have been working also on efficiencies and improving the margin. So we have an overall impact of various elements during this first half coming together to make it a positive. On the other hand, what we should recognize is that the season in U.S. started earlier than last year, so that we have more sales in the first 6 months, whereby last year, the season went into July, August, as you will remember. So that most probably, we have still to see how it works out. Part of the volume has been moved forward because of an early start of the season.

Okay. Clear, that was my follow-up question, how the volume was already into H2, but yes, that's still pending likely. Can you maybe elaborate a bit more on the -- on the collaboration announcement with Kemira? So should we see that you will use, like, their capacity to produce additional SOP and that you will market it?

Correct.

Okay. So in terms of -- so you're benefiting both on volumes and sales. But you just use external capacity. That's...

Correct.

Is it -- then it's marketed globally. How should we see it in terms of production capacity increase? Is it significant or not?

It is a significant increase. However, what we try to do is increase our portfolio and our volume offering to the market, whereby we believe that the impact on the EBITDA will be limited.

Okay. What do you mean with impact on EBITDA?

Well, that additional sales will only have a limited impact on the EBITDA.

Okay. Then if I can shift to Bio-valorization. The margin increase, was it mainly driven by PB Leiner or by Akiolis?

It's on both companies.

And at Akiolis, did you see -- yes, we've seen normally better pricing in both proteins and fats. Do you think that this is stable going into H2?

What we see is that fat prices are -- as you know, are under pressure right now. However, we are trying to move our portfolio. Because of a better monitoring of production, we're trying to sell to customers with higher requirements so that we try and increase the value of our products.

Okay. Maybe last question then and I will give the floor over to the remaining analysts. The capacity addition in Santa Fe for the collagen peptides, you stated that it's still in a, let's say, ramp-up phase.

Correct.

And will additional volumes be -- yes, let's say, also materially already in H2 compared to H2 2019? Or is that too early?

No, no. with the COVID -- our factory is ready. But with the COVID, to explain the product to new -- product -- new customers wherever in the world, it's becoming more difficult. So it's difficult to conquer new markets and new customers. But the product is good. The factory runs well. We run it from times to times, but we think that the ramp up will take longer for this type of product right now.

[Operator Instructions] We have a follow-up question from Christophe Beghin, Kempen.

Okay. More questions from my side then. On T-Power and/or, in general, T-Power, the cost improvement, is that sustainable going into H2 and the coming years?

This is a structural improvement of the cost, yes. We have been taking out structural costs, which will have an impact on the future also.

Okay. Clear. And the new plant that you are willing to participate in the tendering phase, do you have already a kind of indication on the size, et cetera and the -- as well the size of the investment?

No, we don't have yet. We are working with engineering, with our OEMs in the world and try -- and are in the process to define the project right now. So the project definition needs to be ready by June next year, tendering is September next year. And then we will know if we will really have a project that we will propose to the government, that the government accepts that the conditions are okay.

But given that you are willing to participate in the tendering indicates that you are -- that you consider the terms of the CRM mechanism is defined as sufficient attractive to make a potential...

The terms of it are not defined yet. We have been looking at countries around us to understand. But in Belgium, the terms and detail have not been determined, for sure not the finite terms. But we know that depending on the decision of the government, there will be a need for gas-fired production units. So we believe that we have an opportunity, and we want to be ready and prepared that if we have an opportunity, we can take it.

Okay. Maybe last question on guidance. CapEx going forward, you have been investing significantly over the last years. Going into 2021, do you see that this likely that CapEx will drop, let's say, by a couple of 10 millions?

No, we would believe that the CapEx will stay around the same levels.

Also, going to the next years?

Yes. Well, next years, I think for next year, will not be so much off.

[Operator Instructions] We have a follow-up question from Mr. Christophe Beghin, Kempen.

One question then from my side once again. We've seen that Picanol over the last years has been investing and allocating cash into Tessenderlo as you can -- as management of Picanol consider it as an interesting investment. Do you think that going forward, we have seen the Tessenderlo earnings and cash profile has improved materially going forward, valuation has become more attractive? Do you think, as well as being CFO and CEO of Picanol, that that's still the case?

Well, as you know, talking with my head of Picanol, we have started investing in Tessenderlo because we believe in the long-term potential of the Tessenderlo Group. However, if we will keep on buying or not, this is a decision of the Board of Picanol, which they take in due time and whereby purchases are communicated, will occur on a regular basis.

But that statement or the view on Tessenderlo is unchanged, I suppose.

The long-term view, as we -- I can tell you, we believe in the value and in the project which we have started. This we can confirm, that the belief is still there, yes, which has been proven because I believe over the last half year, Picanol has bought, under guidance of the Board of Picanol, about EUR 90 million of shares.

Yes. Correct. Okay. Maybe one last question on Bio-valorization. We've seen a great result into H1. Even when COVID-19 has a bit hampered, let's say, the demand for collagen peptides and maybe as well traditional gelatin. Going into H2, and do you see that the result of H1 is kind of sustainable, both on volume but as well on margin?

As mentioned in the -- in our forecast, we are optimistic about the second half. However, I think you have already figured out, it's a lower performance. However, we are optimistic, but it really depends on how COVID-19 will impact the business of the distributors and the business of the people who use gelatin and collagen in their products. And that's a big unknown factor right now. On the one hand, we are optimistic. On the other hand, there is uncertainty there. But we are optimistic. As we -- as I mentioned to you, we are working in a different type of customers for part of our business with higher-value products. We have become more reliable, so in the end, we can create more value.

Okay. Can you bit elaborate more on the JV you are setting up with the Chinese partner? Who will finance it? Is there a CapEx guidance? By when you believe this unit will be operational?

We believe we will be operational somewhere first half 2022 if all goes well because it depends on all the licenses you need to get in China. We really did this because we have an offering of various type of collagen and gelatin, but here, it is about collagen. And we think by being able to offer fish collagen, we will be able to offer a nice solid proposition to existing customers by enlarging our portfolio. That's really the main target of what we want to achieve.

Okay. And last question, then. In the guidance you provided in the press release, did you already take into consideration the negative development of U.S. dollar?

We have been taking into account the negative development of the U.S. dollar. I think in the half year report, it said that $0.01 is about EUR 1.5 million impact. You should not forget that there is also an impact on our net result because of the intra-group loan in dollar which is not hedged and which has also an impact on our net result when the dollar is devaluing.

Correct. But your guidance adjusted EBITDA, so did you take it in the adjusted EBITDA guidance already into consideration?

Yes. Yes, we did.

We have a follow-up question from Mutlu Gundogan, ABN AMRO.

I thought it was too early to let you go, Stefaan, so one more question. Can you tell us -- I mean, there was this announcement in July that at Darling or Rousselot has commissioned a collagen peptide plant in Gelt in Belgium or [ EU ]. Can you tell us what kind of impact you're seeing from that plant on your business in terms of pricing, in terms of customers reacting?

Well, it's a growing market. It's been a growing market, which is right now affected by of COVID-19. But we are confident that it's a good market. It's a good product. And we have seen people using it worldwide and with positive impact on their life, which people have experienced and expressed. So we think, fundamentally, it's a product which people like.

Right. I mean, you say a growing market. We see capacity being added. Can you talk a little bit about what you see is utilization in the market at the moment and how prices are developing?

It's hard to say right now what is the utilization rate because with COVID as a big unknown factor in the various factories all over the world, how people have been hit. For sure, people have been hit, but it's difficult to say what occupation they have because many factories were in ramp up. So for sure, like a lower factory, ramp up will be delayed. But fundamentally, we think it's a good product.

[Operator Instructions] Our next question comes from Wim Hoste, KBC Securities.

Yes. Two questions from my side into the SOP market, if I may. There were some rumors, perhaps some commentary in the press about very low levels of the river -- the Rhine, and that has, in the past, impacted some of your competitors to produce. So can you maybe be a little bit more specific about your guidance or outlook for the SOP market? Might you benefit from the problems of competition there? What is baked into your guidance? That is the first question. Maybe I ask them one by one.

In respect of the SOP guidance, we are very close to the guidance, the same level of last year. So we are very close to what happened there. There is no major changes compared to the evolution of last year in the second half.

Okay. And then on Akiolis, yes, how is the market behaving there in the past years? There has some occasions, been, you had some Turkish slaughterhouses, et cetera, that have taken over some volumes. Do you still see that competitive pressures? Or has that disappeared? Because I understand from your comments that results for Bio-valorization have improved significantly, both for gelatin and the Akiolis side. So what [ upside ] is rendering market?

I'm so glad you put this question because we are always looking for a market with no competitive pressure. Until now, we have not find any market in which we operate without any competitive pressure. But competition, I think, is good because it makes you invent new things, new systems, new supply chains. So there is -- every day and whatever we do, there is competition. So that's for us a normal way of working to address competition in our markets.

And so with the pressure there was in the past from Turkish slaughterhouse, et cetera, is that still there to the same extent or not?

It's hard to say how much is the extent right now because with COVID information is sometimes harder to get because our salespeople are not in the field. It's much more difficult to really find the really details in the market like things for the Turkish slaughterhouses. I would imagine partially it's going on because people need also Halal meat, which is then slaughtered in the way they want. So I would imagine it's still -- it's partially going on. But to what extent, I'm sorry, I cannot inform you.

We have a follow-up question from Christophe Beghin, Kempen.

I have a last question for the collagen peptides. Can you maybe explain us, what are the most important or most attractive end markets you sell these projects into? And why are they so attractive and, let's say, above GDP growing markets, et cetera? And how big is the investment opportunity for Tessenderlo in this in terms of capital allocation?

I hope you will understand that we do not divulge the market vision we have on individual markets because we are trying to protect our business and our growth. But in general, as I told before, people all around the world who kind of afford it have been using our product and product from competitors to their satisfaction. And is this why this market has been growing on a worldwide basis.

I understand that you don't want to disclose everything, but can you give me a kind of indication? Is it into pharmaceutical applications? Is it into food applications that you see the highest growth?

It's both. It's in sports bars, it's in drinks. It's in, for example, additives for coffee creamer, to address various applications. And each one of these applications is growing, whereby the growth right now is disturbed by COVID-19.

Okay. Do you see especially the highest demand in, let's say, we have booming markets over the last 3 to 4 years and which is continue to exist, likely.

Well, the growth right now has halted because of COVID-19, but we are optimistic that people really, in the past, have shown the trust in the product and which has reflected in the growth of the consumption of the products worldwide.

Okay. But it's kind of positive if you see -- if you have seen some hampered growth in the last 6 months while you have posted such a good result.

Can you repeat, please?

You stated that you have seen indeed some hampered growth or demand for the product. But even then, you have posted such a significant good results due to mix elements. But -- so in general, you are quite bullish and positive on this segment going forward. Okay.

We are realistic, optimistic and -- because we have to take care into the situation in which we are right now on COVID-19 impacting one country after another and one population after another in the world. So we have a question from Christian Faitz in respect of SOP trends during the half year 2. So I believe I covered that question. And there was a question in respect of trends for Industrial Solutions during half year 2. How, in particular, is the amount currently on the construction side? I can tell you right now that we keep on track in the perspective we had put forward. We see construction is, for us, at a reasonable level. It could be higher, it could be better. However, we see that there are still constraints all over Europe, where we operate, in terms of availability of people on the construction wharfs, which is then dampening the explosion that we normally would see, which is the same case as before. We know we have seen construction permits going down. We see them now going up again. So we are confident that we have a good future there and a good upcoming periods for our construction-related business because we are also there developing new products, going into new markets. We are developing Bourges. So we are constantly on the move to make sure we perform better. We have a question from Frank Claassen. How much CapEx do you expect in full year '20? What are your investment projects at the moment? So we expect the same -- to stay at the same at the same level. Since we are reducing leasing, for example, we invest more in trucks in France because we do not lease them anymore. We are investing in storage in the U.S. because we want our liquid fertilizer to be in market-ready for the customer when the season starts. We're investing in the Bio-valorization of our products in France, Akiolis and in the gelatin business. So we have quite some improvement projects still going on during the second half of the year and thus the remainder of 2020. I hope this covers the question.

We still have a follow-up question from Mutlu Gundogan, ABN AMRO.

Yes. Just one more question, Stefaan, on Bio-valorization. So you talk about better mix and that you've been able to use the volumes, improve your processes and sell higher value-add products. Can you be more specific, please? Can you give us a few examples? And I don't want you to name any customers, but can you talk about product categories, things that you've done -- name a few successes, if you will, of what is driving this uplift in margins and in absolute EBITDA?

For sure, we can give some examples. For example, in feather meal, we have been able to find better processes to make sure that the digestibility of feather meal is much better so that we can enter into new markets. We have been reinforcing, for example, our sales structure in the Far East so that we can reach new customers to place our proteins. We have been developing new applications in Gelatin so that we have been able to reach out a new type of customers showing higher value of our products. So there's really -- this is not one product. This is so many different types of applications, structural impact, whereby we realize this improvements.

Right. And if you look at your mix, let's say, so to put it very simple. You might have, let's say, still products in that mix that are the old way of working or you could say maybe more commoditized or lower-margin products; and you have these new products, so to say, where you have higher margins, higher prices. Can you give us the split of, let's say, high-margin versus low-margin currently in your portfolio? Can you tell us how you expect that to evolve in the next few years?

Well, if you want what we want to achieve, we want to better valorize because Every Molecule Counts means we want to valorize with maximum value. What is the split right now? As I told you, this is a long-term project. And I hope the coming conference calls, we can come back to you with better -- with improvement. But nothing is granted. Competition is also improving, customer requirements are changing, so this is a dynamic market and we are doing our best to generate the maximum value in our company.

Yes, yes, yes. And I'm sorry to go on about it. But to understand the potential, I mean, is it just 5% of your portfolio that is coming from these new products/end markets? Or is it already 50%? Just to understand what the potential is and how much more improvement we can expect.

It is a growing business, Mutlu. I can unfortunately, not on the top of my head, give you percentages what it means right now. But I can tell you it's moving up. Every half year, every quarter, we are able to attend better market, better customers with better products. It's an ongoing process.

Yes. It sounds like a great business.

It's a great business because every molecule counts. It's really what we are doing right from the beginning. And what we are doing is we told you for the last 3 years, we're investing in producing higher-value products and this is exactly what we have been doing.

Thank you. We have no further questions. Dear speaker, back to you.

All right. I would like to thank you, all of you, for your confidence in the Tessenderlo project. I want to thank you for the questions. And we keep on working, and our teams and our people keep working in difficult circumstances to make sure that we provide vital services and vital goods to the various markets. And we are really enthused to keep that going and create the future for the company. Thank you very much. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. A replay of the webcast will be available on our website. Thank you all for attending. You may now disconnect.