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Chr. Hansen reaches 7% organic growth despite challenges

Macroeconomic challenges in emerging markets limit growth to lower end of company's guidance.

Despite more challenging growth conditions, Chr. Hansen said it has delivered a strong earnings before interest and taxes (EBIT) margin and a healthy cash flow this year while also making significant progress on key strategic priorities.

Chr. Hansen chief executive officer Mauricio Graber said the results were delivered even though 2018-19 was not without challenges, as tougher market conditions -- especially in emerging markets -- made it more difficult to grow to the level of the company's ambitions.

“We ended the year with 7% organic growth for the group -- at the low end of the guidance provided in June. However, we are satisfied that we delivered well on the financial targets for EBIT margin and free cash flow that we set at the beginning of the year, with EBIT margin before special items reaching 29.6% and 17% growth in free cash flow before acquisitions and special items,” Graber said.

For the full year, the Food Cultures & Enzymes segment delivered solid organic growth of 8%, while Health & Nutrition delivered 9% and Natural Colors delivered 3%.

Graber noted that in the fourth quarter, "organic growth came down as expected for all three business areas, as we continued to see macroeconomic challenges in emerging markets, primarily impacting Food Cultures & Enzymes and Natural Colors.”

Graber said the company’s core categories of cheese, fermented milk and enzymes delivered solid growth in line with its long-term ambition. However, the probiotic business, which has a sizable exposure to the Chinese market, continued to be challenged.

Bioprotection also did not deliver the growth that the company had hoped for, Graber added. Still, Chr. Hansen said it delivered double-digit growth and is confident in the commercial pipeline, having accelerated development of the technology.

The company also said it made “very good” progress on its strategic priorities. Plant Health had a very strong year in Latin America and is set to have another strong year, selling in both Latin America and North America. Further, Chr. Hansen reported that it reached an important milestone in its Human Microbiome lighthouse with the Bacthera joint venture.

Given the ongoing market challenges, the company said it has a cautious outlook for 2019-20.

“After a first quarter with flat to low-single-digit growth, we expect to improve the momentum in Food Cultures & Enzymes and Health & Nutrition for the rest of the year to end at 4-8% organic growth for the group, with an EBIT margin on par with 2018-19 and an improved operating cash flow,” Chr. Hansen said.

The company will be conducting its biennial review of Nature’s number-one strategy and will present the results at a Capital Markets Day in April 2020.

“Given our strong belief in the opportunities inherent in the strategy, fundamental changes from our focus on microbial and natural solutions produced via fermentation should not be expected. Until then, our business focus in 2019-20 will be to improve on our execution of the strategy,” Chr. Hansen said.

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