Ladies and gentlemen, thank you for standing by, and welcome to Corbion Q3 Results 2022. The first speaker to hand over is to Jeroen van Harten. I will now like to hand the conference over to Jeroen van Harten, Investor Relations Director. Please go ahead, sir. Yes. Good morning, everyone. Welcome to the Corbion Q3 2022 call. With us today are Olivier Rigaud, our CEO, Eddy van Rhede van der Kloot, our CFO, and my name is Jeroen van Harten, Head of IR. As usual for our third quarter call, Olivier will start with a short introduction on the numbers, after which we'll move pretty quickly into Q&A. One other point, on December first, we will have our Capital Markets Day. You will hopefully receive a registration link shortly for that. We really hope to welcome you all for that event. Again, December first in Amsterdam. With that, I'd like to hand over to Olivier. Olivier. Thank you, Jeroen, and good morning, everyone. I think you've had a chance to have a look at our Q3 results. As you probably saw, our three BUs are performing well. The necessary price increases that we implemented are clearly having a positive effect on both our top line and the EBITDA recovery. In the Sustainable Food Solutions, the volume and mix combination continue at around 4%-4.5%, the same rate we saw in the first half of this year. We see a continuous strong momentum in natural preservation and antimicrobial solutions. On the functional systems, actually, we see an acceleration in reformulation projects to help our customers to first mitigate inflation impact, but also address some of the raw material shortages. Sometimes this is not helping volume, however, these are high margin. I take a quick example on, you know, gluten reformulation we are doing with enzymes that is really helping nicely the growth we have in, Sustainable Food Solutions. In the Lactic Acid & Specialties division, volumes were obviously down due to the reset we had to do in deliveries to the PLA joint venture. If you look at the other business lines in this division, they grew quite nicely when you look at volume and mix, and particularly the high growth we have in our Medical Polymers division. This is a very encouraging pattern. As we flagged earlier, PLA is clearly going through a slowdown, mainly in China as the lockdowns are impacting us, but also related to the high energy prices we see in Europe. This is impacting the market negatively. However, we remain strong believers in the PLA value proposition and are working really hard in the reinvigoration of the sales pipeline and enhanced application reach. You might have seen over the last days a couple of press releases related to this FDA approval of PLA-based face masks, but also recycled PLA range that we've just launched early this week. Within the incubator, we saw our omega-3 again coming in at a very high growth rate, and that is also reflected in the higher EBITDA contribution from that product line. Our omega-3 product is now being considered the key ingredient by the aquaculture industry. You can understand that we are working hard to unlock more production capacity from our Brazilian plant, expansion being completed as we speak, and that will bring strong benefit as from 2023. Now for the outlook. We are keeping the earlier P&L outlook in place, and that means that as a positive consequence, we should be seeing the leverage ratios coming down by year-end. With that, I'd like to open the lines for Q&A. Operator, back to you. Thank you, sir. If any participant would like to ask a question, please press the star followed by the number one and one on your telephone. There will be a short pause while participants register for a question. We are now taking our first question. Please stand by. The first question from Patrick Roquas from Kepler Cheuvreux. Please go ahead. Yes, good morning, gentlemen. A couple of questions. The first one is on the non-core, which had an excellent quarter. What are your expectations for Q4 in 2023? Is it sustainable in 2023? Second on the leverage ratio, kind of indication, what kind of level you expect it to fall back by year end? On PLA, is it true that once China lockdowns are over and we entering kind of a normalized level of raw materials, energy prices, et cetera, that you expect the growth in PLA to resume? Thank you very much. Thank you, Patrick Roquas. I will take the question on multiplier and on the PLA, and Eddy will answer on the leverage. Basically on the non-core, yeah, indeed, I mean, we've seen a sustained, you know, performance delivery, and we expect this to continue over Q4. To your question, is that sustainable for 2023? Obviously, I think, we are working and we are running these operations really at higher level of capacity occupation. However, a lot will and is depending on the input cost and, how you know, of course, these vegetable oils, which is the primary raw material we are using in that business will develop and how do you cover these things. We do not see any, let's say, big changes in the pattern over the next quarters on this non-core business. On the PLA and China lockdown, yeah, this is still, of course, today very very volatile. Basically on the PLA performance, you know, China was a large part of our sales in cities so far, you know, above the 30% of our business in total. This is what is impacting us today in the second half of this year. When we look at, you know, what happened in China, a lot of the initiatives were also frozen, waiting for the party congress to be completed on October sixteenth, to give further guidance on the packaging, you know, strategy and primarily based on the bio-based packaging. We are still waiting, I mean, for further guidance from the Chinese government on how this is gonna develop and spell out. However, what we see is that in China, still the situation is very uncertain as we speak. So difficult to give you some insight, like, on how China gonna develop at that point in time. What we are doing on PLA, I think is now really working very hard on our sales pipeline. When I mean sales pipeline, we are working on a few major initiatives. One is first of all to improve the application reach. When I just gave a couple of examples, we are working on some very promising categories. I'm thinking about non-woven. If you think about categories like teabags, if you think about categories like coffee capsule. But also we are working on durable goods, where you know PLA can bring also a better functionality than a fossil-based alternative to think about the resistance. At the same time, we have also re-energized, and that's already in place since you know Q3, our go-to-market organization. We've increased our feet on the ground as a customer touching point when I think about sales, business development and marketing with a 40% over the last quarter. These are new resources that come into play to also increase customer contacts and customer contact points. Last but not least, as you know, we are partnering with TotalEnergies in that venture. TotalEnergies is today the number two player in polymers market. We are leveraging their application centers. They have two major application centers, one in Houston, U.S., and one in Seraing here in Europe, Belgium, where they have capabilities to help us formulate really PLA in more categories and more applications. Right now, you know, we are full steam on just enhancing our pipeline to deliver new business leads, you know, over the next quarters. Eddy, maybe you want to take the leverage question. Yeah. On the leverage, Patrick, so I want to reconfirm what we've also shared based on the Q2 call that we had, that we will end the year with a better ratio than the 3.3 that we ended with as per the June position. The biggest contributor in that improvement will be of course our EBITDA delivery. You may remember that Q4 in 2021 was a really soft quarter in terms of EBITDA delivery. This year, if you see a bit the pace that we're closing at will turn out a much higher EBITDA delivery, and thus you get a better ratio. At the same time, we're also of course actively working and managing on all the other levers that we have that we can influence in terms of this ratio developent. Think about disciplined CapEx program, the working capital components that will all in together give us a better outcome by the end of the year. All right. Thank you very much. Thank you for your question. We are now taking our next question. Please stand by. The next question from Sebastian Bray from Berenberg. Please go ahead. Hello. Good morning, and thank you for taking my questions. I would have two, please. The first is on the incubator segment. Could you give any idea of the level of non-algae cost currently sitting in on that business on a run rate basis? Is it EUR 10 million, EUR 15 million or higher than that? The profitability has improved quite a bit, and I'm just wondering what is this other cost. Secondly, questions on interest and financing. At current benchmark interest rates, what would you expect the annual interest cost to be in 2023? And can you remind me if there is any refinancing event due to come up in that year? Thank you. Okay. I think I'll take both questions. On the incubator, indeed, your first figure is pretty much close to what you can see as the run rate cost. The investments we're making in the incubator outside of the DHA omega-3 play, so that's around the EUR 10 million ballpark figure that you're referring to. On interest rates, the first refinancing is in 2025, so still quite some years ahead. The interest rate question, I will come back to that by the year-end figures. Not as per today. That's understood. Thank you. Thank you for your question. We are now taking our next question. The next question from Fernand de Boer from Degroof Petercam. Please go ahead. Yes, good morning. It's actually Fernand de Boer from Degroof Petercam. I have three questions, if I may. First one on sustainable solutions. You see actually volumes declining to now more than 4% negative. Is that marked because you also mentioned that you have solutions in place which are actually seeing good demand. So how is it working? That's the first question. Then to come back on the leverage ratio. I can understand that the second half is going to be better, but I think, at least for me, the main worry is not the end of this year, but the first half of next year, with still a lot of CapEx coming up in the first half, the dividend payment, normally working capital flow in the first half. How does this look for the first half at, let's say, end of June 2023? Then I'm still a little bit puzzled about this PLA thing about new applications. I've been now looking at the company for many years. We have seen on sites with a lot of applications possible for PLA. What made it that it takes so long to start looking at new kind of applications? I think the financial. The venture is already there for a long time, et cetera. They did already have the knowledge. We already saw dashboards at PLA materials a long, long period ago, so I'm a little bit puzzled about that. I think so now I will take that one. Starting with SFS first and your question on volume and why do I feel pretty comfortable and optimistic when I look to SFS. Basically, you know, this is not specifically a volume driven business, so usually we work on this functionality. When I look to the way we develop, for instance, both in the natural preservation but also functionalities in natural preservation, we go to a more sophisticated, what we call, antimicrobial solution. Sometimes you could replace some bulky products by more, you know, pepper and salt alternatives at very high margin, which have better functionality. We are not necessarily driving that on volume, and volume is not the most representative indicator there in preservation. You know, this is usually in the recipes incorporated at 0.1%-0.2% in the final food matrix. When you look to what is impacting primarily the volume decline in SFS over the last couple of quarters is actually some proactive decision we've made to shed off some business. We mentioned, you know, the brewery type of business in Latin America, which is the least differentiated business where, you know, you could use whatever organic acids in that category. That, at that time, you know, favoring a price increase and margin protection was a business we decide to drop proactively. Yeah. The same is valid on functional systems, where I gave the example of dough conditioner. That is a big business for us. You know, when you replace vital wheat gluten, which is today first of all unavailable and very expensive, we are coming with enzymes cocktails. Where you could blend five, six different enzymes that are again more of a very low incorporation rate, where you replace you know products that are that are more in hundreds of tons type of inclusion. This is also something that we are developing very nicely, contributing also to margin improvement, but not showing huge volume impact or even sometimes negative volume consequences. This is why if you look at the volume mix, basically we see still in SFS you know something, as I said, between 4.5%, 4% over the last at least six to three quarters. We are continuing the trend. There is no decline or negative trend on that, on the opposite, you know. This is still very, very solid. Back to the PLA and new application, couple of comments. If you look at to your question, "Why do you make it so long?" Obviously, you know, the key categories in a flexible packaging or rigid packaging, this is the one primarily, some of the flexible packaging, low-end categories when we started, you know, plastic bags, are the one where, you know, PLA has been formulated together with other bioplastic as PHA or biodegradable alternatives like PBAT, although fossil-based as a blend. We've seen, you know, decline in this category based on the fact that both PBAT and PHA are on also severe slowdown for different reasons. PBAT because of high energy price in Europe, and that's primarily produced in Germany today by big players. PHA in the US, where the feedstock is based on vegetable oils. This has been facing also huge inflation next to availability issue. When these two compounds are not available or have been not competitive, PLA has indirectly suffered a lot from this. Now, back to also what we released in H1 result. You know, we came from a sold-out situation in PLA where we unfortunately had to refuse, I mean, a lot of new development. We are in a phase of, you know, being hand to mouth on PLA. Too suddenly this Chinese lockdown and inflation and energy prices are impacting us. I have to say that we entered that with not the required pipeline, and this is what we are fixing now as we speak. I'm not worried in terms of new application. If you think about the potential, we can still see further in some categories, where you can play on the fact that PLA has a very nice carbon footprint advantage on fossil-based alternative. We see as well, you know, polystyrene, which is the major competing product for us. Polystyrene is being formulated out for a number of reasons, the first one being that it is the most difficult plastic to be recycled and sorted out. When we look at the upcoming trend on polystyrene replacement, we are feeling very optimistic that PLA is a great alternative to that. This is the market we look at. Next to that, some applications are still growing very highly. We're thinking about 3D printing or durable goods, where we can also bring some functionality as carbon capture on durable goods, where I see also a long-term prospect for PLA. Now, on leverage, Eddy, maybe you can take that over. Yeah. Especially your question related to the CapEx program. First of all, don't forget that this year is a very rich program in terms of CapEx outlays, because we not only have the lactic acid new build in Thailand, but on top of that, we have also significant expansion programs in the foods side in Peoria and then in the algae business in Brazil. Both the Peoria investment for the natural ferments and the algae investment will come to completion this year. While of course lactic acid's build in Thailand will continue into next year. All in all, it means the CapEx program next year is going to be much lower than what you are seeing this year. That being said, we do have real confidence that the ratio will not worsen compared to the June and then December positions this year, so that'll also be the case for the first half of next year. You mean not deteriorating compared to from June 2023 compared to June 2022? Yeah. It will be better than actually. Yeah. Yeah. Fair enough. Don't forget also in the CapEx program. Our CapEx, we have, of course, flexibility there in exactly what do we initiate at which moment in time. It is not to see the CapEx program as something fully committed. Of course, there's always an element of compliance investments, safety investments, and real sustainability investments. But everything for expansion, there is flexibility if and when to push the button. We can, as we go through the periods, influence that performance. Okay. Thank you very much. Thank you for your question. We are now taking our next question. The next question from Alexander Sloane from Barclays. Please go ahead. Yeah. Hi, all. A couple of questions from my side, if that's okay. Just firstly, on the Lactic Acid & Specialties division, I mean, pretty solid profitability, despite obviously, you know, the 20% volume pullback due to the weaker PLA demand. I appreciate, you know, you had some positive mix in there. You know, is that sort of profitability sustainable if this volume drag continues at the same extent in Q4? I'm assuming in Q3 there might have been some inventory rebuild. Just interested in your thoughts around that. Secondly, just going back to the Sustainable Food Solutions volume outlook, and thinking about 2023. I mean, we're hearing from some ingredient competitors and peers that customer volumes or customer inventories across the industry are higher than normal. I wonder if you kind of concur with that and if you see any potential destocking risks as we go into 2023. Thanks. Thanks, Alexander. Maybe, Eddy, you can take the LAS profitability on Q4, and I will answer on SFS. Yeah. I would say, as we currently see Q4, it will not be that much different from in terms of profitability margin profile than what we have seen in Q3. Yep. On the SFS, indeed, you know, Alexander, a lot of people do speak about, of course, recession coming up and in the U.S. What we see, basically, and if you look to the major categories, although there is of course some uncertainty, we see today that we've seen a shift already from Q2 onwards, a shift to with customer briefs from pure innovation to reformulation. That was, of course, in the face of this huge inflation and but also raw material shortage, if it's different if you think about the shortage on vegetable oil or sometimes some of the starches or sweeteners. It has been the case for gluten. We see customers saying, "Okay, come and help us to overcome this." Raw material challenges. At the same time, one of the way for them to also improve their cost has been to extend shelf life of their product. This is where we play a big role in the shelf life extension. Now, are we gonna see some inventory reduction or destocking? Indeed, I've seen some of our peers mentioning that. We do not see that yet in our portfolio. I think we still have, I mean, a very healthy pipeline. What's important for us going into 2023, as Eddy mentioned before, we have some very nice initiatives in terms of food performance development. We mentioned a couple of times, you know, the natural mold inhibition initiatives we are implementing across the board. These are new markets we are creating to replace a synthetic base. Even though the market, if in the case of the market, would decline, we are going after replacement. You should not forget that in the natural preservation space, this market is growing double the speed of the traditional market. Even though the volume would eventually come at a reduced rate, we would still benefit from that trend that we see going on. This is also supported by a more strict regulation to remove artificial or fossil-based food preservatives. Yeah, again, there is some fear of recession in the market. You see that. A lot of people do speak about it. We don't see, I mean, for sure not in Q4, any negative impact on our business. That's really helpful, Olivier. Thank you. Can I just ask a quick follow-up just on the, Eddy, on your comments on Lactic Acid & Specialties expecting the same in Q4, obviously on profitability. Is it also fair to assume that, you know, we should expect a similar kind of volume drag from lower demand from the PLA JV or might we already be, you know, kind of seeing some improvement on that front? If not, you know, I guess, you know, when would be your best estimate at this point that demand returns there? Thanks. You're absolutely right. Also for Q4, we do expect a downturn in the lactic acid deliveries into the PLA joint venture. Why is that? That's because also in the joint venture itself, the working capital management really is driving their inventory positions to lower levels. That means the need for lactic acid in Q4 for most supplying into the joint venture will be relatively low. Do expect a soft quarter Q4, and then of course a recovery in the early parts of next year. Thank you very much. Thank you for the question. As a reminder, if you wish to ask a question, please press star one one on your telephone. We have one question, so please stand by. The next question from Wim Hoste for KBC Securities. Yes, good day and morning. I have a couple of questions, please. First is on earnings, seasonality. In the past, sometimes there were differences in Q4 versus the other quarters, but for example, because of bonus accruals or maybe skewing in IT costs, et cetera. Are we going to see anything like that this year? That's the first question. The second one is on your omega-3 business. You mentioned that you're working hard on, or you have worked hard on capacity increase and expect to see some benefits of that, going into next year. Can you maybe, yeah, elaborate a little bit further? Have you signed contracts for that additional capacity and how fast can that ramp up? Any clarity on that would also be helpful. a third and final question from my side, and apologies, I was a little bit late to the call, so apologies if it has been raised, but can you update on the raw materials inflation for this year? Is the EUR 150 million for the core business still valid? Can you maybe also comment on the pricing? Have you fully passed through all the raw material price increases that you have had to bear? Those are my questions. Okay, thanks, Wim, Eddy will answer the seasonality in Q4 and the update on raw material pricing, and I will address the omega-3. Eddy, maybe you want to kick off. Okay. Wim, your question on the bonus accruals, that's indeed something from the past. Do not expect that we have to, with the current visibility, make higher accrual levels than what we have already done in the course of this year. That is much more a smooth pattern, if you will. When it comes to raw material, indeed, what we shared based on the Q2 figures is that in the core business cumulative, over a one and half, two years, we had EUR 190 million cost inflation. This is raw mat, packaging, energy, freight. Indeed, as per Q3, we have fully passed that on into the market. That is basically a full catch-up in terms of that cost increase delivery. Going forward, I think we see a bit of a mixed pattern. On the one hand, we still see some categories of further cost increases from today's levels. You especially have to think about the European region, anything related to the energy complex, so the chemicals that we're using, energy itself. That is still on the rise, but not so much as what we have experienced in terms of increments in earlier quarters. That's already partly being offset by also some categories that are showing yeah very encouraging signs of relaxation. I really want to mention the freight. Also for us, on some of the important freight lanes, especially Asia to Europe, for example, we do see a more than significant rate reductions. You will see in a balanced picture there of still some categories on the rise and some on the low. Yeah, this I think will be the storyline also going into next year, that as time goes by, every single day, week, month, there will be volatility. That's also why both on the procurement side, as on the sales side, we stay very short with our contractual obligations as to adjust to the market, as much as possible. On the omega-3 question, so basically on the capacity increases, we elaborated it on that. We are completing this capacity expansion in November. It looks, I mean, really, it is on time and on budget. Basically, this investment is about two things. It's about capacity expansion, but also it's about mix improvement or allowing the plants to be more flexible. On your question, how fast it can be implemented, we're gonna see already the first outcome mid-December, full blast as from January. When you look at what we are planning there, is that basically this investment will bring benefits on not just volume throughput out of the plant, but also a much better mix. We are upgrading some of the product mix we are doing in that plant, allowing much higher margin, which is why we are confident on margin development for the algae business. The last thing we are doing is, if you might remember what made the big turnaround last year of this business was the implementation of a new algae strain when we moved to what we call our DHA 2.0. As part of this investment, we also go to the 3.0. We have a further improvement in yield that we're gonna implement. On the pricing, basically, we, you know, we are positioned in Brazil with a backward integrated, you know, model with a sugar plant. We have cheap energy as we burn bagasse, you know, from the sugar mill, so it's very cheap energy. I believe we have quite an unbeatable, you know, concept and a footprint there when you look at that. When you speak about your last question about contracting, I would say that 2023 is already fully contracted at much higher price. Okay, clear. Thank you. Thank you for your question. There are no more questions. Mr. Rigaud, there are no more questions, so continue with any point you wish to raise. I would like to thank everyone on the call. Thank you for listening and Today. Thank you for participating. Our next opportunity to discuss will be December first at our Capital Markets Day in Amsterdam. Hopefully I can see most of you face-to-face on that occasion. Have a nice day. Bye-bye, everyone. That concludes the conference of Corbion Q2 results of today. Thank you for participating. You may now disconnect.