Corbion (Euronext:CRBN) Q3 2026 Earnings Call

0:00 Welcome to Corbian's Q3 2026 results conference call. Following the opening remarks, there'll be an opportunity for questions. Please note that this call will be recorded. I would now like to hand over to Mr. Alex Sokolowski, head of investor relations. Please go ahead, sir.

0:17 Thank you, operator. Good morning and welcome to Corbian's third quarter 2026 interim management statement conference call. This morning we published our Q3 2026 results. The press release and presentation can be found on our website at www.corbion.com, Investor Relations, Financial Publications. Before we begin, please note that today's discussion will include forward-looking statements based on current expectations and assumptions. These statements involve risks and uncertainties that may cause actual results to differ materially from those expressed. Factors beyond our control, including market conditions, economic changes, and regulatory actions, can impact outcomes. Corbian does not undertake any obligation to update statements made in this call or contained in today's press release and presentation.

1:04 For more details on our assumptions and estimates, please refer to our annual reports. I'm Alex Sokolowski, head of IR, and with me on the call are Olivier Rigaud, chief executive officer, and Peter Kazius, chief financial officer. Now, I would like to hand the call over to Olivier.

1:20 Thank you, Alex, and good morning, everyone, and thank you for joining us today. We delivered a strong third quarter with volume-led growth across both segments and a significant step up in profitability. Health and nutrition was the key driver. As anticipated, nutrition volumes accelerated strongly in the second half, while functional ingredients and solutions continued to grow. Importantly, profitability improved materially. Our cost reduction actions and operational efficiencies are delivering, and we also benefited from lower sugar costs and improved omega-3 DHA pricing. As a result, year-to-date adjusted EBD returned to organic growth. So now let me take you through the key developments, starting with functional ingredients and solutions, where we continue to deliver sales growth, both year-to-date and in Q3.

2:15 Natural preservation remains healthy, with good growth in vinegars, in natural mold inhibitors and enzyme blends. High protein bakery applications also contributed nicely while meat remained softer. Biochemicals maintained a strong momentum we saw in the first half and higher volume to our PLH on venture supported strong lactic acid cells. This growth came with a mixed effect as these activities carry relatively lower margins. But importantly, Q3 showed a clear improvement in profitability, driven by lower sugar costs, our cost actions, and better operational efficiency. Now let's move to health and nutrition, where we saw the strong recovery we anticipated.

3:02 Nutrition volume accelerated sharply as the phasing from the first half came through. Higher official prices supported improved omega-3 DHA pricing, while new customer wins contributed positively to the mix. Together, this drove a strong rebound in Q3 profitability. Biomaterials also continue to grow year to date, supported by both volume mix and pricing. The recent FDA approval of Veltruza announced by Medincelle and Teva is an important milestone and further supports our bright 2030 growth ambition for that business. Pharma was softer. Sales declined both year-to-date and in Q3, reflecting lower volume mix and destocking at key customers in North America and Latin.

3:52 Let me now turn to PLA. We've decided to discontinue the process to sell our interest in the total energies Corbion GV. The process generated interest, but the proposal received did not adequately reflect the value, the strategic positioning, and the long-term potential of the business. So we are clear on the way forward. We believe the best route to maximize shoulder value is to continue to develop the business under the current ownership structure. The GV delivers strong sales growth here to date and in Q3, with some improvement in quarterly profitability. Our priority now is straightforward. Continue to improve operational and financial performance and capture the opportunity as PLA market dynamics strengthen.

4:38 Looking ahead, our strong Q3 performance and our Q4 order book gives us really confidence in the full year. We expect continued growth in functional ingredients and solutions. In health and nutrition, we expect mid-single-digit organic sales growth in Q4. And as expected, this is a moderation from the 20% growth delivered in Q3, as the benefit from the phasing of first-half nutrition volumes normalizes. We expect health and nutrition margins to remain broadly in line with Q3. In functional ingredients and solutions, margins will be seasonally lower, with additional cost pressure in Q4 coming from the Middle East conflict, primarily the sulfuric acid costs.

5:23 Cash generation remains strong. Our nine-month free cash flow supports our full-year target, and we remain disciplined on capital expenditure and cash conversion. Our full-year outlook is unchanged. Organic sales growth of 3% to 6%, an adjusted margin above 16%, and free cash flow between 85 and 90 million euros. So let me leave you now with three messages. First, growth is solid and increasingly volume-driven. Second, profitability improved significantly in Q3 as volume recovered and our cost actions delivered. And third, strong cash generation and good Q4 visibility gave us confidence in delivering our full year commitment.

6:10 So we are focused on maintaining this momentum, strengthening margin, and executing our bright 2030 strategy. With that, let's move to your questions. Alex, back to you.

6:21 Thank you. Call participants, if you would like to ask a question on the call this morning, please press star 11 on your telephone and you'll be placed in the queue. If you'd like to remove yourself from the queue, press star 11 again. Also kindly mute your line while your question is being answered. Our first question this morning comes from Setu Sharda of Barclays. Setu, please go ahead.

6:48 Yeah, hi. Thanks for taking my question. So my first question is basically on the HNN margins now, given you expect HNN margin broadly in line with Q3 in Q4. Should we view the high 30s margin as a reasonable exit rate into FY27 or should we expect some normalization? And what could cause margins to decline from here onwards? My second question is about your Middle East cost. Like can you quantify the Middle East related cost headwind in FY26 and should we expect those costs to reverse in FY27 in case of de-escalation? or will it remain a structural drag? And my third question is about your fish oil prices, like how much of the improvement in fish oil prices has already flown through to omega-3 DH pricing and how much further upside could come as customer contracts renew?

7:50 Yeah. Thank you, Setu. Basically, I will answer the Middle East and Peter will answer the HNN margin and the official price. But just starting on the Middle East, what we've announced in Q2 is that we've had an annualized impact of 26 million that we've already partly compensated. But we would have, and we are expecting, of course, I mean, also still the same impact on annuities based in 27. We are planning to take further pricing actions as from January to mitigate. Now to your question, how structural is that? It is a structural, we do not expect a huge reversal as again, when we go through the dynamic of where this sulfuric acid was produced, I mean, structurally the plants that were producing this lactic acid have been partially damaged or fully damaged.

8:50 and I'm not expected to restart it anytime soon. So we expect the sulfuric acid situation might become structural at least as long as we don't have any more visibility on whenever the Middle East comfort food ceases and this plant would have to be rebuilt. So expect the same impact for sure in 27 there. On fish oil, Peter, if you want to get to the margin of the question.

9:16 No, so let me do it a bit in perspective. As you know, in age one, we had a margin of around 27%. I did indicate already a significant step up in the second half of 2026. And that's indeed exactly what we see coming into our P&O. So that's reflected in this margin of 38%. Also, as Olivier alluded to, we anticipate around the same margin profile in Q4 this year, and we've quite a good visibility on that, because as you might remember, the kind of more shorter term contracts have a visibility of three to six months. So if I then move into next year, then with where currently fish oil prices are, you could anticipate a kind of Q1 on that one. But after that, of course, it's a bit more difficult because our kind of customers will not have these higher margins contracts already for the full year.

10:22 Therefore, I would like to stick with the kind of normal margin guidance, what we said, like longer term, we anticipate to be in kind of health and nutrition around 30%, but there will be a bit of volatility in that. I hope that answers the questions, Satu.

10:42 Yeah, thanks, Peter, Olivier. Thanks. It was very helpful. I'll look back in the queue.

10:48 All right, thank you, Setu. Our next question this morning comes from Robert-Jan Bos from ABN Auto. Robert-Jan?

10:59 Yes, hi, good morning. A couple of questions. Why was the pricing component negative in H&M in the quarter? That is my first question. And my second question, you've been very clear about Give it up, profitability H&M in the fourth quarter, similar to Q3.

11:21 But knowing that you are currently in negotiations about the new contract prices for next year, why so cautious for fiscal year 2027? And why sticking to around 30? It seems to me that if you can lock in higher prices with no significant changes in the cost structure,

11:45 Q4 or second half should be more of a proxy for the full year next year. Maybe you can comment on that. And then a third question on PLA joint venture.

11:59 You're clear that you have withdrawn the disposal process, but I was wondering, have you also tried or have the two involved parties, Total Energies and yourself, also tried and contemplated selling the 50% to the other partner? Yeah, and does it mean that it goes back to the core indefinitely in principle?

12:25 Thanks, Jovert-Jan, and I will straight answer the PLA and Peter will take over the pricing and the chain and margin. So on PLA, as we explained, yeah, we didn't get the level we were looking for. So basically, and you know, this is a profitable business and a cash-positive business, and Obviously, we see also some good momentum coming up in 2027 further with further price increase of PLA with, of course, favorable also sugar impact. Now, having said that, this business remains non-core. We will not change the strategy we just presented a year ago. You know, this business is managed totally separately as a GV company.

13:12 with its proper governance, so we don't run it as Corbion. There is a dedicated management team, so there is no big distraction for us on that one. So it remains non-core, but we said in terms of shareholder valuation, selling that business at a loss would make really little sense because again, it's not a bad business. The outlook is looking better as we are going forward now. both on the top line and profitability and its positive cash. But yeah, we will not reintegrate that in the core. So this is not where you're going to see any changes in terms of capex prioritization or whatsoever. Now moving to the HNN margin, Peter.

13:54 Yeah. So in HNN, Robert-Jan, what I said is that I anticipate kind of in the mid Thank you very much. that we are in negotiation in the course of Q4 in renegotiation of this longer term contract and I think we will comment more on that basically in our next quarterly call.

14:39 If I relate to fish oil prices H&N and I still know your question of H1 so for the kind of H2, I still anticipate a positive pricing. The negative impact or the majority of the price increases are actually impacting volume mix and the pricing impact is reflecting some commercial terms.

15:08 So no pricing benefit in Q3? Why not? That's his first question.

15:13 That's what I did indicate. That is reflecting some commercial terms.

15:20 Okay, but you still expect this to be made up in Q4 then? That is correct.

15:26 I still stick with my comment which I made by H1, that in H2 the combination will be positive.

15:36 Okay, thank you. All right, thank you, Robert-Jan. Our next question comes from Fernand de Boer from the Grof Theatercamp. Fernand?

15:49 Yes, good morning. A couple of questions from my side. First, Peter, why is the visual pricing included in volume mix, as you just said? I'm really puzzled on that one. And then, coming back on PLA, would you give a little bit of an idea of what the growth was in price and what the growth was in volumes in this quarter? We are going to step up our price effort, so how much did we see and how much we still can still come? And then maybe the last comment, question, I'm not sure whether you can answer or will answer, but there has been quite some speculation in the press recently about the SAFRA, CPC, etc.

16:43 Olivier, what's your stance? Staying independent as company because also with eye on your, let's say, departure next year.

16:55 No, Fernand, obviously on speculation, I will not comment, as you can understand, I'm sure. And, you know, whatever would happen, you know, there is fiduciary duty from the supervisory board and if anything would come, it would be dealt at that level. You know, so let's not comment on any rumour. Just before giving the floor to Peter on pricing, just also to give you indication on PLA dynamic and trends, because that's important. If you look at pricing, you know over the last 18 months, pricing has been deteriorating nearly, down to levels that were 2000, 2100 US dollar.

17:41 We've been able, or the GV actually, management has been restoring prices Partially, you know, already in July and there is another layer of pricing that came in October and the bigger one planned for January. So today the prices have already rebounded, you know, in the $2,200 to $2,300 US dollar for PLA. And there is further improvement that we are expecting, as I said, in January. So combining this with basically also lower So in terms of the year-on-year, so if I compare year-on-year price in Q3 versus Q3 last year,

18:44 then if you do this kind of on the shorter term contract and if these are kind of new customers then it actually impacts mix, Fernand. So it is the kind of customer composition why that is the case.

19:00 So I think maybe just to add to what Peter just said as you know we have a large part of our business that was contracted on multi-year till the end of December where prices have not been moving. and I'm not moving because we are contracted at a good price and prior to an increase so we are busy renegotiating this longer term agreement now for 27 and beyond and the whole arbitrage we're going to have to do over the next weeks will be pricing level versus duration because you can imagine that we could go a higher price short term for a three month or a six month deal but We have had the strategy to de-risk our business and providing we can maintain healthy margin at the level we've been able to demonstrate so far for even much longer period than the one we've had before, this is what we are after.

19:59 Just as a reminder, we don't want to be caught in a commodity official pricing where you have $12,000 for three months or six months and then going back down to five or three or whatever, as we've seen in the past. So we don't want to be caught in a commodity play because we cannot, with the industrial model we have, having to put steel on the ground, having to add sugar on 12 to 18 months, being a commodity game. And fish oil is a commodity game. We believe we offer a very strong, sustainable alternative to fish oil. So the whole game in negotiating our long-term agreement now will be to balance between pricing level and duration. And our preference is to go for long-term. to log that. On short term, back to what Peter said, you have spot businesses that we enjoy right now and that you find in the mixed part because we've landed quite a lot of new, nice customers on spot.

20:57 Some of them we hope to convert into longer term agreement as well. But this is in full motion. As you know, a lot is being negotiated now. But our aim is not just to max out on spot opportunity that's going to last only three months because We want to make sure we are consistently delivering the healthy margin. You know, around the 30% for much longer. Because in that we can plan our capacity expansion, we can edge our sugar and guarantee really the profitability of the company for multi years.

21:32 Understood. Can you say anything on the inventory situation in the chain on fish oil?

21:41 it is very tight because the supply gap now that the market estimate if you get it back to you know there's 1.2 million ton of fish all under quota more or less the market estimate the gap around 200,000 tons which is the highest ever seen you know because this is quite significant and actually the issue is even more The gap is 200,000 tonnes roughly from what we know based on the 26 fully allocated quota. Now, the big question mark is what's about 27 because the next big catch season, you know, we're going to be during spring.

22:45 Some people speculate El Niño is going to last beyond this catch season. Some people say, yeah, maybe not. And honestly, we will not start speculating about weather forecast and El Niño dynamics. What we know is that the gap is really now becoming heavily structural. with or without strong El Niño going forward. And this is what I think matters, but we really want to force ourselves not to speculate on one El Niño event only.

23:15 Thanks a lot.

23:18 Thank you, Fernand. Our next question this morning comes from Reg Watson at ING. Reg, please go ahead.

23:26 Morning all. I'd like to follow up on some of these questions around algae pricing and the move through to margins in H&N. So if I look at the spot fish oil price indices, there was a significant move in the second quarter which should have translated into your three-month contract in the third quarter. I think you've explained why that hasn't come through in pricing, it's come through in new customers instead. But I don't understand why it's not reflected in in the spot contracts from existing customers. That's question one. And then question two is your margin guidance for H&N into Q4, flat from Q3, suggests that there'll be no improvement in pricing in Q4. And yet when I look at the index for Q3, which will lag into Q4 for your spot shipments, or your three-month contract shipments, I should say, that suggests there should be a very strong price increase.

24:19 So I'd like to understand the dynamic there, please. That's the first question on algae oil. And my second question is on FINS, which nobody really seems to have touched on. The margin improvement in Q3 is quite dramatic. And you highlighted, I think, three points in your release, sugar, cost reduction, and operational efficiencies. Could you break that down for us, please, the 170 basis points of margin improvement into those three components and give us some examples of the cost reductions and the operational efficiencies that you're getting there?

24:52 Yep, no thanks Reg and I will also have Peter answering the fees margin and some of the algae margin but just also to explain the contracting dynamic because we've been consciously you know trying to minimize the spot business from the start on our algae for a simple reason is that this post business is going in and out and yeah we've had spot business but if you think about our overall mix 85% goes to aqua, 15% goes to, you know, pet nutrition and a few others than human nutrition. In the aqua, 85% of our business, two-thirds are longer-term contract and one-third is spot.

25:38 And we are trying to minimize the spot to either cannibalize it to go to human and pet, which is healthier margin, or we're going to favor our longer-term strategy partners. and primarily in this moment of shortage, this would be our preference because we know they're going to be there tomorrow, unlike the shorter term deal. So these spots, I mean, again, are volatile, they are opportunistic, and sometimes, you know, some of these customers will negotiate for one month, other for three months, a few for six months, but they are... So that's why I think don't draw conclusions on the quarterly dynamics based on the official index because we are not necessarily tracking index dynamics. Sometimes you decide a quarter and you might have a gap or you might decide to allocate volume to more strategy partners than spot.

26:39 Now, yes, we benefit on the spot aqua business short term, but we also benefit from extra volume, different prices, you know, coming on top of the longer term agreement with key strategic partners. So on margin, Peter, if you want to.

26:59 Yeah. So, Rich, in terms of margin, you are right, a sizable step up from Q2 to Q3. It is indeed driven by different components, i.e. sugar being positive, Middle East, and so for it starting to be a bit more negative and and then kind of compensated by by cost and pricing I would like to stay away from quantifying all the kind of four or five key elements but it is perfectly in line what we also did guide basically by

27:31 the end of Q2. Okay thank you and and the and the reason for No step up further in algae. I think, Olivier, you've alluded to it, but is that also the reason why we don't see any further step up in H&N margin in Q4 versus Q3 as well?

27:48 Yeah, correct.

27:49 Yeah, okay. And, Olivier, just a final question on those new customers that have come into algae. Are they in aquaculture or are they in the pet and the human?

27:59 We have really aqua. We have three dynamics. We have aqua. We have the strategic aqua partners, the longer term. asking for more volume, seeing the official situation, and we have a step up in human. But these are the three underlying new customers that you see translated in the mix at better pricing.

28:28 Okay, thank you. And then just a final question. I know you can't comment on bid speculation as it exists today, But perhaps you can give us some indication of historic, the number of times you are approached, I don't know, per month, per year, with people looking to either buy assets or buy the whole company that never work out, because obviously we don't hear about those.

28:53 No, but Reggie, I will not comment on that, because, you know, in the world like we live in, I do not feel any remorse. Okay, thank you.

29:06 Thank you, Reg. We have another question from Robert Jan Boos.

29:12 Good morning, Robert Jan. To come back, but I forgot to ask the following.

29:19 You said in the comments that you expect a seasonally lower margin for FINS in the fourth quarter.

29:28 Indeed, we know that that is a little bit the case. We saw 100 base points A sequential drop-off in Q4 last year. Just to get an idea, should we expect a similar drop-off in Q4 of this year in functional agreements and solutions? That was my question.

29:48 I mean, the first thing I would like to reiterate the kind of full year guidance before we move into all the different elements. And we do reiterate the guidance more than 16%. If you are looking to the drop in Q4, it is in line with historical seasonality, and you are right that next year we saw 100 basis points. I do anticipate a slightly, basically higher decline in Q4, driven by sulfuric acid phasing from that perspective. But if you look into the mix, then look, margins still healthy. and therefore, I mean, our year-to-date margin is 15.7%. But we reiterate our guidance of ending for the full year higher than 16%.

30:37 Okay, but because of sulfuric acid, a little bit stronger drop-off in this year. Okay, that's very clear. There is already some in Q3 and there will be mildly more in Q4. Yeah, thank you.

30:53 Thanks, Robert-Jan. Our next question this morning comes from Eric Wilmer at Sandland Scott Kempen. Eric, please go ahead.

31:03 Good morning, everyone. I also had a question on fish. I believe in a press release, you point out strong sales growth in vinegar and particularly the bakery and market. You also point out strong blends performance. particularly enzymes. I believe your preservative business generates around 300 million sales, if I'm not mistaken, where your blends business I think is much larger, it's materially larger, but at a lower margin. Looking at how your margin developed over the quarter, am I right to conclude that obviously in addition to cost initiatives and lower sugar, did the preservatives, lactic acid and vinegar business actually outperform your lower blends business so kind of wondering if you can give a bit of color on what's happening there on the stuff you make and on the stuff you blend and perhaps a bit cheeky but can you also talk a bit about on a daily basis where you meet the software during your commercial discussions with customers possibly on the on the bakery side or or for example when you're selling your your blends would be keen to just understand that dynamic a bit better thank you

32:13 Eric so I think that on the numbers you gave on the on the different business actually yeah our what we call our functional blends the system businesses is more around the 300 million business primarily US but also like time where we are pretty strong and preservation is much larger than that yeah so it's not 200 as you mentioned it's much larger now to your point what we see that there are some cross you know synergies between these two why just to give you an example when you preserve in bakery with mold inhibitors which is a one of the the big also a growth driver we see right now you need also to make sure that you you extend shelf life with enzyme cocktails which is in our blending business so we have both solution to the bakery market right now so it's clean label preservation but shelf life extension so there is These kind of technical synergies between these two legs that we have.

33:13 Now, as you are fully right, the margin is much higher in the preservation than in the functional blends enzyme cocktails. So this is again the way we try to manage our mix. And as you know, it's part of the operational cost efficiencies and the cost reduction program within Barton to address the functional blends margin in the U.S. because we have very healthy margins in La Tanne. To your question on Le Saffre, but you know Le Saffre is a yeast producer primarily in bakery, which is again something very basic. We do not encounter Le Saffre in the functionality blends or preservation that we are used to.

34:02 You know, our key competitors in that businesses are more the caries of this world than companies like the yeast producers.

34:15 Okay. Thanks for the questions, Eric. Our last question this morning comes from Martin Verbeek at The Idea. Martin, please go ahead.

34:28 Good morning. It's Martin Verbeek of The Idea. Year-to-date, you recorded a strong free cash flow of 57 million. You reiterate your outlook, but that implies that your cash-in, free cash flow for the fourth quarter will be far less than what we tend to see historically in Q4. So has there been free cash flow brought forward, or is it conservative, and why will the free cash flow in Q4 be less strong than what we have seen in the past?

35:09 Thanks for the question. I mean, you have seen, if you look back to the historical pattern of the last years, indeed a seasonality in terms of free cash flow. Age one is normally low, back loaded to kind of age two. It's really driven by seasonality in operating working capital, and that's how you need to view this as well. So is there in terms of the operating working capital, as I alluded to also in H1, a bit of fluctuation? The answer is yes. If I look to the kind of trajectory, I mean, EBDA is how it is phased, CARPEX is how it is phased, and that one is So I would not bank basically on only one quarter of its margin.

36:04 Thanks.

36:06 All right. Very good. This concludes our Q&A session and conference call this morning. I'd like to thank all of you for your attendance and questions, and we look forward to discussing the results further in the next weeks. Please note that we will hold our innovation webcast on November 11th. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.