DSM-Firmenich (Euronext:DSFIR) Q3 2026 Earnings Call

0:00 Good morning and thank you for joining today's call. I'm sitting here with Dimitri de Vreeze, our CEO, and Ralf Schmeitz, our CFO. We published our third quarter trading update earlier this morning. We trust you've had the opportunity to review this press release, which is also available on our website and includes the disclaimers regarding forward-looking statements. Following opening remarks from Dimitri and Ralf, we will open the line for questions. And as a reminder, as always, sell-side analysts who want to ask questions have to register via the questionnaires link, which can be found on our website in the financial calendar. And with that, Dimitri, please go ahead.

0:42 Yes, thank you, Dave, and a warm welcome to everyone else on my behalf. I will begin with a few introductory remarks and then hand over to Ralf to give you a bit more color on the financial performance. Now, let me start with the key highlights, as you've seen on this slide. For the third quarter, it represented another important step. created an important step for delivering the action plan as we have presented to all of you at the Capital Markets Day earlier this year. We have a plan and we are consistently executing on it. Our cook performance has been marked by this consistency with a volume-led like sales growth of 5% in the quarter, which is in line with the first half, despite still a volatile operating environment the world we're living in.

1:34 At the same time, For our EBITDA, our margin improved sequentially to 20.4% in the quarter, as you've seen. That is up from 19.5% in the previous quarter. And if I remind you that the currency had an impact on that 20.4%, if you're correct, for the currency, or if you report at constant currency, that 20.4% would have been 21.2%. Now, we saw a good performance across all our businesses and also geographical areas during the quarter, once again highlighting the strength and resilience of the portfolio that we have chosen. Looking ahead, business conditions entering Q4 remain similar to those we've seen in the previous quarter, supported by a solid order book could start of October and we therefore expect our consistent performance to continue and therefore have increased our outlook for the organic sales growth for 2025.

2:36 We then go to the next slide. These results year to date, but also for quarter three, are a good stepping stone for 27 and 28. Remember, we have the starting point for 26 at around 5%. We've indicated our business and our portfolio should grow between the 4% to 6% during the strategic period and the announcement we made in the CMD. So I think that is nicely aligned. EBITDA quality, we expect around 20% for 2026. The 20.4% for Q3 at constant currencies 21.2. Also the sequential improvement from EBITDA from 19.5 previous quarter to now at 20.4 shows the trajectory towards the 21% for 2027 and then another step up in 2028. So it is a good platform for implementing consistently our plan.

3:32 Now, good to know that our cost and restructuring program is According to plan, this basically means that we will see next to the cost restructuring program, which will help us in 27 and 28, maybe a little bit also already in Q4, with the ongoing pricing actions, with the portfolio mix, with leverage. I think you will see that we are well posed for delivering on our action plan, not only for 26, but also for 27 and 2028. And with that, let me hand over to Ralf.

4:08 Well thank you Dimitri and good morning everyone as well. Dimitri already made a few comments around the total group so let me keep that short and go through the business units in a bit of a moment later. Overall looking at this, looking at the continued operation, Top left, a nice 5% organic growth, as said, fully volume-driven, with a nice leverage in EBITDA, with a like-for-like step-up of 8% in the quarter. Also, from a margin perspective, it was important to set the first step into the direction for the 27-28 plan. We wanted to deliver well over 20%, and we've done so in the third quarter with a nice 20.4%, The headwind that Dimitri alluded to from FX and a nice sequential step up as we communicated and planned for throughout the year.

5:08 Overall, the EBITDA hit 482, as said, an 8% step up, and we've seen a nice growth in both top line and profitability, both in Q3 and Q3 year-to-date, so that is fairly consistent. But as I said, let's spend more time on the business units, so maybe on the next slide, let's start with perfumery and beauty. There we've seen a continued good momentum, as we've seen throughout the year. A very nice 8% step up, again, all volume driven in the quarter, with a step up in EBITDA on a like-for-like basis of 10%. also coming through nicely. If we look at the segments, fine fragrance continued good momentum at a high single digit growth and consumer fragrance continued at a double digit pace as we've seen throughout the year.

6:05 Largely driven by innovations, reformulations and the fact that fragrance is a clear differentiating element in the growth. Both businesses have delivered a double-digit growth year to date, both fine and consumer fragrance, reflecting the very good momentum and strong performance that we've seen consistently throughout the year. Looking at the other businesses, ingredients very much in line with what we guided for at the beginning of the year. We've seen in Q3 a mid-single-digit performance in both businesses. Throughout the year, we're steering more towards a low single-digit business as we indicated that growth would normalize in our ingredients business. From a margin perspective, margin stable at a 22%.

6:54 Again, it reflects a 50% negative effect from FX. But as we communicate consistently, we embrace that and we need to navigate through that. But margin continues to progress from that side very well as well. Maybe then moving to the next slide, please, to taste, texture and health. Here we've seen a solid performance in the quarter with some phasing across the quarters. As Dimitri said, we've seen some business slip into October with a very good start of the quarter. Overall, if we look at taste, texture and health, we basically see around 4-5% across Q2-Q3.

7:40 Remember that we've seen some additional water intake at the end of the second quarter. But the way we look at it is that if you look at the H1 performance of around 4%, we also expect that to continue for the second half with a good Q4 ahead of us. If we look at the allocation between the main divisions, taste and ingredients, it's a bit boring, but we see consistently performance across the two, both contributing to the growth and also synergies continue to find its way back into the top line. In the third quarter, a nice leverage as well. The 3% volume led to a step up of a 6% step up in like-for-like EBITDA performance and margin, largely stable versus prior, reflecting largely a 90% basis point impact from currency. Also here, what we wanted to see is a continued progression of margin, starting with a little over 19% in Q1 to 20% in Q2 and now nicely towards the 20%. Thank you very much.

9:12 Also here, a very consistent performance throughout the year, reflecting a 5% organic growth in the quarter, 4% volume, 1% price, where we basically see the rounding tilt nicely to the 1%. with a very strong flow through into EBITDA, driven by good focus on pricing and cost and obviously mix. If we look at the segments in health, nutrition and care, growth continues to be supported by a strong early life nutrition performance, obviously fueled by continued strength in our HMO business, but also biomedical continues to perform well. If we look at dietary supplements, iHealth, also there we see a continued cautious behavior in the US impacting that business reflected in a low single-digit business performance or growth performance for those businesses.

10:12 A very strong margin development on health, nutrition and care, as said, a combination of pricing, mix and good focus and cost discipline. Also here we've seen a very nice sequential margin improvement, similar as we've seen and Taste, Texture and Health moving from 19% to 20% to 22% now in the quarter despite a very strong headwind from FX as a good portion of this business is exposed to US markets. I think that summarizes the three businesses looking across all of the business units that we have. Basically the quarter is a continuation of the story so far in the quarter. We're focused on the execution of the delivery of the results and throughout the quarters we've seen continued growth and continued market progression in line with plan. And maybe that's a good moment to leave it at that, Dave, and move to Q&A.

11:12 Okay, that's good. Before we start, just a reminder for the sell-side analysts how to get into the queue. Remember that if you want to ask questions, you have to register via the questioners link, which you can find on our website in the financial calendar. And then I hand it back to the operator and see if we already have the first one for questions. Operator? Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Once your name has been announced, you can ask a question. If you want to withdraw your question, please lower your hand using the raise hand function in the Zoom app. Thank you. Our first question comes from Nicola Tang from BNP Paribas.

11:59 Please unmute your line and ask your question.

12:03 Hi, everyone. Morning. Thanks for taking the questions. First, maybe to ask a little bit about current volume trends. It sounds like, as you said, the quarter has started well. I was wondering if you had any latest thoughts on the potential impact or whether there's any pre-buying still going on. I know it's been a topic that we've been discussing through the quarters this year, but it seems like even if there is pre-buying, we haven't seen any reversals. So as we go into year end, as customers maybe want to clean up balance sheets, do you see any risk of a sort of destock? Do you have a view on current balance sheet levels amongst your customers? That's the first one. And then the second question, I was wondering if we could talk a little bit more about input inflation, you know, what you've seen so far this year, especially with the oil price going back up again.

12:50 And, you know, any early take on views for next year? I remember, I think in Q1, you had said that all else being equal, at the time, you know, maybe we were looking at 100 million sort of incremental annualized cost before taking any price actions. I was wondering if that's a kind of relevant data point as we look into 2027, given the fact that oil has gone back up, or is that completely relevant? Thank you.

13:17 All right, Nicola, thanks for those questions. I will leave the input inflation part to Ralf, because he's really fond of that one. Let me take the Q4 and your link to restocking. Indeed, like I mentioned earlier, Good start of Q4. October is behind us, so we'll see that continues. Good momentum also in Q4. You could imagine we've also raised our outlook on organic sales growth. We would not do that without having a clear confidence that Q4 will come in with a good start of October, but also a good order and brief and innovation pipeline. So not only Q4, but also looking at the brief and innovation pipeline for 2027.

14:04 We see good momentum. So coming back to your restocking story, indeed, we have indicated a little bit of restocking, predominantly in perfumery beauty, if you recall well, in the consumer fragrance area. We've seen that in Q1 and Q2. We've not seen any restocking in Q3. We basically see on our customer side that they have normalized their stock levels, so we don't expect destocking either. I think everybody was a bit cautious on what was going on in the world and therefore depleting their stocks. announced a little bit of destocking in 2025, if you remember well. So we've been extremely consistent.

14:49 We also wanted to be transparent on that. But we've not seen any restocking in Q3. We don't expect destocking to go to lower levels of stock. I think it's a normalized level. However, as you have indicated towards the end of the year, you normally have your end of the year review, but that is everywhere. So every year, so year on year, that will not make a change. So normally, I would say it's a normalized level. I think customers feel happy with the current stock level they see today. And then input.

15:20 Good morning, Niklas. So overall inflation, initially we guided for about 100. We basically trimmed that down a bit on some easing in the second quarter, the half year. We moved that somewhat down. I think it's more relevant to what we see in terms of inflation going forward for 27. What we currently see is around 3% of inflation. Overall, I think a manageable number. I mean, it's something that we're used to dealing with. We'll have the usual levers like pricing, reformulation, obviously focusing on growth on the high growth segments, but at the same time taking cost measures and efficiency. So we'll address that as usual going into the year. But a number in that range that you indicated is around that grid for 27. And as I said, we'll address that and you'll see a bit of pricing as well. So expect that to be positive going into next year.

16:28 Thank you. Thank you. Our next question comes from Cathal Kenny with Davey. Please unmute your line and ask your question. Kathar, please press star six on your keypad to unmute. Kathar, your line is unmuted. Okay, Kathar, we will circle back to you. Our next question comes from Lisa Deneve with Morgan Stanley. Please unmute your line and ask your question.

17:07 Hi, thank you for taking my questions. I have three, if I may. The first one is to follow up a little bit from Nicolas' question on input inflation. I mean, year-to-date, your margins are on track, right, for your full year 2026 target, and I know it's really early days now. Thank you very much. Secondly, you had a very strong like-for-like result in the third quarter. There were some small pockets of softness, such as in TTH North America. I'd be very keen to hear what you're seeing in the market, especially in the light of consumer staple companies doing a little bit more innovation and renovation activity.

18:00 So any thoughts on that would be great. And then lastly, a quick one on Bovair. Are you on track for starting up the UK Bovair plant by year end? And how should we think about the contribution of that plant into next year? Thank you.

18:14 Okay, thank you, Lisa, for those questions. I think all three very nice questions. Let me go briefly over it. First of all, the input inflation, I think Ralf was alluding to it. Maybe try to my words on it just to see if we are transparent. So on the EBITDA margin bridge, I think it's clearly that Ralf indicated about 100 million effect. Pricing will be a small part of that. I mean, we're used to that, but we have a few other levers where we feel very comfortable. Now, first of all, remember the 20.4 EBITDA margin for Q3 is at constant currency 21.2. So there's already there is confidence that we have the capability to deliver that.

18:59 Now, for next year, we will have our cost and restructuring program. Remember, we're now 100 million with a headcount reduction of about 1000. We expect 50 million to be delivered for 27 and about 50 million for 28. That will obviously help our EBITDA margin. We also expect growth to continue with leverage on the EBITDA margin. Ralf indicated the bridge on his presentation. So that will help us obviously also in 27 and 28. And then last but not least, you indicated to that we made deliberate choice in tuning our portfolio and accelerate the growth on the higher growth, higher end margin business. Thank you very much. TTH for year to date, so for the first three quarters, so end of September, we delivered about 4%.

20:14 which is a good delivery according to plan. We've seen a good start of October, so we're confident for a strong Q4 as well. What we do see is North America indeed still be soft. That is the story for 2026 in general, not only for TTH, but also for health, nutrition and care. Remember, health, nutrition, care sales is about 40% in North America. So could you remember that the 5% delivery on H&C on organic sales growth is a very strong in light of a big part of their sales is in North America, which is soft, obviously helped by good sales for biomedical and medical nutrition, but also the HMOs and early life nutrition. But I think overall, North America, we expect to remain soft for 2026.

21:00 We need to see what 2027 will bring. Then maybe Beauvaire. Beauvaire is a story where for this year, but also for next year, when we're waiting for the plant to come on stream in 27. We will just sell what we have as interim capacity. That's between 35 and 40 million of sales, which we already have, so it's not something we're building. That is the maximum we can sell for 26 and 27. We still expect that for 26. You also see that for 27 at around a flattish profitability. You really see when the plant will come on stream, which will be in 27. When we get commercial volumes, it will have a predominantly impact for 28 and further.

21:48 Okay, thank you very much. Thank you. Our next question comes from Kathal Kenny with Davey. Please go ahead. Kathal, your line is unmuted. Please go ahead. Okay, we'll move on to our next question. Our next question comes from Alex Sloan with Barclays. Please unmute your line and ask your question.

22:17 Yeah, hi, morning all. Thanks for taking the questions. Two from me, please. The first one, maybe a bit of a follow-up. Just on TTH North America, could you give a little bit more detail on what's driven the sort of incremental softness there in Q3, was it? Customer destocking, weaker end markets, delayed projects, and maybe any particular categories that were more affected than others would be the first one. And then the second one, just on the 27 targets, which obviously unchanged today, which is welcome. I mean, clearly... You will have a tougher comp in 27 than you had assumed when you laid out those targets in March, given that you're going to grow five rather than the two to four.

23:09 So I guess the question would be, what's giving you confidence in sustaining that four to six target on this higher comp base? Is it from the already secured pipeline wins? How much visibility comes from that? Thank you.

23:30 All right, let me try to give some color on TTH North America and then Ralf can take the 2027. But I would take 27 together with 28 because we have a plan for 26, 27 and 28. TTH North America. So let me be very clear. We've not seen any weaknesses in segments. I mean, at the end of the day, year to date, we've grown 4%. I think compared to what you see in the food markets, 4% growth is outperforming the food market growth in itself with the innovation in the market we are in. North America is a bit of a softer segment, but it's not specifically one segment above the other. What we have seen is that dairy is a very strong segment.

24:15 That is a strong segment overall in all regions. Savory, which is a smaller segment for us. Obviously, we see a bit of a less growth. There's still growth, but we see less growth. But that has been in Q1, Q2, Q3 as well. What you've seen is in Q3 for TTH, we've seen also some deliveries delayed into Q4. You will always see that a little bit throughout the quarters. We've seen October being very strong. So I would not say there is one segment where we're particularly concerned about. We basically see that throughout the year, we will reach a very solid growth on TTH. We're only flagging North America. If that comes back on stream, we will see another plus based on the good performance for TTH. So that is what I wanted to give as a bit of color.

25:02 And for us, be aware that dairy is a very important growth factor, also linked to GLP-1, yogurt development and the likes, and that is a global trend.

25:14 All right, good. And let me follow up with 27 targets and maybe it's a 27-28 answer overall. When we also communicated our journey in Capital Markets Day earlier in the year, we also obviously did that looking at the pipeline and the wins that we see coming through. And I think the good performance in 26 is a good testimony of that. So our ambition and target for 27 and 28 are clear. Pipeline is developing well. We're happy with the wins across all the categories. But also, if you look at our 2026 performance, Alex, it's not that we're firing on all cylinders equally hard. As Dimitri just answered your earlier question around the U.S., I think U.S. is still a market that is not performing at its potential.

26:04 Same in Asia, we see markets slowly turning there. Not all countries within Asia are performing equally. But also if we look at our own portfolio, we're very happy with the momentum that we see. In Fragrance, and that is continuing. But we also guided there that even with the very strong performance that we see in 2026, markets there have the ability to grow well also into the period thereafter. But there are certainly areas across our portfolio where we can see a further step up. And based on that, we look ahead into 2027 and 2028. And we were clear on where our ambition and targets are and we feel good about that.

26:52 Thank you. Thank you. Our next question comes from Fernanda Bua with De Groove Petercam. Please unmute your line and ask your question.

27:03 Yes, good morning. One question is coming back on the next year, 27 March in guidance. How much tailwind would you have from forex if you assume the forex to stay where they are today?

27:21 Well, let me take that. It's a good question and good morning and thanks for that. I mean, the FX effect will be easing and leveling off now. FX remains very volatile and that changed almost from week to week. And let's see what the news of yesterday has an impact. But where the dollar is today, a dollar of 112 always makes me happier than a dollar of 117. That's clear. So with the rates as they are today, we should basically anticipate a more neutral effect into next year, which is completely different from what we've seen over the last two years where we had a net win of about 80-90 million. So that should help next year in the delivery of 2017.

28:03 Okay, thank you. Thank you. Our next question comes from Victoria Nice with Bernstein. Please unmute your line and ask your question. Victoria, your line is unmuted. Please unmute and ask your question. We'll move to our next question. Our next question comes from Artem Chubov from Rothschild and Co. Redburn. Please unmute your line and ask your question.

28:43 Thanks. Good morning, everyone. Just checking you can hear me well. Yep, loud and clear. Thank you. Two quick questions, please. So first, could you please update us on your performance in HMO, particularly in the archedonic assets, which I believe was a bit of a tailwind for you this year? How did that develop in Q3? And equally on synergies in TT&H, you've been consistently reporting strong contribution from synergies. So how did that develop in Q3? Thank you.

29:19 Yeah, happy to take those and good morning. Overall, as indicated earlier in the year, ARA contributed about 1% of tailwind throughout the year. We've seen an acceleration and effect in Q1 on the back of the events from another supplier. where we basically work with our customers and we support them as much as we could but we see continued good traction throughout the year because obviously it gave us more volume and reading through on the question for next year we've worked on longer term contracts securing the majority of that volume also going forward and that obviously contributes to the overall strong performance that we see in early life nutrition but coupled together with the HMO.

30:07 Now then moving to synergies, overall we see that coming through, TTH continues. We've seen about a one to one and a half percent contribution throughout the year. That's baked into the numbers. Traction remains very active. we regularly quote when we have a bit of an extended call on some of the examples but they keep on coming through whether they're in beverages where we combine nutritional ingredients together with taste profiles or whether we have baking solutions we regularly call out customers and most recently again where we basically increased the overall how do you say that longevity and fragrance but we make sure that that our cookies and cakes remain fresh and that's a clear combination and synergy. So they continue to come on all fronts.

31:04 Overall pipeline stands still at a level of around 400 million and there's also well over 100 million of business that we want still to come to market. So we'll continue to see that, we'll continue to track it for now and report out because it's an important metric. but also in the other businesses both in P&B and H&C. P&B we had already some earlier wins and they're less profound as in TTH so we don't specifically call them out but also in beauty and care we often say that our competitive position has certainly changed post the merger and that is giving us additional business on that front but we also see the first wins coming through in H&C which is helpful and contributing to the sales performance overall so Remain confident on the delivery of that synergy and we see it back in our numbers and pipeline.

31:58 But more importantly also in the level of engagement that we have with our customers. This is clearly a benefit from the merger.

32:08 Maybe just to conclude, because I remember you also had an ARA HMO linked question, so let me give you a bit of color on the HMO. I think it's a It's a fantastic development for this year. So HMOs, remember, we're the only one approved in China. We also have eight products, HMO-related products approved around the globe. So this is not a one-trick pony. This is a continued development of these HMOs and we already have new ones in the pipeline. So I'm very happy to see that. So remember on that question, what type of business this could become, we said this will generate 100 million plus sales as a category over time. Additional sales in itself. And we said that for 26, you will see that more than half of that is realized in 26. And that will continue into 27.

33:02 We are extending capacity in Eschberg, our plant, as we speak, just to fulfill all these demands. So I'm very happy to see that. And it will also help us in 27. Obviously, this is a tougher comparison than in 26. But this is a good pipeline momentum and we really see that the early life nutrition category is benefiting from that. It's a premium game category and you've seen that in the growth of H&C. You've seen that reported year to date around 4%, Q3 about 5% sales for H&C. And that is with, like we earlier said, with a soft North American market which represents 40% of the sales of H&C. So it shows really the strength of the portfolio and when North America will normalize over time and it will even help H&G going forward.

33:58 Thank you very much. Thank you. Our next question comes from Victoria Nice with Bernstein. Please unmute your line and ask your question. Victoria, your line is unmuted. Please select a microphone and ask your question. We'll move on to our next question. Our next question comes from Usama Tariq with ABN AMRO ODDDO BHF. Please unmute your line and ask your question.

34:34 Hi, good morning, team. I just want to ask, am I audible? Yes. Yes, hi, thank you for the opportunity. I have just three small questions. The first one on pricing for perfumery and beauty. This quarter was volume driven. Can you give a little bit of color on pricing and what do you expect if you expect any pressures in 2027 going forward? My second question would be on buybacks. So the current one is complete. Any color there would be very grateful for your expectations in future. And my final question would be, Any update on the ANH disposal? Thank you.

35:17 All right, Oussama, thank you for those questions. By the way, I thought that DSM Firmenich was a long company name, but you even have a longer company name. So interesting to see how your email address...

35:27 Yes, indeed.

35:29 But let me go through your questions. Indeed, pricing perfumery. Like, I mean, first of all, let's be very clear here that... The perfumery and beauty business is managed on margin. So if ingredients or costs go up and down, that will be in our system, in the ingredient toolbox, in the palette, and we will take that when we come for brief and creation possibilities. So it could even be the case It's a bad idea, but there could be the case that you reduce price and still have a higher margin. So this is the business model around fragrances. Now, what do we expect? Indeed, like Ralph was saying, we have this 100 million of part will be in the perfumery and beauty art. We will work accordingly.

36:16 We will see substitution and reformulation briefs, which, by the way, is also good. Any change in regulation, any change in ingredients, any change in pricing will create reformulation. but we'll also see some pricing effect where we pass through the pricing. Now that normally pricing is we have formulas with customers, with the regional customers that goes a bit quicker. If we have a new brief, we price the new pricing in. If it's logistics and warehousing, there's immediately a surcharge. So it's a pretty flexible business model where we do feel that the margin management is key and we can tap in pricing relatively quickly with different measures. Maybe share buyback and ANH for you, Ralf?

37:02 Yeah, I'm happy to take those. So I think we're clear in our capital allocation policy on that. As you said, indeed, we completed the share buyback at the end of September or at least first week of October reported on that. may be good as a reminder capital allocation first focus on growing our business and we have capex as a priority to fuel future growth that's baked into our cash share target so we're well covered on that front dividend we continue stable preferably rising so that's clear as well and then you get into the space that you just alluded to first money for M&A There we've been very clear. Don't expect any transactions from our side in the period ahead of us. We focus on the execution.

37:56 Our financial targets are clear and that is priority number one for us. Which leaves the share returns. As said, we remain disciplined there. We have a clear guidance on our debt level between 1.5 to 2.5 times EBITDA. At the end of the year, we expect to be at a little over 1.9 times EBITDA. Focus is now on completion of the ANH transaction. If that is out of the way, we remain disciplined in the way we look at our balance sheet. So hopefully that gives some color from that perspective. Then maybe turning to A&H, why are we progressing there? It was clear that we needed to split the company as part of the transaction.

38:44 We've released the new names of the two businesses a little earlier this month, so markets can familiarize with that. And for the rest, we're focusing on completion of those activities. There's a clear plan in place and we're on track. and the delivery towards a closing at the end of the year for ANH.

39:09 Thank you. Thank you. Our next question comes from Matthew Yates with Bank of America. Please unmute your line and ask your question.

39:19 Hey, more than a 20 second. Can you hear me OK?

39:22 Yes.

39:24 Thank you. Dimitri, I've just got one question around the governance of the group in light of Richard taking over as chairman. I guess it's only been a few weeks, so maybe this is a premature question. And I know you've already articulated a multi-year strategy, but Is there any impact or change of emphasis on the way the group has been steered as a result of this change in chairmanship? I know Richard's been on the board, you know, a few years, so you've probably got a close working relationship with him. But just in terms of his focus, his attention, culture, you know, anything that you want to expand about what that change may lead to?

40:12 Thank you.

40:14 Yeah, thanks for that question. I mean, no, not really. I mean, Richard has been three and a half years with us on the board before he was at Firmenich, so there's a clear continuity and consistency. He has been part of the board who approved on the strategic plan, our Capital Markets Day plan. which I think is a is a good plan anyway so apart from that so there's a it's more about continuity I remember after the the integration of these M-Firmenich we thought it was a very natural way going to the next next phase so you should see this as continuity Very good, thank you both. Thank you. Our next question comes from Eric Wilmer with Kempen.

41:28 Please unmute your line and ask your question. Eric, your line is unmuted. Please unmute your line and ask your question.

41:41 Can you hear me? Yes, loud and clear. Super.

41:47 Thanks for taking my question. Within H&C, I was wondering if you could comment on Firamaris, given where fish oil prices have had it. Can you perhaps talk a bit about pricing and volume dynamics for the business, and to what extent ongoing and anticipated customer contract renewals may be supportive? of H&C margins going into 27. I realize it's not a very large business, but it could be just glancing at fish oil prices. Could this be something that would act as a surprise for H&C into 27? Thank you.

42:26 Thank you, Eric, for that question. Well spotted. So welcome to our beautiful business. Indeed, Veramaris is a joint venture with Evonik. The fermentation of omega-3 algae-based fish oil. So this is an area where we will benefit from natural fish oil prices rising. Remember, algae-based fish oil has a few goodies, so to speak, a few benefits. One, it's a constant supply of algae-based fish oil. If you depend on what you fish from the ocean, it depends when it comes and you need to take stock the moment that the harvest is there. Two, it has pure quality and it has consistent quality over time because you basically have an algae-based training setup.

43:16 And three, you can scale the algae-based fish oil and therefore also in terms of pricing. You have a good price point. Now, if fish oil from natural source will go up, obviously algae-based fish oil will benefit from that. We will see that into 27. Now, this business is around 100 million for the total of which we have 50%. So it's not huge. So the 50 million sales turnover is reported by us. Now, what we do see is that the whole human algae-based fish oil in the human application, less to the animal part, the human is sold via H&C, via the sourcing from Wehrmacht. So this is something where I think we will benefit in 27, but I don't expect Huge miracles because at the end of the day, it's a 50 million business. But hey, if we have 20 of those 50 million businesses with positive momentum, then obviously it helps. So you're absolutely spot on.

44:22 It will help a little bit, 27, but it will not be major.

44:24 I think that's a nice above average margin.

44:30 I hope you understood what Ralf was saying with a nice above average margin he was adding. Thank you. Our next question comes from Kathal Kenny with Davey. Please unmute your line and ask your question.

44:51 Hi, can you hear me? Yes.

44:53 Great to hear you. The effort is rewarded.

44:58 It's actually Chetan from JP Morgan. I don't know how the names got mixed up because I was told to unmute my line twice before, but it wasn't my name, so... Don't take it personal. No, it seems like a better name than mine. I had two questions. One was, it's very unusual to see consumer fragrances growing faster than fine fragrance and I was just curious If you can highlight which are the key product segments where you see the strength right now in consumer fragrance. Because fine fragrance, at least we can see the end market, which is high-end perfumes, also very strong.

45:47 Whereas consumer fragrance is growing double-digit. is very unusual. So, maybe if you can shed some light on where you see that trend coming from in terms of product categories, that would be useful. The second question I had was just looking into the cost bridge for next year. You highlighted 50 million savings from the restructuring program. I think I heard 100 million of raw material cost inflation possibly next year. Can you also remind us how much does your fixed cost, excluding raw materials, which is more variable, but how much of your fixed cost actually grows every year, just to get all of the key moving parts in the bridge for cost next year? Thank you.

46:34 Okay, let me do the consumer fragrance and Ralf can give you a little bit of color on the cost. and the inflation there. So on consumer fragrance, let me remind you that year to date fine fragrance has grown double digit as well as consumer fragrance. So they're both doing very, very well now. We do think over time fine fragrance will normalize to a high single digit and consumer fragrance will normalize towards mid single digit. But while I'm saying that, I remember I already said that for four quarters in a row. But I do just want you to remind you that the current levels are exceptional, but we're happy that we're taking it now. If we look at the Brevin Innovation Pipeline, we don't see any softening as we speak.

47:20 Now, for fine fragrance, that's pretty clear. That has to do with geographical growth. It has to do with the younger generation taking a wardrobe of perfumes instead of one or two. I don't know how many perfumes you have at home, but at least the average number of perfumes have went up quite a bit. And our customers started with flankers. So not only the fine fragrance in perfumes, but also bathing soap. All types of deodorants and the likes, body mist and the likes, and that helps obviously the sales. Now, in consumer fragrance, this is about superiority. It is our customers are looking for differentiation in their category and they see fragrances as one of the key levers to do that.

48:09 and we do see that in our innovation and brief pipeline so where they look for higher concentrates but also looking at different fragrances as a differentiating area but also new technology like PopScent which is the encapsulation which has a delayed release of your fragrance so that you don't only feel the fragrance at the moment that you open your washing machine or anything else. It's throughout the period where there's a delayed release that is boosting sales quite a bit, but also new ingredients. I think we said it last time. We have a few new ingredients to market, which Dreamwood is one of them. Umber Ever is one of them. So it is also fueled by new innovation ingredients, which we built with our key customers.

48:56 And last but not least, you do see that the regional accounts are really picking up the pace. And that's also why we see above average growth at the regional accounts and we're benefiting from that.

49:09 All right, let me take the other question. Maybe elaborating a bit Chetan on how I look at it, because for me, mixing the cost program with the regular inflation is not something I do. The cost program is really geared at improving our overall profitability. It's part of a series of actions of improving the margin in line with our plan for 27 and 28, where we said half of the step up in margin is to come from really taking cost out. That's why we also announced the headcount reduction overall and We're performing well on that front. We've aligned with the Works Councils and the like and progressing well on that area. Now, the second question, and that's for me, there are two topics because I don't want to mix it. The program is not in place to address the regular inflation that we see.

50:02 I indicated on the back of the volatility that we currently see around 3% overall on our raw material. As you're aware, I think you have a good understanding of the P&L. We have about a little over 2.5 billion in terms of raw materials. That's where this really relates to. And then on the inflation piece, on the rest of the cost, I always say it's always around 2 to 3. Whenever we make the plan going forward, it always balances out on that. Looking a bit at the average payroll and the like, and this is something that we normally address through a series of actions that Dimitri alluded to earlier on as well, whether that's pricing reformulation, growth and continued discipline in areas beyond Thank you very much. Operator, is there still someone in the queue?

50:50 Because we only have time for one last question. Yes, we have a final question from Victoria Nice with Bernstein. Victoria, please unmute your line and ask your question.

51:21 Hello, can you hear me? Yes, we can.

51:26 Yes, okay, excellent, fine. So my question was on, in fine fragrances, you call that obviously a strong position in prestige, and we've heard from some listed customers recently how mass stage has been driving growth. And you said at the Capital Markets Day that this was an area that was growing faster. So I just wondered if you could talk us through what you're seeing there and then your developments in that segment. And then my second question was just on TTH. Can you quantify the impact of the order delays from Q3 into Q4, please. Thank you very much.

51:58 Yep, good. Good to finally hear you, Victoria. So fine fragrance, let me take that one. So first of all, fine fragrance, we've indicated that it is partly linked to briefs. The number of briefs we get in are really good. But what we do see is that we have seen an improved win rate because of new innovation we bring to the table. And normally, if you win a brief, you need to wait for a year to really, when the product is launched, that we get the business. So we do see that coming in. So we also expect not only for this quarter, but for the next years to come, for the next quarters to come, a good brief win pipeline, which will generate the business.

52:45 And that has to do with new innovation, some new technologies, but also new ingredients. I think we said last time that Umber Ever, which is a very intense umbery note, has been launched into the market, into the palette for our perfumers to work with. and over the last 20 briefs which we won, a big part of that was due to the new ingredients being introduced, being umber ever. So that it shows that new innovation ingredients is appreciated by our customers and it also increases your win rate. So that is why fine fragrance is doing very well, apart from the more generic trends where I think everybody is benefiting from. And I just mentioned it like a wardrobe of perfumes, flankers in the categories.

53:34 but also superiority growth in higher concentrated fragrances. Then maybe TTH for you, Ralf.

53:40 Yeah, no, happy to take that. So overall, we said we've seen some phasing across the borders, both Q2, Q3, but your question was more how much moved to Q4. I think generally then the rounding would probably have been 4% growth for TTH rather than the 3%, but that probably gives you an indication on how much we've seen slipping. I mean, we focus on sequential growth, continued progression and margin improvement. and that allowed also some movement that we don't necessarily push it out in the last days. So that's what we've seen. So with that effect, growth would have been 4%.

54:28 Okay, I think that brings us to the end of our Q&A. Dimitri, do you have some closing remarks to make?

54:37 Well, not really closing much other than I hope you appreciated the new setup, semi-new step-up. We will brief in our presentation and leave predominantly room for Q&As. I clocked it this time. We are a Swiss company, so we should start on time and we should end on time. Our presentation stopped at 9.13. I think that was a key performance in itself. We all think the exchange is important and we appreciate all the questions you have raised. Now, let me briefly close. Like I said in the beginning, Q3 was a good performance with year-to-date, a good performance with good growth and a sequential improvement on EBITDA margin. We didn't say anything about cash, but it's clear that we're confident on the cash delivery between 11% and 12% as well, building on what we've seen year-to-date in terms of cash developments.

55:33 So overall, we are on track with our CMD plan. We do have a plan, 26% We will deliver in line, maybe even above what we have presented in terms of the growth. I think there was a question of Alex, so how does that 4-6 works to a bit the 2-4 original in terms of organic sales growth as an outlook? Now, this business should grow 4-6 year on year on year on year. So this is a business which has the potential to grow year on year in 426. We will see a brief innovation pipeline with a clear step up towards that 2027-2028 in terms of margin and cash with an organic sales growth of the markets with the portfolio we have between the 426.

56:21 So Q3 was a nice confirmation of the execution of the plan. reaffirming the outlook on organic sales growth with a clear trajectory towards 2027 and a clear trajectory towards 2028. And with that, let's close the call.

56:42 Yeah, so that brings us to the end. Thank you all for attending today's call. And as usual, any other questions you have, please address it to the Investor Relations team. Always happy to take your calls. With that, I hand back to the operator to finish and close the call. This concludes today's call, thank you everyone for joining, you may now disconnect