In its Q3 results for the period 1 September 2015 – 31 May 2016 today, the company posted "strong" organic revenue growth of 13% up from 9% in 2014/15.
Revenue for the period was €693m, up 11% on 2014/15.
Chr. Hansen executive vice president and chief financial officer (CFO) Søren Westh Lonning told us the company was “very pleased” overall with this result due mainly to a strong performance in food enzymes and natural colours.
However he said the company was a “bit disappointed” with the 2% health and nutrition growth, which it had expected to be higher.
“Strong” organic revenue growth of 13% in first nine months of 2015/16:
- Food Cultures & Enzymes grew by 13%
- Health & Nutrition 2%
- Natural Colours 20%
EBIT (earnings before interest and taxes) before special items increased by 18% to €189m.
Q3 organic growth reached 12% and EBIT before special items increased by 11% to €71m.
This was largely down to the animal health market, a sector which has been hit hard by challenging commodity prices for meat and dairy.
While human health did well, with double-digital growth, this was largely dependent on a strong performance in North America where it acquired Nutritional Physiology Company (NPC) in January for $185m (€166m).
In the EU the category saw more modest growth of 6-8%.
This was dependent on the success and failures of its customer’s probiotic supplement launches, Westh Lonning said, but he declined to name names.
“We grew very well with several of our supplement customers but we have also seen a few customers not being successful with supplement launches meaning reduced marketing or they stepped out altogether.”
He said innovation would be the key to increasing growth in this market.
The company has been working on several new strains within gastrointestinal and immune health, projects it says should come to a head in the next four to six years.
The company has just completed a clinical study showing a “positive physiological effect” of the bacteria tested and it was now moving onto the next stage in its clinical development plan.
The company did not respond to our request for details on the strain in time for the publication of this article.
It was also working on new delivery formats like probiotic oil drops.
Last year it secured a €75m loan from the European Investment Bank (EIB) to support its microbial work as well as increasing its own R&D spending.
It spent €55 million on R&D during 2014-2015, which equated to 6.4% of revenue and an increase of 19% from the year before.
This year it announced it would be collaborating with Dutch biotech firm Caelus Health to develop Eubacterium hallii probiotics for prevention and treatment of metabolic disease.
‘Extraordinarily low’ commodity prices
However the company’s revenues continue to be dragged down by animal health.
“We have seen animal health – basically probiotics for farmers – has had an adverse impact on financial results,” Westh Lonning said.
CEO Cees de Jong confirmed in a statement today the modest growth in health and nutrition was due to the animal health business, which was “negatively impacted by commodity prices for milk and meat remaining at extraordinarily low levels”.
Yet he added: “Despite the current pressure on the agricultural sector, the long-term growth prospects for our animal health business remain very positive.”
‘Modest impact’ from Brexit
The company said 2-3% of its sales come from business into the UK.
However it said half of that was locked into the Euro value, meaning impact of the recent Brexit fallout would be minimal.
Only 1% of its revenue was ‘exposed’ to fluctuations of the pound.
Asked what the company’s main concern about the impending Brexit would be, Westh Lonning told us it was difficult to predict what would come in the next two to three years but: “Our main concerns would be any major restrictions on the flow into the UK.”
He said any lowering of the UK’s GDP (gross domestic product) would not have a significant impact on the business.
“But it is very early days.”