Chr Hansen's to explore options for Natural Colors business as part of strategic review

02 Jul 2020 --- Chr. Hansen is now exploring strategic options for the potential sale of its Natural Colors business. In its Q3 financial results, the Danish ingredients supplier further highlights that COVID-19 impacts on revenues in Q3 were cited as a net positive. It further reports organic revenue growth of 7 percent in this quarter, with an improved momentum compared to the same period of the previous year in segments of Food Cultures & Enzymes (8 percent), Health & Nutrition (12 percent) and Natural Colors (1 percent), increasing the groups’ organic revenue growth in the first nine months of 2019/20 to 5 percent.

“We’re pleased with our Q3 performance, as our business demonstrated resilience during the first volatile months since the outbreak of COVID-19 thanks to our essential natural ingredient solutions for the food, nutritional and agricultural industries. Customers increased safety stocks of essential ingredients in March and early April, to carry them through potential supply chain disruptions and then inventories began to normalize late April and in May,” comments Mauricio Graber, CEO of Chr. Hansen.

In Q3, Chr. Hansen’s EBIT before special items increased by 5 percent to €97 million (US$110 million), and EBIT margin before special items increased by a 0.4 percentage point to 30.8 percent.

“Our innovative solutions have proved their value, and we were able to continue the strong momentum from recent product launches such as the dairy enzymes Chy-Max Supreme and Nola Fit, and bioprotection posted another strong quarter,” remarks Graber. “Animal Health continued to perform strongly driven by Bovamine dairy probiotics; and Human Health also delivered strong growth, supported by consumers’ interest in probiotics with indications for immune benefits. Natural Colors also delivered positive growth driven by Fruitmax, despite challenging conditions from COVID-19 and low raw material prices.”

"Our Q3 EBIT margin before special items was up by 0.4 percentage points driven by scalability benefits in production and lower travel expenses due to travel restrictions – however, these positives were partly offset by higher freight costs that were also driven by COVID-19,” he adds.

“As part of the strategic review, the Board of Directors and the Executive Board have considered the portfolio of Chr. Hansen, and given that Natural Colors does not share the microbial and fermentation technology platforms, strategic options for the future of Natural Colors will be explored, including a potential sale of the business. We also announce August 25 as the new date for our virtual Capital Markets Day, where we will present all the results of the on-going strategy review.”

Free cash flow before acquisitions and special items grew by 117 percent in Q3 and is up 161 percent after nine months, primarily due to good management of working capital. “The Q3 performance was in line with our expectations and based on the business performance after nine months, we maintain our organic growth and EBIT margin guidance for the full year and increase the free cash flow before acquisitions and special items, although macroeconomic and end-market uncertainty persist due to COVID-19,” remarks Graber.

“We also completed an acquisition in Q3, and signed another early in Q4. HSO Health Care and UAS Laboratories represent important investments in our microbial platform, and we expect to continue to extend our platform through a disciplined acquisition strategy.”

For more F&B coronavirus updates, readers may be directed to FoodIngredientsFirst’s frequently updated COVID-19 updates page.

By Benjamin Ferrer