Corbion results impacted by new Algae Ingredients business

09 Aug 2018 --- Corbion reported H1 2018 sales of €439.2 million (US$509.2 million), a decrease of 4.9 percent compared to H1 2017, entirely due to negative currency effects. Organic sales growth was 3.1 percent. EBITDA excluding one-off items in H1 2018 decreased by 19.0 percent to €71.5 million (US$82.9 million) due to negative currency effects and the inclusion of the Algae Ingredients business (which includes the former TerraVia business acquired in 2017). Organic EBITDA excluding one-off items increased by 1.2 percent in H1 2018.

“I am happy to report that we have seen a continuation of improving organic sales growth rates in our Food business segment which returned to growth in Q2 after a challenging period. In the first half year, Corbion performed within the sales growth rate target bandwidth of our Creating Sustainable Growth strategy. Margins in Ingredient Solutions remained at a healthy level of around 20 percent. As expected, our profitability in Innovation Platforms is adversely impacted by the inclusion of the newly acquired Algae Ingredients business which is in an early stage of development. We believe that this platform offers many exciting growth opportunities for Corbion, leveraging our expertise of running industrial-scale organic acid operations,” Tjerk de Ruiter, Corbion CEO explains. 

Eddy van Rhede van der Kloot, CFO Corbion tells FoodIngredientsFirst: “We have made good progress in the integration of the Algae Ingredients business. Key priorities in the first half of 2018 included bringing the SB Renewable Oils production facility and its products to Corbion standards, to restart a demo plant in Peoria (completed in February) and the relocation of the laboratories to a new location in San Francisco. And we finalized the acquisition of the 49.9 percent share of Bunge in the SB Renewable Oils JV in June, so we are now 100 percent owner of the plant in Orindíuva, Brazil. On the commercial side, we have seen very encouraging progress with distribution partners for AlgaPrime DHA salmon feed as well in thousands of retail outlets for our cooking oil Thrive.”

“The results of the Algae Ingredients business have now been included in the Corbion results for the first time, and as expected, our profitability in Innovation Platforms is adversely impacted by the inclusion,” he adds.  

“We are well on track with the projects in our Innovation Platforms unit, with besides the Algae Ingredients, also includes the PLA plant in Thailand of our 50/50 joint venture TotalCorbionPLA that is getting ready for production in the second half of this year. We expect the Innovation Platforms to approach break-even in 2021,” van der Kloot explains.

Key financial highlights first half of 2018:

• Net sales organic growth was 3.1 percent; volume growth was 6.6 percent
• EBITDA excluding one-off items was €71.5 million (H1 2017: € 88.3 million).
• EBITDA margin before one-off items was 16.3 percent (H1 2017: 19.1 percent).
• One-off items at EBITDA level of €-1.8 million.
• Operating result was €50.2 million.
• Free cash flow was €-16.3 million (H1 2017: €2.3 million). The decline is mostly due to investments in the Total Corbion PLA and SB Renewable Oils joint ventures.
• Net debt/EBITDA at half-year end was 1.8x (year-end 2017: 1.0x).

Net sales in H1 2018 decreased by 4.9 percent to €439.2 million (H1 2017: €461.9 million) due to currency effects (-8.7 percent) offset by positive organic growth (3.1 percent) and a positive impact from acquisitions (0.7 percent). The acquisition impact is related to the purchase of the Algae Ingredients business, says Corbion. 

Organic sales growth of 1.6 percent in H1 2018 in the Ingredient Solutions business unit was mostly driven by volume increases in both the Food business segment and the Biochemicals business segment. In the Food business segment, sales (on an organic basis) were stable versus H1 2017.

The second half of 2018 should see the start-up of the Total Corbion PLA joint venture plant in Thailand, according to the company. The acquisition of the remaining 49.9 percent interest in SB Renewable Oils means that from June the results of the large-scale Orindiúva (Brazil) algae fermentation plant are consolidated in Innovation Platforms. Corbion confirmed their earlier guidance on the EBITDA loss for Innovation Platforms expected to be between €-40 million and €-35 million. 

Net sales in the business segment Food in H1 2018 increased organically by 0.1 percent. In H1 2018, Corbion saw Bakery sales decline due to last year’s challenges in executing our Bakery channel strategy and losses in frozen dough. The Bakery sales decline was less pronounced in Q2 than in Q1.

The performance of Meat in H1 2018 continued to be strong, even though last year’s growth was already substantial. In the US, the portfolio mix shift towards natural preservation solutions continues to drive top-line growth and margin improvements. Meat sales growth outside the US was mainly driven by new contracts in Asia and Latin America. 

In other markets (Beverages, Confectionery, Dairy), overall sales increased slightly. Some of the growth was due to new contracts for PGME, an emulsifier for which we built a new production line in 2017.

The EBITDA margin in H1 2018 decreased from 19.2 percent in H1 2017 to 18.0 percent, mostly caused by higher input costs in the first quarter compared to last year, increasing freight costs, and a negative mix effect in Q2 as Corbion won several sizeable lactic acid contracts in Asia.

Corbion announced the full completion of the acquisition of substantially all assets of TerraVia Holdings for US$20 million in September 2017. As a result, its broad and diverse platform centered on innovative food and specialty ingredients derived from microalgae has now become part of Corbion. 

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