Earnings Transcript for SY1.DE - Q4 Fiscal Year 2023

Tobias Erfurth: Thank you very much [indiscernible] and welcome to everybody in the call or in the live stream to our Presentation of the Results of 2023. How nice to have you in the meeting. We published all related documents on our web page this morning in the section Financial Results where you probably entered the live stream to this meeting. With me today are Heinz-Jurgen Bertram, our CEO; Olaf Klinger our CFO; and Jean-Yves Parisot, our President for Taste Nutrition & Health and incoming CEO. After the review of 2023 numbers and the outlook for 2024, we will open the lines for your questions. With this, I hand over to Heinz-Jurgen Bertram. Please go ahead.

Heinz-Jurgen Bertram: Thank you, Tobias. Good morning ladies and gentlemen and welcome also from my side. I am delighted that so many of you have taken the time to join our call today. As usual, I will highlight the results of 2023. Olaf will provide a deep dive into the financials and I conclude with our key strategic initiatives and an outlook for the road ahead. Before we look at the numbers, I would like to take the opportunity to address some personal words. Last week, we announced the CEO change in our company. I will step down from the CEO position effective March 31st. This is based on a very close alignment and by mutual agreement with our Advisory Board. And I will step down. And I think after 15 years as CEO, it's now a good time for such a change. Jean-Yves Parisot, our President, Taste Nutrition & Health and Member of the Symrise Executive Board, will take over as CEO. Jean-Yves was appointed by the Supervisory Board on February 29th and I am delighted that he is also here with us today. We will come back to the CEO change later in this call. Let us first look at our results 2023, starting with the financial highlights on Chart 4 of our presentation. 2023 was marked by strong business growth in what was once again a challenging environment and once again, we managed to outperform the market. At the same time, the economy has faced ongoing geographical and geopolitical challenges such as the war in the Ukraine and the crisis in the Middle East. Rising inflation and high raw material prices intensified the pressure on our business. On the other side, our diversified portfolio combined with our broad regional presence and our customer bias yet again enabled us to continue on our strong growth path even in these difficult times. What did we achieve in 2023? Let's look at a few KPIs. We grew sales by 2.4% to over €4.7 billion. Organic growth was above 7.9%. Adjusted EBITDA was slightly lower down 2% to €903 million. Therefore the margin came out at 19.1%. This was lower than our guidance and below last year's. Our profitability suffered from increased raw material prices and operating costs. On top of this, we were hit in November and December by the unexpected currency devaluation in Argentina and an extraordinary sick leave rate in Holzminden of approximately 20%. These events we could not compensate. Net income of €340 million was 16% below previous year, which corresponds to €2.44 per share. Our dividend proposal amounts to €1.10 per share for fiscal year 2023. Let's be very clear about this. We have delivered for our shareholders year-after-year. And this proposal represents the 14th consecutive increase in our dividend. Let's take a look at our sales growth on Chart 5. Group sales increased to over €4.7 billion including €35 million sales contribution from M&A. On the downside, we experienced a negative FX effect of minus €290 million. Organically, the group achieved strong growth of 7.9% driven by both segments. With this, we outperformed the market growth and we also outperformed our guidance of 7% -- 5% to 7%. In both segments we enjoyed good growth momentum and increased demand and Slide 6 illustrates. The Taste Nutrition & Health segment generated sales of almost €3 billion. Organic growth amounted to a strong 9.3%. A key growth driver was once again, our Pet Food business which we grew in the double-digit percentage range. Food & Beverage applications showed also high growth areas. The segment benefited from broadening its competencies beyond flavors and nutrition. Our Scent & Care segment also performed well. Sales rose to around €1.75 billion and organic growth came in at 5.6%. Fine fragrance and cosmetic ingredients are experiencing -- is experiencing ongoing strong growth. Let's move to the development of our regions on Chart 7. We grew across all regions with EAME being the strongest one and delivering organic growth of more than 15%. Latin America achieved an organic growth of almost 15%. Asia Pacific also generated good organic growth rates of 4%. In North America, we faced a destocking effect and comparatively low project vitality. In addition, we missed sales due to the production incident in Colonel Island. All these effects resulted in a decrease of 1.8%. Overall, we can report a very sustainable performance. As you can see on Chart 8 with constant strong growth in both of our top and bottom line. Since our IPO in 2006, we have delivered an annual compensated sales growth of 8.3%. Our EBITDA CAGR amounted to 8%. Allow me to thank all our employees across -- around the world for their commitment and dedication. We all can be very proud of what we have achieved together. As Chart 9 shows, given our strong momentum we outperformed over time both the MDAX and DAX indices. We consider this value creation as a confirmation of the attractiveness and results. And also, it reflects the trust investors put in our strategy and the long-term vision they share with us. We are very grateful for that. Let me stop here for the moment and hand over to Olaf. He will now provide the details on our financials. Olaf?

Olaf Klinger: Yeah. Thank you, Heinz-Jurgen, and also a warm welcome to everybody on the phone from my side. Let me add some details on our growth on Slide 11. Our ongoing price increases helped us to compensate for the higher input cost we suffered from with around 80% pricing and around 20% volume. We achieved an industry-leading organic growth of 7.9%. As expected, and communicated at the beginning of last year, pricing came down in the course of the year while volumes went up. In Q4, we saw 50% pricing and 50% volume growth totaling to 9.5% organic growth. The portfolio impact for the full year was €35 million sales or 0.8% of – for two acquisitions actually. Wing Biotechnology was around €20 million and Groupe Néroli Romani was around €50 million both acquired in 2022 and therefore, no longer in the portfolio pillar in 2024. FX translation effects continue to be negative with minus €290 million for the full year 2023 and minus €112 million in Q4, attributable to multiple currencies across the world. Please turn to the group profitability on Slide 12. The cost of goods sold increased slightly faster than sales. Raw material costs and production costs were still up. In addition, fire-related downtime cost of the Colonel Island site and related revaluation of piled-up inventory, the revised Scent and Care strategy and costs for the Cartel investigation caused high one-time effects in Scent and Care, which we adjusted for. Unfortunately, November and December delivered significant lower operating results mainly due to revaluation and provisions for inventory, underutilization and downtime, as well as higher sales general and admin costs and the devaluation of the Argentinean peso. In December, we specified our margin targets to a corridor of 19% to 19.5%. Ultimately we reached an adjusted EBITDA margin of 19.1%, which is substantially below our own ambitions. On Slide 32 in the appendix of the presentation, we give you an overview about all one-offs we adjusted for. Let's turn to Taste, Nutrition and Health on Slide 13. We enjoyed a healthy organic growth of 9.3%, driven by price. As already mentioned for the group, also in TNH pricing came down while volumes went up in the course of the year. Q4 already showed around two-third price and around one-third volume, achieving 9% organic growth for Q4 in the segment. On the margin, the lower-than-expected volumes in the first nine months, especially in pet food led to certain under-absorption and revaluation of inventories including some scrapping. The EBITDA margin came slightly down from 21.6% in 2022 to 21.1% reported or 21% adjusted in the segment. Let's turn to Scent and Care on Slide 14. For the full year, we reached 5.6% organic growth with around 50% for price and around 50% for volume. Fragrances achieved high single-digit growth and Cosmetic Ingredients enjoyed even double-digit growth. Aroma Molecules was burdened from the fire-related stoppage in the Colonel Island plant and a difficult market environment in the chemical sector, which together led to a high single-digit growth decline. Since the reopening of the plant in August, the volumes in Aroma Molecules have recovered. In Q4, organic growth in Scent and Care reached 10.6% only driven by volume. The adjusted EBITDA of the Scent and Care segment decreased 4.9% to €276.7 million. The adjusted EBITDA margin reached 15.8% after 17.1% in 2022. Please turn to Slide 15 for our bottom line. The financial result of minus €94 million was €22 million below last year, mainly due to higher interest expenses for financing, which was €19 million and interest on pension provisions showed another €16 million and this was partly compensated by higher interest income and FX gains. Our tax rate of 25.8% is almost unchanged and within our expected mid-term corridor of 25% to 27%. Net income was around – was €66 million below last year, mainly due to the mentioned negative one-time effects. EPS decreased 16.2% to €2.44 per share. On slide 16, I would like to comment the amortization from business combination, which was driven by -- from the merger in 2003 and major acquisitions in 2014 and 2019. We saw the peak in 2022 and still had €99 million in 2023. Spreading the €99 million over around €140 million Symrise shares it impacts each share was around €0.70. This might be one reason for the huge bandwidth in EPS projections in the market. Working capital -- coming to slide 17. Working capital I would like to mention that the huge increase in inventories in 2022 was necessary to ensure supply availability and reliability. In 2023, we could reinforce our working capital management and reduce the working capital quota to sales from 35.8% to 34.6%. And we have taken various measures already to further improve and to get us to 30% to 32% by 2025. On slide 18, you see the positive impact from the significant improvement of working capital on the business free cash flow. But let me start with the cash flow from operating activities which was significantly above the level of the previous year. Lower earnings were offset by a reduction in working capital and lower tax payments. The operating cash flow rate relative to sales was 15.2% after 7.8% in 2022. Cash outflow from investing activities amounted to €358 million mainly due to payments made primarily in connection with increasing the company's stake in Swedencare as well as to payments for investments in intangible assets as well as property, plant and equipment. There were no new financing activities in the reporting year. And net cash flow outflow for financing activities amounted to €264 million due primarily to payment of the dividend and interest on financial liabilities. As a result, the business free cash flow increased 83.7% to €553 million after €301 million in 2022. This corresponds to 11.7% of sales after 6.5% in 2022. Our ambition is to further increase the business free cash flow to around 12% in 2024 and to even 14% mid-term. Please also see slide 31 in the appendix for the bridge from the consolidated cash flow statement in the financial report to the business free cash flow calculation which I actually mentioned during the Capital Markets Day last year. Please move to our net debt development on slide 19. Our net debt came slightly down to €2.16 billion after €2.23 billion in 2022. The debt ratio was slightly up due to weaker earnings performance and still high working capital. It is currently at 2.4 times adjusted EBITDA without pensions and leasing obligations and 3 times adjusted EBITDA including pension and leasing obligations. This is slightly above our midterm net debt guidance which is 2 times to 2.5 times EBITDA including pensions and leasing obligations. We are confident to get back into our self-defined corridor within the next 12 months to 18 months' time frame. In summary, we are very satisfied with our debt profile. The group has sufficient credit lines available i.e. in the form of a revolving credit facility totaling to €500 million and that was not utilized as of December 31, 2023. We have no covenants very supportive and solid bank relationships and no major refinancing in 2024. All-in-all we want to remain a strong investment-grade profile. My last slide shows our solid balance sheet. Increase in assets were mainly from higher PPE. Inventories came slightly down and our equity ratio is at a healthy level of 47% after 46.4% the year before. To summarize, 2023 was another challenging year for us with the fire and market-related growth and margin decline in Aroma Molecules and the unexpected market-related volume slowdown in Pet Food. Both could not be fully compensated by our very strong Food & Beverages, Fine Fragrances and Cosmetic Ingredients businesses. Nevertheless, we trust in our broad and industry-leading portfolio and we are confident to further outgrow the market and sales also in the future. With an increasing focus on efficiency and portfolio optimization, we are confident to return to our mid to long-term EBITDA margin guidance soon again. And with this, I would like to hand back to Heinz-Jurgen. Thank you very much.

Heinz-Jurgen Bertram: Thank you, Olaf. Ladies and gentlemen, let us look at our segments. Their strategic setup and initiatives they started to keep the business dynamics very high and bring our profitability back to the target level. In both segments, we operate clearly as a differentiator within our industry. Chart 22 illustrates our segment Taste, Nutrition & Health and our ambition to extend our capabilities. Over the past years, we successfully managed the transformation from being a traditional flavor house towards a solutions provider in food beverages as well as in pet food. Today we consider ourselves an augmented flavor house creating value along the whole food system by combining flavor expertise with nutritional and health ingredients. This setup is the result of a consequent portfolio and technology expansion, which we did organically and through bolt-on acquisitions. In the segment, we will take different actions for further build our position for continued accelerated and sustainable growth, as you can see on Chart 23. As a result of our consistent review of our portfolio, we have taken measures in our product lines do not meet our growth and profitability ambitions. As a consequence, we just sold 51% of our trading beverage business in the U.K. together with our distribution partner Th. Geyer, which formed a joint venture and in this partnership the business can be much better developed going further. In order to further expand our leadership position in pet food, we will build a strong ecosystem connecting internal and external expertise to understand our consumers and their owners. You all know that health aspects are playing an increasing role in our product solutions and is on top of our customers and consumers' minds. Throughout the Taste, Nutrition & Health segment, we are going to further bundle competencies cross-divisional and also interdisciplinary to broaden our view towards solutions with a proven health benefit. Swedencare is a good example of our efforts to add health and wellness competencies through joint projects. In the meantime, we hold a stake of about 42% in the company. Let us take a look at the Scent & Care segment on Chart 24, which also enjoys differentiating factors. All three divisions Fragrance, Aroma Molecules and Cosmetic Ingredients on the segment keep leading positions in the key application areas, such as oral care, fragrance ingredients or micro protection in cosmetics. The divisions are connected through joint innovation capabilities manufacturing platforms and backward integration. Please turn to Chart 25 to give you a few examples of current initiatives to even expand our competitiveness and footprint. In Fine Fragrance, we managed double-digit growth rates in the last years. Here we expand our capabilities in Dubai and China with new creative centers. In Aroma Molecules, we successfully shifted our raw materials based towards natural food stock and feedstock, namely pine trees from FSC certified North American Forest. Our next ambition level is to apply the 12 principles of green chemistry to a much higher extent by introducing a Green Chemistry score for our portfolio. In cosmetics ingredients, we currently are focusing on two growth opportunities with strategic partners. In Kobo, we increased our share to 49%, which is in line with the intensified innovation in mineral UV filters and decorative cosmetics. A few days ago, we signed together with Virchow company in India, a joint venture to bundle our strength to leverage the growth opportunities in the region of Asia. We will also include building high-volume production capabilities in India for Cosmetic Ingredients. Chart 26 highlights more selective projects to expand capacities as well as to build new sales and sites globally. In total, we saw capital expenses of €270 million, the same level as last year. We started, for example, new constructions in Brazil, Mexico, Spain and India as just mentioned. We also started to expand capacities to leverage our growth opportunities in certain countries such as China, France, Netherlands, Spain and Mexico. As you all know, sustainability is and always has been an integral part of our strategy, as you can see on chart 27. Our approach is fully aligned with the UN Sustainability goals and embedded in our entire organization. In accordance to the Corporate Sustainability Reporting Directive, which is 2024 in place we conducted a double materiality analysis assessment. The graphic shows the outcome and defines our priorities. CSRD will also lead into additional reporting and transparency requirements for ESG topics, which we prepare to report. Our transparency is acknowledged through numerous ratings. CDP just recognized Symrise with A ratings for its environmental transparency in protecting the climate, water and forest. Only a few companies achieve that. A record number of 21,000 companies were assessed. Ladies and gentlemen, let me now draw your attention to the outlook on chart 28. We feel confident that we have positioned our company well to continue our growth cost. Despite the current volatile market environment with all challenges, Symrise is well positioned to continue to deliver growth above market growth. Therefore, we are targeting organic growth of 5% to 7% in line with our mid-term guidance. We had a really good start into this year into 2024, which gives us again all confidence. As a consequence of the margin pressure in 2023, we started several cost-saving measures. In addition, we will accelerate our efficiency program to ensure a quick recovery of our profitability. For 2024, we expect the current environment and EBITDA margin of around 20%. In order to achieve this, the mentioned efficiency program will deliver around €50 million. In the mid-term we are targeting a margin between 20% and 23%. At the same time, we are keeping our growth ambitions. Symrise aims to generate sales between €5.5 billion and €6 billion until 2025. In addition, we recently extended our long-term growth expectations to 2028 aiming to generate sales of €7.5 billion to €8 billion. Before I conclude our presentation, I would like to draw your attention to chart 29. As we announced last week, I decided to step down at the end of March. I am very pleased that Jean-Yves, an internally experienced manager out of the Symrise Executive Board will take over as CEO. Jean-Yves has successfully transformed Symrise into a leading player in Taste, Nutrition & Health. Our company will be led in best hands with Jean-Yves. We both will ensure a truthful and smooth transition. Jean-Yves, let me briefly hand over to you for a few words. Jean-Yves.

Jean-Yves Parisot: Thank you, Heinz-Jurgen. Thank you so much for your kind words, and I feel really not -- and privileged to be your successor. Ladies and gentlemen, under the leadership of Heinz-Jurgen, we had tremendous achievements. Symrise today is built on a very strong foundation. That is benefiting us in the current demanding business environment. And make no mistake, many in our industry envy us for that strong foundation. One thing is for sure, our entrepreneurial activities will continue to be characterized by setting the right strategic direction at an early stage, to continue to grow profitable and sustainable. I am grateful for the trust that the supervisory board has put in me. I'm due to take over at the end of March, and I'm looking forward to the collaboration with all of you. Some of you, I will already meet in-person during the upcoming road show next week in London, and I look forward to meeting and talking to each one of you. Thank you, and my last words will be for Heinz-Jurgen. From my heart, I really thank you, Heinz-Jurgen. [Foreign Language]

Heinz-Jurgen Bertram: [Foreign Language] Thank you. Ladies and gentlemen, after this bit emotional words, I would like to open the call for your questions, Tobias. It's your show.

Tobias Erfurth: Yeah, short show. I give to the operator many thanks for the presentations. We open for the questions and answers now. And Moritz, please help us with your introductions. Thank you.

Q - Lisa De Neve: Good morning. Thank you for taking my two questions. My first question is on the Pet Food business. So your Pet Food business noted sequential improvements in the fourth quarter. Can you please share where you saw this improvement across the different regions and how you expect this margin to rebound through this year? And how you expect your capacity expansions to contribute to the potential growth you foresee for this year in Pet Food? That's the first question. And the second one is on the margin. So, regarding to a 2024 EBITDA margin of about 20%, can you please share what has been baked into this forecast in terms of different contributing factors such as cost savings and portfolio optimization? Which would be helpful to see what will drive you to 20%? And what are the building blocks to that? Thank you very much.

Heinz-Jurgen Bertram: Lisa, thanks for your questions. I start with this, and my fellows from the Board, feel free to jump in if. So Pet Food improvement, as you rightfully said, we saw a slight improvement already in Q4. And this improvement and -- of the total business in Pet Food will continue to go on for this year as we go forward. And Jean-Yves can hop-in, but one strong area of bouncing back was clearly Europe. In Europe, we saw it. And North America being a bit slower but we expect Pet Food to be back on the historical growth and profitability levels, and because the mega trends are still intact. But the first improvement Lisa, to your question was in Europe. The other regions, slowly following as we can see, and we will see more of this in the course of this year. Second question, 20% EBITDA. We have always said, that of course, we consider ourselves as the growth engine in the industry, with an unsurpassed growth momentum. But, we also consider ourselves guards of the quality of the business and we always have said that, if our margin approach is 20% or goes below, we will take measures. First, we have announced already on the Capital Markets Day that one part of this action is, we will revise and review our portfolio, a lot more strict than we have done before. And as a clear consequence of this today, we announced that the trading business in England will go. And it's in the documents. It's about €40 million turnover. And let's put it this way, the EBITDA margin currently is in the very low single digits. And as I said Lisa, we have reviewed the portfolio. And in this situation of course, the plans were presented, how to get it back on the expected margin level. But in this situation, the decision must be, we have to let it go and we did that. As we also have announced in the Capital Markets Day already that, there will be handed out another piece of business in a similar magnitude, with similar portfolio -- profitability expectation where we after reviewing the business decided, it will go. The only point, why I cannot announce it here and will not announce it here, what it is. First, the carve-out is not that simple because this business is related to another piece of business, which we definitely want to keep. And the other point is, -- and so it's affecting a few sites. And we always said, one of our core values is also our attention and high appreciation of our employees. And we do also this with that asset. But expect this asset to go in the course of the year and maybe second quarter -- end of second quarter, you can see already what it is. These two divestitures and exited of portfolio will have already a perceivable benefit on our profitability. In addition, we have under the helm of Jean-Yves embarked, with an efficiency program, which we expect to bring in this year approximately €50 million. Key drivers are leveraging stronger synergy effects. I may remind you, when we bought Diana, we had lots of consultants coming to us and offering as their help in leveraging more synergies between traditional flavors, and new child onboard Diana. Intentionally, we didn't do that because we knew we did the best acquisition in the industry anyway. So, it was more the priority building trust and not disrupt the wonderful momentum of the business. But now several years later, it is the time and Jean-Yves, is the right man to take care of it to bring the efficiency in. For example, we identified pockets for that in purchasing and indirect purchasing, in processing. So it's a lot where we can generate savings, without laying off people. That is important for me to stress. Having said that, I talked about exiting portfolio and business. I talked about improvement of current processes. And let me briefly mention also business we bring, sooner or later onboard like Swedencare. Swedencare had published their numbers. They have shown an organic growth rate of 25%, with an EBITDA margin of 25%. So, on the one side we exit business, which doesn't fulfill our expectation. And on the other side, we have already paved the way that new business, with an accretive profitability comes onboard. All this together makes me very confident Lisa that we will get back to our guidance and our targeted profitability pretty soon. Okay, Lisa?

Lisa De Neve: Thank you very much.

Heinz-Jurgen Bertram: You're welcome.

Operator: The next question comes from Charles Eden from UBS. Please go ahead.

Charles Eden: Hi, good afternoon. Thanks for taking my question. I'll limit myself to two, but also many congratulations on the retirement, Heinz-Jurgen. So my two questions. Firstly, could you update us on the trends on Aroma Molecules please?

Heinz-Jurgen Bertram: Yes.

Charles Eden: I believe you're back to growth -- volume growth in Q4 for this business. Are you continuing to see volumes recover there? And maybe you could just frame what the total sales where the margin -- EBIT margin was for that business in 2023, and some thoughts on where the sustainable recovered margin of that business could get to in 2024, 2025 when volumes have recovered? And then my second question, just on the efficiency program, you're saying €50 million of savings 2024. Is that the total scope of the savings? Or would you expect potentially some additional cost savings in 2025 and beyond? And just add to that, I guess €50 million savings is about a percentage point to your margin. I guess that gets you back to 20% without any underlying improvement in the business, any operating leverage, et cetera. So is the ambition 20% a floor. And then hopefully if things go well you could exceed that target? Thank you.

Heinz-Jurgen Bertram: So Charles, I couldn't have asked more for such a question. Of course 20% is the floor and we're only taking a bit more accelerated action as we are -- as you are not satisfied with this achievement of 19.1%. First, let me just readdress one point again. I was a bit embarrassed and to have to come back to you folks in December to update our guidance for the year. Two effects played an important role, which we did not have on the radar screen on the Capital Markets Day. Clearly let me put it this way. Capital Markets Day we were at Olaf, 19.9%. Olaf is nodding. So then -- and there was no reason not to believe that our original guidance was intact. What hit us was first the devaluation of the currency in Argentina and me not being the financial guy, but at least I try to the total impact on the top line was a lot more than €30 million and on the bottom line a lot more than €10 million. And then sickness leave rate in November and December, mainly triggered by the corona crisis in Holzminden led to the effect similar magnitude. And that's why we decided, okay, we didn't have that on the radar screen when we met in the last year we have to update our guidance. Having said that Charles, you see the underlying business performance is just healthy. Bringing it back to your question. The potential of bringing in synergies without laying off people is tremendous. Again most of the synergies of the acquisition of Diana had not being leveraged so far I stress that. The other point is on the portfolio measures there is a lot of room. Simply the two measures I mentioned for exiting the business will bring a positive impact. And Olaf has calculated that one of the exiting business; I think it's 0.2% for the total company just that alone. And the other one happening in the mid also this year will not have for this year such a big impact but it will be perceivable. Then the next one whenever we do it bringing in new business, which is accretive and we talked about it will also help. Overall and that is I guess the question of you, our business quality is absolutely intact, absolutely not questionable. And that's why, again, there is no reason to be concerned. And you're right Charles with our business portfolio 20% that is definitely the very lowest bottom of where we can have the business. And if more is possible I'm not afraid to take that as well. Having been said that, I would take the first question. Aroma Molecules. So if it's good to still around. So Aroma Molecules talk about that. I have to say Charles, Aroma Molecules in Symrise hit the perfect storm last year. In end of 2022, our site in Colonel Island faced a severe incident. And we have used the whole last year to get that back. A few weeks later in the same region in Florida one of our competitors Firmenich had a similar accident. They decided to bulldozer and scrap their factory. We have reerected it for the simple point we believe in the future of that business. And we -- I just can't quote one of our former employees Fred Kritzer who has given an extensive interview with the Bank of America. I'm sure all of you guys have read it. And Fred clearly said in that interview Aroma Molecules business was accretive for Symrise. The only difference the conclusion he drives going forward. It will not be accretive anymore. I do not share that. But to the credit of Fred he's out of the company since several years so he doesn't know the latest developments. So Charles the factory which we rebuild is back on stream and the good news it's sold out. At the moment we have no underutilization in Aroma Molecules. At the moment the price is still not there where it should be but it will get there on the other side from the significant devalue and revaluations we did last year the division will benefit. So Charles with all the steps we've done, preparing the ground for a sustainable Green Chemistry in Symrise, strengthening the backward integration, having a safe supply then Symrise is perfectly suited to the challenges of the future. And Charles on top of this some possible upsides are not even factored in. Imagine America elects and they elect Donald Trump and he puts trust customs on imports there is simply only one customer who is producing menthol in North America. So if Donald Trump wants to clean his teeth if he wants or not he has to buy our stuff. So you see there is a lot of reasons to be optimistic and there is not one single reason to have doubts about Aroma Molecules I think we have the first -- the worst behind us. I hope that answers your questions Charles.

Charles Eden: It does. Thank you very much for the detail. Can I just quickly ask just in terms of how big that business is obviously it declined this year just in terms of sales I assume...

Heinz-Jurgen Bertram: Around €400 million. I didn't look up in detail but the magnitude is about that. And yes it has declined a bit mainly because Colonel Island it was around a bit more than €30 million. When the incident happened we notified to you that that will be the negative impact. That assessment was pretty much right on track. We have -- Olaf and myself we have totally being off in assessing the cost impact of this thing. We estimated €20 million and was easily twice as much. It was twice as much as we decided that we don't want to see this happening again. So we did a lot of more precautions to make sure that this unpleasant event doesn't happen again. I hope that answers the point.

Charles Eden: It does. Thanks again.

Heinz-Jurgen Bertram: You're welcome.

Operator: And the next question comes from Nicola Tang from BNP Paribas Exane. Please go ahead.

Nicola Tang: Hi, everyone. Thanks for taking the questions and firstly big congratulations both to Heinz-Jurgen and also to Jean-Yves. First question -- although both actually related to your organic growth outlook. Firstly to get to the 5% to 7% you refer to your market growth rate of 3% to 4%. I think you've had this market -- growth rate assumption for a long time but kind of implies a more normal end market demand next -- or this year 2024. So could you just talk a little bit about what gives you confidence that we're in a more normal situation in terms of demand this year? And you referenced a really good start to 2024. So perhaps you could give us a little bit more color and -- either by geography or by region? And the second question is on pricing. Maybe you could talk a little bit about, within that 5% to 7%, what are your expectations for pricing and your expectations for input costs this year? Thanks.

Heinz-Jurgen Bertram: Okay. So, I'll try to take it and Olaf, you hop in again, if I'm totally off with mine. So, 5% to 7% of this -- for this year if it's getting more fine, we'll take it. But let's point out first, January, we had an all-time record January, just to let you know. So we have some reason to be confident. The reasons for being confident is we continue to see the strong growth momentum in Cosmetic Ingredients. And we are building -- the largest single investment we are currently doing is in Granada for Cosmetic Ingredients, a similar plant like what we did in the US 3,000 metric tonnes. And this thing is already sold out. So I can't wait that this thing is ready. And the same background, that's why we built and formed the joint venture in India where we by the way hold 51%, and where we build additional capacities. What we have in these business types is already sold out with the day the production is ready. So that shows we have a very young and very dynamic product range and the best is still ahead in that one. Also, a good reason for being confident is and Jean-Yves reassured it. Pet Food is getting back on track. As I said, just before with Charles Eden in Europe, we clearly see it. In North America, it's slightly behind, and Asia a bit more than North America, but behind clearly EAME and Latin America is okay. So big driver for us as we have notified you Pet Food was -- it will be a business, including Pet Food, pet care, everything around pet of €1.5 billion next year. Must not forget when we teamed up with Diana in 2015, the Pet Food business at Diana was max €250 million. So, next year, €1.5 billion, I think that's a strong statement. And the Pet Food was not even the strongest growth driver in our company in our business in the last year, and it's Cosmetic Ingredients. So -- and it was a pleasure for me, Nicola to see you guys being on the Capital Markets Day and having Pet Food present and our other growth driver Cosmetic Ingredient highlighted, and many of you said, hey, man, we were not aware what dynamic you have there. So unbroken dynamics in these big drivers and these are the key pillars that our growth dynamics will continue to go on as both of these segments are delivering on some mega trends, and you must not forget Nicola, we are the only pet food guys you're talking to. And all the others you talk to don't have it. So it is a clear differentiator. And with Swedencare, we enter and expand that even. The Swedencare has published their numbers. And just to remind you, 25% organic growth, EBITDA margin 25%. So we are present in those growth segments. By regions that was your second question -- your second point, clearly, we see a strong continued momentum in Europe. We see a healthy good momentum still in Latin America. North America slower but will get back and Asia, clearly, will get back with the open question to see what's in China, but the rest in Asia is just fine. Pricing, Olaf, my shot, we got back to the historical pricing volume thing. Typically, two-thirds were driven by volume and one-third by pricing. And if I look at January and February, we clearly see a good and strong increase of volume. So I guess, for this year, that is pretty close to what's going to happen, and we predicted that at the end of the year. Nicola, does that answer all your questions?

Nicola Tang: It almost does. There was a tiny bit more around inputs in your expectations for input costs this year...

Heinz-Jurgen Bertram: Olaf, now you.

Jean-Yves Parisot: He has been sitting around all the time. Now, it's up to you.

Olaf Klinger: And Nicola, we assume that we will have a flat input costs overall for the group. So that's the driver. And as said we were working -- we are working on the efficiency environment quite a little bit forceful and stringent and that should definitely in combination lead us back to this around 20% margin.

Nicola Tang: Okay. Thank you and congratulations again.

Heinz-Jurgen Bertram: Thanks.

Operator: And the next question comes from Ed Hockin from JPMorgan. Please go ahead.

Ed Hockin: Hi all. Thank you very much for taking my question. And also, just to echo the congratulations to both Heinz-Jurgen and Jean-Yves on your next chapters. I had one question please on Fragrances. So I was wondering how you see the growth in fragrance is progressing. Obviously, it looks like another very strong performance the Fine Fragrance in Q4. But really, how you see both Fine Fragrances and Consumer Fragrances progressing into 2024? And maybe just to zoom in on the Fine Fragrances, clearly the overall market has been strong. How do you see your market share is developing here? And with your acquisitions, whether you're seeing good revenue synergies? And just to clarify how big this business now is for you?

Heinz-Jurgen Bertram: Yes.

Ed Hockin: And if I could just also drop in one quick second one which is your EBITDA margin here in Scent & Care of 15.8%, is it possible to get an idea maybe of how this looks excluding Aroma Molecules, how your Fragrances and Cosmetic Ingredients profitability is trending? Thank you.

Heinz-Jurgen Bertram: Yeah. Sure. More than happy Ed. First, Fragrances growth is good and healthy. Yes, Aroma Molecules, we need to separate and I will do so. First, exceptional year 2023. So negative growth in Aroma Molecules, so 5.8% organic growth for the whole segment so you can make the calculation with the amount of Aroma Molecules and the drop in turnover. So the rest of fragrances must have been a reasonably good year overall. Second point, yes, Fine Fragrances. We have seen since a few years double-digit growth. I've seen also that our major competitors have seen in that segment a good growth. And yes, no secret. If you talk with Givaudan asked about our fragrance business, I quote you for that. We're much, much, much, much, smaller. That's what he said. But frankly, not in all segments, we pick our battlefields very careful. And in Fine Fragrances, we are still smaller, but not to such an extent. And obviously, we definitely did not lose market share. I would say we continued to win market share. And a new situation for our big competitors that in Fine Fragrance even the big iconic brands you find the name of Symrise on it. So having said that, Fine Fragrance and that's why we talked about our ongoing investments in Fine Fragrances yes, we have done some acquisitions, but also the organic growth momentum in Fine Fragrance is wonderful. And the team is just doing the right stuff. No reason to be concerned. I would say assessment Givaudan's Fine Fragrance business is probably approximately twice the size as ours. But ours is significantly bigger than the second tier. So we are getting there. We are making progress and we're closing the gap even in size to the other ones. It may take a while, but we are better underway than all the others expected from us. Having said that, Consumer Fragrance is -- has seen some difficult time because to overstocking and destocking, and we see this coming to an end project vitality is picking up and business momentum is picking up in that as well. And we have good reason to believe sooner or later that this business will also be a solid growth contributor. And our entry when I took for some time, the responsibility for the Scent & Care division, one thing and I talked -- we talked about that was clearly also entry in household. I would say we are making an inroad. We are getting there. We're making progress. And the one or the other competitor has reported some difficulties. We are okay there. And the last question is what would be our margin expectation in Scent & Care, if aroma molecules would not have experienced these exceptional problems this year, let me put it this way. It would be very close to what we expect for the businesses in our company to be. So I think you can make the calculation out of that. That it clearly shows the rest of the business is healthy. Aroma Molecules has faced the perfect storm what I call it, but it'll go back to the situation that Aroma Molecules as historically also will be an accretive business segment. All reasons add to be optimistic and positive Aroma and Scent & Care will have a good year 2024.

Ed Hockin: Thank you, very much.

Heinz-Jurgen Bertram: You're welcome.

Operator: Today's last question for this conference comes from Isha Sharma from Stifel. Please go ahead.

Isha Sharma: Hi, good afternoon. First of all, all the very best to you Heinz-Jurgen. Thank you for the lively discussion over the years and congratulations Jean-Yves of course for your new role. I have two remaining questions, please. One is on Menthol. You mentioned that there is increased competition. Could you please elaborate on whether there are new capacity additions? Or is it just a function of lower demand at the moment? And what are your expectations going forward, as far as business dynamics are concerned? And the second one is just a housekeeping one. CapEx was a bit lower than expected. Is it just a phasing effect in 2024? How should we model it for '24 please?

Heinz-Jurgen Bertram: Isha, thanks for the question. I was hoping that you ask something so that we have opportunity to talk a bit together. So CapEx, of course, when we saw the challenges in the business environment, we switched a bit our focus to protecting the cash position and business free cash flow, Olaf alluded to it. So, we have reviewed some of the CapEx projects. Just to mention one is in Pet food, where the market did not develop as we expected. So we put a few of these investments under scrutiny. And we found ways that we -- some of them, we could avoid at least for a certain period of time and probably also not for this year. Isha, for this year, our CapEx spending is planned to be pretty much in the same magnitude like last year. So, do not expect in your modulation and in the calculation that this year now a big overload. And from last year will happen no way. So that is the CapEx simple explanation with the business performance environment. It was just highest time to review some of these CapEx spending. And then Menthol, Isha, you have read the interview of obviously Fred and I'll talk about it because, it was focused mainly on Menthol. Fred said in that, the menthol faces new competitors. Yes, one competitor entering from China is NHU. But Isha, it's not a new situation that new competitors enter a market segment. And talking about Menthol, it's not a new situation for Menthol. 15 years ago, the biggest suppliers for Menthol in the world were Indian suppliers with natural Menthol, Takasago and Symrise. Then, the market has developed and a new competitor has entered the market, BASF and the two largest menthol suppliers today is Symrise and BASF. And by the way, as Fred says, NHU has entered the market as a new competitor. Fred has mentioned as the capacity of Symrise of 10,000 metric tonnes and BASF as well. I don't know where Fred has the know-how from and knowledge from the competition. But let me put it this way, the magnitude the number is in the right ballpark. NHU he said 5,000 metric tonnes. The whole menthol market in the world is about 40,000 or more 50,000 tonnes. The menthol demand in the world increases 4% per year because, the growth of population in the world and the amount of people who clean and brush their teeth daily is increasing. So 4%, which means, with the total volume of approximately 50,000 tonnes 4% is around 2,000 tonnes per year increase. So if 5,000 tonnes of additional capacity like NHU are in the market, they are used up easily in two years, just in two years. So this is a non-event. Second, threat has said, because of this new competitor, we will face a drop in our company margin or EBITDA 2%. Actually if I calculate, I don't know how this is possible. Our Menthol capacity we use the numbers of threat in the Bank of America quote is around 10,000 metric tonnes as BASF, the average sales price of Menthol is between €15 and €20 per kilogram. That amounts to a total business bit of €15 million to €20 million for us in our company. In a company of close to €5 billion turnover, we end up with less than 0.3% of our total business is Menthol related. Isha and we must not forget Symrise is not only the largest Menthol supplier in the world. It is also the largest customer, goes in Oral Care, must I remind all of you we are number one Oral Care in the world. So we use one-third of our Menthol supply for our internal consumption in Oral Care or conversion into Cooling Agents. Cooling Agents go into Cosmetic Ingredients or in Oral Care. So it ends up with less than 0.2% of our total turnover External Menthol sales at max, how we can generate out of changes in the Menthol market a downturn of 2% in our total EBITDA margin, someone else has to calculate. So you see is a no-brainer for us. We have coped with new competitors. It's a natural thing. We welcome new competitors, because its challenge is always opportunity. And you see I'm far away from being concerned. Isha, I hope that answers your question on Menthol.

Isha Sharma: That was a very comprehensive answer. Thank you so much. I really appreciate it.

Heinz-Jurgen Bertram: You know, I wanted to be sure. So to make some ground, so Jean-Yves still has to find its way into Menthol, so I just wanted to kill this cat for once and ever.

Jean-Yves Parisot: Thank you.

Isha Sharma: The cat is dead for sure.

Tobias Erfurth: Well, thank you very much. It was a strong speech. It was a nice teaching into Menthol to everybody who is not a Menthol Specialist yet. Thank you very much. Usually, it's my task to end this conference. But today everything is a little bit different. So I hand over to Heinz-Jurgen for the final remarks. Thank you very much.

Heinz-Jurgen Bertram: Yeah. Thanks Tobias. Please permit that I have a few words because, again, I would like to thank all of you for your support over the years, for your challenging but always fair questions. Some of you we almost got friends. We had great times together. And I really appreciate that. And I don't want to step down finally without having, thank to all of you for your continued support. And I hope, that you are also as supportive to my successor. And I have to say friend, Jean-Yves, having said that, thanks, to all of you. Thank you.

Jean-Yves Parisot: Thank you.