Despite inflationary pressures and increased input costs, Chr. Hansen is reporting strong organic growth amounting to 14% for Q2 of the 2021/2022 financial year. 

According to the latest interim report spanning between September 1, 2021 to February 28, 2022, the strongest growth was recorded in the company’s Health & Nutrition division, accelerated by “market rebound, new wins and acquisitions.”

Profit for the period amounted to €59 million (US$64 million), up 27% from €46 million (US$50 million) in Q2 2020/2021

“Overall market volatility has increased due to the accelerating inflationary pressure and the Russian invasion of Ukraine,” says the microbial and fermentation giant’s CEO, Mauricio Graber.

Production efficiencies, scalability effects and the positive impact of currencies also helped toward favorable growth numbers, the company underscores.

Chr. Hansen will further solutions in the areas of gut health, immunity, women’s health and infant health.Adjusting pricing and outlooks
Chr. Hansen is responding to the higher cost inflation evident across industry with “proactive pricing measures” and adjusting its outlook by upgrading its organic revenue growth target.

“Price increases will impact all our business areas and are to compensate for accelerating input cost inflation. We have seen substantial cost increases across all major spend categories including raw materials, energy and logistics,” Chr. Hansens CFO Lise Mortensen tells NutritionInsight. 

The supplier notes that its price adjustments have had only a modest impact in Q2, as had been expected. Further price increases will be introduced in the second half.

The initial outlook for organic growth in 2021/2022 was expected in the range of 5-8%. Today this has been scaled up to 7-11%. 

Graber notes that the company is also lowering expectations for the near-term EBIT margin before special items (bsi) from 27-28% to 26-27%. 

“The net effect is expected to be largely neutral on EBIT bsi, consistent with our prior guidance, and we maintain our expectations for free cash flow bsi,” he adds.

Health & Nutrition leading
The strongest area of growth was in the Health & Nutrition category which saw an increase of 26% in organic growth driven by volume. 

Food Cultures & Enzymes, meanwhile, saw an organic growth of 7%, also mainly driven by volume. 

The EBIT margin bsi increased to 27.7% in the second quarter while revenue increased by 17%, reaching €304 million (US$331 million) compared to €260 million (US$283 million) in Q2 2020/21. Year-to-date revenue amounted to €572 million (US$624 million), up 14% from last year.

The company expects significant growth in the HMO category worldwide, with an expected CAGR between 20-35% over the next seven years.The acquisition of HSO Health Care in 2020 has boosted the company’s stronghold in women’s health, a key focal point ahead.   

The company’s Q2 investor presentation for 2021/2022 also outlines gut health, immune health, infant health and “novel indication areas” as areas of focus.  

Impact of Russia’s invasion of Ukraine
Negative effects spiraling out from the Ukraine invasion – including Chr. Hansen’s restricted sales to Russia in accordance with global sanctions – were offset by strong volume growth across businesses units. 

With respect to the invasion in the Ukraine, Chr. Hansen says it will continue to support its Ukrainian employees and customers and, for now, fulfill its supply obligations to provide only ingredients for basic food and human health products to Russia servicing the basic needs of civilians “in full respect” of global sanctions. 

However, the situation will have a negative impact on the outlook for the year causing both a lower topline and a reduced EBIT, it underscores. 

The company’s profits from the continued operations at its Russian division during the conflict will be donated to humanitarian aid in support of Ukraine.

Vegan yogurt launch activity remains high but volumes are still small.High hopes for HMOs
Other acquisitions improving its positioning in the health arena include the purchase of HMO-manufacturer Jennewein, which produced €19 million (US$ 20.7 million) in revenue in the 2021 fiscal year. 

Chr. Hansen expects significant growth in the HMO category worldwide with an expected CAGR between 20-35% over the next seven years. 

Factors that will affect its speed to market include regulatory approvals, mixes vs. single HMOs, dosages, penetration and pricing. The company projects market expansion to occur in two waves, wher the first will occur in the US and Europe over the next few years, followed by a second wave in China. 

In the short term, the company will drive growth in Human Health & HMO by investigating new strains for infant and dietary supplements. In the long term, its focus will be on next-generation HMOS and synbiotics. 

Sustainability drives food R&D
While growth has been strongest in Health & Nutrition, Chr. Hansen’s Food Cultures & Enzymes division still accounts for the majority (65%) of the company’s revenue. 

The company cites growing populations, resource scarcity and the need to reduce food waste as factors that will drive the need for more sustainable protein and microbial solutions. 

In the short term, the company plans to focus its R&D efforts on “maintaining lead” in core ranges, such as next-generation dairy enzymes and sugar reduction and its vegan yogurt or “vegurt” offerings. 

Chr. Hansen observes that launch activity remains high for vegurts, but the volumes remain small, consisting of just 1-2% of the global yogurt category. 

In the mid-to-long term, the company plans to further its bioprotection range, including those for metal alternatives, while investing in non-alcoholic beer and cheese alternatives.