31 Oct 2023 --- In its latest business results, nclick="updateothersitehits('Articlepage','External','OtherSitelink','dsm-firmenich taste results “resilient” as record low vitamin prices impact health & nutrition','dsm-firmenich taste results “resilient” as record low vitamin prices impact health & nutrition','337464','https://www.foodingredientsfirst.com/profile-directory/dsm-firmenich.html', 'article','dsm-firmenich taste results “resilient” as record low vitamin prices impact health & nutrition');return no_reload();">dsm-firmenich’s Taste and Texture and Health (TTH) reported a 5% decline in organic sales. Taste performed strongly, as well as Beverages, with Functional Beverages such as sports recovery and energy drinks positively impacting sales in Q3.

Enzymes, Cultures and Texturing Solutions delivered good organic growth, but the global company reported that Vitamins and Yeast Extracts were “weak.”

Meanwhile, strong pricing was partly offset by low vitamin prices. Volumes were soft, owing to destocking and the company’s decision to step away from low-margin products, including vitamins. 

“In the current global economic environment, we are working hard to mitigate the effects through strong internal actions,” says Dimitri de Vreeze, CEO at dsm-firmenich. 

“We are driving a broad range of self-help measures, with the largest contributor being the vitamin transformation program. In addition, we have pushed harder on cash flow, a key priority for us, and have seen good improvements this quarter.”

De Vreeze adds that the company “remains relentlessly focused on the successful integration of nclick="updateothersitehits('Articlepage','External','OtherSitelink','dsm-firmenich taste results “resilient” as record low vitamin prices impact health & nutrition','dsm-firmenich taste results “resilient” as record low vitamin prices impact health & nutrition','337464','https://www.foodingredientsfirst.com/news/dsm-firmenich-completes-nutrition-mega-merger-innovation-prospects-uncovered-live-at-vitafoods-europe.html', 'article','dsm-firmenich taste results “resilient” as record low vitamin prices impact health & nutrition');return no_reload();">the merger” and delivering its targeted synergies.

“During the quarter, we were pleased with the resilience of our Taste, Texture & Health businesses. However, destocking continued, and vitamin prices remained under pressure, impacting particularly Animal Nutrition & Health (ANH) and Health, Nutrition & Care (HNC) businesses.”

Outlook 2023
The company estimates for FY 2023, on a pro forma basis, an adjusted EBITDA of around €1,800 million (US$1,914 million), which includes an estimated negative vitamin effect as well as an unfavorable foreign exchange effect.

The company has embarked on a comprehensive set of short-term and mid-term focused actions, including improving the profitability of its vitamin activities and structurally reducing exposure to volatility from price fluctuations. 

The vitamin business transformation with a €200 million (US$212 million) cost reduction program includes plant closures, route-to-market simplification and optimized service levels. 

The company recorded a 7% organic sales decline with -1% pricing and -6% volumes, which includes the negative vitamin effect. Without this effect, prices would have been up mid-single digits and volumes would have been down low single digits, the company indicates. 

Taste, Texture & Health
The company noted that TTH results were “resilient,” while Health, Nutrition & Care and Animal Nutrition & Health were weak, driven by record low vitamin prices.

Adjusted EBITDA was €409 million (US$435 million), 32% lower than in the comparable period, resulting in a 400 bps margin decline. This includes a negative vitamin effect, which is estimated at €170 million (US$180 million) in Q3. Without this effect, the Adjusted EBITDA would have decreased by 3%.

According to the company, TTH brings progress to life by tackling some of society’s biggest challenges: providing natural, nutritious, healthy and affordable food and, accelerating the diet transformation with appealing taste and texture, and nourishing a growing global population while minimizing food loss and waste — sustainably. 

TTH consists of Taste, which includes flavors, natural extracts, sweetener solutions and plant-based proteins, and Ingredients Solutions, which includes food enzymes, textures, cultures, natural colorants, nutrients and yeast extracts.

Against a “solid” comparable prior year, TTH delivered a 5% decline in organic sales, mainly due to low vitamin prices and soft volumes. Adjusted EBITDA was €134 million (US$142.5 million) and includes a negative foreign exchange effect of around 6%. Without this effect, Adjusted EBITDA would have been up 1%. 

This resilient performance resulted from the strength in the higher-margin, high-growth activities. Adjusted EBITDA margin of 18.2% was up 130 bps versus the prior year period owing to a positive product mix.

Health, Nutrition & Care, Animal Nutrition & Health 
HNC enables people to improve their health by supplementing their diet with critical nutrients and driving medical innovation forward, helping to optimize immunity, speed up recovery and enhance quality of life. 

Meanwhile, ANH helps deliver healthy animal proteins efficiently and sustainably while harnessing the power of data to make animal farming practices more sustainable, productive and transparent.

Overall, global animal protein consumption has remained resilient, driven by poultry, with demand in China now stabilized, albeit with a slower recovery than expected. However, the ongoing destocking of animal protein continues to lead to an imbalance in the global feed additive marketplace.

ANH saw a continuation of the “exceptionally challenging” conditions of the first half, owing to the unprecedented low level of vitamin prices, which slipped further during the quarter due to oversupply in a weak market.

Organic sales declined by 13%, compared to the same prior year period, driven by weak sales of straight vitamins, partly offset by performance solutions that recorded another strong quarter. 

Performance solutions, such as enzymes, gut health solutions and mycotoxin management, all benefited from farmers prioritizing feed efficiency yield management.