Corbion: Q3-2016 Interim Management Statement

Amsterdam / NL. (cb) Corbion reported sales of 685.2 million EUR in the first nine months of 2016, a decrease of 0.4 percent. Organic sales growth was -0.2 percent, driven by volume declines partially offset by improvements in price/mix. Ebitda excluding one-off items increased by 15.1 percent to 134.8 million EUR. «Our profitability increased substantially, driven by a combination of business mix improvements, cost savings, and lower input costs. However, our top-line growth in Q3 was clearly below our ambition level. Growth is negatively affected by our process of improving the portfolio profitability and the adverse effects of customer consolidation. We anticipate these effects to be of a temporary nature, and remain confident that we will achieve our multi-year guidance», comments Tjerk de Ruiter, CEO.

Key financial highlights first nine months of 2016

• Net sales organic growth YTD was -0.2 percent; volume growth was -0.8 percent
• Ebitda before one-off items YTD was 134.8 million EUR, an organic increase of 16.2 percent
• Ebitda margin before one-off items was 19.7 percent YTD
• Our productivity improvement program Streamline contributed 14.8 million EUR to Ebitda YTD (2015 YTD: 11.0 million EUR). Streamline has been completed and the target savings have been reached
• One-off items of -2.1 million EUR in Q3 in connection with the powder blending plant consolidation in the US
• We commenced our 50 million EUR share buyback program on 21 March 2016. By the end of September the total buyback amount was 43.7 million EUR

Biobased Ingredients

Net sales in Biobased Ingredients, which encompasses Food, Biochemicals, and central costs, decreased organically by 0.8 percent in the first nine months, mostly driven by lower volumes. The Ebitda margin excluding one-off items increased from 17.8 percent to 20.6 percent, as both the Food and Biochemicals business segments improved their margins despite the adverse volume trend which had a very limited impact on the profit margin level.

Business segment Food

Net sales organic growth in the Food segment in the first nine months was -1.8 percent. Sales in the Bakery and Meat markets were lower in the third quarter compared to last year. In Q2 we started the implementation of a process to improve the portfolio profitability, as part of our strategy. This is having a positive impact on the underlying price/mix of the portfolio, while volumes are adversely impacted. The Ebitda margin in the business segment Food continued to improve (from 19.2 percent to 21.8 percent) in the first nine months compared to last year due to lower input costs, program Streamline, and an improved underlying product mix.

In Bakery, sales decreased in the first nine months in a stable US bread market. With the closing of our Kansas plant in Q2, we decreased the number of SKUs and moved smaller customers to an indirect delivery model, which negatively impacts our volumes. Mid-2015 we were able to accommodate a surge in demand for higher priced egg-containing products due to an outbreak of avian flu in the US. A reversal of these effects has put additional pressure on both volumes and price/mix, particularly in Q3. In Meat, sales decreased in the first nine months as customer consolidation in the US put pressure on volumes and prices for more commoditized parts of the market. Our high-end solutions continued on a healthy growth path. Outside of the US, Meat markets developed favorably as demand for our preservation solutions grew. In other markets (Beverages, Confectionery, Dairy), sales increased slightly in the first nine months.

Business segment Biochemicals

Net sales for the first nine months increased organically by 2.4 percent. After a weaker start of the year the growth rates improved from Q2 onwards. All markets grew in Q3 except for Agrochemicals, which continued to decrease due to softer commodity pricing. The main drivers of the growth were strong performances in Medical/Pharma and Electronics. The Ebitda margin for the first nine months improved significantly from 22.5 percent to 25.8 percent due to lower input costs, program Streamline, and a positive portfolio mix effect.

Biobased Innovations

Net sales increased organically by 31.6 percent in the first nine months. Sales are fully driven by lactide/PLA-related volume growth. In Q3, organic sales growth slowed down to 2.1 percent, despite nearly doubling volumes compared to last year. The price/mix effect was negative as a result of selling more standard grade PLA seeding volumes rather than for higher value-added PLA applications. We placed the first equipment orders for a 75 kTpa PLA plant to be built in Thailand, which is estimated to be operational in the second half of 2018. The Ebitda loss of 2.8 million EUR in the first nine months was in line with the comparable period in 2015.

Outlook 2016

As indicated earlier, full year growth for 2016 in the Food segment is expected to end up below the multi-year (2015-2018 CAGR) guidance range of 1-3 percent. The Biochemicals business segment is expected to show improved sales growth in H2 compared to H1, while full year growth is expected to be lower than the multi-year average guidance range of 5-8 percent. As a consequence, for Biobased Ingredients, we expect full year growth to be below the multi-year average guidance range of 2-4 percent. Our 2016 Ebitda margin before one-off items in Biobased Ingredients is expected to significantly exceed the 2018 target of 18.0 percent, even though we expect H2 Ebitda to be lower than H1 Ebitda, in line with previous years.