Corbion: announces full year 2017 results

Amsterdam / NL. (cb) Corbion reported net sales of EUR 891.7 million in 2017, a decrease of 2.2 percent compared to 2016. Organic net sales growth in Q4 was 0.4 percent. Ebitda excluding one-off items in 2017 decreased by 3.5 percent to EUR 164.1 million. The company proposes to distribute a regular dividend of EUR 0.56 per share.

«I am pleased to see the positive sales momentum continuing in Ingredient Solutions in the second half of 2017. Our performance in 2017 was satisfactory except for the volume developments in Bakery. Growth in Meat and Biochemicals was encouraging. We accelerated our efforts in Innovation Platforms with the establishment of the Total Corbion PLA joint venture, and the acquisition of an algae ingredients platform. In November we presented our ‘Creating Sustainable Growth’ strategy for the 2018-2021 period», comments Tjerk de Ruiter, CEO.

Key financial highlights FY-2017:

• Net sales organic growth was -0.4 percent; volume growth was -1.9 percent
• Ebitda excluding one-off items was EUR 164.1 million ( EUR 167.0 million excluding EUR -2.9 million impact of the TerraVia acquisition in Q4)
• Ebitda margin before one-off items was 18.4 percent (2016: 18.7 percent)
• One-off items at Ebitda level of EUR 6.4 million
• Operating result was EUR 122.3 million, an organic decrease of 2.4 percent
• Free cash flow was EUR 24.2 million (2016: EUR 72.1 million). The decline is mostly due to the newly founded Total Corbion PLA joint venture and the acquired TerraVia assets
• Net debt/Ebitda at year-end was 1.0x (year-end 2016: 0.6x)

EUR in millions	FY 2017	FY 2016	Total growth	Organic growth
Net sales	891.7	911.3	-2.2%	-0.4%
Ebitda excluding one-off items	164.1	170.1	-3.5%	-2.3%
Ebitda margin excluding one-off items	18.4%	18.7%
Operating result	122.3	126.9	-3.6%	-2.4%
ROCE	17.4%	20.6%

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Management review FY 2017

The business unit Biobased Ingredients has been renamed Ingredient Solutions. The business unit Biobased Innovations has been renamed Innovation Platforms.

Net sales

Net sales in 2017 decreased by 2.2 percent to EUR 891.7 million (2016: EUR 911.3 million) mostly due to a volume decrease (-1.9 percent), partly compensated by a positive price/mix effect (1.5 percent), and a negative currency impact (-1.3 percent). Furthermore, there was a small negative impact related to the divestment of the Breddo-Likwifier activities, effective as of 9 December 2016.

Organic sales growth of -0.2 percent in the Ingredient Solutions business unit was mostly driven by a weak volume performance in Bakery, which was partly offset by growth in Meat and Biochemicals. Organic sales growth for the Biochemicals business segment was 5.8 percent, due to organic growth in all markets except for Animal Health.

The increase in Innovation Platforms volumes mostly reflects higher lactic acid volumes sold to the Total Corbion PLA joint venture. The negative price/mix is largely the result of the inception of the Total Corbion PLA joint venture, effective 2 March 2017. From that date, lactic acid sales rather than lactide/PLA sales are reported under Innovation Platforms. The acquisition effect in Innovation Platforms is due to the acquisition of the TerraVia assets on 29 September 2017.

Ebitda

Ebitda FY 2017 excluding one-off items decreased by 3.5 percent to EUR 164.1 million, mostly due to negative volume growth and the acquisition of the TerraVia assets. Currencies positively impacted Ebitda by EUR 0.9 million. Ingredient Solutions Ebitda excluding one-off items decreased by 2.0 percent driven by lower volumes and higher raw material costs offset by positive price/mix effects. The Ebitda loss in Innovation Platforms increased to EUR -/-8.8 million (2016: EUR -/- 6.4 million). The EUR 2.4 million higher loss was mostly due to the acquisition of the TerraVia assets.

Depreciation, amortization, and impairment

Depreciation, amortization, and impairment of fixed assets excluding one-off items amounted to EUR 45.2 million compared to EUR 49.8 million in 2016.

Operating result

Operating result decreased by 3.6 percent to EUR 122.3 million in 2017 (2016: EUR 126.9 million).

Financial guidance 2018-2021

Creating Sustainable Growth: The strategy aims to deliver organic sales growth of between 3 and 6 percent annually (including proportionately consolidated joint ventures in Innovation Platforms).

Ingredient Solutions: Net sales growth of 2-4 percent annually (1-3 percent in Food, 3-10 percent in Biochemicals), while maintaining Ebitda margin >19 percent and ROCE > 20 percent annually throughout the period. Recurring capex is expected to be on average EUR 40 million annually.

Innovation Platforms: To better reflect the underlying performance, in addition to reporting IFRS figures, disclosure of proportionately consolidated joint venture figures will be provided for net sales and Ebitda. Net sales growth (including proportionately consolidated joint ventures) 10-30 percent annually. Ebitda (including proportionately consolidated joint ventures) approaching break-even in 2021, while the maximum loss is not expected to exceed EUR -35 million annually for the years 2018 and 2019. Recurring capex (including proportionate share in joint venture capex) of EUR 20-30 million annually.

Debt: Corbion targets a net debt/Ebitda ratio of 1.5x over the investment cycle.

Outlook 2018

Does not incorporate impact potential acquisition remaining 49.9 percent in SB Oils JV

Ingredient Solutions: For 2018 we confirm our Capital Markets Day guidance for Food and Biochemicals for both sales growth and margins. Food is expected to return to the guidance range as some of last year’s Bakery customer losses should start to fade as the year progresses.

Innovation Platforms: The second half of 2018 should see the start-up of the Total Corbion PLA plant in Thailand. The Peoria pilot plant, part of the acquired TerraVia assets, has recently resumed operations, which will significantly raise the fixed cost level for Innovation Platforms. The Ebitda loss including proportionately consolidated joint ventures is not expected to exceed EUR -35 million in the year, but is subject to uncertainty regarding sales ramp-up.

Input costs: Last year’s decrease in sugar prices should start to positively impact our results towards the latter part of the first half of 2018. However, prices of several auxiliary chemicals and vitamins have been on the rise, negating the sugar benefits.