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Report of the board of management

Financial performance

Key figures

Millions of euros

2019

2018

Net sales

976.4

897.2

Operating result

61.3

87.9

Adjusted EBITDA 1

145.9

131.6

Result after taxes

25.8

54.3

Earnings per share in euros 2

0.44

0.93

Diluted earnings per share in euros 2

0.43

0.92

Number of issued ordinary shares

59,242,792

59,242,792

Number of ordinary shares with dividend rights

58,819,590

58,764,635

Weighted average number of outstanding ordinary shares

58,819,590

58,698,602

Price as at 31 December

28.12

24.46

Highest price in calendar year

29.96

29.74

Lowest price in calendar year

24.26

23.30

Market capitalization as at 31 December 3

1,654

1,437

Other key data

  

Cash flow from operating activities

114.4

99.5

Cash flow from operating activities per ordinary share, in euros 2

1.94

1.70

Free cash flow 4

9.6

11.9

Depreciation/amortization (in)tangible fixed assets

61.5

42.0

Capital expenditure on (in)tangible fixed assets

82.6

58.4

Equity per share in euros 5

9.00

8.85

Regular dividend in euros per ordinary share (reporting year)

0.56

0.56

Ratios

  

ROCE % 6

9.9

11.0

Adjusted EBITDA margin % 7

14.9

14.7

Result after taxes/net sales %

2.6

6.1

Number of employees at closing date (FTE)

2,138

2,040

Net debt position/covenant EBITDA 8

2.0

1.6

Interest cover 9

22.2

25.6

Statement of financial position

  

Non-current assets

718.6

616.2

Current assets excluding cash and cash equivalents

326.8

302.5

Non-interest-bearing current liabilities

161.4

140.2

Net debt position 10

303.3

203.3

Other non-current liabilities

24.1

26.9

Provisions

27.5

28.1

Equity

529.1

520.2

Capital employed 11

856.5

750.4

Average capital employed 11

841.7

709.8

Balance sheet total : equity

1:0.5

1:0.5

Net debt position : equity

1:1.7

1:2.6

Current assets : current liabilities

1:0.9

1:0.7

  • 1 Adjusted EBITDA is the operating result before depreciation, amortization, impairment of (in)tangible fixed assets and after adjustments.
  • 2 Per ordinary share in euros after deduction of dividend on financing preference shares.
  • 3 Market capitalization is calculated by multiplying the number of ordinary shares with dividend rights by the share price at the closing date.
  • 4 Free cash flow comprises cash flow from operating activities and cash flow from investment activities.
  • 5 Equity per share is equity divided by the number of shares with dividend rights.
  • 6 Return on capital employed (ROCE) is defined by Corbion as adjusted operating result, including results from joint ventures and associates, divided by the average capital employed x 100.
  • 7 Adjusted EBITDA margin % is adjusted EBITDA as defined above divided by net sales x 100
  • 8 Covenant EBITDA is adjusted EBITDA as defined above, increased by cash dividend of joint ventures received and annualization effect of newly acquired subsidiaries.
  • 9 Interest cover is covenant EBITDA as defined above divided by net interest income and charges.
  • 10 Net debt position comprises borrowings and lease liabilities less cash and cash equivalents, including third-party guarantees which are required to be included under the debt covenants.
  • 11 Capital employed and average capital employed are based on balance sheet book values.

Results

Net sales

Net sales in 2019 increased by 8.8% to € 976.4 million (2018: € 897.2 million), mostly due to a volume increase (3.4%), and a positive currency impact (4.3%), partly offset by a negative price/mix effect (-0.9%). The acquisition of the remaining 49.9% of the SB Renewable Oils joint venture (as per 4 June 2018) and Granotec do Brazil (as per 1 April 2019) positively impacted net sales by 2.0%.

Net sales 2019

Full year 2019 compared to full year 2018

Net sales 

Total growth 

Currency 

Total growth at constant  currency 

Acquisitions 

Organic 

Price/Mix

Volume 

Ingredient Solutions 

7.2% 

4.0% 

3.2% 

1.8% 

1.4% 

1.4% 

0.0% 

 - Food 

10.0% 

4.4% 

5.6% 

2.5% 

3.1% 

2.0% 

1.1% 

 - Biochemicals 

-0.5% 

3.0% 

-3.5% 

0.0% 

-3.5% 

0.0% 

-3.5% 

        

Innovation Platforms 

36.7% 

9.0% 

27.7% 

5.3% 

22.4% 

-13.6% 

41.5% 

Total 

8.8% 

4.3% 

4.5% 

2.0% 

2.5% 

-0.9% 

3.4% 

Raw materials

The carbohydrates, soybean oil, and other raw material spend percentages are in line with previous year. In 2019 Corbion faced an increase in chemical prices in the first half year which softened in the second half.

Raw materials break down

EBITDA

Adjusted EBITDA increased by 10.9% to € 145.9 million in 2019. A positive organic growth of 7.8% and a positive currency effect were partly offset by a negative acquisition effect. Ingredient Solutions saw its Adjusted EBITDA increase by 11.9% as a result of a positive organic growth of 6.5% and a positive currency effect of 4.2%. The EBITDA loss in Innovation Platforms increased to
€ -34.0 million (2018: € -29.2 million) mostly due to the consolidation impact of the acquisition of the remaining 49.9% interest in SB Renewable Oils as per June 2018.

€ million

2019

2018

Net sales

  

Ingredient Solutions

909.7

848.4

- Food

685.8

623.4

- Biochemicals

223.9

225.0

Innovation Platforms

66.7

48.8

Total net sales

976.4

897.2

   

Adjusted EBITDA

  

Ingredient Solutions

179.9

160.8

- Food

119.5

105.3

- Biochemicals

60.4

55.5

Innovation Platforms

-34.0

-29.2

Total Adjusted EBITDA

145.9

131.6

   

Adjustments

18.4

-2.1

Total EBITDA

164.3

129.5

Depreciation/amortization/ (reversal of) impairment (in)tangibles

-103.0

-41.6

Total operating result

61.3

87.9

   

Adjusted EBITDA margin

  

Ingredient Solutions

19.8%

19.0%

- Food

17.4%

16.9%

- Biochemicals

27.0%

24.7%

Innovation Platforms

-51.0%

-59.8%

Total Adjusted EBITDA margin

14.9%

14.7%

   

Total Adjusted EBITDA excl. acquisitions/divestments, at constant currencies

141.9

131.6

Ingredient Solutions

€ million

2019

2018

Net sales

909.7

848.4

   

Organic growth

1.4%

1.7%

   

EBITDA

181.2

160.9

Adjusted EBITDA

179.9

160.8

Adjusted EBITDA margin

19.8%

19.0%

ROCE

22.2%

23.7%

Average capital employed

595.3

518.6

Net sales in Ingredient Solutions, which encompasses Food and Biochemicals, increased organically by 1.4% in 2019, driven by growth in the Food business segment, while the Biochemicals business segment declined versus 2018 on an organic basis. The Adjusted EBITDA margin in 2019 increased from 19.0% to 19.8%.

Business segment Food

€ million

2019

2018

Net sales

685.8

623.4

   

Organic growth

3.1%

0.9%

   

EBITDA

119.7

105.5

Adjusted EBITDA

119.5

105.3

Adjusted EBITDA margin

17.4%

16.9%

Net sales in 2019 increased organically by 3.1%. Bakery, the largest segment in Food, grew throughout the year. In Meat we see the shift in portfolio mix towards natural preservation solutions continuing, which translates into above average growth rates. In other markets (Beverages, Confectionery, Dairy), sales were stable compared to last year. The Adjusted EBITDA margin increased from 16.9% to 17.4%.

Business segment Biochemicals

€ million

2019

2018

Net sales

223.9

225.0

   

Organic growth

-3.5%

4.0%

   

EBITDA

61.5

55.4

Adjusted EBITDA

60.4

55.5

Adjusted EBITDA margin

27.0%

24.7%

Net sales in 2019 decreased organically by 3.5%. All markets declined except for Medical/Pharma. The biggest declines were in the Electronics segment due to a slowdown in the semiconductor markets, and in the Agrochemicals segment where our customers are in anticipation of a regulatory phase out of a category of actives. The Adjusted EBITDA margin 2019 in Biochemicals was significantly ahead of last year (27.0% versus 24.7%), mostly due to positive mix effects from the rapidly growing Medical/Pharma business.

Innovation Platforms

€ million

2019

2018

Net sales

66.7

48.8

Organic growth

22.4%

84.9%

   

EBITDA

-16.4

-31.4

Adjusted EBITDA

-34.0

-29.2

Adjusted EBITDA margin

-51.0%

-59.8%

Average Capital Employed

246.4

191.2

Net sales in 2019 organically increased by 22.4%, mostly driven by increased lactic acid sales to the Total Corbion PLA joint venture, which continues to develop beyond our expectations. Despite significant growth in 2019, Algae Ingredients remained below earlier expectations throughout the year.

Depreciation, amortization, and impairment

Depreciation, amortization and impairment of fixed assets before adjustments amounted to
€ 60.9 million compared to € 42.0 million in 2018.

Operating result

Adjusted operating result decreased by € 4.6 million to € 85.0 million in 2019 (2018: € 89.6 million).

Adjustments

In 2019, total adjustments of € 20.2 million were recorded, consisting of the following components:             

  1. Loss of € 41.4 million related to an impairment in our Algae business. Our earlier estimate (29 January 2020) was a loss of approximately € 40 million

  2. Gain of € 14.7 million related to a remeasurement of the anticipated contingent purchase price of SB Renewable Oils. 

  3. Gain of € 7.9 million as a result of a past service gain due to a change in indexation CSM UK pension scheme

  4. Gain of € 3.5 million as a result of valuation of tax assets related to the acquisition of Granotec do Brazil

  5. Loss of € 2.9 million related to restructuring costs

  6. Loss of € 2.7 million related to a write-down of inventory in the US                 

  7. Loss of € 0.7 million related to relocation and impairment costs as a result of the new warehouse in the US

  8. Loss of € 1.0 million related to one-off bonusses

  9. Loss of € 0.7 million as a result of acquisition costs of Granotec do Brazil

  10. Loss of € 0.5 million related to legal costs

  11. Tax effects on the above of € 3.5 million

In reference to Adjustments 1 and 2: Despite significant sales growth in 2019, Algae Ingredients sales is developing slower than expected. Customer adoption of our key product, an alternative source of omega-3 fatty acids for the aquaculture industry, is taking longer than anticipated. Under IFRS, this generated a triggering event for an impairment test. The current carrying value of the assets has been impaired by € 41.4 million. The net impact on the 2019 Result after taxes amounts to € -26.7 million as the impairment loss is partly offset by a reduction in the value of the earn-out provision to our former SB Renewable Oils joint venture partner.

Financial income and charges

Net financial charges increased by € 1.4 million to € 14.6 million, mainly as a result of the implementation of IFRS 16.

Taxes

The tax charge on our operations in 2019 amounted to € 18.9 million compared to a charge of € 15.5 million in 2018. In 2019, the high effective tax rate of 42.3% after adjustments was mainly caused by the impairment as well as the operating losses of the Algae business in Brazil, in respect of which limited deferred tax assets were recognized. Excluding adjustments and the effects of the non-recognition of tax assets related to operating losses of the Algae business in Brazil, the normalized effective tax rate would have been 29.7%. For 2020 we expect a tax rate of approximately 30%.

Statement of financial position

Capital employed increased, compared to year end 2018, by € 106.1 million to € 856.5 million. The movements were: 

€ million

 

Movements related to the acquisition of Granotec do Brazil

40.6

Transition impact IFRS 16

28.4

Capital expenditure on (in)tangible fixed assets

82.6

Lease contract movements

45.4

Depreciation / amortization / impairment of (in)tangible fixed assets

-103.0

Change in operating working capital

1.2

Change in provisions, other working capital and financial assets/ accruals

16.4

Movements related to joint ventures

-2.4

Taxes

-16.1

Exchange rate differences

13.0

Major capital expenditure projects in 2019 were investments related to lactic acid capacity expansion in Thailand and investments in our Algae plant in Orindiúva.

Operating working capital (excluding movements related to the acquisition of Granotec do Brazil) increased by € 4.5 million. This increase is the balance of an operational increase of € 1.2 million and currency effects of € 3.3 million.

Shareholders' equity increased by € 8.9 million to € 529.1 million. The movements were:

  • The positive result after taxes of € 25.8 million

  • A decrease of € 32.9 million related to the dividend for financial year 2018

  • Positive exchange rate differences of € 14.4 million due to the translation of equity denominated in currencies other than the euro

  • Positive movement of € 5.3 million in the hedge reserve

  • Negative remeasurement effect of defined benefit arrangement of € 6.2 million

  • Net share-based remuneration movement of € 3.1 million

  • Negative tax effects € 0.6 million

At year-end 2019 the ratio between balance sheet total and equity was 1:0.5 (2018 year-end: 1:0.5).

Cash flow/Financing

Cash flow from operating activities increased compared to year-end 2018 by € 14.9 million to € 114.4 million. This is the balance of the higher operational cash flow before movements in working capital of € 14.7 million a negative impact of the movement in working capital and provisions of € 3.9 million and lower taxes and interest paid of € 4.1 million.

The cash flow required for investment activities increased compared to 2018 by € 17.2 million to € 104.8 million. Capital expenditures (€ 76.2 million) and the acquisition of Granotec do Brazil
(€ 28.5 million) accounted for most of this cash outflow.

The net debt position at year end 2019 was € 303.3 million, an increase of € 100.0 million compared to year end 2018, mainly due to dividend payment, capital expenditures, the Granotec do Brazil acquisition, and the increase in working capital compared to 2018, partly compensated by the positive cash flow from operating activities before working capital and provisions.

At year-end 2019, the ratio of net debt to EBITDA was 2.0x (end of 2018: 1.6x). The interest cover for 2019 was 22.2x (end of 2018: 25.6x). We continue to stay well within the limits of our financing covenants.

Subsequent events

On 29 January 2020, Corbion announced it will invest around US$ 190 million in a new lactic acid plant in Thailand with a capacity of 125,000 metric tons per annum, which will operate at the highest sustainability standards and lowest costs.

Reservation and dividend policy

Corbion’s reservation policy is aimed at creating and retaining sufficient financial capacity and flexibility to realize our strategic objectives while maintaining healthy balance sheet ratios. Corbion intends to add the profit (or charge the loss) to the company reserves after deduction of the proposed dividend on ordinary shares. Events potentially impacting our financing requirements such as acquisitions, divestments, reorganizations, or other strategic considerations can lead to adjustments in the reservation amount and the reservation policy. As regards Corbion’s dividend policy, the amount and structure of dividend on ordinary shares that the company will pay to its shareholders depend on the financial results of the company, the market environment, the outlook, and other relevant factors. The dividend policy is the ambition to pay out annually a stable to gradually increasing absolute dividend amount per share (progressive regular dividend policy), subject to annual review of the outlook of the net debt /EBITDA ratio development. This review will be based on multiple criteria such as major investments, timing of M&A, or divestment initiatives. 

Dividend proposal

A proposal to distribute a regular dividend in cash of € 0.56 per ordinary share (2018: € 0.56) will be submitted for approval to the annual General Meeting of Shareholders, to be held on 11 May 2020. This represents 72% of our 2019 Adjusted Result after taxes. The dividend will be charged to the Corbion reserves.