Symrise AG (SY1) Earnings Call Transcript

Ladies and gentlemen, welcome to the Symrise Quarterly Statement Q3 2026 Analyst and Investor Call. I'm Sergin, the Chorus Call operator. [Operator Instructions] and the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to turn it to Rene Weinberg, Head of Investor Relations. Please go ahead.

Good afternoon, ladies and gentlemen. Welcome to our third quarter 2026 call. Thank you for joining us today. All related documents are available on our website. With me today are our CEO, Jean-Yves Parisot; and our CFO, Olaf Klinger. After the remarks, we will open the line for questions. And now I hand over the call to Jean-Yves.

Thank you. Thank you, Rene, and thank you all for joining us today. Today, I will review our third quarter performance, provide an update on the execution of our One Symrise strategy and ONE SYM Transformation and conclude with our outlook for the full year. Let us begin with the highlights on Slide 4. We achieved organic sales growth of 5.3% in the third quarter, improving further from Q and exceeding expectations. Importantly, growth was predominantly voluntary driven with positive contributions across all divisions, demonstrating healthy customer demand and disciplined execution. Food and beverage and Fragrance continued to perform strongly while Pet Food & Care & Wellness returned to growth. This attribution across our portfolio is encouraging and reinforces the quality of our underlying business. We also completed important portfolio actions, ONE SYM initiatives to strengthen organizational effectiveness, focus our innovative priorities and support more effective execution. Our share buyback is also progressing well, reflecting our disciplined approach to capital allocation. The program is expected to be closed by the end of this month. Lastly, the developments reinforce our confidence in delivering the full year outlook. Let us now look at the sales performance in more detail on Slide 5. Turning now to Slide 5. In the third quarter, we delivered sales of more than EUR 1.3 billion. Organic sales increased by 5.3% with 6.1% volume growth, partially offset by 0.8% negative pricing. This mainly volume-driven performance reflects customer activity and execution alongside more favorable comparables. On portfolio, the negative effect mainly reflects the Terpene divestment, partly offsets the consolidation of Floral Concept. The divested Terpene business represents approximately EUR 130 million in annual sales. Due to the transaction structure, the portfolio effect will occur in 2 days and extend beyond the usual 12-month period. After translation headwinds in the first half, FX turned positive in Q3, including a contribution from U.S. dollar. The Taste, Nutrition & Health segment delivered organic sales growth of 5.2%, comprising 4.8% volume growth and 4.4% positive pricing. Reported sales rose to EUR 790 million compared with EUR 736 million in the prior year quarter. The Food & Beverage division continued to deliver market-leading mid-single-digit organic sales growth, driven by double-digit growth in naturals, high single-digit growth in Sweet and mid-single-digit growth in Savory. Beverages recorded a low single-digit decline, reflecting a challenging comparison base following double-digit growth in the prior year period. The performance reflects broad-based volume growth, technical differentiation and strong customer execution. The Pet Food division returned to low single-digit organic sales growth, supported by positive volume driven development, in Palatability and Pet Nutrition. In Pet Nutrition, volumes improved in Q3, while pricing is normalizing and remain negative, reflecting strategic pricing actions implemented during 2026 as well as customer and product mix. The Scent & Care segment achieved organic sales growth of 5.6% with volume growth of 8.1% and negative pricing of 2.5%. Reported sales increased to EUR 520 million from EUR 487 million in the prior year quarter. The Fragrance division delivered mid-single-digit organic sales growth. Consumer Fragrance continued to perform strongly with high single-digit growth, while Fine Fragrances returned to low single-digit growth supported by heavy customer project activity. The Care & Wellness division returned to low single-digit organic sales growth and improved sequentially. Advanced Actives and probiotics delivered double-digit growth while UV filters recorded a double-digit decline. The Aroma Molecules division maintained strong momentum with high single-digit organic sales growth against favorable prior year controls supported by double-digit growth in essential and mid-single-digit growth in specialty fragrance ingredients. All divisions contributed positively in third quarter and together with the mainly volume-driven performance, this underscores the breadth of our growth momentum and the underlying strength of our business. Let's now turn to regional highlights on the Slide 6. Asia Pacific remained our strongest region, delivering organic sales growth of 12.1% -- grew at double-digit rates with particular strength in food and beverage, consumer fragrance and care and wellness. North America delivered solid growth of 4.8%, driven by Food & Beverages, Fragrance, Aroma Molecules and Care and Wellness. Latin America achieved growth of 7.4%, supported by Food and Beverage and Pet Food. And EMEA recorded more moderate growth of 1.7% with positive contributions from food and beverage and fragrance. Our regional performance further underscores the broad-based nature of our growth with strong momentum in Asia Pacific and North America, complemented by an increasing contribution from Latin America. Turning now to Slide 7. I will highlight several examples of how we are investing in growth, innovation and customer value creation across Symrise. At group level, we are strengthening our digital and AI capabilities. Our new digital and AI hub in Chennai complements our existing hub in Barcelona and supports the scaling of data products, AI-enabled process automation and other platform integration. We have also expanded Symvision AI into an end-to-end innovation platform. By combining consumer insight and proprietary sensory with artificial intelligence, we can accelerate the journey from Trend in notification and concept development to the final product. In Nutrition & Health, the Magnum Ice Cream Company awarding rights core strategic supplier status from 2027 onwards, recognizing our innovating capabilities, technical expertise, sustainable vanilla sourcing. We are also advancing our strategy of championing chicken across food and beverage. As we recently announced our investment in advanced technology at our food and beverage side in Berric in France, expand capacity and flexibility, giving customers across regions reliable access to broad portfolio of chicken taste and nutritional solutions. In Scent & Care, the new Lautier 1795 site in Grasse expands our premium natural fragrance capabilities. Together with Floral Concept, it connects local expertise, sourcing and production with Symrise global fragrance platform. Our circular hydrogen recycling project also received a worldwide L'Oreal Energy Award. The project supports reliable supply and lowers the carbon intensity of ingredients used in everyday cosmetic applications. Together, these examples demonstrate how focused investments, innovation and strategic customer partnerships support future growth across Symrise. Turning now to Slide 9. Our strategy remains unchanged. But we are progressing from design towards execution. ONE Symrise defines where we play and how we win. And ONE SYM translates boosts priorities into action across portfolio management, innovation, commercial execution, efficiency and digitalization. Building on organizational changes already underway, our focus is on disciplined implementation and designating resources towards our strategic priorities. The broader mainly volume driven growth delivered in the third quarter reinforces the progress we are making. We're strengthening our capabilities, sharpening our strategic focus and pushing Symrise to deliver durable, profitable growth. Let me start with our recent portfolio actions on Slide 10. Our objective is to improve portfolio quality by focusing capital and resources on innovation-led businesses with attractive growth, margin and cash generation potential. We closed the Terpene divestment in September, enabling us to concentrate on businesses where -- our stronger differentiation and a clear right to win. We also completed the acquisition of Floral Concept. Together with Maison Lautier, it concerns our premium natural platform, expands our capabilities in Fine Fragrance and increases our relevance to high-end fragrance customers. We are investing organically as well, including the planned capacity expansion of Aroma Molecules in India to support growth on global cost competitiveness. Our approach is very consistent, divest businesses with limited strategic fit, strengthen our position in businesses where we have differentiated capabilities and invest in attractive long-term growth opportunities. We are doing this while maintaining balance sheet strength and disciplined capital allocation. Turning to Slide 11. We are evolving our Scent & Care segment to reflect the distinct growth drivers across our portfolio. Going forward, Scent & Care will comprise 3 focused divisions, Scent, Care and Wellness and Aroma Specialties. Within Scent, we are creating a dedicated natural ingredients unit, bringing together Floral Concept on Maison Lautier. Their complementarity capabilities give us a stronger platform for premium natural fragrance ingredients and strengthen our relevance for customers seeking differentiated, high-quality natural solutions. Following the Terpene divestments, we are also repositioning Aroma Molecules as Aroma Specialties with a clearer focus on specialty ingredients and improving the efficiency and competitiveness of the remaining portfolio. These changes allow our organization with our portfolio priorities, establish clear accountability and enable us to focus on innovation, resources and capital and the opportunities with the greatest strategic potential. Slide 12 provides you more detail on Aroma Specialties. The Terpene divestment creates the opportunity to reposition our opportunities around a clear strategic ambition. We are sharpening the focus of the business on 2 strategic pillars: essential Ingredients where technology and scale underpin cost competitiveness and signature ingredients where innovation, intellectual property and application expertise drive differentiation, higher value creation. Our objective is to build a more focused specialty-driven business with a stronger margin and growth profile. Building on our broad access to more than 1,000 customers, we will prioritize high-impact specialty ingredients where our capabilities give us a clear right to win. At the same time, we are working to create a more flexible global production network, strengthen cost competitiveness and expand in attractive markets. Together, these priorities will help us further enhance competitiveness and improve profitability over time, consistent with our objective to improve efficiency and reinvest for growth. Turning now to Slide 13. I will highlight how we are translating our ONE SYM Transformation priorities into tangible progress by generating structural efficiencies and deliberately reinvesting a portion of these savings to accelerate future growth. We are advancing operational excellence across our global operations and procurement activities through greater standardization, digitalization and coordination across the group. At the same time, we are replacing fragmented solutions with scalable capabilities. Let me give one example of how we are combining greater efficiency with targeted investment in the group. We have expanded Symvision AI from an individual digital solution into an end-to-end innovation platform combining and prioritizing sensory and consumer intelligence with AI across the product development process. This enables teams to identify consumer preferences more effectively. Current team decides into product concept and accelerate development for our customers. The comment on also allows us to share expertise across divisions and scale innovation across Symrise. We are ranking part of efficiencies to strengthen our data and AI capabilities, including the new digital and AI hub in India, alongside the exiting hub in Barcelona. Together, the hubs will provide shared expertise, platforms, capabilities across the group. This example demonstrates ONE SYM in action, replacing fragmentation with scalable group-wide capabilities, improving efficiency and reinvesting a portion of the -- into innovation and future growth. These initiatives enhance our ability to move faster, reach customers more effectively and generate greater operating -- over time. Please turn now to Slide 15. Let me conclude with our outlook. We reaffirm our full year 2026 guidance. We continue to expect organic sales growth of 2% to 4%, an EBITDA margin of 21.5% to 22.5% and an adjusted business free cash flow margin above 14%. Following the strong third quarter, we expect organic sales growth to moderate sequentially in the fourth quarter. Organic sales growth will remain below the third quarter level, reflecting more challenging prior year comparables. We continue to see underlying customer activity and we expect full year organic sales growth near the midpoint of our guidance range. We expect adjusted EBITDA margin in the lower half of our guidance range, reflecting targeted investment activity, innovation, organizational capabilities and people. We are investing a portion of the efficiency gains to reinforce our competitiveness and support durable and profitable growth. We are balancing this investment with disciplined margin management and a continued focus on cash conversion. Our midterm targets also remain unchanged, supported by execution of our ONE SYM strategy ONE SYM transformation. With that, we are happy to take your questions.

[Operator Instructions] And the first question comes from Alex Sloane.

Two questions from me, please. The first one, just in terms of the Q4 organic guidance, I'd be interested, does it just purely reflect the comparatives in terms of the sequential moderation? Or has there been any sort of meaningful pull forward of customer demand into Q3, do you think? And just in terms of that Q4 run rate, rather, what needs to happen next year for that run rate to improve to the 5% to 7% medium-term target? That's the first one. The second one, just in terms of the margin guidance that you slightly clarified today, I mean consensus already was below the midpoint of 22%. So by sort of now wanting explicitly to the lower half, should we interpret that as you being sort of more comfortable towards the bottom end of the range? And if so, can you help us understand how much of that potential year-on-year margin decline reflects deliberate reinvestment that you've talked about versus maybe cost inflation that you're finding more challenging to pass on through price.

Okay. Thanks a lot, Alex. So I will answer to the 2 questions. The first one is regarding Q4 organic guidance. So we definitely did a very good Q3. That's the first thing. The second thing is there is no slowdown of the demand in front of us. The demand is there. We are on a strong underlying market, and we are in a very resilient market. So trend is there. And as I explained, so the comparables in Q3 were easier than in Q4. So that's a very mathematical aspect where we are anticipating with comparables impact on the growth. But there is no market slowdown, and there is no demand slowdown. We have a very active portfolio. We have a very strong intimacy with the customer and the signs are more positive than ever. Regarding Q3 and next year, the trend, the trend is there. We do not change our midterm guidance. I am myself following very carefully the top line every month with every division with our segment leader. There are a lot of wins in the pipe. There are a lot of news, which is showing that the customer in all our reference market are really also coming back. The customer portfolio in our reference market are shifting, and we are also shifting. When it's necessary from bigger accounts to midsized accounts, when it's necessary from a region to another one, and we all know that we invest now in Middle East. So I am keeping my guidance for the next year. Regarding your second question, margin. The margin is also linked to the top line. The top line is there. We said initially that the bottom of the guidance, EBITDA should correspond to the bottom of the guidance of the sales. So we are guiding for a midpoint for the sales. So we are guiding for a midpoint for the EBITDA. We mentioned low end because we are careful. We have also some headwinds. We had the tariffs. We have also some raw material increase, oil-based products, PG. So there are something also we're really competing with an acceleration of our efficiencies. And I will also answer to you. We are playing for delivering the short-term guidance, i.e., between 21.5% and 22.5% adjusted EBITDA. Meanwhile, we are accelerating this transformation means we are accelerating not only the efficiency deliveries, but also the way we are reinvesting for guaranteeing strongly that will come back quickly in the 5% to 7% organic sales growth.

The next question comes from Lisa De Neve from Morgan Stanley.

I would like to follow up from the margin question just now from Alex. I mean you stated that you're sort of accelerating your reinvestments into the business to drive growth in future years. I mean, can we talk a little bit about the moving parts about like how we think about the 2027 margin? And to an extent, I mean, how should we think about your efficiencies and your transformation program playing into this? That's my first question. And then only is on Pet Food. I mean, can you share what the improvement in the third quarter for Pet Food? I mean to which extent was this driven by the order book shift that happened from the second to the third quarter in palatability? And how should we think about the Pet Food growth algorithm from here into the fourth quarter and 2027? Have you delivered any sort of new business wins in this segment would be keen to get some color on that.

So thank you, Lisa. Regarding the question one, about the margin question. First, I would like to emphasize that we really made a very strong 2024-2025 performance. We moved from 19% EBITDA to 21.8%. We gained 280 basis points where we are really focusing on efficiency without reinventing so much in top line. Now we suffered last year, like everybody on the top line. So that's the reason why we have decided to reinvest. Coming back to now the efficiency. A big piece of the efficiency is coming from procurement. As I mentioned, we are buying more than EUR 2 billion raw materials, more than EUR 1 billion indirect. We have now a centralized organization. The leader is based in U.S. with a team meeting last week, and we are really checking a lot of points, KPIs and belief points, and we are really on a good track there. The second big efficiency levers is operational excellence. We are more than 80 plants. Now we are a very strong central operational excellence team, and we start to see the impact of this team. So all in all, the efficiencies are continued to be delivered. Regarding end of the year, I told you we are to arbitrate. We are delivering the efficiencies and reinvesting, for 2027, the trend will be the same. We will continue to deliver cost savings, cost avoidance, even cost cutting, what is necessary, and we will continue to invest in the top line. So opportunity is there, and the objective is to go back to the 23% as soon as we can in terms of EBITDA margin. Regarding your question about Pet Food. Pet food is a very strong, resilient market. The pet food population continued to grow substantially. The pet food customers are growing after there are some shift of market share between different customers. We are doing top-to-top meeting with a big account. We are accelerating the growth and the prospection, i.e., sales excellence in the small region customer, also private labels, which are gaining market share, substantial share in Peru. So we are continuing to build strong partnership with the key accounts and we are continuing to increase our market share in the other part of the customer portfolio. The order book is strong. There is no reason to see any kind of a slowdown. So the trend is good and the growth is back. Growth is back both in palatability and nutrition. We have still now some price decrease effect adjustment, price increase effect in nutrition, which are offsetted by the volume growth. And today, the trend is positive. And it also makes me confident to not change the guidance for all Symrise going back to 5% to 7% growth, taking into account that pet food has always been a growth driver, and there is no reason for pet food to continue to be a growth driver for Symrise.

The next question comes from Ed Hockin from JPMorgan.

Actually, the first one is a bit of a follow-on to the previous question on pet food because traditionally had been high single digit, low double digit growth driver for the business is now appreciated it's back into growth, but is for a while been flattish kind of zone. So how much of this is the end market? What do you see on the end market volume growth rate versus I'm thinking back to your Capital Markets Day several years ago now in Brittany that was about extending your pet business more into pet health supplementation, pet care adjacencies. I'm wondering for your pet food business over the medium term, how much are you thinking about extension beyond palatants and nutrition and whether or not you think palatants and nutrition maybe more mature growth categories today than maybe pre-pandemic. And then my second question, please, is on the raw materials inflation and how you're pricing for that. So in your pricing that remains negative in Q3, I guess if you strip out negativity from UV filters and aroma molecules, how is the pricing and also nutrition? How is the pricing in the rest of the business performing. And as you're looking into 2027, to what degree are you expecting a cost step up and that we should expect the raw materials inflation and also the pricing elements to be more forceful in 2027, maybe it has been in '26?

Thanks, Ed. Two good questions. Regarding food, the end market is dynamic. Our customers are continuing to invest. Our customers just also announced their results, and they are good results regarding the pet business. And what they chose to these customers in every region, the market is dynamic. So the volume is there, volume growth is there like pre pandemic. The main difference is that during the pandemic, the volume was increasing. And during the pandemic and the raw material, the prices were increasing. We are back to normality and the growth is back. And the growth is back. And we are also to follow the growth. We are investing -- we invested recently in Brazil. We invested recently in Mexico. We are investing in Australia. So we are also coming back to capacity investment, which is a good signal. So regarding the maturity of our business, we are not only investing for palatability, but you know that we invested quite a lot in Nutrition. And the nutrition market is also a growing market. We adjust the price, but really not price is -- par adjusted. So when we see a price effect, it's really offsetting very -- on a small magnitude our growth. So palatability and nutrition are back to growth, both price and volume and price still negative in nutrition, but it will come back in the coming -- in the future coming back to price increase. Your second question is very interesting. Regarding raw materials and reminding what if we put out some UV filters or nutrition or something like that. First, even if we are selling specialties, it's very important for us to pass through the cost. The cost pass-through is a very important growth driver is our model. You see our model. Normally, we speak about 2/3 -- 2/3 volume, 1/3 price, sometimes it's totally different, but we are still in mind, 2/3 volume, 1/3 price. Now we have some negative pricing, which are very well explained, and there are 3 main prices. The first one is nutrition, but we're at the end of pricing adjustment. The second one is mental where also we are in a regularization of the market and the volume is growing, and we have a lot of competitive edge also on this market, and we are running after competitiveness, mainly through better access to raw material. The last one is UV filters, and I admit that UV filters, even if it's a growing business, by the way, it is because it's a growing business that there are some aggressive competition, price decrease is still there and price decrease could continue, but this price decrease cannot have -- will not have a significant impact on the all Symrise organization. So conclusion, the price challenges are very well identified, are very different. And regarding the raw material, whatever is happening on the raw material or tariffs, by the way, of inbound logistics also cost, we are very keen to also have -- be close to our customers to pass through a reasonable way this cost increase. It's a very disciplined way we are now managing the profitability at those profit levels.

The next question comes from Martin Roediger from Kepler Cheuvreux.

My 2 questions. In particular, on Aroma Molecules, high single-digit organic growth in Q3. I understand you have been aggressive in pricing to gain volumes in account of your competitors, especially in mentor. If so, how do you find the right balance between volume and pricing? Because I assume the profitability effect from price cuts is negative and certainly more severe for your EBITDA margin than the positive profitability effect from gaining volumes? That is my first question. The second question is on the M&A effects in Q3. The disposal of Terpene to Mutares is the dominating part. But it is out of your portfolio for just September and the acquisition of Floral Concept is tiny. My question is, did the Terpene business with its EUR 130 million annual sales have a very different seasonality over the individual quarters?