The company said it believes that the full potential of the ANH business could be best realized through a different ownership structure. “All potential separation options will be considered.”
It plans to separate out the ANH unit over the course of the next year. It said the move will minimize its exposure to vitamins earnings volatility.
"The ANH unit is also operating in a more capital intensive segment than our other three business units," noted a spokesperson.
As part of the vitamin transformation program announced in June last year dsm-firmenich said it is continuing to make considerable progress on its cost reduction plan including plant closures, route-to-market simplification, and optimized service levels. “The company remains confident in realizing a contribution of €100m in adjusted EBITDA in 2024 and the full benefit of €200m in 2025.”
It is likely though that the Bovaer and Veramaris businesses will be retained within the wider group as they are a "strong fit" and "have synergies" with the core human nutrition activities, according to the spokesperson.
"Bovaer is a sustainability enabler for the dairy industry, which is an important segment in our taste, texture and health (TTH) business. Veramaris is the algae-based omega, for which dietary supplements (health, nutrition and care) and pet food (TTH) are strong growth markets."
'A logical outcome'
“This carve-out is a substantial structural step for the company and its culture, but one logical outcome of the strategic asset review announced earlier in second quarter of 2023. It follows the merger of the high margin specialty business of Firmenich with the portfolio of DSM, which combines both specialties across the full life-sciences verticals and high-volume, low margin businesses such as ANH.
“Synergies from the DSM and Firmenich merger aimed to make the combined group one of the fastest growing ingredients companies in the coming three to four years.
“The lower margins from the ANH business certainly were a drag to group EV/EBITDA and other multiples comparing them to peers such as Symrise, Chr Hansen, Croda, Givaudan, Kerry, and Novozymes which seem to be the aspirational peer group for financial investors from here,” commented Stefan Schmidinger, chief economist, Kemiex.
Looking at the evolution of the 10 vitamin price indices of Kemiex over the past two years, however, the current environment drags EBITDA as much as the negative €500m effect it estimated for full-year 2023, he added.
The ANH business of dsm-firmenich is a major supplier in the global animal nutrition arena, both for raw materials and premixes, and it can deliver substantial operational leverage in a good weather vitamin and animal nutrition environment, according to Schmidinger.
“The carve-out will certainly create more transparency on the different businesses and cultures of the merged dsm-firmenich group and offer additional time for the shareholders to consider options such as keeping it in the group, or partially or fully dispose it, or IPO it over the coming three years. For global agricultural trading powerhouses, or private equity, it could be a great standalone business to quickly become a top player in premix.”
