Chr. Hansen marks 9% organic growth in Q3 amid inflationary pressures, spurred by probiotic demands

07 Jul 2022 --- During an “uncertain macroeconomic environment” Chr. Hansen reports a 17% organic growth to date from the start of the year for the health and nutrition sector, resulting in a 13% revenue increase for Q3. A total organic growth of 9% was reported, mainly driven by volume growth.

“Following a very volatile market during COVID-19, in the past nine months we have seen a strong rebound in customer and consumer interest in probiotic supplements. The positive market development has been supported by the acquisition of UAS Labs, which has given us broader access to the end markets across online and traditional sales channels,” Lise Mortensen, CFO at Chr. Hansen tells NutritionInsight.

“As a pure business-to-business company, we are impacted by timing of orders, and we expect Q4 growth to be more modest, but still supporting a robust FY22 performance.”

Mitigating supply chain issuesPricing measures were taken to tackle inflationary pressures.
Based on the quarter’s performance, Chr. Hansen will narrow the organic revenue growth target for 2021/22 to 8-10%. 

“The delayed impact from pricing combined with the continued inflationary pressure and actions to protect our supply chain negatively affected our EBIT margin b.s.i. However, at 26.3% for the first nine months, we remain on course to deliver within our guidance,” says Mauricio Graber, CEO at Chr. Hansen. 

“In Q3 we started to see an increased impact from pricing initiatives to protect us against inflationary pressure. However, still not to an extent to protect our profitability, and the EBIT margin declined in Q3 versus last year,” Mortensen concludes.

Mortensen explains the results are solid and aligned with the expectations, despite the volatile economic environment. “A key priority is to mitigate the impact from the challenging global supply chains and secure delivery performance to our customers.”

“Volume growth while implementing price adjustments to reflect the current inflationary pressure started to have a favorable impact during Q3,” the company explains. Revenue for the quarter amounted to €318 million (US$325 million), and year-to-date revenue showed €890 million (US$908 million).

“The execution of our strategy to differentiate as a focused microbial and fermentation technology company continued to deliver solid results with 9% organic growth for the third quarter 2021/22, equal to 13% growth in monetary terms,” says Graber. 

Probiotic “rebounds in Europe”The company projects an adverse forecast for the US, which is dealing with supply chain issues.
The company estimates that there will be a continued boost of probiotics in the European market in the third quarter and a decrease in the US due to supply chain partners in China negatively affected by COVID-19 lock-down measures.

Globally, probiotic supplements are expected to “trend toward the medium-term outlook of mid-single-digit growth,” the report mentioned. However, it stresses the risk of inflationary pressures and downtrading leading to a negative impact on volumes as consumers search for cheaper alternatives .

Another decreasing market is infant formula. Reduced volumes were caused by supply chain issues in the US which caused a nationwide formula shortage. In China, the decreased birth rates have reduced the volume of infant products.

“Customer interest in HMOs remains high, and product registrations in China and other key markets are ongoing,” the report notes.

“The market for microbial-based solutions for plant protection developed favorably supported by strong commodity prices, while high feed prices harmed the selling environment for animal feed probiotics.”

The lighthouses – bioprotection, fermented plant bases, plant health and human milk oligosaccharides (HMO) – delivered 29% organic growth.

Macroeconomic challenges
The report mentions, “as a global food supplier to the food and health industries, we have responsibilities toward fulfilling the basic needs of civilians for food and health products, also in Russia. For now, we will continue to supply only ingredients for basic food and human health products, in full respect of global sanctions.”

Therefore, they stopped their supply of products to Russia outside of that category, and “an amount equal to the profit from the continued operations in Russia during the conflict will be donated for humanitarian aid in support of Ukraine,” the report notes.

By Beatrice Wihlander