Good morning, everyone. Welcome to the Corbion H1 2024 Results Call. Today, the results will be presented by Olivier Rigaud, CEO, as well as myself, Peter Kijntjes, CFO. This morning, we published our H1 2024 results. You can find the press release and presentation on our website if you go to www.corbion.com/investor relations, financial publications. As usual, our half year results call, Olivier and myself will walk you through the presentation, after which we'll move into Q&A. With that, I would like to hand over to Olivier.
We delivered a strong performance in the first half of 2024, demonstrating the underlying strength of our business. I'm very happy with the continuation of our positive volume mix growth, adjusted EBITDA, as well as free cash flow delivery. In Q2, we delivered a great volume mix growth of +5.5 organically, leading to H1 volume mix growth of 3.6%. On adjusted EBITDA, we delivered EUR 51.6 million in the quarter, which is the first quarter excluding the contribution of emulsifiers, which you might remember, we divested April 2. The resulting EBITDA margin in the second quarter is 15.3%, a significant step up versus Q1 and versus last year. In health and nutrition, we continue our path to grow sales at double digits rate at very attractive EBITDA margin.
In functional ingredient and solution, we've seen positive volume mix driven by food. The EBITDA margin has been increased in Q2, while fully absorbing the allocated SG&A cost previously allocated to emulsifiers. In our PLA joint venture, we've seen now the third consecutive quarter-over-quarter sales growth. The free cash flow has been positive, which together with the divestment proceeds, resulted in a net debt/EBITDA ratio of 2.2 times. I can also report that the restructuring plan we announced earlier this year is well on track. Since we anticipate the positive momentum to continue in the second half of the year, we maintain our full year guidance. So now moving to the next slide and looking to the functional ingredient and solution business and dynamics.
We see a much-improved business momentum in the key categories we serve, like bakery, meat, and dairy, across the regions, and particularly in North America. The customer innovation in our food ingredient segment remains strong, particularly around recipes, cost reduction, and clean label formulations. While in our biochemical segments, we see a continuation of market softness in some markets, such as semiconductors and agrochemicals. We continue to focus on our key strategic growth initiatives, such as natural mold inhibitors, dough conditioners for bakery, dairy stabilizers, and natural antioxidant solutions. This is translating in an accelerated sales pipeline with high conversion rate. As you might have seen, we recently announced a bolt-on acquisition in India, supporting our food solutions business and aim to serve both local demand as our global key accounts in the region.
Of course, the startup of our state-of-the-art circular lactic acid plant in Thailand, after three years of construction, now ramping up gradually as per our plan. We've already produced and sold several thousands of tons in spec product to the market. This new plant, as you know, is one of the most important future value creation enabler for Corbion for the years to come. And last point, in terms of efficiency initiatives to improve our margins, we are well on track in this division, both on industrial footprint optimization, with the mothballing of our Peoria plant and FTE reduction. So now moving on to the health and nutrition business unit. I'm really happy to report that this division continues to perform very strongly.
We benefit from a continued strong demand of omega-3, both in aquaculture and in pet nutrition, while we also see a positive momentum in our medical biopolymer business, primarily in orthopedics and slow-release drug delivery. Highlighting here, some of the growth initiative in our omega-3 business, we benefit from secured longer-term contracts in aquaculture, while we are growing strongly in additional categories as pet nutrition and making solid progress in human nutrition customer approvals. As we speak, our capacity expansion plans in our Brazilian operation is progressing according to schedule, and we see a continuation in process and yield efficiency to support growth for the second half of the year, but also for 2025. Now, moving on to the next slide and discussing about our PLA joint venture. As stated before, we are now in the third consecutive quarter on quarter sales growth.
We see this trend continuing in the second half of the year. Growth is primarily driven by China, piloting new market development initiatives. We are making good progress in building a differentiated portfolio, such as expanded PLA, to bring new functionalities to the market and reduce dependencies to the more volatile end markets. All of this is resulting in a very solid customer development pipeline for the joint venture. Now, let me hand over back to Peter to go through the detailed financials. Peter, up to you.
Thanks, Olivier. Following the completion of the emulsifier divestment by April 2, we've prepared the profit and loss statement, excluding discontinued operations in line with IFRS 5. You will find the profit and loss statement of discontinued operations in our press release on page 20, and the EBITDA impact on page 4. On chart 9, you will see the bridge between last year's reported number, where we've taken out discontinued business. In H1 2023, we reported sales of EUR 738 million, of which EUR 96 million related to the emulsifier business. The sales on a continued basis was therefore EUR 642 million. In H1, we've seen a mild sales decline driven by lower pricing, but offset by volume mix growth of 3.6%, of which you have seen that the volume mix growth in Q2 itself was +5.5%.
On EBITDA, we did report an adjusted EBITDA level last year of EUR 97 million, of which EUR 28 million relates to discontinued operation. The adjusted EBITDA of the discontinued business excludes the allocated SG&A costs, which were previously allocated to the non-core emulsifier business. In H1, we've seen an EBITDA increase of EUR 70 million versus last year, driven by health and nutrition. If you look to the functional ingredient and solutions, on H1, it's sluggish, but if you look to Q2, it was very strong performance. If we dive then to the profit and loss statement of continued operations, you recognize the sales and adjusted EBITDA level for H1. You can see in Q2, the sales increased with 2.3%, and EBITDA increased with 54% to a level of EUR 41.6 million.
This EUR 41.6 million includes the allocation of standard cost in emulsifiers. If you go a bit deeper in the P&L, you see that the depreciation went up as a result of prior year investments. In H1, the adjusted number is EUR 8.7 million, and this includes the restructuring cost of around EUR 9 million. On financial and other income and expense, it's in line with last year, which is EUR 3.7 million. H1 joint venture result is flat. And last year's numbers, as you might remember, includes the impairment of capitalized costs related to the cancellation of the Grandpuits projects. The tax rate is 24%, which is in line with anticipation.
You see that the results after tax of the discontinued operations of EUR 145.7 million includes the book profit of the sale of the emulsifier. If you then dive into the two segments, functional ingredients and solutions, we've seen a continuation of the positive momentum. In Q2, volume mix growth was +3.2%. As Olivier indicated, this is really driven by the food segment, with biochemicals still showing some temporary softness. In food, we've seen growth in our key markets, like bakery, meat, and dairy, as well as a continued growth in our key initiatives. Q2 pricing was minus four percent, sorry, -5.4%, in line with Q1, following the relaxation of input costs. The adjusted EBITDA includes the allocation of SDNA costs previously allocated to emulsifier.
Absorbing these costs, the EBITDA margin in Q1 was 10.4%, which is reflecting the positive volume mix, as well as the impact of our cost reduction initiatives. As indicated earlier, we will fully compensate these allocated costs in 2025 and are currently implementing a series of initiatives to deliver on this. Health and nutrition is continuing the path of double-digit volume mix growth at sustainable high EBITDA margin. The organic sales growth in H1 was +14.5%. Volume mix in both Q2 and H1 were +14.1%, predominantly driven by our algae DHA business, supporting both agriculture and pet nutrition. The biomedical polymer segment is on track, delivering double-digit growth for the full year, with H1 sales being stable following phasing of some orders.
The adjusted EBITDA margin is around 30%, and the increase versus last year is driven by a combination of increased operational leverage, strain optimization, as well as favorable product mix. These results are a great confirmation on our strategy. If we look to our PLA joint venture, as Olivier alluded to, we've seen the third consecutive quarter of sales growth, with EBITDA margins in line with our estimates. H1 organic sales growth was +14.1% versus last year, with Q2 being 6.2%. The increase is driven by volume development. As indicated, margin 2023, driven by price input cost dynamics, primarily sugar. With that, I would like to hand over to Olivier.
Yeah, thanks, Peter. So before getting into Q&A and seeing the positive continued momentum in our business, we confirm our full year outlook for 2024, and also our midterm outlook for 2025, as we are working on the full compensation of this emulsifier-related stranded cost. So, for 2024, we anticipate to grow volume mix within the 2%-6% growth. Pricing anticipated to be low single digit negatively. Adjusted EBITDA for continuing operations above 18%, which is in line with the former, over 15% on core activities. And on free cash flow, we feel confident to deliver over the EUR 50 million guidance we gave earlier. On this, thank you very much for your attention, and I'm now opening the floor to questions. Operator, back to you.
Thank you, sir. If any participant would like to ask a question, please press the star one one on your telephone. There will be a short pause while participants register for a question. The first question comes from Robert Jan Vos from ABN AMRO ODDO BHF. Please state your question.
Yes. Hi, good morning, all. A few questions: you realized organic EBITDA growth of close to 22% in H1, 46% in Q2. When looking at your guidance, is there any reason why H2 would be trending below H1? You're basically saying that H2 growth will be above 14% only. So that's, that's my first question. I have a few others.
Okay, thanks, Robert Jan. I will let Peter take that one.
Yeah. So, Robert Jan, I think we feel very strongly about the, the outlook. If you look in the stacked up of, of prior, year, then, then keep in mind that the strain optimization in health and nutrition, you already see a significant offset between H1 2023 as versus H2 2023.
Okay, and related to this one, you changed, you've not increased, but changed the 18, the more than 15% number into more than 18%, and that is because of the changes in the definition. Can you provide the absolute EBITDA base that is used for this guidance? So, what is the 2023 adjusted EBITDA on which this guidance applies?
No, we can. So, if you look to our last year reported number, that was EUR 136.7 million. That's where we did apply this more than 15%. And if you then do this 18%, that applies then to a lower base, because there we took out the allocation of this stranded cost. If you look in terms of the absolute number, in terms of EBITDA growth, that means we are growing in excess of EUR 25 million more. And as indicated, yeah, this is really, we feel very strongly about delivering a higher number than the 15% growth.
You said the old base was EUR 136.7, right?
1, 3-
Was that what you-
Correct. 163.7, not 13-
Ah, EUR 16. And what is the new-- Yeah, yeah, exactly. What is the new number then, for this EUR 163.7? Minus EUR 25, is that what you said?
That's correct. So, if you say the number of the core reported EBITDA, it is EUR 163.7 . What you roughly need to do, because in the discontinued operation, we took out this EUR 24 million of stranded cost, so that's then the new base on which this 18% is calculated.
Okay. That's clear.
So-
Yeah, I noticed, I noticed in the reporting of today that also the base for the 2023 adjusted EBITDA was adjusted for, as we now know, then for Q1 and Q2. Can you provide the remaining quarters of the year as well, please? Not in this call, maybe, but can you provide new restated figures for the quarterlies? Is that possible?
Yeah, that is possible. We're quite transparent on that. And as you know, we needed to be compliant with IFRS 5, and therefore the discontinued operation, so.
Okay. And then a question on, if I may, a question on the PLA joint venture. It says on one of the slides, it says the adjusted EBITDA margin is in line with the 2024 estimate. Just to be clear, does that imply that you expect 14% EBITDA profitability for PLA in 2024?
So, as we guided earlier, we anticipate in 2024 to be at a profitability level of EBITDA between 10% and 15%, given the current price input cost dynamic, of which sugar prices are relatively high in this year. We also indicated that it is in this year, and with now sugar prices returning to a normal level and increase of volume in the PLA that going forward, these margins should go up. So, this 10%-15% is the one which we guided earlier in the year.
Okay. Yeah, so you're in that range, that's, that's what you, what you would set, actually. Okay. That's, that's very clear. Maybe on the announcement for the acquisition in India, can you put a few numbers on it? For example, how big is it in sales, EBITDA, and maybe also-
Yeah.
What is the price paid?
Yeah. So, in terms of the acquisition itself, I think it's a nice bolt-on acquisition following our strategy. In terms of the numbers and acquisition price, it's a very limited amount. And Robert Jan, think about a full amount, including kind of payout between EUR 1 million-EUR 2 million. So, from that perspective, it's not significant.
Yeah, if I may add, Robert Jan, on that-
Yeah.
What we are looking more with this investment is, as we've done in Mexico last year, is to have an anchor investment in which we can build on the same approach we've done in Brazil and Mexico last year. Primarily to follow our global key account in the regions, just moving recipes we have, in the regions, in other regions, there. So, it was to have an, just an anchor base on which we can build, fast, as we've done, yeah, in Brazil or, or Mexico. So really same, same model, same approach.
Okay. That's clear. And then finally, if we talk about the cash taxes that you still owed, related to the disposal of the emulsifiers in the second half, is that simply the difference between what you mentioned as the net proceeds of EUR 323.8 million and the full year cash proceeds of EUR 255 million, i.e., close to EUR 70 million, that you still need to pay in taxes in the second half? Is that correct?
That's, yeah, that's the exact way to do that, Robert Jan. And by the way-
Okay
... this, that we do, we will pay in Q3.
Q3, okay. That's it for me. Thank you.
Thank you.
Thanks, Robert Jan.
Thank you. The next question comes from the line of Wim Hoste from KBCS. Please state your question.
Thank you, good, good morning also from my side. A couple of questions. The first one would be on the new lactic acid plant performance, and the impact of the ramp-up scenario on the global footprint you have. So, can you help us understand what is the pace of the ramp-up you foresee for the coming quarters, and at what stage or what timing would that impact production at the other sites and allow you to reduce production at some of the less efficient site or shift to then more specialties? Can you walk us a bit around that? So that's the first question. Maybe I'll let you answer that one first.
Yeah. Sure. Good morning, Wim. So, on this plant, actually, as we told before, indeed, it's to maximize the lowest cost position there and reducing some of the highest. So that's already been initiated, for instance, so we repurposed our, you know, lactic acid production in Spain. So where we stopped to produce actually natural ferments following the mothballing of Peoria in the US. So there is this indeed a kind of, you know, moves that are really connected, where we stop lactic acid fermentation in Spain to produce in the lactic plant the food ferments to compensate for the Peoria closure. And this is bringing, by the way, a much higher margin on food ferments.
And at the same time, it allows to ramp up the new Thai operation. We are playing also with the rest of the network, whether this is our operations in Brazil or in Thailand itself, with a former commercial process. So, the plan actually is that obviously we are still in the ramp-up phase. What we are looking and preparing is because you also need to organize the whole supply chain and to some extent, some customer referencing behind, as you bring these new technologies in plant. But basically, it's also to have a significant step-up next year. Yeah. So, most of the impact, and you remember we announced that already in the Capital Market Day, is to happen in 2025.
So, this year is really also to make sure we have stable operation, we have customer referencing on this new plant, which sometimes you have to re-qualify, sometimes not. So, on this, we are well on track on this program, but most of the impact will come in 2025.
Okay, understood. That's clear. And then, my second question would be, on, on PLA. Yeah, the better market momentum, I think in the introductory comments, it was stated that it's mainly China-related. Obviously, China is a big, is a big market for you, but, yeah, can you maybe elaborate a little bit on, on what you see underlying? Are these, yeah, packaging volumes? Can you also elaborate on, on what you're seeing in, yeah, the higher end, that, that you're targeting? How much contracts have you signed for that, or, or an ID? What, what kind of applications, what kind of contracts, how long are the durations?
Mm-hmm.
Also on the markets, yeah, outlook in total and new initiatives, et cetera, capacity additions. I think one of your big potential competitors has withdrawn from its plans a number of weeks ago. So, if you can just, yeah, talk a bit around the aspirations that you're seeing and maybe who is building, who's not building. I think NatureWorks probably building its plan, but can you maybe also give a bit of a feel on that?
No, sure. So, on the first part of your question, on the market, indeed, today, most of the recovery is coming from China and primarily from, you know, a specific category that we call industrial 3D printing. This is quite a trend now happening in China, where 3D printing, yeah, we are more familiar with the home-based printer, but now it's moving to some kind of industrial, they call it the 3D printing farms. For certain categories like, you know, plastic toys and all these, these similar types of products , and this is really growing pretty fast. And there, the interesting part is that PLA is being really utilized because of its functionality.
It's one of the best, if not the best, you know, polymer that fits with the three-D printing technology in terms of resistance and hardness. So now, as we said before, we want to reduce some dependencies on the more volatile categories and lower end, like flexible packaging, to move to more specialty ones, like some rigid packaging, and in that, we are developing this foamed expanded PLA to replace foamed expanded polystyrene. Think about food trays and these type of things, or microwavable noodle cups that are very popular in Asia. So, we are making nice progress there, but it's not yet representing a significant amount of sales, although it's pretty promising.
So, I have to say, this is why today, really the biggest part of recovery is in China, and to some extent, slight recovery in Europe, but really most of the recovery is in China. Back to the market environment, as you of course know, the market dropped by almost 50% in the last year and half, and we've been able to in that these conditions to even slightly increase our market share with a couple of percent in that period. And this was related to the fact that we did, for a large part of our business, long-term sales agreement, multi-years agreement, that helped us to mitigate the impact of the market drop at that time.
So, and that's a policy we've had so far, really to secure a large part of our volume through longer term agreements, you know, and this could be three to five years type of agreement. So, we are in continuing that strategy with some really important strategic accounts globally. So that's important, whilst we are moving indeed the portfolio to more differentiated product. And again, we are still, I think, in progress on that, yeah, so we are not yet at the end of the exercise. More to come on that front. You might have seen in the press, the joint venture has announced quite a lot of strategic partnerships over the last weeks, so we are pushing into that direction.
About the market dynamic, actually, next to this big investment that was, let's say, withdrawn in the U.S. that you were referring to, there is another 6 projects that have been withdrawn or put on hold in China, so in the last 4-6 weeks. So, there is, of course, the project you mentioned going on in Thailand, but that's the only major active project today where the plant is in construction. So, I, I think again, it tells really something that of course, you know, we came to that conclusion a bit before everyone when we decided to cancel the project in Grandpuits. Seeing the capital intensity, you know, and the return of such type of projects. Yeah, so it's, I think, not a surprise to see others coming to the same conclusion now.
For us, as we said, the aim is to max out the current plant and specialize it. We have room to grow that plant with very, very limited investment, and yeah, we're just gonna focus on the strategy to specialize as much as we can these plants on differentiated product.
Okay. That's very clear. Thanks for the information and congratulations on good results.
Thank you.
Thank you. The next question comes from the line of Sebastian Bray from Berenberg. Please state your question.
Hello, hello. Thank you for taking my questions. Good morning. Can I ask firstly, one on PLA? If Corbion is operating a policy where it has moved towards the lower end of the temporal range for hedging, meaning six months out, why do margins not accelerate aggressively in the second half of the year, given the amount of cost relief that's available?
Oh, sorry, I thought there were more. So let me take this one, Sebastian. So, if you look in terms of the cost curve and the hedging policy, which, by the way, for the joint venture, we do collectively, so the joint venture knows exactly when we do this hedging policy. Then, and you look to the sugar curve, then what you see during the course of Q2, Q3, and you see a big sort of peak, and after that it should relax. So therefore, the margin should definitely go up in 2025. Don't expect it yet basically in Q3, and there might be a mild impact in Q4.
That's helpful, thank you. And can I ask one on the contract structure for the algae business? Is there a cliff edge moment sometimes in 2025 when the contracts negotiated for the omega-3 come up for renegotiation, or is this a stepped process?
No, no, I think it's a very, very fair question. So, what we've done indeed is plan. We have different end dates on the different contracts, yeah? So, it's, there is no cliff, but it's also about, and they are quite longer term. You speak about either 3 or 5 years, yeah? And as we are growing the customer base, because that's an important other element, is that, you know, we have two ways to de-risk that. Obviously, in aquaculture, it's quite a concentrated market, but there is still room for us to open new avenues and new customers, which we are doing. And of course, is opening new categories. We mentioned last time, you know, pet nutrition is already up to 10% of our overall sales, yeah?
So we are, we have, let's say also different business market dynamics. As we said, yeah, we are working to open up the human nutrition business. That is also gonna, also, in terms of risk, yeah, be very, very helpful for the future. But so far, there is no short-term, you know, cliff to see or to be anticipated.
That's helpful. And just to, as a reminder on the stranded cost effects, my understanding is the company has restated its figures to adjust for the fact that the emulsifiers business is no longer included in continuing operations. This has led to an incremental cost, if I read through the report, of about EUR 8 million in H1 on functional ingredients. I assume it will be a pretty similar number for H2. And then is the correct approach to modeling this, just to say, "Okay, well, this stranded cost goes away in 2025?" The reason I'm asking is that it is a pretty hefty step up in EBITDA margins for that segment, purely from the falling away of stranded cost, and I want to understand if I'm thinking about this in the right way.
So, Sebastian, you think absolutely in the right way. So, in terms of continued and discontinued operation, the kind of IFRS 5 rule, in the continued operation, we fully included the stranded costs, so therefore, also this EBITDA number, which we presented in Q2, is including that. As we said, we are in a kind of transitional phase but have plans in place and are working on activities to fully compensate that in 2025. So, the principles which we applied and which we did communicate earlier are exactly the same. The difference is a bit of split of core, non-core versus continued versus discontinued operation.
That's helpful, and last one from me. The CapEx at the group level, and more broadly, the cash flow, it looks like there's a little bit of work to do in H2, especially on the WC side, to hit full year guidance. Is there any sense that you can squeeze CapEx or the company can squeeze CapEx downwards further in 2024, 2025, or is H1 just the run rate that you need to grow and that is what it is?
No. So in terms of CapEx, we continuously look, of course, to the right CapEx level. You're right on the working capital part of the equation. Let me stress two things. The one is, if you look in terms of trade receivables, you see an uptick, and this is really driven by the increased sales level in Q2 as well, and of course, in H2. If you look in terms of inventories, there's a bit of combination. So, if you look in the H1 number, there is an increase in our intercompany freight lines driven by Red Sea, which is impacting that adversity. Also, that increase you will not have, and I expect a further reduction of our working capital in H2.
So those are the, I would say, key components of that, that one. You're also right that, CapEx itself, I mean, we are this, this kind of, more significant, significant sale.
That's helpful. Thank you.
Thank you. The next question comes from the line of Fernand de Boer from Degroof Petercam. Please state your question.
Yes, good morning, and a couple of questions my side, although most have already been answered, but I'm still a little bit puzzled about your guide, because it still looks very conservative to me, and I thought your answer, Peter, was, was quite short on, on the first question on that one. So could you explain, with sugar prices becoming more favorable, with biomedical coming through in the second half, and also, I think the strong margins in, in omega-3 will continue. It's not that they will come down, so that should still mean a doubling in EBITDA from omega-3. So why, so conservative? That's the first one, and then on volume growth, also in food, could you give us a little bit idea? Because if you look at U.S. market, grocery markets, volumes are not that strong yet.
Is there a kind of inventory buildup, restocking in the chain? Could you have you any idea about how much that is? Then the last one, on semiconductors of biochemicals, you were not seeing a recovery yet. When do you expect that to come through?
Yeah, Fernand, so Olivier, I'm gonna take the last two, and Peter will take the guidance. So, first, on volume growth in food, you're right, and although we see some categories, and when we look to the detailed categories, primarily in the largest food market being North America, you know, being slightly negative, like bakery or meat. But what we can see is that customers post inflation have been really focusing first of all on a lot of reformulation and cost optimization, you know, projects from pure innovation. So, and we've had big success there so with a very strong pipeline. So primarily in our functional systems area where we've had major, major customer and share gains there from these developments.
So that, I think, has been driving and is still driving volume growth on the second half. And the other part is, when I was mentioning clean label, you know, we have a big initiatives on natural mold inhibitors, where we are placing the synthetic, you know, current used product via these natural alternatives. One of the great move with the restructuring is that moving operations from Peoria to our Spanish operation makes us very competitive in the market, because efficiencies in Spain are great. The plant is operating a much higher yield level, so we've also gained quite some significant share being able to convert synthetic mold inhibitor to natural. So this is really two elements driving also a strong volume growth and sustainable growth.
On semiconductor, you might remember we are anticipating some recovery, as from Q3. And, although there are some very early signs, now most of the customers says, yeah, expect that more towards the year end. So the market is positive about the fact that things are coming back to normal. But, you know, as we are down in the chain quite far, yeah, we don't see that yet. And we're expecting some signal early Q3 that we do not see, and the market feedback is that it'll be more towards the end of the year. Yeah, on the guidance, Peter-
Yeah.
- I'll let you answer that one. Yeah.
No, thanks on that. You're right, Fernand, and Q2 looks quite good. We feel good about the positive momentum. I think you're also mentioning some elements which are favorable. There is one which temporarily might be a bit less favorable, which is freight rates, which we have seen in the volatile economy creeping a bit up. And if you look to our guidance, I mean, we really maintained higher than 15%. And that's, I think, how you need to look to it as well.
And if you look at, let's say, next year, because you had a kind of guidance for several years of 15%-20% on the core business, but now you actually changed the core business. So if assume next year, the stranded cost will drop out, is that then part of organic growth, or is that then actually not part of organic growth? So can we still assume 15%-20% also for next year?
Yeah. So in the guidance metric, I think our outlook for 2025 does not change. That means indeed underlying, we say, expect this 15%-20%, and we will absorb these stranded costs, which means organically, yeah, since we reduced the base, you will see a percentage, a higher number in 2025.
Last question. To get rid of this stranded cost, could we expect more non-recurring costs in H2 or next year?
Yeah, I can take this one. No, actually, you know, we are implementing as we speak, and we already started a couple of months ago. You know, major initiatives that are, you know, being implemented as we speak, to cover fully this stranded cost for next year. So this is around, you know, major initiatives around. I can name, you know, the five most important ones we are working on: procurement initiatives, pricing initiatives, we have some further plant optimization in terms of efficiency and yield, and then we have a full product portfolio review in terms of SKU rationalization and tail cut, which is normal, you know, discipline you have in any business.
But then we are taking, you know, this opportunity to have a full review of the detailed product mix on looking at everything that is slow-rotating, moving, margin-dilutive type of things. So that we are already implementing as we speak, to make sure we have the full impact of stranded costs, you know, kicking in, in 2025. So that's to support that, we've set up an internal transformation office with a dedicated team that is helping us steering, you know, the activities there, and the exercise.
Okay. Yeah.
Mm-hmm.
Thank you. The next question comes from Setu Shah from Barclays. Please state your question.
Hi, I've got three questions. The first one is, like, at the start of the year, the EBITDA guide was, like, based on flat volumes in H1, and you did 3.6%. Are you more optimistic for the upper end of the range, or do you think H2 will be slower than you had originally thought?
... The second question is on the health and nutrition margin. Like, it has been quite strong. Is this a cyclical high in health nutrition margin, or can you sustain a 30% margin medium term? And my third question is just skipping question. What is the full year adjusted EBITDA impact from like discontinued versus the EUR 27.8 million you guided in H1? Yeah.
Okay. Not all the questions were allowed a few, but I think I did get them. So let me take them. So if you look to the health and nutrition margin, there indeed strong on 30%. That was in Q1, that's in Q2. And I would assume we are also, if you look in H2, around the same level. If you look in terms of the volume mix element of this 2%-6%, given the strong growth, which we've seen in H1 in total, I think that you are right, that in this bandwidth, we are at the higher part of the range.
The last one, if you look to the, and also final one, then, you are right in terms of, of discontinued operations, that it will spark, EBITDA and then taken out trend.
Okay. And, one more question, like, on the PLA, you disclosed, at the capital markets day that PLA JV was only 6% of the functional, ingredient solution. Now, this was depressed due to, like, slow down. So where are we on that today? Like, and how much recovery can happen over there over the next 12 months?
So, basically, when we spoke about 6%, this is the lack of supply to the joint venture. What we see now is that the joint venture, because of the strong momentum, is coming with increased forecast, which they did already in the first half, and they confirmed for the second half. So that proves the fact that they have a higher degree of confidence with the customers' outlook. So, I think it's if you calculate it, it's not that difficult in the sense that, yeah, we supply lactic acid there, so capacity has been running close to 50%. You know, when they would be full out, you could think this 6% will go above, slightly above 10%.
We're gonna end the year in between something like this, as they are growing volume back to not yet full capacity utilization, but nicely ramping up volume in the second half.
Okay, thanks.
Thank you. There seems to be no further audio questions at this time, if you wish to take your webcast questions. Mr. Rigaud, there are no more questions. Please continue with any points you wish to raise.
Also, I think I would like to thank you, operator. Thank you all people in the call. Thank you for joining this, and obviously, we're gonna reconnect for the Q3 results. Thank you very much, and have a good day. Bye-bye!