Welcome to the Corbion full year 2022 results conference call on the 3rd of March 2023. During the introduction, all participants will be in listen only mode. After that, there will be an opportunity for questions.
To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, you can please press star one and one again. Please note that this call is being recorded. I would now like to hand the conference over to Peter Kazius, Investor Relations Director. Please go ahead, sir.
Yes, good morning, everyone. Welcome to the Corbion full year 2022 results call. With us today are Olivier Rigaud, our CEO, and Eddy van Rhede van der Kloot, our CFO. My name is Peter Kazius , Head of Investor Relations. As usual, there is a slide deck available from our website if you go to corbion.com, Investor Relations Financial Publications. I would now like to hand over to Olivier.
Thank you, Peter, and good morning, everyone. Welcome again to this 2022 Corbion's results. I will start with the first slides on our company purpose. At Corbion, we feel very strong about what we are standing for, preserving what matters. Today, 65% of our business is aligned behind three Sustainable Development Goals. This is up from 60% in 2021, with an ambition to be at 80% by 2030.
Moving on to the next slide on fiscal year 2022 key points and key results. We delivered in 2022 a record year in organic sales growth and Adjusted EBITDA delivery. All key financial metrics were within the earlier provided guidance, with an organic sales growth for core of 24.3%, and this was driven by all three business units.
The volume mix was 5.6% and a price impact of 18.7%. The total Adjusted EBITDA was close to EUR 185 million, so an organic growth of 17.9%. Last but not least, we delivered on our commitment to reduce our net debt EBITDA ratio down to 3 x.
Moving on to the second slight slide on key points. We made significant progress in delivering on our Advance in 2025. I'm feeling very confident of delivering updated initiatives and target that we presented at our last Capital Markets Day in December. On sustainability, we've made progress, and we are really ahead of schedule. I will come back on one major development, having, you know, our science-based target commitment increase to 1.5 degree C later in the deck.
We also successfully implemented price increases to mitigate rising input cost inflation. Here we speak about over EUR 240 million over 18 months, achieving unprecedented level of price increase. Algae omega-3 is another point worth highlighting. As you might remember, we set a target to get into a break-even situation in the course of 2022, back in the Advance 2025 original target.
We delivered on that promise, and this led to the creation of an Algae Ingredients business unit and also as a new reporting segment. Last but not least, we initiated the divestment of our Non-core emulsifier business. Now, let's dive on the next slide on the three business unit, and primarily on some of the business developments. First of all, starting with a Sustainable Food Solutions.
In preservation, we see a continuous momentum in terms of natural ingredients replacing synthetic and artificial preservatives. We also launched a new antioxidant platform, which is a very close adjacencies to the current business, by establishing key partnerships and seeding the market over 2022 to have an impact as from second half of 2023 and beyond in 2024.
In functional systems, we focused on shelf life extension, on food ferments as natural mold inhibitors, but also being very active in reformulation, driven by some raw material shortages, where our customers have been really asking to support them in reformulating their recipes. We've done that as well, you know, in some reformulations driven by cost inflation.
Another adjacency we launched in terms of shelf life extension in the functional systems is a launch of a new dairy stabilizer systems, being the first in road from Corbion into the dairy category, opening also new growth opportunities. Moving now to the Lactic Acid & Specialties, we saw a continued very strong growth in the medical biopolymer segment.
The lactic acid sales to the PLA declined, sorry, in H2 2022 due to the PLA market weakness that we previously reported. We'll come back to that at a later stage. The growth in the semiconductor market continued, although Q4 saw some signals of temporary softness in the market. Finally, we've made and are still making very good progress in line with our plans to complete the buildup of our new circular lactic acid plant in Thailand.
As a reminder, this is planned to be commissioned by the end of 2023. On our third newly created business unit, Algae Ingredients, we've seen across 2022 a significant traction in new customer adoption of our solutions. June was the first time we were breakeven on EBITDA, and we've been profitable since then in that division.
We've been busy to invest to enhance our production capacity to allow growth on 2023 and beyond, but also to create flexibility in that plant in Brazil to address new categories as pet nutrition, thus diversifying from aquaculture, and also, I think, a way to also optimize our margin. Moving to next slide and coming back to the sustainability of value proposition of Corbion.
I mentioned, I mean, the commitment to the 1.5 degree. This is the most ambitious goal of the Paris Agreement, if you might remember. We are pretty proud of that. We've been raising the bar over the last years. The SBT's target approved our proposal by November. We are now on a journey and the path to execute on that ambitious target, further reducing our emission and improving our sustainability profile.
How does it translate? Let's look at the next slide, where basically we've been raising the bar on the first four bullets. I will not comment them all, but basically whether it is about indeed, the percentage of net sales aligned behind the three SDGs that we have prioritized.
Also we are moving to a strong reduction in, for the first time in absolute CO2 reduction on Scope 1 and 2, and realign our base versus 2021, raising the target on LCAs and also, I mean, introduced social value assessments on our products. Quite a lot happening on that front as well. On this, let me hand over to Eddy to dive into the financial performance of 2022.
Thank you very much, Olivier Rigaud. Good day, everybody. I understand maybe the visuals come in a bit with a delay. I will call out the page numbers I'm on. Let's start with the proper loss, which is page 10. We've been growing the top line very nicely last year to 11 to about EUR 1.5 billion in terms of revenues. That's a 36% increase versus 2021.
Within that, the organic growth has been for the total company, 24.6%. Also Q4, we ended up with a very nice growth pace, organically growing close to 27% for the business. That translated in an Adjusted EBITDA growth of 36% for the full year. Again, looking on an organic basis, that's a 17.9% organic increase for the year.
Margin profile for the total company has been relatively flat over full year versus 2021. Looking at the adjustment line, that's always where we are disclosing certain special elements. Last year, you see a EUR 10+ billion for the full year. That was very much caused by divestment of a land we held in Netherlands in Breda. The book profit on that, and also the Frozen Dough activities that we let go in 2021.
In 2022, we also had some special effects, and the most notable one is the Totowa warehouse sale that we already communicated about earlier in 2022. That translate then to an operating result increase of 35% from EUR 82 million - EUR 100 million, close to EUR 111 million. Financial income has been less negative.
Financial income and expense, I should say, has been less negative in 2022 versus 2021. That's because we have quite some support from stronger currencies on our intercompany loans that are also recorded in there. Result on joint ventures. That's of course, the results, especially on the PLA joint venture, less positive than 2021, and that is really reflecting the underlying operational developments in the business which we can talk about later.
Taxes, more negative than it was in 2021, and it's not so much that 2022 was special. That's more a normal tax level, I would say, with the operational results. It's really that the 2021 figures had been positively impacted by the deferred tax asset that we could record in conjunction with the sale of land in Netherlands.
Bottom line, that translates to a 15%, close to 15% increase on the result after tax from EUR 78 million - EUR 90 million. Let's take a deeper dive on the different business components. Page 11 is our Sustainable Food Solutions business. We've been growing that organically for the full year at a pace of 21.5%.
Within that, a big part has been caused by increases of prices, we've talked about it on earlier occasions, the massive price increases that we have put through the market over units. Underlying, if you look at the volume plus mix. Both dynamics that has shown a pretty consistent pattern over the whole of 2022 to the comparable basis, of course, of 2021.
That's on the total a 3.6% increase of volume plus mix effects for the total SLS business. The EBITDA as an absolute amount has grown very nicely over the year from a EUR 75 million level to EUR 96 million. A good EUR 21 million up.
The margin has been slightly coming down from 12.9% - 12.3%, and that is also partly caused by this huge effort in passing through price increases. Mathematically, you will see some margin erosion as a consequence of that. Next page, Lactic Acid & Specialties segment. I'm on page 12 now. Also there a nice growth, 20.4% organically for the full year, but that has been fully caused by pricing.
If you look underlying to the volume plus mix developments, that has effectively been coming in neutral and zero. Of course, the PLA-related activities are also had an impact on that development for the full year. Also here, a nice step up in the absolute amount of Adjusted EBITDA by about EUR 10 million.
On the margin profile, bit similar pattern in terms for the full year and a nice ramp-up still at the last quarter for the year with a slightly higher margin than for the rest of the year, close to 18%. We will move to the Algae Ingredients business, page 13. We are there, of course, coming from a lower base, so very much on a very high growth pace, 115% for the full year.
Also in the last quarter, close to 200% growth. Within that, really the volume component is very important in here. That's really catering for the far majority of this growth. We have announced earlier occasions that we broke even for EBITDA since June this year. That is also what you see here.
For the full year, you see a -3.3 EBITDA. I'd like to really highlight, and you will find a very nice composition table at the end of the pack that we have. Now that we have this new segment, Algae Ingredients, we have changed our allocation of especially our G&A cost line. It means now also Algae Ingredients has to take its fair share of incurring those costs.
For a full year, that has been a level of EUR 3.5 million. Without that carrying of G&A, the underlying EBITDA would have been positively even for the full year at EUR 0.2 million. That's the dynamics there. Very nice growth delivery and profitability increases over the year.
Moving to Incubator, page 14. There you see a step up in the investments we're making expressed in the Adjusted EBITDA being negative from a level of EUR -3 million to a much larger level, EUR -9 million in 2022. Part of that is being caused because the algae-related R&D efforts had a focus in 2021, still very much on the Algae Ingredients segment. Therefore, a big share of those costs were allocated to the Algae Ingredients, ingredient segment.
I think about introducing the new strains that we talked about in our Brazil plant. In 2022, the focus of the algae-related R&D capabilities are more looking at other initiatives from the algae portfolio, which we talked about earlier occasions.
The PLA joint venture results. This is on a 100% basis, page 15. Here, the EBITDA margin stayed about 26% for the full year. What strikes here is especially the lower margin profile in the last quarter.
What we have been doing here is in the joint venture, we have an active approach to our working capital management and b ecause of the dynamics that we talked about on the earlier occasion on PLA, we were getting to too high levels of inventory, and we decided to temporarily cease the production in the joint venture for about 10 weeks. This has been happening since mid-November to end of January. That's now behind us. We have ceased production, and that means that all the operational costs are flowing through the P&L.
That has really had a downward pressure, if you will, on the EBITDA delivery and the margin profile for Q4. After January, we are now back and started to produce again, catering for their expected further developments. Moving to Non-core. That is our U.S. emulsifier activities, which we have announced we will divest.
Within that, very nice growth delivery, both from top line but also EBITDA, close to a doubling of the EBITDA delivery from about EUR 18 million in 2021 to EUR 34 million in 2022. Very nice delivery and very successful also passing through here of all the input cost dynamics into increased prices.
One page on the funding ratio. An important theme we also discussed in the Capital Markets Day back in December. We've been able to improve the ratio from the midpoint in June last year, where we were closing at 3.3 terms. I'm talking here about the covenant net debt. Towards a level of 3.0 by the end of the year. That fits very nicely in terms of the guidance I've been giving in December, where we stated we would end within the range of 2.9-3.2. We are on the good side of that range, if you will.
Going forward, we indicated that we further are expecting to recover and improve the ratio to a level of 2.5-2.9 in that range towards the end of the year. This is all still not taking into account any positive impact from the divestments proceeds of the emulsifiers business in the course of this year. With that, I hand over back to Olivier on the outlook.
Yeah. Thanks, Eddy. Let's go to the outlook, final page. First of all, why are we feeling confident about 23 outlook? This is in light of the current dynamics we see in the business. It's also why we reconfirm the volume mix organic growth of core activities between 5%-8%, with SFS growth rate expected to be more skewed across H2, driven by phasing of some of the expansion plans, like our investments in food ferments.
In Lactic Acid & Specialties, growth rate in H1 will be impacted by lower sales to the PLA joint venture. In algae, we continue to see very strong growth in aquaculture, but also trading up in the new categories, as I mentioned earlier, as pet nutrition.
All in all, I am very excited by the new development in our core portfolio, such as mold inhibitors in SFS, the development in slow-release drug delivery in our biomaterials biomedical business in LAS, and the good visibility we have on our algae contracts for 2023. We also see the potential for encouraging margin development as the year progresses. We reconfirm the Adjusted EBITDA organic growth for the core activity between 15% and 20% range.
This is coming from both volume and mix improvement, as well as operational efficiencies, such as the ongoing optimization we are doing in our lactic acid production network. On CapEx, we reconfirm the guidance from EUR 160 million and EUR 190 million. 2022 was the peak year of investment in our 2025 strategic period.
Last but not least, in terms of debt to EBITDA ratio, we are expected to further reduce it down to 2.5-2.9 range by the end of 2023, excluding the positive impact upon the realization of the divestment of our emulsifier business.
As a conclusion, although there is some disappointment in Q4 EBITDA delivery, we are expecting some of these rolling over in Q1, but I'm feeling increasingly confident in our full year guidance, and we are looking forward to updating you again as the year progresses. Thank you. Now let's open it up for Q&A.
Thank you, sir. If any participant would like to ask a question, please press star one and one on the telephone. If you wish to cancel this request, you can please press star one and one again. Once again, it's star one and one if you want to ask any question. If you wish to cancel your question, you can please press star one and one again. There will be a short pause while participants register for question.
Okay, let's take the first.
We are now going to take our first question. The first question comes from the line of Alex Sloane from Barclays. Please ask your question. Your line is open.
Yeah. Hi. Morning, all. Thanks for taking the questions. A few from me, please. Just firstly on PLA and the potential inflection there. I mean, good to hear that you've restarted production in January.
Is that on the basis of kind of seeing any signs of renewed demand from China reopening? It's more still thinking about a kind of a second half recovery at this point? Just on the second one, I mean, working capital was obviously a large outflow for the year overall and was maybe slightly higher than consensus had been modeling.
What are you thinking in terms of, you know, working capital outlook for the business in 2023? Just finally, just on the emulsifiers, disposal process, I wonder if you could talk to, you know, how that's going and your confidence levels that that will indeed, complete in 2023? Thanks.
Thank you, Alex. I will answer the PLA and maybe the other two questions. On PLA, indeed, as we discussed before, the major impact came from the Chinese downturn and the lockdown, as we explained last year. So far, we see a continuation of that trend across Q1. We are indeed still not expecting any major recovery prior to H2.
What we've been really very active with in the meantime, in terms of mitigation and actions, is going for indeed new categories development to also reduce dependencies to packaging. Also pushing in terms some of geographical expansions and activity, leveraging our partner in the joint venture go to market. This is again in place since early this year.
Last is negotiating with some of our key customers longer term sales agreement to secure further development. Back to your initial question, we expect still the market to remain soft over the H1 and China reopening or having an impact over H2. Eddy, maybe you want to take the working capital.
Yeah, on the working capital, I think we're happy on the components of the debtor development and the payables developments. Also the debtors, we not see any, for example, aging deterioration, anything like that. I think those are very much in control and developing very consistently.
When we talk about working capital development, it is really the inventory position that we talk about. Looking in what happened last year, we had an increase of about EUR 100 million value of inventory. That's ends 2022 versus ends 2021. Within that, about EUR 11 million has been caused by currencies. Stronger dollars for example. That's something of course we cannot really influence.
The second component that is the largest, it's about EUR 50 million, is all to do with price, it means more expensive kilos of inventory about the input costs that we've seen rising, translating in more expensive kilos. Of course as time will go by and once inflation factors on raw materials, packaging, energy and freight will come down, some of that value should reverse.
Of course, it's very hard for us to make predictions on how all these input cost factors will develop as time goes by. The third component with the inventory, that's something we can influence directly ourselves. That is the volume component of inventory. Really the amount of kilos if you will, both raw materials and finished goods. That has been increasing by about EUR 40 million in last year.
That is something we actively are working on in the different parts of the business. It's a multidisciplinary approach as you can imagine. We are bound to recapture significant part of that increase in the course of this year.
That's on the working capital. Your question on the progress we're making on Emulsifiers. We cannot share too much on that. But being said that, we are making very good progress in the process. We are talking with multiple parties, and we are very confident that we will close out this transaction in the course of 2023. Very much also what we have shared during the Capital Markets Day, and I want to leave it at that for a moment.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Patrick Roquas from Kepler Cheuvreux. Please ask your question.
Yeah, good morning, gentlemen. Thank you for taking my questions. I've got a couple. The first is on SFS. You did not provide guidance during the Capital Markets Day for Q4, but, yeah, SFS was below at least our expectations, and the recovery was simply not as pronounced as seen in Q2 and Q3.
What happened there, and could you quantify some of the effects? T hen second on Algae. Yeah, great to see the performance. If I'm right, there were some tax losses carry forward within your Brazilian business. Can you remind us here, what's the room and what's the impact on your corporate tax rate, for example, for 2023?
Finally, aside from capacity expansion, what are the options for you to kind of explore all the benefits or let's say, grab all the growth prospects that are out there and is licensing to third parties, one of the options? Thank you very much.
Thank you, Patrick. On the SFS actually, yeah, we didn't update that in detail with the last Capital Markets Day. What I could say is that the working capital management we've seen in the market that are still going on, and actually we are also doing ourself, is something that we had anticipated actually, already at that time. We didn't communicate about it and it has also been factored in our 2023 outlook.
Basically where what we've seen as dynamic and this is what we anticipate, is that supply chain normalizing. If you remember the whole crisis we've had, basically in the course of 2021 and 2022, customer did overstock. We did overstock as well to secure supply and make sure we had business continuity.
Now that things have been relaxing massively in terms of containers availability, truck drivers availability, there is no need to have a higher level of inventories. We've seen our customers being more disciplined and we are doing the same. We had anticipated. Yeah, we didn't communicate, but it was anticipated and it was factored in our outlook. On Algae, I will answer on the growth part. I will let Eddy discuss on the tax item you mentioned.
Clearly we are now of course having the confirmation that, you know, our model on Algae is proven and in terms of course, not only profitability but with the developing market and adjacent market next to aquaculture. Indeed, the question is being posed now and from the strategic aspect to what's coming next, and we are actively working on this now.
Again, if you see the dynamic of that market, we are in a very favorable context where basically now we have a real solid adoption, based on the very structural trends. First of all, consumers understanding, you know, the sustainability aspect of, you know, good aquaculture, not relying on wild fish oil.
Next to this, you see that there is a structural issue with wild fish oil in terms of supply and demand going forward that will only increase going forward. We're gonna have to make strategic decision in the coming month, meaning, you know, before the end of 2023 on what's next for us. We will keep you posted about exactly this next step.
At that stage, we do not exclude indeed any more, whether it is licensing or whatever. I think I'm feeling pretty good about it because the algae platforms offer quite a lot of flexibility in terms of arrays of categories, but also of products going forward. Eddy, maybe you want to take the tax element.
Patrick, your question on tax. I think what you're referring maybe to is that in the course of this year, and especially in the last quarter, we had some support of sales tax that we could recognize. Not so much income tax, but really corporate income tax and sales tax.
You know, Brazil is pretty complicated with all kinds of tax regulations, but that has been a support. That has not been the reason, the underlying reason why we had a very strong finish of Algae Ingredients in Q4 out of EUR 1.9 million EBITDA that we disclosed. There was some support. On your corporate income tax, that's always something we disclose as part of our annual report, that comes out about a month from now.
We always find the position on income tax that, yes, in Brazil, we have in aggregate in Brazil, there's some income tax losses that we have not recognized yet on the balance sheet. The further progress we're making in Brazil, we can further recognize that in the future. I really want to leave that question once we come out with the annual report if that's okay.
Okay. That's clear. Thank you.
We are now going to proceed with our next question. The questions come from the line of Robert Jan from ABN AMRO – ODDO BHF. Please state your question.
Yes. Hi. Good morning, all, and thanks for taking the questions. I have a few left. First I want to come back on the Q4 EBITDA of Sustainable Food Solutions. I had the same observation, namely, I had expected several million EUR higher EBITDA in Q4, and I do not fully understand the explanation. You talk about working capital management by your customers, but that says more about, at least I would assume about revenue and not so much about EBITDA.
I was wondering, is there anything specific why EBITDA is maybe a bit held back in Q4? You mentioned in the press release and also in the presentation the deliberate shedding of some lower margin beverage business, if that may be in effect in Q4. That is my first question.
Second, I noticed that in order to calculate net debt EBITDA for your covenant, you can always add, of course, dividend from the joint ventures. This year you added both the dividend for 2021 and for 2022. The dividend 2022 was also paid in 2022.
I was wondering, is there any reason for this timing difference compared to last year and what should we expect from that going forward? Lastly, maybe specific for Eddy, I think there was a one-off gain somewhere in the first half in the interest line. What can you say about normalized interest costs going forward, based on your now disclosed total net debt of EUR 700 million? Thank you.
I'm afraid I'm going to take all questions here. Let me give it a try.
That's fine.
On your Q4 SFS, that command we made already early in the year of the shedding of the lower margin business on beverages, that has been happening already in the earlier quarters as well. That's not a specific reason for Q4 as such.
I would really highlight two elements that are specifically on the EBITDA delivery as an absolute amount as is in Q4. One is the relatively lower volume base, so really lower sales in, just say in kilotons, compared also to earlier quarters. That is always a consistent pattern that we've seen from many, many years.
I think what Olivier also say is this year, the year-end effect has been more pronounced than other years because we tend to see more active working capital management of quite a few of our customers than what we've seen in earlier years. That had the more pronounced, I would say, volume reduction effect in the, in the, in the last quarter search.
On top of that, we are also looking, of course, at our inventory position. It's always. You really have to go very granular on a product level. Always when you produce, if you sell more than what you produce, so if your inventories come down, you need to look at what is your fixed cost component in that, in that stock positions. That really, that's what we call the absorption effect.
That has played out in Q4 specifically quite negatively in terms of EBITDA delivery in Q4 versus earlier quarters. That has really been a, yeah, a one-off effect, if you will, in the quarter a nd that's, yeah, will have ups and downs as quarters cruise by in terms of how the inventory position versus going to develop.
That I will say are two clear extra elements I will say on the EBITDA delivery search for SLS. On dividend, yes, well spotted indeed. In last year we had, in that sense, a bit of a different pattern in paying out a dividend out of the joint venture to the two shareholders. This, by the way, is always a mutual decision between this and TotalEnergies. It's not something we can drive ourselves.
It's always a joint decision as you understand. The usual pattern that we apply is that we try to get our dividends paid in the last month, if you will, of the running year. Basically it's not so much that 2022 has been yield on out.
It's really the 2021 payment in mutual consensus of how we have paid in the opening quarter of 2022 rather than in the last quarter of 2021. At that time, indeed, therefore you see a relatively higher paid out dividend than what you normally see in the year. It has been 2 x $700 million in that sense.
On your interest expense line, yeah, maybe the best thing is if I give you the average interest rate, I will share that with a couple of the markets by the way, what the position was then. Since then, of course, interest rates have increased a bit. If you look at our total debt structure and you apply the average interest rates, it's close to 2.7% at the moment. If you take that number versus the total debt outstanding, then you come at, as per today's markets, the interest expense line for basically that's level for this year.
Okay. That's very clear. To conclude on that dividend question, it's not necessarily the case that there will be no dividend then in 2023 because you tried to have it paid in the last, or towards the end of the actual year. Is that correct?
Exactly. Like I said, the usual pattern is that we decide on that in the last board meeting of the year, and then we usually have a payout in the last month of the year. As always, based on what's the dividend capacity in terms of results, and is there a dividendable revenues or results to be made?
Secondly, what is the cash flow outlook of the joint venture of course, because you don't want to pay dividend and then a month later have to get back with new cash injections in transmission. That's always the components that we as shareholders take into consideration when we come to the exact timing of the decision of the dividend fee. Yeah.
All right. Very clear. Thank you.
We are now going to take our next question. The next question comes from the line of Sebastian Bray from Berenberg. Please state your question.
Hello, good morning. Thank you for taking my questions. I would have three, please. I'll ask them one by one. Firstly, interest cost. There's been a few effects that have run through the P&L, mainly related to intercompany loans over the last two or three years. What is a decent figure in light of the increase of net debt to assume for the net financial expense of Corbion for 2023?
You picked the one wrong. Sorry. I think I just tried to answer that. That's 2.7% on the debt. That's our average debt structure. We get some offset by interest income from the joint venture loan that we have. Take 2.7%, that's the current market rates that we have, we're talking about.
The 2.7% is it's just literally take the net debt that was reported at the end of the year and think, well, it's the best part of 3% interest rate. Okay. That's understood. The second question is on Sustainable Food Solutions, and it comes back to a few that have been asked earlier.
I'm still not clear on what has led to the about 4 percentage point sequential decline in EBITDA margins. If it were customer destocking, one would expect that the volumes of this business would be under pressure in Q4.
Actually, relative to both my own expectations and those of the consumer ingredients sector, +4% is not bad growth. What's this? Just to understand here, I apologies, the line wasn't very good earlier. The main effect here is Corbion emptying its own inventories and underproducing in order to improve full year working capital. Is that right ?
Yeah. First of all, we say volume plus mix is 4%. It's not only volume. Volume came down, mix came up. It's the combined of those two effects. That is the 3.6% for the full year and also a similar pattern for Q4. That was 3.5%. You can find it in one of the disclosure tables. Yes, like I just said, the absorption effect, as we call it, has been negative in the last quarter, and there is a big component hitting in the food, in the Food Solutions space.
That's helpful, thank you. Can you remind me just of the logic before I move on to my last question of putting volume and mix together as opposed to price and mix?
Yeah, that's something we came out with in the Capital Markets Day, early December, where we said in a world where prices and input cost inflation, and thus our pricing, responses to that, sales price responses to that. Where we have seen now in a period of excessive price increases, getting in its own line.
You know, nobody knows exactly, of course, going forward is inflation going to continue? Will it stabilize? Will it reverse? Like we see for example, freight costs, energy, particularly in Europe, where it was full first very much on the rise, now it's completely in reverse. There's lots of pricing dynamics and input cost, inflation dynamics.
We think it is a better read on the underlying performance of our business to take that separate, disclose that separate, and show what then the volume plus mix is really developing over time. We think that that is a better read on how we are growing and developing our business 'c ause otherwise you get a very, you know, diluted, maybe, complex patterns to project it.
That's helpful, thank you. Just a question on pricing. At the start of this year, so the first two months, how are fee pricing and raw material baskets Corbion been performing? Has there been a widening of the spread between the price increases that have been implemented, and raw materials I assume are modestly deflationary, or has this developed in another way?
I will take that question, Sebastian. What we've seen is that the first part of this year, we had of course the benefit of the carryover of the whole pricing we did last year. Price indeed, we see some deflation. Eddy just mentioned freight and energy. We've seen some of the chemicals, not all over.
I think now obviously we are in a reverse situation than last year, where last year we've been managing of course very closely the pricing freeze almost every quarter and every month. Now we are looking at procurement and the trend is staying short on some of the procurement items and making sure that, you know, we cash in on the price stickiness.
That's, I think the key on this first part of the year. The price increase on the start of this year has been modest. This is what we planned, again, in our outlook, because most of it has been realized already across 2022. Now it's about really, I think the famous price stickiness as you see some relaxation in input cost. The big thing for me in 2023 is about indeed the price stickiness in the business. We see a step by step indeed there's some relaxing input cost elements.
That's helpful, thank you. Final one, Olivier. Do I sense that your enthusiasm for expanding PLA has waned a little bit in light of the margin performance of this business in 2022 b ecause the release doesn't mention anything about the ongoing negotiations with Total with regards to the potential site in France. Is it a plausible scenario that in a few months' time there's a press release saying that Corbion cuts at stake in the JV in return for reducing its capital commitment?
Yeah. This is, of course, this is just a speculation, Sebastian, but, yeah, of course, you know, in any decision we're gonna make, we will have the market conditions and the outlook in mind. Definitely. You know, and if I to answer your question straight, I mean, we are following this discussion very closely with our partnerr b ecause definitely, you know, we have to adapt to market circumstances evolution. All in all, if you look at PLA, yeah, you know, this is a very recent story. Remember we start in 2018.
If you see the growth pattern, you know, between 2018 and now, what you see is that basically, yeah, we've had a flattish -5% if you think about volume between 2022 - 2021, so it's not that, you know, the thing has been tanking. Just in the growth story with Valwhere, the CAGR was 15%, now it has been just flattish. I don't think there is nothing abnormal in, you know, as such a new product line development, which is new to the world, you know, to Corbion. Yeah, we'll keep you posted as the discussion with TotalEnergies evolves.
That's helpful. Thank you for taking my questions.
We are now going to take our next question. The question comes from the line of Fernand de Boer from Degroof Petercam. Please state your question.
Yes, good morning. It's Fernand de Boer from Degroof Petercam. Thank you for taking my questions. A couple are still left. Firstly, to come back on the PLA, I think early at the Capital Markets Day you said around 20% is probably the right margin for the PLA joint venture. Do you still think that is achievable in 2023? That's the first one. To come back on the Sustainable Food Solutions, I think Olivier, you said that the Q4, let's say, inventory adjustments are also taken into account in the guidance.
What do you exactly mean with that? Do you still assume that in 2023, and certainly in the first half, volumes will be down in Sustainable Food Solutions, or how do we have to read it, or just that they would normalize? These are the first two questions I had.
Can you take it with PLA and we'll answer the SFS.
Just on on PLA, indeed that's the statement I made in the in the Capital Markets Day. I think you need to look a bit what happened in Q4, of course, what has been the ending quarter in terms of margin profile. We gave the explanation in the temporary ceasing of the production plant, so that's was 1.5 months out of Q4.
Again, that will also be the full month of January for Q1. Don't expect a big recovery in Q1 in that sense for margin delivery. Yeah, we remain modest in our outlook, I would say, especially in the first half of the year for PLA developments. Second half of the year, we might have a recovery. I think we need to be a bit modest in our margin expectations for the total years, particularly, margin wise for the year.
May I follow up on PLA? What could you say at this moment about current market price for PLA? For me, the big question mark is, what gives you the confidence, let's say, new product developments will indeed start to deliver as from H2? We have been working when you started with PLA joint venture, you had, I think, more than 25 customers in all different kinds, working on all different kinds of applications. How will that work through now suddenly as from H2? Why not earlier?
On this one, Fernand, because it's like any other business, you know, when we start to see the softness, we start to put a lot of business development and pipeline development in place, actually, where we know that any pipeline from the briefs to, you know, the first business is a year. In some categories could be more.
In food usually it's a bit more, it depends on the category. When we've been reenergizing getting more, let's say, people on the ground, more application people in the joint venture back to, you know, mid last year, we see some of this development, you know, materializing. Yeah.
Next to, of course, at one point China gonna reverse trend because, you know, China has lots of the stock. When I combine these two things, when I look at our pipeline on one hand and to, yeah, the signal you get from China, although we don't see the change impacting the numbers yet. This is, I mean, how, what we base our assumption on H2 on PLA.
On the SFS guidance, back to, you know, our customer reducing their inventory, we see some continuation of that in Q1, although we expect, you know, this, I mean, to have less impact and to have a small positive in terms of volume and mix over Q1 for SFS. That's our expectation.
Okay. The PLA price at this moment in the market?
Sorry, I forgot your PLA price. So far on PLA, basically you know, we've been, I mean, as we communicated earlier, largely above the $3,000 on PLA, and we are still in that ballpark number today.
Okay. Thank you very much.
We are now going to proceed with our next question. The question's come from the line of Wim Hoste from KBC Securities. Please state your question.
Yes, good morning also from my side. Can you talk a little bit about demands in the semiconductor markets? Was Q4 a one-time weakness, and do you see that coming back fast and back to the previous levels? Can you maybe comment on that?
The second question would be on the potential ramp up scenario for the gypsum free plant. What might be the cost impact of ramping up that plant? I think then you start depreciation in that. Can you maybe talk about, yeah, the timing to fully ramp that up, the impact on the cost curve it might have, between ramp up or the start of production, and then the full utilization of the plant?
No. Yes. Wim, I will answer. On the semiconductor, indeed, we saw some softness in Q4, but nothing alarming at all because, you know, this is an industry which has this pattern, you know, where you cannot really make a statement from a quarter to another. What we've seen is that and still there is a number of investments because, you know, the market is still short and there are some big investments coming on stream today that will have a positive impact in the course of the next two years. We are not specifically worried about that.
On the opposite, you know, at one point, the thing is that today we supply that business from a highly specialized plant in the Netherlands here in Amsterdam, which is the only one in the world to get this very pure quality level at, you know, 99.999% of purity on this green solvent.
At one point, it's about, you know, expand this capacity on the first semiconductor. This is more the type of discussion I think we're gonna have over the next 18, 24 months. This business is becoming so important and crucial that at one point you might need to have dual sourcing in terms of plant for security of supply and business continuity. This is something we are studying as we speak. Eddy, I think, do you want to tackle the Eagle One?
Eagle One, Wim, I think I shared already in the Capital Markets Day, please be referred back to that sheet already quite explicitly what the contribution, EBITDA contribution is once Eagle One is fully up and running. Basically, that is a net outcome of cost savings on the variable cost line because we are having a much more efficient process making lactic acid, that is a savings compared to conventional technology.
Of course, you need to staff it, you need to maintain the plant, therefore you have needs to staff up in your fixed expense line. The combination of the two gives an EBITDA contribution. How does it pan out next year? The plant will become operational by the end of this year.
Yes, depreciation will start to kick in next year and take, say for example, the 10% level of the CapEx that we have announced. That will be depreciation line for years impact, but not hitting EBITDA obviously, because that's exclusive depreciation. Operationally, yeah, it depends all about how quickly we are able to ramp up the plant to full capacity.
Whenever we have the possibility, we will use this plant as maximum as possible because this is the cheapest plant to operate for us. That's, that is something, yeah, that we have to go through next year, because it always takes some periods to go through the learning curve of a new plant. This is then also in the terms of technology and the newer and newer type of technology. That will take some periods.
If I may add to that, as you know, I think one of the strengths we have because of the lactic acid plant network, having these five global plants, is to be able indeed to max out capacity when we have the better cost position and also the best CO2 footprint. Will be the case with this new plant in Thailand.
One of the things is that, obviously, we're gonna max out that value, you know, as fast as we can. We believe there is a lot of value creation going forward, starting in 2024 when we do that. To maybe give you some granularity, where do we stand, because these are, as you know, massive plants.
We've already started commissioning of utilities in that part, so we know when you speak about different utilities side and all the side processes. This is progressing very well as we speak. Obviously, the key part of the commissioning will happen over Q4 when you start to put the bugs, the bacteria in the system and get the first batches. So far we are really well in line in this schedule a nd the extensive commissioning will happen really over the second half.
Okay. Clear. One other question if I may.
Of course.
Can you maybe comment on the PLA landscape? I think in previous calls there was a discussion that some capacity was mothballed by Galactic's Chinese partner. Is there any change to that situation, but also in general to the PLA production landscape?
Actually, what happened in China obviously has been impacting quite a lot of these projects that were announced in China. The situation in the Chinese capacity is also. I mean, when we look at the statistics and what's going on is very similar to what we see ourselves.
In the sense that there is not a different pattern in terms of market share or market development. Obviously, you know, what's happening on this softness we've experienced last year, half year, has been also making people think about revising, you know, the millions of tons that were announced at the time. You know, this is now, you know, quite low profile, to being honest.
On that respect, you know, having a fully installed running capacity as we have in Thailand makes us confident as that as soon as the recovery in the Chinese reopening hits, we're gonna be there full steam.
Okay, clear. Thank you.
Yeah.
We are now going to proceed with our next question. Our last question come from the line of Alex Sloane from Barclays. Please state your question.
Hi. Yeah. Thank you for taking the follow-up. Just two very quick ones. Just in terms of the inventory reduction in SFS in Q4 and the profit drag that had, Are you expecting in your guidance for that impact to continue into 2023?
Then I guess more broadly on the 2023 guidance, I mean, it sounds like the 5%-8% volume mix target is gonna be certainly second half-weighted both in SFS and lactic and specialty on the top line. Would you expect kind of a similar phasing in the EBITDA growth, or might you get kinda more of the price stickiness benefit that you talked about in the first half to compensate for that? Thanks.
Maybe I can take this. I will give you an answer for the total core. We're very, very confident about the 15%-20% EBITDA growth, the organic EBITDA growth that we have reconfirmed for 2023. Also we do expect that we'll see that also in the opening quarters of the year. That will be back a little bit in that sense, the growth pattern.
By the way, a small thing, you say 5%-8% volume. I'd like to make a small adjustment there. We always say volume plus mix. That's really volume plus mix, that's the 5%-8%. It's not the volume that we are guiding for. Take a combination of the two.
Yeah. Yeah, sorry that I meant volume mix. The line was a bit bad there. Can I just confirm that you're saying for the 15%-20% that you're not expecting phasing there, that's the growth that you're expecting the first half?
No. When we talk about this skewing to the second half, that is more applicable for the top line development at a volume plus mix rather than the EBITDA growth delivery.
Okay. Very clear. Thank you.
We are less seeing a pattern of skewing towards the end of the year.
Super.
Mr. Rigaud, there are no more questions. Please continue with any points you wish to raise.
Let me close the call and thank you for all the questions. As I said, again, we discussed, although we had this disappointment in Q4 on EBITDA, I'm feeling increasingly confident in our full-year guidance and also as just Eddy mentioned. We're going to look forward to update you as the year progresses. Again, we're going to speak again for sure for the Q1 release. On this, have a very nice day. Goodbye.
This concludes the Corbion full year 2022 conference call on the third of March, 2023. Thank you for listening. You may now disconnect.