Ladies and gentlemen, thank you for standing by. Welcome to DSM's Conference Call on the First Half Year Results of 2020. Throughout today's presentation, all participants will be in a listen only mode. After the presentation, there will be So you need to ask questions. Now I would like to turn the call over to Mr.
Harzin. Please go ahead.
Thank you, operator. Good morning, and welcome to the conference call on our first half twenty twenty results. I'm joined on this call by our Co CEOs, Jelvin Natchez and Dmitry de Beze. Jelvin will give a short introduction, after which we will open the line for questions. As always, I need to caution you that this conference call may contain forward looking statements.
We can find the disclaimers about Forward looking statements are placed in the press release on our website. And with that, I hand over to Jill.
Thank you, Dave. Good morning, everyone, and welcome to this call on DSM's first half results 2020. I truly hope that you and your loved ones have managed to stay safe during these testing times. I have to say that we continue to be amazed by the resourcefulness and dissemination not only with our people, but also of our partners and customers. Together, we seem to be able to find new ways of working in order to keep our activities going, while at the same time keeping everyone safe and healthy.
In addition, within DSM, we have deliberately kept A strong focus on our long term ability to deliver on our purpose led and performance driven strategy, seeking the right balance between short term measures and continuing to build on our relevance for the future. This is visible amongst others in the decision to go ahead With the Urban acquisition in Q2, which strengthens our long term growth platform in specialty animal nutrition and enhances our diagnostic capabilities. It is also visible and material where we have accelerated our existing profit improvement initiatives without hindering our readiness to serve customers 20. This being said, let me turn now to our H1 results and start with the financial highlights on Page 3.
We are
pleased to report a solid A1, especially given the extraordinary market dynamics with an adjusted EBITDA slightly down on flat sales and a strong cash generation, up 33% year to date. Nutrition delivered a good performance with sales up 6% and the adjusted EBITDA up 5%, driven by solid underlying performance. Spikes in demand driven by COVID-nineteen did take place during the 6 month period, but with only a slightly positive overall effect. The first half is, of course, more challenging for materials with volumes down 14% compared to prior year and an adjusted EBITDA down 88%. Customer operations and end user demand deteriorated rapidly at the end of Q1 Moving to COVID-nineteen, the demand weakness persists things throughout Q2.
Now turning more specifically to the Q2 Two highlights. Let's go to Page 4. The market conditions during the Q2 developed broadly in line with the expectations as Communicated during our Q1 earnings call. We have seen continued solid business conditions in Nutrition for Q2, resulting in a 9% organic sales growth and 8% adjusted EBITDA growth, this time led by human nutrition, while animal nutrition drove the Q1 performance. Materials saw volumes down 21% with a gradually improving momentum towards the end of the quarter.
Market conditions impacted in particular our specialty portfolio exacerbating the translation from volume to EBITDA. To account for these developments, Materials undertook measures to minimize operating costs and cash outflows And as part of the further restructuring initiatives to improve performance, we'll implement a next phase of measures during the second half of the year. I'll extend on this remainder, but let me give you first the update on Nutrition, starting on Page 9. Overall, Nutrition delivered a healthy organic sales growth, up 5%, driven by higher volumes, predominantly in Animal Nutrition in the Q1 and in Human Nutrition in the 2nd quarter and supported by an estimated overall slight increase in sales related to COVID-nineteen. The adjusted EBITDA increased 5% and adjusted EBITDA margin remained stable at 21% versus last year.
The first half results were enhanced by 2 recent acquisitions, which accelerates our growth strategy, firmly focused On further building are DSM's Specialty Nutrition and Health Business, offering advanced and differentiated solutions. First, CSK, which brings taste, texture and biopreservation solutions in semi hard cheeses, strengthening DSM's student beverage offering. Secondly, Glyco, the only fully integrated The GMO supplier in the world, strengthening our innovation solutions in early life nutrition and with interesting developments in the areas of medical nutrition and
good food.
And finally, in June, we announced the acquisition of Herba Group expected to close in Q4. With this acquisition, DSM will gain market leadership in mitotoxin prevention, Increased its strong market position in animal gut health solution, added to its premix facilities and add Diagnostics and testing capabilities. Now let's move to Page 12 for Animal Nutrition. In the 1st 6 months, Animal Nutrition delivered a good 10% organic growth with a 7% volume increase, driven by COVID-nineteen related stocking efforts. The first half was, however, characterized by 2 very different quarters.
Q1 was fueled by accelerated processing by feed producers anticipating supply disruptions caused by COVID-nineteen together with a beneficial shift to protein seen as easy to prepare for home cooking the poultry and eggs. The second quarter saw some destocking slightly earlier than anticipated, especially in geography where headcount began to ease, leading to a more modest volume performance. The 2nd quarter also saw a strong 7% price effect, although this was owed mainly to the pricing of past 2 ingredients and FX related price increases in Brazil. Overall, conditions remain solid with shifts within geographies, species and channels playing to our broad portfolio in global support. Additionally, the effect of the African swine fever continues to unwind in China with DSM benefiting from the growth in professional wine production, although this was offset partly by new outbreaks in Vietnam and the Philippines.
Now moving to human nutrition, you go to Page 14. As with animal nutrition, human nutrition and health It was also characterized by very different quarters, resulting in an overall solid first half with 2% organic sales growth driven by volumes. At the end of a softer Q1, entry loading effects Cause our customers to replenish the supply chain and therefore a strong demand through April May for food and beverage and early life nutrition. In addition, the pandemic reinforced consumer attention to health and nutrition solution reflected in a continued Strong demand in dietary supplements. These market developments resulted in an 11% organic growth in Q2 with volumes up 13%, including the positive impact linked to COVID-nineteen.
By June, demand began to normalize with pantry unloading from households, but with demand levels for dietary supplements remaining higher than in 2019. Finally, our other nutrition businesses saw an overall slightly negative effect from COVID-nineteen as we show in more detail on Page 15. Now moving to materials on Page 17. Overall, the first half of the year saw a 14% decline in volumes with a 28% fall in EBITDA. Clearly, COVID-nineteen has significantly impacted our customers' operations and end user demand, and in particular, our specialty businesses percent in high performance plastics, dynama and foam.
Nevertheless, the long term trends The driver business in particular are high quality specialty businesses remain in place and we also see some signs of recovery. Although the timing and shape of the recovery remain very uncertain. As mentioned earlier, To counter near term conditions, we initiated strict cost control measures and minimized cash outflows in the first half. In the second half, we are implementing new actions as part of a wider set of restructuring initiatives aimed at improving business performance, which will deliver annualized recurring cost savings of €25,000,000 to €30,000,000 With our balanced approach, We do not undertake reactive measures that optimize the growth potential of our business, but Should we see persisting market issues in specific parts of our businesses, we are ready to take additional actions. Switching to Page 18.
During the Q2, volumes were down 20% to 25% in April It's down about 15%. Looking at the segments, Engineering Materials saw increasing weakness in the global automotive market, partly offset by stronger demand in packaging and medical applications. Resin volumes started to show some signs of recovery by the end of June, Functional materials continue to be affected by 5 gs investment delays. And projected materials saw orders being deferred as local and national governments focus their efforts on managing the pandemic. These market developments led to a 21% volume 20.
In the quarter with the full EBITDA impact exacerbated by near term adverse conditions in our Specialty businesses, Plus reaching minus 47%. Now moving briefly to our Innovation Center On Page 20, overall performance in the innovation center remained good in H1 with sales up 4% supported by Biomedical. In Q2, however, we recorded an 82,000,000 impairment on our investments in the Medici project, Following the decision by the poet DSM joint venture to mothball the 2nd generation bioethanol plant following continued technical challenges and the market deterioration recently. This brings us to the outlook on Page 24. Based on our first half performance Given the continued limited visibility of our Materials businesses, we maintain our outlook statement for the full year 2020, in line with our Q1 reporting.
And with this, I'd like to open the floor for question and answer. Thank you.
And the first question is from Mr. Thomas Mecklesworth. Go ahead please, sir.
Hi, Jean Levine. Hi, Dave. Thanks, Anthony. Thanks very much for the presentation. Two questions, if I may.
In terms of the 2% impact that you're calling out, can I read your comments that That's now expected to completely fade out in the Q3? I'm just trying to interpret The exit rate comments that you're making. And secondly, are there any updates On some of the innovation pipeline projects that are coming through, any new color or information that you could share with us there would be
very helpful. Thank you.
Good morning, Thomas. Dmitry, do you want to maybe add some color to
Yes.
A bit of background noise, but it could be me. So maybe on the materials today. So like you said, We have much of the ability to give any insight. So therefore, we gave you a bit of a background on how it developed over the quarter. And we're now in August, so I can give you a little bit of an update on July, but overall, we saw a 20% to 25% reduction in volume in So in May, which was minus 15% in June, where in July, we do To your 10% to 12% lower volume.
So you see some recovery, a different story For business segment, obviously, what we definitely see is that the automotive remains down Throughout Q2, and we feel that the company will take longer, mostly because the value chain doesn't take long. So it is a complicated value chain. So if there's an abrupt demand fallout, it will take a while, Even if demand is picking up for value chains to be up and running. So we expect automotive to be slow in Because of demand and the uptowns, but also because of the value chain. On the other hand, if you've seen building and construction, we reported pretty high improvements Throughout quarter 2 because the value chain is shorter, so if demand picks up, you can
The assumption is no longer being recorded.
And that is basically a differentiation to the end use segments on the 2. But I hope you give a little bit of feel Throughout the quarter, too, and the July rates on how we did that performance.
Very helpful.
And on the innovation side of mine, of course, there's a lot to be said. Now we can start Well, actually, Dimitri, do
you want to start with some
of the more human nutrition based innovation projects?
Yes, sure. So I think Avonsia is one of the key projects in Stevia. So in Avonsia, we basically have Supported to market, the safety on trading products in the test markets. During the last quarter, we said we would tax intact in the summer. That's still out there.
We do see, however, that some of the targeted customers were impacted by the lock some of the development activities where they basically needed their lap are delayed. But overall, There is still a clear, keen interest in our product. Also, the fermentation capacity is scaling up very successfully. So I think it's resulted. The only thing is that hopefully the development activities will last And that will be reopened.
We will open the call to speak ahead. Then in terms
of other human nutrition innovations,
I think you've seen that we've announced our agronomist with A drill on the plant based developments, canola pro related with great Plant based material, which is not only nice in terms of taste and history, but it's also high in nutritional value. And I think that is something that This is a unique combination. So just to give a bit of color, in addition to what we call the big innovation projects, I think there is a lot ongoing And obviously, the COVID-nineteen development in terms of immunity dietary supplements, probiotics, gut health Absolutely, please. Not only due in Colpus, but also for the company. That has a bit of color, Jody.
Yes. And let me And the whole The recorder is connected. Now we're recording, but that's okay. I'll add a little bit on the more animal nutrition side. So, what we're seeing And is there as well, the production is ramping up quite nicely.
So that's okay. And what we're seeing is that, of course, with the COVID Situation is less eating out and so the consumption of salmon is a bit down, but interestingly the number of fish in the water is actually a bit up As a result, so fee consumption is still very much there and our relevance is very good. So in terms of latest news, What we are we have a couple of things that have to tell us. For example, Rochamps, a French retailer is now selling shops with Veramaris. We're also working with one of the leading shrimp producers in the U.
S. To develop a vegetarian shrimp. Your shrimp doesn't eat Ishmael. And we are also hopefully going to be able to announce an additional European retailer distributing And Oferomaris salmon in addition to Causlan, Mudge and Pesto, which we already had on board. So It's progressing quite nicely.
And then on the Galanzius, which is twenty. Health Enzymes, if you remember, we had launched that in Latin America first. Now in the Q1, we have launched in Europe. And hopefully, still within this year, we will be able to launch in the APAC region. So that is also progressing nicely.
And then when it comes to clincal, the ESSER process is unfortunately a bit long, particularly when it comes to a new ingredient, something quite novel. They have been asking quite a bit of additional clarifying questions and certain additional data. We remain confident that our filing is of very good quality with over, I think, 35 peer reviewed studies. And we now look at probably a registration in 2021 given the additional questions being asked. But this is always one of the question marks which go along with the registration process page.
And so we're going through it step by step. So that's for highlights projects that of course has a lot of other innovations within the portfolio.
Great. Super helpful. Thank you for that color. Excellent.
Yes, good morning everyone and thanks for taking the question. The first one is on FX. Can you tell us what the impact of Negative cruises was on EBITDA in the 2nd quarter. What would you expect the full year impact to be assuming flat exchange rates going forward? And then secondly is on the PO joint venture.
I know it's just a small part of your investment case, but you explained already Why you more bold to plumber? Can you elaborate a little bit? And why you still believe you will be able to license out your technology? Thanks.
Yes. Good morning, Madeline. Let me take those 2. So first, indeed, it's good to remember that in the second quarter, We had about €10,000,000 of FX headwinds and we had flagged that and it's predominantly actually related to the Brazilian real The devalued strongly already in Q2. Now we've seen, of course, the foreign exchange change quite a bit in the last 2 weeks or so, particularly with the U.
S. Dollar We're seeing and as you know we tend to be long U. S. Dollar in materials and in nutrition. So we're probably looking That's a headwind with today's exchange rate of between €30,000,000 €40,000,000 for H2.
So unfortunately, Not a small headwind from FX at this point. And when it comes to BOE, so exactly what I tried To say in the introductory comments that the impairment is of the Liberty 1 assets, which are in the U. S. What we have Current from this journey is actually a lot in terms of IP on enzymes and yeast. So we have actually proven our technology, which is relevant 1st generation, 1.5 gs and 2 gs, and this is applicable to a number of sources.
So Unfortunately, we've come to the conclusion that almost over is actually quite a difficult cellulosic source to manage because it's so full of Gritz, among others, and that basically has a real physical impact on the processing plant. But The technology from an IT point of view can be very much applied to sugarcane by gas Well, rise on straw, something more homogeneous. And we currently, of course, have already some licensing income from the 1.5 gs space. So we will we do preserve the IP and the on-site manufacturing technology related to that. Unfortunately, the technical assets in Iowa we've had to impair.
That's very clear. Thank you, Geraldine.
The next question is from Mr. Laurence Alexander, Jefferies. Go ahead.
Good morning. Can you give a sense of scale for, what your total what you characterize as more specialty businesses within Nutrition? How you group that? And also the total sales going into plant based proteins, I know that you've put it as a Product family. And secondly, can you talk a little bit about trends in working capital and how you can bring working capital down as a percentage of sales?
Sure. Thanks, Laurence. Dmitri, do you want to start with the first two questions?
Yes. So your question about specialty business, I think we don't segment offices in business Specialty and this is non specialty. As you know, Navios' model is unique in combining our global product portfolio With an enormous amount of ingredients, I think, unheard of, and we're still working on adding ingredients to it. And then I'd highlight to, in the animal nutrition space, to regions and species, then in the human nutrition space, to regions and markets. And That sensation capability is creating this differentiation factor.
So that is how We segment our business and there is some transparency on some of the regions and in terms of human nutrition, in terms of the end use market. So that's how we look at it. So Overall, I think in our strategy, we've also indicated that the EBITDA quality for nutrition space is about 20%, So that creates that specialty business. So that's the background. Then in terms of plant based, obviously, plant based Development is there can be new developments over the last years.
We basically, with our confidence, think that we should play a role in that plant based area, especially in the DSM for specialties area, looking at meat alternatives And then dairy alternatives with our yeast extract, Vangelans and our premix solutions, as in Nigeria will be beaten up by the innovation part. And you've also seen that we've announced the joint venture with Bill in terms of Canola Pro. So it is an emerging market, So I wouldn't put any sales turnover can do it, but it's certainly an area where we feel that it adds to our Nutrition and Health Care.
Thanks, Dimitri. And then on working capital, absolutely. So here, if I look at the performance of the second quarter, Of course, I'm particularly happy with the step up in cash generation of 33% for the 6 months, so that's good. This is of course the result of a very deliberate focus on cash outflows and also a very big Focus on accounts receivable. So if I look at our DSO is down and our overused have never been as small as a percentage of sales.
So we've been very, very active here to make sure that we're not losing out. We also see that on the payables, it's Looking pretty good. Where it's high currently is on inventories. And I would say it's partly deliberate. So given the disruptions in the Supply chain now is not the time to try and tighten them too much.
And it's of course on materials linked to the lower sales That is to be expected. So to your question of where do we improve that we see the sales from here, Inventories remains the big number in this. And I think when the world becomes a little less unpredictable, we will push harder on
bringing inventory levels further down.
So that's on the
20. The
The next question is from Mr. Mathieu Yates, Bank of America. Go ahead please.
Hey, good morning, everyone. Just a couple of questions on the Nutrition division, please.
And this one was just
The profit growth was much less than the revenue growth in the quarter for Nutrition. I Just wondered why there wasn't a better drop through on the margin effects or mix go against you a bit here? And then the second question is specifically on the animal part of the portfolio.
As you said in the
intro, 2 very interesting quarters so far this year. It still sounds like there's some downward pressure on fee demand from the restaurant closures and the meat processing bottlenecks. So Just wondering what you were seeing in Q3 in terms of volume and pricing so far on the animal side?
Yes. Thanks, Matthew. Let me maybe tackle both of these. First, when it comes to the nutrition margin, there's a couple of things to remember here. One is Animal Nutrition.
In the Q1, we had a 7% price effect on Animal Nutrition, But that includes a couple of things that don't go down to the bottom line. One is the pricing on past few ingredients, that's nearly 3% of that 7%. And the other one is actually foreign exchange effects in Brazil. So we invoice in Brazilian real, but the prices are set in dollars and So that created an FX impact within the price column and that was about 2%. So with the 7, we've got about 2% Positive pricing in Animal Nutrition.
So that's not obvious to see when you look at the numbers at first. And of course, the other part is the foreign exchange effect that was asked earlier of about €10,000,000 in the quarter. So when you factor those 2 in, that's why you sort of end up to a I would call it stable, but maybe couple of A bit down on the margin on Nutrition. So that's on margin. And then, yes, Animal Nutrition in very contrast In the quarter, you remember the big sort of accelerated sourcing in Q1.
We saw that starting to unwind actually From May. And what we are seeing overall going forward is good business conditions, I would say. But we do expect a bit of the continued bit of normalization and destocking in Q3. So If you remember, the Q1 effect was around 6%. And here, we are expecting we are estimating that in Q2 it was 2% to 3%.
So logically we would have another piece of destocking in the Q3, but then with normalized conditions Thereafter. So it doesn't really change the fundamentals of the business. It's more a little bit the spikes 20. Linked to the corona
stuff. Very clear. Thanks, Geraldine.
Three questions. First is on Materials. Your planned restructurings in the second half leading to annual cost Savings of €25,000,000,000 $30,000,000 on an annualized basis. Can you talk about the actions you're planning related costs and also the timing of the benefits? The second question, again, on materials.
You have high value added products there. So you might have benefited from low raw material Pricing in the Q2, can you quantify them these performance and expect to go forward? And finally, A question on Animal Nutrition. I heard there is a new regulation by the Dutch government to cut CO2 emissions. So If the farmers has put ins in their feed, there might be an impact on DSM either on your feed additives Or once your Clean Color product is registered next year, maybe a very quick adoption for that product.
Maybe you can comment on that.
Thank you, Martin.
Start, Jimmy.
Yes. So on a material state, Indeed, we've announced, in addition to the program, which we already started last year in the mid-twenty 19, was already Slow market demand for materials and now with COVID-nineteen impacting the materials, we basically accelerate that program With restructuring and organizing around 25 to 30 annualized That has a few elements. 1 is in the operations as well as in the supply chain, Continuous improvement, certainly in aligning the supply chain on some of the areas where we think that recovery will be slow. Secondly, in the sourcing area, where we will share sourced materials, reach out to our suppliers. So switching savings are a second element of that program.
And the third one will be in efficiency and efficiency of R and D. And we expect that, that will have sort of a starting time in Q3, Q4. So the savings will come in towards the end of the year, predominantly in this year because we need to go through consultation processes. And before That is being implemented when we are at the end of Q3. So that's basically the color of timing.
And in terms of raw materials, Indeed, we had lower input prices in Q2. Remember that within the materials field, We have a strong portfolio where we feel that raw materials, input prices going up or down are not the main driver. Basically, it's clear on margin. And that basically means that if raw material prices go up, we try to hold on it for a while. And if our materials prices go down, for materials prices go down, we'll try to hold on it for a while.
If prices go up, we immediately That's integrated in our pricing. I think we've been very successful in that. So raw material input costs are the main drivers. Are you aware, by the way, if there is a lower input price, then you also need to reevaluate your stock. So it's happening a little bit.
So in Q2, Yes, there was a low rate surprise, but it didn't really impact our EBITDA to that extent. And then I think A and H for you, Charlene?
Yes, yes. Nikhil, and thank
you for your question on the divestment. It's actually a reflection of something a bit broader in Europe. So when I gave the Kinkou update, I should also have mentioned that while the registration is going on, the creating the market activities are Still very much progressing. And what we're seeing in particular is that the green deal, the EU green deal It's changing the landscape quite a bit. So, for instance, there's quite a lot of talk around the new climate law that would make It's binding to get to 0 by 2,050 and maybe even the binding targets by 2,030.
So that can be helpful. And then there's a whole sort of sum to talk strategy in Europe where basically the EU is starting to integrate the agricultural Space in the climate related strategies. And that does include, of course, methane emitted by livestock. So developments not only of the Dutch government, which are very much in line with this broader EU concept It's very relevant and actually helpful for us. So very fair point.
Thanks.
The next question is from Mr. Patrick Faif, UBS. Go ahead please.
Thank you and good morning everyone. A few questions please.
Two quick ones on materials.
You mentioned in your introductory remarks the delayed contract in Manila. You also quickly mentioned the 5 gs. Can you talk about when you would expect these Conference today is to come back and how do you see the scale and scale up opportunity for 5 gs in 2021?
And then a third question
on nutrition. You provided some very useful monthly trends for materials, Including July run rates, can you do the same for Nutrition, please?
Okay. Do you just take
the first one?
Yes. Then you can take out some of the elements of nutrition. I'm just joking. Anyway, on materials, thanks for the questions, indeed. So let me give some background on the Protective Materials business, so Dyneema, Normally, Dyneema business.
So the Dyneema business, you need to distinguish between 2 elements. 1 is the contracts portfolio. So those are commitments to call off certain contracts throughout the multiple year period. And the complex water control is very strong, and we've added 2 new umbrella complex Also in quarter 2. So the market is pretty strong.
The issue is that the call off by the national and local governments Law enforcement protection is done via the government, and they are currently handling another crisis, which is COVID-nineteen, And we, therefore, have not focused yet on calling on those contracts. So Call offs is the key issue. What we've seen is that was low in Q2. We do see with opening up Of some of the regions in the countries, and that is improving. So in that sense, we are Thinking towards the end of the year, that maybe could normalize a little bit, although it has COVID related impact.
But we certainly think that the call offs on the portfolio will normalize a little bit to the second half of the Yes. Then in terms of 4 gs 5 gs networks, indeed, we are one of the main players in fiber optic materials. Since with COVID-nineteen, this has initiated a new wave of activities. I mean, it was already there That 4 gs will be replaced by 5 gs in a sort of transition mode. That was delayed because people were waiting for investments on 4 gs because They wanted to go to 5 gs.
And if 5 gs will not take off, they need to accelerate 4 gs investments. We hope COVID-nineteen And accelerated acquisition process on projects. We've seen projects now being started, and that means that there's normally a lead time of 6 to 9 months before that We request our material, so certainly towards the end of the year and in 2021, we expect that business to tick up.
Thanks, Dimitri. And to your question on a monthly split for nutrition. I think it's probably worth me mentioning here that we are only providing for monthly split because of a lack of guidance on materials and we fully And that you're trying to understand the dynamics in that space in particular. Now of course, in Nutrition, we provide an outlook for the year. So That's a bit different.
So we'd rather not go into the monthly space, but nonetheless add a little bit of color maybe to what has already been said. So on Animal Nutrition, you remember we said there was clearly a stocking effect in Q1, destocking in Q2, And we expect to get more of that going forward in Q3. So that's on Animal Nutrition. On Human Nutrition, we saw really the big acceleration Being at the start of Q2 and the 1st 2 months, then in June, and we started seeing a normalizing. Although that is potentially the case for food and beverage and early diet nutrition, while dietary supplements remain Strong.
So that's the dynamics in terms of the split within Q2. Now if I add to this because there's a lot of moving parts 20. Our Personal Care and Aroma business continued to have a negative impact. That is mainly the Sun Filter business That clearly is still COVID impacted while the aromas typically when it comes to going into detergent is doing okay. We saw in food specialties a broadly neutral impact.
That is very much continued to be a strong momentum The savory and for packaged foods and dairy, whereas beverages, different cover bidding Q2, particularly brewing, That's still impacted by the lessor eating out of home demand. And then finally, hydropolloids was Clearly impacted in Q1 because our operations on China, especially a good Q2 on the back of that and then we'll probably normalize in Q3. That's the simplest summary I can provide.
Thank you very much.
The next question is from Ms. Katie Nakamura. Please go ahead please.
Hi, good morning, Geraldine. Good morning, Dmitry.
Two questions from my side focusing on human nutrition. Given the strength of the human AURVEVA growth number, did you gain share in dietary supplements or in immunity related products In the first half? And then secondly, relating to that, I would
just like to get
your thoughts on your medium and long term outlook And a broader dietary supplement space, maybe some specifics are in the different categories within that, particularly on the probiotics side? Thank you.
Yes. Thank you for that. Let me take those. So I think building on what Geraldine just said, I think we have seen 3 Trends in the human nutrition space and then I'll come back to the dietary supplement. So, what we see is definitely the Supply chain uncertainties related to sensitivity.
Basically, that has impacted Quite the value chain. That is obviously a short term effect. And the whole balance between foodservice and home heating is an element that maybe that will rebalance. But there's a third element. What we think that book is fair to say is the continued elevated demand for immuno optimizing products And that's what the criteria of Shopkins and Medical.
So it's very difficult to say whether we gain market share, but I think in terms of what we have done in In terms of sales growth of the income, it's clearly impressive for what we have shown. And with our global portfolio and our investment to market in dietary supplements, I do see that we have strengthened our position. So what do we expect from dietary settlements? We basically have seen that this whole COVID circumstances have created a advantage on how nutrition helps your health And we think it's there to stay, obviously, with vitamins, with probiotics, with all elements of ingredients, which Improved mix, vision and health. So that is something where we work hard on and we feel that it is an absolute impact.
In terms of probiotics, obviously, probiotics and improving the immune system helps. We have a very good position by our eye health In our Constell brand, not only in the U. S. But also into Asia. So that's absolutely a category which 20.
It is benefiting in combination with dietary supplements as such.
Very clear. Thank you.
The next question is from Mr. JPMorgan, go ahead, please.
Yes. Hi. Thanks. Just coming back to the write down on the Poet JV, I think it's a broader question, The Innovation Center, capital employed was just around 600,000,000 plusminus a few million As of the end of 2019, I mean, is there a change in terms of how There is a sort of focus around monetization of capital employed on the innovation sector projects Because to some extent, the group returns at the moment are being diluted from that innovation center, capital employed. So Any change in how you guys monitor your progress around monetizing some of the spendings on innovation projects?
Thank you.
Yes, thanks for this question. Now I have to say that this impairment of power doesn't really It's changed the way that we look at innovation. I mean, it's we're very conscious that if you want to be a science based innovation driven company, you do have to invest In innovation projects and we've put together the innovation center in order to facilitate that. Unfortunately, in the case of 2nd generation biofuels from Kornstover to be precise, has Turned out to be a real challenge from the mechanical engineering point of view. But as we said, the high things that we developed there is actually the backbone And our capabilities is the backbone of some of the other big projects that we have such as Adantian, Viramaris that are all Biotech based has strengthened biosynthesis capabilities and our biotech center in health in particular It is now enabling us to develop in many different aspects of our nutrition and health space, our biosynthesis.
So No, it doesn't really change. Of course, we do want to try and get as much return on capital as we can from these growth areas. The likes of innovation, it's always the same pattern. At first, you have to invest and then you get the returns. So it is the part of the group where that KPI will always look a bit challenged.
But I do believe that We have a very rich portfolio of innovation coming through. In this case, unfortunately, we've had to impair this one.
Thank you.
And that leaves us basically public for a last question. And we're closing now to 10 o'clock. So operator, let's do another last Question.
Okay. The last question is from Mr. Brunt Van Stegman, Bernstein. Go ahead please.
Thanks very much for squeezing me in. I'll give it 21 then. Can I ask you on the Materials business, please? It's been pretty mixed Performance especially contrasted to the resilience of the nutrition cluster. And you mentioned at the beginning as well But you expect a recovery to be relatively slow.
Does that change in any way Your view strategically on that business, please. And how do you see the longer term trajectory in the materials business develop? Thank you.
Yes, let me take one and answer that question. And I think for me today, These circumstances are unprecedented. And I think, Sandy, there is no proxy for quality of any activity today And certainly no reason to review our strategic course. I think Body Ice Hockey Materials business is not GDP related to synthetic dividend. And certainly, it doesn't have any proxy for the value of any business.
To your point, that there is a slow recovery, That is only for the automotive part, which is 18% of materials. But in building and construction, electronics, The Dyneema bit, the cyber optic materials, materials from the medical space, we do feel that There is a quicker recovery. So we need to sub segment. That's also one on the reason why in terms of our restructuring program. We're basically Not implementing any of the trade moves because that would be relatively unwise, to put it politely, To restructure and save costs where you take a right long term future.
So we still strongly believe in that future. We've also seen that there is huge innovation potential, and we just need to weather the storm and to create visibility to the innovation. So in that sense, It's a bit of a long answer to your, I think, fair question. But no, we don't see, at this moment in time, no region to review our strategic plans.
Great. Thank you.
I'm going to turn the second question. You still have the opportunity. No? Okay. Then that brings us then to the Q and A for today.
If you have additional questions, as you know, please don't hesitate to reach out to the Investor Relations team. And Viki, do you want to make some closing remarks? Yes. Thank you, Dave.
Thank you, everybody. Just to wrap up, we have delivered a solid result in a highly dynamic environment And nutrition continues to do well with solid business conditions in animal and in human, hopefully confirming our long term growth drivers. And to remind you, Materials is a core to the business and the current environment is not derailing us from achieving the potential for these businesses. And we will continue to take a balanced approach to manage near term challenges while pursuing at the same time our strategic goals. While COVID-nineteen could be quite disruptive on our lives and business, we also feel that as a science based company with a strong focus on sustainable innovation, We are very well positioned for the future.
And Dave, before we wrap up, shall we remind our audience about our virtual
Investor Day? Yes, it would indeed not hurt. You're right. We unfortunately have to decide to abandon the original plan. As You probably recall, we planned our investor event in London on the 4th November, nicely arranged venues that we have.
But COVID is changing also this plan. So indeed, we have to change it to a virtual event. And that means that This Capital Markets Day, which then will be actually only a half day, it's a Capital Markets Day, will be done virtual. The information you can find on our website and that investor event will focus on our nutrition growth strategies and our innovation pipeline And with this said, we have to conclude today's conference call. As said earlier, any further questions, please reach out to us.
So rest need to thank you for participating today. And then back to the operator.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for attending. You may now disconnect your lines. Have a nice day.