Ladies and gentlemen, welcome to the Novonesis Q1 2026 conference call. I'm Lorenzo, the Chorus Call operator. I would like to remind you that all participants will be listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for question at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Tobias Cornelius Björklund. Please go ahead.
Thank you, very much operator, and welcome everyone to Novonesis conference call for the first quarter of 2026. As mentioned, my name is Tobias Bjorklund, and I'm heading up investor relations here at Novonesis. In this call, our CEO, Ester Baiget, and our CFO, Rainer Lehmann, will review our performance as well as the outlook for 2026. Also attending today's call, we have Tina Fanø, EVP of Planetary Health Biosolutions. We have Henrik Jørck Nielsen , EVP of Human Health Biosolutions, Andrew Taylor, EVP of Food & Beverage Biosolutions, and Claus Crone Fuglsang, Chief Scientific Officer. The conference call will take about 50 minutes, including Q&A. Let's change to the next slide. As usual, I would like to remind you that the information presented during the call is unaudited and that management may make forward-looking statements.
These statements are based on current expectations and beliefs, and they involve risks and uncertainties that could cause actual results to differ materially from those described in any forward-looking statement. With that, I will now hand you over to our CEO, Ester Baiget. Ester, please.
Thank you. Thank you, Tobias, welcome everyone. Thank you for joining us this morning. The year started strong with 7% organic sales growth against a high comparable, including around 1.5 percentage point effect from exiting certain countries and a good one percentage point from inventory buildup in animal. We deliver growth across all sales areas in both developed and emerging markets while achieving an adjusted EBITDA margin of 37.8%. Developed markets grew 8% with solid performance in both Europe and North America. Emerging markets grew 4%. We continue to drive growth through innovation and a stronger market presence with tailored solutions. We launched five new biosolutions in the first quarter, and we are well on track for our full year expectation.
These launches are responding to an increasing consumer and societal needs, from higher yields in food to replacing fertilizers in agricultural. 10 months into the Feed Enzyme Alliance acquisition, we're delivering in line with our initial expectations, and more importantly, we are continuously seeing increased traction with our customers through a broader and integrated offering of enzymes and probiotics. As a complement to our global footprint, we acquired an attractive production facility in Thailand in early April, and it's expected to be operational in 2027. The facility holds optionality to produce different biosolutions, including the scaling of HMO production, which would require additional investments. Such investments are already included in our communicated CapEx plans towards 2030. We are operating in a world with increasing global uncertainty, with rising pressure on economies in many different ways.
Countries are seeking for homegrown solutions to strengthen energy and food security supply. Biosolutions are increasingly becoming central answers to resilience and productivity agendas, reducing exposure to global disruptions while enabling the creation of local jobs. In our dialogues with customers and policymakers, particularly in the energy area in Southeast Asia and in India, we see this momentum accelerating. Novonesis is uniquely positioned to support this shift. With a strong start to the year, we feel very confident about our full year outlook. Growth is expected to be mainly volume driven, supported also by pricing. The outlook includes a close to one percentage point effect from exiting certain countries. For the adjusted EBITDA margin, we maintain the outlook at 37%-38% with an expected margin expansion compared to 2025, more than absorbing currency headwinds and increasing raw material costs.
With that, let us now look at the divisional performance in more detail, starting with Food & Health Biosolutions. Please turn to slide number four. Thank you. Food & Health Biosolutions delivered a strong organic sales growth of 9% in the first quarter. The adjusted EBITDA margin was 35.7%, 130 basis points lower compared to last year, mainly driven by the ramp-up in commercial resources we did over the course of 2025, product mix effects from stronger growth in HMO, and strong currency headwinds. These were partially offset by cost synergies and economies of scale. During the quarter, we launched three new products in Food & Health, including a new yogurt culture solution that improves taste and texture while also delivering higher yields and productivity benefits.
For 2026, we expect the division to deliver organic sales growth in line with the group, primarily driven by Food & Beverages and supported by growth in Human Health. Food & Beverage deliver. Please turn to slide number five. Thank you. Food & Beverage delivered a strong organic sales growth of 11% in the quarter. Growth was mainly volume driven, with pricing contributed a good one percentage point. Synergies contributed to growth and in line with expectations, supported by cross-selling and increased commercial scale. Growth was well anchored across geographies and industries. Performance was driven by increased market penetration, a strong adoption of innovation, and positive market development. Despite muted consumer sentiment, we continue to see high demand for higher protein, for clean label products, and healthier solutions, supporting an increasing demand for biosolutions.
Momentum in dairy continued to be strong and was led by North America and emerging markets. In fresh dairy, demand for efficiency, higher yields, and high protein continues to drive strong demand, including bioprotection and probiotics. In cheese, customer conversion to higher yield solutions remains a key growth driver. Growth across the remaining industries was driven by innovation and increased penetration, led by plant-based solutions and beverages, with solid performance from recent launches. Solid growth in baking and meat also contributed to growth. For 2026, growth in food and beverages is expected to be broad-based, supported by both synergies and pricing. Human Health delivered organic sales growth of 5% in the first quarter. Growth was primarily volume driven while pricing and synergies contributed positively.
Performance was driven by strong growth in advanced health and nutrition, supported by both early life nutrition and advanced protein solutions. Early life nutrition was led by HMO with growth across regions, including cross-border trade into China. Advanced protein solutions grew alongside the anchor customer. Dietary supplements was impacted by a softening North American market, where our sales to women's health category continued to be strong. For 2026, growth in human health is expected to be supported by dietary supplements as well as advanced health and nutrition, led by HMO. Pricing is expected to contribute positively, and t he full revenue is expected to add around one percentage point to growth. Please turn to slide number six. Thank you. Planetary Health Biosolutions delivered organic sales growth of 5% in the first quarter against a high comparable.
The anticipated inventory buildup at the key customer in Animal contributed a good two percentage points to growth. The adjusted EBITDA margin was 39.5%, up 10 basis points year-on-year, driven by the Feed Enzyme Alliance acquisition and cost synergies, including the ramp-up in commercial resources we did over the course of 2025, as well as currency headwinds. We launched two new products in Planetary Health in the first quarter. In Animal, we introduced the Bovacillus probiotic for cattle, benefiting from a faster route to market following the formation of Novonesis. These solutions enhances digestion and strengthens cattle immune system, resulting in an increase of up to a kilo of milk per cow per day, while also improving the feed efficiency.
In plant, we launched the first product based on our new enzyme platform, a phytase that enhances nutrition uptake in soil, improving the yield from acre of corn by around 3%. The solution initially targets corn in North America and is supported by several years of a strong field trial data. For 2026, we expect the division to deliver organic sales growth in line with the group with relative stronger contribution from Agriculture, Energy & Tech. Please turn to slide number seven. Thank you. Household Care delivered organic sales growth of 4% against a high comparable. Growth was mainly volume driven, supported by positive pricing. Performance was driven by increased market penetration and adoption of new innovations across laundry, dish, and other cleaning categories in both developed and emerging markets, with particularly strong traction among local and regional customers.
For 2026, we expect solid performance in household care in a market that carries some uncertainty related to weaker consumer sentiment. Growth will be driven by continued innovation, increased penetration in both developed and emerging markets, and continued support from pricing. Agriculture, Energy & Tech deliver organic sales growth of 5% in the first quarter, driven by energy and agricultural, while tech declined due to order timing in biopharma, processing aids, and high comparable. Strong growth in energy was driven by Latin America and Asia Pacific, particularly India, reflecting continued growth in corn ethanol production. North America also supported growth through increased adoption of innovation and higher ethanol production volumes, supported by growing exports. Additionally, increased penetration of biodiesel solutions and the ramp-up of Second-Generation ethanol production contributed to the strong growth.
Following the increasing need for energy security and supply, as countries are seeking further diversification from fossil fuels, we see an increasing strategic global interest for higher biofuel blending. Strong growth in Agriculture was mainly driven by inventory buildup at the key customer in animal, contributing by around 4% to the organic sales growth for Agriculture, Energy & Tech. As mentioned, integration of the feed enzymes acquisition continues to progress in line with expectations, with synergy milestones materializing as planned. Our plant business declined during the quarter due to timing and high comparable. For 2026, growth in Agriculture, Energy & Tech is expected across all industries, led by energy and supported by synergies and pricing. Now let me hand over to Rainer for a review of the financials and the outlook for 2026. Rainer, please.
Thank you, Ester, good morning, everyone, and welcome to today's call from my side. Let's turn to slide number eight. In the first quarter, sales grew a strong 7% organically and 4% in reported euro, including around 1.5 percentage points effect from exiting certain countries. Sales synergies across both divisions and pricing each contributed around one percentage point, while the inventory buildup in animal contributed a good one percentage point. Currencies provided six percentage point headwind, while M&A contributed positively with 3%, reflecting the Feed Enzyme Alliance acquisition. The adjusted gross margin improved by 120 basis points to 60.1% versus Q1 of last year. Pricing and productivity improvements, as well as the Feed Enzyme Alliance acquisition, supported the development while currency and product mix had a negative impact.
Total operating expenses adjusted for PPA-related depreciation and amortization were 29.1% of sales, compared to 27.3% in Q1 last year. This development mainly reflects the planned increase in commercial resources over the course of 2025, driven by both organic expansion and the Feed Enzyme Alliance acquisition. The adjusted EBITDA margin for the quarter was 37.8%, compared to 38.3% in Q1 2025. The margin benefited from the higher gross margin, cost synergies, and around 50 basis points from the Feed Enzyme Alliance acquisition in line with our expectations. This was offset by higher operating expenses and currency headwinds. Let's keep in mind also that last year's operating expenses were quite low in the first quarter.
Adjusted earnings per share, excluding PPA amortization, were EUR 0.57, corresponding to an 8% increase compared to last year. Operating cash flow amounted to EUR 167.1 million in the first quarter, an increase of EUR 60.7 million year-on-year. That was mainly driven by improved net profit and a more favorable working capital development compared to Q1 last year. CapEx in the quarter amounted to EUR 93.1 million, equal to 8.3% of sales. Despite higher investments levels, free cash flow before acquisitions increased by 9% to EUR 74 million. On March 12th, we successfully issued EUR 1.7 billion of senior unsecured notes to refinance the existing bridge loan related to the Feed Enzyme Alliance acquisition.
Relating to this, I'm also very happy that S&P Global Ratings issued an A-minus stable outlook rating for Novonesis. With this, let us now turn to slide number nine to talk about the outlook. Please note that the outlook presented today is based on the current level of global trade tariffs and the prevailing foreign exchange environment. As Ester mentioned earlier, we're very confident in the full-year outlook and confirm our guidance for both organic sales growth and profitability on the back of a strong start to the year. The outlook for organic sales growth is maintained at 5%-7% and includes close to one percentage point effect from exiting certain countries. Growth is expected to be mainly volume driven, supported by around one percentage point from sales synergies and a good percentage point contribution from pricing across both divisions.
The outlook also reflects some uncertainty related to consumer sentiment for the year. The recent situation in Middle East and its broader implications to global market dynamics is difficult to fully assess and leads to increased uncertainty. However, based on our diversified end market exposure and flexible regional production footprint, including our pricing capabilities, we currently do not expect a material impact on our adjusted EBITDA margin. We continue to monitor the development closely. We expect a smaller positive timing impact also in the second quarter from the animal business related to inventory buildup at a key customer. I want to reiterate, though, that for the full year, this effect is expected to be neutral. We continue to expect the adjusted EBITDA margin to be in the range of 37%-38%, reflecting continued margin expansion compared to 2025.
This improvement is expected to be driven by a stronger gross margin, the Feed Enzyme Alliance acquisition and synergies, partly offset by currency headwinds of around 0.5 percentage point and including somewhat higher input costs. As previously communicated, we'll see a temporary step up in CapEx as part of our strategy to enable growth through 2030 and beyond. This includes continued expansion of our resilient global enzyme production footprint, completion of the doubling of our U.S. dairy culture capacities here in 2026, and investments related to the recently acquired facility in Thailand. In addition, we continue to invest in the implementation of our new ERP system, which will impact CapEx by around one percentage point annually over the next few years. As a result, CapEx is expected to be 12%-14% of sales for 2026.
Net debt to EBITDA is expected to be around 1.7x at year-end, supported by strong cash generation and continued deleveraging despite the increased CapEx level. We had a strong start to the year and remain very confident in the 2026 outlook. With that, I will hand back to Ester.
Thank you, much Rainer. Could you please turn to slide number 10? Thank you. In the current macroeconomic environment, demand for our biosolution continues to be strong across all fronts. From customer needs for higher yield and efficiency, consumers' increasing demands for healthier nutrition, and to growing needs to decouple from fossil fuels as countries seek greater energy diversification and security of supply. Quarter after quarter, we demonstrate the strength and the resilience of our business model, supported by strong innovation, a resilient global footprint, and diverse end market reach. As the world continues to evolve, the relevance and the need for biosolution only continues to increase. Even with increasing global uncertainty, we are confident in our 2026 outlook as well as the 2030 targets, including the 6%-9% organic sales growth CAGR.
With that, we're now ready to open the call for Q&A. Operator, please.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you are entering the queue. If you wish to remove yourself from the question queue, you may press star and two. Question on the phone, a request to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Thomas Wrigglesworth from Morgan Stanley. Please go ahead.
Good morning. Thanks, Ester. Thanks, Rainer, for the presentation. Two questions, if I may. Could you just elaborate a little deeper as to how you see the Middle Eastern conflict playing out both within your business and within your customers? I guess there's, you know, the message that we hear is that Southeast Asia will be more impacted by cost inflation, and clearly that then leads to a question about your emerging market exposure. Anything that you can share in terms of recent order pattern changes or freight rate constraints that are limiting or enabling your business would be very useful. Secondly, just in light of that, just on the bioenergy side, you know, you've touched on, you know, seeing an uptick in interest in obviously bioenergy solutions.
Is that to say that this is gonna be something that will happen in a couple of years, or is there gonna be a more immediate impact through 2026 as you see it? Thank you.
Excellent, excellent question, Thomas, let me start answering to them and then also let Tina build up on each of them. First, regarding Middle East conflict, important to mention that our direct exposure to Middle East and the sales in Middle East, they are small, so the impact effect of that, it's marginal to none on our overall revenue. Building on your comments on what are we see these changing dynamics in our in the world that we live in. We see from one side increased level of cost from raw materials that we have very good conversations with our customers, also including pricing, and we're confident that it will lead to a marginal neutral non-impact into the EBITDA.
We see a increasing continued interest from our customers around the globe that was there, but now with this crisis in Middle East, if anything, we see it as a catalyzer of further momentum. We see a catalyzer of further momentum for diversification, and that's true across all segments. We see it on food, the eagerness for healthier and cleaner and replacing stabilizers and texturizers and seeking for solutions that will continue to fulfill the consumer dynamics. We see it in household care. We see it in energy. We see an increasing need, particularly in energy, and then maybe tipping in your second question, particularly in countries that they had already in the past taken decisions towards biofuels.
We see Brazil, North America, Malaysia, Indonesia, the countries that they had already included biofuels into their diversification benefiting from those decisions of the past. Seeing a broader resilience and being able to absorb the constraints on supply and also access to competitive raw materials. We see that momentum doubling up across the whole globe, particularly with a strong pull here in Southeast Asia. These efforts are there. It's not so much on the sales year -to -date. We see in U.S. an increasing level of exports, the big impact, it's for the long term, as you mentioned. Do we see the growing direction of increasing pull from mandates that will lead to continuous investment?
In any case, it gives us stronger comfort on the drivers of growth. Long answer, indicating that, what we're doing, with our customers, what we, doing on price, at the same time, the catalyzer of this crisis of a momentum that was there for solutions leading to higher yields and higher efficiencies and also decoupling from energy.
Yeah. Only adding a bit because I think Ester covered most of it. Short term, I would say yes, you will see it as a pickup in exports from the U.S. mostly. However, you will also see it elsewhere longer term. I am just coming back from Southeast Asia, in fact, here over the weekend, and there is a significant interest in, for example, biodiesel expansion. We talked about Indonesia going from B30, B40 to even B50. I would say that diversification journey we have been on with feedstock diversification, with end market diversification and geographical diversification is serving us well here. Most impact you should expect in the longer term, given the mandates are ramping up, so it is a good underlying growth driver for the energy segment.
Shorter term, it is mostly from exports, but not only from exports. In the quarter, you know, you hardly see anything. Exports has been growing over the last year, that is part of our numbers as well.
Thank you both. Very clear.
The next question comes from the line of Thomas Lind Petersen from Nordea. Please go ahead.
Good morning, Ester. Good morning, Rainer, and everyone else. Two questions also from my side, both regarding the guidance for this year. Ester, back in February, you said that you expect a sort of deterioration in the consumer sentiment, and I think perhaps you were alluding to North America. I was just wondering if you could give us a bit of color on that. Is that still what you expect for the year, or are you beginning to see a deterioration in the consumer sentiment? Perhaps also if you could comment a bit on the pricing and your ability to raise prices given the higher raw materials. One question here regarding the revenue for this year.
The second one is about the adjusted EBITDA margin. You end up here at 37.8% in the first quarter. Just wondering if how we can extrapolate from for the rest of the year. Also, given, I believe, that your FX headwind, at least the large part of the FX headwind that you've seen, has sort of been cycled now. Is there anything that speaks for a lower adjusted EBITDA margin going forward, or how should we think about this? Thank you.
Excellent. Thank you, Thomas, for your questions. I'll answer the first one, and then I'll pass it to Rainer on EBITDA. Regarding the comments we made at the beginning of the year, as you so nicely indicated, we included in our guidance some softness on consumer behavior. We could foresee that coming, and that was included in our guidance, and it's already happening. We continue to include it in our guidance for the full year. It's true that the strong start of the year gives us comfort, and it reduces the risk from the volatility and uncertainty of the market that we're living in.
We continue to see, as I mentioned before, a strong underlying demand from our solutions, but we see some cases of that softening demand. Maybe particularly, not reflected in Q1, but in the Q1 figures, but particularly in Human Health. This is a segment where we see consumers, and in North America, when they are sitting and choosing their where they're allocating their pocket money, decreasing the demand of probiotics. We see some indications there of softer consumer demand in North America in probiotics, which as I mentioned, included in our guidance, and also coupled with a strong start of the year gives us full comfort of deliver of the full-year guidance. Then I'll pass it to Rainer on EBITDA.
Yeah. Thomas, you're absolutely right. Of course, the biggest, let's say, spread between the FX side was in Q1, where we actually had last year even a tied to the U.S. dollar 106, and now we're running at 117, 118. Nevertheless, that's keep in mind that is a gradual impact. For the year, we still see the around 0.5 percentage point impact on the EBITDA margin. Of course, the strong margin in Q1, please look at the sales, right? There's quite some sales leverage in there. That was the highest sales quarter ever. That, of course, will come down a little bit, but therefore we feel comfortable that this margin is going to be between the 37% and 38%.
Thank you, Rainer. Building on your comment on pricing, we have really good conversations with our customers, and we feel comfortable on the momentum there, on bringing in the prices and then leaving, as Rainer mentioned, of no impact to the EBITDA margin for the year.
Thank you.
The next question comes from the line of Chetan Udeshi from JPMorgan. Please go ahead.
Yeah. Hi. Morning. Thanks for taking my questions. I was just curious on your announcement to buy this facility in Thailand. You know, you are spending a lot of your own CapEx, then on top you're buying this facility. I'm just curious from a timing perspective, why now? You know, there is so much CapEx going on. Is this an indication of, you know, you thinking about yourself more capacity constrained, is this more a unique opportunity? I think this is much more an Ex-HMO type facility, maybe it can speed up your go-to-market on HMO side.
The second question, maybe this is just a reminder because you're growing very, very strongly in dairy, but I was at dsm-firmenich's Capital Markets Day earlier this year, and they were actually indicating that they are at number one in dairy enzymes, from what I remember. I was just curious, how are you growing in dairy, across both your cultures and enzymes? Is there a limitation from the [Chr. Hansen] merger that you had in place because of regulatory consideration that is probably limiting to some extent your growth, or can that be even better at some point once that limitation is taken away? Thank you very much.
Thank you, Chetan. I will let Andrew answer the question on on dairy and enlighten you on why now we're stronger and even more equipped to be the partner of growth for our customers with a bolder portfolio. Building on your first question on Thailand, we have announced increased CapEx of 12%-14%. To support growth, aiming also for the high end of our guidance. This facility in Thailand is a good add to that path.
It is bringing optionality for growth, including further investments that they are already included into the 12%-14%, and also comes with some capacity already today to produce HMO that supports the growth trajectory of this business, opportunistic acquisition that puts us in a good place in a region that we're growing, well embedded in our overall CapEx, included in our strategy, and then with the further investments to capture the potential of this optionality embedded already in the 12%-14%.
Maybe taking on the second part of the question around dairy. I'd begin with, we have very strong customer relationships across the world in dairy, and we're seeing good growth in both cheese and fresh dairy and all its related subcategories. When you think about cultures and enzymes, you know, we're very strong in both of those and actively innovating. I think the thing that's probably most interesting for us right now is the combination of those pieces. Post the combination of the two companies, we're now able to do things in the combination of cultures and enzymes that help both the production of the cheese, as an example, as well as the aging, oftentimes in one bag.
A lot of what we're trying to do is expand those solutions that are both driving productivity for our customers, which is an ongoing demand, but then also new value. How can you create better-tasting cheeses? How can you taste quicker ripening cheeses? We're very comfortable in our position, and the growth we're seeing around the world supports that.
The next question comes from the line of Lars Topholm from DNB Carnegie. Please go ahead.
Yes, I also have two questions. One is actually related. Let me start with that. In Thailand, there's a lot of focus on production of ethanol from cassava, which requires enzymes. I just wonder, Tina, if you can put some words to the significance of this for you guys. Are these enzymes some you can produce on your new Thai asset? My second question goes to [Agriculture], Energy & Tech, which grows 5% organically. There's a 4% contribution from inventory build-up in animal health, and I assume bioenergy grows double digits. It seems to me something is going terribly wrong with plant and with tech.
I just wonder if you can put some words and maybe some growth rates on the four different components of this division and maybe also the reasons behind, what should we say, the less flamboyant growth in parts of that business. Thank you.
Thank you, Lars. I'll pass it to Tina, who will also guide you on the optionality of the plant on Thailand with further investments and remind us that we not look in our business on a quarterly level. We're here for the long run, we are confident on the full year guidance.
I know, Ester, you said the same after Q4, and now we have two soft quarters in a row. The long term starts with a weak quarter. That's how it is.
Every quarter is a quarter.
That's.
I repeat myself, we were confident in the full year guidance, but I'll pass it to Tina, Lars.
Yeah.
Yeah, Lars. Let's start with Thailand. Yes, Thailand is one of the places in Southeast Asia where we operate in our bioenergy space as well. The plant which we have there gives us optionality also for producing the enzymes there. This is good. In terms of Agriculture, Energy & Tech, you're right, we saw a strong growth in bioenergy, the math then brings that tech and plant is in decline. I don't. You said terribly wrong. I don't at all agree to that point. I would say I think sales is progressing according to plan. Yes, it's a decline quarter, yes, it is a double-digit decline, we remain confident for the full year.
Agriculture, Energy & Tech is gonna grow stronger than household care, and all of Planetary Health is gonna grow in line with group. I feel quite good about where we are, including in plant and Tech. Tech is, as you know, quite lumpy, especially giving biopharma processing, and you could say we knew that we wouldn't get any orders here beginning of the year. We expect that to ramp up, and we see that ramping up for the full year. That's why also Tech is gonna contribute to the growth of AT. Plant is super small. You know there is timing on when is exactly planting. Then you have to remember also the tough comp which there are in both plant and Tech from 2025.
Thanks, Tina. I would just mention it didn't grow in Q1 2024, so the tough comp from 2025 was on a very easy comp, I guess, in 2024.
Okay. What about 2023 then?
Thank you very much. Yeah. Fair enough.
Lars, let's hold that question for end of the year. When we see the growth coming in, we remind ourselves about the volatility of very two small segments that they are by intrinsic nature volatile, they contribute consistently to growth for the company.
Very clear. Thanks.
The next question comes from the line of Alex Sloane from Barclays. Please go ahead.
Yeah. Hi, good morning. Thanks for taking the questions. Two from me, please. First one just on household. Obviously with oil prices, much higher and petrochemical-based surfactants under renewed cost pressure, are you seeing any, you know, acceleration in demand from your customers for enzyme substitution? If so, you know, when would you expect that to translate into your volumes? The second one was just a follow-up on the food biosolutions. Obviously, the growth rate there, excluding the Russia exit, really strong, I think, you know, close to 15%. Dairy obviously the standout. Could you maybe help us, you know, just disentangle what is...
You see as kind of structural growth within that, from, you know, penetration and new customer capacity opening versus, you know, maybe any temporary customer behavior, if there was any maybe pull forward of orders, customer restocking, et cetera. I guess, you know, should we be expecting that food growth to slow and normalize in the second half please? Thanks.
Excellent. Thank you, Alex. Tina will answer your question regarding the underlying drivers of the growing demand in household care, and then, Andrew on food and beverages.
Yes on household care, you could say increased oil prices is increasing the discussions on substitution of surfactants. However, this is not something you do overnight, this is something which we are gonna see as time progresses. This is an underlying good driver for our household care business. I would more think of it in a more longer-term perspective, Alex. We have over many years invested in emerging markets because there is a significant growth opportunity for us there. This is a market where we have low single-digit growth when you look at both emerging as well as developed market when you combine it. It's not a high growth area, but we've been able to outgrow that given the investment, given our strong footprint in emerging markets.
As we also have talked about many times, the inclusion of enzymes in emerging market is less, so there is a significant opportunity for us to go for. Short term, you could say there is a increased interest for surfactant replacement, but not only surfactants, it's also other oil-derived components. However, there is also the risk of taking out, for example, enzymes short term given the cost pressure they are under. This is not something we are seeing. We remain, you could say, confident in the full year outlook of solid growth in household care.
Yeah. Following up on the question with regards to food and dairy. First off, the base structural momentum continues to be very positive. You know, we've talked the last couple quarters about things such as the drive for productivity, the drive for high protein yogurts, for new texture experiences. If you look across the world, those underlying structural drivers remain and actually are strengthening in some parts of the world. We do have some benefits from the annualization of some of the larger projects that have been queuing up in dairy, which we've noted before in the past. The opportunity pipeline looks solid, but we wouldn't expect that to continue at the same rate. The thing that's also important is we're seeing good growth in food as well, so not just dairy.
If you think about the balanced portfolio, we are continuing to see acceleration. We talked a little bit last quarter, we continue to see beverages as an example, back in the growth mode through some of the investments we've made. We think it's very balanced across the two pieces.
Thanks very much.
The next question comes from the line of Matthew Yates from Bank of America. Please go ahead.
Hey, good morning, everyone. A couple of follow-ups really from what we've discussed already. The first one for Rainer, just around the operating expenses. Looks like it was up about 13% on a reported basis, I guess probably closer to 10 at constant scope. You mentioned, I guess, some annualization effect given spending ramped up through the course of last year. Just wondering, when you think about the full year guidance for 2026, is the expectation that OpEx grows in line with sales or slightly faster? And then the second question, sorry to just circle back on Tina. I think it was Lars was asking about the animal performance. I mean, it looks to me over the last three years, the animal business hasn't grown. I apologize if that's wrong. You're welcome to correct me.
It has been quite some time now. Can we just talk a little bit more about how that business is doing and where the confidence would come from to think that growth may pick up over the coming quarters? Thank you.
Thank you. Thank you, Matthew. I will let Rainer answer your first question, and then Tina build. Your question was on animal or on plant, then?
On animal.
Okay, perfect.
Let me answer first the, on the OpEx side. Absolutely right, we saw a step up in Q1, exactly what you said, the rolling effect of annualization. Even on top of that, there's always a little bit of timing, so I do not expect actually to increase OpEx for the next quarters relatively to the Q1 number. We're here really gonna see more a flattish development.
Yeah. On the animal business, we feel quite comfortable with where we are on the animal side. We have seen growth over the last years. It is a business where we see in the customer discussions increased focus on the full biosolutions which we are offering.
You can't share anything more specific about market conditions or product launches?
Yes, one of the things we're also calling it out this quarter is the launch of Bovacillus. We have earlier years launched a number of new enzymes. HiPhorius, for example, a new launch which is coming. It is, as you know, in the animal space and you need to do trials in order to prove the benefits of it. We feel, I would say, quite good at where we are. It is, when we look at what we have, the combo solutions is something which there is quite some interest in, both from enzymes as well as probiotics. We see, you could say good pickup on our silage solution. Overall, I would say we are in fact in a good place in the animal space.
It is a bit more difficult on the numbers given the acquisition, so you'll have to look at both organic and the acquired and so forth. Overall, we believe we are in a good place there. Let's go into details on the discussion later on if needed.
Very good. Thank you both.
The next question comes from the line of Søren Samsøe from SEB. Please go ahead.
Yes, good morning, Ester, and the team. I have two questions. One is more in dairy, in China, just if you could update us on growth in yogurt and also cheese. I understand cheese is growing quite well, although from a low level still. Then my second question is on the Human Health weakness. I understand, of course, driven a bit by the weak consumer in North America, but are there any other dynamics we should be aware of here, or changes to the dynamics? How is the growth looking in Europe and Asia? Thank you.
Thank you, Søren. I love it when the question comes implied with the answer on, particularly in human health, on, the isolation on, North America, on the softness, but I'll let Henrik build on that. First, Andrew, shine you up on with what efforts we're doing in China and that we continue to grow in the, in the segment on. It is re-.
Very good question. As we all know, the fundamental dairy market in China has been challenged for a few years. What's exciting is we're continuing to see growth. We saw growth last year. We're seeing growth again this year. That is both in fresh dairy as well as in cheese. On the drivers of that growth are different. On the fresh dairy side, a lot of it ends up being around innovation and new products and new solutions that we're driving to help reinvigorate the category. On cheese, that's where we're helping build that market over long periods of time. We've been investing in the cheese team in China as a way to actually be the reference point as that market develops. The drivers are different, but both positive.
Thank you for the question, S ø ren. Yes, in human health, one theme is for sure the U.S. market. Long-term underlying drivers are still healthy. Short-term, we are seeing some signs of a weakening U.S. consumer. There is of course the consumer sentiment out. We see fewer searches on online platforms for probiotics, and we have yet to see that potentially become an effect. This is something we are definitely keen on watching out for. You ask about Europe and Asia. Overall, the quarter was in line with our expectations. Europe also, it's a growth market, but at a more moderate pace.
As well as in APAC, where maybe I highlight the, we're seeing some very nice growth in dietary supplements in China. They're still coming from nowhere. This is from a small base, but an area where we have high expectations.
Okay, thanks.
The next question comes from the line of Sebastian Bray from Berenberg. Please go ahead.
Hello, good morning, thank you for taking my questions. I have two, please. One is on the plant health segment. I'm trying to work out if the absence of growth here is a deliberate decision on Novonesis' part or a result of market share loss that is not wanted. I look at the Planetary Health segment margin, and I think to myself that maybe there is some removal of lower margin products here that have either commoditized or were not quite what Novonesis was looking for. What intentions, what program has Novonesis been implementing in this segment, and what is the end goal? My second question is on the bioenergy segment.
If you were to rank in order of importance, increase in ethanol production, change in market share, and growth in 2G, what would have been the biggest drivers of the growth in Q1? Thank you.
Thank you, Sebastian. Regarding the question about energy, you mean growth in Q1 for 2G?
Okay. On plant health, yeah, we talked about, we had some restructuring of part of our plant activities last, end of last year. That was simply because we have a number of launches we want to get out. You could say more securing that we get benefit from the things which we have developed. We're happy with the launch we have done just this quarter on Actifive. You could say an example of what it is we want to get out and do some work for us. Overall, I would say, in plant, remember plant is a very small part of Agriculture, Energy & Tech. It's five-ish%.
You know, it's quite small, so it's not influencing in any significant way the margin. It is. Planetary Health is a good. You could say it's big industries, efficient, with a nice profitability. In terms of Bioenergy, I would say, well, when you look at the ranking where you say increased production, change of market share, and whether it's 2G growing, while 2G is still very, very small, it is less than 5% of the energy segment. Although the growth rate is nice, it is still a small part of the growth. If I were to rank them, the biggest one which is driving our growth is the increased, I wouldn't say penetration, but the increased production of ethanol.
That is the main driver for our growth.
Thank you, Tina.
Thank you.
The next question comes from the line of Nicola Tang from BNP Paribas. Please go ahead.
Hi, everyone, and thanks for taking the questions. Coming back on Household Care, or actually coming back on the comments around cautious consumer behavior that you'd flagged earlier in the year, I think, you know, today you were referring to the probiotics business, but I think you've historically mentioned Household Care, particularly risks or the potential risk in North America. I was wondering if you've seen any deterioration at all in Household Care specific to North America or generally? Conversely, I was wondering if perhaps there could have been any pre-buying by or safety stock build by some of your customers, either in Household Care or elsewhere, just, you know, in light of the kind of Middle East uncertainty. The second question, I was wondering if you could give a little bit more detail on your outlook for inputs.
Is it fair to assume that the main potential impact from the Middle East conflict might be more around energy costs, where I know you have hedging? Could you talk a little bit about what you're seeing in terms of raw materials? Cause as I understand, it's mainly natural, so where there's less inflation than on the synthetic side. Could you talk about the magnitude of input inflation that you expect for this year, and any commentary around specific inputs or availability of inputs? Thanks.
Thank you, Nicola. I'll comment on both questions, and then I'll pass it to both Tina and Rainer. The first one, important to mention that the 7% growth, it's underlying growth across all segments. Robust growth, volume growth mainly, also a little bit of growth from pricing. It is driven by a continuous increasing demand of our solutions. We don't see changes on the consumer's buying behavior. This is underlying driving demand growth, where biosolutions continue to be the answer of our customers. We don't see the softness in North America on Household Care. Tina is gonna further comment on that. We see continued penetration. Collecting the fruits of the investment we've made in the past.
Last year, we put 400 more people, boots on the ground, sellers in the regions, and we see the benefits there. We see the closeness of the customers, the proximity where the growth is, and then translating it on what it is, the top line growth, that also with the strong start of the year, gives us full confidence for the year-end guidance. Regarding the costs, Rainer will talk about this, but as I mentioned, we bring in pricing and conversations with our customers, and we aiming and forecasting non-impact to the EBITDA for the year.
As Ester said, I mean, when you look at the University of Michigan Consumer Sentiment Index in the U.S., that is something which for sure we are watching. If you watch the Nielsen data, you will see you could say flattish/declining volumes in the U.S. in detergent volumes after a good 2025. This is something we are watching, you could say, in the market. When we look at our data, we don't see any impact. In fact, I also want to highlight that given our broad base with different players in different segments, if people move between, you could say, private label and branded goods, for example, in Europe, we have a broad exposure.
If they move down in tier to less enzyme containing enzymes, then we are not immune to that. That outlook of our sentiment and how we look at the world is included in our outlook for the full year. As we have said, we expect solid growth in Household Care.
Nicola, regarding the input costs of the Middle East, as Ester basically said, this is mainly impacting us on the supply chain side. Meaning our basically transportation and packaging cost is affected by that, which we are basically recovering on the pricing side. That is really the driver for it, not the other components on the COGS side.
One more question, Operator, please. Last question.
The next question comes from the line of Charles Eden from UBS. Please go ahead.
Hi. Thanks for sneaking me in. I'll limit myself to two quick ones, if that's okay. Firstly, probably for Tina, can we just come back on the plant and tech? Obviously, you mentioned double-digit decline in tech in the quarter, but I think you obviously mentioned order timing. Is the expectation that reverses in Q2 or at least in the balance of 2026? If possible, could you quantify the magnitude of that order timing headwind in Q1? Secondly, just to come back on Food and Beverage, obviously a lot of time focused on [Ag], energy and tech, but food and beverage in particular, sort of 11% organics, but 15% underlying if you exclude the Russia exit. Quite an incredible performance. Can you just sort of help us understand? Maybe that's well ahead of the end market growth. What is driving that?
What's the success in your offering which is allowing you to grow probably 4x or 5x the underlying market? Thank you very much.
Thank you, Charles. I love that question. What is the driver of that we continue to outgrow the markets that we present? It's consistently across all areas a single pattern: customer proximity and bringing answers that lead to value generation for our customers. That's true for food, that's true for dairy, that's true for household care, that's true for bioenergy. In the environment that we live in today, we see that pool continue to grow. I'm gonna tiptoe on your first question and then pass it to Andrew. We saw a decline, double-digit decline in ag and in plant and in tech this quarter, mainly from timing. Both are going to contribute to growth through the year.
That means implicitly that there's going to be growth on the remaining of the year to overcome the decline that we saw on a segment in AAT that contributed to growth with a strong growth from bioenergy and also growth in animal, that we see good momentum and conversations with our customers. With that, Andrew, I'm passing it to you.
Yes. Thank you. If you take a step back and think about what's driving food and beverage, I think there's a few things. One, we all see the same data on the underlying market growth. I would say that there are pockets of the underlying market that we are differentially exposed to. We always talk about the high protein trends around the world. That's clearly a piece. The biggest piece is the increasing use of our biosolutions. It's actually driving penetration around substituting, in particular, for synthetics. What's exciting is that is a continuing trend in many of the things that we see. For example, Maha and other things actually are helping with that. As an example, a culture can substitute for multiple things in a yogurt that are potentially at risk.
We do see that across food, in food and beverage. The third piece is really around how you share that value. If we're helping our customers create productivity, if we're helping them get better end consumer and customer demand, we also work to share that value through the pricing. We are excited about the progress. It's a very choppy market around the world, but we keep investing in that part of the business. In particular, the capital investments we're making are very important because it signals to our customers, we're willing to grow with them for the long term.
Thank you very much. With that, we're closing the session of the day. Looking forward to continuing the conversations with all of you during the forthcoming days. Thank you so much. Bye.