Today, and thank you for standing by, welcome to the Robertet First Half 2025 Results webcast and conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press *11 on your telephone keypad. You will now hear an automated message advising your hand is raised. To withdraw a question, please press *1 and 1 again. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link anytime during the live event. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Jérôme Bruhat, CEO of Robertet. Please go ahead, sir.
Thank you very much. Good morning to everyone, and welcome to Robertet's First Half 2025 Results. My name is Jérôme Bruhat. I'm the CEO of Robertet, and I will be joined today by Julien Aubert, who is the Head of the Raw Materials Division and also our Chief Sustainability Officer, and by Isabelle Pardies, who is our Chief Financial Officer. I will begin, and Julien will give you some commercial highlights and business performance while Isabelle is going to present the financial results in more detail. Let me start with the first highlights, the first slide. First Half 2025 highlights. We had, as you've seen yesterday, a solid growth on both an organic growth of +9.2% and a reported basis of +7.7%, with all regions contributing to that growth.
We are quite happy with those results because they reflect Robertet's unique positioning in naturals, but also our ability to navigate a quite uncertain environment in many regions. The Raw Materials Division delivered particularly strong momentum as well as flavors, and we are quite happy also to report that Chase Edge, which we acquired last year, is progressing quite well. We are pleased with the contribution of the staff of the year. We have put our management in place, and we are making a strategic shift with this acquisition, moving from a subcontracting activity to a new product-driven business model with first anchorage in results. You also discovered yesterday that our EBITDA margin has reached 22.5%, which is an improvement of 110 basis points versus last year, despite quite strong effects impacts on the U.S. dollar and, to a lesser extent, Latin American currencies.
Alongside those strong results, we are quite happy to report that sustainability, which is our heart of the strategy, continues to develop quite well, and Robertet obtained for the second year in a row the EcoVadis Platinum recognition just in August. We are also quite happy to continue our progress with 64 supply chains which are certified by external auditors and are starting to have a strong commercial momentum, as well as the very good recognition obtained from EpiFinance year after year with a strong progress. Turning to revenues, solid organic growth in the first half, I just want to explain to you a bit the cascading. The organic growth has increased by 9.2% on organic basis. Again, as you remember from a strong Q1 at +5.5% to an even stronger Q2 at +10%, which obviously was on a relatively easier basis of Q2 2024.
Nevertheless, let's remind us that growth was supported by a solid commercial momentum, especially in raw materials and flavors, driven mostly by volume. In terms of scope, the first half includes six months of Phase X. You see the contribution of 0.6% organic growth, but we have to remind ourselves that last year we had the integration of Sonarom, which was a much bigger contribution of external growth, above 2%. Currency impact has been quite negative on us, 2.1 percentage points, mainly due to a weaker U.S. dollar. We have also to see that these currency effects have been quite concentrated on Q2, which is obviously making us very cautious on the rest of the year. Overall, sales have been reported at €446 million, up to +7.7%. Let me now hand over to Julien, who will comment on the specific business performance by division and by region.
Hello, everyone.
Turning to slide five, which shows revenue by divisions. Starting with raw materials, which account for 26% of group revenue, revenue increased by 14.4% in the first half. The strong performance reflects our unique positioning with the widest portfolio of naturals, which unlocks unlimited creative possibility for our clients, and our seed-to-send model that ensures full vertical integration from sourcing to creation. Moving on to fragrance, which represents 36% of group revenue, revenue grew modestly by 0.5% in the first half. Growth was mainly driven by new markets and confirming the success of our international expansion, although it was held back in North America due to inventory effects at one of our main customers. Flavors, which account for 35% of group revenue, growth reached 10.7% in the first half, supported by strong demand across key customers' categories and the continued shift toward natural products.
Finally, assembly, which accounts for 3% of group revenue, grew by 9.1% in the first half, supported by international rollout and demand for natural active ingredients. This division offers strong potential, particularly in food supplements and positive nutrition. Turning to slide six to look at the performance by region, it's important to note that all regions contributed to growth in the first half of the year. Our core market, Europe and North America, together represent 73% of group sales, stable compared to last year. In the U.S., we remain optimistic despite the uncertain context. The loyalty of our major international clients and our ability to support new emerging brands among the younger generations continue to provide a solid base. In addition, the expansion of our creation center in New York and our strong local industrial footprint further strengthened our position in this key market.
At the same time, international expansion remained an important long-term revenue opportunity for Robertet. New markets represent nearly half of the global flavor and fragrance market, but currently account only for 27% of the group revenue, highlighting strong growth potential. The acquisition of Sonarom at the end of 2023 gave us a strong footprint in flavor in India, while the construction of our first industrial site in Indonesia will enable us to reinforce our position in this strategic country. With that, let me now hand over to Isabelle, who will comment on the financial performance in more detail.
Good morning, everyone. Turning now to slide seven with the review of the income statement. Gross profit increased by 12.5% over the first half of the year. This significant 250 basis point margin improvement reflects a favorable product mix with strong contributions from flavors, fragrances, and beverages. On the other side, external expenses rose by 12.9% in the first half of the year, mainly impacted by rising energy, maintenance, and transport costs. We also add non-recurring IT investment linked to globalization projects. Personnel expenses were up 11.9% in the first half, reflecting both hiring to support growth and wage increases. EBITDA increased by 12.7% in the first half of the year. This represents a 22.5% margin on revenue, up 110 basis points compared with the same period last year. Finally, group share of net income rose by 13.2% in line with the EBITDA evolution.
Now turning to slide eight with the cash flow generation. As you can see, the group generated a net operating cash flow of €32.7 million in the first half of the year. Operating cash flow was impacted by two main factors. First, higher tax outflow, up €12 million year over year linked to growth. Secondly, working capital outflows of €36.5 million, mainly due to strong activity in May and June. Out of around €20 million invoiced during this period, €14 million are expected to normalize in the second half of the year. CapEx amounted to €16.9 million, reflecting our ongoing investment to support growth. As a result, free cash flow before acquisition stood at €15.8 million. After taking into account net acquisition of €1.7 million, free cash flow post-acquisition reached €17.5 million.
Looking forward, we continue to expect annual CapEx of around €40 to €45 million through 2030, with about 80% industrial and 15% IT. Now, let me hand over to Julien, who will comment on sustainability performance.
Thank you, Isabelle. Turning to slide nine, sustainability is at the very center of our strategy, and we continue to strengthen both our commitments and our performance in this area. Let me highlight the two key points of this slide. First, our supply chains. We have reached a new record with 64 verified or certified supply chains. This is not only a strong sustainability achievement, but also a clear business advantage. We are seeing a growing demand from our clients for products sourced from verified supply chains. In this context, we are firmly committed to reaching 100% of our strategic product covered by a certification by 2030. Second is our recognition by EcoVadis. Robertet achieved Platinum status with a score of 88 points, placing us in the top 1% of companies evaluated worldwide. This is an external acknowledgment of our credibility and impact in our sustainability efforts.
Together, these results show that sustainability is not just a responsibility for us; it's also a real driver of trust, growth, and differentiation. Let me now hand it back to Jérôme for outlook and closing remarks.
Thank you, Julien. We're going to take now slide number 11. Yeah, thank you. For 2025 total, our priority is really to balance a normal prudence, I would say, given the global environment, but also some strong determination as we navigate an environment that we still expect to be very uncertain. Perhaps we anticipate a few evolutions. First, there will be a stronger impact of U.S. tariffs for our U.S. subsidiary, which represents 33% of our sales. This should be gradually offset by price increase. As you know, we may expect some immediate implementation for many clients, but some delays for others.
We also foresee a normalization of organic growth after the strong momentum in the first half. Again, +9.2% is way above our average, so we expect the rest of the year to normalize. We expect also a strong currency volatility, particularly linked to the U.S. dollar, which is very far from our last year's comparison. In this context, we are still reaffirming our 2025 targets, delivering between 5% and 7% organic growth, together with a further improvement of our EBITDA. Lastly, let me remind you in slide 12 our long-term ambition and plan, which we call "Save to Success." We want to achieve in 2030 between €1.1 billion and €1.2 billion of revenues, which implies an average annual growth of 5% to 7%. We expect within this growth, roughly €50 million to €80 million revenues coming from targeted M&A. This ambition will be driven by several factors.
First, we will remain focused on our four divisions, which will all contribute to this momentum. Second, we expect from a geographical progress to focus on Asia and focus on the demand for natural products that is rising in those new markets. Finally, we anticipate some growth in health and beauty, which represents today only 3% of our sales and which we see as the big potential of diversification for our growth. With these drivers, we will continue to maintain our unique business model, which is vertically integrated, and our unique leadership in natural ingredients, which gives us an edge within our industry. With this, we expect to deliver sustainable and profitable growth over the long term. I will now close and thank you very much for your attention and start to take some questions. Thank you.
Thank you so much, dear participants. As a reminder, if you wish to ask a question, you need to press *11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press *1 and 1 again. Alternatively, you can submit your questions via the webcast. Mr. Mbao will compile the Q&A roster. This will take a few moments. Once again, if you would like to ask a question, please press *11. Alternatively, you can submit your questions via the webcast. Dear speakers, there are no questions on audio lines at this moment. Please proceed with any written questions.
Okay, thank you very much. I'm going to filter out the questions we are starting to receive on the chat if there are no audio questions. One question from Stefan is, how much pull-forward sales into the U.S. occurred in H1 with customers potentially trying to avoid higher tariffs? And was that particularly a good price realization on these kinds of pull-forward sales?
Thank you, Stefan, first for the question. We have not seen any strong movement in that direction. When we look at most of our major clients, the ordering pattern has not really moved. We think that there was no particular anticipation, at least on their side, of pull-forward. Same thing on our part because with the discussion in the previous months, we have seen that there was a lot of uncertainty on tariffs, and we have basically waited for this materialization to take action.
Let me remind also that Robertet has a very strong industrial footprint with 30 industrial sites. Especially, we have production sites in North America where we produce almost 100% of what we are selling over there. The major impact of tariffs is really not on finished goods with high added value, but mostly on ingredients, some of them coming from Europe because we are obviously delivering some natural ingredients from Grasse to our U.S. subsidiary that go in our formulas there. The vast majority is also coming from India and China, where the big commodities of the industry are produced today, and that will be impacted by the U.S. tariffs. On one hand, we are confident that our very diversified footprint will help us cope with those new tariffs.
On the other hand, we cannot minimize the impact linked to production costs linked to those ingredients that we are mitigating with strong price increases that we are currently negotiating with our customers in the U.S. The second question was, you mentioned a strong end of H1, which is true in May and June, and have these trends continued into the summer? The answer is no. There were, as you know, we have a slightly seasonal turnover pattern because if you take the average of the past five years, 52% of sales, between 52% and 53% of sales tend to be realized in H1 versus H2. We were quite pleased with those big seasonal orders. The growth was a bit amplified by the relative weak Q2 2024, but still, we were quite happy with the growth in H2.
The summer has been normalized and starts to look a little bit more challenging. That's why we are quite prudent on our guidance for the year. One question, and a few questions actually, were exploring destocking issues in the U.S., which we have mentioned in our communiqué, in our press release. Are we seeing some new trends in fragrances, especially some fine fragrances? Producers have spoken about a softer summer in perfumery. What is our outlook? The first thing we can say is the global outlook on fragrance is a bit softer than last year, especially in the mature markets like Europe, where we see indeed some softening in fine fragrances. I would say in the U.S., the market is not so much driven by fine fragrances, but more by mass fragrances, where we continue to see some good momentum.
Excluding our major restocking at our top client in the U.S., we are seeing good growth in North America. Also, the growth of perfumery in new markets like China and Latin America has been quite strong, so we don't see there any softening. Again, the overall picture is, on one hand, a softening of fine fragrance in mature markets, a good health of other categories in those mature markets, and a big rise of fine fragrance in those new markets. In the last conference, you said you expect a full-year EBITDA margin to be below full-year 2024, but as a reminder, we are 9.4%. Since the H1 margins are now 7.5 million than last year, you expect the margins to be lower than full-year 2024. That would imply a big drop in margins in H2. How much do you expect tariffs to be on the margins?
Yes, we have seen a very strong EBITDA margin improvement last year, which has continued in H1 2025. Nevertheless, we are quite prudent for the rest of the year, I admit, in order to reflect the major headwinds that I spoke previously about. We are expecting an improvement of the EBITDA. Nevertheless, the EBITDA margin in % of the sales will be much more challenging as we see those headwinds. Headwinds from the U.S. dollar, headwinds from the U.S. tariffs, and softening of the growth. I will not comment today on any guidance of the EBITDA margin. We will obviously do our best to match last year's high level, but we cannot guarantee it at this point. We are still very confident in our ability to grow the overall margin in euros.
To what extent is AI starting to play a role in the formulation of flavors and fragrances, both among your competitors and at Robertet itself? For our competitors, I cannot say because I'm not aware of their specific programs. I can just say that in Robertet, AI has not yet started to play a role because we are in the midst of a major project aimed at providing an AI assistant to our creators. I think we are one of the few companies that will use AI in the core business of creation, but in a way that is the opposite of normalization and standardization.
We want our perfumers to continue to exercise their personal creativity, but with an AI assistant which is able to give them a bigger source of inspiration within their databank of formulas and a tool that gives them the possibility to gain speed in the way they create. That is not the aim of Robertet in AI. I hope it answers your question.
A question from Royster Waldron. Did you experience an ethics benefit in cost of goods in H1? Yes. As we have a negative impact in sales, we have, on the other side, a positive impact of ethics in our cost of goods, which is the same as in sales because the part of U.S. dollar purchase is comparable with our sales.
A question from Franz Jürgens on health and beauty. Given the current growth of health and beauty, it does not appear to be an acceleration which substantiates your assumption for a strong future growth. What is your confidence coming from? Our confidence on health and beauty remains quite intact. It's true that +9% is below our long-term target of +20%, but we are in the midst of deploying a commercial force, especially in Asia, that will drive further growth. For example, we have recently opened a subsidiary in Australia in order to get active accreditation from Australia. That is the benchmark in the whole Asian region. That will obviously help us not only in Australia, which is a relatively small market, but also in the whole Asia market. Another example is the reinforcing of our sales structure in the U.S.
Currently, we want also to work, and that will have mid-term impacts on the range of products. We have currently four big products in health and beauty and a series of very small ones. We have hired a new Health and Beauty Scientific Director in order to drive the future product pipelines. We are also exploring other options to distribute and develop such ingredients, active ingredients, all natural, but coming from different partners. We are still very confident. 9% is still a strong organic growth, but we aim at doubling this growth over the next years through commercial exploration and through product pipelines.
Excuse me, dear speakers, we proceed with questions.
Yes. There were a lot of questions on tariffs, so we are trying to answer a lot of questions without taking each one because there are a lot of questions on U.S. tariffs. Again, on U.S. tariffs, we have had a slight impact in Q2, which we start to feel. The major impacts we will see will be Q3 and Q4, where the level of tariffs has been now pretty fixed and stable. We expect this tariff impact to be in the range of $15 to $20 million in the second half, which means we have to compensate it with a price increase of roughly 9 to 10%, which is exactly what we are negotiating with our customers right now.
As I said before, we expect those price increases to be implemented quite immediately at roughly half of our clients and to be delayed four to nine months as an experience with the big clients that for some of them will go up to delaying to next year the application of the new price increase because of their own planification and standards. All in all, we are quite confident that we will be able to compensate the vast majority of those tariffs by price increase. As we always see when we are exercising strong price increases, the effect might come in 2026 at some customers. The question was given on the slowdown of fine fragrance and as we have seen, especially in summer, some effect. First of all, we are not speaking today about the second half. Again, the momentum was still pretty strong in the first half.
Nevertheless, we see a softening and our operation in fragrance during the summer has been close to flat, which means we are quite prudent for the rest of the year. We can proceed with audio questions if you have some.
Yes, of course. Just give us a moment. We are going to take a question from the audio line, and it comes to the line of Fraser Donlen from Berenberg. Your line is open. Please ask your question.
Good morning, everyone. Thanks for the presentation. Can you hear me okay?
Yes.
Yeah. I think you already answered my question on tariffs. The second part of that was just on raw material. I think at the beginning of the year, you had talked about maybe kind of 4% or 5% inflation in your raw material cost at the group level. I think then it kind of cooled a little bit. Could you maybe give the latest update on how you see that in 2025? The second question was just on flavors. Could you maybe give a bit more color on like the acceleration you've seen? How sustainable is that? To what extent has it been driven by new customer wins or existing customers? The final question, also staying on the flavors topic, do you see any change in your briefs coming out of the U.S., especially as it relates to like new regulation, the move against ultra-processed food?
You know I think some of your competitors have talked about maybe seeing some benefits from that in 2026. Would you kind of tend to agree with that comment or not? Thank you very much.
Thank you, Fraser. I'm going to hand over to Julien on your questions about the cost of raw materials and potential gap between our forecasts at the beginning of the year and what we've seen so far.
It's true that if we come back to late 2024 and early 2025, we were at a level of raw material cost, natural and synthetic, that we are at a very high level. It's true that, especially, and we mentioned where we are the CMD in Grasse, we started to see some price getting a little bit softer, and that actually has been confirmed over the first semester. Price tends to decrease overall slightly, and that's also why we see our improved margin. The cost of goods was better than expected for the first half, but the demand is still quite high, so we don't see a strong increase.
It's mostly prices that are getting softer, and the trend stabilizes, at least right now, and should stabilize or continue slightly to decrease for the second half. No major decrease to be expected on the second half.
Thank you.
Fraser, let me answer your other questions. On flavors, yes, we see quite a strong momentum, which we believe is quite sustainable because we are working with a good range of major clients, which are, again, seizing the advantage of Robertet being the world leader of raw materials in order to give briefs that go in the direction of healthier, more natural, and cleaner labels. That is definitely driving a momentum of briefs, and I would say all over the world, in Europe, U.S., but also in the rest of the world. Back on your specific questions, do we see some changes in briefs, especially in the U.S. on processed food?
We have not seen a major change on our side, probably because Robertet is mostly exposed to categories such as beverages and berries, mostly beverages, whereas a big part of the market where we are less present is really in the savory and sweet products where we are relatively less exposed. Even in those categories, we have not seen yet a major shift in the briefs. That may change, that may come. What is positive on our side is that in the beverages category, obviously, you see a lot of briefs coming into more evolved or sophisticated categories such as the sports drinks, for example, or functional drinks, which make the richness of the briefs in the beverage category higher than before. That is probably the only consequence of the trends I currently see.
Perfect. Thank you very much.
Thank you.
There was a question on clarification of my previous answer of where did I get this 9 to 10% price increase in H2? Was it group level or just U.S. fragrance? Let me be very clear on that. It is U.S. only because only the U.S. will be impacted by those tariffs. It is group level, not just fragrances, because those ingredients increase will affect all divisions, especially fragrance, of course, but also to a lesser extent flavors. Yes, we see some dynamic in that direction from the full fragrance industry, so fragrance and flavors, because as I said before, only India and China are producing today the major commodities. That means that all our competitors are confronted with the exact same phenomenon. There will be some time before Europe and the U.S. can take over the production of such commodities.
In the meantime, we have no choice but to accept those tariffs and tariff increases and to reflect them in prices. Again, we are not talking to our competitors. We are not talking about our competitors to our clients, but we believe everybody is applying more or less the same strategy. Another question came from Future M&A. Are you able to provide some more information on how you find companies through brokers or professional contacts and some general financial metrics that you consider, such as the multiple paid or the targeted ROI? Regarding future M&As, most of the targets we find are a bit below the radar of big institutions because our sweet spot are companies doing between €10 million and probably up to €15 million turnover per year, which are, I would say, bolt-on acquisitions. We are targeting mostly local businesses that will increase the F&F footprint of Robertet.
Second target is people having very high-quality supply chains that will complement ours and that will reinforce the leadership of Robertet with its leadership in natural fragrances and to some extent, some very new and promising technologies. That is probably why we acquired Fazet last year, which has this supercritical CO2 technology that has big potential in the U.S. That is the targets we are looking at. They are mostly coming from our local network because we have country managers on the ground being in contact with brokers, with professional contacts, as you said, and obviously with, I would say, business networks that provide those targets. It can be sometimes lawyers that provide those targets to us and that we study one by one.
In terms of financial conditions, as we are mostly targeting smaller and mostly family businesses, our policy has always been to ensure continuity, to ensure continuity of the management, to ensure continuity of the business, to ensure continuity of, I would say, social continuity, which is very important for some business owners. That is why we have tended to pay recently between 12 and 14, exceptionally 15 times the EBITDA. We are generally prudent because the business perspectives are always long-term and never short-term, which obviously carries with it some costs that we reflect in the purchasing price. There was a question, sorry, because I just want to make sure my answers are clear. The question was, apologies to ask again, what is your exposure to fine fragrance if you include indirect exposure via raw materials and direct exposure in the perfumery division, and especially in Europe?
First, on the first question, we have always communicated that fine fragrance represents a major part of our raw materials division business, roughly 30%, which itself represents 25% of the group. The other part is located in the perfumery division with a different business model because we go up to the creation of fine fragrance in the perfumery division only, which is exposed to roughly 10% of its business in 30% of its business, sorry, in fine fragrance. If you add the 30% of the raw materials division plus the 30% of the perfumery division, you reach roughly between, I have not calculated precisely, but roughly between 15% and 20% of the group. That's our exposure to the fine fragrance category. Even the second part of the question, which is what is the size of fine fragrance in Europe, we do not communicate on the split per region.
What is the impact of U.S. growth in H1 from the restocking at your last customer? How long do we expect this to persist? As I said before, we have a very sharp decrease of fragrances in North America in the range of the division itself being in the range of minus 10% to 15%. Again, without this effect, we are up 15% in North America in fine fragrance. The impact will continue until the end of the year because we had an exceptionally strong year last year with this customer, both driven by strong sales, both driven by expansion of their distribution network, but also by an excessive stocking that we are in a way paying this year. This effect will stop towards the end of the year, which was the moment where last year they started to slow down on their orders.
We will probably feel much better next year because this customer, we are convinced, will be back to growth. The health of the brand is good. The expansion is good. We are continuing to be a major for this customer. That is going to be a full 2025 effect, but we do not expect this major effect to go into 2026. The question was, do you foresee a scenario where U.S. tariffs will change your long-term competitive standing or strategic priorities for that market? Thank you for the question. Indeed, this will not change our trajectory. The U.S. is still 33% of our business, and we believe we have, especially with our unique positioning of a leader in naturals, plus for the first time our ability to produce naturals locally with Fazets, we still believe very strongly in the potential of this market. It will not change the trajectory.
Again, since the same commodities are employed by the whole industry coming from India and China, we believe it will not affect our competitive standing in this market because the impact on cost of goods will not only impact Robertet, but will impact the rest of the industry.
Question about our improvement in the working capital ratio by 2030. Could you discuss where this improvement is coming from? As told during the CMD, our main improvement in the working capital comes from inventories level. As you know, our inventories levels are significant, explained by our natural specialty. We're trying to reduce the level of stock and the DIO. It's the case for the H1 2025, and we will continue our effort in this trend.
For the training, let me take maybe one last question. The question was, you said you are confident to grow the margin in euros. Is that remark related to H2 or the full year? Let me clarify. This is for the full year because we've seen in H1 a strong increase both in euros and in the % of the sales. For all the headwinds I explained, we are much more prudent for H2. We believe we will strongly improve the value, but we are not able to guarantee that we will be able to improve the margin itself given the strong headwind. I think we've covered most of the questions. Thank you very much for your presence and attention.
Again, I want to close this webcast first by thanking you for your attendance, second by sharing with you again that we are very happy with the first half of the year, which we believe delivers a very strong performance compared to our peers and stronger performance than expected on our side. Nevertheless, we remain prudent and determined for the H2. Prudent because headwinds are accumulating and determined because our unique positioning continues to give us an edge and continues to drive a strong project activity. That being said, again, I will also want to tell you that as we had the CMD in May, we continue to want to communicate with you regularly and probably more regularly than in the past our financial information and our business perspectives. We've done that through our annual results. We've done that now for the second year in a row through the webcast.
We're very happy to see that more and more people are attending Robertet's financial reports. Thank you very much and have a good day.
This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.