Earnings Call: Q2 2019

Aug 8, 2019

It is an estimate. Thank you for standing by. I am fantastic at your Chorus Call operator. Also, thank you for joining Usimra's ID plus year 2019 results conference call. In the beginning of today's call, all participants will be in a listen only mode. This presentation will be followed by a question and answer session. If any participant are difficulty hearing the conference, please press star key followed by 0 for operational assistance. I now hand over to your host of today's call, Mr. Tobias Heil. Please go ahead. Hey, thanks, Francesca. Good morning, and welcome to our Analyst and Investor Call on the publication of our half year results for the period January to June 2019. All cost funding Materials including the presentation has been published on our website this morning. A replay of this call will be available later today. Today's call will be held by our CEO, Doctor Heinzio Gautam, and our CFO, Rudolf Kringer. After their presentations, we are open for your questions. Of years. Good morning and welcome everyone. Thank you for joining our earnings call on the results of the first half of twenty nineteen. Olas and I will run you through the numbers and update you on the status of some key initiatives and objectives. As usual, we will be happy to answer your questions following a short presentation. Let us start with a big picture on Slide 3. All in all, we had a good first half year. We maintained our solid growth dynamics partly against strong prior year comparables. Group wide, Sunrise grew sales by 7.4 percent to almost 1,000,000,000. Our EBITDA has been adjusted for 1 off effects in the connection with the planned acquisition of ADF IDF. Normalized EBITDA therefore came in at 1,000,000. Profitability remained at a high level with a normalized EBITDA margin of 20.8%. This is 0.7% higher than last year's figure. Our normalized net income exceeded previous year's level by 7.8 percent. Normalized earnings per share rose we specify our outlook, we now expect a normalized EBITDA margin of around 21% for the full year. Despite the challenging market environment Sunrise again showed very good growth. Slide 4, please look at Slide 4, which provides the group sales bridge. We increased sales by 7.4% to around 1,000,000. On an organic basis, sales grew by 6.2% to 1,000,000. The effects contributed about 1,000,000 to the top line. All segments benefited from strong customer demand and contributed to growth, as you will see on the following chart. Let's move to Chart 5, showing the performance of our Centant Care business. This strong sales trend of the 1st 3 months continued in the 2nd quarter. Sales in the 1st 6 months amounted to 1,000,000. This represents a significant increase of 7.8 percent organically centered care achieved strong sales growth of 6.3%. The main driver was the fragrance business with an organic sales growth in the double digit percentage range. The application areas, consumer fragrances and fine fragrances showed a particularly good development. Our comprehensive backward integration was once again a key success sector providing secure access to renewable fragrance ingredients. Please turn to Chart 6 for a sales breakdown of flavors. The segment achieved sales growth of 5.4 percent, which is notable given the high comparables in the first half of twenty eighteen. In total, segment sales reached 1,000,000. On an organic basis, Flavor grew sales by 3.7%. The segment generated double digit sales growth in Asia Pacific Applications for savory saw a very dynamic demand. Chart 7 covers our 3rd segment nutrition. Momentum remained very high. Nutrition increased sales organically by an excellent 11%, including FX, sales amounted to 1,000,000. The strong driver was pet food with a very strong double digit organic growth. Pro V also achieved double digit sales growth. In the food application area, the Asia Pacific And Latin America regions enjoyed an increasing demand. Let's have a look at the regional sales development on Slide 8. The fastest growing region was again Latin America with the sales in of 13.3%. It was followed by Asia Pacific with a sales plus of 9.1%. North America delivered good growth with 5.0% and the region grew by a solid 3.5%. The share of sales generated in emerging markets amounted to 44% with an overall sales growth in these markets of 11 point 2%. Let me now hand over to Olaf for the detailed financials. Olaf, Thank you. Hi, Jun. This gentleman also a warm welcome from my side. As usual, I will walk you through our financial performance in some more details. Let me start with some quick comments on our top line. We are very satisfied with our 6.2 and organic growth in H1 and 4.4 percent in Q2, especially in light of a tough prior year comparison. As you will remember, we showed 6.6 percent organic growth in Q2 2018, which by far was the strongest quarter last year. Therefore, we are pleased with our current growth profile, which is supported on a reported basis by FX tariff of 1.2% during Q1. Compared to a 7.2% headwind for the same period last year. In addition, let me give you a special comment on raw material. You confirmed that for this year, we expect lower increase in raw material costs compared to last year. The numbers now 3% to 4% after 5% last year. But we see a diverse picture between the segments and care still suffers and continues to fade higher prices for chemical based raw materials. In the natural space, we see a mixed picture, flavor enjoy stability in food and vegetable based raw material prices, but on a high level, while nutritionist faces higher prices for yeast and sugar per month. To compensate for these effects, we have increased prices, and we did increase prices primarily in the Centene Care And Nutrition segment. And H1, we saw the following price volume mix. On a group level, we saw price volume stood off roughly fifty-fifty. Tipping care was most affected by raw materials. The H1 rose was mainly pricing. Flavor and contrast had almost only volume and nutrition showed roughly the 40sixty price volume split. Following his opening remarks, let us turn to the year earnings development on Slide 10. Group EBITDA came in at 3,000,000 after 3117,100,000 in the comparable period 2018. Reported group EBITDA, a, achieved $341,700,000. The difference of $9,600,000 are cost related to the acquisition, financing and the preparation of the integration of ADF IDF, which will carve out and normalize for better comparison. Some words on the implementation of the new IFRS 16 leasing standard. I mentioned in March that we expect a positive EBITDA impact of around 50,000,000 for this year. With now full visibility, we had a positive impact of 9,800,000 on EBITDA in H1. So around 20,000,000 for the full year would be a good assumption. Let me explain the address 16 impact. And the ADF IDF transaction impact in some more detail. The first amounts to 9,800,000, the second to 9,600,000. Due to the very similar amounts, both margins, the reported EBITDA margin and the normalized margin without IFRS 16 impact are both at 20.2%. The normalized EBITDA margin, including IFRS impact reached 20.8%. Talking about the margins of the segments, both Centen Care and Flattiver increased the EBITDA Nutrition increased its normalized EBITDA. 2nd care was still impacted by a transformed raw material situation. 2nd EBITDA came in at 140,200,000 after 127,900,000 an increase of 9.7%. The EBITDA margin amounted to a solid 19.7% including IFRS 16 and COP or 19.2% is out due to high raw material costs slightly below the 19.4% from H1 2018. The flavor segment increased EBITDA by 13.6% to $144,300,000. The EBITDA margin was at 22.6%, including IFRS 16 impact a 22.1% result compared to 21% last year. The good improvement is linked to product mix and better raw material handling. Nutrition EBITDA normalized and then at 66,800,000 with an EBITDA normalized margin of 19.5 percent, including IFRS 16, 18.8 was out, And then, and that's compared to 20% last year. The slight decline is mainly caused by a delayed ramp up of the new factory in Georgia and specific higher raw material costs at food, which I mentioned earlier. Please turn now to Slide 11 for our bottom line. Following slightly lower pressure from raw materials and improved manufacturing costs, gross profit increased by 9.7% to 1000000 after 1000000 last year. Depreciation increased by 14 500,000 due to the new IFRS 16 impacted, by 8,800,000 and of course, higher CapEx investments, which we have done over the past couple of years. The financial result decreased by 7,400,000 to minus 27,300,000, primarily due to regular refinancing activity and the pre financing of ADA IDF as well as the interest component related to IFRS 60. Net income grew to 1,000,000 and earnings per share normalized for ADF IDF transaction related costs rose to per share. Our tax rate decreased to 27% is therefore already positioned within our new mid term guidance of a 26% to 28% tax Slide 12 shows the development of our new key performance indicator business free cash flow. Business free cash flow in H1 was still impacted by increasing working capital, but already achieved the ZAR 131,000,000, an increase 60,000,000, which means a 14% improvement compared to H1 2018. For the full year, expect business free cash flow to be better than last year as a percentage of sales business free cash flow is expected to show the double digit hescentage figure. Let's move to our cash flow analysis on Slide 13. Operating cash flow came down to 141,000,000 after 151,300,000 in H1 2018. The decline resulted mainly from higher inventories, a reduction of trade payables this year after an increase last year. And higher income taxes paid. Financial cash flow increased to 947,000,000 which contains 400,000,000 from the capital increase in February, 250,000,000 from a new switch sign in March and DKK500 1,000,000 from a new euro bond in May. Please keep in mind that the cutoff date is June 30, So neither the cash outflow for ADS IDF nor the payback for the old Eurobond of 500,000,000 is included. Slide 14 represents our healthy balance sheet with an equity ratio of 37.8 percent. Biggest changes were in cash, borrowings, and equity, or significantly impacted our financing activities. For ADF IDF acquisition and the refinancing of our bond. Please follow me on Slide 15 to our solid financing structure. On the left hand side, you see our maturity as of the end of June 2019. The 2019 bonds still shown here expired in July this year and was already repaid at that time. On the right hand side, you see the traditional net debt leverage The net debt, including pension, increased by $113,000,000, which resided from the $400,000,000 capital increase in February, minus higher leasing obligation liabilities of 96,000,000 from IFRS 16, dividend of 123,000,000 and higher pension provisions of 1,000,000. Despite the ongoing benefits impacts from pension provisions, following lower interest rate, Our long term net debt, including pension leverage target, remains unchanged, was 2 to 2.5 times And our clear goal here is to run seminars with an investment grade profile. So all in all, think we are on a very good way to deliver according to our strategy and our financial ambition, which we have presented to you during our Capital Markets Day. Earlier this year. And with that, I would like to hand back to Hans here. Thank you, Olaf. Let me spend a few more moments with some operational highlights on Chart 17. We are consistently executing on the 3 pillars of our strategy. Let's start with our growth initiatives. Demand for metal remains high. We will therefore ramp up our production expansion in South Carolina in the US in the quarter 3. Just last month, flavor launched a production line for liquid flavors in the Russian town of Ogovo South of Moscow. In our headquarters in Osman, we continued investing in new technologies and capacity. In the first half year, we finalized and expansion project in fragrances. We also opened a new development center for cosmetic ingredients in Holzmin to further build on our competencies. Another initiative which I would like to share with you is vendor for change. As you know, together with Unilever, we support Vanilla, Thomas, and young people. For the first time, the Unilever ice cream brand was is positioning our activities around Vanilla directly at the point of sales, naming Sunrise as a key contributor for truly sustainable in other products. An important development in our portfolio has certainly been announcement of the planned acquisition of ADF IDS. The company is a U. S.-based producer of all natural protein solutions, which will be a perfect fit to our existing food and pet food activities. We expect to close this transaction Let's move on to Chart 18 with our updated outlook for the current fiscal year. After a good first half of twenty nineteen we're confident to continue growing faster than the relevant market. The annual global market growth is expected to be around 3% to 4%. Based on our broad portfolio and our strong market positions, we aim for sales growth in the range of 5% to 7%, which is in line with our previous guidance. We expect that the good growth dynamics will continue to we specify our earnings outlook for the full year and raise the guidance for our normalized EBITDA margin to around 21%. Also supplied by the effects from April 16. As all have explained, we have a strong focus on cash flow. Our objective is to achieve a double digit business free cash in 2019. Let me conclude with a brief outlook Chart 19 provides an overview of our objectives for the period until 2025. We strive to remain among the fastest growing players in our industry. Therefore, our targeted annual growth rate remains at 5% to 7%. Our profitability is already at a high level However, we see potential for further increase in the coming years. In 2025, we want achieve an EBITDA margin in the range of 20% to 23%. The key driver of this plan margin increase will be an advanced product mix. Let me stress that we're confident to achieve our ambitious growth targets. Chart's 20 provides you with the outline of our growth journey until 2025. Our plan is to almost double our sales to between 1000000000 We intend to achieve this through 1st, organic growth by further leveraging market opportunities for existing business. Secondly, incremental growth coming from new technologies and capacity expansion. And last but not least, to boost strategic complementary acquisitions. Utilizing these 3 levers, we see ourselves well positioned to achieve our goals. Thank you. Thanks. I'm Thurgen and many things all up. Turning to question and answers, we are now happy to take your questions. On the call. We kindly ask you to put only two questions. If you cannot tag all your questions during the conference call, questions. The first question is from the line of Thomas Toboda with Societe Generale. Please go ahead. Good morning gentlemen. Two questions, please. 1st on flavor and nutrition, a very nice development on margin in the first half. But the decline will slow down a little bit. Could you could you please talk a little bit more on the drivers. And am I am I mistaken in in believing that, destabilizing vanilla prices are playing playing a role in this development. As for the second question, you sent in care if if we strip out the IFRS 16 effect on the margin, that the margin in the first half was still a little bit under pressure. How should we think about page 2? Is this slowing down in the rate of inflation, an indication that your margins could catch up? Or should we should we still assume that that pressure is not easing? Thank you. Thomas, thanks for your questions. Let's start with the question. 1 on flavored I think one of key levers, the vanilla price development was a big contributor to some swings. Yes, last year, the high price contributed to some extent to the significant growth and the prices being stabilizing has also and this year a positive impact on the bottom line. So that's not all of it to quote one of you We think this is just a seasonal or momentary effect. It's not a structural challenge that the growth of flavors has been a bit slower in these periods of time. Overall, we believe our flavor business continues to enjoy a strong or any growth momentum. We believe that the bottom line continues to develop very healthy. But yes, one point for some upswings and changes was certainly vanilla price and the vanilla situation. Yes, Having said that, let's turn to Centrel Care. We saw a certain improvement of the margin We have always indicated that the raw material prices has contributed to the pressure on the margin but we also have flagged that we were able to increase the prices. We will have to continue to do so. The raw material situation in fragrance in Centen Care continues to be on a very high level. But however, we believe that we're very well positioned with our strong backward integration to cope with this situation. Having said that, we believe we have good reason to be confident for the margin development going forward. Thomas, I hope these, answers, satisfy you with, your questions. Okay? Great stuff. Thank you. This question is from the line of Heidi Vesterinen with Xfinity and P. Please go ahead. Good morning. So, on flavored again, could you talk about what you're seeing in North America, please? We're hearing from many peers that with softness with multinationals. Do you see that as well and what you're seeing with locals and regionals? And then the second question, even if you could talk a bit more about cosmetic ingredients, you know, what are you seeing there? Here, some peers have talked about softness in North America and China recently, you know, are you seeing that? And what is your outlook? Thank you. Okay. K. Thanks, Heidi, for the questions. I'll come to that. Yes, Savers in North America. There is a certain softness, but I wouldn't say it's being structural. As we said, it's always some seasonality in our business we saw some softness to your question. We believe this is just temporarily. We have no reason to believe that this is a structural thing. So that's why we have not specifically selected. There's nothing we are concerned about. No reason. And there is no difference. There is no significant difference between the development of multinational flavor customers or local and regional, we believe we what we've seen is a temporary small effect and I really or we believe that there is nothing which we should flag at this time and nothing which we should be concerned of Having said that cosmetic ingredients goes in the same direction, there is nothing where we would see a significant softness in the particular market. We believe we have set up a very healthy portfolio of products and and we believe that there is nothing which we specifically should flag if there would be hiding in promise. We would have told you upfront. There is nothing at this point in time where we should be concerned. We believe the numbers which we showed is pretty much in line with the the expectations, no significant positive and no significant negative surprise. So it reflects the way we set up our business in flavors particularly and also in cosmetic ingredients. Nothing to be concerned of. Okay. From ai ID, since you've referred to China also, if you've seen our strong growth in Asia Pacific, good part is China and we enjoy good growth in China. So from that perspective, on a good track in the region, which we expect to grow faster in the coming future. Thank you. You're welcome. Stanley. Please go ahead. Hi, good morning. Just one question on free cash flow. Could you talk us through the increase in working capital in the half and the impact on free cash flow? As far as I understand, you recently added free cash flow to your management incentives. So how is that, how is that flowing through to your sales staff? Are they also incentivized by for cash flow metrics or is it more around growth? Yes, I like to take that. So working capital, if you look into the details you were that the impact is primarily on the despite very positive impact, which we did not see this year again, so that it's one part of the explanation. Nevertheless, it's a topic which we are addressing at the moment. So business free cash flow is a key indicator. It's on board level implemented. It's also on the management level implemented as a KPI. So we have a balanced KPI environment coming from top line EBITDA and also business free cash flow as an indicator. And clearly, there is a lot of focus on this topic. Keep in mind, we are going fast for a number of quarters for now. So of course, the working capital is growing risk the decline. And of course, we have the ambition to continue and improve step by step the business free cash flow. Therefore, we gave the guidance, for the end of the year that it will be double digit. It was, slightly, at the high end of single digits at the end of last year. So optimistic that we will see this going in the direction and the right direction. Okay, Alex, does that answer your question? Yes, thank you. You're welcome. The next question is from the line of Ronald Horst with Redmont. Please go ahead. Good morning. Thanks for the questions. Firstly, I just wondering if you can help with the the price volume split specifically for Q2. Firstly, and and the second question is on the margin outlook. Does that assume any contribution in Q4 to earnings revenues from the CTF, IPF acquisition? Thank you. So the second question, no, this is like for like this, the guidance, there is no potentially positive effect from ADF IDF incurred. As you said, we are still working on the on the closure of this, which is ongoing on a constructive basis. But as it's not done yet, we have not included that price volume, I would say all of you give some detailed numbers on this one. Yes. So of course, this was one of the worries last year that we are not getting through with price increases. I think what we see at the moment is that in Q2, the price element was even stronger than in Q1, which is a clear indicator that, we see these price increases coming through in different segments, as I said, in, Centricare very much, price driven environment. And also nutritionists, increasing prices, even the raw material pressure we have. So clear signal, yeah, successful in getting through this price increases, and, we should see more of this in the second half of the year. No negative volume growth for any of the divisions in Q2? No. Great. Thank you. Next question is from the line of Patrick Drafas with UBS. Please go ahead. Hi, everyone, and thanks for for taking my questions. And the first one will be on ADF IVF. You can mention that that the talks continue in a constructive manner. Can can you update us on on the schedule where where we stand with with the, mister likely closing, and and, and potential worries may be around the FCC pushback. Mhmm. And then the second question would be just the Georgia delay in the startup. Could you quantify that that affects for the 2nd quarter and should we assume that there will be more, and more one offs related to that happening in the third quarter before you actually start up the plan? Thank you. Okay, please. Thanks for the questions. Very specific and not unexpected to be precise. I would say I took the ADF IDF. Yes, we face a certain delay. All together, we have originally end of the year, expected the closure by mid of th/is year. We now expect the closure of the deal I would say, end of third quarter. That's the moment where we are. The good news is no change in message. We expect the success closure, we are currently in very constructive discussions with the Department of Justice. We are obliged not to tell anything about the details what we can say is very constructive and we expect the closure of the deal successfully around end of third quarter. So in new terms, it's a delay compared to our original calculations of 3 months, but nothing which fundamentally changes these things. And that at least the second question, Doctor. Olaf, you want to pick that one? Yeah. So, as indicated, we have, a slight delay in our ramp up, which is nothing, dramatic. There's nothing which I would specify at the moment. When it comes to the normalization of transaction related costs, yes, we will continue to do so. I can't give you a number at the moment. As you've seen 9,600,000, so far, there will be, some more of course related to the time after closing when we do the integration. But it's a little bit too early to say how the magnitude would be. Okay. Thank you very much. Yeah. You're welcome. Good afternoon. Good morning. Thank you very much for taking my questions. Quick ones hopefully. The ongoing cost for the deal. Could you give any guidance, to how that's gonna play out in the second half? Thank you. And then secondly, just on on your guidance, of, obviously, 5 to 7 percent organic growth for the full year. So I'm certain from the comments you've made so far that any softness in 2Q, you expect to eventually recover in the third quarter. And and secondly, on on the growth that you've clearly highlighted, how much of that 5% to 7% organic growth do you think will come from, from the growth projects that you cited including the Carolina facility coming up. Thank you. Okay. So, Tom, thanks. As we said, the ADF IDF acquisition is not included in the reported figures and in the outlook so far. So that is as we cannot specify exactly when the closure of the deal finally will take place. I gave you my best guess at the moment, but we felt it's fair enough to not include in any of the outlook numbers. So that's purely what we reported here today without that. Having said that, the organic growth, which you flagged, is, yes, some of the initiatives, which we have started are expected to pay off in the second half of the year, just let me mention one of the things which are currently in the process of being started. That's the mental expansion. That we expect, of course, to contribute to some effects to the organic growth and That's why we're one of the reasons, amongst others, why we're optimistic that our growth momentum will continue to be very healthy in the second half of the year. It's, of course, we could try to view the audience, say how much comes from this and that initiative because the one or the other is a bit delayed or is a bit earlier than expected. I would say We leave it with a message. Organic growth will be within 5% to 7%, which is very healthy and we believe the good news is there is no take down on the message that our growth momentum will remain healthy. Okay? Okay. Just a just a quick follow-up. So I was I was looking forward, obviously, this the €9,600,000 that you incurred in in fuel costs Is that something that we should assume each quarter going forward until closing? Because, obviously, there will be incremental transaction costs Okay. Now, of course, some of this $9,600,000 is related to the acquisition itself, which is behind us. So we have signed the contract or the legal work is done. Everything is is done. Financing, what you see at the moment is we are looking forward to the closing. So, of course, only when we have seen the closing integration work will start. So, we will not see the same magnitude of cost, until the closing. Afterwards, as I said in my previous statement, it's a little bit too early to specify the amount of, transaction and integration related costs. This will come and once we have a better understanding I will give you a number. But for here today, the good key message is we are confident that the acquisition will come the message is it's slightly delayed as most of you have figured out anyway. And from the positive impact, which we expect from the acquisition there's no change in the key message. Okay? Sure. Very clear. Thanks, both. The next question is from Ethan Sharma with MainFirst Bank. Please go ahead. Hi. Thanks for taking my questions. Quickly. Most of them are answered, actually. Just quickly on the 6th project. So we I just wanted to get date on the new site in China and menthol, when should we expect, the start up? Also could see on flavor. In q 1, you said that you don't see it. It's in q 2. We don't really see this as a structural problem in the regions. Have has it changed, in the, let's say, in July? Thank you. Okay. Isha, so I picked the first part of your all of the second. So good to have you in the call, by the way. So, we start with the CapEx projects. As we said, the big ones, ADF IDF we already had. It's according to now it's 3 months late And I'm going to be specific as far as we can see, it is 4 weeks late, which is nothing to be reported. So it's on track pretty much for a project of this magnitude. It's 4 weeks late. We're in the process of ramping it up. And nothing that can be surprised to be represent a report. So that's the good one. On cost limiting regions, which we shared with you in the, in the Capital Markets Day this year. It's also on track. We'll be pretty much ready by end of this year. That's the latest we know so far, so nothing negative to report. And then there's China, greenfield. It is a bit late as well, but it's nothing because we screwed up or something like this. It's just some additional requests, nothing negative, but just some additional requests and requirements from Chinese officials, which we've also nothing negative to report in any of these projects with the exception of what I just said The one or the other is delayed or slightly delayed, but the key message, positive message on all these projects remains positive. And that's why in the previous question, we believe that some positive growth momentum for the remaining month of the year will come from the 1 or the other of these projects, okay? I think that's all up, the second part of the question. Yeah. So, you know, question about the flavor, Q2 situation. Yeah, I think a lot was, color related to what So, no change in our message here. The 5% to 7% ambition, stands for the group. And we have a very good portfolio to make that happen. Keep in mind that flavor was extremely strong last year. And, I refer again to the high comp in this situation, that should not be forgotten. Okay. Hopefully, each of that answers your questions. Thank you very much. Yeah. You're welcome. The last question is from Sabine Panuti with JPMorgan. Please go ahead. Yes. Good morning. I asked questions and a follow-up. So my first question is on pricing. Could you give us on Latin America? What is the pricing contribution to the number you reported? And, given what you gave, I calculated, estimated rather that you had a pricing contribution of 4 in Q1, 3 in Q2 and a tougher comp, in the second half of the year, with, is it fair to say that, we will see maybe less pricing attribution in H2. My second question is on your largest 21% new target. So I understand that you have the basis points also impact from IFS. Is there anything else within, your business performance that we should take you to account to, to see the change between 20 21%. And then the follow-up, I have, I'm sorry, unflavor, I hear you on the tough comparative. However, into, into 2, the comp in swaver was escalated as in Q1. And so, almost a 600 basis point of data acceleration. So can you explain where is it coming from? And in each to you have slightly, less, tough comparison. Should we expect an acceleration from the one, growth level, which is around 3.8%. Thank you. Well, this was so much about numbers. So, you know, I have, I heard that these 5 questions, Who will have you deal with all these numbers? Yeah. So, pricing, contribution is said, you have a very mixed picture at the moment. And of course, the headwind and raw materials is specifically on the Centric Care side and a good part also in nutrition specifically pet food. You're dealing with this price increases. And of course, this comes with the delay we have price headwinds for quite some time. And, the price increases have very much been put in place. So we will see the effects coming through. And therefore, I can't confirm at the moment that pricing will be less important in the second half. That is the comment I can give you on on this side. When it comes to the margin situation, the 20% change to 21%. 0.5,0.6 percent of that is related to IFRS 16. And the data is pretty much our impression of the better profitability for this year compared to the beginning of the year. So take that as a positive that we are optimistic about our performance for the remainder of the year. Latin America prices. Exactly. So Latin America, you see us with 13% organic growth in the region. The impact, which comes from hyperinflation Argentina is excluded from this number. So we just wanted to give you a clear picture on this what you have seen also in connection with the raw material headwind is that we we saw price increases all also on the US dollar side, which is not a given. And therefore, this indicator also but we are able to increase prices also in the region like Latin America. And last, I would say the good volume growth in the region coming, especially also from pet food, which, we have there are two sites, one in Brazil, one in Argentina, nicely contributing to the growth in Latin America. Okay. I hope that was to all the numbers in that in your questions, a little bit, to deal with Yeah. There was another part of the question which was on Sliver to understand why there was such a deceleration, despite the same comparative. Well, it was, as Olaf said, I picked that up. It's just more seasonal effects and closing effects. So, nothing to be concerned of. So, it's just the monthly seasonal stuff to the largest extent. As I said, nothing to be concerned of, okay? Yes. Questions from the line of with Natural Research. Please go ahead. Yes. Hi, gentlemen. Thanks for taking the questions. I have to know once more with ADFIS and what we define as successful deal. So do you assume that 100% of the deal will be will be finalized, or is there a chance that you might have to dispose part of the business, as an requirement to to fulfill the deal? And second question is when just follow-up on your Argentina and Brazil and pet food volume. Why doesn't this help on the margin side, then if the FX effects is all the hyperplasia is such a dominant and don't you support from there or what is your cost basis in which currency is that predominantly? ADF IDF. And as I said, we believe we were specific enough in the context what we can say today, we believe successful completion of the transaction by endofthirdquarter. That includes that basically then we can start with the integration. The rest of this thing and the rest of the deal is currently part of the discussion with the Department of Justice. What we believe We can close the deal without having to change anything under the successful assumptions which we have shared with the market before. That's where I would leave it. I don't want to interfere with the current discussions with the Department of Justice as we're by legally bound to these restrictions. And please let's respect that we follow the American guidelines Having said that, all else you want to deal with the second part? Yes, Patrick, also from my side, the pet food environment the showed a good performance. So the electric business is, of course, not the majority of the business, the which is still in the US and in Europe. I just referred to that as a nice contributor on the volume side for the region. The pet food business performing very well, gross wise, but also profitability wise. The pressure we see, and you're probably referring to the nutrition margin situation is more on the food side and we gave you, the indication that this is related to the ramp up situation in Georgia. Again, pet food is very positive contributors for us. Okay. Thank you very much. Yeah. You're welcome. Next question is from the line of Katy Hutchison from Wedbush. Please go ahead. Good morning, gentlemen. And two questions from my side. Firstly, on the production delays in the Diana Foods new site, in Georgia, you called that out as a headwind to margin for nutrition. So how is this progressing so far into the second half And how should we look at margin, nutrition margin for H2? And then secondly, I see you called the TACQUA in the statements. I don't know if some of your peers are present in space already. It's giving your position in pet food. And now with the ADF IDF position, I'd be interested to hear how you see that business developing on your plans for that segment going forward? Thank you. Yes, Kathy. Thanks. Yes, the delays in the Georgia plant caused some headwind. We believe that we're with most of it out of the woods. It's a big, very big plant. So we expect not to see as much what we can say today as the same headwind in the second half of this. That's where I would leave it at the moment. The second part in ATCWA that business as we always said is it's nice. It's a unique part of in the diameter thing and it's developing very healthy, but it's small. So we didn't flag it specifically as we don't want to mislead anyone. It is not something which changes the financial performance in Diana significantly. But overall, the top line was healthy in the healthy double digits in the first half of the year. And there's no sign that this will change at the moment. So I would say at the moment, that's where I would leave it. We had quite some startup project problems with this business, but it appears that this is now stabilized and it's developing very healthy. It's a nice contributor. Actually, Diana has made it a 3rd business unit business unit, so it shows It's now on a solid, very healthy growth part in a very interesting indication, as we all know, of farming is an area which has a bright future and we're happy enough to be as one of the very few players being active in that area. I hope that is enough of the information for Aqua at the moment. As soon as there's more to report, we'll specify it more. And I hope on the delays of the Georgia that was specific enough, okay? Hello, Katie. Many thanks. Ladies and gentlemen, this brings us to the end of our conference call. Thank you very much for your time and your interest in Simwise. We are looking forward to seeing you at upcoming conferences or roadshows. We will publish our trading update for the 9 months 3rd quarter on October 29th. Thank you very much. Good bye and have a nice day. Thank you for joining and answering today. Goodbye.