Ladies and gentlemen, thank you for standing by. I am Francesca, your conference call operator. Welcome, and thank you for joining the Symrise AG half year 2019 results conference call. In the beginning of today's call, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If any participants have difficulty hearing the conference, please press star zero for operator assistance. I now hand you over to your host of today's call, Mr. Tobias Hentze. Please go ahead.
Many thanks, Francesca. Good morning and welcome to our analysts and investor call on the publication of our half year results for the period January to June 2019. All corresponding materials, including the presentation, have 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, Dr. Heinz-Jürgen Bertram, and our CFO, Olaf Klinger. After their presentations, we are open to your questions. For this, I hand over to our CEO, to Heinz-Jürgen Bertram. You may begin.
Thank you, Tobias. Good morning, welcome everyone. Thank you for joining our earnings call on the results of the first half of 2019. Olaf 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 the short presentation. Let us start with a big picture on slide three. All in all, we had a good first half year. We maintained our solid growth dynamics, partly against strong prior year comparables. Group-wide, Symrise grew sales by 7.4% to almost €1.7 billion. Our EBITDA has been adjusted for one-off effects in the connection with the planned acquisition of ADF/IDF. Normalized EBITDA therefore came in at €351 million. 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%. Normalized earnings per share rose to EUR 1.14. We specify our outlook. We now expect a normalized EBITDA margin of around 21% for the full year. Despite the challenging market environment, Symrise again showed very good growth. Slide four. Please look at slide four, which provides the group sales bridge. We increased sales by 7.4% to around EUR 1.7 billion. On an organic basis, sales grew by 6.2% to EUR 98 million. The effects contributed about EUR 19 million 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 five, showing the performance of our Scent & Care business. The strong sales trend of the first three months continued in the second quarter. Sales in the first six months amounted to EUR 712 million.
This represents a significant increase of 7.8%. Organically, Scent & 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 factor, providing secure access to renewable fragrance ingredients. Please turn to chart six for a sales breakdown of Flavor. The segment achieved sales growth of 5.4%, which is notable given the high comparables in the first half of 2018. In total, segment sales reached EUR 637 million. 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 seven covers our third segment, Nutrition. Momentum remained very high. Nutrition increased sales organically by an excellent 11%.
Including FX, sales amounted to EUR 343 million. A strong driver was pet food with a very strong double-digit organic growth. Probi 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 eight. The fastest-growing region was again Latin America with a sales increase 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 EU 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 11.2%. Let me now hand over to Olaf for the detailed financials. Olaf?
Thank you, Heinz-Jürgen. Ladies and gentlemen, 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% organic growth in H1 and 4.4% in Q2, especially in light of a tough prior year comparison. As you will remember, we showed 10.6% 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 tailwind 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 materials. We confirm that for this year, we expect a lower increase in raw material costs compared to last year.
Key numbers now 3%-4% after 5% last year. We see a diverse picture between the segments. Scent & Care still suffers and continues to face higher prices for chemical-based raw materials. In the natural space, we see a mixed picture. Flavor enjoys stability in fruit and vegetable-based raw material prices, but on a high level, while Nutrition faces higher prices for yeast and sugar ferments. To compensate for these effects, we have increased prices, and we did increase prices primarily in the Scent & Care and Nutrition segment. In H1, we saw the following price-volume mix. On a group level, we saw a price-volume split of roughly 50/50. While Scent & Care was most affected by raw materials, their H1 growth was mainly pricing. Flavor, in contrast, had almost only volume, and Nutrition showed roughly a 40/60 price-volume split.
Following these opening remarks, let us turn to the earnings development on slide 10. Group EBITDA came in at EUR 351.3 million after EUR 317.1 million in the comparable period 2018. Reported group EBITDA achieved EUR 341.7 million. The difference of EUR 9.6 million are costs related to the acquisition, financing, and the preparation of the integration of ADF/IDF, which we carved out and normalized 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 EUR 15 million for this year. With now full visibility, we had a positive impact of EUR 9.8 million on EBITDA in H1, so around EUR 20 million for the full year would be a good assumption. Let me explain the IFRS 16 impact and the ADF/IDF transaction impact in some more detail. The first amounts to EUR 9.8 million, the second to EUR 9.6 million.
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 16 impact, reached 20.6%. Talking about the margins of the segments, both Scent & Care and Flavor increased their EBITDA. Nutrition increased its normalized EBITDA. Scent & Care was still impacted by a tense raw material situation. Segment EBITDA came in at EUR 140.2 million after EUR 127.9 million, an increase of 9.7%. The EBITDA margin amounted to a solid 19.7%, including IFRS 16 impact, or 19.2% without. Due to high raw material costs, slightly below the 19.4% from H1 2018. The Flavor segment increased EBITDA by 13.6% to EUR 144.3 million. The EBITDA margin was at 22.6%, including IFRS 16 impact, and 22.1% without, compared to 21% last year. The good improvement is linked to product mix and better raw material handling.
Nutrition EBITDA normalized came in at EUR 66.8 million, with an EBITDA normalized margin of 19.5%, including IFRS 16, 18.8% without, 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 for pet 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 EUR 692.3 million, after EUR 630.9 million last year. Depreciation increased by EUR 14.5 million due to the new IFRS 16 impacted by EUR 8.8 million and of course, higher CapEx investments, which we have done over the past couple of years.
The financial result decreased by EUR 7.4 million to minus EUR 27.3 million. Primarily due to regular refinancing activities and the pre-financing of ADF/IDF, as well as the interest component related to IFRS 16. Net income grew to EUR 153.4 million, and earnings per share normalized for ADF/IDF transaction-related costs rose to EUR 1.14 per share. Our tax rate decreased to 27% and is therefore already positioned within our new midterm guidance of a 26%-28% tax rate. 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 EUR 131 million, an increase of EUR 60 million, which means a 14% improvement compared to H1 2018. For the full year, we expect business free cash flow to be better than last year.
As a percentage of sales, business free cash flow is expected to show a double-digit percentage figure. Let's move to our cash flow analysis on slide 13. Operating cash flow came down to EUR 141 million after EUR 151.3 million 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. Operating cash flow increased to EUR 947 million, which contains EUR 400 million from the capital increase in February, EUR 250 million from a new short-term in March, and EUR 500 million from a new euro bond in May. Please keep in mind that the cut-off date is June 30th, so neither the cash outflow for ADF/IDF nor the payback for the old euro bond of EUR 500 million is included. Slide 14 represents our healthy balance sheet with an equity ratio of 37.8%.
The biggest changes were in cash, borrowings, and equity, all significantly impacted by 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 bond 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 EUR 113 million, which resulted from the EUR 400 million capital increase in February, minus higher leasing obligation liabilities of EUR 96 million from IFRS 16, dividend of EUR 123 million and higher pension provisions of EUR 93 million.
Despite the ongoing negative impacts from pension provisions following lower interest rates, our long-term net debt, including pension leverage target, remains unchanged with 2 to 2.5 times. Our clear goal here is to run Symrise with an investment-grade profile. All in all, I 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 market day earlier this year. With that, I would like to hand back to Heinz-Jürgen.
Thank you, Olaf. Let me spend a few more moments with some operational highlights on chart 17. We are consistently executing on the three pillars of our strategy. Let's start with our growth initiatives. Demand for menthol remains high. We will therefore ramp up our production expansion in South Carolina in the U.S. in quarter 3. Just last month, Flavor launched a production line for liquid flavors in the Russian town of Rogovo, south of Moscow. In our headquarters in Holzminden, we continued investing in new technologies and capacity. In the first half year, we finalized an expansion project in Fragrances. We also opened a new development center for cosmetic ingredients in Holzminden to further build on our competencies. Another initiative, which I would like to share with you, is Vanilla for Change. As you know, together with Unilever, we support vanilla farmers and young people.
For the first time, the Unilever ice cream brand, Wall's, is positioning our activities around vanilla directly at the point of sale, naming Symrise as a key contributor for truly sustainable vanilla products. An important development in our portfolio has certainly been the announcement of the planned acquisition of ADF/IDF. 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 in the second half of 2019. Let's move on to chart 18 with our updated outlook for the current fiscal year. After a good first half of 2019, we're confident to continue growing faster than the relevant market. The annual global market growth is expected to be around 3%-4%.
Based on our broad portfolio and our strong market positions, we aim for sales growth in the range of 5%-7%, which is in line with our previous guidance. We expect that the good growth dynamics will continue to a slightly higher profitability. 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 effect from IFRS 16. As Olaf explained, we have a strong focus on cash flow. Our objective is to achieve a double-digit business free cash flow in 2019. Let me conclude with a brief look at our long-term targets. 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%-7%. Our profitability is already at a high level.
However, we see potential for further increase in the coming years. In 2025, we want to achieve an EBITDA margin in the range of 20% to 23%. The key driver of this planned margin increase will be an advanced product mix. Let me stress that we are confident to achieve our ambitious growth targets. Chart 20 provides you with the outline of our growth journey until 2025. Our plan is to almost double our sales to between EUR 5.5 billion and EUR 6 billion. We intend to achieve this through, first, organic growth by further leveraging market opportunities for existing business. Secondly, incremental growth coming from new technologies and capacity expansions. Last but not least, through strategic complementary acquisitions. Utilizing these three levers, we see ourselves well-positioned to achieve our goals. Thank you.
Many thanks, Jürgen, and many thanks, Olaf. 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 take all your questions during the conference call, we will answer the remaining questions later. Many thanks. First question, please.
The first question is from the line of Thomas Baudchon with Société Générale. Please go ahead.
Yes. Good morning, gentlemen. Two questions, please. On Flavor and Nutrition. Very nice development on margin in the first half, the top line growth slowed down a little bit. Could you please talk a little bit more on the drivers? Am I mistaken in believing that these stabilizing vanilla prices are playing a role in this development? As for the second question, Scent & Care, if we strip out the IFRS 16 effect on the margin, the margin in the first half was still a little bit under pressure. How should we think about H2? Is this slowing down in the rate of inflation an indication that your margins could catch up, should we still assume that pressure is not easing? Thank you.
Thomas, thanks for your questions. Let's start with question one on Flavor. I think one of the 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, this year, a positive impact on the bottom line. 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 Flavor has been a bit slower in these periods of time. Overall, we believe our Flavor business continues to enjoy a strong organic growth momentum. We believe that the bottom line continues to develop very healthy. Yes, one point for some upswings and changes was certainly the vanilla price and the vanilla situation. Yes.
Having said that, let's turn to Scent & Care. We saw a certain improvement of the margin. We have always indicated that the raw material crisis is a big contributor to the pressure on the margin. We also have flagged that we were able to increase prices. We will have to continue to do so. The raw material situation in fragrance in Scent & Care continues to be on a very high level. However, we believe that we are 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?
It does. Thank you.
Next question is from the line of Heidi Vesterinen with BNP Paribas Exane. Please go ahead.
Good morning. On flavors again, could you talk about what you're seeing in North America, please? We're hearing from many peers that there was softness with multinationals. Do you see that as well? What are you seeing with locals and regionals? The second question, maybe if you could talk a bit more about cosmetic ingredients, what are you seeing there? We hear some peers have talked about softness in North America and China recently. Are you seeing that? What is your outlook? Thank you.
Okay. Hey, thanks, Heidi, for the questions. I'll come to that. Flavors in North America. There is a certain softness, I wouldn't say it's being structural. We said, it's always some seasonality in our business. We saw some softness. To your question, we believe this is just temporary. We have no reason to believe that this is a structural thing. That's why we have not specifically flagged it. There's nothing we are concerned about, no reason. There is no difference, at least no significant difference between the development of multinational Flavor customers or local and regional. We believe what we've seen is a temporary small effect, and we believe that there is nothing which we should flag at this time and nothing which we should be concerned about. Having said that, cosmetic ingredients go in the same direction.
There is nothing where we would see a significant softness in a particular market. We believe we have set up a very healthy portfolio of products, and we believe that there is nothing which we specifically should flag. If there would be, Heidi, we 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 expectations. No significant positive and no significant negative surprise. It reflects the way we set up our business in Flavor particularly, and also in cosmetic ingredients. Nothing to be concerned of, okay?
May I, Heidi, since you referred to China also? If you've seen our strong growth in Asia Pacific, a good part is China, and we enjoy good growth in China. 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.
The next question is from the line of Nicola Tang with Morgan 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've recently added free cash flow to your management incentive. How is that flowing through to your sales staff? Are they also incentivized by free cash flow metrics, or is it more around growth?
Do you want to-
Yeah, I'd like to take that. Working capital, if you look into the details, you will see that the impact is primarily on the payable side, where we had some impact last year on the positive side, very positive impact, which we did not see this year again. Nevertheless, it's a topic which we are addressing at the moment. 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. We have a balanced KPI environment coming from top line EBITDA and also business free cash flow as an indicator. Clearly, there is a lot of focus on this topic. Keep in mind, we are growing fast for a number of quarters by now. Of course, the working capital is growing with the top line.
Of course, we have the ambition to continue and improve step by step the business free cash flow. 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 digit at the end of last year. Optimistic that we will see this going in the right direction.
Okay, Nicola, does that answer your question?
Yes. Thank you.
You're welcome.
The next question is from the line of Ranulf Orr with Redburn. Please go ahead.
Morning. Thanks for the questions. Firstly, I just wondering if you could help with the price volume split specifically for Q2. The second question is on the margin outlook. Does that assume any contribution in Q4 to earnings revenues from the ADF/IDF acquisition? Thank you.
The second question, no. This is like for like, the guidance. There is no potentially positive effect from ADF/IDF in Q4. As you said, we are still working on the closure of this, which is ongoing on a constructive basis. As it's not done yet, we have not included that price volume. I would say, Olaf, you give some detailed numbers on this one.
Yeah. 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 Scent & Care, very much a price-driven environment, and also Nutrition is increasing prices given the raw material pressure we have. Clear signal. We are successful in getting through with price increases, and we should see more of this in the second half of the year.
Okay. No negative volume growth for any of the divisions in Q2?
No.
Great. Thank you.
Next question is from the line of Patrick Rafaisz from UBS. Please go ahead.
Hi, everyone, and thanks for taking my questions. The first one would be on ADF/IDF. You just mentioned that the talks continue in a constructive manner. Can you update us on the schedule, where we stand with the likely closing, and potential worries maybe around the FTC pushbacks?
The second question would be just on the Georgia delay in the startup. Could you quantify that effect for the second quarter? Should we assume that there will be more one-offs related to that happening in the third quarter before you actually start up the plant? Thank you.
Okay, Patrick. Thanks for the questions. Very specific and not unexpected, to be precise. The ADF/IDF, yes, we face a certain delay. Altogether, we have originally, beginning of the year, expected the closure by mid of this year. We now expect the closure of the deal by end of third quarter. That's at the moment where we are. The good news is, no change in message. We expect a successful 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, it's very constructive, and we expect the closure of the deal successfully around end of third quarter. In new terms, it's a delay compared to our original calculations of three months, but nothing which fundamentally changes these things.
That leaves the second question, Georgia. Olaf, you want to pick that one?
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, EUR 9.6 million so far. There will be some more, of course, related to the time after closing when we do the integration. It's a little bit too early to say how the magnitude will be.
Okay. Thank you very much.
Yeah, you're welcome.
The next question is from the line of Tom Wrigglesworth with Citi. Go ahead.
Good morning. Thank you very much for taking my questions. Quick ones, hopefully. The ongoing costs for the deal, can you give any guidance for how that's going to play out in the second half? Thank you. Secondly, just on your guidance of 5%-7% organic growth for the full year, should I interpret from the comments you've made so far that any softness in 2Q you expect to eventually recover in the third quarter? Secondly, on the growth that you've clearly highlighted, how much of that 5%-7% organic growth do you think will come from the growth projects that you've cited, including the Carolina facility ramping up? Thank you.
Okay. Tom, thanks. As we said, the ADF/IDF acquisition is not included in the reported figures and in the outlook so far. 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 fair enough to not include it in any of the outlook numbers. 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 menthol extension.
That we expect, of course, to contribute to some effect to the organic growth, and that's one of the reasons, amongst others, why we are optimistic that our growth momentum will continue to be very healthy in the second half of the year. Of course, we could try to peel the onion, 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 the message, organic growth will be within 5%-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 quick follow-up. I was looking for, obviously, the EUR 9.6 million that you incurred in deal costs. Is that something that we should assume each quarter going forward until closing? Obviously there will be incremental transaction costs.
Okay. No, of course, some of this EUR 9.6 million is related to the acquisition itself, which is behind us. We have signed the contract, all the legal work is done, everything is done. Financing. What we see at the moment is we are looking forward to the closing, so of course, only when we have seen the closing, the integration work will start. 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.
Yeah. For here and today, the good and 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. Thank you both.
Welcome.
The next question is from Isha Sharma with MainFirst Bank. Please go ahead.
Hi. Thanks for taking my questions. Quickly, most of them are answered actually. Quickly on the CapEx project. I just wanted to get an update on the new site in China and menthol, when should we expect the startup? Also quickly on Flavor. In Q1, you said that you don't see In Q2, you don't really see this as a structural problem in the regions. Has it changed, let's say, in July? Thank you.
Okay. Isha, I take the first part of your questions, Olaf the second. Good to have you in the call, by the way. We start with the CapEx projects. As we said, the big ones, ADF/IDF, we already had. According to now, it's three months late. menthol, to be specific, as far as we can see, it is four weeks late, which is nothing to be reported. It's on track pretty much for a project of this magnitude. It's four weeks late. We're in the process of ramping it up. Nothing negative to be represented or reported. That's the good one. On cosmetic ingredients, which we shared with you in the Capital Markets Day this year, it's also on track, will be pretty much ready by end of this year. That's the latest we know so far. Nothing negative to report.
This China Greenfield, it is a bit late as well, but it is nothing because we screwed up or something like this. It is just some additional requests. Nothing negative, just some additional requests and requirements from Chinese officials, which we fulfill. Nothing negative to report in any of these projects, with the exception of what I just said. The one or the other is a bit delayed or slightly delayed, but the key message, positive message on all these projects remains positive, and that is why in the previous question, we believe that some positive growth momentum for the remaining months of the year will come from the one or the other of these projects. Okay. Having said that, Olaf, the second part of the question is for you.
Yeah. Your question about the Flavor Q2 situation. Yeah, I think a lot was cutoff related, 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, which should not be forgotten.
Okay. Hopefully, Isha, that answers your questions.
Thank you very much.
Yeah, you're welcome.
The next question is from Sabine Paillote with JPMorgan. Please go ahead.
Yes, good morning. I ask questions and a follow-up. My first question is on pricing. Could you give us on Latin America, what is the pricing contribution to the number you reported? Given what you gave, I calculated or estimated rather that you had a pricing contribution of four in Q1, three in Q2, and a tougher comp in the second half of the year. Is it fair to say that we will see maybe less pricing contribution in H2? My second question is on your margin of 21% new target. I understand that you have the 60 basis point or so impact from IFRS 16. Is there anything else within your business performance that we should take into account to see the change between 20% and 21%? The follow-up I have, I'm sorry, on Flavor. I hear you on the tough comparative.
In Q2, the comp in Flavor was as elevated as in Q1, and we saw almost a 600 basis point acceleration. Could you explain where is this coming from? In Q2, you have slightly less tough comparative. Should we expect an acceleration from the H1 growth level, which is around 3.8%? Thank you.
Olaf, this was so much about numbers. I heard at least five questions. Olaf, you deal with all these numbers.
Yeah. Pricing contribution, as said, we have a very mixed picture at the moment, and of course, the headwind in raw materials is specifically on the Scent & Care side, and to a good part also in Nutrition, specifically pet food. We are dealing with this through price increases, and of course, this comes with a delay. We have price headwinds for quite some time, and the price increases have very much been put in place. 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 this side. When it comes to the margin situation, the 20% change to 21%, 0.5%, 0.6% of that is related to IFRS 16.
The delta is pretty much our impression of the better profitability for this year compared to the beginning of the year. Take that as a positive, that we are optimistic about our performance for the remainder of the year.
Latin America prices.
Exactly. Latin America, you see us with 13% organic growth in the region. The impact which comes from hyperinflation, Argentina is excluded from this number. We just wanted to give you a clear picture on this. What we have seen also in connection with the raw material headwind is that we saw price increases also on the USD side, which is not a given, and therefore a good indicator also that we are able to increase prices also in a region like Latin America. Last, I would state a good volume growth in the region coming especially also from pet food, which we have there 2 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 your questions, a little bit to deal with this.
Yeah, there was another part of the question which was on Flavor to understand why there was such a deceleration despite the same comparative.
Well, it was, as Olaf said, I pick that up. It's just more seasonal effects and closing effects. Nothing to be concerned of. It's just the monthly seasonal stuff to the largest extent. As I said, nothing to be concerned of. Okay?
The next question is from the line of Patrick Schmidt with Warburg Research. Please go ahead.
Yes, hi, gentlemen. Thanks for taking the question. I have to annoy you once more with ADF/IDF and what you define as successful deal. Do you assume that 100% of the deal will be finalized, or is there a chance that you might have to dispose part of the business as a requirement to fulfill the deal? Second question is, just follow up on your Argentina and Brazil pet food volume. Why doesn't it help on the margin side then if the FX effects or the hyperinflation is such dominant, and don't you export from there, or what is your cost basis? In which currency is that predominantly? Thank you.
First, Thanks, Patrick, for the question. ADF/IDF, 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 end of third quarter, that includes that basically 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 are legally bound to these restrictions. Please, let's respect that we follow the American guidelines. Having said that, Ulf, you want to deal with the second part?
Patrick, also from my side, the pet food environment showed a good performance. That later business is of course not the majority of the business, which is still in the U.S. and in Europe. I just referred to that as a nice contributor on the volume side for the region. The pet food business is performing very well growth-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 a very positive contributor to us.
Okay. Thank you very much.
You're welcome.
Next question is from the line of Katie Hutchison with Citi. Please go ahead.
Good morning, gentlemen. Two questions from my side. Firstly, on the production delays in the Diana Food's new site in Georgia, you call that out as a headwind to margin from Nutrition. How is this progressing so far into the second half, and how should we look at Nutrition margin for H2? Secondly, I see you called out Aqua in the statement, and I know some of your peers are present in that space already, given your position in pet food. With the ADF/IDF acquisition, I'd be interested to hear how you see that business developing and your plans for that segment going forward. Thank you.
Yeah, Katie. Thanks. 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 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 Aqua, that business, as we always said, it's nice. It's a unique part in the Diana thing, and it's developing very healthy, but it's small. 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. Overall, the top line was healthy in the healthy double digits in the first half of the year. There's no sign that this will change at the moment.
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 third business unit, separate business unit. It shows it's now on a solid, very healthy growth path in a very interesting indication. As we all know aqua farming is an area which has a bright future ahead, 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?
Okay. Thank you.
You're welcome.
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 Symrise. We are looking forward to seeing you at upcoming conferences or road shows. We will publish our trading update for the nine months and third quarter on October 29th. Thank you very much. Goodbye, and have a nice day.