A good and sunny day from Holzminden, and welcome to our today's Symrise call. All materials have been published on our website this morning, and a replay of the call will be available later today. Today's call will be held by our new CEO, Jean-Yves Parisot, and our CFO, Olaf Klinger. After their presentations, we are open for your questions. I now hand over to Jean-Yves Parisot. Please start.
Thank you, Tobias. Good morning. Good morning to all of you, ladies and gentlemen. Welcome from my side to our Investor and Analyst Conference call, presenting our results for the first half of 2024. Thank you for taking the time to join us today. Let us start with our agenda for today, slide 2. Together with you, I would like to look at the half-year results, and Olaf Klinger will provide a deep dive into the financials, and I will conclude by highlighting our growth and strategic initiatives and giving you an update of our outlook for the remaining year. In the ongoing challenging political and economic environment, Symrise was able to continue its growth trajectory in the first half of 2024. We operate a proven and stable business model with comparatively low-risk content. Over the years, we have diversified and positioned the group robustly.
At the same time, high inflation persisted, which resulted in the increase of costs. Symrise managed to offset most of them by employing strict cost control together with an efficiency program, which we started at the end of January this year. Let's take a look at the financials on Chart 4. The first half of this year was marked by strong business growth in a continuously changing environment, and I'm glad to say we once again managed to outperform the market. We increased sales by 6.3% in reporting currency to EUR 2.6 billion. Organically, we achieved a growth rate of 11.5%. The EBITDA increased also by 11.5% to EUR 530 million, compared to the normalized figure of the previous year. The gross EBITDA margin reached 20.7%, which is an increase of 1 percentage point compared to the normalized last year figure.
Our efforts for increasing efficiency are starting to pay off. 50% of our targeted efficiency savings of EUR 50 million have been already realized. The business free cash flow amounted to EUR 226 million, an increase of more than EUR 120 million. Net income increased by EUR 52 million and totalized EUR 239 million. So, earnings per share increased to EUR 1.71 compared to EUR 1.34 in the first half of 2023. R&D expenses amounted to EUR 135 million, an increase of 3.2% versus the previous year. We will encounter somewhat limited visibility due to geopolitical uncertainties and high inflation rates. However, our business model, our global structure, and our unique portfolio are continuing to provide the strongest possible basis for sustained profitable growth going forward. Let's zoom into our sales growth for a moment on the slide 5.
Group sales increased to EUR 2.6 billion. We experienced a negative impact of EUR 16 million from the divestiture of our beverage trade business in the UK and around EUR 110 million headwinds from FX. Organically, the group achieved a very strong growth of 11.5%, driven by an excellent performance of both segments. Chart 6 illustrates the growth dynamics by segment. The taste, nutrition, and health segment achieved organic sales growth of 10% in the first half of 2024. Considering portfolio and exchange rate effects, the segment sales in the reporting currency amounted to EUR 1.572 billion and amounted to 2.9% above the previous year figure in reporting currency. Once again, a key growth driver was our pet food business, which grew in the double-digit percentage range, driven by additional volumes. Food and beverage applications demonstrate also a high growth rate as well.
The segment benefited from broadening its competencies beyond flavor and nutrition. The food and care segment achieved an organic sales growth of 14.1% in the first half of the year. In reporting currency, that amounts to 12.1%. Sales increased to EUR 993 million. Fine and consumer fragrances, as well as cosmetic ingredients, are continuing to grow strongly. Additionally, aroma molecules showed very good growth after the production incident in the U.S. last year. Let's move now on to chart 7 for the performance by region. We grew across all regions, with Latin America being the strongest one, delivering organic growth of more than 30%. Asia Pacific and Europe achieved an organic growth of more than 11%. In North America, we had a more moderate growth rate of 2.2%. Let me now hand over to Olaf. He will go into more detail looking at the financials. Olaf, thanks.
Thank you very much, Jean-Yves, and also a warm welcome to everybody on the phone from my side. Let me add some details to our growth on slide 9. Last year, our growth was primarily driven by pricing. As anticipated, we are seeing a strong return in volume this year. Our organic growth this year of 11.5% was positively impacted by a 9.4% increase in volume, while we experienced a slight decline in real pricing of around 1%. This was offset by the impact of a positive 3.3% hyperinflation-related effect, mainly stemming from Argentina. In Q2, we achieved 12.1% organic growth compared to 10.9% in Q1. While we saw a hyperinflation-related pricing impact of 4.4% in Q1, the impact came down to 2.2% in Q2 and is expected to further decrease during the coming two quarters.
Already at this point, I want to confirm that our organic growth guidance of 5%-7% for 2024 excludes the hyperinflation-related pricing. We announced the divestment of the UK beverage trading business to Th. Geyer effective March 1st as part of our portfolio optimization. This divestiture resulted in a EUR 16 million reduction in sales for the last four months, or a -0.7% impact on our overall top-line performance. FX continued to be headwind in the second quarter, contributing a negative impact of EUR 41 million, following a negative EUR 69 million in the first quarter. This resulted in a total negative impact of EUR 110 million in the first half of the year, representing -4% of our sales. Let's turn our attention to slide 10, which highlights our group profitability.
As you can see, we've experienced an improvement in gross profit reaching EUR 998 million, a 13.5% increase compared to the first half of 2023. This growth is primarily driven by the fact that our cost of goods sold has increased at a slower pace than our sales revenue. This positive development resulted in a 2.5 percentage point improvement in our gross margin, rising from 36.4% to 38.9%. Furthermore, we achieved a EUR 55 million increase in EBITDA, driven by our profitable sales growth and strict cost measures. Our broad-based efficiency program is paying off. Against budget, we realized cost savings of EUR 25 million until the end of June. Next to cost savings on T&E, as well as consulting services, we are benefiting from a very cautious rehiring approach across the organization.
Process optimization and the utilization of economies of scale through our one Symrise approach contributes not only short-term, but more importantly, the program is only a starting point for us. We are aiming at a lasting increase of our profitability in the long run. The program is closely monitored on a monthly basis. While we achieved strong performance, our EBITDA was impacted by certain extraordinary expenses. These include EUR 9 million severances and a write-off of around EUR 8 million in connection with a legal dispute. If not adjusted for these expenses in our reported EBITDA. Despite these additional costs, we were able to increase our EBITDA margin by 1 percentage point to 20.7% compared to the adjusted 19.7% for the first half of 2023. Moving on to EBIT, we experienced a 10.4% increase, reaching EUR 366 million compared to EUR 331 million in the first half of 2023.
While our EBIT margin of 14.3% is showing a 0.6 percentage point increase levels last year, it did so at a slower pace than our EBITDA. This difference is primarily attributed to an impairment of EUR 17.9 million on plant and machinery, as well as assets under construction and taste, nutrition, and health. I'm coming back to this. In conclusion, despite facing some headwinds, we have achieved a strong improvement of our financial performance in the first half of 2024. Let's turn to taste, nutrition, and health on slide 11, where you can see an organic growth for H1 of 10%. This performance was mainly driven by volume of 6.1%, reflecting robust demand across both our food and beverage as well as pet food divisions. The pet food volume growth has returned, particularly in the area of palatability.
Since hyperinflation impacted T&H more than food and care, we saw a positive mid-single-digit hyperinflation-related pricing impact. Real price decreases in pet nutrition led to a slight decline here. The organic growth of T&H in Q2 was 12.6%, i.e., stronger than in Q1. The divestment of the UK trading business had a negative impact of -1% of sales from 2024 for T&H. For the first half of the year, our EBITDA saw an increase of 3.8%, reaching EUR 348 million from EUR 335 million the year before. This represents an industry-leading EBITDA margin of 22.1% for H1, which compared to 21.9% for the same period last year. Our EBIT declined by EUR 7 million to EUR 229 million, resulting in an EBIT margin of 14.5%. This decrease was driven by the EUR 17.9 million impairment charge related to the mentioned plant machinery and assets under construction for our pet food business.
This impairment stems from our previously communicated decision to pause a pet food project in the US due to revised market expectation and the subsequent review of our CapEx project roadmap impact. Let's turn to food and care on slide 12. The food and care organic growth of 14.1% in H1 was driven by double-digit volume growth in all three divisions. Despite a challenging market environment, aroma molecules saw a significant increase in volume, primarily driven by the resumption of production at Colonel's Island. terpene prices experienced a decline. Hyperinflation-related pricing had a small positive impact on food and care. The organic growth in Q2 was 11.2%. The food and care segment saw a 30% increase in EBITDA to EUR 182 million, up from the normalized EUR 140 million last year. This translated into a strongly recovered EBITDA margin of 18.3% compared to an adjusted 15.8% in the previous year.
Let's move to slide 13 to discuss our bottom line. Our financial result improved by EUR 3 million to minus EUR 42 million. This was primarily due to a slightly improved interest result, lower expenses related to hyperinflation effects, particularly in Argentina. We also made progress in our tax efficiency, reducing our tax rates to 25.3%, a decrease of 0.8 percentage points. This puts us at the lower end of our midterm tax rate guidance of 25%-27%. Despite the decline in financial result, our net income saw an increase of EUR 502 million compared to last year, reaching EUR 239 million. The key driver for this is the improved profitability, as well as the negative one-time effects posted in food and care last year. As a result, our EPS increased by 27.7% to €1.71 per share, up from €1.34 per share in the previous year.
Coming to slide 14, it is worth mentioning that we significantly increased our business cash flow by more than doubling it from EUR 106 million to EUR 226 million. This represents 8.8% of sales compared to 4.4% in H1 2023. This improvement was driven primarily by enhanced EBITDA and better working capital management. Additionally, a slightly lower CapEx by EUR 5 million compared to the previous year contributed to the improvement. Our cash flow from operating activities for the first half of 2024 increased by EUR 144 million to EUR 288 million. Our guidance for the business pre-cash flow of 12% for 2024 and our midterm guidance of 14% remains unchanged. Please move to our net debt development on slide 15. Our net debt to EBITDA ratio is currently at 2.3 times adjusted EBITDA without pensions and leasing obligations and 2.9 times adjusted EBITDA, including pensions and leasing obligations.
This is slightly above our midterm net debt guidance, which is 2-2.5x EBITDA, including pension and leasing obligations. We are very confident in our ability to return to our self-defined corridor within the next 12-18 months. Furthermore, our debt profile remains strong, with no covenants or imminent maturities, supporting very solid investment-grade rating. As you can see on Slide 16, the total assets reflect a slight increase. The increase in assets is primarily driven by higher trade receivables, a direct result of our increased sales. This is offset by a decrease in cash and cash equivalents. It's mainly driven by the dividend payment, as well as the acquisition of other shares in food and care for around EUR 48 million and lower inventory. The changes on the equity and liability side are primarily stemming from an increase in retained earnings.
The effect of the higher net income of the period exceeds dividend payment retirement. Our equity ratio consequently remains on a healthy level of 48.2%, indicating a strong financial position. Overall, we continue to benefit from our well-diversified, streamlined, and broad portfolio, which provides a stable foundation for continuing profitable growth beyond market growth. And with this, I would like to hand back to Jean-Yves. Thank you.
Thank you very much, Olaf. Thank you. So, ladies and gentlemen, before we move on to our outlook, allow me to highlight some strategic initiatives of our segments. In both, we are differentiating ourselves in the industry. Let me start with Taste, Nutrition & Health on slide 18. Two weeks ago, the food and beverage division opened its digital immersion co-creation center in Asia, pioneering the future of innovation. The center represents an investment in the Asia-Pacific Innovation and Technology Center in Singapore.
Here, we aim to drive end-to-end product development with customers and industry partners through the blending of market, consumer, and sensory insights with disruptive technology and prototype development, from evaluation to validation. Also, in Asia, we opened a facility in Beijing to expand our footprint to be closer to our clients and better leverage growth opportunities in this part of China in July. We are constantly reviewing our portfolio to add capabilities. On the other hand, if a product line does not fit anymore to the competencies we want to build or does not meet our expectations concerning growth or profitability any longer, we will exit. In the second half of this year, we intend to diversify our aquafeed business to focus more on our core expertise. Annual sales of business to be sold amount for around EUR 20 million.
We will look for a new owner who can further develop the business. I have already mentioned that in the first half of this year, we sold our beverage trading business in the UK following the same strategic rationale. The marine ingredient world remains very appealing for us, and in the future, we concentrate on high-value natural substances coming from marine to be used in taste and nutrition. Symrise is recognized as a leader in sustainability. This is why I'm also especially proud to share an initiative that our pet food operations employees at different locations started, and they did an excellent approach. They simply asked themselves, "Where can we save resources such as electricity, energy, or water?" The results are remarkable as far as the efficiency gains versus last year are concerned. You can see some figures on the slide.
Finally, in the last months, we launched several new product concepts covering nutritional and health aspects, such as glucosamine-balanced blood glucose levels or Vitapro, supporting the immune system. All results of our unique Augmented Flavor House approach. In Scent & Care, we are continuing to invest in our competencies and capabilities, and let me highlight a few achievements on slide 19. We successfully closed with our Indian partner, Virchow Group, the transaction of Viyash in July, buying 51% of the shares. We strategically expand our production capacities for high-value cosmetic ingredients in the Scent & Care segments. As the first chemical production site of Symrise outside Europe and North America, the new facility represents a great milestone for us to accelerate future growth in Asia for this business.
Under the brand Lautier 1795, we bundle our expertise in developing the finest fragrance materials such as tuberose, jasmine, or orange absolu in Grasse. Also in Grasse, we are constructing a new site hosting R&D, creation and production of natural ingredients, as well as fragrance composition in line with the Lautier brands and the extensive efforts to increase and consolidate our footprint in southern France, including the latest acquisitions of SFA Romani and Groupe Néroli. Under the brand Holzminden Lab, we are focusing on fragrance molecules produced under the principle of green chemistry that are biologically degradable and have a low carbon footprint. Here, we use our expertise in renewable wood mastering, upcycling, and our comprehensive synthesis know-how, a large portfolio of unique captives produced under high sustainable principles. That brings me to another view of our sustainability agenda, and please turn now to slide 20.
Our ambition is to embed sustainability in our entire value chain from sourcing to delivery. In each of the different value steps, we run important projects. It starts with sourcing sustainably cultivated raw materials by applying good agricultural practices and ensuring human rights. Applying sustainability in product development and operation is also key for us. I mentioned lines such as loyalty and Holzminden Lab, where sustainability is an intrinsic driver. Utilizing green chemistry and focusing on circular economy is very material for us, as is protecting environment also. Our clients and their consumers are for transparency and environmental-friendly products. The increasing awareness of health, nutrition, and personal care drives also our innovation agenda. Ladies and gentlemen, let me now draw your attention to the outlook on chart 21.
Despite the current volatile market environment because of geopolitical tensions and continued high inflation overall, Symrise is well positioned to continue its growth path. We are therefore confirming our growth targets and continue to expect to grow faster than the relevant markets, with an organic growth rate between 5%-7% for 2024. In terms of profitability, we are seeking to achieve an EBITDA margin of around 20%. I explained already by Olaf concerning the business cash flow. We are aiming now for a rate relative to sales of around 12% for 2024. Let me conclude by affirming our corporate strategy and long-term target 2028, which you can see on slide 22. Symrise aims to increase its sales to EUR 7.5-EUR 8 billion by 2028, with an annual organic growth rate of 5%-7% and targeted acquisitions.
The profitability should meet the target corridor of 20%-23% in the long term. Ladies and gentlemen, thanks for your attention. Before we open the call for questions, I would like to invite you to our capital market days in Holzminden on November 19th and 20th, where we want to highlight not only our strategic direction for the coming years, but also some important innovation and growth projects at our Holzminden headquarters, the site where it all started 150 years ago. Now, I'm very pleased to open the floor for your questions. Thanks a lot.
Many thanks, Joaquin, and many thanks, Olaf. After the instructions from our operator, Alice, we're happy to take the questions, ideally limited to two questions each. Many thanks. Please go ahead, Alice.
Thank you. We'll now begin the question-and-answer session.
Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from the line of Lisa De Neve with Morgan Stanley. Please go ahead.
Good morning. Thank you for taking my two questions. My first question is, can you please share the moving parts toward currently sticking to your 2024 EBITDA margin guide of 20%? How do you see the second half EBITDA margin evolving, and should we apply fairly normal seasonality where first half margins are typically a bit better than the second half?
Are there any incremental exceptional elements that we should take into consideration? That's my first question. And the second one is on CapEx. Can you provide us with an update on your growth CapEx pipeline in TNH and which expansions you're currently scheduling to come online in the next 12 months? And can you also share on the impairment you took, whether this is a temporary suspension of the North American Pet Food Plant or it's a permanent suspension and you're not targeting to bring that back over time? Thank you.
Okay, so thank you for the two questions, and I propose to hand over to Olaf and to complement if necessary. Thanks, Olaf. Yeah, hi, Lisa. Thanks for your question. So on the EBITDA margin guidance, we are sticking to the around 20%.
We are seeing a good picture in the first half, and as you stated, the second half is always a little bit softer for us, and therefore, I think the guidance is still good for the year. Nevertheless, of course, we are working very hard at the moment and clearly ambitions around it. When it comes to your point on exceptionals, so far we have not foreseen any specific exceptionals for the second half of this year. I mentioned two specific items for the first half. The growth CapEx for TNH, if you want to talk about the pipeline of CapEx projects. Yes. He visited our liquid plant here in here in and Holzminden yesterday, so I will hand over to you. Thanks for the two me. Concerning the EBITDA, I think Olaf summarized very well the perspective for the second part of the year.
Concerning CapEx, so we are really being very prudent about the CapEx, the way we spend the CapEx. The question today is not only to deliver growth, but profitable growth and return on the CapEx. So we are today more and more making sure that we are utilizing the CapEx the best way in terms of return on investment. I will start with your question about the pet food. We had, 2, 3 years ago, we had a very strong pet food sales development in North America during the COVID period, and the market was asking for a big increase of volume. So the volume is still increasing, but not at the pace it was increasing 2 or 3 years ago.
So we have decided with Olaf to really, and with the team, of course, we have decided with the team to really make a pause on this investment, and you will see the impact for the first semester EBIT, but it's only a pause. And of course, the volumes are there, but what we want to be sure, we want to be sure that we are really filling the assets the most rapid way as possible. So that's the reason why we are also visiting the global planification of our different sites in the world. So that is the explanation for the pet food, just a way to be realistic and not to overspend and not to spend too early.
Concerning the CapEx for TNH, again, the volume, as mentioned by Olaf, is there, and Olaf mentioned an investment in Holzminden, so we invest close to EUR 30 million for the time being in the liquid blending facility I was visiting yesterday in SunTrack, and we definitely need this volume capacity. So the answer is to say we are really making sure that our CapEx spendings are following strictly our volume forecast.
Thank you very much.
Thanks.
The next question comes from the line of Charles Eden, UBS. Please go ahead.
Hi, morning. Thanks for taking my questions. My first one is just, could you comment on the trends you're seeing in July? Are they broadly similar to Q2? Have you seen any step down? I'm just sort of wondering, I guess, following on from the previous question around the margin guide.
On the top line, again, you're running EBITDA XFX pricing sort of 8.5% organics in the first half, yet you've obviously retained the 5%-7%. So I just want to understand if there's anything you've seen in July to sort of urge you to be a bit more cautious. And then my second one, just on the impairment charge in the first half, so that's EUR 17 million. Why didn't you strip that out and report it sort of a normalized EBITDA, given that it's clearly a one-off? Or is that sort of a signal that you're trying to not use that normalized EBITDA metric that you used last year and really want to just focus on absolute EBITDA? Thank you.
Okay, thanks. So I will take the first question and hand over to the second to Olaf. Concerning the trend in July, my answer will be with two parts.
The trend in July for us is quite good. I try to avoid to say very good, but we see still a very good trend in terms of volume increase, which makes me to be very confident for the second part of the year. That being said, I'm also always very realistic. One month is only one month. We never know what the market can do in the different regions and industries. We have also to anticipate where the FMCGs are going themselves, right? Concerning the growth, it is really still there. I'm also confident for the margin. You have to know that we are still on the way to increase the prices in the main part of our businesses. We are making some concessions when necessary because of the big cost material decrease, which is a very mechanical impact.
But all the time, we are keeping the gross profit. In any case, we are really keeping the gross profit. So even if it has an impact on the top line, it has no impact on the gross profit. So that's why also we have very strict rules internally. So having been, I think I answered the first question. If not, please come back later on. I hand over for the second for the impairment form to Olaf.
Yeah, Charles, thank you for the question. I think we know each other for quite some time, and you know that I'm not a friend of adjustments and carving out whatever. There's always something in a company like us. We are in a global environment, and we have operational and sometimes some specific items, but we need to deal with that.
And therefore, I prefer very much not to normalize the EBITDA, but I flag them in a way that you can understand this. I think we have done well with this approach, except for last year where the magnitude of the special items, especially in connection with Colonel's Island, was so big that we decided to make an adjustment last year. But in the normal circumstances, I try to avoid it. Hope that answers the question.
It does. Thank you.
The next question comes from the line of Nicola Tang, BNP Paribas Exane. Please go ahead.
Hi everyone. Thanks for taking the questions. But first, I wanted to push a bit more on the organic growth outlook for the second half.
You talked about July being quite good, but if I look at your full year guidance, it does imply a bit of a slowdown in the second half of the year. So are there any specific areas where you're seeing a bit of a slowdown, or are you just trying to maintain a bit of caution given the low visibility? And then the second question, I wanted to ask a bit more about the cost efficiencies that you've been delivering so far. I think Olaf, in your remarks, you mentioned a few examples, so T&E and consulting services. I wonder whether you could give a bit more color on what's behind that EUR 50 million plan for the year and also how you're thinking about further efficiency opportunities beyond 2024 as well. Thanks.
Okay. So I will start answering and let Olaf complete.
Concerning the organic growth outlook, I just mentioned we are quite confident for the second part of the year. I think that even if we have a double-digit growth for the first part of the year, which is including also some hyperinflation impact pricing-wise, and myself, I am confident that we can reach the 5%-7%, and I should say minimum. But the idea is not to change the agenda all the time, and the idea is to remain realistic and not to reinvent the wheel. But no slowdown. To answer your question, Nicola, straightforwardly, I don't see the main slowdown, but I will let Olaf give you some more color about the hyperinflation impact we could see.
The second point concerning the cost efficiencies, as we mentioned, also I think in the first call, when we put in place this program, there are two parts. The first part is really very strict cost management, T&E, and so on, which is delivering a lot short term. As we mentioned, we already delivered EUR 25 million of the EUR 50 million, which is a tremendous performance from the team in terms of commitment. There is a second part which we deliver short term, but mainly midterm, long term, which are efficiencies. Efficiency program concerning indirect materials, concerning raw material, concerning operational asset efficiencies. Behind the indirect, you have the logistics, you have the energy, you have a lot of other stuff. Behind the raw material, we are close to EUR 2 billion procurement we are buying on the market.
Behind the plant efficiency, we are running more than 80 plants. Exactly linked also to the CapEx message I was giving earlier, we are also making our best to optimize more and more globally our operations. We are a very agile operation company, and we are very close to the customers. We have a new lab opening, but we want also to be more and more leveraging our scale globally through our operations. So it is the second part of the rocket, which is today difficult to measure. We are now putting in place different programs, but it is giving us a good perspective for the 20%-23% midterm target. But perhaps I will let Olaf also comment on the top line on the hyperinflation effect, for which we had myself, I had some questions last time and also Olaf.
Yeah, so we carved it out clearly to make sure that you understand where the organic growth for Symrise is without this effect, which primarily comes from Argentina, Turkey. If you take that out, you are more on the range of 9%, 9.5% at the moment. So that is volume-driven growth. And I think it's remarkable that we discussed here double-digit growth rates, and we should not forget that. We have summarized for a long 5%-7% as an ambition, an ambition to deliver above market growth, and we clearly stick to that. We also need to recognize that this growth continues for quite a while already. And therefore, I think we need to be realistic in our assumptions. And that's why we feel quite comfortable with the current guidance, and we will do everything to overdeliver as we have always done.
And if it's happening, if it's possible, then we will definitely show it.
Okay, thank you.
The next question comes from the line of Matthew Yates, Bank of America. Please go ahead.
Hi, good morning, everyone. A couple of questions really for Olaf. Just coming back on the exceptional items. Obviously, if you were to add back that EUR 17 million, you talk about that gives you what, 60-70 basis points of extra margin. Are you suggesting that would probably be too aggressive because inevitably every year there are going to be some items of this magnitude, or would you say actually that is fair to say underlying margins were comfortably over 21% in the first half? And then I wanted to push you a little bit on the cash flow guidance.
As you show in the slides, first half roughly double what you achieved a year ago, yet your full year guidance for 12% is not that far away from what you did a year ago. So is there something about timing volatility in the second half that you need to highlight, or can we come to the conclusion that you are well ahead of budget in possibly exceeding that 12% cash flow guidance for this year? Thank you.
Olaf, I propose you start, and I will complement if necessary.
Yeah, so I think it's important to note that we had some exceptionals in the first half, which were, as you rightly said, probably pushing the margin a little bit higher than we showed us at 20.7%. However, I come back to what Lisa said at the beginning. The second half, from a historical perspective, is always a little bit softer.
We all know what happened last year in November, December, and we were scrutinized by you on this picture. So we remain quite confident, very confident in this regard. But definitely, we do not want to overpromise, and this is what you have in the picture at the moment. Cash flow guidance, I'm with you that we have made very good progress in this regard, but this current guidance is probably on the more conservative side at the moment. We are working very, very hard also on the working capital. T&H has made tremendous progress the last two years already, and Scent & Care is now in the situation that they can further improve this. And therefore, definitely, I'm comfortable that we can at least deliver on our guidance.
Yep. So I think that Olaf told everything.
I should just say, myself as a new CEO, I am really not only confident, but I'm also realistic. As Olaf mentioned last year, beginning of the year, we were very pushy, I think. We don't want also to disappoint you. So the confidence is also for us with a piece of realism. What we want is to be totally transparent. What Olaf explained, we want also to avoid a lot of restatements or whatever. So we have everything in. We are accountable for everything, the running and the exceptionals. Be sure that if we can increase the results and the performance, we will do it. Never by sacrificing also the future of the company. So the idea is really to make it the right way, always delivering what we commit to. So that's really the rule. Again, the questions that you are very pertinent.
The cash flow generation is a very good one because we had exactly the same question between ourselves. So let's see what will be the end of the year, but don't forget that the midterm are 14%. So if we can reach the midterm sooner, we will do it. Be sure.
Okay. Thank you both.
The next question comes from the line of Edward Mundy, JP Morgan. Please go ahead.
Morning, all. Thank you very much for taking my question. The two questions really are on pet food growth and on Scent & Care. On the pet food growth, still strong growth in H1, double digits, and in Q2 as well.
I was wondering, please, if you could break down a bit the nature of this growth by volume pricing and how much FX pricing contribution there is in there and what you're looking really for the pet food segment to deliver in terms of growth as you head into H2. And my second question, please, on Scent & Care is some easing in the total organic sales growth in Q2 versus Q1. I'm wondering if you can elaborate on some of the drivers of this easing by fine fragrance, consumer fragrance, aroma molecules, and cosmetic ingredients. Is it right to see that fine fragrance and cosmetic ingredients were somewhat slower in Q2 and what the prospects for these two businesses are for the rest of the year? Thank you.
Okay. So I will take the questions concerning pet food. Pet food growth.
A big difference in pet food today versus two or three years ago is today pet food is including the palatability business, the legacy business of Symrise, coming from Diana, and the nutrition business coming from the acquisition of ADF IDF. So in both businesses, the trend is good, but the situation of the market is different. Concerning palatability, where we have a very strong historical position, we are definitely, in terms of volume, rebounding with the market. The market is really there. By the way, also the Swedencare, we have some shares in the Swedish company, Swedencare, is showing a 10% organic growth for the Q2. For the pet food, it gives you an idea of the volume growth for pet food, right, for the palatability part, where we are increasing volumes in every part of the world.
Concerning the price, we are very keen to defend the pricing in our palatability business. Concerning the nutrition part, it's a totally different picture because the nutrition part, we were seeing a very high price increase the last two years, which we were really carrying over to the market. Now the prices of egg protein are going down, so we are following the market trends, very transactionally. There are two different pictures. In all the cases, the volumes are there, but in terms of price, prices are maintained for the palatability as much as we can. When we do some price concession, it's really a one-to-one approach for really respecting our customers, for which we have a very strong partnership.
Concerning the nutrition, we are coming back to a more reason we are sticking to the egg market, mainly in North America, where the main part of our operations are. In a nutshell, the growth is there, and there is no reason to see the same dynamic for the second part of the year, volume-wise and price-wise. Concerning Scent & Care, Scent & Care did a very good first part of the year, a very good starting point, and we are growing in every part of the business. We start by cosmetic ingredients. Cosmetic ingredients were definitely very strong, differentiated positions, and it is a fast-growing market where we are also facing every actor's competition. So we are also screening the market in terms of price adjustment, but the volumes are definitely there. Concerning fine fragrance and consumer fragrance, we are very, very proactive.
Concerning fine fragrance, we have reinforced our team and competencies, and we are winning more and more big deals with big brands. Concerning consumer fragrance, we are down an exercise of reshuffling our target industry, meaning shampoo, meaning cleansing, meaning fabric care. So we are really now wanting also to enter more in big deals and to turn more of strategic partnerships with customers. For finishing with aroma molecules, as mentioned previously, we are also coming back to very good growth, mainly due to the fact that we are recovering sales after the problem we had last year in North America. So Scent & Care growth was in H1. We'll continue in H2. Again, we need to be realistic and to make sure that we are always fitting with the competitiveness in terms of value pricing.
In the view of time, I now ask for only one question per participant, please. Thank you very much.
Our next question comes from the line of Isha Sharma with Stifel. Please go ahead.
Hi, good morning. So if I'm left only with one question, you're good. Could you please give us an overview of your planned investments? Apart from the pet food in the US, are there any planned delays? How should we think of the CapEx run rate, please?
The plan for pet food in the US?
Other planned delays.
Other planned delays. No, no. The question of, again, as I said to, I think we said, is the delay of pet food in the US is really in the frame of the efficiency and the return on capital employed.
We could have done the investment in the U.S. by having a slow ramp-up, and we decided not to make it that way. It's really a way to execute with discipline the capital expenditure. We have no other type of delay because the growth, the volumes are really there. Even I was, as I mentioned to you, visiting our investment in Holzminden for the liquid blending. I can tell you the liquid blending capacity today is unstopped. We are using some tollers or some partners, and we are making some optimization of batches. We are pushing for investment everywhere and in every part of the world. It's not a trend of volume decrease. The trend is the contrary. The trend for us is a strong volume increase. For me, the U.S. experience is also a way to make things with discipline.
We have to pay the bill sometimes, but again, with a big amount of money, which we have mentioned, perhaps some money will come back. But we prepare to be transparent and to really be very disciplined in the way we use the cash. So no negative signal. I think it's a signal of a disciplined way of using the cash. Did I answer the question?
Yes, you did. I just was wondering what is the run rate? Should we take H1 as a good benchmark for CapEx going forward?
Yes. Normally, we have higher spend, CapEx spend in the second half of this year. So you should add a little bit to the picture you see for H1. That's a point to avoid. Yeah. Yeah, it's like the reason why we're also careful for the free cash flow. Yeah. We have to be balancing. Yeah.
The next question comes from the line of Emilien Baillet. Please go ahead.
Hi. I was wondering if you could talk a bit more about the terpene environment because that seems like where you're having the biggest pricing headwinds in aroma molecules within Scent & Care. Why is pricing so weak? And are you seeing any perhaps structural changes to demand for natural versus synthetic terpenes? Are you concerned about that? Thank you.
So I think we are very close to the chemical pricing environment in the terpene space. That is where we play. There was a lot of additional competition coming after China especially reopened after the pandemic, and that has still an impact on the price situation. Now, we are using this material internally. We are selling it also to our competition. And the price weakness for the time being in terpene continues.
At the same time, as you know, we had an incident in our Colonel's Island site last year, and we were piling up some raw materials. Of course, we have long-term supply contracts for this, which is important. And these contracts are still sitting on some higher raw material costs. So that influences the picture in terpene at the moment we are dealing with. But looking forward, the elements should come now together, which makes us more positive for this environment. And we are very happy to have this backward integration in our portfolio. And it's important to have access to the natural-based fragrance ingredients more and more. And that's how we have positioned Symrise in this market environment and continue with this strategic ambition being in terpene. Great.
Thank you very much.
You're welcome.
Our next question comes from the line of Ranulf Orr, Citi. Please go ahead. Hi.
Thanks for taking the question. Just sticking with Scent & Care, I'm just wondering if you could please give a bit more margin or a bit more information on the margin there. I mean, it feels like conditions for many parts of that division are as close to as good as it gets. Exceptional volume, peers reporting very strong margins. Yet you're still at about 18%. So maybe just some information by the sort of subsegments would be useful. And then also, if you could just bridge the pathway you see to get from that 18% up to a kind of 21% margin would be very interesting to hear. Thank you.
Yep. So I will stop the answer, and I will let Olaf supplement if necessary. So yes, definitely. There is a big difference between Scent & Care performance and TNH performance.
TNH, we are Symrise, a strong player, by the way, the best delivering on the market. And Scent & Care, we are small compared to some competitors, which is not the case for TNH. So this is a starting point. Being small and competing with companies which are bigger, we need to put on the market more or less the same operating cost. And that has, in terms of scale, that has a direct impact on the profitability. That is the first thing. The second thing is also an operating cost. The second thing is also in terms of size. The more your business is sizable, the more you can play and have better cost of goods sold in terms of efficiency, size of batch, globalization, networking. So it is the second part of the puzzle with this product portfolio optimization, and it is not negligible there.
The third part is also, which is part of the story of Scent & Care today, we are reorganizing Scent & Care. So there are also some exceptionals, which are impacting Scent & Care performance today. So when you add A, B, C, and we'll let Olaf complement if I missed a key element, it does not justify a 10% difference or whatever, but it explains the performance of Scent & Care today. But it also gives you a perspective of the improvement we can do quite rapidly and substantially by growing the right way, by addressing the right solution to the right customer, and leveraging our scale. And scale, not only also across Scent & Care, but also across the full Symrise organization. So it is definitely for us a challenge, but it is a positive challenge in terms of perspective to improve the profitability as a whole. Olaf, if you want to complement?
No, I think you said a lot around it. Maybe as an additional element, you know that we have built the cosmetic ingredients business to a very remarkable size at the moment, continuing to invest into this fast-growing and higher-margin business. So that's also a differentiating factor. It's an opportunity to develop the Scent & Care journey. And the other statement I wanted to make is that Jörn Andreas is very much behind bringing this to the next level. The program is called Elevate 27 on purpose. So he's addressing the different parts of his portfolio in a very stringent, also cost-controlled way. So that gives another perspective that there is more opportunity for us in building and advancing Scent & Care. Okay. Ladies and gentlemen, we are running out of time, and we will answer all remaining questions in the next hours and days.
This brings us to the end of our conference call. Thank you very much for your interest in Symrise and your time today, especially as we are, again, not the only presenting company today. We are looking forward to seeing you in person soon. Many thanks. That's it for today. All the best. Have a nice day, a great summer, and ideally, a wonderful vacation. Thank you very much, and goodbye.