Chr. Hansen Earnings: Price Increases Lead to Guidance Upgrade

Wide-moat Chr. Hansen CHR reported fiscal third-quarter EBIT of EUR 92 million, in line with the company-compiled consensus. Organic revenue growth in the quarter was 9%, mainly driven by price increases. Given strong organic revenue growth year to date, the company raised its 2023 guidance. It now expects full-year organic revenue growth of 9%-11% (previously 8%-11%) and free cash flow of EUR 200 million-EUR 230 million (previously EUR 180 million-EUR 220 million), while it maintained its outlook for a 26%-27% EBIT margin. This was likely expected by the market, as consensus organic revenue growth for 2023 was 10% and the stock was trading flat intraday. The merger with Novozymes remains on track to close in the fourth quarter of 2023 or the first quarter of 2024. We don’t expect to make a material change to our DKK 620 fair value estimate.

The outlook for the dairy, meat, and processed food markets remains challenged. Chr. Hansen expects no volume growth in cheese in 2023, while it expects fermented milk, meat, and processed food to decline. Conditions are better in health and nutrition, with the market for probiotic human health products expected to grow 4%-6%. Customer interest in human milk oligosaccharides remains high. Demand for the company’s plant protection products remains solid, while sales of animal feed products are being negatively affected by declining feed prices.