Chr. Hansen Earnings: Strong Organic Growth Leads to Guidance Upgrade

Wide-moat Chr. Hansen CHR reported fiscal fourth-quarter EBIT of EUR 99 million, up 8% over last year, driven by volume growth, continued price increases, and stable operating expenses. The underlying performance for the group was stronger than expected, with organic revenue growth of 16% versus 10.4% in the company-compiled consensus. However, negative currency effects weighed on the reported results, bringing revenue and EBIT back in line with consensus.

As part of the merger process with Novozymes, Chr. Hansen has been required to change its financial reporting to follow the calendar year. For this reason, it also provided an outlook for calendar 2023. Given strong organic revenue growth year to date, it has increased the full-year outlook to 10%-12% growth from 9%-12%. It expects the EBIT margin to range between 26% and 27%. This compares with an EBIT margin of 26.3% for the same period last year and 26% reported for the first eight months of 2023. The merger with Novozymes remains on track to close in the fourth quarter of 2023 or first quarter of 2024. The market reacted favorably to the solid organic sales growth and guidance increase, sending the shares up around 2% in early trading. We don’t expect to make a material change to our DKK 620 fair value estimate at this time.

The solid underlying performance was supported by both business areas. Customer interest in human milk oligosaccharides, or HMOs, remains high. During the quarter, Chr. Hansen received approval from the Chinese authorities with regard to the technology employed to produce all of its HMOs. This enables the company to apply for the final approval for its HMOs with Chinese authorities. For full-year 2023, Chr. Hansen expects growth in the cheese segment to be offset by declining markets for processed food, meat, and fermented milk.