Release Date: February 19, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you elaborate on the sources of volume growth expected in 2025, given that many CPGs are finding volume harder to come by? A: Our volume growth for 2025 is expected to be 1% to 4%, primarily driven by Health & Biosciences, Scent, and Taste. We have strong commercial pipelines and a high win rate in these areas. Food ingredients will see lower volume increases. Our focus over the next three years is to drive growth rates and narrow the margin gap with best-in-class competition by investing in R&D, commercial capabilities, and capacity.
Q: Could you explain the EBITDA bridge for 2025 and your expectations for seasonality in Q1? A: The EBITDA bridge to the midpoint of our 2025 guidance is driven by volume growth and productivity. We expect sales to grow 2.5% with an incremental margin of about 35%, yielding 4 to 5 points of EBITDA growth. Productivity is expected to offset inflationary pressures. The first half of the year will be stronger due to the expected completion of the Pharma Solutions divestiture by Q2, which is also our seasonally strongest quarter.
Q: What are your expectations for input inflation and net pricing development in 2025? A: Input costs remain historically high, with modest inflation in Taste and Scent due to natural ingredients. Food Ingredients may see some deflation, while Health & Biosciences is generally flat. Overall, we expect our input cost basket to be flat to slightly up. Pricing is expected to be consistent throughout the year, and we will work with customers on reformulations and price discussions to mitigate costs.
Q: Are you on track to achieve 15%+ margins in Functional Ingredients, and what initiatives support this growth? A: We are on track to achieve mid-teens margins in Functional Ingredients. In 2024, we achieved low double-digit EBITDA margins. Under new leadership, we are confident in our plans to reach mid-teens margins through better customer service, attractive margins, and aggressive productivity plans.
Q: Can you provide details on your free cash flow expectations and any plans for setting new midterm targets? A: For 2025, we expect free cash flow to be about $500 million, including a significant tax impact from the Pharma Solutions divestiture. Adjusted for this, free cash flow would be about $350 million. We are targeting a slight inflow in net working capital and plan to invest 6% of sales in CapEx. Regarding midterm targets, we will provide more clarity later in the year, but we are focused on executing our current strategy and strengthening the company.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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