Specialist
Former senior adviser at Firmenich SA
Agenda
- Likely rationale for announced DSM-Firmenich (AMS: DMS) merger, synergy targets and operational outline
- Integration timeline, execution risks and focus
- Potential competitive landscape impact, highlighting Givaudan (VTX: GIVN), Symrise (ETR: SY1), International Flavors & Fragrances (NYSE: IFF) and Kerry (LON: KYGA)
- Expected changes in customer buying behaviour, supply chain considerations and EBITDA outlook
Questions
1.
What are your high-level views of the agreed DSM-Firmenich merger?
2.
How reasonable is the targeted EUR 350m of adjusted EBITDA in synergies with a EUR 500m annual sales uplift?
3.
The synergy breakdown – F&B [food and beverage] 60%, health and nutrition and care 25%, then 15% in the perfumery part. A slide on p104 of the merger presentation, or the capital market’s day presentation, runs through several of the different areas. Could you indicate which parts of that list you think are reasonable vs a bit more challenging?
4.
How much is your base case for the EUR 350m EBITDA synergy target, given what you’ve said?
5.
How has customer demand around formulation evolved? Has it become increasingly complex? How well-aligned is the DSM-Firmenich merger to meet those increasing needs?
6.
How do you assess the scale of this DSM-Firmenich integration challenge? How well-positioned do you think the management team is to execute on these challenges?
7.
Management is looking at revenue synergies by year four and cost synergies by year three. Do you think that’s a reasonable timeline given the integration challenges?
8.
Could you comment on the integration officer or management more broadly, from a very objective perspective on how well-experienced they are to deal with an integration of this magnitude?
9.
What is your percentage probability of the merger going through, integration happening and all targets hit with limited integration challenges vs the probability of some meaningful integration challenges and lost market share during that period?
10.
How does this DSM-Firmenich merger compare to the IFF [International Flavors & Fragrances]-DuPont Biosciences merger? What is the magnitude of synergies and opportunities there? How significant is the challenge and what is management’s ability to achieve the integrations?
11.
Do you think the IFF-DuPont integration has a lower probability of going more smoothly and playing out effectively?
12.
You indicated a 50/50 chance for the DSM-Firmenich being successful in the way that has been outlined. What do you think for IFF-DuPont?
13.
What are the broader supply chain considerations, particularly focusing on Europe and the reliance of the ingredients market on suppliers such as BASF, further up the chain? If natural gas availability switches off from Russia and BASF is forced to shut its Ludwigshafen site, what ramifications could that have for F&F [fragrance and flavour] players? Given the relative weights of these chemicals, could they be imported from other regions with little impact?
14.
How much of the volume could come out of the market if suppliers further up the chain such as BASF pause certain sites? Thinking about Europe, could it be double-digit percentage of volume impacts?
15.
What’s your assessment of McCormick’s F&F entry? What impact does that have on the major players?
16.
How should we understand Firmenich’s EBITDA margin decline, 22.1% and 19.1% from 2020 to 2021? Why do you think this impact was so large compared to peers? Is it reversible?
