dsm-firmenich revealed Q3 2023 trading updates, estimating for FY 2023, on a pro forma basis, an adjusted EBITDA of around €1,800 million, which includes an estimated negative vitamin effect of about €500 million as well as a negative foreign exchange effect of about €90 million. Below are segment highlights from the company's sales report.
Perfumery & Beauty performed well delivering a 2% organic sales growth when excluding the 2% negative impact from the Pinova plant closure in Georgia, United States. This performance was driven by a 3% pricing growth across all segments, offset by lower volumes in Ingredients, which experienced further destocking and soft demand.
Adjusted EBITDA was €212 million and includes a negative foreign exchange effect of around 8%. Without this effect, the Adjusted EBITDA would have been up 6%. The Adjusted EBITDA margin of 23.0% was up 110bps versus the prior year.
Taste, Texture & Health (TTH)
Against a very strong comparable prior year, TTH delivered a 5% decline in organic sales. Strong pricing was partly offset by low vitamin prices. Volumes were soft, owing to destocking and our deliberate decision to step away from low-margin products including vitamins.
Adjusted EBITDA was €134 million and includes a negative foreign exchange effect of around 6%. Without this effect, Adjusted EBITDA would have been up 1%. This resilient performance resulted from the strength in the higher-margin, high-growth activities. Adjusted EBITDA margin of 18.2% was up 130bps versus the prior year period owing to a positive product mix.
In a challenging operating environment, HNC recorded 8% lower organic sales compared to the same prior year period, due to 10% lower volumes. Ongoing destocking impacted some of the HNC segments. Good pricing was largely offset by lower vitamin prices.
Adjusted EBITDA was down 48% year-on-year due to lower volumes, the work-through of high-cost inventories, and idle costs due to production shutdowns with the total vitamin effect of around €40m.
Animal Nutrition & Health
Overall global animal protein consumption has remained resilient, driven by poultry, with demand in China now stabilized, albeit with a slower recovery than expected. However, the ongoing destocking of animal protein continues to lead to an imbalance in the global feed additive marketplace.
ANH saw a continuation of the exceptionally challenging conditions of the first half, owing to the unprecedented low level of vitamin prices which slipped further during the quarter due to oversupply in a weak market.
The ANH team is fully focused on the vitamin transformation program, which was announced in June 2023. The €200 million cost reduction program is well underway to deliver a contribution of around €100 million Adjusted EBITDA in 2024, and the full benefit of the program in 2025.
The Q3 2023 Adjusted EBITDA was down 91% year-on-year, with a vitamin effect of about €120 million. The Adjusted EBITDA margin remained at similar low levels to Q2 2023, because of lower vitamin prices, lower volumes, and higher costs.
Dimitri de Vreeze, CEO, commented, "In the current global economic environment we are working hard to mitigate the effects through strong internal actions. To this end, we are driving a broad range of self-help measures, with the largest contributor being the vitamin transformation program. In addition, we have pushed harder on cash flow, a key priority for us, and see good improvements this quarter. At the same time, we remain relentlessly focused on the successful integration of the merger and the delivery of our targeted synergies.
During the quarter we were pleased with the continued good performance of our Perfumery & Beauty and the resilience of our Taste, Texture & Health businesses. However, destocking continued, and vitamin prices remained under pressure, impacting particularly Animal Nutrition & Health and Health, Nutrition & Care businesses. For the remainder of the year, we do not expect a material change in these business conditions, although the last quarter will begin to reflect the contribution from our internal costs actions.
The decisive actions we are taking at this time provide a strong base from which we will be able to deliver attractive innovation-driven growth. With our market-leading and highly complementary portfolio of ingredients, science and technologies, we are confident in achieving our mid-term financial targets. We are reviewing all segments to prioritize and accelerate the company's high growth and higher margin business. We will provide an update on progress of all our strategic actions at our Capital Markets Day next year."