Koninklijke DSM N.V. (OTCQX:RDSMY) Q2 2019 Earnings Conference Call August 1, 2019 3:00 AM ET
Dave Huizing - VP, IR
Feike Sijbesma - CEO & Chairman
Geraldine Matchett - CFO
Conference Call Participants
Neil Tyler - Redburn
Mutlu Gundogan - ABN AMRO
Laurence Alexander - Jefferies
Laura Pineda - Baader Helvea
Alexandra Thrum - Morgan Stanley
Chetan Udeshi - JPMorgan
Ladies and gentlemen, thank you for standing by. Welcome to DSM's Conference Call on the First Half Year Results of 2019. [Operator Instructions] Now I would like to turn the call over to Mr. Huizing. Please go ahead.
Thank you, operator. Ladies and gentlemen, good morning, and welcome to this conference call on DSM's first half 2019 results, which we published earlier this morning. We know it's a very, very busy day for all of you with all these companies reporting today. So we will give it our best try to limit the call to 45 minutes. I'm sitting here with Feike Sijbesma, CEO and Chairman of DSM's Managing Board; and Mrs. Geraldine Matchett, Chief Financial Officer and Member of the Board. Geraldine will give a short introduction, after which Feike and Geraldine will answer any questions you may have.
As always, I need to caution you that today's conference call may contain forward-looking statements. And in that regard, I would like to direct you to the disclaimers about forward-looking statements as published in the press release. And with that, the floor is yours, Geraldine.
Thank you, Dave. Good morning, ladies and gentlemen. It's a pleasure to welcome you on this call on DSM's first half results for 2019. I will provide a few comments on the key slides of our investor presentation that we published this morning together with the press release, and then we'll open the Q&A session.
However, before starting, I have to point out that our H1 2019 results are reported against the set of prior year figures that include a significant additional benefit from the exceptional supply disruption and some key vitamins, that we clearly communicated all along last year as the temporary vitamin effect.
In order to provide as much transparency as possible, we continue to show this separately, calculating growth against 2018 total results, including this special event as well as the comparison excluding this event. Of course, from a perspective of monitoring the progress of our business, the comparison to last year's underlying business is the meaningful one. For this reason, in the remainder of my introduction, I will compare H1 2019 versus the underlying business as estimated and reported in 2018.
One more comment on comparisons, please note that we adopted the new IFRS 16 standard on lease accounting as per its effective date on the 1st of January 2019, whilst the 2018 figures are not restated. You can find the full information on this on Page 24 of our press release. This said, let's start with the financial highlights for the first half on Page 2.
We are pleased to report a good performance in the first half of the year. In terms of top line development, Nutrition delivered a good 4% organic sales growth in both quarters, while sales in Materials remained 5% to 6% below prior year in Q1 and Q2 on the back of ongoing weak market conditions in some end markets. Overall, however, adjusted EBITDA increased 12% in the first half; and when excluding the positive effect from IFRS 16, this remains a good growth of 9%, which is well in line with our strategic targets.
More specifically on Q2, we saw continued good momentum with 10% EBITDA growth, including IFRS 16. This growth is driven by continued good performance in Nutrition and a step-up in the performance of our Innovation Center. Over the 2 quarters, we stepped up our cash generation with an adjusted net operating free cash flow up 14% to EUR 257 million. Finally, we are pleased to reiterate our full year outlook as communicated in Q1.
Now moving to Page 8 for Nutrition. Nutrition delivered a 4% organic growth in H1, driven by a good performance in Animal Nutrition, a solid performance in Human Nutrition and strong growth in Personal Care and Food Specialties. This is a strong result, particularly considering the tough comparable period we saw with 10% organic growth in H1 2018. Adjusted EBITDA in Nutrition increased by 13% in H1 or 11%, including IFRS 16. The EBITDA margin increased 120 basis points to 21.1%, including 50 basis points from IFRS 16. This increase in margin was supported by the solid organic growth, lower costs and positive foreign exchange.
Now looking at Q2, results were overall in line with the first quarter with 4% organic growth, this time driven by Animal Nutrition mainly, and supported by ongoing good performance in Personal Care and Food Specialties. After a strong start in Q1, Human Nutrition had a softer quarter, but this was partially related to order patterns at large food & beverage customers and does not reflect a change in business sentiment.
In Q2, Nutrition delivered 13% EBITDA growth, including a 3% from IFRS 16, almost the same as in Q1. The adjusted EBITDA margin was again strong at 21.4%, including 50 basis points from IFRS 16 versus 20.4% in Q2 last year.
Now let's look more specifically for a moment at Animal Nutrition on Page 9. For the first half, Animal Nutrition reported 4% organic growth, with volumes up 3%. This is very strong performance compared to the 8% volume growth last year. Q2 demonstrated continued good business performance with a 10% organic growth.
The 6% volume growth in the second quarter was achieved despite the intensified African swine fever in China, that we were able to mostly compensate given the higher poultry production in the region as well as increased pork production in other regions. These offsetting effects demonstrate the value of our global footprint and our broad species coverage. Prices were slightly up in the first half, with a small positive momentum in Q2 following some price initiatives to compensate higher input costs and the continued benefit from the environmental policies implemented in China.
Let's move to Page 10 to look at Human Nutrition. Overall, business conditions in Human Nutrition are good. Early Life Nutrition, pharma and dietary supplements performed well, with especially our B2C business, i-Health, showing a continued double-digit growth. In food & beverage, we continue to see soft demand from large global customers, while our small and regional customers, which we typically serve with our premix, continued their strong growth.
After a good start to the year with a 5% organic growth in Q1 against 8% in the same period last year, Q2 was a softer quarter, mainly driven by lower sales to large F&B customers, which was partly related to order patterns and does not reflect the change in business sentiment. Overall, we realized 2% organic growth in the first half against a tough comparison of 8% last year.
In our other nutrition activities, we realized a strong 8% organic growth in the first half. Personal Care showed a very strong growth in sun and skin care; while in Food Specialties, we enjoyed good growth in enzymes and cultures.
Moving to our Materials business. Let's go to Page 12. Market conditions in Q2 remained challenging in automotive, building and construction and E&E, especially in China. Other segments were robust, with strong market conditions in our Dyneema and Functional Materials businesses. Volumes were down 5% in the first half, with a similar performance in Q2 as we have seen in the first quarter, while price developments reflect the fluctuations in input costs.
The adjusted EBITDA for the first half remained flat versus prior year, in line with Q1, resulting from a strong performance in the high-margin businesses of Dyneema and Functional Materials, and supported by good margin management, strict cost control and a small benefit from currencies. These earning drivers are reflected in the EBITDA margin for H1, which expanded 90 basis points to 18.4%, including 30 basis points from IFRS '16; and in Q2 showed a similar margin development as in the first quarter, with an EBITDA margin up 110 basis points to 19%, including 30 basis points from IFRS 16.
Now moving to our Innovation Center, let's go to Page 14. The Innovation Center had a good first half of the year, with a solid top line and bottom line growth. Bio-based products and services contributed strongly to the results, in part thanks to new and recurring license income from these technologies used for producing bio-based fuels. In the quarter, however, solar experienced continued softness due to the subdued Chinese markets. The adjusted EBITDA increased from breakeven in H1 2018 to EUR 11 million in H1 2019.
Now let's turn to Page 15 for a couple of quick comments on cash flow and working capital. So Page 15. As mentioned earlier, our overall cash generation in H1 increased 14% to EUR 257 million in adjusted net operating free cash flow. However, our working capital to sales ratio at the end of Q2 of 20% remains behind last year's H1 performance of 19.2%, in part reflecting increases in capital employed from foreign exchange movements, IFRS 16 and the consolidation of Andre Pectin.
The working capital performance in Q2 did improve after the difficult start to the year in Q1, but more needs to be done. Reducing inventories has been challenging, especially in Materials, where the visibility remains low in some of our end markets. Given where we stand at the first half, our aim is to ensure that the working capital ratio is back in line with 2018 by the end of the year.
And now let's move to Slide 17 for some brief comments on sustainability and innovation. So that is 17. As you know, sustainability is at the very core of DSM and its purpose. As such, we focus on delivering science-based sustainable and scalable solution that seek to meet the future challenges of the world today. This slide highlights some of the great progress we are making in staying true to our purpose. But please read Page 15 in today's press release for all the details on these initiatives.
Core to sustainability are, of course, our big ticket innovation projects, which we continue to make good progress on, achieving some important milestones in the first half of this year. Veramaris began commercial production of its algae-based omega-3 fatty acid for agriculture in its new plant in Blair, Nebraska. Clean Cow, the feed ingredient that significantly reducing -- reduces methane emissions from cows, submitted its regulatory filing in Europe in order to get the product authorized for commercial use.
And Avansya, the fermented Stevia sweetener, saw very positive customer response, and production on a semi-commercial scale has started in H1. The construction of the commercial size plant in Blair, Nebraska is on track with targeted completion by the end of this year. And NIAGA is seeing an increasingly good customer response and appetite for its revolutionary technology to produce fully recyclable carpet.
And now to finish, let's go to Page 18, on the outlook. On our outlook, we can be short. We continue to see good business conditions in Nutrition and continue -- and we aim to continue for some -- to deliver some earnings growth in Materials. As such, we are therefore pleased to reiterate our full year outlook as shown on this slide.
And with this, I open the floor for questions, operator.
[Operator Instructions] Our first question is from Mr. Neil Tyler, Redburn.
A couple from me, please. Firstly, Geraldine on the working capital ratio, are you able to split out the impact on the ratio of Andre Pectin and foreign currencies to give us an idea of how the sort of underlying ratio, excluding these factors, developed? And second question, in Animal Nutrition, the price initiatives, we've read about some market disruption on the supply side again taking place.
And are you confident that the pricing gains made in the quarter weren't, to some extent, inflated by temporary factors? And so I wonder if you could just share a little bit on that. And then thirdly, the comments you made about customer order patterns. Can you help us understand what you are sort of seeing that allows you to make that comment, if you like, to be confident that it's not a deterioration in demand?
Yes, Neil. Maybe let me start with the working capital. And for me, the best way to address that is probably actually through the ROCE KPI. So if you actually look at our ROCE, we are at 13.1% versus 13.8% last year same time. Now the first thing is we need to correct for IFRS 16, and that brings you up to 13.4%. And then there is acquisition impact, which is 0.3% and FX is 0.1%.
So that makes up the delta between the 13.1% and the 13.8%. So as you can see, there is an impact of acquisitions on our balance sheet that we will struggle to offset. But what we want to make sure is that the working capital part is back on track. And actually when you look at the total working capital, it hasn't increased. If we look at DSO, it's pretty stable, and actually so are the other KPIs.
So DSO was at 70 days. Our DPO is 93, in line with last year. And inventories, which is the one we want to reduce, is the one that's remaining stubbornly stable. And I have to say that the lack of visibility, to some extent, and predictability of the market is not helping us in that space. But this remains our -- an area where there's a lot of action and focus, and we will continue to work on it towards the year-end.
So that's on working capital. Now maybe I'll go to your third question briefly on H&H, so the customer order patterns. So here, what we're seeing is actually overall for H&H good business conditions. So Early Life Nutrition, dietary supplement, pharma are fine. The area where we're seeing the sluggish growth is on food & beverage at our larger customers. Now there is an element of cut off. There are a couple more -- fewer days this quarter versus quarter last year. But what we're also seeing is a bit of hesitation in terms of the orders. But we're not seeing something structural in the sense of we're not seeing a big shift in products or in relationships, et cetera, which is why we're quite confident in saying that this is related to order patterns as opposed to any big change in business sentiment.
And mainly from the big ones in food & beverage.
Yes, exactly. So I've said, it's basically with the larger customers. And Feike, do you want to take the Animal Nutrition?
Yes. And the Animal Nutrition can be short. We don't have, in this quarter, a clear windfall of price increases in the bigger vitamins, and I don't anticipate that in the coming quarters either. You're right that some prices will be increased or announced to be increased. But as you know, we don't operate on the spot market. So I will not expect an immediate impact on our quarterly results as a large part will go for premixes, et cetera.
So it's always a dampening effect up and down, to be honest, on how that works in our results. So you will see that more on the longer term, if it sticks, because I need to see also how much of that will be really realized to all customers. But of course, I like higher prices more than lower prices.
Next question is from Mr. Mutlu Gundogan, ABN AMRO.
A few questions. The first one is on Animal. Quite a step-up from the previous quarter in terms of price/mix. Can you give us an idea of how much that was driven by mix versus higher selling prices and indicate or perhaps talk about what the main products or product groups were that was driving both of these elements? Secondly is on other nutrition. If I recall correctly, your organic growth was 12% in Q1.
You now talk about 8% in the first half. That seems to indicate somewhat or around 4% in Q2. Is there a slowdown? Is it difficult comps? Perhaps talk a little bit about that. And then finally, on Materials, your EBITDA margin was very strong, up 80 bps, excluding IFRS 16. And you do talk about different product mix, higher unit margins. So perhaps split that one out for us, please. And how sustainable are each of those elements?
Mutlu, let me maybe start in reverse order. So looking at the margin in Materials. So what we've seen there is, indeed, we have a step-up in margin, which is a combination of mix. Because what we're seeing is that the growth that we're getting is in these higher-margin businesses such as Dyneema. And even within Dyneema, the life protection part of that business, but also our Performance Materials are very strong. But we have to say that they've also in there a fair amount of very proactive margin management, cost containment actions to make sure that we are also defending our earnings line when we're seeing the top line being very similar to Q1 at minus 5%, minus 6%.
Now I think the main sort of color that we can give around Materials is that we are seeing a Q2 which is very similar to Q1. So when we spoke last, we were thinking that we were sort of open to maybe Q2 having a different business dynamic. That was not the case. But we are happy that we are able to deliver stable earnings. And this is a combination of those different moving parts which could get us there. So that's really the additional color we can add to the Materials margin. Now let's go back to which one to take next.
Well, the -- maybe the prices, you said on Animal Health in the fourth quarter -- second quarter, sorry, 4% price increase, correct. Would be a little bit careful in thinking really on quarter-by-quarter. If I look already for the first half year, Mutlu, you see in the first half year a price increase of 1%. So I think it's not an enormous price increase if I look, especially for the half year. And indeed, it has a lot to do with mix FX.
Also, some more sales of some of the sourced products. And of course, the passed-on-ness that we do of the prices which we source in. So that has a higher pricing effect and a more limited effect, of course, on the margin. And there is some effect, indeed, in the prices. Also in China, Blue Sky, safety and all of that stuff. So indeed, there is not a negative pricing momentum there, but I would not overestimate the positive effect.
On the comps, well, if you look to a weakening -- if you look to basically Nutrition and Materials, basically the EBITDA was about 12%, 13% Q1 and Q2 for Nutrition and about flat for Materials in both quarters. So the total company has also to do with the innovation, the corporate costs and the other elements. But if you look to 2 businesses, it's a more or less the same effect in the second and third quarter. Of course, and the second quarter, let's be honest, has a higher EBITDA than the first quarter.
So I don't think that the second quarter showed a slowdown. Even in terms of EBITDA, it has stepped up compared to the first quarter. But you need always to be careful indeed in those comps thing. Also, last year, of course, there was a lot of movements in the first three quarters, to be honest, on the ordering. Coming back to Geraldine's previous point on ordering patterns, you remember last year, of course, this vitamin effect.
This caused some nervousity in the first quarter. And then the second quarter people were hoping that things would resolve itself because of the machinings of BASF. So that was a little bit different. And then in the third quarter they helped. And they need to order again. So last year, there were quite some movements over the different quarters which will have some effects on the comps.
I think that third quarter also of last year was again a strong quarter on some of those elements. So we'd like to be careful on the comps. If I just turn to the EBITDA also, I think we delivered on both, to be honest, Nutrition and Materials, good EBITDA. More than 10% of Nutrition, flat of Materials, well, in this economic climate. And I should not judge about myself, but I think that's a solid performance.
Next question is from Mr. Adam Bubes, Jefferies.
Laurence Alexander speaking. Two questions, one on the Veramaris. Can you topline characterize the strategy? And are you targeting the premium prices currently seen for algal oils or will it be priced more closer to conventional fish oils? And is it competitive with sugarcane economics? And secondly, for the cluster of JV, so the Veramaris, Stevia, the Clean Cow efforts as well. How should we think about the return on capital hurdle for the next tranche of investments in these areas?
All right. Well, Veramaris, we just opened the factory. I was there in Nebraska for a visit 2 weeks ago for the opening of the factory. So we build it all on time, on budget and all that stuff. So it looks good. The interest of the market is clearly there. So yes, customers -- I don't want to say are knocking on our door, and maybe I want to say that. So I think we will supply the market. We are now building up the pipeline, customer trials, first supplies. The whole supply chain in the second half year, and then next year we can go.
We have seen that some retailers clearly make the interest and announcements like Kaufland in Germany or Match in France. Lingalaks, the Norwegian salmon producer, made this announcement of its interest in us. So you see also that some players, both in the retail area and the salmon producers, made, let's say, pre-book announcement about it. So here you see the interest.
It goes a little bit too fast and too far for me to say where our pricing will end up because that's exactly the discussion we have at this moment. Of course, there is a reference point to fish oil, that -- because it's replacing that. But they're more sustainable. We have a constant cost price whereas fish oil prices have always been fluctuating due to quota, heatening of the ocean, and et cetera.
So there you will see always some movements, where we, of course, have a stable cost price, hopefully, declining. And indeed, if I can get a premium there because I think it is a product which provides really the sustainability, it's great. There's another element. Over the years, the fish oil went down a little bit in its content of EPA and DHA. That means that over the recent 5 years, the DHA and EPA content in our salmons which we eat from fish farms has a lesser omega content than, let's say, 5 or 10 years ago, and we can restore that with our products.
So that is a quality effect. So I gave you a couple of arguments, which I'm using, also our customers', on why our product has also some uniqueness. On Stevia and Clean Cow, I think we are on track. Geraldine can say something about thresholds and investments. But with Stevia, we are building the factory and doing the testings now. In Clean Cow, we have registrated, like Geraldine said in the introduction, awaiting on the registration. But Geraldine can add something here.
Yes. In terms of the return on capital employed from a JV, we don't provide the granular split of that. But what we've done in every single case is we compared how do we go forward with this under our own scheme versus how does it compare if we go into the journey as a joint venture. So to give you an idea for Veramaris, we knew that the plant will cost broadly EUR 200 million.
Although, by the way, teaming up Evonik was helpful because they had a very appropriate site in Blair for this. And it also enables to, therefore, share the capital investment between parties. Similarly, for Avansya, for Stevia, with Cargill, they brought the same number of pots and pans to get this going. We used to have quite discussions about that. And so -- and indeed, all of these big tickets are very positive in terms of our overall financials, but we don't split out by JV.
Our next question is from Ms. Laura Lopez Pineda, Baader Bank.
First, on pricing on the Materials business. So -- and I will be interested to see how -- so the pricing for the Specialty products, for sure, has kept robust; we also see that in the margin. But how do you see that going forward? So we are hearing from other players in the chemical space, also that now, let's say, they are feeling some pricing pressure also in the specialty supply chain. So how do you see that evolving in the second half? And in general, what is your view for the Materials division?
Also, in the second half of -- do you continue to expect this weak environment to continue? And then I have a question on the Innovation division. You mentioned weakness in the solar projects. And yes, indeed, in China this has been very low since last year already. However, demand has been strong this year again. So prices in general have been low, but then it will be interesting to understand what is your exposure there, and are you feeling more like a negative pricing or is also volumes from your cycle?
All right. Yes, on the pricing of Materials, I basically said it all. Materials is only new to the whole company. Nutrition is 30%, hardly an impact of the economic climate. Materials is 30%, and of course, there, we feel it, but not so much in the specialty part of Materials. Dyneema, Functional Materials and those specialties, we don't see it. Of course, we see it in automotive business.
So therefore, due to the specialty part of the Materials and the change, transformation of our Materials business over the years, we don't have a big impact and we have a flat EBITDA. If you compare that with many other players, that is a different picture. Dyneema and Functional Materials and those kinds of things. And I don't see a change in the second half here. I think we will continue to have good pricing with those products. And you see it, like you said, also in our margins, which are pretty good in Materials, of course.
The higher volume products in automotive have a lower volume, and that you see in our volume and sales, with smaller volume products having a good margin and a good price, and we kept that, and I expect we keep that. Of course, we don't see, in the second half year, an improvement of our bigger products in Materials, in automotive. I don't anticipate now on a resolution between China and the U.S. So on that end, the second half in the volumes, I don't see an improvement there in our Materials business.
On Innovation, indeed the Innovation Center did very well, both on biomedical and bio-based very well. On solar, a little bit hurt. Why? We sell a lot of our products of the solar business, coatings and others to China, also for the U.S. market. So panels being manufactured from our coatings in China to the U.S, well, that trade clearly went down. You're right, stopped the total global consumption of this business went down, and that means that maybe we switch over time some of our sales to the U.S., but that will not go automatically, so that's always a lead time.
Or the U.S.-China resolve it and then our imports from China to the U.S., which our Materials, could be restored. All of this, of course, is a very small parts of our Innovation Center, and our Innovation Center is a small part of our total company. So we talk about small movements here, but yes, we noticed something in our solar business.
Our next question is from Ms. Ally Thrum, Morgan Stanley.
Could you just please throw some -- I know you've given us some color already on the Human Nutrition business around volume and pricing. But could you maybe give us a bit more color on geographically, where we're seeing the pressure in pricing and the slowdown in volume? And then the second question, well, you've already given us some color on Veramaris as well. Now that a plant is up and running, could you give us a bit more of an idea of the P&L impact and the phasing of when we can start to see sales?
Sorry, the last one, again?
Now that the plant is up and running, could you give us an idea of what you expect or what your expectations are around the P&L impact?
Yes. I mean maybe let me start with Veramaris. So what we said there is the current facility which is now up and running, when it reaches its full capacity, we'll be generating sales of around EUR 150 million to EUR 200 million for the JV. Now we're in the process, of course, of getting it started in deliveries, et cetera. So really, I think the best way to think about it is that we will start seeing that contribution from next year and not really a huge something -- material to the group in the second half. Although I have to say, it's going very well, so maybe we'll see a little acceleration there. But this would be fully in line with our assumptions for the whole JV. And then on the ...
On the Human -- yes, on the Human side, you can make a double split of our Human business. You can look at by geographical distribution. You can look to the different segments. If I take the segments first in Human Nutrition, the Early Life is doing well. Dietary supplements is doing well. Pharma applications doing well. Of the food and beverage market, it's a little bit a mixed bag.
It is only, I guess, about 30% of our total H&H business. Because Early Life, infant formula, pharma, dietary supplements is a big part of our Human Nutrition business. And there, we see that the bigger customers, like Geraldine said earlier, have some hesitation, and we switch more and more to the smaller customers. That has quite some impacts. Smaller customers for small orders, bigger customers, a bigger order flow.
So it's a little bit a shift. If I look to our total food & beverage business, I would say, roughly, globally, half of that food and beverage part, which is a part of Human Nutrition, is the big customers and the other half is the small customers. If I split out all of this geographically, I think the business did well. We know it's a workout, but not so much on the food & beverage market, but more on the i-Health and the dietary supplement markets. Also, Asia was good. Europe, a little bit lesser and strong in LatAm.
So yes, you can split this whole H&H into segments, as I said. And then the weakest part was the larger businesses of the food & beverages segment. We can split it geographically, then I would say Europe was maybe the weakest, and Asia, North America strong. I hope that gives some feeling of the total H&H business. And then to add another part, which is also Human Nutrition, first half year in Food Specialties, Personal Care, Aroma Ingredients which is also party to the same market, showed an 8% growth over the first half year.
Okay. And just maybe -- yes, for one last question. So who is going to take the last round?
Next question is from Mr. David Simons [ph], JPMorgan.
This is Chetan here from JPMorgan. I had one question around -- we've seen some issues with BASF again in terms of vitamin A supply, maybe a specific rate. But I think structurally, the question was in the last few years, we've seen more disruptions than the other way around. And I'm just thinking whether you've seen any change in terms of conversations that you might be having in terms of your customers, either in terms of contract structure that they want to have in place, maybe longer term than right now? Or any other sort of share shift that you might be seeing structurally, any change within your conversation with the customers?
I would like to answer this very carefully, if I'm honest, because disruptions and issues with our competitors is not a topic I should talk about, nor how customers have trust or less trust or whatever in our competitors here. So I would like to be very, very careful here. Of course, what we do is running our own operations with high quality and high reliability and try to gain as much as possible the heart and minds, and wallets also of our customers, and getting their preference in ordering. And I think we do well on that area, if I'm honest. I don't know whether that answers, but I want to be careful here.
No, that's helpful.
I wish all competitors, of course, the best. I wish us, by the way, the very best.
And maybe if I can squeeze in one on Materials. I know you still are guiding to some increase, which means second half has to improve. Is that just a base effect that...
The price increase, you mean?
No. I think he was referring to our outlook for Materials.
Materials, yes, that's correct.
So we aim to deliver some earnings growth. Now at the end of quarter 1, we were aiming to deliver some earnings growth as well. And given that the markets, as we all know, is not really moving much, this remains our ambition, but maybe there's a little bit less space to deliver that. Now maybe it's a good opportunity for me to just remind you that if you look at the second half of last year, Q3 was a strong quarter, Q4 was a much smaller quarter. So it will be important to look at it from a total H2 point of view to see whether on a full year, are we able to deliver that earnings development.
Okay. That's leaves us basically to close. Geraldine, do you want to make some closing remarks?
Yes, very briefly. As you know, everybody is busy today. But thank you, Dave. In summary, H1, we delivered a good performance. It's important to remember that the business conditions in Nutrition remains very supportive to our plans for the full year. And that in Materials, as we just explained, we aim to deliver some earnings growth. This leads us to maintain our outlook for the full year, and we're very well positioned to deliver on our 2021 strategic target. And with that, I thank you all for joining the call.
Thank you, Geraldine. Thank you, Feike. This concludes our conference call for today. Thank you very much for your attention and your questions. If you have any further questions, don't hesitate to reach out to our team today. And then we wish you luck with this busy day. And with that, I now hand over the call back to the operator.
Ladies and gentlemen, this concludes the DSM half year results call. You may now disconnect your lines. Thank you, and have a nice day.