Thank you. Good morning, ladies and gentlemen, and welcome to Chr.

Hansen investors and analyst call on the publication of our 2018/19 annual report. As usual together with our CFO, Søren Westh Lonning, we will first give you an overview of the business developments of the last months before we open the line for questions and answers.

Before we move on, please take notice of the Safe Harbor statement on slide two. Thank you.

Let's continue. 2018/19 was a solid year for Chr.

Hansen, although clearly not without challenges. Market conditions made it more difficult for Chr.

Hansen to grow at the level of our ambition this year, and whilst we entered 2018/19 with a solid growth of 7% in line with our revised guidance range, we had aimed for a better year finishing, particularly in Natural Colors and Food Cultures & Enzymes. There is no doubt that for a growth company like Chr.

Hansen, a quarterly organic growth number of 2% is clearly not what we aspire for, nor what our investors expect from us. Microeconomic headwinds in emerging markets, raw material price declines in natural color pigments, and customer dynamics negatively impacted our performance in the second-half of the year.

However, we must also be self-critical and acknowledge that in certain parts of the business we simply did not live up to own expectations, and could have done a better job at delivering good results execution; for example, in Natural colors, in Animal Health, and in Food Cultures & Enzymes specifically in Asia-Pacific. Considering the softer top line performance then, we are satisfied that we delivered on our other two financial guidance metrics.

EBIT before special items came in at 29.6%, 40 basis points above last year. The increase was mainly driven by scalability benefits from our Copenhagen site expansion that was largely offset by investments in our lighthouses and other strategic priorities.

Free cash flow before acquisition and special items grew by 17% to €229 million with a sizeable contribution from the sales and leaseback of our head quarters here in Horsholm. To dive a bit more into the Q4 dynamics, please turn to the next slide.

As expected, the fourth quarter, we saw a meaningful slowdown across all three businesses with different moving parts. Let me start with Food Cultures & Enzymes.

We delivered 3% organic growth in Q4 leading to 8% for the full-year, slightly below our guidance. In line with our expectations, the tailwind from euro pricing faded in the fourth quarter, but we saw a further deceleration in volume growth slightly beyond what we anticipated.

Whilst our core categories of cheese, fermented milk, and enzymes delivered solid growth in line with our long-term ambition, our probiotic business, which has a sizable exposure to the Chinese market, continued to be challenged, and bioprotection did not deliver the growth that we had hoped for. We always said that it is not a straight line to reach the lighthouse target, but it has also become clear over the last 12 months that we need to step up our effort in bioprotection.

So, excluding probiotics and bioprotections, FC&E performed very well and in line with the growth model, but it is also true that we saw headwind from an emerging markets intensify particularly in Latin America, Middle East, and China, some of customers are increasingly under pressure to realize cost savings as end consumers are looking for more affordable products. These create a headwind for us, but let me note that it also creates an opportunity to help them drive efficiencies with our products.

Turning to Health & Nutrition, with 9% organic growth for the year, we delivered on our guidance for 2018/19, but we also saw a noticeable decline to 4% organic growth in Q4. Most of this step-down is related to timing in Plant [Health] [ph] business, which has had great year.

So while this decline in Q4 for Health & Nutrition may have come as a surprise to you, it's purely related to older patterns. Dynamics in Human [indiscernible] and Human Health are unchanged with infant formula driving growth globally both in Q4 and for the full-year.

For dietary supplements, we continue to see market growth in large sales market like the U.S. below historic levels which is why it will be increasingly important for us to expand our product offering and customer base.

In Animal Health, I am pleased to report that in the U.S. we have seen further signs of improvement in the underlying market in Q4.

However what is more important than farmer economics is our ability to drive sales and strengthen our market position, and with a fresh view from our new leader in animal health, we concluded that we need to put more emphasis on self-execution and distributor management. Moving on to Natural Colors, we ended the year below guidance at 3% organic growth because we saw further erosion in business with negative minus 2% organic growth in Q4.

Our large exposure to annatto and carmine where prices are down 30% year-on-year almost at historical low level hurts us particularly in Latin America but also in EMEA. To put it into perspective, excluding annatto and carmine, our Natural Color business would have grown 7% for the full-year, but the weakness in Natural Colors was not only related to raw material price declines, the Middle East which was supposed to be a growth driver for this year, contracted, and whilst our business in Color & Foods grew strongly, we did not secure as much new business in Europe as we had planned for.

The difficult microeconomic environment in emerging market is clearly visible when you look at our regional numbers. Please turn to the next page.

Our largest region, Europe, Middle East, and Africa, declined minus 2% in Q4, and those delivered 4% growth for the full-year. Momentum across all three segments slowed compared to Q3.

In Food Cultures & Enzymes growth in the core dairy business was offset by weaker demand in Turkey and Middle East, as well as lower probiotic cells, and a decline in wine cultures due to a late-season. In Health & Nutrition, we saw decline in the business, but that was mostly because of timing of orders in animal and human health business.

Lastly, Natural Colors declined because of the already-mentioned weakness in the Middle East and its carmine and annatto exposure. In contrast to EMEA, though North America developed quite positively in Q4, organic growth was 9% in the fourth quarter, leading to 7% for the year, while it's growth in Food Cultures & Enzymes came down slightly because of less momentum in cheese and a decline in probiotics.

Health & Nutrition grew strongly, driven by both animal and human health. And in Natural Colors, we see double-digit growth in North America, driven by the larger conversions, wins that we have already talked about earlier this year.

Finally, in Latin America, growth came down to 2% in Q4, leading to 21% for the year. Excluding euro pricing, organic growth in the quarter was minus 2%, while growth in Food Cultures & Enzymes was strong, except for Argentina.

Health & Nutrition declined largely because of all their patterns in Plant Health, and Natural Colors was impacted by raw material price declines and general lower demand for Natural Colors in the challenging economics of Latin-America. Lastly, coming to Asia Pacific, organic growth was in line with last quarter leading to 3% organic growth for Q4 and 4% for the full-year, while Natural Colors face another soft quarter, and momentum in Health & Nutrition was impacted by the African swine fever and less momentum in dietary supplements.

We saw improved growth in Food Cultures & Enzymes, and no further deterioration as some may have feared. Food Cultures & Enzymes in China grew slightly.

Those solid growth in fermented milk was largely offset by the continued weakness in dairy probiotics. It should also be noted the comparable for Q4 was slightly easier, as we saw the slowdown in China start at the end of the last financial year, meaning that the overall market dynamics that we discussed in depth last quarter are unchanged.

So, all in all, a more challenging market environment for Chr. Hansen and a fourth quarter that clearly fell short of our ambition.

However, we strongly believe that Chr. Hansen should not only be judged by the performance of a single quarter, but equally on the merits of our long-term opportunities.

And if you turn to the next page for our Nature's number one strategy update, you can see that over the last 12 months we've made good progress in further developing the business and building a solid foundation for Chr. Hansen industry-leading growth trajectory.

The technology that we master, our microbial platform is incredibly powerful, and having been in business for more than 145 years, Chr. Hansen has a huge competitive advantage.

We are only now starting to understand, which role bacteria play in our daily life beyond fermenting foods, and which business opportunities can arise from our collection of our 40,000 strains, whether it is in improving health or making agriculture more sustainable. Not least, the recognition that we received from Corporate Knights as the world's most sustainable company in the world is a testimony to the area of good bacteria that lies ahead of us.

If we look at the progress in our segments, one-by-one, for Food Cultures & Enzymes, it's all about leveraging the full potential, and I see ample room for us to further grow our business both in the existing categories via up-selling and innovation, but also an increasingly so in the new adjacencies like bioprotection, fermented beverage, and plant-based alternatives, and we are making good progress here. The SWEETY culture for low sugar yogurts, or the CHY-MAX Supreme enzyme, which allows cheese makers to achieve a meaningful yield increasing their production are two really good examples of launches that came out of the R&D pipeline recently.

Digital Services is another promising field that we're developing and even though it's still very early days. Lastly, 2018-2019 was also a good year for plant based alternative business.

We are receiving more requests and briefs, also from large brand owners that want to enter this fast growing segment. Turning to Health & Nutrition, I'm really excited to talk about our human microbiome lighthouse, where we reach a huge milestone by signing the joint venture with Lonza.

Our newly formed company now called BacThera, which we operate as a contract manufacturer for life therapeutics received anti-trust approval at the end of August, we have started to upgrade our existing facilities here in Haslem and equip our labs in Basel. Our next step is to complete the first wave of investments by December 2020.

However, already now we can start doing preclinical work and have good discussions with first potential customers. Our second lighthouse in Health & Nutrition, namely Plant Health as already mentioned has a fantastic year, we continue to roll out products in Latin America, and I'm very proud to report that we also generate the first sales outside of sugarcane these years.

With regard to the U.S. market entry, we now have all registrations in place to start selling in first trials with distributors are ongoing.

To further advance our R&D pipeline, we also opened a new lab here close to Copenhagen, where we will work on streaming and straining improvement for the next generation of plant probiotics. In natural colors, we continue to strengthen our portfolio with the launch of the HANSEN SWEET POTATO and coloring food alternatives to carmine and synthetic red, and we also launched a new pet food branch that was very well received by the market.

And with this, I would like to turn it over to Søren for a further deep dive into the segment numbers and group financials.

Thank you, Mauricio, and good morning also from my side. Food Cultures & Enzymes ended the year on a soft note with only 3% organic growth in Q4, leading to solid 8% organic growth for the full-year.

Whilst pricing remained intact in Q4 with 1% despite increasing cost pressure from some customers, volume growth came down to 2% and that was because of the already mentioned weakness in probiotics and bioprotection that lastly set solid growth in our core categories, fermented milk cheese enzymes and meat, which grew in line with our long-term financial ambition. In probiotics, our sales in North America and EMEA were negatively impacted by large volume brands losing market share, and whilst we've had had good wins with new brands, also in plant based alternatives, the volumes are still very small with the net impacting negative for us.

In addition, China, our largest probiotic market declined, that is not because of the entrance of new players, but mainly because of the preference shifts of consumers, which we believe is partly driven by the increase in food inflation in China. As we have talked about last quarter, we have equally strong positions in both ambient and chilled yogurt but upselling opportunities in the enzyme space, which is gaining share a more limited which is why the shift in consumer preferences has a negative revenue mix impact for us.

In bioprotection, we delivered double-digit growth for the full-year that Q4 was soft, as we had a high comparable from the ramp-up of the second generation last year. But also because we saw decline within the cheese segment, which have set most of the growth in fermented milk and meat.

So overall, we saw solid growth in our core business in line with the long-term growth model, but a negative impact from our added functionalities categories. Looking at profitability for the business area, that relatively low revenue growth affected our EBIT margin for Food Cultures & Enzymes which decreased by 1.4 percentage point in Q4 to 38%.

Furthermore, there was an impact from strategic investments and inventory reductions at our sites, which were only partly offset by underlying scalability and production. For the full-year, the EBIT margin was on par with last year as investments in bioprotection, digital and other strategic initiatives offset the scalability benefits of about one percentage point from our Copenhagen site expansion.

Coming to Health & Nutrition on the next page, Human Health delivered solid organic growth, both for the quarter and the full-year, whilst in Animal Health, we saw a further improvement in Q4, leading to overall good growth for the year. Plant Health reported very strong growth for the year, but all of patents led to a decline for Q4 and I can already now flag that we will also see an impact next quarter.

Within Human Health, infant formula continued to be the main growth driver globally, with strong growth in Q4 and for the full-year. Dietary Supplements declined in Q4 and was flat for the full-year with the main drivers for Q4 being slower market growth in the U.S., order patterns in EMEA and lower promotion activities by customers in Asia-Pacific.

Please note that the strong growth in dietary supplements that we saw in North America in Q4 was mostly because of timing orders and will reverse next quarter. In Animal Health, all species contributed to solid growth in Q4, with a very positive development in cattle in the U.S.

market whilst our APAC business was challenged by African swine fever, and EMEA was impacted by timing of orders in our silage business. If you look at the margin development for Health & Nutrition, the EBIT margin in Q4 and for the full-year, improved driven by favorable product mix and a small contribution from currencies, which were partly offset strategic investments.

Let's continue with natural colors on the next slide. And we can keep this short as we have already talked about the main drivers.

As already said, organic growth in Natural Colors decelerated further to minus 2% in Q4 and 3% for the full-year. And whilst, we continue to see strong growth in our Premium segment, Coloring Foods, this was not enough to offset the impact from declining raw material prices and softer demand in emerging markets.

Whilst the top line performance is clearly not satisfactory, we managed to achieve a solid improvement in the EBIT that grew by 8% in FY 2019 also by deliberately passing on some low margin business and maintaining an attractive return on invested capital and as I keep emphasizing these are the most important metrics for this business. To get organic growth in Natural Colors back on track next year, we have restructured the sales organization in Europe and APAC to better serve the specific demands of our customers and this is what you see reflected in the Q4 margins together with an unfavorable impact from currencies.

The EBIT margin came in at 13.4% compared to 15.3% last year. For the full-year though, we saw an increase to 12.7% driven by operational efficiencies and lower raw material cost that was partly offset by the organizational changes and currencies.

Moving on to the Group financials on the next page, group organic growth came in at 7% for the year with the volume component of 5% and a 2% contribution from price. The impact from currencies on the top line was minus 1% whilst the effect from the Hundsbichler acquisition was immaterial.

If we look at profitability drivers, gross margin improved by 1.3 percentage points year-in-year driven by all three business segments, whilst operating expenses increased by one percentage point to 26.6% of revenue due to the continued investment into Nature's no. 1 initiatives.

Overall, this led to an EBIT margin before special items of 29.6% for the year, up 40 basis points. The impact from currencies was overall immaterial.

In Q4, the EBIT margin before special items was 33.3% compared to 33.8% last year, mainly because of lower volume growth combined with the strategic investments. Turning to the right side of the slide, free cash flow before acquisitions and special items came in at €229 million, €33 million above last year driven by the completion of the sale and leaseback of our main site in Hørsholm.

Operating cash flow was on par with last year as higher taxes paid due to the absence of acquisition related benefits offset the increase in operating profit. Operational investing cash flow came in at €72 million net of the inflow from the sales and leaseback agreement, which was closed at the end of August and as such in line with our revised guidance of significantly less than €110 million to $130 million.

CapEx as percent of revenue was 12% compared to 10% last year, which is a step-up from historic levels, but in line with the expanded CapEx program outlined at the Capital Market Day. It was low below what we initially planned for the year, as some of our purchases were delayed into next year.

And this phasing means that the CapEx for 2019, '20 will still be at an elevated level. With this, I would like to come to the guidance for next year, please turn to the next page.

As we don't expect a material improvement in trading conditions, at least not in the first-half of the year. And natural colors raw material prices are expected to remain low, we take a cautious stance and expect organic growth for the group to come in below our long-term ambition in the range of 4% to 8% with a neutral impact from your pricing.

We expect a week one with flat to low single digit organic growth for the group. This is in part because of the specific challenges that we've seen in the business in 2018 and '19.

But also because there will be an impact from normalization of inventory levels in the distribution chain for Food Cultures & Enzymes. As we have seen, demand come down in some markets during the second-half of the year, we have identified higher than normal inventory position in parts of our distribution channel.

And we expect these to normalize during Q1. Also, all the panelists in health and nutrition will not be favorable in Q1, and here I would like to flag Plant HEALTH again and also dietary supplements.

For the remainder of the year, we expect our microbial platform combined to grow 7% to 10% in line with the long-term ambition and that will call us to grow low to mid-single digits. Our confidence in this guidance from our view of the commercial pipeline and Food Cultures & Enzymes as well as the actions that we have been implementing to improve execution and Mauricio will expand on this in a second.

The EBIT margin before special items is expected to be around 29.5%. And we will invest the scalability benefits from our Copenhagen side expansion and other operating efficiencies back into the business to further drive our lighthouses and all the strategic priorities.

Maybe it's worth reiterating that we continue to see possibilities to further drive profitability as volume grow, but that we are taking a deliberate decision to priorities growth at this point in time. Free cash flow before acquisitions and special items is expected to be around €190 million as we execute on our expansion program, CapEx is expected to be above the €139 million realized in 2018, '19.

And this is primarily related to investment facing from 2018 and '19 to 2019, '20. In terms of capital allocation, next page please, our priorities remain unchanged.

We will continue to invest in capacity R&D and our people to support our organic growth. Secondly, we will also continue to consider inorganic growth opportunities to strengthen our technology platform for market presence.

And over the last 12 months, we have done some work here to set up a more structured way to identify potentially interesting targets mainly in our Food Cultures & Enzymes and Health & Nutrition businesses. Thirdly, we remain committed to paying an ordinary dividend and disputing additional cash to shareholders in the absence of acquisitions or other corporate actions like the bacteria joint venture that we signed this year.

For the financial year 2018, '19, together with the Board of Directors, we will propose an ordinary dividend of €0.95 to the annual share, to the annual general meeting, which will take place at the end of November. And with this I would like to hand back to Mauricio.

Thank you, Søren. Chr.

Hansen is a growth company and in 2019 and '20 our number one priority will be to improve and accelerate our execution of the nature's number one strategy. I want to highlight six areas of growth execution focus.

As Søren said, we expect emerging markets to remain the headwind for core daily business, which is why upselling, innovation, and further developing our adjacencies will become even more important for buyer protection. We have a good commercial pipeline, and more than 500 customers currently using our products.

And we feel very confident about the long-term growth potential and the value proposition, we bring to customers, also, we have stepped up our R&D efforts to accelerate the development of the third generation of our fresh new range to open up the Asian market, and we invest more in our cheese range to facilitate the next bigger way of growth and further increase penetration of these new technology. In China, the priority for next year is to sustain our existing business while investing into new innovation for the Chinese market and strengthening our market share with SME players, and in the low yield chill segments.

Coming to Human Health, growth next year would be supported by launching new products and expanding our customer base. In Animal Health, we have identified areas to strengthen our execution and with further expand our route-to-market with distributors and via direct selling outside of North America.

Also, we were further roll out our most recent innovations such as GalliPro® Fit and advanced our new product pipeline. In Plant Health, we expect another strong year in Latin America driven by sales in sugarcane and other crops as well as small contributions from our U.S.

market entry. Lastly, in Natural Colors, we will work harder to increase our coloring food sales in EMEA, win new conversion projects in the U.S.

and strengthen our position in food services. At the same time, we have initiated our usual buying annual strategy review process.

The result of these will be presented at the Capital Markets Day, which will take place on April 22nd in Copenhagen. So please book your calendars already today, on the next slide you will see the date.

Though I do not expect any fundamental changes to come out of these strategy process. We have many exciting growth opportunities in microbial and natural solutions produced via fermentation of our framework, but we will use the strategy review process to assess the progress of our growth opportunities and to stress test all the assumptions that we have for our business.

We are active in a very dynamic industry where the pace is accelerating and agility is crucial and I want this to make sure that we have all it takes to stay ahead of the game. To wrap up, 2018/19 was a solid year for Chr.

Hansen, but not without challenges. While we made good progress in our Nature's no.

1 agenda and in particular on our lighthouses of Plant Health and human microbiome, we didn't achieve our initial growth targets and it has become very clear that in the current micro environment we need to roll up our sleeves and work even harder to raise the bar in term of growth performance. But I am 100% convinced that where the team that we have in place in our strong technology platform with gate, there's too many mega trends we would succeed.

Thank you very much for listening and we're happy to take your questions now. Operator, please open the line.

Good morning and thank you for taking my questions here. First of all, you have detailed in your guidance your outlook for the year even down to two quarters also, could you kind of elaborate on what is the biggest risks as you see it in this guidance?

That's the first question. The next question is on bioprotection.

First of all, of course like to hear the dynamics behind the decline in sales into cheese in this quarter, but also that the comment you made about that you are increasingly convinced about the success of bioprotection and that you need to step-up the effort, but especially how will you step-up your efforts within bioprotection? And then the last question is regarding the declining prices for annatto and carmine, what is driving these price declines?

Thank you.

Thank you. This is Mauricio, will take on high-level the answer to your questions and passing on to Søren for more details.

So, on the guidance, we are providing a wider range 4% to 8%, given what we view as a little bit more uncertain in volatile environment, and we are also providing the Q1 guidance because we think it's a little bit of a special quarter, given the [further facings] [ph] in Human Health as well as the inventory described by Søren. I think the key aspect for us to deliver on our guidance would be to drive the growth in the areas that I just covered in one of our last pages.

I think that's the fundamental and that we don't see any further deterioration of our trading conditions. On bioprotection just quickly, so bioprotection we are very confident on the value that it brings to customers.

Most customers want what our clean label and our bioprotective culture just represents a formidable way of keeping products fresh and using the power of good bacteria. But we need the technology to work across areas where it has not worked so well.

And one of them is in cheese that's a very conservative industry and where we need to drive better technical performance of our bioprotective culture. Søren, with that, I will pass it to you to comment a little bit more on those topics and the prices and annatto and carmine.

Yes, so both carmine and annatto are two raw materials where we historically have seen volatility, and it's often linked to harvest condition which has been favorable. It's been linked to more farmers moving into this category combined creating a higher supply than there is a demand for, and that is what is ultimately driving down prices in these categories.

And over time, it will find some sort of equilibrium and then other events can then drive it up or down again, but we believe that the price level that we have now is sort of the -- is at a -- we said in the raw material side is at the lower level at what we can proceed because it's starting to become less attractive for farmers to move into the category and hence it will limit the supply. But it takes some time.

I think that's an important point from you have the low point and then the raw material, it takes some time before that is translated fully into our sales prices. There are some delay going up, but there is also some delay going that, and that creates a little bit of extract when we consider our sales and organic growth in natural colors.

So could you just remind me of lag time here? So is it around quarter or what?

Typically, it would be a little bit more of a quarter. It will be more to the tune of around more of a half year at least.

Okay, thank you.

Couple of questions from me also, first on Food Cultures & Enzymes and probiotic which seems to be a big reason for the lower growth, can you give us some insight into how much of revenue in the division is probiotic? And how much of your Chinese revenue in Food Cultures & Enzymes is probiotics just to understand the growth dynamics?

Second question also to Food Cultures & Enzymes, you flagged as you call it muted Q1, could Food Cultures & Enzymes contract in Q1? And can you quantify what effect you have factored in for Q1 from this de-stocking you are mentioning?

And then question number three, I have more but then I will jump back into the line. In bioprotections, your lighthouse ambition to €200 million revenue by 2025, and my numbers and that assumes it's 7% of current Food Cultures & Enzyme revenue, you need to grow 27% CAGR to reach that, are we not at a stage where it would be advisable to reduce that long-term targets, and if not, then why not?

Thanks.

Let me address your questions. So if we start by the Q1 contracting in the distribution channel, we - on a full-year basis, we assess this impact to be less than 1 percentage point.

So, it will be we expect some percentage point negative impact in Food Cultures & Enzymes in Q1, but less than full you can say implicitly. It also means that we do not expect the contraction in Food Cultures & Enzymes in Q1.

So that's not what we expect. On bioprotection, I would say that you're absolutely right that hitting the number in 25 is becoming more challenging, we are taking actions to accelerate part of that but I think the key message that I want to leave you with Lars is that we remain very committed to the €200 million ambition, we see the potential out there, we see our technology relevant to address that and what we will consider as part of our strategic review is of course the exact year where we'll be able to realize that in, you are right that 25% and 27% CAGR is making it more challenging but we'll make an in-depth review of that as part of our strategy review this fall and spring and then to your questions regarding probiotics, probiotics is somewhere between 10% and 15% of our Food Cultures & Enzymes business, and it's significantly larger in our Chinese market, so significantly larger in our Chinese market, and I will not go in more into details on that.

I would say one more comment that I want to add to this is that when you look to probiotic and as a key disappointing element in Q4, it was a combination of China being worse than we expected. Actually, we saw very solid growth outside probiotic in the Chinese market in Q4, the probiotic was worse than we expected.

The other element is that in other regions, we also saw a negative development in probiotics in Q4 that we hadn't fully expected. And it's primarily the large brand owners, a few large brand owners who seems to be suffering in this element whereas we continue to see a lot of interest in the probiotic category among the smaller players within new innovative concepts, plant based yogurts, et cetera.

So in that segment, we're still growing very well, but it's not enough to compensate for the dynamics in the -- among the larger players.

Just one follow-up question on the bioprotections, so you mentioned second generation is growing very fast. Does that imply that when you launch a new generation, older generations will actually contract or was that a misunderstanding on my side?

Hi, Lars, this is Mauricio. I don't think I will make this assumption.

So the second generation has grown very well, because they continue to provide a very strong bioprotective efficiency, while reducing any other implications for the formulator meaning any day store acidification or aftertaste in the product. So I think what we need to have with the third generation is to be a third generation that help us address the challenging cheese.

Cheese is the smallest of the three categories where we're playing now. And when you look at the success of bioprotection in fermented milk and in meat is performing very well.

So I think to your question and Søren's answer is not a question if we will succeed in bioprotection, a little bit more to the speed, but it's not going to be a straight line, I think when you kick in a new generation, you're able to address more of the market potential, and we also have adjacent spaces where we are closer to breaking in with our bioprotection technology. So we'll address the answer as part of our strategic review in April but committed to the €200 million.

And what is the time horizon for the launch of third generation, what does that bring to the table compared to version one and two, both in terms of which picture you address, but maybe also does it allow you to enter new verticals?

Yes, I think the third generation is something that realistically is one to two years also it will take a little bit of time; it's not something we will launch in the coming quarters. So that's to address that point.

And it's definitely going to address new segments. I mean, the second generation has been quite successful in Latin America and all that models, we couldn't address before, it has not been able to really unlock the potential we see in Asia-Pacific and that is one of the key missions of a third generation, and also the third generation we'll also be targeting to come with better solution for the cheese segment.

It makes sense. Thanks for taking my questions.

I will jump back into the line.

Well, in addressing the challenges in FC&E in China, you had talked about finding new smaller customers, could you update us on how that is going? And to me this sounds a little bit like in North American dietary supplements where you know about a year ago, a year and a half ago you talked about how some of your key customers loss share and then you were going to expand your customer base but we haven't really seen a recovery, you're plus on, so how can we be sure that you will turn around FC&E around so quickly?

That's the first question and then the second one. So we saw the weaker top line and the margin is down as well for 2020 or lower than expected, in any parts of the business are you sacrificing margins to deliver top line?

You talked about some customers being challenged in saving costs. So I wonder, if you need to reduce prices or launch products that are at lower price points to help your customers?

Thank you.

So Heidi, I think on China, it's been, we have made progress in our organization and our go-to-market and in establishing the relationships and the pipeline with SMEs. And all of this is happening for sure, at the same time that there's been a lot more challenging trading conditions in China, as you know, and as reported by many companies.

So while we are happy with the pace of our execution of our plan, the monetization of that into revenue has clearly not yet materialized to let's say effect that it reflects on the results. You have had consumer in China that has to pay a lot more for food, given the food inflation, driven by swine and many other categories, as well as all the underlying economics that we discussed.

Yet, we remain confident on the, let's say, expansion and granularity of our customer base in China that will derive deliver future growth, just addressing quickly dietary supplements. So I think dietary supplements is not only about expanding the product base, but also expanding the product offering, and there we have very tangible effect on the value propositions we are bringing to customers and the innovation that I've seen from our Human Health organization.

We have four to five very exciting launches coming that are being very well received by the market. And finally, on your question about margin and execution, I don't think it's the way our business works, which is I don't think we would sell more if we lower prices, we price for the benefit that our cultures and the activity that our cultures deliver to the market, and I think our pricing discipline on our business model is a fundamental way of our structure of doing business.

Søren you may want to complement if there's anything on that?

No, and I can also to the specific sub-point of your question, Heidi related to whether we are launching products at a lower price point. That is not the core of what we do, we continue to bring innovation and deliver value.

Of course, we will continue to review whether there are segments of the markets where we -- where we can come with some new solutions that are also addressing sort of the lower end of the market where we are not as strong as in the high end of the market, but we don't expect that to be an impact on our margin partly, when it comes to Food Cultures & Enzymes, I think it's very important to really focus on the full-year picture and not so much the quarterly dynamics, full-year we are flat in Food Cultures & Enzymes but it represent a gross margin improvement of around roughly one percentage point which is quite sizable, and then we have taken the decision to invest that into initiatives in Food Cultures & Enzymes to drive the future growth of the company, and the specifics of Q4 doesn't change that overall story or momentum you can see.

Thank you.

Yes, good morning gentlemen. In the call, you mentioned the impact of the African swine fever.

Could you maybe give some elaboration on how you include that in your guidance for 2020, then a short question on your best pricing mechanism, is it still estimated to be zero? And then I guess some comments on [DowDuPont] [ph], you've previously said that an acquired active, causing some price pressure, how's that developing?

Yes, to address your questions regarding the African swine fever, the way we see it right now is that it's impacting our animal health business in China, negatively, it's not a very large business for us, but on the other hand, it's favorable in some other markets that is then supplying the swines to the Chinese market. So we have actually seen quite good development over the year in EMEA as an example.

So that component is factored in, when you look to our animal health projections for '20. We don't believe that picture will change then the other aspect is that the African swine fever is putting, is creating -- is supporting to create a food inflation in China that is overall affecting the consumer buying patterns, and we believe that, that is also going to continue to be a track and that's also included our in our assessment.

So as an overall, the African swine fever is considered in our guidance. When it comes to Euro price effect, I can confirm that we are still expecting an immaterial effect in '20, based on the current currency rates.

And in terms of DowDuPont without mentioning specific competitors, I would say that generally, some of our large competitors up have been more active recently. But I think it's also important to stress that it's what we consider more of a normalization, after some years where some of those competitors have been more distracted.

So definitely we feel the competition situation now realizing, but I would say that's also that I thought we are not allowed in something that are radically changing the markets that we are operating in.

Okay. Crystal clear, thank you.

Hi, Guys. Apologies if I'm repeating any questions, I think you have dropped off of the part of the call, so back on the line now.

And two quick ones for me, first of all, in terms of the probiotics weakness that you mentioned, in Cultures & Enzymes, is this still the whole trading down aspect? Or can you give a bit more of an idea in terms of your delivery versus the market growth?

And it sounded like you were losing some market share to DSM before. That's the first.

And then secondly, in terms of bioprotection, and I think this has sort of been asked already, but and Can you give an idea of actually how big cheese was? It was my understanding that it's almost all really yogurt, which has been growing, so sort of surprising the, a decline in cheese is driven what is presumably a sort of close to 0% delivery in Q4.

Thanks.

Maybe I can address your last question and then Mauricio can address the second. I would say that for bioprotection we operate today, you can say that the three core segments that we have are cheese, fermented milk and meat and we are doing quite well in meat very, very strong growth in meet.

We are also when you look at the full-year doing quite well in the yogurt segment outside North America, where we had some clear headwinds in the beginning of the year in particular, but outside that particular region in fermented milk, we were doing quite well. And those two are the two largest segments.

That's right. And then you have cheese, which is smaller than the others, but still able to impact also, the overall growth numbers.

And here, one of the key challenges that we have is simply in some cheese types that are most relevant for bioprotection. We don't have a solutions that is good enough in addressing the post acidification in some of this cheese, and that is currently limiting our ability to grow in that segment.

So but you're right yogurt and fermented milk are the two largest segments, but cheese is not all important.

And just to clarify on your first question, your first question, we are talking about probiotics within Food Cultures & Enzymes, correct?

Yes, just from what you mentioned in the press release.

Yes. So, basically what you see with probiotics is on the positive side, we see a renewed interest in probiotics in food innovative food products.

So whether it's fermented beverages or plant-based products, if you see many of them are being launched with a probiotic offering. However, the contrast to that is some of the large brand owners in the dairy category have seen a poor performance of their brands with probiotics.

So I do not believe that we're losing share. I think our probiotic growth is declining in connection with the performance of some of the large brands of dairy products fermented meat that have probiotics.

And then maybe just one additional comment regarding China specifically, Bear in mind that here we have this dynamic with the ambient temperature yogurt and the chilled yogurt, where ambient right now is gaining share on the account of chill, which further impacts the growth in China plus some trading down in products within the dairy space in China as well, which is also impacting probiotics.

Okay, thanks. Maybe there's a final one.

On a different note, you mentioned on capital allocation? I mean, is it -- and is it sort of a message that actually acquisitions will be a more important part of your growth formula going forward?

It sort of seems to be what you were mentioning in terms of restructuring your approach?

Well, I wouldn't -- necessarily saying that way. I think what we have taken is a more structure approach to look at the -- and assess the environment where we operate in the adjacencies because as we also said, during the call, we operate in an environment that's moving very fast.

And I think the core capabilities that we have in microbial solutions in fermentation processes. We want to keep a leadership position on that.

We have always, I think, historically, Chr. Hansen, done bolt-on acquisitions.

And we will continue to look at things that either continues to give us our technology, synergy opportunity, or a browser market synergy, but it's within that context.

Okay. Thanks, guys.

Good morning everyone, Arthur Reeves, Barclays here. A couple of general questions, please, and then one specific.

At the start of the presentation, you said that some of the disappointment in 2019 numbers were down to execution? How much additional growth could that if you'd executed?

Well, could that have made in the end, please. Second question is you've said a couple of times a Chr.

Hansen is a growth company. What percentage growth do you have to have to be a growth company?

I've got one specific question that maybe I'll leave to later if that's okay.

So I think, I'll stop at the questions and then pass on to Søren to compliment it, which always are very difficult to split, you know, execution from external factors. I think what we tried to do is take ownership of our destiny and make sure that we're not just blaming micro economic factors for sure it was a year of some headwinds that we have.

But if I think the simple answer to your question would be, I think execution should have allowed us to come at the upper end of our revised guidance. So that would be my assessment.

I think we were disappointed that we guide them, right there lower their guidance, seven to eight and came in at seven rather than eight. Whether you have to be at growth company, many people saw, you know, put that in different ranges.

I think in many markets, they would say above 5% is a growth company. For us, Chr.

Hansen a growth company is aligned with our long-term ambition of being a growth company of 8% to 10%. And we believe the microbial empower of good bacteria over the longtime should enable us to deliver a cake our way to 10%.

And that will be part of our strategic review, as we look into the future five years for Chr. Hansen.

Thank you. My specific question is about Plant Health and the timing of orders that is going to affect quarter one.

Can you give us a bit more detail on that, please?

Yes, you have to bear in mind that Plant Health is still a relatively small business for Chr. Hansen.

We sell very limited products and it's all sold through one partner. So the buying behavior and all the patterns that we get from that partner can influence the quarterly timing quite significantly in Plant Health.

So I think it's worth reiterating when you look to '19 overall, we saw a significant increase at very, very high double-digit growth rate in Plant Health and we also project strong growth in '20 overall, but when our partner will buy, put on inventory for the season, et cetera is - will as long as it has this size exposure to one customer and primarily one region, it will be a topic in a business like that. But we absolutely confirmed that we convinced that we in '20, we'll see another strong year in Plant Health with very, very attractive growth rates.

And I think, sorry, I'm probably the one comment to add to that is we have already mentioned in previous guidance and goals that health and nutrition overall, we saw the vision that we are banking a lot of growth. We are happy that we deliver 9%, but you can see that on a quarter-to-quarter basis it has more variability.

So I would encourage you to look at health and nutrition on an annualized basis and the consistent track record of growth.

Thank you.

Yes. Hello.

Quite some of my question has been asked, but in fire protection we saw in Q4 you had a -- for the full-year you had a 10% growth and for the first nine months you had 15. So basically, I guess you must have had a negative growth in Q4.

My question is, is this slow uptake of new clients or is this a loss of existing clients on the way of the cheese situation, but could you maybe say a little bit more about that? And then, I just wonder on your - how certain you are on these new initiatives that should return growth from Q2 onwards.

I mean, the lower Q1 relates to macroeconomic chances and do these macro challenges have to improve before you see a high growth in Q2? What are, as it also was asked before, the most essential assumptions to where in turn to grow from Q2 and onwards?

Thank you.

Yes. Let me address your first questions regarding bio-p.

First and foremost, it's not we grew slightly in bio-p in Q1, so it was not negative, just to be clear about that. Now, the key reason in to cheese is not related to big losses of clients in bioprotection, we continue to have a very solid customer base.

We continue to have a very solid pipeline of projects that we execute on and we are winning good projects. That being said, when you look to it, I mean, Q4 was the quarter last year where we launched the second generation bio-p and there was some immediate uptake from that, that makes the comparable a bit tougher.

The other part is that, as this is still a relatively new concept for several customers, there are still some optimizations in terms of how much the customers are using it across the product portfolio, finding -- experimenting to find the exact right doses that works for them, et cetera. So there will be some of these factors also influencing the momentum.

So in addition to cheese, it's a tough baseline and then there are these customers that are still learning how to really use it. But we've not had losses as such in bio-p and it's not a question of competition becoming much fiercer in this space.

I mean, we have competitors, but it's not - the picture hasn't changed much over the last couple of quarters.

And I think Annette to your question on the Q1 versus Q4, I think it's less about the macroeconomic effects and more about the one off effects or the timings of our execution that I had mentioned. So Q1, we had a lower momentum given because of the timing of orders that we have discussed overall in Health & Nutrition particularly in Plant Health and in Human Health highlighted by Søren, and also the normalization of inventory stocks in our distributors in Food Cultures & Enzymes, and some of the lingering of the macroeconomic factors, but when we look at our predictive information and our pipeline in our level of activity to customers.

We have strong conviction on our Q2 to Q4 microbial platform coming back to the range of growth that the business has to deliver.

I think we would traditionally close the Q and A session here, but I think giving the questions that's been and so on, we can open up for a few more questions and extent the Q and A to make sure we address the questions that you have.

Good morning, guys. Thank you for the question.

Can I start with the topic of adjacencies because you've mentioned it for a couple of years now, but we haven't actually seen anything put into practice? So when you think about adjacencies sorry, I should say, what do you mean by that?

What sort of categories or technologies could we think about when Chr. Hansen is looking at it's adjacent categories.

That's my first question. The second question is that the majority of your gross margin expansion they share was reinvested in sales and marketing.

Could you identify specific areas where that investment is going, and secondly related to that gross margin expansion has been slowing sequentially, so I think it's probably lower next year than it was this year. And at the same time, you're anticipating your margins are maintained, so should we not expect more investment in order to maintain your top line growth rate, that's my second question.

And the final question is just on your market growth rate historically at Chr. Hansen, we've become accustomed to end market growth rate of 3% to 4%.

What do you think that market growth rate is today, and how do you see it developing? Thank you.

Faham, I will deal with the first one and pass it on to Søren last question. So, on the adjacencies, some of the exciting adjacencies that I can mention in Food Cultures & Enzymes for example would be the whole area of fermented beverages, and the growth of fermented beverages within the beverage category has been, tremendous.

You see all the type of Kombucha beverages near beer beverages and in many of those are fermented beverages. We're deploying our technology either fermentation or also probiotics and we have some really exciting technologies for microbial base for zero alcohol beer, et cetera.

So a large growth from a highly energized team dedicated to that. Plant Based you see there is another part of that.

You see plant-based solutions being developed as an alternative to other type of protein, dairy, meat proteins. Most of those require fermentation process as well.

And we have a lot of new wings in helping those leaders in those categories to convert to those categories. Those are actually monetized already on cells.

So we are active in those adjacencies and not only talking about that. In the areas of investments, I will highlight trait.

So one of them is a research and development and precisely for example, for these adjacencies we are growing our capabilities in R and D to develop microbial solutions for plant based solutions, for fermented beverages, for our new generation of bioprotection and expanding our scientific base on that. We also continue to invest in our bioprotection team and we mentioned our core digital services, which is another area we're investing to create a basis of digital services for our Food Cultures & enzymes.

Søren you may want to complement that and answer the question on beyond the ranch.

Yes. In terms of the gross margin that you allude to, I think it's important to split it a little bit business-by-business area.

So, when it comes to Health Nutrition, the key driver is really product mix and that can be a little bit volatile from quarter-to-quarter. In Natural Colors, we saw the largest effect of our raw material impact in the first half of the year, and sort of operational efficiencies kicking in during the year, but coming down during the year because of the raw material impact, and if you look to Food Cultures & Enzymes, we guided already from the beginning of the year that we would expect a much tougher baseline in the second half of the year particular Q4, still we were able to deliver very strong underlying scalability from our production setup during the year, but that was an inventory movements and other that sort of skewed the picture a little bit into Q4.

So I would say overall, we are quite pleased with the development in gross margin, don't always interpret it the Q4. Faham, when I'm moving to FY'20, I would say that probably the area where we expect the most positive impact in gross margin will be from Food Cultures & Enzymes given that we will continue to gain some scalability benefits in that part of the business.

So just to give a little bit of guidance to where we believe that will come from. I hope that answered the questions on gross margin.

You had some questions regarding also the end market and the 3% to 4% I believe is a reference to especially the Dairy segment and Food Cultures & Enzymes, and what I can say here is that over the last 12 months, we've probably more seen the market growing to around 2.5%. So fermented milk has been growing at a lower level, it's more been these 2, 2.5% during the year and not least because emergent marketing and not growing to the extent that we have seen historically.

And the other component is cheese, which has been around 2% for the full-year, but where we've seen a gradual, you can say slowdown in growth during the year. So the cheese market in the U.S.

producing at a high level, but growth is not to the level that we saw early on in our financial year '19. So there are some dynamics there on the end market growth that is also playing in, but as we have said many times before, I mean our ambition in Food Cultures & Enzymes is not to grow in line with the market.

Of course we are affected by the end market growth, but our growth model really builds on a lot of levers in addition to market [growth], and those are the ones that we can really work on to grow the business.

Thanks for the very detailed response. Can I just have one follow up maybe and focusing on my other first part of the question, which is on adjacencies?

How does Chr. Hansen being a dairy company for the last 100 years or so pivot itself into different categories without really acquiring expertise?

Well, I think that's why we call it adjacencies because our adjacencies that are very close to our capabilities. So if you look at a plant based, plant based you need to understand fermentation and that is what we do in dairy last from our goals to market, it's many of the dairy customers that have been also the leaders in developing plant based alternatives.

So I think we have the goals to market and we have the technology, you're right that in fermented beverages we have the expertise, but in some cases we are building relationships with new customers and that is important for us to expand our coverage, which is also one of the areas where we have invested.

Thank you.

Yes, a couple of additional questions, it's around M&A, so the first one, which I'm sure you're sick and tired of getting, but why are you the correct owner of Natural Colors? The second one, hopefully [indiscernible] show there are a couple of assets being shopped around right now, Glycom in Denmark for example, CSK down in Holland, which among other things can change our Culture business, I know you can probably not be very specific, but what is your view on larger M&A, more ratio and this would completely unrealistic to assume you could buy one of these or another larger assets within the next 12-18 months.

Thanks.

Thank you, Lars, On Natural Colors first, I mean, it is a recurring question. I think I would expect the question particularly given the challenging performance of Natural Colors because if you could say, if you take out Natural Colors, our performance of last year as far as growth would have been a lot stronger.

However, it still had the return on invested capital north of 24%. And we understand the business quite well.

So it, then nothing new for you, it does not have a great amount of synergy with our microbial platform. But its natural solution is on trend.

And we believe that the conversions in Natural Colors in the North American market represent a large opportunity. So that's the Natural Colors.

I mean, we've always said that we run and execute that business to our best of our ability. If somebody felt that they were better owners and would prepare to sort of pay the price for better ownership of that business, we would consider that, but we don't have a formal process to sell Natural Colors, just to be clear, any rumors around that.

On the others that you mentioned without commenting on any special M&A, I would say, you are right; I mentioned that we are in a very dynamic moment in the industry. Our major competitor, DowDuPont is up for sale, we know that we cannot participate in that, but there's very exciting opportunities within the bioscience microbial space where we play, and I think we have to recognize which one of those would enhance Chr.

Hansen's value and long-term industry leadership, and I think we will give them fair considerations on what they represent and why would be potentially good owners of those businesses. Søren, you might add?

Is infant nutrition sort of more attractive than your [average] segment?

So let's tackle -- let's not talk about Glychem, but let's talk about HMO just to be clear. So you saw from our report, that infant formula has been a growth engine for our Human Health business, and we believe that infant formula nutrition is something that has a lot of positives.

So, we will study the HMO market, you know, it's a probiotic, what are the potential synergies go-to-market is interesting, will HMO remain as a differentiated technology, will it commoditize, I think you want to have firm conviction about those areas when you talk about HMOs.

Excellent. It's great answer, Mauricio, thank you very much.

Thank you. We really appreciate your questions.

Thank you very much, and we will be available in the times ahead, if there are any additional questions. Thank you very much.