Tobias Erfurth - Head of Investor Relations Heinz-Jürgen Bertram - Chief Executive Officer Olaf Klinger - Chief Financial Officer

Thomas Swoboda - Société Générale Michael Schaefer - Commerzbank AG Knud Hinkel - equinet Bank AG Elizabeth Coen - Davy Group Patrick Roquas - Kepler Cheuvreux Heidi Vesterinen - Exane BNP Paribas Geoffrey Robert Haire - UBS Investment Bank Ranulf Orr - Redburn Partners LLP Chetan Udeshi - JPMorgan

Okay. Good afternoon, ladies and gentlemen, and welcome to our Full Year Results Conference 2017. We welcome our guests here in the Sofitel hotel, in Frankfurt. We welcome our guests on the phone. With me are our CEO, Dr. Heinz-Jürgen Bertram; and our CFO, Olaf Klinger. All documents have been published this morning on our webpage in the section Investors, at Events & Presentations. In the same area, you will find the playback of this conference call in the course of the day. After the presentation, we are open for your questions. I will now hand over to our CEO, Dr. Heinz-Jürgen Bertram. You may begin.

Thank you, Tobias. Ladies and gentlemen, welcome to the Symrise investor and analyst conference for the fiscal year 2017. We are happy that you have joined us here in Frankfurt. We would also like to welcome all participants who are with us on the phone today. In today's session, our CFO, Olaf Klinger, and I will present you the financial and operational highlights of 2017. We will also give you an update on our strategic initiatives and an outlook for the current year. After our representation, we will be happy to answer your questions. Let us start with Chart 4 and our financial highlights. As you can see, we have further expanded on our strength. We successfully continued our profitable growth course in 2017. For the 12th year in a row, we have grown our sales and expanded our market share. Sales rose to almost €3 billion, and EBITDA climbed to more than €630 million. With an EBITDA margin of 21%, we very clearly delivered on our profitability target. Net income grew to more than €270 million, which corresponds to €2.08 per share. There is more good news for our shareholders. We will propose a dividend increase to €0.88 per share. Please move to Chart 5 for the group sales development. Despite unfavorable FX effects, we increased our sales by 3.2% to almost €3 billion. On an organic basis, we grew sales by 6.3%. Let us come to our segments on Chart 6. Scent & Care delivered sales of over €1.2 billion. The decline compared to 2016 is mainly due to the sale of the industrial activities of Pinova. On an organic basis, the segment grew by almost 4%. We saw particularly good momentum in the fourth quarter with organic growth of around 6%. Our Flavor segment increased sales by 8.5%. It benefited from double-digit growth in EAME and North America. Application for Sweets and Beverages showed particularly good dynamics. In our Nutrition segment, we grew sales by almost 10%. Pet Food was, again, one of the strongest growth drivers with a strong double-digit sales growth in some regions. Chart 7 illustrates our regional performance. We once again achieved strong growth in Latin America with a sales increase of almost 8%. Amongst others, we benefited from new business in vanilla applications as well as strong Fragrance demand and strong demand in Fine Fragrances. In North America, sales declined by 4.1%, and reflect the sale of industrial activities of Pinova. Overall, we saw good dynamics in the region, amongst others in Sweets and Beverages applications. In Asia Pacific region we reported sales growth of 1.4%. While Oral Care developed a bit slower compared to 2016, we saw very good demand in Cosmetic Ingredients. EAME also delivered very good sales growth of 7.4%. We benefited from very good dynamics in the nutrition business and expanded sales in Oral Care. A comparison of mature and emerging markets on the right shows, we generated 44% for total sales in emerging markets. Overall, we gained 7.6% growth there. Please turn to Chart 8 for our earnings development. We increased our EBITDA to €630.3 million and delivered a very solid EBITDA margin of 21%. This is a very good result despite targeted investments into growth initiatives as well as more headwinds from currency effects and certain raw materials. Symrise is not focusing on quick wins. We are long-term oriented and have a clear focus on sustainable, profitable growth. Chart 9 illustrates that very impressively. Over the course of 12 years, we have continuously increased our sales and delivered on our high profitability targets. In other words, we create value. Our compound annual sales growth amount to more than 8% and to over 9% for the EBITDA. Investors appreciate our performance and our stock, as Chart 10 shows. In 2017, we again left the DAX and the MDAX behind us. Our share price gained 22%. We want to share our success with our investors. For the fiscal year 2017, Management and Supervisory Board proposed a dividend increase to €0.88 per share. Having said that, I would like to hand over to Olaf for more details on our financials. Olaf?

Yeah, thank you very much, Heinz-Jürgen, and good afternoon also from my side to all of you here in the room, but also on the phone. Following Heinz-Jürgen's initial remarks, I would like to give you a few more details on our 2017 financial performance. So let's start with the group sales development on Page 12. With organic growth of 6.3%, Symrise has once more defended its position as the number 1 growth player of the flavors and fragrance industry. As in prior years, three quarters of our growth came from new volumes and 1 quarter from price increases. The portfolio effect of minus 1.3%, comprises the acquisitions of Nutra Canada, Nutraceutix and Cobell as well as the divestiture of Pinova Industry Application business. All of these portfolio effects will vanish in 2018 with the exception of Cobell, which contributed €27 million turnover to our 2017 financial figures since consolidation in July last year. Furthermore, since January 17, 2018, we consolidated Citratus, the Brazilian fragrance producer with about €11 million in sales, an acquisition which we announced in December of last year. As previously discussed, during our 9 months call, we faced significant foreign exchange headwinds in the second half of the year mainly now coming from the U.S. dollar. Overall, this resulted in a negative foreign exchange effect of minus 1.8%. At least for the first 6 months of 2018, we expect the U.S. dollar primarily to continue to be a strong headwind for us. And on regional growth, I would only like to add to Heinz-Jürgen's comments that adjusted for the Pinova portfolio effect, like-for-like growth in North America would have amounted to plus 5.4% compared to minus 4.1% reported growth. Please turn to Slide 13 to take a closer look at our bottom line. 2017 sales rose stronger than gross profit, resulting in a slight margin dilution of 30 basis points from 41.2% gross margin in 2016 to 40.9% in 2017. This development was mainly related to higher raw material cost that were only partially offset by savings and manufacturing costs that we achieved thanks to ongoing efficiency measures in our production environment. On raw materials, in total we spent €1.3 billion, which represents a material cost quota of 42.2%, up slightly from 41.6% a year before. The increase in our raw materials was related both to naturals and now also to synthetics, while we continue to see an upward trend in natural raw materials, particularly for vanilla and citrus. Oil-based raw materials have also started to rise again in 2017. However, this was not only due to the critical shortage that hit the Flavors and Fragrance market in Q4, but also due to other factors, such as the tightening of environmental standards in China, and related closure of production facilities, especially in China. Overall, prices were up around 4% in 2017, clearly at the upper end of what we have been expecting and also guided for. For 2018, we remain cautious given the current supply and demand imbalance and some uncertainty related to the BASF situation. Overall, we expect a significant increase in raw material costs. That said, in the currently challenging market environment, it's our utmost priority to fulfill our delivery applications towards our customers. We still very well positioned with our industry-leading backward integration in key materials, like in Menthol, like in CST and cooperate very closely with our customers on a one-to-one basis to find the right solution for each product going forward. Moving to earnings. Group EBITDA amounted to €630.3 million and that was stable compared to last year. The margin of 21% lies well above our above-20% margin guidance for 2017. As already explained, the earnings performance must be seen in the context of higher raw material expenses, increased CapEx and R&D investments as well as strong headwinds from foreign exchange. And to give you an idea, there was an EBITDA impact of €10 million in Q4 only foreign exchange, not only hit top line but also the bottom line. R&D expenses were up 5.6% year-on-year whilst marketing and administration costs were fairly stable. Higher R&D investments to a larger part related to [coal issuance] [ph] and will support our growth in the future. Group EBIT rose 2.2% to €431.6 million, resulting in an EBIT margin of 14.4%. On final remark on the slide, please note that prior year figures have been slightly restated for the finalized purchase price allocations for Nutraceutix. And as you're well aware, we normalize for acquisition and integration costs related to Pinova in 2016. Please turn to the next slide, Slide 14 for the segment reporting. In Scent & Care, we saw demand picking up in the second half of the year with organic sales growth of 7.7% in Q3, and 5.8% in Q4, leading to volume-driven organic growth of 3.9% for the full year, so nice recovery in the second half of 2017 as predicted and as promised. Reported sales were €1,263 million for 2017. Looking at earnings Scent & Care EBITDA amounted to €248.1 million. The margin at 19.6% was in line with the normalized level of the previous year. Slide 15, coming to our Flavor segment on this slide, we concluded a very successful year with €1,101.9 million in sales, an increase of impressive 8.5% year-on-year. Organic growth was even stronger, amounted to 9.3%. However, please bear in mind that this growth rate was driven by both price and volume, about 50-50. And for 2018 we expect the pricing impact to be slightly less. The portfolio effect of 2.7% stems from Cobell. The integration of this business is very well underway. We are very happy with this development. Organic growth in the fourth quarter was 7.1%, mainly driven by Sweet and Savory applications. Coming to the segments earnings. Flavor EBITDA amounted to €242.9 million. The margin at 22% was below prior year's margin of 23%, but still at a very high level, and this despite the Cobell acquisition, which slightly diluted the Flavor margin. And those who looked at the fourth quarter saw that this quarter was a very good quarter for Flavors. Let's move to Slide 16 for Nutrition. Nutrition reported sales of €631.3 million. This corresponds to a plus of 9.6%. Organic growth came in at 6.5%, it was about one quarter price and three quarters volume affect. The slight slowdown in organic growth in Q4, was only 3.5%, continue to be related to our Probiotics business. As you know, Probi has been experiencing a temporary destocking probing by one-off its major clients, and expects the impact of this destocking to continue due in the first quarter of 2018. The underlying business performance of the segment, however, was very well on track for Probi as well as for Nutrition overall. Excluding Probi, organic sales in Nutrition would have been 9.1% in Q4, so quite impressive also here. EBITDA for Nutrition rose by 4.3% to €139.4 million. Despite increased expenditures for the capacity expansion of Diana Foods in the USA and investment in the expansion of the pet food footprint, the margin remained high at a level of 22.1%. Having taken a look at the segments, let's continue with the P&L elements below EBIT on Slide 17. The financial result amounted to €56.1 million in 2017, €12.5 million lower than in 2016m, while the interest result improved by €0.9 million year-on-year, the other financial result was negatively impacted by currency effects of minus €7.3 million after a plus €8.8 million in 2016. These effects were coming from financing activities related to sourcing activities in Madagascar as well as onetime effects related to the depreciation of the Argentinian peso, so very special environments and situations. Regarding our interest result, please note that the repayment of the Eurobond only took place in October, so only two months of interest rate savings. Going forward, we expect annual interest rate savings related to the convertible bond issue of about €6 million in 2018, in comparison. Our interest rate exposure has been further reduced through an increase in segregate finance instruments. Income tax in 2017 decreased by 4.9% to €99.8 million, mainly due to the tax reform in the U.S., the resulting tax rate was 26.6%, which is well below our long-term rate expectation of below 30% tax rate. With a net income of €270.3 million, we achieved an undiluted EPS of €2.08 but it's attributable to Symrise shareholders after €2.05 in 2016. Consequently, we proposed a dividend of €0.88, €0.03 more than last year at the Annual General Meeting in May. Please turn to Slide 18 for the review of our balance sheet. Overall, total assets slightly decreased by 1.6% due to scheduled amortization and lower cash compared to the high 2016 number that was impacted by the sales proceeds from Pinova Inc. Non-current borrowings went up due to the issuance of the convertible bond. The equity ratio increased from 36.4% to an even healthier 37.8%. Net debt amounted to 3.0 times EBITDA, including pensions or 2.2 times excluding pensions. This is slightly above what we expected for 2017, which we foresee - have foreseen with 2.7 times to 2.8 times EBITDA. The reason for this were higher than expected working capital build up related to the harvesting campaigns like in vanilla and the tightening procurement markets in the second half of the year as well as some higher CapEx spending in 2017. Let's now turn to Page 19 for the cash flow analysis. In 2017, we made good progress in strengthening our focus on cash flow. The operating cash flow increased by 16.9% to €396.2 million. Operating cash flow and percentage of sales was up from 11.7% in 2016 to 13.2% in 2017. The improvement in operating cash flow was achieved despite the aforementioned special working capital effect. Investing cash flow declined from €311 million to €219.3 million, driven by prior year M&A. Overall, €205 million or 6.8% of sales was spent on CapEx in 2017 given the number of larger projects, Heinz-Jürgen will report in a minute. The figures above the 6% of sales, which we forecasted as construction progress was ahead of plan. For 2018, we expect CapEx to come back to around 6% of sales, while for 2019 onwards. We forecasted a decrease to 4% to 5%, which is the more normal number for Symrise. And with this, I would like to hand back to Heinz-Jürgen.

Thank you, Olaf. Following the deep dive into our financials, I would now like to take you through our strategic priorities and initiatives. Chart 21, please. Those of you who have followed us for some time now and know the Symrise story, is a story of innovation as much as of diversification. The underlying drivers for our business are global megatrends, which we constantly leverage. These include mix to the growing world population, also urbanization and the rapidly increasing consumer focus on natural products. All our activities are fully aligned with exactly those megatrends. More than a decade of sustainable and profitable growth is evidence for that we not only have a very effective setup, but that our strategic strategy is spot on. Growth, efficiency and portfolio diversification are the key pillars of our strategy as illustrated on Chart 22. They are well proven levers and they have contributed to our highly reliable performance over the years. Let me show you some concrete projects along those strategic priorities. Chart 23 presents growth initiatives in emerging markets, in particular, in Asia/Pacific. We have been active in this region for decades now. For already more than 20 years, we have also been present with our own Research Center and manufacturing facilities in Singapore. Singapore is one of the key centers for business, life-style and technology. Accordingly, it has an important hub for us. Following the significant investments in capacity expansions in 2010 and 2011, we built a brand new Flavor Innovation and Technology Center. The official opening in May last year marked the completion over the expansion for over €30 million on our regional headquarters in Singapore. This event is really a win-win situation. We contribute to Singapore's region of becoming Asia's regional Food and Nutrition hub, while at the same time being located right in the middle of it, which allows us to immediately benefit from attractive growth opportunities in the whole region. Yet Singapore is just one of our growth projects in Asia. In 2017, we also established a new creativity center in Mumbai and a new sales office in New Delhi, from which we serve the Indian market. We also invested in building a new sales and development center in Vietnam, and expanded our site for development and application technology in Indonesia. All these initiatives support our local footprint and even more importantly, customer proximity, a prerequisite, for the future growth. Efficiency is the second pillar of our strategy. One area we continuously work on is in that context is our sourcing. Please turn to Chart 24. You know that our backward integration not only enables us to secure access to high quality raw materials at all times. They also contribute to most efficiency in securing as we agree on long-term contracts with suppliers at defined rates. This enables better planning and it helps us in times of scarcity of - and volatile prices, of course, there are limits. For instance, in case of the shortage of the key ingredient, fragrance ingredient citral, which we currently see in the market. And let me show you in this case we have been in a good position due to our backward integration, in particular, due to the acquisition and integration of Pinova, Renessenz. This perfectly illustrates what we significantly benefit from the constant expansion of our backward integration. It will therefore remain a strategic priority going forward. Let us move to Chart 25 for our portfolio now. In today's fast-paced world, the degree of innovation and reinvention of a consumer brand product is crucial. Our customers rely on us in their effort to strengthen their product lines and expand their value proposition. They highly appreciate our innovation drive and the ongoing additions to our own portfolio, be it in the traditional Flavor and Fragrance business or in new areas, such as Care and Nutrition. Let me give you an example. We've been significantly exploring the Microbiome. This is a new area, which we decided to combine skincare with protection against air pollution, in the face of urbanization, a much discussed and researched topic. By cross-linking our longstanding expertise in beauty care, with the latest insights in environmental pollution, we have developed a solution, which not - would not just one but multiple benefits. The result was SymUrban, which provides skincare like moisture, protects against pollution and prevents premature aging. During the Personal Care and Health Convention, in Asia, in March 2017, SymUrban was awarded the most effective new ingredient. Amongst others, we have by far the highest share of relevant patents, as the Patent Asset Index illustrates 33.8% to be exact. To compare, three years ago, we stood around at 25%, a clear proof of our innovation power. From our portfolio to another integral part of our strategy, sustainable management, please turn to Chart 26. You all know that in everything we do, we try to improve constantly our environmental impact. May be in the way we source our new raw materials or in the manner we reduce our ecological footprint. In 2017, we have once again been recognized on several occasions for our sustainable business management. I am very proud for our A rating by the Carbon Disclosure Project, the CDP rated Symrise as the global leader within the industry in all three categories; climate, water and forest. We managed to further reduce our carbon footprint and continue to lead the energy and materials sector as well as the MDAX stock index. We have also been recognized by EcoVadis for our outstanding sustainability management and we have been honored by the DQS for the Excellence Award in Green Chemistry and Social Engagement. We have committed ourselves to a clearly defined set of goals, based on the 17 United Nations Development Goals. Each one has a specific level to be achieved over the next 15 years. Let us move to what is ahead of us for this year. Profitable growth is also our goal for 2018. And we are confident; we have had a good start for the first quarter with strong demand across all business areas. The macroeconomic fundamental, the good market dynamics, and not to forget, the additional demand coming from our new product innovations calls for another year of targeted investments. We're also slowly reaching the upper-end of some of our capacities. But as you know from us, we manage our business with foresight and thus expand in due time. With about 6% of sales, our 2018 CapEx program is therefore, again, at the right and at the higher-end. Take it as a clear sign of our confidence and the market opportunities we have identified. Chart 28 shows some investment projects. Amongst, we have extended our Pet Food production in France from where we are serving customers in EAME region. In June, we will capitalize on the expanded spray drying capacities in the U.S. In August, we will be able to leverage additional capacities for Cosmetic Ingredients there. And we're also already preparing the ground for 2019. In the U.S. we will have started construction work on an additional plant for Diana, and we will further increase our menthol capacities. Overall, we will invest about €100 million in the U.S. In China, we are in the process of building new production site in Nantong. We will be operational there from December 2019 onwards. Let me conclude the presentation with our financial targets on Chart 29. I just mentioned it. We are confident about the fiscal year 2018. The fundamental drivers for our business are intact and we expect a solid global economy. However, some foreign exchange rates will remain volatile. Furthermore, we see significantly higher cost for raw materials, but thanks for our long-lasting and close corporations with our suppliers, as well as our efficient backward integration, we expect to compensate for most of it. To further drive growth, we will capitalize on our global market presence, broad customer-base and expanded portfolio. Therefore, we see ourselves in a very good position to once again outperform the flavor and fragrance market, which is expected to grow by 3% to 4%. In addition, we want to maintain our strong profitability and target at an EBITDA margin of around 20%. Our midterm targets, which lasts until the end of fiscal year 2020, also remain fully in place. We aim at a sales CAGR of 5% to 7%. Furthermore, we strive for an annual EBITDA margin between 19% and 22%. Having said that, I would like to open the floor for your questions now.

Thank you very much, Heinz-Jürgen. Thank you very much, Olaf. So let us start now with the question-and-answers. We will start with the questions here in the room and we will switch to the guests on the phone afterwards. For all the guests in the room, please wait [for Olivia for] [ph] the microphone, that your question is also heard on the phone. We kindly ask you to put only two questions. If we cannot take all your questions during the conference, we will answer the remaining questions later today. Many thanks and the first question, please.

Thomas Swoboda from Société Générale. I will ask two questions, please. Firstly, Mr. Bertram, you elucidated to the recent investment in Asia, you have made, looking at 2017 you just said 1% growth there. What is holding you back? I guess this growth must come. I'm just wondering, what is in the way currently? And secondly, on the citral situation and very straightforward, did you lose sales and profits, because of the citral situation in Q4? And should we be expecting some pressure there still in Q1? Thank you.

Okay. Yeah, Thomas, thanks for the question. First, investment in Asia, yes, last year in Asia, the growth with 1.4% was not overwhelming, clear point. But to your point, we are confident the growth will come back. This was a temporary issue. It was few incidents, which came together. We lost one business in Oral care the year before, and which we regained, so it's just a seasonal thing, and there were some other incidents, which came together. Overall, we have no reason to believe our dynamic in Asia somewhat is not present anymore. That's also because of why we invested and focused in some of our investments for the Asian markets. So I'm happy for that question. We believe our long term growth opportunities are intact in Asia. And we will see that in this year already that Asia has a stronger growth momentum. So having said that, it's just a big part, the accidents, which came together, some of them. It's not one isolated big thing. So Asia is fine overall. Citral is the second question, citral top line and profit. It is something which we encountered, no question about that. Did we not gain business opportunities? I would doubt about that, but we certainly saw higher costs. If you look at our Q4 numbers, we have the material we need. So we're in a good and favorable situation compared to others. But in situations like this, where raw materials are - and availability is limited, very often the material is just not there where we need it, so we have to ship it back and forth short-term. So it's a lot of airfreight going on. So you will see a lot of extra cost. In a normal, in an ideal situation, you would have the material there where you need it and you typically would have shipment not by air, at the moment, this is ongoing. I expect this to go on for several more weeks, and then we should be getting to a bit more normal situation. But it is clear our situation is more favorable, I hope it came across from what I said, because at least we have the material. In principle, we have it all. The hit is so not on the top-line, but it's on the bottom-line, in particular, higher cost. Hope that answers your question. Okay.

Michael Schaefer, Commerzbank. Two questions also from my side. First, one on your raw materials outlook, you recorded 4% increase last year. Raw materials, now you're guiding for something like a significant increase in 2018. Mr. Bertram, you mentioned that you will compensate for this entirely. So well on the other hand, you're guiding for a 1% drop basically in the EBITDA margin, so any kind of clarification? Also timing wise, what do you expect to - the recovery to happen when? And maybe also splitting on the raw material side between the naturals and synthetics, so what are the key major drivers there? This will be the first question. And the second one is on your menthol capacity expansion plans. If you can just update us on what kind of capacity is coming on top basically and where this would bring you to basically in total? Thank you.

Okay. I start with menthol, the second first. Short term, we will double our metal capacities in the U.S. And we go on stream beginning of next year. And we will - we're very confident we will stay in the timeframe and the cost-frame. So we're very confident we will do that. But let me say that as well, that will not be it. We will further, again, double the capacities. So this is beginning next year, we will double in the U.S. And that is the first step for doubling our global capacities in general. So we are doing quite a big shot there. But the start of this expansion will be next year going on stream and then from there continuously expansion. On the outlook, we're very early in the beginning of the year. I think, no one here is surprised about the outlook. We are confident. We are optimistic. On the margin, it would be far too early to give a firm commitment on something, at this point in time with what is going on, FX volatility on the one side and the other point on the raw material end. However, that is clear. We believe, we will again, deliver. We will, again, outperform the market, despite certain FX effects and these things which go on. We will see some additional momentum going forward. We have managed to increase prices. So I told you that raw material prices are going up, which means it's a clear signal for us to talk with our partners and our customers that price increases are necessary. And I can say, we manage to do this. And as we're going forward, you will see the one or the other impact from price increases. The other point is, as was said, this unusual situation of raw material shipment from A to B, that has to go back to normal as well. And I said, it will go on, it's our expectation for several more weeks. And then we should get to a situation that the materials are there where we need it. The prices for raw materials will remain high, that is our anticipation, but we will get some momentum on it. Please bear in mind we are the leading manufacturer of fragrance ingredients in the market as well. So on that side we clearly also benefit. So there is a few things which will help us during the year and a few effects where we face headwind like FX effect at the moment. Overall, that leads us to the assessment that we're confident that we did the right decisions in time. One good example for that is the Pinova acquisition, which now turns out to be just a great thing, as it helps us and brought us in a favorable situation. I hope that answers the question.

Maybe I can take the opportunity because Tobias gave me a hint on the interpretation of what is significant for us, because apparently the financial market sees this as a 10% to 15% increase. That will not be the case. This is not the intention to indicate this. We saw 4% in 2017 increase. The chance is there will be a little bit more. But as Heinz-Jürgen just mentioned, we feel better positioned overall, and therefore, significant should be interpreted in the right way.

Hello, Knud Hinkel from equinet Bank. Coming back to your CapEx guidance for 2018, it seems that the U.S. is a little bit on focus here. Is it purely incidental or is there any overarching consideration behind that? Thank you.

Well, I believe it is a positive sign, because we believe the acquisition of Pinova was at the right time of the right field. And we clearly have conveyed the message to you that the integration is complete, that's why we are not adjusting, not normalizing, nothing. And now as it's complete, that it's integrated, that we have shapened the company. We sold some industry activities. It's the right start now to leverage on - expand on this portfolio. So that's why a big portion, you're absolutely right, of our investments at the moment goes to the U.S. So Pinova was not just acquired to have a new few more materials, but to have a new technology, a new platform for ingredients, which we were built for. And it was built - it was bought, because it gives us the opportunity in an area for sustainable raw material sourcing. It clearly distinguishes us from a lot of other suppliers. And if you look what major global customers in the fast-moving consumer goods industry have conveyed as a message that from 2020 on, they're not buying any material from not sustainable raw material sources. I would recommend to the one or the other supplier to do a similar move to prepare the ground for that when that time comes. The message is we will clearly be there. We will achieve our objective. And you see on our ambitious investment, we will leverage on it. We clearly see that as an opportunity and also as one of the levers why where we built the confidence of this year for us and for our business. Some of our major investments are there and they will generate additional value. I'm totally convinced, good question.

Any more questions in the room? Yeah, there is one.

Good afternoon. This is Liz Coen from Davy. So just two questions for me, just going back maybe to Scent & Care, and just to fully understand, organic growth in Q4 of 5.8%, that was all value and there was no pricing in that, is that correct? And then maybe from your comments on pricing in Q1, we would assume that you are getting price increases too. So there has been a significant change?

So, yes, your question - yes, yes. So Q4, unfortunately, I would say, would be a rounding around, no price increases. As you know the citral crisis, it was - to be clear, it was not just BASF, it was different things which happened, but BASF, I would say was the tip on the iceberg. In China, you see it's a lot of more awareness on environmental aspects, so quite some suppliers are also limiting their supply. So BASF was one major thing, but it happened, the force majeure of BASF, at the end of third quarter, so the impact was in fourth quarter. And you cannot ask for price increases for something which has not happened. So going out to the customers, I expect that we will see raw material price increases, because we anticipate a force majeure just doesn't sit, so - but when it has happened, you can go out and that's what we told you on various occasions, you can go out, you can talk with your partners, with your customers, for them it is obvious. All these numbers, chemical ledger are displayed, what the raw material price increase is. So after certain negotiations, sometimes nicer, sometimes more - a bit more bumpy, but you can get price increases. And I would say, Q4 nothing, Q1 minimum.

Okay. Just one more question, if I may. Moving onto Nutrition. So you mentioned that the Q4 organic growth would have been 9.1% excluding the impact of Probi. I understand that that's temporary in nature, but it's going to flow through to Q1. And I just want to know if - will it be the same impact in Q1, a similar impact of what we've seen in Q4. And also how confident are you in returning to the high-single-digit organic growth rates of 9%, let's say, for the full year…?

We could be in a tricky situation as you want me to comment on Probi's numbers. And Probi is publicly listed, so I'm trying to guide you and to be diplomatic. So in Q4, I would say some of the deviations, if there were deviations at all between consensus and what you saw is actually routed in Probi, so yes, you're right. And Probi had issued in Q3, a profit warning, I think, that was what is out on the table. And from what I can communicate Q4 was certainly something and from what has been communicated, you may see something in Q1 as well. But that is Probi, and we are still fully committed, that was one of the great ideas of us going into Probi. And in my presentation, I alluded to some of the products which will hit the market, where we replace chemistry by biology. We started with some urban and you will see there's more to come over the course of the year. You've seen our strong innovation power. I hope the question now doesn't show up, do you spend enough for research? Do you file enough patents? And all the stuff you have been bothering me in the past, you see more than one-third of the whole intellectual property is with us. And this is not my numbers, it's from a British institute measuring it. And I think this is clearly shows that the innovation leader is us. And what you see now going on is we want, and that's logic, this innovation power convert into business opportunity. So it is by no way a surprise that our CapEx is for two years about on a record high to transform innovation opportunities into market opportunities. I think, this is a clear sign of strength.

Patrick Roquas from Kepler Cheuvreux. First question is on sentiments that you see amongst your client base with probably on the one hand still focused on cost savings, on the other we hear some more sounds with regard to bigger importers on innovation. So - and what is your feel that your client base is looking at today?

The second…

You get the second, but let me first answer - this is a very good question, because I don't know the answer yet, but it's a tricky situation. On the one side, yes. The major clients are still focusing on a lot of cost savings initiatives. A lot of the global brands, but the same is what you asked for is my opinion that cannot go on for too long as the biggest value of global companies is the value of their brands. And it has to come in additional value with these brands, otherwise why buying branded products, which come with an extra cost. So what you implied and is exactly my opinion, there has to come a swing when you can - have to focus - main focus move away from just cost savings. Cost efficiency always a target, but cost saving too. Innovation is the next big thing, where is the next iPhone, where is the next idea. And you've seen from our innovation portfolio that's a pretty good probability that, that will come from us. But I am totally with you. In these days, where you will see, sooner or later, shift on to strong innovation partners. It is good to be positioned, to be one of the first choices, absolutely, with you. And this point that the focus from cost saving as the first priority to innovation and getting new products in the market as the first priority is not there yet, but the tipping point will be pretty close. That's my - that's good as I can assess. Second question, this was a good one, you deserve the second one, come on.

So second one is on M&A. So how do you consider your balance sheet? Are you open for something big? Or are you more on the cautious side and looking for more of the add-on kind of type of thing?

That's an easy one. So we are not limited on our balance sheet on opportunities, as I learned that with Diana, that was the best deal in town. And when I asked our head office Supervisory Board on this opportunity, and they said, how much do you think it's going to cost you? I said €1.2 billion, €1.3 billion, well. It looks like a lot of money at that point in time. When we did the financing, it was surprising to me, I could have gotten three times the amount of money. The market rewards good ideas. So the challenge is with me, if I come up with a great idea, I'm going to get the money, that's not the problem. The problem is being more savvy and being cautious on the opportunities. And talking on the M&A opportunities, many of them at the moment are far too expensive. I see no way on many of these deals, which go through that you can drive value out of it. We are valued 12 times EBITDA. The business in our industry typically in these days requires, if you want to be successful 12 times plus some synergies, right, so 12, 13 times. If you pay beyond 14, 15 times, for sure you have passed on all synergies to the vendor. And from there on, I do not see any way to make a business case out of it. And let me assure you, for the Flavor and Fragrance business, I don't see any means that I would spend more than that what I just outlined. And if you look what has happened in the industry recently, there has been multiple 16, 17, 18 times. We have been in these processes, but we stepped out, and you will not see us doing these deals. It's your money, and we cannot make a business case out of it. On the other side, of course, we look at opportunities. And there are always opportunities arising. The only thing which is necessary - it may be for us necessary to look a bit more careful and look for opportunities which are not that obvious. If there is a bidding contest out there and the whole industry is going after it, at the moment it's a pretty safe bet. We will not get it because others are willing to spend more, but I have to work with your money wisely. I think that was as straightforward and honest as you can think. So if there is acquisition opportunities tomorrow or currently, we'll look into it, but if there is unreasonable price expectations no way. And to test us, look at Cobell, what we paid was 11 times EBITDA.

Michael Schaefer, Commerzbank, again. Two questions. Sticking to synergies, we haven't heard about Pinova synergies for a long time. So I wonder whether you could update us where you're standing, whether you're still targeting €15 million and when you are there on the timing side? Second one is on working capital. You have sold or you've build up something like €130 million working capital - net working capital again in the past year. So given what we've heard about the raw materials expectations you have, what's the ramp up process you're planning for the second half? So I wonder whether you can shed some light on what we should expect basically in 2018 and may be also beyond 2019, once those new plants are fully up and running? Thank you.

Okay. Let's do it this way, I take the Pinova and, Olaf, you're still with me, so you take the working capital. Okay, Pinova synergies, I would say the €15 million are in. It's just not in this specific situation obvious because we shuttle around with Pinova on some of this other raw material mess, which is at the moment going on. But there is no one in our company who would not say straightforward on firsthand that, that was not the right acquisition at the right time. So the synergies are in, that's why we stop integrating in all this. This is out, we're not normalizing. We're not adjusting. We may have even a bit more synergies in. But that is - and the question came, that is why we full-steam focus now on expanding what we have in the U.S. It is a strong basis. It's strong fundament. We've made good progress, I've been in Jacksonville, Colonels Island and Bushy Park just a few weeks ago. I'm extremely pleased on the progress, which is made. And you will see continuous improvement from now on going on, but they transformed from a value - a company which diluted the overall performance to a value contributor. And we're pretty confident that we achieve our targets earlier than announced originally. Okay?

Now, on the working capital, as you know, I put a lot of emphasis on this since I joined to improve the situation. And I think we are making good progress, very targeted initiatives, like this over-dues. When you compare us to immediate competition, you will probably recognize that our inventory level is higher in proportion. I think one of the major reasons for that is our way-more built footprint when it comes to backward integration. The supply chains are longer, taking vanilla for example, the campaign starts in June and we set up the vanilla in April/May for the ice-cream season. So sometimes it sits on our books for 12 months and longer. I think that is something which is part of our business model. And this is the reason why we also added last year based on higher volume and prices in the vanilla space for example to the working situation. But I can ensure you that my colleagues know that the working capital environment is extremely important and gets a lot of attention in the environment. It's not easy, but we are going after it, that's for sure.

Olaf, I think that was perfect. Olaf was a strong proponent for reducing inventory, starting with. But vanilla, we all experienced that together. It's a balance which you have to see. Vanilla extract now, it's just who has some quantities available. So fortunately, we have inventory and we have the special situation with our backward integration. We told you on various occasions that this is not something to make extra money, but it's like an insurance. Sometimes you benefit, sometimes it's giving you some extra cost. At the moment, it's giving you the benefit, because you can pursue all business opportunities at least with those partners which you have long-term. And others which show up new and now - and want to have some quantities and did not show up in other times, they have to see where they get the material. So that's - and it has an impact on the working capital, that's for sure. That is something which will, to some extent, be for long time the case. There is also some exceptional situations, one is menthol, because we will start our menthol plant begin of next year, and we need starting material. And our partner will not be ready by then, Lanxess. And we all recall last time we went through. So I hope we learned our lesson, and we start putting material onsite and you see that in the balance sheet, that's for sure. And that is also one effect, but that will go away begin next year on when we start the production, we will use that material up. So that is in addition to something which is permanent, some temporary strengths, and which is not small stuff. You will see that. And it will continue to be there and even build up a bit over the year.

Thomas Swoboda from Société Générale. I have one strategic question, please. Symrise is a phenomenal growth story, external organic growth, it's all perfect. We're seeing that since a couple of years. On the profitability side, I mean, it's a good profitability. There is nothing to complain, but we see in the sector that more is possible, your competitors are doing more. My question is not pointing towards, are you going to 24%, 25% EBITDA margin, that we understood. You are not a fan of it, but my question is how high on your agenda is to bring the profitability to the upper end of your target range? What would need to happen for us to see more payback on the investments you have done?

Well, we are in a privileged situation. We have the opportunity to choose between priority growth - top line growth and priority bottom line growth. This is a choice, which most of our competitors do not have. We outgrow the market since years, 8% growth - organic growth per year. That is over the last few years. That is strong. So yes, and to some extent we compromised a bit on the bottom line. And we told you that a bit more could be possible. But you see it on the long-term guidance, 19% to 22%, that is somewhat good, but you feel it could be better. What is the situation at the moment? Givaudan has 21.6% EBITDA. Givaudan is [FF has] [ph] 21.2%, we have 21.0%, so which is not a big difference. But we all don't believe in this normalized stuff. So let's look what's on the table and that is pretty much the same. Although we have a higher profitable growth rate, and the message of today is we believe our growth story will continue - growth story will continue. And we also said, we will make sure it will be profitable growth, in a band, let's say, 20% to 22%, there may be sometimes where more is possible, but the message from me was, if we're going to the upper level, 22% or whatever, we will continue to invest in further growth. As we have the opportunity. You saw our tremendous innovation power, why not transferring it into growth as the opportunity is there. If you look in our industry, there is not a lot of growth stories. Actually, it is us and not a lot more, organic growth in that - more than organic growth between 5% and 10%, so we said the bandwidth is 5% to 7% long-term. That's more than you see in other area - in other areas, in other companies. And that is the highest priority automatically you comprise in to some extent on other area. And to your point, the day we do not see any more the opportunity to outperform the market. And that day, I don't see yet. But if that day were there, we would have to look that the bottom line goes up. I think that was straight on.

Ladies and gentlemen, we already answered a lot of questions in the room. And we already are running out of time a little bit. But it would fair to answer at least some questions from the phone. I know that there are some people that dialed in. Let us switch now to the questions on the phone. Please again put only one question we will see of how far we can get. First question, please, from the phone. Thank you.

Ms. Vesterinen, your line is now open.

Hello, who is there?

Hi. Hi, it's Heidi. Thank you. I have a question on Scent & Care. When I look on a full-year basis, I saw that the gross margin actually increased a lot year-on-year. This I thought was a positive surprise because you were talking a lot of price pressure. I think you started talking about that in Q2. And it looks like the reason why EBITDA margins were flat year-on-year in Scent & Care is the fact that you increased R&D spend as a percentage of sales. So can you talk a bit about what happened to the gross margin and is this increased R&D spend going to improve the growth rate going forward? Thank you.

Okay, yeah, thanks, Heidi. Good to have you on the line. Well, we increased the R&D spending in Scent & Care, that's for sure. We made quite some new colors [ph], we informed you about that. And the next logical step is, if you are on the call, is you have a lot of opportunities. You have to increase R&D spending to leverage on these opportunities. So first, that's a good news, good opportunity. But of course, yes, you're right. You see the impact short-term. But overall, it should result in some outcome of these opportunities as the R&D investments is a clear commitment. And so, I believe the growth rate of Scent & Care should be healthy going on. And so far, we were at least with our predictions, right. Last year, at this time, most of you were concerned of our growth rate in Scent & Care, because it was a bit below the expectation. We told you by second half of the year it will come in and it will have a different momentum. And I have no reason to believe that this stronger momentum will fall shorter for this year. The only disclaimer we made is this raw material thing. So we believe, we are positioned in a favorable position with these raw materials, but some isolated special incidents can happen that something is required short-term and we have to find it out some way. Overall, I believe I hope you all heard our outlook is very positive, and that reflects also the outlook for Scent & Care. Okay, Heidi?

Heidi, if I may add on the gross margin situation, we made good progress on the efficiency side when it comes to production environment. But there was also the impact from the divestiture of the Pinova, Inc. industrial business, which naturally comes with high manufacturing cost as part of the business model. That was one of the drivers for the improvement.

Thank you.

You're welcome.

Next question comes from Geoff Haire, please.

Yeah, good afternoon. Thank you for the opportunity to ask the question. Just wanted to come to the dividend payment that you've made a point there, it's only 3% increase year-on-year. And over the last sort of three or four years, you've been paying dividend growth of roughly 6%. Is this a function of the CapEx spend that you've got going at the moment? And once that's through, could we expect to see the dividend grow faster?

Dividend, Olaf, you made the final decision. You sit on the money, you explain.

I'm happy to do that. So what we did is you saw the EPS increasing from €2.05 to €2.08 last year and we basically put the additional €0.03 straight into the dividend. As we've said before, we always want to make sure that our shareholders participate in our earnings. And the approach, there is really to make sure that we have sufficient funds. So we found, I think, a good balance between CapEx investments, which we are doing, honoring our financial liabilities and, of course, make sure that our shareholders participate. And I think the approach we took is a very fair one basically leading to 100% usage of additional earnings for dividend purposes.

Let me add to that. I had a discussion before we went on the conference call here for questions. Yes, we are aware with the opportunities we have that the CapEx ratio we have currently is very high. And let me reassure you, we have no plans to leave it at that high level. But as you saw from our innovation machine, innovation power at the moment that's the opportunity to translated in business opportunities. But the normal situation of CapEx should be more in the 4% range. And this is a temporary incident. And having said that, we had to look on where do we allocate the money, and we felt is, at the moment in this special situation, wiser to make - to pass on the increase in earnings per share in the dividend, but that is it. But that can be, in different times, also different. I hope that was the answer to your question as clearly as possible with an outlook.

Yes. Thank you.

You're welcome.

Thank you. Next question from Ranulf Orr, please.

Hi, thanks very much for taking the question. I just wanted to ask about the new manufacturing facilities being built. Can you give an idea of the scale of them? How the ramp up works? Perhaps any of the volume is presold? What kind of capital utilization you could expect? Thank you.

Okay. I can do that. So first I will not tell you the capacity in detail, because our competitors would calculate. But as we have said, starting with menthol, that's in the magnitude as per now for the first step, close to €50 million. Same is the Cosmetic Ingredient plant in total, it's about €45 million and the capacity will be significant but it will be build up. The Cosmetic Ingredient plant in three steps

The first step to come this year, and based on it's a new process, it's a new material, the process will be tripled over the time to come, I would say, over the next two years or so; the second point is, the product for the first step, which comes out of the plant is - it's all - all of that is sold already. So there will not be a problem selling that, and probably in the second step, doubling it will also be very well feasible and tripling it then we have to develop that market. So that outline is a very healthy product range. So we are very confident about that. Actually we already have made plans to increase the cosmetic plant in Germany as well. So you see that is taken care of. Second one is the menthol. At the moment, we are basically distributing menthol and not selling it. And with the process we have, although other competitors plan to go also on-stream with menthol, we're very confident that we can sell that product, in particular, for the first stage of the product additional quantity in Bushy Park that is already to a large extent, sold as well. So - and we are - you hear me, we're not concerned at all about getting this product - additional product quantity in the market. We have a good and very solid process, we believe, probably one of the best in the world, so that should be feasible. Talking about the Diana plant in Georgia, which will go on-stream somewhat mid of next year, and I have talked yesterday with Jean-Yves, he was very confident, he was in Georgia. And so, there is no reason for me not to believe we will sell that product. It's natural product. And the trend for naturalness where we know the farmer, the field, and the land how the product has been made, that trend is still ongoing and that plant reflects this trend. And again, the investment there, I haven't mentioned that is €80 million. So you see that is a big commitment. And we - rest assured, we wouldn't do it, if we were not convinced that we can sell these products, and as I said for big part of it, it's already sold. I hope that answer to your question.

That's perfect. Thanks.

Thank you very much. Next question and last question comes from Chetan Udeshi with JPMorgan. Please go ahead.

Yeah, hi. I had a question around the Scent & Care growth. If you've seen the growth over the past few quarters has been more, I would say, more volatile, up and down. Do you think there is some structural element to that? Or should we now expect the growth to be much more in a normal range, like we say 5% to 7% in the coming quarters?

Yeah.

And second question I had was, can you just remind us how much actual backward integration do you have to raw materials in terms of how much of your volumes that you source come from your captive supply?

Yeah, okay. First, Scent & Care, that's clear. Scent & Care is always and was always, and unfortunately, will always be more cyclical than Flavors. Flavors is lot more robust. And on the other side that is also an opportunity. So in good times, there is also - sometimes more opportunities in that business. At the moment with some headwind in raw materials that's the other side. So overall, my prediction is, this is the nature of this industry. It is not as solid and then stable. On the side, the volatility or the higher volatility gives also some additional opportunities. And we're happy that we have both of this and it's our job to manage it appropriately, so that you as investors can benefit from outside opportunities. But on the other side, in a tough times, you have a safety cushion that the business runs safe. And that's the message we want to convey. We believe at the moment the balance we have is very good, and that's what we would like to keep. Having said that, I hope that answers your question for the volatility on Scent & Care. The other one is on the backward integration. With the Pinova stuff, it has significantly increased our backward integration. And if we go by not number of products, but the quantity we use, we are clearly by more than 50% in our backward integration. I would be fooling you if I give you exact number, but it's clearly beyond 50%. And we have committed that by year 2020 or 2022, it will almost everything backward integrated. So there will be always a certain portion, which we buy from third-party, but it will be limited. And you see in these days where the uncertainty, is raw material available, that is a clear message we can convey. We will deliver. We will be there for our partners. And it may come, at some point, with extra cost. But we are known as a safe partner, as a lighthouse in these times, and we believe that is a value. The other point, which may be even more important than just safety and supply, which at the moment is the - biggest focus point is we believe going forward our responsibility goes beyond just creating flavors and fragrance. Our responsibility as a quality supplier means taking on responsibility also for the raw materials. And if raw material trends go towards big focus on natural materials, sustainable materials, aspects like what is happening to the environment, how is this sourced, become more and more predominant. And our vision, our message is clearly we want to know the farmer, the field and the conditions where the products have been made of. And that is avenue we pursue and we believe that's the right way. Madagascar vanilla is just one of these assets. But that's why we will continue to push our backward integration. At the moment, clearly being already more than half of our materials and rest assured till 2020, 2022, it will be almost everything we source, okay?

Understood. Can I follow up on citral then? You said you are not necessarily seeing a big impact or you're well sourced. Can I ask who are the alternatives that you see in terms of filling the gap from BASF outage at the moment?

The situation - well, the situation - for the citral situation, you better ask BASF, as they declared force majeure, not us. We say we find our ways. Another supplier of citral, DRT, also the factory in India just exploded last week, I read. So, obviously, there is a lot of exceptional issues ongoing. The good thing is, as I said, we can manufacture the materials which we need via the Pinova avenue from different sustainable materials. And it just takes changes in the production schedule, changes in some of the equipment. But we know how to do it, we have done it and it came with some extra cost, some of it you have seen.

Understood. Thank you.

The citral - well, just one, the citral is not only the basis material for lot of raw - fragrance materials. You have clearly pointed out, it goes also in the vitamin industry, DSM and all these folks. And that is something I clearly cannot answer what the ramifications there are. We're talking about our case and our message is clear. We know how to deal with this situation. We get there, we see some extract cost there. But the safety of supply from our products is guaranteed. I think that's a clear and strong message. Okay?

Ladies and gentlemen, this brings us to the end of our conference and our conference call. Many thanks for your patience with us in 20 minutes overtime. Thank you very much for your time and your interest in Symrise, and have a nice day. Bye-bye.