Corbion NV
AEX:CRBN
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Corbion NV
Earnings Call Analysis
Q3-2023 Analysis
Corbion NV
The company showcased resilience with a 4.2% organic sales growth and an impressive 12.3% adjusted EBITDA growth in the first nine months of 2023, despite macroeconomic uncertainties. The results illustrate the robustness of the company's operations, achieved in part due to efficient capital management practices including enhanced operational efficiencies and optimized capital allocation. This fiscal discipline has steered the company on a path towards positive free cash flow from Q2 onwards.
Looking forward, the company has reiterated its commitment to mid-single-digit organic sales growth for the core business in 2023, with a minor adjustment to its core adjusted EBITDA organic growth, now at the lower end of the 15% to 20% range. This reflective change accounts for the intricate and fluctuating geopolitical and economic landscape. For the fourth quarter, an improved volume mix is anticipated compared to the past quarters, fostering a positive outlook for the near future.
Significant investments, like the Thai Lactic Acid circular plant scheduled for startup in early next year, play a crucial role in the company's strategy for future growth. These investments are carefully balances so as not to adversely impact the company's medium-term advancement. Financial prudence will see the estimated capital expenditures (CapEx) for 2023 lowered to around EUR 130 million, with a focus on maintaining a disciplined capital deployment approach.
Strategic shifts are on the horizon, including a restructuring program to be unveiled in 2024, comprehensive of a full review of operating expenses, capital program, and working capital. This adjustment is designed to accelerate free cash flow delivery and improve profit margins, while the continuing divestment of the non-core emulsifier business via a broader auction process is intended to maximize value, potentially extending the transaction's conclusion into the first half of 2024. Regarding their position in PLA, a strategic review has been initiated in light of the challenging market.
The Algae Ingredients division has laid out an effective plan to catalyze sales growth through 2027 by capitalizing on the current plant's capabilities and investing in medium-scale CapEx. Growth in this sector comprises R&D innovation, product mix shifts towards higher-margin segments, and the production of refined oils. Vital to the company's strategy is avoiding a negative free cash flow cycle that could result from underwriting the construction of another new plant, for which diverse financing options are being evaluated.
Company executives maintain a stance of cautious optimism, asserting that despite the volatile circumstances, they remain confident in the long-term growth outlook. The leadership clearly intimates their expectation that the targets delineated during the Capital Markets Day remain achievable in 2024, indicative of an underlying confidence on their strategic planning and execution capabilities.
In a candid acknowledgment, the company recognizes past disappointments against expectations. However, they underline an anticipated strategic review reporting set for January 2024 which will aim to clarify aspects of their strategy. This report is designed to delineate how the company plans to capitalize on the substantial opportunities within its markets, with particular emphasis on recovery plans and a detailed strategic direction.
While the restrictive program contemplates adjustments across the company's operating expenses, capital program, and working capital, it leaves room for additional strategic considerations. These may include further portfolio decisions, akin to the emulsifier business divestiture, that could lead to additional business units' disposals—a move indicative of a company dynamically shaping its portfolio to its strategic advantage.
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Good morning, everyone. Welcome to the Corbion Q3 2023 Results Call. With us today are Olivier Rigaud, CEO; and Eddy Van van Der Kloot, CFO. My name is Peter Kazius.
This morning, we published our Q3 results. You can find the press release and presentation on our website, if you go to www.corbion.com/Investor Relations/Financial Publications. Olivier will start the call by presenting the first couple of slides, after which we'll pretty quickly move into Q&A. Let me hand over to Olivier.
Thank you, Peter, and good morning, everyone, and welcome to this quarterly and end month year-to-date results conference call. So starting with a key highlights, we delivered organic sales of 4.2% and adjusted EBITDA growth of 12.3% in the first 9 months of 2023. These demonstrate the underlying strength and resilience of our business and was achieved in a partly challenging and volatile macroeconomic environment.
In Q3, we've experienced similar volume mix growth dynamics as in Q2, and margins went slightly up. Organic sales for core activities declined 2.2% and we had a 6.1% adjusted EBITDA growth.
As anticipated, we are delivering a positive free cash flow as from Q2, driven by enhanced operational efficiencies, ongoing efforts in optimizing the working capital and strict capital discipline. In our SFS business, the growth was driven by pricing and this growth has been partially offset by a decline in sales volume attributed to customer destocking but also a relatively subdued end consumer market.
We are pleased to know that we are seeing continued growth in our product market adjacencies like dairy stabilizers, natural antioxidant and natural mold inhibitors.
In the Lactic Acid division, we continue to experience a temporary slowdown in some markets, PLA and Lactic 2 PLA being one. We mentioned that in Q2 where we processed during our quarter, a very specific grade of Lactic Acid that really dedicated the production of the joint venture on this grade not needing regular Lactic Acid grade. But we also saw within the semiconductor industry in the agrochemical industry, severe destocking taking place.
On another side, our biomedical business continues to perform extremely well and is driving higher Lactic Acid and Specialties margins.
Moving on to the Algae Ingredients. The business delivered outstanding progress in sales growth in aquaculture next to expanding the product pipeline and portfolio for the pet food and human nutrition markets. Our profitability is also trending very positively at 13.4% margin in Q3 above the overall company average.
Now moving to the outlook. On sales, we remain with our earlier guidance and expect mid-single-digit organic sales growth in the core business for the full year '23. Positive pricing being offset by low single-digit volume mix decline in line with market developments.
For the Q4, the volume mix development is expected to improve versus the decline [indiscernible] of the previous quarters. Given the increasing challenging and volatile geopolitical and macroeconomic environment, we slightly adjust the core adjusted EBITDA organic growth for the full year towards the low end of the 15% to 20% range. Our Q3 EBITDA margin at 12.7% is slightly up versus Q2 and Q3 last year.
On free cash flow, we anticipate to be positive in the second half of the year and approach full breakeven for the full year, and we expect to continue to trend really upwards in '24 and beyond excluding the positive free cash flow impact upon the realization of the divestment of our non-core emulsifier business.
In line with our disciplined capital allocation approach, the estimated CapEx for 2023 is lower to around EUR 130 million and this is not adversely impacting the medium-term growth of the company. On our biggest investment, our new Thai Lactic Acid circular plant, we are expecting to be completed and on schedule by the end of this calendar year with a start-up plan in the course of Q1 next year. With this major investment now largely behind us, we expect significant value creation going forward.
The covenant net debt EBITDA ratio by the end of 2023 is anticipated to be around the high end of the previous guided range between 2.8x and 3.2x being an improvement versus the June 23 position where we were at 3.4x. Now let's move also on to the strategic development.
So you remember at our CMD in December 22, we identified the attractions of our addressable markets. These opportunities remain. However, given this ongoing challenge, a comprehensive review of certain limit of our portfolio is warranted. We are preparing a restructuring program to manufacture itself in 2024 and this program includes a full review of operating expenses, capital program and working capital to accelerate positive free cash flow delivery and margin improvement. As a result, we anticipate a significant positive free cash flow as from 2024 excluding the free cash flow contribution from the divestment of emulsifiers.
On this topic, a broader auction process to divest this business has been started in order to maximize value, which is likely to extend the confusion of the divestment transaction into the first half of '24.
In Q3, you might remember, we announced the decision to post further investment in the second PLA plant and given the current challenging market backdrop, we have initiated a strategic review of our position in PLA.
The Algae business, as I mentioned before, continues to deliver outstanding progress showing growth both in sales and EBITDA. And following this strong performance, we are reviewing how we can best maximize the value creation of the longer-term growth opportunity. Within this, we are considering various financing structures.
Next, we continue to focus and we'll further develop our high-growth, high-value biomedical business. On this strategic environment, we anticipate to present our plans to you in greater detail on January 31, '24.
So that concludes the formal presentation. Eddy and I would be now delighted to take your questions. Just before moving, I would just like to say in a few words as a summary. Notwithstanding the macroeconomic and geopolitical challenge we faced in the first 9 months of the year, we delivered 12.3% growth in adjusted EBITDA. However, we recognize that this was disappointing against what we probably thought we might be at this stage of the year given the characteristics of our addressable markets and the strength of our operating model.
The strategic review that I've said is already underway and will be reported in January '24, aims to provide greater clarity to aspects of our strategy and further insight into how we will address the significant opportunities that our addressable markets present to us. So we really look forward to speak to you directly in January. On this, I will now open to Q&A. Operator?
[Operator Instructions] The first question come from the line of Wim Hoste from KBC Securities.
A couple of questions from my side. Maybe first, can you elaborate on the progress you're making in the adjacencies in Sustainable Food Solutions, products like natural mold inhibitors, dairy stabilizers, how much growth can we expect from that in Q4 and the coming quarters? How fast do you see that ramping up? So that's the first question.
The second one would be on Lactic Acid & Specialties. I'm also looking here at your order books and updates on business or end markets like semiconductors, Agro and Biomedical specifically. How are the order books in those fields building? Any comments on that would also be helpful.
And then a third question would be on the PLA strategic review. Can you maybe offer a bit of clarity what the contractual arrangements you have with the total might allow you or not allow you to do how much flexibility you have in that strategic review, given the contractual arrangements? Any clarity on that would also be helpful. Those were my questions.
Okay. Thank you, Wim. So addressing your first question on adjacencies in SFS. Basically, we discussed primarily about 4 key adjacencies there. I mentioned 3 of them. The dairy initiative with the stabilizers, shelf life extension, natural mold inhibitors and the natural antioxidant. So what we've done over the last basically a year is really creating a very strong pipeline in this line. And what we see now and this is where we are feeling optimistic and how optimistic about this is that this pipeline starts to convert as we speak. So we see sales really materialize in a very positive way.
And the good thing about some of these initiatives that develop on the dairy stabilizers is that we are utilizing existing assets to produce these food solutions. So there is no specific CapEx related or additional investment related to this type of category. So that we see now a very nice project portfolio and very nice take-up.
If you dive into it, for instance, the natural mold inhibitors. So as you might remember, we invested in some capacities in Peoria, United States to provide that. So we've been scaling up that plant in the course of the year. So now we are converting some of these bakery plants, primarily in the U.S. and in Mexico, but also in Latin America. So we see traction there and this is about converting Synthetic products to natural alternatives, so synthetic mold inhibitors to natural alternatives. So this is also in a nice ramp-up phase as we speak.
Other initiatives we have are around though commissioning for some bakery application where there our technology in enzyme cocktails, I think whether it is about helping a gluten reduction or sugar reduction or also helping to provide higher protein-based food or low carb food are really playing quite a nice role today into some of the market underlying trends.
So these are our 3 that are pretty successful. The natural antioxi of a different nature. There, we started to combine the traditional Corbion antimicrobials that are primarily based on lactic acid, acetic acids/vinegars, propionic acid with a natural antioxidant and natural antioxidants are around specific botanical extract being acerola extract, Rosemary extract and our aim there is really not to sell single ingredient, but solutions that combine synergies across that range.
If you look at Q4, back to your question, we see just a continuous, I mean, of order strength in these 4 adjacencies. And obviously, we expect a nice ramp-up to continue next year.
On Lactic Acid order book, yes, you mentioned semiconductor, Agro and the Biomedicals. In semiconductor, we are now in a downturn cycle that we've experienced last time back in 2019. So back on -- and I'm sure you might have seen some of the profit warning of the key end players and that are in the end consumers of our products, the Samsung-like type of customers in the end. So we are much have been in the chain that what we've seen is that these people so really a slowdown of their own market already 6 months ago. A lot of capacity has been mothballed in that field. Although at the same time, people do announce investment programs, renew capacity being built in the U.S. and in Europe.
In the meantime, people like Samsung just reopened their capacity and plans so we are expecting a recovery there. Now when we speak to the market, everybody says yes, recovery will happen in the second half of '24. Because again, we are down in the chain there -- in the supply chain. So this is what the market tells us.
Having been through this cycle a few times already over the last 10 years, we are confident it's going to turn. And when we look to all the capacity being built, this is going to turn. The key question is indeed is that going to happen in the second half of '24 as our customers do see it now and do tell us now.
In Agro, there are a couple of drivers there behind. A big one is destocking big players and also that's something that is public information when you look to the results of the [indiscernible] where they have been also in a very, let's say, strict working capital management destocking cost supply chain crisis. And some of the crop conditions this year didn't help because we had an unfavorable weather in some regions where they also saw their activity going down. So we've seen a severe destocking in agro although I think in the grand scheme of things for Corbion [Technical Difficulty].
Ladies and Gentlemen, please continue to stand by. Your conference will resume shortly.
Okay. So yes, I think we lost the connection here. So I'm back online. So I was just commenting on the Biomedical, the last part of your second question, Wim. On Biomedical, there the drivers -- I mean, our longer-term drivers, what we see is that in this part of our business, projects are multiyear projects. So what we are cashing now and benefiting from is really materialization of a pipeline that has been already initiated 4 years ago or 3 years ago. So we feel very confident when we look at the nature of our pipeline and the conversion.
You might remember this year we had quite a nice breakthrough with the FDA approval for the Teva technology in the U.S. against schizophrenia. We know Teva is working with our JV partner, made in cell in the second molecule introduction. So these are things that have been in the play with ADA approval over the last 5-plus years, materializing now. And we have quite nice projects in the pipe. So Biomedical, we simply expect a strong continuation of the current momentum over the next years as well.
So now your last question on PLA review, I will hand over to Eddy on the flexibility question that you asked earlier.
Yes. So Wim, so your question on the JV arrangements. As you know, the JV is a 50%-50% structure, the joint control we have mutually the same rights and obligations in the contract so that's completely mirrored. We are not having a standstill provision in that sense. And in these kinds of JV contracts, you can assume that the usual provisions related to offering to the other party is all included in the contract.
The next questions come from the line of Fernand de Boer from Degroof Petercam.
A couple from my side. First of all, regarding the CapEx guidance what is postponed in your CapEx guidance? Or is what is canceled? Maybe the better word, I'm not sure. That's the first question.
And then the second question is you expect an improvement in volume trends in Q4. But do you expect volume mix to be positive in Sustainable Food Solutions in Q4? Because the comparison base is actually very weak. Do we still expect that to be negative as maybe destocking continues or consumers who remain in the bad shape?
And then I'd like to come back on the strategy update at the end of January in the press release you say anticipate. This date at the 31st that is not -- that is absolutely sure it's going to happen. So what could happen that this strategy update is not going to be at the 31st of January? Is it related to the sale of the emulsifiers or what is exactly the reasoning for that using that wording?
No, maybe to clarify this one first, No. We will host this on the 31st. There is no -- sorry if this was misinterpreted Fernand, but this is a fixed date already in the diary. So don't read anything beyond that -- anticipated words. We will ask that we will [indiscernible].
So on the CapEx guidance, on your first question, on the CapEx guidance, yes, usually, we've reviewed the entire CapEx line. To some extent, let me give you an example. We were planning initially a strong momentum to continue in the ethyl lactate plant for semiconductor, the topic we just discussed before. In the current market delay, there is no need to do any new investment right now and not in '24 as we see and this is also combined to the fact that, yes, we were just simply out of the previous investment cycle for the semiconductor in our Dutch operation, where also we've seen our plant performing and yields going much better than what we anticipated. So this is a combination of, indeed, current market conditions but also efficiency that we've generated.
And we've seen the same across a few of the investments we've made. A good one is on our Algae business, as an example, where we've implemented again an improved strain recently that is giving much better yield that contributes to also more volume in the same asset and better cost. So we've been looking really to each line of our CapEx program with a really highly scrutiny to say, yes, we don't want to compromise the upcoming growth.
But there is -- so semiconductor is one example. Our pharma business is another example where today, I mean, again, we see that we do not have to invest rightfully. We have a spare cap, we found way really to increase efficiency in our Spanish operation in different ways with lower spend. So -- and we've applied exactly that discipline, of course, on this year but also on '24. And we will come back to that detail because we looked at '24 already, as you can imagine, we are already in budgeting period and we've lowered substantially as well the outlook for '24 in that without impacting the growth profile or the future of our projects.
On Q4 trend, Eddy, I would hand that to you.
Yes. So Fernand, on the volume/mix developments, especially in SFS, let's first look what happened in this year. So in the first half of this year, we were closing at minus 6.5%, 6.4% negatively for the first half. Q3 was slightly better, still negative but slightly better at minus 5.1%. There, you need to take into consideration that in Q3, we are comparing to the strongest comparison of last year because Q3 last year was the strongest quarter for us. And yes, you're right, with the current visibility that we have, we do anticipate a further recovery of the volume mix development for SFS close to breakeven, I would say, for Q4 as such. So -- and there also, the comparisons in this case, more favorable because Q4 last year was a relatively weak quarter also for SFS.
Could you say anything about pricing for Sustainable Food Solutions in Q4? Because it landed now at 1.5% could -- is pricing still going to be positive in Q4? Or could that even turn negative as some input costs have come down and maybe your clients are requesting our lower prices? Or is it maybe more for next year?
So you're right. If you look at the pricing dynamics that goes exactly the opposite. So you remember that we went through a series of price increases last year. Basically, every quarter, we've opposite the prices in last year, really it's the highest price points coming out of last year and entering into this year, that carryover effect, as we call it, was very pronounced in Q1, close to 50% price increases. Q2 came back to 8%, Q3, 1.5%, like you just said. So that is really, I would say, the lapping effect, if you will, of price increases that have been pushed in the market last year, had the comparison become stronger and stronger in that sense to beat.
What's happening in the marketplace? And I think we talked about that also on earlier occasions. Yes, with the visibility and further materialization of input cost reduction, we do have some room and we are applying that very selectively to reduce certain price components to hold on, if you will, and defend certain pieces of the business. So don't get a message that we will and are reducing prices across the board of the total portfolio, but in selective segments, we do so. And of course, yes, that's starting, I would say, mildly in Q2, a bit more in Q3, and we have to see how that go forward in the next year.
So maybe to add a few comments on that financial -- on pricing, you have also 2 segments, the 3 subsegments within SFS, the functional systems, the natural preservation and the other ingredients.
What we see is that on price stickiness, Functional System is the one where we believe we have and we will retain quite a high price stickiness. These are complex solutions takes time to formulate, they are very customer specifics. So there, we are feeling very confident about price stickiness.
In preservation, it is more a mixed bag because we have highly differentiated antimicrobial blends where we also have a very high price stickiness. And then you have the basic sodium lactate to name an example that goes into a harvest information for the needs that is less, let's say, differentiated, where we might have to adapt indeed as input costs are going down.
In other ingredients, this is where basically the highest exposure is. And there, what we've seen is that already in Q3, we took decision to maintain a stronger pricing discipline. We've lost a few volume, not massive, but that was a conscious decision to say, I think it's important that we retain our margin or go and improve and capture additional margin as input costs are reversing.
So all in all, if you look at the volume mix impact, if you think about the 5.1% decline that Eddy just mentioned before across Q3. In there, I would say, we have roughly, I mean, 50% still destocking, but we see that really softening in SFS quite a lot. And the other part is really, I mean, some pricing dynamic that we've accepted in some selected markets or volume that, yes, we want to let go if we just -- I mean, in the less differentiated part of the portfolio, we don't want to go, I mean, a lower price or down in prices. So hope it helps on your question.
Maybe one word, could you spill one word on the performance of non-core of the emulsifier with minus 21% decline in volume mix, but also quite some pressure on the EBITDA margin?
No, sure. So what you see in emulsifier, and if you remember, we've had 2 stellar years if you compare to the historical performance. And primarily last year, if you look at the performance last year, we had to make up for some key competitors in the market having many issues and force measures.
And just to give you a couple of examples, when you are dual supply in a large key account and one of the suppliers declaring default, we cannot let our key account down, and we had to make it up. And we gained a massive share last year because of this market context.
Now this is -- I mean, this has improved to some extent on the other side. But even customers were pushed to switch grade because some grades were not available from competitors and we help them as much as we could by going to different grades and they have to readapt to reformulate.
So what you see there is just a normalization. So it's not that the market is certainly crashing down and so on but there is a readjustment back on I mean what was an exceptional year last year. At the same time, what we see is that we've gained a lot of credibility on this business because of what happened and the fact that we could back up and help customers not to shut down during this critical period.
So yes, when you look at the numbers, if you look back to the last 3 years, we are back into what this business has been delivering previously, consistently. So that's what I would say on this one.
The next questions come from the line of Sebastian Bray from Berenberg.
My first I'll ask them in turn. My first one is on the PLA joint venture with Total. I'm in the aging scenarios where Corbion divest from this business, could you remind me of what the total net or gross debt is held at the JV level? Because presumably, Corbion would get a 50% stake of that debt deducted from whatever prices agreed to come up with the cash or equity value.
Eddy?
So as per June, the position is for the joint venture, about EUR 120 million as debt, so it's on a 100% basis.
And sugar price, raw materials offset. I believe the company has indicated in the past that, for 2024, the decline in nonsugar input costs would be in absolute euro terms greater, at least on a forward-looking basis than the headwind from higher sugar prices. Can you tell me if that's still the case? And also, is the company stepping away from hedging much in advance because at the moment, there seem to be fears of a bit of shortage in sugar markets and that might revert some time in 2024.
Yes. So to address that question, we have specifically added a special sheet in analyst presentation page 19. So you see a pie chart of the total input cost. So these are all the input costs on a variable basis. So energy, freight, packaging, raw materials, and of course, also sugar. What we try to depict here is about 75% plus of the input costs are on a reducing dynamic, I would say. So costs coming down, and we really -- odd one out as a single cost category is in the sugar, but that comprises to about 20% of the total bill.
And absolutely, last time, we also stated that, and that's still the case, in absolute amounts, the reduction on input costs on that 75% of the pie is more than overcompensating of where the sugar prices are closing at because that's only comprising 20% of the pie.
In terms of hedging, we are not stepping away from the minimal hedge positions. And the minimum hedge on sugar that is we stated that before as a half year, so we're always half a year out hedge so that is also the case now. Yes, you're right. In the current dynamics, we don't go to the extreme maximum case, which could go up to 2 years in advance. So we stay on the short side of the half year to 2 years' time frame, if you will, to indeed have the ability to see how these markets will further develop. And also, of course, how our pricing dynamics to our customers can be adapted if and where needed.
And my last one is just on the CapEx and in particular, the Algae business and it's twofold. Firstly, how is it possible to reconcile maintaining the long-term growth targets that Corbion set at its Capital Markets Day in December, with what looks like for a few years will be a substantially reduced CapEx budget of about, call it, EUR 130 million or so per annum? Rough guess, correct me if I'm wrong.
And secondly, Olivier, I believe you mentioned multiple financing options for Algae. What could this be? There's not seemingly an obvious joint venture partner, potentially project finance is the only thing for chance to mind, but aside from just Corbion paying out of its cash flow for a plant, what would the other options be?
No. So I think on Algae, I think this is a good example because if you remember in the CMD, solid plan to debottleneck the current footprint, the plant in Orindiúva to generate sales growth till '26, '27 on these plants.
So the short term, when I say short, medium term, so '24, '25, '26, with the current, what I call rather limited CapEx, although it's quite substantial for Algae, will enable us to generate growth for the next 3 years. And in the same time, the growth is not only CapEx related. There is a shift in mix where we trade up from aquaculture to pattern nutrition and human nutrition. And we also produce now refined oil in the plant that gives you much better yield.
And the last point I alluded to a few minutes ago is that the R&D organization in San Francisco is really also developing constantly new strains with higher yields, which we just implemented them in another step. So when you combine all that, we have a very solid plan in the next 3 years to continue to generate both top line and EBITDA growth from Algae.
The big question is what's next knowing that you will build a new plant, it takes 3 years to build and you will need to make a decision to gap something operational '28, '29. In that, we do not and we will not enter into another negative free cash flow cycle. And this is why we said, yes, we're going to really come back within the Algae roadmap to the various financing options that could really make a difference in not, again, having to invest a massive amount of capital in a brand-new Algae plant going forward. And this is what we're going to detail on the 31st of January, Sebastian.
The next questions come from the line of Alex Lynch from Barclays.
I've got 3, if that's okay. Just firstly, I mean, on the visibility on the Q4 top line guidance, I mean, I think it implies a pretty big inflection in core volume mix growth perhaps positive 3%, 4% to hit the unchanged guidance. At this stage, how much visibility do you have on that given we're obviously in kind of late October?
Then the second one would be on the emulsifiers disposal. Obviously, you announced this was going to be disposed at the beginning of December last year. So I'm just trying to understand why it's taking so long as we've seen now been delayed into the first half of next year. Is it around limited interest in the asset or just kind of mismatch in valuations? Any reason why the auction process wasn't started earlier this year?
And then finally, I mean, just going back to or putting some of the different pieces of guidance you've put together for '24. I mean is there any reason at this stage why you would think that the targets that you set out at the Capital Markets Day wouldn't be valid for '24? So I mean, can you repeat the 15% to 20% EBITDA growth in '24, do you think at this stage?
So on your first question on Q4 top line, as you're right to say, we have October, not yet done, but mostly behind us. So we're -- again, we have, of course -- we can see front-end and we see some of these getting slightly better. That's number one.
The second is, of course, last year, Q4 was not a good quarter, as you might remember. And that was, I mean, primarily coming in December based on the very high inflation. If you remember last year, a lot of businesses shut down for a large part of December last year that created quite some issue. So obviously, I will not say immune to that this year but with what we can see and I'm looking, for instance at SFS, we believe that the severe impact of destocking and a primary information systems is really behind now. So it's more about soft demand. But again, on the visibility we have today, as Eddy mentioned before, we believe we're going to have an improvement on the volume mix on Q4.
On lactic acid, also, you remember what really hurt last year was this extended shutdown of the PLA joint venture. And this year, there is no shutdown plan in Q4. So that's also quite an important element in terms of visibility we do have for Q4.
So the last point, obviously, although it is small, is on Algae where we have a very strong visibility because there, the business is fully contracted and has been already fully contracted for the entire year. On the emulsifier disposal, Eddy, you might want to take that one?
Yes. So basically, on the Emulsifier process, basically, we have started this whole process with a 2-phased approach. The first phase was that we had earlier conversations with a limited amount of strategic partners. But that process did not materialize to an acceptable outcome. So therefore, we had to start the second phase of the process. That's this broader-based auction that we have announced. This is really to get us to maximize the value out of this internal transaction.
By the way, don't take that transition from Phase 1 to Phase II is very recent because we are already such progress in this broader auction process that by the end of this month, which is basically next week. We will expect nonbinding offers of a group of people out that we outreached both related to strategics and private equity financial partners.
On the guidance, '24, basically, and -- so there, although we have this challenging and volatile environment, as we discussed already. We remain really confident in the longer-term growth outlook. So the impact of this guidance, I mean, of course, we're going to refine all that and come back to you in January but I remain pretty confident. So let's come back in January with all the detail on our strategic review and recovery plan, Alex.
The next questions come from the line of Robert Jan Vos from ABN AMRO ODDO BHF.
I have a couple of questions left. First on the Emulsifier business. Thanks for the clarification on the top several topics. But is withdrawal of the decision to dispose an option at all for you? That's my first question.
Then my second question is on the PLA clarification question. You mentioned that you do not expect the EBITDA margin to increase in the coming quarters and what do we use as base for this statement? Is that the underlying margin of around 16% excluding the mentioned inventory result that you talked about? Or is it a different base? So that's my second question.
Then on CapEx, you lowered your CapEx guidance for 2023. Can you -- probably you will talk about this more in January but can you provide some early indication of where we should expect CapEx to land in 2024?
And then my final question. Yes, you announced a restructuring program. And you mentioned that you will address operating expenses, your capital program and also working capital. But could this program also includes additional portfolio decisions similar to the emulsifier business so that you may contemplate further disposals. Those were my questions.
So Eddy will take the first 3 and I will address the fourth one maybe.
Yes. So your first question on the Emulsifier withdrawal. Let's still go back to the basics here. Emulsifier financially is a good performing business. It's nice margins, it is cash generative. So in that sense, yes, we should not rule out if we don't get a good financial outcome of the broad-based auction process that we are in the midst of then you cannot rule out that we will withdraw or will not come to a conclusion on this and maintain the business for a certain period of time. But that's too early to say. But this is not in that sense, something we will let go at any price or any valuation.
On your PLA margin delivery, I think you have to see that a bit where we are currently in. So yes, PLA joint venture is cruising at about 15% EBITDA margin delivery for this year. We did discuss at earlier occasions that there is some margin contraction taking place in the PLA joint venture in the last year or so because PLA prices on average are on the reducing side, while their key input costs being sugar-based lactic acid is on the rise because that is a consequence of the price formula that is being applied for sugar costs being charged to the joint venture.
So in that sense, the joint venture is facing margin contraction, which is a different position than where the joint venture was 2, 3 years ago where you had exactly the opposite. That also in a situation where the volumes are not resulting in a fully utilized plant.
So I think, currently, I would say, also into next year don't assume too big margin recoveries. We have shared our vision on margin profile for next year that is specifically in the range of 10% to 15% in the analyst presentation. So I would say the current year's margin delivery is probably more at the higher end of the bandwidth that we see for next year.
CapEx, of course, we really want to come out with a holistic approach and outcome of the whole recovery program that we are working on both on OpEx, CapEx and working capital. The only thing I'm -- which maybe I can give you already some information is that we will come out with a CapEx program, which is substantially lower than what we have this year. And this year, as you've seen in the press release, we will be around EUR 130 million. So next year, we will be at a lower point versus that. But I really like to address those kind of questions in a holistic way when we come out with the full program and that gives us also a better visibility for '24 and '25.
Yes. On the restructuring program, basically, the primary focus of our plan is to review certain elements in our portfolio. We discussed PLA, obviously, emulsifier is an ongoing process. It's also important we do that in the context of indeed, how do we get Algae to the next step, as we just discussed. And that's also important that we keep on growing the Algae business.
Next to that, usually there is the wider portfolio, but there is also a full review we've already initiated related to our industrial footprint. Also to look at the specific product portfolio as well on top of the OpEx. So this is a very broad, deep review that we've started.
Mr. Rigaud, there are no more questions in the queue. Please continue with any points you wish to raise. Thank you.
Thank you, operator. So I just want to thank everyone on the call and give you, I mean, of course, a meeting to the 31st of January next year. So far, indeed, going into a deep dive on this strategic development. Thanks to all and have a nice day.