Chr Hansen Holding A/S

CSE:CHR

Earnings Call Transcript 2021-Q3

[Operator]

Thank you, and welcome to the presentation for Chr. Hansen Q3 conference. [Operator Instructions] I advise you that the conference is being recorded. I would now like to hand the conference over to the speaker today, Chr. Hansen CEO, Mauricio Graber. Please begin.

[Mauricio Graber, CEO, President & Member of Executive Board]

Good morning, and welcome to today's conference call on Chr. Hansen's Q3 2021 results. Together with our CFO, Lise Mortensen, we will do a short presentation today before opening up for questions and answers. Before we start, please take notice of the safe harbor statement on the next slide, Slide 2. Let's turn to Slide 3 to begin the presentation. Chr. Hansen delivered Q3 2021 results in line with expectations, but at a slower pace than in the first half of the year. Organic growth in the third quarter was 4% with equal contribution from volume/mix and price, leading to 8% organic growth year-to-date. The slowdown was as expected, driven by a lower positive contribution from euro pricing as well as a high baseline as customers build up safety inventories during COVID-19 last year in Q3. In Food Cultures & Enzymes, we saw acceptable volume growth of 2% driven by continued solid momentum in cheese and reduced negative impact from China, leading to 5% organic growth in Q3. The performance in Health & Nutrition, on the other hand, was not fully satisfactory with 0% organic growth in the quarter as large human health customers adjusted their order volume in the third quarter to reduce elevated stock levels as a response to slower demand in the traditional sales channels. Contrary to that, our newly acquired probiotic businesses whose customers have a strong online presence, deliver a strong third quarter, which reconfirms the strategic decision we have taken with the acquisitions to broaden our customer base in the markets we serve with our strength to solution offering. Animal and Plant Health delivered solid growth as expected.Now looking at profitability. Our EBIT margin before special items in Q3 was 29.3% compared to 34.5% last year. The underlying EBIT margin before special items, meaning our margin, excluding the recent acquisitions, was 33.1%. The key driver for the margin decline of 1.4 percentage points in the underlying business were FX and a return to more normal spending patterns that offset production efficiencies. Year-to-date, the EBIT margin before special items stood at 27.3%, well on track to deliver on our outlook for the year. Free cash flow before acquisitions, divestments and special items was EUR 120 million compared to EUR 144 million last year, and largely driven by the investment in our HMO lighthouse at the beginning of the year. Let's turn now to Slide 4 for a strategic overview. In terms of strategic progress, we are well on track to deliver on our priorities for the financial year: reinvestment in the core, leveraging our lighthouse and executing the portfolio changes. Reinvesting in our core platforms of dairy, animal and human health remain our largest priority as the majority of the growth during the 2025 strategy period will come from these businesses. To defend and expand our market position, we will accelerate commercialization of new innovations and further expand our global reach and proximity to customers. Despite travel restrictions and limited ways to engage with customers in person during the pandemic, we have seen an all-time high new launch activity in dairy, with more than 10 new products that we have launched year-to-date and we have also expanded our digital offering to work even closer with our customers. In Animal Health, we successfully completed the global rollout of our poultry probiotic GALLIPRO FIT, and we recently launched a new cattle probiotic, Bovacillus in the Americas. Also, we are further expanding our route-to-market in close collaboration with local sales partners, for example, in Asia Pacific and Latin America. Human health, next to integrating the recent acquisitions and despite the current headwinds, remain focused on building science and strengthening our scientific marketing around our industry-leading strain portfolio. For example, in April, we released a new clinical study on the immune balancing benefits of probiotics on stress and sleep of shift workers. We received 2 new health claims: one for our DBS-1 strain in Canada and another for our women's health strain combination, UREX, in Japan, and we've rolled out our education program, the Probiotic Institute in China and globally. Furthermore, our dialogues with dietary supplement customers show that there is more and more demand for a full solution offering all the way from scientifically documented strains to finished products. And with our acquired consumer packaging capabilities from UAS Labs, we are well-positioned to cater to this strength, while taking more control over our full supply chain. Next to reinvesting in the core, we also continue to invest and leverage our microbial expertise to build new markets with our lighthouses. In spring, we launched the third generation of our bioprotection range for dairy products, and we also expanded our product offering for fermented plant bases, under the new VEGA brand. In Plant Health, we continue to work closely with our partner, FMC, to bring biological crop protection solutions to farmers in Latin America, the U.S. and now also in Canada. And lastly, our joint venture, Bacthera, reached a major milestone in May with the receipt of its manufacturing licenses for clinical trial production in Denmark and Switzerland. Looking at our acquisitions, the extend pillar of our strategy, we are well on track to deliver around EUR 100 million revenue, and we now expect our EBITDA contribution of around EUR 15 million, up EUR 5 million, driven by a slightly improved sales outlook and efficiencies. At Jennewein, we are on plan to expand our downstream facilities in Germany, and we continue to advance dialogues with customers. However, as we have already discussed last time, the pace at which the market is developing, is lower than initially expected. On a positive note, during the period, we were able to prove the strength of our acquired HMO intellectual property by favorably resolving an outstanding litigation case. Finally, with the closing of the Natural Colors divestment at the end of March, we paid out an extraordinary dividend to shareholders in May equal to the amount of a normalized ordinary dividend for the financial year '19/'20. And with these comments, let me now turn to Page 5 for the regional review. Regionally, the [indiscernible] remains largely unchanged compared to last quarter. Our largest region, Europe, Middle East, Africa, grew 3% organically in Q3 with good growth in Food Cultures & Enzymes and decline in Health & Nutrition, leading to 5% year-to-date. Both businesses faced a high baseline as customers build up safety inventories during COVID-19 last year. North America reported 5% organic growth in Q3 on a relatively easier comparable. Food Cultures & Enzymes grew solidly in the third quarter, supported by the reopening of the food service channel, while Health & Nutrition was negatively impacted by Human Health as we just discussed. Year-to-date growth was 7%. Moving on to Latin America. The region delivered 19% organic growth in Q3 with a lower contribution from euro pricing compared to the first half of the year and driven by both, a strong performance in Food Cultures & Enzymes and Health & Nutrition. Year-to-date growth was 30%. Lastly, Asia Pacific delivered negative growth of 6% in Q3 to flat sales year-to-date. Our Health & Nutrition was impacted by a very high and tough baseline comparable. And Food Cultures & Enzymes reported another quarter of declining sales driven by China though to a lesser extent than in the first half of the year. Market sources indicate that the Chinese yogurt market continued to decline at a double-digit rate during the third quarter, but we're cautiously optimistic momentum will improve over the coming quarters as we see good levels of engagement with customers and a solid pipeline. And with this, I would like to hand over now to Lise for the segment and group financials.

[Lise Skaarup Mortensen, Executive VP, CFO & Member of Executive Board]

Thank you, Mauricio, and good morning also from my side. Please move to Slide 6 for the segment review. Food Cultures & Enzymes grew 5% organically in Q3 and 7% year-to-date with a 2% contribution from volume mix. Euro pricing contributed 3% in Q3 compared to 6% during first half of the year. Overall, the global market for fermented milk continued to decline slightly while cheese production grew approximately 1 percentage point, which means that in FC&E, we continue to outperform the underlying market. If we look at the product segments, we saw a very strong growth in meat and fermented plant bases in Q3, while cheese grew solidly. Fermented milk and enzymes delivered good growth, while our probiotics business continued to decline. While volume growth in fermented milk improved slightly compared to the first half of the year and despite the high comparable, momentum in enzymes normalized following a very strong first half of the year. Lastly, our bioprotection lighthouse delivered strong growth in Q3, mainly driven by meat while growth in dairy was moderate. That said, we are seeing the pipeline in fermented milk filling up nicely with the launch of the third generation first Q, but it generally takes 6 to 12 months for projects to materialize. Turning to profitability. The Q3 EBIT margin for Food Cultures & Enzymes decreased to 33.0% compared to 34.4% last year, as production efficiencies were offset by FX and a return to more normal spending patterns as we ramp up activities post COVID-19 and as we invest in strategic initiatives to drive growth in the core. Year-to-date, the EBIT margin was 31.6% compared to 32.9% last year. In Health & Nutrition, please move to Slide 7. Organic growth was heavily impacted by the high baseline from last year and destocking in human health leading to flat volume and organic growth for Q3 and 9% organic growth year-to-date. In our human health legacy business, sales declined both in dietary supplements and infant formula as customers with large exposure to traditional sales channels adjusted their orders to bring down inventory levels. Our recent acquisitions, however, which have a larger exposure to e-commerce market, posted very strong growth. Turning to our agricultural businesses. In Q3, Animal Health delivered solid growth driven by strong momentum in cattle and good growth in poultry and swine, while plant health grew very strongly. With regards to profitability, the underlying EBIT margin was 1.5 percentage points, below last year's Q3 as we ramped up activities following the COVID-19 lockdowns and we also faced a 1 percentage point headwind from FX. The reported margin was 22.7% and remained impacted by the recent acquisitions. Year-to-date, the reported EBIT margin was 19% compared to 29.7% last year, and the underlying EBIT margin was 29.2%. In total, the 3 acquisitions, HSO Health Care, UAS Labs and Jennewein contributed EUR 73 million of revenue year-to-date and EUR 12 million of EBITDA. Please turn to the next slide, Slide 8, for group financials. The microbial platform, our continuing operations, delivered 4% organic growth in Q3. Pricing was driven by our euro price list mechanism but to a much lesser extent than during the first 6 months. Acquisitions contributed 11% to absolute revenues in Q3, and adjusting for a negative currency effect, this led to euro growth of 10% for the quarter. Year-to-date, organic growth was 8% and reported sales grew 9%, with a 10% contribution from acquisitions and an 8% FX headwind. Moving on to profitability on the next page, Page 9. It was very much in line with expectations. The development in our EBIT margin in the underlying business turned negative in Q3 as the pandemic effect reversed and we returned to more normal spending patterns. Acquisitions had a negative impact of approximately 4 percentage points and FX was minus 0.2 percentage points. Year-to-date, the EBIT margin came in at 27.3%, well on track to deliver within our guidance. With regards to the divestment of Natural Colors, we booked a gain of EUR 636 million in the third quarter. This is slightly below the EUR 650 million that we guided for due to final purchase price adjustments. If we look at the cash flow on the next slide, Slide 10. Year-to-date, our free cash flow before acquisitions, special items and divestments, decreased compared to last year, driven by higher CapEx and lower operating cash flows. The latter was driven by higher working capital that was partly offset by acquisition-related tax benefits and higher noncash adjustments due to depreciation and amortization charges. The increase in working capital is partly related to outstanding receivables from the carve-out of Natural Colors that have been paid at the beginning of Q4. Working capital is expected to come down to a normalized level by the end of the year. Following the receipt of the proceeds from the Natural Colors divestment, leverage came down to 2.3x EBITDA and should end around 2x at the end of the year. And with this, let's turn to Page 11 for the outlook. In light of the performance of the first 9 months, we keep our guidance for the financial year 2020/'21. Organic revenue is expected to be 6% to 8%, driven by Food Cultures & Enzymes and supported by a positive contribution from euro pricing in the range of 3%. Organic growth in Health & Nutrition will be driven by Animal Health and Plant Health, while we expect Human Health to post a soft fourth quarter as customers continue to work through their inventories and adopt to slower demand. We are also facing some COVID-related supply constraints for certain raw materials, which limit our ability to drive new business in Q4. On the positive side, the outlook for our acquisition looks slightly better than before, thanks to strong momentum in the online sales channel, but still within the guided range of around EUR 100 million. Our EBIT margin before special items is expected to be 27% to 28%. The EBIT margin of the underlying business is expected to be below last year as FY '19/'20 contains some positive one-offs. Remember, the VAT income in Brazil and the one line consolidation of UAS Labs in Q4, and we will continue to return to more normal cost levels. Currency is expected to dilute the EBIT margin negatively by up to 1 percentage point and the acquisitions by 4 to 4.5 percentage points. Free cash flow before special items, acquisitions and divestments is expected to be EUR 140 million to EUR 160 million with CapEx of EUR 150 million to EUR 160 million. And with this, I'm handing back to Mauricio to wrap up the presentation.

[Mauricio Graber, CEO, President & Member of Executive Board]

Thank you, Lise. To wrap up, Q3 was a softer quarter, in line with expectations. With 8% organic growth and EBIT margin before special items of 27.3% after the first 9 months, we are well on track to deliver on our ambition for the year. The financial year 2021 is a transition year for Chr. Hansen as we are executing the recent portfolio changes, but we are on the right track. The integration of UAS Labs and HSO is largely completed. The divestment of Natural Colors is closed, and our HMO team is addressing the initial challenges we faced head on. As the world gradually reopens, advancing our commercial pipeline and bringing new launches to customers is our #1 priority, but we must also acknowledge that uncertainty remains high, and that the pandemic will continue to post challenges short term, whether it's related to weaker end markets, increased cost focus or potentially supply bottlenecks. What's important for the coming months is that we stay focused day to day while executing on our 2025 strategic priorities. Thank you for attending on this, and let's open up for questions and answers now.

[Operator]

[Operator Instructions] And the first question comes from Lars Topholm from Carnegie.

[Lars Topholm, Co]

Yes. A couple of questions from me. One is about your guidance because the 6% to 8% organic growth is, of course, unchanged, but your wording has changed quite a bit. So after Q2, you said the highest contribution would come from Health & Nutrition. Now you say it will be driven by Food Cultures & Enzymes. And I just wonder what that change in wording implies for Q4 because if the total growth 6% to 8% and is driven by Food Cultures & Enzymes, does that imply that for the full year, you see Health & Nutrition growing less than the 6% to 8%? And then to the same paragraph, in Q2 you mentioned you saw a contribution from euro-based pricing in line with last year, which was 2%. Now you just see a positive impact. Is that still expected to be 2%? And then on your raw material challenges in Human Health, I understand it's related to some of the add-on services you sell on top of the -- what we call it, I wouldn't call it the basic probiotic. Of course, that is advanced, but you understand what I mean. I wonder what duration you see of this challenge? What can you do to mitigate it? And how big do you think the impact is?

[Mauricio Graber, CEO, President & Member of Executive Board]

Lars, let me take the first part on your comments about the sentiment on Q4. I will pass it on to Lise and Anders to talk about euro-based pricing. But I would take on the raw materials as well. On Q4 and what you read from our comments today, I think what has transpired is that Human Health had a soft quarter due to very high comparables to last year, but it's the part of the Health & Nutrition business that we also see customers in the traditional channel, having larger inventories versus the high demand on the pandemic. Versus we see in Food Cultures & Enzymes signs of better trading conditions and momentum going into Q4. So I think you read that correctly that we see some upside going into Q4 in Food Cultures & Enzymes, strength in animal and plant and a bit more cautious on human health into Q4 due to the factors that I mentioned and also because there are a lot of supply chain disruptions in overall, let's say, the ingredient sector. I think we have a narrow and focused portfolio. We're less affected by that. But indeed, in our bulk probiotic cells, we don't face any challenges. But our fully packaged solutions, we do face some challenges that, I think, largely limit our ability to go and acquire more businesses in Q4. We have plans to see that normalize into fiscal year '22. With that, Lise, I pass it to you for the euro pricing question.

[Lise Skaarup Mortensen, Executive VP, CFO & Member of Executive Board]

Yes. The euro pricing impact is expected to be 3% for the full year, which would mean 1% to 2% in Q4.

[Lars Topholm, Co]

And is it correct that, that would be -- euro pricing effect that is 1 percentage point bigger than you implied after Q2?

[Lise Skaarup Mortensen, Executive VP, CFO & Member of Executive Board]

I think we said 2% to 3% as far as I recall, and now we say 3%.

[Lars Topholm, Co]

Okay. That's clear. Just to get back to your answer, Mauricio. So was I correct in assuming that for the full year, you now see Health & Nutrition growing below the 6% to 8%?

[Mauricio Graber, CEO, President & Member of Executive Board]

Lars, we're not sort of guiding on that specifically. What I think we imply is that we see stronger growth coming now from Food Cultures & Enzymes. I think we guide overall for the group, and we're not giving specific guidance for the 2 business areas.

[Lars Topholm, Co]

That's fair enough. Then I have a question on Bacthera. Actually relating back to your May 31 announcement of the license to begin to produce, so I wonder if you can put some words on how you see revenue ramping up in that business and also disclosure wise going forward? I mean, I know as a joint venture, it's shown on 1 line, but will you give additional information that allows us to see the revenue and the EBIT contribution?

[Lise Skaarup Mortensen, Executive VP, CFO & Member of Executive Board]

So Lars, the setup that we have with Bacthera in our announcement was we have a drug substance setup here in Hørsholm and a drug product setup in Brazil where we're able to now produce on their the right conditions for pharma grade probiotics for live biotherapeutics and supply those to customers for clinical trials. I think really good questions on Bacthera that will probably will defer as we talk about Q4, the full year and looking into 2022, the market has on some areas being affected by COVID and ability to do trials. On the other hand, there's products that are advancing faster to Phase III and potential commercialization. So we will be giving an update on that in the quarters ahead.

[Operator]

The question comes from Heidi Vesterinen from Exane BNP Paribas.

[Heidi Maria Vesterinen, Financial Analyst]

So I'll go one by one. First on APAC, please, which was down 6%. So culture sounds less China is improving, but health and nutrition is weakening. Could you separate what you're seeing in supplements and infant nutrition, please? So that's the first question.

[Mauricio Graber, CEO, President & Member of Executive Board]

So indeed, Asia Pacific, talking about Human Health, we saw very challenging comparables to last year Q3. It was probably their businesses that had some of the highest comparables both in dietary supplements and in infant formula. And excluding that, I would say, our projection for growth in Health & Nutrition going forward in Asia Pacific is quite strong. It's a very dynamic market with strong sales online, and wherein markets like China and Korea, we have historically done very, very well. So let's say, other than the current comparables, I see a strong momentum for that as part of our strategic plan.

[Heidi Maria Vesterinen, Financial Analyst]

And could you comment on infant nutrition, please?

[Mauricio Graber, CEO, President & Member of Executive Board]

Infant nutrition in Asia Pacific. So we saw a high -- we saw high comparable, as I mentioned, there's been a lot of moving parts in infant formula in China. Short term, there was a large customer that sold their brands in the Chinese market. There's been concerns about the rate of growth of children in China. On the other side, you have read the same reports that I have read on the government releasing further the policy of number of children you can have in China. So a longer-term better prospect for growth of infant formula in China. What I always like to remind is the following: our largest opportunity in China with probiotics is about penetration of probiotics in the infant formula. And we continue to see very good engagement and a very strong partnership, both with international and infant formula owners as well as with the leading Chinese brands that, by the way, under government regulation continue to consolidate. So we are well-positioned to win with the Chinese formula largest players.

[Heidi Maria Vesterinen, Financial Analyst]

And speaking about infant nutrition, given the topic of birth rates declining, it's a global issue, right? We hear about it in Europe and other regions. What have you seen in other regions in that segment?

[Mauricio Graber, CEO, President & Member of Executive Board]

So you know what, we continue to see, Heidi, is honestly that the premiumization in infant formula is the largest trend. So for us, the success and the growth in infant formula will be about our best documented probiotic strains playing a role in premiumization and obviously, the adoption of HMO into the infant formula -- formulations in the largest markets, first in the North American market, and second, in the Chinese market once it's approved, will play a fundamental role for our growth in infant formula.

[Heidi Maria Vesterinen, Financial Analyst]

And then a few on the raw material shortage. So what exactly is the raw material that is in short supply? And how long do expect an impact? And I'm also wondering if this is mainly a volume effect? Or do you also expect a gross margin effect? I'm just wondering if you can pass on extra procurement costs that you might incur because of the situation?

[Mauricio Graber, CEO, President & Member of Executive Board]

Heidi, because of, let's say, competitive reasons, we're not going to narrow this to a single raw material. I think I've commented that is related to our full package solutions in human health probiotics. So we have mitigated the challenges with great work of our sales and operation planning team to be able to supply all of our orders in hand, but we will not be able to pursue incremental businesses in Q4. As mentioned earlier, we expect the situation to normalize for fiscal year '22. I've always -- first of all, we are not as impacted as many other players that have broader portfolios with the overall inflationary trends but we have a strong customer relationships and good pricing power to be able to pass through any inflationary impacts.

[Heidi Maria Vesterinen, Financial Analyst]

So it sounds like it's mainly a volume effect. And then last question, so -- on this topic. You said the fully packaged solutions business is impacted. So if there's a global shortage of this raw material, why wouldn't your customers who are packaging on their own also get affected, impacting the rest of your business?

[Mauricio Graber, CEO, President & Member of Executive Board]

I think everybody is affected by some challenges in the raw material supply chain highly.

[Heidi Maria Vesterinen, Financial Analyst]

So is it possible that the non-fully packaged solution part of your business has an impact due to that?

[Mauricio Graber, CEO, President & Member of Executive Board]

I don't think so because we have good visibility into the orders and the engagement with customers. But as you have seen, as we have talked about a slowdown that has played, may very well play a role into what we have seen.

[Operator]

Our next question comes from Søren Samsøe from SEB.

[Søren Samsøe, Country Head of Denmark and Analyst]

The first question is on Food Cultures & Enzymes. I was just wondering if you could give some more color on your slightly high expectations for that for the rest of the year? Is it more due to that there's list track from China? Or is it more that you see higher growth from -- in meat and bioprotection, for example. And then the second question is regarding China and yogurt. The market data seems to indicate a slight change of dynamics where infant yogurt is not gaining so much market share from chilled. Is that also a trend that you are seeing? Yes, let's start with those 2 questions.

[Mauricio Graber, CEO, President & Member of Executive Board]

So FC&E -- indeed, you highlight some of the key points that we see positive momentum. So I would say there is positive momentum in cheese. We see a good momentum in cheese where you see continued in-home consumption and a stronger demand for some of the cheese varietals related to food service, whether it's Mozzarella or Cheddar strong global demand in those areas, good momentum in cheese. We have mentioned that we have a very strong pipeline in bio-p. But as Lise mentioned, it will take 12 months or so to see that reflected monetized into revenue. But we also see the same dynamic that you see in China comparables with ease and we see the balance between ambient and chilled although at a much reset based on where it is today, both hopefully poised for a return to more normalized consumption levels.

[Søren Samsøe, Country Head of Denmark and Analyst]

Okay. And a question on ambient yogurt in China?

[Mauricio Graber, CEO, President & Member of Executive Board]

Yes, I think that's basically what you mentioned is that ambient doesn't seem to be gaining share from chilled and that's consistent to what we see, although I mentioned that the much lower levels of consumption given the high growth of drinking milk that is currently taking place in China.

[Søren Samsøe, Country Head of Denmark and Analyst]

And as -- I seem to have seen that your main competitor in yogurt cultures has launched a quite strong products for ambient yogurt in China, which basically allows for live cultures in the finished yogurt product. Do you have a similar product? And if not, is this a risk to your market share in ambient yogurt in China?

[Mauricio Graber, CEO, President & Member of Executive Board]

No. We -- our collaboration with customers in China, both in ambient and in chilled, and the products that we have to service those segments, we consider those to continue to be industry-leading. So we don't see any major challenges. We have strong competitors. And I think the innovation of competitors pushes us also to continue to be 1 step ahead in innovation.

[Operator]

Next question comes from Charles Eden from UBS.

[Charles Eden, Director European Chemicals & Consumer]

Just 2 questions for me, please. Firstly, I just wanted to dig into the retention at the lower end of the full year organic sales growth guidance of 6% because when I look at the 8% year-to-date performance, the low end would require around flattish in Q4. So I guess I'm asking, do you feel there's still some inventory destocking to come or inventory normalization, particularly in H&N? That's question number one. And then the second question was just picking up on your comments around FC&E in response to an earlier question and momentum in recent trading. Is that comment largely related to trends in China? Or was it more broader statement received?

[Mauricio Graber, CEO, President & Member of Executive Board]

So I'll comment on the FC&E and then pass it on to Lise for guidance. No, the comment on FC&E was broader. It's business where we have, as I mentioned in the call, launched a lot of innovation specifically for dairy and we see a very strong engagement with customers across all the innovation platforms. So our VEGA launch for planned basis, although from a very small base, is growing very strongly. Our launch of FreshQ third generation has had a very high engagement with customers. We continued to see our enzyme business perform very well and the new generation of cultures that we launch is also continuing to drive good growth and momentum. So it's a broad and global, the comment on FC&E. Lise, on to you to the questions on guidance.

[Lise Skaarup Mortensen, Executive VP, CFO & Member of Executive Board]

Yes. So yes, keeping the guidance at 6% to 8%, while we are at 8% year-to-date should certainly be seen in the light of that we still operate in uncertain times. What we have talked to here is that we do see positive tendencies in FC&E, but we have also just experienced a quarter where with the Human Health and below satisfactory results. And as also said, Human Health is expected to post another soft quarter. So you can see in the light of that, yes, we are at the low end of the range is not our ambition, but we are living in uncertain times, which is why we keep the 6% to 8%. And we feel that, of course, that we are on track to -- well on track to land it.

[Operator]

[Operator Instructions] And our next question comes from Christian Ryom from Nordea Markets.

[Christian Sørup Ryom, Senior Analyst]

First, a question on the Food Cultures & Enzymes Division. So as I understand you, you're seeing improving momentum in demand from the food services, particularly in North America. Can you give us sort of some clarity on where you are in -- how far progressed you see the recovery in food services globally and whether you expect a similar dynamic across the EMEA region, so that is -- that food service -- increased demand from food service doesn't crowd out demand from in-home? I'll start with that question.

[Mauricio Graber, CEO, President & Member of Executive Board]

Yes. I would remind just that as Chr. Hansen, we are largely a retail company from a channel point of view. Our largest exposure to food service is really in North America in the cheese market. So that's why we mentioned that I do not expect any impact or shift patterns from the reopening of society or the growth in food service that would negatively affect our European business. So we are -- we have limited exposure to food service and mainly in the North American cheese market.

[Christian Sørup Ryom, Senior Analyst]

Okay. That's very clear. And then just a couple of quick questions on the Health & Nutrition business. So first, on your outlook for the HMO franchise. Can you elaborate a bit on the extent to which new registrations are required to sort of significantly lift sales from the current level? And when do you expect those registrations to arrive?

[Mauricio Graber, CEO, President & Member of Executive Board]

Yes. I mean, first of all, I can say with a lot of conviction that all the work that we are doing in HMO validates our strategic move into the space. We think that HMO will be highly synergistic with our probiotic franchise we believe that HMO will play a substantial role in the premiumization of infant formula. Now the key growth in the HMO business will come from the launches in the U.S. market and where registration has been completed, FDA approval has been granted. And the next big thing after that will be the registration approvals of the Chinese market. That we expect is going to take long. We don't expect that to happen before '23, '24, but that will open up important access to the Chinese market. But indeed, these are products that will require a registration of every single HMO. We are now in the process of commercializing the first 5 fixed HMOs that are the most representative by volume in mother's milk.

[Christian Sørup Ryom, Senior Analyst]

Okay. And then just a question for clarification on your guidance for the revenue contribution of your acquired businesses. So going by the year-to-date revenue, the EUR 100 million that you're guiding for the full year would suggest sort of a moderate slowdown in revenues for the acquired businesses relative to Q3. Is that sort of a fair interpretation? And to the extent that it is, what does that reflect? Is that related to raw materials or order phasing? Or what is the explanation there?

[Lise Skaarup Mortensen, Executive VP, CFO & Member of Executive Board]

No, no, we are not seeing any of that. You should just see it as a cautious guidance around a range of around EUR 100 million. But we are, as you have noted, very well on track to make that number.

[Operator]

And as there appear to be no further questions, I will turn the conference to the speakers for any closing remarks.

[Mauricio Graber, CEO, President & Member of Executive Board]

Thank you very much. This concludes today's conference call and Q&A session. Thank you for joining, and we look forward to continuing our dialogue during the upcoming virtual road shows. For those of you that are taking a summer holiday, have a nice one, and we look forward to talking to you. Thank you.