Q2 2023 Whole Earth Brands Inc Earnings Call
Good morning, and welcome to the hope was Brian fucking water. When he was when he treated results conference call all participants will be in a listen only mode.
Today's presentation, there will be an opportunity to ask questions. Please.
Please also note today's event is being recorded.
At this time I'd like to turn the conference call over to Josh <unk> Investor Relations at ICR.
Please go ahead.
Thank you and good morning, today's presentation will be hosted by Irwin Simon the Companys executive Chairman.
Rajneesh Ulrey and Geoffrey Robinson, the company's recently appointed interim co Chief Executive officers.
And Bernardo feel Chief financial Officer.
Nigel Williston, President and C O O branded CPG North America region will be available for Q&A.
The comments during today's call and the accompanying presentation contain forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
All statements other than statements of historical facts are considered forward looking statements.
These statements are based on management's current expectations and beliefs as well as a number of assumptions concerning future events.
Such forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward looking statements.
Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC.
We will also refer to certain non-GAAP financial measures today.
Please refer to the tables included in the earnings release, which can be found on our Investor Relations website, investor Dot whole Earth brand's dotcom rec.
Reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. Additionally, we've provided a supplemental earnings presentation on the Investor Relations website that may be useful in your analysis of the company's performance.
With that I'd now like to turn the call over to Mr. Simon go ahead Ron.
Okay.
Thank you, Jeff and thank you all for joining our call today, we produce second quarter revenue of $132 9 million and generated $18 $2 million of adjusted EBITDA, We continue to demonstrate meaningful progress with our margin improvement initiatives in the second quarter.
Along with our top line performance that was consistent with the prior year quarter on a constant currency basis and ahead of last year when taking into account our strategic decisions to decrease wholesome bulk sugar sales to avoid incremental tariffs.
On a consolidated basis, our second quarter adjusted gross profit margin was 34%, which was 50 basis point improvement sequentially and marked our second consecutive quarter of margin improvement.
Our adjusted gross profit margin has improved approximately 150 basis points as compared to our fourth quarter of 2022.
The entire global team remains laser focused on stabilizing streamlining and evolving our operations to drive enhanced productivity sustainable margin improvement our supply chain reinvention is on track and will play a critical role in right sizing our cost basis freezing up additional dollars.
For growth investments in support of our diverse portfolio of global brands.
I want to emphasize our confidence in the future of our business hold or France is a global leader in better for you sweetener and reduced sugar categories. Our product assortment is well positioned with a portfolio of brands that address unique consumer preferences and offer entry level price points.
For consumers that are feeling the effects of the ongoing macroeconomic headwinds. We also have strategic sourcing relationships across both of our businesses that represent competitive moats and provide surely a supply for all our key accounts.
With approximately three and four consumers Amy to limit or avoid refined sugar or portfolio of great brands and products are increasingly relevant in today's marketplace. Our mission to help consumers achieve a healthier lifestyle positions us for success and we continue to have our sights set on this.
Dropping a massive $100 billion total addressable refined sugar market, which is being displaced by fast growing organic and natural sweeteners.
With that I'll shift to some corporate matters that I recognize are top of mind for the investment community.
The board and the special committee or continue their work on evaluating the odd solicited non by the take private proposal from some Barber holdings pre L. L. C. Suffice it to say, we have shareholders' best interests in mind, our and methodically working through the evaluation of this offer as well as.
Central strategic alternatives that are focused on maximizing value for all our stakeholders.
When appropriate we will update you on any and all developments.
As recently announced in mid July we shared some further updates to our leadership structure to accommodate the strategic alternative process. The board appointed Rajneesh, Audrey who was our president Chief operating officer of International businesses for the branded CPG segment and Jack Robinson.
Who was our president of the flavor ingredients segment to act as our interim co Chief Executive Officer effective July 16th.
Both are highly capable executives, bringing together more than 60 years of experience that will be value in ensuring continually the near term as the board Committee competes it special evaluation of potential strategic alternatives.
Raj This is a seasoned entrepreneur and an accomplished business operator with more than 30 years of experience in the CPG industry across various geographies cultures. He has demonstrated his ability to drive growth in underdeveloped markets and achieving outstanding results. He is a dynamic.
Leader and we are pleased to have him represent our branded CPG segment as interim co CEO .
Complementing Raj this is Jeff Robinson, who is leading our flavor ingredients segment and as interim co CEO under his leadership the business has been executing extremely well, most notably with the acceleration of growth that we experienced over the past two years, we're excited to build on this success.
And reinvest in new applications for our ingredient business to continue to further diversify our sales channels.
Both Rajiv didn't yet have made important contributions and are tasked with carrying forward our efforts to streamline our operations as a need to reinvigorate global growth and enhance our margin profile.
As you May know I'm, a big hockey fan and to quote the Venerable the 1980 U S. Olympic Gold team coach Herb Brooks, who payments. He said right moments are born from great opportunities this feels especially appropriate today.
We're energized by the opportunities that lie ahead for our businesses.
We believe we are aligned with extremely powerful health and wellness trends and especially our operating team is an excellent with this group of Rockiness, Jeff combined with the depth of Nigel Willard experiences founder and former CEO of our largest business wholesome sweeteners is absolutely huge for us.
I'm as excited today as I was when we bought these businesses is D. P. D. We're making great progress in operational improvements, which have resulted in improved service and it flavors and ingredients. The opportunities. We saw three years ago are being realized through the team's extremely tactical approach to it.
<unk> new opportunities.
We are fortunate to have an excellent group of leaders across both of our operating segments and I look forward to working alongside with the team to support the long term growth of this business with that I'll pass the call over to Raj you said, Jeff for some summary remarks on their respective business units Rockies.
Thank you and good morning, everybody and thank you for taking time to be on the call.
Before I summarize my comments on Q2 results and lay out the macro picture of our branded CPG business.
Let me first say that I'm very excited to take on the role to lead our CPG business, along with a very expedient talented and enthusiastic global team.
In my previous role as President of the International Division I.
I have traveled extensively and seen firsthand.
Tuesday, Asimov, our teams and the strength of our business.
I'm very optimistic and strongly believe that we are uniquely placed to provide to all our consumers.
Options towards living a healthier lifestyle.
In my previous role I had been part of the leadership team.
She has been laying the foundation of our midterm strategy.
I think they view, a baby and baby wanted to go and.
And therefore build a clear to begin to align corporate goes to optimize costs and building next gen. Six in a wait and provide healthier consumer adoption.
I reaffirm that the team continues to remain focused in building all of these corporate priority.
Coming to what you do somebody.
Our branded CPG business generated revenue of $102 $3 million.
Which was down one 2% on constant currency basis.
Given primarily by our planned strategy tissues in two degrees there what are you a fulsome voucher lets see.
Ingredient channel.
Hence to avoid paying income tax, which if paid lead to lower margins and reduced profitability.
This strategy is well in line with our continued effort to optimize our channel mix and drive margin improvement gross profit dollar growth and cash flows excluding.
Excluding the degrees in somebody's frequencies, which accounted for a 4% decline in segment revenues.
Branded CPG constant currency revenue increased two 8%.
It confirms and demonstrates the resiliency of our portfolio.
Our branded CPG portfolio is well positioned in the current environment.
The diverse assortment of strong brands.
So all the pre consumer points value premium and private team.
Our product assortment and jokes with them reach out of great strength.
Vince to constantly drive deducts.
We are the largest importer of organic sugar in the United States and also believe they are the largest by it obviously that would be the wood.
With the offerings, we have the candidate and the price mix. Our portfolio provides we are very well positioned to help retailers improve their merchandise and address evolving consumer needs to have options.
North America, approximately 80% of my revenues are generally good but didn't unmeasured channels.
Chad.
E Commerce food service private label and ingredients.
We continued to see healthy growth in unmeasured channels during the second quarter.
Private label continues to be an emphasis given economic picture that is influencing consumer spending.
We did not track channels, which represent 20% of North America revenue.
Planned thought and expected near term slowdown in velocity due to the price increases and a reduction in trade promotions.
However, as we progress through the year. We believe we are now in a much better position with them.
Production and subsequent customer 77 to reach an inflection point and we gained shelf space and distribution.
In the international bandwidth CPG business, we continue to gain and grew in all key markets.
Also in line with that strategy, we have focused to drive our Nashville portfolio.
And you have new products coming to market in early 'twenty 'twenty four samad.
Simultaneously, we have a very robust product innovation pipeline to position ourselves to grow in adjacencies.
Finally on our ongoing North America supply chain Reinvention project, which is so critical for driving down unit costs, and thereby improving margin I'm very pleased to share that on track.
Advancing our transition rapidly.
This success is that our customer service levels.
Year to date basis.
Back to optimal levels.
We ceased production would be out of my mom facility at the end of June and are preparing the facility to be all sorts of sublease later in 2023.
The new facility at our co man he's in the final stages and the first production runs have been successfully running through April 23.
Now before I hand over to Jeff.
I do recognize all our employees across different geographies work with great enthusiasm and servicing and providing healthier alternatives.
And last but not least a big shout out to our North America supply chain team for a job well done both in time and it shouldn't be thank you and what you get.
Thank you Raj niche flavors and ingredients is a strong free cash flow generator with key barriers of entry and a global leadership position that support our broader growth and diversification initiatives at holder France.
This diversification in both revenue and cash flow is valued in a fluid environment such as this which has allowed us to deliver greater consistency in our operating results.
On that note, we continue to generate solid revenue growth in our flavors and ingredients segment in the second quarter with a 4% constant currency increase.
On top of a nine 9% increase in the second quarter of 2022.
The 15, 3% increase in the second quarter, 2021, which combined for a 25% two year comp.
We will continue to face tougher comparisons for the next few quarters, but we remain encouraged by some of the long term opportunities that we see any end markets that we serve that will drive continued growth our.
Our success will be supported by our deep experience focus and continued efforts to grow each of our product solutions.
All of which are based on our ability to be nimble and to identify specific uses and functions for our various liquorice products.
In my 32 years working for the Mapco business I've never been more excited about what lies ahead for our suite of product solutions.
We have developed a set of commercial initiatives aimed at driving adoption of our natural liquorice based ingredients in our end markets across food and beverage personal care pharmaceuticals, and industrial for instance, within the confection market, we are helping our customers comply with new regulatory.
Lori requirements in the European Union for product purity, and food, we continue to focus on improving the taste profiles of better for you products, especially for a lingering aftertaste.
In personal care.
Our products are used in a wide variety of cosmetics skincare and in oral care products by many brands that are growing their presence globally and finally I'd note that we are well positioned as a potential substitute for certain P size forever chemicals that had been recently regulated in the U S.
E U.
Our products have unique attributes that can replace P fast chemical functions and some specific manufacturing processes, which demonstrates how unique and diverse the licorice route is.
Beyond the commercial success. Our business is also advantaged by the significant improved cost structure, following our footprint optimization projects, which is allowing us to better compete.
Taken together our team has the right focus and the tools necessary to drive growth and we're very excited about the future for this business with that Bernardo over to you.
Thank you Jess and good morning to everyone.
I will start by walking through our second quarter financial performance as a reminder, please refer to our non-GAAP reconciliations at the press release for additional detail.
I encourage you to view our supplemental earnings presentation on our Investor Relations website.
What was the second quarter ended June 32023, consolidated project revenues decreased <unk>, 5% to $132 $9 million versus the prior year quarter.
On a constant currency basis.
Revenues were essentially flat versus the prior year second quarter.
Gross profit was $33 $4 million compared to $37 $3 million in the prior year second quarter.
Adjusted gross profit was $44 million compared to $42 $6 million in the prior year period.
Kris was largely driven by cost inflation, partially offset by pricing actions.
<unk> the prior year period included approximately $900000 of favorable noncash purchase accounting adjustments related to the inventory you've elevations that did not reoccur.
Reported gross profit margin was 25, 1% in the second quarter of 2023 compared to 27, 9% in the prior year period.
Adjusted gross profit margin was 34% compared to 31, 9% in the prior year.
The decline versus prior year was primarily a function of higher cost of goods sold due to cost inflation in excess of realized price increases.
As compared to the first quarter adjusted gross profit margin improved 50 basis points and that's compared to the fourth quarter 2022. Adjusted gross profit margin is up approximately 250 basis points demonstrating the team's hard work to recover less much.
Consolidated operating income was $3 million.
Operating income up $7 $7 million in the prior year second quarter.
Consolidated net loss was $5 $5 million compared to net income of $1 $3 million in the prior year period.
Net loss was driven by the lower operating income as well as increased interest expense.
Finally, consolidated adjusted EBITDA was $18 $2 million compared to $19 $7 million in the prior year second quarter.
Consolidated adjusted EBITDA decreased seven 6% with negligent affects it back to the court.
This idea of resorts for second quarter.
Branded CPG segment product revenues were $102 $3 million for the second quarter of 2023.
Decrease of $1.8 million or one 7% compared to $104 $1 billion for the same period in the prior year.
On a constant currency basis segment product revenues were down one 2% compared to prior U S sport, 8% growth from pricing actions was more than offset by 6% decline due to lower volumes as Rajiv noted excluding the planned decrease in wholesome bulk sugar sales segment constant currency revenues increased two 8%.
Operating income for the branded CPG segment was $1 $5 million in the second quarter of 2023 compared to a pretty equal $5 $6 million for the same period of the prior year.
The decrease in operating income was primarily due to cost inflation, including the sale of higher cost inventory as I was at a discrete costs such as higher severance expenses and the impairment of success at sub zero point $8 million related to either production lines at our Decatur, Alabama facility.
Savory ingredient segment product revenues increased 4% on both a reported and constant currency basis to a new quarterly records for segment revenue since the company has been public of $36 million for the second quarter 2023.
We need them for the sake of ingredient segments was $9 million in the second quarter of 2023, which matched that of the prior year period.
Operating expenses for corporate for the second quarter of 2023 were $7 $4 million compared to $6 $9 million in the prior year period.
<unk> was primarily due to an increase in stock based compensations and sanford's, which was partially offset by lower bonus expenses now I'll briefly cover our June year to date results.
For the six months period ended June 33, 23, consolidated project graduates crude, 0.5% and reported basis to $265 million versus the prior years six months period.
On a constant currency basis revenues increased one 4% compared to prior year period.
Consolidated operating income was $6 1 million compared to $14 $8 million in the prior year period.
Consolidated adjusted EBITDA decreased seven 2% to $34 8 million.
Moving to cash flow and balance sheet.
Cash provided by operating activities for the six months ended.
June 30, 2023 was $4 $9 million and.
Capital expenditures for the same period were $2 $7 million, which resulted in approximately $2 $2 million of free cash flow and adjusted free cash flow was $12 million.
As of June 32023, we had cash and cash equivalents of 24 $1 million and $427 million of long term debt net of unamortized debt issuance costs.
Our long term debt decreased from year end 2022 by five $875000.
As a result of revolver repayments of $4 million in mandatory repayments of the term loan of $1 million $875000.
At June 30, 2023 there were $72 million John in our 125 because of all the revolving credit facility.
During the second quarter of 2023, we entered into interest rate swap agreement to manage exposure to our interest rate risk related to variable interest rates of our term loan facility.
The agreement covers the variable interest rate to one on $183 $3 million of the term loan representing 50% of the notional amount of the facility to a rate of four to six 5% through February 2026.
As a result, we expect to realize approximately $1 million of interest savings in the second half of 2023.
We remain committed to a conservative financial policy and we will.
Continue to be proactive in our approach to mitigating risk.
Reducing leverage is the company's top priority and our primary focus is to accomplish this through organic means for 2023 we still expect our leverage ratio to remain constant between we're taking immediate actions, where we can to reach a cool.
Now shifting to our outlook.
But you are reaffirming today.
As a reminder, our outlook is presented on a reported basis, which includes the impact of foreign currency translation and our expectations for growth are presented on an organic basis.
Our 2023 we expect to soon into project revenues to be in the range of $550 million to $565 million representing growth of two 5%.
We expect consolidated adjusted EBITDA to be in the range of $76 million to $78 million.
Our top priority is cash flow generation and the results are the best three quarters is a reflection of that focus.
Total catcher expenditures to be approximately $9 million finally with respect to our cash add backs. We continue to expect a decline.
And as we complete our supply chain reinvention projects through the second half of the year.
Including no one forecasted events anticipated I'll, just $4 million for the reminder of the.
That concludes my remarks.
Peter Please open the call for questions.
Thank you we will now be conduct a question and my first question.
I would like to ask a question. Please press the star one on your salary.
Phone keypad.
A confirmation tone will indicate your line isn't the question with you.
First I too would like to remove your question from the queue.
Perfect. Thank you guys.
Because if I mean it made the most.
That's really helpful before pressing Dave Starkey.
One moment, please while I would pull for questions.
Yeah.
Yeah.
Yes.
Our first question comes from Cosmos <unk> with our size capital. Please go ahead.
Hey, Thanks, guys. Thanks for taking my questions and Oh.
And I think it'd be a little remiss not mentioning on this call. The amazing acquisition you did on the other business. So congratulations on that.
Thank you. Thank you Scott and thanks for your nice note.
So with just looking at that the debt structure I was there anything you guys can do to get that down more quickly I mean, I guess, it's also in context of the strategic review going on it seems organically, having it come down it's going to take a real long time.
So Scott I think there's a couple of things absolutely, we can do and driving sales.
And driving cash and we have a plan.
You know just started that down over the next couple of years I think.
What's important to also understand is you know in regards to horse business. You know, we carry about $220 million of inventory as we buy out our liquorice ingredient business and making sure we have supply and that's why we have exclusive because we do have.
Great supply out there.
Making sure we have lots of sugar and that we're not going into quota. So we do carry and you remember the C. O heating days right. So you had this with turkeys where inventories. So is there are different ways that we can finance our inventories.
Is there additional cash is there additional costs that we take out of this business and I know the team is looking at that we've identified lots of areas. How we can reduce cash so working on the balance sheet is something that we're.
We're doing I think the team now in regards to our swap that we just did in global interest rates down too.
Yeah. So the 4% level. So that is I think they focus so looking at inventories is a big one looking at taking additional costs out of there and I think the other big pools with Jeff and Raj will talk about the opportunities in growing our sales and there's some great opportunities was on ourselves.
Haven't realized any of the benefits yet to be go into co man.
Getting into deep off from some of the things there. So there's lots of levers out there for us to pull and there's lots of things we're working on to get additional.
Additional cash to ensure that our debt levels come down, but you know.
In the next couple of years there is a good plan in place to bring our cash to bring our debt levels down below four.
And then thanks for all that color and then and you know looking at the strategic review.
You guys have underway you know what.
What else I mean, obviously theres the us the offer out there what else do you think you know if you ever got to look at the possibilities of.
The strategic review what else should we be considering.
That said I think again, you know here's a company that was brought together three years ago.
And basically has had some successes.
During the Covid, where were some of the challenge is going to our own production.
And you know some of the other challenges we got caught with some of the higher interest rates, but with that scale is important where our strategic opportunities for us.
I think what's important here is the base, we've got a great base business here.
And there's a lever support but the board and the special Committee today.
We're looking at strategic alternatives.
You know what strategic alternatives are so there is a thorough review of their but the good news is we're starting with a real estate company. It's not like we're in trouble you know the house is on fire I think it's important to know there's good solid base here with good free cash flow with great businesses.
No.
In an acquisition within the consumer packaging space.
This week I think.
You know as other consumer companies look for growth doesn't look for.
This is a good opportunity.
What's unique and Jeff identified it is the opportunities with our liquorice ingredient business and every product has ingredients to have the final product and there's a lot of good opportunities. Some liquorice seven out there. The other thing today as it was lots of noise out there regardless of sweeteners.
Unofficial sleepers.
Diseases, you know, we have artificial sweeteners and we have not so sure. So we have the whole gamut circuit.
Covered here, we got a great international business with cancer out that has tremendous tremendous brand equity and brand recognition basically it's only sold in three or four countries. Today. So there's lots of expansion. So you know with that as we go through the review I think you know the board Special Committee will look at what's the opportunities here.
And where are the strategic opportunities and make sure that we're looking at it for shareholders.
Perfect and I have one housekeeping item what was the.
Nice realizations CPG this quarter I don't know if I saw it.
Thank you.
Yes.
Bernardo.
Yes, so oh on the supplemental deck on page four you can see the Mcdonald's price and volume for both businesses for embedded CPG segment for the second part is where it was four eight percentage points.
Yes.
Perfect.
Let me just add one other thing I think the other thing is just to put in place what we have here and the management team on the consumer side.
With Washington, Nigel you know between both of them. They are 60 years, and Jeff with 30 years, and bringing Bernardo and with his fresh eyes.
And Brian Let me Theres, an incredible team is here for our company.
It does a half a billion dollars of size that's running this today and I think that's well that's a key and that's what gets.
Myself and should get shareholders comfortable there's great adults in here running this business.
Actually the Colorado and thanks, guys.
Our next question comes from Ryan Mayors with Lake Street Capital. Please go ahead.
Hey, good morning, guys. Thanks for taking my question first.
First one for me as you know the guidance implies improved growth in the second half of the year. Obviously, just wondering what you guys are the level of confidence isn't that.
And what sort of assumptions you guys are baking in.
But how do you want to take that.
Yes perfect.
Thank you for the question and first like we're very pleased with our performance junior to date.
The $18 $2 million of adjusted EBITDA due to a significant step up versus Q1.
You can buy Mahjoub station right at the back.
Cost inflation has flattened and be back from both supply chain innovation restriction programs is this one of the results.
As you heard last quarter and again today margin improvements in recovery, it's Howard.
Top priority.
We're pleased to deliver against that in terms of revenue.
Still a lot of time left to your indecision L. A will help in that regard.
But we need to stay focused on operational execution and maintaining excellent service levels. As we continued to demonstrate this team's performance improve.
And I think just to add onto that is as Bernardo said, we're early stages with regards to you know.
Moving all of our production to our third party co pack and Houston in Mexico.
And taking those costs out there and we are definitely not recognize all of those and I think you know as I sat with the team last week is looking at the growth opportunities.
And so there were some bumps along the way in regards to the comments that came out of an ascertained fall stuff like that but we've seen some great recoveries. The other thing that we've mentioned here, we did not sell as much sugar as we could have as we did not want to pay the higher tariffs and you know those sales.
It will ultimately come so listen I think the Big thing also is we go back and other years, where we didn't have product and we didn't have service levels getting our service levels and the high Ninety's is the most important thing and that's one of the big focuses of the cheap also one of the big focus of the team is growing.
Distribute between either nationally even going into other countries, whether it's Germany, which we sell $200000 today.
A little bit of business in Belgium. So there is some big expansion opportunities.
But the big thing is to get our service levels up to the levels that they shouldn't be to ensure that we can service our customers.
Got it that's helpful. And then when we think about the sequential margin improvement I'm. Just wondering if you guys can quantify how much of that was actually exiting lower margin businesses or taking overall cost out of the business whether through supply chain reinvention.
Or whatever you want to call. It just curious what that kind of mixes and I think that'd be helpful to understand.
Alright.
So, let's take that as well.
And in terms of in terms of the margin improvement second quarter and in the first quarter. The majority of that is being driven by bank by quest.
Especially on the on the one on transportation side has been has been one of the areas that would be helpful.
Two weeks, although helped by the.
Sugar Bulks is decreasing.
It was not a major driver for our portfolio.
Uh huh.
Got it that's helpful. Thanks for taking my questions.
Thank you.
Thank you.
Our next question comes from John Cummings with Roth Capital Partners. Please go ahead.
Hey, everybody thanks for taking my questions.
So a couple for you on the flavors business.
Maybe to start if you could give a little more detail on that P. Fast replacement opportunity. You commented just in the prepared remarks about how that's something you're looking more into I was wondering if you could just give more detail on maybe how how significant of an opportunity that could be and what is it that you're actually like what what target uses.
Do you see your products being helpful for.
Okay.
Jeff So yeah I'll take that one thank you.
P. Five compounds they have a lot of different uses across various industries for coatings for cleaners firefighting foam and in particular industrial surfactants, which are basically blooming agents surface surface tension agents don't bodies of water and there's thousands of P fast chemicals out there.
They are coming under a lot of environmental scrutiny.
Because they persist in the environment.
And Theres bio accumulation in other words, they they accumulate and living living organisms.
And there's all kinds of potentially identified risks like reached the metabolism fertility cancer.
Cancer or fetal growth immune systems, So liquorice has.
Some historical uses where P. Fast compounds have also been used and I. It's funny that maybe liquorice started out as an industrial surfactant in certain applications.
And then it was replaced by PFS compounds, but now with this concern over the environmental impact.
Of of using PFS compounds and what happens if they go into the land and so forth.
Where where the market is really opening up for us mostly in industrial surfactants and you know.
Liquorice functions extremely well, but but you know now with the with the change in in an environmental attitudes and well you know moving towards better environmental responsibility a liquorice route extracted with water is certainly environmentally friendly.
Okay. Okay. I guess is there a way to give any kind of size opportunity.
Just trying to do what we wanted to do that for competitive reasons. You know, we don't break out the sub segments of our of our sales.
Fair enough.
Pigment itself.
And then second question for me still on the flavors business.
But if I you know that that business has been so strong both in revenue and that growth number and the margin that you are reporting.
And if I'm looking at more kind of medium long term from here I'm just curious what seems good.
You know sort of high level.
Financial model to to underwrite too I mean is this kind of I I remember it being a low single digit grower I'm not sure. If you think maybe now that opportunity is greater.
And on the margin side, you know, it's been that kind of 30% segment operating margin rate right around there I'm wondering if you see longer term opportunity there.
Is that a good place to be for the medium term.
Well I think when you're looking at growth you really have to look at how we how we look at our business, which is and I'm not going to break out the numbers of it but in our sub segments. So you know we have tobacco, which is non growth had actually declined.
Liquorice, confection, which traditionally hadn't grown in and I guess that made is targeted as a single digit.
Gross company, but now there's new regulatory requirements for product purity.
And because we have the best supply chain in the industry and the most capabilities.
We're seeing growth in both value and volume in that segment, which we haven't seen in a long time again the PFS.
Compound replacement I mean, as we find more and more different uses.
We're liquorice can function in place of certain key fast compounds, there's growth there and there's also a margin there in food.
They're very select specific ingredient.
We are targeting healthy.
A better for you and healthy products to improve taste, we they use a very little bit of a liquorice products that we have to to mask. After taste and then personal care is really really interesting because the dynamics of that market.
People are all looking for in skincare products cosmetic oral care.
And and even eyecare products in lip care, they're looking for products that are derived from a natural source and that really liquorice has a lot of functions in these in these different products.
And it is from a natural source. So I think the model of single digit growth really was kind of you know tobacco is going to decline and we're going to see some growth in the food sector, but now the dynamics are really changed and we're really broadening what we're looking at.
I would say you know, it's not going to use these developments come in clumps.
It takes a while for people to adopt them and validate them.
Changing from a <unk> compound to liquor issue is a surfactant, but you know I.
I think there is tremendous growth opportunities out there and I think the margins. We're showing right now are representative of what we should see in the future.
It's just that we had something unique there.
I said before with regards to supply and you know Jess 30, plus years of US doing this and now liquorice being recognized as an ingredient.
There's a lot more applications and it really did it actually did so I think that's something here that there's a real special software.
Excellent. Thank you.
Yeah.
Okay.
And final question comes from Alex I don't know with unknown. Please go ahead.
Hey, guys. Most of my Stuff's been answered I have one housekeeping, which is when you were talking about add backs was that 4 million for the balance of the year just supply chain are all sort of all non standard add backs.
So yes, this is related to supply chain reinvention.
In time, we don't have any in any meaningful add back some insights on the remainder of the year.
Okay, and then I guess the only thing other question I have is can you.
I know that you said you just sort of report on special Committee findings.
When there's something to report, but can you give us some sort of timeline or how you guys are thinking about calendar on that.
Listen I.
Come back in this year, we have engaged Jefferies as I've said, we will.
Work with somebody and we will work with others, but the main thing is keep the attention on the business and that's what I don't want to lose lose focus on what we're trying to do here and that's the most important thing so there's not like a timeline out there it will go up there.
And do our fiduciary responsibility.
Board is especially committee, but the key is you know we got a lot of good things going and make sure. We don't lose focus on that with our people and our customers.
And our suppliers out there.
Great Alright, thanks, a lot.
Yeah.
Oh excuse me now I would like to turn the floor back over to Simon for closing comments. Please go ahead.
Thank you everybody for joining today's call as you can see we have a lot going on.
There's there's a lot to do here and number one you know we have the team in place to do it which is key.
As I said before.
We got some unique opportunities out there and I really you know as I sat with the team last week, we really got a good strategic plan and is here and again as this company came together.
You know three years ago during COVID-19 and couldn't get to facilities could make things stop and it really is today. So I want to thank the team for really digging in there and really putting team pulling together what we are number two.
Listen as a public company, we'll always look at what's the right opportunity what's right for shareholders.
And what we can do to ensure shareholder value.
None of US were happy where the stock came down too, but as we see here.
Cash flow, we see good businesses, we see uniqueness is here and we see a good plan to rebuild and treat a lot more value.
And.
The team is working hard at that you know, there's a lot of employees within basketball around the world and they're working hard and it's sure to keep everybody focused.
So thank you very much for joining the call and we look forward to keeping everybody updated when we can and talking to you again soon have a great day and enjoy the rest of the summer. Thank you.
This concludes today's conference call.
Please disconnect your lines at this time, thank you for your participation and have a good day.
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