EUR 850.00 For Business Accounts Only

Morningstar | Chr. Hansen Reports Second-Quarter Results, Announces Pharma Joint Venture With Lonza

From its origins as a cheese rennet producer, Chr. Hansen has transformed into a pioneer in offering microbial and natural color solutions for the food, beverage, and pharmaceutical markets. Our wide economic moat rating is supported by its intangible assets, switching costs, and a cost edge resulting from the company’s years of high R&D spending, strong client relationships, proprietary technology/client data, and leadership position in each of the three markets in which it operates.Growth is secular and driven mainly by health and wellness trends, including removing undesirable content from food, prolonging products' shelf life, and improving the taste profile. In Food Cultures and Enzymes, Chr. Hansen’s largest segment (at nearly 60% of sales), the firm holds a dominant position. Price is almost never an essential factor as cultures and enzymes are an insignificant part of end products’ total production cost (less than 2%) while their strategic value to their risk-averse client’s product and core business is asymmetrically higher. This has led to robust pricing/mix contribution.The health and nutrition division shares a common R&D platform and similar production technology with the cultures and enzymes segment. The human health unit benefits from branded probiotics such as the LGG and BB-12, two of the most documented probiotics worldwide, and an increasingly stringent regulatory environment that should help Chr. Hansen differentiate further from competitors that have less documented probiotic cultures. Similarly, regulation is a significant driver in both plant health and animal health, the other two subdivisions of the segment, with higher utilization of biological nematicides versus chemical alternatives and recent bans on antibiotics in animal feed leading the way.Lastly, although Chr. Hansen’s natural colors division is the only segment of the group that does not benefit from its fermentation-based research capabilities, it still exhibits healthy returns (25% ROIC over the last decade). Regulation and consumer awareness regarding clean labelling are the main drivers of the conversion to natural colors.