Looking back at our first year following the Azelis IPO, we can be proud of the achievements and performance of the group. Azelis has demonstrated remarkable growth in all regions despite the continuously challenging macroeconomic and geopolitical environment.
At the level of the Board of Directors, Mr. Tom Hallam joined Azelis as an independent and non-executive director and new chair of the Audit and Risk Committee, succeeding Mr. Jürgen Buchsteiner. On behalf of all Board members, I want to express our sincere appreciation to Jürgen for his valuable contribution over the past years; we are now looking forward to working with Tom on further developing the risk and control function within Azelis. Mr. Sertaç Sürür took on the role of CEO & President of Asia-Pacific and, with that appointment, also became a member of the Executive Committee. We are confident that Sertaç will lead Azelis into the next growth phase in this region.
In 2022 we increased our ESG efforts with a particular focus on the strategic pillars “People,” “Products & Innovation,” “Governance” and “Environment” in line with our Action 2025 sustainability strategy.
Our employees remain at the heart of Azelis’ operations. I am therefore utterly proud to report that – based on our most recent Employee Satisfaction Survey – the level of engagement amongst our workforce, measured by satisfaction & motivation and loyalty rates, has once again improved. Azelis offers a safe, inspiring, diverse, and rewarding working environment where people can thrive and grow as an integral part of Azelis’ ambitious growth plan. Regarding HR systems, we realized the migration to one single payroll provider in 33 countries and kicked off its integration with our central HCM system in 2022.
In support of our strategy to be an innovative solution provider for our commercial partners, we established several innovation centers across all regions. As in previous years, we won several industry awards thanks to our innovation capabilities. Investments in product stewardship expertise ensure compliance with the various “green” legislative initiatives, including the continuous strengthening of our global SHEQ support center.
As part of our overall enterprise risk management, Azelis fortified its capabilities in internal audit, SHEQ (including sustainability), IT security and legal & compliance. We increased internal resources and responsibilities in these areas, but equally invested in market-leading systems and tools to improve our efficiency and professionalize our operational standards. That will allow us to appropriately manage the challenges related to external threats such as cyber security, fraud, corruption, export control, and a rapidly changing regulatory environment.
The main focus within the environmental pillar of our sustainability strategy has been to invest in several measures to reduce the carbon footprint within our operations, which led to the achievement of our carbon intensity target for 2022. Also noteworthy is that Azelis, for the first time, approved a dedicated budget related to carbon emission mitigating technologies.
Azelis’ continuous ESG efforts earned us a Platinum rating from EcoVadis® and an ESG Industry Top Rated Sustainalytics score, which places us in the top percentile of companies in our industry.
In summary, Azelis again made significant steps forward in strengthening its capabilities and core competencies within the different layers of its organization, and we are now even better positioned to support our successful growth trajectory.
Yours sincerely,
Antonio Trius, Chair of the Board of Directors
I am pleased to report another strong set of results for 2022, illustrating the attractiveness of our business model and industry. More importantly, our results reflect our colleagues' hard work and dedication worldwide, and the benefits of our growing scale and footprint.
At the beginning of the year, we set out to further build upon our achievements in previous years despite the global threat posed by the war in Ukraine, which exacerbated the protracted supply chain disruptions affecting most industries worldwide since the pandemic.
Despite these headwinds, we achieved multiple operating milestones, accelerated our growth strategy and outperformed market expectations. We delivered €4.1 billion of revenue, generated more business from our existing operations, completed 12 acquisitions and made significant progress on strengthening our laboratory network. We achieved €456.9 million of adjusted EBITA, a 164 bps margin expansion over the prior year, reflecting the benefits of our growing scale. We generated free cash flow of €438.0 million, implying a cash flow conversion rate of 94.8%, demonstrating the cash-generative nature of our business.
The revenue we achieved represents year-on-year growth of 45.3%, of which 20.1% was organic, this was driven by the benefits of our deep lateral value chain and growing footprint, allowing us to win market share and secure more mandates from principals.
The new mandates reflect our principals’ growing trust in our ability to leverage our scale and our industry-leading digital platforms to develop the market for their products. Likewise, our market share expansion with new and existing customers demonstrates our customers’ trust in the group’s ability to address their needs by expanding the market reach of their portfolio.
We made further progress in strengthening our footprint with the acquisition of 12 companies across our three regions, representing combined total annual revenue of over €620 million. Seven of these acquisitions reinforce our presence in EMEA, specifically accelerating our growth in the Middle East and Africa, with the acquisition of Umongo and Chemical Partners in South Africa and Lebanon respectively. We completed four acquisitions in Asia Pacific, including Ashapura Aromas in India, creating a global flavors and fragrance platform following the 2021 acquisitions of Vigon and Quimdis in the US and France respectively. In July, we entered South America with the acquisition of Rocsa, one of Colombia's leading specialty chemicals and ingredients distributors. These acquisitions significantly expand our market reach and lateral value chain, further reinforcing our ability to innovate for our principals and customers.
During the year, we inaugurated our new regional innovation center (RIC) in Singapore, which serves as a hub for our technical innovations for the food & nutrition market in Asia Pacific. The Americas RIC that opened in Mexico City in 2021 became fully operational in 2022, supporting our growing business in North and South America. In EMEA, we opened a one-of-a-kind competence center for meat and meat alternatives in Poland. These specialized application laboratories allow us to stay at the forefront of innovation for our customers and principals.
We achieved a significant milestone in our digital journey during the year, with the successful cloud migration to Microsoft Dynamics 365. A cloud-based ERP system further enables us to increase our operational efficiency and ensures that we can scale our back-office activities as we grow. Furthermore, the cloud-based ERP system is a secure foundation for our digital initiatives that drive and support our long-term growth.
At the end of 2022, we completed 14 e-Labs and had over 100 customer portals across several end markets that we serve, in line with our objective of having the most advanced digital platform for our customers. Likewise, we continued to progress in rolling out principal portals to some of our largest suppliers, providing them with unparalleled transparency and valuable market insights.
Last but by no means least, our commitment to contribute to a better world and greener environment continues to translate into our actions. Consistent with how seriously we take our sustainability agenda, we have engaged an independent auditor to help us enhance the substance and integrity of our sustainability reporting by providing limited assurance on a number of our KPIs. Our consistent progress toward achieving our ambitious sustainability objectives was recognized in 2022, earning Azelis an industry leading Sustainalytics rating with the lowest risk assessment rating in the industry of 12.4.
Before closing out my letter, I would like to express our support for all those affected by the recent earthquake in Turkey and Syria. The magnitude of the devastation means that although all 158 of our colleagues in Turkey are safe and accounted for, many have suffered loss directly or indirectly, and we have put a relief program in place to support them. We at Azelis stand ready to contribute to the rebuilding efforts as soon as affected communities emerge from the tragedy.
There remains considerable uncertainty in the global economy, the dedication of all our Azelis colleagues keeps me optimistic that we will continue to deliver on our objectives and create value for all our stakeholders. I am grateful to work alongside such dedicated professionals and proud to lead the Azelis group toward our shared vision of becoming the reference innovation solutions provider for the specialty chemical distribution industry.
Yours sincerely,
Dr. Hans Joachim Müller, Chief Executive Officer
In 2022, we completed 12 acquisitions across three regions. We reinforced our footprint in EMEA with seven acquisitions across the region, including Umongo in South Africa and Chemical Partners in Lebanon, strengthening our position as the leading specialty chemicals distributor in the Middle East and Africa. We continued to expand in Asia Pacific with four acquisitions including Ashapura in India, creating a global platform for flavors & fragrance. During the year, we entered South America with the acquisition of Rocsa, one of Colombia's leading specialty chemical distributors, with a rapidly growing presence in Peru and Central America.
We continue to make progress on our strategy of building a network of laboratories as well as regional innovation centers (RIC) to drive innovative formulations that benefit both our customers and principals. We opened a RIC in Singapore to serve the food & nutrition markets in APAC. We also opened our one-of-a-kind Regional Competence Center for Meat & Meat Alternatives in Poland, which will support the rapidly evolving trends in the meat industry driven by consumer needs and the shift toward sustainability. Our RIC in Mexico became operational in 2022, and houses five laboratories for Food & Nutrition, Pharmaceuticals & Healthcare, Personal Care, CASE, and Advanced Materials & Additives. The Mexico RIC will serve as the innovation hub for North and South America.
Our focus on providing the most innovative formulations continues to be recognized by relevant industry bodies. In 2022, we won two Ringier Technology Innovation Awards for food & beverage and personal care. We also received bronze at the Sensory Bar awards at in-cosmetics Global 2022.
We continue to lead the market in digitalization, with more than 100 customer portals live as of the end of the year. These market-specific portals provide our customers access to our technical capabilities, industry and product resources as well as highly curated insights into market trends.
We have launched 14 e-Labs, which provide a gateway for product development for our customers. We are also rolling out principal portals, which provide our suppliers with unparalleled market intelligence on their products.
We completed the fifth edition of our principal satisfaction survey, which showed the overall satisfaction of our principals improving steadily to 4.26 (out of a maximum score of 5.0), from 3.60 when we launched the survey in 2014. The survey, conducted every two years, measures how our principals view our performance based on several metrics ranging from quality of contact with our technical sales to stock policy and forecasting. Importantly, the latest survey showed a significant improvement in the net promoter score (more than double), indicating the likelihood of our principals recommending Azelis as a distributor of choice.
We have successfully migrated the majority of our entities to Microsoft D365. Having a cloud-native ERP (enterprise resource planning) system raises efficiency in our operating processes and sets us up for future growth.
A robust, centralised masterdata tool and management system ensures that we are able to respond to business and industry needs quickly and efficiently. The group accommodated over 30,000 newly compliant safety data sheets to meet the EU REACH Regulation (EU) 2020/878 deadline without business disruptions.
In 2022, we obtained the top ESG industry ranking from Sustainalytics, among a peer list of 178 international traders and distributors.
Azelis is a leading global innovation service provider in the specialty chemicals and food ingredients industry. We innovate through formulation to create value for our principals and customers, allowing them to benefit from the breadth of our technical expertise, the strength of our lateral value chain, and the depth of our strategic alliances.
We provide innovative and sustainable formulations to over 59,000 customers, and market insights and channels to grow the market for products of around 2,700 principals. Our activities are supported by industry-leading digital capabilities powered by a robust IT infrastructure. Our mission is guided by our commitment to sustainability and contributing to a better world.
We have more than 60 application laboratories worldwide, delivering a wide range of very relevant services for customers, including developing new formulations or enhancing existing ones, as well as benchmarking product performance.
Our lateral value chain and broader network capabilities provide customers with constant innovative formulations, while our digital platforms (customer portals, e-Lab) provide them access to our network capabilities in real-time, reducing time to market. Our innovative tools and formulations expand the market for our principals’ products and empower them with valuable insights on emerging market trends that inform their R&D and contribute to shaping products for the future.
With digitalization as one of the top strategic pillars at Azelis, we aim to deliver engaging and personalized digital experiences to both our customers and principals. For our principals, we have developed seamless API (application programming interface) connectivity that automates the real-time flow of information, reducing the complexity of ensuring that all relevant technical, commercial, and regulatory information about their products is up to date and accessible. For our customers, we have created end-to-end digital services that include customer portals and the e-Lab. The customer portals offer our customers easy access to the latest trends, high-quality information on products and formulations, regulatory documentation and easy access to relevant Azelis teams.
The Azelis e-Lab is a digital platform that allows customers to create, enhance or fix formulations at their convenience. The e-lab provides all the necessary tools to create a detailed briefing of the customer’s project, with immediate formulation and product recommendations. The platform gives instant access to our global network of technical experts, offering a faster and easier path toward innovative formulation, and with this, reducing time to market for their products.
Through our principal portals, we provide transparency, key statistics, and relevant market insights to our principals. In addition to a real-time view of sales performance and opportunities, we give our principals concrete insights into the application of their products, as well as emerging market trends that can help steer their R&D programs towards market needs.
Sustainability is a critical part of our value proposition, our identity, and our business model. In 2021, Azelis launched Action 2025, the group’s sustainability strategy. Action 2025 reinforces our commitment to becoming the world’s leading provider of sustainable solutions and services for the specialty chemicals and food ingredients distribution industry. At Azelis, we play a significant role in helping our suppliers and customers achieve their sustainability objectives. Selecting from the broad portfolio of products we distribute, we identify sustainable products and develop formulations that enable our customers to launch more environmentally friendly products. We will continue to assess the sustainability protocols of our suppliers and help them develop their own sustainability practices, improve sustainability standards across the value chain, and enhance the reputation of the chemical industry.
Our purpose inspires us. Our growth drivers power us forward. But it is our values that define who we are and what we stand for. On our journey toward a more sustainable and innovative future, our values are embedded into everything we do and each step we take.
We are entrepreneurial. Embracing a culture of ambition and innovation that empowers our people, ensuring they can explore different ways of thinking for our customers and principals.
We are respectful. Balancing hunger with humility as we strive to become a benchmark for innovation, sustainability and digital offerings, dedicating our professional lives to the future of our customers, our principals, and our planet.
We are focused. We deliver unrivaled service and build trusted partnerships by providing uniquely tailored solutions in response to deep local knowledge and emerging market trends.
We are knowledgeable. Collaborating with principals, colleagues, and customers to blend ideas and expertise that deliver market-leading solutions that will improve people’s lives globally.
Azelis is a leading global innovation service provider for the specialty chemicals and food ingredients industry. We go beyond connecting producers of specialty chemicals and food ingredients (our principals), and the manufacturers of consumer products for the Life Sciences and Industrial Chemicals end markets (our customers). We create value by expanding the market reach for our principals’ products through our technical expertise, which allows us to combine products from different principals and develop innovative formulations. Our customers appreciate the one-stop-shop opportunities and these innovative formulations that support their businesses' continued growth.
Our value creation proposition is powered by our continually expanding lateral value chain, a comprehensive library of chemistries required to develop formulations within a specific end market, exclusively sourced from a vast list of principal partners, and formulation expertise for a wide range of applications across market segments and geographies.
Our focus on innovation is supported by a growing network of laboratories, each specialized in a market segment to serve a region. We take innovation even further with an industry-leading digital platform that connects our stakeholders to the Azelis ecosystem of chemistry, formulations, market insights, regulatory documentation, and other services.
Our strategy of ‘Innovation through formulation’ has created value for our stakeholders over the years, delivering average annual revenue growth of 18.9%1 and generating 62.8%2 return on investments per year on average.
At Azelis, our single greatest asset is our people. We have a shared value system that is reflected in our commitment to sustainability. We are EcoVadis® Platinum-rated and our Action 2025 sustainability strategy details our objective to become the industry reference distributor of sustainable solutions and services.