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Novozymes announced its results for the first quarter of 2018. Q1 organic sales growth of 2 % in line with our expectations: Household Care +1 %, Food & Beverages +5 %, Bioenergy +9 %, Agriculture & Feed -5 %, Technical & Pharma -10 %. EBIT margin at 28.9 %. FCF before acquisitions DKK 403 million. 2018 outlook maintained on all parameters.

Peder Holk Nielsen, President & CEO of Novozymes: “We’re well in line to deliver on our full-year sales growth outlook of 4-6 %, and margins are strong despite a significant currency headwind. We continue to see good progress on our key priorities, including increasing presence with new and existing customers to cater for their individual needs. There is still some uncertainty in the agriculture-related business, including from recent geopolitical tensions. However, with current insight, we remain firm about accelerating sales growth throughout 2018 and beyond.”

Highlights Q1:

  • Organic sales growth of 2 % and -6 % in DKK. USD/DKK decline of 13 % in Q1 y/y
  • Growth in Household Care, Food & Beverages and Bioenergy
  • Agriculture & Feed and Technical & Pharma lower, mainly due to continued pressure from certain agriculture markets, as well as timing in Pharma
  • 6 % organic growth in emerging markets; developed markets on par with last year
  • Strong product development: launch of first yeast solution – Innova® Drive – for conventional biofuels, EU approval of probiotic solution Alterion® for poultry, approval of microbial corn bioyield product Acceleron® B-360 ST for the US and the EU, and launch of a new enzyme class for automatic dishwash enabling easy removal of dried-in cereals
  • Strong EBIT margin of 28.9 %, up due to timing of emerging markets’ ramp-up costs and despite currency headwind. Q1 2017 at 27.0 % (~29 % excluding reorganization costs)
    Free cash flow before acquisitions at DKK 403 million
  • Dividend payout of DKK 4.50/share. 42 % payout ratio
  • Full-year 2018 outlook maintained: Organic sales growth 4-6 % (growth relatively stronger in 2H y/y), EBIT margin ~28 %, FCF before acquisitions DKK 2.3-2.6 billion, ROIC 24-25 %

Novozymes announced its results for 2017. Solid year with 4 % organic sales growth (Q4: + 4 %): Household Care + 1 %, Food & Beverages + 9 %, Bioenergy + 11 %, Agriculture & Feed – 3 %, Technical & Pharma + 2 %. EBIT margin at 27.9 % (around 29 % excl. one-time costs). FCF before acquisitions DKK 2.4 billion.

Regarding the 2018 outlook, with good momentum in the business and a strong pipeline of products and opportunities, we see organic sales growth of 4 – 6 % and an EBIT margin of ~28 %.

Peder Holk Nielsen, President & CEO of Novozymes:
“2017 was satisfactory with solid growth and margins. Similar to other years, 2017 saw differences in divisional growth rates, but serving more than 40 industries with enzymes and microbes provides robustness. Our key priorities for 2018 are to increase our presence with new and existing customers, especially in emerging markets, and ensure we cater for individual customer needs with impactful innovation. And although uncertainties exist, with good momentum, a strong product pipeline and increased commercial activities, we see a promising outlook with accelerating growth for 2018 and beyond.”

Highlights:

  • Organic sales growth of 4 % (Q4: + 4 %) and 3 % in DKK (Q4: – 1 %)
  • 4 out of 5 areas grew; Food & Beverages and Bioenergy performed very well
  • Agriculture & Feed lower, mainly due to poor agriculture markets
  • 4 transformative innovations launched of the targeted 10 by 2020
  • Reported EBIT margin of 27.9 % (2016: 27.9 %). Q4 2017: 27.6 % (Q4 2016: 28.6 %)
  • Albumedix (non-core pharma) divested late 2017. DKK 66m negative Q4 EBIT charge
  • M&G financial asset write-down of remaining DKK 60m (DKK 47m post-tax) in Q4
  • Lower year-on-year tax rate despite one-off US tax charge of DKK ~30m in Q4
  • Free cash flow before acquisitions solid at DKK 2.4 billion; higher investments as expected
  • Proposed dividend payout of DKK 4.50/share. Dividend growth of 13 %. 42 % payout ratio
  • Full-year 2018 outlook: Organic sales growth 4 – 6 % (growth relatively stronger in 2H y/y), EBIT margin ~28 %, FCF before acquisitions DKK 2.3-2.6 billion, ROIC 24 – 25 %. Stock buyback program of up to DKK 2 billion. Long-term dividend payout ratio upped from ~40 % to ~50 % of net profit