Post on 12-Jun-2022
Roadshow presentation12M 2018
Released on January 24, 2019
Summary
2
Satisfactory 2018 results – financial outlook met
• Satisfactory results; guidance parameters from beginning of 2018 met
• Challenging Middle Eastern markets were the main unexpected drag on organic sales growth
• Good development in emerging markets supported by innovation and increased commercial presence
• Pipeline solid and developing very well
3-6% organic sales growth guidance for 2019
• Uncertainty regarding certain businesses covered by a 3 percentage point overall range
• Step-up in commercial activities and strong innovation entering the market
• Solid earnings with EBIT margin between 28 and 29%
• Strategy and long-term target update expected in June
Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and Governance2
Latest results 3
Overview and strategy 15
Market overview 24Household Care 25Food & Beverages 28Bioenergy 30Agriculture & Feed 34Technical & Pharma 40
Sustainability 41
Financials and governance 46
Table of contents
Latest results
Highlights
Satisfactory 2018 performance
• Financial guidance parameters met as set out at the beginning of 2018
• Bioenergy strong; solid performance in Food & Beverages; growth in Agriculture & Feed; Household Care flat; Technical & Pharma declined
• Middle East took out ~1 percentage point of overall organic sales growth
• Emerging (+5%) and developed markets (+3%) both posted organic sales growth
• Eight impactful products launched and good progress on our priority innovation platforms
• Increased commercial activity in emerging markets
2019 outlook: 3-6% organic sales growth, 28-29% EBIT margin
• 3pp spread in range reflects strong new product performance and geopolitical uncertainty
• Innovation and increased penetration across geographies will drive growth
• Investments in emerging markets will support growth
• Solid earnings outlook with EBIT margin between 28 and 29%
• DKK 2 billion share buyback program
• Proposed dividend of 5 DKK/share, 11% increase y/y
4
1%
7%5%
-3%
-6%
2%0%
5%
12%
3%
-5%
4%
HouseholdCare
Food &Beverages
Bioenergy Ag & Feed Tech & Pharma Total
Organic sales growth by segment
Q4'18 FY'18
Key financials(DKKbn)
February 2018Outlook
2018Realized
Sales growth, organic 4-6% 4%
EBIT margin ~28% 28.3%
Net profit growth ~0% 3%
Net investments excl. M&A 1.3-1.5 1.4
Free cash flow excl. M&A 2.3-2.6 2.3
ROIC incl. goodwill 24-25% 24.2%
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Organic sales growth by geography
5
34%of sales
North America
12M 2018 y/y: 5%
Q4 y/y: 3%
36%of sales
12M 2018 y/y: 1%
Q4 y/y: 1%
Latin America
12M 2018 y/y: 6%
Q4 y/y: 1%
Asia Pacific
12M 2018 y/y: 5%
Q4 y/y: 5%
Europe, the Middle East & Africa
35%(12M 2018: 5% y/y)
65%(12M 2018: 3% y/y)
Developed Emerging
10%of sales
20%of sales
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
4%
1%
2%
1%
0%
FY'14 FY'15 FY'16 FY'17 FY'18
FY organic sales growth
-3%
1%
-2%
2%
1%
Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
Quarterly y/y organic sales growth
Flat performance in 2018
• Organic growth 12M 2018 0% y/y; Q4 2018 1% y/y
• Weakness in the Middle East due to economic distress and trade sanctions
• Global customers continued cost optimization – in line with expectations
• Sales to regional customers performed well – China in particular
• Good traction for the freshness rollout; now available in multiple countries
• Strong performance in dishwash from innovation and environmental focus
2019 outlook and priorities: freshness, emerging markets and regional accounts
• Low-single-digit organic sales growth
• Rollout of freshness platform: multiple emerging markets to be added through the year and shipments to European markets late 2019
• Unlocking growth in emerging markets through presence and innovation
• Solutions tailored to specific customer preferences
• Less of a drag from global accounts
Household Care
6
32%of sales
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
9%
5%
4%
3%
7%
Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
Quarterly y/y organic sales growth
4%5%
2%
9%
5%
FY'14 FY'15 FY'16 FY'17 FY'18
FY organic sales growth
Food & Beverages
Solid and wide-ranging growth
• Organic growth 12M 2018 +5% y/y; Q4 2018 +7% y/y
• Broad-based growth; especially strong in food & nutrition and beverages
• Strong growth in oils & fats
• Baking performed well in Asia Pacific but hampered by planned price reductions in North America and the situation in the Middle East
• Starch growing despite volatile commodity pricing in Asia Pacific
2019 outlook and priorities: emerging markets and solutions from the priority innovation platforms
• Mid-single-digit organic sales growth
• Continued step-up in commercial presence, especially in the emerging markets
• Ramp-up of newly launched innovations, such as Frontia® and Palmora®
• Demand for health and wellness solutions creates opportunities
7
29%of sales
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
14%
9%
20%
15%
5%
Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
Quarterly y/y organic sales growth
19%
-5%-3%
11% 12%
FY'14 FY'15 FY'16 FY'17 FY'18
FY organic sales growth
Bioenergy
Continued strong momentum for biofuels
• Organic growth 12M 2018 +12% y/y; Q4 2018 +5% y/y
• New yeast technology well received; second product, Innova ® Lift, launched in Q4
• Good growth across regions for conventional biofuels
• US and global ethanol production estimated to be up ~1% (Q4 y/y negative). Inventories remain elevated and producers margins tight
• Latin America growing as Brazil continues expansion into corn ethanol production
2019 outlook and priorities: yeast, Brazil and continued innovation
• High-single-digit organic sales growth with flat global ethanol volumes y/y
• High US ethanol inventories and tight margins
• Trade conflicts creating uncertainties for US export market
• Expectations continue to be based on current political conditions
o Awaiting clarity on E15; expected sometime before the summer
o Mandates could add volume growth in China and Brazil
8
19%of sales
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
7%
19%
5%
-3%
3%
FY'14 FY'15 FY'16 FY'17 FY'18
FY organic sales growth
-7%-5%
13%
10%
-3%
Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
Quarterly y/y organic sales growth
Agriculture & Feed
Mixed year with strong growth in BioAg
• Organic growth 12M 2018 +3% y/y; Q4 2018 -3% y/y
• Strong BioAg performance driven by Acceleron® B-360
• Sales to animal feed challenged; difficult market conditions in Latin America
• Alterion® product in animal health gained good traction across regions
• Balancius™ ramping up and gaining interest in the market
2019 outlook and priorities: innovation and The BioAg Alliance
• Low-single-digit decline to mid-single-digit increase
• Increased sales contribution from Balancius™
• Continued penetration of the probiotic solution Alterion®
• Conclusion on the future setup of the BioAg business expected in the coming months
• Navigating volatile agricultural markets with innovation and strong partners
9
14%of sales
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
R&D update – priority innovation platforms
10
Arrows denote progress over the past 12 months.
Freshness solutions for laundry detergents
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Two exciting collaborations
11
Natural solutions for dairy and beef cattle
Elanco and Novozymes have entered into a joint development agreement to develop nutritional health solutions
Early stage - exploring the first ideas
Good fit with our animal health priority innovation platform
Making every drop count
BioSec® - our first product from the water platform
launched in December
Leveraging technology that partly originates from our
biomass conversion research
The Copenhagen wastewater treatment facility BIOFOS is the
first end-user applying our enzymatic dewatering technology
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Financials – 2018
12
Satisfactory 2018
• Initial 2018 financial outlook parameters met
• Organic sales growth at +4%
• Middle East and Feed were main negative surprises
• Reported EBIT margin at 28.3%, up 40bp, supported by productivity improvements and cost control
• Adjusted EBIT margin down 70bp, due to lower deferred income, higher commercial activity and currency headwind
• Net investments at DKK 1.4 billion, DKK 300 million lower y/y
• Free cash flow at DKK 2.3 billion, ~DKK 100 million lower than 2017 due to higher net working capital
Key financials(DKKbn)
2017 Realized
February 2018Outlook
2018Realized
Sales growth, organic 4% 4-6% 4%
EBIT margin 27.9% ~28% 28.3%
Net profit growth 2% ~0% 3%
Net investments excl. M&A 1.7 1.3-1.5 1.4
Free cash flow excl. M&A 2.4 2.3-2.6 2.3
ROIC incl. goodwill 25.6% 24-25% 24.2%
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Financials – 2019 outlook
13
3-6% organic sales growth and solid earnings
• Organic sales growth guidance of 3-6%. Currencies add ~1pp in reported Danish kroner
• Growth expected in all businesses as well as from both emerging and developed markets
• 3pp spread in range reflects strong new product performance and geopolitical uncertainty
• EBIT margin 28-29%, supported by productivity improvements
• Lower y/y net investments at DKK 1.0-1.3 billion
• Free cash flow excl. M&A at DKK 2.2-2.6 billion
• ROIC at ~23% ( including 1 percentage point negative impact from IFRS 16 Leases)
• Dividend of 5 DKK/share proposed, 11% increase y/y
• DKK 2 billion stock buyback program
Key financials(DKKbn)
2018realized
2019outlook
Sales growth, organic 4% 3-6%
EBIT margin 28.3% 28-29%
Net profit growth 3% 0-5%
Net investments excl. M&A 1.4 1.0-1.3
Free cash flow excl. M&A 2.3 2.2-2.6
ROIC incl. goodwill 24.2% ~23%*
* The implementation of IFRS 16 Leases has a negative impact on ROIC of approximately 1 percentage point.
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Summary
Satisfactory 2018 results – financial outlook met
• Satisfactory results; guidance parameters from beginning of 2018 met
• Challenging Middle Eastern markets were the main unexpected drag on organic sales growth
• Good development in emerging markets supported by innovation and increased commercial presence
• Pipeline solid and developing very well
3-6% organic sales growth guidance for 2019
• Uncertainty regarding certain businesses covered by a 3 percentage point overall range
• Step-up in commercial activities and strong innovation entering the market
• Solid earnings with EBIT margin between 28 and 29%
• Strategy and long-term target update expected in June
3-6% organic sales growth guidance for 2019
• Step-up in commercial activities and strong innovation entering the market
• 3pp spread in range reflects strong new product performance and geopolitical uncertainty
• Solid earnings with EBIT margin between 28 and 29%
• Capital Markets Day with strategy update on 17 June in Denmark
Satisfactory 2018 results
• Satisfactory results; guidance from beginning of 2018 met
• Challenging Middle Eastern markets were the main unexpected drag on organic sales growth
• Good development in emerging markets supported by innovation and increased commercial presence
• Pipeline solid and developing very well
Summary
14 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Overview and strategy
Innovation is the core
• Innovation focused on enzymes and microbes
• +100 new product launches• Close to 600bps in gross
margin expansions
Global presence
• ~6,400 employees • ~700 products sold in 140
countries• Major production footprint
in the 3 regions: North America, EMEA and Asia Pacific
Solid financials (2018)
• ~28% EBIT margin (2018)• ~24% ROIC (2018)• ~5x EBIT (since IPO)• ~7x Net Profit (since IPO)• DKK ~28bn in FCF (since
IPO)
Market leader
• ~48% of total market with DKK 14.3bn in sales (2018)
• ~3x Sales (since IPO) • Serving +40 different end
markets
World leader in Bioinnovation - Novozymes at a glance
R&D focused
• >1,500 people employed in R&D
• ~6,500 patents • 13% of sales invested in
R&D• DKK ~24bn spent on R&D
since IPO
Company background
• Listed in 2000 at Nasdaq Copenhagen (NZYM B)
• Majority owner Novo Holdings (~25.5% of the capital, ~70% of the votes and 2 seats on the Board of Directors)
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Sales (right) EBIT margin R&D/Sales ROIC
DKKm
17 years of innovation driven growth
16 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
29%of sales
17
4%
1%2%
1%0%
2014 2015 2016 2017 2018
4%5%
2%
9%
5%
2014 2015 2016 2017 2018
19%
-5% -3%
11% 12%
2014 2015 2016 2017 2018
7%
19%
5%
-3%
3%
2014 2015 2016 2017 2018
9%6%
13%
2%
-6%2014 2015 2016 2017 2018
Uniquely diversified group creating synergies and opportunities
32%of sales
19%of sales
14%of sales
6%of sales
Household CareOrganic growth
LaundryAutomatic dishwash
Hand dishwashProfessional cleaning
Food & BeveragesOrganic growth
BioenergyOrganic growth
Agriculture & FeedOrganic growth
Technical & PharmaOrganic growth
BakingGrain milling & starch processing
Food & nutritionBeverage
Conventional biofuelsBiomass conversion
FeedAnimal healthBioAgriculture
Textile & leather Forest products
Wastewater Biocatalysis
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Our global business serves a large number of local markets and industries
34%of sales
North America
Sites: Production, R&D
Main markets: Bioenergy, HHC, F&B, BioAg
Acc CAPEX: ~DKK 4.3bn
FTE’s: ~1,300
5Y avg. organic sales growth: +4%
36%of sales
Europe, the Middle East & Africa
Sites: HQ, Production R&D
Main markets: HHC, F&B, Feed
Acc CAPEX: ~ DKK 7.6bn
FTE’s: ~2,900
5Y avg. organic sales growth: +4%
10%of sales
Latin America
Sites: Production
Main markets: HHC, F&B, Feed, Biofuel
Acc CAPEX: ~DKK 420m
FTE’s: ~350
5Y avg. organic sales growth: +4%
20%of sales
Asia Pacific
Sites: Production, R&D
Main markets: F&B, HHC, Tech & Pharma
Acc CAPEX: DKK ~3.1bn
FTE’s: ~1,900
5Y avg. organic sales growth: +5%
Main sites with production and R&D Satellite production site Satellite R&D site
18 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Quality
• Superior logistical agility due to full control of value chain
• Ability to tailor solutions to specific customer and market needs
• First mover in a number of markets lead by ability to innovate
• High quality products that meet regulatory requirements
• Wide range of solutions and product offerings
High barriers
• Unique market-leading position in a global niche
• Strong technology backbone and competences
• More than 6,500 patents
• Diverse biotech know how and investments needed to compete
• Long term trusted partner for our customers
• Extensive know-how and manufacturing expertise
Competitive advantages across the value chain has led to a unique market leading position
Scale
• Production: 5 core plants in 3 regions
• Novozymes’ R&D investment equals 2/3 of total industry investments
• Technical services: half of commercial organization “on site”
• Market & technology coverage
Sustainability
• Sustainability is in our DNA helping our customers to save an estimated 88 million tons of CO2 (2018)
• Triple bottom line
• Pioneering life cycle assessment documentation
19 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Molecular biologyStrain development using protein engineering, genetic modification, DNA sequencing, etc.
Continued development in our technology base… …creates opportunities to develop new business platform
YeastBio-
Agriculture
Solutions for Water
Sugarcane platform
Freshness
Grain milling
Vegetable oil
processing
Developing new technology and business platforms
Bio-informatics & Systems biologyApplication of computer algorithms in the computational discovery of enzymes in DNA databases
Screening systemsApplication of high-throughput robotics to find the best enzyme candidates
Industrial-scale fermentationProduction of enzymes and proteins whilst continuously optimizing and improving yields
20 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Improve enzyme efficacyProtein engineering of enzymes improves efficacy. Customers buy efficacy, not volume
3
21
Enzyme technology improves Novozymes’ profitabilityNovozymes dedicates 10-15% of R&D spend to productivity improvement programs
Micro-organisms
Raw materials
Fermentation
Purification
Formulation
Enzymes
3 ways to gain productivity improvements
Improve production strainAbility to produce more enzymes per m3 fermentation tank through genetic engineering of host organism
1Optimize industrial productionProcess optimizationEquipment optimizationInput optimization
2
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Novozymes four strategic focus areas
Rally for changeWe will form partnerships and networks with customers, consumers, governments, suppliers, academia and others around us to make a sustainable difference
Lead innovationWe will inspire and excite our customers by delivering more significant innovation, tailored to their local markets
Focus on opportunitiesWe will prioritize the customers, markets and activities that hold the biggest opportunities for creating impact
Grow peopleWe want to be better at enabling our employees to develop their professional and leadership skills
22 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Tina Fanø
Agriculture & Bioenergy
Executive Vice President Novozymes since 1993
Peder Holk Nielsen
CEO & President
Novozymes since 1984
Thomas Videbæk
Research, Innovation & Supply
COO & Executive Vice PresidentNovozymes since 1988
Anders Lund
Household Care &Technical Industries
Executive Vice PresidentNovozymes since 1999
Prisca Havranek-Kosicek
Finance, IR, IT & Legal
CFO & Executive Vice PresidentNovozymes since 2018
AndrewFordyce
Food & Beverages
Executive Vice PresidentNovozymes since 1993
Executive Leadership Team
23 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Market overview
Household Care overview
Laundry
Key industry trends
• Growth in the liquid and unit dose market, driven by consumer convenience and stronger commercial focus on these categories
• Rising demand for Household Care solutions tailored to emerging-market needs, such as hot and humid conditions and mild handwashing alternatives
• Strong interest in freshness and odor reduction technologies and claims
Product launches
• Licheninase – A new enzyme launched for automatic dishwashing, targeting dried-in cereals
• Lipex® Evity 200 L – New premium liquid lipase for the removal of grease stains
4,353
4,6324,702 4,717
4,625
2014 2015 2016 2017 2018
Sales in DKKm
+9% +4% +1% +2% 0%
Organic growth
Automatic
dishwash
Hand
dishwash
Professional
cleaning
>60%NZ market share
25 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Eliminateharsh chemicals
Decrease dose, increase performance
Preserve fabrictexture, color
Our enzyme technology adds significant benefits
Remove stains,boost whiteness
Save energy, water, time
Deal with complex hygiene issues
26 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
0
20
40
60
80
20
Bn USD
34
2012
4637
18
2017
21
2022e
0%+4%
Emerging markets
Developed markets
5%
3%
CAGR ‘17-’22
…70% of the detergent market growth is expected to come outside of
developed markets
In the past, the majority of the detergent business was centered on
developed markets
But with the ongoing rise of emerging markets…
Developed markets Developed markets
Emerging markets
Emerging markets will be driving growth going forward
Source: Euromonitor, July 2018, Novozymes analysis
27 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Food & Beverages overview
Baking
Key industry trends
• Consumer focus on health, wellness and natural products
• Increase in raw material costs and focus on production process optimization
• Customers consolidating operations in order to increase overall efficiency
• Consumer focus on brands using local produce and/or catering to specific local taste, tradition and cultures
Product launches
• Palmora® – Our first solution for the palm oil industry
• Frontia® – A new technology for grain-milling
Grain milling Food & nutrition Beverage
30-40%NZ market share
3,2783,715 3,740
4,041 4,122
2014 2015 2016 2017 2018
Sales in DKKm
+4% +5% +2% +9% +5%
Organic growth
28 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
29
The grain value chain
• Significant presence in starch - industry leaders in enzymatic starch conversion for sweeteners
• Portfolio that includes LpHera®, Extenda®, Secura® and Sweetzyme®
• Frontia® opens a new segment with our starch customers in wet milling, enhancing the yield of key value streams - protein and starch
Starch slurryfrom wet mill
LiquefactionNovozymes LpHera®
SaccharificationNovozymes
Extenda®
Novozymes Secura®
Purification IsomerizationNovozymes Sweetzyme®
Refining
Fructose syrups
Maltose syrups
Mixed syrups
Corn
Milling
Frontia®
Gluten
Fiber
Glucose syrups
Ref
iner
y
Wet
mill
Grain milling Starch processing
Starch
Starch
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Bioenergy overview
Key industry trends
• Growing calls for lower CO2 emissions in the transportation sector, driving demand for ethanol
• Political push in favor of biofuels in more regions
• Volatility in commodity prices, affecting customer margins
Product launches
• Innova® Drive – Novozymes’ first launch within yeast for conventional biofuels. Innova® Drive is aimed at ethanol plants with short fermentation times
• Innova® Lift – The second product from our yeast platform. Innova® Lift is aimed at ethanol plants with longer fermentation times
2,270 2,543 2,4382,644
2,805
2014 2015 2016 2017 2018
Sales in DKKm
+19% -5% -3% +11% +12%
Organic growth
Conventional biofuels Biomass conversion
>50%NZ market share
30 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
1.0
1.5
2.0
2.5
3.0
3.5
Q1
201
3
Q2
201
3
Q3
201
3
Q4
201
3
Q1
201
4
Q2
201
4
Q3
201
4
Q4
201
4
Q1
201
5
Q2
201
5
Q3
201
5
Q4
201
5
Q1
201
6
Q2
201
6
Q3
201
6
Q4
201
6
Q1
201
7
Q2
201
7
Q3
201
7
Q4
201
7
Q1
201
8
Q2
201
8
Q3
201
8
Q4
201
8
$ per bu$ per gal
Corn Ethanol
Price development in ethanol and corn US Ethanol inventories
10
12
14
16
18
20
22
24
26
Q1
201
3Q
2 2
013
Q3
201
3Q
4 2
013
Q1
201
4Q
2 2
014
Q3
201
4Q
4 2
014
Q1
201
5Q
2 2
015
Q3
201
5Q
4 2
015
Q1
201
6Q
2 2
016
Q3
201
6Q
4 2
016
Q1
201
7Q
2 2
017
Q3
201
7Q
4 2
017
Q1
201
8Q
2 2
018
Q3
201
8Q
4 2
018
Bar
rels
in t
ho
usa
nd
s
Ethanol producer margin
Ethanol production
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Q1
201
3Q
2 2
013
Q3
201
3Q
4 2
013
Q1
201
4Q
2 2
014
Q3
201
4Q
4 2
014
Q1
201
5Q
2 2
015
Q3
201
5Q
4 2
015
Q1
201
6Q
2 2
016
Q3
201
6Q
4 2
016
Q1
201
7Q
2 2
017
Q3
201
7Q
4 2
017
Q1
201
8Q
2 2
018
Q3
201
8Q
4 2
018
Co
ntr
ibu
tio
n m
argi
n c
/gal
31 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Sources: EIA, Ethanol RFA
32
The Ethanol ProcessEnzymes are applied in multiple stages, along with yeast in fermentation
PastBasic products for liquefaction and saccharification
PresentMultiple offerings across liquefaction, saccharificationand now also yeast
FutureIncreasingly customized solutions for liquefaction and saccharification, novel solutions for other process steps
Designing enzymes for individual plantsUsing our diagnostic program to deliver custom fermentation solutions, tailored to a plant’s unique operating conditions
Addressing complexity in bioethanol production
From standard to more customized solutions
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
EUROPEAN UNIONRenewable Energy DirectiveProduction: 1.4bn gl/yearPotential addition: +1bn gl by 2030
TOTAL ADDITION BY 2030
24bn gallons/year
LATIN AMERICARenovaBioProduction: 7.4bn gl/yearPotential addition: +4-6bn gl by 2030
CHINAE10 by 2020Production: 6-700m gl/yearPotential addition:+5bn gl by 2020
INDIAStrong governmental push for public investment in 2GProduction: 280m gl/yearPotential addition: +150m gl/year 2G by 2030
NORTH AMERICARenewable Fuel StandardProduction: 15.8bn glPotential addition: +13bn gl by 2030*
+150m
+1bn
+4-6bn
+13bn
+5bn
Policy objectives point to a doubling of ethanol by 2030 vs. today
33 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
*Including RFS cellulosic volume mandate currently waived due to lack of capacity
Agriculture and Feed overview
Key industry trends
• Consumer focus on health, wellness and natural products
• Sensitivity to fluctuations in commodity prices among farmers
• Consolidation of large agricultural companies to increase overall scale and efficiency
Product launches
• Acceleron® B-360 ST – A biological seed treatment that promotes symbiosis between microbes and corn plants, strengthening root systems and increasing plants’ access to nutrients
• Balancius™ – A novel enzyme that improves digestion and nutrition in chickens
1,7282,130 2,207 2,108 2,045
2014 2015 2016 2017 2018
Sales in DKKm
+7% +19% +5% -3% +3%
Organic growth
Animal health BioAgriculture
25-30% (Feed enzymes)NZ market share
Feed
34 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Inoculants hold significant opportunity for market expansion across crops and geographies
Factors driving inoculant growth:Soybean Pulses Alfalfa Canola Corn Wheat Cotton Rice
Market expansionSignificant opportunity across crops and geographies
Global Planted Acres1
(5 year avg. 2009–2013)
~ 260m ~190m ~15m ~85m ~425m ~549m ~80m ~400m
Inoculants Treated Acres2 ~55-60% ~ 15% ~50% ~ 5% ~ 5% <1% <1% <1%
Immediate commercial portfolioWorking from strong starting position with existing commercial products
BioAg Existing Product Portfolio
NA
LATAM
RoW
Advantageous commercial footprintMonsanto’s broad global footprint enabling upstream distribution and leveraging relationships with distributor and retail channels
Current Inoculants Treatment Regime
Upstream(Seed Company)
Midstream (Distributor/Retailer)
Downstream (Grower)
Strong product position Moderate product position Minor product position No current product position
35 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
1. Source: FAO stats and Internal estimates 2. Internal 2014 estimates
BioAg Alliance PipelineIndustry’s most advanced microbials platform and R&D capability
The BioAg Alliance: R&D Development Pipeline
Biologicals
Collaborative
partnerships and
research are driving
innovative solutions to
produce food in a
sustainable way1 BioAg Alliance – Monsanto legacy microbials, partnership with Novozymes
1 3 4 Dev. Subm.Corn Soy
R&D Target Crop Phase* Enhancement**
2
BioAg Alliance1
BioYield 3
BioYield 2 for S America adv. to launch
BioYield 2 (Acceleron 360) adv. to launch
BioYield 3
Legacy Monsanto Biologicals Projects
YIELD & ABIOTIC STRESS
*R&D Phases:
1 – Research, 2 – Early Development, 3 – Late Development, 4 – Registrations Submitted
**Product enhancement: (Life Cycle Management activities)
Dev. – Under development; Subm. – Submitted for Registration
36 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Scientific evidence supports enzyme penetration - enabling livestock farmers to reduce feed cost
70% of total cost of poultry production is feed including additives which is around 5%.
Poultry producer margins are low when:• Feed prices are high• Meat prices are low
Feed formulation is an art and the nutritionist is often the decision maker. The scientific and nutritional philosophies combined with commodity prices determine enzyme inclusion levels
In tough conditions the producer sees two options:• Cost out = reduce enzyme inclusion • Increase efficiencies = increase enzyme
inclusion
The degree of enzymatic and nutritional understanding determines the decision:
• Advanced/’modern’ customers increase enzyme inclusion
• Simple/traditional customers reduce enzyme inclusion
• Enzyme inclusion increases the efficiency of poultry producers
• Lack of scientific understanding drives uneconomical customer decisions
37
Market is sensitive to feed and meat price changes
Low margins leave the producer different options
Scientific education of customers to increase penetration
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
ProActProtein• Maximizing protein utilization and improving nutritional value• Improves protein digestibility by >20%, increasing feed conversion• Reduces need for additional protein feed, such as soybean meal
Attractive value propositions in feed enzymes
80-90%
10-15%
35-45%
0%
25%
50%
75%
100%
Phytase Protease Carbohydrase
PhytasePhosphate• Only 3-30% of phosphate in feed is available to the animal• Ronozyme NP® releases half of the phosphate bound –
Ronozyme HiPhos® releases nearly all of it• Significant reduction in phosphorous excretion from animals as
farmers can save 25-100% of added phosphate
OthersEnergy• Xylanase & glucanase increase non-starch polysaccharide digestion• Amylase improves starch digestibility, releasing more energy• Cellulase improves fiber digestion• Grain feed savings of ~2.5% and less pollution (ammonia, nitrate,
nitrous oxide and CO2)
Estimated penetration across species
38 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Partnerships help drive innovation in feed & animal health
39
The world needs sustainable efficiency gains in animal production. Improving the yield in animal production would have significantly positive impact in terms of global warming and use of agricultural land.
• 9+ billion people by 2050• Protein demand to double next 40 years• Feed counts for 50% of costs in animal
production• Arable land per capita expected to decrease
by 35% from 2000 to 2050• Antibiotic resistance and regulation are
driving the need for alternatives to antibiotics
Maximize nutrition by enhancing digestive systems
Balancius™, a new gut health solution to optimize feed conversion
In-feed solution for poultry grow-out
Global roll-out of Alterion® continues
Poultry hatchery solution to ensurechicks get a healthy start in life
Pipeline for commercialization in 2018 and beyond
Pond treatment for warm water aquaculture
Long-standing partnership on Bacillus-basedproducts
PartnershipsCo-create the future of feed
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Technical & Pharma overview
Key industry trends
• Continuous focus on process optimization and cost reduction
• Water scarcity driving demand for solutions that reduce water consumption, improve water quality and clean wastewater
Product launches
• BioSec® – Novozymes’ first product for sludge dewatering. BioSec® is aimed at municipal wastewater treatment
• Low temperature cellulase for liquid denim abrasion and garment biopolishing
Answering the world’s call for cleaner water
Solving the world’s water problems presents a monumental challenge for society. As part of its Sustainable Development Goals (SDGs), the
United Nations has identified Clean Water & Sanitation as Goal 6, recognizing that water is the key to unlocking progress in several of the other SDGs.
829982
1,055 1,021
792
2014 2015 2016 2017 2018
Sales in DKKm
+9% +6% +13% +2% -6%
5 year organic growth
Forest products Wastewater
~50% (enzymes only)NZ market share
Textile & leather Biocatalysis
40 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Sustainability
Our long-term targets focus on world impact 2020Impact targets
Company performance – the traditional view on sustainability
World needs – areas where we can make an impact
Social
Environmental
• 10 transformative innovations• 5 partnerships for change• Educate 1 million people• Enable Zymers to develop• Save 100 million tons of CO2
• Reach 6 billion people with our biological solutions
Sustainableraw materials
Resourceefficiency
Productstewardship
Health &Safety
Human &labor rights
Employeesatisfaction
Sustainablegrowth
Education Health andlivelihoods
Climatechange
Operational targets
Environment• Energy consumption• Water consumption• CO2 emissions • Renewable energy
People• Occupational accidents • Employee absence• Employee satisfaction and motivation • Employee development• Women in senior management
Governance Corporate governance
Businessintegrity &antitrust
Economicgrowth
Jobcreation
Supply chainmanagement
42 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
-10%
40%
90%
140%
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Ch
ange
sin
ce 2
00
5
0%
1%
2%
3%
0
5
10
15
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Emp
loye
e ab
sen
ce
Acc
iden
ts p
er m
illio
n
wo
rkin
g h
ou
rs
Accidents per mill. working hours Employee absence (right)
We plan to continue our journey of operational excellence
Decoupling resource consumption from economic growth
Steady improvement in employee metrics
• Novozymes has over time proved how investments in efficiency and optimization programs pay off not only from a sustainability perspective but also from an economic perspective
• In the US we have a biogas plant which turns wastewater into steam
• 24% of the total energy consumed comes from renewable sources; mainly windfarms
Gross profit
Water
Energy
CO2 emissions
Sales
43 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
44
Leather:
50 kg CO2per ton of hide
Paper making:
150 kg CO2per ton of pulp
Agriculture:
15 kg CO2per ton of corn
Cosmetics:
190 kg CO2per ton of fatty acid ester
Textile:
350 kg CO2per ton of fabric
Beverage:
25 kg CO2per 1000 liters of beer
Animal feed:
130 kg CO2per 1000 Chicken
Detergent:
100 kg CO2per ton of laundry
Cereals:
110 kg CO2per ton of bread
We are reducing CO2 emissions together with our customers by offering solutions that help produce more with less In 2018, Novozymes helped customers save 88 million tons of CO2 through the application of Novozymes’ products
Vegetable oil:
44 kg CO2per ton of oil
Starch based biofuel
1100 kg CO2per 1000 liters of ethanol
Biomass based biofuel:
2200 kg CO2per 1000 liters of ethanol
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Novozymes’ remuneration principles for the Executive leadership teamRemuneration principles ensure close alignment with long term shareholder interests, links remuneration to shareholder gains and losses, and ensures management retention
Long term incentive program (2017-2019)Annual remuneration scheme
0
5
10
15
20
Mo
nth
s o
f sa
lary
p
er y
ear
Max 2 months of base salary cashbonus linked to fulfilment of EBITand sustainability targets
Max 3 months of base salary cashbonus linked to fulfilment ofpersonal targets
Base salary
Salary and cash bonus
Conditions for long term program• The incentive program consists of 50% stock options and 50% stocks with
the opportunity to double annual remuneration. Awards will depend on accumulated economic profit generated (75%) as well as average organic sales growth (25%).
• Economic profit is defined as: NOPAT - (Avg. inv. capital x WACC)• NOPAT is adjusted for hedging result to eliminate impact of currency
fluctuations as well as for any impacts from major acquisitions. A fixed WACC of 6% will be used during the entire program
• Stock options will be awarded annually (3-year vesting period), stocks in 2020 (no vesting period). Maximum clause caps upside (max. cap = 2x intrinsic value at establishment ex. inflation)
0102030405060708090
100
1.0 2.0 3.0 4.0 5.0 5.5 6.0 6.5 7.0 7.5 8.0% s
tock
& o
pti
on
s aw
ard
ed
DKKbn of acc. economic profit
Economic Profit (75% of the program)
0102030405060708090
100
1% 2% 3% 4% 5% 6% 7%% s
tock
& o
pti
on
s aw
ard
ed
Organic Sales growth
Organic growth (25% of the program)
45 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Financials and governance
Historical performance demonstrates track of delivery
47
DK
Km
Long term targets
• Return to historical organic revenue growth rates
• ≥26% EBIT margin
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,00018 years of organic growth
16.7%19.2% 20.0%
24.7%
28.3%
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
0%
5%
10%
15%
20%
25%
30%
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
EBIT margin
Profitability has benefitted from productivity improvements and operational leverage 2000-2018
EBIT margin
Historical performance demonstrates track of delivery
48
0
5,000
10,000
15,000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
0%5%10%15%20%25%30%
Invested Capital ROIC
0
500
1,000
1,500
2,000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
0%2%4%6%8%10%12%14%
CAPEX CAPEX to Sales
DK
KmD
KKm
DK
Km
NIB
D/E
BIT
DA
RO
ICC
AP
EX/S
ale
s
CAPEX
ROIC
Net interest-bearing debt
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Long term targets
• 0-1x Net interest bearing-debt-to-EBITDA
• ≥25% ROIC incl. goodwill
• ~8% CAPEX to Sales
-1,000
0
1,000
2,000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
-0.4-0.20.00.20.40.60.81.0
Net Interestbearing debt NIBD/EBITDA
Novozymes carries limited exposure to raw material fluctuations
Factors impacting COGS
• Productivity improvements
• Input prices
• Currency
Note: accounting practice implies that there is a time lag between current price levels and COGS
Factors impacting Novozymes’ input prices• Geographical location, e.g., differences in input
• Contractual agreements, e.g., timing and duration
• Substitution possibilities, i.e., flexibility in use of different inputs, not dependent upon one source
• Price development on other products produced by our suppliers from the same input
Split of Cost of Goods sold Raw materials consist primarily of different carbohydrates. Approximately 50% of raw material input are e.g., sucrose, maltose, glucose and starch
Raw materials; 34%
Energy/utilities & others; 22%
Indirect production costs; 44%
49 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
50
124 146 162 217 231 255 278 309 326 358 504 600 687 786 925 1,062 1,190 1,318 1,438
424 185392
8471,053 1,107
500400
832
2,0002,000
2,0002,000
2,000
0.33 0.40 0.450.63 0.70 0.80 0.90 1.00 1.05 1.15
1.601.90
2.202.50
3.00
3.50
4.00
4.50
5.00*
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Div
iden
d p
er s
har
e, D
KK
DK
K m
illio
n
Dividend / Buybacks
Dividend Buyback Dividend per share (right)
Since 2000 DKK ~27bn has been returned to shareholders through dividend or share buybacks
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
*Proposed for fiscal year 2018
51
Shareholder distribution
Two share classes; A and B shares
• All “B”- shares listed in Copenhagen under the symbol “NZYM B”
• All “A” share capital and 21,991,400 “B”-shares are held by Novo Holdings, who is fully owned by the Novo Nordisk Foundation
As of December 2018
• Novo Holdings, owned 25.5% of the share capital and controls 71.7% of votes (all A shares and 9% of B shares)
• Novozymes had more than 55,000 shareholders of whom 95% were private shareholders in Denmark
• ~50 institutional investors incl. Novo Holdings owned ~50% of the B-shares
*Distribution equals where shares are managed, Dec 2018
Shareholder distribution of B common stock*
Novo Holdings was the only major stockholder holding more than 5% of Novozymes common stock
4%9%
17%
18%
17%
34%
2%Treasury stock - Novozymes
Novo Holdings A/S
Denmark
UK
Rest of Europe
North America
Rest of World
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
52
Foundation ownership advocates long-term focus
Purpose of the Foundation
The Novo Nordisk Foundation is an independent Danish foundation
with corporate interests. The objective of the Novo Nordisk
Foundation is twofold:
• To provide a stable basis for the commercial and research
activities conducted by the companies within the Novo Group
• To support scientific and humanitarian purposes
0
50
100
150
200
250
300
A-shares B-shares
No
of
shar
es –
mill
ion
s
Free-float
Treasury
Foundation
Principal investments
SonionChr. Hansen
Xellia
Financial investments
Venture capitalSeed capital
Novo Group companies
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Structure and ownership
Our investor relations team
53
Tobias BjörklundHead of Investor relations+45 3077 8682tobb@novozymes.com
Naja WivelCoordinator+45 3077 2076nwv@novozymes.com
Further investor relations information is available from the company homepage at investors.novozymes.com
Carl AhlgrenIR officer+45 3077 2783cxal@novozymes.com
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
54
Forward-looking statements
This presentation and its related comments contain forward-looking statements, including statements about future events, future financial performance, plans, strategies and expectations. Forward-looking statements are associated with words such as, but not limited to, "believe," "anticipate," "expect," "estimate," "intend," "plan," "project," "could," "may," "might" and other words of similar meaning.
Forward-looking statements are by their very nature associated with risks and uncertainties that may cause actual results to differ materially from expectations, both positively and negatively. The risks and uncertainties may, among other things, include unexpected developments in i) the ability to develop and market new products; ii) the demand for Novozymes’ products, market-driven price decreases, industry consolidation, and launches of competing products or disruptive technologies in Novozymes’ core areas; iii) the ability to protect and enforce the company’s intellectual property rights; iv) significant litigation or breaches of contract; v) the materialization of the company’s growth platforms, notably the opportunity for marketing biomass conversion technologies or the development of microbial solutions for broad-acre crops; vi) the political conditions, such as acceptance of enzymes produced by genetically modified organisms; vii) the global economic and capital market conditions, including, but not limited to, currency exchange rates (USD/DKK and EUR/DKK in particular, but not exclusively), interest rates and inflation; viii) significant price decreases on inputs and materials that compete with Novozymes’ biological solutions. The company undertakes no obligation to update any forward-looking statements as a result of future developments or new information.
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance