Novonesis A/s Class B · OMXCOP:NSIS_B
Novonesis A/s Class B — Novozymes — Q1 2019 Earnings Presentation
54 slides from Novonesis A/s Class B's earnings presentation, Apr 24, 2019
Slide 1: Roadshow presentation Q1 2019
Roadshow presentation Q1 2019 Released on April 24, 2019
Slide 2: Table of contents
Table of contents Latest results 3 Overview and strategy 14 Market overview 24 Household Care 25 Food & Beverages 28 Bioenergy 30 Agriculture & Feed 34 Technical & Pharma 40 Sustainability 41 Financials and governance 46 22
Slide 3: Latest results
Latest results R Rethink Tomorrow hovozymes’
Slide 4: Highlights
Highlights Q1 weaker than expected due to US bioethanol Q1’19 2019 Key financials Realized Outlook • All segments roughly as expected, except for Bioenergy; declining US ethanol Sales growth, organic -4% 3-5% volumes were further impacted by the Midwest flooding • As expected, negative impacts from
Slide 5: Organic sales growth by geography
Organic sales growth by geography Europe, the Middle East & Africa North America 33%of sales 38% of sales Q1 y/y: -5% Q1 y/y: 3% Developed Emerging 68% (Q1 2019: 0% y/y) 32% 9% (Q1 2019: -10% y/y) Latin America Asia Pacific of sales 20% of sales Q1 y/y: -2% Q1 y/y: -13%* *incl. Iran 5 Latest results
Slide 6: Household Care
Household Care 33% of sales Q1 as expected • Organic sales development Q1 2019 -3% y/y • Weakness in the Middle East due to economic Quarterly y/y organic sales growth distress and trade sanctions • Global customers’ cost optimization still negative but less than before 2% • Sales to regional custom
Slide 7: Food & Beverages
Food & Beverages 29% of sales Mixed performance – overall roughly as expected • Organic sales development Q1 2019 -2% y/y Quarterly y/y organic sales growth • Good growth in food & nutrition and beverages • Baking performed well in Europe and Asia Pacific but hampered by planned price reductions in
Slide 8: Bioenergy
Bioenergy 18% of sales Tougher-than-expected first quarter • Organic sales development Q1 2019 -8% y/y • Lower-than-expected US production volumes and Quarterly y/y organic sales growth floods impacting the Midwest in latter part of the quarter, and continuing into April • Estimated volume decline o
Slide 9: Agriculture & Feed
Agriculture & Feed 14% of sales Q1 roughly as expected • Organic sales development Q1 2019 -6% y/y • Good BioAg performance Quarterly y/y organic sales growth • Sales of feed enzymes remain challenged; market conditions in Latin America continue to be difficult and tough comps in China 13% • Alterio
Slide 10: Two new product launches
Two new product launches Frontia® Jade CTS500 New addition to the grain-milling platform New microbial product for soybean seeds Untaps extra value in corn by releasing more starch, fibers and protein Launched under the Novozymes–Bayer partnership Enables customers to improve their yield, capacity a
Slide 11: Financials – Q1 2019
Financials – Q1 2019 US bioethanol makes for a weaker start to the year than Q1’18 Q1’19 expected Key financials Realized Realized Sales growth, organic 2% -4% • Organic sales development -4% • Bioenergy below expectations; Household Care, Food & Beverages and Ag & EBIT margin 28.9% 25.7% Feed rough
Slide 12: Financials – 2019 outlook
Financials – 2019 outlook Full-year earnings outlook maintained after early-April 2019 2019 2019 upgrade. Narrowed sales growth guidance following outlook outlook outlook Key financials January 24 April 4 April 24* weakness in US bioethanol Sales growth, organic 3-6% 3-6% 3-5% • Organic sales growth
Slide 13: Summary
Summary First quarter weaker than expected due to US bioethanol • All segments roughly in line with internal estimates except for Bioenergy • As expected, negative impacts from the Middle East, feed enzymes and planned price reductions in US baking enzymes • Earnings roughly as expected 3-5% organic
Slide 14: Overview and strategy
Overview and strategy = R novozymes'
Slide 15: World leader in Bioinnovation - Novozymes at a glance
World leader in Bioinnovation - Novozymes at a glance Solid financials (2018) Market leader 17 years of innovation driven growth • ~28% EBIT margin (2018) DKKm • ~48% of total market with DKK • ~24% ROIC (2018) 14.3bn in sales (2018) • ~5x EBIT (since IPO) 30% 16,000 • ~3x Sales (since IPO) • ~7x Ne
Slide 16: Uniquely diversified group creating synergies and opportunities
Uniquely diversified group creating synergies and opportunities Household Care Food & Beverages Bioenergy Agriculture & Feed Technical & Pharma Organic growth Organic growth Organic growth Organic growth Organic growth 19% 19% 13% 11% 12% 9% 9% 7% 6% 4% 5% 5% 5% 4% 2% 2% 3% 2% 1% 1% 0% 2014 2015 201
Slide 17: R&D update – priority innovation platforms
R&D update – priority innovation platforms Freshness solutions for laundry detergents Arrows denote progress over the past 12 months. 17 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Slide 18: Our global business serves a large number of local markets and industries
Our global business serves a large number of local markets and industries North America 34%of sales Europe, the Middle East & Africa 36% of sales Sites: Production, R&D Sites: HQ, Production R&D Main markets: Bioenergy, HHC, F&B, BioAg Main markets: HHC, F&B, Feed Acc CAPEX: ~DKK 4.3bn Acc CAPEX: ~
Slide 19: Competitive advantages across the value chain
Competitive advantages across the value chain has led to a unique market leading position 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 Scale • Production: 5
Slide 20: Developing new technology and business platforms
Developing new technology and business platforms Continued development in our technology base… …creates opportunities to develop new business platform Molecular biology Strain development using protein engineering, genetic modification, DNA sequencing, etc. Bio- Bio-informatics & Systems biology Agr
Slide 21: Enzyme technology improves Novozymes’ profitability
Enzyme technology improves Novozymes’ profitability Novozymes dedicates 10-15% of R&D spend to productivity improvement programs 3 ways to gain productivity improvements Purification Raw materials Fermentation Enzymes Formulation Micro-organisms Improve production strain Optimize industrial producti
Slide 22: Novozymes four strategic focus areas
Novozymes four strategic focus areas Rally for change We will form partnerships and networks with customers, consumers, governments, suppliers, academia and others around us to make a sustainable difference Lead innovation We will inspire and excite our customers by delivering more significant innov
Slide 23: Executive Leadership Team
Executive Leadership Team Anders Prisca Peder Tina Andrew Thomas Lund Havranek-Kosicek Holk Nielsen Fanø Fordyce Videbæk Household Care & Finance, IR, IT & Legal CEO & President Agriculture & Bioenergy Food & Beverages Research, Innovation & Supply Technical Industries Executive Vice President CFO &
Slide 24: Market overview
Market overview R Rethink Tomorrow hovozymes’
Slide 25: Household Care overview
Household Care overview Key industry trends Product launches (2018) Organic growth • Growth in the liquid and unit dose • Licheninase – A new enzyme +9% +4% +1% +2% 0% market, driven by consumer launched for automatic convenience and stronger commercial dishwashing, targeting dried- Sales in DKKm fo
Slide 26: Our enzyme technology adds significant benefits
Our enzyme technology adds significant benefits Eliminate Remove stains, Decrease dose, Preserve fabric Save energy, Deal with complex harsh chemicals boost whiteness increase performance texture, color water, time hygiene issues 26 Latest results • Overview and strategy • Market overview • Sustaina
Slide 27: Emerging markets will be driving growth going forward
Emerging markets will be driving growth going forward In the past, the majority of the But with the ongoing rise …70% of the detergent market growth detergent business was centered on of emerging markets… is expected to come outside of developed markets developed markets Bn USD 80 CAGR ‘17-’22 +4% 0
Slide 28: Food & Beverages overview
Food & Beverages overview Key industry trends Product launches (2018) Organic growth • Consumer focus on health, wellness • Palmora® – Our first solution +4% +5% +2% +9% +5% and natural products for the palm oil industry • Increase in raw material costs and • Frontia® – A new technology Sales in DKK
Slide 29: The grain value chain
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 stream
Slide 30: Bioenergy overview
Bioenergy overview Key industry trends Product launches (2018) Organic growth • Growing calls for lower CO2 • Innova® Drive – Novozymes’ first launch within yeast for +19% -5% -3% +11% +12% emissions in the transportation sector, driving demand for conventional biofuels. Innova® ethanol Drive is aim
Slide 31: Ethanol contribution margin, production and prices
31 Sources: EIA, Ethanol RFA 0 5 10 15 20 30 25 1.5 2.0 2.5 3.0 3.5 1.0 Q1 2013 Q2 2013 $ per gal Q3 2013 13.8 2013 Bn gallons Q4 2013 Q1 2014 NA Q2 2014 Q3 2014 14.8 Q4 2014 2014 Brazil Q1 2015 Q2 2015 Ethanol production Q3 2015 Corn 15.2 EU 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 China 15.8 2016 Q4 2
Slide 32: Addressing complexity in bioethanol production
Addressing complexity in bioethanol production Designing enzymes for individual plants Using our diagnostic program to deliver custom fermentation solutions, tailored to a plant’s unique operating conditions From standard to Past Present Future Basic products for Multiple offerings across Increasing
Slide 33: Policy objectives point to a doubling of ethanol by 2030
Policy objectives point to a doubling of ethanol by 2030 vs. today +1bn EUROPEAN UNION Renewable Energy Directive TOTAL ADDITION BY 2030 Production: 1.4bn gl/year Potential addition: +1bn gl by 2030 24bn gallons/year +5bn +13bn CHINA E10 by 2020 Production: 6-700m gl/year Potential addition: NORTH A
Slide 34: Agriculture & Feed overview
Agriculture & Feed overview Key industry trends Product launches (2018) Organic growth • Consumer focus on health, • Acceleron® B-360 ST – A biological +7% +19% +5% -3% +3% wellness and natural products seed treatment that promotes • Sensitivity to fluctuations in symbiosis between microbes and corn
Slide 35: Inoculants hold significant opportunity for market expansion
Inoculants hold significant opportunity for market expansion across crops and geographies Factors driving inoculant growth: Soybean Pulses Alfalfa Canola Corn Wheat Cotton Rice Market expansion Global Planted Acres1 Significant opportunity across crops and (5 year avg. ~ 260m ~190m ~15m ~85m ~425m ~
Slide 36: Latest results • Overview and strategy • Market overview • Sustainability • Financials and
36 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Slide 37: Scientific evidence supports enzyme penetration
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%. Market is sensitive Poultry producer margins are low when: • Feed prices are high to feed and meat • Meat prices ar
Slide 38: Attractive value propositions in feed enzymes
Attractive value propositions in feed enzymes Phytase Estimated penetration Phosphate • Only 3-30% of phosphate in feed is available to the animal across species • Ronozyme NP® releases half of the phosphate bound – 100% Ronozyme HiPhos® releases nearly all of it • Significant reduction in phosphoro
Slide 39: Partnerships help drive innovation in feed & animal health
Partnerships help drive innovation in feed & animal health Co-create the future of feed Partnerships 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
Slide 40: Technical & Pharma overview
Technical & Pharma overview Key industry trends Product launches 5 year organic growth • Continuous focus on process • BioSec® – Novozymes’ first product for sludge +9% +6% +13% +2% -6% optimization and cost dewatering. BioSec® is aimed at municipal reduction wastewater treatment • Water scarcity dr
Slide 41: Sustainability
Sustainability R Rethink Tomorrow hovozymes’
Slide 42: Our long-term targets focus on world impact 2020
Our long-term targets focus on world impact 2020 Impact targets Company performance – the World needs – areas where we can • 10 transformative innovations • 5 partnerships for change traditional view on sustainability make an impact • Educate 1 million people • Enable Zymers to develop • Save 100 mi
Slide 43: We plan to continue our journey of operational excellence
We plan to continue our journey of operational excellence • 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 s
Slide 44: We are reducing CO2 emissions together with our customers
We are reducing CO2 emissions together with our customers by offering solutions that help produce more with less 88 Detergent: Animal feed: Textile: Cereals: Million tons 100 kg CO2 130 kg CO2 350 kg CO2 110 kg CO2 CO2 per ton of laundry per 1000 Chicken per ton of fabric per ton of bread Agricultur
Slide 45: Novozymes’ remuneration principles for the Executive leadership team
Novozymes’ remuneration principles for the Executive leadership team Remuneration principles ensure close alignment with long term shareholder interests, links remuneration to shareholder gains and losses, and ensures management retention Annual remuneration scheme Long term incentive program (2017-
Slide 46: Financials and governance
Financials and governance a R Rethink Tomorrow hovozymes’
Slide 47: Historical performance demonstrates track of delivery
Historical performance demonstrates track of delivery 18 years of organic growth 16,000 14,000 12,000 Long term targets 10,000 • Return to historical organic DKKm 8,000 revenue growth rates 6,000 4,000 • ≥26% EBIT margin 2,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2
Slide 48: Historical performance demonstrates track of delivery
Historical performance demonstrates track of delivery 3,000 1.2 Long term targets 0.9 NIBD/EBITDA 2,000 0.6 • 0-1x Net interest bearing- DKKm 1,000 0.3 0.0 debt-to-EBITDA 0 -0.3 -1,000 -0.6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net Interestbea
Slide 49: Novozymes carries limited exposure to raw material fluctuations
Novozymes carries limited exposure to raw material fluctuations Factors impacting COGS Split of Cost of Goods sold • Productivity improvements Raw materials consist primarily of different carbohydrates. • Input prices Approximately 50% of raw material input are e.g., sucrose, maltose, glucose and st
Slide 50: Dividend per share, DKK
Since 2000 DKK ~27bn has been returned to shareholders through dividend or share buybacks Dividend / Buybacks 5,000 5.00 Dividend Buyback Dividend per share (right) 4.50 5.00 4,500 4.00 Dividend per share, DKK 4,000 3.50 4.00 3.00 3,500 3.00 DKK million 2.50 3,000 2.20 1.90 1.60 2.00 2,500 2,000 1.0
Slide 51: Shareholder distribution
Shareholder distribution Two share classes; A and B shares Shareholder distribution of B common stock* • All “B”- shares listed in Copenhagen under the symbol “NZYM B” Novo Holdings was the only major stockholder holding more than • All “A” share capital and 21,991,400 “B”-shares are held by Novo 5%
Slide 52: Foundation ownership advocates long-term focus
Foundation ownership advocates long-term focus Purpose of the Foundation Structure and ownership 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 resea
Slide 53: Our investor relations team
Our investor relations team Further investor relations information is available from the company homepage at investors.novozymes.com Tobias Björklund Carl Ahlgren Naja Wivel IR officer Coordinator Head of Investor relations +45 3077 2783 +45 3077 2076 +45 3077 8682 cxal@novozymes.com nwv@novozymes.c
Slide 54: Forward-looking statements
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, "bel