Novozymes H1 Performance in Line, Reports Growth for Food Enzymes
14 Aug 2014 --- Novozymes has reported that sales growth in the first half was in line with expectations, within the range for full-year outlook. Organically, sales grew by 8% (4% DKK, 8% LCY). Sales growth slowed down during the period as expected after a strong first quarter and due to a higher comparable level in the second quarter.
EBIT grew by 19%, and the EBIT margin increased by 3.5 percentage points to 28.1%. The higher EBIT margin was driven by a one-time positive impact of roughly 2 percentage points from The BioAg Alliance and a significant improvement in underlying earnings. Free cash flow came in strongly at DKK 3,417 million due to the positive one-time impact from The BioAg Alliance and a relatively low level of CAPEX in the period.
The full-year sales growth outlook is maintained. Full-year expectations for EBIT and net profit growth are increased to 9-11%, up from 8-10%. Expectations for ROIC, including goodwill, are adjusted to ~22%, up from 21-22%. Lastly, expectations for free cash flow are revised upward by DKK 500 million, mainly as a result of lower expectations for net investments and a higher positive impact from The BioAg Alliance.
Peder Holk Nielsen, President and CEO of Novozymes, comments: “It’s been a good first half for Novozymes. Sales growth was in line with expectations and earnings were strong. For the full year, we maintain our outlook for sales growth, and profit is now expected to come in a little better than what we thought back in April. Looking beyond the financial performance, we’ve seen good progress in our innovation pipeline and portfolio of growth platforms in the first half of the year. In the second half, we'll continue to concentrate our efforts on advancing both to further strengthen our ability to deliver double-digit sales growth.”
Total sales in the first half of 2014 were DKK 6,094 million, an increase of 4% compared with the first half of 2013. Exchange rates had a negative impact on sales, and sales in LCY were up by 8%. Acquisitions and The BioAg Alliance had a minor impact on sales growth and, organically, sales grew by 8%. Sales to the Bioenergy industry were the most significant contributor to sales growth.
Sales to the Food & Beverages industries increased by 2% in DKK and by 5% in LCY compared with the first half of 2013. Sales for the production of healthy foods and to the baking industry were the most significant growth contributors. Despite relatively flat sales for freshkeeping applications, sales to the baking industry grew as a result of good growth in other application areas. Sales to the starch industry were flat for the period, as the important Chinese starch market remained challenging.
Sales to the Agriculture & Feed industries decreased by 3% in DKK and were up by 2% in LCY compared with the first half of 2013. Organically, sales grew by 4%. Sales to the animal feed industry developed well and contributed positively to sales growth. Sales to the animal feed industry increased as a result of good performance across product categories, especially in the Americas.
Food & Beverages sales growth is expected to be driven by further growth in solutions for the production of healthy foods. Sales to the baking industry are also expected to contribute to growth, whereas sales for starch conversion are now expected to be roughly flat given the continued difficult conditions on the Chinese starch market.
