Novozymes Matches Expectations But Reports Food Enzyme Decline

Sales of food enzymes were on level with the first quarter of 2008 in DKK and down by 5% in LCY. Sales of enzymes to the baking industry were on level with the first quarter of 2008.

29/04/09 Novozymes has reported a rise in first-quarter operating profits that matched expectations. Novozymes, which is the world’s leading supplier of industrial enzymes said that sales in the first quarter of 2009 were affected by the global economic downturn and a troubled US bioethanol industry, bringing sales in local currencies (LCY) on par with last year. This was below expectations. Expected full-year sales growth in LCY is now slightly positive, reflecting first-quarter sales and reduced expectations. The development in profits and cash flow was better than expected for the quarter. Expected 2009 operating profit margin is increased to 19–20%. Current exchange rates reduce full-year operating profit growth in DKK. Outlook for net profit is maintained.

“We entered 2009 knowing it would be a tough year, and sales in the first quarter more than confirmed this. The extent of the global economic downturn indicated by the first quarter has taken us and some of our customers by surprise. This, and declining sales to the US bioethanol industry, resulted in sales below expectations,” says Steen Riisgaard, President and CEO. “We're consequently reducing our 2009 sales outlook, to now only slightly positive growth. On a positive note, we expect to improve profit margins. However, overall, we still face high uncertainty as to what may lie ahead.”

Total sales rose by 5% to DKK 2,126 million. Exchange rates, especially the strengthened US dollar, impacted sales positively by 5 %-points. There was no impact from acquisitions, so sales in LCY were on level with the same period last year.

Enzyme Business sales increased by 4% in DKK in the first quarter, whereas sales in local currency (LCY) were down by 2%. The quarter was unfavorably affected across industries by the economic downturn and by a slowdown in US bioethanol production.

BioBusiness sales, consisting of microorganisms and biopharmaceutical ingredients (BPI), increased by 16% in LCY and 14% in DKK. The strong quarterly growth was attributable to timing of sales of microorganisms to the BioAg industry.

Novozymes reported a quarterly decline in food enzymes sales due to the economic downturn. Sales of food enzymes were on level with the first quarter of 2008 in DKK and down by 5% in LCY. Sales of enzymes to the baking industry were on level with the first quarter of 2008. Enzymes are primarily used in industrial production of bread, a staple good for which demand can be expected to be stable during economic downturns. Sales of enzymes to the brewing industry were negatively impacted by the economic downturn, especially in the developing markets, with declining beer volumes. Further, customers’ and distributors’ financial difficulties and lower raw material prices reduced demand for brewing enzymes in the quarter.