Novozymes Posts “Positive” Q1 Results with Sales and Earnings “On Track”

26 Apr 2017 --- Denmark-based biotechnology company Novozymes has reported overall positive Q1 results with a 3% organic sales growth mainly driven by food & beverages and bioenergy. The company reports that sales and earnings are on track with this “good start to 2017” which has also seen solid progress on Novozymes strategic priorities. 

EBIT grew by 6%, and the EBIT margin improved by 0.7 percentage points to 27%. Adjusting for the extraordinary costs related to the layoffs in January, the EBIT margin would have been around 29%. The outlook for 2017 is maintained, the company says.

In January, when Novozymes released its financial group statement for 2016 results, the Danish producer of enzymes also announced it was axing 198 employees, 62 of them in Denmark. 

Novozymes says that as part of the organizational changes, resources are being focused on high-growth opportunities and growth markets, and the company has continued its significant investments in R&D and technology leadership. 

It has also made good progress in its innovation pipeline with the launch of two new solutions in Bioenergy and BioAg. Furthermore, last month Novozymes embarked on a new strategic collaboration with Boehringer Ingelheim in probiotics for poultry hatcheries.

“It’s been a good start to the year. The majority of our markets have developed well, and profitability was high. I’m pleased to see that we’re making progress on our strategic priorities, exemplified by the recent collaboration with Boehringer Ingelheim in probiotics for poultry hatcheries,” says Peder Holk Nielsen, President & CEO of Novozymes. 

“Finally, our pipeline of new innovation is advancing. All in all: positive developments in Q1.”

Food & Beverages sales grew by 6% organically and by 8% in DKK compared with the same period last year. Food & Beverages growth came from most of the company’s segments, with starch, nutrition and brewing contributing most. As expected, sales to Novozymes baking business declined due to the implementation of reduced prices in the North American fresh-keeping market. 

Sales growth in starch came from several markets. China contributed the most to growth due to a combination of corn price developments and increased demand for our recently launched innovation. 

Total costs excluding net financials, share of losses in associates and tax were DKK 2.743 million, an increase of 3% or DKK 75 million compared with the first quarter of 2016.

Gross profit increased by 4%, and the gross margin was 57.8% in the first quarter of 2017, slightly up compared with last year where the gross margin was 57.6%. Productivity improvements had a positive impact on the gross margin but were offset by unfavorable price/mix changes.

Operating costs were DKK 1,164 million, an increase of DKK 26 million, mainly driven by higher sales and distribution costs. Operating costs as a percentage of sales were 31%, 1 percentage point lower than the first quarter of 2016.
 
Sales and distribution costs increased by 6%, representing 12% of sales, while R&D costs were on par with last year, representing 13% of sales. Administrative costs increased by 1%, representing 6% of sales and other operating income totaled DKK 13 million in the first quarter of 2017, compared with DKK 9 million in the same period last year.

Nutrition also showed good uptake, mainly in the developed markets, where Novozymes recent launch in low-lactose dairy, Saphera, has been well received. “Lastly, our products within raw material optimization for brewing continued to show good momentum,” the company claims. 

Net profit was DKK 772 million, an increase of 4% from DKK 745 million in the first quarter of 2016, driven by higher EBIT and a lower tax rate, but partly offset by higher net financial costs.

In terms of sales outlook, three months into the year and Novozymes continues to expect to deliver organic sales growth of 2-5% in 2017, with all five sales areas contributing. The outlook for sales growth in Danish kroner remains unchanged at 3-6%.

Food & Beverages sales growth is expected to be driven primarily by new products launched in the starch industry in 2016 and 2017. Growth is expected to be higher in emerging markets. Baking is still expected to be negatively impacted by implementation of reduced prices in the North American fresh keeping market.