Novozymes Raises FY Profit Outlook, Reports Growth in Food Enzymes
23 Oct 2014 --- Novozymes has reported that sales growth in the first nine months was in line with expectations. Organically, sales grew by 8% (5% DKK, 8% LCY) compared with the first nine months of 2013. In the third quarter alone, sales grew by 9% organically compared with Q3 2013. EBIT grew by 16%, and the EBIT margin was 27.4%, up 2.4 percentage points compared with the first nine months of 2013.
Around half of the EBIT margin increase was a result of the one-time positive impact from The BioAg Alliance and the other half due to improved underlying profitability. Free cash flow came in strongly at DKK 4,319 million (US$733 million) due to the positive one-time impact from The BioAg Alliance, higher profit, a low level of CAPEX and a lower net working capital ratio.
The full-year organic sales growth outlook is narrowed in at the middle of the previous range to 7-8% from 6-9%. This is expected to translate into ~6% sales growth in DKK. Full-year expectations for EBIT growth are increased to 14-15% and for net profit growth to 13-14%, both up from 9-11%. The EBIT margin is now expected at 26-27%, up from around 26%. Expectations for ROIC, including goodwill, are increased to 22-23%, up from ~22%. Lastly, expectations for free cash flow are revised upward by DKK 400-500 million to DKK ~4,300 million, due to expectations of higher profit, lower CAPEX and a lower net working capital ratio.
Peder Holk Nielsen, President and CEO of Novozymes, comments: “We continue to see a good development in our business nine months into the year, and we increase the outlook for profit and cash flow for the full year. Innovation has been a key driver of top and bottom line, and recent currency developments are contributing positively to the outlook. Sales have been in line with expectations, and we narrow in the outlook for organic sales growth to the middle of the range. Uncertainties remain in a number of markets and in the macro environment, but our strong and diversified portfolio is broadly positioned for growth, and that is expected to prove valuable yet again.”
Sales to the Food & Beverages industries increased by 2% in DKK and by 5% in LCY compared with the first nine months of 2013. Sales to the baking industry and for the production of healthy foods were the most significant growth contributors, whereas sales to the starch industry witnessed a minor decline due to the continued challenging Chinese starch market. Sales to the baking industry increased as a result of good growth in dough conditioning and other application areas. Sales for freshkeeping applications were stable.
Sales to the Agriculture & Feed industries increased by 2% in DKK and by 6% in LCY compared with the first nine months of 2013. Organically, sales grew by 8%. Sales to the animal feed industry grew strongly as a result of good performance across markets and product categories and strong growth in the Americas.
Sales in Europe, the Middle East & Africa (Europe/MEA) grew by 8% in DKK and by 8% in LCY compared with the first nine months of 2013. All sales areas contributed to sales growth. Sales to the Household Care and Food & Beverages industries were the most significant growth drivers.
Sales in North America increased by 9% in DKK and by 12% in LCY compared with the first nine months of 2013. All sales areas contributed to the strong sales growth. Sales to the Bioenergy and Agriculture & Feed industries were the main growth drivers.
Sales in Asia Pacific were down by 5% in DKK and by 1% in LCY compared with the first nine months of 2013. Sales to the Bioenergy industry were the main contributor to sales growth, whereas sales to the Food & Beverages and Household Care industries were lower. China was an especially challenging market in the first nine months, among other things due to the continued tough market environment for starch conversion.
Sales in Latin America were up by 3% in DKK and by 11% in LCY compared with the first nine months of 2013. All industries contributed to the strong sales growth. Household Care was the most significant growth contributor.
