arrow down

Q1 2019

Full-year earnings outlook maintained after early-April upgrade. Narrowed sales growth guidance following weakness in US bioethanol.

All businesses developed roughly as expected except for a weaker US bioethanol industry. Organic sales growth of -4%: Household Care -3%, Food & Beverages -2%, Bioenergy -8%, Agriculture & Feed -6%, Technical & Pharma +5%. EBIT margin 25.7%. Net profit 14% lower year-on-year (y/y). Free cash flow before acquisitions DKK 0.4 billion.

Peder Holk Nielsen, President & CEO: “The first-quarter decline in sales was no surprise – we communicated this back in January. We also expected US bioethanol to be down, but the decline was larger than we had foreseen. The floods in the Midwest have made it tougher for our customers. With the problems continuing into April, it will be difficult to reach the top end of the guided organic sales growth range, and we adjust our outlook to 3-5%. We’re confident sales growth will increase during the year as innovations, the freshness platform, BioAg seasonality and Bioenergy all step up, and the Middle East comparison gets easier.”

Highlights Q1 2019:

  • All businesses roughly as expected except for Bioenergy. A declining US bioethanol market has been further impacted by the Midwest flooding since mid-March
  • As expected, negative impact from the Middle East, feed enzymes and the planned price reductions in US baking enzymes
  • Developed markets flat; 10% organic sales decline in emerging markets, with the Middle East as the main drag
  • EBIT margin soft but as expected at 25.7%, mainly due to lower gross margin from lower sales and a planned increase in sales and distribution costs
  • Net profit down 14% y/y due to lower EBIT and hedging losses
  • Free cash flow before acquisitions DKK 0.4 billion; net investments DKK 0.1 billion

2019 outlook: Organic sales growth 3-5%; an expected 1 %-point added to growth in DKK. US bioethanol production in Q1 was more negative than expected, especially in the wake of flooding in the Midwest in March, continuing into April. The 3-5% range reflects both strong new product performance and geopolitical uncertainty. Stronger growth in 2H vs. 1H y/y for multiple reasons. EBIT margin at 29-30% supported by solid productivity gains and release of full deferred income as communicated on April 4 following the new BioAg setup. Net profit growth of 5-10%. CAPEX at DKK 1.0-1.3 billion. FCF bef. acq. at DKK 2.0-2.4 billion. ROIC expected at ~24% (~25% excl. IFRS 16 Leases). Stock buyback program of up to DKK 2bn to be initiated April 25, 2019.