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Q3 2019

Difficult US ethanol and agriculture-exposed businesses; 1% organic sales growth in Q3

Organic sales growth of -2% (Q3: +1%) in the first nine months of 2019: Household Care 0% (Q3: +5%, Food & Beverages -1% (Q3: +1%), Bioenergy -4% (Q3: -5%), Agriculture & Feed -3% (Q3: +3%), Technical & Pharma -3% (Q3: -14%). EBIT margin at 27.6% and net profit down 7%. FCF bef. acq. DKK 2.1 billion.

Peder Holk Nielsen, President & CEO: “As announced on October 9, performance for the first nine months of 2019 was weaker than expected. And while Q3 grew organically, we continued to see a difficult US ethanol market, weak global agricultural markets and a starch business under pressure leading us to adjust the outlook. We are implementing our “Better business with biology” strategy and make good progress to secure we can deliver on the plan for the 2020-2022 period”.

Highlights 9M 2019:

  • Executing on the updated strategy and reallocation program announced on June 16
  • Innovation ramping up as expected in second half but difficult and persistent headwinds in US ethanol and global agriculture-exposed businesses, and in starch processing in Food & Beverages
  • Products launched in the third quarter; Optimize 500 for soy with an improved performance and on-seed stability; and Achieve Advance for low temperature automatic dishwashing conditions
  • Developed markets -1% (Q3 -2%) mainly due to weak US bioethanol; emerging markets -3% (Q3 +6%) mainly due to the Middle East but also to softness in certain emerging markets
  • Reported EBIT margin of 27.6% (Q3 23.0%) affected by one-offs from restructuring costs in the third quarter as well as accumulated deferred income relating to BioAg and the divestment of the remaining pharma-related royalty in Q2 (9M excl. one-offs at ~26%, Q3 excl. one-offs at ~30%)
  • Net profit down 7% y/y, impacted by one-offs and lower sales
  • Free cash flow before acquisitions of DKK 2.1 billion; net investments DKK 0.6 billion
  • Shares totaling DKK 1,362 million bought back under the 2019 stock buyback program of up to DKK 2 billion
  • As an event occurring on October 15, 2019, Novozymes announced that President & CEO Peder Holk Nielsen will leave his position in early 2020, and a successor will be announced shortly

2019 outlook: Organic sales growth of -2-0%, with an expected 0.5-1 percentage point addition to growth in DKK. EBIT margin at 27-28% including ~2 percentage points from one-offs. Net profit growth of -5-0%. Net investments at DKK 0.8-1.0 billion. Free cash flow before acquisitions maintained at DKK 1.9-2.3 billion. ROIC at ~21% (~22% excl. IFRS 16 ­– Leases).