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Q2 2020

Robust first-half results despite significant headwinds, especially in Bioenergy; organic sales growth of 4% and EBIT margin of 27.5%. 2020 outlook reinstated

First half organic sales growth of 4% (DKK 3%): Household Care 11%, Food & Beverages 7%, Bioenergy -15%, Agriculture & Feed 17%, Tech. & Pharma -22%. EBIT margin at 27.5% and free cash flow before acquisitions of DKK 2.1 billion.

Ester Baiget, President & CEO: “I am very pleased to note that we delivered solid results of 4% organic sales growth with strong earnings and cash flows during what was a turbulent first six months of the year. The agility and resilience of Novozymes’ business demonstrates that fundamentals are in place to deliver innovation and sustainable solutions to customers. The pandemic is still very present, and we continue to take all necessary measures to keep our employees safe, protect the business and maintain our ability to supply our customers. But as countries and economies carefully reopen, we now reinstate our 2020 outlook with an organic sales performance of -2% to +2%, an EBIT margin of around 26% including much weaker currency effects, and free cash flow before acquisitions of 2.4 to 2.8 billion DKK.”

Highlights 1H 2020:

  • Organic sales growth of 4% (3% in reported DKK)
  • Very strong growth in Household Care driven by the continued roll-out of the freshness platform, supported by stockpiling; strong but mixed developments in Food & Beverages with baking as the main growth driver; solid growth in Agriculture & Feed supported by a one-off benefit in BioAg and timing of Feed sales; significant decline in Bioenergy and Technical & Pharma, our two business segments most severely impacted by COVID-19
  • Emerging markets reported strong organic growth at 9% while developed markets grew by 1%, hampered by the decline in the U.S. ethanol market
  • EBIT margin solid at 27.5%; underlying margin improvement of ~200 basis points
  • Free cash flow before acquisitions strong at DKK 2.1 billion; net investments at DKK 0.4 billion
  • Acquisition of PrecisionBiotics Group, well aligned with strategic direction in Human Health
  • Strong innovation agenda with six product launches; five broad market launches including the first enzyme for cleaning medical instruments and devices
  • Strong balance sheet and a NIBD/EBITDA of 0.9x allow for continued commitment to stock buybacks and dividend policy

 

2020 outlook: Novozymes reinstates its full-year 2020 organic sales outlook at -2% to +2%. Household Care, Food & Beverages and Agriculture & Feed are all expected to deliver mid-single-digit growth while Bioenergy and Technical & Pharma carry the most uncertainty in terms of the full-year performance. The EBIT margin is expected at around 26% supported by productivity improvements and cost control, while much weaker currency effects, lower operational leverage and the acquisition of PrecisionBiotics Group are all expected to hamper margin performance. The 2019 underlying EBIT margin was ~26%. Free cash flow before acquisitions is expected at DKK 2.4 to 2.8 billion with ROIC including goodwill at 18 to 19%. The stock buyback program totaling up to DKK 1.5 billion and the dividend policy and capital structure policy all remain unchanged.