Novozymes taps new CEO, aims to boost growth; Bio-ag, next-gen biofuels key

January 22, 2013 |

Novozymes-logoIn Denmark, Novozymes appointed Peder Holk Nielsen as President and CEO, effective April 1, 2013, succedding Steen Riisgaard, who steps down in a planned succession after 12 years as CEO and 33 years with the company and Novo Industri/Novo Nordisk.

Digest readers will be familiar with Nielsen, who has been serving most recently as Novozymes’ Executive Vice President and head of its Enzyme Business, a position he has held since 2007. Prior to this, Nielsen held a wide variety of management assignments in Novozymes and Novo Industri/Novo Nordisk.

Nielsen heralded the company’s $115M investment in Beta Renewables in a visit with the Digest community last October in San Francisco at Advanced Biofuels Markets – taking a 15% stake in the venture alongside Texas Pacific Group and Chemtex.

That partnership took on a new dimension this week with the announcement that GraalBio, who will be deploying Beta Renewables PROESA celluloisc ethanol technology in a $1.96 billion set of investmetns in Brazil, received a $437 million infusion from BNDES, the Brazilian development arm — the majority of which will take the form of an equity injection. BNDES will take a seat on the GraalBio board — and the venture is committed to become a heavy customer for cellulase enzymes.

The outlook for Novozymes is closely linked to growth opportunities in next-gen biofuels and in bioag, Nielsen told the Digest in an interview yesterday.

“In Bio-ag, for example, we just just recently signed a biopesticide sector agreement with Syngenta, and we are really excited about that,” Nielsen said.

Other partnerships in bioag and next-gen biofuels? “We have been committed to building strong partnerships, and in every situation it is at the very least something to consider. It always comes down the the right financial agreement.”

Nielsen and Novozymes remain bullish about next-gen biofuels, but are cautionary about expectations beginning before the mid-2010s.

“We’re excited about the pipelines,” Nielsen noted. “What we see now is a line-up of prospective customers trialing biomass in Crescentino [Beta Renewables' first commercial plant, in Italy]. Hopefully what will emerge are contracts and deals that could be signed in 2013 — but that will mean operations no earlier than 2015, or later, because of the time required to build the plants. We expect the real growth to come in 2016-17 while 2015 will be smaller, but not insignificant.”

The prospective investors? “It’s really across the board, you have energy investors, financial investors, companies like Graal Bios, and biomass companies.”

Geographically, Nielsen see different sectors working in different regions. “For cellulosic biomass, the trend has been towards Latin America and Asia, and less in the US and North America.” In Bio-ag, Nielsen sees a different mix: “Bio-ag is primarily Latin America and North America.”

Reduced growth rate 2013-14

With the outlook on next-gen biofuels remaining strong but the timelines stretching into the mid-2010s for global scale, Novozyme’s long-time CEO Steen Riisgaard lowered the company’s revenue growth forecast in an earnings announcement this week.

“With 2012 behind us, we have reviewed our long-term growth scenarios and decided to adjust our long-term financial targets. We are still confident that we can reach the long-term sales growth target of more than 10%, although not until 2015. Meanwhile, profitability will remain at current levels, and we are raising our target for EBIT margin to more than 24%.”

As Riisgaard alluded, the company’s earnings are strong. Yesterday, the company reported 7% sales growth in 2012 compared with 2011. EBIT increased by 17%, raising the EBIT margin to 24.4%. Net profit grew by 10%. Strong free cash flow before acquisitions of DKK 1,581 million exceeded the outlook.

“For 2013, the EBIT margin is expected to remain at its current high level, while organic sales growth is expected to increase to 5-8%,” Riisgaard projected.

“We delivered strong earnings growth and record profitability in a year when organic sales growth was challenged and came in at 4% – below our ambition,” says Steen Riisgaard, President & CEO. The ROIC target is confirmed as more than 22%. The company’s strategy is unchanged and, under the leadership of the new President & CEO, Peder Holk Nielsen, Novozymes will continue to focus on innovation, partnerships and sustainability.”

New executive leadership team as of April 1, 2013

Novozymes executive management will organize into a functional structure with all current Executive Vice Presidents and joined by Andrew Fordyce. Today VP of Sales and Customer Solutions, Andrew Fordyce, 49, has been with the company since 1993, holding positions in commercial operations, R&D and production in Denmark, Switzerland and the US.

• President & CEO: Peder Holk Nielsen
• Business Development: EVP Thomas Videbæk
• Business Operations: EVP Andrew Fordyce
• Supply Operations: EVP Thomas Nagy
• Research & Development: EVP and CSO Per Falholt
• Corporate Functions: EVP and CFO Benny D. Loft

The bottom line

The Novozymes board opted for continuity at the top, in elevating a current executive to the top slot. However, there are incremental shifts already apparent, in the move towards a functional structure which creates, according to Nielsen, “one big supply organization,” supporting current businesses such as corn ethanol enzymes.

Meanwhile, the Business Development Unit, led by Videbæk, will include the work on developing the biomass conversion technologies including cellulase enzymes.

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