Novozymes reports tough US bioeconomy conditions hit Q3 sales growth

In Denmark, Novozymes announced organic sales growth for 2019 to date of -2% (Q3: +1%). In its segements, results were: 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.

The company pointed to highlights such as: 

• 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
• 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%)

CEO Peder Holk Nielsen, President said, “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”.

Looking ahead, Novozymes said that it expected 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, and a net profit decline of 5-0%. 

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