Roadshow Presentation - FY 2017 Released on February 7, 2018
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Roadshow Presentation FY 2017 Released on February 7, 2018
Table of contents
1. Latest Results 3
2. Overview and Strategy 15
3. Market Overview 24
- Household Care 25
- Food & Beverages 28
- Bioenergy 30
- Agriculture & Feed 34
- Technical & Pharma 40
4. Sustainability 41
5. Financials and Governance 46
22 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and Governance
Good momentum Solid progress on strategic priorities • Increased focus on high-growth opportunities and markets • More impactful innovation • Stronger connections between research, marketing and sales across industries and geographies Accelerating growth • Divisional structure works. More focused organization • Robust strategies drive performance • Sustainability integrated in everything we do 3
Highlights
Solid 2017 performance
• Organic sales growth +4% (Q4: +4%) 2017 organic sales growth
by segment
• 4 out of 5 segments with organic growth ‒ diversity gives robustness: 11%
• Household Care +1% (Q4: -3%) 9%
• Food & Beverages +9% (Q4: +9%)
• Bioenergy +11% (Q4: +14%) 2%
1%
• Agriculture & Feed -3% (Q4: -7%)
• Technical & Pharma +2% (Q4: +22%)
-3%
Household Food & Bioenergy Ag & Feed Tech &
• EBIT margin 27.9% (~29% excluding one-time costs) Care Bev Pharma
• Solid cash flow generation at DKK 2.4bn, including higher investments
• 4 of 10 transformative innovations launched in the 2015-2020 program
Reported EBIT margin
Good momentum set to continue in 2018
• Organic revenue growth of 4-6%. All segments expected to grow 27,9% 27,9%
27,7%
• EBIT margin ~28%. Step-up in activity level, currency headwind
• Net profit growth ~0% including strong currency headwind
• 13% higher dividend proposed = 42% payout ratio
• DKK 2bn share buyback program
FY'15 FY'16 FY'17
• Long-term payout ratio upped from ~40% to ~50%
4
Organic sales growth by geography
+2%
+4% Q4 y/y
12M y/y
+3%
+6%
+12%
Q4 y/y
36% +5% Q4 y/y
12M y/y of sales 12M y/y
34% 20%
of sales
of sales
-11%
-1% Q4 y/y
12M y/y
10% +3%
12M y/y
35%
Emerging markets +5%
of sales 12M y/y
65%
-1% Developed markets
+7%
Q4 y/y
Q4 y/y
5
Household Care
32% of sales
Modest sales growth in 2017. Q4 declined as expected Full-year organic sales growth
• Organic growth y/y: 2017 +1%. Q4 -3% 9%
• North America and Europe up for the year
• Europe benefits from good dishwash enzyme sales growth
4%
• Enzyme volume reductions by some large global customers impact
developed and selected emerging markets 2%
1% 1%
• Regional players increase enzyme use across geographies
• Enzymes for liquids drive growth in Asia Pacific, in particular China FY'13 FY´14 FY'15 FY'16 FY'17
• First shipments from our freshness & hygiene platform in Q4
Quarterly y/y organic sales growth
2018: Ramp-up in freshness & hygiene. Continued
5%
pursuit of new opportunities in emerging markets 4%
• Freshness & hygiene platform expected to contribute from 2H 2018
1% 1%
• Focus on expanding our presence and increasing penetration in emerging
markets, leveraging our detergent design centers in India and China
• Cost focus by larger customers expected to continue into 2018
• Continued high innovation level; four new products launched in 2017
-3%
Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
6
Introducing our
freshness &
hygiene
platform
Current consumer challenges in laundry Trends increasing the need for freshness and hygiene
Consumers turning to liquid detergents
Yellow armpits, grime on Sweat and odor in Malodor issues in
cuffs and collars sportswear washing machines
Growth in use of synthetic materials
Increased use of cold-water wash
Our deep clean solutions will transform these complex
issues into something “fresh and clean”
7
Food & Beverages
28%of sales
Full-year organic sales growth
Strong 2017 performance supported by continued good
momentum in Q4 9%
• Organic growth y/y: 2017 +9%. Q4 +9%
• Solid growth across most platforms and regions; nutrition performed well 5%
with increased uptake of innovation. Starch performed satisfactorily, 4%
3%
though softer Q4 2%
• Baking performed well despite reduced prices in North America. Strong
growth in Europe, the Middle East & Africa
FY'13 FY´14 FY'15 FY'16 FY'17
• Beverages posted good growth throughout the year
In 2018, most segments are expected to grow. Quarterly y/y organic sales growth
Innovation and emerging markets are key 11%
10%
• Continued up-manning in 2018, especially in emerging markets 9%
• Newly launched innovation for vegetable oil processing and grain milling
6%
expected to contribute to sales growth in 2018
4%
• Baking to be impacted by continued price reductions in North America,
while sales in other geographies are expected to perform well
Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
8
Bioenergy
18%of sales
Full-year organic sales growth
Good growth in enzymes for conventional biofuels
19%
• Organic growth y/y: 12M +11%. Q4 +14%
• US ethanol production estimated to be up 2-3% in 2017 and Q4. US 12% 11%
ethanol inventories remain elevated
• Growth in conventional biofuels driven across geographies
• Innovation and tailoring customer solutions key to performance
• Biomass conversion contributing, but small part of overall sales -3%
-5%
Looking into 2018 FY'13 FY´14 FY'15 FY'16 FY'17
• US ethanol production for 2018 expected to be roughly on par with 2017
• Producer margins expected to be thin in 2018 Quarterly y/y organic sales growth
• Commercial launch of yeast product early 2018
Country-specific biofuel news 16%
14%
• RenovaBio Brazil may increase local demand for ethanol
8%
• US EPA discussions ongoing: removal of RVP restriction (to allow E15+ all 7% 6%
year round), ethanol exports included in RIN credit calculation, 2018 RVO
blend mandate, RFS point of obligation
• Chinese bioethanol mandate supportive of global industry, but more Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
visibility needed. Novozymes is well established in China
9
Agriculture & Feed
15%of sales
2017 impacted by weak farm economics Full-year organic sales growth
• Organic growth y/y: 12M -3%. Q4 -7%
• Pick-up in Q4 demand slow, as farmers expect continued tough 19%
conditions.
• Feed enzyme sales soft due to weak end-market demand 5%
7%
5%
• Animal health continues good traction from low base
-3%
Focus on innovation and market expansion FY'13 FY´14 FY'15 FY'16 FY'17
• Strong pipeline development; new products and regional expansions
key growth drivers
• Yield gains and on-seed survivability increased significantly Quarterly y/y organic sales growth
22%
• Acceleron® B-360 ST for corn expected to start shipments in 2H 2018 in
preparation for the 1H 2019 planting season in North America
8%
2%
-7%
-16%
Q4'16 Q1'17 Q2'17 Q3'17 Q4'17
10Priority innovation platforms
Arrows denote progress to next phase over the past 12 months
11Introducing “Solutions for water” as a new platform
• The world treats an estimated 200 billion m3 of wastewater on an annual basis
• Solving the world’s water problems is a monumental challenge for society
• Sustainable Development Goal #6: Clean Water and Sanitation
• HelloScience established as an open innovation network
Novozymes’ technology Relevance in water treatment
Cleaning fouling in water treatment
New freshness & hygiene technologies
systems
Degrading compounds in process and
New hydrolytic enzymes wastewater
Removing and recovering nutrients from
New microbial technologies
wastewater
Next-generation formulation Recovering energy from wastewater
122017 performance; 2018 outlook
Solid performance
• 4 out of 5 segments growing Key financials Realized Outlook
(DKKm) 2017 2018
• Agriculture & Feed weak in Q4
Organic sales
• Emerging-market investments increasing to support growth 4% 4-6%
growth
• EBIT margin solid at 27.9%. ~29% excluding one-time costs
• Net profit growth 2% impacted by additional one-time costs EBIT margin 27.9% ~28%
• Solid free cash flow generation of DKK 2.4bn
Net profit growth 2% ~0%
• 4 out of 10 transformational innovations by 2020 now launched
Net investments
1,665 1,300-1,500
excl. M&A
Good momentum set to continue in 2018
• Organic revenue growth expectation of 4-6% with growth from all segments Free cash flow
2,398 2,300-2,600
• EBIT margin ~28%. Step-up in activity level, currency headwind excl. M&A
• Free cash flow excl. M&A at DKK 2.3-2.6bn expected. Lower net investments ROIC incl.
25.6% 24-25%
• Proposed dividend of DKK 4.50/share. 13% higher dividend goodwill
• DKK 2bn share buyback program. Long-term payout ratio upped
from ~40% to ~50%
13Summary Good momentum Accelerating growth Innovation is key. Faster commercialization Capital Market Days 2018 Save the date: September 17-18, Raleigh, NC 14
Our business is about turning amazing science into sustainable biological answers in a growing world
6,500 2nd 48% 76 million
More than 6,500 active and In 2017, Science Magazine Market leader in industrial In 2017, our customers
pending patents ranked Novozymes the enzymes with an estimated avoided an estimated 76
world’s second-best science 48% of the global enzyme million tons of CO2 by
employer market in 2017 applying our products
⅓ sales 8 new
in EM 13% products 6,300
Roughly ⅓ of sales of our revenue is reinvested In 2017 we launched 8 new More than 6,300 employees
generated in emerging in R&D impactful products on six continents
markets in 2017
15Overview and Strategy
Novozymes at a glance
World leader in Bioinnovation Company background
Global presence Listed 2000
• ~6,300 employees
Ticker NZYM B
• ~700 products sold in 140 countries
• Major production footprint in 3 regions Exchange Nasdaq Copenhagen
Market leader
• ~48% Novozymes
• Serving +40 different end markets
R&D focused 5 years of organic growth & EBIT
• ~1,400 people employed in R&D
• ~6,500 patents
• ~ 13% of sales invested in R&D +7% +7% +4% +2% +4% 32%
• Innovation focused on enzymes and microbes 31%
EBIT margin
14.142 14.531 30%
Solid financials (2017) 14.002
12.459 29%
DKKm
• USD 2.4bn in sales 11.746 28%
• ~28% EBIT margin
27%
• ~25% ROIC
26%
25%
Majority owner Novo Holding 24%
• Controls 25.5% of the capital 23%
• ~70% of the votes 22%
• 2 seats on the Board of Directors 2013 2014 2015 2016 2017
17 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceExperienced leadership team
– with 22 years seniority on average
Thomas Peder Prisca Anders Tina Andrew
Videbæk Holk Nielsen Havranek-Kosicek Lund Fanø Fordyce
COO & Executive Vice President, CEO & President CFO & Executive Vice President, Executive Vice President, Executive Vice President, Executive Vice President,
Research, Innovation & Supply Novozymes since 1984 Finance, IR, IT & Legal Household Care & Agriculture & Bioenergy Food & Beverages
Novozymes since 1988 Novozymes since 2018 Technical Industries Novozymes since 1993 Novozymes since 1993
Novozymes since 1999
18 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceUniquely diversified group
- creates synergies and opportunities
Household Care Food & Bioenergy Agriculture & Technical and
Beverages Feed Pharma
Laundry detergents, Baking, Starch to syrups, Conventional biofuels Animal feed Textile & leather, Pulp &
Dish wash detergents, Brewing & alcohol, Cellulosic biofuels Animal health paper, Wastewater
Cleaning products Healthy concepts BioAgriculture
32% of sales
28% of sales
18%of sales
15%of sales
7%of sales
Organic growth, average Organic growth, average Organic growth, average Organic growth, average Organic growth, average
9%
~3% ~5% 9%
~7% ~7% ~7% 13%
19% 19%
12% 9%
5% 11%
4% 4% 5% 7% 5% 6% 6%
3%
2% 2% 2%
1% 1%
-5% -3% -3%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
19 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceSolid financial track record driven by innovation
17 years of innovation driven growth
30% 16.000
28%
26% 14.000 Strong performance since
24% 2000
22% 12.000
• ~3x Sales
20% • ~5x EBIT
10.000
18% • ~6x Net Profit
16% • DKK ~26bn in FCF
8.000
14% Innovation is the recipe
12%
6.000 • DKK ~22bn spent on R&D
10% since IPO
8% 4.000 • +100 new product launches
6% • Close to 600bps in gross
4% margin expansions mainly
2.000
through productivity
2%
improvements
0% 0
Sales DKKm EBIT margin R&D/Sales ROIC
20 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceOur global business serves a large number of local
markets and industries
36%
EMEA
NZ: HQ, Production R&D
Main markets: HHC, F&B, Feed
Acc CAPEX: ~ DKK 6.9bn
FTE’s: ~2,900
5Y Avg growth: +5%
20%
34%
ASIA PACIFIC
NORTH AMERICA NZ: Production, R&D
NZ: Production, R&D Main markets:
Main markets: F&B, HHC, Tech & Feed
Acc CAPEX: DKK ~2,8bn
Bioenergy, HHC, F&B, BioAg 10% FTE’s: ~1,800
Acc CAPEX: ~DKK 4bn
FTE’s: ~1,300 5Y Avg growth: +4%
5Y Avg growth: +4%
LATIN AMERICA
NZ: Production
Main markets: HHC,
Feed, BioAg & F&B
Acc CAPEX: ~DKK 400m
Main sites with production and R&D
FTE’s: ~350
5Y Avg growth: +6%
Satellite production site
Satellite R&D site
Percentage of total sales (2017)
21 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceOur set of competitive advantages across the value
chain has led to a unique market leading position
Scale Quality Sustainability High barriers
• Production: 5 core • Superior logistical • Sustainability is in our • Unique market-leading
plants in 3 regions agility due to full DNA helping our position in a global
control of value chain customers to save an niche
• Novozymes’ R&D
investment equals 2/3 • Ability to tailor estimated 76 million • Strong technology
of total industry solutions to specific tons of CO2 (2017) backbone and
investments customer and market • Triple bottom line competences
needs
• Technical services: half • Pioneering life cycle • More than 6,5000
of commercial • First mover in a number assessment patents
organization “on site” of markets lead by documentation • Diverse biotech know
ability to innovate
• Market & technology how and investments
coverage • High quality products needed to compete
that meet regulatory • Long term trusted
requirements partner for our
• Wide range of solutions customers
and product offerings • Extensive know-how
and manufacturing
expertise
22 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceDeveloping new technology and
business platforms
Continued development …creates opportunities to
in our technology base… develop new business platform
Molecular biology
Strain development using protein
engineering, genetic modification, DNA
sequencing, etc
Bio-
Yeast
Agriculture
Bio-informatics & Systems biology
Application of computer algorithms in the
computational discovery of enzymes in Vegetable Freshness
DNA databases oil Water &
processing hygiene
Screening systems
Application of high-throughput robotics Grain Sugarcane
to find the best enzyme candidates milling platform
Industrial-scale fermentation
Production of enzymes and proteins
whilst continuously optimizing and
improving yields
23 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceEnzyme technology improves Novozymes’ profitability
3 ways to gain productivity improvements:
Novozymes dedicates 10-15% of R&D spend to productivity improvement programs
Purification
Raw materials
Fermentation
Enzymes
Formulation
Micro-organisms
1 2 3
Improve production strain Optimize industrial production Improve enzyme efficacy
Ability to produce more Process optimization Protein engineering of
enzymes per m3 fermentation Equipment optimization enzymes improves efficacy.
tank through genetic Input optimization Customers buy efficacy, not
engineering of host organism volume
24 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceMarket Overview
Household Care overview
32%
of sales
Business Characteristics
• Mainly laundry detergents but expanding into dish wash 5 year organic growth
+9% +4% +1% +2% +1%
• Top three detergent producers make up ~50% of the global market; top
20 at ~80% Sales in DKKm 4.702 4.717
4.632
• Developed markets ~2/3 of global market
4.353
Key industry trends 4.222
• Growth in the liquid and unit dose market, driven by consumer convenience
and stronger investments in these categories
• Rising demand for solutions tailored to emerging-market needs such as hot
and humid conditions and demand for mild hand-washing alternatives 2013 2014 2015 2016 2017
• Certain global customers under pressure leading to formulation changes
Applications
Product launches 2017
• Laundry detergents (+85%)
• Medley® 2.0 – The second generation of our multienzyme solution for
laundry detergents ensuring strong and stable wash performance • Automatic dish wash
• Progress® excel – A new premium liquid detergent enzyme that enables • Hand dish
superior wash performance at all temperatures • Professional cleaning
• Progress® In – A new enzymatic solution to help detergent producers in NZ market share
emerging markets develop better detergents • >60%
• Freshness & hygiene – First groundbreaking solution from the freshness
Competition
& hygiene platform in Household Care
• Dupont
26 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceOur enzyme technology adds significant benefits
Eliminate Remove stains, Decrease dose, Preserve fabric Save energy, Deal with complex
harsh chemicals boost whiteness increase performance texture, color water, time hygiene issues
27 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceConsumers are shifting from traditional detergents
to new formats and increased performance
Global market 2010 Global market 2020E
USD USD
~42bn +50bn
Liquid
Powder
Unit dosage Powder Liquid Unit Dose
100%
90%
80%
70%
Big differences 60%
in detergent 50%
applications 40%
across 30%
20%
geographies
10%
0%
North America Europe (CWE) APAC RoW
Developed Markets Emerging Markets
Powder Liquid Unit dose
28 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceFood and Beverages overview
28%
of sales
Business Characteristics
Processing agricultural inputs Food products 5 year organic growth
• Relatively few product • Baking main market +3% +4% +5% +2% +9%
categories • Broad customer/application base Sales in DKKm 4.041
• Fragmented global customer • ~80% direct sales 3.715 3.740
3.190 3.278
base
• ~60% direct sales
2013 2014 2015 2016 2017
Key industry trends
• Consumer focus on health, wellness and natural products
• Raw material volatility and focus on production process optimization
Applications
• Customers consolidating operations in order to increase overall efficiency
• Baking
• Starch conversion
• Brewing and Beverage alcohol
Product launches 2017 • Nutrition
• Palmora® – Our first solution for the palm oil industry, which improves NZ market share
yield and plant performance for palm oil producers
• 30-40%
• Frontia® – A new technology for grain-milling customers that delivers
Competition
better yields in starches and gluten and reduces energy consumption in
wheat and corn-milling operations • DSM, Dupont, regional
29 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceThe grain value chain
• Significant presence in starch - industry leaders in enzymatic starch conversion for sweeteners
• Portfolio that includes LpHera ®, Extenda ®, Secura ® and Sweetzyme ®
• Frontia ® opens a new segment with our starch customers in wet milling, enhancing the yield of key value streams - protein and starch
Starch slurry
Corn Starch from wet mill Refining
Wet mill
Refinery
Liquefaction Saccharification Purification Isomerization Fructose
Milling Novozymes LpHera® Novozymes Extenda® Novozymes Sweetzyme®
Fiber Novozymes Secura® syrups
Frontia®
Gluten
Maltose Glucose Mixed
syrups syrups syrups
Grain milling Starch processing
Starch
30 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceBioenergy overview
18%
of sales
Market Characteristics
Conventional biofuels Biomass Conversion 5 year organic growth
• Starch based ethanol is mainly a • Global business (EU, US, LATAM) +12% +19% ´-5% -3% +11%
US market (+85%) • Dependency on political mandates Sales in DKKm
• US corn ethanol industry affected • Few players – investments can hard 2.543 2.644
2.270 2.438
by corn and ethanol prices to attract 1.909
• Ethanol makes up ~10% of US
gasoline consumption
Key industry trends 2013 2014 2015 2016 2017
• Growing calls for CO2 reduction in the transportation sector
• Political push in favor of biofuels in several regions
Applications
• Volatility in commodity prices affects customer margins
• Corn ethanol
• Biomass Conversion
• Yeast (new)
Product launches 2017/18 • Sugarcane
• Spirizyme® T – An advanced suite of glucoamylases that free up residual NZ market share
sugar in corn so that it can be fermented into ethanol, thereby increasing • >50%
ethanol yield Competition
• Innova Drive – a new yeast strain that help ethanol producers reduce • Dupont, regionals and other
process complexity and impact from process upsets – and get more ethanol technologies
from their raw materials
31 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceEthanol production
Bn gallons
Global ethanol production Ethanol producer margin
30 1,60
1,40
margin cents per gal
25
1,20
Contribution
20 1,00
15 0,80
0,60
10 16.2-
13.8 14.8 15.2 15.8 16.3 0,40
5 0,20
0 0,00
2013 2014 2015 2016 2017E
NA Brazil EU China RoW Total
Ethanol Contribution Margin
Price development in ethanol and corn $ per bu
US Ethanol inventories
$ per gal
3,5 9,0 26
Barrels in thousands
8,0 24
3,0
7,0 22
2,5 20
6,0
18
2,0 5,0
16
4,0 14
1,5
3,0 12
1,0 2,0 10
Corn Ethanol US fuel inventory
32 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and Governance Sources: EIA, Ethanol RFAAddressing complexity in bioethanol production
Designing enzymes for individual plants
Using our diagnostic program to deliver custom fermentation solutions, tailored to a plant’s unique operating conditions
Past Present Future
From standard to Basic products for Multiple offerings Increasingly customized
more customized liquefaction and across liquefaction, solutions for liquefaction and
saccharification saccharification and saccharification, novel solutions
solutions
now also yeast for other process steps
The Ethanol Process:
Enzymes are applied in multiple stages, along with yeast in fermentation
33 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernancePolicy objectives point to a doubling of ethanol by 2030 vs. today
EUROPEAN UNION
EU Renewable Energy Directive:
10% in transport by 2020* +1bn
Post 2020 framework under
TOTAL ADDITION BY 2030 development incl. mandate for 2G
Ambitious national policies
~ 24bn gallons/year 1G and/or 2G in FIN, SE, DK,
~ 90bn liters/year IT, FR, SK
~ 1bn gl/year
+1bn gl by 2030
+5bn
+13bn
NORTH AMERICA CHINA
Renewable Fuel Standard: E10 by 2020:
36bn gallons ethanol per 5 billion gallons
year by 2022 of which 16bn By 2025
gallons are cellulosic. US ambition to have large
moving slowly from E10 scale production of 2G
towards E15 +4-6bn INDIA
~ 16bn gl/year Strong governmental
+13bn gl by 2025/2030 push for public investment in 2G
11 biorefineries by 2022
LATIN AMERICA 22.5% ethanol blending
Biofuels Brazil: E27 + doubling goals by 2022
of volumes of ethanol ~ 250m gl/year
• Overall biofuels represent 4% of ROAD transport fuels today. In US needed by 2030 to +150m gl/year 2G by 2030
biofuels make up 10%, while its 27% in Brazil achieve climate ambition
Argentina: E12
• Ethanol makes up 3/4 of all biofuels produced today Mexico: E10 +150m
• US and Brazil dominate the global market with 70% of biofuels ~ 8bn gl/year
production (85% of ethanol) - mainly from corn or sugarcane +4-6bn gl by 2030
* indicative 0,5% for 2G and max 7% 1G
34 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceAgriculture and Feed overview
15%
of sales
Market Characteristics
Animal Health & Nutrition BioAg 5 year organic growth
• Sales and distribution through • Sales and distribution through +5% +7% +19% +5% -3%
partnerships partnership with Monsanto
Sales in DKKm
• Applications mainly for mono- • Americas ~90% of sales
2.130 2.207 2.108
gastric animals (poultry and swine) • Key crops: Soy, corn, pulses and 1.728
1.669
canola
Key industry trends 2013 2014 2015 2016 2017
• Consumer focus on health, wellness and natural products
Applications
• Focus on yield-gains
• Enzymes for animal feed
• Sensitivity to fluctuations in commodity prices among farmers
• Animal probiotics
• Consolidation of large agricultural companies
• Bioyield enhancement and
Biocontrol in Agriculture
Product launches 2017 NZ market share
• BioAg: Acceleron® B-200 SAT – By enabling additional upstream • 25-30% (Feed enzymes)
treatment in soybeans, this enhanced isoflavonoid stimulates beneficial
• Leading producer of inoculants
microbe growth in the soil and improves nutritional uptake
(BioAg)
• BioAg: Acceleron® B-300 SAT – a biological upstream seed treatment
Competition
product containing a fungus, Penicillium bilaii to boost corn yields
(Novozymes launch in Q4’16 – Alliance launch in Q1’17) • Feed: Dupont, AB Vista,
• BioAg: BASF, Bayer etc.
35 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceInoculants hold significant opportunity for market expansion
across crops and geographies
Factors driving inoculant growth:
Soybean Pulses Alfalfa Canola Corn Wheat Cotton Rice
Market expansion Global Planted Acres1
Significant opportunity across crops (5 year avg. ~ 260m ~190m ~15m ~85m ~425m ~549m ~80m ~400m
and geographies 2009–2013)
Inoculants Treated
Acres2
~55-60% ~ 15% ~50% ~ 5% ~ 5%BioAg Alliance Pipeline
Industry’s most advanced microbials platform and R&D capability
The BioAg Alliance: R&D Development Pipeline The BioAg
The BioAg Alliance
Alliance
PHASE 1: PHASE 2: PHASE 3: PHASE 4:
DISCOVERY: EARLY ADVANCED
Biologicals
PROOF OF CONCEPT PRE-LAUNCH
DEVELOPMENT DEVELOPMENT
10’s of Thousands
of Microbes
Thousands of
Candidates
Hits
Confirmed Hits /
Commercial Leads
Commercial
Candidates
Final Launch
Preparation
Pipeline Highlights:
• Corn BioYield 2 – Expected to be
Collaborative Corn, Corn approved in 2018 for sales in 2019; to be
Soy and BioYield 3 Soy branded as Acceleron B-360 ST1
partnerships and Wheat Bio-Nematicide Corn
BioYield 2 to • Corn BioYield 3 strains progress in Phase
BioYield
research are driving Pipeline be branded 2 with broader testing, fermentation and
Soy BioYield 2 as Acceleron
innovative solutions to BioControl for S.A. formulation development
B360 ST1
Pipeline
produce food in a • Soy BioYield 2 inoculants advanced for
Soy BioYield 2
North and South America , providing new
sustainable way for N.A.
longer life rhizobium and easier handling
benefits
Pipeline Advancement
Our technologies are
Commercial Highlights Two products launched in 2017:
on >80M acres today
Biological products like Acceleron B-300 SAT can increase
• Corn BioYield 1: Acceleron B-300 SAT in the U.S. with global
nutrient availability, which can lead to enhanced root and shoot
expansion opportunity (launched by NZ in Q4’16)
development, supporting stress tolerance, increased yield
potential and ability to absorb and store carbon • Soy BioYield 1: Acceleron B-200 SAT for soybeans in the U.S.
1. Subject to regulatory approvals. To be stacked with B-300 SAT
37 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceScientific evidence supports enzyme penetration
- enabling livestock farmers to reduce feed cost
Market is sensitive to feed and Low margins leave the producer Scientific education of customers to
meat price changes different options increase penetration
70% of total cost of poultry production is feed In tough conditions the producer sees two • Enzyme inclusion increases the efficiency of
including additives which is around 5%. options: poultry producers
• Cost out = reduce enzyme inclusion • Lack of scientific understanding drives
Poultry producer margins are low when: • Increase efficiencies = increase enzyme uneconomical customer decisions
• Feed prices are high inclusion
• Meat prices are low
The degree of enzymatic and nutritional
Feed formulation is an art and the nutritionist is understanding determines the decision:
often the decision maker. The scientific &
nutritional philosophies combined with • Advanced/’modern’ customers increase
commodity prices determine enzyme inclusion enzyme inclusion
levels • Simple/traditional customers reduce
enzyme inclusion
38 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceAttractive value propositions in feed enzymes
Phytase ProAct® Others
phosphate protein energy
Only 3-30% of phosphate in feed is Maximizing protein utilization and Xylanase & glucanase increase non-
available to the animal improving nutritional value starch polysaccharide digestion
Ronozyme NP® releases half of the Improves protein digestibility by Amylase improves starch digestibility,
phosphate bound – Ronozyme HiPhos® >20%, increasing feed conversion releasing more energy
releases nearly all of it
Reduces need for additional protein Cellulase improves fiber digestion
Significant reduction in phosphorous feed, such as soybean meal
excretion from animals as farmers can Grain feed savings of ~2.5% and less
save 25-100% of added phosphate pollution (ammonia, nitrate, nitrous
oxide and CO2)
Forceful pursuit of science leadership with DSM Estimated penetration across species
alliance across species, product classes and regions
100%
75%
Phytases Proteases 50%
80-90%
Carbohydrases 25%
35-45%
10-15%
0%
Phytase Carbohydrase Protease
39 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceAnimal health & nutrition
The world needs sustainable efficiency gains in animal production. Improving the yield in animal production would have
significantly positive impact in terms of global warming and use of agricultural land
• 9+ billion people by 2050
• Protein demand to double next 40 years
• Feed costs in 50% of costs in animal production
• Arable land per capita expected to decrease by 35% from 2000 to 2050
• Antibiotic resistance and regulation are driving the need for alternatives to antibiotics
Our partners
In 2015 we initiated a partnership In 2016 H1, Alterion® was released In March 2017 we embarked on a
with Adisseo with the shared together with Adisseo which is a new strategic collaboration with
ambition to enter and develop the probiotic for poultry at grow-out Boehringer Ingelheim in probiotics
market for probiotics at grow-out farms, as the first product in our for poultry hatcheries
farms innovation cluster “Natural growth
promotion”
40 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceTechnical and Pharma overview
7%
of sales
Business Characteristics
Wastewater Treatment Textile, Leather, Pulp and paper 5 year organic growth
• Microorganisms for industrial use • Enzymatic solutions and technical +6% +9% +6% +13% +2%
in wastewater treatment support for processing textiles and
• New initiatives to target e.g. leather Sales in DKKm
982 1.055 1.021
sludge watering and membrane • Solutions for process optimization for 829
cleaning paper producers 757
Key industry trends
• Increasing demand for wastewater solutions due to increasing water
quality/pollution cleanup regulations
2013 2014 2015 2016 2017
• Consumer demand for improved textile quality and longevity
• Enzymatic solutions optimizing processes and lowering chemical use Pharma divested end 2017 (~1/3 of business)
Applications
Launch of new innovation priority platform “Solutions for water”
• Wastewater/ Textiles / Leather /
• Solving the world’s water challenges presents a monumental challenge
Pulp & Paper / Biocatalysis
for society. As part of the SDG’s the UN has defined Clean Water and
Sanitation as goal #6 Novozymes market share
• We are investing in biotechnological solutions for water treatment that • ~50% (enzymes only)
could be used for; cleaning fouling on water treatment systems, Competition
degrading compounds in process water and wastewater, removing and • Dupont + regional
recovering nutrients from wastewater and generating energy, such as
biogas from wastewater
41 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceSustainability
New long-term targets focus on world impact 2020
New IMPACT targets Novozymes’ Updated operational targets
• 10 transformative innovations • Save 100 million tons of CO2 unique contribution: Environment People
• 5 partnerships for change • Reach 6 billion people with our • Energy efficiency • Occupational accidents
• Educate 1 million people biological solutions • Water efficiency • Employee absence
• Enable Zymers to develop • Reduction in CO2 intensity • Employee “satisfaction and
• Renewable energy motivation”
• Supplier program • Employee “opportunities for
• Gold Class RobecoSAM rating development”
• Carbon Disclosure Project A List • Women in senior management
World needs – areas where we can make an impact
Climate Sustainable Health and Economic Job Supply chain
Education
change growth livelihoods growth creation management
Company performance – the traditional view on sustainability
Business
Resource Sustainable Product Human & Employee Health & Corporate
integrity &
efficiency raw materials stewardship labor rights satisfaction Safety governance
antitrust
Environmental Social Governance (economic)
43 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceWe plan to continue our journey of operational excellence
• Novozymes has over time proved how investments in efficiency and optimization programs pay off
not only from a sustainability perspective but also from an economic perspective
• In the US we have a biogas plant which turns wastewater into steam
• 24% of the total energy consumed comes from renewable sources; mainly windfarms
Decoupling resource consumption Steady improvement in employee metrics
from economic growth 15
Gross profit
150% 3%
Sales
Change since 2005
Accidents per million
Employee absence
10
working hours
100% 2%
Water
5
50% Energy 1%
CO2 emissions
0% 0 0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Accidents per mill. working hours Employee absence (%)
44 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceWe are reducing CO2 emissions together with our
customers by offering solutions that help produce
more with less
In 2017, Novozymes helped customers save 76 million tons of CO2 through the application
of Novozymes’ products
Detergent: Animal feed: Textile: Cereals:
100 kg CO2 80 kg CO2 1100 kg CO2 110 kg CO2
per ton of laundry per ton of feed per ton of fabric per ton of bread
Agriculture: Beverage: Leather: Paper making:
15 kg CO2 25 kg CO2 100 kg CO2 150 kg CO2
per ton of corn per 1000 liters of beer per ton of hide per ton of pulp
Vegetable oil: Starch based biofuel Biomass based biofuel: Cosmetics:
44 kg CO2 1100 kg CO2 2200 kg CO2 190 kg CO2
per ton of oil per 1000 liters of ethanol per 1000 liters of ethanol per ton of fatty acid ester
45 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceNovozymes’ remuneration principles for the
Executive leadership team
Remuneration principles ensure close alignment with long term shareholder interests, links remuneration to shareholder gains
and losses, and ensures management retention
Annual remuneration scheme Long term incentive program (2017-2019)
Salary and cash bonus Economic Profit (75% of the program)
100
18 90
Max 2 months of base salary cash
% stock & options
80
Months of salary per year
16 bonus linked to fulfilment of EBIT and 70
14 sustainability targets
awarded
60
12 50
10 Max 3 months of base salary cash 40
8 bonus linked to fulfilment of personal 30
6 targets 20
10
4 0
Base salary
2 1,0 2,0 3,0 4,0 5,0 5,5 6,0 6,5 7,0 7,5 8,0
0
Bn DKK of acc. economic profit
Conditions for long term program
Organic growth (25% of the program)
100
• The incentive program consists of 50% stock options and 50% stocks with 90
% stock & options
the opportunity to double annual remuneration. Awards will depend on 80
accumulated economic profit generated (75%) as well as average organic 70
awarded
sales growth (25%). 60
• Economic profit is defined as: NOPAT - (Avg. inv. capital * WACC) 50
• NOPAT is adjusted for hedging result to eliminate impact of currency 40
fluctuations as well as for any impacts from major acquisitions. A fixed 30
20
WACC of 6% will be used during the entire program
10
• Stock options will be awarded annually (3-year vesting period), stocks in 0
2020 (no vesting period). Maximum clause caps upside (max. cap = 2x 1% 2% 3% 4% 5% 6% 7%
intrinsic value at establishment ex. inflation)
Organic Sales growth
46 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceFinancials & Guidance
Historical performance demonstrates track of
delivery
Long term targets
17 years of organic growth
16.000
14.000
12.000
10.000
DKKm
8.000
Return
6.000
4.000
to historical
2.000 organic revenue
0 growth rates
Profitability has benefitted from productivity improvements
and operational leverage 2000-2017
27,9% 30%
24,7%
EBIT margin
25%
19,2% 20,0%
20%
≥26%
16,7%
EBIT margin
15%
10%
5%
0%
48 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceHistorical performance demonstrates track of
delivery Net interest-bearing debt
2.000 1,0
0,8 Long term targets
0,6
NIBD/EBITDA
1.000
0,4
0,2
DKKm
0 0,0
-0,2
0-1x
-1.000 -0,4 Net interest bearing-
debt-to-EBITDA
Net Interestbearing debt NIBD/EBITDA
15.000 ROIC 30%
25%
10.000 20%
ROIC
DKKm
15% ≥25%
5.000 10%
5%
ROIC incl. goodwill
0 0%
Invested Capital ROIC
CAPEX
2.000 14%
CAPEX/Sales
12%
1.500 10%
8% ~8%
DKKm
1.000 6%
4%
CAPEX to Sales
500
2%
0 0%
CAPEX CAPEX to Sales
49 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceNovozymes carries limited exposure to raw
material fluctuations
Factors impacting COGS Split of Cost of Goods sold
• Productivity improvements, input prices, Raw materials consist primarily of different
currency carbohydrates. Approximately 50% of raw material
input are e.g., sucrose, maltose, glucose, starch.
• Note: accounting practice implies that there is a
time lag between current price levels and COGS Energy/utilities &
others; 20%
Factors impacting Novozymes’ input prices
• Geographical location, e.g., differences in input
• Contractual agreements, e.g., timing, duration
• Substitution possibilities, i.e., flexibility in use
of different inputs, not dependent upon one Raw
materials;
source 35% Indirect
production
costs; 45%
• Price development on other products produced
by our suppliers from the same input
50 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceSince 2000 DKK ~23bn has been returned to
shareholders through dividend or share buybacks
Dividend of DKK 4.50 per share for 2017 (up 12,5% from 2016), corresponding to a total dividend pay-out of DKK
1,318m (pay-out ratio of 42.3%). It has been proposed to initiate a new stock buyback program worth up to DKK
2bn. Accumulated dividends of DKK ~9.5bn and stock buybacks of DKK ~14bn have been returned to the
shareholders since 2000
Dividend per share, DKK
Dividend / Buybacks
5.000 4,50* 5,00
4,00
Dividend Buyback Dividend per share 3,50
4.500 4,00
3,00
2,50 3,00
4.000 2,20
1,90
1,60
DKK million
1,15 2,00
3.500 0,90 1,00 1,05
0,63 0,70 0,80
0,33 0,40 0,45 1,00
3.000
0,00
2.500
2.000 -1,00
2.000
2.000 2.000
2.000
-2,00
1.500
-3,00
832
1.000 -4,00
1.053 1.107 400
847 1.190 1.318
500 500 1.062
392 786 925 -5,00
424 600 687
185 326 358 504
124 146 162 217 231 255 278 309
0 -6,00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
*Proposed for
fiscal year 2017
51 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceShareholder distribution
Novozymes “B”-shares are listed on the Shareholder distribution of B common stock*
Copenhagen stock exchange under the symbol Novo A/S was the only major stockholder holding more
“NZYM B” than 5% of Novozymes common stock Dec 31 2017
North
Two share classes; A and B shares America; 27%
• All “B”- shares listed in Copenhagen under the
symbol “NZYM B”
Novo A/S;
• All “A” share capital and 24,031,400 “B”-shares 10%
are held by Novo A/S, who is fully owned by the
Novo Nordisk Foundation Rest of Europe;…
Rest of
World; 3%
As of December 2017
• Novo A/S, owns 25.5% of the share capital and
Own shares;
controls 71.2% of votes (all A shares & ~10% of 5% Denmark;
B shares) 17%
• Novozymes had more than 55,000 shareholders
of whom 95% were private shareholders in
UK; 25%
Denmark
• ~50 institutional investors incl. Novo A/S owned
~50% of the B-shares *Distribution equals where
shares are managed, Dec 2017
52 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceFoundation ownership advocates long-term focus
Purpose of the Foundation: Structure of Novo Holdings and ownership
The Novo Nordisk Foundation is an
independent
Danish foundation with corporate interests.
The objective of the Novo Nordisk Foundation is
twofold: to provide a stable basis for the
commercial and research activities conducted by
the companies within the Novo Group and to
support scientific and humanitarian purposes.
350
300
No of shares – millions
250
Financial Novo Group Principal
200 investments companies: investments
Venture capital Sonion
150 Seed capital Chr. Hansen
Free-float Xellia
100 Treasury
Foundation
50
0
A-shares B-shares
53 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and GovernanceOur investor relations team Further investor relations information is available from the company homepage at investors.novozymes.com Tobias Björklund Elsebeth Kjærsgaard Klaus Sindahl Naja Wivel Head of investor relations IRO IRO Coordinator, +45 3077 8682 +45 3077 2510 +45 5363 0134 +45 3077 2076 tobb@novozymes.com elgs@novozymes.com ksdh@novozymes.com nwv@novozymes.com 54 Latest Results • Overview and Strategy • Market Overview • Sustainability • Financials and Governance
Forward-looking statements
This presentation and its related comments contain forward-looking statements, including
statements about future events, future financial performance, plans, strategies and expectations.
Forward-looking statements are associated with words such as, but not limited to, "believe,"
"anticipate," "expect," "estimate," "intend," "plan," "project," "could," "may," "might" and other
words of similar meaning.
Forward-looking statements are by their very nature associated with risks and uncertainties that may
cause actual results to differ materially from expectations, both positively and negatively. The risks
and uncertainties may, among other things, include unexpected developments in i) the ability to
develop and market new products; ii) the demand for Novozymes’ products, market-driven price
decreases, industry consolidation, and launches of competing products or disruptive technologies in
Novozymes’ core areas; iii) the ability to protect and enforce the company’s intellectual property
rights; iv) significant litigation or breaches of contract; v) the materialization of the company’s
growth platforms, notably the opportunity for marketing biomass conversion technologies or the
development of microbial solutions for broad-acre crops; vi) the political conditions, such as
acceptance of enzymes produced by genetically modified organisms; vii) the global economic and
capital market conditions, including, but not limited to, currency exchange rates (USD/DKK and
EUR/DKK in particular, but not exclusively), interest rates and inflation; viii) significant price
decreases on inputs and materials that compete with Novozymes’ biological solutions. The company
undertakes no obligation to update any forward-looking statements as a result of future
developments or new information.
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