Sales and markets

Organic sales growth was 4% in 2012. Household Care and Microorganisms were the largest growth contributors, posting sales growth of 14% and 23% respectively. The Latin America region increased sales by 13%, where Household Care and Feed & Other Technical Enzymes were major contributors.

Total sales in 2012 were DKK 11,234 million, an increase of 7% compared with 2011. Exchange rates impacted sales positively, and sales in LCY were up by 3%. Acquisitions and divestments had a minor negative net impact on sales growth, and sales grew by 4% organically.

Enzyme Business

Enzyme Business sales were DKK 10,163 million, up by 7% compared with 2011. In LCY, sales were up by 3%. Sales of Household Care and Feed Enzymes were the strongest growth contributors in 2012. The global market for industrial enzymes grew by an estimated 7% to DKK 21 billion in 2012. Novozymes retained its market share at 47%.

Household Care Enzymes

Household Care Enzymes sales increased by 14% in DKK and by 12% in LCY compared with 2011. The strong sales growth was driven by a continued increase in penetration of enzymes across detergent tiers to enhance wash performance, enable low-temperature washing and replace traditional chemicals in detergent formulations. Sales of Household Care Enzymes to emerging markets were a strong contributor to global sales growth.

Food & Beverages Enzymes

Food & Beverages Enzymes sales increased by 5% in DKK and by 1% in LCY compared with 2011. Sales of enzymes for the production of healthy foods were the strongest contributor to sales growth in 2012. Sales to the starch and baking industries were roughly flat, while sales to the beverage alcohol industry were lower than in 2011.

Bioenergy Enzymes

Bioenergy Enzymes sales were down by 2% in DKK and by 9% in LCY compared with 2011. The U.S. Energy Information Administration estimates U.S. ethanol production to have declined by ~5% during 2012 compared with 2011. Bioenergy Enzymes sales were lower for the period as a result of lower U.S. ethanol production, a decrease in enzyme content per gallon of ethanol produced and price and product mix changes. In October 2012, Novozymes launched a new product for the bioenergy industry, Novozymes Avantec®, which enables producers of corn-based ethanol to increase the ethanol yield by up to 2.5% with the same amount of corn. Adoption of the new product is progressing well and had a minor positive impact on sales growth in Q4.

Feed & Other Technical Enzymes

Feed & Other Technical Enzymes sales were up by 7% in DKK and by 3% in LCY compared with 2011. Enzyme sales to the animal feed industry were the main growth driver as a result of a continued increase in sales of RONOZYME® ProAct on the Latin American, Asian and European markets as well as improved phytase enzyme sales. Enzyme sales to the other technical industries, including the textile industries, were lower than in 2011.

Household care – Achieving growth in a mature market

In 2012, Novozymes achieved strong sales growth of 14% in Household Care Enzymes through a combination of increased market penetration globally and market growth in emerging regions, such as Asia Pacific, the Middle East and Latin America.

Our increased market penetration is being driven by two factors: the desire of detergent manufacturers to utilize innovative enzyme solutions to improve the performance of their products and to reduce the volatility of their input costs.

Innovation boosts market share
Performance innovation can mean one of two things: a new enzyme class or the optimization of an existing solution. Examples of recent discoveries of new enzyme classes include Novozymes Mannaway®, which targets food stains containing guar gum, an ingredient found in foods such as ice cream, and Novozymes XPect®, which targets fruit stains. However, most innovation revolves around optimizing existing technology to improve its core performance and move detergent technology to the next level, where highly compacted liquid and powder detergents wash clothes in cold water. If all Europeans washed their clothes using cold water, it would be possible to close three large coal-fired power stations, reducing the continent’s CO2 emissions by 12 million tons a year. Through the application of our products, including household care, we aim to save customers 75 million tons of CO2 emissions by 2015.

Our sales growth in household care is also linked to the increasingly volatile cost of builders and oil-based surfactants, key ingredients in detergent formulations, and to greater demand for sustainable detergents. Enzyme prices have remained relatively stable over time, a trend we expect to continue in the future. Consequently, our customers are exploring the option of increased enzyme levels to stabilize input costs, a move that will also reduce the chemical load in detergents and environmental impact. Through our enzyme innovation, we are already able to provide solutions that successfully enable reduced use of surfactants and builders, and we expect to be able to do this to an even greater degree with future innovation.

Middle class driving growth
Economic growth in emerging markets is bringing new opportunities for the use of enzymes in household care products, as more and more people can afford washing machines and higher-quality detergents. Additionally, the improved performance of detergent formulations reduces laundry and dishwashing times, a luxury sought by a burgeoning middle class.

Novozymes has benefited from strong partnerships with global detergent manufacturers as they expand in emerging markets, as well as from close relationships with regional and local producers. These relationships have allowed us to develop a good understanding of the unique needs of each market and tailor our enzyme development accordingly to everything from basic entry-level products to highly advanced detergent formulations.

A bright future
We are confident that our innovative technology, product development and strong customer partnerships will enable us to sustain strong growth in Household Care. We offer detergent producers highly competitive and unique solutions. However, we acknowledge that growth is not automatic and that we must ensure our solutions are a step ahead of our competition. When we take market share away from chemical-based companies, we must expect them to reciprocate with stiff competition. Novozymes will continue to develop innovative technology and target all market tiers, enhancing washing performance and discouraging consumers from buying lower-quality detergents containing fewer enzymes.

In many areas of the world, consumers are facing economic hardship, but innovative and high-quality detergents can actually support consumers in their quest to save money and buy sustainable products by prolonging the lives of their clothes and washing in cold water. Novozymes is committed to making high-quality, sustainable washing easier, better and cheaper for consumers worldwide.

2012 ENZYME BUSINESS & BIOBUSINESS SALES BY INDUSTRY

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Household Care Enzymes
Food & Beverages Enzymes
Bioenergy Enzymes
Feed & Other Technical Enzymes
Microorganisms
Biopharma
2012 MARKET SHARE IN ENZYMES FOR INDUSTRIAL USE

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Novozymes
DuPont
DSM
Others
FIVE-YEAR SALES DEVELOPMENT IN ENZYME BUSINESS AND ORGANIC GROWTH
DKK million
%

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Household Care Enzymes
Food & Beverages Enzymes
Bioenergy Enzymes
Feed & Other Technical Enzymes
Organic sales growth
FIVE-YEAR SALES DEVELOPMENT IN BIOBUSINESS AND ORGANIC GROWTH
DKK million
%

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Microorganisms
Biopharma
Organic sales growth

BioBusiness

BioBusiness sales were DKK 1,071 million, up by 5% compared with 2011. Sales in LCY were flat compared with 2011. BioBusiness sales grew by 10% organically, adjusting for the divestment impact of Novozymes’ Biopharma operations in Sweden in 2011 and the acquisition impact of EMD/Merck Crop BioScience.

Microorganisms

Microorganisms sales were up by 23% in DKK and by 18% in LCY compared with 2011. Organically, sales grew by 17%, adjusting for the acquisition of EMD/Merck Crop BioScience in 2011. Microorganisms sales to the BioAg industry were the strongest growth driver in 2012 as a result of positive sales developments in Latin America, Europe and Asia. The majority of the sales growth in Microorganisms came from an exclusive sales and marketing agreement entered into during Q4. Microorganisms sales to the wastewater industry and for cleaning solutions were roughly flat in LCY compared with 2011.

Biopharma

Biopharma sales were down by 50% in DKK and by 53% in LCY compared with 2011. The divestment of Novozymes’ Biopharma operations in Sweden late 2011 had a considerable negative impact on sales in 2012. Organically, sales were down by 23% compared with 2011, as one large order from a customer in 2011 was not placed again in 2012.

BioBusiness paves the way for growth

BioBusiness was created in 2007 to develop promising new applications of biotechnology outside of enzymes, drawing on Novozymes’ strong knowledge base and culture of innovation. A number of key developments in 2012 further strengthened the foundation for commercial success in microorganisms and biopharmaceuticals.

In May, our new facility in China commenced commercial production of Novozymes Hyasis®, a pharmaceutical-grade hyaluronic acid for the treatment of arthritis and cataracts. The factory meets the highest pharmaceutical production standards – ICH Q7 GMP – and represents an investment of more than DKK 350 million in a market with estimated sales of DKK 1 billion a year. Developed in close collaboration with customers, Novozymes’ Bacillus-derived, non-animal product offers unparalleled consumer safety, avoiding the risks associated with other commercial sources of hyaluronic acid.

Connecting to create in 2012
In August, Novozymes partnered with BASF and Cargill, two global leaders in their segments, to develop an industrial biotech-based production process for acrylic acid from renewable raw materials. This high-volume chemical is used in a wide range of products, from diapers to coatings and adhesives. Novozymes’ microorganisms will convert renewable raw materials into 3-hydroxypropionic acid (3-HP), a chemical precursor to acrylic acid, helping to reduce dependence on finite resources such as oil.

In October, Novozymes BioAg’s partnership with Syngenta was expanded beyond JumpStart® to include the microbial-based fungicide Taegro®, a sustainable biological solution that helps farmers combat fungal crop diseases. Syngenta will be responsible for sales, marketing and distribution, and Novozymes for production and registration. BioAg is now the largest business area of BioBusiness in terms of sales.

Fit for growth
BioBusiness has built a solid business platform during its first five years. We have expanded our competencies, implemented new business models and refocused our resources on opportunities with a better strategic fit. As a result, we are convinced that BioBusiness has laid the foundation for double-digit annual organic growth.

Big risk, big payoff
It is in BioBusiness' DNA to carefully weigh sizeable risks against prospective rewards in the search for market-changing innovations. We have moved into areas with considerable potential and considerable failure risks, exploring how to develop solutions for global challenges such as improved health care, food availability, water scarcity and renewable alternatives to oil. In many instances, we are pioneering the industry. The key has been to leverage our abilities, form useful partnerships, learn new industries and minimize the inherent risks in building new business. We are also dependent on our partners, approval processes and market adoption.

We are still navigating the best way forward. There is a pipeline for new activities that fit strategically with Novozymes’ overall objectives and can balance the portfolio in terms of risk, future value creation and resource utilization. The BioBusiness Portfolio Board actively manages new opportunities and will continue to acquire, divest and terminate activities as required to ensure a balanced portfolio.

FIVE-YEAR SALES DEVELOPMENT IN BIOBUSINESS AND ORGANIC GROWTH
DKK million
%

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Microorganisms
Biopharma
Organic sales growth

Sales by region

Sales in Europe, the Middle East and Africa (Europe/MEA) increased by 8% in both DKK and LCY compared with 2011. The strongest growth drivers were sales of Household Care Enzymes and Microorganisms. The divestment of Novozymes’ Biopharma operations in Sweden had a negative impact in 2012.

Sales in North America were up by 1% in DKK and down by 6% in LCY compared with 2011. Household Care Enzymes were the main positive contributor to the development, whereas Bioenergy Enzymes and Biopharma had lower sales in 2012 compared with 2011. 

Sales in Asia Pacific were up by 12% in DKK and by 5% in LCY compared with 2011. Household Care Enzymes and Microorganisms were the main contributors to growth, whereas Feed & Other Technical Enzymes were the main negative contributor.

Sales in Latin America were up by 13% in both DKK and LCY compared with 2011. Household Care Enzymes and Feed & Other Technical Enzymes were the main growth drivers, whereas sales of Food & Beverages Enzymes fell in 2012.

Food standards set the agenda

Food safety has become a major public concern in recent years, resulting in more exacting quality standards from regulatory authorities worldwide to protect consumers. This is impacting the entire value chain from ingredient producer to branded manufacturer. Novozymes is actively helping customers meet these increased regulatory requirements, thus positioning the company as the quality leader in the enzyme industry.

Enzymes for food and beverages are Novozymes’ second-largest product area, accounting for 28% of sales in 2012, and the second-largest enzyme market globally with a value of more than $1 billion a year. Although enzymes are used widely across product categories, producers and countries, they remain a niche technology, making the development of processed foods one of Novozymes’ key long-term growth drivers.

Food and beverage manufacturers are increasingly demanding innovative products that address efficiency and health and are produced to high regulatory standards. Novozymes’ enzyme solutions meet these needs. Novozymes Acrylaway®, for example, has been proven to substantially reduce the formation of acrylamide, a potential carcinogen, in a broad range of foods, including coffee, biscuits, cereals and potato-based snacks. Our juice industry solutions, meanwhile, allow manufacturers to supply more appealing and nutritious products and optimize yields, thereby producing more with less.

Quality and regulatory leader
Two recent cases illustrate how Novozymes’ capabilities in quality and regulatory affairs can be used to mitigate risks to consumers and customers’ brands, address the expectations of authorities and customers, and improve the company’s competitive positioning:

The EU introduced the Food Improvement Agents Package (FIAP) in 2009 to harmonize legislation for food ingredients across Europe. FIAP is complex and requires extensive new documentation. Drawing on its know-how, networks and experience in managing complicated cross-functional collaborations with customers, Novozymes became the first enzyme producer in Europe to deliver dossiers for approval in May 2012, nearly three years before the March 2015 deadline. As the first mover, Novozymes was able to play an important part in setting expectations for the documentation to be supplied to the EU in the coming years, and so further position the company as the quality leader in the enzyme industry.

A growing number of food manufacturers require their suppliers to achieve third-party certification to a recognized food safety standard. This provides independent confirmation of compliance with generally accepted requirements and can save the manufacturers from conducting audits themselves. Novozymes moved early to obtain FSSC 22000 certification for a number of food enzymes in 2010, and is now seeing several customers adopting this standard themselves and requiring other important suppliers to have this certification.
 
Going forward
We expect authorities and customers to become increasingly demanding. Tougher requirements can naturally be regarded as a risk from a cost and process perspective, but we regard these regulatory changes as fundamental market developments where a limited upfront investment can produce a healthy return. We will continue to leverage our expertise, global reach and many years of experience as an international supplier of food enzymes to retain and develop our leading position in compliance and food safety.

2012 SALES BY REGION

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North America
Europe/MEA
Latin America
Asia Pacific

Product launches in 2012

 

Q1 2012

Novozymes Cellic® CTec3: A state-of-the-art cellulase and hemicellulase complex that allows the most cost-efficient conversion of pretreated lignocellulosic materials to fermentable sugars.

Q1 2012

Novozymes Sanferm® Yield: An improved glucoamylase enzyme that allows distillers to achieve higher alcohol yields and increased fermentation efficiency, with a shorter fermentation time.

Q1 2012

Taegro®: Biofungicide for control of soilborne pathogens such as Rhizoctonia and Fusarium on a variety of high-value crops (e.g., tomatoes, strawberries and lettuce).

Q2 2012

Novozymes Panzea®: A xylanase enzyme for conditioning baking dough. Key benefits include superior bread appearance, texture and volume of baked goods, and dry, stable dough.

Q3 2012

Novozymes Saczyme® Plus 2X: An improved glucoamylase enzyme mix that enables higher yields in beverage alcohol production.

Q4 2012 Novozymes Avantec®: An alpha-amylase enzyme with glucoamylase and protease enzyme side activities that increases ethanol yields in corn-based ethanol production by up to 2.5%.

 

BioBusiness comes of age

Thomas Videbæk speaks of positive developments in BioAg, and how BioBusiness is growing, although not always as expected.

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