Expectations for 2013

Expectations for 2013

 
Financial targets:
Sales growth of 4-7% in DKK   
Sales growth of 5-8% in local currency (LCY)
Organic sales growth of 5-8%
EBIT growth of 4-7% 
EBIT margin of around 24%
Net profit growth of 6-9%
Investments of around DKK 1,100 million
Free cash flow before acquisitions of around DKK 1,650 million
ROIC of around 20%

Sustainability targets:
Ensure 95% supplier adherence to our supplier program for commercial, quality and sustainability performance
Improve energy efficiency by 42% compared with 2005
Maintain CO2 efficiency above 50% compared with 2005
Improve water efficiency by 35% compared with 2005 
Score at least 75 for “satisfaction and motivation” in our employee survey
Score at least 75 for “opportunities for professional and personal development” in our employee survey
Ensure that at least 30% of new leaders appointed are women
Ensure that at least 55% of new leaders appointed are a nationality other than Danish
Keep the frequency of occupational accidents below 3.0 per million working hours
Keep employee absence below 3%
Keep employee turnover above 4% and below 9%
Obtain Gold Class rating from SAM in the Sustainability Yearbook 2014
Enable a 50 million ton reduction in CO2 emissions through our customers' application of our products
Establish a biofuels initiative, championed by Novozymes, under the U.N.-led initiative SEFA (Sustainable Energy for All)

Financial expectations

2012 was an eventful year for Novozymes. In terms of profitability and earnings growth, it was a very satisfactory year, whereas sales growth was disappointing, despite being within the guided range. Looking at 2013, we expect to be able to retain the current level of profitability, as we feel confident of our continued ability to improve productivity throughout the business. On the sales side, we expect Novozymes' sales growth to pick up from 2012, although it will still be below the long-term target.

Sales expectations

The full-year LCY and organic sales growth guidance is 5-8%. Based on exchange rates at January 18, 2013, sales growth in DKK is expected at 4-7%. Organic sales growth is expected to pick up during the year.

Within Enzyme Business, Novozymes expects all four sales areas to contribute to growth in 2013. Growth drivers in 2013 will again be Household Care Enzymes and Feed Enzymes, included in the Feed & Other Technical Enzymes area.
 
Household Care Enzymes are expected to be the strongest contributor to full-year sales growth, as the fundamental growth drivers of the business are expected to remain in place in 2013. Furthermore, enzyme sales to the household care industry will be supported by higher sales to a detergent manufacturer that ceased its remaining captive enzyme production in the second half of 2012.
 
Sales of Feed Enzymes, included in the Feed & Other Technical Enzymes area, are expected to benefit from the continued global rollout and adoption of RONOZYME® ProAct and a positive development of phytase enzyme sales.

Growth in the Food & Beverages Enzymes segment is expected to increase as some of the major industries such as starch and baking return to growth, and with the increase in demand for enzymes for healthy food concepts expected to continue.

Enzyme sales to the bioenergy industry are expected to grow in 2013 compared with 2012. Sales in the U.S. will be positively affected by increased penetration of the recently launched product 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. The full-year sales outlook is based on the expectation that U.S. bioethanol production in 2013 will be roughly at the level of 2012.

BioBusiness sales are expected to grow in double digits organically, with positive contributions from both the Microorganisms and Biopharma business areas.

Microorganisms sales to the BioAg industry are expected to be the strongest growth contributor due to the recently announced partnerships and to growth in North America and new markets in Europe and Asia. The acquisition of Natural Industries, Inc. in November 2012 will contribute slightly to LCY and DKK sales growth in 2013. The other Microorganisms industries are expected to grow moderately.

Biopharma sales are expected to benefit from increased sales of recombinant albumin to a growing customer base established in 2012. Hyaluronic acid sales are also expected to grow, as potential customers conclude the product-testing phase during 2013 and place commercial orders.

Earnings expectations

EBIT growth is expected at 4-7%.

The 2013 expectation for the EBIT margin is around 24%.

Net profit is expected to grow by 6-9%.

Around 75% of expected USD/DKK exposure for 2013 has been hedged at 5.61 DKK/USD compared with 5.70 DKK/USD in 2012. For 2013, around 42% of expected EUR/DKK exposure has been hedged at 7.41 DKK/EUR.

Investments and cash flow expectations

For 2013, Novozymes expects around DKK 1.1 billion in net investments. Besides maintenance CAPEX and investments for operational efficiency, Novozymes will invest in future sales growth, including expansion of R&D facilities. Investments are also being made to improve energy efficiency, thus positively contributing to energy cost savings and achievement of the sustainability targets.

Free cash flow before acquisitions is expected at around DKK 1,650 million, mainly as a result of higher net profit and lower CAPEX.

Return on invested capital is expected at around 20%.

Exchange rates at year-end

The outlook is based on exchange rates for the company’s key currencies remaining at the closing rates on January 18, 2013, for the full year.

(DKK)

EUR

USD

JPY CNY
Average exchange rate 2012 746 579 7.28 91.80
Closing rate January 18, 2013 746 560 6.23 90.05
Estimated average exchange rate 2013 746 560 6.23 90.05
Change in estimated exchange rate 2013 compared with average exchange rate 2012 0% -3% -14% -2%

Other things being equal, a 5% movement in the USD is expected to have an annual impact on EBIT of DKK 60-80 million.

Product pipeline

The pipeline for product launches is strong, and more products are expected to be launched in 2013 than were launched in 2012. These product launches will support Novozymes’ long-term growth.

Within Enzyme Business, the strongest growth drivers in 2013 will again be Household Care Enzymes and Feed Enzymes.

EBIT growth is expected at 4-7%.

SUSTAINABILITY ACROSS THE VALUE CHAIN

Our focus on sustainability across the value chain impacts our interaction with suppliers, customers and society at large, helping improve livelihoods, the environment and the way we do business.

MORE WITH LESS

Novozymes' biosolutions bridge the gap between dwindling natural resources, rising costs and growing human needs, by enabling our customers to produce more, higher-quality products with less energy and fewer raw materials. A biobased economy is achievable, and our innovations will help the world get there.

The biobased economy and the global stage

We may be a relatively small company but we have big plans – we want to change the world together with our customers. Our technology holds the key to an economy based on renewable resources. Novozymes is dedicated to building a biobased economy, not only through the products and solutions the company develops, but also by participating in the political processes that will shape the world of tomorrow.

The successful development of the global economy hinges on the ability of government bodies and private companies to work together to drive innovation and growth. As a result, knowledge- and innovation-rich companies such as Novozymes are gaining the ear of government. Novozymes is using this opportunity to further drive change by engaging in dialogue with policymakers and advocating for a biobased society, by sharing its biotechnology know-how and presenting its innovative solutions.

Creating opportunities
As part of this global advocacy effort, we strategically select and participate in global forums and events, such as Rio+20 and B20 meetings, not only to engage with politicians and industry opinion leaders, but also to meet with customers and partners to find possible synergies.

Our agenda in 2012 was to positively influence and drive necessary change in the following areas:

  • Ending fossil fuel subsidies
  • Free trade in sustainable solutions
  • Robust carbon pricing
  • Support for deployment of low-carbon solutions
  • Private investment in green infrastructure

The United Nations Conference on Sustainable Development (Rio+20) in June 2012 was the biggest sustainability event of the past two decades. More than 55,000 people from 193 countries and over 1,500 companies participated and directly contributed to the debate. Novozymes was represented in the processes and the event, where the final agreement focused on several key areas for both the company and the future of the biobased economy. We presented our solutions to heads of state, journalists and global opinion leaders, and we connected with a large number of current and potential customers to explore future projects.

Listening to mitigate risk
By participating in such global events and engaging with stakeholders around the world, Novozymes also gains vital insights that can be integrated into the business and the solutions offered to customers. Learning how policymakers, opinion leaders and NGOs view our industries enables us to better understand the business value chain, anticipate future requirements and safeguard our business by developing new solutions to meet changing market needs.

A long-term commitment
It takes time to influence political decisions, and we recognize, of course, that political support for building a biobased economy requires a long-term effort. In 2013, we will continue to advocate our solutions and policies that promote sustainable long-term growth. Focus areas will include establishing solid sustainability agendas with the new leadership in China and the U.S. administration, with particular emphasis on priorities for renewable energy. One of our long-term targets aims to secure biofuels as a "high-impact opportunity" on the Global Action Agenda of the U.N.’s Sustainable Energy for All initiative in 2015.

Sustainability expectations

Like our long-term targets, the sustainability expectations reflect our consideration of the entire business value chain and our key stakeholders. Therefore, we have designed our expectations to address the following categories: suppliers, Novozymes, customers and society. While we consider the entire value chain, the majority of the expectations focus on internal efforts.

Sustainable supply chain

In line with our new long-term target of 100% adherence to our supplier program for commercial, quality and sustainability performance in 2015, our target for 2013 is to ensure that 95% of all suppliers with a 12-month rolling spend above DKK 1 million observe these requirements.

Novozymes

Within Novozymes, our expectations relate to resource utilization, workplace development and sustainability leadership.

Utilization of resources and climate change impact

We have chosen 2005 as the baseline year for our resource efficiency targets. The 2013 targets for improving resource efficiency are 42% for energy, 35% for water and 50% for CO2. The CO2 target is based on emissions from Novozymes’ own production sites and from energy suppliers.

Workplace development

Novozymes endeavors to cultivate a workforce of satisfied and motivated employees. Our efforts are addressed through targets for employee satisfaction and employee development. In 2013, the target is a score of at least 75 in our employee survey for both “satisfaction and motivation” and “opportunities for professional and personal development.”

To further foster a diverse and inclusive workplace, Novozymes has set new targets for diversity at leadership level. The proportion of male to female employees and of Danish nationals to nationals of other countries at leadership level is currently lower than in the organization as a whole. These figures are also relatively constant. Therefore, our target for 2013 is for a minimum of 30% of all newly appointed leaders to be female and a minimum of 55% to be a nationality other than Danish. Leaders are defined here as those who have at least three employees reporting to them.

In addition to these targets, we aim to keep the frequency of occupational accidents below 3.0 per million working hours and the rate of absence from work below 3% in 2013. The target for employee turnover is set at a range that reflects the present job market and Novozymes’ aims with regard to attraction and retention of employees. We see it as preferable to have a turnover above 4% and below 9% in 2013.

Sustainability leadership

Novozymes prioritizes benchmarking its sustainability efforts against peers, as shown in the 2013 target of earning a Gold Class rating from SAM in the Sustainability Yearbook 2014. Although we have chosen Dow Jones Sustainability Indexes and SAM’s rating as yardsticks, a number of alternative ratings are just as valuable.

Customers

We aim to help our customers make better use of the world’s resources and reduce their products’ environmental footprint across their life cycle. Therefore, we have set a target of enabling a 50 million ton reduction in CO2 emissions through our customers’ application of our products in 2013.

Society

To strengthen the pull of sustainable solutions in society, and to reach our new long-term target of championing the inclusion of biofuels as a "high-impact opportunity" in the U.N.’s Sustainable Energy for All (SEFA) initiative, our target for 2013 is to champion the establishment of a biofuels initiative under SEFA. More specifically, this will require Novozymes to take a leading role in bringing together all actors with a commitment to biofuels and gathering these commitments within what is defined as an initiative under SEFA.

SUSTAINABILITY ACROSS THE VALUE CHAIN

Our focus on sustainability across the value chain impacts our interaction with suppliers, customers and society at large, helping improve livelihoods, the environment and the way we do business.

MORE WITH LESS

Novozymes' biosolutions bridge the gap between dwindling natural resources, rising costs and growing human needs, by enabling our customers to produce more, higher-quality products with less energy and fewer raw materials. A biobased economy is achievable, and our innovations will help the world get there.

The biobased economy and the global stage

We may be a relatively small company but we have big plans – we want to change the world together with our customers. Our technology holds the key to an economy based on renewable resources. Novozymes is dedicated to building a biobased economy, not only through the products and solutions the company develops, but also by participating in the political processes that will shape the world of tomorrow.

The successful development of the global economy hinges on the ability of government bodies and private companies to work together to drive innovation and growth. As a result, knowledge- and innovation-rich companies such as Novozymes are gaining the ear of government. Novozymes is using this opportunity to further drive change by engaging in dialogue with policymakers and advocating for a biobased society, by sharing its biotechnology know-how and presenting its innovative solutions.

Creating opportunities
As part of this global advocacy effort, we strategically select and participate in global forums and events, such as Rio+20 and B20 meetings, not only to engage with politicians and industry opinion leaders, but also to meet with customers and partners to find possible synergies.

Our agenda in 2012 was to positively influence and drive necessary change in the following areas:

  • Ending fossil fuel subsidies
  • Free trade in sustainable solutions
  • Robust carbon pricing
  • Support for deployment of low-carbon solutions
  • Private investment in green infrastructure

The United Nations Conference on Sustainable Development (Rio+20) in June 2012 was the biggest sustainability event of the past two decades. More than 55,000 people from 193 countries and over 1,500 companies participated and directly contributed to the debate. Novozymes was represented in the processes and the event, where the final agreement focused on several key areas for both the company and the future of the biobased economy. We presented our solutions to heads of state, journalists and global opinion leaders, and we connected with a large number of current and potential customers to explore future projects.

Listening to mitigate risk
By participating in such global events and engaging with stakeholders around the world, Novozymes also gains vital insights that can be integrated into the business and the solutions offered to customers. Learning how policymakers, opinion leaders and NGOs view our industries enables us to better understand the business value chain, anticipate future requirements and safeguard our business by developing new solutions to meet changing market needs.

A long-term commitment
It takes time to influence political decisions, and we recognize, of course, that political support for building a biobased economy requires a long-term effort. In 2013, we will continue to advocate our solutions and policies that promote sustainable long-term growth. Focus areas will include establishing solid sustainability agendas with the new leadership in China and the U.S. administration, with particular emphasis on priorities for renewable energy. One of our long-term targets aims to secure biofuels as a "high-impact opportunity" on the Global Action Agenda of the U.N.’s Sustainable Energy for All initiative in 2015.

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