Novozymes: just another company?

GLOBAL CONNECT

Dialogue is key in managing opportunities and risks, and meeting the needs of a biobased society. It also helps Novozymes and its network of global stakeholders turn high expectations into viable products.

Just as innovation, sustainability and a diversified portfolio are key elements of our business model, partnerships have always played a vital role in building future growth.

We have had our ups and downs, yet we continue to grow because of our ability to translate our know-how and technology into market-expanding products and solutions.

We fell short of achieving our long-term sales growth target in 2012, but even in a challenging global economy there were many indicators of success: strong EBIT margin growth, a series of promising partnerships and continued focus on innovation.

2012 was a mixed year for Novozymes, challenging in some respects and promising in others. By proactively pursuing new business models and further tapping into the changing needs of our customers, we successfully introduced innovative solutions to the market and formed solid partnerships. Meanwhile, our agility was tested: We delivered strong earnings and continued to raise productivity, but we were unable to realize our long-term target for sales growth, reaching only 4% organic growth. But does this mean that Novozymes is “just another company”?

Delivering earnings in a tricky market

Two primary factors contributed to the resistance we met in 2012: the slowdown in global GDP growth and a turbulent U.S. bioenergy market. Compared with 2011, U.S. ethanol production decreased by approximately 5%, in part because of the drought that hurt the industry as a whole. At the same time, we saw a lower enzyme content per gallon of ethanol produced. Favorably, the industry defended the Renewable Fuel Standard from efforts to overturn it.

On the other hand, Novozymes delivered strong sales growth in the household care and animal feed industries, testament to the company’s ability to grow the business through innovation.

Overall, we recorded EBIT growth of 17% and an EBIT margin of more than 24%, exceeding our expectations at the beginning of the year, and customers saved an estimated 48 million tons of CO2 through the application of our products. However, organic sales growth came to 4%, well below our target of 10%, and we must do better in 2013. 

Success through continued partnerships

Just as innovation, sustainability and a diversified portfolio are key elements of our business model, partnerships have always played a vital role in building future growth. Two good examples of this in 2012 were Household Care and BioAgriculture (BioAg).

Sales to the household care industry continue to perform exceptionally well, growing by 14% in 2012. Over the past five years, Novozymes has achieved average annual growth of more than 10% in this segment, much of it rooted in the strong alliances we have formed with leading companies around the world.

Interest in the BioAg field is increasing and has given rise to a number of notable acquisitions within the industry over the past year. In August, Bayer CropScience acquired U.S. AgraQuest for $425 million, and in November, BASF acquired Becker Underwood for approximately $1 billion, both indicating the sizable potential of the BioAg industry. Our partnership with Syngenta on the development of JumpStart® and the microbial-based fungicide Taegro® has added significant weight to our BioAg business, which is now the largest of our BioBusiness ventures.

Partnerships for future growth

For an expanding global business, strategic partnerships are an important element in reaching and servicing new customers. Prime examples are the bioenergy and biochemical industries, where we have utilized the flexibility of our business models to create more opportunities for the future and build a solid foundation for growth.

Our partnership with Beta Renewables is a significant step forward in the commercialization of advanced biofuels. The combination of our enzymes and Beta Renewables’ bioenergy production technology enables us to offer customers a superior turnkey solution with reduced financial and technological risk that could boost our annual sales by up to DKK 1 billion in the latter part of the decade.

In August, we concluded an agreement with BASF and Cargill to develop an industrial biotech-based production process for acrylic acid from renewable raw materials. Acrylic acid is used to make a wide range of products, including diapers, and the idea is to give consumers worldwide a biobased alternative at a similar cost.

Targeting 10% organic sales growth

We built a strong foundation of partnerships in 2012, and I am confident in Novozymes’ ability to accelerate into double-digit growth in 2015 and onward, in collaboration with current and future strategic partners.

During my 12 years as CEO, the average organic growth rate has been around 7-8%. We have had our ups and downs, yet we continue to grow because of our ability to translate our know-how and technology into profitable, market-expanding products and solutions. This ability is clearly illustrated by the increase in return on invested capital (ROIC) from 10% in 2000 to 20% in 2012, and in the EBIT margin from 16% in 2000 to 24% in 2012.

Novozymes has always been innovation driven – it is in our DNA. Others may try to follow our lead, but with more than 6,000 employees worldwide collectively fueling our innovative spirit, and with a portfolio of solutions that can successfully solve global problems, we will never be just another company.


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Steen Riisgaard
President & CEO

GLOBAL CONNECT

Dialogue is key in managing opportunities and risks, and meeting the needs of a biobased society. It also helps Novozymes and its network of global stakeholders turn high expectations into viable products.

Just as innovation, sustainability and a diversified portfolio are key elements of our business model, partnerships have always played a vital role in building future growth.

We have had our ups and downs, yet we continue to grow because of our ability to translate our know-how and technology into market-expanding products and solutions.

Partnerships for growth

Novozymes’ Executive Vice Presidents explain the growing role of partnerships, and the benefits and opportunities these offer the company.

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