Quarterly Report • Aug 12, 2010
Quarterly Report
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The strong sales and earnings growth in the first half of the year came from higher demand in the enzyme business and a continued good cost development across the organization. The strong growth was also the result of a challenged first half in 2009. Based on the first-half performance and currencies that have developed slightly favorably since previous guidance, sales are now expected to grow by 10–12% in DKK (7–9% organically). EBIT is expected to grow by 20–22%, and the EBIT margin is expected to be in the range of 21–22%. Net profit is expected to grow by 22–24%, investments are now expected to be in the range of DKK 1,150–1,250 million, and free cash flow before acquisitions is expected at DKK 800–900 million.
For the first half of 2010:
"The strong sales and earnings growth in the first quarter continued in the second quarter. I'm very pleased with this development," says Steen Riisgaard, President & CEO. He continues: "Demand was high in the enzyme business, and all industries actually grew double digit if you look at the second quarter in isolation. Earnings continued to benefit from high productivity improvements, better capacity utilization, and tight cost management. However, it must be remembered that the first half of last year was the easier half from a comparison point of view, and there is still some uncertainty as to how markets will develop in the second half of 2010. Despite this uncertainty, with the strong first-half results in the enzyme business and a slightly more favorable currency outlook, we are increasing our expectations for the full year."
| Realized | 2010 outlook | 2010 outlook | ||
|---|---|---|---|---|
| 1H 2010 | 1H 2009 | August 12* | April 29 | |
| Sales, DKKm | 4,794 | 4,163 | ||
| Sales growth, DKK | 15% | 10–12% | 6–8% | |
| Sales growth, LCY | 13% | 7–9% | 4–6% | |
| Sales growth, organic | 14% | 7–9% | ||
| EBIT, DKKm | 1,109 | 802 | ||
| EBIT growth | 38% | 20–22% | 12–14% | |
| EBIT margin | 23.1% | 19.3% | 21–22% | ~ 21% |
| Net profit, DKKm | 825 | 577 | ||
| Net profit growth | 43% | 22–24% | 17–19% | |
| Net investments, DKKm Free cash flow before |
554 | 333 | 1,150–1,250 | 1,000–1,100 |
| acquisitions, DKKm | 425 | 387 | 800–900 | 800–900 |
| ROIC | 24.0% | 19.3% | 21–22% | ~ 21% |
| Avg. USD/DKK | 562 | 560 | 567 | 556 |
| EPS (diluted), DKK | 12.93 | 9.16 |
* Assumes exchange rates for the company's key currencies remain at the spot rates on August 11 for the rest of 2010.
Company announcement no. 6, 2010 Page 1 of 18 Novozymes A/S Investor Relations 2010-17926-01
Krogshoejvej 36 2880 Bagsvaerd Denmark
Telephone: +45 4446 0000 Fax: +45 4446 9999 Internet: www.novozymes.com CVR number: 10 00 71 27
Total sales up 15% in DKK, 13% in LCY
Total sales in the first half rose by 15%, compared to the same period of 2009, to DKK 4,794 million. Exchange rates impacted sales positively, and sales in LCY increased by 13%. Divestments in 2009 impacted growth negatively by approximately 1 %-point.
Enzyme Business sales increased by 17% in DKK in the first half of 2010 to DKK 4,425 million. Sales in LCY were up by 15%, and divestments of noncore activities in India had a slightly negative impact on sales growth. All the main industries experienced growth in both DKK and LCY, with detergent and technical enzymes being the strongest growth contributors. Enzyme sales up 17% in DKK, 15% in LCY
BioBusiness sales down 2% in DKK, 9% in LCY
BioBusiness sales were 2% lower in DKK and 9% lower in LCY compared to the first half of 2009, as a result of divestment of noncore activities in the microorganism business and lower sales of biopharmaceutical ingredients (BPI), mainly due to timing of large orders. Organically, BioBusiness sales were down by 2% compared to the first half of 2009.
Detergent enzyme sales increased by 15% in DKK and by 13% in LCY compared to the first half of 2009. The development was driven by continued global enzyme penetration across detergent tiers to enhance washing performance and increasing sales of multienzyme solutions to replace traditional chemicals in detergent formulations.
Technical enzyme sales increased by 24% in DKK and by 22% in LCY in the first half. All industries in technical enzymes showed healthy growth rates, and the ethanol, starch, and textile industries continued to be the strongest performers in absolute terms. Enzyme sales to the textile industry, and especially to the textile mills, grew from a challenged first half of 2009. The positive development in enzyme sales to the starch industry was mainly driven by stronger demand from the emerging markets.
Novozymes' enzyme sales to the ethanol industry were up by 26% in LCY for the first half of 2010 compared to the same period last year and are expected to have been in line with the growth in US ethanol production in the same period. Enzyme sales to the ethanol industry in the first half of last year were negatively affected by specific customers' lower ethanol production. This was not the case for the first half of 2010. Also, favorable blending economics have kept ethanol production and demand at a high level. The industry seems to be well on track to reach and even surpass the RFS mandate of 12 billion gallons for 2010. On the European market, ethanol enzyme sales continued to show good growth, although the market is small compared to the US.
Food enzyme sales increased by 15% in DKK and by 12% in LCY compared to the first half of 2009. The divestment of noncore ingredient activities in India impacted sales growth negatively by roughly 1 %-point. Higher demand for baking, brewing, and beverage alcohol enzymes to enhance quality and performance was the main driver behind the growth. Newly introduced concepts for the baking and brewing industries continued to gain traction in the market and also contributed to the positive development in the period.
Feed enzyme sales were up by 7% in DKK and by 5% in LCY compared to the first half of 2009. The second quarter of 2009 was affected by inventory reduction at the distribution partner, which was a consequence of their inventory buildup in the first quarter of 2009. No such inventory volatility was seen in the first two quarters of 2010. The phytase enzyme market remains under competitive pressure, although the recently EUapproved phytase enzyme RONOZYME® NP has been well received by the market and is starting to take on competition. Other enzyme sales to the feed industry continued to Feed enzyme sales up 7% in DKK, 5% in LCY
Detergent enzyme sales up 15% in DKK, 13% in LCY
Technical enzyme sales up 24% in DKK, 22% in LCY
26% LCY growth in ethanol enzyme sales
Food enzyme sales up 15% in DKK, 12% in LCY
develop well, and RONOZYME® ProAct, a feed enzyme increasing protein uptake from diets by poultry, is gaining interest on the European market, where it was recently approved.
Microorganism sales were up by 4% in DKK and down by 3% in LCY compared to the first half of 2009. The turf and landscape business divested in July 2009 impacted sales growth in the first half of 2010 negatively by roughly 9 %-points. Sales to the bioagricultural (BioAg) industry were affected by timing and, after first-quarter sales slightly down on the first quarter of 2009, showed double-digit growth for the first half as a whole. Microorganism sales to the institutional & household cleaning and wastewater treatment industries were on par with the first half of 2009. Microorganism sales affected by divestment
Biopharmaceutical ingredient sales (BPI) improved compared to the first quarter of 2010 and were down by 16% in DKK and by 23% in LCY compared to the first half of 2009. The continued negative sales development was mainly caused by timing of relatively large orders. This industry is subject to substantial quarterly variation in sales patterns, as sales comprise a small number of relatively large transactions. BPI sales affected by timing
Two new products launched in Q2 2010
emerging markets
Two new products were launched in the second quarter of 2010:
Growth in DKK / Growth in LCY
Sales in Europe, the Middle East, and Africa (Europe/MEA) increased by 16% in both DKK and LCY compared to the first half of 2009. Detergent and food enzyme sales were the strongest growth contributors in relative terms, but technical and feed enzyme sales also developed well in the period. Sales in North America were up by 13% in DKK and by 11% in LCY compared to the first half of 2009. Detergent and technical enzyme sales, including in particular enzyme sales to the US ethanol industry, were the main growth contributors, whereas lower sales of biopharmaceutical ingredients impacted sales negatively in the period. Sales in Asia Pacific increased by 15% in DKK and by 11% in LCY compared to the first half of 2009. Detergent and technical enzyme sales were the largest growth contributors, whereas the development in feed enzymes impacted sales negatively. 16% growth in Europe, Middle East, and Africa North America sales up 11% in LCY Double-digit growth in
Sales in Latin America were up by 23% in DKK and by 15% in LCY compared to the first half of 2009. Sales of technical enzymes and food enzymes continued to be the largest growth contributors.
Total costs excluding net financials and tax increased by 9% to DKK 3,709 million. Cost of goods sold and other operating costs increased due to higher volumes sold and a higher activity level, especially in R&D. The accumulated effect of strong productivity improvements throughout 2009 had a positive impact on cost of goods sold in the first half of 2010. Gross profit increased by 18% compared to the first half of 2009, resulting in a gross profit margin of 56.3% compared to 55.1% for the first half of 2009. Increased sales, productivity improvements, and higher capacity utilization in the enzyme plants were the main reasons behind the strong development compared to the first half of 2009. Gross profit margin for Enzyme Business was 57.6% in the first half, an improvement of 0.7 %-points compared to the first half of 2009. Gross profit margin for BioBusiness was 40.8%, compared to 36.5% for the first half of 2009. Other operating costs increased by 6% to DKK 1,613 million for the first half of 2010. The ratio of other operating costs to sales was 34% for the first half of 2010, compared to 37% in the same period last year. • Sales, distribution, and business development costs increased by 4%, representing 12% of sales • R&D costs increased by 12%, representing 14% of sales • Administrative costs were flat, representing 8% of sales Other operating income fell by DKK 8 million to DKK 24 million for the first half compared to the same period last year. Most of the income was related to the grant from the US Department of Energy regarding Novozymes' cellulosic biofuel enzyme project DECREASE. Depreciation and amortization rose to DKK 298 million for the first half, an increase of 6% compared to 2009. EBIT increased by 38% to DKK 1,109 million compared to DKK 802 million in the first half of 2009, and the EBIT margin was 23.1% compared to 19.3% for the first half of 2009. Strong underlying sales growth, improved gross profit, and a careful development in other operating costs impacted the development in EBIT positively. Net financials and Net profit Net financial expenses were DKK 19 million for the first half, on par with the same period last year. A higher net currency hedging/revaluation gain of roughly DKK 38 million Total costs increased 9% Gross profit margin 56.3% R&D represents 14% of sales EBIT up by 38%, EBIT margin 23.1% Net financial expenses on par
contributed positively to the development in the half year, whereas other financials developed negatively by DKK 48 million, mainly explained by the fair value adjustment of employee stock option schemes. Reduced net interest expenses of DKK 10 million impacted net financials positively compared to the first half of 2009.
At the end of the first half of 2010, net interest-bearing debt was DKK 851 million compared to DKK 949 million at year-end 2009.
Profit before tax increased by 39% to DKK 1,090 million from DKK 783 million in the first half of 2009.
with last year
growth
Tax rate 24.3% In the first half of 2010, the effective tax rate was 24.3% compared to 26.3% in the first half of last year. The lower tax rate is the result of recently negotiated APAs (Advanced Pricing Agreements).
43% net profit Net profit increased by 43% to DKK 825 million compared to the first half of 2009.
Cash flow from operating activities increased by 36% to DKK 979 million compared to the first half of 2009. The positive development was primarily due to higher net profit and a positive development in working capital relative to sales. The development in working capital benefitted from a relative improvement in receivables, inventories and payables compared to the first half of last year. A planned and accrued one-time payment was made in the second quarter of 2010 and related to recently finalized tax agreements. The payment had a negative effect on operating cash flow. Operating cash flow DKK 979 million
Net investments excluding acquisitions were DKK 554 million in the first half compared to DKK 333 million in the same period of 2009. The higher investment level is mainly related to the ongoing construction of the cGMP hyaluronic acid (HA) plant built in Tianjin, China, and the new enzyme plant in Nebraska, USA. Net investments DKK 554 million
Free cash flow before acquisitions reached DKK 425 million in the first half against DKK 387 million in the first half of 2009. The development in free cash flow was the result of higher operating cash flow and higher net investments. Free cash flow before acq. DKK 425 million
Shareholders' equity was DKK 6,761 million at June 30, 2010, up from DKK 5,841 million at year-end 2009. Shareholders' equity was increased by comprehensive income and decreased by dividend payments of DKK 359 million. Shareholders' equity represented 59% of the balance sheet total against 54% at year-end 2009.
Net debt-to-equity was 13% at June 30, 2010, compared to 16% at year-end 2009.
Return on invested capital (ROIC) was 24.0% for the first half compared to 19.3% for the same period in 2009, primarily explained by higher EBIT and the lower tax rate. ROIC 24.0%
At June 30, 2010, the holding of treasury stock was 2.3 million B shares, equivalent to 3.6% of the total number of shares outstanding.
In 2010, Novozymes has set three new targets for water, energy, and CO2 efficiency, replacing previous years' water and energy consumption targets. The targets measure percentage improvements on 2005 efficiency levels.
Compared to the first half of 2009, water, energy, and CO2 efficiency all improved in the first half of 2010. However, they are all falling short of their targets half way into the year.
Employee-related targets improved in the first half compared to the same period last year, and were all within or very close to their target ranges.
| 2010 1H |
2009 1H |
2010 Target |
||
|---|---|---|---|---|
| Improved water, | Water efficiency (compared to 2005 index) | 18% | 13% | 20% |
| energy, and CO2 | Energy efficiency (compared to 2005 index) | 18% | 12% | 30% |
| efficiency | CO2 efficiency (compared to 2005 index) | 19% | 6% | 25% |
| Lower level of | CO2 emission reduction (million tons) from customers' application of enzymes |
~ 15 | ~ 13 | 28–29 |
| occupational | Significant spills | - | - | - |
| accidents | Fatalities | - | - | - |
| Frequency of occupational accidents per million working hours | 4.5 | 5.3 | < 4.5 | |
| Lower rate of | Number of employees on June 30 | 5,325 | 5,227 | |
| employee | Rate of employee turnover | 6.9% | 7.0% | > 4% – < 9% |
| turnover | Rate of absence | 2.2% | 2.2% | < 3% |
IAS 34
12% in DKK
The Group financial statement for the first half of 2010 has been prepared in accordance with IAS 34 and the additional Danish regulations for the presentation of quarterly financial statements by listed companies. The Group financial statement for the first half of 2010 follows the same accounting policies as the Group financial statement for 2009.
Total sales are now expected to grow by 7–9% in LCY and organically. Based on currency rates at August 11, 2010, sales growth in DKK is expected at 10–12%. 7–9% organic growth, 10–
The full-year sales growth expectation is based on an average growth rate for the coming two quarters that is lower than the growth seen in the first half. Although no structural changes are expected in Novozymes' business environment, the first half of last year was easier from a comparison point of view, and there is still some uncertainty as to how the markets will develop in the second half of 2010.
Enzyme Business, especially sales of detergent and technical enzymes, is expected to be the strongest contributor to the full-year sales growth. One assumption included in the fullyear sales growth expectation is that the US biofuel industry will produce around 12.5 billion gallons of ethanol for the full year.
BioBusiness' sales are now expected to be on par with realized sales in 2009. The main explanation for BioBusiness' lower sales growth expectation compared to previous guidance is the negative impact in BPI from lower milestone payments/clinical material sales for the Plectasin project. Sanofi-Aventis has decided to discontinue its commitment to the antimicrobial peptide (AMP) plectasin project.
The microorganism business is expected to be the growth driver for BioBusiness, where sales of microorganisms to the BioAg industry are expected to reach a double-digit organic growth rate for the year. In August, Novozymes acquired the Brazilian microorganism producer Turfal, giving direct access to the Brazilian agricultural market. The acquisition is expected to impact Novozymes' 2010 sales positively by roughly DKK 10–15 million and has been included in the full-year sales growth expectation.
Short-term volatility and discontinuation of projects – either by Novozymes or one of its partners – are not uncommon when building new business opportunities, especially in an area such as BioBusiness. The quality of BioBusiness' current project portfolio is still high, and Novozymes' strategy, commitment, and long-term expectations for BioBusiness are unchanged.
EBIT growth 20–22% EBIT is now expected to grow by 20–22% in DKK. The increased earnings expectation is the result of higher expectations for full-year sales growth, productivity improvements, higher production capacity utilization in the enzyme business and continued tight cost management across the organization. Slightly more favorable currencies are also expected to impact EBIT growth positively for the full year. EBIT margin is now expected to be 21–22%. Net profit in DKK is now expected to grow by 22–24% in 2010. Higher EBIT growth and a lower tax rate are expected to affect net profit growth positively. In late 2008, Novozymes entered into hedging contracts for the USD and the JPY covering 2009 and 2010. Net cash flow for the USD exposure is hedged at a DKK/USD rate of 591 for the full year, whereas DKK/JPY cash flow exposure is hedged at 6.53 for the full year. The expected USD exposure for 2011 has been hedged at 585 DKK/USD. Investments are now expected to be in the range of DKK 1,150–1,250 million. Stronger foreign currencies and the expectation that a higher proportion of the announced investment amount for the enzyme facility in Nebraska, USA, will fall in 2010 instead of 2011 account for the difference compared to previous guidance. The enzyme production plant in Nebraska, initiated in 2009, is expected to be built over a three-year period and cost roughly USD 160–200 million. The hyaluronic acid facility in China is on track and is expected to begin production and sales early 2011. The outlook for free cash flow before acquisitions is retained in the range of DKK 800–900 million, positively impacted by higher net profit expectation but reduced by the higher investment amount. Return on invested capital (ROIC) is now expected to be 21–22%, due to the increased net profit expectation. EBIT margin 21–22% Net profit growth 22–24% Investments DKK 1,150–1,250 million FCF before acq. DKK 800–900 million ROIC 21–22%
| August 12 | April 29 | |
|---|---|---|
| Sales growth, DKK | 10–12% | 6–8% |
| Sales growth, LCY | 7–9% | 4–6% |
| Sales growth, organic | 7–9% | |
| EBIT growth | 20–22% | 12–14% |
| EBIT margin | 21–22% | ~ 21% |
| Net profit growth | 22–24% | 17–19% |
| Net investments, DKKm | 1,150–1,250 | 1,000–1,100 |
| Free cash flow before | 800–900 | 800–900 |
| acquisitions, DKKm | ||
| ROIC | 21–22% | ~ 21% |
The 2010 outlook is based on exchange rates for the company's key currencies remaining at the spot rates on August 11, 2010, for the full year. Novozymes' key currencies are: EUR, USD, JPY, and CNY.
| (DKK) | EUR | USD | JPY | CNY |
|---|---|---|---|---|
| Average exchange rate 2009 | 745 | 536 | 5.73 | 78.47 |
| Average exchange rate 1H 2010 | 744 | 562 | 6.14 | 81.30 |
| Spot rate August 11, 2010 | 745 | 572 | 6.74 | 84.49 |
| Estimated average exchange rate for 2010* | 745 | 567 | 6.44 | 82.90 |
| Change in estimated average exchange rate for 2010 compared to average exchange rate in 2009* |
0% | 6% | 12% | 6% |
| Estimated avg. exchange rate for 2010 per 28.04.2010 | 744 | 556 | 5.97 | 81.45 |
| * Estimated average exchange rate is calculated as the average exchange rate YTD combined with the spot rate ROY. |
Note: Other things being equal, a 5% movement in the USD is expected to have an annual impact on operating profit of DKK 45–65 million, which is similar to the sensitivity given for 2009.
Sanofi-Aventis has decided not to move ahead with the antimicrobial peptide (AMP) Plectasin NZ2114 into clinical phase 1. In light of their project portfolio, the risk–benefit profile of the compound was not as attractive as hoped. Novozymes has the opportunity to outlicense plectasin to another partner, and the feasibility of this will be clarified during the second half of the year. Meanwhile, the other AMP projects (e.g., arenicin) currently in Novozymes' BPI pipeline are moving ahead as planned.
In August, Novozymes acquired the Brazil-based microorganism producer Turfal with annual sales of around DKK 15 million. The acquisition gives Novozymes direct access to an agricultural industry with an interesting potential for biological products. Turfal's main products are nitrogen-fixating inoculants for soybean. Novozymes' 2010 sales are expected to be impacted positively by DKK 10–15 million as most of Turfal's sales occur in the second half of the year, which is the Brazilian planting season for soybean. Novozymes' 2010 earnings guidance is not expected to be impacted by the acquisition, and the effect from the acquisition has been included in the full-year guidance for both sales and earnings.
This company announcement contains forward-looking statements, including the financial outlook for 2010. Forward-looking statements are, by their very nature, associated with risks and uncertainties that may cause actual results to differ materially from expectations. The uncertainties may include unexpected developments in the international currency exchange and securities markets, market-driven price decreases for Novozymes' products, and the launch of competing products within Novozymes' core areas.
Contact persons:
Annegrethe M. Jakobsen (Europe) Tel. (mobile): +45 3077 3050
Paige Donnelly (USA) Tel. (mobile): +1 919 218 4501
Press and media: Investor Relations:
Tobias Bjorklund (DK) Tel. (mobile): +45 3077 8682
Martin Riise (DK) Tel. (mobile): +45 3077 0738
Thomas Bomhoff (USA) Tel. (US mobile): +1 919 649 2565 Tel. (DK mobile): +45 3077 1226
The Board of Directors and Executive Management have considered and approved the Group financial statement for Novozymes A/S for the first half of 2010.
The Group financial statement has been prepared in accordance with International Financial Reporting Standards (as adopted by the EU), and additional Danish regulations for the presentation of Group financial statements by listed companies.
In our opinion the accounting policies used are appropriate, the Group's internal controls relevant to preparation and presentation of a Group financial statement are adequate, and the Group financial statement gives a true and fair view of the Group's assets, liabilities, net profit, and financial position at June 30, 2010, and of the results of the Group's operations and cash flow for the first half of 2010.
We further consider that the Management's review in the preceding pages gives a true and fair view of the development in the Group's activities and business, the profit for the period, and the Group's financial position as a whole, and a description of the most significant risks and uncertainties to which the Group is subject.
Bagsvaerd, August 12, 2010
Executive Management:
| Steen Riisgaard President and CEO |
Benny D. Loft | Per Falholt |
|---|---|---|
| Peder Holk Nielsen | Thomas Nagy | Thomas Videbæk |
| Board of Directors: | ||
| Henrik Gürtler Chairman |
Kurt Anker Nielsen Vice-Chairman |
Paul Petter Aas |
| Jerker Hartwall | Søren Jepsen | Ulla Morin |
| Michael Munksø | Walther Thygesen | Mathias Uhlén |
| Appendix 1 | Main items and key figures |
|---|---|
| 1.1 First half of 2010 | |
| 1.2 Statement of comprehensive income | |
| 1.3 Segment information | |
| Appendix 2 | Distribution of sales |
| 2.1 By industry | |
| 2.2 By geographical area | |
| 2.3 Quarterly sales by industry | |
| 2.4 Quarterly sales by geographical area | |
| Appendix 3 | Statement of cash flows and financial resources |
| Appendix 4 | Balance sheet and Statement of shareholders' equity |
| 4.1 Balance sheet | |
| 4.2 Statement of shareholders' equity | |
| Appendix 5 | Product launches in 2010 |
| Appendix 6 | Company announcements for 2010 (excluding management's trading) |
| Appendix 7 | Financial calendar 2010–2011 |
1.1 First half of 2010
| (DKK million) | 2010 1H |
2009 1H |
% change | 2010 Q2 |
2009 Q2 |
% change |
|---|---|---|---|---|---|---|
| Revenue | 4,794 | 4,163 | 15% | 2,469 | 2,037 | 21% |
| Gross profit | 2,698 | 2,294 | 18% | 1,390 | 1,140 | 22% |
| Gross margin | 56.3% | 55.1% | 56.3% | 56.0% | ||
| EBITDA | 1,407 | 1,084 | 30% | 721 | 541 | 33% |
| EBITDA margin | 29.3% | 26.0% | 29.2% | 26.6% | ||
| EBIT (operating profit) | 1,109 | 802 | 38% | 574 | 399 | 44% |
| EBIT margin | 23.1% | 19.3% | 23.2% | 19.6% | ||
| Net financials | (19) | (19) | (17) | (21) | ||
| Profit before tax | 1,090 | 783 | 39% | 557 | 378 | 47% |
| Corporation tax | (265) | (206) | 29% | (137) | (99) | 38% |
| Net profit | 825 | 577 | 43% | 420 | 279 | 51% |
| Attributable to: | ||||||
| Shareholders in the parent company | 824 | 577 | 43% | 420 | 279 | 51% |
| Equity minority interests | 1 | - | - | - | ||
| Foreign exchange gain/(loss), net, etc. | 32 | (6) | 5 | (13) | ||
| Interest income/(costs) | (35) | (45) | (14) | (4) | ||
| Other financial items | (16) | 32 | (8) | (4) | ||
| Total financial income/(costs) | (19) | (19) | 0% | (17) | (21) | 19% |
| Earnings per DKK 10 share | 13.19 | 9.30 | 42% | 6.71 | 4.50 | 49% |
| Earnings per DKK 10 share (diluted) |
12.93 | 9.16 | 41% | 6.58 | 4.43 | 48% |
| Free cash flow before acquisitions | 425 | 387 | 10% | |||
| Return on invested capital (ROIC), incl. | ||||||
| after tax (ROIC), incl. goodwill | 24.0% | 19.3% | ||||
| Net interest-bearing debt | 851 | 1,426 | (40)% | |||
| Equity ratio | 59.2% | 48.5% | ||||
| Return on equity | 26.2% | 24.5% | ||||
| Debt-to-equity ratio | 12.6% | 29.0% |
1.2 Statement of comprehensive income
| 2010 | 2009 | |
|---|---|---|
| (DKK million) | 1H | 1H |
| Net profit | 825 | 577 |
| Other comprehensive income | ||
| Fair value adjustment of Novo Nordisk stock | - | 9 |
| - transferred to Financial income/costs | - | (38) |
| Currency translation of subsidiaries and minority interests | 574 | 18 |
| Tax related to hedges of net investments in foreign subsidiaries | - | 19 |
| Cash flow hedges | (317) | 183 |
| - transferred to Financial income/costs | (14) | (62) |
| Tax related to cash flow hedges | 5 | 10 |
| Other comprehensive income, net of tax | 248 | 139 |
| Comprehensive income, total | 1,073 | 716 |
| Attributable to: | ||
| Shareholders in the parent company | 1,072 | 716 |
| Minority interests | 1 | - |
| 1H 2010 | 1H 2009 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Enzyme | Enzyme | ||||||||
| (DKK million) | Business BioBusiness | Corporate | Total | Business | BioBusiness | Corporate | Total | % change | |
| Revenue | 4,425 | 369 | 4,794 | 3,788 | 375 | - | 4,163 | 15% | |
| Cost of goods sold | 1,878 | 218 | 2,096 | 1,631 | 238 | - | 1,869 | 12% | |
| Gross profit | 2,547 | 151 | 2,698 | 2,157 | 137 | - | 2,294 | 18% | |
| Gross margin | 57.6% | 40.9% | 56.3% | 56.9% | 36.5% | 55.1% | |||
| Sales and distribution costs | 586 | 586 | 566 | 566 | 4% | ||||
| Research and development costs | 661 | 661 | 591 | 591 | 12% | ||||
| Administrative costs | 366 | 366 | 367 | 367 | (0)% | ||||
| Other operating income, net | 24 | 24 | 32 | 32 | (25)% | ||||
| Operating profit | 1,109 | 802 | 38% | ||||||
| Capital expenditure | |||||||||
| Intangible assets | 5 | 4 | 1 | 10 | - | - | 25 | 25 | |
| Property, plant and equipment | 359 | 161 | 27 | 547 | 212 | 34 | 65 | 311 | |
| Capital expenditure, total | 364 | 165 | 28 | 557 | 212 | 34 | 90 | 336 |
Novozymes' operating segments reflect the way the activities are organized and controlled. Although revenue within Enzyme Business can be subdivided into further activities, the activities are considered to be integrated, as most of the production facilities are common to the segment as a whole. Gross profit is the primary parameter used when the Management evaluates the performance of the segments.
The functions for Sales and distribution, Research and development, and Administrative are considered as working for both segments and their costs are therefore allocated to the Corporate function. Revenue between the individual segments is deducted in the revenue of the selling company and amounts to DKK 7 million in 1H 2010 (DKK 11 million in 1H 2009).
2.1 By industry
| 2010 | 2009 | % change | % currency | % change in | |
|---|---|---|---|---|---|
| (DKK million) | 1H | 1H | impact | local currency | |
| Enzymes | 4,425 | 3,788 | 17 | 2 | 15 |
| - detergent enzymes | 1,499 | 1,307 | 15 | 2 | 13 |
| - technical enzymes | 1,513 | 1,225 | 24 | 2 | 22 |
| - food enzymes | 1,039 | 905 | 15 | 3 | 12 |
| - feed enzymes | 374 | 351 | 7 | 2 | 5 |
| BioBusiness | 369 | 375 | (2) | 7 | (9) |
| - microorganisms | 287 | 277 | 4 | 7 | (3) |
| - BPI | 82 | 98 | (16) | 7 | (23) |
| Sales | 4,794 | 4,163 | 15 | 2 | 13 |
| 2010 | 2009 | % change | % currency | % change in | |
|---|---|---|---|---|---|
| (DKK million) | 1H | 1H | impact | local currency | |
| Europe, Middle East & Africa | 1,749 | 1,508 | 16 | 0 | 16 |
| North America | 1,786 | 1,577 | 13 | 2 | 11 |
| Asia Pacific | 913 | 796 | 15 | 4 | 11 |
| Latin America | 346 | 282 | 23 | 8 | 15 |
| Sales | 4,794 | 4,163 | 15 | 2 | 13 |
| 2010 | 2009 | |||||||
|---|---|---|---|---|---|---|---|---|
| (DKK million) | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q2/Q2 | |
| Enzymes | 2,271 | 2,154 | 2,022 | 1,988 | 1,877 | 1,911 | 21 | |
| - detergent enzymes | 765 | 734 | 680 | 685 | 650 | 657 | 18 | |
| - technical enzymes | 784 | 729 | 724 | 651 | 624 | 601 | 26 | |
| - food enzymes | 545 | 494 | 433 | 463 | 449 | 456 | 21 | |
| - feed enzymes | 177 | 197 | 185 | 189 | 154 | 197 | 15 | |
| BioBusiness | 198 | 171 | 145 | 130 | 160 | 215 | 24 | |
| - microorganisms | 145 | 142 | 53 | 85 | 117 | 160 | 24 | |
| - BPI | 53 | 29 | 92 | 45 | 43 | 55 | 23 | |
| Sales | 2,469 | 2,325 | 2,167 | 2,118 | 2,037 | 2,126 | 21 |
2.4 Quarterly sales by geographical area
| 2010 | 2009 | % change | |||||
|---|---|---|---|---|---|---|---|
| (DKK million) | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q2/Q2 |
| Europe, Middle East & Africa | 882 | 867 | 881 | 823 | 770 | 738 | 15 |
| North America | 936 | 850 | 719 | 750 | 740 | 837 | 26 |
| Asia Pacific | 474 | 439 | 403 | 396 | 394 | 402 | 20 |
| Latin America | 177 | 169 | 164 | 149 | 133 | 149 | 33 |
| Sales | 2,469 | 2,325 | 2,167 | 2,118 | 2,037 | 2,126 | 21 |
Appendix 3: Statement of cash flows and financial resources
| 2010 | 2009 | |
|---|---|---|
| (DKK million) | 1H | 1H |
| Net profit | 825 | 577 |
| Reversals of non-cash expenses | 630 | 667 |
| Corporation tax paid | (406) | (142) |
| Interest received | 11 | 48 |
| Interest paid | (55) | (112) |
| Cash flow before change in working capital | 1,005 | 1,038 |
| Change in working capital | ||
| (Increase)/decrease in receivables | (80) | (139) |
| (Increase)/decrease in inventories | 91 | 1 |
| Increase/(decrease) in trade payables and other liabilities | (37) | (180) |
| Cash flow from operating activities | 979 | 720 |
| Investments | ||
| Purchase of intangible assets | (10) | (25) |
| Sale of property, plant and equipment | 3 | 3 |
| Purchase of property, plant and equipment | (547) | (311) |
| Cash flow from investing activities before acquisitions |
(554) | (333) |
| Free cash flow before acquisitions | 425 | 387 |
| Acquisition of activities and companies | - | - |
| Free cash flow after acquisitions | 425 | 387 |
Appendix 4: Balance sheet and Statement of shareholders' equity
4.1 Balance sheet
| Assets | 2010 | 2009 | 2009 |
|---|---|---|---|
| (DKK million, end of period) | Q2 | Q2 | End |
| Completed IT development projects | 34 | 7 | 7 |
| Acquired patents, licenses, and know-how | 612 | 669 | 629 |
| Goodwill | 504 | 432 | 443 |
| IT development projects in progress | 18 | 81 | 45 |
| Intangible assets | 1,168 | 1,189 | 1,124 |
| Land and buildings | 2,110 | 1,962 | 2,023 |
| Plant and machinery | 1,781 | 1,440 | 1,549 |
| Other equipment | 351 | 328 | 326 |
| Property, plant and equipment under construction | 1,247 | 673 | 906 |
| Property, plant and equipment | 5,489 | 4,403 | 4,804 |
| Deferred tax assets | 76 | 64 | 62 |
| Other financial assets (non-interest-bearing) | - | 81 | 1 |
| Total non-current assets | 6,733 | 5,737 | 5,991 |
| Raw materials and consumables | 217 | 226 | 237 |
| Goods in progress | 452 | 405 | 411 |
| Finished goods | 888 | 943 | 887 |
| Inventories | 1,557 | 1,574 | 1,535 |
| Trade receivables | 1,740 | 1,468 | 1,468 |
| Tax receivable | 164 | 65 | 210 |
| Other receivables | 174 | 220 | 215 |
| Receivables | 2,078 | 1,753 | 1,893 |
| Other financial assets (interest-bearing) | - | - | - |
| Other financial assets (non-interest-bearing) | 37 | 146 | 187 |
| Total other financial assets | 37 | 146 | 187 |
| Cash at bank and in hand | 1,016 | 906 | 1,284 |
| Total current assets | 4,688 | 4,379 | 4,899 |
| Total assets | 11,421 | 10,116 | 10,890 |
| Liabilities and shareholders' equity | 2010 | 2009 | 2009 |
|---|---|---|---|
| (DKK million, end of period) | Q2 | Q2 | End |
| Common stock | 650 | 650 | 650 |
| Treasury stock | (1,481) | (1,777) | (1,624) |
| Other comprehensive income | 402 | 109 | 154 |
| Retained earnings | 7,178 | 5,917 | 6,651 |
| Minority interests | 12 | 11 | 10 |
| Total shareholders' equity | 6,761 | 4,910 | 5,841 |
| Deferred tax liabilities | 493 | 847 | 694 |
| Long-term employee benefits | 14 | 16 | 13 |
| Non-current provisions | 161 | 154 | 125 |
| Non-current financial liabilities (interest-bearing) | 1,631 | 1,388 | 1,674 |
| Non-current financial liabilities (non-interest-bearing) | 113 | 18 | 22 |
| Total non-current liabilities | 2,412 | 2,423 | 2,528 |
| Financial liabilities (interest-bearing) | 236 | 944 | 559 |
| Financial liabilities (non-interest-bearing) | 131 | 75 | 73 |
| Provisions | 34 | 25 | 30 |
| Trade payables | 513 | 374 | 531 |
| Tax payable | 59 | 261 | 97 |
| Other current liabilities | 1,275 | 1,104 | 1,231 |
| Total current liabilities | 2,248 | 2,783 | 2,521 |
| Total liabilities | 4,660 | 5,206 | 5,049 |
| Total liabilities and shareholders' equity | 11,421 | 10,116 | 10,890 |
| 4.2 Statement of shareholders' equity | |||
| 2010 | 2009 | 2009 | |
| (DKK million) | Q2 | Q2 | End |
| Shareholders' equity excl. minority interests – | |||
| beginning of period | 5,831 | 4,465 | 4,465 |
| Dividend paid | (359) | (326) | (326) |
| Sale of treasury stock | 93 | 14 | 36 |
| Stock-based payment | 29 | 30 | 61 |
| Tax of equity items | 83 | - | 215 |
| Comprehensive income | 1,072 | 716 | 1,380 |
| Shareholders' equity excl. minority interests | 6,749 | 4,899 | 5,831 |
| Minority interests – beginning of period | 10 | 11 | 11 |
| Comprehensive income | 1 | - | (1) |
| Currency adjustment | 1 | - | - |
| Minority interests – end of period | 12 | 11 | 10 |
| Total equity – end of period | 6,761 | 4,910 | 5,841 |
Appendix 5: Product launches in 2010
| Q1 2010 | Cellic® CTec2 – a unique and improved cellulase complex for cost-effective hydrolysis for commercial production of bioethanol from cellulosic feedstock. High conversion efficiency on acid and neutral pretreated feedstocks |
|---|---|
| Q1 2010 | Cellic® HTec2 – an improved hemicellulase complex for commercial production of ethanol from cellulosic feedstock that provides a hydrolysis boost option over Cellic CTec2, i.e., improves C5 sugar yields |
| Q1 2010 | Novamyl® Steam – an enzyme for the Chinese steamed bread market allowing longer-lasting freshness |
| Q1 2010 | BG MaxTM – a combination of microorganisms and enzymes designed to maximize biogas potential and improve the efficiency of anaerobic wastewater systems |
| Q2 2010 | Sprizyme® Excel – a saccharification enzyme for the ethanol industry enabling higher conversion of starch into sugars and hence improving productivity for ethanol producers |
| Q2 2010 | Pectinex® Ultra AFP – a new generation of pectinases developed for secondary mash treatment to break down the cell wall of fruits, thus providing improved performance in fruit processing |
Appendix 6: Company announcements for 2010
| Excluding management's trading in Novozymes shares | ||
|---|---|---|
| January 21, 2010 | Group financial statement for 2009 |
|---|---|
| March 4, 2010 | Annual Shareholders' Meeting 2010 |
| April 29, 2010 | Group financial statement for first quarter of 2010 |
| August 12, 2010 | Group financial statement 1H 2010 |
|---|---|
| October 28, 2010 | Group financial statement 9M 2010 |
| January 21, 2011 | Group financial statement for 2010 |
| March 2, 2011 | Annual Shareholders' Meeting |
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