Novozymes delivers stronger than expected Q1 results
After the first quarter of 2023, Novozymes delivers stronger results than expected with 5% organic sales growth. The company confirms the 2023 outlook of 4-7% which is expected to be driven by pricing and volume growth.
COPENHAGEN, Denmark – April 26, 2023. In the first three months of the 2023 financial year, Novozymes delivers 5% organic sales growth, an EBIT-margin of 26.0% before special items, and ROIC including goodwill of 17.7% before special items. A solid start to the year and a strong end to the first quarter confirms the full year organic sales growth outlook of 4-7%.
“Novozymes is delivering stronger than expected results as we had a strong end to the first quarter including some impact from timing of orders. We are experiencing an increasingly positive impact from pricing, which will continue throughout 2023. The solid Q1 results confirms our confidence in the sales growth outlook of 4-7% for the year. We are delivering on our strategy by capitalizing on our broad portfolio of sustainable solutions and diverse end-market exposure in more than 30 different industries,” says Ester Baiget, President & CEO, and continues:
“Last month, we reached an important milestone when our shareholders approved the proposed combination with Chr. Hansen, bringing us one step closer to creating a leading global biosolutions partner. Now our focus is on obtaining the necessary regulatory approvals. I am confident that together, we will significantly strengthen our ability to unlock value for customers, shareholders, and our employees – all while enabling a healthier planet.”
The proposed combination of Novozymes and Chr. Hansen was approved at Extraordinary General Meetings on March 30 with strong support from the respective shareholders of each company. The closing of the combination is expected to be completed in the fourth quarter of 2023 or the first quarter of 2024.
Growth driven by Bioenergy and Agriculture, Animal Health & Nutrition
For the first three months of the year, organic performance by business area were 2% in Household Care, -8% in Food, Beverages & Human Health, 28% in Bioenergy, -9% in Grain & Tech Processing and 19% in Agriculture, Animal Health & Nutrition.
Sales growth in the first quarter was supported by both underlying volume growth and strong pricing. Novozymes capitalizes on its broad portfolio of sustainable solutions and diverse end-market exposure, with an increasingly positive impact from pricing. Organic sales growth was strong in Bioenergy and Agriculture, Animal Health & Nutrition, both delivering double-digit growth. In Household Care, the sales growth was driven by developed markets from increased penetration and despite declining in-market detergent volumes. In Food, Beverage & Human Health, first quarter sales growth declined negatively impacted by challenging comparator as well as supply-chain constraints in Human Health and a soft North American probiotic market. Sales growth also declined in Grain & Tech Processing despite a solid grain performance and was due to expected softness in Tech Processing from lower sales of solutions for covid-19 test kits and lower sales of solutions for textile production.
Developed markets is the main driver of growth
For the first quarter, organic growth rates by geography were 2% in Europe, Middle East & Africa, 7% in North America, -2% in Asia Pacific, and 21% in Latin America.
Sales in developed markets grew 7% organically and emerging markets grew 1% organically. Bioenergy was the main driver of growth in developed markets with Agriculture, Animal Health & Nutrition also delivering double-digit growth. Household Care produced solid growth despite declining industry volumes in developed markets, while Food, Beverages & Human Health as well as Grain & Tech Processing declined. In emerging markets, growth was driven by solid double-digit growth in Agriculture, Animal Health & Nutrition and Bioenergy, whereas Household Care was flat. Food, Beverages & Human Health as well as Grain & Tech Processing declined. Pricing was solid in both developed and emerging markets.
Financial outlook for 2023
The organic sales growth outlook is maintained in the range of 4-7%. Full-year growth is expected to be driven by a combination of stronger pricing relative to 2022 as well as volume growth. Positive pricing across all business areas is expected to contribute more than half of total organic sales growth, whereas innovation and increased market penetration will be the main components of volume growth. Despite the stronger than expected performance in the first quarter, partly benefitting from timing, we still expect more modest growth in the first half of the year. The outlook assumes no major changes to the current state of the global economic situation.
EBIT margin before special items is expected at 25-26%. ROIC incl. goodwill before special items at 16-17%.
Case: Transforming food systems from field to fork
A deep dive into one of Novozymes’ commitments to a healthy planet
The world has managed to feed more and more people in recent decades, but growing populations, increasing nutritional needs, and the impact from climate change mean that we have to rethink the way we produce and consume. Novozymes’ biosolutions play an important role along the entire food value chain.
"Biosolutions can help feed the world sustainably from field to fork. With biosolutions, we can help farmers produce more crops per acre, overcome tough weather conditions and increase yields for livestock – while leading to significantly less pollution and better animal health. Biosolutions also help food producers get more out of raw materials, supermarkets to reduce food waste, and consumers fill up their shopping baskets with more nutritious, healthier, and tastier foods and beverages. We are only beginning to discover the potential of biosolutions.“
Morten Enggaard Rasmussen, Executive Vice President of People, Sustainability and Brand at Novozymes.
Higher yields from the same crops
To transform global food systems, it is important to look at the way we grow food for people and animals. Biosolutions can help make crops more resilient to climate change, increase crop yields, reduce the use of chemical fertilizers, and lower CO2 emissions. If Novozymes’ biosolutions were applied to all of U.S. cornfields and all of U.S. chicken production combined, it would save 87 million tons of CO2. This is almost twice as much as Denmark’s annual CO2 emissions.
Making better use of raw materials
The world experiences shortages of raw materials, only spurred on by the COVID-19 pandemic and geopolitical conflicts. Last year in July on Earth Overshoot Day, we had already used all the resources that the planet generates during an entire year. With biosolutions, we can make better use of the raw materials available, for example by gaining more starch and protein from corn and getting more vegetable oil from the same volume of feedstocks.
Reducing food waste
It is important to tackle food waste in order to save scarce resources, reduce carbon emissions, and tackle hunger. One approach to reducing food waste is by extending the shelf-life of baked goods. Novozymes’ biosolutions help retain the freshness of baked goods such as breads, flatbreads, tortilla wraps, and cakes for longer periods of time. For example, our fresh-keeping solutions for bread have saved approximately 80 billion loaves of bread from being thrown away. If stacked up, those loaves would reach to the moon and back ten times.
To feed a growing population, the world also needs to look at different sources of protein. In fact, if 10% of protein demand was replaced with alternative proteins, it would bring enough grain savings to free up 50% of arable land in Europe.
Consumers are increasingly turning to plant-based foods, but the taste, mouthfeel, and price must be right to make these products go mainstream. Novozymes’ biosolutions help improve the taste and texture of plant-based foods and beverages, for example by giving plant-based drinks the smooth feel that consumers want.
Proteins produced by fermentation can also enhance the taste, texture, and nutritional profile of plant-based meats, and they have the potential to reduce carbon emissions by up to 90% compared to animal protein. Novozymes is investing heavily in an advanced protein production facility to meet the growing demand for plant-based protein.
Our biosolutions improve yields in agriculture by improving plants’ access to nutrients in soil and animals’ access to energy, proteins and minerals in feed. This leads to better use of arable land for food and feed production, reduced use of chemicals, and reduced emissions to the environment from manure in livestock production. Furthermore, our biosolutions in Food and Beverages lower the environmental footprint of food production and consumption by reducing food waste and enabling the use of local raw materials.
Novozymes is the world leader in biological solutions. Together with customers, partners, and the global community, we improve industrial performance while preserving the planet's resources and helping build better lives. As the world's largest provider of enzyme and microbial technologies, our bioinnovation enables higher agricultural yields, low-temperature washing, energy-efficient production, renewable fuel, and many other benefits that we rely on today and in the future. We call it Rethink Tomorrow. www.novozymes.com
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