Novozymes announced its results for first nine months of 2020. Organic sales growth of 1% (Q3: -3%) in the first nine months of 2020: Household Care 7% (Q3: -1%), Food & Beverages 5% (Q3: 1%), Bioenergy -11% (Q3: -5%), Agriculture & Feed 4% (Q3: -19%), Technical & Pharma -15% (Q3: 2%). EBIT margin at 27.0% (Q3: 26.1%) FCF bef. acq. at DKK 2.7 billion (Q3: DKK 0.7 billion).
Ester Baiget, President & CEO: “Our performance in the first nine months was satisfactory, especially considering the COVID-19 implications. Results are driven by our versatile portfolio and the organization’s ability to rapidly adapt to a changing environment. Combining this with an increased customer focus, also in the innovation cycle, I’m confident that we’re setting the scene for a stronger future performance. Looking at 2020, we continue to see considerable COVID-19 related uncertainty and consequently we maintain the range for organic sales growth at -2% to +2%. However, we are increasingly gaining confidence that the midpoint of the range is the most likely outcome. We raise the EBIT margin outlook to 26-27% and FCF before acquisitions to DKK 2.6- 3.0 billion.”
In summary:
- Strong growth in Household Care and solid growth in Food & Beverages driven by innovation and COVID-19 related effects, and despite destocking
- Declines in Bioenergy and Technical & Pharma with COVID-19 and social distancing as main explanations
- Emerging market growth at +3% organically; developed markets flat, mainly due to declining U.S. ethanol production
- Innovation launches in Q3; Microvia™ bacterial hard-surface bio-cleaning solution and LpHera® next-generation solution for higher yield starch processing. In addition, the Fiberex platform was introduced for enhanced corn conversion into ethanol and higher value by-products
- Solid earnings at 27.0% EBIT margin and strong FCF generation at DKK 2.7 billion before acquisitions
- Solid balance sheet with leverage of 0.9x net debt/EBITDA despite recent acquisition and DKK 1.5 billion stock buyback program completed on August 24
- September 1 reorganisation setting the direction towards a clear customer-centric focus across activities
2020 outlook: Novozymes maintains the organic sales outlook of -2% to +2% due to the unusually high uncertainty prevailing in the marketplace but with increasing confidence that the mid-point of the range is the most likely scenario. The EBIT margin is raised and now expected at 26-27% (previously ~26%). Free cash flow before acquisitions is now expected at DKK 2.6-3.0 billion (previously DKK 2.4-2.8 billion) and ROIC including goodwill is maintained at 18-19%. The dividend policy.
