Novozymes reports Q1 sales in line with expectations, strong margins

Novozymes today announced its results for the first quarter of 2018. Q1 organic sales growth of 2% in line with our expectations: Household Care +1%, Food & Beverages +5%, Bioenergy +9%, Agriculture & Feed -5%, Technical & Pharma -10%. EBIT margin at 28.9%. FCF before acquisitions DKK 403 million. 2018 outlook maintained on all parameters.

PederHolk Nielsen, President & CEO of Novozymes: “We’re well in line to deliver on our full-year sales growth outlook of 4-6%, and margins are strong despite a significant currency headwind. We continue to see good progress on our key priorities, including increasing presence with new and existing customers to cater for their individual needs. There is still some uncertainty in the agriculture-related business, including from recent geopolitical tensions. However, with current insight, we remain firm about accelerating sales growth throughout 2018 and beyond.”

Highlights Q1:

  • Organic sales growth of 2% and -6% in DKK. USD/DKK decline of 13% in Q1 y/y
  •  Growth in Household Care, Food & Beverages and Bioenergy
  • Agriculture & Feed and Technical & Pharma lower, mainly due to continued pressure from certain agriculture markets, as well as timing in Pharma
  • 6% organic growth in emerging markets; developed markets on par with last year
  • Strong product development: launch of first yeast solution – Innova® Drive – for conventional biofuels, EU approval of probiotic solution Alterion® for poultry, approval of microbial corn bioyield product Acceleron® B-360 ST for the US and the EU, and launch of a new enzyme class for automatic dishwash enabling easy removal of dried-in cereals
  • Strong EBIT margin of 28.9%, up due to timing of emerging markets’ ramp-up costs and despite currency headwind. Q1 2017 at 27.0% (~29% excluding reorganization costs)
  • Free cash flow before acquisitions at DKK 403 million
  • Dividend payout of DKK 4.50/share. 42% payout ratio
  • Full-year 2018 outlook maintained: Organic sales growth 4-6% (growth relatively stronger in 2H y/y), EBIT margin ~28%, FCF before acquisitions DKK 2.3-2.6 billion, ROIC 24-25%