novozymes strategy & growth - euroland
TRANSCRIPT
Novozymes Strategy & Growth Danske Bank, Navigating the Nordics Stockholm, June 9th 2015
Anders Lund
VP, Head of Marketing
This presentation and its related comments contain forward-looking statements, including statements about future events,
future financial performance, plans, strategies and expectations. Forward-looking statements are associated with words
such as, but not limited to, "believe," "anticipate," "expect," "estimate," "intend," "plan," "project," "could," "may," "might"
and other words of similar meaning.
Forward-looking statements are by their very nature associated with risks and uncertainties that may cause actual results
to differ materially from expectations, both positively and negatively. The risks and uncertainties may, among other things,
include unexpected developments in i) the ability to develop and market new products; ii) the demand for Novozymes’
products, market-driven price decreases, industry consolidation, and launches of competing products or disruptive
technologies in Novozymes’ core areas; iii) the ability to protect and enforce the company’s intellectual property rights; iv)
significant litigation or breaches of contract; v) the materialization of the company’s growth platforms, notably the
opportunity for marketing biomass conversion technologies or the development of microbial solutions for broad-acre crops;
vi) the political conditions, such as acceptance of enzymes produced by genetically modified organisms; vii) the global
economic and capital market conditions, including, but not limited to, currency exchange rates (USD/DKK and EUR/DKK in
particular, but not exclusively), interest rates and inflation; viii) significant price decreases on input and materials that
compete with Novozymes’ biological solutions. The company undertakes no obligation to update any forward-looking
statements as a result of future developments or new information.
Forward-Looking Statements
2
Session outline
• Novozymes strategy
• Household care
• Food & Beverages
• Bioenergy
• New growth platforms
3
Novozymes the world leader in Bioinnovation
Household Care
Food & Beverages
Bioenergy Agriculture &
Feed Technical &
Pharma
Founded 1925
Listed 2000
Ticker NZYM B
Exchange Copenhagen
Market Cap* US$ ~15bn
Long-term targets 2015-2020: 8-10% organic sales
≥ 26% EBIT margin
≥ 25% ROIC
Global: ~6,500 FTE’s, 700 products in 140 countries
R&D intensive: ~7,000 patents, ~14% of sales spent on R&D
Profitable: $2bn in sales and 27.2% EBIT margin in 2014
Majority owner Novo A/S controls 25.5% of the capital and 70.4% of the votes
Who we are?
4
Key facts
*A+B shares May, 2015
15 years of innovation-driven returns
Strong absolute returns since 2000
2.5x sales
4x EBIT
5x net profit
DKK ~30bn In operating cash flows
Driven by topline and leverage
~7% organic sales CAGR
+5.4 %-points gross margin
+10.5 %-points EBIT margin
+12.9 %-points ROIC
Innovation is the recipe
DKK 16bn invested in R&D
+100 new solutions marketed
5
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
Sales DKKm EBIT margin R&D/Sales ROIC
Our set of competitive advantages across the value chain has led to a unique market-leading position
Scale
• Production: 5 core plants
in 3 regions
• Research & Development:
2/3 of total investment of
industry
• Technical services: half of
commercial organization
“on site”
• Market & technology
coverage
Sustainability
• Pioneering sustainability:
• Triple bottom line
• Life cycle assessment
documentation
• Trusted long-term partner
High barriers
• More than 7,000 patents
• Diverse biotech know
how and investments
needed to compete
• Customer partnerships
• Manufacturing expertise
6
Novozymes
48%
Genencor (DuPont)
20%
DSM 6%
Others and
captive 26%
Novozymes
48%
Genencor (DuPont)
20%
DSM 6%
Others and
captive 26%
48%
20%
6%
26%
Source: Novozymes estimate
Novozymes
Dupont
DSM
Others
7
Our new strategy puts partnerships front and center for success in creating impact
8
Growth until 2020 expected to be driven by established industries with additional growth from platforms
~7% Novozymes’ organic growth average, 2010-2014
~7% Growth platforms’ organic growth average, 2010-2014
~7% Established industries’ organic growth average, 2010-2014
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2010 2011 2012 2013 2014
Long-term
organic growth target
8-10%
Established industries are
the basis for growth
Growth platforms expected to
enable 8-10% growth
Diversification in revenue
streams important for solidity
2015 2016 2017 2018 2019 2020
1
2
3 Growth platforms
- BioAg
- Biomass Conversion
- Animal Health & Nutrition
- Pharma
Established industries
- Household Care
- Grain-based ethanol
- Food & Beverages
- Technical
Household Care
18% 35% 26% 14% 7%
Household Care
Food & Beverages
Bioenergy
Agriculture & Feed
Technical & Pharma
• Laundry & Dishwasher detergents
• Cleaning products
• Baking • Starch to syrups • Brewing &
Alcohol • Healthy concepts
• Corn ethanol • Cellulosic
biofuels
• Animal feed • BioAgriculture
• Textile & Leather
• Pulp & Paper
• Wastewater
• Pharma
ingredients
Household Care: A strong portfolio of innovation with global relevance built over last 50 years
11
6 enzyme classes
10 best-in-class product families
Coronase®, Liquanase®, Savinase®, Stainzyme®, Amplify®, Lipex®, Carezyme®, Celluclean®, Mannaway®, xPect®, Intensa Evity®, Blaze Evity®
~100 countries
300+ brands
Etc.
1 platform of enzyme and microbial technology
Albania, Algeria, Argentina, Australia, Austria, Bangladesh, Belarus, Belgium, Bolivia, Bosnia-Herz., Brazil, Bulgaria, Cameroon, Canada, Chile, Colombia, Costa Rica, Croatia, Cyprus, Czech. Republic,
Denmark, Dominican Rep., Ecuador, Egypt, El Salvador, Estonia, Ethiopia, Finland, France, Germany, Great Britain, Greece, Guatemala, Honduras, Hong Kong, Hungary, India, Indonesia, Iran, Ireland, Israel,
Italy, Ivory Coast, Japan, Jordan, Kenya, Lebanon, Lithuania, Luxembourg, Malaysia, Mauritius, Mexico, Morocco, Myanmar, Netherlands, New Zealand, Nigeria, Norway, Oman, P.R. China, Pakistan, Panama,
Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Romania, Russian Fed., Saudi Arabia, Serbia, Singapore, Slovakia, South Africa, South Korea, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syria,
Taiwan, Tanzania, Thailand, Trinidad &Tobago, Tunisia, Turkey, Uganda, Ukraine, United Arab Emirates, USA, Uzbekistan, Venezuela, Vietnam, Yemen
New stabilization technology Novozymes Evity® is a range of highly robust and stable enzymes
Pectate
lyase Mannanase Cellulase Lipase Amylase Protease
Innovation has driven growth and solidity over the long-term.
• Enzyme market leader with +60% global market share
• 13 new nonexclusive products and 2 technology platforms launched within last 5 years
• Current market dynamics adds uncertainty short-term, but long-term case intact. Last 5 years, quarterly growth has fluctuated between -2 and +19%
12
-
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
5.000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
DK
K m
illio
n
2000 • ~80% of sales from 5 customers • ~30% emerging markets
2014 • ~80% of sales from 20 customers • ~45% from emerging markets
2000-2009 CAGR: 4%
2010-2014 CAGR: 8%
3 priorities govern Household Care R&D
Strengthen partnerships with global innovators to increase enzyme inclusion
Enable broader penetration in emerging markets
Explore novel biological solutions and new wash categories
Strategy – Sustainability – Innovation – Household Care – Bioenergy – Food & Beverages
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1. 2. 3.
Food & Beverages
18% 35% 26% 14% 7%
Household Care
Food & Beverages
Bioenergy
Agriculture & Feed
Technical & Pharma
• Laundry & Dishwasher detergents
• Cleaning products
• Baking • Starch to syrups • Brewing &
Alcohol • Healthy concepts
• Corn ethanol • Cellulosic
biofuels
• Animal feed • BioAgriculture
• Textile & Leather
• Pulp & Paper
• Wastewater
• Pharma
ingredients
Food & Beverages enzymes summary The largest category in the enzyme world
A small fraction of food ingredients and processing aids
A global industry with many applications
Strategy – Sustainability – Innovation – Household Care – Bioenergy – Food & Beverages
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Baking
Food & Nutrition
Starch, oils & fats
DKK ~9bn
DKK ~15bn
DKK +300bn
DKK ~9bn
Food Ingredients
• Flavors &
colors
• Processing
ingredients
• Preservatives
• Specialty
proteins
• Other
ingredients
Enzymes
• Food & Beverages
Enzymes for
• Detergents
• Biofuels
• Feed
• Technical
applications
Source: Novozymes own estimates, Leatherhead, expert interviews, GXC, Freedonia, Euromonitor Source: Novozymes own estimates
Beverages
F&B enzyme market
Novozymes sales, DKKm 2000-2014
Novozymes is the global leader in the Food & Beverages enzyme market
Most fragmented and diverse market for Novozymes
• Broad portfolio of 300+ products across applications
• Top 5 customers make up ~20% of sales
• Distributors important for global reach (~30% of sales)
Strong market position and robust growth driver
• Novozymes is #1 in all the main markets where it plays
• 6% sales CAGR since IPO – 26% of Group sales today
• Fragmented industry structure and industry profile make for slower ramp-up of new products, but long lifetime
Source: Novozymes own estimates.
DSM, DuPont,
Others
+ Captive
0
1000
2000
3000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
+6%
Strategy – Sustainability – Innovation – Household Care – Bioenergy – Food & Beverages
16
Bioinnovation and Novozymes can have a greater impact on consumers and society
Claas: Can you illustrate this or graphically show the two sides of the equation. No
need to use numbering and the numbers don’t
correspond
Strategy – Sustainability – Innovation – Household Care – Bioenergy – Food & Beverages
17
More with less
Health Emerging markets industrialization
Consumers wanting more natural foods
Four defining trends set the scope for future growth…
… and define innovation opportunities for the future
Unlock new
substrate streams
Enhance
productivity offering
in existing markets
Freshkeeping
Remove unwanted
compounds
Food & Beverages
18% 35% 26% 14% 7%
Household Care
Food & Beverages
Bioenergy
Agriculture & Feed
Technical & Pharma
• Laundry & Dishwasher detergents
• Cleaning products
• Baking • Starch to syrups • Brewing &
Alcohol • Healthy concepts
• Corn ethanol • Cellulosic
biofuels
• Animal feed • BioAgriculture
• Textile & Leather
• Pulp & Paper
• Wastewater
• Pharma
ingredients
Bioenergy: Innovation can grow the enzyme market, even in an underlying flat market
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-20%
-10%
0%
10%
20%
30%
40%
Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
U.S. quarterly ethanol volume growth rates and Novozymes organic growth (quarter over last year quarter)
NZ org. Bioenergy growth Eth.vol. growth
Avantec® launched
Spirizyme Achieve® and
Olexa® launched
Source: EIA and Novozymes
Further innovation targeted, along different paths – Novozymes to launch new innovation in 2015
2,70
2,80
2,90
3,00
3,10
3,20
3,30
3,40
3,50
2012-2014 2015-2017 2018-? 2020+
Eth
an
ol yie
ld p
er
bu
sh
el o
f co
rn, g
al/b
u
20
Sta
rch
&
Su
ga
r
Fib
er
New processes
and biological
solutions convert
corn fiber into
ethanol
New enzyme and
yeast-based
innovation
Avantec®, Olexa®
& Spirizyme
Achieve®
Remaining fiber
pool potentially
converted into
ethanol
Innovation direction
Starch
Fiber
Increasing ethanol yield Increasing throughput Reducing other costs
Converting fiber into ethanol
New growth platforms
We are building 4 growth platforms for long-term impact by leveraging Novozymes’ core capabilities and experience
Agriculture holds great opportunities and is ”home” to 3 of the platforms, but we are not limited to agriculture.
Partnerships are critical for existing and new platforms.
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BioAgriculture
The BioAg Alliance is dedicated to
fundamentally enhancing the
research and development of
naturally derived microbial
technology to enable farmers
globally to produce more crops from
arable land while using fewer
resources.
Animal Health & Nutrition
To help feed the world, we work with
partners to develop and drive
adoption of proven biological
innovations that improve feed
efficiency and animal health.
Biomass Conversion
Through strong partnerships we
work to transform underutilized
agricultural biomass into renewable
energy and chemicals to achieve
greater productivity from land, drive
rural economic development, and
reduce GHG emission intensity from
energy and chemical production.
Biopharma
In Biopharma we work to improve
the lives of people globally by
delivering consistent and proven
innovation to enhance drug delivery
and formulation of drugs.
Conclusion
• Long-term topline growth seen as main driver of value creation
• Strategic direction reflects priority of growth, while remaning a highly profitable company
• Strong competitive position built on heritage and compounded investments in technology and assets
• Established industries are foundation for growth
• New growth platforms to contribute to growth as they ramp up towards long-term impact
23