Novozymes A/S (Novozymes) has reported sales of DKK8.1 billion for the year-end 2008, up 10%, compared with the sales of DKK7,438 billion in the previous year-end. It has also reported a net profit of DKK1.1 billion for the year-end 2008, up 8%, compared with the net profit of DKK1.04 billion in the previous year-end.

Strong 2008 performance.

New, increased long-term targets. Growth expectations for 2009. 2008 sales growth was strong at 13% in local currencies. Earnings were also very satisfactory. Lower growth in the fourth quarter 2008. Expected sales growth in 2009 of 8–13% in DKK in an uncertain market. Favorable long-term trends lead to new, increased long-term targets. Higher future growth supported by higher investments.

Sales growth of 5% in local currency (LCY) and 10% in DKK in the fourth quarter

53.5% gross margin compared to 53.1% in 2007

Operating profit of DKK1,504 million, a 7% increase, excluding one-off item in 2007

Operating profit margin of 18.5% compared to 18.9% in 2007, excluding one-off item

Free cash flow before acquisitions of DKK755 million against DKK963 million in 2007

Net interest-bearing debt of DKK1.380 million compared to DKK1.769 million at year-end 2007

Equity ratio of 45% at year-end 2008

2008 was a strong year for Novozymes. I’m very pleased with our performance, says Steen Riisgaard, president and chief executive officer. Lower growth in the fourth quarter may point to a slowdown going into 2009. But further ahead there are favorable trends and opportunities for our business, so we have upped our level of ambition and increased our long-term targets.

Outlook for 2009

In view of the economic environment, Novozymes considers its current 2009 growth outlook satisfactory. The severity of the global economic slowdown remains very uncertain, and efforts have been made to reflect this in the outlook. Assuming that exchange rates for the company’s key currencies remain at the spot rates on January 21, 2009, the outlook is:

2009 sales growth of 8-13% in DKK and 3-8% in LCY

Growth in operating profit of 10-15% in DKK and in net profit of 5-10% in DKK

Free cash flow of around DKK 100-300m, reduced by a high level of investments

New long-term targets

In the light of last year’s performance and the expected long-term trends, Novozymes has increased its long-term targets to:

Organic sales growth of more than 10% p.a. (plus enzymes for conversion of biomass)

Operating profit margin of more than 20%

Return on invested capital of more than 22%

Income statement and balance sheet


Total sales for the year rose by 13% in LCY. Activities acquired in 2007 contributed 2 percentage points. Exchange rate developments during the year were volatile, especially for the USD, impacting negatively on sales in DKK. As expected, sales growth in the fourth quarter was modest at 5% in LCY and 10% in DKK. There was no acquisition impact in the quarter.

Total 2008 enzyme sales were up by 12% in LCY and 9% in DKK. Organic growth was approximately 11%. Overall the full-year development was very satisfactory, especially given that most industries experienced lower growth in the fourth quarter 2008. Faced with high uncertainty and global economic slowdown, customers showed cautious behavior in the fourth quarter 2008, for example by destocking. In 2008 BioBusiness sales grew satisfactorily by 21% in LCY and 12% in DKK. Microorganism sales experienced 5% organic growth for the year. The activities acquired within biological agriculture (BioAg) delivered higher growth than expected. Biopharmaceutical ingredients (BPI) experienced a decline of 1% in LCY.

Sales of detergent enzymes rose by 13% in LCY and 12% in DKK in 2008. All geographical regions developed positively, and both new and established products contributed to the strong development. Detergent producers across categories continued to use more enzymes in their formulations for improved washing performance and added functionalities. Substitution of other detergent ingredients with enzymes was also a strong growth driver in 2008.

Fourth-quarter 2008 sales increased by 6% in LCY and 8% in DKK compared to the same period of 2007. The lower growth compared to previous quarters was in line with expectations and reflects cautious behavior among customers.

Sales of technical enzymes rose by 15% in LCY and 10% in DKK in 2008. Approximately 1 percentage point can be attributed to the activities acquired in India in 2007. Enzyme sales to the fuel ethanol industry showed strong growth throughout the year, outperforming growth in North American fuel ethanol output. Sales of textile enzymes for abrasion of denim fell during the year as the result of a fashion trend in favor of darker denims and a slowing US denim demand. Total textile sales were down 16% for the year.

Sales of technical enzymes rose by 7% in LCY and 17% in DKK in the fourth quarter of 2008 compared to the same period of 2007. Novozymes’ sales growth in fuel ethanol enzymes was close to 40% in the quarter. This should be seen against the background of more challenging market conditions for ethanol producers. The remaining technical industries declined, explained by the cautious customer behavior mentioned previously.

Sales of food enzymes rose by 10% in LCY and 7% in DKK in 2008. Approximately 2% points can be attributed to the acquired activities in India. Sales of brewing, baking, and beverage alcohol enzymes performed especially well. High raw material prices and limited resources in the food industry drove an accelerated rate of penetration over the year, as the relative cost savings offered by enzyme technology increased.

In the fourth quarter of 2008 sales declined by 6% in LCY and 3% in DKK compared to 2007. There was no acquisition impact in the quarter. The quarterly performance was subject to cautious customer behavior across industries.

Sales of feed enzymes increased by 10% in LCY and 6% in DKK in 2008. The acquired activities in India contributed approximately 2% points. High inorganic phosphate prices increased the global demand for phytase enzymes. However, prices in the phytase enzyme market remain under pressure, especially in Europe. Sales of enzymes for enhanced utilization of vegetable proteins in animal feed diets also performed very well during the year. Customers’ cautious behavior in the fourth quarter notably reduced full-year growth.

Sales in the fourth quarter 2008 were down by 14% in LCY and 9% in DKK compared to the same period of 2007. Despite falling phosphate prices in the quarter, there are no indications of this leading to reduced phytase demand, as prices are still at a high level. The development in the fourth quarter reflects an adjustment of customers’ inventory levels due to concern about future market development.

Sales of microorganisms rose by 39% in LCY in 2008. Approximately 34% points can be attributed to the BioAg activities acquired late 2007, which performed significantly better than expected at the beginning of the year. Other microorganism sales experienced organic growth of 5% during the year, despite being subject to ongoing product pruning activities. Growth was mainly related to the plant care and wastewater treatment areas. In DKK, total 2008 microorganism sales rose by 31%.

Fourth-quarter sales were down by 3% in LCY and up by 3% in DKK. There was no acquisition impact in the quarter. Overall, sales were unfavorably affected by the uncertain and challenging market outlook, leading to customers reducing inventories.

Sales of biopharmaceutical ingredients (BPI) were down by 1% in LCY and 12% in DKK in 2008. Sales were affected by an anticipated decline in volumes for some existing contracts. Also, 2007 included sales for clients’ clinical trials, which were not repeated in 2008.

The fourth quarter 2008 was positively affected by variations in customers’ offtake patterns. As noted previously, this industry operates with substantial quarterly variation in sales patterns, as sales generally comprise a small number of relatively large transactions.