Novozymes has released financial results for 2015, reporting sales grew by 4 percent organically last year. EBIT grew by 15 percent and the EBIT margin was 27.7 percent. Net profit grew by 12 percent. For the fourth quarter, sales grew by 2 percent organically when compared to the same period of 2014.
While total sales were up organically, Novozymes reported a 5 percent organic drop in bioenergy sales. Sales for household care were up 1 percent organically, while food and beverage sales increased 5 percent organically, food and agriculture sales increased 19 percent organically and technical and pharma sales were up 6 percent organically.
Bioenergy accounted for 18 percent of Novozymes sales last year, with household care, food and beverage, agriculture and feed, and technical and pharma accounting for 33 percent, 27 percent, 15 percent and 7 percent, respectively.
During the fourth quarter, bioenergy sales decreased by 15 organically compared to the same quarter of the prior year. According to Novozymes, the challenging market environment persisted throughout the quarter, as customers continued to focus on costs in a low-margin environment. The company&rsquo;s bioenergy sales decreased, mainly due to unfavorable mix changes, and continued price and market share pressure throughout the year, when compared to 2014.
&ldquo;Bioenergy was a disappointment in 2015,&rdquo; said Peder Holk Nielsen, president and CEO of Novozymes, during an investor call. &ldquo;The thin margins of our customers and low ethanol prices changed the value proposition of our yield-enhancing enzyme systems. Consequently, we saw a negative mix, price and market share impact.&rdquo;
&ldquo;Growth-wise, we expect a challenging 2016,&rdquo; Nielson continued. &ldquo;Bioenergy is expected to contract. This has a dampening effect on group growth, which aside from bioenergy is expected to do relatively well.&rdquo;
Nielson also noted the company has seen significant volatility in the American markets and in commodities over the past 18 months. &ldquo;The depressed commodity prices have made us revise our growth expectations to bioenergy. Our corn ethanol customers value yield-enhancing enzyme technology less than they did a year ago, and low fossil fuel prices add uncertainty to the pace of ramp up of cellulosic ethanol.&rdquo;
Andrew Fordyce, executive vice president of business operations, elaborated on business in the bioenergy segment during the call. &ldquo;The bioenergy business is one of the more volatile compared with the other market segments Novozymes serves,&rdquo; he said, noting the company has experienced quarterly growth rates in this period from between negative 15 percent to positive 32 percent, and between&nbsp; negative 9 and positive 19 percent on an annual basis. &ldquo;In the big scheme of things over the 5 year period, ethanol output has grown about 2 percent per year, where we have grown sales by 4 percent per year due to innovation,&rdquo; Fordyce said.
&ldquo;We believe that ethanol is an important element of the liquid fuel market and that it plays a critical role as an environmentally sustainable fuel,&rdquo; he continued. &ldquo;For that reason we strongly advocate for more use of bioenergy and advanced biofuels. That said, bioenergy has not been a primary growth driver for Novozymes in the last five years, and in the next five years we don&rsquo;t expect that to change. We believe that the global demand for ethanol will continue to increase. It won&rsquo;t drive strong growth, but it provides an opportunity for the U.S. ethanol industry to utilize its capacity better and for our customers to export more.&rdquo;
&ldquo;As we detailed in our conference call in October, our customers run a commodity refining business. It&rsquo;s volatile and it will remain so,&rdquo; Fordyce said. &ldquo;We&rsquo;re working hard to increase our agility by expanding our product offering and increasing the speed to further help our customers adapt to changing market conditions.&rdquo;
According to Fordyce, market conditions for ethanol producers continued to be very tough during the fourth quarter of last year, and those conditions do not appear to be improving in 2016. This year, Novozymes expects bioenergy sales to contract, he said, while product volumes will remain roughly flat.
&ldquo;Exactly when the negative mix effects will bottom out, I can&rsquo;t tell you right now, but we are in full force on innovation to make it happen sooner than later,&rdquo; Fordyce said.
During his presentation, Fordyce also indicated Novozymes launched Avantec Amp, an alpha-amylase enzyme system, during the fourth quarter of last year. &ldquo;Interest in trialing Amp has been strong,&rdquo; he said. &ldquo;We expect to launch more innovation in 2016.&rdquo;
&ldquo;These solutions will support us in the marketplace, but they are not expected to contribute enough to fully offset the negative impact from price mix and lower market shares in 2016,&rdquo; Fordyce continued.
According to information published by Novozymes in its quarterly report, the company expects a modest increase in biofuel production volumes over the coming years, driven by increased demand in emerging markets and some growth in North America as E15 and E85 blends slowly expand.
The company also noted it continues to believe in the long-term commercial viability of second-generation biofuel. &ldquo;Novozymes remains committed to unlocking this opportunity through the development of more and enhanced technology for our customers in this emerging market,&rdquo; said the company in its report. &ldquo;However, low oil and ethanol prices have increased uncertainty as to when second-generation biofuels will commercialize. In the absence of strong political support to secure a market for advanced biofuels, and as the ramp-up times for the first commercial-scale facilities have been longer than expected, it has become unlikely that Novozymes will sell enzymes to 15 biomass conversion plants by 2020.&rdquo;
In the short-term, Novozymes said bioenergy sales are expected to contract this year, as the challenging market environment in the U.S. is expected to continue. U.S. ethanol production for this year is expected to be on par with last year. Longer-term, Novozymes said it expects moderate sales growth within bioenergy once through the challenges of 2016.
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Novozymes has released financial results for 2015, reporting sales grew by 4 percent organically last year. Bioenergy sales dropped 5 percent organically. EBIT grew by 15 percent and the EBIT margin was 27.7 percent. Net profit grew by 12 percent.	

Novozymes reports drop in bioenergy sales for 2015

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