Troubled U.S. ethanol industry hurts Novozymes

By Kris Bevill | April 14, 2009
Web exclusive posted at April 29, 2009, at 4:29 p.m.

Denmark-based Novozymes reported first quarter 2009 sales that were less than previously expected and said the "troubled U.S. ethanol industry" was partly to blame for the downturn. The enzyme developer/distributor said that sales of enzymes for ethanol production fell by 3 percent in the first quarter. According to the company, Novozymes has been particularly affected by a downturn in U.S. ethanol production because its clients have reduced operating capacities. Novozymes' enzymes customers include Poet LLC, ICM, Inc. and, until recently, VeraSun Energy Corp.

"We entered 2009 knowing it would be a tough year, and sales in the first quarter more than confirmed this," Novozymes President and CEO Steen Riisgaard said. "The extent of the global economic downturn indicated by the first quarter has taken us and some of our customers by surprise. This, and declining sales to the U.S. ethanol industry, resulted in sales below expectations. We're consequently reducing our 2009 sales outlook, to now only slightly positive growth."

Previous sales growth predictions had called for an increase of up to 8 percent this year. The updated prediction includes an assumption that the U.S. renewable fuel standard for 2009, which calls for 10.5 billion gallons of ethanol to be blended into gasoline, will be sustained. The new sales outlook also takes into consideration no further decline in global economic activity.

Overall, the company expects to achieve a profitable year. Profit margins are expected to increase and the gross margin for the company's enzyme division improved slightly in the first of quarter of 2009 compared to the first quarter of 2008.

Earlier this year, the company introduced two enzyme families to be used to advance cellulosic ethanol technology - Cellic CTec and Cellic HTec - and expects to contribute to the commercialization of cellulosic ethanol in 2010 by providing a further advanced family of enzymes.