The Novozymes Report 2019
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The Novozymes Report 2019 Where we make a difference In 2019, an estimated 5.9 billion people used products made with our solutions on a weekly basis Rethink tomorrow Novozymes A/S 1 Our purpose Contents Together we find biological answers for better lives in a growing world – Let's rethink tomorrow The big picture Accounts and performance 4 2019 in brief 52 Performance and consolidated 2019 in brief 14 Five-year summary financial statements 2019 was a challenging year for 15 Letter from the Board of 60 Performance and 48% Novozymes. Several industries Directors environmental data experienced strong headwinds Novozymes holds an but there were signs of recovery in 17 Letter from the CEO 62 Performance and social estimated 48% share of Household Care. 19 This is Novozymes & governance data the global enzyme market. 21 Novozymes and the Sustainable 64 Notes Development Goals 136 Statements 142 Financial statements for Strategy Our business Novozymes A/S Novozymes’ updated strategy Better 24 Strategy 157 Glossary business with biology was launched in 29 Risk management 158 About the report June 2019. It will help us capture the right opportunities at the right time 33 Targets together with our customers. 34 Outlook for 2020 Governance 37 Corporate governance Explore 40 Board of Directors the highlights of the 42 Executive Leadership Team Novozymes Report 2019 at report2019.novozymes.com 44 Remuneration report 49 The Novozymes stock Novozymes A/S 2 4 2019 in brief 14 Five-year summary 15 Letter from the Board of Directors 17 Letter from the CEO 19 This is Novozymes 21 Novozymes and the Sustainable Development Goals Where we make a difference Novozymes’ solutions contributed to an estimated saving of 87 million tons CO 2 for our customers in 2019 The big picture Financial highlights 2019 2019 Key figures realized outlook1 DKK Sales growth, organic (1)% (2)-0% EBIT margin 28.1% 27-28% Net profit growth (2)% (5)-0% 28.1% -1% -2% Net investments excl. acquisitions, DKKbn 1.0 0.8–1.0 EBIT margin Organic sales growth Net profit growth (2018: 28.3%) (2018: 4%) (2018: 3%) Free cash flow before acquisitions, DKKbn 2.2 1.9–2.3 The EBIT margin ended at 28.1%, down Total sales in 2019 were DKK 14,374 Net profit declined by 2% to ROIC (including from 28.3% in 2018. Excluding the million, a decline of 1% organically DKK 3,155 million in 2019, down goodwill) 21.1% ~21% one-time costs incurred in 2019 relating and flat in DKK. from DKK 3,227 million in 2018. Avg. USD/DKK 667 667 to organizational changes, and the net gain from the termination of The BioAg Overall unsatisfactory sales growth 1. Outlook guided as of October 23, 2019. Alliance and from the divestment of in 2019 mainly due to challenging the pharma-related royalty, the EBIT agricultural markets. margin in 2019 was around 26%. 21.1% ROIC (2018: 24.2%) Return on invested capital (ROIC), including goodwill, was 21.1%, down 3.1 percentage points from 24.2% in 2018. The decrease was mainly a result of higher net invested capital. ROIC was impacted negatively by 0.8 percentage point by the Outlook 2020 implementation of IFRS 16. See more details on performance in Accounts and performance Novozymes A/S The big picture 2019 in brief 4 Sustainability highlights 2019 2019 Key figures realized target Estimated reduction in CO2 emissions through our custom- ers’ application of our products, in million 0.9 31% 30% tons 87 ≥ 94 < organic Lost time injuries/million working hours Women in senior management Renewable energy Growth in absolute sales (2018: 2.4%) (2018: 30%) (2018: 23%) water consumption (4)% growth < organic Novozymes achieved its 2020 safety In 2019, we exceeded our target Energy from renewable sources Growth in absolute sales target one year ahead of time with of 29% for women in senior accounted for 30% of our total energy consumption (5)% growth just 0.9 lost time injuries per million management (directors or higher). energy consumption in 2019. ≤ organic working hours in 2019. This is the best This is a result of our continued focus In Denmark, Brazil and Tianjin, Growth in absolute sales result ever to be achieved across the on improving diversity. we purchase our electricity from CO2 emissions (24)% growth organization. renewable resources. Renewable energy 30% 28% Occupational accidents1 0.9 ≤ 1.5 Employee absence 1.9% ≤ 2.0% Better business Women in senior with biology management 31% ≥ 29% 2020-2022 1.5°C 87,000,000 Enabling employee development 77 ≥ 75 We are committed to providing the world with Tons of CO2 emissions saved biological solutions that can help limit global Customer satisfaction2 54 ≥ 50 warming increase to 1.5°C. This commitment In 2019, our customers saved an estimated 87 million tons of CO2 has been validated by the Science Based emissions by applying Novozymes’ products. The savings achieved are 1. Per million working hours. Targets Initiative. equivalent to taking approximately 36 million off the road. 2. Defined as Net Promoter Score. See more details in Accounts and performance Novozymes A/S The big picture 2019 in brief 5 Sales by geography North America Europe, the Middle East Latin America Asia Pacific & Africa 33% 37% 10% 20% of sales of sales of sales of sales -6% Organic sales growth 3% Organic sales growth 5% Organic sales growth -3% Organic sales growth Organic sales declined 6% in 2019 compared Organic sales grew 3% in 2019 compared Organic sales in Latin America grew Organic sales in Asia Pacific declined 3% in with 2018. Difficult market conditions for with 2018. Moderate growth in Household 5% in 2019 compared with 2018. While 2019 compared with 2018, as performance in Bioenergy and Agriculture & Feed had Care and Food & Beverages, paired with Agriculture & Feed was negative, the very Food & Beverages was curbed by weakness a negative impact on the overall sales strong growth in Agriculture & Feed, shaped good performance was primarily driven in starch processing and the negative effects performance. Sales in Household Care, Food the good performance in 2019 overall. by Bioenergy as more corn-based ethanol from the Middle East. & Beverages and Technical & Pharma grew Bioenergy and Technical & Pharma were capacity came online during the year. in 2019. slightly down. Novozymes A/S The big picture 2019 in brief 6 Sales by industry Industries 5% of sales (2018: 6%) Household Care 33% of sales Food & Beverages 13% (2018: 32%) of sales Bioenergy (2018: 14%) Sales by industry Agriculture & Feed Technical & Pharma 20% of sales (2018: 19%) 29% of sales Novozymes holds an estimated 48% (2018: 29%) share of the global enzyme market. One out of five of Novozymes’ industries grew in 2019. Household Care delivered according to expectations set out at the beginning of the year. Bioenergy, BioAg, and Food & Beverages were negatively impacted by weak agricultural Organic sales growth markets. 1% -1% -3% -5% -3% Novozymes A/S The big picture 2019 in brief 7 Household Care Product launches Key industry trends Medley® 3.0 – Next generation of Consumers are willing to pay more for liquid blends upgraded with the latest natural products technology to meet consumer needs and the latest product formats Compaction of laundry detergents remains a strong trend, driven by Achieve Advance – New enzyme for low increased sales through online retailers temperature automatic dishwashing and the desire to reduce the use of plastics Strong interest in freshness solutions 33% for the removal of malodor and grime, of total sales including in synthetics Growing interest in microbial cleaning and bio-based solutions for softeners and dishwashing by hand 1% Organic sales growth 2020 outlook 2019 results Growth with local customers primarily came from increased enzyme penetration and sales Organic sales growth is expected to be Sales in Household Care grew 1% for the in developed markets grew moderately in supported by the continued rollout of year. Sales reported in DKK grew 3% for the 2019. Sales in emerging markets declined, as the Freshness platform and increased SDG impact full-year. strong growth in India throughout the year penetration in emerging markets. was offset by the weaker Chinese market The sales performance in 2019 benefitted early in the year and the annualization of Some of our larger customers are expected from solid growth with local customers and negative impact from the Middle East. to further stabilize their performance, the negative trend in business with large whereas medium and small laundry global customers subsiding. The commercial The negative impact from the Middle East detergent producers are expected to Our solutions contribute to rollout of the Freshness platform progressed was another reason for the shifting sales continue improving their formulations with reducing aquatic pollution, as planned and key innovation milestones performance from a slight decline in the first further inclusion of enzymatic solutions. among other things. were achieved. Freshness was predominately six months to solid growth in the back half of a second half sales growth contributor. the year. Read more about our contributions to the SDGs Read more about our Household Care solutions at Novozymes.com Novozymes A/S The big picture 2019 in brief 8 Food & Beverages Product launches Key industry trends Frontia® Jade – New addition to our Growing consumer demand for high- Grain milling platform for the Chinese quality, healthy and sustainable foods market, extracting extra value from corn by releasing more starch, fibers and Consumers focus on brands using local protein and clean label ingredients catering to local tastes, traditions and cultures Continued focus on yield enhancement solutions in agro-processing industries 29% Strong interest from emerging markets of total sales in production optimization solutions 2020 outlook Organic sales growth is expected to be -1% broad-based with all regions contributing to growth.