Roadshow presentation 9M 2020
Released on October 21 2020
Further investor relations information is available from the company’s website at investors.novozymes.com Roadshow presentation Table of Content
• Latest results 4 • Equity story 14 • Business overview 26 • ESG overview 51 • Financial overview 58
2 Disclaimer Forward Looking Statement
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.
3 Latest results
4 Latest results Highlights
Satisfactory first nine months despite COVID-19 implications. Full-year 9M 2020 Q3 2020 EBIT margin and FCF outlook raised; sales outlook maintained with Realized Realized midpoint of range as most likely outcome Sales performance, organic % +1 -3 • More customer-centric organization announced on September 1 EBIT margin % 27.0 26.1
• Organic sales; 9M y/y: +1% (Q3 y/y: -3%). Segment performances impacted ROIC incl. goodwill % 19 19 differently by COVID-19 during the year Free cash flow before acquisitions DKKbn 2.7 0.7
• Household Care and Food & Beverages negatively impacted by destocking in Q3, as expected
• Agriculture & Feed negatively affected by inventory adjustments in Q3 Organic sales performance by segment
• Bioenergy and Technical & Pharma negatively impacted by COVID-19 effects, Q3’20 9M’20 also in Q3 7% 5% • EBIT margin at 27.0% (Q3: 26.1%) and free cash flow before acquisitions at 4% 1% 2% 1% DKK 2.7 billion -1% -3% • Full-year organic sales outlook maintained at -2% to +2; midpoint of range as -5% most likely scenario -11% • EBIT margin and free cash flow outlook raised to between 26 to 27% and DKK -15% 2.6 to 3.0 billion respectively -19% Household Food & Bioenergy Agriculture Technical Novozymes Care Beverages & Feed & Pharma
5 • Latest • Equity story • Business • ESG • Financial results overview overview overview Latest results Organic sales performance by geography
Europe, Middle East ⚫ Main sites with production and R&D ⚪ Satellite production site ⚫ Satellite R&D site North America & Africa
9M y/y: -4% 9M y/y: 5% 32% Q3 y/y: -4% Q3 y/y: -1 % 40% of sales of sales
⚫
⚪ ⚫ ⚫ ⚫ ⚫
⚫⚪
⚪⚫ Latin America Asia Pacific 9M y/y: 9 % 9M y/y: -1 % 9% Q3 y/y: -3 % Q3 y/y: -7% 19% of sales of sales Emerging 34 % Developed 66% 9M y/y: 3% 9M y/y: 0% Q3 y/y: -6% Q3 y/y: -2%
6 • Latest • Equity story • Business • ESG • Financial results overview overview overview Latest results Household Care
Strong sales performance; Q3 impacted by destocking YTD organic sales performance (y/y) • Organic sales; 9M y/y: +7% (Q3 y/y: -1%) • Strong sales performance driven by rollout of the freshness
technology and increased enzymatic penetration 7% 2% • Sales amplified by COVID-19 related effects; Q3 affected by 1% 0% 0% expected destocking • Q3 2019 comparator more difficult than those from 1H 9M’16 9M’17 9M’18 9M’19 9M’20 • Launch of Microvia™ for hard surface cleaning 35% of sales 2020 perspectives Quarterly organic sales performance (y/y) • Freshness technology performing according to plan; increased enzyme penetration for detergents in emerging 11% 11% markets 5% 5% • Consumer behaviors affected by COVID-19
-1%
Q3’19 Q4’19 Q1’20 Q2’20 Q3’20
7 • Latest • Equity story • Business • ESG • Financial results overview overview overview Latest results Food & Beverages
Solid first nine months led by baking YTD organic sales performance (y/y) • Organic sales; 9M y/y: +5% (Q3 y/y: +1%) • Growth led by baking, beverages declined from lower demand in brewing 9% 4% 5% • Q3 impacted by destocking as expected, especially in baking 1%
• Q3 2019 comparator more difficult than those from 1H -1%
9M’16 9M’17 9M’18 9M’19 9M’20 2020 perspectives • Consumer behaviors affected by COVID-19 31% of sales
Quarterly organic sales performance (y/y)
11%
3% 1% 2% 1%
Q3’19 Q4’19 Q1’20 Q2’20 Q3’20
8 • Latest • Equity story • Business • ESG • Financial results overview overview overview Latest results Bioenergy
Improvement in Q3, though still below last year YTD organic sales performance (y/y) • Organic sales; 9M y/y: -11% (Q3 y/y: -5%) • U.S. ethanol production impacted by COVID-19 restrictions; 14% 10% less decline in Q3 • Sales outside the U.S. growing, also in Q3 -4% -7% • Introduction of the Fiberex technology -11%
9M’16 9M’17 9M’18 9M’19 9M’20 2020 perspectives • Supporting customers with more tailored solutions, also 17% of sales considering the difficult market conditions Quarterly organic sales performance (y/y) • Volatile year impacted by COVID-19
11% 2%
-5% -5%
-37% Q3’19 Q4’19 Q1’20 Q2’20 Q3’20
9 • Latest • Equity story • Business • ESG • Financial results overview overview overview Latest results Agriculture & Feed
Growth driven by Agriculture; Q3 significantly impacted by YTD organic sales performance (y/y) inventory adjustments in Feed • Organic sales; 9M y/y: +4% (Q3 y/y: -19%) • Agriculture performed well in upstream corn inoculants but
weaker in downstream solutions; Q3 negatively impacted by 5% 4% 0% timing -2% -3% • Feed declined slightly; significant Q3 inventory adjustments 9M’16 9M’17 9M’18 9M’19 9M’20 due to lower market demand 13% of sales 2020 perspectives Quarterly organic sales performance (y/y) • Global farm economics and COVID-19 related uncertainty 27%
8% 3%
-9%
-19% Q3’19 Q4’19 Q1’20 Q2’20 Q3’20
10 • Latest • Equity story • Business • ESG • Financial results overview overview overview Latest results Financials – Performance 9M
Solid financial performance despite challenging conditions • Organic sales; 9M y/y: +1%; DKK sales -1% • Gross margin at 56.2% — benefiting from productivity improvements, lower input costs and one-offs • EBIT margin at 27.0% — roughly 1 %-point improvement y/y adjusted for one-offs • ROIC incl. goodwill at 19.2% — impacted by increased invested capital and lower NOPAT • Free cash flow before acquisitions at 2.7 billion DKK – mainly driven by better earnings quality
Key financials 9M 2020 9M 2019 Q3 2020 Q3 2019 Sales performance, organic % +1 -2 -3 +1 Gross margin % 56.2 55.2 56.1 55.5 EBIT margin % 27.0 27.6 26.1 23.0
ROIC incl. goodwill % 19.2 20.5 18.9 17.7
Net investments excl. acquisitions DKKbn 0.6 0.6 0.2 0.2 Free cash flow before acquisitions DKKbn 2.7 2.1 0.7 0.8
11 • Latest • Equity story • Business • ESG • Financial results overview overview overview Latest results Financials – Outlook 2020
2020 outlook; • Organic sales performance of -2% to +2%, midpoint of range as most likely outcome • Household Care and Food & Beverages maintained at mid-single digit growth • Bioenergy and Technical & Pharma expected to decline double-digit • Agriculture & Feed now expected at low-single digit growth • EBIT margin and FCF expectations increased • ROIC incl. goodwill maintained at 18% to 19% • Stock buyback program totaling DKK1.5 billion for 2020 completed on August 24
April 7/ 2020 outlook October 21* August 11 April 29 /July 8 January 24
Sales performance, organic % -2 to +2 -2 to +2 Suspended 1 to 5
EBIT margin % 26 to 27 ~26 Suspended ~27 ROIC (including goodwill) % 18 to 19 18 to 19 Suspended 20 to 21 Free cash flow before DKKbn 2.6 to 3.0 2.4 to 2.8 Suspended 2.5 to 2.9 acquisitions
For modelling purposes:
Effective tax rate % 19 to 21 19 to 21 Suspended 19 to 21
Net financials DKKm ~ -150 ~ -150 Suspended ~ -200
Net investments DKKbn 0.8 to 1.0 0.8 to 1.0 Suspended 0.8 to 1.0
Stock buyback program DKKbn 1.5 (finalized) up to 1.5 up to 1.5 up to 1.5
* Assumes that the exchange rates for the company’s key currencies remain at the rates prevailing on October 20 for the rest of 2020
12 • Latest • Equity story • Business • ESG • Financial results overview overview overview Latest results Summary
Satisfactory performance considering COVID-19 implications • 2020 outlook for sales at -2% to +2%; increasingly gaining confidence that the midpoint of the range is the most likely outcome • Increased outlook for EBIT margin and FCF before acquisitions • New more customer-centric organization
Better business with biology
13 • Latest • Equity story • Business • ESG • Financial results overview overview overview Equity story
14 Equity story Our products are used in +30 industries We launch 15-20 new products annually
Enzymes are… ~90% ~10% Microbes are… of sales of sales … proteins that catalyze chemical reactions and thus often replace … living microscopic organisms, such as bacteria and fungi. They are chemicals in products and industrial productions essential for nourishment, immunity and replication in e.g. plants and animals
Specific Catalytic Natural Fast
Baking
Animal nutrition Laundry Food & & health nutrition Leather Bioenergy Textiles
Beverages
Pulp & Paper Wastewater
15 • Latest • Equity story • Business • ESG • Financial results overview overview overview Equity story The world leader in industrial enzymes and microbes across the value chain We are uniquely positioned to drive innovation opportunities
Innovation leadership Best-in-class production Diversified global presence
• Strong R&D organization and broad technology platform • Cutting-edge protein engineering improves enzyme • Highly skilled technical sales and service teams enables supports continued product development efficacy long-standing customer relationships • Forefront of technology to secure our leading position • Genetic engineering of host organisms and production • Highly diversified selling to +2,000 customers covering through innovation allowing for massive parallel process optimization is driving higher throughput +30 industries in ~140 countries screening: bigger libraries, better answers
~48% 2X market share1
Increased pipeline selectivity to accelerate time to market The world’s largest producer of fermented proteins. Market and technology leader and key driver of market from ~5 years to ~3 years Efficiency gain have doubled the available capacity expansion in the industry
16 • Latest • Equity story • Business • ESG • Financial results overview overview overview
1. Novozymes market share within industrial enzymes Equity story Novozymes is about turning amazing science into sustainable biological solutions Since 2013, we have more than doubled our average number of launches relative to the average number from 2000-2012
• Capitalize on critical mass and expertise to develop new cutting-edge Balanced customer-approach to new product launches technology and innovation Non-public Public 21 20 20 • Enable cross-fertilization to leverage innovation and synergies across 18 industries 17 17
• Secure technology leadership through continued investments and 13 technology scouting
2013 2014 2015 2016 2017 2018 2019 Build Buy Borrow (collaborate) Internally generated ideas Universities, incubators and Customers and partners, We continue to find new uses for our technology start ups Hello Science within existing industries
Household Care case
Freshness
Feasibility Discovery Development Launch Commercial Cellulase
Pectatelyase Lipase
Protease Mannanase Novozymes’ stage-gate model secures an efficient and standardized Amylase evaluation of new pipeline candidates
17 • Latest • Equity story • Business • ESG • Financial results overview overview overview Equity story Enzyme technology improves Novozymes’ gross margin and profitability We re-invest ~13% of sales into R&D projects for product innovation and productivity improvement
Product innovation Process innovation Technology development
2/3 1/3
Raw materials Micro-organisms
Consumer needs 1. Improve production Industrial-scale fermentation • Nine billion people by 2050 strain Production of enzymes and proteins whilst continuously • Increasing urbanization optimizing and improving yields • Growing demand for food, water and health
Customer needs Molecular biology • Fight for profitability Strain development using protein engineering, genetic • Global race for consumer preferences modification, DNA sequencing, etc. • More regulation and standards Fermentation 2. Optimize industrial Purification production Formulation Planet needs Bio-informatics & Systems biology • Global climate change Application of computer algorithms in the computational • Societies stuck on oil discovery of enzymes in DNA databases • Biodiversity under threat
Screening systems 3. Improve enzyme Application of high-throughput robotics to find efficacy the best enzyme candidates
18 • Latest • Equity story • Business • ESG • Financial results overview overview overview Equity story Solid global presence Decentralized R&D meets local needs faster and better
North America Europe, Middle East & Africa Sites: Multi-purpose ⚫ Main sites with production and R&D ⚪ Satellite production site ⚫ Satellite R&D site production and R&D +1% +3% Sites: HQ, Multi-purpose FTE’s: ~1,200 production and R&D FTE’s: ~2,800 5Y avg. organic 5Y avg. organic sales growth sales growth
33% ⚫ ⚪ ⚫ 37% of ’19 sales ⚫ ⚫ ⚫ of ’19 sales
⚫⚪
Latin America Asia Pacific ⚪⚫ Sites: Regional production Sites: Multi-purpose FTE’s: ~300 production and R&D +4% +4% FTE’s: ~1,800
5Y avg. organic 5Y avg. organic sales growth sales growth
Emerging markets 34% Developed markets 66% 10% of ’19 sales of ’19 sales of ’19 sales 20% of ’19 sales
19 • Latest • Equity story • Business • ESG • Financial results overview overview overview Equity story Uniquely diversified group creating synergies and opportunities We launch technologies in five main business segments
Household Care Food & Beverages Bioenergy Agriculture & Feed Technical & Pharma
33% of ’19 sales 29% of ’19 sales 20% of ’19 sales 13% of ’19 sales 5% of ’19 sales
>60% 30-40% >50% 20-30% ~50% market share market share market share market share1 market share2
Laundry Baking Conventional biofuels Animal nutrition Textile & leather Automatic dishwash Grain milling & starch processing Biomass conversion Animal health Pulp & paper Hand dishwash Food & nutrition BioAgriculture Wastewater Professional cleaning Beverages Biocatalysis
Learn more Learn more Learn more Learn more Learn more
Sales in DKKbn and organic sales growth Sales in DKKbn and organic sales growth Sales in DKKbn and organic sales growth Sales in DKKbn and organic sales growth Sales in DKKbn and organic sales growth
19% 5 4.6 4.7 4.7 4.6 4.8 20 4.1 4.2 4.0 12% 13% 4 15 3.7 3.7 11% 9% 10 2.8 2.8 6% 3 5% 5% 2.5 2.6 5% 2.4 3% 2% 5 2% 2.1 2.2 2.1 2.0 2% 1% 1% 0% 1% 1.9 2 -1% 0 -3% -3% -3% 0.8 -3% -5% -5% 1.0 1.1 1.0 -6% 0.7 1 -5
0 -10 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
20 • Latest • Equity story • Business • ESG • Financial results overview overview overview
1. Novozymes market share of feed enzymes 2. Novozymes market share of enzymes only Equity story Enzymes and microbes allow for the production of more with less We are reducing CO2 emissions together with our customers
Our innovations are paving the way for a better tomorrow
Remove tough stains and enable Improve filtration and flavor of Save time, water, energy and Higher production output low-temperature washing beer and ensure raw material chemicals in textile production optimization
Raw material, water and In 2019, Novozymes energy savings helped customers save 100 kg CO 25 kg CO 350 kg CO 2 2 2 87 million tons of CO2 per ton of laundry per 1000 liters of beer per ton of fabric through the application of New differentiating products Novozymes’ products
Produce sustainable energy Improve animal health, growth Improve crop yield from crops or waste and feed utilization and health Equivalent to taking Cleaner, smarter, safer ~36 million cars off production the road
Sustainable growth 2200 kg CO2 130 kg CO2 15 kg CO2 per 1000 liters of ethanol per 1000 chickens per ton of corn
21 • Latest • Equity story • Business • ESG • Financial results overview overview overview Equity story Historical performance demonstrates delivery track record
Organic sales EBIT NWC DKKbn growth DKKbn margin DKKbn Sales performance EBIT margin Net working capital /Sales 20 20% 7 40% 7 30% Organic sales growth Sales EBIT margin EBIT NWC/Sales NWC 6 6 24% 23% 25% 15 11% 27.7% 27.9% 27.9% 28.3% 28.1% 30% 5 27.2% 5 24.4% 24.7% 10% 20% 7% 7% 7% 21.8% 22.3% 19% 19% 20% 4 4 4% 4% 4% 4% 10 20% 16% 2% 15% 3 3 14% 15% -1% 0% 12% 2 2 5 10% 9% 10% 1 1
0 -10% 0 0% 0 5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
FCF before acq. Payout NIBD DKKbn /Sales DKKbn ratio DKKbn /EBITDA Free cash flow before acquisitions Shareholder payout Net interest-bearing debt 7 40% 7 60% 6 1.0 FCF before acq./Sales FCF before acq. Buyback Dividend Payout ratio (right axis) NIBD/EBITDA Net interest-bearing debt 34% 0.8 6 6 47% 50% 5 0.8 45% 30% 42% 5 5 39% 4 0.6 37% 38% 0.5 4.2 36% 40% 0.4 33% 34% 4 4 31% 3 0.3 0.3 0.4 19% 3.4 3.5 20% 3.2 3.3 0.2 17% 17% 3.1 30% 0.2 15% 16% 15% 2.9 3 14% 2.7 3 2 0.1 0.1 0.2 13% 2.3 2.4 2.3 2.2 20% 10% 1.8 2 1.6 2 1.5 1 0.0 1.4 10% -0.2 1.0 1.0 0.8 10% 1 1 0.5 0 -0.2
0 0% 0 0% -1 -0.4 2010 2011 2012 2013 2014* 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
22 • Latest • Equity story • Business • ESG • Financial results overview overview overview
* BioAg Alliance initiation Equity story Finding sustainable answers to the world’s problems is core to Novozymes We are gearing the business for sustainable growth with ‘Better business with biology’
Sustainable Differentiate to succeed Invest in impact Spearhead new business agriculture Focusing the R&D pipeline Showing up for our customers – and change the world
Water scarcity
Energy transition
Commercial investments Innovation platform roll-outs Strategic opportunity areas • Broader commercial footprint and • The Freshness platform is the most • Increasing health and wellbeing with Digitalization customer innovation hubs in India, revolutionary Household Care clinically proven products for human and automatization China and Turkey driving penetration in innovation in the past +20 years oral and gut health emerging markets • Improving animal health by way of • Feeding the world by providing • Digitalization of basic sales and biological solutions is good for business alternative specialty protein for food technical service tasks will allow more and good for animal wellbeing ingredients via fermentation time to raise the bar for each customer Shifting • Responsible production of vegetable demographics oils is key to cleaner and more sustainable foods
23 • Latest • Equity story • Business • ESG • Financial results overview overview overview Equity story Measuring our future success by ‘Better business with biology’ Mid-term targets 2020-2022
World Business Zymers
CLIMATE Organic sales growth Enable learning 1 Save 60 million tons CO2 5+% per year Score survey in 2022 by enabling low-carbon fuels in the transport sector in Nurture diversity 2022 EBIT margin Score 86 in our diversity index by 2022 28% or higher by 2022 WATER Ensure wellbeing Reach > 4 billion people ROIC incl. goodwill by providing laundry solutions that replace chemicals Improve safety by reducing the number of accidents 23% or higher by 2022 in 2022 by 2022
PRODUCTION & CONSUMPTION Model assumptions Inspire the world Pledge 1% of our time to local outreach activities by Gain 500,000 tons of food Net working capital/Sales (improving as % of sales) Net investments/Sales (8% or below) 2022 by improving efficiency from farm to table in 2022 Effective tax rate (21-22%) NIBD/EBITDA (~1x) Dividend payout ratio over the coming years (~50%)
24 • Latest • Equity story • Business • ESG • Financial results overview overview overview
1. 2020 will likely be impacted by portfolio changes Equity story World leader in Bioinnovation Global leadership in enzyme and microbe development arise through a combination of competitive advantages
+10 years of innovation-driven growth
Sales (left axis) EBIT margin R&D/Sales ROIC 16 30%
15 28%
14 26% 24% Company background 13 Unique sustainability profile 22% 12 • DKK 14.4 bn in sales (2019) • ~87 million tons of CO2 emissions reduced (2019) • ~28% EBIT margin (2019) 20% • ~700 products sold in 140 countries DKKbn 11 • ~21% ROIC (2019) 18% • >1,500 people employed in R&D 10 16% • Listed on Nasdaq Cph. in 2000 (NZYM B) • Close to 600bps in gross margin expansion 9 14% • Majority owner: Novo Holdings • 15-20 product launches annually 8 12% • ~25.5% of the capital and ~70% of the votes • 2 seats on the Board of Directors 7 10% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
We are mastering the full value chain
Innovation Best-in-class production Diversified global leadership presence
Novozymes’ unique position to drive innovation opportunities
25 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview
26 Household Care
The value we create Where we make a difference Our enzymes enable manufacturers to produce Innovative brands help grow your market share. We work with you to ensure our biological laundry and cleaning products that offer better solutions make your products stand out performance with reduced environmental impact Laundry
Automatic dishwash Eliminate Remove stains, Decrease dose, harsh chemicals boost whiteness increase performance
Hand dishwash
Professional Deal with complex Preserve fabric Save energy, SDG impact cleaning hygiene issues texture, color water, time
Our solutions contribute to reducing marine pollution and improving Learn more about the wastewater treatment value propositions
27 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Household Care overview
Key segment trends Main growth drivers • Strong interest in freshness solutions for removal of • Higher enzyme inclusion and innovation to improve malodor and grime, including in synthetics wash performance at low temperatures, improve sustainability and optimize formulations • Compaction of laundry detergents remains a strong 33% trend, driven by increased sales through online • Demand for better-performing products in retailers and the desire to reduce the use of plastics of ’19 sales emerging markets • Consumers are willing to pay more for natural • GDP and population growth in emerging markets products +1% • Growing interest in microbial cleaning and bio- based solutions for softeners and dishwashing by 5Y average organic Main growth barriers hand sales growth Organic sales • Traditional consumer washing habits, e.g. high DKKbn growth temperatures 5Y sales overview 5.0 3% • Middle-class consumers’ ability to differentiate 4.8 4.7 4.7 brand performance 4.6 4.6 2% 4.5 2% • Regulations favoring surfactants over enzymes in emerging market product standards
1% 1% 1% • Sustained low petrochemical input costs reducing 4.0 1% the adoption rate of high-performance enzymes
0% 3.5 0% 2015 2016 2017 2018 2019
28 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Growth driver Freshness platform Lifestyle changes are spurring demand for freshness, and we are on track to deliver DKK 1bn
Consumers’ lifestyle changes are the drivers of growing hygiene needs…
Urbanization increasing Increase in synthetic Colder and shorter Shift in detergent density fabrics wash cycles format preferences
…which center around issues of odor and grime left on clothes even after wash…
(Reoccurring) malodor Layers of build up Yellowing & greying formation human body grime / color dullness
…are key consumer concerns identified by Novozymes
29 • Latest • Equity story • Business • ESG • Financial results overview overview overview
Sources: Novozymes consumer study; Euromonitor, Jan 2018; Mintel GNPD, April 2018; UNFPA, April 2018; Grand View Research; April 2018 Business overview Growth driver Enzyme inclusion We see large potential for future enzyme inclusion, especially in emerging markets
Significant up-dosing and penetration potential in emerging markets in general and Presence and emerging market solutions to in Asia Pacific in particular unlock potential
7x enzyme up-dosing opportunity
14 100 ⚫ ⚫⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ 12 ⚫⚫ ⚫ ⚫ ⚫ 80 ⚫⚫ 10 ⚫
60 8 5x volume ⚫ Innovation hub ⚫ Sales office opportunity • Innovation hubs in China, India and Brazil
Billion Billion tons 6
40 Dosing (indexed) Dosing • Sales offices in Brazil, China, India, Mexico, Pakistan, 4 Malaysia, South Africa and Turkey 20 2 • New sales offices opened in Kenya and Thailand
• Sales presence in Colombia, Egypt, Indonesia, 0 0 Western Europe North America Middle East Latin America Eastern Europe Asia Pacific Philippines, Nigeria and Venezuela and Africa Detergent volume (left axis) Enzyme dosing index • Emerging market-specific products and blends
30 • Latest • Equity story • Business • ESG • Financial results overview overview overview
Sources: Euromonitor, May 2019; Novozymes analysis Business overview Growth driver Detergent compaction We believe enzymes can contribute even more to a detergent and to compaction
Other Other Perfume Perfume
Builders
Builders Polymers
Polymers Multienzymes Enzymes
Surfactants Surfactants
• New and more stable enzymes to replace • Freshness solutions to reduce the need for surfactants perfume
• Using enzymes to compensate for • Enzymes to replace polymer functions, such as performance loss when reducing pH level and fabric care and whiteness the need for builders
31 • Latest • Equity story • Business • ESG • Financial results overview overview overview
Sources: IHS chemical 2014; Euromonitor, 2019; expert interviews, 2019 *EU representative example, value as percentage. Food & Beverages
The value we create Where we make a difference Enzymes enable producers to diversify their product It's hard to keep up with ever-changing food and beverage trends. Stay one step ahead and ranges and develop products that stay fresh longer get more out of your raw materials with leading enzyme innovations Baking
Grain milling & starch processing New substrate Productivity streams and yield
Food & nutrition
Freshness Health, safety SDG impact Beverages and taste and sustainability
Our solutions contribute to making food production systems more Learn more about the sustainable value propositions
32 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Food & Beverages overview
Key segment trends Main growth drivers • Growing informed consumption for high-quality, • Demand for better and more convenient food with healthy and sustainable foods i.e. awareness about food safety and “naturally healthy” products • Plant protein, acrylamide removal, less sugar added, 29% low lactose, low transfats and enzymatic • Growth in market for “food intolerance” products, interesterification of ’19 sales such as lactose-free • Food producer focus on cost optimization, • Demand for substitutes for animal protein and processing aids and brand building +4% growth in grain and VOP • Consumers focus on brands using local and clean • Demand for optimization of raw materials and label ingredients catering to local tastes, tradition 5Y average organic production processes and cultures sales growth • Optimization to help manage commodity input cost • Strong interest from emerging markets in Organic sales volatility DKKbn growth production optimization solutions and in processed 5Y sales overview foods 4.5 9% 10%
4.2 8% 4.1 Main growth barriers 4.0 4.0 5% 5% 6% • Conservative industries with consumer preference 3.7 3.7 4% for traditional foods
2% 3.5 2% • Consumer and industry skepticism about technology in food and beverages production -1% 0% • Fragmented local markets and dietary habits as well 3.0 -2% 2015 2016 2017 2018 2019 as regulation
33 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Growth driver The grain value chain
Novozymes offers multiple solutions across the value chain • Significant presence in starch. Industry leaders in enzymatic starch conversion for sweeteners • Portfolio that includes LpHera®, Extenda®, Secura® and Sweetzyme® • Frontia® opens a new segment with our starch customers in wet milling, enhancing the yield of key value streams in protein and starch
Grain milling Starch processing
Refining
Starch slurry Starch from wet mill
Liquefaction Saccharification Purification Isomerization Fructose Fiber LpHera® Extenda® Sweetzyme® syrups
Secura®
Refinery Wet mill Wet Corn Milling Maltose Glucose Mixed Frontia® Gluten syrups syrups syrups
Starch
34 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Growth driver Vegetable oil processing Enzymatic applications for vegetable oil processing show huge potential
New agro-processing applications • Novozymes offers multiple solutions across the value chain • Improving efficiency in vegetable oil production is a >DKK 1bn opportunity • Replacing chemical catalysts for specialties is a DKK 400m opportunity End products • Cooking oil • Margarine & shortenings • CBE • OPO, etc. Specialty fats producer • Low transfat & 3-MCPD Specialty oils & fats
Oilseed Mill Refinery Extraction Refining
• Fatty acids • Fatty alcohols • Food & non-food additives Oleo player • MCT Oleochemicals
35 • Latest • Equity story • Business • ESG • Financial results overview overview overview Bioenergy
The value we create Where we make a difference Our enzymes and yeasts maximize the efficiency of You work hard to create the most value at the lowest cost and to stay flexible enough to ethanol plants adapt to changing markets. We work hard to deliver solutions and services that will help you Conventional succeed biofuels
Biomass conversion Ethanol yield Release bound improvement starch
Eliminate operation Superior viscosity reduction SDG impact stress
Novozymes promotes the development and deployment of low carbon Learn more about the transportation fuels value propositions
36 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Bioenergy overview
Key segment trends Main growth drivers • Growing demand for clean energy as climate • Stable and coherent political mandate to drive change and sustainability are high on public adoption of biofuels agendas 20% • Industry consolidation and focus on process • Increase in global biofuel mandates continues, economics driving demand for enzymatic solutions driven by key emerging markets of ’19 sales that enhance yield • Strong pressure on US ethanol industry due to low • Innovation for yield enhancement and chemical cost producer margins and high inventories +2% reduction
• Demand for reducing CO2 emissions in transport 5Y average organic sector sales growth
Organic sales DKKbn growth 5Y sales overview 3.0 15% Main growth barriers 12% 11% 2.9 • Lack of political commitment to set and enforce 10% 2.8 2.8 2.8 blending mandates 5% 2.7 • An energy industry with a vested interest in 2.6 traditional fuels 2.6 2.5 0% -3% -3% 2.5 • Competition with other transport technologies for -5% 2.4 -5% “best way” to reduce CO emissions 2.4 2
2.3 -10% • Competition with other industries and technologies 2015 2016 2017 2018 2019 for feedstock conversion 37 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Market Bioenergy Sizeable market with local political support
⁓1.5bn European Union Key legislation: Renewable Energy Directive
⚫ = Production in bn gal per year
North America ⁓16bn Key legislation: China ⁓0.9bn Renewable Fuel Standard Ambition to achieve E10 by 2022
Latin America ⁓9bn Key legislation: RenovaBio ⁓0.5bn
India Strong governmental push for public investment in 1G and 2G
38 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Case Ethanol production
Global ethanol production US ethanol producer margin
40 0.7 Rest of World China EU Brazil US 35 0.6 30 28.6 29.1 0.5 26.2 26.8 25.8 0.4 25 0.3 20 6.9 7.9 8.6 7.2 6.8 0.2 15
Billion Billion gallons 0.1 10 0.0 14.8 15.4 15.9 16.1 15.8 5 gal) per (USD margin Contribution -0.1 0 -0.2 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2020
Price developments for ethanol and corn US ethanol inventories 5.0 28 Ethanol Corn 4.5 26 4.0
3.5 24 bu 3.0 22 2.5
2.0 20 USD per gal/ per USD
1.5 in millions Barrels 18 1.0 16 0.5 0.0 14 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
39 • Latest • Equity story • Business • ESG • Financial results overview overview overview
Sources: Renewable Fuels Association (RFA), Center for Agricultural and Rural Development (CARD), Iowa State University, and U.S. Energy Information Administration (EIA) Business overview Growth driver Addressing complexity in bioethanol production Designing enzymes for individual plants
The ethanol process • Enzymes are applied in multiple stages, along with yeast in fermentation • Using our diagnostic program to deliver custom fermentation solutions, tailored to a plant’s unique operating conditions
1. Past 2. Present 3. Future From standard to more Basic products for Multiple offerings across Increasingly customized solutions for customized solutions liquefaction and liquefaction, saccharification liquefaction and saccharification, novel saccharification and now also yeast solutions for other process steps
Liquefaction Saccharification Yeast
Slurry Jet cooker Liquefaction Fermentation Distillation Ethanol
Convert feedstock into fermentable sugars Ferment sugars to EtOH
40 • Latest • Equity story • Business • ESG • Financial results overview overview overview Agriculture & Feed
The value we create Where we make a difference Our solutions improve yields in farming and enhance Enzymes and microbes are nature's own perfect tools. We put them to work in agricultural the digestibility and nutritional value of animal feed solutions that increase the efficiency of crop and livestock production BioAgriculture
Animal nutrition Powerful Bioyield protection enhancement
Animal health
Improve feed and gut Improve animal SDG impact functionality gut health
Our solutions support sustainable food production and resilient agricultural Learn more about the practices value propositions
41 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Agriculture & Feed overview
Key segment trends Main growth drivers • Agriculture affected by more frequent incidents of • Governments in emerging economies focusing on extreme weather agriculture productivity • Sustainable yield enhancement still in high demand 13% • High input costs for farmers with increased as world population grows, putting pressure on chemical and fertilizer scarcity agricultural sector to produce more and better of ’19 sales products while minimizing negative environmental • Regulatory requirements for more sustainable impact farming practices and focus on animal welfare +4% • Farmer sensitivity to fluctuations in commodity • Growing calls for reduced use of antibiotics in farm animals prices 5Y average organic • Increased demand for food and protein due to • sales growth Increasing focus on feed efficiency and animal changes in dietary habits health with less use of antibiotics Organic sales DKKbn growth 5Y sales overview 2.4 19% 20%
2.3 Main growth barriers 15% 2.2 2.2 2.1 • Low pricing for traditional fertilizers, pesticides and 2.1 10% 2.1 2.0 crops 5% 2.0 3% 5% • Incomplete scientific understanding of plant and 1.9 1.9 0% -3% animal microbiome 1.8 -5% -5% 1.7 • Fragmented and complicated regulation in local
1.6 -10% markets 2015 2016 2017 2018 2019
42 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Case Our new BioAg setup allows for broader outreach
More flexible setup in the future will enable Novozymes to bring biological solutions to more partners and additional crops – and to continue the journey towards the targeted 250-500m acres by 2025
Partnership New continuation partnership
A commercial partnership with Univar CORE PARTNERSHIPS Solutions in the Canadian market with distribution rights to our main downstream BIOYIELD products
Bayer and Novozymes continue close commercial and innovation partnership in CORN
In BIOCONTROL, Novozymes will continue its present activities and collaborations independently. This includes the collaboration with Syngenta
In bioyield outside of corn, Bayer continues to be the main commercialization partner in the key SOY markets of the US, Argentina, and Brazil New strategic opportunities with UPL for development within BIOCONTROL as well as in certain focused crops, e.g. peanuts
FUTURE PARTNERSHIPS
43 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Case We are committed to our core technologies and partner with industry leaders to win
We develop and commercialize these technologies together with our partners, who are leading players in their respective industry
Feed and animal Bacillus for Hatchery Natural solutions gut health enzymes monogastrics probiotics for cattle
Enzymes Probiotics • Full portfolio of feed enzymes • Growing area for Novozymes with pipeline of products • Recently launched game-changing innovation • Alterion® tracking well • Improve the sustainability of livestock production • Support the trend of reducing antibiotic use in animal farming
44 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Case Scientific evidence supports enzyme penetration We enable livestock farmers to reduce feed costs
Market is sensitive to feed and meat Scientific education of customers to Low margins leave the producers price changes increase penetration with different options
70% of the total cost of poultry production is feed • Enzyme inclusion increases the efficiency of During tough conditions, producers see two options: including additives which accounts for around 5% poultry producers • Cost out = reduce enzyme inclusion Poultry producer margins are low when: • Lack of scientific understanding drives • Increase efficiencies = increase enzyme inclusion uneconomical customer decisions • Feed prices are high The degree of enzymatic and nutritional understanding • Meat prices are low determines the decision:
Feed formulation is an art and the nutritionist is often • Advanced/’modern’ customers increase enzyme the decision maker. The scientific and nutritional inclusion philosophies combined with commodity prices • Simple/traditional customers reduce enzyme determine enzyme inclusion levels inclusion
45 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Growth driver Attractive value propositions in feed enzymes
Phytase - Phosphate • Only 3-30% of phosphate in feed is available to the animal • Ronozyme NP® releases half of the phosphate bound – Ronozyme HiPhos® releases nearly all of it • Significant reduction in phosphorous excretion from animals as farmers can save 25-100% of added phosphate
Estimated penetration across species ProAct - Protein • Maximizing protein utilization and improving nutritional 80-90% value • Improves protein digestibility by >20%, increasing feed conversion • Reduces need for additional protein feed, such as soybean meal 35-45%
Others - Energy • Xylanase & glucanase increase non-starch polysaccharide 10-15% digestion • Amylase improves starch digestibility, releasing more energy Phytase Protease Carbohydrase • Cellulase improves fiber digestion • Grain feed savings of ~2.5% and less pollution (ammonia,
nitrate, nitrous oxide and CO2)
46 • Latest • Equity story • Business • ESG • Financial results overview overview overview Technical & Pharma
The value we create Where we make a difference Our solutions improve processes across industries such Our enzymatic and microbial solutions target your customers’ unmet needs across global as textiles & leather, wastewater, pulp & paper and markets. The result is a strong pipeline of customer-relevant innovations that will help you pharma grow your business Textile & leather
Pulp & paper Improve the strength Longer-lasting and Bleach of your fabric more sustainable clean-up textiles
Wastewater
Degrade wastewater Prevent wastewater Support growth in biomass SDG impact Biocatalysis compounds odors
Our solutions contribute to reducing marine pollution and improving Learn more about the wastewater treatment. value propositions
47 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Technical & Pharma overview
Key segment trends Main growth drivers • Water scarcity and water pollution driving • Sustainability in technical industries such as textiles legislation and demand for solutions that reduce water consumption and improve water quality • Consumer demand for improved textile quality and 5% longevity • Major apparel companies are rethinking their supply chains to accommodate an increased public of ’19 sales • Demand for wastewater solutions due to increasing interest for sustainability in fashion water scarcity and pollution cleanup regulations • Regulatory changes might follow leading to +2% • Enzymatic solutions potentially optimizing renewed interest for biological alternatives to the processes and lowering costs harsh chemicals currently being used 5Y average organic Main growth barriers • Focus on cost reductions and process optimization sales growth • Fragmented and chemically-driven technical continues Organic sales DKKbn growth industries 5Y sales overview 1.4 13% 15% • Water prices potentially so low that there is no 1.3 incentive to invest in water-saving solutions 10% 1.2 6% • Price-driven acceptance of low quality textiles and 5% raw materials in emerging markets 1.1 1.1 2% 1.0 1.0 1.0 0% • Preference for lower-cost, chemical solutions to -3% 0.9 enable market growth -6% 0.8 -5% 0.8 0.7 0.7 -10% 2015 2016 2017 2018 2019
48 • Latest • Equity story • Business • ESG • Financial results overview overview overview Strategic opportunity areas
Catalysts to solve global needs How it fits with ‘Better business with biology’
Human oral and gut health Differentiate to succeed Invest in impact Spearhead new business Focusing the R&D pipeline Showing up for our customers – and change the world
*Illustration Strategic opportunity areas Size illustrates project resource Contributing to long-term growth allocation and color illustrates Specialty alternative active projects proteins
Development seed Fueling mid-term growth but still evolving New opportunity areas at the intersection of sustainable challenges and customer needs which contributes to our long-term growth Growth star • Nurtured and funded in a dynamic structure separate from the core Fueling short-term growth with sharp focus on execution business • Governed by an Innovation Council using a differentiated Investment
approach (IRR) investment on Return Anchor business • Pressure-tested and refined using rapid learning cycles Creating stable growth and revenue Investing more than an additional
DKK 150 million Value creator in new strategic opportunities Creating strong base for profitability to fund growth over three years Launch probability
49 • Latest • Equity story • Business • ESG • Financial results overview overview overview Business overview Human oral and gut health Specialty alternative proteins Deliver clinically-proven products for Providing alternative specialty protein human oral and gut health for food ingredients via fermentation
Connecting our discovery engine with consumer insights enables innovative biological Strong R&D and fermentation capabilities uniquely position us to deliver specialty solutions for oral and digestive health protein ingredients
Mio. tons Market for probiotics and enzymes DKKbn Fermented proteins demand forecast 2.0 within consumer health 80
1.5 60
40 1.0
20 0.5
0 0.0 2018 2023 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
50 • Latest • Equity story • Business • ESG • Financial results overview overview overview
Sources: Lux Research Inc, Plant Based Foods Association, Euromonitor, TechNavio, Nicholas Hall, Nutrition Business Journal, Industry Analysts, Acute Markets, Nature Biotechnology, Novozymes analysis ESG overview
51 ESG overview Committed to making a better world At Novozymes, sustainability is a key component of our business strategies and management processes
We manage our performance on material ESG issues through relevant In 2015, we made the UN Sustainable Development Goals (SDGs) our targets and KPIs own. The SDGs inspired our purpose and strategy and we began our journey to contribute to the goals
Stepping up our ambition with ‘Better business with biology’ addressing three global challenges – climate, water and sustainable production and consumption
Novozymes is among the first few companies globally to set up science-based targets validated and accepted by the Science Based Targets initiative (SBTi)
52 • Latest • Equity story • Business • ESG • Financial results overview overview overview ESG overview The world Our operations Measuring our success Measuring our success
Novozymes is committed to help solving three global challenges: Climate, We hold ourselves accountable for reducing the negative impact Water and sustainable Production & Consumption from our operations in these areas
Climate Climate
Limit global warming increase to 1.5 degrees 50% reduction in absolute CO2 emissions from operations on our way to becoming carbon neutral in 20501
Save 60 million tons CO 2 Reduce absolute CO emissions from operations by 40% by 20222 by enabling low-carbon fuels in the transport sector in 2022 2
Water Water Ensure clean and efficient water use 100% of sites manage water in balance with local conditions
Reach > 4 billion people by Develop context-based water management providing laundry solutions that replace chemicals in 2022 programs at 100% of sites by 2022
Production & consumption Production & consumption Produce more and better products with less impact 100% of key materials and waste managed in circular systems
Gain 500,000 tons of food Achieve 100% circular management of our biomass by 2022 by improving efficiency from farm to table in 2022
53 • Latest • Equity story • Business • ESG • Financial results overview overview overview
1. Compared to a 2018 baseline and is being verified by SBTi 2. Compared to a 2018 baseline ESG overview Produce more with less We are reducing CO2 emissions together with our customers
In 2019, our customers saved an estimated 87 million tons of CO2 emissions by applying Novozymes’ products. The savings achieved are equivalent to taking approximately 36 million cars off the road 87,000,000 tons of CO emissions saved Detergent Animal feed Textile 2
100 kg CO2 130 kg CO2 350 kg CO2 per ton of laundry per 1000 chicken per ton of fabric Estimated annual CO2 emissions saved (millions tons of CO2)
+45% 88 87
Agriculture Beverage Leather
15 kg CO2 25 kg CO2 50 kg CO2 per ton of corn per 1000 liters of beer per ton of hide 76
69
60
Vegetable oil Paper making Biomass based biofuel
44 kg CO2 150 kg CO2 2200 kg CO2 per ton of oil per ton of pulp per 1000 liters of ethanol 2015 2016 2017 2018 2019
54 • Latest • Equity story • Business • ESG • Financial results overview overview overview ESG overview We plan to continue our journey of operational excellence Since 2010, we have grown our revenue by 48%, while absolute emissions from Novozymes’ operations have risen by only 6%
Decoupling resource consumption from economic growth Steady improvement in employee metrics
30% (4)% 77 31% Renewable energy Growth in absolute water consumption Employee satisfaction Women in seniormanagement Target of 28% or higher - 2018: 23% Target of organic sales growth or less - 2018: 1% Target of 75 or higher - 2018: 78 Target of 29% or higher - 2018: 30%
(24)% (5)% 1.9% 0.9 per million working hours
Growth in absolute CO2 emissions Growth in absolute energy consumption Employee absence Lost time injuries Target of organic sales growth or less - 2018: 7% Target of organic sales growth or less - 2018: 1% Target of 2.0% or less - 2018: 2.1% Target of 1.51 or less - 2018: 2.4
180% 8 3% Sales Gross Profit Water Energy CO2 emissions Employee absence (right axis) Accidents per million working hours 160% 7 140% 6 120% 2% 5 100% 80% 4
60% 3 1% Change since 2005 since Change 40% 2 20% 1 0% -20% 0 0% 2005 2007 2009 2011 2013 2015 2017 2019 2005 2007 2009 2011 2013 2015 2017 2019
55 • Latest • Equity story • Business • ESG • Financial results overview overview overview
1. Defined as a three-year rolling average of occupational injuries with absence per million working hours ESG overview Keeping the organization accountable Sustainability governance, activities and targets are anchored and executed across functions and operations
Broad remuneration policy and sustainability governance Sustainability Awards and Recognition
The new incentive program covers the Executive Leadership Achieving sustainability recognition gives credibility to Sustainability Team, the Senior Leadership Team and directors, and other Novozymes' work and inspires other companies to drive and employees 20% improve sustainability performance Organic sales growth Sustainability targets, in line with ‘Better business with biology’, Weighting in 40% will be allocated if performance targets achieved on four remuneration sustainability parameters; climate, water & circular, workplace, policy and Zymers by the end of 2022 CDP Climate CDP Water Security & The sustainability component will only be unlocked if Novozymes 40% Change CDP Supply Chain performs above the floor levels across all four parameters Economic Profit
Sustainability is governed at the highest level by the Board of Directors and Executive Leadership Team
The Impact Board sets Novozymes’ FTSE4Good Ethibel In 2018, Novozymes established the strategic global direction and Index Series SDG Governance Board to build a ambition in respect of the SDG shared understanding of the opportunities and risks associated with the UN Sustainable Development Goals (SDGs) and to translate this knowledge into corporate priorities and targets The Foundation Board ensures the internal foundation for Novozymes’ sustainability performance across Euronext Vigeo Dow Jones Indices operations Sustainability
56 • Latest • Equity story • Business • ESG • Financial results overview overview overview ESG overview Novozymes combating the world’s pressing problems Sustainability drives the way we do business and we have always taken the triple bottom line approach
We are committed to doing our part and to helping the world reach the goals of the Paris Agreement
Absolute, not relative measures of CO2 emissions and consumption of water and energy
DKK Since 2010, we have been successful in decoupling resource consumption from economic growth across all parameters
Broad commitment across the organization as part of new remuneration policy
Focus on a balanced approach to the remuneration policy with the sustainability component only being unlocked if we perform above the floor levels across all parameters; climate, water & circular, workplace, and Zymers by the end of 2022
External auditing of our non-financial targets by PwC secures validity and transparency of our progress
Our CO2 emission targets has been validated by the ScienceBased Targets initiative (SBTi) as being in line with a 1.5°C pathway We have identified six SDGs to which we believe Novozymes’ technologies and actions can contribute significantly
57 • Latest • Equity story • Business • ESG • Financial results overview overview overview Financial overview
58 Financial overview Multiple tools to optimize cost base
Factors impacting COGS Factors impacting our input prices Split of Cost of Goods Sold
Note: accounting practice implies that there is a time lag Raw materials consist primarily of different chemicals and between current price levels and COGS Geographical location, i.e., differences carbohydrates e.g. sucrose, maltose, glucose and starch in input
Currency Input prices Contractual agreements, i.e., timing and duration Raw USD Materials ~35% Indirect production ~45% Substitution possibilities, i.e., flexibility costs Approximately in use of different inputs, not split of COGS dependent upon one source
Price developments for other products Productivity produced by our suppliers from the ~20% improvements same input Energy/Utilities & others
59 • Latest • Equity story • Business • ESG • Financial results overview overview overview Financial overview Historical performance demonstrates delivery track record Mid-term targets 2020-2022
Organic sales DKKbn growth Sales performance 25 20% Organic sales growth Sales Sales performance Organic revenue growth of +5% per year1 20 11% 10% 14.5 15 7% 7% 7% 14.0 14.1 14.4 14.4 EBIT margin at or higher than 28% by 2022 4% 12.5 4% 4% 4% DKK 11.2 11.7 10.5 9.7 2% 10 -1% 0%
ROIC incl. goodwill at or higher than 23% by 2022 5
0 -10% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EBIT DKKbn margin DKKbn ROIC EBIT margin ROIC incl. goodwill 7 40% 20 30% EBIT margin EBIT ROIC Invested capital 26% 25% 26% 6 24% 23% 22% 27.7% 27.9% 27.9% 28.3% 28.1% 30% 15 21% 21% 5 27.2% 20% 20% 24.4% 24.7% 20% 21.8% 22.3% 4 20% 10 3 10% 2 10% 5 1
0 0% 0 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
60 • Latest • Equity story • Business • ESG • Financial results overview overview overview
1. 2020 will likely be impacted by portfolio changes Financial overview Historical performance demonstrates delivery track record Model assumptions 2020-2022
DKKbn NWC/Sales Net working capital 5.0 30% NWC/Sales NWC Net working capital Improving as a percentage of sales 4.5 24% 4.0 23% 25% 3.5 20% 19% 3.0 19% 20% Net investments CAPEX to sales at or less than 8% 2.5 16% 15% 2.0 14% 15% 12% 1.5 9% 10% DKK Net interest-bearing debt ~1x NIBD/EBITDA 1.0 0.5 0.0 5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
DKKbn CAPEX/Sales DKKbn NIBD/EBITDA Net investments Net interest-bearing debt 3.0 18% 4.5 1.0 CAPEX/Sales CAPEX NIBD/EBITDA Net interest-bearing debt 16% 4.0 0.8 0.8 2.5 14% 3.5 13% 14% 12% 3.0 12% 0.5 0.6 2.0 11% 10% 2.5 0.4 10% 8% 0.3 0.3 0.4 7% 2.0 1.5 7% 7% 8% 0.2 0.2 6% 1.5 0.1 6% 0.1 0.2 1.0 1.0 4% 0.5 0.0 -0.2 2% 0.0 0.5 -0.2 0% -0.5 0.0 -2% -1.0 -0.4 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
61 • Latest • Equity story • Business • ESG • Financial results overview overview overview Financial overview Shareholder distribution and dividend payouts
As of December 2019 • Novo Holdings held 25.5% of the share capital and controlled 72.0% of votes (all A shares and 8.6% of B shares) • Novozymes had more than 52,000 shareholders of whom 95% were private shareholders in Denmark • ~50 institutional investors incl. Novo Holdings held ~58% of the B shares
Shareholder distribution of B shares1 DKK ~23.2bn returned to shareholders since 2010 Novo Holdings was the only major shareholder holding more than 5% of Novozymes’ All B shares listed in Copenhagen under the symbol ‘NZYM B’ and all A share capital and 18,931,400 B common stock shares held by Novo Holdings, who is wholly owned by the Novo Nordisk Foundation
3% Payout DKKbn ratio
7 60% 22% 30% Buyback Dividend Payout ratio (right axis)
6 47% 50% 45% 42% 5 39% 38% 40% 36% 37% 34% 33% 4 31% 3.4 3.5 3.2 3.3 30% 18% 2.9 3.1 3 2.0 2.0 27% 2.0 2.0 20% 2 2.0 2.0 1.5
1.0 10% 1 0.8 0.8 0.5 0.4 1.3 1.4 1.5 Denmark UK Rest of Europe North America Rest of World 0.9 1.1 1.2 0.5 0.6 0.7 0.8 0 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
62 • Latest • Equity story • Business • ESG • Financial results overview overview overview
1. Distribution equals where shares are managed, Dec 2019 Financial overview Foundation ownership advocates long-term focus
Purpose of the Foundation Structure and ownership
The Novo Nordisk Foundation is an independent Danish foundation with corporate interests. The objective of the Novo Nordisk Foundation is twofold: Novo Nordisk Institutional and private • To provide a stable basis for the commercial and research activities conducted by the Foundation investors companies of the Novo Group • To support scientific and humanitarian purposes
240 220 Novo Holdings A/S 200 180 160 140 Foundation Treasury 120 25.5% of total shares 74.5% of total shares Free-float 100 72.0% of votes 28.0% of votes 80
Number of shares (millions) of shares Number 60 40 20
0 A shares Bshares
63 • Latest • Equity story • Business • ESG • Financial results overview overview overview Financial overview Our investor relations team Further investor relations information is available from the company’s website at investors.novozymes.com
Tobias Björklund Carl Ahlgren Naja Wivel Ulrik Wu Svare Head of Investor relations IR officer (US) Coordinator IR officer +45 3077 8682 +1 919 702 6144 +45 3077 2076 +45 3077 3187 [email protected] [email protected] [email protected] [email protected]
64 • Latest • Equity story • Business • ESG • Financial results overview overview overview