Roadshow presentation9M 2019
Released on October 23, 2019
22
Table of contents
Latest results 3
Overview and strategy 14
Market overview 25
Household Care 26
Food & Beverages 31
Bioenergy 36
Agriculture & Feed 40
Technical & Pharma 45
Sustainability 46
Financials and governance 50
Latest results
Highlights
Third-quarter acceleration, but weaker than expected due to difficult agriculturally-exposed businesses
• Commercialization of innovation progressing as planned
• Bioenergy, Agriculture & Feed and starch processing (Food & Beverages) adversely affected by persistent headwinds
• EBIT margin at 27.6% 9M y/y, in line with expectations and impacted by one-offs related to the updated strategy
• Full-year organic sales guidance: -2% to flat
• Implementation of updated strategy
4
Key financials9M’19
Realized2019
Outlook*
Sales growth, organic -2% -2-0%
EBIT margin 27.6% 27-28%
Net profit growth -7% -5-0%
Net investments excl. acquisitions (DKKbn) 0.6 0.8-1.0
Free cash flow before acquisitions (DKKbn) 2.1 1.9-2.3
ROIC incl. goodwill 21% ~21%**
5%
1%
Food & Beverages
Household Care
Bioenergy Ag & Feed Tech & Pharma
0%
Total
1%
-1%
-5%-3%
-4%
3%
-14%
-3%-2%
9M’19Q3’19
Organic sales growth by business area
* Assumes that the exchange rates for the company’s key currencies remain at the rates prevailing on October 22 for the rest of 2019.** The implementation of IFRS 16 – Leases has a negative impact on ROIC of approximately 1 percentage point.
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
34%y/y 9M: -3% / Q3: +6%
66%y/y 9M: -1% / Q3: -2%
Developed Emerging
Organic sales growth by geography
5
33%of sales
North America
9M y/y: -5%
Q3 y/y: -7%
37%of sales
9M y/y: 2%
Q3 y/y: 4%
Latin America
9M y/y: 1%
Q3 y/y: 8%
Asia Pacific*
9M y/y: -5%
Q3 y/y: 4%
Europe, Middle East & Africa
10%of sales
20%of sales
* Incl. Iran.
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Solid quarter in line with expectations
• Organic sales 9M 2019 y/y: 0%; Q3 2019 y/y: +5%
• Freshness rollout developing well and according to expectations
• Growth from regional customers; pressure from global accounts easing but still present
• Weakness in the Middle East due to economic distress impacting mainly first half of 2019
• Third quarter positively impacted by timing
Household Care
6
33%of sales
-3%
Q2’19Q4’18Q3’18
2%
Q3’19Q1’19
1%
-1%
5%
Quarterly organic sales growth (y/y)
2019 outlook and priorities: Freshness and emerging markets
• Further expansion of our Freshness technologies
• Continued penetration of emerging markets
• Expect low-single-digit organic sales growth
9M’15
1%
9M’18 9M’19
0%
9M’16 9M’17
1%2%
0%
9M organic sales growth (y/y)
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Food & Beverages
Stabilization of baking while starch processing remain challenged
• Organic sales 9M 2019 y/y: -1%; Q3 2019 y/y: +1%
• Solid growth in food & nutrition and beverages
• Starch negative due to commodity prices and wet weather in the US
• Baking down due to economic distress in the Middle East and price declines in freshkeeping but stabilizing in the third quarter
7
29%of sales
2019 outlook and priorities: Innovation and commercialization
• Broad-based commercial penetration
• Ramp-up of recent innovation launches
• Soft performance in starch
• Expect flat organic sales for the full year Q4’18Q3’18 Q1’19 Q2’19 Q3’19
3%
7%
-2%-3%
1%
Quarterly organic sales growth (y/y)
9M’199M’179M’15
9%
9M’16 9M’18
5%
1%
4%
-1%
9M organic sales growth (y/y)
Will be updatedWith final picture
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Bioenergy
Weak performance as US ethanol industry remains under pressure
• Organic sales 9M 2019 y/y: -4%; Q3 2019 y/y: -5%
• Declining US ethanol production; Novozymes’ customers holding back more than industry average
• Strong initial penetration from recent yeast product launches
• Growing demand in Latin America as Brazil expands production capacity
8
19%of sales
2019 outlook and priorities: US volatility, yeast and Brazil
• US ethanol industry expected to remain under pressure
• Solid growth from yeast penetration and capacity expansion in Brazil
• China progressing towards E10 implementation
• Expect mid-single-digit decline in organic sales Q2’19Q4’18 Q3’19Q3’18 Q1’19
15%
5%
-8%
0%
-5%
Quarterly organic sales growth (y/y)
9M’15
-7%
9M’199M’16
-1%
9M’17 9M’18
10%14%
-4%
9M organic sales growth (y/y)
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Agriculture & Feed
Difficult markets overshadowing growth from innovation
• Organic sales 9M 2019 y/y: -3%; Q3 2019 y/y: +3%
• Feed sales growing as expected driven by roll-out of Balancius™
• BioAg sales still behind target mainly due to wet spring weather in the US Midwest; corn-inoculant BioRise®
contributed to growth in Q3
9
13%of sales
2019 outlook and priorities: Agricultural market uncertainty persists
• BioAg with uncertainty including Latin American drought delaying planting
• Innovation to continue ramp-up in BioAg and Feed
• Feed sales expected to be flat for the year
• Expect low-to-mid-single-digit decline in organic sales
-3%
Q3’18 Q2’19
-6%
Q4’18 Q1’19 Q3’19
10%
-7%
3%
Quarterly organic sales growth (y/y)
19%
9M’189M’15 9M’16
0%
9M’199M’17
-2%
5%
-3%
9M organic sales growth (y/y)
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Achieve Advance
For low-temperature and short-cycle
automatic dishwashing
Optimize 500
Improved performance and on-seed stability
Two exciting product launches in the third quarter
10 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Financials
11
Q3 earnings impacted by restructuring costs
• Organic sales growth of minus 2% y/y (Q3 +1%)
• Gross margin at 55.2% - roughly 200bp lower than last year due to weak top line and restructuring
• EBIT margin of 27.6% (~26% excl. one-offs); Q3 23.0% (~30% excl. one-offs)
• Net profit down 7% due to lower sales and losses on currency hedges
• Lower net investments as large construction projects have concluded
• Free cash flow of close to DKK 2.1 billion as lower net investments offset lower profits from operations
Key financials Q3’18 Q3’19 9M’18 9M’19
Sales growth, organic 5% 1% 4% -2%
EBIT margin 28.5% 23.0% 28.2% 27.6%
Net profit growth -1% -21% 3% -7%
Net investments excl. acquisitions (DKKm)
252 177 887 573
Free cash flow before acquisitions (DKKm)
1,090 833 1,980 2,051
ROIC incl. goodwill 24% 18% 24% 21%
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Financials – 2019 outlook
12
Full year outlook confirmed as per October 9 revision
• Full-year organic sales growth outlook revised due to persistent headwinds in US ethanol, global agriculture businesses and in starch processing
• Net of currencies and M&A: an additional 0.5-1.0 percentage point reported in DKK
• EBIT margin expected to be 27-28% and 25-26% when adjusted for one-offs
• Net investment of DKK 0.8-1.0 billion as major construction projects completed and production setup is well invested
• Free cash flow at 1.9-2.3 DKKbn with lower investments compensating for lower operating cashflow
* Assumes that the exchange rates for the company’s key currencies remain at the rates prevailing on October 22 for the rest of 2019.** The implementation of IFRS 16 – Leases has a negative impact on ROIC of approximately 1 percentage point.
Key financials9M’19
Realized2019 Outlook
October 23*
Sales growth, organic -2% -2-0%
EBIT margin 27.6% 27-28%
Net profit growth -7% -5-0%
Net investments excl. acquisitions (DKKbn)
0.6 0.8-1.0
Free cash flow before acquisitions (DKKbn)
2.1 1.9-2.3
ROIC incl. goodwill 21% ~21%**
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
13
Summary
Third-quarter acceleration, but weaker than expected due to US ethanol and agriculturally-exposed markets
• Third-quarter performance a step in the right direction, but year-to-date performance not satisfactory
• Persistent headwinds in US ethanol, agriculture businesses and in starch processing
• Better business with biology; good progress in executing updated strategy
Betterbusiness
withbiology
13Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Overview and strategy
Innovation is the core
• Innovation focused on enzymes and microbes
• +100 new product launches• Close to 600bps in gross margin
expansions
Global presence
• ~6,400 employees • ~700 products sold in 140 countries• Major production footprint in the 3
regions: North America, EMEA and Asia Pacific
Solid financials (2018)
• ~28% EBIT margin (2018)• ~24% ROIC (2018)• ~5x EBIT (since IPO)• ~7x Net Profit (since IPO)• DKK ~28bn in FCF (since IPO)
Market leader
• ~48% of total market with DKK 14.3bn in sales (2018)
• ~3x Sales (since IPO) • Serving +40 different end markets
World leader in Bioinnovation - Novozymes at a glance
R&D focused
• >1,500 people employed in R&D• ~6,500 patents • 13% of sales invested in R&D• DKK ~24bn spent on R&D since IPO
Company background
• Listed in 2000 at Nasdaq Copenhagen (NZYM B)
• Majority owner Novo Holdings (~25.5% of the capital, ~70% of the votes and 2 seats on the Board of Directors)
15 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
30%
12,000
12%
6%
8%
4%
10,000
0%
2%
16,000
2,000
14,000
10%
0
6,000
14%
28%
16%8,000
18%
20%
22%
4,000
24%
26%
20
08
20
06
DKKm
20
16
20
11
20
02
20
04
20
05
20
07
20
00
20
10
20
12
20
13
20
14
20
01
20
09
20
17
20
18
20
03
20
15
Sales (right) R&D/Sales
ROICEBIT margin
17 years of innovation driven growth
32%of ‘18 sales
29%of ‘18 sales
16
Uniquely diversified group creating synergies and opportunities
19%of ’18 sales
14%of ’18 sales
6%Of ‘18 sales
Household CareOrganic growth
LaundryAutomatic dishwash
Hand dishwashProfessional cleaning
Food & BeveragesOrganic growth
BioenergyOrganic growth
Agriculture & FeedOrganic growth
Technical & PharmaOrganic growth
BakingGrain milling & starch processing
Food & nutritionBeverage
Conventional biofuelsBiomass conversion
FeedAnimal healthBioAgriculture
Textile & leather Forest products
Wastewater Biocatalysis
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
2%1%
2014
4%
20172015 2016 2018
1% 0%
2014 2017 20182015 2016
2%4% 5%
9%
5%
-3%
2015 20172014
19%
2016 2018
-5%
11% 12%
19%
2014 2015
5%
20182016 2017
7%
-3%
3%
9%
20182015 20172014 2016
6%
13%
2%
-6%
Our global business serves a lot of local markets and industries
34%of ’18 sales
North America
Sites: Production, R&D
Main markets: Bioenergy, HHC, F&B, BioAg
Acc CAPEX: ~DKK 4.3bn
FTE’s: ~1,300
5Y avg. organic sales growth: +4%
36%of ’18 sales
Europe, the Middle East & Africa
Sites: HQ, Production R&D
Main markets: HHC, F&B, Feed
Acc CAPEX: ~ DKK 7.6bn
FTE’s: ~2,900
5Y avg. organic sales growth: +4%
10%of ’18 sales
Latin America
Sites: Production
Main markets: HHC, F&B, Feed, Biofuel
Acc CAPEX: ~DKK 420m
FTE’s: ~350
5Y avg. organic sales growth: +4%
20%of ’18 sales
Asia Pacific
Sites: Production, R&D
Main markets: F&B, HHC, Tech & Pharma
Acc CAPEX: DKK ~3.1bn
FTE’s: ~1,900
5Y avg. organic sales growth: +5%
Main sites with production and R&D Satellite production site Satellite R&D site
17 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Quality
• Superior logistical agility due to full control of value chain
• Ability to tailor solutions to specific customer and market needs
• First mover in a number of markets lead by ability to innovate
• High quality products that meet regulatory requirements
• Wide range of solutions and product offerings
High barriers
• Unique market-leading position in a global niche
• Strong technology backbone and competences
• More than 6,500 patents
• Diverse biotech know how and investments needed to compete
• Long term trusted partner for our customers
• Extensive know-how and manufacturing expertise
Competitive advantages across the value chain has led to a unique market leading position
Scale
• Production: 5 core plants in 3 regions
• Novozymes’ R&D investment equals 2/3 of total industry investments
• Technical services: half of commercial organization “on site”
• Market & technology coverage
Sustainability
• Sustainability is in our DNA helping our customers to save an estimated 88 million tons of CO2 (2018)
• Triple bottom line
• Pioneering life cycle assessment documentation
18 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Improve enzyme efficacyProtein engineering of enzymes improves efficacy. Customers buy efficacy, not volume
3
19
Enzyme technology improves Novozymes’ profitabilityNovozymes dedicates 10-15% of R&D spend to productivity improvement programs
Micro-organisms
Raw materials
Fermentation
Purification
Formulation
Enzymes
3 ways to gain productivity improvements
Improve production strainAbility to produce more enzymes per m3 fermentation tank through genetic engineering of host organism
1Optimize industrial productionProcess optimizationEquipment optimizationInput optimization
2
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Invest in impact
Show up for our customers with strong
commercial teams, capable of guiding
innovation and services to deliver on
customer goals
Spearhead new business
Unfold high-potential impact areas in a
dynamic, efficient process, building
tomorrow’s business and answering
global needs
Enablers
Better business
Differentiate to succeed
Adapt our approach to fit industry
potential and concentrate on
significant opportunities across
markets and segments
Reallocate toward
high-impact innovation
Expand emerging-market
and commercial activity
with biology
Focus areas
Simplify, optimize
and digitize
Thrive in a dynamic
organization
20 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
New strategic opportunity Contributing to long-term growth
Development seedFueling mid-term growth but still evolving
Anchor businessCreating stable growth and revenue
Growth starFueling short-term growth with sharp focus on execution
Value creatorCreating strong base for profitability to fund growth
Every industryplays an
important role
21
Differentiate to succeed with assigned roles for each industry
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Invest in impact by focusing the R&D pipeline
Before Better business with biology
Value Value
Risk RiskProject resource allocation Project resource allocation
New strategic opportunities
*Illustrative example
22 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Enzymes
EnzymesEnzymes
Microbes Microbes
Past Present Future
23
Broader technology offerings increase opportunities over time
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Spearhead new business in areas of global need
Contaminant removal
Protecting water resources by applying biological solutions to
remove contaminants from water and wastewater
Specialty alternative proteins
Feeding the world by providing alternative specialty protein for
food ingredients via fermentation
Human oral and gut health
Increasing health and wellbeing with clinically proven products for human oral and gut health
Market overview
Household Care overview
Laundry
Key industry trends
• Growth in the liquid and unit dose market, driven by consumer convenience and stronger commercial focus on these categories
• Rising demand for Household Care solutions tailored to emerging-market needs, such as hot and humid conditions and mild handwashing alternatives
• Strong interest in freshness and odor reduction technologies and claims
Product launches (2018)
• Licheninase – A new enzyme launched for automatic dishwashing, targeting dried-in cereals
• Lipex® Evity 200 L – New premium liquid lipase for the removal of grease stains
4.353
4.6324.702 4.717
4.625
2014 2015 2016 2017 2018
Sales in DKKm
+9% +4% +1% +2% 0%
Organic growth
Automatic
dishwash
Hand
dishwash
26 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
>60%NZ market share
Professional
cleaning
Eliminateharsh chemicals
Decrease dose, increase performance
Preserve fabrictexture, color
Our enzyme technology adds significant benefits
Remove stains,boost whiteness
Save energy, water, time
Deal with complex hygiene issues
27 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Lifestyle changes are increasing the demand for freshness, and we are on track to deliver DKK 1bn
Consumers’ lifestyle changes arethe drivers of growing hygiene needs…
…which center around issuesof odor and grime
Cold wash Detergent format
SyntheticsUrbanization
Sources: Novozymes consumer study; Euromonitor, Jan 2018; Mintel GNPD, April 2018; UNFPA, April 2018; Grand View Research; April 2018
Key consumer concerns
identified by Novozymes
Malodor Grime
Body soils
Freshness
28 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
We see large potential for future enzyme inclusion, especially in emerging markets
Significant up-dosing and penetration potential in emerging markets in general and Asia Pacific in particular
6
0
2
12
4
8
14
10
0
20
40
60
80
100
Middle East and Africa
North America
Billion tons Dosing (indexed)
Western Europe Latin America Eastern Europe Asia Pacific
5x volume opportunity
7x enzyme up-dosing opportunity
Detergent volume Enzyme dosing index
Presence and emerging market solutions to unlock potential
• Innovation hubs in China, India and Brazil
• Sales offices in Brazil, China, India, Mexico, Pakistan, Malaysia, South Africa and Turkey
• New sales offices opened in Kenya and Thailand
• Sales presence in Colombia, Egypt, Indonesia, Philippines, Nigeria and Venezuela
• Develop emerging market-specific products and blends
Source: Euromonitor, May 2019; Novozymes analysis
Emergingmarkets
29 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Biological detergents: We believe enzymes can contribute even more to a detergentand to compaction
Sources: IHS chemical 2014; Euromonitor, 2019; expert interviews, 2019* EU representative example, value as percentage.
• New and more stable enzymes to replace surfactants
• Freshness solutions to reduce the need for perfume
• Enzymes to replace polymer functions, such as fabriccare and whiteness
• Using enzymes to compensate for performance loss when reducing pH level and theneed for builders
Biologicaldetergent
Surfactants
Enzymes
Polymers
Builders
Perfume
Other
Surfactants
Multi-enzymes
Polymers
Builders
PerfumeOther
30 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Food & Beverages overview
Baking
Key industry trends
• Consumer focus on health, wellness and natural products
• Increase in raw material costs and focus on production process optimization
• Customers consolidating operations in order to increase overall efficiency
• Consumer focus on brands using local produce and/or catering to specific local taste, tradition and cultures
Product launches (2018)
• Palmora® – Our first solution for the palm oil industry
• Frontia® – A new technology for grain-milling
Grain milling Food & nutrition
30-40%NZ market share
3.2783.715 3.740
4.041 4.122
2014 2015 2016 2017 2018
Sales in DKKm
+4% +5% +2% +9% +5%
Organic growth
31 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Beverage
Health, safety and sustainability
Freshnessand taste
New substratestreams
Productivityand yield
HealthMore natural foods,please
More with lessEM industrialization
Trends Opportunities
32
Better food for a growing world
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
33
• 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 - protein and starch
Starch slurryfrom wet mill
LiquefactionNovozymes LpHera®
SaccharificationNovozymes
Extenda®
Novozymes Secura®
Purification IsomerizationNovozymes Sweetzyme®
Refining
Fructose syrups
Maltose syrups
Mixed syrups
Corn
Milling
Frontia®
Gluten
Fiber
Glucose syrups
Ref
iner
y
Wet
mill
Grain milling Starch processing
Starch
Starch
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
The grain value chain
End products• Cooking oil• Margarine &
shortenings• CBE• OPO, etc.• Low trans fat
and 3-MCPD
End products• Fatty acids• Fatty alcohols• Food & non-
food additives• MCT
• Novozymes offers multiple solutions across the value chain
• Improving efficiency in vegetable oil production is a >1B DKK opportunity
• Replacing chemical catalysts for specialties is a 400 mDKKopportunity
MillExtraction
RefineryRefining
Specialty fats producerSpecialty oils & fats
Oleo playerOleochemicals
Oilseed
3
1 2
4
New agro-processingapplications
34 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Enzymatic applications for vegetable oil processing show huge potential
Acrylamide removal
Transfats and
enzymatic interesteri-
fication
Plantprotein
Lowlactose
Less sugar added
Source: Novozymes revenue estimates
Healthy food
trends
35 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Increasing consumer health awarenessdrives food trends and opportunities
Bioenergy overview
Key industry trends
• Growing calls for lower CO2 emissions in the transportation sector, driving demand for ethanol
• Political push in favor of biofuels in more regions
• Volatility in commodity prices, affecting customer margins
Product launches (2018)
• Innova® Drive – Novozymes’ first launch within yeast for conventional biofuels. Innova® Drive is aimed at ethanol plants with short fermentation times
• Innova® Lift – The second product from our yeast platform. Innova® Lift is aimed at ethanol plants with longer fermentation times
2.270 2.543 2.4382.644 2.805
2014 2015 2016 2017 2018
Sales in DKKm
+19% -5% -3% +11% +12%
Organic growth
Conventional biofuels Biomass conversion
36 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
>50%NZ market share
Bioenergy - a lot of opportunities exist
EUROPEAN UNIONRenewable Energy DirectiveProduction: 1.4bn GPYPotential addition: +1bn gallons by 2030
Total additional GPY by 2030
24bn(gallons per year)
LATIN AMERICARenovaBioProduction: 7.4bn GPYPotential addition: +4-6bn gallons by 2030
CHINAE10 by 2020Production: 600-700m GPYPotential addition:+5bn gallonsl by 2020
INDIAStrong governmental push for public investment in 2GProduction: 400m GPYPotential addition: +150m gallons/year 2G by 2030
NORTH AMERICARenewable Fuel StandardProduction: 15.8bn GPYPotential addition: +13bn gallons by 2030*
+150mGPY
+1bnGPY
+4-6bnGPY
+13bnGPY
+5bnGPY
*Including RFS cellulosic volume mandate currently waived due to lack of capacity.
Ramping up commercially in
emerging markets to be ready for expected shift
37 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Ethanol production
38 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Sources: EIA, Ethanol RFA
Global ethanol production (billion gallons) Ethanol producer margin
Price development in ethanol and corn US Ethanol inventories
7.200
2018
6.267 6.760
13.816
2014
14.807
2013
14.313
2015
23.422
6.760
25.774
2017
15.413
2016
6.860
15.936
7.920
26.810
16.061
25.083 RoW
China
EU
Brazil
NA
26.18228.570
0
1
2
3
4
5
6
7
8
2014 2016
USD
per
gal
/bu
20172013 2015 20192018
Ethanol Corn
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
Co
ntr
ibu
tio
n m
argi
n (
$/g
allo
n)
0
10
5
15
25
20
2013
Bar
rels
in t
ho
usa
nd
s
2014 2015 2016 2017 2018 2019
39
The Ethanol ProcessEnzymes are applied in multiple stages, along with yeast in fermentation
PastBasic products for liquefaction and saccharification
PresentMultiple offerings across liquefaction, saccharificationand now also yeast
FutureIncreasingly customized solutions for liquefaction and saccharification, novel solutions for other process steps
Designing enzymes for individual plantsUsing our diagnostic program to deliver custom fermentation solutions, tailored to a plant’s unique operating conditions
Addressing complexity in bioethanol production
From standard to more customized solutions
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Agriculture & Feed overview
Key industry trends
• Consumer focus on health, wellness and natural products
• Sensitivity to fluctuations in commodity prices among farmers
• Consolidation of large agricultural companies to increase overall scale and efficiency
Product launches (2018)
• Acceleron® B-360 ST – A biological seed treatment that promotes symbiosis between microbes and corn plants, strengthening root systems and increasing plants’ access to nutrients
• Balancius™ – A novel enzyme that improves digestion and nutrition in chickens
1.7282.130 2.207 2.108 2.045
2014 2015 2016 2017 2018
Sales in DKKm
+7% +19% +5% -3% +3%
Organic growth
Animal health BioAgricultureFeed
40 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
25-30% (Feed enzymes)NZ market share
Our new BioAg setup allows for broader outreach
41
42 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Scientific evidence supports enzyme penetration - enabling livestock farmers to reduce feed cost
70% of total cost of poultry production is feed including additives which is around 5%.
Poultry producer margins are low when:• Feed prices are high• Meat prices are low
Feed formulation is an art and the nutritionist is often the decision maker. The scientific and nutritional philosophies combined with commodity prices determine enzyme inclusion levels
In tough conditions the producer sees two options:• Cost out = reduce enzyme inclusion • Increase efficiencies = increase enzyme inclusion
The degree of enzymatic and nutritional understanding determines the decision:• Advanced/’modern’ customers increase enzyme inclusion• Simple/traditional customers reduce enzyme inclusion
• Enzyme inclusion increases the efficiency of poultry producers• Lack of scientific understanding drives uneconomical customer decisions
Market is sensitive to feed and meat price changes
Low margins leave the producer different options
Scientific educationof customers to increase penetration
ProActProtein• Maximizing protein utilization and improving nutritional value• Improves protein digestibility by >20%, increasing feed conversion• Reduces need for additional protein feed, such as soybean meal
Attractive value propositions in feed enzymes
80-90%
10-15%
35-45%
0%
25%
50%
75%
100%
Phytase Protease Carbohydrase
PhytasePhosphate• 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
OthersEnergy• Xylanase & glucanase increase non-starch polysaccharide digestion• Amylase improves starch digestibility, releasing more energy• Cellulase improves fiber digestion• Grain feed savings of ~2.5% and less pollution (ammonia, nitrate,
nitrous oxide and CO2)
Estimated penetration across species
43 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Feed and animal gut health enzymes
Bacillus for monogastrics
Hatchery probiotics
Natural solutions for cattle
Pond treatment(aquaculture)
We are committed to our core technologies and partner with industry leaders to win
Enzymes
• Full portfolio of feed enzymes
• Recently launched game-changing innovation
• Improve the sustainability of livestock production
Probiotics
• Growing area for Novozymes with pipeline of products
• Alterion® tracking well
• Support the trend of reducing antibiotic use in animal farming
We develop and commercialize these technologies together with our partners, who are leading players in the industry
44 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Technical & Pharma overview
Key industry trends
• Continuous focus on process optimization and cost reduction
• Water scarcity driving demand for solutions that reduce water consumption, improve water quality and clean wastewater
Product launches
• BioSec® – Novozymes’ first product for sludge dewatering. BioSec® is aimed at municipal wastewater treatment
• Low temperature cellulase for liquid denim abrasion and garment biopolishing
Answering the world’s call for cleaner water
Solving the world’s water problems presents a monumental challenge for society. As part of its Sustainable Development Goals (SDGs), the
United Nations has identified Clean Water & Sanitation as Goal 6, recognizing that water is the key to unlocking progress in several of the other SDGs.
829982
1.055 1.021
792
2014 2015 2016 2017 2018
Sales in DKKm
+9% +6% +13% +2% -6%
5 year organic growth
Forest products Wastewater
~50% (enzymes only)NZ market share
Textile & leather
45 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Biocatalysis
Sustainability
6 12
PRODUCTION & CONSUMPTION
Gain 500,000 tons of food
by improving efficiency from
farm to table in 2022
CLIMATE
Save 60 million tons CO2
by enabling low-carbon fuels in
the transport sector in 2022
Limit global warming
increase to 1.5 degrees
WATER
Reach > 4 billion people
by providing laundry solutions
that replace chemicals in 2022
Ensure clean and
efficient water use
Produce more and better
products with less impact
WORLDBy 2030, we will help...
2022 targets
Reduce absolute CO2
emissions from operations
by 25% by 2022
Develop context-based water
management programs at 100%
of sites by 2022
50% reduction in absolute
CO2 emissions from
operations on our way to
carbon neutral in 2050
100% of sites manage
water in balance with
local conditions
100% of key materials and
waste managed in circular
systems
NOVOZYMESBy 2030, we will achieve…
2022 targets – examples Achieve 100% circular management of
our biomass by 2022
Sustainability drives how we do business
47 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
-20%
20%
60%
100%
140%
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Ch
ange
sin
ce 2
00
5
0%
1%
2%
3%
0
5
10
15
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Emp
loye
e ab
sen
ce
Acc
iden
ts p
er m
illio
n
wo
rkin
g h
ou
rs
Accidents per mill. working hours Employee absence (right)
We plan to continue our journey of operational excellence
Decoupling resource consumption from economic growth
Steady improvement in employee metrics
• Novozymes has over time proved how investments in efficiency and optimization programs pay off not only from a sustainability perspective but also from an economic perspective
• In the US we have a biogas plant which turns wastewater into steam
• 24% of the total energy consumed comes from renewable sources; mainly windfarms
Gross profit
Water
Energy
CO2 emissions
Sales
48 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Financials and governance
Historical performance demonstrates track of delivery
50
Mid-term targets 2020-2022
• Organic revenue growth of 5+% per year
(2020 likely impacted by portfolio changes)
• EBIT-margin at or above 28% by 2022
• ROIC (incl. goodwill) at or above 23% by 2022
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Turnover development
EBIT- margin
ROIC (incl. goodwill)
0%
10%
20%
30%20.000
15.000
5.000
0
10.000
DK
Km
RO
IC
2010 2011 2012
7.486
2013 2014
11.871
2015 2016 2017 2018
9.01310.421 10.535
11.891 12.585 12.880 13.953
ROIC (right) Invested Capital
0%
10%
20%
30%
2010
27,9%27,2%24,7%
22,3%
2011 2012 2013 2014 2015 20182016 2017
22,0%24,4%
27,7% 27,9% 28,3%
10.510 11.234 11.746 12.459 14.002 14.142 14.531 14.390
5.000
0
10.000
15.000
2012
DK
Km
2011 20152010 2013 2014 2016 2017 2018
9.724
+5%
-716
1.0000,0
-1.000
0
2.000
3.000
-0,5
0,5
1,0
DK
Km 990
NIB
D/E
BIT
DA
2010 2011 2012 2013 2014
2.535
2015 2016
346
2017 2018
1.0191.6421.430
805437
-5%0
1.000
500
1.500
2.000
0%
5%
10%
15%
2013
DK
Km
20162012
CA
PEX
/Sal
es
2010
1.177
2011 2014 2015 2017 2018
1.326 1.316
783 7051.015
1.188
1.6651.388
Historical performance demonstrates track of delivery
51
Model assumptions 2020-2022
• Improving as % of sales
• CAPEX to sales at or below 8%
• ~1x Net interest bearing-debt-to-EBITDA
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Net working capital
Net investments
Net interest bearing debt
CAPEX to sales (right) CAPEX
NIBD/EBITDA (right) Net Interestbearing debt
3.000
0%
0
1.000
20%2.000
10%
-10%
30%
DK
Km
2.023
2010
NW
C/S
ales
20132011 2012 2014 2015
1.720
2016 2017 2018
2.741
1.5801.943
2.195
1.076
2.088
2.768
NWC to sales (right) NWC
Novozymes carries limited exposure to raw material fluctuations
Factors impacting COGS
• Productivity improvements
• Input prices
• Currency
Note: accounting practice implies that there is a time lag between current price levels and COGS
Factors impacting Novozymes’ input prices• Geographical location, e.g., differences in input
• Contractual agreements, e.g., timing and duration
• Substitution possibilities, i.e., flexibility in use of different inputs, not dependent upon one source
• Price development on other products produced by our suppliers from the same input
Split of Cost of Goods sold Raw materials consist primarily of different carbohydrates. Approximately 50% of raw material input are e.g., sucrose, maltose, glucose and starch
52 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
34%
22%
44%
Energy/utilities & others
Raw materials
Indirect production costs
504 600 687 786 925
2,20
2,50
3,00
3,50
4,00
4,50
5,00
2016
8321.000
1.3181.062
1,90
2.0001,60
400
2010 20172011 2012
2.925
1.519
2013
2.000
2014
2.000
2015
3.062
1.190
2.000 2.000
1.438
2018
504786
3.190 3.318 3.438
53
DKK ~20bn returned to shareholders since 2010
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Dividend per share (DKK)Buyback (DKKm) Dividend (DKKm)
54
Shareholder distribution
Two share classes; A and B shares • All “B”- shares listed in Copenhagen under the symbol “NZYM B”
• All “A” share capital and 21,991,400 “B”-shares are held by Novo Holdings, who is fully owned by the Novo Nordisk Foundation
As of December 2018• Novo Holdings, owned 25.5% of the share capital and controls
71.7% of votes (all A shares and 9% of B shares)
• Novozymes had more than 55,000 shareholders of whom 95% were private shareholders in Denmark
• ~50 institutional investors incl. Novo Holdings owned ~50% of the B-shares
*Distribution equals where shares are managed, Dec 2018
Shareholder distribution of B common stock*Novo Holdings was the only major stockholder holding more than 5% of Novozymes common stock
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
4%9%
17%
18%
17%
34%
2%
Treasury stock - Novozymes
Rest of Europe
Novo Holdings A/S
Denmark
UK
North America
Rest of World
Remuneration principles for the Executive leadership teamRemuneration principles ensure close alignment with long term shareholder interests, links remuneration to shareholder gains and losses, and ensures management retention
Long term incentive program (2017-2019)Annual remuneration scheme
0
5
10
15
20
Mo
nth
s o
f sa
lary
p
er y
ear
Max 2 months of base salary cashbonus linked to fulfilment of EBITand sustainability targets
Max 3 months of base salary cashbonus linked to fulfilment ofpersonal targets
Base salary
Salary and cash bonus
Conditions for long term program• The incentive program consists of 50% stock options and 50% stocks with the
opportunity to double annual remuneration. Awards will depend on accumulated economic profit generated (75%) as well as average organic sales growth (25%).
• Economic profit is defined as: NOPAT - (Avg. inv. capital x WACC)• NOPAT is adjusted for hedging result to eliminate impact of currency fluctuations
as well as for any impacts from major acquisitions. A fixed WACC of 6% will be used during the entire program
• Stock options will be awarded annually (3-year vesting period), stocks in 2020 (no vesting period). Maximum clause caps upside (max. cap = 2x intrinsic value at establishment ex. inflation)
0102030405060708090
100
1,0 2,0 3,0 4,0 5,0 5,5 6,0 6,5 7,0 7,5 8,0% s
tock
& o
pti
on
s aw
ard
ed
DKKbn of acc. economic profit
Economic Profit (75% of the program)
0102030405060708090
100
1% 2% 3% 4% 5% 6% 7%% s
tock
& o
pti
on
s aw
ard
ed
Organic Sales growth
Organic growth (25% of the program)
55 Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
56
Foundation ownership advocates long-term focus
Purpose of the Foundation
The Novo Nordisk Foundation is an independent Danish foundation with corporate interests. The objective of the Novo Nordisk Foundation is twofold: • To provide a stable basis for the commercial and research
activities conducted by the companies within the Novo Group• To support scientific and humanitarian purposes
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Structure and ownership
Novo Nordisk Foundation
Institutional and private investors
Novo Holdings A/S
25.5% of total shares71.7% of votes
74.5% of total shares28.3 of votes
150
0
50
300
200
100
250
No
of
shar
es –
mill
ion
s
A-shares B-shares
Foundation
Treasury
Free-float
Our investor relations team
57
Further investor relations information is available from the company homepage at investors.novozymes.com
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance
Tobias BjörklundHead of Investor relations+45 3077 [email protected]
Naja WivelCoordinator+45 3077 [email protected]
Carl AhlgrenIR officer+45 3077 [email protected]
Ulrik Wu SvareIR officer+45 3077 [email protected]
58
Forward-looking statements
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 inputs 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.
Latest results • Overview and strategy • Market overview • Sustainability • Financials and governance