Expectations for 2012


Sales are expected to grow by 7–11% in 2012, and operating profit by 9–12%. The expectations for 2012 reflect uncertainty about the global economy, expressed by relatively wide intervals for the sales and earnings growth guidance. We expect to further improve our resource efficiency in production.

Expectations for 2012

Financial targets:
Sales growth of 7–11% in DKK   
Sales growth of 3–7% in local currency (LCY)
Organic sales growth of 4–8%
EBIT growth of 9–12% 
EBIT margin of 22–23%
Net profit growth of 5–8%
Investments of around DKK 1,200 million
Free cash flow before acquisitions of around DKK 1,500 million
ROIC of around 20%

Sustainability targets:
Enable a 47 million ton reduction in CO2 emissions through our customers' application of our products 
Improve energy efficiency by 38% compared to 2005
Improve CO2 efficiency by 50% compared to 2005
Improve water efficiency by 33% compared to 2005 
Score at least 75 for ”satisfaction and motivation” in our employee survey
Score at least 74 for ”opportunities for professional and personal development” in our employee survey
Score at least 80 for ”my colleagues live Touch the World” in our employee survey
Keep the frequency of occupational accidents below 4.0 per million working hours
Keep employee absence below 3%
Keep employee turnover between 4% and 9%
Obtain Gold Class rating by SAM in the Sustainability Yearbook 2012

Financial expectations

Sales expectations

The full-year 2012 guidance reflects the uncertainty about the global economy. It is difficult to predict at what pace global demand might deteriorate in the event of further negative economic sentiment or signals. Although Novozymes has proven relatively resilient in recessionary economies (last shown in 2009) thanks to the characteristics of some of the markets our products and technologies serve and the advantages they offer, our sales are also partly dependent on consumption and GDP growth. The full-year organic sales growth guidance of 4–8% addresses the current level of uncertainty.

Adjusting the 2012 sales growth expectation for the roughly 1 %-point negative impact of divestments and acquisitions during 2011, the full-year LCY sales growth expectation is 3–7%. Based on exchange rates at January 18, 2012, sales growth in DKK is expected at 7–11%.

Within Enzyme Business, Household Care Enzymes are expected to be the strongest contributor to full-year sales growth. Feed Enzymes, included in the Feed & Other Technical Enzymes area, are also expected to be a relatively strong contributor to full-year sales growth. The full-year sales outlook is based on the expectation that the US biofuel industry will produce roughly 14.2 billion gallons of ethanol in 2012, up by 2–3% compared to 2011. Full-year Bioenergy Enzymes sales should also benefit from the introduction of new and more efficient products and should be able to outpace the underlying growth in ethanol volumes.

BioBusiness sales are expected to grow in double digits organically, with positive contributions from Microorganisms and Biopharma. Novozymes BioAg sales are weather sensitive, as seen in the 2011 US Midwest flooding and late planting season, which impacted Novozymes’ BioAg sales negatively, but should be able to deliver healthy growth under normal weather conditions. The other Microorganisms industries should also develop well. The divestment of Novozymes Biopharma’s operation in Lund, Sweden, will have a negative sales impact of roughly DKK 90 million in 2012, which will impact both LCY and DKK sales growth negatively. This has been included in the guidance.

Earnings expectations

EBIT growth is expected at 9–12%. Compared to 2011, there are positive effects from the absence of the IFRS adjustment of acquired inventories at EMD/Merck Crop BioScience, slightly more beneficial currency exchange rates, the divestment of Novozymes Biopharma’s slightly loss-making operation in Lund, Sweden, and continued productivity improvements. Pulling the other way are higher raw material prices, full staffing costs and low capacity utilization at the HA facility in China, and higher staffing costs at the new enzyme facility in Nebraska, USA, together with continued investments in R&D and business-building activities to support our long-term growth ambition. The projects within the additional DKK 150 million investment in R&D and business-building activities described in The Novozymes Report 2010 were all initiated in 2011 and have full-year effect in 2012.

As a result of the above, the 2012 expectation for the EBIT margin is 22–23%.

Net profit is expected to grow by 5–8%. USD exposure for 2011 was hedged at 5.85 DKK/USD. USD exposure for 2012 has been hedged at 5.70 DKK/USD, and 75% of expected 2013 DKK/USD exposure has been hedged at 5.60.

Investment and cash flow expectations

As expected previously, the relative investment level should start to decline. For 2012, we expect around DKK 1.2 billion in investments. Besides maintenance CAPEX, the main part of the investments relates to the finalization of the Nebraska enzyme facility. Part of the expected investments in the Nebraska enzyme facility that were planned to take place in 2011 has been included in the expected CAPEX figure for 2012.

Free cash flow before acquisitions is expected at around DKK 1.5 billion, mainly as a result of higher net profit and the lower CAPEX.

Return on invested capital is expected at around 20%, slightly lower than in 2011 due to the acquisition of EMD/Merck Crop BioScience in 2011 having its full impact in 2012.

Exchange rates at year-end

The outlook is based on exchange rates for the company’s key currencies remaining at the closing rates on January 18, 2012, for the full year.




Average exchange rate 2010 745 562 6.42 83.08
Average exchange rate 2011 745 536 6.73 82.94
Closing rate January 18, 2012 744  580 7.55 91.82
Estimated average exchange rate 2012* 744 580 7.55 91.82
Change in estimated exchange rate 2012 compared to average exchange rate 2011 0% 8% 12% 11%
* Estimated average exchange rate is calculated as the average exchange rate YTD combined with the closing rate ROY.

Note: Other things being equal, a 5% movement in the USD is expected to have an annual impact on EBIT of DKK 60–80 million.

"The full-year organic sales growth guidance of 4–8% addresses the current level of uncertainty."
"The EBIT margin in 2012 is expected to be 22–23%."
Enabling long-term growth
Novozymes believes in investing freed-up resources in future growth.
Biofuel expectations
2012 is set to be the year when commercially available ethanol takes off, paving the way for investments in the second wave of ethanol plants.
BioBusiness in 2012
BioBusiness' portfolio looks perhaps more interesting than ever before.

Sustainability expectations

Utilization of resources and climate change impact

We have chosen 2005 as the baseline year for our resource efficiency targets. The targets for 2012 for improving resource efficiency are 38% for energy, 33% for water, and 50% for CO2. The CO2 target is based on emissions from Novozymes’ own production sites and from energy suppliers.

Furthermore, we want to emphasize the potential of our technology to reduce the environmental footprint during a product's life cycle by setting a target of enabling a 47 million ton reduction in CO2 emissions through our customers’ application of our products.

Workplace development

Our goal is to have satisfied and motivated employees at Novozymes. We address this through targets for employee satisfaction and employee development. The target for “satisfaction and motivation” is a score of at least 75, and the target for “opportunities for professional and personal development” is a score of at least 74 in the employee survey. In 2012, we have added a new target for our employees’ identification with our new set of corporate values, Touch the World, as a way to follow up on the launch of these values in 2010 and further implementation efforts in 2011. The target is to score at least 80 for ”My colleagues live Touch the World” in our employee survey.

In addition to these targets, we aim to keep the frequency of occupational accidents below 4.0 per million working hours in 2012 and the rate of absence from work below 3%. The target for employee turnover is set at a range that reflects the present job market and Novozymes’ aims with regard to attraction and retention of employees. We see it as preferable to have a turnover above 4% and below 9% in 2012.

Sustainability leadership

Our target of a Gold Class rating from SAM in the Sustainability Yearbook 2012 reflects the importance we attach to benchmarking Novozymes against our peers in relevant areas. Although we have chosen Dow Jones Sustainability Indexes and SAM’s rating as yardsticks, a number of alternative ratings are just as valuable.

Novozymes expects to launch 6–8 new products in 2012.

Advanced biofuels on the brink of commercialization

Construction began in 2011 on the first commercial plants for the production of biofuels from agricultural residues, and the industry continued to advance through process improvements and government support. Grants and loan guarantees in the US, a new 5-year plan in China, and industry initiatives in Europe and Brazil point toward commercial-scale facilities becoming operational on all four continents within the next couple of years.

This is what Novozymes has been working for in close concert with our partners for a number of years, and we are now on the brink of commercialization.

Milestones in 2011
In the US, the Environmental Protection Agency approved E15 gasoline (15% ethanol) for vehicle model year 2001 onward. The previous “blend wall” allowing only 10% ethanol to be blended in gasoline had threatened to prevent further growth in biofuel production and compliance with the Renewable Fuel Standard. While commercial challenges remain, this landmark decision offers a clear way forward for increased use of biofuel in the US.

Meanwhile, the US Departments of Energy and Agriculture continued to support advanced biofuels by providing funding and loan guarantees for the first commercial plants. Novozymes’ partner POET as well as other companies received loan guarantees under these programs during the year. In addition, the Department of Defense announced that it will invest up to USD 510 million over the next 3 years in the production of advanced “drop-in” aviation and marine biofuels for military and commercial transportation.

In Italy, Novozymes’ partner Mossi & Ghisolfi Group began work on what is expected to be the world’s first commercial-scale plant for advanced biofuels. The facility is due to be fully operational by mid-2012, producing roughly 50 million liters a year from energy crops and wheat straw.

China announced considerable support for advanced biofuels in its 5-year plan for 2011–2015. Acknowledging that advanced biofuels are in their infancy, the government will provide support for industrial players to commence construction of the first commercial facilities over the next 5 years. Novozymes’ Chinese partners COFCO and Sinopec plan to bring an advanced biofuel plant with a capacity of 50 million liters on line within the next few years.

Novozymes launched the first commercially viable enzyme for the production of biofuel from agricultural waste early in 2010. With the first commercial plants now becoming operational, and all the industrial and political initiatives being launched around the world, we look forward to learning how the technology scales, driving further improvements and commercial opportunities.

"We have added a new target for our employees’ identification with our new set of corporate values, Touch the World."