COMPANY PRESENTATION - Novozymes

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COMPANY PRESENTATION - Novozymes

COMPANYPRESENTATIONTobias BjorklundHead of Investor RelationsDanske Large Cap Seminar Dec. 1 st 2010


Safe Harbor Statementt tThis presentation and its relatedcomments contain forward-lookingstatements, including financialexpectations.Forward-looking statements are by theirvery nature associated with risks anduncertainties that may cause actualresults to differ materially fromexpectations.The uncertainties may includeunexpected developments in theinternational currency exchange andsecurities markets, market-driven pricedecreases for Novozymes’ products, andthe introduction of competing productswithin Novozymes’ core areas.2


Novozymes –The World Leader in Bioinnovationi • Largest market share of all players in IndustrialEnzymes (47%)• More than 60 years legacy in the businessFounded 1941Listed 2000• 2009 sales of USD ~ 1.5 billion• 20 years sales growth CAGR of 8%TickerExchangeNZYMCopenhagen• 2009 EBIT margin of ~ 20%Market Cap* (MDKK) ~ 48,000• ~ 14% of sales spent on R&D• + 6,300 granted and pending patents• ~ 5,400 employees• More than 700 products used in 130 countries inover 30 different industries*A+B shares October, 20103


Uniquely Diversified Group Creates Synergiesand New Opportunities• Unique biotech-focused business with a strong legacy of delivering growth, earnings, andcash flow• Approximately 14% of annual sales invested in R&D• Global provider of enzymes to all market segments creates global market leader position• Leveraging competencies across segments accelerates pace of innovation, reducescompetition and creates high barriers to entryDetergentenzymesTechnicalenzymesFoodenzymesFeedenzymesMicroorganismsBiopharmaceuticalsApplicationsApplicationsApplicationsApplicationsApplicationsApplications• Laundry &dishwasherdetergents• Corn ethanol• Starchconversion tosyrups• Textiles• Baking• Brewing• Oil & fats• Wine & juiceEnzyme Business• Monogastricanimals• Substitutingphosphate• Enhancingprotein uptake• BioAg• Wastewatertreatment• Institutional &householdcleaning• Cell cultureingredients• Hyaluronicacid• Albufusiontechnology• Anti-microbialpeptidesBioBusiness4


Undisputed Market LeaderExpanding Enzyme Application2003 – Global l enzyme2009 – Global enzymeGlobal l enzyme marketmarket: DKK ~ 13bn market: DKK ~ 16bn2009 value DKK ~ 16bnRest ofmarket57%Novozymes43%Market potential*Rest ofmarket53%Novozymes47%Others16%DSM6%Captive10%Novozymes47%Untapped marketMulti-billion (US$)Current enzymemarketDKK ~ 16bnDanisco21%Rules of competitiondictated by innovation*Global markets for chemicals, food ingredients, feed additives, etc.5


Delivering i Tomorrow’s Solutions TodayDelivering solutions fromnature:food applications, detergents,pharmaceutical products, theenergy sector and countless otherapplicationsHelping companiesbecome more efficient:energy efficiency, saving rawmaterials, reducing waste andreplacing chemicalsThis unique approachleads to:“more with less”higher quality, lower costs, betteryields and a better environment6


Innovation-driven di Top-Line Growth• Achieving growth through R&D investment remains a fundamental priority• > 50 product introductions in the last 5 years, ~ 100 active projects in currentportfolio• R&D investments reaping rewards with increasing diverse revenue streamsR&D Expenditure 2005−2009(DKK million)Close to 20 year sales CAGRof around 8%Sales DKKm EBIT margin R&D/Sales ROIC7938809951,0961,20722%21%20%19%18%17%16%15%14%13%12%11%10%9.0008.0007.0006000 6.0005.0004.0003.0002.0001.00002005 2006 2007 2008 20097


Historical PerformanceDemonstrates t Track Record of DeliveryLong-term targets• Organic sales growth of more than 10% p.a.• Operating margin of at least 20%• ROIC of more than 22%• All targets exclude the opportunity for enzymes for cellulosic ethanol20%16%12%8%4%0%1990−2009 sales CAGR at 8%Sales DKKmGrowth9.0008.0007.0006.0005.0004.0003.0002.0001.000025%20%15%10%10.2%5%12.5%13.6%ROIC15.5%17.4%19.3%20.2%21.7% 20.3%19.5%21%20%19%18%17%16%15%Operating profitEBIT DKKm EBIT margin1.8001.6001.4001.2001.00080060040020008


A Unique Competence:Enzyme Technology Improves our Profitability• Focused on improving margins through sophisticated technological solutions• Achieved sales CAGR of 8% over 20 years with improving i margins• Roughly 20% of the R&D spend goes into productivity improvementsProductivity improvements are gained in threeways:1. Production strain improvement2. Production process optimization3. Improving the enzyme producedFERMENTATIONFORMULATION2. Optimizing the industrialproduction Traditionalproduction optimization• Process optimization• Equipment optimization• Input optimizationRAW MATERIALSPURIFICATIONMICRO-ORGANISMS1. Improving the production strainImproving the microorganisms’ ability to producemore enzymes per m 3 fermentation tank throughhgenetic engineeringENZYMES3. Improving the enzymeproducedImproving the efficacy of theenzymes through proteinengineering. Customers buyefficacy, not volume9


Reducing CO 2 EmissionsTogether with Our Customers• In 2009, Novozymes helped customers save 27 million tons of CO 2–equal to half of Denmark’s annual CO 2 emissioni• Novozymes’ vision: working towards a future where biological solutions create the necessarybalance between a better business, a cleaner environment and better livesNet CO 2 saving using 1kg enzymein different production processes3,400 kg3,800 kg30 kg 40 kg 100 kg 150 kg 150 kg 200 kgUp to600 kg1,300 kgBIOCATALYSISCEREAL FOODOILS & FATSPAPERANIMAL FEEDLEATHERTEXTILESBIOETHANOLDETERGENTFOOD10


Potential ti CO 2 Savings Per Year in 2030• When using enzymatic solutions and currenttechnologyMillion tons CO 2 saved in 2030• Industrial biotech can save the world up to2.5 billion tons of CO 2 per year• Novozymes is uniquely positioned tocontribute to these savings6332041024• In 2009, Novozymes helped our customers668save 27 million tons of CO 2• 27 million tons are equal to half ofDenmark’s total CO 2 emissions per yearProvide substitutes for fossil fuelsSubstitute other chemicalsRecycling waste into energy and materialsImprove efficiency in industrial processes• As estimated by WWF in september 200911


9-month 2010 Overview9M 2010 sales:DKK: +17%, LCY: +12%, Organic: +13%Total Business Sales Development9M’09–9M’10 (DKKm)• 9M enzyme sales growth remained strong,driven by detergent, technical and food(67)261• Continued positive performance in BioAg –slightly negative in I&HC, WWT and BPI319• Strong 9M earnings development• EBIT +35% (DKK 1,700 billion)• EBIT margin 23.2%• ROIC 24.3%01973297,320• DJSI Biotechnology Sector leader for 2 ndconsecutive year6,28112


9M 2010 Financial i PerformanceDKKm 9M 2010 9M 2009 DevelopmentAbsoluteSales 7,320 6,281 1,039 117Gross profit 4,097 3,458 639 118Gross margin 56.0% 55.1%EBIT (Operating profit) 1,700 1,257 443 135EBIT margin 23.2% 20.0%Net profit 1,264 893 371 142EPS (diluted) 19.80 14.17Operating cash flow 1,762 1,470 292 120Net Investments, excl. acq. 787 605 182 130Free cash flow before acq. 975 865 110 113Acquisitions 22 - 22 -Free cash flow 953 865 88 110Net interest-bearing debt 300 910Net debt-to-equity 4.1% 17.3%Equity Ratio 62.3% 49.7%ROIC, incl. goodwill 24.3% 20.7%Index13


Large Part of Novozymes’ Business is Related toProduction or Processing of Agricultural l Commodities14


Year 2050, if we Keep Going (The Ehrlich h Equation)x ~5=~10 xx ~215


Decoupling Use of Resources from EconomicGrowth• Enzymes are efficient biologicalcatalysts, t with microbial origini• Utilized in production processesthey can increase efficiency,reduce energy consumption,Economic Growthlower raw material input or limitwaste streamsResource Consumption• With Bio Innovation we canproduce ”more with less” andhelp decouple economic growthfrom the consumption ofnatural resourcesBioinnovationTime16


OVERVIEW • STRATEGY • SEGMENTAL OVERVIEW • SUSTAINABILITY • FINANCIAL REVIEW • APPENDIXThe Renewable Fuel Standard (RFS) in the USMandates Strong Growth of Biofuels UsageRFS = mandated biofuels use in the US16bn galloncellulosic biofuels5bn gallon otheradvanced biofuels15bn gallonstarch-based ethanolCO *2 balance≥-20–70%≥ -50%-90%Current tax credit regime:$0.45/gallon to the blender – no matter the feedstock+ $0.56/gallon to the producer of cellulosic ethanolOil-basedgasolineCornethanolOther adv.biofuels(biodiesel,sugarcane, etc.)Cellulosicbiofuel* “Well to wheel 2006 + RFS2”17


Developing Enzymes for Cellulosic Biofuelsin Close Co-operation with Global l Partners18


Conversion of Renewables into Chemicals- Technology, Partners, and ProjectsMetabolic engineeringGrain/biomassFermentablesugarsA microbial cell is optimized by gene technologyto produce a desired d compound from a givenfeedstock.Technological fit:Renewable Not secluded enzymes, butchemicalintracellular pathways thatconsist of many different enzymes.Confidential molecule•Molecule: Acrylic acid•R&D time frame: ~ 2012•Business model: Technology license•Market (05): USD 11bn, AGR +4%•Aim: Not replace existing capacity,but take share of new capacity•Molecule: Polypropylene•R&D time frame: ~ 2015•Business model: Technology license•Market (08): USD 66bn, AGR +4%•Aim: Not replace existing capacity,but take share of new capacity•Compound: Biogas (from bagasse)•R&D time frame: ~ 2015•Business model: Technology license•Market: N/A19


Detergent t Enzymes can Replace PetrochemicalsOur unique synergistic enzyme portfolio....can replace chemicals, and enables..Protease• Proteins, e.g. blood,grass, meat, eggCost stabilitytyLipase• Oil / greasy body and foodstains, butter, sweatAmylaseCellulaseMannanase• Starch-based soils, e.g.ice cream, gravy, potatoes• General cleaning,especially dust and mud• Guar gum-based stains,e.g. ice cream, soup,makeupLow temperaturewash & othersustainabilityclaimsPectinase• Fruit and juice-basedstainsCompaction20


Performance Overview by Segment, 9M 2010Enzyme Business: 9M10, DKK: +19%, 9M10, LCY: +15% (93% of sales)Detergentenzymes(32%)9M10, DKK: +19%9M10, LCY: +16%• Strong focus from detergent producers, across tiers, on improving washingperformance with enzymatic technology• Double-digit sales growth across all geographical regions• Replacement of chemicals with multi-enzyme solutions supported growthTechnicalenzymes(31%)9M10, DKK: +22%9M10, LCY: +18%• Ethanol enzyme sales +20% in LCY, expected to be roughly in line with US ethanoloutput growth• Enzyme sales for starch conversion and for textiles continued good performance• Smaller industries in technical enzymes also developed very wellFood• Continued strong growth in baking and brewing enzyme sales9M10, DKK: +19%enzymes9M10, LCY: +14%(22%)• Quality, yield improvements and healthy concepts drove growth across segments -not only baking and brewing enzymes• 2% negative impact on 9M’10 growth due to divestment of noncore activities in IndiaFeedenzymes(8%)9M10, DKK: +5%9M10, LCY: +0%• RONOZYME ® NP continuously establishing itself well in a highly competitive Europeanphytase market• RONOZYME ® ProAct• Continued strong sales development in emerging markets• Off to a good start in the European feed market, after recent launchBioBusiness: 9M10, DKK: (6)%, 9M10, LCY: (13)% (7% of sales)Microorganisms(5%)9M10, DKK: 1%9M10, LCY: (6)%• Continued positive performance in BioAg – slightly negative in I&HC and WWT• Negative net acquisitions/divestmentsimpact of 5 %-points in LCYBiopharmaingredients(2%)9M10, DKK: (25)%9M10, LCY: (32)% • Lower Recombumin® and Cell Culture Ingredients sales23

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