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Novozymes’ F&B unit delivers company’s top growth in H1 2017

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Gill Hyslop

By Gill Hyslop+

11-Aug-2017
Last updated on 11-Aug-2017 at 16:09 GMT2017-08-11T16:09:47Z

Novozymes' Food & Beverage division has posted good growth, following important advances in developing enzymes from grain milling, among others. Pic: ©iStock/younghee song
Novozymes' Food & Beverage division has posted good growth, following important advances in developing enzymes from grain milling, among others. Pic: ©iStock/younghee song

Novozymes’ Food & Beverages division clocked in the company’s highest growth, increasing 8% organically and 10% in Danish Krone (DKK) in the first half of the year compared to 1H 2016.

Peder Holk Nielsen, president & CEO of the biotechnology company, said overall, performance was better than expected in the first half of the year.

Andrew Fordyce

“We had growth in the large segments and delivered 3% organic sales growth with a strong EBIT margin, excluding one-offs,” he said.

Total sales rose 3% to €978.9m ($1.1bn), while operating profit rose 3% to €264.9m ($312m).

H1 2017 division growth

  • Food & Beverages +8%
  • Bioenergy +7%
  • Household Care +1%,
  • Technical & Pharma -4%
  • Agriculture & Feed -6%

Baking challenges in US

Andrew Fordyce, executive VP, Food & Beverages, Novozymes, told this site that F&B’s strong growth in the first half was boosted by a 10% Y-O-Y organic growth in the second quarter.

“Our solid Q2 also comes from a strong step in our baking business as we regain growth in spite of US price decreases,” he said.

“Our US baking business contracted as expected, although at a slower rate during the second quarter, which is really good news.”

Fordyce said the Copenhagen, Denmark-based company is gaining market share in the EMEA region, especially in the baking segment.

“Our EMEA baking growth has been strong enough to offset the negative impact from the announced price reductions in the North America baking business,” he said.

Lactose reduction technology

“Food and nutrition in EMEA also performed well, with our categories in infant formula and low-lactose dairy continuing to deliver growth,” he said, noting that much of the growth is due to Saphera, Novozyme’s new lactose reduction technology.

Brewing demand

“Brewing was another strong growth contributor in the EMEA region.

“We are seeing that in Africa, use of local raw materials, like sorghum, continue to gather strength and that is driving higher enzyme consumption,” he said.

He said the company’s performance in Asia Pacific continued to deliver the results it saw in the first quarter.

“We saw that lower corn pricing continues to support demand from our Chinese starch processing customers. The corn price advantage over sugar is also helping our distilling customers, which means higher enzyme off take in that segment, too.

“On the other hand, our brewing business in APAC has been a drag on results as beer volume growth remains weak in China,” he said.

Depressed demand in Latin America

Fordyce said Latin America continued to be the negative outlier in the F&B space.

“Customers continue to suffer from weak economics and depressed consumer demand.

“In this tough environment, we saw broad-based weakness in our F&B business with our brewing business contracting the most.

“[However}, our strategy of helping our customers and partners around the world to produce better foods with less input has shown good traction,” said Fordyce.

Company outlook

Food & Beverages sales growth is expected to be driven primarily by new products launched in the grain-processing industry in 2016 and 2017, reported Novozymes.

Highlights

Organic revenue growth of 3% and 3% in DKK

1H EBIT growth of 3% with a reported EBIT margin of 27.1% (2016: 27.2%)

1H EBIT margin at 28.5%, excluding reorganization costs (2016: 28%)

Q2 EBIT margin at 28.2%, excluding reorganization costs (2016: 28%)

Baking is still expected to be impacted by price reductions in the North American fresh food market, while sales are expected to perform well in other markets.

Grain: the new enzyme

Holk Nielsen said the company also made important advances in grain milling.

According to Novozymes, grain milling is a new enzyme segment where it aims to provide higher starch and protein yields in corn and wheat milling.

This will allow grain millers to improve profits by delivering more high-value products using fewer raw materials and less energy.

“We should see growth pick up in the second half of the year, but also acknowledge the risk of agriculture-related markets changing swiftly. Consequently, we maintain our full-year expectation for organic growth, while DKK expectations have been adjusted to reflect weaker currencies,” said Holk Nielsen.

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