Novozymes half-year profit jumps 6%

Denmark-based biotechnology company Novozymes has reported half year pre-tax tax profit up 6% to DKK 1,906 million (€256m), compared to DKK 1,792 a year earlier, helped by strong sales growth.

The firm’s net profit was DKK 1,496 million, an increase of 8% from DKK 1,389 million in the first half of 2015, primarily driven by the gain from net finance.

In the first half of 2016, sales grew by 3% organically and were flat in DKK compared with the first half of 2015.

Earnings before interest and taxes (EBIT) was on par with the first half of 2015, Novozymes reported. The EBIT margin was 27.2%, also on par with the first half of 2015. Adjusting for the restructuring costs in Q1, the EBIT margin would have expanded to above 28% and EBIT growth to around 4% compared with the first half of 2015.

In its statement, Novozymes said its outlook for full-year organic sales growth is adjusted to 2-4%, down from previously 3-5%/ The adjustment reflects uncertainty in most of the industries in which Novozymes operates.

‘Price competition in enzymes is tough’

Sales to the bioenergy industry decreased by 6% organically and by 7% in DKK compared with the first half of 2015. US ethanol production in the first half of 2016 is estimated to have been up by around 3% compared with the first half of 2015.

The margins for ethanol producers remained low in the first half of 2016. Novozymes’ customers continued to focus on low-cost solutions, resulting in further negative product mix changes, and price competition in enzymes is tough.

The recently launched products Avantec Amp and Liquozyme LpH contributed positively to the product mix, but not enough to offset the overall negative impacts from product mix and pricing.

Bioenergy sales

Bioenergy sales are now expected to contract organically more than previously expected in 2016, as the competitive market for enzymes is expected to continue, driving prices down and offering lower in-use cost for ethanol producers. US ethanol production in 2016 is expected to increase by around 2% compared with 2015. Novozymes expects to launch more innovation in the U.S. conventional ethanol market in the second half of the year.

This article was written by Liz Gyekye, editor of Bioenergy Insight and Biofuels International