Novozymes revises 2016 outlook after slow second quarter growth

By Ann Bailey | August 10, 2016

In the first half of 2016, Novozymes’ second quarter sales grew by 3 percent organically, less than the company had earlier expected.  The company attributed the slower growth to BioAg and Bioenergy divisions sales that were weaker than it had anticipated.

Bioenergy sales continued to contract, decreasing by 6 percent organically and by 7 percent in Danish Krone, compared to the first half of 2015, as ethanol margins remained low. Ethanol producers continued to optimize their production economies which resulted in further negative product mix changes, the company said. Price competition in enzymes also is tough, Novozymes said.

The conversion rate from trialing of Novozymes’ Avantec Amp and Liquozyme LpH to commercial sales are slower than expected as a result of the current environment. Ethanol companies have reduced spending on enzymes as ethanol margins remain low, said Tina Sejersgard Fano, Novozymes vice president of Agriculture and Bioenergy.

“Most producers are still looking for lower cost solutions and that drives mixed changes and increases price competition,” Sejersgard Fano said.

Novozymes estimates its production of ethanol in the first half of 2016 increased by about 3 percent, she said. Second quarter growth was more modest than in the first quarter, she noted. Novozymes’ 2016 ethanol production will be about 2 percent higher than production in 2015, Sejersgard Fano said. The company expects to launch more innovation into the U.S. ethanol market in the second half of this year.

BioAg sales, meanwhile, were lower in the first half of 2016 than in the first half of 2015 as U.S. as a result of changed production and sales pattern to its partner and reduced use of soybean seed inoculants by U.S. farmers during the past spring planting season, Novozymes said. Farmers used less inoculants because commodity prices are low and they are trying to trim input costs.

Overall, Novozymes sales grew 3 percent organically in the first half of 2016 and were flat in Danish Krone, Novozymes said. The company reduced its outlook for total 2016 organic sales growth to 2 to 4 percent, from its previous estimate of 3 to 5 percent.  The outlook for sales in Danish Krone remains unchanged.

“Our business improved in the second quarter,” said Peder Holk Nielson, Novozymes president and CEO. “We’re on track to reach our full-year profit margin, but we adjust our sales expectations due to performance in the second quarter and the uncertainty facing many of our markets.”