Novozymes reports reduced bioenergy sales for Q3

By Erin Voegele | October 23, 2019

Novozymes released third quarter financial results on Oct. 23, reporting weaker than expected performance. The company cited a difficult U.S. ethanol market and weak global agricultural markets as reasons for the downturn.

“As announced on Oct. 9, performance for the first nine months of 2019 was weaker than expected,” said Peder Holk Nielsen, president and CEO of Novozymes. “And while Q3 grew organically, we continued to see a difficult US ethanol market, weak global agricultural markets and a starch business under pressure leading us to adjust the outlook. We are implementing our “Better business with biology” strategy and make good progress to secure we can deliver on the plan for the 2020-2022 period.”

Sales for the company’s bioenergy segment declined 4 percent organically for the first nine months of the year. The decline for the third quarter alone was 5 percent organically.

Novozymes said average U.S. ethanol production volumes declined further in the third quarter as pressure on the industry remained strong. “Deteriorating conditions in the industry caused by persistently lower producer margins and high inventory levels have led to several plant shutdowns and lower capacity utilization,” Novozymes said in a statement. “The production volumes of Novozymes’ customers are down by more than the industry average, as reported by [the U.S. Energy Information Administration].”

According to Novozymes, its recently launched yeast products have been well received by customers and have already gained a solid position in the industry. The company also noted sales outside the U.S. are also growing, driven primarily by capacity expansion in Brazil as the country moves towards higher mandated ethanol volumes.

Moving forward, sales for the bioenergy segment are expected to remain challenged as difficult conditions in the U.S. ethanol industry overshadow positive developments in yeast and strong momentum in Brazil. Organic sales for bioenergy are expected at a mid-single-digit decline for the full year.

Novozymes also operates business segments focused on household care, food and beverages, agriculture and feed, and technical and pharma. Overall, the company reported a 2 percent decline in organic sales growth.

The third quarter financial report also referenced an Oct. 14 announcement by Novozymes that Nielson will step down from his post once a new CEO is named. That is currently expected to happen in early 2020. Nielson has been employed by Novozymes for 35 years, including 25 years as a member of the executive team.