Novozymes expects to deliver organic sales growthSales growth from existing business, excluding sales from acquiring new businesses, measured in local currency. of 2-5%. All five business areas are expected to contribute to organic sales growth in 2017.
As the majority of the sales for BioAg is expected toward the end of the year, as in 2016, and since Q1 2016 is a relatively high comparison, organic sales growth for Novozymes in the first quarter of 2017 is expected to be roughly flat.
Household Care sales growth is expected to be higher in emerging markets. Growth in 2017 will also be supported by new product launches. Toward the end of 2017, the first product launch from the Hygiene platform is expected, but no material sales contribution from this is expected in 2017.
Food & Beverages sales growth is expected to be driven primarily by new product launches in the starchLong chains of sugar molecules. Starch is the main component of cereal grains such as corn, wheat and rice. Enzymes are used as a catalyst in the production of starch, speeding up the production process and boosting yields. industry made in 2016 and 2017. Growth is expected to be higher in emerging markets. Baking is expected to be negatively impacted by price reductions as a result of more competition in the US baking market.
Bioenergy sales growth is expected to be driven by new product launches. The North American market is expected to be dynamic in 2017. US ethanol production in 2017 is expected to be on par with 2016. Global sales to the emerging biomassOrganic material, predominantly plants or plant residues. conversionA biological method for turning agricultural residues and waste into high-quality fuels, electricity or renewable chemicals. industry are expected to contribute to sales growth.
Agriculture & Feed sales growth is expected to be driven mainly by animal feed. Headwinds in agriculture, particularly low farmer income, are expected to create a somewhat challenging environment in BioAg. In 2017, Novozymes expects to recognize around DKK 200 million of the deferred BioAg income as sales. Deferred income does not impact the calculation of organic sales growth rates; it impacts realized sales growth in DKK and has no cash flowThe difference between the available cash at the beginning and the end of an accounting period. impact.
Technical & Pharma sales are expected to be roughly on par with 2016.
EBITEarnings before interest and tax. growth is expected to be 3-6%, on par with the expected sales growth in DKK. Novozymes expects to maintain the current high level of profitability with an EBIT marginEarnings before interest and tax as a percentage of revenue. of around 28% in 2017.
The effective tax rateIncome tax expense as a percentage of profit before tax. is expected to be around 21%.
Net profit is expected to grow by 2-5%, on par with the expected organic sales growth. Net financial costs are expected to be higher than in 2016, given the expected USD/DKK exchange rate.
Net investments are expected to be DKK 1,700-1,900 million. Maintenance investments and manufacturing capacity expansions will drive investments, along with expansions in R&D, notably the new innovation campus in Denmark.
Free cash flowCash flow from operating activities minus cash flow from investing activities and changes in net working capital. before acquisitions is expected to be DKK 2,000-2,200 million.
Return on invested capital including goodwill is expected at 24-25%.
Currency exposure
In 2017, EBIT will be most exposed to currency fluctuations in the USD and EUR.
Other things being equal, a +5% movement in USD/DKK is expected to have an annual positive impact on EBIT of DKK 100-120 million, and vice versa.
Other things being equal, a +5% movement in EUR/DKK is expected to have an annual positive impact on EBIT of DKK 150-200 million, and vice versa.
Sustainability outlook
The sustainability expectations for 2017 reflect our ambition to continuously improve our business operations across our value chain – making our operations more cost-effective, environmentally friendly and socially responsible.
We have categorized our sustainability outlook into Environment, Other and People.
Benny D. Loft, CFO & Executive Vice President presents Novozymes’ 2016 financial results and outlook for 2017.
| 2016 realized | 2017 outlook | ||
| Sales growth, organic | 2% | 2-5% | |
| Sales growth, DKK | 1% | 3-6% | |
| EBIT growth | 2% | 3-6% | |
| EBIT margin | 279% | ~28% | |
| Net profit growth | 8% | 2-5% | |
| Net investments excl. acquisitions, DKKbn | 1.2 | 1.7-1.9 | |
| Free cash flow before acquisitions, DKKbn | 2.7 | 2.0-2.2 | |
| ROIC (including goodwill) | 251% | 24-25% | |
| Avg. USD/DKK | 673 | 696 |
Financial calendar
| Feb. 22, 2017 | Annual Shareholders' Meeting 2017 | |
| Apr. 26, 2017 | Interim report for the first 3 months of 2017 | |
| Aug. 11, 2017 | Interim report for the first half of 2017 | |
| Oct. 25, 2017 | Interim report for the first 9 months of 2017 | |
| Jan. 18, 2018 | Group financial statement for 2017 |
| Environment | 2016 realized | 2017 target | 2020 target | |
| Estimated reduction in CO2 emissions through our customers’ application of our products, in million tons | 69
| ≥ 72
| 100
| |
| Water efficiency* | 6% | 4% | 25% | |
| Energy efficiency* | 10% | 7% | 30% | |
| CO2 intensity* | 16% | 9% | 25% | |
| Renewable energy | 24% | 24% | 30% | |
| Other | ||||
| Customer satisfaction | 45 | ≥ 35 | n/a | |
| Medal class rating from RobecoSAM** | Silver | Medal | Gold |
| People | ||||
| Occupational accidents*** | 2.2 | ≤ 2.0 | ≤ 1.0 | |
| Employee absence | 20% | ≤ 2.0% | ≤ 2.0% | |
| Directors or higher who are women | ≥ 25% | ≥ 30% |
* Efficiency/intensity is measured by dividing net consumption by gross profit. The improvement is calculated as the relative improvement in efficiency/intensity compared with the base year 2014. ** The distribution of medals will be announced in RobecoSAM's Sustainability Yearbook on Jan. 19, 2017. We expect silver. *** Per million working hours. |
