2015 was a year when diversity in Novozymes’ end markets helped to deliver revenue growth in spite of a difficult year in the Bioenergy business. Strong performance in Agriculture & Feed and good traction within Food & Beverages made up for unexpected weakness in Bioenergy and low growth in Household Care. For 2016, low commodity prices, including for oil, are expected to continue to put pressure on sales growth, particularly impacting the Bioenergy business. From a Group perspective, Novozymes expects sales growth across markets – with the exception of Bioenergy, where sales are expected to decline. This leads to 2016 expectations of moderate organic sales growth of 3-5% for the Group. Sales growth in DKK is also expected to be 3-5%, assuming that exchange rates for the company’s key currencies remain at the closing rates on January 18 for the rest of 2016.
High comparatives for Bioenergy and Agriculture & Feed in Q1 2016 make for expectations of uneven growth over the course of 2016. Low organic sales growth is expected in Q1, whereas organic sales growth in the remaining nine months is expected to increase, bringing annual organic sales growth into the guided range.
Household Care sales growth is expected to improve, compared with the 1% organic sales growth realized in 2015. Sales growth is expected to be driven by higher enzyme inclusion in detergents across tiers and markets to enhance wash performance and sustainability. However, sales growth is expected to be tempered by continued slower growth in emerging markets and lower sales to one particular customer at the beginning of 2016 compared with 2015. ###FACTBOX VIDEO###
Food & Beverages sales growth is expected to be driven by a continuation of the positive trends seen in baking in 2015, supported by growth in the starch business driven by increased penetration of recently launched innovation. Healthy concepts are also expected to contribute to sales growth.
Bioenergy sales are expected to contract organically in 2016, as the challenging market environment in the U.S. is expected to continue. Novozymes’ sales growth is expected to be supported by innovation launched in the fall of 2015, as well as novel solutions to be launched in 2016. However, innovation is not expected to fully counter the negative annualization effect from a lower market share and an unfavorable product and price mix.
Agriculture & Feed sales are expected to deliver solid sales growth driven by a continuation of the trends seen in 2015, leading to positive sales developments within both BioAg and animal feed. In 2016, Novozymes expects to recognize DKK ~210 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 flow impact.
###FACT:FOCUS###Technical & Pharma sales are expected to grow, driven by an expected increase in sales to the technical industries.
The effective tax rate is expected to be ~22%.
The expectation for net profit growth is 8-10%, driven by growth in EBIT and an expectation of lower net financial costs compared with 2015.
Net investments are expected to be DKK 1,100-1,200 million. Besides maintenance, most CAPEX targets manufacturing capacity expansions and expansions in R&D, notably the new innovation campus in Lyngby, Denmark.
Free cash flow before acquisitions is expected to be DKK 2,400-2,600 million.
Return on invested capital including goodwill is expected at 25-26%.
From a currency perspective, 2016 EBIT is most exposed to fluctuations in the USD and EUR.
Other things being equal, a 5% movement in USD/DKK is expected to have an annual impact on EBIT of DKK 90-110 million.
Other things being equal, a 5% movement in EUR/DKK is expected to have an annual impact on EBIT of DKK 150-200 million.
The sustainability expectations for 2016 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 and People.
Outlook for 2016
|Sales growth, organic||4%||3-5%|
|Sales growth, DKK||12%||3-5%|
|Net profit growth
|Net investments excl. acquisitions, DKKm||1,015||1,100-1,200|
|Free cash flow before acquisitions, DKKm
|ROIC (including goodwill)