Novozymes Q1 beats forecast, raises earnings outlook
Danish industrial enzymes producer Novozymes reported a bigger-than-expected rise in first-quarter o…Danish industrial enzymes producer Novozymes reported a bigger-than-expected rise in first-quarter operating profit, helped by a one-off positive impact from its alliance with U.S. company Monsanto and strong sales of ethanol enzymes.
The Monsanto alliance, which was formed in December and aims to develop microbial products for agriculture, boosted the operating margin by around 4 percent in the quarter to increase it above 30 percent.
Earnings before interest and tax (EBIT) rose to 923 million Danish crowns ($171 million) in the first quarter from 709 million crowns a year ago, above a forecast for 819 million crowns in a Reuters poll.
The group raised its full-year outlook and now expects operating profit to grow by 8 to 10 percent from an earlier 6 to 9 percent.
Novozymes' shares were over 4 percent higher in early trade.
The firm's sales of enzymes to the United States' bioethanol sector grew by 29 percent to 514 million crowns even though the sector's production of ethanol only grew around 11 percent.
"Our new enzyme products for the ethanol producers are doing really well," chief financial officer Benny Loft told Reuters.
He said the products, which were launched during 2013, helped ethanol producers to increase their production using the same amount of corn and that was why producers had increased use of Novozymes' products.
Analysts polled by Reuters had expected sales of bioenergy ethanol of 488 million crowns in the quarter.
"Overall, it's a very good first quarter," analyst Morten Imsgard from Sydbank said. "Novozymes demonstrates to the investors that there is good growth in several of the major business areas, especially the bioenergy division," he said.
Analyst Michael Friis Jorgensen from Alm. Brand Bank said that both the sales of ethanol enzymes and the one-off boost from the alliance with Monsanto were better than expected.
Sales of detergent enzymes, Novozymes largest business area, grew by 7 percent to 1.08 million crowns, in line with analysts' expectations, driven by a new large customer and increasing sales in emerging markets.
Detergent producers add enzymes to the washing powder to increase its performance, enable low-temperature washing and replace traditional chemicals.
Novozymes' enzymes are also used in amongst other things food, beer and animal feed. Its peers include Denmark's Chr. Hansen, Dutch group DSM and Dupont from the United States.
The expectation for total sales growth for 2014 was adjusted to 4 to 6 percent from 4 to 7 percent in Danish crowns due to a negative currency impact.
