Expectations for 2014


    Sales and EBIT in the past 5 years

    Expectations for 2014

    Financial targets:

    • Sales growth of 4-7% in DKK
    • Sales growth of 6-9% in local currency (LCY)
    • Organic sales growth of 6-9%
    • EBIT growth of 6-9%
    • EBIT margin of around 25-26%
    • Net profit growth of 6-9%
    • Investments of around DKK 900-1,100 million
    • Free cash flow before acquisitions of around DKK 3,200-3,300 million
    • ROIC of around 21%

    The 2014 expectations include the impact from the agreement with Monsanto on The BioAg Alliance (see Company announcement No. 29 of December 10, 2013).

    Sustainability targets:

    • Ensure 97.5% supplier adherence to our supplier program for commercial, quality and sustainability performance
    • Improve energy efficiency by 42% compared with 2005
    • Maintain CO2 efficiency above 50% compared with 2005
    • Improve water efficiency by 34% compared with 2005
    • Score at least 75 for “satisfaction and motivation” in our employee survey
    • Score at least 75 for “opportunities for professional and personal development” in our employee survey
    • Ensure that at least 30% of new leaders appointed are women
    • Ensure that at least 55% of new leaders appointed are of a nationality other than Danish
    • Keep the frequency of occupational accidents below 3.0 per million working hours
    • Keep employee absence below 3%
    • Keep employee turnover between 4% and 9%
    • Obtain Medal Class rating by RobecoSAM in the Sustainability Yearbook 2015
    • Enable a 56 million ton reduction in CO2 emissions through our customers' application of our products
    • Ensure that biofuels are included as a High Impact Opportunity in the U.N.-led Sustainable Energy for All initiative

    Financial expectations

    On December 10, 2013, Novozymes announced the formation of The BioAg Alliance with Monsanto. This agreement is expected to close early 2014 and will impact financial performance in 2014. This outlook builds on the assumption that the agreement is approved by the relevant authorities, hence the outlook includes the financial impact as described in Company announcement No. 29, 2013, and further explained below.

    2013 was an important year for Novozymes. Sales and earnings grew satisfactorily. Currencies provided headwinds, but in general the business continued on the right track. Looking at 2014, we expect a continuation of trends seen in 2013 with good underlying sales and EBIT growth. The outlook for 2014 is positive and offers scenarios of a stronger performance in 2014 than in 2013.

    Sales expectations

    On the sales side, Novozymes expects organic and LCY sales growth of 6-9%. Based on exchange rates at January 20, 2014, currencies will also in 2014 provide headwinds, and sales growth in DKK is expected to be 4-7%.

    Novozymes expects a positive contribution to sales growth from all five sales areas. Of these, Household Care and Bioenergy are expected to be the most significant growth contributors.

    Household Care sales are expected to be driven by a continued desire by customers to improve wash performance, enable low-temperature washing and replace chemicals. As in 2013, emerging markets are expected to contribute strongly to sales growth.

    Food & Beverages sales growth is expected to be driven by further growth in solutions for the production of healthy foods. The large application areas of baking and starch conversion are also expected to contribute to growth.

    Bioenergy sales are expected to benefit from increased penetration of Novozymes’ novel yield discovery solutions Avantec®, Spirizyme® Achieve and Olexa®. The 2014 sales outlook is based on the expectation that U.S. fuel ethanol production in 2014 will be around 13.5 billion gallons, slightly higher than in 2013.

    Sales to the Technical & Pharma industries are expected to grow, primarily due to an expected increase in pharma sales.  

    The BioAg Alliance 

    Sales to the Agriculture & Feed industries are expected to be impacted by The BioAg Alliance. The alliance will not have any impact on organic sales growth in BioAg, but Agriculture & Feed sales in DKK and LCY are expected to be negatively impacted by up to 7 percentage points (up to 1% of total sales). The positive contribution from TJ Technologies will offset about half of this impact, resulting in a net negative impact from acquisitions and divestments on Agriculture & Feed sales in DKK and LCY of 3-4 percentage points.

    In The BioAg Alliance, Novozymes’ BioAg sales recognition will change to reflect the equal value share with Monsanto. Agriculture & Feed sales are expected to be negatively impacted by up to 7 percentage points in 2014, as DKK 150-200 million of the total deferred income arising from the up-front payment received from Monsanto is expected to be recognized as sales in 2014. The total deferred income is around DKK 1,500 million and is expected to be allocated to sales over a period of 5-10 years starting in 2014.

    The net impact on Novozymes’ gross margin in 2014 of Novozymes and Monsanto splitting revenue and of the deferred income is an expected negative impact of around 1 percentage point.

    Total sales and distribution costs as a percentage of sales for Novozymes are expected to decrease by around 1 percentage point given the transfer of marketing responsibility to Monsanto. This roughly evens out the negative impact from the lower gross margin.

    As part of the BioAg Alliance, Novozymes will increase its spending on R&D, but keeps its target of an EBIT margin of more than 24%.

    In 2014, Novozymes expects to realize a one-time gain from the transfer of predominantly intangible assets to Monsanto, as the transaction value of the assets exceeds the book value. The positive contribution to the EBIT margin in 2014 net of transaction costs, transition costs and increased R&D spend in 2014 is 0.5-1 percentage point.

    Organically, Agriculture & Feed sales are expected to show a similar pattern to 2013. BioAg sales, now through The BioAg Alliance, are expected to deliver good underlying growth in the Americas and strong growth in new markets. Feed sales are expected to deliver only modest growth due to the competitive situation in phytases.

    Earnings expectations

    EBIT growth is expected to be 6-9%. Higher sales, continued productivity improvements and the one-time impact from The BioAg Alliance are expected to have a positive impact on EBIT, whereas currencies are expected to provide yet another year of headwinds. 

    The EBIT margin is expected to be 25-26%, including the one-time positive impact of 0.5-1 percentage point from The BioAg Alliance.

    The effective tax rate is expected at around 23%.

    Net profit is expected to grow by 6-9%.

    Around 75% of expected USD/DKK exposure for 2014 has been hedged at 5.79 DKK/USD. In 2013, the full USD/DKK exposure was hedged at 5.63.

    Investments and cash flow expectations

    Net investments are expected to be DKK 900-1,100 million. Besides maintenance CAPEX, most investments target operational efficiency improvements. Novozymes also expects R&D-related CAPEX to support The BioAg Alliance.

    Free cash flow before acquisitions is expected at DKK 3,200-3,300 million. The free cash flow includes the positive impact from The BioAg Alliance agreement, which is expected to contribute DKK 1,350-1,400 million, slightly lower than what was communicated in December 2013 due to timing of CAPEX.

    Return on invested capital is expected at around 21%, including the positive impact from The BioAg Alliance of around 1.5 percentage points.

    Exchange rates at year-end

    The outlook is based on exchange rates for the company’s key currencies remaining at the closing rates on January 20, 2014, for the full year.

    Average exchange rate 2013 746 562 262 91
    Closing rate January 20, 2014 746 550 236 91
    Estimated average exchange rate 2014 746 550 236 91
    Change in estimated exchange rate 2014 compared with average exchange rate 2013 0% -2% -10% 0%


    Other things being equal, a 5% movement in the USD is expected to have an annual impact on EBIT of DKK 70-90 million.



    Novozymes' biosolutions bridge the gap between dwindling natural resources, rising costs and growing human needs, by enabling our customers to produce more, higher-quality products with less energy and fewer raw materials.

    A biobased economy is achievable, and our innovations will help the world get there.

    Sustainability expectations

    Like the long-term targets, the sustainability targets for 2014 reflect Novozymes’ consideration of the entire business value chain and its key stakeholders. Therefore, the targets are designed to address the following categories: suppliers, Novozymes, customers and society. While the entire value chain is considered, the majority of the targets focus on internal efforts.

    Sustainable supply chain

    As a stepping stone toward our long-term target of 100% adherence to our supplier program for commercial, quality and sustainability performance by 2015, the target for 2014 is to ensure that 97.5% of all suppliers with a 12-month rolling spend above DKK 1 million are assessed.


    Within Novozymes, our expectations relate to resource utilization, workplace development and sustainability leadership:

    Utilization of resources and climate change impact

    We have chosen 2005 as the baseline year for our resource efficiency targets. The 2014 targets for improving resource efficiency are 42% for energy, 34% for water and above 50% for CO2. The CO2 target is based on emissions from Novozymes’ own production sites and from energy suppliers.

    “Novozymes’ sustainability targets for 2014 are designed to address suppliers, Novozymes, customers and society.”

    Workplace development

    Novozymes endeavors to cultivate a workforce of satisfied and motivated employees. Our efforts are addressed through targets for employee satisfaction and employee development. In 2014, the target is a score of at least 75 in our employee survey for both “satisfaction and motivation” and “opportunities for professional and personal development.”

    To ensure a continued focus on diversity without compromising our policy of hiring and promoting employees based on merit, we will maintain both the targets for diversity introduced in 2013. Therefore, our target for 2014 is for a minimum of 30% of newly appointed leaders to be female and at least 55% to be of a nationality other than Danish.

    In addition to these targets, we aim to keep the frequency of occupational accidents below 3.0 per million working hours and the rate of absence from work below 3% in 2014. The target for employee turnover is set at a range that reflects the present job market and Novozymes’ aims with regard to attraction and retention of employees. We see it as preferable to have a turnover between 4% and 9% in 2014.

    Sustainability leadership

    Novozymes prioritizes benchmarking its sustainability efforts against peers, as shown in the 2014 target of earning a Medal Class rating from RobecoSAM in the Sustainability Yearbook 2015. Although we have chosen Dow Jones Sustainability Indices and RobecoSAM’s rating as benchmarks, we also participate in a number of other ratings that are just as valuable.


    We aim to help our customers make better use of the world’s resources and reduce their products’ environmental footprint across their life cycle. Therefore, we have set a target of enabling CO2 emission reductions of 56 million tons through our customers’ application of our products in 2014.


    To strengthen the pull of sustainable solutions in society, Novozymes aims to further the success of the U.N.-led Sustainable Energy for All (SE4All) initiative. In 2013, SE4All included Sustainable Bioenergy as a focus area and gave Novozymes the mandate to begin forming a so-called High Impact Opportunity. As substantial progress was made with SE4All in 2013, Novozymes has decided to accelerate its ambitions for the initiative. As a result, the target initially set for 2015 of championing the inclusion of a biofuels initiative as a High Impact Opportunity has been brought forward as one of the corporate targets for 2014. This will require Novozymes to take a leading role in leveraging a multi-stakeholder coalition that currently includes Beta Renewables and Bloomberg New Energy Finance.

    Illustration-Sustainability acrossthevaluechain.png


    Our focus on sustainability across the value chain impacts our interaction with suppliers, customers and society at large, helping improve livelihoods, the environment and the way we do business.