Biotech-based world leader Biotech-based world leader in enzymes & microorganisms Novozymes Novozymes Financial results 1H 2006 Conference call, August 8 4:30 pm DK time Unlocking the magic of nature
Conference call August 8, 2006 Conference call August 8, 2006 DK time 4:30 pm UK time 3:30 pm US east coast time 10:30 am Dial-in numbers Access code “ Novozymes” +45 7026 5040 DK +44 20 7769 6432 UK +1 877 204 0753 US Today’s call is also being broadcasted live via the Internet at www.novozymes.com/investors, tab Conference call. Members of Executive Management will present the financial results, which will be followed by a Q&A session. In total, today’s call is expected to last up to an hour. Following the call, a replay will be available at the Internet site above. 2 Unlocking the magic of nature
Key messages in 1H 2006 Key messages in 1H 2006 Key financials YTD 1H • Healthy development in sales in line 2006 with expectations S ales growth, DKK 8 % • EBIT growth from continuous S ales growth, local 5 % productivity gains and solid free currency cash flow continued EBIT growth 10 % • Four products launched in 2Q 2006 • Joint development agreement with China Resources Alcohol Corporation (CRAC) within biomass-to-fuel ethanol • Acquisition of UK-based Delta Biotechnology Ltd supports the platform of ingredients for the biopharmaceutical industry • Execution of share capital reduction of 6.6% or DKK 46 million (nominal) • Overall strategy retained - business development activities initiated within certain areas • Free cash flow 2006 expectations up DKK 100 million 3 Unlocking the magic of nature
1H 2006 sales development 1H 2006 sales development 1,000 800 ales in DKK million 600 997 996 990 799 791 400 752 S 200 344 340 184 156 0 Technical - Technical - Food Feed Microorganisms detergent others 1H 2005 1H 2006 4 Unlocking the magic of nature
Detergent enzymes - business update Detergent enzymes - business update • 1H 2006 sales up 1% in DKK and on S ales in DKK million par in local currency • S hort-term impact from higher ingredient costs has stabilised 997 990 • Continued growth in sales in emerging markets • FY 2006 sales expectations retained at slightly positive, both in DKK and 1H 2005 1H 2006 local currency S ALES CAGR ’00–’05 of -3% 2,000 2,404 2,140 2,050 2,052 2,038 2,014 1,000 0 2000 2001 2002 2003 2004 2005 5 Unlocking the magic of nature
Other technical enzymes - business update Other technical enzymes - business update • S ales up 21% in DKK and 17% in S ales in DKK million local currency • Fuel ethanol enzymes remain the main growth contributor 966 • Continued good growth in enzymes 799 for starch conversion due to increased demand for sweeteners • Increased penetration of enzymes for textile mills in Asia 1H 2005 1H 2006 • FY 2006 sales growth expected to 1,800 S ALES CAGR ’00–’05 of 9% be 15-20% in both DKK and local currency 1,720 900 1,515 1,441 1,350 1,237 1,144 0 2000 2001 2002 2003 2004 2005 6 Unlocking the magic of nature
Food enzymes - business update Food enzymes - business update • S ales up 5% in DKK and 2% in local S ales in DKK million currency • Good growth within baking from newly implemented US -distribution 791 752 set up • Increasing demand for enzymes to beverage alcohol and processed foods 1H 2005 1H 2006 • Wine and juice below expectations S ales CAGR ’99-’05 of 5% 1,500 • S lower penetration in the dairy 1,000 industry 1,482 1,491 1,439 1,413 1,387 1,187 500 • FY 2006 sales growth expected to be mid single-digit both in DKK and 0 in local currency 2000 2001 2002 2003 2004 2005 7 Unlocking the magic of nature
Feed enzymes - business update Feed enzymes - business update • S ales up 1% in DKK and down by 2% in S ales in DKK million local currency • Fluctuations in alliance partner’s inventory continue to affect quarterly 340 344 growth figures • Increased sales in all markets except from Europe 1H 2005 1H 2006 • FY 2006 sales growth is expected to be S ales CAGR ’99-’05 of 21% 750 mid single-digit in DKK and low single- digit in local currency 500 748 698 608 545 250 418 298 0 2000 2001 2002 2003 2004 2005 8 Unlocking the magic of nature
Microorganisms - business update Microorganisms - business update S ales in DKK million • S ales up 18% in DKK and 14% in local currency • Main growth driver continues to be the institutional & household 184 156 cleaning industry • Continued expansion outside main US -market supporting geographical 1H 2005 1H 2006 diversification Growth through acquisitions ’01-’03 400 • FY 2006 sales expected to grow above long-term expectations in 300 both DKK and local currency 200 308 298 261 205 100 70 0 2001 2002 2003 2004 2005 9 Unlocking the magic of nature
S ales development - geographical split S ales development - geographical split Total +8% +5% DKK LCY Europe, MEA -1% -1% North America DKK LCY +19% +13% 1,372 DKK LCY 41% 1,012 Asia Pacific 31% +13% +9% 217 681 DKK LCY 7% 21% Latin America +7% +2% DKK LCY 10 LCY = Local Currency Unlocking the magic of nature
R&D news R&D news • Confident outlook for the project pipeline; • 6 - 8 new product launches expected during 2006 • Product launches in Q2: Liquanase , enzyme for the detergent industry • Cerezyme , enzyme for the brewing industry • • BPX-1, enzyme for the fuel ethanol industry • Novo BioClean, microorganism for the institutional & household cleaning industry 11 Unlocking the magic of nature
S trong pipeline to support sales growth S trong pipeline to support sales growth ~13% of sales invested in R&D, ~800 people Technical enzymes Food enzymes Feed enzymes Microorganisms Biopolymer and Pharma proteins Detergent: Improved dough Improved phosphorus Institutional & New, improved cleaning products, non-bread release, vegetable Household cleaning: Hyaluronic acid and and fabric care products. protein, aquaculture. Odour reduction, oil & potentially other properties, New concepts for grease degradation. biopolymers. new concepts, improved brewing. dish washing products. Food specialties – dairy Plant care: Biofungicides, Antimicrobial peptides. products, oils & fats. growth enhancement, Other technical: expand application of New technology for New technologies and existing products. antibody production. improved processes for starch and fuel ethanol, Waste treatment: Cell cultures substrates. Bioprocesses. Ammonia and nitrite control, colour removal, New industries: hydrocarbon Digestion disorders. degradation. Approx. 5% Up to 10% of Approx. 85% of R&D resources of R&D resources R&D resources 12 Unlocking the magic of nature
Income statement and cash flow Income statement and cash flow DKK million 1H 2006 1H 2005 % change Sales 3,282 3,037 8 Gross profit 1,795 1,641 9 EBITDA 871 837 4 Depreciation (214) (240) (11) EBIT 657 597 10 EBIT margin % 20.0 19.7 - Net financials (66) (8) NM Tax (148) (148) - Net profit 443 441 - EPS (diluted) 6.72 6.49 4 Cash Flow from operations 784 605 30 Investments before acquisitions (184) (125) (47) Free cash flow before acquisitions 600 480 25 Acquisitions (66) - - 13 Unlocking the magic of nature
Currency risk management Currency risk management • Favourable currency rates support (DKK) USD J PY ’00 CNY growth in sales and EBIT, while net Average 2005 6.00 5.45 73,25 financials are affected negatively, S pot April 25, 2006 6.00 5.25 74,91 depending on hedging activities Spot August 7, 2006 5.81 5.05 72,86 • Novozymes' policy is to hedge Est. average for 2006* 5.95 5.15 74,30 existing net assets in foreign currency, and expected future net Est. average 2006 -1% -5% 1% compared with avg. exposure from the company's exch. rate 2005 operations • 2006 net cash flow in US D and JPY Impact to operating profit from a 5% change in the is hedged and included in financial value of (annualised): outlook: US D DKK 30-40 million - approx. DKK 5.86/US D - approx. DKK 5.57/JPY ‘00 JPY DKK 5-15 million * Estimated average calculated as an average of YTD + Spot August 7th 2006 14 Unlocking the magic of nature
Expectations for 2006 Expectations for 2006 Provided that current exchange rates remain unchanged for the rest of the year, the expectations for 2006 are: S ales growth 7-9% Operating profit growth 7-9% Operating margin Around 19% Net financials DKK minus ~100 million Net profit growth 5-7% Cash flow before acquisitions DKK 850-950 million Return on invested capital after tax 18-19% 15 Unlocking the magic of nature
Business development update Business development update • Overall strategy retained - including new initiatives to enhance business opportunities • Increasing investments in enzymes for the fuel ethanol industry • S trategic initiative for long-term growth, launched in 2005, progresses as planned • Platform of ingredients for the pharmaceutical industry 16 Unlocking the magic of nature
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