Novonesis B Unsp/Adr

Good morning, everyone, and welcome to this Novozymes conference call. Thank you all for calling in. My name is Tobias Björklund. I'm the head of investor relations. I'm joined here today by the full management team, as well as the rest of the investor relations team. Our CEO, Esther Bagé, will begin today's call by reviewing our performance in the first quarter, followed by CFO Lars Green, who will cover the financials. The presentation should take around 15 minutes. And after that, we will be happy to take your questions. Some of the matters we will discuss in this conference call are forward-looking, and I would like to remind you that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. With that, I will now hand you over to our CEO, Esther Bache. Esther, please.

Thank you, Tobias. It's a pleasure to be here speaking to you all. I started my role as CEO of Novozymes on the 1st of February, and I embrace this responsibility with a lot of pride. In Novozymes, we translate some of the world's most pressing needs into opportunities. And we answer them with science. When I look at Novozymes, I see a healthy company. I see a company with skilled people, an incredible innovation pipeline, and very strong financials. I also see a company that holds a great potential for further growth. And to unleash that potential, we simply have to do what we are designed, what we are set for, solving global needs with biology. And while doing so, we also commit to deliver higher sales, earnings, and value creation. I am a Spanish national by birth and a chemical engineer by training. I came to Novozymes with 25 years of professional experience from Dao, where I worked in a broad range of businesses, functions, and across different regions. I have had the privilege of leading strong teams, making good businesses even better, and advancing from challenging situations. I know for a fact that change rarely comes easy. It takes hard work. It takes dedication. It takes a strong purpose. It takes good leadership. And it takes clear direction. That is why I and the executive leadership team, together with the board of directors, we are determined to deliver. I look forward to leading Novozymes on its exciting journey, and I can assure you my full commitment towards delivering on our strategy, better business with biology. Now, please, if you could turn into slide number two for review of our first quarter performance. As you already know, we delivered a very strong first quarter with 10% organic growth coming from all main businesses and geographies. I am impressed with how the organisation has been able to fully meet customer specific demands and even in these very difficult and turbulent times. However, as we communicated on April 7th, the ongoing COVID pandemic has forced us to suspend the 2020 outlook. And this is still the case. The first quarter EBIT margin came in at 28.9%, which is a significant improvement on the last year. The good development was driven by efficiency gains and higher operational leverage. The cash flow for the quarter was also strong, with 825 million DKK, which is roughly twice the amount we reported on the first quarter of 2019. From an innovation perspective, we launched two new products in addition to making a new freshness solutions available to the market. And before we review the business segment, let's look at the geographical sales performance. So please, if you could turn into slide number three. In the first quarter, organic sales grew by a strong 13% in emerging markets and by a solid 8% in developed markets. The strong performance in emerging markets was mainly driven by bioenergy, household and care, and food and beverages. Sales in the developed market was led by household and care and food and beverages. And the growth on these two segments was partially supported by a higher underlying COVID-19-related consumption and consumer and customer stockpiling. Now, please turn into slide four for Households Uncared. In household and care, we had a strong start of the year with 11% organic cells growth in the first quarter. Our growth good underlying momentum continued into 2020, driven in part by our fluorescence platform, where we made a new enzyme for liquid and unit dose detergents available. This new solution is now on the shelves in many European countries. And the sales on the first quarter also benefit from the COVID-19 related demand, especially in Europe and in North America, as we saw our customers there stockpiling critical materials and where the consumers also loaded their pantries and did more laundry and more dishwashing at home. In emerging markets, we delivered strong growth in Middle East, in Africa and in Latin America, where the sales in Asia-Pacific were hampered by declining sales in China as consumers experienced COVID-19 restrictions. So looking ahead, the COVID-19 related stockpiling effects will likely be offset when the pandemic eventually subsides. But we also expect sales to benefit from continued market penetration with existing enzyme technologies and our freshness solutions. The full year sales indication for household and care remains volatile, but roughly intact. And that's based on our current insight and the assumption that both our own and our customers' logistics will continue to function relatively normally. If you could please turn into slide five. Our organic sales in food and beverage grew 11% in the first quarter. The strong performance was driven by growth in baking, in beverages and grains, while sales in food and nutrition declined slightly. The sales were particularly strong in baking, with growth from both well-established fresh-keeping and flour correction technologies, as well as from consumer health-oriented offerings such as acrylamide reduction for baked and fried goods. In the first quarter, we launched a new member of the Safira product range, Safira Fiber. Safira Fiber is a solution that converts lactose in milk into soluble dietary fiber. And this new product offers multiple consumer benefits in milk, including sweetness without added sugar. It also brings increased dietary fiber content for better digestion and reduced lactose for consumers with lactose intolerance. As a fiber grain structure, it will support the dairies to provide healthier foods to the consumers. The sales in the first quarter were affected by COVID-19 related demand. Although it's difficult to assess its impact, it's likely that stockpiling and the shift to eating at home that lead to extra demand to some of our solutions, for example, in baking. And this trend will assume to be offset when the situation eventually settles. the few year sales indication for food and beverages remains volatile, but roughly intact based on our current insight and assumption that both our own and our customers logistics will continue to function relatively normal. We could please turn into a slide six. Our bioenergy business posted a strong performance with 11% organic sales growth. The overall performance was as expected, with growth coming from the continued capacity expansion of corn-based ethanol production in Brazil, the increased penetration of our yeast technology and growing US production volumes. The first quarter sales were not significantly impacted by the southern drop of U.S. ethanol production as it only started in the last week of March. But looking at the full year, however, the social distancing and the people staying at home, that will have an impact for gasoline demand and ethanol, leading to significant drops of production volumes. Bioenergy is the segment where we see the most uncertainty for the full year. And it was also the main reason why we had to suspend the outlook. If we could please turn into slide seven for reviewing agricultural unfit. In agricultural and feed, we grew 8% organically in the first quarter, led by a strong growth in bioag and accompanied by a solid performance in feed. The growth in bioag was driven by strong inoculant sales in North America, but also enabled by the relatively easy comes. The business was transitioned very well into the new partnership model with Bayer. We have also made progress with other BioAg partners, including Syngenta, with whom we just launched Taegro, both in Europe and in Latin America. Taegro is a unique biological fungicide used to combat fungal diseases. And this technology helps farmers to protect their fruit and vegetable crops against frequently occurring diseases. And today are currently mainly combated with the use of chemical pesticides. Animal feed also benefit from inventory moves across the value chain and continue the commercialization of Valencius. Balencius is an exciting technology for improved gut and health in poultry, which together with our bioinoculants will continue to drive sales in 2020 and beyond. We continue to highlight that the full sales in agricultural and feed are subject to market uncertainty related to global farm economics, trade concerns and potential COVID-19 disruptions. And finally, let me add a few comments on technical and pharma. Organic sales in technical and pharma declined 10% in the first quarter. And this decrease was mainly caused by the timing in pharma as well as the declining sales we saw in textile due to COVID-19 disruptions in China. And with that, I will hand over to Lars for the financials and for the wrap-up. Up to you, Lars.

Thank you, Esther. Please turn to slide 8 for a review of our financial performance in the first quarter. Sales in the first quarter grew 10% organically and 9% in reported Danish kronor. The strong performance was led by double-digit growth in household care, food and beverages, and bioenergy, accompanied by solid growth in agriculture and feed, while sales in technical and pharma declined. The gross margin for the first quarter ended at 57.1%. This was a 160 basis point improvement on the first quarter of 2019 that was mainly due to productivity gains, lower input costs, and higher operational leverage resulting from the strong sales performance. The strong top line performance also had a positive impact on the EBIT margin, which ended at 28.9% for the first quarter. This was a 320 basis point improvement on the EBIT margin compared to the first quarter of 2019. In addition to the higher operational leverage driving a lower OPEX to sales ratio, the EBIT margin also benefited from the improved gross margin. The return on invested capital, including goodwill, ended at 21.3% after the first quarter of 2020. This was 300 basis points higher than in the first quarter of 2019. The improvement was due to the higher net operating profit after tax, which more than offset the increase in average invested capital. Net investments in the first quarter of 2020 amounted to 138 million Danish kroner. This was on par with the first quarter of 2019. The free cash flow before acquisitions was 825 million Danish kroner in the first quarter of 2020. This was 405 million Danish kroner higher than the free cash flow of 420 million in the first quarter of 2019. The strong development between the periods was mainly driven by higher sales and margin expansion. Even with a very good first quarter realized in the books, uncertainty persists for the full year. Our outlook for 2020 remains suspended until we get a better understanding of the implications of the current situation. As we communicated on April 7, the share buyback program totaling up to 1.5 billion Danish kroner will continue as planned and the company's dividend policy and its capital structure policy are unchanged. Please turn to slide number nine. Let me summarize the messages here today. We are operating in turbulent times with limited visibility. Despite this, it's very encouraging to see that we are able to capture growth opportunities as they arise. Novozymes is geared to deliver even in difficult times when supply chains are under pressure and access to consumers becomes more difficult. With a strong start to the year in sales, earnings, and cash flows, we are showcasing our company's strengths and what we can achieve together. That said, there is still a lot of uncertainty, especially with respect to the U.S. ethanol market and stockpiling effects. Thus, our outlook remains suspended. Looking beyond 2020, we are seeing good progress in the implementation of our strategy, Better Business with Biology, and we are working hard to drive sustainable and profitable growth. For obvious reasons, we will not be traveling in the coming days, but we will instead host a series of conference calls. We are looking forward to meeting you in that virtual setting. That concludes today's presentation, and we are now ready to take your questions. Operator, please begin.

Thank you very much. So ladies and gentlemen, if you have a question, please press star and then two on your phone keypad now in order to enter the queue. And then after I announce you, just ask that question. The first question is from the line of Soren Samse of SEB. Please go ahead.

Yes. Good morning. My question is regarding household care. If you could talk a little bit about how you see the rest of the year progressing. I was not completely sure how you saw it from what you wrote in your report. Also, if you can say something about what you have seen in April and how quickly you would see from your customers, the detergent producers, when they react, how quickly can you normally see that reaction in your numbers? And then for bioethanol, just what you see currently here in April is quite different from Q1, I guess, and also what you see for the year in that division. Thank you.

Thank you. I will let Hannes and Tina go deeper on the results for the other drivers, as we're seeing answering your question in more detail for individual segments. But overall, on the net effect, we have seen in Q1 the positive effect and the translation into sales of the increased demand. for the change of consumer habits from both stockpiling in detergents, but also the intrinsic increased demand of detergents with a higher quality or also the increased number of dishwashes or detergent laundry at home. So the combination of those aspects, that was an increased accelerated sales that we captured in Q1. The areas that we saw in bioethanol, we saw that forecasted decline in Q1 area, but not necessarily reflected in our books because it was a trend for projections that we would see from the demand to come as we are forecasting now. So the overall net stockpiling effect and increased consumer trends for both detergents and consumer changing dynamics with also the forecasted tendance of bioethanol linked to the lower gasoline demand that's continued to prevail as long as the gasoline is not increasing. And with that, I leave it to you, Anders and Tina to go in deeper.

So, three questions, and thanks for those, Søren. First, on the rest of the year, I think it's fair to say that there are a lot of uncertainties as we look into the year. We've had a very, very strong start to the year. I think Esther alluded to two of the factors. One relates to stockpiling, the other one relates to intrinsic demand. We believe that the majority of what we have seen of the positive momentum above what we had of momentum in the back half of 2019 It relates to stockpiling, but there is also a demand component, especially in North America and in Europe. I think some of the uncertainties that we see are, of course, the split between stockpiling and demand, but we don't have full visibility to how that will play out the rest of the year. And then I think the emerging markets in general is a place to watch out for in terms of their supply chains and the stability in the economies that can concern me a little bit. I think we will have more stability in North America and in Europe for a year. In relation to April, we have seen continued good momentum in April. But if you follow the, which I guess relates to your last question, if you follow the cash register data that comes out of Nielsen, you'll also see that it has been going up and down quite dramatically. And over the last couple of weeks, we've seen demand softening quite a bit. And even in some geographies, it's gone down to negative. And that means that that will hit us back to more normalized levels as we get into Q2. When you talk about customers and the effect on us, I think this is a very special case, and I would not use that as a proxy for the future, but we have seen sort of a delay in our business of around a couple of weeks with these very, very dramatic jumps that we've seen in the consumer offtakes. That's a very unusual situation, and I think in all of the years I've been in this business, I've never seen week-by-week variations as we've seen over the last six to eight weeks. So again, I would not use it as a proxy, but that's the development we've seen over the last couple of months. I hope that answers the question.

And then over to the bioenergy part. So already when we started the year, we talked about that Q1 would have a wider range compared to company average, and that has indeed been the case. As you have seen, we had a very strong Q1 driven, especially by capacity getting online, as well as some of our innovations, especially in the e-space, as Esther already has alluded to. And it was also supported by, if you look at the IEA data, some increased production volumes. However, as you also are so right, Søren, when you look at the year-to-date numbers, they are in EIA, and if you follow the weekly numbers, They are in significant negative territories, which is the reason or one of the reasons, one of the key reasons for why it is we suspend our guidance. We also see that in our numbers. However, I think it's important to remember that when miles gets back up, when it is we get margins, ethanol producer margins into more positive territory, then NovoSams is very well positioned, given our broad product offerings as well as the closeness we have to the customers in order to take advantage of when we get back up and get sales back on track. But you are right. What we see in April is very different from what we saw in Q1.

Our next question is over to the line of Lawrence Alexander at Jefferies. Please go ahead, Lawrence. Your line is now open.

Good morning. Hi, Esther. I guess a quick question on how do you think about Novozyme's operating rhythm compared to what you're used to in terms of how fast the system is responding? And secondly, can you give a sense for with bioenergy, Is the mapping from the EIA data going to be linear, or do you have some offsets that will reduce the volatility in your segments?

The way I see Novozymes, it's been a little bit more than two months since I'm in this incredible company and I'm amazed on the strength of the company. It's well fit and positioned for the long-term growth and also our commitment in long-term shareholder creation. If anything you can say on the rhythm of the pulse of the corporation, I think that Q1 results clearly speak for that. 10% growth and nothing else than the sum of collective efforts across many areas. It was, yes, a good momentum from Q4. It was also the effective implementation of our strategy. It was moving ahead with implementation of of commercialization of innovation, but it was also swiftly and effectively reacting to unpredicted change on demand. So we first absorbed the volatility in Asia that we saw the decline, and we reacted to that resiliently. We have kept all our plans running despite the headwinds. And then we translated the increased demand that we saw at the year end, at the quarter end, from stockpiling and change and in food and in detergents into sales. So that pretty much to me speaks about the good rhythm, a good pulse, a good resilience. And yes, it's a journey. We have done good progress on the prioritization of our innovation pipeline, ensuring we're putting the right focus, good momentum, and you have my commitment to continue on that direction. On your question on bioenergy, I will let Tina go deeper on that one. What I can tell you is that we are not immune what is happening in North America. 50%, up to 50% drop demand in some of the states. That's a big number. But at the same time, we're broader than North America. And we're broader than enzymes. So we have a global portfolio. We have a strong pipeline and efforts on penetration of yeast. We were capitalizing in Q1 and we're going to continue on the momentum of the growth in Asia. And those are areas that we're backing up. And Tina's team is fully committed on mitigating the downsides that we're seeing in North America.

Yeah, so elaborating on what Esther said, we are influenced by the decline in miles driven as well as the low margin environment, which they are in the U.S. But the way biggest impact is the decline in miles driven. When gasoline is not consumed in the U.S., there's no need for ethanol either in that miles which are not driven. So you should not... expect, you should not expect us to be immune. But as I also alluded to, we are still seeing PNQ1 growth coming from especially Latin America, but also other emerging markets and then our innovations in the yeast platform. And we are well positioned when miles come back up. Hope that answers the question.

Thank you. Yes, thank you. Okay, the next question is from the line of Gunter Zachman at Bernstein. Please go ahead. Your line is open.

Hi, good morning. Thanks for taking my questions, too, if I may. First of all, you mentioned in the press release a negative mix on gross margin. Can you just describe what's driving that negative mix? And then the second one for Anders, can you just talk us through what you're planning for the rest of the year for the European rollout of the Freshness platform and the exclusivity with Procter, how long that will continue, if I can sneak in a follow-up on that when you're planning to launch the product in North America. Thank you.

Thank you, Gunther. Anders, if you could answer the health and hygiene related and then I'll pass it afterwards to Lars on the margin.

Yes, and thanks for the question, Gunther. The European rollout is moving according to plan. We are now, as we have also said, coming into the liquid segment and the unit dose segment, and we are sort of progressing throughout most of Europe, and several countries have been rolled on with the technology. Essentially, just as we had planned a couple of years ago, When we talk about exclusivity, yes, we have exclusivity, and the good thing about that is that as long as our partner commits to the volumes that we have agreed, we will remain having that exclusivity. It looks very much as if that's the case. That does not mean that we will not have freshness technology for the broad market, but it's not the same technology. We have all along planned that that will be launched sometime in 2021. That's still our expectation for the broad market. For North America, we don't give specific guidance. Of course, we have plans together with our development partner, but we don't give specific guidance on timing simply because of the agreement that we've made with our development partner. I hope that answers the questions.

And when it comes to the gross margin, then I think, first of all, I'd like to reiterate that we actually had 160 basis points expansion of the gross margin. And then we sort of tried to explain in our note how is that composed. Compared to history, we actually have a less negative impact from product mix and price in this first quarter. So actually a bit better than what we have seen in the past. And then I remind you also that in the first quarter of last year, we had deferred income in our sales, a little bit of that. That did not carry any production cost. So that also is a small negative on the gross margin when you compare it quarter to quarter. So underlying improvement is actually stronger than the 160 basis points that we have as the reported number.

That's really helpful. Thank you both.

Okay. The next question is from the line of Michael Novot at Nordea Markets. Please go ahead, Michael. Your line is open.

Thank you very much. Just two bioenergy questions first. One is to the emerging markets and Brazil. We've seen Brazil going out saying that they're cutting growth forecast by approximately 15%. So how are you planning for this? And is that something that you also see sort of continuing into quarters beyond the second and third quarter? And then secondly, on U.S. bioenergy, we saw ADM... cutting around one-third of their capacity, a bit more than one-third of their capacity, and furloughing employees for next four months. So it's also just to get a feeling on how you are sort of planning for this, because that's into August that they are furloughing employees. So just to get a sense of how long you see that this is pressure in the ethanol market, of course, driven by fewer miles, but just in your planning processes, how you see sort of the stretch of this going on.

Thank you, Michael. I will let Tina follow up and give you further details. In general, we saw healthy growth in Q1 on bioenergy, and that was the good momentum in North America, the new capacity adds in Latin America and Brazil, and also the penetration of our yeast technology. It is true that the industry is facing headwinds across many different areas. Being probably North America, the region was exposed. Before we go deeper in bioenergy, I only want to remind that diversity of our portfolio and that's the beauty that NovoScience brings in on how we're playing globally and also the diversification of our niche on how to overcome what is a fantastic market over the cycle and that we have a strength in other areas for the next of the year.

Yep. Thanks, Michael. So first on the emerging market, and especially on the Latin American setup, as I know you know, most of the ethanol in Latin America is coming from sugarcane. So you'll have to think about the profitability of sugarcane ethanol versus corn-based ethanol, and corn-based ethanol is more profitable there. However, that doesn't mean we are immune to the decline in miles driven ethanol. in that segment either. I think that what you should look at is a healthy growth in Q1 in emerging markets and especially in Latin America. And then think about that in general, the volatility we have in the bioenergy markets, but especially in the US, but also in other geographies, is one of the key reasons for why it is we're suspending guidance. So it is difficult for me to predict on how it's gonna end. And more specifically on ADM and the US setup and them cutting their capacity into August. I think you'll have to look at that we need to get the miles back up, but when we have got the miles back up, we also have seen, you've heard me talk a number of times about increased inventories in the bioenergy space, and that has not become smaller in this period where, in fact, inventories have got up higher. So there's also some inventory to be burned off. So that means that there are uncertainty. The way we operate with it is that we have some different scenarios which we are trying to navigate. And in all cases, we are preparing in order to be ready to be there, work with our customers. Even in these times, we have our guys out working closely with customers in order to be able to to deliver the products and the solutions which they need for those who operate, but also when they are ready to ramp back up. So it is one of the key reasons why we have suspended our guidance, so I unfortunately cannot give you more insight into how long and how deep is this crisis going to be.

Okay. Thank you very much.

Okay, before going on to the next question, which is the line of Silky Cook from JP Morgan, If anyone has a question, again, could you please press star and then two on your phone keypad now? And Zilko, we're over to you. Please go ahead.

Thanks very much. Good morning. My nutritionist has said going into the quarter before the COVID-19 pandemic, it looked like expectations were maybe for mid-single-digit growth across the various businesses. And so, as best as you can estimate, do you think the benefit from the pandemic and pre-buying was maybe about half of the organic growth in the first quarter, or do you think it was less than that? My second question has to do with the trends in detergent enzymes. We all could do look at the Nielsen data, and it doesn't look like that. Many things continued. Personal care items were in demand in April as well. But detergent enzymes specifically, what were the detergent, anti-detergent sales dropped off. And so I was wondering whether you can discuss what happened to your detergent enzyme sales in April, whether they in fact were positive or up slightly, or whether you think your April results were up slightly. And lastly, I have a question on your cost structure. And that is, given the volatility in demand, what do you think the levers are that you can pull or what are the things that you can do? And do you have a general idea over short or over longer term what the right level of SG&A expense and R&D expense should be for NovaZones. Thanks very much.

Thank you. That was a broad question, and I'll give it to Lars to go in detail. In an overall scope, we are here for the long run. We are a long-term growth company, and we're consistently and continually investing for the long term. Having said that, we're very conscious on the situation that we're living today, and we're also aligning to the reality. And we're taking precise measurements to ensure we maximize the use of our cash, and we align to the situation that we're living today, but not at the expenses of compromises for the long term. There is a future after coronavirus, and we're continually investing for that future because our solutions are going to be part of that future. Then, to your question on what is the split of the growth between organic growth and stockpiling, maybe I will take that from another angle, and that yes, we capture both the good momentum that we saw for Q4, but also The increase of or the change of dynamics from consumers and then the stockpiling effect. But what is important is that we did capture an unprojected or unpredicted demand. And that speaks for the resilience of the organization, the strength of our supply chain, the reliability of our operations. And yes, the good relationship of our sellers with the customers that were there to translate that unpredicted opportunity into sales. Lars, after you.

Yeah, thanks Esther. So just adding a little more flavor to it, then as we also said in our call early April, we came into 2020 with good momentum from second half of last year, but we also did see our sales accelerate through the first quarter, and therefore I think it is fair to assume that part of the extra or accelerating sales in the latter half of the quarter has been related to stronger demand in some areas, but also a level of stockpiling. And the reason we suspended guidance is that we really cannot say exactly how much is what, and also for how long this situation will last. Maybe just one more comment to it. The first quarter of last year in 2019 was a relatively weak quarter and so therefore the comparison was also relatively easy but we are somewhat ahead of our plans in the first quarter so you should see the performance and the 10 percent in that light and on the cost structure we did in the third quarter of last year implement a a restructuring of some of our functions, and we did release a certain level of resources that we are planning as part of our strategy to reinvest to support our pipeline and support our commercial activities to accelerate our growth. So we are committed to do that, although in these circumstances it is a bit difficult to execute completely on the plan. But we are trying to then be smart about how we do it and, for instance, accelerate some of our digital investments that allows us to interact with our customers in a smarter way. So that's how we go about it. But we are committed for the long term to implement the investments as we planned in our strategy.

Do you want an answer on the question on April on household care? Specifically, as I also said before, we see a solid momentum continue. My analysis of the situation is that the disruptions we've seen in the supply chain driven by very, very strong consumer demand in March and parts of April is now being replenished in the entire supply chain, and that's the effects that we see continuing into April. Again, as I said before, we see around a two-week delay in this period where when disruptions happen, we see that translate into our numbers in a couple of weeks' time.

Does that answer your question?

Yeah, I'll get back into queue. Thank you.

Thank you. In that case, I believe the next question is from the line of Jonas Hansen at Danske Bank. Please go ahead, Jonas. Your line is open.

Thank you and good morning all. A couple of questions from my side. First of all, could you talk about how the lower oil price is affecting your business, besides in bioenergy, of course, in general terms, both positives and negatives, and then specifically within household care where you're also talking about a continued penetration story of enzymes into detergents, but how is that affected by the lower oil price? And then secondly, on bioenergy then and yeast, how is the sales in yeast being affected by the sharp decline in ethanol production? I guess it must be much more tough to sell and push the penetration story here. And then as a follow-up, how much of revenue in bioenergy is coming from yeast today?

Thank you, Jonas. In the oil price relationship to our sales or the dependence, I would call it more like an indirect effect. So if you would see oil as... indication of the consumer demand, because typically, historically, they have been related, then there is a very strong correlation. I mean, there is in some areas that we have a high exposure and like a higher linkage to oil prices on the excess demand of bioethanol beyond the 10%. which is required by regulatory, and there is also some elasticity on replacement of enzymes from other alternatives, oil-based. But in general, the demand of our products, it depends more of consumer needs and demand and acquisition power than oil prices itself. It's the value and the differentiation that we bring in and the willingness to pay for those attributes. And historically, typically, that it has been related to oil prices. So there is a correlation, but maybe oil price, it's the effect or the symptom, not necessarily the driver or the area that triggers the demand of our products. With that, I will also pass it to Anders and to Tina, if you could maybe further level out on the specific trends that we see in detergent and also the implementation of yeast.

Yeah, so thanks for the question. Short term, there's little effect on developments in oil price on the household care business. It's not triggered sort of a on weekly developments. Longer term, as you can also see if you make sort of a correlation analysis, there is a certain correlation, but it's not a sort of 100% correlation. I think the way that I look at this is that the best for neuroscience is long-term sustained high oil prices with sort of stability in price. That is what creates the least disruption in the chain. And it's also where you sort of have the longest motivation for our customers to make the reformulations. So the opposite to that is, of course, a long-term low oil price. And I think we have to accept that that makes some of our reformulations positioning more challenging and more difficult.

And on the bioenergy and the yeast side, so you are right that it's more difficult for us to push the continued penetration of yeast simply given that we cannot travel out to customers and run the truck and support them in doing that. We are using a number of digital means, and that is helping us part of the way, but it is slowing down the general penetrations also because yeast sales, you could say when you have implemented the yeast, also follows the production of ethanol. So from that perspective, it's true that it is, in general, with new solutions, it is more difficult to trial them in these circumstances. In terms of how much yeast is out of our bioenergy sales, it is getting to, I would say, a significant part. I think where you should look at it is mostly that it's growing very nicely, given we have got a number of new plants online, and therefore when you compare to Q1 for last year, it is a key growth driver. From competitive reasons, I would like to refrain from giving you the exact number on how much yeast is, but it is getting a significant part, but enzymes are still the vast majority of what we sell in bioenergy.

Okay, fair enough. Thank you very much for your answers.

The next question is from the line of Sam Perry at Credit Suisse. Please go ahead, Sam. Your line is now open.

Hi. You talked about the pull-forward impact of COVID in household care and food and bed. Is there any aspect of that within the feed business, within ag and feed?

Thanks. Thank you. And I'm going to pass this last question to Tina to further elaborate on that one.

Yeah. And on the ag and feed side, we have seen... I would say less of an influence directly. We do see some moves in the supply chain, and part of that will be, you could say, normal supply chain moves. Part of it may be COVID-19 related. It is also, if you, and that is not COVID-19 related, but think back of our January announcement, we were also calling out that we expected more volatility in the ag and feed segment and that has not become less after the outbreak of the COVID-19. So some moves in the supply chain we do see, especially on the feed side, but also some on ag, but mostly on feed. Great.

Thank you for your time and for the dialogue, and I'm looking forward to continuing the conversations with many of you and for the Q session soon. Thank you.

This now concludes today's call. Thank you all very much for attending. You can now disconnect.