Novonesis B Unsp/Adr

Thank you, operator, and welcome, everyone. So my name is, as announced, Tobias Björklund, and I'm the head of investor relations here at NovoScience. At this call, our CEO, Esther Bagé, and our CFO, Lars Green, will review our performance for the first nine months of 2021, as well as the outlook for the full year. Also present at this call are Tina Feiner, EVP Agriculture and Industrial Buy Solutions, Amy Byrick, EVP Strategy and Business Transformation, Anders Lund, EVP Consumer Buy Solutions, and Klaus Fuglsang. CSO, EVP of Research and Development. The entire call will last for about 45 minutes, including time for questions at the end. Before we begin, I would like to remind you all that the information presented during the call is unaudited and that management may make forward-looking statements. These statements are based on current expectations and beliefs, and they involve risks and uncertainties that could cause actual results to differ materially from those described in any forward-looking statement. By that, I'll now hand you over to our CEO, Esther Bache. Esther, please.

Thank you. Thank you, Tobias, and thank you all for calling in. Could you please turn to slide number two? First of all, I would like to express my appreciation to those who attended our Virtual Capital Market Day last month. I hope you felt the excitement from all of us on the team when we shared our renewed strategy, Unlocking Growth, powered by biotech. It's the start of a journey where we will prioritize strong work. secure the delivery of our strategic direction, both short and longer term, and where we invest to secure a longer period of sustained growth. The ambition being to double our reported sales by 2030, sustainably. We're setting at a good pace for 2021, building on a solid foundation for the years to come. Now, let's look at the highlights of the first nine months of the year. We delivered a solid performance with 6% organic sales growth in the first nine months and 7% in the third quarter. The good sales performance is also reflected in strong earnings, return on invested capital and free cash flow, not only year-to-date but also in the third quarter alone. In three of our five business areas, we delivered a strong double-digit organic sales growth. Our well-diversified end-market exposure across more than 30 industries is showing its strength in a volatile environment. In particular, food, beverages and human health, as well as grain and tech processing, did very well. Bioenergy is recovering from last year's COVID-19 impact and also posted double-digit growth for the nine months. Agricultural, animal health and nutrition performed as expected, with strong growth in the third quarter And while house and care grew by 3% in the third quarter, this was a bit softer than we originally projected. With the first nine months of the year now in the books, we are narrowing upwards the 2021 outlook range for organic sales growth from previously 4% to 6% to now 5% to 6%. The updated sales outlook remains subject to some destocking in the fourth quarter, especially in food, beverages, and human health. We're also lifting the outlook for EBIT margin from previously around 26% to now around 27%. This also leads to an increased outlook for free class flow of 2.8 to 3.2 billion and ROIC, including Goodwill, of 20 to 21%. When it comes to innovation, we've launched eight products so far this year, including four here in the third quarter. One of the third quarter launches is the exciting broad market launch of our freshness technology for laundry called Pristina, while the other three are new sustainable solutions for agricultural. We also signed an exciting long-term collaboration agreement with Anivia Plant Nutrients to develop solutions that reduce the need for synthetic fertilizers in commercial agricultural. With that, let's now review each of the five business areas in more detail. And let's start with household care. Could you please turn to slide number three? Thank you. The performance in household care was flat in the first nine months and fell slightly short of our expectations, against a tough competitor from the last year. The nine-month performance was supported by increased enzymatic penetration in emerging markets and the freshness platform. Developed markets were softer than expected, mainly due to a more challenging European market in the third quarter. The third quarter weakness in Europe was due to a decline in detergent volumes and private label customer difficulties, which we expect to continue into the fourth quarter. On the innovation front, as we mentioned, we launched Pristina, our first broad market freshness solution. Pristina addressed some of the largest unsolved consumer challenges, setting a new global standard for detergent performance. We expect additional launches over the coming years, enabling further penetration into additional formats and markets. Looking at the full year, we will continue to focus on penetration in emerging markets. The freshness platform will continue to grow and we are excited about the long-term potential of Pristina. The performance in Europe was softer than expected in the third quarter and we also expect this to continue in the fourth quarter. In summary, the full year performance in household care is now indicated around flat which follows a 5% percentage comparator from last year. Please turn into slide four. Thank you. In food, beverages, and human health, we saw a strong and better than expected performance with 15% organic sales growth in the first nine months. The strong performance was broad-based with also areas growing in the double-digit range, including solid traction in human health. Growth was a result of a high consumer demand and increased penetration driven by innovation, especially within the health-focused categories. If we look at the third quarter in isolation, performance was once again strong and above expectation, with 16% organic sales growth year on year. The strong and broad-based momentum continued and was further amplified by raw material inflation among our customers. And in contrast to our expectations, the third quarter performance continued to be supported by high customer stock levels and high consumer demand. Looking at the full year performance, the strong underlying growth in food is mainly driven by innovation, increased penetration of enzymatic solutions in emerging markets, and our consumer health-focused solutions. In addition, our sales benefit from elevated ingredient prices. Our beverages business is expected to grow, mainly driven by a gradual recovery in brewing following last year, which was negatively affected by COVID-19 restrictions. Human health is estimated to grow organically into double digits, driven by innovation and cross-selling. Following a better-than-expected first nine months of the year, we are raising the full-year growth indication for food, beverages, and human health. We now estimate the business to grow organically by low double digits, including a fourth quarter assumed to be impacted by customer stocking and softer consumer demand. Could you please turn into slide number five? Organic sales in bioenergy grew 12% in the first nine months, while the performance was enabled by our strong sales organization and close interaction with our customers. It came on top of soft baseline including COVID-19 implications the last year. Outside of North America, Latin America performed very well, driven by the expansion of starch-based ethanol production. And looking at the third year performance, bioenergy grew 5% organically, following a relatively normalized year-on-year baseline. And growth was driven by a starch-based ethanol expansion in Latin America and solid performance for biodiesel in Asia Pacific. For the full year, We expect sales in bioenergy to grow high single digits, driven by the gradual recovery in U.S. ethanol production, continued capacity expansion of corn-based ethanol production in Latin America, biodiesel expansion, and market penetration supported by innovation. Please turn to slide number six. Thank you. The strong nine-month performance in grain and tech processing was broad-based and ahead of expectations. with a 12% organic sales growth. Both grain, which accounts for roughly 70% of the business, and tech grew double digits in the first nine months. The performance in grain was driven by starch and vegetable oil processing and supported by increased demand for Novozyne's yield-enhancing solutions that help offset the very high commodity prices. The double-digit growth in tech was led by a recovery in global textile volumes following last year's COVID-19 disruption. In the third quarter, sales grew 4% organically on top of a 9% comparator from last year. This was better than expected and primarily due to continued high customer inventory levels. For the full year, sales in grain and tech processing are indicated to grow at high single-digits. Grain will be driven by innovation and market penetration, while the recovery in the global textile industry will be the main growth driver in tech. Please turn to slide number seven. Agricultural, animal health and nutrition sales declined 3% organically in the first nine months. The decline was in line with expectations and mainly due to negative base effects from the roughly 60 million Danish kroni one-off related to the former bio-ag set-up Q2 last year and a difficult comparator following the stockpiling in animal nutrition in the first half of last year. Performance was strong in the third quarter and, as expected, with both agricultural and animal health and nutrition growing in the double-digit range. However, the 16% year-on-year organic growth was based on a soft comparator from last year. It was also a busy quarter. on the innovation side with three product launches for the U.S. agricultural market and a new collaboration with Anubia Plant Nutrients. For the full year, we assume low single-digit organic sales growth in animal health and nutrition overall. And with that, I will hand over to Lars for a review on the financials. Lars, please.

Thank you, Esther. Please turn to slide number eight. Our performance for the first nine months of the year was strong and ahead of our expectations for sales, earnings and cash flows. Sales grew 6% organically and by 5% in reported Danish kroner and included a 3% contribution from M&A and about a 4% headwind from currencies. The reported gross margin was strong at 58.2%, 200 basis points above last year's margins. The third quarter gross margin was also strong at 57.9% and above expectations. Production efficiencies from stronger sales and productivity improvements were the main drivers of the margin improvement in both the first nine months and the third quarter. Higher raw material costs had a slight negative impact on the gross margins for the first nine months and a bit more of a negative impact in the third quarter. The EBIT margin was also strong at 28.8%. It was mainly driven by gross margin improvement and came despite higher operating costs, currency headwinds and acquisitions. The 29.1% margin in the third quarter was also strong and was based on the same drivers and explanations as for the nine months, except that currencies provided a slight tailwind compared to the third quarter of last year. The first quarter one-offs and the effect from the two recent human health acquisitions had roughly a net neutral impact on the reported EBIT margin for the first nine months. The EBIT margin for the third quarter was slightly higher than the reported 29.1% when adjusted for the headwinds from microbiome lapse acquisition and the third quarter year-on-year tailwinds from currencies. Net investments were on par with last year, both in the nine months and in the third quarter. Free cash flow excluding acquisitions was strong at 2.7 billion yen in the first nine months and 900 million in the third quarter. The performance was driven by the higher net profit and an improved earnings quality. The return on invested capital, including goodwill, was 22.1% for the first nine months of 2021 and 21.4% for the third quarter. This was 2.9 and 2.5 percentage points higher respectively than in the same periods of 2020. Both the nine months and the third quarter improvements were driven by higher net operating profit after tax, which more than offset an increase in average invested capital following the two human health acquisitions. Please turn to slide nine for the updated 2021 outlook. Although some of our end markets remain volatile in the wake of the pandemic, and we continue to experience elevated customer inventory levels, we are narrowing our outlook range for organic sales growth to five to 6%. Primarily food, beverages and human health, and grain and tech processing have performed better than expected and are now estimated at low double-digit growth and high single-digit growth, respectively. Bioenergy is indicated to end the year at the upper end of the previous range with high single-digit growth. The household care business softened somewhat in the third quarter relative to our expectation, which is assumed to carry over into the fourth quarter and is now expected to end the year around flat. The indication for agriculture, animal health and nutrition is maintained at low single-digit growth. Sales in reported Danish kroner, including currency and M&A, are expected to be roughly on par with the organic sales growth. The raised EBIT margin outlook of around 27% includes a negative impact mainly from acquisitions and a slight headwind from currencies. The supportive margin contributions from sales growth and productivity improvements are expected to be partly offset by higher raw material and freight costs, as well as continued strategic reinvestments and increased commercial activities. The outlook for the return on invested capital, including goodwill, is raised to 20-21% and includes negative effects mainly from acquisitions. The free cash flow before acquisitions is raised and now expected at 2.8-3.2 billion Danish kroner. supported by higher sales and an improved operating cash flow. With this, I'll hand back to Esther for a wrap-up before we open up for questions. Esther, please.