Novonesis B Unsp/Adr

Welcome to the Novozymes conference call regarding the interim report for the first nine months of 2023. Throughout, all participants will be in listen mode only, and afterwards, there will be a question and answer session. Today, I am pleased to leave the word to Tobias Cornelius Bocklund, Head of Investor Relations. Please begin your meeting.

Thank you, Operator, and welcome everyone to Novozymes conference call for the first nine months of 2023. My name is, as mentioned, Tobias Björklund, and I'm heading up Investor Relations here at Novozymes. At this call, our CEO, Esther Barget, and our CFO, Lars Green, will review our performance and key events of the first nine months of the year, as well as the outlook for the full year. Also attending today's 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, CFO and EVP of Research and Development. The entire call will take about 60 minutes, including time for questions at the end. As always, I would like to remind you 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 involve risks and uncertainties that could cause actual results to differ materially from those described in any forward-looking statement. With that introduction, I now leave the word to Esther Berger, our CEO. Esther, please.

Thank you. Thank you, Tobias. And welcome, everyone. If you could please turn into slide number three. Overall, the first nine months were much in line with expectations, and we delivered organic sales growth of 5%. Reported volumes declined by 1%, while underlying volumes were roughly flat, and pricing was positive by roughly 6%. In the third quarter, organic sales growth stood at 8%, with pricing at around 5% and volumes growing by roughly 3%. Pricing for both the first nine months and the third quarter continued to be roughly similar across business areas, although slightly less positive in household care. The overall growth development was very much in line with expectations from the beginning of the year, with an expected stronger second half of the year, which is confirmed so far through the results we are presenting today. The well-diversified portfolio of solutions and broad market exposure provides a stability in current volatile end markets. The strong 8% organic sales growth in the third quarter was driven by bioenergy, food, beverages and human health. as well as household care. Agricultural, animal health, and nutrition also performed well, whereas grain and tech processing was more challenged. The ongoing stocking in the food-related part of the business is gradually leveling off, which is part of the explanation for the third quarter's 7% organic sales growth in food, beverages, and human health. Also, human health grew nicely in the quarter. Innovation, new product launches and market penetration were other factors driving our performance across all business areas. Next, we maintain a solid 4 to 6 organic sales growth outlook for the year. We are fully on track to deliver our full year gross margin that will be roughly flat compared to 2022, as price increases and productivity improvements are offsetting the effect from higher input costs. With the third quarter gross margin being on par with the same quarter last year, we expect an expansion in the fourth quarter. We delivered a strong 26.6% EBIT margin before special items in the third quarter and 25.5% after the first nine months. The performance was in line with expectations and well aligned with our fully EBIT margin outlook before special items between 25% to 26%. Net, we are in a good place when it comes to earnings and returns, and we maintain the full-year outlook for both EBIT margin before special items at 25% to 26%, and ROIC including goodwill before special items at 16% to 17%. The free cash flow is strong at 1.1 billion kroner in the third quarter, with improving working capital as key reason for the development, much in line with expectations. On October 17th, we paid an interim dividend to Honor Novozyme shareholders ahead of the closing of the combination with Christian Hansen. Besides delivering on our business targets, we are also focused on promoting biotechnology as part of the answer of many of the world's issues. At the United Nations General Assembly in September, we were able to speak and listen to companies, organizations, and policy makers about what biotechnology has to offer in a world of increasingly scarce resources and as an enabler of future job creation. decarbonization, planetary health, and human health continue to be high on the world's agenda. And given Novozyme's toolbox, we are part of the solution for a better future. As a final introductionary remark, we are progressing very well on closing the combination with Christian Hansen. Timing? It's still for Q4 2023 or Q1 2024. And with approvals now received in all relevant countries relating to the margin agreement, except for South Korea and the EU, we are in a good