Novozymes continues food enzyme market growth
impressive growth in a tight marketplace.
Earnings grew by 11 per cent while sales increased 8 per cent. "We are very satisfied with the results for 2006," said Novozymes president Steen Riisgaard.
"Sales developed as expected and, although the price trend for raw materials and energy worked against us, our productivity improvements enabled us to achieve higher earnings than originally expected."
The increases reflect a continuation of the firm's impressive performance in a sector that has seen only modest growth, and has had to contend with rising costs. Growth in both operating profit and net profit in 2005 was 11 per cent.
This upward trend has continued. Sales of food enzymes rose by just below eight per cent in both DKK and local currencies in 2006 compared with 2005, primarily due to high growth rates in sales of enzymes to the baking industry.
The new distribution set-up in North America and increasing penetration of baking enzymes in general had a positive impact on sales. Sales of enzymes for beverage alcohol and processed foods also grew healthily, mainly due to increased demand in Asia.
Sales rose by 6 per cent in DKK in the fourth quarter of 2006 compared with the fourth quarter of 2005. Measured in local currencies, growth was 9 per cent. The development was primarily driven by growth in sales of enzymes to the juice, wine and baking industries.
Looking to the future, the firm aims to achieve sales of DKK 10 billion in 2010, a target that will require organic growth of eight to nine per cent within the enzyme and microorganisms business, as well as further acquisitions.
"Assuming exchange rates based on the spot rates on 24 January 2007, growth in sales is expected to be seven to nine per cent in 2007, equivalent to growth of eight to ten per cent in local currencies," said Riisgaard.
"Operating profit is expected to grow by five to seven per cent negatively affected by exchange rate movements. Net profit for the year is expected to increase by five to seven per cent, and free cash flow before acquisitions is expected to be in the region of DKK 800-900 million."
A report from Business Communications Company estimated that by 2009 the European enzyme market would reach €1.83 billion. The market for bakery enzymes came in at €32.1 million in 2003, expected to climb to €52.3 million by 2010.
Novozymes continues to dominate the enzyme market with about a 50 to 60 per cent share. US biotech firm Genencor, which now belongs to Danisco after acquisition clearance last year, falls into second place with an approximate 30 per cent slice.