Danish enzymes company Novozymes continues on a high this year, despite a slight fall in food enzyme sales for the quarter, resulting in an overall boost to 13 per cent for its forecast for net profit increase for the full year.
Operating profit rose by 7 per cent to DK 458 million (€61.6m), of which DK 448 million was generated by enzymes and DK 10 million by micro-organisms. The operating profit margin was 16.5 per cent for enzymes and 7.7 per cent for micro-organisms. The latter was negatively affected by costs relating to two company acquisitions in the half-year and is therefore unchanged compared to the first half of 2002, notes the company.
Profit before and after taxation was DK 502 million and DK 361 million respectively, equivalent to increases of 33 per cent and 34 per cent respectively compared to the first half of 2002.
Sales of food enzymes were 3 per cent lower than last year, which the company notes were significantly reduced by lower exchange rates, especially the US dollar.
Sales to the baking industry reportedly grew comfortably, while sales to the brewing industry were negatively affected by lower production - especially in China - and delayed sales due to the late wine harvest.
The sales growth for the second quarter of 2003, compared to the second quarter of 2002, was negatively affected by the extraordinarily high sales in 2002 and the highly negative effect of exchange rate movements, stated Novozymes.
Meanwhile, sales of feed enzymes grew by 19 per cent. The total market for phytase products is continuing to expand, which the company said was boosted by the alliance with Roche Vitamins. On 23 July, DSM's acquisition of Roche Vitamins was approved by the EU Commission and Novozymes expects the strategic alliance in feed enzymes with Roche to continue with DSM as a new partner, assuming that DSM obtains the final approval from the US Federal Trade Commission.
Sales of technical enzymes rose by 3 per cent, significantly reduced by lower exchange rates. Sales of other technical enzymes rose by 12 per cent in spite of the negative effect of the exchange rates.
The company's Oils & Fats division already has several products on the market and is set to focus its resources on increasing market penetration, including sales of enzymes that can remove or reduce the content of trans fatty acids in oils.
Meanwhile, in Processed Foods, last year Novozymes entered a strategic alliance with Chr. Hansen to develop new products for the dairy industry, and the launch of the first main products from the alliance is expected in 2005.
The outlook for the full year remains highly positive with net profit expected to increase by 13 per cent - compared to the previous outlook of 10 per cent - due to favourable developments in net financials, while the growth in operating profit is still expected to be 3-5 per cent.
Through the first half of 2003, the main sales currencies fell in value compared to the Danish krone. Since 97 per cent of Novozymes' sales are international, the company notes that the falling exchange rates are therefore expected to have a significantly negative effect on the financial results for 2003.
The outlook for free cash flow before acquisitions has nevertheless also been adjusted upwards to DK 800-900 million compared to DK 750-850 million previously.