INTERVIEW: Novozymes CEO: Sees Limited Impact From Euro Crisis

Source: By Aaron Back, Wall Street Journal • Posted: Tuesday, June 19, 2012

LOS CABOS, Mexico–Novozymes A/S (NZYM-B.KO), a Danish producer of industrial enzymes used in everything from detergents to biofuels, sees limited impact on its business from the euro-zone crisis barring a “catastrophe” such as a Greek exit from the euro zone.

“The outlook we have is that our sales for this year will grow by between 4% and 8%, and only a catastrophe in Europe will shake that number,” Novozymes President and Chief Executive Steen Riisgaard told Dow Jones Newswires in an interview.

“Apparently the outcome of the election in Greece was that they will live up to their written obligations, which I think is a good thing,” he added, speaking on the sidelines of the Group of 20 Nations conference in Los Cabos, Mexico.

In addition, a weakening euro is likely to be a net positive for the company, which reports results in Danish kroner.

“The Danish kroner is linked directly to the euro, so if the euro depreciates then all our sales in the U.S. will be more valuable.”

In April, the company said it expects organic sales growth of 4% to 8% this year, or 7% to 11% in Danish kroner terms.

For the first three months of the year, Novozymes reported revenue growth of 2% to DKK2.73 billion, and net profit growth of 4% to DKK510 million.

In the quarter, 36% of the company’s revenue came from North America and 36% came from Europe the Middle East and Africa, followed by Asia at 19%, which Mr. Riisgaard says is mostly China.

In China, Novozymes sees a growing market for ethanol, as technology moves past traditional corn-based ethanol and toward cellulosic ethanol made using agricultural waste, a more efficient process better suited to conditions in China.

“They are a net-importer of corn so it doesn’t really make sense for them” to convert corn into fuel, Mr. Riisgaard said. “But the opportunity for them to use agricultural waste is enormous.”

The company recently announced a deal in which it will sell ethanol-producing enzymes to Chinese company Shengquan Group. With a new $100 million facility, Shengquan will become the first company in the world to produce cellulosic ethanol on a commercial scale. The deal was signed during Chinese president Hu Jintao’s visit to Denmark last week.

Shengquan currently produces an industrial chemical called furfural from corn husks, which leaves behind cellulose as a byproduct that it can then convert into industrial ethanol using enzymes from Novozymes.

“They will be producing 20,000 tons a year, which is not a huge amount but it still a good commercial-scale amount, and they can produce it at competitive prices. So much so that they can sell it not for fuel but for industrial use, for which there is no subsidy in China.”

Shengquan has the capacity to expand its ethanol production five-fold just by using its own industrial byproduct, he added.