Tags: Novozymes | costs | profit | NVZMY

Novozymes Reduces Costs to Keep Profits Up

By Meghan Sapp   |   Friday, 11 Nov 2011 10:16 AM

Novozymes (NVZMY), the world’s largest industrial enzyme producer, has had a pretty good run of it lately, but they’re well aware that the global economy is taking another downturn, witnessed by their own customers’ reticence to purchase into the fourth quarter. So it’s cutting costs to keep profits up.

Reporting its third quarter at the end of October, the company was happy to note that growth for the first nine months of the year came in at 8 percent, though low on the 8 to 11 percent range it originally hoped for. Total EBIT was at $119 million, which beat the Reuters forecast of $112.7 million.

Novozymes is focusing on reducing costs to keep it in the black while looking to new markets in China and India, where a growing middle class is demanding better washing detergents and cleaning products, where its enzymes excel.

The problem for investors, however, is in the EBIT margin, which held steady at around 23.3 percent, the same as last year, but is expected to fall to 22 percent by the year’s close.

There’s some concern, too, about the slow uptake of enzymes for second-generation ethanol production, in which the company is a global leader. In October the company won a U.S. patent case against rival DuPont Danisco, which earned it damages of $18.3 million. DuPont (DD) says it will appeal.

Developing markets

In a case of building the cart and buying the horse at the same time, Novozymes is investing in a social investment project in Mozambique that will see it not only create new markets for its biofuel enzymes but will help create a sustainable industry from the ground up.

CleanStar Mozambique is an innovative agro-forestry project that focuses on production of cassava for ethanol production that is then supplied to local urban markets for cooking fuel, reducing the demand for charcoal and, therefore, deforestation.

The project was launched at the Clinton Global Initiative in September and has received accolades from across the United Nations for its innovation in sustainable business models. It also has shot the company to the forefront of sustainable investment.

Standard & Poors kept its rating at hold for the Denmark-listed stock but raised its target to $166.40 from $149.70.

Novozymes reports its fourth quarter earnings on Jan. 19.

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Novozymes (NVZMY), the world s largest industrial enzyme producer, has had a pretty good run of it lately, but they re well aware that the global economy is taking another downturn, witnessed by their own customers reticence to purchase into the fourth quarter. So it s...
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