No Major Surprises in Novozymes’ Q4 2022 Results

Wide-moat Novozymes NZYM B reported organic growth of 11% in the fourth quarter and 9% for the year, beating company-compiled consensus. The bioenergy segment was the primary driver, exceeding consensus’ annual projection by 500 basis points. The EBIT margin of 26.4% for the entire year was in line with guidance, and broadly in line with consensus of 26.6%. Compared with last year’s outlook, the range for organic revenue growth is 100 basis points narrower for 2023, reflecting management’s increased confidence. Novozymes’ guidance anticipates 4%-7% organic growth, driven by volume and price strategies, and maintains a 25%-26% EBIT margin. This is broadly consistent with our forecast. Consequently, we don’t expect to make a material change to our DKK 395 fair value estimate.

Three of the five segments had double-digit growth in 2022: bioenergy; food, beverages, and human health; and grain and technology processing. For 2023, the food, beverages, and human health segment is expected to be the primary growth driver with guidance for high-single-digit organic sales growth overall and double-digit growth coming from human health. Bioenergy and agriculture, animal health, and nutrition should deliver mid- to high-single-digit growth. Bioenergy will be supported by corn-based ethanol capacity expansion in Latin America while innovation and pricing should drive agriculture, animal health, and nutrition. Grain and technology processing growth is expected to be in the low- to midsingle digits due to weaker demand for textiles and coronavirus-related enzymes. Household care is expected to grow in the low single digits, based on continuing detergent volume contraction in Europe.