Novozymes Earnings: 2023 Guidance Maintained Despite Volatility in Segment Growth

Wide-moat Novozymes NZYM B reported first-quarter results that were consistent with the year’s outlook. EBIT reached DKK 1.1 billion, with an organic sales growth of 5%. This growth was supported by favorable timing of orders, solid pricing, and underlying volume growth, particularly in agriculture, animal health and nutrition, and bioenergy. Novozymes exceeded the company-compiled consensus, with their EBIT 5% higher and organic growth 1.7% percentage points higher. The company maintained its 2023 organic growth guidance of 4%-7%, with an EBIT margin of 25%-26%. Our forecast aligns with the results, so we anticipate no significant changes to our DKK 395 fair value estimate. At present, the shares are trading in 3-star territory.

Organic sales growth for household care, food and beverages, human health, bioenergy, grain and tech processing, and agriculture, animal health, and nutrition segments were 2%, negative 8%, 28%, negative 9%, and 19%, respectively. The company’s outlooks for the year remains unchanged across all businesses, with the exception of bioenergy, which is now expected to grow at a high-single-digit rate, compared with the previous prediction of mid- to high-single digits. In our view, the most notable feature of Novozymes’ performance remains the volatility in the growth of the underlying segments. During this first quarter, consensus estimates were markedly inaccurate across all segments, which could partly explain the decline in share price seen today.