Peder Holk Nielsen - Chief Executive Officer Anders Lund - Executive Vice President, Household Care & Technical Industries Tina Sejersgaard Fanoe - Executive Vice President, Agriculture & Bioenergy Andrew Fordyce - Executive Vice President, Food & Beverages Thomas Videbaek - Executive Vice President and Chief Operating Officer Benny Loft - Executive Vice President of Corporate Functions and Chief Financial Officer

Annette Lykke - Handelsbanken Lars Topholm - Carnegie Michael Rasmussen - ABG Soren Samsoe - SEB Klaus Kehl - Nykredit Markets Hans Gregersen - Nordea Ian Wood - Redburn Sebastian Bray - Berenberg

Hello and welcome to the Novozymes conference call. Today, we'll present our results for the first nine months of 2016. My name is Peder Holk Nielsen and I'm the CEO of Novozymes. With me today are my colleagues from the executive leadership team. That's Tina Fano, who is Head of the Agriculture and Bioenergy division; Andy Fordyce, Head of the Food and Beverage division; Anders Lund, Head of Household Care and Technical division; Thomas Videbaek, COO and Head of Research Innovation and Supply; and Benny Loft, CFO and Head of the Corporate Functions. Our Investor Relations team is also with us here today. As usual, we'll start with a brief presentation and afterwards, we'll take your questions. Please take a look at slide number 2 and move on to slide number 3 for a summary of the first nine months. First off I want to remind everyone on the call of what we said in August about the rest of the year. We said that we expected sales growth for the second half to be skewed toward the end of the year. In other words, we were expecting growth in Q3 to be lower than growth in Q4. But that being said, Q3 did come in lower than what we were expecting in August. We’re currently experiencing some challenges in a number of our industries. Our customers in agriculture are affected by poor economics through low commodity prices and that’s impacting our business as well. Also some of our recent innovation have picked up slower than we anticipated at the beginning of the year. As a result, our sales after nine month are lower than expected. Our organic sales growth came in at 1% and our growth in Danish krone decline by 1%. We have therefore decided to adjust our guidance for organic sales to around 2% as we continue to expect a stronger sales growth in the fourth quarter. This is in line with what we communicated back in August. Nine month into the year, our EBIT and EBIT margin were roughly on par with last year. Adjusting for the negative one time impact following the restructuring back at the beginning of the year, our EBIT and EBIT margin improved marginally. As we go through these headwinds right now, we’ll invest more in customer engagement activities and accelerate our innovation programs. And at the same time, we make sure to tighten our belts and reduce our cost levels. So in spite of the headwinds, we’ll deliver between 8% and 9% net profit growth in 2016. As mention back at the time of the half year report, we’ve been facing some issues in both our Bioenergy and Agriculture segments. These segments remained challenged after nine month as ethanol producers and farmers in both the U.S. and Latin America operating tight cost control right now and have less money to spend on technology advancements, such as our enzymes and BioAX treatments. We believe that we get into the end of the negative cycle in Bioenergy. And in BioAg, we’ll see growth retuning as soon as the fourth quarter as we start to ramp up for 2017. The chains challenges that we currently facing in Bioenergy and BioAg largely relate to one region, North America. Sales growth outside North America for the total business exactly quite satisfactory with 5% organic growth across our divisions. Sales in household, Household Care came in a little short in the third quarter compared with the first half of the year. In Household Care, we continue to see good growth in most of the emerging markets as well as in the U.S. premium market, but it’s dented by a decline in Europe. In Food & Beverages, we’d glad to see our brewing and starch business continue to deliver solid growth, but growth in the division is slightly muted as sales to the baking industry marginally down on last year. In a moment, Anders, Tina and Andy will give you details of the dynamics in each of our divisions. On the strategic side, we’re seeing good progress on a number of priorities. In September, we acquired the German technology company, Organobalance, just strengthen our platform within microbials. Organobalance gives us access to a large and interesting strain library and enhances our capabilities within microbial screening and assay technology. Secondly, I am happy to see our efforts in sustainability paying off. Novozymes got a record high sustainability score in the Dow Jones Sustainability Index and we made it to the A-list and the CDP 2016 climate change assessment. Finally and certain not least, I am happy to see progress in our pipeline. We expect a good number of innovations to be launched during the fourth quarter across our divisions. Thomas Videbaek will take you through some of these launches in his update on research and innovation. And with that I’ll hand it over to Anders Lund to go through Household and Technical. Anders please.

Thank you, Peder. Please turn to Slide number 4. Sales in the Household Care industry increased by 1% organically and we were flat in Danish krone for the nine months. We continue to see good growth in the demand of our liquid solutions especially in China. However the growth in China is not as strong as the beginning of the year when some of our customers were building up inventory for promotion activities. In North America, the underlying trend for premium detergent seems to be more solid now. This trend is encouraging as it reinforces the focus on technology upgrades. The positive developments in Asia and North America are offset by declining sales in Latin America and Europe. In Europe, the detergent market is very competitive which put pressure on our customers to save cost where they can. This makes the market for certain enzyme types more competitive. For the full year, we are now expecting sales growth to be on par with last year as the uptick of recently launched innovation is going slower than anticipated as well as our realized sales is lower than expected. In Technical, we see good growth nine month into the year across most segments. Pharma is currently driving growth, thanks to increase demand for albumin and pharma enzymes. In addition, we are seeing good development in the royalties received from sales of the GSK’s Tanzeum for diabetes treatment. Please turn to Slide number 5. Consumer awareness of hygiene issues in laundry is becoming increasingly relevant for the detergent industry. [indiscernible] [0:05:32] hygiene solutions potentially driving the next wave of growth in Household care in both developed and immerging markets. We see four key trends driving the need for innovative solutions to address consumer’s hygiene concerned. First of all, we see a trend toward low temperature wash and this can create odor problems. This has increasingly become an issue colder wash concepts have expanded over the years. Secondly the rise of liquid detergent increases the need for efficient odor control as liquid formulas lack properties that can improve laundry hygiene. Thirdly, the trends towards increased use of synthetic textiles highlight the hygiene problems to a greater extend as odors are tougher to remove from these materials than from more traditional textiles. And finally, urbanization with more people moving into the cities and living in closer proximity increases the exposure to odor and pollution. This is highly relevant in the emerging markets where consumers are particularly concerned about hygiene issues. There is an overall between general cleaning and hygiene and we are uncertain of how our customers would persist in these concepts. However, there is a strong interest among our customers. Novozymes has been investing in the hygiene platform for quite a while and we want to become a first mover as we see great potential to address these four key trends. We expect to see the first sales at the end of ‘17 with more significant impact in ‘18 and ‘19. And now I’ll hand it over to Tina to speak about Agriculture and Bioenergy.

Thank you, Anders. Please turn to Slide number 6. Sales by energy industry have declined by 7% organically and by 8% in Danish krone nine month into the year. Ethanol producers have continued to focus on low cost solutions rather than premium yield enhancing technologies which impact us negatively on both product mix and price. U.S. ethanol production for the first nine months is estimated to be up by 3.5% with production in Q3 at a very high level. For the full year, we still expect production to be up by around 2%. Gasoline more miles driven as well as increased exports are all fueling and increase demand for ethanol. Our recently launched products Avantec Amp and Liquozyme LpH are both making progress. Our Liquozyme solution is doing better than expected whereas the uptake of Amp is still somewhat lower than we initial had hope for. A large number of our current customers are now using one of these solutions and we continue to see progress in our trial programs both with existing customers and potentially new ones. The bottom line Bioenergy is that we are working our way through the headwinds right now by focusing on our expertise and delivering innovations supported by our technical service. We will continue to work closely with our customers to help them optimize their operations and economics by providing the benefits of our unique offerings. In BioAg, lower global Ag commodity prices have impacted the inoculants segment with the most significant effect being a lower price mix. Consequently, our BioAg business remained negative nine months into the year. Most of the negative impact is due to the effect from the change in production and sales patterns which took effect from Q4 2015 and a similar pickup is expected going forward as we start the preparation for the next year’s season in North America. Our sales growth in BioAg for the full year is therefore still expected to reach positive territory. In animal health and nutrition, we have seen strong in the initial part of the year partly driven by inventory fluctuations but also by good in-market sales growth. We continue to see the strongest growth in the developing markets and Latin America. In feed probiotics trailing and the commercial rollout of Alterion are progressing as planned. The product is now being launched in a number of countries in the Middle East, Asia Pacific, as well as North America. Agriculture & Feed is still expected to deliver moderate sales growth for the full year and we expect both areas to contribute positively. And with that, I’ll hand over to Andy to give an update on Food & Beverages.

Thank you, Tina. Please turn to Slide 7. For the first nine months, growth in Food & Beverages was 1% organically and on par with last year in Danish krone. In 2016, growth in Food & Beverages has been a mix bag. We’ve seen strong growth in the brewing and starch businesses, while sales to baking have contracted marginally. Additionally, we are still feeling the negative effects from the sales contraction in the infant nutrition segment that was noted in the first half of the year. For the Starch segment, we continue to see positive impact from the innovation we’ve launched for the refining segment over the last couple of years. Our growth in starch is across regions with Europe and Asia Pacific looking particularly good. From our future growth perspective things also look positive as we expect to launch the next line of innovations for starch in Q4. Thomas Videbaek will take you through some of the concepts during his section in a few moments. Sales to our Brewing segment also performed well nine months into the year. Our solutions in brewing for raw material optimization in India and Africa continue to drive good growth as brewers in these emerging markets are increasingly producing beers from local raw materials, which offers good opportunities for enzymes. As I said at the beginning, we’ve also had a few negatives that have weighed down overall growth in Food & Beverages. In baking, we are down marginally as growth in Europe and Asia Pacific was outweighed by declining sales in the Americas. The sales decline in the U.S. is a result of suggesting prices proactively to accommodate in up and coming expiry of a baking application pattern. Finally in Food & Nutrition, we continue to see the negative impact from infant nutrition segment were sales down significantly in the first nine months. This is partly offset by strong growth in our lactose reduction area. I’ll pass the work to Thomas Videbaek now for an update on research and innovations.

Thank you, Andy. Please turn to Slide number 8. In Research Innovation and Supply, we are seeing good progress on our strategic priorities. Back in September, we announced the acquisition of Organobalance to strengthen our microbial platform. Organobalance is a researched focus company that has specialized in microbial solutions in particular lactic acid bacteria and yeast. The company is based in Berlin and Frenchburg and has roughly 30 employees. The acquisition of Organobalance gives Novozymes to access to a large collection of strains and will also advance in our understanding of how to develop new, sustainable solutions across the industry. Organobalance has some very interesting microbial applications for animal health and nutrition and we look forward exploit these opportunities. Our plan is to integrate Organobalance as part of Novozymes’ global R&A and the new team with continue to be based in Germany. On the innovation side, we are excited about the large number of expected launches in fourth quarter across most of our divisions. First of all, we look very much forward to the launching of the first upstream corn inoculants which was jointly developed with our partner Monsanto. We previously talked about why this launch of a new upstream corn inoculants is so exciting with its unique formulation providing farmers with increased on seed stability and improved yield propositions. The corn inoculants will be marketed under the name SAT B-300 and will be launched together with Monsanto’s Acceleron brand in 2017. In the Food & Beverage area, we’ve talked about over the last year, how we wish to bring more impactful and faster innovation to the market in the relatively conservative food and beverage space. In starch, we’ll be launching solutions for our customers that will help them increase productivity and yield in their operations. These new innovations provide - improves the separation of starch and protein during the grain milling by consuming less energy. This concept fits strongly with our customers’ priorities for saving costs, while improving yield of high value outputs. This is a very exciting new area for enzymes. On top of the milling innovations, we expect to launch a next generation securification technology for converting starch into sweetness as well as new innovations in the oilseed processing. Lastly, we are glad to highlight that we are just about to launch our first commercial solution within sugarcane based ethanol for biofuels. Sugarcane based ethanol is a market where enzymes have traditionally not being used but we’ll launch this first biological solution that prevents ferm development during the fermentation process and help producers lower their costs. And with that, I’ll pass the word to Benny for an update on the financials.

Thank you, Thomas, and please turn to Slide 10. From an earning perspective, the first nine months were on par with last year. The fact that our sales growth is weaker than we forecasted at the beginning of the year obviously makes it more challenging to lift our earnings. However if we adjust for the negative one time impact following the reorganization at the beginning of the year, our EBIT and EBIT margin would actually have improved a little compared to last year. Our net profit is also in line with our full year guidance. Our gross margin for the first nine month was 57.7. Product mix changes and the cost associated with the reorganization were offset by productivity improvements. Adjusting for the reorganization, our gross margin would have been around 58%. Operating cost decreased by 3% compared with the first nine month of last year. This is mainly due to our ability to keep administrative spend stable while R&D also decreased slightly, partly due to the HA related write-downs last year. Net financial for the first nine months were negative at DKK 5 million but improved significantly from a loss of DKK 166 million at the same time last year. The difference is due to the currencies as we had significant losses on our hedging and revaluation last year. As mentioned earlier in the call, we are adjusting our organic sales guidance from 2 to 4 previously to around 2% for the full year and from 1% to 3% in Danish krone to 0.1%. This adjustment reflects the same performance in the first nine month and the chances we have seen Household Care, Food & Beverages and in our Agriculture markets. We expect sales to pick up in the fourth quarter in particularly in Monsanto, to Monsanto in BioAg where we expect sales to ramp up as part of the preparation for the 2017 season. We are now one year into the new cycle with Monsanto where production and sales for the coming season to a larger extend takes place in Q4. As Peder mentioned at the beginning, we will reduce our cost level as we go through this period of weaker sales to deliver our profit target. We therefore maintain our full year guidance on the EBIT margin at 28%, while we are narrowing the EBIT growth from 1% to 3%, to 1% to 2%. The adjustment reflects the lower sales growth. Net profit is also narrowed from 8% to 10%, to 8% to 9% growth. Cash flow, net investment and return on invested capital are all unchanged for the remainder of the year. I’ll now pass the work back to Peder for final wrap up.

Thank you, Benny. So to sum it up, our recent innovations have had a slower pickup than anticipated which is why our organic sales felt short about guidance in August. We’re adjusting the organic guidance range from 2% to 4% to roughly 2% to reflect the weaker sales. And we’ll shift more resources to customer engagement and accelerating innovation while reducing our cost level, our overall cost level. And finally our pipeline of sustainable biological solutions is strong and we’ll be launching a number of very exciting innovations in the coming quarters. And now we’re ready to take your questions. Operator, please begin.

[Operator Instructions] We have a question from Annette Lykke. Please go ahead.

Thank you very much. I think it’s fair to say that you now have a different reality with a 4% growth in 2015 and 2% - around 2% in ‘16, and I also see you to meet your medium term guidance of 6% to 7% in ‘17 as it looks now. And I just have a question for you in this respect, do you think you sort of have the right portfolio of product when some of your clients within for example by ethanol detergent and also now the farmers are facing some economic pressure. Do you have when they are trading down on to the mid and low tier seconds, do you have right portfolio in this area? And also in this respect to taking your slower top line development to account, is this now time for Novozymes to go in and have a more far look at your cost spending to sort of meet this new reality? And I have a follow-up question afterwards.

Thanks for the questions. Of course, it's a new reality when we guide 2% for 2016 and it's not satisfactory and it's not where we want to be at all. We're not changing our long term views of the business. We're not changing our model at all. We think we have the right model. We continue to invest the 13% to 14% in research and development. I think that the changes in the marketplace over the last two years now have some of them have been rather abrupt, and I think when we look back, there has been periods of time where we did not have the right product portfolio to really if you like engage with customers in the new world. I think we're improving a lot in that respect, but of course when customers are trading down to what we call the mid-tier then revenues are lower in the mid-tier than they are in the premium tier, but I don't think it's at least it's not my impression that we're less competitive in the mid-tier, but it just happens with less revenues. And then I think I'll Benny talk about cost spending. Benny, please?

Yes, first of all thank you for the question. There's no doubt that we are looking at the cost spending currently. And what you have always seeing throughout 2016 is that the cost level has actually going down. And currently we are and making sure that the cost to betterment is you can say aligned with the growth that we currently have. So today we are much more cautious about how we spend and how we prioritize. Having said that and also what Peder said, we still a strong believer that biological solution is the future and we will not miss the opportunity to invest in that future. So it's a balance that we are making currently about being able to also find resources for innovation, for how we approach the customers and customer engagement. And at the same time that we are able to deliver the EBIT and the EBIT margin on the level that we are seeing today. So only growing a few percent as we are currently that puts some pressure on cost and we believe we are in control of that.

And a follow-up on Novozymes in the baking industry, as I understand you are now sort of also trading down on prices there to sort of mid patent expiry early 2018. What will be the impact in 2017, what will be the sort of the longer term growth rates for this and is this a single innovation where this will happen or do you have other projects or strong products where we should expect a similar behavior?

So we'll let Andy take the first keeping question. Andy please?

Right, so as you know we're seeing an expiry of the patent in early 2018. The actions that we're taking now are similar to the actions that we saw in our European market when a similar patent expired earlier, and that is we're being proactive about how do we adjust prices, so that we can maintain market share in a very good way and actually develop our partnerships in our North American channel strategy. So you're starting to see the impact of this patent come down. There will be some additional entrants we want to maintain our position. That that means that 2017 will be a pretty tough year in baking, because the adjustment in the North American market will go much quicker than it did in the European market just by virtue effect that products can move around between the markets. So you're seeing us be proactive to go ahead and I would say get to a new set point and then we actually see over the longer term, of course additional ways to invest and recreate a growth patent, but 2017 will be a tough story on fresh keeping in North America.

Thank you so much.

And we'll take our next question from our Lars Topholm. Please go ahead.

Yes, also a couple of questions on my side. And it goes a little bit on the costs you’ve discussed earlier, so we're seeing new level of admin cost of 178 million, is that what we should assume going forward or have you sort of been holding back on costs exception early in Q3 because you could see the top line was behind, so that we should expect a higher admin cost level in Q4 or how would you see this? And then the second question goes on your gross margin, because I adjust for recognition of deferred revenue, it's actually down 100 bps sequentially so from Q2 to Q3, I wonder if you can comment on what is driving that? And then final question which has to do with Household Care and this launch of new shoot of low temperature enzymes, PSA have announced just two weeks ago. I just wonder if you have any comments on how that might affect the competitive situation in the detergent market. Thanks.

So, I jump directly into answering the question. So, administrative costs are certainly down. As we talked about before, we did adjust the sales guidance back in August to 2% to 4%. And already at that point and there was a lower growth than we have expected in beginning of the year. So we certainly did start being very focused upon the cost. I would say you can say within all parts of Novozymes of course there are supporting functions that to some extent will be considered administrative cost. And in all of those functions, we have been very focused upon holding back on cost. And I'm also sure that this is not a level that we'll be able to maintain longer term if we do not do something additionally. There's also a few one-time effect that is impacting Q3 positively, but they are relatively small, so I don't want to talk to those bigger extent. But going forward, we will be very focused upon development within supporting functions of Novozymes really be very careful about what are the positions, the open position that we fill, and be very focused upon what are the growth opportunities the customer engagement activities innovation that we would like to support. So there will be a rebalancing between what are supporting functions within Novozymes and what are active engagements with customers with innovation and so on. So it's not - I don't want to say it's a new level, but certainly we are trying to hold back on costs in a significant way and finding smarter way of running the business from a supporting function point of view. In respect of the gross margin and I think you commented upon the quarter-over-quarter, I would just comment to the fact that deferred income is actually down the first nine months compared to last year. And the overall gross margin if you adjust not for the deferred income part, but from the reorganization cost back in Q1 is on par with last year. So we see a…

My question is if I adjust for that deferred revenue then in Q2 2016 you had a gross margin of 57.9% and that would drop to 56.9% in Q3 where when I look aside from deferred revenue. So these are the numbers without deferred revenue.

And my - you can say my comment is actually including the deferred revenue.

Your comment is not a question. My question with all of respect to any of - my question is, why does it drop 100 bps without the deferred revenue?

So, I don't know if - we would normally not go into the details in the first nine months. And there are swings between costs in the first nine months gross margin is on par with last year adjusting for the reorganization. And then of course, if you take one quarter on another quarter there will be production stop, there would be things that we do in production and so on in some peers. So it's not you can say it does make sense to make these comments on a quarterly basis.

Okay. So just a quarterly blip which happens to be down?

Yeah, it could also have gone out.

. A:

And the last part and on Household Care, so first of all, we haven’t tested the product is out in the market with the feedback that we get from the market doesn’t indicate any superiority. I think it’s important to stress that Novozymes has a very broad and by far the broadest portfolio proteases and we also have low temperature proteases in our portfolio. We recently launched a new extremely stable liquid protease which at least to our knowledge is very superior to anything else in the marketplace. So from that perspective, I would not - it’s not something that is of a significant concern to us. And I do believe that this will not have any larger impact on the business for the next coming years.

Excellent. Thank you very much for taking my questions.

And now take our next question from Michael Rasmussen. Please go ahead.

Thank you very much. After the Q2 - sorry after the Q2 report, you talked about an upcoming launch in the Bioenergy division for the U.S. first year for now. Where we in terms of this in terms of when will it be launched and also if you could set some light on what is the product basically going to do for ethanol producers and how are you thinking in terms of pricing on that product? Then coming back to costs, I can obviously see what you have done so far and I read what you’re talking about. But my question is basically, is this kind of one to one exercise i.e. the savings that you’re going to generate in admin and so on. Is that kind of go into R&D and customer engagement or you’re looking at kind of overall cost savings in going forward? And when you’re ready to give a more precise statement to the market on this plan? And then finally, if you could confirm all the opposite, if you have implemented a hiring freeze at the moment and if you’re looking at basically taking the number of staff down from here on going forward? Thank you so much.

Thank you. We’ll let Tina talk about Bioenergy and new products. Tina?

Yes, we are launching a product you can say this quarter for the sugarcane based ethanol which Thomas was talking about before. We will also be launching more products for the U.S. market as well. We are trailing different products, but it’s too early to tell in details what’s about including pricing. And we do work with finding ways to secure that you get more benefits that can be yield that can be you could say cost savings of chemicals so that’s the general concepts we’re working with in the biofuel space.

But Tina, after Q2 as I recall, as you talked about the U.S. launch or are the launch for U.S. produces would come in 2016, is this not the case anymore?

It will come right around that you could say early 2017 or in 2016. We expected to be early 2017 now.

Okay. Thank you.

And on the cost, I think it’s - it’s not like we have an absolutely explicit plan, but in general terms it’s a one to one where we’re trying to save on back office operations in order to continue to support our innovation programs and to a accelerate in particular innovation that is close to market and also our investments in actual market presence. But it’s not like it’s worked out as an exact one to one but that’s roughly where we are.

So going forward we should basically look at R&D spending to go up of 14% of revenues and then maybe admin of self-distribution to come down?

I mean we do not guide yet on 2017 and I would not expect R&D cost directly overshoot the ‘14, it also depends a bit on currencies. And now, as you know, I’m sure you remember that in our structure, there’s both - when you think about new innovation, there is both strictly R&D cost, there is the types of development cost as business development cost and there’s a technical service cost. And it varies from business units from division to division and from business to business where exactly it is we make the split. So it’s slightly more complicated. But I think you should assume everyone should assume that will roughly keep our R&D ratio at where it is today. We are not trying to knock down on the R&D part at all. And actually, I think we’ll be investing more in some of the R&D programs that are close to market. We now implementing measures in the company of course the second quarter. If I haven’t said it clearly yet I’ll say it again, it’s a disappointment the third quarter ending a year with 2% growth is not where we want to be. We need to address this. We put things in place already with the rework in February. I think that’s working up very well but it takes a bit of time and now we’re trying to sharpen that a bit. So that’s what’s happening now. We do not have a hiring freeze. Well we are hiring for critical positions but we’re trying to take advantage of attrition in particular in the back office operations.

Great. Thank you very much.

And we’ll take our next question from Soren Samsoe. Please go ahead.

Yes, good afternoon, guys. Two questions both related to Household Care. First of all, and in Europe, if you can explain a little bit what’s going on there? I’m seeing negative impacts from the private label products really taking share or what you actually see in Europe? What’s causing this pressure? And then in China where you have good traction seems like some of your process are complaining about top price competition throughout the year. Do you see a risk this could sort of move further down to your level as a player to them at some point? Yeah. those my questions. Thanks.

So if we start with there with Europe, what we see right now is that the European market is not growing as a detergent in market. And that does put pressure on the whole industry to save cost and some of that pressures spills over to Novozymes and obviously that has an effect on some of the technologies where we are sailing. So I think it’s actually more that dynamic where we have not been able in Europe to actually convince customers to use more of our technology but rather that we have seen that it’s the development has not been moving. I think what do I seen in some of the other geographies especially if you look at North America, you’re seeing a momentum to what’s more expensive products or higher end products and that same development we’re not seeing. It’s not actually that the private label that significant shift in private label and actually on the other hand private label is not necessarily a negative for Novozymes. We see some of the highest enzyme inclusions are in some of the private label products in some of the markets in Europe. So I don’t think you can make that link. In terms of China, I think China is first of all it’s a very volatile market; it’s a very dynamic market. I think there are opposite trends we see actually consumers are willing to trade up and we are seeing a number of the middle class consumers trading up to more expensive products and higher end products. At the same time, we’re seeing what you see a very tough competitive environment in China where some of the local Chinese are pushing very extreme rebates in order to grab share and obviously that takes margin out of the entire market and works against the development or the positive development what we potentially could foresee. That being said I think the discussions we have with our customers both in China, the local Chinese and the global customers indicate that we still believe that China is basically in the liquid segment holds a lot of potential for growth in the coming years and we strongly see that as a market that will develop positively for us.

Maybe just an additional question on BioAg, do you have any update from R&D some of the stuff you’ve done with Monsanto lately?

I think set right now we’re looking very much forward to the launch of a SAT B-300 that’s going to be a very interesting launch and it’s going to had significant business all the years to come, we strongly believe. On top of that as you know we are running this very, very big program, testing thousands of microbes in the field, we still don't have the results for the 2016 campaign. These are results that's come up and will be commented on in the beginning of next year. Of course, we're looking very much forward to this. We believe that there's a lot of potential in this area and that's why we are investing so heavily in it.

Okay, look forward you. Thank you.

And we'll take our next question from Klaus Kehl. Please go ahead.

Yes, hello, Klaus Kehl with a couple of questions. My first question would be to you Peder, when you talked about the Bioenergy, I believe that you said that you were approaching the end of a week period. Could you elaborate a bit on that comment? Secondly, this new ethanol sugarcane product, what kind of impact do you expect from that, could you just yeah give us some thoughts early thoughts now? And then thirdly we've talked a lot about your cost base and you're doing what you can which you hold down the admin et cetera, but when we talk about productivity, is there any reason not to expect the continued productivity improvements going forward? That would be my three questions.

Thank you. So let me take the first one on Bioenergy. When you look at the journey we've been on in Bioenergy, we had tremendous success in particularly in 2013 and 2014 in offering solutions to customers in a higher ethanol price environment where they would have where they had strong benefits from getting higher yields. Those products had a higher sales price and so higher sales point for us. That mix, positive mix effect of 2013 and 2014 has reversed. And I have to admit that we were scrambling initially, but I think we've gotten ourselves organized around delivering solutions to customers that are more tuned to cost savings and less tuned to yield improvement programs. So when you look at the underlying market where there exactly growth in the ethanol output market now, I think we're seeing the end of the downturn given the conditions as we know them today. But I've not launched that guarantee if you like that that nothing can happen. But when we look at it now, it looks as if we’re seeing the end of it, and that these mix effects have largely been taking, and now we're starting to grow again from a new base. We haven't done the budgets for 2017 yet. But when we look at and that's more comment on the total business, when we look at the total business and at least the pipeline and the things we have going for 2017, we actually look at 2017 as a better year growth wised than 2016 certainly. And buyer entity is a part of that getting a pluck into that hole, so we don't lose like two percentage points on the entire business which we have done for the last six quarters now. Then I’ll let Tina talk about sugarcane. Tina, please?

But could I just give your follow-up question, does it mean that or do you mean that you don't - you expect a price pressure that should fade quite significantly from yeah from Q4 and on board, is that the way to understand your answer?

I think it's more a mix pressure than it's a price pressure. But again I'm not saying that nothing will happen, but I'm saying there are also positive things happening in the business. There's new innovation coming out there. So I think on the balance of things, we’re starting to see the end of it. Yeah. Tina?

On the sugarcane ethanol product, it's going to be - we're launching it right now. We have seen some positive results. It's a product that helps prevent ferm development during the fermentation process. We believe that it offers a cost benefit for the Brazilian sugarcane ethanol producers. Whether it's you could say it's going to be launched now, so it's going to be small in the beginning. So it's not going to be you could say material on the Novozymes scale in the near future.

So you also had a question in respect to productivity and cost. So I think your question is also very much linked to what's happening within production productivity across Novozymes, there's a lot of things than we can still do and that's what certainly we’re working on and do every day a little bit of improvement. In isolation, productivity improvement in production will certainly also continue that is a firm view we have. I think what you also have to of course to bear in mind is that other parts goes into the gross margin such as raw material costs, but also price and mix. And we have talked about the price impact being slightly up in this period, but it's still within 1% to 2% as we’ve talked about in the past. But of course, swings that we have to cater for to be able to continue to have the gross margin of around where we are today. I would also say that positive things happening within 2G ethanol, and I'm sure we have talked to you about the margins in 2G ethanol is not in the beginning going to be as high as we have seen in the past. So these kinds of things can have an impact on gross margin, but we are working hard to make sure that we can keep the margin and productivity within production will continue to confirm that.

Okay, excellent. Thank you.

And just to build on what Benny says on productivity within our production. This has been a cornerstone for many years in what we're doing and we continue to see it as a cornerstone. As you know we're working on productivity improvements in several different ways within our production. We're working on it. You could say from an engineering point of view where we continue to find better ways of getting the fermentations through our facilities that's one area, we continue to work on that. We also continue to work on making better strains to produce our products in a more efficient way to produce some with a higher yield, to produce them in a way that makes it easier to recover. This is an area where we have a lot of opportunities whether technology offers itself very well and we continue to see a lot of opportunities in this area. So looking added from a productivity point of view, we don't see any reasons why this is not something that's going to continue.

Thank you very much.

And we'll take our next question from Hans Gregersen. Please go ahead.

Good afternoon. Starting with Household Care, you mentioned back in Q2 that you saw a competitor doing somewhat deep price cuts in Europe. And if I picked up you commented this morning, you also indicated there was a little bit of reformulation going on in Europe. Can you give further details into what's going on here? Then over to you Peder, more strategic question, you are an innovation driven company of course which is right, but it seems like you're doing a lot of innovation, but the market is for varying reasons not willing or able to buy your new innovation farming economics, poor economics in bioethanol et cetera. Are you currently facing a scenario where short term that you're doing all the right things strategically, but you can just not sell a new innovation at a fair price and if that's the case, how will that fit into the 2017 outlook without going into numbers. I mean you're seeing household calving pressured by delayed innovation pick up et cetera. What are you doing to rectify this? Thank you.

Is that the two Household Care questions? I think it's fair to say that we have always been in a competitive environment and some markets more hot from that perspective than others. What we've seen in Europe is not out of the ordinary during this year. I think actually the primary thing which is happening in Europe right now is that the market is very, very stable and not really growing and then we have seen that we have had to adjust our pricing on a few selected enzyme systems, and that means that we are struggling a little bit in Europe. But I think it's not out of the ordinary, we've been like in many markets in this position before. In terms of reformulation, it's not something that we are seeing. I think it's not right to assume that the issues we have in Europe in this quarter and on the full year is related to any negative reformulations that are happening. I think it's much more related to the fact that the market is essentially just flat in Europe and that puts pressure on the entire supplier base.

And on the so-called strategic question, I think it’s maybe to give it a longer answer, but I think it’s easier for us to drive strong revenue growth and to drive innovation into the marketplace in a high raw material, high growth environment than it is in the current environment. The Novozymes is all about replacing other ingredients, chemicals, energy, water. And as these competing technologies are have gotten cheaper, it’s tougher to drive growth. When we think about growth, we think about ourselves, we think about how we can innovate in an environment like this and I think we’ve gradually getting our arms around that. I think there the couple of things where you could say a couple of specific areas where the market is probably a bit slower than it has been. I think the market is a bit slower in Household Care because it seems to be more difficult for many of our customers to actually pass on the technology advantages to consumers with a higher price point and therefore they are more reluctant in doing so and they are more often looking for other savings to be able to accommodate the new innovation that we supply to them. That doesn’t really change the value of the innovation we’re bringing to them but it makes things a bit slower. And then the other area point to is Bioenergy where the market is very dynamic and even though margins for our fuel ethanol customers in the U.S. have improved a bit, it’s still a very tough market. And these customers are looking for whatever avenue they can find to save money. That also includes trialing a lot of stuff. And in Bioenergy, we are seeing a lot of almost constant trialing with customers. And one other thing is that have surprised us a bit in the third quarter is that the pick-up from these trailing have been slower than we were hoping for. I think that’s a unique set of dynamics to the fuel ethanol business in the U.S. and nothing that should really change our view of the company nor our business model. I think we’re getting a fair price for our technology but obviously when we replace other technologies and these technologies are getting cheaper then when we bring in a new piece of innovation, the value we can extract is lower than it would have been in a high raw materials environment. But having said all that, I don’t think that’s the real problem or the real reason for a 2% growth as we have in 2016. I think it’s a blend of just I mean just bad luck with a number of businesses that all seems to turn against us really for different reasons and our reaction is to invest more in the innovation programs that can cater for the situation we’re in right now. We’re not betting on any immediate changes in that environment. We are betting on our own ability to actually innovate to cater for needs in that particular environment we intuit not right now.

But Peder, I mean I mean you can look for example mid way or you see some price erosion in the U.S. to the pattern expiry, Pharma economics will still impact, feed enzymes. I mean there’s a broad range of let’s say external factors impacting your business climate that you cannot really do anything about and understand that you need to invest to maintain your competitive positioning. But is it really going to change the short term market dynamics?

As I said before, we are - when we look at 2017, we have a view that it’s likely that 2017 will be better growth wise than 2016. I think we have already in 2015 and certainly with the rework in early 2016, we started addressing some of the near market opportunities that we have in our pipeline and in our sales force and we are - we think those will pay off and that we will see more growth in 2017 than we’ve seen in 2016. Yes.

Thank you.

And will take our next question from Ian Wood. Please go ahead.

Hi, thanks for taking the question today. The first question really is just on your visibility of sales and your guidance. I can understand there were a number of problems in forecasting Bioenergy sales when that was the problem but with Household Cares assuming to be the reason for the slowdown this quarter, I wonder why you couldn’t see that coming when you’re only selling to in a way concentrated customer base maybe four or five very big customers? ,:

Thank you. We actually do have more than five customers in Household Care. We have quite a few but I’ll let Anders talk about that. Anders, please.

Since I think there’s a few different perspectives, it’s not that that we are particularly excited about the results that we generated in Q3 and I do think it will improve for the future. But I think there is some underlying things that that at least we need to be aware of. One is that 2015, the comparisons from a relative growth perspective had a very, very strong Q3 versus weaker Q2. We are actually seeing our business is very stable between the two quarters Q3 and Q2, so although we had expected some pickup, it’s not that sort of our business essentially went off a cliff and all of a sudden it’s very different than it was the quarter before, it’s actually very stable. And although we had hoped for and expected and slightly more growth we didn’t know that our Q3 would be weaker than our previous quarter. So I think the visibility is reasonable, I think we have hoped for a slightly better Q3, but we knew that was not going to be as good as Q2.

And then will let Tina talk to the pricing on soybean inoculants and maybe corn inoculants. Tina?

Yeah, on the pricing is specific pricing on soybean inoculants, I mean Monsanto is the commercial partner, so the pricing I leave to them. But I’ll give a bit more flavor to how the sales of our solutions have been on the BioAg space. If you look at it, it has been the issues if I may say so has been relating to the U.S. where there isn’t such a strong tradition for using in inoculants as there for example use in Canada and Latin America. We have seen very strong sales in Canada also of our various in inoculants. So I don’t think it’s a matter of only pricing but on the pricing side, I will refer to Monsanto bit. On the corn inoculants and there are different ways how you can introduce new products that goes for everything. And one of the things which we have chosen together with Monsanto has been that the corn inoculants will be used on the broad spectrum of the Acceleron product, so that it’s going to be used on all the Acceleron brand in 2017. So that’s quite interesting we think and something which will you could say make a difference for the farmers.

Just to clarify, it’ll be on all of the Acceleron product sales of corn because I know there is three different price points for the Acceleron product, it will be on all of those?

Yes.

Thank you.

Thank you, Tina. I’m cognizant of time, so we’ll take one more question, please.

Okay, we’ll take our last question from Sebastian Bray. Please go ahead.

Hello and thank you for taking my questions. I have three please. My first question is, could you perhaps break out the shortfall in sales between churn and loss in market share if it has been any? And I’m also curious on generally speaking Bioenergy, so I think corn ethanol margins strengthens likely over the past quarter because of the fall in corn prices and I just want to even hear if it’s purely churn within your own portfolio or if you know some of your competitors are taking share? And more generally speaking, could you perhaps give me a breakdown of what gives you the conviction but you’re organic sales growth is going to accelerate from a nine month growth actually of 1%. So such but you get the hit 2% for the full year which would imply you do a lot well over 3% of the Q4. I mean aside from Bioenergy, potentially topping - the decline in Bioenergy potentially topping out. Could you perhaps give an idea of the magnitude within this segment of the contribution that you expect to this? Thank you.

Thank you. To the best of our understanding, we’re not losing overall market share and nor do I think we are gaining market share and the situation. I think it’s largely about as you called it a shortfall in our own portfolio that there is a mixed changes that goes towards products that gives us lower revenues. I think that's also the case in Bioenergy though Bioenergy is a very dynamic space, so even though it from a 30,000 feet view may look stable, there's a lot of exchange and competition for individual customers. But it's not our impression that that we are seeing a very or we seeing a shift, a real shift in market share between ourselves and our competition. And then I'll let Benny talk about the fourth quarter. Benny, please?

Thank you, Peder. So if you look into the fourth quarter and the growth we see there, it is and we also expect that back in August that we will see relatively strong growth in Q4 where it's coming from is has not changed either it's really the way that we operate together with one time within the BioAg where simply because we need to produce the microbes for the new season already now are actually bag in Q3 and now in Q4, and we need to sell those two months and so simply because it's becoming part of their - when they sell the corn, it's part of the corn they sell, so they need the product now. And we see this - you can say this is the second year, we see this preparing for the next year season, and we certainly see that also in this fourth quarter, so very strong growth within the BioAg space simply because we are producing and preparing one center for the next season within the BioAg. Looking in and we have given a few more details into this announcement the two areas Household Care and Food & Beverages is also contributing. But it's not going to change significantly from the first three quarters to the full year that's what we have put into the stock announcements. But that big swing factor here is we need the BioAg.

Thank you very much.

Thank you, Benny. So maybe just to round this off, obviously we're not happy with a 2% growth for any year including 2016. The - it's largely about mix changes within our own portfolios that makes it harder for us to drive revenue growth. We do not think that there's any of course the market share shifts in some of the smaller segments, but it's not really a market share game. We are working hard to expand the total market as a clear market leader with 48% of the industrial enzymes market and a clear leader in BioAg solutions, it's all about market expansion, and we continue to believe in and work in the model of investing in R&D to do exactly market expansion. And with what we know about 2017 and the view of the pipeline, we think 2017 in all likelihood is going to produce higher growth rates in what we're seeing right now. Maybe just on a closing note, I do want to warn against believing that profitability in the lower some of you call that the mid-tier mix of all portfolio is lower than it is at the premium tier. We make good profits on our entire portfolio. So it’s a wrong assumption that the profitability gross margins would decrease in this environment. I think it's a true assumption that if Novozymes does not expand the total market then it's going to be a grind between us and our competitors. So we are really committed and focusing on market expansion through our innovation programs. With that, I want to thank you for your attention today and I close off this telephone conference. Thanks very much.