Peder Holk Nielsen - CEO Andy Fordyce - EVP, Business Operations Thomas Videbaek - EVP, Business Development Per Falholt - EVP, R&D Benny Loft - CFO

Michael Rasmussen - ABG Joe Dewhurst - UBS Tobias Bjorklund - Danske Bank Soren Samsoe - SEB Laurence Alexander - Jefferies Hans Gregersen - Nordea Nicola Tang - Bank of America Melvin Hecht - 1919 Investment Counsel

Hello and welcome to the Novozymes’ conference call where we’ll present the results for the first half of 2015. My name is Peder Holk Nielsen and I am the CEO of Novozymes. With me today are my colleagues in the executive leadership team. That’s Andy Fordyce, who’s heading Business Operations; Thomas Videbaek, who’s heading Business Development; Per Falholt, who’s heading R&D; Thomas Nagy, who’s heading Supply Operations; and Benny Loft, the CFO of Novozymes. The IR team is also with us. We’ll start out with a brief presentation as usual and afterwards we’ll have a Q&A session. Please take a look at slide number 2, and move onto slide number 3 for a summary of the first six months. The first six months have been hectic for Novozymes with a number of positive but also some negative developments. On the positive side, the numbers we’re presenting today beat or equal any previous six-month period in the history of the Company: the highest sales growth in Danish krone, the highest EBIT margin on a like-for-like basis and the highest return on invested capital. The numbers are good, yet, at 5% for the half-year organic sales growth, is below expectations. We’re facing issues in household care and bio-energy and we expect these to temper growth for the remainder of the year. We expect all markets to contribute positively to sales growth in 2015. Good developments in agriculture and the food enzyme markets prove to solidify-- solidity of our business and make up for some of the headwinds. But they don’t make up for them fully and as a result, we’re revising our expectations for the full-year sales growth to allow for this. In our Q1 conference call in April we discussed some of the short-term challenges we’re facing in household care and bio-energy. These challenges did not go away in the second quarter. We have a great business in both these markets, by far the strongest market position, great partnerships and strong innovation and yet we are facing short-term headwinds that will have a negative impact until we fully adapt to new market conditions. Looking broadly at the business, the volatility we’ve seen in currency, energy and grain markets, as well as the uncertainty around growth in emerging markets, are creating a lot of uncertainty. How to address this uncertainty is high in our customers’ agenda. We clearly work hard to show them how our biological solutions can be part of the answer, but the setting is challenging and uncertainty as to how sales will grow in the second half has increased. On the positive side, our agriculture and feed business and food and beverage businesses are both performing well, proving the value of a well-diversified business once again. For the full year we now expect sales to grow organically by 4% to 7%, revised from 7% to 9% at our previous guidance. On the earnings side, the first half was good and our guidance on profit is maintained. Higher productivity and cost management are expected to offset the lower sales growth and we now expect the EBIT margin to be between 27% and 28%; up from around 27% at our previous guidance. We’re holding back on costs and advancing efficiency initiatives to slow the growth in some operating costs for the year to better match the lower top-line expectations. We’ll, of course, continue to invest for the longer term in our strategic priorities and in innovation. With that, I’ll hand it over to Andy. Andy, please?

Thank you, Peder. Please turn to slide 4. I’m going to start with some details on bio-energy. Sales growth in the first half was positive at 2% organic against the backdrop of US ethanol production up roughly 3%. Our growth in bio-energy declined during the period and was negative in the second quarter compared to the same period last year. Of course, this is not satisfactory and, as we see it, it’s the result of two factors. First of all, the market’s been very volatile. In April we talked about how some ethanol producers were starting to see less value optimizing for higher ethanol yields from the starch fraction due to low ethanol margins and high contribution from the animal feed component. In the second quarter, raw material prices normalized a little bit but the industry is still going through a low-margin period creating a strong focus on costs. This leads to the second factor. We’re the largest enzyme player in this market and we have great customer relationships across the market, but our position has been built around highly innovative solutions within the premium-yield category. Our customers are still pushing for ethanol volumes but as a low margin environment. However, they’re seeking lower cost enzyme solutions to boost profits and that means Novozymes are seeing a negative impact due to mix effects. To reverse the trend, we have to show more differentiation to more customers. We’re currently test marketing a number of innovations that will broaden the scope of our solutions and show differentiation for more types of customers towards the end of the year. The yield proposition is by no means irrelevant and we’ll continue to push this agenda, but we have to offer more than yield to increase flexibility when commodity markets are going through volatile periods. For the full year we expect bio-energy sales growth to be slightly positive organically and the underlying production of ethanol in the U.S. to be up slightly. Please turn to the next slide for the sales overview. Developments in household care in the first half of the year have varied significantly from market to market and customer to customer. All in all, sales were flat organically compared with the first half of last year. Sales were up by 2% organically in the second quarter alone. From a regional perspective, the Americas have been the most challenging with Latin America soft and North America challenged by the dynamic detergent market situation. Europe, Middle East, Africa and Asia Pacific are up slightly compared with the same period last year. If we look across customers in all regions we’re still seeing strong growth with a number of key customers that continue to enhance their product performance and sustainability using enzymes. And that goes for both the emerging and developed markets, as well as multinational and regional players. As in any given year, there’s a group of customers that are happy with their current product formulations and don’t make any major changes to content. But, unfortunately, we’re also seeing lower sales to one customer in particular. This development is expected to temper growth on our household care business until a new base has been established and new innovation takes effect. I want to emphasize that we have a strong pipeline in household care with all important customers and for the broad market and do not see current weakness having impact on our ability to continue bringing innovation to the market. In fact, we think there’s a strong need for innovation to accelerate value-capture formulations but innovation won’t change the game in 2015 when organic sales growth is expected to be slightly positive with current visibility of customer initiatives. The comps between Q3 are tough, whereas Q4 looks a bit easier in household care. Food and beverage grew 5% in the first half, which is good. In baking we’re currently seeing good growth, the fresh-keeping segment is stabilizing, other categories are growing and we’ve had success further penetrating emerging markets. We’re stepping up our selling efforts making more customer visits and holding workshops showcasing our solutions and helping customers apply our technology. It’s simple and it works. Healthy concepts are also delivering growth. Starch is now also contributing a little bit to growth. Starch in China has stabilized for now and we’re bringing further innovation to the market. Starch conversion is a market where we haven’t launched many innovations over the last decade. With the novel solutions, such as LpHera [ph] and Securo [ph] we’re showing customers that innovation can help them reduce their chemical spend and improve yields. These solutions are important as growth contributors and for strengthening customer dialogue and we expect to launch further innovation for our starch customers soon. With that, I want to pass the word to Thomas Videbaek, who will take you through the remaining sales areas.

Thank you, Andy. Agriculture and feed sales have developed strongly in the first half and were up by 19% organically. BioAg contributed strongly to sales growth. Feed sales grew marginally. Don’t get too hung up on the quarterly growth rates. We grew 40% in first quarter and negative 3% in the second quarter and timing is the major factor in this. In BioAg the North American planting season is now predominately complete for our business and the alliance performed well. We saw good growth in soya markets and higher sales for pulse crops. We now look to Latin America, where the season will be getting underway shortly. It looks a bit more challenging in light of the economical situation. As in previous years, Novozymes will start to produce and sell our microbial solutions for the upcoming North America season towards the end of the year. This will support growth in fourth quarter. Although we are currently in a state of relatively low commodity prices, we continue to be committed to developing and commercializing novel microbial technologies for farmers around the world. From a field-testing perspective 2015 is exciting. Roughly 2000 microbial strains have been planted across more than 50 sites in the U.S. That’s an increase of four times to prior season’s quantity of microbes. In addition, our joint teams are now running microbial field tests in more than 20 countries in North and South America, in Europe and in Asia. In feed the first half of the year has been good. The two quarters are different. Q1 was a stronger quarter on easy comparisons [too] and second quarter businesses, some destocking in the feeder lines. Performance-wise in the market the feeder lines has done well, especially in [fire chases] and [pro chases]. For the full year animal feed is expected to contribute positively to sales growth. In technical and pharma we delivered 6% organic sales growth in the first half. Pharma has continued to perform well mainly due to higher demand for our albumin products. Finally, a small update on biomass conversion. We continue to work closely with our partners to ramp up and debottleneck their operations. We don’t have any data point to share at this point but are happy to see things continue to improve and climb the learning curve as we start to deliver customized solutions to our global partners. That’s it for business development and I’ll hand you over to Per Falholt for an update on research and development.

Thank you, Thomas. In R&D we continue to push for innovation across established markets and in the growth platforms. To pick up where Andy left on household care, there’s a lot of innovation to come in household care. We see a continued high level of interest from customers in using enzymes to build their brands, including growing focus on cold-water wash performance and less dependence on traditional and price-volatile chemicals. Emerging markets also offer significant opportunities to increase penetration. We are addressing all of that in R&D and are optimistic about household care, working together with our partners and alone along three tracks of stain removal, hygiene and dedicated innovation for emerging markets. The projects we are working on in R&D won’t be able to make a difference short term as sales, as development cycle in this market are simply too long for that. But innovation is critical for our growth ambitions in the mid to long term. In bio energy things are a little bit different. Adoption of new technology is very rapid and some of the new solutions we are working on right now are expected to make a difference already in 2015. With such a short return speed in product development is crucial as is consistency of performance and that is what we are ensuring at the moment with our test marketing. Within the growth platforms in May we announced a new partnership with animal probiotics with Adisseo. Adisseo is a French feed company with a strong heritage and competencies in amino acids, feed vitamins and other feed solutions. In the partnership Novozymes will be responsible for lab testing, development and production whereas Adisseo will be in charge of animal testing and commercializing the solutions. The field of animal probiotics is an area we think holds significant opportunities for Novozymes. The market is interesting and still at a very early stage. We feel that we can leverage our knowhow within microbiology fermentation and animal feed and with a partner get to the market quickly and efficiently. We expect the first product for poultry to be introduced within the next year. The partners will also explore opportunities for future expansion within probiotics for both swine and poultry. And lastly in the second quarter we also signed an important land deal for Novozymes, kick-starting the establishment of a new innovation campus here in Denmark. And with that I will now pass the board over to Benny.

Thank you Peder. For an earning perspective the first half of the year was good. The gross margin increased slightly compared with last year, productivities improved and raw material prices were a little bit down, which offset a few minor items such as high activities and write downs. Mix was neutral. On EBIT margin we have seen a margin expansion of around 1 percentage point on a like to like basis, driven by both currencies and underlying performance. A good gross margin contributed little to this but more importantly we’ve been able to keep increasing operating cost at a modest level. Operating costs were up by 9% in Danish kroner and that was largely due to currency development. We have invested more in R&D and sales on behalf of distributing at administered costs. On the cash side we’ve seen a strong cash flow in the first half helped by, little by timing between quarters as payables positive impacted by timing, payments with more than 200 million. This will reverse in the second half of 2015. The full year sales outlook has been adjusted. Profit outlook is maintained. Organic sales growth is now expected at 47%, sales growth in Danish kroner is adjusted accordingly to now 13 to 16%. The rent has been increased as we see higher uncertainty as to how sales will grow in the second half. EBIT growth is maintained at 15 to 17% and the EBIT margin is expected to increase to 27 to 28%, up from around 27% in previous guidance. The expected lower topline growth is offset by slower growth in operating cost and increased productivity across the business. The outlook for net profit this year is also maintained at 11 to 13%. We have planned for some expansion in operating cost which we are now adjusting to better fit the sales growth level. The organization has previously proved flexible and prudent on cost expansions when necessary and we again expect to be able to manage costs actively and eliminate waste and phase cost in the best way possible so that we can continue with our strategic priorities and expansion in R&D and customer related activities. However the elements of the outlook are unchanged since previous guidance beside a small adjustment of the investment. And now back to Peder.

Thank you, Benny. So a brief recap. We had a good first half on earnings whereas sales growth was not as strong as we expected. The breadth of our end markets proved valuable but positive developments in agriculture and feed and food and beverage can’t fully make up for the headwinds in household care and bio energy. And organic sales growth in 2015 is consequently lowered and now expected at 4 to 7%. Volatile markets and uncertainty around growth in emerging markets are increasing uncertainty around sales growth rest of the year and that is reflected in this new range. Profit outlook is maintained as cost management and productivity improvements lead to an increased EBIT margin, compared with previous guidance. Meanwhile we continue to invest heavily in innovation to adopt to the volatile world and deliver long term sustainable growth. And now we’re ready to take questions. Operator, please begin.

Okay, thank you. [Operator Instructions], And we have our first question on line coming in from Michael Rasmussen from ABG. Please go ahead.

A couple of questions. I’d like to start up on the household care division, please. If you could talk a little bit about the past, when we’ve seen growth rates drop down significantly from time to time, could you talk a little bit about how long you typically see growth slowing down in that division? And secondly, in relation to that, if you could state a little bit what the reasons have been in the past why you’ve seen a growth slowdown. I noted that specifically in the first quarter of 2016 I am sorry 2006 we had 2% negative growth. You said that due to a higher price of oil that resulted in some reformulation of the detergent products, which had a negative impact on enzyme sales. So is this something similar, basically, that we’re seeing now? And if you could compare what’s going on right now with the past, please. And then my final question is on your long-term target, please. You did say in the annual report that you look for 8% to 10% growth on average in 2015 to 2020. And now you had a poor start. And I was just wondering what the risks are because, looking at your key assumptions, your first assumption is one, success in household care and two, success in bio-energy. And that certainly seems to have had a bad start to that period. Thank you.

We’ll let Andy talk about household care. Andy, please?

I think when we look at what’s happening right now, we see one customer making a change that’s having a short-term impact on things. But, in general, we still see the same trends out there in our household care business that have been helping us to drive growth in the past. So we view this as, yes, it’s a short-term, short- to medium-term issue that we have to work through, especially with one particular customer. We’re actively working on that. So we’re coming up with new opportunities, I think, based on the changes that they’ve articulated to us. And it’s hard to be exactly predictive on this one but I think, structurally, things are still in place for good opportunities in household care. So I don’t think it’s fair to compare what’s happening now to anything that’s happened in the past. Each one of these situations are unique. I guess low oil prices, you could speculate, actually have an impact by forcing a situation where it’s harder to get reformulation projects going. But I don’t think that that’s a major impact on what’s happening in our business now. We still see customers that are excited about the opportunity to save cost and improve performance through adding enzymes, in spite of the fact that oil prices are a bit lower. But it does create some headwinds when you try to initiate new reformulation projects. So oil prices are an impactor but, again, I don’t think that they’re anything compared to something that happened in 2006. That’s a different situation.

So, Andy, basically what I’m hearing you saying is that this is unlikely to be three years with zero growth, like we saw in 2004 to 2006?

We definitely see good opportunities to grow this business. We’ve got an innovation pipeline that’s full of great things. And, again, unfortunately, we had this short-term issue that we work on. So I don’t see this is as structural impactor to longer term growth opportunity.

Great.

Maybe just to add, as we pointed out earlier today and also in the announcement, we actually see good growth in many other parts of our household care market, we see very strong growth with some of the drivers that Andy talked about. So I don’t think that there’s any reason to believe that this is systemic. It’s a short-term issue, primarily in North America. But, of course, it’s something we need to work through and it’s also no secret that it’s painful to work through this issue. Long term, on the full business, you’re absolutely right that we guided 8% to 10% on average. We’re not changing that. We still believe that is where we’ll be with the business. Obviously, we had hoped for a slightly better start. I think we talked about household care. I also think that the issues we have in bio-energy are short-term issues that we’ll be able to fix. So let me just close this one off and say, for now, we’re not changing our long-term targets. We still believe that they are relevant for the Company.

Great. Thank you very much.

Okay and we next question on line coming in from Mr. Joe Dewhurst from UBS. Please go ahead.

I’ve just got three questions. Just first of all on the revised guidance for EBIT and then what’s really the breakout there? Could we see most of the increased margin that we see in EBIT being reflected in gross margins? Or is it maybe more to do with controlling some of the R&D spend? And then just on the feed market, you indicated that there was a bit of destocking going on in the second quarter. Just any color on that. And then, in that same area, with the pro-biotic launch and given all of the changes that are-- or a lot more focus in the U.S. on antibiotic replacement or phase-outs in the U.S., could you see quite a strong growth dynamic as a result of that once you have the product next year? And then finally, just with the household care, with this one customer impact, can you indicate potentially what this one customer impact has had on the organic growth and what the organic growth would have been without that and how long you think the one customer impact is going to continue for? Thank you.

Thanks very much we’ll let Benny talk about the EBIT guidance and also the one-customer effect. Please, Benny?

Thank you, Peder. So when we look into the guidance of EBIT, then we have had a very good year from an earnings perspective this first half-year. And the thing that is, you can say, working in our way, is that actually this time it’s not the gross margin which is contributing to this guidance improvement. Gross margin is as expected. The underlying improvement, productivity improvement, we still see those in gross margin, but you can say the write-down is taking these positives away. So the reported gross margin is roughly compared where it was last year. So what we see is we actually are able to hold back on cost and be more effectively in using our cost and this is mainly within the administrative areas. So this is not a matter of holding back on cost in R&D, nor is it holding back on cost in sales and customer-related activities. We actually see increases in those costs, even when you exclude the impact from currency. And, of course, part of the EBIT guidance and the improvement in margin is also slightly due to currency being with us.

Thanks.

And when we look at the probiotics, this is bacteria that Novozymes and Adisseo is planning to launch within a 12-months period. This is a bacteria that will help promote the weight gain, limit development of unwanted bacteria in the animal’s digestive tract. And this is a market where we see significant potential. It’s currently a market to the tune of €200 million or €300 million worldwide. It’s a market that’s growing to the tune of 8% to 10%. So we’re excited about this. We think this is something that has long-term potential for Novozymes. But I think it’s also fair to say this is something, as we’re saying, will be launched over the next 12-months period, so expect some ramp up time here. But as a new market entry for Novozymes, as a new opportunity for Novozymes, we’re excited about this product.

And just with the feed destocking that you saw in the second quarter. Was --?

When you look at our feed and ag development, as I mentioned, the reason for the development in second quarter is due to timing. We post a 3% decrease in that segment in second quarter. And, as I said, the by far biggest part of this is timing. Had we not had the destocking, that segment would have been positive also in second quarter. But, as I said, don’t put too much into the quarters here. This is a business that swings from month to month. When we look at the six-month result, we think it’s a very impressive result. We continue to see good growth in this segment for the full year.

Thanks.

Then I’ll take the one on the one customer. As you can clearly see, we’re pointing out to two major issues on household care. One is Latin America and the other one is North America. The effect of the changes that that one customer made, we’re not really quantifying. But, as you can hear, that is a significant part of the issue we have at hand. And, certainly, if it hadn’t been for those specific changes, we would have reported quite significantly higher growth rates on household care than we’re currently doing.

And the impact of this will this run its course by the end of the year, do you think? Or --?

I think the impact is going to endure for a while; of course, depending on what actually happens in the North American market. But we have a new technology that we think will kick in and will be able to help us grow beyond this resetting at that particular customer. So I suspect that the change that’s made by that customer is going to endure for a while and then we have a good technology that hits the market and also hits this customer, which will help us outgrow the situation.

Thanks very much.

And our next question or line is coming Mr. Tobias Bjorklund from Danske Bank. Please go ahead.

Good afternoon everyone. So staying on the household care, I remember that you indicated some 3 to 4% growth after Q1, with the downward revised of the full year and now we’re talking about 2015 outlook. And now you expect slight growth. Is that lower expectations related to this client only? Or are there other things playing into that? That’s my first question. And then in bioenergy, 2% volume growth in the quarter year on year and you were down 4%. Could you go through the moving parts here? And also relating to the market share views here in this segment. And the last question is regarding cellulosic ethanol. One of your competitors, enzyme competitors, has announced teaming up with a Chinese player who are under production of second-generation ethanol. What do you see here in China? Are there any positive moves in your books when it comes to the Chinese second-generation ethanol market? Thank you.

Andy, household care.

Yes, so you mentioned the sort of 3 or 4% guidance in April and now slight growth is our, you know -- what’s the difference between these two. Certainly the one customer impact is part of that but I think the other part of that is, if we look at some of the emerging markets you know they have not developed as we had expected, you know it’s not a I would say pervasive but a few markets you add up the small businesses and they create a significant change is also not going perfectly well in 2015. So that’s what drives the 3 or 4% down to the slight growth guidance that we’re giving now.

Is there a general theme there, these emerging markets are very different.

Well the ones that we’re seeing a negative effect and it’s about sort of the economics and what’s happening in GDP and sanctions and even stuff like war. So it’s a combined things that are hitting in different parts of the world right now but have added up to you know a slight dent compared to the additional headwind around the single customer impact. You then talked about bioenergy and you wanted to know the moving parts and the market share situation. So what I highlighted when we talked in April was that with the decrease in oil price and the lower margins that our ethanol customers were actually receiving, this was quite a significant change from our positioning which was based on premium yield. And that meant that we had to actually change our innovation and re-launching products that actually address the idea of a lower margin environment emphasizing more things like throughput than just premium yield. So part of what you’re seeing is a mix effect where there are cases where we’re actually moving customers from premium products to products that focus on throughput and those are at a lower price helping to address the care about that they have. There’re some elements of this that are price related we think some customers still can get good advantage from our technology but we’re being sensible about how we price it in the current environment and then in the normal I would say competitive market where market share moves between you know several key players we’ve seen a slightly negative trend over the last quarter that’s also impacting this. So those are the three things that have created this situation I think in Q2. Now looking forward we’ve been working very hard in actually getting a new product portfolio out in test marketing and we believe that that’s going to help us in the second half to [indiscernible]. And that’s a good position to be in and I’m pleased with how fast we’ve been able to adjust the mix, how fast we’ve been able to get customers out trialing and that’s something that we’ll go ahead and push hard in the second half.

How much of your sales in bioenergy is enzymes for yield throughput compared to other value-adding revenue streams? Do you have a ballpark figure for that?

I think, Tobias, it’s too hard to actually quote a number around that. There’s a lot of smearing and stuff like that, so I’d prefer to just say what I said about mix effects.

Okay.

So to summarize it then, I think on household care, of course there’s never a simple truth, but on household care the issue is, to some extent, a softness in emerging market growth and that’s in particular in Latin America we’ve seen that. And then it’s this one customer, which mainly has an effect in North America. That’s also what keeps us excited about the growth opportunities in household care. We don’t see this as being a systemic thing at all. We see this as being a couple of things that’s just hitting us at the same time. And we continue to have very strong innovation efforts, both for the emerging markets but also, as Per pointed out, for some high-end applications in the more matured markets. On bioenergy, you can say oil price movements shouldn’t surprise us. We’ve seen bioenergy customers have profit challenges before. I think the interesting thing right now is that, while ethanol prices are low and still allows Americans to have cheaper gas than if they’d used gasoline on their own, the actual feed components, the DDGS, the remainder of the corn, is actually very expensive because of the Chinese demand. So what customers are seeing now is that they get a lot of money for their so-called byproducts and less for the ethanol. And, therefore, the desire to actually have higher ethanol yield right now is lower. And that affects our growth with that particular suite of products. And we now are redesigning and moving into improving throughput, as Andy was talking about. But it’s really a unique situation that occurs because the byproducts are so much more expensive now compared to the ethanol than they used to be. And then we’ll let Thomas talk about cellulosic ethanol. Thomas, please?

And you’re absolutely right that recently DuPont announced a fairly big project in China with New Tianlong Industries. We’re very happy to see that this development takes place. We are very happy to see more people getting engaged in this industry. So for us this is very, very good news. We are in dialog with a number of players around the world, including players in China, but it’s too early to talk about these opportunities now. We’ll get back to that when things firm up and become more concrete. I think, just as a quick one on this, it’s also important to mention that when we look at the commercial facilities around the world today, there are six now; we actually supply five of those. And we are, on a daily basis, working on securing the debottlenecking in having these facilities to operate at capacity. That will, hopefully, help fuel even more projects around the world. So good news to see that more people are getting engaged in this segment, helping to push the industry forward, getting up the learning curve.

Thank you very much.

Okay and there is next question on line coming in from Mr. Soren Samsoe from SEB. Please go ahead.

First a follow-up question regarding household care. Just if you could elaborate a little bit on this customer taking out an enzyme class. Is it primarily due to performance? Or is it due to price? What’s the reasoning? And just looking from the outside and just trying to find out, how easy is it to switch away from an enzyme? Does it take a big investment for the customer or not? Just to find out if this could be a trend or not. And secondly --

Andy please?

So I won’t get into the details behind what our customers do. That’s confidential information between us and them. How easy is it for this to happen? I think it depends a lot on the formulation and the class of enzyme that you’re talking about. I don’t see this as a general trend and I just think this is a special case where they elected to move in a slightly different direction. And then, of course, it’s got an impact on us short term but, again, it opens up opportunities for the long term, considering how they’re repositioning things. So that’s about the level of detail that I can go into on it.

Okay. And while we’re on the household care, could you just give an update on how it’s going with your new premix products, if that is catching on?

You mean the blended products? Is that --?

Yes.

Those continue to get good traction. As I’ve said before, we probably won’t talk about those singled out because they’re a platform technology that helps both in our liquid and our powdered businesses. We see a variety of customers both in mature markets but also especially in emerging markets finding good value in the convenience they get with these blended products. So we’re happy with the progress we’re making on those.

Okay. And then just a final question on ethanol. This new product you’re working on, could you give us any -- maybe quantify how much better does this need to be in terms of throughput performance before customers will see it as attractive to switch from some of the enzymes they are using now, which appear to be some of your old enzymes? Is this a -- do you have to do a major breakthrough or is it adjustments to what you have done for a while?

Well, I guess it’s a -- I’m not 100% sure I understand, so I’ll try to speak to it and you can guide me a little bit if I’m not getting it right. We have a big portfolio of innovation also in bio-energy. And what we had been preparing for was for more launches of yield-oriented products in 2015. But, in the meantime, since things changed, we decided to shift over to some different blends, some different enzymatic options that address, for example, the throughput idea; also chemical replacement, things like avoiding additional chemical inputs in the fermentation because that also creates a cost saving and ease of use value. So there’s no simple answer to your question, when you can create a 2-plus percent increase in yield without adding additional cost that’s actually very compelling to customers. And then, similarly, if you can get that 2% in throughput at the same yield that’s also a compelling value proposition. But, again, there’s other things that go into this. For example, avoiding chemical inputs ease of use, other things that customers care about. So I think we’re in a good position with the innovation portfolio we have to get products out. We’re seeing good customer response to the new products we’re actually test marketing. So I feel good about our effort to switch from what was valuable in 2014 into a new set of values in 2015.

Okay, that’s helpful. And just finally, just if you can you comment on the ongoing consolidation in the industry and then also, at the same time, the new production of capacity that’s happening in the industry, how these dynamics are impacting you guys.

I’m not absolutely sure I understand what you’re referring to. Are you talking about the enzyme industry? Or --

No. In -- we’re talking bioethanol. There’s been consolidation in the industry and also we are seeing that there’s new capacity being built. So I was just wondering.

Still in bioenergy, yes. I think, by and large, if you look at Novozymes, and I would argue that also goes for bioenergy, then a consolidation has two effects. One effect is that sometimes it becomes harder to fully price your products. But the other effect, which I actually think is more significant, is that these companies tend to be more professional in the way they assess performance and, therefore, also willing to pay for performance. So, in particular, on bioenergy, I think consolidation speaks in favor of our business model because we are much better at working with companies that fully understand the effect of the technology we bring to them.

Thank you.

And our next question or line is coming in from Mr. Laurence Alexander from Jefferies. Please go ahead.

Two quick ones on household care. Do you expect to get back to mid-single-digit organic growth by the back half of 2016? And if not, why not? And when you explain the ethanol dynamic in terms of DDGS, is it that simple? DDG prices look to be down about 20% quarter over quarter. So should we expect a recovery in volumes in the back half? Or are you really looking at the spread between the DDG price and the corn price? Or is there something more nuanced going on?

As I said before, we reiterate our long-term guidance. So we obviously believe we’ll get household care growth back up again. We’re not guiding specifically for 16 today but I think it’s a fair assumption to have that we get growth back in household care up through 2016, otherwise it’s going to be hard to make the long-term growth projections in that segment. DDGS. I think, again, not all customers fully understand how the value is created in that plant, so there’s also a bit of slack. The main driver still is the one of DDGS being so fairly highly priced and ethanol being inexpensive. We are hoping for that the new suite of products that add to our yield-discovery suite will help us grow in the remainder of 2015 rather than a change in our customers’ demand. But we’re ready for both with the two suites we have.

Thank you.

Our next question or line is coming in for Mr. Hans Gregersen from Nordea. Please go ahead.

Good afternoon. First a question on product launches and innovation. In your guidance assumption what have you assumed of contribution from launch of new products in household care and bioenergy? And also when was the new starch products launched in China is the first question? Second question. In terms of margin expansion, your higher guidance for this year, can you try to perhaps in wording try to guide us of how much has been driven by underlying improvement in productivity gains and cost containment, or cost reductions directly, in administration and what is one-off? And then finally, if you look on household care that reformulation done by that one specific customer, is there anything directly related to the oil price, as such, i.e., going back to chemicals? Or is it more broadly based? Thank you.

Andy, household care launches and starch launches, please?

You asked a variety of questions, I think, about what assumptions did we make about the impact of the launches in household care and bioenergy. I don’t have any specifics on that other than we’re launching products in both areas. Bioenergy is very active right now, as we’ve highlighted, and has an impact in 2015 already. Household care. We’re making launches but some of these are launches to partners, so they’re less obvious in the external environment. But they also help us continue to get the growth we get with some of our big partners and, for that matter, help us address some of the short-term challenges we have with the one customer. I think you said something about China launches in starch. What we’ve done in starch is we’ve made broad market launches that are also applicable in China. So those occurred in 2014 and also in 2015. And we think we’ve got more launching to do coming up in starch to actually help continue the trend of both stabilization in China but also growth in that market.

But, Andy, in the guidance you have made for this year, you must have made some assumptions in your internal budgets of the new, let’s say, -- the test marketing you’re doing on 1G, you must have made some assumptions of how much that’s going to contribute to growth and price mix.

Yes, but I’m not going to get into the split between how we launch different products in bioenergy and how that has an impact. I think it suffices to say that the reason the guidance is a little bit broad at the 4% to 7% for the full year is if things go well in bioenergy we’re, of course, at the upper end of the range. If they don’t go as well as we put into the assumptions we’re towards the lower end of the range. I think launches are less of an issue in household care, but bioenergy is a big part of the range.

Benny, margins?

So I think, perhaps to simplify the answer a little bit not going into all the details, I think it’s fair to say that when we look at the margin improvement, which is also expected to be there end of the year, it’s probably around 1 percentage point improvement. And it’s due to currency. It’s due to us being able to be holding back on, to a large extent, administrative costs and, to a lesser extent, you can say holding back on costs related to our R&D and sales and cost-related activities. So I think the way that it’s structured is a good way where we still support the business with what is needed.

So that improvement should be sustainable going into 2016, generally speaking?

We do not expect to add a lot of administrative costs in 2016 that is correct. But, if we would decide to invest, I will not comment for now.

And then on this household care customer, of course we will never understand exactly why things are done at a customer level but it doesn’t appear to be all related at all. It’s more about the positioning of certain products in the marketplace and how you precisely position these products. And the way they have chosen to reposition themselves, it takes out some enzymes that we supplied to that particular customer. And then just on the guidance for growth for 2015, I think the way Andy presented it you might be led to believe that the only uncertainty we have is bioenergy. I don’t think that’s a fair representation. Bioenergy is uncertain but, of course, there are also other moving parts in the business. But bioenergy is one of those that we watch very carefully.

And we the next question on the line coming in from Ms. Nicola Tang from Bank of America. Please go ahead.

Hi there, you actually just touched on one of my questions just now but maybe you can expand. On the costs, tightening on costs, to what extent is that also -- is that only happening in sales and marketing and then versus R&D? And could that impact your longer term growth if you’re spending less on R&D? The sense I get from your earlier comments from Per on the drive for innovation was just not, but maybe you could confirm. And then on the household care side, have you seen any incremental negative impact on the US consumer in terms of down trading in Q2, with oil prices moving lower? Or are you just seeing the same impact that you saw in Q1 and the incremental negative is more from loss of -- or those large customers and the change there? Thank you.

So we’ll let Benny have a go again on cost tightening.

We have talked about the gross margin or, sorry, the margin improvement that we have seen this first half year. As I said, currency and administrative is very much the reasons. Moving into also second half, I think also it’s fair to say that we all need to be very careful about what we need to do and what you can do in a different way. That also goes for sales and R&D. But I think it’s also fair to say that we are very carefully trying to make sure that what is needed is also funded. So there’s no belief and we have absolutely no belief that this has any impact on our ability to grow long term. We still invest significantly in R&D and we’ll continue to do that as well as in our market presence.

And that’s, of course, because we look at this as a parenthesis. We stick to our general business model of having significant investments in R&D. And maybe Per, you can talk a bit about where we are investing.

Yes for sure, and as you see from the result, we are investing more in R&D than we have ever done before. We continue to increase that investment. We have a lot of new technologies coming up. We pushed more money into BioAg. We continue to invest in household care. We have a number of new areas coming up and the basic technology development supports a lot of our growth drivers. So in the last year we have grown R&D more than ever in historical terms. So, from an innovation point of view, we are in a very strong position. And I strongly believe that we will continue to deliver innovation to all our markets.

And on household care and North America, again there is never a simple truth but, by and large, I think the issue we have in North America is one single thing and it started in Q1 and it persisted in Q2 and we think it’s going to do for a while.

Okay. Thank you.

Alright there is last question the line coming in from Mr. Melvin Hecht from 1919 Investment Counsel. Please go ahead

Pretty much all my questions have been answered. In the past you’ve talked about the number of field trials that BioAg has executed. How is the South American growing season going along in terms of field trials, in terms of effects and in terms of productivity of the new products? Thank you.

That’s one for Thomas Videbaek. Thomas, please?

As I mentioned, we are doing a number of trials in North America. We’re doing a number of trials in Latin America as well as Europe and Asia. So, at this point in time, we are looking at these plants’ growth, so to say. It’s too early to say what the effect of those trials are going to be for this season. We are very, very encouraged by the results of last year and now we look very much forward to see what are the results going to be for the 2015 season. This is a long-term project and we continue to be excited about it.

Thank you, Thomas. I think we have time for one more question, please.

Okay and we have one more question on line coming in from Mr. Hans Gregersen from Nordea. Please go ahead.

I guess for you, Thomas. You made an impairment of DKK50 million this quarter. Can you give a little bit further insight on what’s going on and what the outlook is both for hyaluronic acid but also from royalty income from your overall technology platform? Thank you.

I think, with your permission, we’ll split it in two and let Benny talk about impairment. Benny, please?

So we do impairments after every quarter and, again, I think it’s fair to say that our progress within pharma is not as we have expected, hoped for. And this is basically within HA, which is also the reason that the -- when we do get the asset base we have you can say the business we foresee cannot support the value of the asset base, which is why we have made the write-down of [indiscernible].

Sorry, I was more looking to the reasons why you did it not so much, let’s say, the technicalities. Sorry.

So I think I did say that the reason was that the business opportunity, the size of the business, is not as positive that we would have hoped for. So that’s the reason.

When we look at the royalty, you’re right, we’re excited about the development of the GSK [TLT1] product in the marketplace. As we understand it we are up to around 7% market share for that product in the market and we are getting a royalty income from that. I have to say here that the royalty is one quarter delayed and as this is a fairly newly launched product, that means that one quarter actually means a significant increase. So right now, we’re looking at fairly small rises, but we are happy to see that in the future that’s going to increase.

Thank you Thomas.

So I think that brings this conference to an end. I want to thank you for your questions and for your attendance. We’re looking forward to meeting with many of you over the next weeks both here in Europe and the US and a few other places. We understand the need for having conversations about the results we’ve delivered today and the outlook and we’re eager to have that conversation. Just to round it off, the issues we have in terms of top-line growth is mainly household care in North America and Latin America and we’ve talked at length about that. It’s in bio-energy, where it’s the price differential between DDGS and ethanol that gives us some short-term ripples. We firmly believe that none of this is systemic and we think we have good answers and good responses for that, but when it hits us, at the same time, we cannot just outgrow it and we have to take down our guidance for growth for the full year, but it doesn’t change our commitment to our long-term targets. And, with that, I want to say thanks, again, and goodbye.