Peder Holk Nielsen - CEO Tina Sejersgaard Fanoe - EVP, Agriculture & Bioenergy Andrew Fordyce - EVP, Food & Beverages Anders Lund - EVP, Household Care & Technical Thomas Videbaek - EVP and COO Benny Loft - EVP of Corporate Functions and CFO

Lars Topholm - Carnegie Annette Lykke - Handelsbanken Michael Rasmussen - ABG Soren Samsoe - SEB Tobias Bjorklund - Danske Bank Hans Gregersen - Nordea Klaus Kehl - Nykredit Markets

Good afternoon and welcome to the Novozymes conference call and our full year results for 2016. Thanks for joining. Today, we'll talk about developments in our markets, progress in our pipeline. We will give you a detailed update on the financials and then we will take your questions. But before we go there, let me just spend a minute on reiterating the fundamentals of our business. Novozymes is the world leader in the industrial biotechnology. We've built the enzyme market through consistent large investments in research, technology and customer relations. And we'll well underway to build a new industrial microbes market with BioAg at the center. Our estimates show that the global enzyme markets have grown between 1% and 2% in 2016 and that we have maintained our 48% share of the market. Many of our customers have us as their sole enzyme supplier and innovation partner; that's both an honor and an obligation, and we're proud to always bring solutions which fit their needs. With the slowdown over the last quarters, some of you are concerning that the growth journey is coming to an end. And I often get the question from you. Can you continue to create innovation that excites our customers? And my simple answer is, yes. Let me give you a couple of examples. We have found new enzyme systems which can provide better hygiene, better cleaning and improved freshness of washed clothes. Our first product will launch this year, but the platform holds so much power to deliver better detergents to the consumers. That I am sure, it will be a growth platform for many years to come. As you know, the BioAg aligns now brings the first ever microbe onto corn seed and data shows this amplification of nature's own technology gives an extra three bushels per acre in yield, and that’s not the end, we already had a significant improvement ready for launch in 2019. And our enzymes and yeast for turning waste into liquid field is starting to pick up. The vision of brining biological solutions to our customers excites us. So the slowdowns into Q2 of 2015 worries and frustrates us. We should be able to crank our higher growth rates with the advances in our technology base. To do so, we have successfully changed our priorities to drive growth in today's world and maintain our commitment to investing and bringing groundbreaking technologies to the market. Our technology platform develops exponentially. We can do so much more in terms of customer rising solutions, make new bio solutions affordable and improve our cost position in the existing areas than we could just a couple of years back. In short, we continue to extract returns from the industrial bio-solutions business by investing in the technology. So that was the overview. Please turn to Slide number 2. As you know, Novozymes had a difficult year sales wise, but we have continued to improve on our margin and met our earnings guidance for the 16th year in a row. And today, I am happy to report to you that we had a strong close to the year, and it looks like we have regaining momentum. Since the second quarter of 2015, the global enzyme business has been hit by the margin pressure on the North American fuel ethanol customers. And at the same time, our new business area in BioAg goes through a rough period like other agricultural input businesses. The result of this is the modest 2% organic growth in revenues in 2016. But a lot of things also went well last year. The new division prioritized our pipeline with a stronger focus on market impact and speed. They also improved our customer interactions. As an example, Household Care has created a top 20 program where we customized solutions for the 20 largest customers. And the divisions increased our focus in creating new businesses and attending to the opportunities in the emerging markets. As a result, we increased our presence in India, Africa and the Middle-East. Also we have designed better processes to listen to our customers and to consolidate the input we get. Given the momentum in the markets and our pipeline of new products, our aim for 2017 is organic sales growth between 2% and 5%, and then we maintain our EBIT margin of 28%. To make this happen, we need to make shifts in our cost allocation. We need to fuel growth by making investments and innovation, business development and in sales in particular in the emerging markets. The implication is that we have to led 198 colleagues go; they will all be told today or tomorrow. Novozymes have been used to outgrow these problems. We've been used to have time to lead attrition help us move resources to where we needed them. That's not enough right now, so we have to layoff. Behind the number is the 198 Zymers who have unique skills, and they've all contributed to making Novozymes great. So, it's painful to see them leave and I want to thank them all and wish them good luck. Now, please turn to Slide number 3. Our guidance for 2017 is based on the world as we know it now so is our longer term view. Our strategy partnering for impact is delivering. During 2015 and 2016, we worked hard to turn technological advances into impactful products, and our view of our pipeline is that it is strong and has the power to fuel growth, also under the current market conditions. With the full impact of these changes to our pipeline and the increased attention to opportunities in the emerging markets, we aim to reach our historical growth level. We also continue to aim for the announced EBIT return on invested capital and our non-financial targets. Now, I suggest we move on and give you some more granularity on our performance and outlook. The entire executive team is here that's Tina Sejersgaard Fanoe, Andy Fordyce, Anders Lund, Thomas Videbaek and Benny Loft. Anders, please go on from here please.

Thank you, Peder. Please turn to Slide number 4. 2016 was the 11th consecutive year where we posted growth in Household Care. I'm pleased with our ability to continue to grow our Household Care business, and although growth in 2016 was not impressive, it is a testament to a stable business that's continuing to deliver growth. Our analysis of the market situation in Household Care shows that we have maintained our strong global market share position. We had a strong finish to the year in Household Care, delivering 5% growth in Q4, taking the full year to 2% growth. Our quarterly sales growth came in quite lumpy in 2016, reflecting variations in order patterns and differences in the 2015, quarterly comparisons. I am naturally pleased that we delivered a strong finish after the weak sales performance in Q3. In the following, I'll give some perspectives of how our business developed in 2016 and what drove that development. In Asia, we delivered high single digit growth partly driven by our recent protease and amylase launches in partly by solid underlying market growth. Especially, the liquid market in China is showing strong double digit growth in the last few years. With the launch of Progress Uno and Amplify Prime, we have for the first time unique solutions for the liquid emerging market segment. The new products deliver both strong wash performance and unprecedented stability. This is a great example of how innovation designed for the emerging market conditions drive growth for Novozymes. Looking at North America, we saw solid mid-single digit growth driven by consumers trading up to a higher performance products and by the introduction of a new amylase for automatic dishwash. Again, another good example of how innovation drives growth. In Latin America, our business declined slightly. In Western Europe, we had modest growth in line with underlying market development whereas Eastern Europe declined mid-single digit driven by market in down-dosing by a few local customers. Moving in our different segments, our dishwash business grew double digit. Growth came from penetration in hand dish, which is a new and exciting category for Novozymes. We also saw a good growth in automatic dishwash. In laundry, growth was more modest where liquid enzymes did slightly better than powders. Looking into 2017, we expect to continue our solid performance in Asia where our new liquid launches are expected to continue to deliver growth. Increasing the penetration in Asia is high on our agenda, and we are investing more resources in the region to harvest these opportunities. A quick example of this is our decision to setup a new detergent formulation center in India. With the new center in India, we had stronger formulation capabilities. It allows us to better show Asian customers how enzymes can significantly improve wash performance and how they can demonstrate these effects to their consumers. This year, we expect a similar competitive environment as in 2016, and there will be pockets that would come under pressure; however, we expect to maintain our strong market share position. As Peder mentioned earlier 2016 is also the year where we will launch our first hygiene solution. I am truly excited about this new platform both because of strong market interest and because of significant growth expectations. The sales impact in 2017 will be limited as we launch the end of the year. But we expect to see this platform generates substantial growth in the years to come. Please turn to Slide number 5. In Technical and Pharma, we did well in 2016 as sales grew by 13% though the fourth quarter came in low at 12% growth. During 2016, we saw a good uptake of our pharma enzymes and albumin in our pharma business. As well as increased royalties from GSK. Our sales to the textile and wastewater treatment segments were satisfactory for 2016 while our leather business ended up slightly positive for the year. Now, I’ll leave the stage to Tina to talk about all the exciting developments we see in Agriculture and Bioenergy.

Thanks, Anders. Let's turn to Slide number 6 and look at Bioenergy. I am very pleased that we got a positive end to 2016 with the 7% growth in Q4. Bioenergy covers sales to both conventional biofuel and sales to biomass conversion and the growth was driven by both areas. In the U.S., 2016 was a difficult year for us where customers went for cheaper solutions, and they also did a lot of extended trialing. So, we have seen a decline in the enzyme value per gallon. As you already know, we have launched new innovations such as Liquozyme LpH to address this. It is a good price competitive solution in liquefaction and it is performing well. In conventional biofuel in the U.S. were around 85% of our business, there are around 200 plants. And in biomass, there are six plants operating. So, we offer tailor-made products to fit the different needs and wishes of these plants. And we also offer more than just the product itself. As an example, we support optimization of the ethanol plant with our technical service and provide training of the employees. We call it the Bioenergy University. In the U.S., ethanol production grew 3% in 2016 due to more miles driven and higher exports to for example Brazil and India. Globally, ethanol production grew 2%. Overall, we maintained markets share in biofuel, but sales declined by 3% in 2016. Competition here continues to be strong and comes from other enzyme producers from crops containing enzymes, and from enzyme expressed in yeasts. A number of you have asked about how it’s going in biomass conversion, especially in Q4, we had strong sales as the plants are starting to operate at more stable levels. Although, it still early days, we’re happy with the progress and will update you on how this develops. So all in all Bioenergy are down 3% in 2016 and Q4 was up 7%. So now let's turn to Slide 7, to look at Ag & Feed. In the animal feed market, we saw a strong uptake of our feed enzymes. We continue to see the strongest growth in the developed markets and Latin America. Here, it is our protein enhancing solution making the biggest impact. In probiotics, Alterion is being rolled out as planned. Here, our partner is Adisseo. We are both very excited about the prospects of probiotics and how they can improve animal health. And we’re only getting started. So far, we have approvals in the Middle East, Asia and North America and we’ll expand to even more geographies in 2017. Moving on to BioAg, as we discussed before in these calls, low crop prices have put pressure on farm income in 2016. This led some farmers to use less, or to use a lower cost BioAg product. Despite this, sales caught up in Q4. This is due to the ramp up in BioAg as preparations started for the 2017 season in North America. 2016 also marked year one in the new distribution setup. We are now delivering to Monsanto instead of supplying directly to retailers and distributors. This changes the timing of our sales. So before this change, we realized two-thirds of our sales in the first half of the year and one-third of our sales in the second half. And now, the situation is reversed. This change means that I expect our first quarter this year to decline, compared to Q1, 2016. What I’m most excited about is that we launched our new upstream corn inoculants, Acceleron B-300 SAT, in December. This product will be used on all new corn hybrids in 2017. And in 2025, we’re targeting 90 million acres across crops for this technology. The reason I am so proud is that this launch is a complete result from our partnership with Monsanto. It helps farmers to produce more with less in sustainable way which is what this partnership is all about. So all in all, Agriculture & Feed delivered 5% in 2016, driven by strong growth in Q4. And with that, Andy is next.

Thanks, Tina. Let's start to Slide 8 to cover developments in Food & Beverages. I am happy to report that we had a solid finish in Food & Beverages with 4% growth for the quarter. Well, I can't say I am satisfied with 2% growth for the full year. It was good to see strength in starch and beverage was able to overcome difficulties in the baking and food nutrition. Now let's begin to the main drivers behind our 2016 result. The highlight for Food & Beverages was the strong interest we saw from customers in Asia Pacific. We had solid growth across the region and across our business segments with baking standing out as a growth driver. We put increased focus on baking in A-Pac, so I am pleased to see these efforts paying off. Another highlight was the improved market in China for starch based sweeteners and for beverage alcohol. Our Chinese customers were happy to see lower corn prices and relatively high sugar prices. Lower corn prices helped our customers to improve margins and this is supported for our starch and distilling enzymes. During the year, we used our strong market position in China to capture solid growth for the year. Middle East Africa delivered solid growth also. We saw increasing opportunities in starch processing. And brewing was strong in Africa as customers are increasingly using our enzymes to take advantage of local raw materials like cassava. Looking at our global starch business, we have stepped up our starch refining products with new enzymes technology and our customers are responding positively. That means we saw solid growth not just in China and Middle East Africa, but also in Europe and the Americas. In fact, we have seen starch customers impressed enough with our products and strong technical service that we have won share and we have secured long term supply agreements. I see this is good validation of our competitor position and strong engagement with our customers. Now I have to share a few things that didn’t go our way during 2016. First, when I look at our food nutrition business many things went well. We saw solid growth across sub segments including our dairy lactase business. But just we lost market share at a large in fit nutrition customer overall our food nutrition business was down for the year. Shifting to baking, as I said earlier, we had good developments in baking and some emerging markets that overall it was a difficult year. The main issue in baking comes in North America to prepare for the expiry of the U.S. fresh-keeping patent coming in 2018 we used 2016 to rework our distribution partnerships in the U.S. I feel good that we were successful during the year securing long-term distribution and innovation agreements with key customers. But the reality is we are seeing price erosion in the U.S. baking markets as we position ourselves for the coming patent expiry. So what is it looks like in Food & Beverages for 2017. We see strong opportunities in the emerging markets and we are devoting more sales in technical service to these areas. We are also investing our facilities as an example we are building a new baking lab in Turkey to support customers in Middle East and Africa. As in 2016, we see solid growth coming from our starch business in the coming year. Our plans include more starch product launches during year as we further strengthen our business. Thomas will also tell you about new opportunities in grain milling that we will work to open up in 2017. We are also planning to introduce new vegetable oil processing enzymes as this is an area where we are seeing increasing opportunity and we are making progress with our new oil yield concepts. Food nutrition will return to growth in 2017, as we work through our difficulty in infant nutrition and retain solid growth in other segments. In Beverages, we expect low growth. Sluggish developed markets will drag on emerging market growth. And finally to baking, it will be a challenge in 2017 while we see continuing opportunities for near-term growth in emerging markets we will see price erosion in North America. On balance, I see Food & Beverages delivering supported growth in 2017 while starch and food nutrition as the main drivers. Now, Thomas, over to you.

Thank you, Andy. Please to turn Slide number 9. There are two things I want to cover today. First, I want to comment on our sustainability targets on water and energy efficiencies. Unfortunately, we had some challenges during 2016 which has led us not to reach those efficiency targets. We're taking steps to improve our performance in 2017, and we remain optimistic on reaching the long-term sustainability targets. The second thing I want to cover that's progress in our pipeline. As if you know, it's a key priority for us to bring our pipeline forward, and I'm happy to report solid progress across our pipeline of more than 100 projects. Some research projects are product development where others are projects to optimize our own production methods. Most importantly, we see progress in our eight priority programs. These programs are priority to us because they open up significantly new market opportunities. We are looking at significant turnover contributing from these programs in the mid -term. As mentioned last year, we'll update you when changes occur during the year. For more detailed look at Household Care, please turn to Slide number 10. Anders mentioned the upcoming launch of our first product in the high-teen segment. This is a new area for us, and new classes of enzymes are being developed. Odor and microbial residuals are becoming an increasing issue in home laundry with changing lifestyle and washing habits in developed as well as emerging markets. We are excited about the upcoming launch, and we have more technology on the development in that program. We have talked about solutions for emerging market on the several allocations. In some cases, we developed a new molecule as in the case of Progress Uno. But in other cases, it might be a different formulation. It might be a modified production set up or a changed logistical approach. We see opportunities all along the value chain. Please turn to Slide number 11 for our look at Food and Beverage. Last year, we mentioned the segment of vegetable oil processing. This is the segment with very large volumes of raw materials with a potential for optimization. We have seen good yield increases from enzymes, and we are currently working with partners to see, if a robust process can be developed and the right cost window met. We added a new segment this year. In the starch industry, the milling step is critical for the overall yield of starch as well as protein. We have again together with the partner, seen exciting potentials here. Yields of both starch and protein have increased, and we are currently looking for the right enzyme cocktail for our commercial proof-of-concept. Now please turn to Slide number 12. We have seen good momentum in Agriculture & Feed. It's a year ago we launched Alterion, as mentioned by Tina. This was the first product in the segment of animal probiotics, and we're happy with the current progress. We are currently pursuing a number of leads and engaging our colleagues from the newly acquired Organobalance to develop a broader offering. Tina also mentioned at the launch of B-300 SAT, our first inoculant for corn, it will be exciting to follow this launch and prepare for the next generation by BioYeild2, planned for launch in 2019. We have also in this area several further improvements that are being worked on in the lab, not least when we look ahead for products coming out of the transformational BioAg pipeline. We are seeing some very strong leads coming out of this program, and we continue to push the hits through the pipeline and plan to launch product early in the next decade. Whether it's developing new products or opening up new segments, our R&D muscle is key priority for us. It's important to remember that significant resources are also spent on continuously improving our manufacturing capabilities likewise we are investing significant resources in securing that we keep our technology platform cutting edge. We currently investing significant resources in areas like metagenomics, next generation sequencing as well as digitalization, all of which makes sure that our R&D capabilities allow us to open up new areas for the future and grow our business. That’s all from me, and I’ll pass the word to Benny.

Thank you, Thomas, and please turn to Slide 13. We are now close to books for 2016, and the entire organization has worked hard to adjust to a lower growth rate than we had expected. I am happy that we deliver on EBIT margin, net profit growth, return on invested capital, and cash flow coming in even better than expected. So all this metric, we reached the target that we guided for in the beginning of 2016. In fact, since 2001, we have met or even exceeded our guidance for EBIT margin and return on invested capital. This proves that we have a high degree of control overall our business and that our colleagues all over the growth accommodate to deliver. During 2016, we have kept a tight control of cost. For example, we have saved on employee costs by filling only critical vacancies. As a result, we have reduced the number of employees by 1%. By being very focused on cost development, we have seen travel cost based on service cost and other cost types coming down over 2015. If we look at the gross margin then the underlying gross margin in 2016 war on par with the margin in 2015. Productivity improvement were offset by negative price mix impact wide off negatively impact the gross margin in Q4, both when comparing to Q3 2016 and Q4 in -- so both comparing to Q3 in 2016 and comparing to Q4 in 2015. Going forward, we will aim to maintain our current gross margin level, but this is not simple. Higher growth in emerging market could increase the pressure on gross margin as could higher demand for biomass conversion enzymes. Another factor is the CapEx level, which we expect to be a little higher for the next couple of years. But as I said, our plans are to maintain gross margins. Our net profit grew 8%. For 2017, we are guiding 2% to 5% of organic growth, and we are confident that we can reach it. However, we already know that the first quarter would be at below that range. This is due to the seasonality of our BioAg business as Tina explained earlier. Around two third of our BioAg sales have been in the second of the year, which is the pattern we expect to see in the future. A big swing factor in 2017 is our business in Bioenergy. Without going into a lot of details, the launches that we’re coming, that are comings in Bioenergy will be important for us to turn the negative sales development we saw in 2016. As Peder said earlier, we have laid off 998 people, as also said before, we’re doing this to areas where we see opportunities of growth. So it’s important for me to stress, that this is not a cost saving exercise. We’re rebalancing our cost, so we can invest for growth while safeguarding our margins. So, we are guiding an EBIT margin of about 28% again. Our net investment in 2017 will be higher than normal, in the last couple of years, our CapEx levels have been relatively low but now we’re expanding around the world. Most of the investments are maintenance and expansion of existing production facilities like Blair in Nebraska, where we’re currently building more enzyme capacity. As we also announced in 2016, we have a production of these in India from an acquisition 10 years ago, which is soon expiring. So we’re investing in a completely new facility in India to replace the lease one. And off course, we will also invest in our new innovation campus in Denmark. CapEx for 2017 will be between DKK1.7 billion and DKK1.9 billion. As a result of the elevated CapEx level, our free cash flow will be between 2 billion and 2.2 billion in 2017. A word on return on invested capital. As we will have higher CapEx for the next few years, our return invested capital will be a little bit lower. But we plan to return to the long-term return invested capital product of 25%. For 2017, the return on invested capital is expected to be between 24% and 25%. Finally, we have a new stock buyback program plan. We will spend DKK2 billion to buy back shares. Also, we are proposing a dividend payout of DKK4 per share. This is an increase of 14% over last year and equals a payout ratio of 39%. We still target a payout ratio of 40% so we’re almost there. Our long term target Thomas, mentioned earlier that we see around half of our sales growth coming from our pipeline. The other half of the growth will come from underlying market growth and further penetration of our existing portfolio products. So we’re still guiding for a return to our historical growth rate but we’re little delayed compared to where we had wanted to be. With that I’ll now give the word back to Peder.

Thank you, Benny. Please turn to next Slide. Let me just quickly summarize our message today. We finished 2016 with the solid fourth quarter, a full year growth was lower than expected by the beginning of 2016, but despite that we delivered on our margin guidance and earnings guidance. If you look into the Novozymes engine room, we have developed our pipeline and accelerated near-to-market innovation that’s particular in the emerging markets. And we worked hard to improve on market visibility. We launched eight new products in 2016. Two of them are within the transformative programs Thomas talked about. Today, we also announced the layoff of our 198 collogues that’s unfortunately necessary to make the changes well safeguarding profits. And finally, when we look at the business longer term, our pipeline of products and business opportunities looks good, and we expect to return to historic growth rates as these projects materialized. That concludes our presentation today, and now, we’re ready to take your questions. Operator, please begin.

[Operator Instructions] And we will take our first question from Lars Topholm with Carnegie. Please go ahead.

A couple of questions on my side. Peder, you just rounded off discussing the long-term targets. Just to confirm, when you talk about a return to historical growth is that the 6% to 7%, I think you mentioned at the end of 2015? And when you talk about at least 26% EBIT margin target being challenged in a situation where you may get 28% margin, are you seeing anything specific that puts that margin under pressure long term? Or how should we see that? Then, a second question goes to your CapEx, more to get a feel for the CapEx level you see in 2018 and 2019 as a one-off element in the high 2017 CapEx. So, how should we see that? And maybe a brief final question. In your remuneration program, you talk about an economic profit target of 7.5 billion over the next three years, how do you define economic profit? Thank you.

Thank you, Lars, great questions. The very quick answer to your first question is, yes. When we think about historical averages, we think about 6% to 7%. And then, I'll let Benny talk about EBIT margin CapEx and remuneration. Benny, please.

Yes, so thank you, Lars. Starting with the EBIT margin, you can say ever since we have listed keeping the EBIT margin is actually a challenge in an environment where what time we see price erosion. So, every year, we need to improve the way that we work the way that we produce levels also be the case in the future. And as you know, I am sure you know that the competition is also -- it's tough and we have seen price erosion probably in the high end and also mix change that is impacting us negative. So we have work even harder in the future to maintain our margins. I would though say that I feel that we are in control that the 28% and we are also adding for that in the future. And that was the first and the next one about CapEx, we have a high level in 2017, I will not give you any number for '18 and '19. I can't though tell you that part of the CapEx in '17 and also in '16 was our new innovation campus. And of course that is contributing to the high level. We are planning to inaugurate the innovation campus in the beginning of '19. So that piece will go out of the CapEx level. So, we do believe that CapEx will come down again. In respect of economic profit --

So unchanged in '18 and then down in '19, is that a realistic assumption to put into a model?

So, what I said, I will not give you a number for '18, it will be higher than what we have seen in the past. And the innovation campus will take down CapEx in '19. In respect of economic profit, we are -- you can say making the calculation base and I think very, very and normal ways of doing economic profits. So, it is what is called NOPAT over the invested capital, so that's basically, and I'm sure that you can get the more detail from investor agent later on.

And will take our next question comes from Annette Lykke with Handelsbanken. Please go ahead.

My first question will be on the guidance range for 2017 in terms of organic growth, 2% to 5%. Could you maybe share with us what sort of assumptions should be present, if we should reach the higher level of the guidance range? Where would you really like to see some more or better trends? Moreover, also, I'd like to ask you, Peder, how confident are you on this guidance range, 2% to 5%, compared to how confident you felt a year ago, when you guided for 3% to 5% for 2016? Then I have a few follow-ups.

So, I'll take these questions. So 2% to 5% organic growth for 2017 and of course that indicates someone circles into the business, but also some visibility. I think for in order to get to the high-end I would in particular look at Bioenergy and BioAg. Of course all of the rest that needs to also grow and actually our assumption is that all the different business areas will grow, but I think if we were to get to the high-end of that is in particular going to come from Bioenergy and BioAg. To get to the lower end I think is also about Bioenergy. So that is still the most uncertain piece of our business as I view it right now. The question on how confident I am on the scale from 1 to 10 that's a difficult one. I think, we have done a lot to improve on visibility. We've done a lot to better understand the mechanisms of the marketplace. We learned a lot about the dynamics of our markets as oil price and raw mat prices were tumbling in 2015, and we saw some further impact of that in 2016. So, I feel confident about the 2% to 5%. So, I think that's the best answer I can give you.

Okay. And then, in respect to the recovery of the Bioenergy division, on the biomass conversion, how solid do you think this increase in 2G enzymes is? Should we expect that to continue, or has it more been a maybe also a budget-related demand? And my second question would be on Agriculture & Feed. If we excluded the ramp up for the BioAg launches for 2017, how much was the underlying growth in that division?

That's two very good questions for Tina. Tina, please.

Yes, so let me start with the biomass question. In the world, there are six plants operating so for sure if goes on, you could say if one have issues in the operations that means something for how much we are going to deliver so it is still a volatile business. We do expect that it would contribute to growth also next year. So, you could say there hasn’t been any budget related things in the numbers. It is that the plans are ramping up and getting more stable, but it is still volatile. Then on Ag & Feed, you asked about excluding the ramp up. I think here it's important to see that -- we see that change of sales pattern given that we start delivering two to Monsanto. So part of it is the new product which we are launching but part of it is also the change in the patents, so you should expect to see the same for next year. So that’s, I can't tell how much the underlying business is, you can see that animal feed part has been a solid growth contribution and we also expect that for next year.

Then, let me ask in a different way. Have we seen any growth in the fourth quarter for the BioAg alliances sales of inoculants in the market?

So you could just to, maybe get back as well to the question you had before. On the in-market sales of our products, we do expect and we have seen growth. So you can say that’s probably the best comparison which you can use. However, given the timing of our sales to Monsanto, it's for sure not completely decoupled, but it doesn't follow each one to one. Then on the corn in inoculants, you could say, we see a good pick up, we follow the early ordering Monsanto for the early ordering and else it is on the feedbacks and it is going out to a number of farmers and it looks good but you could say, it's still too early to tell how it's happening in the field.

And we will take our next question from Michael Rasmussen from ABG. Please go ahead.

Firstly, staying on biomass conversion, as I recall it, initially when we talked about this, three years to four years ago, in the contract with POET, and I think you initially only had that contract for four years, i.e., is there a risk that you will lose this contract to DSM either in 2017, or in 2018? And then secondly, moving onto the conventional Bioenergy business, in the U.S. in the fourth quarter what exactly did the market share do? And also, how was the price/mix impact from the recent launches? And then finally, moving back to the remuneration program, you do mention a range of 3% to 5% organic growth through '17 through to 2020 in terms of how large a share of the actual shares or share options that the employees can get. Can you add a little bit of flavor on why exactly did you choose 3% to 6% range, also in combination with the previous questions on the 6% to 7% historical ranges? Thank you very much.

Thank you. Good questions for Tina again, at least the first two of them.

Yes, so on the biomass sales, we do see we have these six plans upgrading and we do see that in general they are getting more and more stable production. Whether you could say whether comments on specific customers, I’ll not do that because that’s not what we normally do. But I can say that all six are operating and we do expect growth on all six.

Is it rightly understood that you will -- that the deal initially, I mean you guys told us that, was set up so it was a beauty contest after four years versus you and a competitor in the market?

I will just try to cover that one. The contract we have with POET was for four year from commercial start up. At least, I don’t think it's a risk, serious risk for Novozymes that a competitor would move into that business anytime soon that’s not a part of our plan, and I don’t think it's part of POET plans either.

And when exactly did they reach commercial startup?

I think that’s a good question and I guess the fact that I don’t have an answer would indicate to you that’s not at all the conversation we're having with POET right now. We expect to continue to supply that and we have very good relationship to POET.

And let me comment about the U.S. conventional biofuel market, which you also asked about and we’ve talked about two of our launches, so Avantec Amp and Liquozyme LpH, and both are, you could say, getting good foot hold in the market, we see it in quite a number of plants of both products. And we have though as we’ve been talking about throughout the year, seen price mix effects where customers have been choosing, you could say, due to spend less on enzyme solutions by using the lower-priced products. And we’ve also seen some price competition. So that’s what we’re seeing throughout the year, we also see that and we’ve had talks about that as well in these calls, whether we’ve reached the bottom of it, you could say that we think that we have done a lot in order to secure that we’re better positioned to gaining the business we have, both with these launches as well as launches to come in 2017. As well as what we do outside the product we’re selling.

And then, I'll take the question on remuneration. Just to make sure we understand the numbers correctly. The ramp on sales growth, the compound of sales growth, starts at 3% for the next three years and it ends at 6% not 5%. So the Board and we’ve agreed that three quarters of our long term incentive should be linked to economic value created and one quarter should be linked to the CAGR of sales growth. So with 2 to 5 in 2017, you can see that the upper end of this range which is 6% would indicate that we would be in order to get the full payout would be over 6% for 18 or 19.

And we will take our next question from Soren Samsoe from SEB. Please go ahead.

First, a question regarding your guidance for this year. You say you expect flat growth in Q1 due to BioAg, but also due to high comparables, comparisons, could you just explain in what divisions is it that you see high comparables in Q1? And what do you mean by that, actually?

So thank you for the question, when we’re looking into the Q1 and the reason for us to guide is, I suppose of this. When we take a way, the impact from the BioAg business we’re seeing growth and the reminder of the businesses we’re in. So, the roughly flat growth in Q1 is entirely linked to the BioAg and this is again linked to the shift from first half to the second half of the year.

Okay. So what you are saying is that the comment regarding that you have high comparison we should look away from, it is only due to BioAg? Is that how we should see it?

That is also a high comparison and it also is linked to the BioAg.

Then you have to explain what you mean by high comparisons, because if you look at the numbers Q1 is almost the easiest comparable of the full year.

So let be clear, we are seeing growth outside the BioAg it is inside related to BioAg.

Okay. Let us then assume it is entirely related to BioAg then what you then say is that if it's flat in Q1 then in, given that most growth will come in Q4 as you say, then how you should reach the 2% to 5% will, let's say, be very, very, very dependent on the growth you get in Q4 in BioAg. Is that then correctly understood?

I think I'll add to that, that Ag is of course an important part of the growth. As we have said, we are expecting growth in the all areas. And it's not the growth in the Q4 as started -- it's in BioAg it’s a growth in second half of the year in BioAg. That is important for us to get to the 2% to 5% growth.

Okay. I'm a little confused regarding the comparable, but let's get back to that later. Second question relates to your deferred income, which is around 200 for the year. If you could just tell us when -- can we expect that to be the same level the coming years, or will it start to deteriorate at some point in the near future?

So when we did the acquisition back in '13 the way that we have accounted for the differed income is that I would say the first five to six years after the BioAg lines. Then you will be at a relatively high level and after that period you will come down to relatively low level. So that’s the way and that’s the plan that we are following.

Okay. And then lastly, regarding the guidance you have given for 2017 in terms of growth and also the 28% margin, have you assumed that the competitive pressure will stay the same as well as now? Or do we expect acceleration in the competitive pressure, especially on pricing; I think here would be relevant to know? Thank you.

I think we have seen the slight increase in the competitive pressure in 2016. But I think it's just a universal thing that low growth overall growth increases competition of it. We expect that to continue in '17, but we do not expect any dramatic change to the top but we expect it to continue.

And we will take our next question from Tobias Bjorklund from Danske Bank. Please go ahead.

I have a few questions. If you look at the Monsanto that you sold into already for the planting season next year, could you share some light on how many acres that has been covered with the inoculated seeds that now are in the bags, because I think you are likely to know that? Secondly, on Bioenergy, good growth here in Q4; I understand Europe and a second innovation was two components there. Is U.S. still demanding here in Q4? And for 2017, with flattish growth in the U.S. ethanol volume outlook, what is your view specifically the U.S. market? Do you expect overall organic growth for the segment, but specifically relating to the U.S. market? And, Anders, you spoke about the pockets of competitive growth in Household Care, could you share some light on that? Thank you.

Thank you. Good questions. We will let Tina take the first two. I assume when you talk about the corn acres that's in the back.

Yes, so we have delivered everything for Monsanto to be planted for next year. We do not comment specifically this year, sorry -- so be planted next year. But we do not comment specifically on the acres to be treated. It is the part of the 90 million acres which we talked about, but we do not comment specifically on the acres. On the Bioenergy you asked about first 2G, 1G and what about the U.S., and we have seen and quite some competitive pressure and quite some trading down in the U.S. this year, and we do expect that this is going to be stabilizing that we are in a better position to keep our share. Overall, our share has been stable throughout the last quarters.

And on Household Care, I think the way we look at 2017 as it's very much a continuation 2016. We see pockets that are under pressure primarily in the carbohydrates field, and mainly in Europe where we will have the largest impact also and some impact in the U.S.

And will take our next question from Hans Gregersen with Nordea. Please go ahead.

Coming back to your organic growth guidance, if I read everything you have stated verbally and the framework you have guided into the option program it signals that you have for some years seen a lower growth than previously. You also made some comments regarding that you are being challenged on maintaining an unchanged gross margin. Are we getting into a scenario where lower growth will have a negative ability for you to drive margin expansion in the coming years, not so much an answer on numbers but more your verbal comments? That's the first one. Secondly, you mentioned in some of the segments you see stronger growth in emerging markets, rather than more mature markets. Could you be a little bit more precise in growth between the four main segments, whether they're going to contribute above or below the average you are seeing for the Group as a whole? And then finally, you have seen a quite volatile inventory-to-sale ratio over the last three to four years; is 2016 influenced by any stock building, for whatever reason? Thank you.

Thank you. On organic growth, we are guiding 2% to 5% for the 2017, and as I was talking about before, if we are to get the full payout on our LTI, our long-term incentive program than we have to be over 6% CAGR for 2017, 2018 and 2019. So that gives you an idea about is driving for we are not guiding for 2018 and 2019 now we are telling that's our guidance longer term is that as these innovation programs get to market then we will return to our historical growth rate. And I think that is as precise as we will get it today. I think as I said before of course it nothing is absolutely clear, but I would assume that if we have lower growth organic growth rates I suppose to higher then the competitive forces of the market is a bit more aggressive and there will be a bit more pressure on gross margin. I don’t think it's dramatic hence I think we can -- as Thomas was pointing to we can work with that and we can improve our cost position as we have always done. But there will be slightly more price pressure in a market where growth is lower. I don’t think we can guide on the growth of the individual five segments in the emerging markets. They all contribute to growth, the way we're seeing it and that’s also the case for 2017. And then, I’ll let Benny talk about our inventory position. Benny, please?

Peder, before we move on could we just have a little bit back your answer on the margin? You have, for the first time ever, if I recall correctly, announced an official staff reduction program. You have over the years done a tremendous job on driving down cost ratios, especially in -- both from a COGS perspective but administration. But as easy wins, I guess, have been taken firstly will it not become more difficult for you just to maintain your margin as the opportunity for cost cutting must be lower today than it was, let's say, 10 years back, where you had significantly lower margins?

I don’t think it works that way, and I think what you should pay attention to is that we guide 28% for 2017 as our EBIT margin. And I don’t see that should really change. I think there is still a lot of thing that we can do in Novozymes. I think our real problem is that the growth in 2016 was only 2% and it's 2% to 5% for 2017 and that does not allow us to just outgrow which the resource reprioritizations that has to go on in the business and we have to -- unfortunately we have layoff some people. Then, I think we need to push on and let Benny talk about inventories. Benny, please.

So Hans, can you just repeat the question, I was not entirely sure what you asked for?

If I look, your inventory-to-sales ratio, that has been quite volatile over the last four years, and we have seen a relative increase in the inventory-to-sales ratio this year. Are there any specific reasons for that?

There is a one reason that we are -- you can say trying to have the inventories and make sure that we can deliver. We don’t want to be in a situation where we cannot deliver. So we had a few situations where we were close and that's why, we're making sure that we have the inventories. So, that's not a lot of a more detail into that.

Thanks Benny. I'm cognizant of time. So, we'll just take one more question, please?

We will take our last question from Klaus Kehl with Nykredit Markets. Please go ahead.

Two questions, please. First of all, you mentioned this hygiene platform that you will launch in 2017, and you have talked about it before. But I was just wondering whether you could share any light on the market potential that this product could have. Secondly, I'm not sure whether you addressed it, but you have 5% organic growth in the Household Care in Q4; could you elaborate a bit on that because it's, yes, quite a change compared to Q3? And is there any particular market, or clients, or anything that is driving this growth? Thank you.

That's two good questions for Anders. Anders, please?

Thank you very much. I think it’s very fair to say when we launch new innovation and when we talk about the hygiene program, it is because we believe it’s going to be big for Novozymes. How big is, of course, difficult to say, we know that the customers that we talk to about this, they are excited about it, we also get indications that show that this could be substantial from a growth prospective, but I will not guidance on how big that is. I think the way you should look at it is, that it’s a platform that will be arriving over the next many years, we will come with new technologies, different technologies, not only to one customer but to a number of customers into the broad market. And if we’re successful with that venture this will be substantial. In terms of the 5% growth in Household Care, I guess the way to look at it is to combine a Q3 and Q4 and then you basically net all of that out and we had a, what in Novozymes' terms in Household Care at least, dreadful Q3, and that was a lot of that came back in Q4. I think if you look at the reasons behind it's both a question of order patterns which were more favorable in Q4 versus Q3 but it’s also a consequence of the comparisons for 2015, where we actually had a really strong Q3, where as we had relatively weak Q4. And those are the fundamental drivers for the great comeback in Q4. Thank you.

Thanks Anders. So, we have to close here. Thanks for joining in. Thanks for participating. Thanks for all the good questions. I’m sure we’re going to meet many of you over the road shows, over the coming two or three weeks. And hopefully, we’ll get a chance to further dive into both the questions that has been asked today, but also the questions that we didn’t manage to answer today. Thanks very much.