Peder Holk Nielsen - President and CEO Anders Lund - EVP, Household Care & Technical Industries Tina Sejersgard Fano - EVP, Agriculture & Bioenergy Andrew Fordyce - EVP, Food & Beverages Thomas Videbaek - EVP and COO, Research, Innovation & Supply

Lars Topholm - Carnegie Michael Vitfell-Rasmussen - ABG Sundal Collier Fulvio Cazzol - Goldman Sachs Hans Gregersen - Nordea Laurence Alexander - Jefferies International Annette Lykke - Handelsbanken Andrew Benson - Citigroup Klaus Kehl - Nykredit Bank Ian Wood - Redburn Soren Samsoe - SEB Ben Gorman - UBS

Good afternoon and welcome to the Novozymes conference call and our results for the first quarter of 2017. Thanks for joining. Today, we'll talk about our performance for the first quarter and the progress we've made in our strategic priorities. Our presentation should take around 25 minutes, and as usual there will be a Q&A session straight afterwards. My name is Peder Holk Nielsen and I am the CEO of Novozymes. I'm joined here today by colleagues in the executive leadership team; that is Tina Fano, who is heading Agriculture & Bioenergy; Anders Lund, head of Household Care; Andy Fordyce, head of Food & Beverages; and Thomas Videbaek, head of Research, Innovation & Supply. Benny Loft, our CFO, is not here today. Benny is in for some minor surgery, so he sends his regards. Our IR team is also present. Please turn to Slide 2. We are making good progress on our strategic priorities. As communicated back in January, we deploy more resources to high-growth opportunities and growth markets. The programs have just been initiated and we'll continue to increase the resource spend during the year to enhance our sales and business development efforts in the emerging markets. As you know, we believe there is potential new business in the emerging markets which can be unlocked in the short term by investing more resources. We believe this is particularly true for Household Care and Food & Beverages. I'm excited about the progress in our pipeline. We continue to invest in R&D to strengthen our technology leadership. This has resulted in good progress and two of our market expanding opportunities in our pipeline have advanced to the next stage. And we've made two important product launches during this quarter in Bioenergy and in BioAg. In Animal Health &. Nutrition, we've entered into a strategic collaboration with Boehringer Ingelheim. Together, we will develop and commercialize probiotics for poultry hatcheries. Thomas Videbaek will return to this in the R&D update later in our presentation. So, it's been a good start to the year and our sales and earnings are on track for 2017 compared to the outlook we provided back in January. Now, let's look at the numbers. So please turn to Slide 3. Sales for the first quarter came in slightly better than we had expected. Sales were up by 3% organically and by 4% in Danish krone. Most of our markets have developed well. In fact, we have seen good growth in our businesses since the third quarter of 2016, especially Bioenergy and Food & Beverages. We are only three months into the year, so while it's been a good start to the year, it has not made us change our growth outlook. The agricultural markets are volatile by nature and the increased focus on cost performance by some of our large FMCG customers do induce some uncertainty for the remainder of the year. I'm though encouraged by the growth in our emerging markets. It's good to see a 6% growth in this first quarter in these markets. And it's really good to see our Bioenergy business continue with the momentum we saw towards the end of last year. Both our conventional Biofuels business and Biomass Conversion are contributing to growth. And earnings are good. EBIT grew by 6% and the EBIT margin ended at 27%. If we adjust for the extraordinary cost related to the reduction in personnel during the first quarter of this year, the EBIT margin would have been around 29%. All in all, positive developments here in Q1 with solid progress on strategic priorities and our sales and earnings are on track for the year. Now let's move on to Anders Lund, so he can give you an update on Household Care, Technical & Pharma. Anders please?

Thank you, Peder. Please turn to Slide 4. In Household Care, we continue to put full force behind our innovation to help our customers deliver better performing products. We continue to see innovation as a key for driving higher enzyme inclusion as well as increasing penetration in emerging markets. That's what we are focused on and we are progressing well towards that goal, even if market remains challenging. First quarter came in as expected at 1% organic sales growth. Let me give some details on the quarter. Sales in automatic dish wash were very strong, driven by tailored enzyme solutions and because of increased performance focus in Europe. In laundry, we are seeing good developments in many emerging markets such as India, Southeast Asia and China. These markets are developing well for us as our recently launched multienzyme blend and higher stability products make inroads in these markets. So overall speaking, we are doing well in the emerging markets. Right now what's keeping growth in check is our laundry business in some of our developed markets. The underlying laundry market is showing limited growth and some of our large global customers are under pressure to deliver growth and improve profitability at the same time. The cost focus from large FMCG companies is not new but it is further accentuated in the beginning of the year. Now let me spend a little time to talk about our priorities in 2017. We want to stay on top of how our customers' ambitions develop and be their preferred enzyme and innovation partner. We also want to inspire our customers and make sure they see the full perspective of what we can achieve together. Accordingly, one of our strategic focus areas in 2017 is to continue with the implementation of our Top 20 program where we prioritize and allocate additional resources to our 20 most important customers. As a new thing, we are co-developing campaigns with our customers to differentiate their products and to educate consumers about the benefits of enzymes in detergents. A few recent examples are Unilever's launch of their new OMO liquid detergent in China and Coop's [indiscernible] detergent launch last week in Denmark, both talking about enzymes and Novozymes. Finally, we are progressing well with our hygiene and freshness platform and expect to launch the first solution at the end of the year. So, to sum up, sales came in as expected in Q1, markets remain challenging following the start of the year with an accentuated focus on cost in the customer dialogues, we have significant launches in our pipeline, and our hygiene program is on track. Moving quickly on to Technical & Pharma, sales in the first quarter came in flat organically, as expected, and 13 down in Danish krone. We saw good developments within Pharma whereas sales to the Technical Industries were slightly behind last year. Now I'll hand it over to Tina to talk about Agriculture & Bioenergy. Tina?

Thanks Anders. Let's take a look at Bioenergy on Slide 5. I'm pleased to see that we progressed in building our business across agricultural value chain. You may have seen that we recently released our One Acre Study. It shows how the same acre of U.S. farmland can produce more feed, food and energy with lower greenhouse gas emissions by adding biological solutions to the conventional value chain. This is the very promising area that we are active in. In the first quarter of 2017, the good momentum we saw last year continued. In the first three months, sales grew by 6%, coming from both conventional biofuels and biomass conversions. For the U.S. conventional biofuels market, we have launched a new yield-enhancing product portfolio under the Spirizyme T umbrella. It's gaining good traction in the market as we see many of our customers wanting to trial the product and continue buying it beyond trialling. Also our solution launched last year, such as Avantec Amp and Liquozyme LpH, continue to contribute all good innovations that can help us all save CO2 when using liquid fuels. U.S. ethanol production is estimated up 4% for the quarter. Consumption was however slightly down, so inventories are increasing while exports are stable. Producer margins came down a little in Q1, but are still positive. Biomass Conversion also grew, thanks to our partners' increasingly stable production, leading to increased uptake of our 2G enzymes. Let's take a look at Agriculture & Feed on Slide 6. Sales through Agriculture & Feed grew by 2% organically in Q1. As we discussed before, the strategic focus within our Feed business is on selling enzymes to enhance the nutritional value of animal feed. We are also extending into a new business area of health solutions. One of the technologies here is probiotics. In probiotics, we have a partnership with a feed ingredient maker, Adisseo. Together we have launched one product for poultry. Sales of this joint product, Alterion, are progressing well. Last month we added another significant element to this area when we announced a strategic collaboration with Boehringer Ingelheim Animal Health. The focus here is on poultry hatcheries. I am excited that we are expanding our reach, which is crucial for building this new area. Looking at current performance, sales of enzymes for feed grew strongly in the first quarter, mainly due to underlying performance as well as favorable timing of orders. Our growth was broadly based. In BioAg, Q1 sales growth was negative, as expected, due to the changed sales patterns. Going forward, we expect the majority of our sales to come in during the second half of the year, which was not the case previously. This makes a quarter over quarter comparison difficult. Our BioAg business is progressing as planned. Our newly launched corn yield booster, Acceleron B-300 SAT, which is the first product developed together with Monsanto, has been well received by the market. Novozymes realized all of its sales of this product for the North American 2017 season in the second half of 2016, so we don't see it in the Q1 numbers. We are hardly on quantity, so getting microbial treatments onto corn is an important step for the alliance, but it would take some time before it becomes a larger part of our business. Soy and pulses are our main business today, and for the soybean farmers, the BioAg Alliance is also offering new technology this spring in the Acceleron product line. I think it's great to see the fruits of our joint efforts and how our different capabilities lead to better, more sustainable solutions for farmers. So to sum up, we are seeing good progress in developing our business in the agricultural space. We had an exciting new collaboration with Boehringer Ingelheim in Animal Health, we have launched one new product in BioAg and one new product in Biofuels too, and we see positive development in both conventional Biofuels and Biomass Conversion. And now, over to Andy.

Thanks Tina. Let's turn to Slide 7 to cover results in Food & Beverages. We are focusing our efforts to help our customers to improve the quality and sustainability of their food and beverage products. That focus is paying off as customers have rewarded us with a solid start to the year at 6% growth in Q1 for Food & Beverages. Let me give a little bit of detail on how things have developed. Looking at our regions around the world, with the exception of Latin America we've seen growth across all geographies. Europe/Middle East/Africa was the strongest region with all industry segments delivering growth. North America has been strong in all industry segments except baking, which was weak due to expected price reductions in our freshkeeping segment. Asia Pacific was mixed. China continues to show strong results in the starch and distilling business, counterbalanced by weakness in brewing and a slower start in Southeast Asia and India. From an industry segment viewpoint, Starch and our Food & Nutrition business were the major drivers for our growth in Q1. Starch continues to benefit from modest corn prices, giving the industry a boost in the sweetener and fermentation industries as it's a low-cost carbohydrate source in the market. Novozymes has a strong position in the starch processing enzyme market with a full suite of products, solid tech service and new innovation strongly reinforcing our leadership position. I'm happy to report that we are delivering on a strong return to growth in our Food & Nutrition business, as we spoke about in our last call. This resulted from containing strong demand in our dairy lactose reduction business and from recovered market share in the infant nutrition space. In our January presentation, we talked about new innovation in both our Grain Milling and our Oils & Fats businesses. We're making good progress in both areas. Test marketing and customer trials have given positive feedback on our new yield concepts and this increases my confidence that we have future potential. The grain milling and oils and fats yield concepts are interesting new areas where Novozymes' innovation can help create more opportunities for our customer. It will take time to assess potential and we will keep you posted as we make progress and firm up our expectation for these areas. Now, if I look at some of the tougher areas, Baking is contracting due to the price reductions we're making in North America and that is pulling down otherwise solid results. While that is expected, we are working hard to grow in Baking via our emerging markets and through new innovation with partners. That will take time. Additionally, Latin America and Eastern Europe are not growing as we would like within Food & Beverage area. This is partly related to political and economic conditions in these regions. That said, we're working with customers in the regions to develop good opportunities. Summarizing, we want to help the industry to make better food for more people. We will be pushing hard to grow the business through new innovation and working with customers for penetration opportunities, especially in emerging markets. We feel that approach will keep up momentum as we work through challenges, especially in baking freshkeeping. On balance, I'm pleased with the start we have in the division. We have good opportunities to help customers to succeed and to see Food & Beverages with Starch and Food & Nutrition as the main drivers of growth within our portfolio at the moment. Now, Thomas, over to you.

Thank you, Andy. Please turn to Slide 8. As Peder and Tina mentioned earlier, we have recently announced a new strategic collaboration with Boehringer Ingelheim Animal Health, one of the largest animal health companies in the world. We are excited about this new collaboration which will focus on the development and commercialization of probiotics for poultry hatcheries. Probiotics can provide birds with beneficial bacteria early on in life and be an alternative to antibiotic growth promoters. The collaboration with Boehringer Ingelheim marks an important development for Novozymes within probiotics and for poultry producers too. Utilizing Boehringer Ingelheim's close relationship with producers and application understanding, Novozymes will gain valuable access to new insights, distribution channels and customers. Looking at our innovation, we continue to push for more launches across our established industries and new markets. In the first quarter of 2017, we launched one new product in BioAg and one new product in Bioenergy. The BioAg Alliance launched Acceleron B-200 SAT for soybeans. This product is based on a technology that complements and stimulates the growth of beneficial microbes in the soil. This can improve nutritional uptake, leading to an improved plant health. The B-200 SAT formulation has significantly improved stability, enabling upstream seed treatment of soybeans. In Bioenergy, we announced the launch of Spirizyme T portfolio. This is an advanced suite of glucoamylases with a number of yield enhancing activities, especially a focus on converting difficult to ferment sugars. Extensive plant trials have shown that using Spirizyme T reduces the amount of these residual sugars by up to 70%, which is the highest in the industry. At current prices, this can result in up to $1 million in additional revenues for a 100 million gallon plant. This is a great example of how our technology in combination with powerful technical service can create value for our customers. Customers can operate their plants more efficiently with less waste and higher yields. Please turn to Slide 9 for a quick update on the pipeline. A key task for Novozymes is to develop our business – in developing our business is to advance our pipeline, and I am happy to report significant progress on a couple of our market-expanding opportunities in Q1. In the starch industry, we have a program within grain milling. Milling is the first step in grain processing and has great influence on the overall yield of starch and protein. Today, there are no enzyme solutions for grain milling and that's what we are trying to change. The technology is based on our understanding of complex fiber and biomass structures, which allow for better separation of the grain components. In the beginning of the year, we have seen promising test results with our customers, which takes us a good step forward towards commercial proof of concept. As a result, this program has been moved from 'Discovery' to 'Development' and we aim at launching in 2017. In BioAg, as we talked about earlier, we had a successful commercial launch of our enhanced corn inoculant, Acceleron B-300 SAT. The inoculant was on all Monsanto's new corn hybrids in the U.S. and farmer has received it well. It will be exciting to follow the rollout of the first upstream corn inoculant over the next few years. All in all, we are encouraged with the progress across our portfolio of market-expanding programs and we look forward to see how these and other new innovation reach to market and have an impact on the world. That's all for me and I'll now give the word to Peder for a short update on Q1 financials and a summary. Peder?

Thank you, Thomas. I'll cover the financials in Benny's absence. Please turn to Slide 10. From a financial perspective, the gist of it all is that profitability has remained high in the business and the financial outlook for 2017 is maintained on all parameters. Let me add a few comments to our first quarter performance. We have 3% organic sales growth, which translates into 4% top line growth in Danish krone and 6% growth in EBIT. As you might recall, the first quarter of 2016 was impacted by reorganization costs. So was the first quarter of 2017 as we reduced staff. The associated extraordinary costs were about the same in the two periods and therefore are a wash when you compare Q1 2017 to Q1 of 2016. If we disregarded the extraordinary costs, EBIT margin would have been around 29% in this quarter. We are careful on cost expansion in Novozymes. This is an important driver of the high EBIT margin here in Q1. Also, we had a slightly higher gross margin. Unfavorable developments in price and mix were more than offset by productivity improvements. We are allocating resources, more resources to growth initiatives. So expect cost to increase from this low Q1 level. Consequently, we maintain our full-year EBIT margin expectation of around 28%. Net profit was up 4%. Our net financial costs were higher than Q1 last year as we saw an unfavorable development in currency hedging costs. Our tax rate was 1% lower at 21%. Free cash flow grew by 16% and made up 20% of sales in this first quarter. We expect net investments to become considerable this year, which will have a dampening effect on free cash flow generation in the remaining three quarters of 2017. From a balance sheet perspective, net debt increased in the first quarter. It's largely driven by us returning around DKK 1.7 billion to shareholders. So in short, we maintain the full year outlook on all parameters. Please turn to Slide 11. Let me round off our presentation by concluding that we had a good start to 2017 with solid progress in our strategic agenda, that our diversified growth model in Novozymes showed its quality this first quarter, and we continue to put resources behind our top innovation programs, the deep partnerships and local market solutions. Novozymes' business is about turning amazing science into sustainable biological answers to create long-term value, and this first quarter was a good step in that direction. That ends our presentation, and as we flip through Slide 12 and go on to Slide 13, we are ready to take your questions. Operator, please begin.

[Operator Instructions] We'll take our first question from Lars Topholm of Carnegie. Your line is open.

Congrats with a good quarter. A couple of questions on my side. Tina, you mentioned favorable timing of orders in Feed, at least it was on the slide. Can you elaborate a bit on how we should think about growth for that business in Q2 if we want to take that into account? And then on Household Care, both in the presentation and in the report you highlight what you call an accentuated focus on cost from your customers. Can you be a little bit more explicit about what happened in Q1, and when you mentioned there is a risk that this could hurt enzyme dosage, is that because you basically have insight into your customers' pipeline, so you know this, or how should I think about that? And then a household question, the 17 million or so in layoff costs, how is that distributed under different cost categories? Thank you.

Thank you, Lars. We will let Tina have a go at the feed enzymes business. Tina, please?

Yes, so it's true that the growth we're seeing in our Feed business is partly coming from underlying performance and partly from timing of order. That's as much as I can say, Lars. It's when we compare what we are selling and comparing it to our [indiscernible] sales, so that's how we pick that up.

Okay, but you cannot indicate how many percentage point of the phasing affect us?

No.

Okay, that's fair enough, Tina.

And the Household Care question, I think the way we look at this is that we are seeing that the large FMCGs are under a lot of stress, both to deliver growth and improve margins. Some of those customers are some of our large Household Care customers and that dialogue has been increased in terms of the pressure that we're seeing. These remarks, they cover specific customer dialogues, but we are not commenting on those individually. I think the way to look at this is that we look at a little bit more on certainty than we did when we entered the year – uncertainty than we did when we entered the year, and that's what we're calling out here.

Thank you, Anders. And the 17 million in extraordinary costs are pretty evenly distributed across the lines and the different divisions and functions. So it's very equal across these different elements of the business. Thanks Lars. Then we move on to the next question.

Our next question is from Michael Rasmussen of ABG. Your line is open. Michael Vitfell-Rasmussen: First of all, I would like to ask into the gross margin. You mentioned negative price mix is impacting that negatively. Could you give us a little bit more details on any specific product areas or divisions or geographies please that you think is negative prospects? Then moving on to the Food & Beverage division, I think it's the first time you break the DKK 1 billion in quarterly turnover. Now is there any reason for why we shouldn't see this performance continue throughout the year? And on that note, can you just talk a little bit about how the prices on freshkeeping products in the U.S. is kind of phrasing out from now until Q1 2018? The final question is on Spirizyme T. Tina, maybe you could just add a few more comments? You did say that a lot of customers or some customers at least had gone from trialling into actually buying the product. Is this happening at a quicker pace than what you have seen in the past with for example Avantec or other product launches, or is this kind of a normal run rate? Thank you so much.

Thank you. All very good questions. I think we'll start with Andy on Food & Beverage. Andy, please?

Right. So we felt good about Q1. We saw a lot of things go right. We called out Starch and Food & Nutrition as particularly positive. Beverage was also a nice contributor. The one outlier was the Baking business, which was expected based on the changes we are seeing in the North American freshkeeping market. We feel good about the potential to contribute positively to growth throughout 2017. It's nice to have a good start. I think we've got a good balance of sort of ups and downs that we're also working with. I think it will be hard to say exactly where we'll land for the full year, but like I said, a good start gives me some confidence that it's headed in the right direction. When we talk about price in freshkeeping, we're in a process now making adjustments in the prices. That's being done in what we call a glide path approach. So you should imagine that all the way through Q1 2018, we're making adjustments in prices to reflect what we think the new market pricing will be and we're kind of let's say gradually taking things down to that level throughout the year.

And then on the Spirizyme T, we see if we compare to products like Avantec Amp and Liquozyme, I would say we see quite good traction. So you could say, it's in the higher end of what we have seen normally but it's not extraordinary, but it's in the good end of what we have seen. We see customers, we've been out trialling it, we launched the product in February and we have been out trialling it before as well, and that's why we can tell that the customers are starting buying as well.

And on the gross margin, first of all there is a very good work done in research and optimization and supply operations to optimize. So we actually see some good contributions, positive contributions to gross margin. The main drain on gross margin is pricing and it's exactly what Andy talked about in Baking. That's the main part of that. Actually I think very comforting, we're seeing the end of fuel price reduction, fuel enzyme price reductions. The mix is almost a wash. So it's really Baking pricing that takes the gross margin down a bit. Then we move on to the next question please.

Our next question is from Fulvio Cazzol of Goldman Sachs. Your line is open.

Good morning everyone, or good afternoon I should say. Three questions from me. The first one is, whether you can provide additional color and if you could give us some sense of sustainability of growth within the Starch business, as I think that your growth rate picked up in the second quarter of last year, so just wondering if this could impact your run rate in the coming quarters. My second question is on the moving parts behind your margin guidance for the year, specifically whether you can provide any color on the impact we should expect from the increased investments that you mentioned to improve growth in the EMs? And then my last question is on the new collaboration with Boehringer Ingelheim. When do you expect to see the new relationship contributing to results, i.e., does Japan already have a probiotics offering which Novozymes can now produce for them or would you be starting from scratch with this new partner? Thank you.

Thank you very much. We'll let Andy talk about Starch. Andy, please?

So it was a good start to the year, particularly strong in Starch. That's being driven by three things. One is corn prices especially in China are at levels that make starch a particularly interesting carbohydrate source for the refining, sweetening industries and for the fermentation industries. So, that remaining solid will help us throughout the year. Two additional things are going on. One is that we had launched new innovation in starch refining about a year ago, year and a half ago, that helped us gain some market share. We're going to continue to see positive impact from that market share gain in 2017, not for the full year but sort of for a majority of the year. So that also gives us some support. Then the third thing is, we're talking about some new innovation on the grain milling side. That's not really in our results yet and I don't think it will have a big impact in 2017, but it can provide an additional growth source in the future. So I think that also gives us some confidence that starch is a sustainable platform for growth in the future. I think we'll have a hard time matching the Q1 number in isolation, but throughout the whole year I think we're going to have a good situation in starch.

Thank you, Andy. And Thomas, what should we expect from the Boehringer Ingelheim collaboration?

Hopefully very exciting outlook for poultry hatcheries, that's certainly what we are aiming at. The background for this collaboration is to develop and to commercialize probiotics for this exciting area. This is a new activity for Novozymes and for Boehringer, and together we will decide what products do we take into development here, and then over time we will see them get into the marketplace. So this is a new area for both parties and an exciting area for the poultry industry we think.

And on the margin, I mean we posted 27% this first quarter, and if we take out the extraordinary costs that we have because we let people go, it would have been 29%. We expect that as we execute on the strategies we talked about on the first quarter, which includes significant investments in the emerging markets, you may remember we talked about a Detergent Formulation Center in India, we talked about additional baking resources in Turkey to support our business in the Middle East and Africa on baking products, just to name a couple of examples, that combined with some additional investments in research that is heading out towards some of the main opportunities we're talking about and Thomas just referenced, we will be adding people as we get into the second and third and fourth quarter, and that will be a bit of a drain on the annual EBIT or the closing EBIT margin, which we expect to come up at around 28%. And with that, we'll take the next question please.

Our next question is from Hans Gregersen of Nordea. Your line is open.

Going back to the last question, Peder, you talked about that investments will be picking up in the second half. Can you be a little bit more specific or detailed on what sort of investments you're looking at? And a follow up on that, I think it was about one or two years back, you announced a transformational target, about five partnerships and 10 new products to be launched by 2020. Can you give an update on where you are? And then finally over to Household Care, first of all, how big a proportion does the 20 customers account for? And secondly, when we look on this cost focus you mentioned, you stated in the Q1 review that there has been a negative impact. Can you first of all quantify what that is and what is the potential risk we are looking towards for the remainder of the year? Thank you.

Thank you. I think we'll start with the Household Care question. Anders, please?

So when we look at the 20 program, it is the majority of our business and it's plus-two-thirds of our business that is within the top 20. I think an interesting observation around that is that we have three very large global accounts but we also have some very big local accounts, and it's among those where we try to prioritize these driving more innovation into all of these 20 customers. On your other question, I think we are calling out right now is some early signals on uncertainty and I don't want to be much more specific than that, and the reason is that we simply do not have a full sort of certainty where this will take us in terms of 2017 and 2018, and the impact that we are talking about is actually more related to sort of an outlook in 2017 rather than it is what impacted us in the first quarter.

And on the partnerships and our targets within that, you're absolutely right, that is an important part of driving the business forward. We have some very important partnerships already and we think we are on track to the five partnerships before the end of this decade. Likewise, when you look at our pipeline, we see a number of transformational products coming along. So here, 10, it's a very challenging target we have set for ourselves, but we believe we are on track to actually reach it, and when I look at the pipeline, I'm really encouraged with the progress.

Thank you, Thomas. And on the EBIT margin, the further addition of cost that we're going to make, I think was the question. As I said that there is quite an addition of cost in the emerging markets. I referenced a couple of examples of that. Also in research, we are adding cost in specific areas. The exact makeup of the journey is not totally clear because it depends on really our success in recruiting people and how fast we can do that. So I can't give you a lot more details on exactly how it's going to work out. But when you look at the full year, we think it's going to take the underlying EBIT margin of 29% this first quarter down to 28% for the full year.

This is the coordinator. Are we ready to take the next question?

We are ready to take the next question, yes please.

Our next question is from Laurence Alexander of Jefferies. Your line is open.

Two questions. First, if the U.S. ethanol industry stays roughly flat for the next several years, how fast you think you could grow the Bioenergy business with the 2G biofuels and the share gains that you're targeting? And secondly, just to come at the restructuring question from a slightly different angle, will the pace of accelerating investments continue in 2018 or should you get at least some level of a slingshot effect as the new investments coupled with the restructuring give you a reset to base for 2018?

We'll start off and let – we'll let Tina answer the ethanol question. Please, Tina?

So in Q1, we have seen U.S. ethanol production being up with 4% but for the full year we do expect it to be on par, slightly up compared to 2016. We do expect that both conventional biofuels as well as biomass conversion, our second generation ethanol, will be contributing to that growth for the full year.

Thank you, Tina. On the investments in the business, as we told in January, we were letting go of about 198 Zymers as we call ourselves, because we needed to quickly invest more heavily into the emerging markets and some of the other innovation programs that we've been talking about. That investment will happen over 2017. We also – we are reserving some space for further investments in 2018, but of course we haven't planned 2018 yet. I think the best I can say now is that we expect to end 2017 with an EBIT margin of 28% as guide, and then we'll look at what investments are needed in this area in 2018 as we move on. Then we'll take the next question please.

Our next question is from Annette Lykke of Handelsbanken. Your line is open.

Thank you very much. I just have a few questions. Most of them have been answered. In connection with your larger clients being more focused on cost [indiscernible], how certain or what degree of visibility do you have in terms of these clients, including your new hygienic enzyme platform or products? Should we see any uncertainties in this respect?

Okay, that was one question which I think we'll direct to Anders. Anders, please?

Thanks a lot for the question. I think I can very clearly state that there is no link between our hygiene platform and the uncertainty that we call out. We are as excited as we've always been on the hygiene platform and we are also working towards launch at the end of the year. I think that the reason why we called it out is that we are seeing sort of the FMCGs being under more pressure. Some of that pressure travels to us and that's what we called out as something that we might get back to later in the year. But the two are not connected whatsoever.

Okay. And then maybe a question for Tina, in the Bioenergy, are we seeing sort of a stronger interest for the biomass production and thereby second generation enzymes in this respect or how should we read this, what is your expectations for these facilities in the longer-term?

We are – you could say our sales growth in the biomass industry is driven by that our partners are getting more and more stable production. So as their production ramp up and it becomes more stable, then we also see a growth. We do see though as the number of plants are not that big, as you all know, that it will be lumpy, but we do expect that for the full year it will contribute to growth. And we do also as the industry is being formed, it is just in the nascency of an industry, then we do also hope more plants to get online, but that is for the future.

Okay, thank you.

Thank you. Then we'll take the next question please.

Our next question is from Andrew Benson of Citi. Your line is open.

I was wondering if you could sort of give any quantification of the 2G enzyme business, and I think I'm right that you are supplying five reactors or power fuel plants at the moment, but just to get an idea of the contribution to growth versus the mature 1G business. On Slide 8, your progress in your pipeline, I was just wondering if you can give some sort of quantitative guidance of the peak sales/peak profit potential of the pipeline. Thirdly, the oil price erosion down to beating it last year was an alleged contributing factor to the slowdown in your business, and oil prices are now in where they were in 2014 and before, but they are a lot higher than early last year. So is there any sign that the high oil price is leading to stronger growth yet? And lastly, just when do you think the time horizon of a first probiotic product through the new alliance with Boehringer Ingelheim might be launched? Thanks.

Thank you. Tina, 2G please?

So 2G is contributing to our growth but it is still a small part of our full Bioenergy business. It's for sure something we have hopes in but it is still a small part of the total sales.

And on the pipeline development, as I said, we are excited about the development of the pipeline. We think that we have a number of transformational opportunities, but we also think it's too early to talk about peak sales and the actual commercial value of these different pipelines. We will get back to talk about the individuals as we are ready and doing that in our normal updates. But we don't give out the specific values of the individual projects. That's simply too uncertain.

Thank you, Thomas. If I can just add, of course the mere fact that we called them out indicates that they are significant. On oil price, I think that's a very good question, and obviously we were – I mean actually we only saw the real impact in our Bioenergy business in the second quarter of 2015, which indicates that it's actually more about producers' margins than it's about the actual oil price when we think about the biofuels. Now oil prices have come up a bit, so has ethanol prices, but when you look at the producers' margins, they have improved a bit but they are still not great. I think if we see some further increase in oil price, we'll probably see that the business will be doing better. We are I think at the end of this tremendous mix change that happened between the second quarter of 2015 and the third quarter of 2016. And what you're seeing in biofuels right now is that the business is roughly stable. We are bringing new innovation out there and that generates a bit more or helps us grow a bit faster than the underlying market. Personally I think higher oil price, if that was to happen anytime soon, it takes a bit before it really rubs into the system. So you shouldn't expect a short term effect except for that U.S. bioethanol business on oil pricing. But as we have said many times, long-term, longer term, a company who makes its profit and revenue growth from delivering replacement of raw materials and energy, high raw mat cost and high energy cost generally favors the adoption of new innovation, and thereby also helps us grow our revenues. With that, we'll take the next question please.

Our next question is from Klaus Kehl of Nykredit Markets. Your line is open.

Two questions from my side. You have mentioned a couple of times that the fast moving consumer goods companies, they are under pressure, which will always have a negative impact on you or could have a negative impact, but why do you think they are under pressure? Is it due to declining volumes in the market or is it increased competition or what exactly is the trigger for this? And secondly, is it a global trend, are we more talking about Europe? And thirdly, you said that you've had a solid start to the year, but you also stated that here in Q1 you've seen inventory build-ups in Feed, to some extent in Bioenergy and you see increased pressure from the fast moving consumer goods. Does that mean that overall you are more cautious about the coming quarters than you were before or how should I understand that? That would be my questions.

Thank you. I think we'll direct the FMCG question to Anders please.

So I think the two things I'd call out on the FMCGs and what's happening, I think one is the longer-term effect where retailers have been pushing FMCGs quite hard over actually quite a few years and actually try to drive down their profits and making it more difficult for them to act. The other thing which we are also seeing is that there is some increased activities amongst some of the investors which are also pushing them for higher margins. Both of those factors are making life right now tougher on some of the global FMCGs. And on the question of whether this is global or local, I think the pressure is to a very large extent global when it comes to retailer pressure, and of course investor pressure also you could consider global.

And on the first quarter, I think as Tina pointed out or points out, there is a – at least there is some fairly high feed enzyme inventories at our partner when we cruised from the first quarter to the second quarter, which is probably going to I mean come back over the next three quarters. We also know that there is a high inventory position on bioethanol in the U.S., not enzymes but bioethanol, and that that could lead to a reduction in production maybe in the second and third quarter. So there are a few things that has to do with timing, but I will say in general, we caution you to look too much at the individual quarters. We look at the longer trend. We do that when businesses do not perform as we want them to perform and we also do so when we have a quarter that comes in slightly better. I don't think we are any more cautious. We have looked in detail at the business and the buildup to the announcement to the market this morning, and when we look at the full year, it looks almost dot on what we expected in January. With that, we'll take the next question please.

Our next question comes from Ian Wood. Please state your company before stating your question.

It's Ian Wood from Redburn here. My first is around the new corn inoculant. I think it sounds like you had a very good sell-out from Monsanto in the first quarter. Maybe you could talk about how this makes you think about acreage for next year when you sell it in the 4Q, and then longer-term the acreage for this product? I think also on BioAg, you mentioned something around soybeans on the Acceleron line. Maybe you could just talk a little bit about that? And then finally on the Bioenergy, I think Spirizyme, you're talking about a fairly good launch. How you're feeling about the rest of the year? Do you have any other products ready for this market? And those are my questions. Thanks.

Thank you. Good questions for Tina. Tina, please?

So let me start with the corn inoculant. So the corn inoculant was launched from our side and sold to Monsanto in last year, so that it's out in the field now. Monsanto is reaching about half of U.S. corn, so that's 45 million acres. And this new corn inoculant gets onto all the new corn hybrids, so that's between 10% to 20% of their acreage. So, doing the math leads to that it's around 5 to 9, or 5 to 10 depending on how you calculate, of million acres right now. How we will be moving forward with that, it needs finally to be decided, but for sure we have been out talking about that the Acceleron line which includes this but also different crops is something which has the potential to reach 90 million acres. On the soybean Acceleron line that is you could say part of the Acceleron brand as well, it is an isoflavonoid compound which helps attract microbes to the plants and thereby helps give extra yield. And then you asked about a Bioenergy question on whether we have other product launches, and we do have other product launches in the making in the Bioenergy space as well for later in the year, on top of the Spirizyme T product which we launched in February.

Excellent. Thank you.

Thank you, Tina. We'll take the next question. Maybe we have time for one or two more please.

Our next question is from Soren Samsoe of SEB. Your line is open.

Two questions from my side. First a follow-up on some of the earlier questions on Household Care. I was just wondering, since you now say that there's increased cost pressure from your customers that are looking at their budgets, we know that some of the price of some of other ingredients in detergents has gone up. In sort of a few years ago, one of the big arguments from you guys was that you'd be able to substitute a lot of the other ingredients in detergents with enzymes at better pricing. Is that not happening given that you have so weak growth and is that story more or less dead now? That was the first question. And the second question is more on your CapEx level, which is of course quite high at around 12% of sales this year. When do you expect that CapEx level to normalize and at what level as a percentage of sales do you expect it to normalize at? Thank you.

Anders, you get another turn at the Household Care market please.

So to your question around reformulation, I think it's absolutely still valid. There are some dynamics in the market where it does take time and the short-term effects are not immediate. It's not that our customers, they do trade depending on raw material cost sort of over months. This is more the longer-term game. I also think, adding to that, it's important to say that a lot of our growth that we actually saw from 2006 up until 2010-2011 was actually driven by reformulation, and some of those low-hanging fruits have been taken, and of course it makes it a little bit more difficult to get at. But we definitely will benefit from higher raw material prices. It makes the equation towards enzymes more positive and favoring our technology. So longer-term, this is exactly what we hope will happen and it will have a positive contribution, but it doesn't happen so fast.

Thank you, Anders. And on CapEx, as you probably are aware of, we are making a large investment here in Denmark to create another or a second innovation campus. That is a large investment and we expect to be done with that as we roll into 2019. Also, we are expanding in India to move out of some leased facilities we're in right now and to have our own manufacturing setup in India. Those are examples of, a couple of examples of some extraordinary investments that we cater for in 2017 and the next couple of years. Of course we will be doing our 2018 budgets at the end of the year and we'll start preparing for the volume growth we think we'll have in 2018 and 2019, and based on that we'll size the investment level that is needed for our manufacturing setup in 2018-2019 and going forward. But I think a good number to still have in mind is that kind of the maintenance CapEx is about 8% of revenues. That is what caters for 4% to 5% volume growth and the normal kind of optimization that goes within the business. And then some years we have something that goes over and we've also had years where we've been under.

But on average, you have had – the last 20 years, you've had 9.3% of sales. So why do you expect now that it should be below that level?

I didn't say I expected it to be below that level. I said the maintenance part is around 8% and that caters to about 5% volume growth. If we have higher volume growth, we'll need to front-load and we'll have higher investments. So I'm not saying 9.3% is out of the question, I'm just saying we'll wait and see until we have build up the expectations for 2018 and maybe 2019.

Okay. Thank you.

We'll take one last question please.

We'll take our final question from Mr. Ben Gorman of UBS. Sir, your line is open.

Just maybe one very, very quick follow-up on the corn product in BioAg, and thanks for the detail in terms of the acreage expected at the moment, but when can we expect it to come through sort of more into sort of revenue numbers? Obviously now these are reasonably strong acreage numbers straightaway and yet our organic growth has been much below what we might expect off the back of that. So is that purely just a very strong negative impact from the timing issues you discussed on the other products? And also, what can we think of in terms of revenue per acre? Should we think about it in line with your sort of historical products of $1.5-ish per acre? Thanks.

Okay, so to answer on the corn inoculant, you are completely right, we are at the bottom of an ag cycle and we do have a change in sales patterns where we move our sales towards the second half of the year in order to allow Monsanto simply to get the products onto the seeds and get ready for the planting season. So, you could say some of the benefit of the new corn inoculant we saw in Q4 2016, so before the launch, and it is also you could say part of our expectation for the end of the year numbers for this year. So they are in fact included in the numbers. The price point is, you could say it's a matter of deciding do you want to get a broad penetration or do you want to skin the market, and we have chosen to go with a price point which is at the lower end of where our historical products have been in order to get it out broadly.

Thank you, Tina. That I think has to conclude our conference here. I'm cognizant of time. Thanks for attending the conference. Thanks for all the great questions and we hope to see some of you as we get on the road later this week and next week. Thank you very much.