Peder Holk Nielsen - President and Chief Executive Officer Anders Lund - Executive Vice President, Household Care & Technical Industries Andrew Fordyce - Executive Vice President, Food & Beverages Tina Sejersgård Fanø - Executive Vice President, Agriculture & Bioenergy Thomas Videbæk - Executive Vice President & COO, Research, Innovation & Supply

Annette Lykke - Handelsbanken Søren Samsøe - SEB Michael Vitfell-Rasmussen - ABG Sundal Collier Lars Topholm - Carnegie Günther Zechmann - Bernstein Ben Gorman - UBS Sebastian Bray - Berenberg Ian Wood - Redburn Hans Gregersen - Nordea Andrew Benson - Citigroup

Good morning and welcome to the Novozymes conference call. Like you, we've been sitting here for a while and waited to get on. I apologize for the delay. It's apparently a server problem with our service provider. But luckily, we have it fixed now. My name is Peder Holk Nielsen and I'm the CEO of Novozymes. I'm joined here today by my colleagues in the executive leadership team, that is Tina Sejersgård Fanø, who heads up Agricultural and Bioenergy; Anders Lund, Head of Household Care; Andy Fordyce, Head of Food & Beverages; and Thomas Videbæk, Head of Research, Innovation and Supply. Our IR team is also present here today. Please turn to slide number two. All in all, we had a good first half. Sales were up by 3% organically in Danish kroner. This was better than we had expected. And we have growth in all our largest segments – that is Household Care, Bioenergy, and Food & Beverages. Growth in the Household Care enzyme market was slow as some of our larger customers in the developed markets are cutting down on formulation cost. At the same time, we also see many business opportunities mature and we keep our focus on innovation for both market expanding and market supportive technologies, not least in the emerging markets. But the balance for now is slow growth for the first half year. I’m pleased to see our Bioenergy business continue with the momentum we saw towards the end of last year, both sales of enzymes for conventional biofuels and biomass conversion develops well also beyond North America. Our Food & Beverage business is performing well, most subcategories experienced solid growth and we expect that to continue, thought the second quarter double-digit growth may be difficult to maintain for the full year. I expect a rebound in agriculture and feed, where the chain sales cycle have shifted sales from the first half into the second half of the year, but BioAg is still associated with some uncertainty as farm economics continue to be fragile. Now, let's look at the geographical split of our business. We see growth in both emerging and developed markets. Sales were up by 2% in the emerging markets and by 3% in the developed markets. Our business in Latin America is challenged whereas Asia-Pacific is doing very well. On the earnings side, we're also doing well. If you exclude one-offs related to organizational changes in 2016 and here in 2017, then EBIT would have grown by around 5% and the EBIT margin would be around 28.5%. Cash flow was also solid. Our investment programs run according to plans. And just to remind you, we are investing in a new greenfield plant in India. We expand our plant in Nebraska and we're well underway with the construction of our new innovation campus here in Denmark. Our innovation level has been high this first half year. In the second quarter alone, we made four important launches across segments. We'll talk about them later in this presentation. Half way through the year, we're optimistic about the full year and we see strong underlying growth in the second half as we continue and as we guided at the beginning of the year. As you probably remember, we had some negative surprises last year. And as our agriculture-related markets are volatile, we're still taking a careful approach to our full-year growth outlook. As a result, the underlying expectations are maintained, but we adjust our Danish kroner expectations to reflect the weaker currency environment and only the weaker currency environment. All in all, a satisfactory performance, a good performance half way through the year and solid progress on our key priorities. Please turn to slide number three. As you know, our goal is to return to historical growth rates, with maintained focus on profitability. Innovation drives revenue and earnings growth in Novozymes. Innovation allows for the expansion of new applications. It opens completely new markets and it enables us to keep our lead in existing markets. Innovation also allow us to produce enzymes and microbes more efficiently, which gives leverage on both production and cost base. These improvements give us the opportunity to invest even more in innovation and in customers and, at the same time, secure attractive return to our shareholders. This process, supported by a significant IP position, is what makes the Novozymes business so attractive. Given the lower growth level of the last couple of years, some people may ask whether this model is now broken. My answer is that the model is not broken at all. Innovation is and will continue to be what builds the strength in Novozymes. So, I'm excited about the recent progress in our pipeline, with four impactful launches here in the second quarter. The power of Novozymes lies in having a strong research backbone. It lies in connecting customers' insight and meets with application know-how, feeding on the research backbone. These connections occur across geographies and industries and they allow us to bring targeted solutions to individual customers and market needs. Medley 2.0, which we launched here in the second quarter, for the household care industry, and Palmora for palm oil processing are good examples of solutions targeting the emerging markets. The power of Novozymes also lies in cross-fertilization in our research and development. We can leverage one industry solution into a completely different solution for another industry. The frontier technology for grain milling is an example of this, with its origin in our research on biomass conversion. We can leverage our technology investments across more markets and industries than any other player. And that matters. We're scaling up the deployment of resources to high growth opportunities and growth markets, while also maintaining our high level of innovation in the developed markets. To support our strategy of getting closer to our customers, we're also investing in local application centers. Turkey and India for now, but more will follow. So, let me summarize. We focus on growth and to return to historical growth levels. With growth comes many benefits for Novozymes and our stakeholders. We're not immune to what happens in the world and we're sometimes challenged by factors that are beyond our control. What we can control is our persistent focus on innovation to enable better and more sustainable solution for our customers. And in this respect, we're in good shape. I’ll now hand the word over to Anders Lund. Anders, please.

Thank you, Peder. Please turn to slide number four. Sales in Household Care grew by 1% again both for the quarter and for the first six months of 2017. The sales development in the second quarter was as we expected back in January and after Q1. Asia-Pacific performed well in the quarter with continued strong growth in markets such as Southeast Asia, India and China. China is a great example of how quickly consumer demand can shift and how fast the market can adopt new enzyme technology once it comes in the right format. The new liquid enzymes we introduced 18 months ago are a great example of this kind of fast adoption. Looking at Latin America, sales were down for the period. The recently improved consumer confidence is not yet visible in our numbers. We experienced modest growth in North America, Europe, the Middle East and Africa. Some larger customers in these markets are going through cost-savings programs, which also affect Novozymes. These cost-saving programs impact our business negatively, but we still see enough opportunities to offset the negatives and post growth for the quarter in both Europe and North America. I’m very pleased with the sales development to the automatic and hand dish wash category, which continued to be strong. As Peder stated in the beginning of the call, our innovation rate has never been higher and there's also a good appetite for the solutions we offer. We launched two exciting new detergent products in the second quarter. Thomas will get back to this later in the R&D update. In Household Care, we continue to see significant opportunities in the emerging market as GDP growth and urbanization drive the need for new and better laundry detergents. We're investing in delivering new solutions that can address these consumer needs. Our potentially game-changing freshness and hygiene platform include several technologies that are relevant for consumers in both the developed and emerging markets. And we're on track to launch our first solution in this space toward the end of the year. Furthermore, we are investing in delivering an improved cost position to increase enzyme penetration in emerging markets. And finally, we're reinvesting people, leadership and new facilities to help our customers in these markets. So, let me sum up. Sales in Q2 was as expected back in January and after Q1. We remain excited about the significant potential we see in the emerging markets and our priority is to deliver technologies focusing on unmet consumer needs. In the second quarter, we launched two new exciting products that help our customers optimize their detergent performance and stability. And finally, our freshness and hygiene platform remains on track for the first product launch in Q4 with more technologies to follow. Before I close, let's take a look at Technical & Pharma. Here, organic sales were down 4% after the first half and by 7% in Q2. The reason behind this development is primarily driven by volatile offtakes, particularly in pharma. And now, I’ll hand it over to Andy to talk about food and beverages.

Thank you, Anders. Let's turn to slide five, so I can share details on the good results in Food & Beverages. I'm happy to report that food beverages delivered strong organic growth of 8% in the first half, boosted by an excellent second quarter, with 10% organic growth. I talked about positive momentum in April and now our Q2 results show that it continues. But our solid Q2 comes also from a strong step in our baking business as we regain growth in spite of US price decreases. For Food & Beverages, our aspiration is to deliver solutions that help our customers improve the quality and the sustainability of their food and beverage products. I'm pleased to see our efforts focusing on the growth platforms paying off in 2017 in many markets. Let me give you some insight into what's behind the Food & Beverages results. Europe, the Middle East and Africa contributed most in the first half, with a very strong Q2 growth in both baking and nutrition. In baking, we're gaining share as well as penetrating opportunities in emerging markets from within the region. The EMA baking growth we've seen has been strong enough to offset the negative impact from the announced price reductions in the North American baking business. Food nutrition in EMA also performed well with our categories in infant formula and low lactose dairy continuing to deliver growth. A good part of the growth comes thanks to a faster rollout of Saphera, our new lactose reduction technology. Brewing was another strong contributor in the EMA. Specifically, we're seeing that in Africa, use of local raw materials like sorghum continue to gather strength and that's driving higher enzyme consumption. In North America, we've seen good uptake of most of our categories with nutrition and starch contributing most. Our US baking business contracted, as we expected, although at a slower rate during the second quarter, which was really good news. Performance in Asia-Pacific continued to deliver the solid results we saw in the first quarter. Specifically, we saw that lower corn pricing continues to support demand from our Chinese starch processing customers. The corn price advantage over sugar is also helping our distilling customers, which means higher enzyme offtake in that segment too. On the other hand, our brewing business in APAC has been a drag on results as beer volume remains weak in China. From a geographical viewpoint, Latin America continues to be the negative outlier in the Food & Beverage space. We see customers continuing to suffer from weak economics and depressed consumer demand. In this tough environment, we saw broad-based weakness in our Food & Beverage, with our brewing business contracting most. In the last couple of quarters, I've talked about how we want to enable new markets within Food & Beverages in both grain milling and vegetable oil processing. These are two new markets that hold significant potential if we succeed with breakthrough innovations. On that, I'm happy to report that, in Q2, we've taken big steps by launching new products in both grain milling and palm oil processing. Our test marketing has shown promising yield data within both categories and customer trials. Thomas will talk more about the actual launches and the benefits of our technology in his update in a moment. To finish, let me summarize. We've seen a great first half in Food & Beverages, with 8% organic growth. This has been supported by most of our application areas and geographies. Our strategy of helping our customers and partners around the world to produce better foods with less input has shown good traction. And despite some negative price drivers in baking from our North American business and general weakness in Latin America, we're delivering solid growth. And with that, I'll leave it to Tina to go through Ag & Bioenergy. Tina Sejersgård Fanø: Thank you, Andy. Let's take a look at Bioenergy on slide six. During the last quarter, we have seen good development in our Bioenergy business. Biofuels reduce CO2 emissions by 50% to 90% compared to gasoline, so the growth is also good news from a climate perspective. As you see, the second quarter is no exception to this trend. Organic growth was 8% and came from both conventional biofuels and biomass conversion. In conventional biofuels, growth came across geographies. In the US, growth was supported by 4% growth in ethanol production. The high production level in the US has the effect that inventory levels are also relatively high. Therefore, we think there is a risk that volumes will come down in the second half of the year. So, we expect modest growth in US ethanol production for the full year. We continue to seek good momentum in biomass conversion. Our partners operate at run rate, which means increased uptake of enzymes. The industry is still in its infancy, so you have to expect volatility here. Right now, sales are good, while we expect slowdown towards the end of 2017. As you might have seen, we said in June that yeast for ethanol production is a new priority for us. In conventional ethanol, we are trialing products at plant scale and we're pleased with how things are going. Commercial launch will happen next year. In cellulosic ethanol, we're already well underway and have several customers buying our yeast. When we pair the yeast with new enzymes and services, we believe it will set new standards for our customers' performance. Now, let's take a look at agriculture and feed on slide seven. In this business area, our sales declined by 16% for the quarter and 6% for the first half, while in market sales were as expected. Let me go into more details on what's behind this. In feed, sales was strong in the first quarter with strong uptake in Asia-Pacific and North America. But they leveled out in the second quarter due to inventory reductions at our partner. So, for the half year, we realized moderate sales growth. In animal probiotics, sales are developing well, but we're coming from a lower base. Products are being rolled out into new markets and regions. As you may recall, we have a partnership with Adisseo and we recently announced a very exciting collaboration with Boehringer Ingelheim Animal Health. We continue to see real good progress in building a strong position in probiotics for animals. In agriculture, our launch of Acceleron B-300 SAT for corn was well received by the market. We are preparing for the next season as product will be shipped to Monsanto in second half of the year. But also, as you know, it has been a tough year for farmers and we are feeling that too. Recovery has not yet kicked in. This, coupled with a change in sales cycle, gives the declining sales. As a reminder, the change in sales cycle is a gradual change and it moves more sales to the second half of the year compared to the first half. For the full year, we expect ag and feed to show positive growth. So, let me sum up Bioenergy sales were good. Feed enzymes moderate for the half year due to stocks movements. Probiotics for animals positive development. And ag down as sales continued to shift from first half to second half. Now, over promise for an update on our product launches and pipeline progress. Thomas Videbæk: Thank you, Tina. Please turn to slide number eight. As already mentioned by Peder, innovation has picked up during the second quarter, with Novozymes launching four new products. These launches are all within our established businesses and with the potential to enable new market segments. This illustrates that there's a significant innovation to be done even in our well-established industries. I'm happy to let you know that we launched two products within Household Care. Medley 2.0 is the second generation of our multienzyme solution, catering for the special washing conditions in emerging market. The product targets small and medium-sized players, allowing for increased stability and performance, as well as cost savings along the value chain. The second product we launched in Household Care is Progress Excel, a new protease for liquid detergents that enable premium wash performance at all temperatures and with greater flexibility in the formulation. Andy already mentioned that there's two new products in Food & Beverages here in the second quarter. In vegetable oil processing, we launched our first product for the palm oil industry. Palmora improves yield and provides process improvements to palm oil producers. This first product is being rolled out to keep partners in Malaysia and Indonesia. These two countries account for about 85% of global palm oil production. Our new Frontia technology in grain milling is based on our capabilities within complex fiber and biomass structures. It allows for better separation of grain components, enabling higher yield and there also high profits for our customers. All in all, some very exciting product launches, which we'll tell you more about as they progress over time. Please turn to slide number nine for a very quick update on our pipeline. As I said, we launched products within grain milling and vegetable oil processing and, therefore, these programs are being moved from development to launch stage. It's encouraging to see the power of our R&D muscles. That’s all from me. I’ll pass the word back to Peder for a few words on the financials and the outlook. Peder?

Thank you, Thomas. In the absence of a CFO, I'll try to review our financial performance here today. But before I go there, let me just thank Benny Loft for his many years of service to Novozymes. That includes almost ten years as CFO. Benny and I had talked about that, at some point in time, we would bring a new CFO in to help us continue the successful journey. So, this June, we decided to part ways. We're looking abroad as well as in Denmark to find the right replacement. We believe the successful candidate can bring new insights on how to continue to improve our business performance. We're currently interviewing candidates and we hope to be able to come back to you with more information in the not-too-distant future. Then please turn to slide number ten. Our financial performance was good this first half. We came out better than expected in organic revenue growth. This was mainly driven by Food & Beverage and the Bioenergy segments. And I'm sure you recall, we expected to be a bit slow on the organic revenue growth in this first half, with a pickup in the second half. Sales grew 3% organically and in Danish kroner. Adjusted EBIT grew 5% and the adjusted EBIT margin was 28.5% after the first half, of course, compared with 28.1% in the same period last year. We incurred roughly 70 million Danish kroner in reorganization cost in the first quarter of 2017. In the first quarter of 2016, we had similar reorganization costs. The related charge for the CFO change in the second quarter of 2017 was 34 million Danish kroner. This is the sum of two parts. The severance payment as per contract with Benny and the other part is the accumulated long-term incentive programs that we owe Benny. The full year effect, relative to guidance, is a negative impact of around half a percentage point on full-year EBIT guidance. As I spoke about earlier, we are in the process of allocating more resources to growth initiatives and a larger emerging market footprint. These investments are ramping up as we speak. Net profit came in 1% higher compared with the same period last year. Our net financial cost were higher than the first half of 2016, which is mainly due to an unfavorable development in currency hedging costs. The free cash flow before acquisitions came in at 1.4 billion Danish kroner and is roughly flat compared with last year. We still expect net investments to be considerable this year as we invest in R&D and in planned expansions. This will have a dampening effect on free cash flow generation in the second half of 2017. We continue our share buyback program and expect to accumulate up to 2 billion Danish kroner for the full year. After the first half, we have purchased shares worth 1.1 billion Danish kroner. All in all, we maintain the underlying full-year outlook, but the weakened currency environment, and this is especially the weaker US dollar, requires adjustments in expectations for Danish kroner outlook. Please flip through slide 11 and turn to slide number 12. Let me quickly summarize our message here today. We delivered a good first half, but came in better than expected. We saw growth in all the large segments and in most geographical regions. We delivered good underlying earnings growth, driven by revenue growth, productivity improvement and a careful cost expansion. We should see growth pick up in the second half, mainly due to timing in Agriculture & Feed and the continued momentum in the business. Volatility, especially in the agricultural markets, makes us a bit cautious in our guidance for the full year. We continue to focus on innovation across industries, geographies and enzyme classes. Innovation is the strength and the power of Novozymes and the true generator of uniqueness. And now, we are ready to take your questions. Since we started late, we go till 45 minutes past the hour and I hope you can you can join us for that. Operator, please begin.

[Operator Instructions]. And we'll take our first question from Annette Lykke from Handelsbanken. Please go ahead.

Thank you very much. Peder, I have a question for you. Maybe I just get a little bit confused. I think you said in the beginning of the call that you were taking a capital approach to the full year outlook. At the same time, you were talking about that H1 came in better than anticipated. Are you sort of indicating that we should be in the high end of your guidance range of 2% to 5% and what are you promising in this respect? And then, afterwards, I have two questions regarding added household effect. I like to hear if you can say or maybe elaborate a little bit on how much you see of an effect from the hygienic enzyme, I guess not so much 2017, but how much in 2018, 2019. And maybe a more general comment on should these new enzymes on this platform you have maybe be a reason for you to get closer to 4% or 5% growth for this division? And then finally, for the household business area, the cost-cutting behavior among your top clients or the top detergent producers, are these making you more nervous about this launch in terms of the sort of adoption rate or willingness to invest and add new enzymes to the detergents in this cost-cutting environment? Thank you.

Thank you. Let me try to put a bit more flavor to our guidance. So, we landed 3% growth in the first half that. We expect higher growth rates in the second half for the businesses, the momentum we have in the business. There is a particular thing about BioAg that we, of course, have built into our numbers. So, that would lead you to say that the confidence level in Novozymes as regards hitting the range of 2% to 5% has increased over the first half. I think that's right. But it's also clear that in both 2015 and 2016, there were changes in our customers' marketplace that happened very suddenly that we did not know about and we did not book it. Therefore, I think the entire range of 2% to 5% sales growth, organic sales growth is in play for the full year, but confidence levels in Novozymes has increased with a good first half. Anders?

Well, we're not guiding on 2018 yet, but I think it's fair to say that we believe the hygiene platform will be Material and you will also see that in our numbers. But it's also fair to say that this is going to be a ramp up and the effect that we are currently looking at, you'll probably see more that effect in the back half of 2018 and then going into 2019. I hope that gives you an answer to that question. In terms of cost-cutting, on whether this is dampening our belief in the hygiene platform, I think we can firmly say no. We are getting extremely strong evidence from consumers and from our customers that this is going to be a really relevant technology that they clearly see can be commercialized. So, I would like to make it a firm no.

If I could follow on your comment on the second question on growth rates for household care, I know you're not providing guidance, if you should get back to more like mid-single, even high-digit growth for Novozymes as a whole, shouldn't you at least make somewhat better growth rates in your Household Care, which is still your largest division, to make it or fulfill that sort of ambition. So, do you need more products in the hygienic and freshness products to reach 3% to 5% growth for Household Care.

You're absolutely right that it's built into our business plan that to return to our historical growth rates and, as you indicate, even going beyond. Then Household Care, with the size it has, it needs to be – it cannot dilute too much. So, we need household care to move up to kind of mid-single digit area. And I think we have plans for that. Freshness and hygiene is one part of it. The other part is actually a very robust growth that comes out of the emerging markets that will help us get there. So, I'm confident we'll bring it there. And as you point out, it's absolutely a precondition for getting the whole business to return to historical growth rates and, of course, going beyond.

Thank you so much.

And we go to our next question from Søren Samsøe from SEB. Please go ahead. Søren Samsøe: Yes, hello. A further question into the Household Care. You mentioned that some of your customers are in cost-cutting mode. First of all, could you share with us, how big of a percentage or how big the sale of your customers are – do you feel are in cost saving mode now? And then, with that in mind, if these customers are in cost saving mode, how willing are they to include new innovations, like, for example, the hygiene platform into their detergent formulation these days? If you could elaborate on that.

Yes. Thanks, Søren, for the question. As we also mentioned at our Q1 announcement, we're seeing these cost challenges from some of our largest players. I think the very comfortable thing is that we are capable of offsetting that with a lot of opportunities with our other customers and still post growth for the quarter. And to your last question around whether this is going to have an effect on growth longer-term, I suspect it will not. We still believe that we can get our growth rates up and hygiene will be a big part of that. Søren Samsøe: Okay. But more specifically, I mean, you suspect you can get growth. But are you – if some customers feel that that maybe some solutions are too over-engineered or complex and then customers do not want to pay for that and actually it's taking out maybe enzymes now. Isn't that difficult then to suddenly go out and sell a new platform like the hygiene platform to them?

At least the feedback we get is that's not the case. What's happening right now is that we're seeing some concentration on pressure on the margins, but the confirmation we get in terms of our new technologies as it was before, they're very excited and we have not changed our launch plans in the conversation around new technology. Søren Samsøe: And then the second question is just a sort of a smaller one. But in the Tech & Pharma space, part of your pharma income comes from selling the albiglutide to – or GSK selling it and you receive royalties. But it seems like GSK will stop selling this from 2018. I know it's probably relatively small number still, but could you give just an amount how much EBIT you will miss out on when they stop selling this. And also, if you have other customers ready to sort of replace them in your pharma space.

We'll let Thomas take that one. Thomas, please. Thomas Videbæk: Yeah. Søren, you're absolutely right that we have also heard that the GLP-1 product from GSK is being discontinued. This is already a small number in the overall business. So, I don't suspect you'll see any effect of that in years to come. We do have other customers in the pharma area using this technology, but those are very small numbers. Søren Samsøe: Okay, thank you.

Thank you. We'll go next to the line of Michael Rasmussen of ABG. Please go ahead. Michael Vitfell-Rasmussen: Thank you so much. First, I would like to talk a little bit about how you see the gross margin development from here on? Because I, obviously, hear you talking about some price pressure impacts from large customers and you're talking about the regions that you're growing potentially, some of them are a little bit lower margin. So, looking at just the weakness in the first half of 2017, how should we model in the gross margin going forward? My second question comes back to, again, the large customers in the Household Care division. I didn't quite understand exactly how many customers were doing this. Is it rightly understood that, after Q1, you talked about one customer? So, can you please confirm if this is still the case? And also, in terms of timing, so has this been fully implemented in Q1 and then that is kind of the run rate or is it kind of ramping downwards, so to say, in the next couple of quarters? And then, my final question is coming back to margins. If you could just comment a little bit about the margin cycle for new products. Here, I'm thinking, for example, Medley 2.0. Is this any different to product launches in the past and kind of the EBIT margin cycle for that?

Thank you. Good questions. On the gross margin, gross margins are pretty stable when you look at our numbers. And I expect that to continue for a while. You shouldn't expect that regions have a – regional sales split have a major impact on gross margin at all. That’s not really affecting gross margins. We actually have good gross margins also in the emerging markets if that was the hunch you had. The customers in Household Care that we've talked about at length now, it's more about volume reductions than it's about price reductions. So, we don't see a lot of price pressure coming out of these customers. We see them do formulation changes where they take less advantage of our technology. And maybe if I just go on here, I think what we're seeing with these major customers in Household Care in the second quarter is no different from the first quarter. It's the same thing that's going on. And as I'm sure you're aware of, one of our larger customers are under quite a bit of pressure from owners. And we are working with them. I think we have the situation well under control. But you never know, things can change. But it's really not a pricing issue, it's more volume adjustments. Specifically, on new products and margins, it varies a bit. The margin on Medley 2.0 is high. It's not a diluting thing. But, of course, sometimes we will introduce new products that has lower margin. And then, as you know, we use our technology to gradually get yields up and, therefore, you see an improvement on the margin as we see the market develops. So, absolutely, no news here. And I think when you get back to the more fundamentals part of it, the gross margin, it's not like we see a gross margin pressure really. Michael Vitfell-Rasmussen: Okay, thank you so much.

Thank you. We'll go next to the line of Lars Topholm of Carnegie Investments. Please go ahead.

Yes. Just a few questions on my side. One against for Household Care, so just to understand, if customers take in the hygiene platform, will they have to raise their product prices to fund it? A second question goes for Tina and Bioenergy, about this yeast initiative, I just wonder to what extent this affects which enzymes your customers buy from you. So, if they adopt your yeast technology, will they have to buy a more advanced enzyme or can they buy a cheaper enzyme? Are there any, what you say, cannibalizing effect or the opposite? And then, maybe a third question to Food & Beverage because in the Q2 report you flag that the growth rates we're seeing right now, of course, exceptionally strong in an historic perspective and they might be lower in the second half of the year. But given that comps are a lot easier in Q3, should we assume a slowdown in organic growth in Q3 or is it for H2 as a whole?

Thank you. So, we'll let Anders have a go at Household Care again. Anders, please.

So, in terms of the pricing, of course, we're not in control of how our customers are going to price our technology. But, typically, the way that it's done it's going through a larger reformulation where they either try to stabilize the cost, of course, increase it if they can get a higher price point in the marketplace. But I don't think we want to speculate about that right now.

Okay. Tina Sejersgård Fanø: Yeah? And then I’ll take the one on yeast. So, we do see yeast as a new area of innovation both in itself and then there is also the area of innovation where we tailor the enzymes so that they fit, you could say rightly or correctly or most optimally to the yeasts. There are yeast expressing some enzymes, but that gives an opportunity for securing that we have exactly the right mix in the fermentation.

And then on to your question about Food…

Sorry, that, I simply didn't understand. So, how will this affect your revenue per gallon in your view? Will it go up or the opposite? Tina Sejersgård Fanø: We see it as a new revenue stream.

Yeah. But does it affect the existing revenue stream? That's my point. I'm trying to get a grip on the total here. So, you said some yeast you don't sell today, but will that carve into your enzyme revenue? Tina Sejersgård Fanø: No, that's not our expectation. There are already yeasts out there expressing enzymes.

Yeah. That, I know. But, Tina, I’m asking about your business.so, the yeast revenue you expect, that would be on top of what you get from enzymes? Tina Sejersgård Fanø: Yes.

And not in any way – okay. That's clear. Thanks. And sorry for – Tina Sejersgård Fanø: No problem, Lars. No problem.

I just want to – well, I just want to address this last comment in any way. It's an additive thing, but I can't exclude that if there are customers that buy their yeast from us, they’ll do something else with the enzymes. But at least, I think when you look at the business, Lars, then you should assume that this an additive – an additional business to Novozymes. Andy, please?

So, what we're trying to say that Q2 in isolation is a tough thing to go ahead and match for the full year. And it's pretty easy to do the math on the comps in Q3 versus Q4. It'll be easier for us to deliver in Q3 and a little bit tougher in Q4.

Okay. That’s fair enough. And then, congrats with the 10%, by the way. That's all from me. Thanks.

Thank you. We'll go next to the line of Günther Zechmann from Bernstein. Please go ahead. Günther Zechmann: Hi, good morning. I've got no questions on Household Care, I promise. The first one is on gross margins value guided for 30 to 40 bps improvement a year from efficiency gains in the past. What were the offsetting factors in Q2 that led to flat gross margin compared to last year? And the second one is on FX. To what degree are you hedged on the dollar/kroner for 2018 please? And when do these hedges roll off?

So, on the gross margin, then you're right, we constantly get efficiency gains in our operations, mainly because we use our technology to advanced yields in our fermentations and therefore we both get cheaper manufacturing, but we also get a better utilization of the capital we have invested in our plants. The opposite to that, of course, or the other factor, is that there is price erosion in the market. So, historically, that's been 1% to 2%. And there are also mix changes in the marketplace that affect these things. And it goes a bit up and down, but I don't think we have led you to believe that gross margins would just constantly go up. I think we still have the potential to continue to optimize, but there also these other factors in the marketplace that, over time, will keep the gross margin hovering, I think, around the level we are at today roughly. But, of course, that depends on the mix we put to the market. As I talked about before, how many new products we put to the market in the case that they might have a slightly lower gross margin. And it depends on the competitive price pressure. On hedging, we have not hedged 2018 yet. Günther Zechmann: Yeah, that's very clear. Thank you.

Thank you. We'll go next to the line of Ben Gorman from UBS. Please go ahead.

Hi, guys. Thanks for taking my questions. Just a few from me. First of all, in terms of the BioAg business into the second half of the year. Can you give us any guidance in terms of your full-year expectations for the corn inoculant in terms of acreage and any sort of feedback you’ve had in terms of – any sort of view you have in terms of profitability with sort of weakness in the end market economics? That's the first one. The second one, in terms of Bioenergy, can you give us an update in terms of how big biomass is as a proportion in terms of the division now and also as a percentage the contribution to growth in the quarter. And is there a particular reason now why it's contributing more than it was historically? And then finally, just on the sort of core business, Food & Beverages and Household Care, can you give us any insight in terms of – not necessarily your customers in particular. I know that some of them are facing more pressure than others. But in terms of the end customer, so are you seeing a particular change in demand for product development because of the end customers' change in demand for differentiation and everything like that? How is that sort of wider trend affecting you at the moment?

Thank you. Very good questions. Please let Tina take the first two of them. Please. Tina Sejersgård Fanø: So, on the BioAg side, you are about the corn inoculant, we lost the corn inoculant in December last year. And it is getting out [indiscernible]. It's not -- you could say, you’ve had good sales in 2016 off that and we expect that to roll out further here in 2017. We're not specific on the amount of acreage we expect it to be on, but it's going to be a nice contributor. In terms of profitability, the BioAg business is in line. It's more a matter of how much is being used of our products. On the Bioenergy side and biomass, we have seen biomass contributing to our sales growth since Q4. It is in the low-single digit in terms of how much it's contribute or how big it is. And we see that as a consequence of that – the plants are, you could say, running more and more stable. It is fair to say that, you could say, since Q4 last year, we have seen good growth – or growth contribution from the biomass side, but you should expect that it will remain to be volatile. They have six plans in the world operating. We supplied five of them. So, it is – you could say, if one of them goes in maintenance mode, then you will be able to see it. And comparisons in Q4 would also be more difficult. I hope that answered your questions.

Sorry, I was just going to follow up very, very quickly on the biomass, in particular. Are you seeing sort of a big change in sentiment towards putting CapEx into that industry? Tina Sejersgård Fanø: I would say that’s too early to say so. We do have plants operating, but we really need to get the regulatory frameworks solid in place and we need to continue to see the plants operating before that's really happening.

And then, there was a question on, I think, the appetite of our large customers in Food & Beverages and Household Care, the appetite on interacting with us on product development. And I let Thomas take that one. Thomas? Thomas Videbæk: Thank you. And you're absolutely right, we want our customers, be it in Household Care or Food & Beverages or anywhere else, to see us a driver of innovation for their businesses. So, we are really in close contact with a lot of our large and smaller customers in order to find ways to work with their end products and make improvements, be it either to the end products or to the way of the processing to those end products or in simply cost-saving modes. It's not that I think we have seen an enormous increase in that, but we are seeing a constant and continued real big appetite for working with us on continuing to develop their processes and their end products.

Okay, thanks. Thanks, guys.

We'll go next to the line of Sebastian Bray with Berenberg. Please go ahead.

Good morning. And thank you for taking my questions. I would have three, please. The first is that you mentioned that H1 developed better than expected. I was wondering, within this better-than-expected development, was Food & Beverages stronger? And was BioAg or Bioenergy [indiscernible] BioAg actually a touch weaker? And second question is, why would you necessarily expect Food & Beverage to – organic growth to decelerate into H2? And the third one is on the technical aspect of business, the technical segment. Is this segment core to enzymes – core to Novozymes, pardon me? And could – are there parts of it which are seen as core or non-core or is this a longer-term divestment candidate? Thank you.

Thank you. Let me take the first one. So, first half was better than we expected and it's largely about Food & Beverage. Bioenergy was also slightly better than we expected and that's roughly it. BioAg and the other businesses came in pretty much as we had expected. But Food & Beverage and Bioenergy was a notch better. Well, I think Food & Beverage was more than a notch better. And, of course, that also almost answers the other question you had, why isn't it sustainable. I think it might be sustainable, but every time you have a business that kind of shoots up and you – of course, you enjoy that growth, you also get a bit concerned that there is something in it that might not be totally sustainable. That's why we say that the solid double-digit growth that we had in the second quarter, we're not sure that will continue into the second half. So, I hope that answered that question. Then well – Anders, please, technical enzymes, is that core to Novozymes?

Whether it's core to Novozymes, it's 7% of our business today. I think we have businesses that we enjoy. It's not the area where we put the most focus, but it's areas where we're still investing. Although from a small base, I think we're seeing good growth in a few of the segments. Forest products being one, where we do have invested resources and where we're seeing growth coming out of. Our recently launched bleaching technology called [indiscernible], but it's not the areas where we put the most focus.

Just as a quick follow-up to that, are the market shares in the end markets across segments where you operate at the moment roughly stable?

Specifically on technical industries?

Just across the board, not just in technical.

I think across the board and also for technical, I think it is quite stable. We're not seeing any major shifts of market share in any of our businesses.

Thank you very much.

Thank you. And we'll take our next question from the line of Ian Wood with Redburn. Please go ahead.

Hi all. Thanks for taking my question today. Just a couple. So, starting off with the EBIT margin, I think you're still guiding for a 28% reported margin for the year. I guess that means, on the underlying basis, you're going to be looking at about high 28%, 28.7% or so. Do you have any guidance about what we should be thinking about for the next year or outer-years on the EBIT level? And then second, I'm sorry if I missed it. I don't know if you actually fully quantified what the headwind in BioAg was for the first half. Maybe if you could give a number around that and also what the tailwind might be in the second half? And then finally, going back to your 2G biomass business, I know it's too early to say if you had new plants coming or anything like that, but do you have any comments about how the cost competitiveness is developing in the market? Thank you/

Thank you. So, on the EBIT margin, we're still shooting for 28% for the full year. And as you know, we reported less for the first half, so we're going to see a hike up in the second half on the reported numbers. And of course, we have good reasons to believe so. One thing that hit us in the first half, of course, is the cost to the – reductions we made in the – in January and also to the changes to the management team here in June. So that's the explanation. Going forward, of course, we are – well, not of course, but we do have a long-term EBIT floor of 26%, so we're above that floor. As I've told many times, we have no intention of bringing ourselves to the floor. I think you should expect us to hover around the level we are at now. Unless we come across some really significant new expansion areas where we would like to expand, to build new business platforms, then we would retain – hopefully, retain the right to come back and talk about that specifically and may also take EBIT margins down. But for now, there's no plans of doing so and we're going to close the year at around 28%. Then Tina gets a chance on BioAg again. Tina, please? Tina Sejersgård Fanø: So, in BioAg, we are coming from a situation in 2015/2016 where about two-thirds of our sales were in the first half and one-third was in the second half. And we're moving, you could say, that around until to a situation where we are now, where we have about a third in the first half and two-thirds in the second half. On the biomass side, you asked about new plants. And we do – you could say, we do have most insight into what is happening with Beta Renewables, whom we have invested in. But in general, in the market, they are working with a number of different projects. There are projects in, I would say, all geographies. If I may highlight two areas where a lot is happening. In India, there is quite some projects being discussed. As well as, you could say, from the European framework, the RED II framework. There is some quite some discussions on making legislative, supportive measures for biomass.

Great. Tina, can I just ask one quick follow-up on that ag shift. So, I understand you're going from two-thirds in the first half – or sorry, the other way around. But that started last year. So, is there an equal amount in the shift last year and this year? Is there any difference? Tina Sejersgård Fanø: Yes, it's roughly. it is a gradual movement over the last years. So, yes.

Okay, thank you.

Thank you. We'll take our next question from the line of Hans Gregersen with Nordea. Please go ahead.

Good morning. Three questions. Peder, just for clarification, so one of the first questions regarding the organic growth guidance, you alluded that H2 should be better than H1. You saw 3% in the first half, but still you say that the full 2% to 5% range was in play, if I could hear correctly, the line was quite bad. If we can just clarify what you mean. And then to Anders, in terms of Household Care, if I could hear you right, in the beginning of the presentation, you said the price pressure or the cost-cutting measures at your customers did not have any impact. But you state in the press release that you're seeing pressure from several customers. Could you just clarify, are there any negative impact in H1? And what is expectation for H2? Then finally, for Andy. In terms of your starch launch earlier this year, when do you expect that to be fully cycled with your key customers? And then, on your product launches for grain milling and palm oil, do they need any investments into the production setup for the customers to apply?

Thank you. Lots of good questions. So, on the organic growth guidance, I think what you said is roughly right, so the line apparently wasn't that bad at all. The first half, we landed 3%. We have our plans and we still reiterate or we do reiterate what we said in January that the second half, in all likelihood, is going to be better than the first half, which would lead you to believe that full-year growth guidance would be 3% or above. I don't think we can rule out 2%, nor can we rule out the high end of the range. I think there's still some uncertainty. And I'm just -- I mean, we lived through 2015 and 2016 where there were some stuff that hit us in a way that we had not expected. And I'm just cautious. So, we keep the whole range in play. And I think 2% is as real as 5% is. And then we'll let Anders talk about Household Care.

So, when we talk about cost pressure, I hope that what I said was that, of course, it has a negative impact when we are hit by these, but the good thing is that we have so much opportunities elsewhere that actually makes up the numbers and we can still post growth for the half year. Looking ahead, that pressure we expect to also see throughout the rest of the year. But also, we expect to be able to mitigate that and still post growth for Household Care throughout the rest of 2017.

But do you expect it to be better in the second half than the first half?

I think we maintain the guidance we said all year that we – all divisions will contribute to growth and we also expect that to be the case for Household Care. Thomas Videbæk: Hans, you asked about two things. One is the starch refining business. Earlier launches in that area, they've done very well. We've see nice growth in those areas. That is one thing that I think will be slowing down a little bit in the second half because we will be sort of approaching some of the market share gains. But on the other hand, the kind of new launches in milling and palm oil also give us some good opportunities to grow in that space. You asked specifically about whether investments were required to go ahead and make use of these new technologies. I would say that it's not a high barrier to entry for our customers. They have to make some adaptions, but we don't see this as sort of materially slowing things down. On the other hand, it does take a while to penetrate because these are big factories requiring good testing and there's also a lot of them, so you won't see a – you'll see a nice, steady increase a as we start to penetrate.

So, you'll not see the sort of growth rates as you saw from the starch launch?

The starch launch, the difference is that enzymes are already very much fundamental to that part of the business. These areas are new and require some education to the customers, some validation that the value proposition works and some small adaptions to the way they operate. So, it takes a bit more than the sort of easier entry on the starch refining side.

Thank you.

And we have added quite a few resources in Malaysia and Indonesia to help do exactly what Andy is talking about. I'm respectful of time and I think we have to just take the last question now. So, operator, please, the last question.

Certainly. Our last question will come from the line of Andrew Benson with Citi.

Thank you very much. I know we're probably all exhausted from all these questions, but two very brief ones. On the yeast, is that a new business you're just entering? And is there any sort of strategic aspiration there you can share with us? And secondly, perhaps if you can be a bit clearer on BioAg Alliance. I thought you should have had a pretty visible order book from Monsanto into the second half, or is that simply not the case and the orders don't come in until later, which gives you that variability? I just want to understand what the basis is of your concern given, I'd have thought, you should've got most of the orders for the second half by now. Tina Sejersgård Fanø: So, on the yeast, yes, it is a new business area for us. It's not, you could say, completely new given that we, for some time, have been selling to several partners in the 2G space on the yeast. But it's new that we are entering into the conventional ethanol area with yeast as well. So, yes, it is a new strategic business area for us. On BioAg and visibility, yes, we do have, you could say, a good alignment with Monsanto. We do see the shift in – from the two seasons, and that is what I can comment on there. And, yes, we do have a view on and an outline for where it is we expect to end the year. But the markets are volatile, so we need to be certain on that as part of our guidance.

If you just allow me then, I think the – the uncertainty on BioAg is essentially, if you like, up towards the end of the year and it relates to Monsanto's expectations to planting in May/June of 2018. And what we're building in is just an uncertainty that they could change their plans depending on harvests this year and what else happens in the world. So, of course, there's order visibility, but there's not necessarily visibility into what's going to be planted in the spring of 2018. And then, I'll just add on yeast, I think it's so wonderful that with yeast, where we're now starting to play, you can envision that, over time, you can actually do some really cool things by optimizing the cocktail of enzyme solutions and yeast solutions, and that's where we're heading.

We have to close for today. I want to thank you for your attention. And I hope we'll see you as we get on the road today and the next few weeks. Thank you so much for your interest in Novozymes.