Good morning, and welcome to the Novozymes Conference Call. My name is Peder Holk Nielsen, and I’m the CEO of Novozymes. Today, I’m joined by the Executive Leadership Team and Investor Relations. We will start by reviewing our performance and key events for 2018. We’ll also discuss the outlook for 2019. Our presentation should take around 30 minutes, and after that, we’ll be happy to take your questions. Please turn to Slide number two. We met our financial guidance parameters given at the beginning of the year. This is satisfactory, but we have set our sights on organic sales growth of more than 4%. We’ve been impacted by a challenging situation in the Middle East, which takes roughly 1 percentage point out of our growth. Our financials were good with 28.3% EBIT margin and 2.3% – DKK 2.3 billion in free cash flow. We’re in the process of commercializing products from our priority innovation platforms, and we support our new innovations with solid investments in commercial activities. This includes increased presence in growth markets. We had variations in performance of the different businesses. Food & Beverage, Bioenergy and BioAg all did well during the year. Household Care was flat, whereas feed and Technical & Pharma declined. In 2019, we expect to increase sales organically by 3% to 6%. The outlook reflects annualization of the Middle Eastern impact and uncertainty around the future setup of our BioAg business as well as volatile agricultural markets. Growth comes from strong innovation and increased market penetration, particularly in the emerging markets. We are bringing new game-changing products and technologies to the markets such as freshness in laundry, yeast for Bioenergy and Balancius for feed. For Q1 of 2019, we expect to post a modest decline in organic sales growth as the Middle East feed and U.S. baking are all likely to experience a challenging start to the year. Earnings for the year will be solid with productivity improvements, cost control and, as it looks right now, a currency tailwind. We expect an EBIT margin of 28% to 29% and CapEx as a percentage of sales to be below 2018. With that fly in, let’s move on to take a closer look at regional sales development. Please turn to Slide number three. Growth in the developed markets was driven by strong Bioenergy and BioAg sales in North America, whereas Household Care was challenged, particularly in Europe. Latin America grew mid-single digit, mainly driven by increased corn ethanol production in Brazil and Bio Food & Beverages. Asia Pacific also grew mid-single digit. Household Care performed well, whereas our starch business was a bit challenged by the low sugar prices. Overall, it’s good to see both emerging and developing markets posting organic sales growth for the year. Our increased commercial investments in growth markets are beginning to benefit the business, and we’ve added close to 70 people in these growth markets over the year. After this quick review, it’s over to Anders to go through Household Care. Anders, please.

Thank you, Peder. Please turn to Slide number four. Growth in Household Care was challenged in 2018, with organic sales growth of 1% in the fourth quarter and flat for the year. As you know, sales were negatively impacted by some of our large global customers who reduced their enzyme spend. While that was expected, unforeseen disruptions in the Middle East, supply chain issues at North American customer, and the truck strike in Brazil took out all together a couple of percentage points of full year growth. On the positive side, we continue our strong performance with regional customers, particularly in the emerging market. China delivered solid growth, supported by innovation and growth of liquid detergents. Africa, Southeast Asia and India also delivered solid growth. And the rollout of the freshness platform continues. The first product is ramping up according to plan, and we are now shipping to five destinations covering an estimated 10 to 15 countries. The platform will contribute more to growth during 2019, with additional emerging markets being added as we move through the year. And as planned, we’ll start shipping products to the broader European market toward the end of 2019. Outside laundry, our dishwashing business delivered good growth. This was driven by an increased demand for phosphate-free automatic dishwashing detergent, and our ability to supply innovative and sustainable solutions for this area. Looking at 2019, we expect organic sales growth to be low single digit in Household Care, with the main swing factor being the Middle East. Our focus for the year is to continue the ramp-up and geographical expansion of our exciting freshness platform. In addition, we continue to pursue opportunities in the emerging markets and drive performance with local accounts across geographies. Moving on to Technical & Pharma. Organic sales declined by 5% in the fourth quarter and 6% for the year. Second half was weaker than expected as the pharmaceutical sales performed below expectations and our textile business continued to be challenged in the Middle East. For 2019, we expect low single-digit organic sales growth for Technical & Pharma. And now I’ll hand it over to Andy. Andy, please.

Thanks, Anders. Please turn to Slide five. Overall, 2018 was a solid year for our Food & Beverages business. Full year sales grew 5% organically and by 7% in the fourth quarter. Growth came from all industries except baking. High performance standouts for the year included Food & Nutrition, vegetable oil processing and our beverage businesses. The starch business posted moderate growth, while baking contracted slightly. At the beginning of 2018, I commented that we saw good opportunities for our business coming from consumers' desire for healthier diets and clean-label foods. Our Food & Nutrition and vegetable oil processing businesses benefited strongly in 2018 from these long-term consumer trends. Enzymes for lactose reduction and plant protein processing helped customers provide more free from and vegetarian options for their consumers. Also, Novozymes enzymes that eliminate trans fats in edible oil and reduce acrylamide in processed foods helped our customer to respond to regulation aimed at healthier diets. Looking more closely at vegetable oil processing, we saw broad-based growth, both geographically and in various applications, as our innovations in these areas are paying off. Specifically, opportunities like oil degumming and specialty fats processing are increasing, and we’re prepared to serve these growing needs. Further, we continue to focus on palm oil extraction with Palmora as a growth area, but with modest sales results in 2018. For baking, 2018 was a mixed year. While we saw continued strong growth in most emerging markets, this was a down year in the Middle East as sanctions, economic turmoil and flour export regulations created issues in this important market. The downside we experienced in Middle East, along with the planned price reduction effect in North America, meant, in all, our baking business contracted slightly and underperformed our expectations for the year. In starch, sales growth overall was modest as good progress in Frontia for grain milling and strong growth in enzymes for specialty syrups was weighted down by flat development in starch refining. Switching to beverage. Growth in our distilling and juice and wine business was strong. Brewing was moderate as growth in Latin America and India was tempered by share loss in other geographies. Looking forward, in 2019, we anticipate broad-based growth to continue for our Food & Beverages business with an outlook of mid-single-digit growth. We see solid opportunities in our Food & Nutrition business, along with vegetable oil processing and grain milling where our prior innovation platforms all have solid potential. Speaking of grain milling technology, I’m happy to announce that we have just launched Frontia Jade expanding our corn milling yield offering to the important Chinese market. In baking, we expect emerging markets and demand for acrylamide reduction solutions to be positive drivers for penetration in this segment. However, although our pricing glide path in North America freshkeeping stabilizes after Q1, we expect competitor activity in the developing markets – developed markets to remain a headwind. To sum up the Food and Beverages division, I’m satisfied with our performance in 2018, and I’m pleased to see that our growth came from a broad base. This picture continues to reflect our opportunity in 2019 as we’re working hard with customers to transform the quality and sustainability of the world’s food and beverages industries. With that, Tina, over to you.

Thank you, Andy. Let’s start by looking at Bioenergy on Slide six. 2018 was a very good year for our Bioenergy business, supporting decarbonization of transport. For the full year, we delivered 12% organic sales growth, which came on top of a strong 11% growth in 2017. The fourth quarter was, as expected, a bit softer with 5% organic growth from lower ethanol volumes and a tough comparison from Q4 2017. As I’ve mentioned in previous conference calls, growth was driven by a strong momentum due to our broad technology base, the launch of our yeast product for conventional biofuels and good performance in Latin America with producers expanding into corn-based ethanol production. U.S. ethanol production is estimated to have been up roughly 1% for 2018, including fourth quarter that was down 3% to 4%. Ethanol inventories are high, and producer margins have declined throughout the year. We are happy to see continued discussions supporting expanded use of biofuels. In the U.S., we are awaiting clarity on the E15, which is expected sometime before summer. In Brazil, the RenovaBio framework should support the continued expansion of corn-based ethanol production. China is investing in new capacity. And the RED 2 directive in Europe has been adopted, so member states are now working on the implementation process. Now let’s turn to Slide seven for an update on Agriculture & Feed. 2018 was a mixed year for the Ag & Feed business. BioAg posted double-digit organic growth, whereas the feed business declined. The combined organic sales growth for the full year was 3%, but negative in the fourth quarter. The weak fourth quarter sales were impacted by timing of corn product sales as well as low sales of feed enzymes. BioAg performance in 2018 was strong and driven by the new corn product Acceleron B-360, which was sold for application to roughly 16 million acres of corn for the 2019 planting season. As I’m sure you’re aware, our BioAg partner was acquired by Bayer last year. We are currently in negotiations with Bayer on the future setup of the BioAg business and expect to conclude in the coming months. Feed enzymes sales declined in 2018, mainly explained by a weak market in Brazil. On the other hand, the Animal Health business had good performance. Alterion did well. And the newly launched enzyme, Balancius, has been well-received in the market, but as it is early days, the contribution is small. We expect a solid ramp-up during 2019. So to summarize the messages for the two areas. Bioenergy continued its strong performance on top of a strong 2017. BioAg posted good growth while feed was negative due to Brazil. We had a strong year on innovation front with the launch of Balancius and two new yeast products. For 2019, we expect Bioenergy to post high single- digit organic growth. We expect global ethanol production to be roughly flat. The outlook for Ag & Feed includes a relatively higher degree of uncertainty, and we expect low single-digit decline to high single-digit growth. The high degree of uncertainty relates both to the future setup of our BioAg business and volatile agricultural markets. And now, I’ll hand over to Thomas.

Thank you, Tina. Please turn to Slide number eight. 2018 was a strong year of innovation for Novozymes. We launched eight new products, with an additional five exclusive launches, and we had progress across our innovation platform with solutions such as Balancius for improved chicken gut health, Acceleron B-360 for improved corn yield. Each of the priority platforms has the potential to open up completely new markets with significant sales contribution over the medium to long term, and we expect another strong launch year in 2019. Today, Novozymes' innovation pipeline includes more than 120 research projects with many more active leads. Our structure enable the divisions to bring innovation to the market at a higher and faster rate than ever, while at the same time, significantly leveraging cross-segment R&D synergies. This is a structure we constantly drive to optimize. Please turn to Slide number nine. Besides the technology and innovation progress during 2018, we also made two announcements that tie us well with our priority platforms. In November, we announced a collaboration with Elanco, focusing on the development of natural solutions for dairy and beef cattle. The application R&D is being conducted as a joint effort, and we’re currently exploring the first ideas. In connection with the launch of our first product for the water platform back in December, we also announced a collaboration with Biofos, a large wastewater facility here in Denmark. The water treatment space offers an exciting opportunity for Novozymes to leverage our core technologies. While it’s still early days, we’re very excited about the impact our technology could make to help address one of the world’s most significant challenges. That’s all from me, and I’ll hand you over to Prisca. Prisca Havranek-Kosicek: Thank you, Thomas. Please turn to Slide 10. Our financial performance in 2018 was satisfactory. Our organic sales growth was 4%. currencies and deferred income flat and the divestment of Albumedix impacting by roughly 1%, so giving a total minus 1% in Danish kroner. For the fourth quarter in isolation, organic growth was soft at 2%, with currencies and deferred income flat and the divestment of Albumedix impacting by roughly 1%, so giving a total of 1% growth in Danish kroner. The gross margin was at 57.4%, roughly 50 basis points lower than in 2017. Productivity gains benefited the gross margin, whereas higher input costs and lower deferred income were the main negatives. At 28.3%, the reported EBIT margin was 40 basis points higher than for 2017. Adjusted for both reorganization costs and the divestment of Albumedix in 2017, the EBIT margin was down 70 basis points. As previously mentioned, this is mainly the result of negative currencies, but also higher input costs, a step-up in commercial activity, and lower deferred income. The effective tax rate was 18%, 1.5 percentage points lower than in 2017. This is mainly explained by the transfer of IP assets from Switzerland to Denmark initiated at the end of 2017. Net financial costs were DKK 40 million lower than in 2017, and net profit came in 3% higher year-on-year. This was a result of a lower tax rate and despite hedging losses. We also had a DKK 120 million write-off of a financial guarantee in the second half of 2017. Free cash flow was approximately DKK 2.3 billion. This is roughly DKK 100 million than in 2017 and largely the result of an unfavorable development in working capital, which is due to a worse-than-expected development in receivables and inventories. CapEx was reduced by almost DKK 300 million from 2017 and totaled DKK 1.4 billion. We have now initialized trial production at our new facility near Mumbai, India. All in all, we delivered a satisfactory side of financials in line with our outlook. Now please turn to Slide number 11 for the 2019 outlook. We expect 3% to 6% organic sales growth for 2019. At current spot rates, we see an addition of around 1 percentage point for sales in Danish kroner, including the effect from lower deferred income. Our organic sales growth outlook reflects an annualization of the Middle Eastern impact, the future setup of our BioAg Alliance as well as volatility from certain agricultural markets. For the first quarter, we expect to post a modest decline in organic sales growth as the Middle East feed and U.S. baking are all likely to experience a tough start to the year. Looking at the various businesses, we expect Bioenergy to post high single-digit organic growth for the year. For Agriculture & Feed, we mainly see uncertainty for the BioAg part. And the business as a whole should see a low single-digit decline to a mid-single-digit increase, and this includes a slight growth for the feed area. In general, agricultural markets and farm economics are not doing any better than last year. We expect low single-digit growth in Household Care. And for Food & Beverages, we see mid-single-digit growth levels. And finally, for Technical & Pharma, we have an outlook of low single-digit growth for the year. All in all, this adds up to an outlook of 3% to 6% organic growth. We expect an EBIT margin of 28% to 29% for the full year. Productivity improvements are expected to support the margin, whereas input prices are expected to impact negatively. At current spot rates, we expect a minor currency tailwind. We have hedged 100% of our 2019 U.S. dollar exposure at an average rate of DKK 621 to the U.S. dollar, which is well below the current spot rate. The effective tax rate is expected to be at 18% to 20%, and we expect full year net profit growth to be between 0 and 5%. The outlook for CapEx is lower than in 2018 at DKK 1 billion to DKK 1.3 billion. The outlook for free cash flow before acquisitions is between DKK 2.2 billion and DKK 2.6 billion. We guide for around 23% return on invested capital. This includes a negative impact of roughly 1 percentage point from the implementation of IFRS 16 as of January 1, 2019. Subject to the approval at the shareholders' meeting in February, we propose a dividend of DKK 5 per share. This equals an 11% increase from last year and a 44.6% payout ratio. And finally, we’re announcing a share buyback program worth DKK 2 billion, which is on par with what we bought back in 2018. All in all, a solid financial outlook for 2019. And now I’ll hand you over to Peder for a wrap-up.Peder, please.

Thank you, Prisca. Please turn to Slide 12. So let me summarize our message here today. We met our financial guidance parameters set up at the beginning of 2018. This is satisfactory, although we were aiming for higher organic sales growth. The Middle East was the main unexpected drag. On the financial side, earnings and cash flow were both solid. This year, We expect 3% to 6% organic sales growth. Growth will come from innovation and market penetration, particularly in the emerging markets. game-changing products and technologies to the markets such as freshness in laundry, yeast for Bioenergy and Balancius for feed will make strong contributions to our top line. We also expect solid earnings, driven by our continued effort to optimize product solutions and reduce manufacturing cost. Our toolbox is unique, and we have a very strong one position. Our enzymes and microbes can create a more sustainable world with more efficient use of water, energy and raw materials. Few companies can match the reach and impact of Novozymes solutions. In 2018, we reached more than 5.6 billion people with our products. We believe we have the potential to continue to create significant impact together with our customers and partners, but we need to do more to make sure our solutions also play a role in shaping the world of tomorrow. So we’ve initiated a strategic review, exploring how we can get closer to realizing the full potential of our purpose and create greater impact from our investments. The review also coincides with our long- term financial targets ending this year. We’ll share the updated strategy and targets with you at the Capital Markets Day on June 17, and we invite you to join us for this occasion here at our offices in Denmark. More information will follow, and I hope you’ll all be able to participate. This concludes today’s presentation, and now we’re ready to take your questions. Operator, please begin.

[Operator Instructions] And the first question is from the line of Jonas Guldborg from Danske Bank. Please go ahead. Your line is now open.

Good morning. Yes. Two questions from my sideassumption of global – stable global ethanol markets in 2019. What does that include with regarding the U.S. market? Because you must have a negative assumption there because you say that is growing and there’s also other places where we could see some positive development. And then maybe challenged you a little bit on your Household Care guidance for 2019 where you say low organic, low single-digit organic growth because you had 0% in 2018, and then minus 1% from the Middle East and minus 2% from the other stuff. And then you’re guiding low single digit in a year where we should see some increased traction from the freshness platform.

Thank you. We’ll let Tina talk about ethanol. Tina, please.

Yes. So you’re right, Jonas. On the U.S., we have a slight negative expectation for ethanol volumes. So that means no – E15 – hardly any E15 and hardly any China is included in our expectations.

So looking at the outlook for 2019, our freshness platform delivers exactly as we expected. Actually, it’s building up really nicely. The challenge we have is related to the Middle East where we have a relatively high explosion in Household Care. And that relates to, of course, trade sanctions in Iran and Syria. It relates to the Turkish devaluation. And then it relates to some challenges we have seen in the second half of 2018 and also in Saudi Arabia. All of that combined actually takes out a couple of percentage points of the growth outlook we had, had we not had that challenge in the Middle East.

Yes. So you could say underlying, you had a 2%, 2% to 3% organic growth in Household Care in 2018. And then my question is why is that going to be at the same level in 2019?

So the effects that we saw are annualizing in 2019 of the Middle East, and so we have – actually building strong momentum. But because of the difficulties we’re having in the Middle East, we actually – we take some of that momentum out. So had it not been for that, we will actually be on a solid ramp-up of growth in Household Care.

Okay, thank you.

Next question is from the line of Gunther Zechmann from Bernstein. Please go ahead. Your line is now open

Can I start with two, please? One, following up on the E10 comments. In China, you said Tina that you don’t include anything in your guidance from that, but you mentioned on the call that you’re seeing investments going into that ground numbers, investments going in enzymes at some point. Can you just highlight what you’re seeing in the market in terms of China’s drive for E10 across the country? That’s just number one. The second one on Household Care. I think middle last year we were speaking around a higher oil price and you might have seen some activity of your customers thinking of reformulating enzymes back into their laundry formulations. Given where we are now, has this stopped? Or what’s the current feeling you have around your large and midsized, I suppose, HBC customers? What are they doing in the market? Thank you.

Thank you, Gunther. We’ll let Tina have a go at China and ethanol, please.

Yes. So on China, the situation in the market is that there’s an established business out there. We, for sure, have that included in our guidance. We also see some distilling plants moving over to fuel production. We also start seeing new capacity being built, but it takes, you could say, some time to really get up and matter. So that’s why I said that we have hardly – we don’t have much in on extra capacity from new capacities in China. But for sure, it’s there, and for sure, you could say we are following. We do expect that in the future years, that’s where we really are going to see the impact on E10 in China because we expect it to come, and it’s going to matter, but we haven’t included that much of the extra growth in 2019.

Thank you, Tina. And Anders, penetration of enzymes in Household Care, please?

So on the relation to oil price, the hike we saw have not had any effect. And I think what we also commented before, we need to see sustained high oil prices before we start to see that positive effect. Our guidance for 2019 is based on the oil prices as we have now, so I wouldn’t expect that to drive any significant change in the outlook.

Okay. Can I maybe just flip my question, Anders, and ask, are you seeing higher inclusion rates of surfactants at the expense of enzymes? Or is that just a neutral impact on your content in laundry currently?

Right now, I would say we’re not seeing those effects. I think we’ve been under this oil price regime for a while, and that there’s no effects as a consequence of the low oil price right now and we don’t expect that in 2019 either.

Thank you.

Next question is from the line of Annette Lykke from Handelsbanken. Please go ahead. Your line is now open.

First of all, a question to Tina on the inventories of bioethanol, in the U.S they’ve been around for, I think it’s two years now you have mentioned those. With squeezed margins, is it the expectation of the higher prices? Or could you that, I know it’s not your business, but could you potentially share with us some thoughts on why you think these inventories are fairly high? And also, even though they’re at all- time high levels, how big are they? If we have a reduction, will it have any meaningful impact on your growth? Then my second question would be to the expectations. You had a fairly wide spread on your growth from 3% to 6%. I’m just wondering at what time we would know where you would be – whether you would be in the lower end or in the higher end of your growth targets here? Should we get past this soft Q1 quarter? Or would you already, at the Q1, maybe know if – where you would land to the year, as there’s a fairly big spread? Thank you.

Thank you, Annette. So Tina, on ethanol inventories and do they matter to our growth, please.

Yes. So the expectation for the Bioenergy business is a high single-digit growth, and that is assuming that inventories will remain high throughout 2019. So for sure, it is something which is influencing the business. And we do see, you could say, we have seen, as you saw in Q4, some decline in the U.S. ethanol production. And that’s, you could say, the effect we have. But we still expect high single-digit organic growth for next year.

But Tina, can you say anything on why these inventories are so high when you have squeezed margins? Is there any good explanation for that?

Well, that’s a very good question. I can try and speculate, but I think your speculation is maybe as good as mine. But the way I see it is that, for sure, everyone in the U.S. is waiting for E15 or reopening of the exports to countries like China. So – and then there might also be a consolidation play going on. We have seen some of these moves throughout 2018. So that would be how I would be speculating on it.

Would – could you then comment on how long time can the producers afford to have these inventories? Is there a certain threshold here or time line?

I wouldn’t say there’s specific threshold or time line. I mean, we have seen in Q4 a decline of at least 3% to 4% in the ethanol production. And I think, I see that as an outcome forward. But you shouldn’t expect that beyond so many days of inventories than it’s an abrupt change in the situation. Thank you.

And on the guidance of 3% to 6%, let me first say that, of course, the whole range, as far as we can see, is in play. The upper part of the range has to do with stronger performance than we have in our budgets on some of the introductions that we have made over the last couple of years, product introductions, that is, that they can certainly perform better than what we have in our budgets. it also includes that some of the expected reduction that Anders was talking about into 2019 that they will be smaller. So things can go better. Things can also worse. That’s the 3% where we see a bit more of the negatives and we see some weakness on the – some of the product introductions. Over layering all this is, of course, a rather a world with a lot of uncertainties. We see the trade conflict between China and the U. S., which, as Tina talked about, influences businesses like ethanol and our BioAg business in soybeans, in particular. We also have an internal, if you like, or specific to Novozymes, uncertainty that they will in all likelihood disappear within the next few months relating to the BioAg Alliance. When I combine all these things, I think the best go we have now is 3% to 6%, and the whole range is in play. And it’s too early to say anything about trigger points within the year where we would start thinking about narrowing the range. So we’ll have to see how business gets started and how these uncertainties they unfold and how the opportunities unfold.

Okay, thank you very much.

Next question is from the line of Soren Samsoe from SEB. Please go ahead. Your line is now open.

It’s Soren from SEB. I was disconnected from the call, so I apologize if my questions have already been asked. First of all, on, if you can say, on the Middle East effect, in first half, is it – do you see it, as you see it now, will it sort of be a fading effect? Or is it a flat? Or is it accelerating as you see it now? Secondly, the sales you expect in 2019 from the freshness platform, if you could maybe explain a little bit on how you see the visibility on that sales from your end? And then if you could also comment on the gross margin, which has declined both full year and Q4 by 40 to 50 basis points. Seems to be due to high input cost. Could you quantify what are these input cost effects? And also, if you will see similar negative effects in 2019 at the current spot rates.

Thank you, Soren. And I actually don’t think these questions have been asked before, so we’ll let Prisca talk about the impact of the Middle East on gross margin. Prisca, please. Prisca Havranek-Kosicek: Yes. Yes. Thank you, Soren, for your question. So on the Middle East impact, for the first half year on 2019, we expect roughly a similar impact that we saw in the second half of 2018. So I don’t expect any change in sentiment in that in the first couple of months of the year. For the gross margin question, yes, you’re right, we see a decline in gross margin. Now also bear in mind that, of course, our gross margin has been fluctuating also in the past. However, the input costs that we have called out throughout the full year during 2018 have impacted the gross margin. We also have an FX impact there. And don’t forget the impact of the deferred income, which is also, of course, in Q4 can be seen. As to your question for 2019, we don’t guide on gross margin, so I’m afraid I can’t be much more specific on that. But I expect raw material price, raw material prices, I don’t see – we’ve seen a significant decline of the levels. So I expect that will also be impacting input costs and, therefore, the gross margin going forward. But don’t forget that we always have a counter effect that comes from productivity improvements in our operations. And how that plays out, it remains to be seen.

Sure. Sure, Prisca, but maybe you can then elaborate what input is it that is responsible for, you can say, the majority of the headwinds you have? Prisca Havranek-Kosicek: It is both in the direct costs, which are raw materials, but also utility costs and general fixed production costs. So you’ll see a mix of both. Of course, there’s always fluctuations quarter-by-quarter. I would call out the raw material cost for 2018, as I’ve done throughout the year of 2018. Because in the beginning of 2018, we saw a quite – or actually the end of 2017, we saw quite a steep increase in certain raw materials that we use for our manufacturing.

Thank you, Prisca. And Anders, on how freshness is going to go to market in 2019? Anders, please.

So the status now is, we are shipping to five destinations covering an expected 10 to 15 countries, mainly in the emerging markets, Southeast Asia and Middle East and Africa. The ramp-up is going according to plan. The bigger impact, we’ll see in the latter part of 2019 where Europe will also come online both with powders and liquids. So you’ll see a gradual ramp-up, but the biggest – but that was basically ramp-up over the course of the year.

Okay thank you.

Next question is from the line of Lars Topholm from Carnegie. Please go ahead. Your line is now open.

Yes. Couple of questions from me. One is on the net working capital. When we discussed at this after Q3 you assured me it went up due to seasonality, but that doesn’t seem to be the case. So I wonder if you can put some comments on what is then the reason for higher working capital? And how do you see this in 2019? Second question, your R&D cost as a percentage of sales dipped quite significantly in Q4. Is this just a quarterly blip? Or are you forecasting R&D expenses will be on a new lower level? And if so, what are you holding back on? And then a final question goes to BioAg. And you raised the flag for potential changes to the alliance subject to discussions with Bayer. So I wonder if you can say anything on the time frame for those discussion being finalized and maybe also list some of the potential scenarios we should prepare for. Thank you.

Thank you, Lars. We’ll let Prisca have a go on net working capital and R&D spend. Prisca, please. Prisca Havranek-Kosicek: Thank you, Lars. Yes, let me take R&D first. So this is a normal quarterly fluctuation. We haven’t changed any investment level in R&D whatsoever. If you look into the trend of the quarterly R&D in terms of sales over the last 2018 and – sorry, 2019 and 2017 quarters, you see fluctuations between 12.3% to 13.5%. So it’s quite a wide range, and it’s well within the range. So there’s nothing particularly happening in Q4 that would have an effect for 2019 and so on. So we are at the same investment level in R&D. As for net working capital, yes, you are right, and I’m actually quite – a bit disappointed by the net working capital development in the last quarter of 2018 because we expected a higher than – we have seen decrease of net working capital. As to your question of seasonality, we have – as you have seen, we’ve had quite a diverse growth pattern by quarter in 2018. And I can think, also say, I would expect something similar in 2019. So that drives fluctuations in working capital, amongst the other things. You’ve seen our free cash flow has fluctuated somewhere between DKK 300 million and DKK 1 billion in a quarter, so that’s a swing of DKK 700 million. So I expect to see also quite significant swings in free cash flow generation on a quarterly basis also going forward. And that is what I was referring to mainly with the seasonality. But you’re right that, particularly the receivables performance, but also the inventories have not come down as much as we would have expected them by the end of 2018.

Prisca, may I ask what you do to actively optimize this? Prisca Havranek-Kosicek: Yes, I think that’s a very valid question. So working capital has my full attention. As my colleagues – sorry, as my colleagues will be able to vouch for. So we’re doing a couple of things. But before I go into that, let me just maybe explain structurally. Structurally, we are investing in growth. So we are also, as you know, investing in strong growth in the emerging markets, yes? So the emerging markets footprint comes with a certain carry of working capital that we’re consciously investing in. In addition to that, as you also have known I think from a resilience of revenues point of view, that’s a very good thing. We are expanding our portfolio as to markets, but also as to products, and that also has an impact on the complexity and the inventory. So that is basically a headwind that we have from that. Now how do we address that? We are investing continuously, but have actually quite recently invested into planning software or planning systems that we hope will better enable us to manage our inventory. But having said that, I think it’s also important that in our kind of business, we will always be very prudent on stock levels because we don’t want to run out of stock at – the business that we’re in, and particularly the gross margins we’re in. So it’s always a delicate balance. We’ll also be very carefully watching receivables and managing receivables and DSOs. And it has a high retention, but there’s a couple of, I would say, counteracting structural trends that are related to our investments in emerging markets, amongst others, that we have to mitigate.

And then on the BioAg business, so as of now, you could say the BioAg business, the alliance is completely committed to continue delivering. However, as we’re also calling out in our expectations or in our outlook for the segment for Ag & Feed, we’re talking about a low single-digit decline to a mid-single-digit growth, and one of the reasons is, you could say, exactly how will the future be of our BioAg business. There’s also the normal underlying uncertainties, especially in these geopolitical situations in the agricultural market. We are, and have been, for quite some time in good and constructive discussions with Bayer. These discussions continue. And it’s too early to say, you could say, when we’ll finally conclude. We expect it to be in the period to come. But these things takes time, and therefore, it’s difficult. But I can assure you that we’ll inform you as soon as we have something definite on how we see the future of that business.

Tina, can I ask you, could a potential outcome be that you continue with Bayer for just on corn and are free to find other partners for other crops?

That is a number – I mean, it is – one of the great things about the BioAg business is that there are so many different opportunities and possibilities, and we’re looking into all of them in order to take it forward the best possible way.

Thank you, thank you for answering my questions.

And next question is from the line of Michael Rasmussen from ABG. Please go ahead. Your line is open.

Thank you, thank you so much. Apologies, I also have a couple of technical problems here. First of all, on the Household Care, in terms of hygiene platform. Can you share with us what kind of feedback that you’ve been hearing now from the markets, meaning feedback from the end-users, if anything? And also, other detergent producers in these markets adjusting for the sale prices? Secondly, a bit of a household question on Bioenergy. Can you give the typical growth breakdown in terms of share gains impact from yeast price? And just remind us, when yeast is standardized? I think you launched it in Q2 of 2018. And then finally, also a bit of a household question. On Bioenergy, now I do know that you’re starting to have a global ethanol volumes instead of U.S. ethanol volume, so can you give us, please, the rough estimate splits between the U.S., Europe, Latin America and China? Thank you.

Thank you, Michael. So Anders, on freshness, please, feedback?

The best evidence we have is, of course, the conversations we have with our partner with whom we’ve launched this. And they are – continue to be very excited about this. The initial feedback that we have seen from the Philippines where it’s been out and also being promoted, they are also quite positive. But I think it’s too early to tell what’s the consumer perception. And that’s also the feedback we get from P&G. In terms of sales price as a consequence of including this enzymes and specifically this technology is still a relatively small part of the total formulation, so I don’t think we should expect that sales prices will change. I think every time you include a new claim or you change your formulation, you do it in a way where you basically have the entire formulation in play. And at least, the experience we’ve seen is that they try to balance the cost, and that means that something will go out and something will come in, and in this case, it’s the freshness platform that comes in.

Maybe if I can allow an addition, I think the – that’s what we’re seeing now in the emerging markets. I think as we get into the more matured markets and with some liquid versions and some of the specialty brands, you might see a different positioning of the whole thing. So it’s going to be exciting times. And it’s going to be exciting to see how in the first instance P&G is going to play this technology across their full suite of different brands and geographies. Tina, please?

Yes. And on the, as you call it, household on biofuel, so the growth that we saw throughout 2018 and also in Q4, 2018 is a continuation of what we saw throughout, you could say, the full year, which is a mix of, I would say, three things. It’s a mix of especially Brazil but Latin America, but particularly Brazil, moving more and more into corn-based ethanol. We see also a good contribution from our innovations, specifically the yeast products. And then we see, you could say, mix price share contributing as well. Yeast, we launched, in fact, two yeast products in 2018. The first one was launched, I think it was the February 6, but at least in Q1. And the second product was launched in Q4. So we launched two yeast products, and they are also a significant part of the growth we have seen. We also talk about the ethanol volumes. And in the U.S., we do expect a slight decline. And why do we do that? One of the reasons is that margins and inventories are high, as we have talked about throughout the year. And then we have not factored in, you could say, the E15 push, which we expect, which we hope will come, but given timings, we’ve not factored that in. Then we do, outside the U.S., expect an increase in ethanol volumes. And here, the biggest driver for that is, in Brazil, as it was also in 2018. While in China, we do see, you could say, moves in building up that market further. But it’s still too early to include a significant part in our 2019 sales. I hope that answered your questions, Michael.

Yes. The question was also relating to the revenue split by region.

Yes. And by region, so we sell about, I think it’s around 85-ish percent in the U.S. and the rest outside.

Okay, thank you so much.

Our next question is from the line of Nicola Tang from Exane BNP Paribas. Please go ahead. Your line is now open.

Hi, everyone. Thanks for taking my questions. The first would be on Ag & Feed and this very wide guidance. It sounds like the guidance depends on BioAg. I was wondering if you could talk a little bit more the feed side. Did I hear you correctly that you’re getting for slight growth, but the comp in Q1 was very tough? Can you remind us as how feed developed three year because from memory, it was actually quite tough most of the year? And what’s your assumption on the underlying market given the fact that you actually have a few innovation coming through? And the second question is on the Middle East. You talked in Q3 a little bit around about – some workarounds perhaps in Turkey around the baking business. Based on your guidance where you say that H1 this year will be similar to H2 of last year, sounds like maybe you haven’t have a workaround. Is that a correct assumption?

Thank you. So Tina, you get to talk about feed now.

Yes. So on the feed side, you’re so right, feed has been rough throughout 2018, and we have seen the business in decline. And we have seen – most of it is coming from Latin America and particularly the segment which we called proteases. And that decline has, you could say, throughout 2018, although we have seen a bit of sales for our Balancius product, our new innovations, but that has not been able to make up for the decline in the underlying feed enzymes market. So throughout 2018, we also saw strong growth in – of our probiotics. So for example, Alterion as I’m calling out. So there are these, you could say, positives on Balancius, on Alterion, but the decline, particularly in proteases in Latin America, are not compensating for the growth we see elsewhere. For 2019, we do expect slight growth in the feed market overall, yes.

And Andy has cleared his voice to answer your question on the Middle East and Turkey. Andy, please?

Yes. So in 2018, kind of the back half of the year, we saw quite a bit of turbulence in the Middle East that impacted baking more because of the kind of the Turkish lira devaluation. That’s an important market for us. That’s not the main driver of sort of, let’s say, softness in baking in Q1. It’s a part of it. We’ll have to annualize sort of a rebasing, but we’re optimistic about getting back into those markets and regrowing in 2019 after the rebasing. But the bigger impact in Q1 is the continued price pressure on Novamyl in North America, which is – our planned price reductions actually get annualized after Q1. That’s the bigger impact around baking for the softness starting.

And the next question is from the line of Anton Brink. Please go ahead. Your line is now open.

Yes, good morning all. First question would be on Henkel stating that they would increase their innovation, among others, their laundry care unit. I was wondering is that expected to help your organic growth going forward? Or does the exclusivity to P&G in terms of the Freshness & Hygiene platform limits your capabilities there? And then secondly, I have a question on BioAg and feed. I think it has been extensively discussed already. We have – basically, the 2019 guidance is significantly below consensus expectations. Can you give us an indication of where the pipeline stands in terms of commercial launches despite the setbacks you’re facing with low crop price levels and the potential deal risk related to Bayer-Monsanto? Thank you.

Thank you for your questions. So the recent news on Henkel, Anders, please?

So the recent news on Henkel doesn’t change our outlook. We have a strong pipeline with Henkel as we do with all our large customers that’s built into our expectations through the year. The relationship between what we’re doing with P&G and freshness and Henkel should not have any impact on our ability to service them. We have a strong pipeline, and we expect to execute on that.

And then Thomas will talk you through the BioAg pipeline and the future of that. Thomas, please?

Yes. BioAg and feed is the area or is areas where we have seen very strong pipeline innovation coming over the last couple of years, and we’re expecting to see that turn into sales opportunities here in 2019. We launched the Balancius in the feed area at the very end of 2018. And this is very, very interesting product that we have been out or DSM has been out sometime last year saying that this is going to turn into midterm revenue of EUR 60 million to EUR 80 million, so that’s certainly an interesting innovation hitting the market. Likewise, we’ve been talking about Acceleron B-360 that’s getting into 16 million acres. So again, a significant innovation that’s making its way into the marketplace and will also start to show up in our books.

Okay. And then maybe a bit of a follow-up on the question. Because I mentioned the consensus being at 10%-plus levels organic growth in the coming five years, if I’m correct. I mean, you’re guiding for 2019 now. Can you give us a bit more on, let’s say, the midterm outlook for this unit?

Yes, for sure, you could say we are investing and have some of our growth platforms are in Animal Health and it’s also in BioAg. So it is something, it is areas – both of these are areas where we expect higher growth than what we’re guiding for 2019 on the longer term. but as of now, we’re looking at the Ag and Feed segment for 2019, and that’s low single-digit decline to mid-single-digit growth. But on the longer-term horizon, we do expect more to come out as the innovations get more impact into the market.

So maybe to add to that, I think the – I mean, BioAg is inherently an uncertain place. But I think the – because of the major flows of Ag commodities, I mean, who knows where soybeans are going to grow in the second half of 2019 given the potential expansion of the conflicts with China. It’s not easy, but one thing that we know for sure is that the innovation that we’re bringing out, in particular what we’re doing in corn inoculants, drives really solid growth, and that’s the going to come through the numbers. I also think what we’re doing on Animal Health, the new areas that we’re expanding in animal feed drives solid growth. So the uncertainty is really more, but there are some supply chain uncertainties with partners and then there’s uncertainty around the kind of the older businesses that we have, in particular in feed, but also in the soybean area. But we are excited about the investments we’re making. We’re running out of time. We may have time for just one last question. Thank you.

And the next question is from Sebastian Bray from Berenberg. Please go ahead. Your line is open.

Good morning, and thank you for taking my questions. I have three quick ones, please. The first one is what exactly have happened in the markets for LatAm feed, aside from one-off Brazilian truckers strike that has meant that the growth rate has come down over 2018, is my first question. My second is just following up on some of the others that have been asked. What can actually been negotiated in BioAg? Is it simply products scope? Or could there be a change to the 50-50 profit-sharing that is currently in play between Monsanto or Bayer that is now and Novozymes? And thirdly, could you please outline the drivers for the above-market growth in – give us some idea of their importance in terms of order of magnitude for Bioenergy. So ethanol production is flat globally, why should Novozymes be able to grow at [indiscernible]? Thank you.

Those are quick questions that we say thank you for, and they go to Tina.

Yes, and I’ll try to be quick then. So on LatAm and feed, throughout 2018, we’ve had vitamin prices spike tremendously, which has meant something for how much feed producers have had to invest or have had money or ability to invest. In other additives, we have seen something on soy prices. And then the last, but not least, we’ve had a significant meat scandal. There’s also other competitive moves, but the three first ones are the main ones. On Bayer, we are in negotiations as we speak, so unfortunately, I don’t have much more I can contribute with Bayer. I do understand that it’s frustrating. But for sure, the minute we know more, we’ll let you know. On biofuel, you are right, we are growing above the market. That is due to innovation in general, I would say.

Thank you very much.

Thank you, Tina, and thanks for all your questions. I’m afraid we have to close it now. But luckily, we’ll be on the road, and hopefully, meeting many of you over the next couple of weeks in the different geographies. And then as a last reminder from here, please take notice of June 17, where we’ll host a Capital Markets Day here in Denmark, and we’ll get back with details. Thank you so much for your interest in Novozymes. Thank you.