Novozymes Names Nielsen CEO Amid Biofuel-Market Challenge
Stock Chart for Novozymes A/S (NZYMB)
Novozymes A/S (NZYMB), the world’s biggest maker of enzymes used in washing-machine powder, named Peder Holk Nielsen as its chief executive, handing the 56-year-old the challenge of meeting growth targets against a backdrop of slower bioethanol production and drug-development delays.
Nielsen will succeed CEO Steen Riisgaard, who is retiring on April 1 after 12 years in the role, Bagsvaerd, Denmark-based Novozymes said in a statement today. Novozymes also reported fourth-quarter earnings that beat analyst estimates, buoyed by sales of enzymes for household and consumer products.
Novozymes’ change of leadership coincides with a slowdown in sales of enzymes used to convert corn into biofuel as the industry contends with cheaper gasoline costs. Nielsen, currently head of enzymes, will accompany Riisgaard to the World Economic Forum’s annual meeting in Davos this week to promote its biotechnology.
“What surprised us was the evolution of the crisis in the U.S. fuel-ethanol industry, that it continued to get worse,” said Nielsen, who earned a PhD in chemical engineering prior to a career in industry that saw him join Novozymes when it split from Novo Nordisk in 2000.
Shares of the Danish supplier of enzymes to the beer and jeans industry jumped as much as 8.5 percent, their biggest intraday jump since April 29. They traded 6.8 percent higher at 171.8 kroner in Copenhagen as of 3:00 p.m. Novozymes has advanced 7.8 percent this year, valuing it at 52.3 billion kroner ($9.3 billion). DuPont Co. (DD), its principal rival in enzymes following the purchase of Novozymes’ local competitor Danisco, added 4.5 percent.
“The share price has been drifting a bit, but now we’ve come through with 2012 results that were, if anything, a bit better than what we had guided,” said Nielsen in a phone interview.
Earnings before interest and taxes were 671 million kroner in the fourth quarter. Analysts had predicted 571.8 billion kroner, according to eight estimates compiled by Bloomberg.
The Danish company is targeting more than 10 percent growth in revenue from existing businesses after 2015. Sales this year will expand 4 percent to 7 percent, it forecast.
Demand for enzymes for biomass conversion and sales to the biopharmaceutical industry are expected to “materialize slowly” in 2013 and 2014, before those businesses make a more significant contribution by 2015, according to Novozymes.
DuPont, Novozymes and Royal DSM NV (DSM) are hoping for a step change in the pace of cellulosic biofuel production as the first high-volume refineries go into operation, marking a shift from an experimental fuel into a commercially viable one.
Production of the fuel made from crop waste, wood chips, household trash and other non-food organic sources will reach 9.6 million gallons (36 million liters) in 2013, up from less than 500,000 gallons in 2012, according to data compiled by the U.S. Energy Information Administration and obtained by Bloomberg News. That gain will leave the industry short of the government’s target for 1 billion gallons that gasoline and diesel producers are expected to blend into their products next year under a federal energy regulation.
Possible New Plant
Latin America and Asia will likely account for the next wave of cellulosic biofuel plants, said Riisgaard, who is retiring after overseeing Novozymes since its initial public offering in 2000. If the biofuel market in Brazil develops well, Novozymes could add a dedicated plant there to supply the local market, he said.
Riisgaard said among the highlights of his career at Novozymes was making a go of a business that skeptics regarded as the “dumb” part of pharma company Novo Nordisk, with little potential as a standalone business. Passing up on the opportunity to buy AgraQuest isn’t a regret, given the multiple and $425 million price tag that Bayer AG (BAYN) agreed to, he said.
Novozymes has 47 percent of the market and that share is gaining, Riisgaard said.
His departure coincides with a redesign of Novozymes’ management to incorporate an improved focus on bringing innovation and technology to the market more quickly. Andrew Fordyce, vice president of sales and customer solutions, joins the board.
“There’s going to be more focus on the pipeline of innovation,” said Chief Financial Officer Benny Loft in an interview. “Our challenge is to listen to customers and get our innovation to them faster.”
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