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Source: Novozymes news release

To view the complete report, click here.

The first quarter of 2014 was strong from a sales growth, earnings and cash flow perspective. As expected, sales came in strong in the first quarter and, organically, sales increased by 11% compared with Q1 2013 (7% DKK, 10% LCY).

EBIT grew by 30%, and the EBIT margin was 30.4%, driven by a one-time positive impact from The BioAg Alliance of net around 4 percentage point and a better than expected development in underlying earnings. As a result, expectations for full-year EBIT growth, EBIT margin, net profit growth, ROIC and free cash flow are increased, despite the unfavorable currency development.

Expectations for full-year organic and LCY sales growth are maintained, and expectations for sales growth in DKK are adjusted for currency within previous range.

Sales to the Bioenergy industry were up by 29% in DKK and by 34% in LCY compared with the first quarter of 2013. The U.S. Energy Information Administration estimates that U.S. ethanol production in the first quarter of 2014 grew by ~11% compared with the same period last year.

Bioenergy sales benefited from continued positive developments in Novozymes' yield discovery solutions Avantec®, Spirizyme® Achieve and Olexa®. Penetration of all three solutions continued to increase in the first quarter of 2014.

Sales to the Agriculture & Feed industries decreased by 11% in DKK and by 6% in LCY compared with the first quarter of 2013. Organically, sales were down by 1%. Sales to the animal feed industry contributed positively to sales growth, whereas sales to the BioAg industry declined slightly compared with the same period last year.

Sales to the animal feed industry increased due to a continued positive development for RONOZYME® ProAct. Sales to the BioAg industry were lower due to an expected change in timing of orders between quarters. Disregarding this, underlying sales grew nicely compared with the same period last year.

The BioAg Alliance with Monsanto was completed on February 10, 2014, from which date Novozymes' BioAg sales recognition changed to reflect the equal value share with Monsanto. In the first quarter of 2014, Novozymes recognized DKK 62 million of deferred income as revenue. This counterbalances a proportion of the negative impact from lower sales recognition through The BioAg Alliance.

The change in sales recognition had no impact on the organic growth rate for Agriculture & Feed. The organic growth rate for the sales area will continue to reflect the underlying sales performance of the animal feed business and BioAg business.

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