January 18, 2017 / 8:10 AM / 3 years ago

Novozymes cuts 198 jobs, to invest more in emerging markets

COPENHAGEN, Jan 18 (Reuters) - Danish enzymes maker Novozymes said on Wednesday it would cut 198 jobs and allocate resources to high-growth opportunities in emerging markets, indicating it could take time to return to previous growth rates.

The business flourished after being spun off from drugmaker Novo Nordisk in 2000, but a lower oil price in recent years has hit demand for its enzymes used in detergents and in the production of biofuel.

For 2017, the company expects organic sales growth - stripping out currency moves - of 2-5 percent, far from the double-digit growth rates of the past.

Last year, Novozymes cut its long-term organic sales growth expectations to 6-7 percent a year from 2017 through 2020, down from a previous target of 8-10 percent. It was the second time in a year it had cut the target, having lowered it in 2015 to 8-10 percent from 10 percent or more.

Novozymes, which had 6,441 employees at the end of 2016, said it would increase investments in customer-oriented activities, innovation in growth markets and in strengthening its technologies. It said it would increase its presence in South East Asia, Africa and the Middle East.

Novozymes shares opened more than 3 percent higher.

“Since most of the programmes will not have a commercial impact with significant revenue contribution for the next one to two years, Novozymes does not currently expect organic sales growth rates in line with the historical performance to be achievable in 2017,” the company said.

“Once the programmes have been commercialized, these will be achievable again,” it added, without giving a new target for its sales growth in the years before 2020.

Novozymes’ fourth-quarter earnings were slightly better than expected by analysts, and the company announced a share buyback programme worth up to 2 billion Danish crowns ($287 million).

The company said it expected a 2017 operating profit margin of around 28 percent and a return on invested capital including goodwill of 24-25 percent.

“Novozymes’ 2017 guidance on earnings is a bit lower than expected, but it seems primarily to be because of exchange rate effects,” said Sydbank analyst Morten Imsgard, who has a “hold” rating on the stock.

Novozymes said financial costs were expected to be higher in 2017 than in 2016 due to the dollar/Danish crown exchange rate.

$1 = 6.9621 Danish crowns Additional reporting Nikolaj Skydsgaard; Editing by Mark Potter

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