Assets
| Type | Time | Amount | Unit |
|---|
Revenue
| Type | Start date | End date | Amount | Unit |
|---|
XML
See the xml submitted here:
No XML document available for this report.
Separator
The full data:
ormene 28 feb. 2014
Ba
novozymes
Rethink Tomorrow
Novozymes A/S | CVR No. 10007127 | Novozymes" Annual Report 2013
Approved at the Annual Shareholders' Meeting on february 28, 2014
1403034EogSN57481
Erhvervsstyrelsen
men 5
sSTYRELSEN
mm .
em TT
ERHVERV
28 6En, 200
Chairfnan: Niels Korhkrup
Contents
THE BIG PICTURE
Letter from the Board of Directors
Letter from the CEO
The year in brief
Key figures
BUSINESS REVIEW
14
"6
20
Company profile
Business model
Market trends & outlook
Risk factors & opportunities
STRATEGY & PERFORMANCE
22
Strategy
Long-term targets
Expectations for 2014
Sales and markets
Financial and sustainability discussion
The Novozymes stock
GOVERNANCE
54. Board of Directors & Executive Leadership Team
59. Corporate governance
62
Risk management
ACCOUNTS & DATA
66
67
638
69
70
71
73
117
122
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of shareholders' equity
Consolidated statement of cash flows
Environmental and social data
Notes
Statements
Financial statements for Novozymes A/S
novozymes
Rethink Tomorrow
mi
i as 0
== O
FEE ss
og
sæ:
mi
Jude
se
.N
0,
La
De;
1403034EogSN57482
Ta OT ED TLE:
Letter from the Board of Directors
Strategy in focus
2013 was an important year for Novozymes: A change in leadership, new long-term corporate targets,
organizational changes, acquisitions, partnerships and alliances all put strategy and execution in focus.
The year also brought healthy organic sales and earnings growth, illustrating once again the strength
of a diversified business with innovation at its core.
New leadership, same strategy, different organization Although Novozymes might look the same today as it did
At the beginning of 2013, Novozymes conducted a planned — last year, much changed within the company in 2013. The
management succession process resulting in the organization adopted a new structure to sharpen focus on
appointment of Peder Holk Nielsen as the company's second — the customer, internal processes and procedures were
CEO from April 1. The Board emphasized that the task reviewed, and new R&D application units and novel growth
ahead is not about revolutionizing the company. Ratheritis — platforms were created, all to help achieve Novozymes' long-
about the evolution of the existing strategic foundation to term targets.
take the company further toward its vision of providing Innovation drove growth in 2013
sustainable biological solutions that create the necessary
. G . .
balance between better business, cleaner environment and All sales areas contributed to a 5% increase in sales in.DKK,
better lives a 6% increase in EBIT and a record-high EBIT margin of
GLOBAL CONNECT
Dialogue is key in managing opportunities and
risks, and meeting the needs of a biobased
society. It also helps Novozymes and its
network of global stakeholders turn high
expectations into viable products.
THE BIG PICTURE
Letter from the Board of Directors
"Novozymes invests 13-14% of sales in R&D. A large
portion of this funding is dedicated to new ideas and
technology as a source of new business opportunities
and growth in the longer term.”
24.7% in 2013, with particular progress in Bioenergy and
Household Care. The growth in both of these industries
demonstrates the power of innovation.
In Bioenergy, the underlying bioenergy market was flat, yet
Novozymes delivered double-digit organic sales growth due
to new enzyme technology that gives customers higher
yields of ethanol! and corn oil, while also saving energy in
their production.
In Household Care, customers continued to benefit from
higher inclusion of enzyme systems in detergents, as
Novozymes has advanced the technology to a point where it
enables customers to produce better and more sustainable
detergents without additional costs.
Growth platforms with exciting potential
Novozymes invests 13-14% of sales in R&D. A large portion
of this funding is dedicated to new ideas and technology as
a source of new business opportunities, productivity
improvements and growth in the longer term. Novozymes
has built two strong platforms with the intention of
transforming how farmers grow crops and how waste is
utilized. The BioAg and biomass conversion platforms both
offer exciting potential for Novozymes and witnessed
exciting developments in 2013.
The world's first commercial-scale cellulosic ethanol plant
was inaugurated by Beta Renewabies, a Novozymes
partner, in Crescentino, Italy. The plant is significant, with:
the initial capacity to convert agricultural residues, waste
and energy Crops into 50 million liters of ethanol per year.
Novozymes also entered into important new collaboration
agreements with M&G Chemicals, which is looking to
produce bioplastics in China once financing is in place, and
with Rafzen on the production of cellulosic ethano! in Brazil.
These partnerships and the inauguration of the plant in Italy
are critical for showing politicians, investors and the world
in general that biomass conversion technology is ready for
commercialization,
Within BioAg, Novozymes entered into a long-term strategic
alliance with Monsanto, one of the world's largest
agricultural technology companies. The Board is excited
about The BioAg Alliance's potential to develop biological
solutions for farmers worldwide. The BioAg Alliance is
expected to support our sales growth in both the short and
the long term. Furthermore, it will allow Novozymes to
strengthen its established microbial technology position
1403034EogSN57483
and fermentation competencies, and invest significantly in
innovation to develop the agricultural biologicals market.
For its part, Monsanto brings to The BioAg Alliance
competencies, agricultural know-how and a commercial
infrastructure that are second to none.
These platforms could transform Novozymes' future
business, and the Board wil! closely monitor progress in
these areas in these crucial early years. In the meantime,
Novozymes plans to continue to reap the rewards of its
diversified business model, delivering consistent sales and
earnings growth through innovation and increased
productivity,
January 2014
The Board of Directors
Novozymes A/S
Ho RR,
FIL PE
Letter from the CEO
The journey continues
A year of transition, 2013 saw Novozymes reorganize the company, reprioritize its research efforts,
secure important partnerships and deliver strong earnings. While poised for further growth, we must
also stay on top of industry innovation, competition and ever-evolving customer needs.
Global impact
We made an extra effort to put our customers at the center
of everything we do in 2013, challenging ourselves to gain
an even better understanding of what they want and need.
In spite of many internal changes, Novozymes was able to
deliver a number of significant biosolutions in close
collaboration with customers worldwide.
The innovation pipeline was refocused to deliver more
innovation enabling our customers to produce more with
less. The package of yield discovery solutions for biofuels
launched in June — Novozymes AvantecØ, SpirizymeO
Achieve and Olexacw — reached customers at a time when
productivity increases made the difference between profit
and loss. The package enables customers to increase the
ethanol! yield from corn by up to 5% and corn oil extraction
by up to 13%, while also saving up to 8% energy.
Within Household Care, we delivered innovation to support
better laundry detergent performance at low temperatures
and reduce costs through the replacement of
petrochemicals with highly efficient enzymes.
Fortunately, our customers appreciate the value we bring to
their products. For example, Henkel presented us with its
Best Innovation Contributor Award, and P&G named us
External Business Partner of the Year for the sixth
consecutive year. These awards are testament to the
standards of innovation, product quality and service we aim
to give all our customers.
Overall, it is estimated that customers saved 52 million tons
of COz through the application of our products in 2013. We
generated sales growth of 5%, EBIT growth of 6% and an
EBIT margin of 24,7%, but were unable to realize five of our
sustainability targets.
Falling nto place
In April 2013, the new Executive Leadership Team
restructured the organization, sharpening our focus on the
customer, In order to change the world together with our
customers and reach our long-term targets, it is absolutely
crucial that we understand our customers and their world
and make decisions based on what matters to them.
At the onset of these Organizational changes, the Executive
Leadership Team introduced three strategic focus areas to
help Novozymes meet its promise of double-digit growth by
2015: deliver more significant innovation to the market,
ensure success in new platforms, and cultivate great leaders
and develop employees. We will continue to work on these
areas in 2014.
Partnerships for progress
As part of our strategy of expanding opportunity and
increasing innovation, partnerships offer us a way of really
getting to know and understand customers and using our
combined resources to deliver more significant innovation.
In the fall, our biomass conversion business reached major
milestones both in its existing partnership with Beta
Renewables and in new deals with Rafzen and M&G
Chemicals. Developments such as these bring the world
closer to renewable energy for all. In December, Monsanto
and Novozymes formed The BioAg Alliance to revolutionize
the research, development and commercialization of
biosolutions for agriculture, eventually bringing more
choices and changes to farming globally.
"Partnerships offer us a way of really getting to know
and understand customers and using our combined
resources to deliver more significant
Innovation.”
THE BIG PICTURE
Letter from the CEO
The year ahead
Over the past few years, we have seen increased interest in
the biotechnology industry from large chemical companies,
a reflection of its immense promise. We do not see this
interest waning in 2014. Although it may increase
competition, it also helps draw more resources and
attention to the biotechnology sector, helping the sector
gain momentum.
In 2014, we aim to unlock more of our potential in
emerging markets, which present valuable opportunities in
areas such as Household Care where enzyme penetration is
relatively low. We will also work for wider adoption of newly
launched biosolutions such as Avantec&, SpirizymeO
Achieve and Olexa0. It is equally important for us to
understand and meet real customer needs in industries that
are not growing as much as we would like, for example
Food & Beverages.
At the same time, we cannot lose sight of the sustainability
of our own operation — a Critical part of our business. We
Qur employees play a vital role in our ability to deliver on
our expectations and achieve our long-term targets.
Therefore, 2014 will see a continuation of our sharpened
focus on leadership and employee development.
Delivering on our promise of double-digit growth
At Novozymes, we believe our biosolutions have the capacity
to change the world together with our customers. Only by
knowing our customers will we be able to maintain our
long-term commitment to innovation and sustainability.
And so our journey continues, as we work together to
deliver relevant and significant innovation and reach our
target of double-digit growth in 2015.
EG. Ao4 AK
Peder Holk Nielsen
did not reach some of our efficiency and diversity targets for — President & CEO
2013, and action has been taken to address this.
Sustainability will remain a priority in the coming year as we
seek to overcome these challenges.
GROWING TOGETHER
Novozymes connects with diverse
stakeholders in the global community to
innovate and invest in tomorrow's
biobased, renewable society. The more we
learn from each other, the faster we get
there,
1403034EogSN57484
frie Bao rr like
The year in brief
The year in brief
SALES AND EBIT
Sales and EBIT in the past 5 years
c E z z
2 S 2 2
E 9 = E E
i
v , v te i vw
Se ” rd £ i xx
e oa s . 2"
2 gi az 2
ir Fr | z
SALES BY GEOGRAPHY
& SALES GROWTH
Geographical distribution of sales and sales
growth in 2013
MARKET LEADER IN INDUSTRIAL ENZYMES
With an estimated 48% of the global enzyme market in 2013,
Novozymes has strengthened its position as the world's leading
producer of industrial enzymes.
THE BG PICTURE
The year in brief
CO, EMISSION REDUCTION
In 2013, customers reduced their CO, emissions by 52 million tons through the application
of Novozymes” products, equivalent to taking 20 million cars off the road.
2,
rigt
LONG-TERM TARGETS
EBIT margin
we Fra Ki
2015 å TARGE
BRET FN Fy
ACCIDENTS PER MILLION WORKING HOURS
Novozymes aims to keep the frequency of occupational accidents below 3.0 per
million working hours, and in 2013 we reached an all-time low of 2.4.
hva
åg
z ao
z c
vw mu
75 en
BE 68
gå 22
1403034EogSN57485
Ih BL BØ], Fr
Key figures
Key figures
SALES AND EBIT ROIC AND INVESTED CAPITAL
DKK miliion DKK million %
14,000 14,000 30
12.000 11,234 11,746 12,000 28
10,510 73
10,000 un i i 10,000 26
8,448 E :
8,000) ; i nå ,) 8,000 24
6,000| … HE: 5 6,000 22
4,000| : ; | ei 4,000 20
: 2,117 |" 2,340 no ds ed ;
2000| "1688 id 2,000! .: … : : ” f18
0 då 4 i HNG 0 ' Mk 16
2009 2010 2011 2012 2009 2010 2011 2012 2013
Sales + Invested capital
HM EBIT HE ROIC
EFFICIENCY IMPROVEMENT COMPARED WITH 2005 FREQUENCY OF ACCIDENTS
%
60 8
59
6
5.1
40 41 … 43
4 ; .
30 - 3,0
' 2.4
2
20
10 i . 1 . t 0 i L , i '
2009 2010 2011 2012 2013 2003 2010 2011 2012 2013
EJ water efficlency Improvement ”, Frequency of accidents (per million working hours)
- Energy efficiency Improvement
mM CO3 efficiency Improvement
THE BIG PICTURE
Key figures
2013 2012 2011 2010 2009
Income statement (DKK million) - … .
ES 11,746 11,234 10,510 9,724 8,448
Gross profit 6,716 6,423 5,908 5,412 4,700
Research and development costs 1,528 1,527 1,464 1,360 1,207
EBITDA 3,639 3,448 3,126 2,796 2,252
Operating profit / EBIT 2,901 2,745 2,340 2,117 1,688
Financial items, net (142) (161) 75 6 (67)
Net profit 2,201 2,016 1,828 1,614 1,194
Balance sheet (DKK mill) ensure
NERETESTE STS 10,676 10,223 9,053 7,057 5,991
Total assets 16,506 15,113 13,842 12,593 10,890
Shareholders' equity 11,066 9,568 8,824 7,836 5,841
Non-current liabilities 2,841 2,630 2,661 2,249 2,528
Invested capital 11,871 10,998 9,843 8,182 6,790
Net interest-bearing debt 805 1,430 1,019 346 949
Investments and cash flows (DKK million) BEER
Cash flow from operating activities eee 2,599 2,758 2,709 2324 1,817
Purchase of property, plant and equipment 762 1,128 1,290 1,326 1,009
Net investments excluding acquisitions 783 1,177 1,316 1,326 978
Free cash flow before net acquisitions and securities 1,816 1,581 1,393 998 839
Business acquisitions and purchase of financial assets 640 732 1,530 23 0
Free cash flow 1,176 849 (33) 975 839
er eee meeen eee renee
Revere gro DR % RT 4
Revenue growth, LCY % 8 3 10 10 2
Revenue growth, organic % 7 4 7 11 2
Research and development costs as a percentage of revenue % 13.0 13,6 13.9 14.0 14,3
Gross margin % 57,2 57.2 56.2 55.7 55,6
EBITDA margin % 31.0 30.7 29.7 28.8 26.7
EBIT margin % 24.7 24.4 22.3 21.8 20.0
Net profit margin % 18.7 17.9 17.4 16.6 14.1
Effective tax rate % 20.2 22.0 24.3 24,0 26.3
Equity ratio % 67.0 63.3 63.7 62.2 53,6
Return on equity % 21.3 21.9 21.9 23.6 23.1
Return on invested capital (ROIC), including goodwill % 20.0 19.9 21.3 22.2 20,3
Return on invested capital (ROIC), excluding goodwill % 21.8 21.6 23,0 23.7 21.8
WACC after tax % 4.7 4.7 4.5 5.6 7.0
Earnings per share (EPS), diluted” DKK 6.93 6,33 5.71 5.05 3.79
Dividend per share (2013 proposed)" DKK 2.50 2.20 1.90 1,60 1.15
% 2009-2010 restated to reflect 1-to-5 stock split of the company's A and B shares.
Key figures have been prepared in accordance with the Danish Society of Financial Analysts' "Recommendations & Financial Ratios 2010"
Environmental and soda date ES
Water efficiency Improvement (compared with 2005) ” ” UREN 33 32 30 29 27
Energy efficiency improvement (compared with 2005) % 40 38 34 30 27
CO, efficiency improvement (compared with 2005) % 54 55 47 38 24
Million
Estimated CO, reductions from customers' application of Novozymes' products tons 52 48 45 40 27
Total number of employees No. 6,236 6,041 5,824 5,432 5,275
Rate of employee turnover % 7.5 8.1 8.3 7.5 6.7
Frequency of accidents with absence per million working hours 2.4 3.0 4.3 4.1 5,1
Employee satisfaction Score 77 78 77 76 77
Development opportunities Score 74 75 74. 73 74
New leaders appointed who are women % 26 37 nd, n.a. na.
% 44 51 na, n.a. na,
New leaders appointed of a nationality other than Danish
1403034EogSN57486
X
X.
novozymes
Rethink Tomorrow
. , mn, an
mee n ER V
(| 2 LJ
hore
Ruse .
3
(
ll
SÅ
ser
AD em
BUSINESS REVIEVY
Company profile
Company profile
Novozymes is the world leader in bioinnovation, producing a wide range of industrial enzymes and
microorganisms. Seeking to change the world together with our customers, we offer biological
solutions that help customers create more with less and improve performance, while saving energy
and generating less waste.
CO, EMISSION REDUCTION
In 2013, customers reduced their CO, emissions by 52 million tons through the application
of Novozymes” products, eguivalent to taking 20 million cars off the road.
PREDSS
ert mn
JØREGPNKEREN
ry
Fur Va vøl |
COz reductions equivale
The world's natural resources are under escalating pressure
from growing populations and increased consumption. lø
we are to meet the world's basic needs, continued
innovation is essential. Novozymes" biosolutions are part of
the answer. Used in the manufacture of a wide variety of
products, our biological solutions improve the efficiency of
industrial processes by saving energy and raw materials
while reducing waste. The result is higher quality, lower
costs and improved environmental performance for our
customers.
Rethink Tomorrow
Our innovative solutions are a product of our expertise in
biotechnology. Novozymes' unique industrial biotechnology
platform and customer partnerships provide a wealth of
opportunities for the world's industries. Microbiology, high-
throughput screening, protein engineering and
fermentation technology are just some of the tools on
which we base our business. Combining industrial insight
with this technology platform, we partner with customers
across a broad range of industries to create tomorrow's
industrial biosolutions.
1403034EogSN57487
Novozymes has a global presence with over 6,200
employees on six continents. More than 20% of our global
workforce is engaged in research and development, and 13-
14% of sales are invested in research and development
worldwide. To safeguard our biosolutions, we currently hold
over 7,000 granted or pending patents, which is testament
to the possibilities that emerge when nature and technology
join forces.
World leader in industrial enzymes
We constantly strive to grow our business and expand our.
markets by bringing new innovations to the market and
launching new platforms, Novozymes supplies five major
global industries: Household Care (36% of sales), Food &
Beverages (27%), Bioenergy (16%), Agriculture & Feed
(14%) and Technical & Pharma (7%), generating total sales
of DKK 11,746 million and EBIT of DKK 2,901 million in
2013.
With an estimated 48% share of the global enzyme market
in 2013, we strengthened our position as the world's
leading producer of industrial enzymes,
HUSER 3%
BEVIS
Company profile
"With an estimated 48% share of the global enzyme
market in 2013, we strengthened our position as the
world's leading producer of industrial enzymes.”
More than 700 products and 40 unique end markets
globally
Novozymes sells products all over the world for applications
as diverse as detergents, biofuels, agriculture, food and
beverages, biopharmaceuticals, wastewater, textiles and
pulp & paper.
Enzymes are widely used in laundry and dishwashing
detergents, and this area accounts for 36% of Novozymes"
sales. Our solutions improve the performance of detergents
by enabling improved stain removal, garment care and
general wash performance. Enzymes have a positive
environmental impact because they can replace larger
amounts of petrochemical-derived ingredients, and their
unique catalytic action makes enzymes particularly useful
ingredients in low-temperature and concentrated
detergents.
Enzymes for the bioenergy industry, one of Novozymes"
main focus areas, turn starch (primarily corn), cellulose and
biomass into fermentable sugars used in the production of
ethanol and renewable plastics, for example. Biofuels are an
important step toward meeting the growing demand for
sustainable energy.
Novozymes supplies a range of microorganisms and
enzymes for use in agriculture. Our biosolutions help
farmers grow healthier, møre productive crops, enhance the
digestibility and nutritional value of animal feed, and
maintain healthy water conditions by combating common
problems associated with intensive aquaculture.
Our enzymes are used extensively in the food and beverage
industry to enhance the quality of bread, beer, wine and
other products. Our solutions enable customers to offer
healthier and tastier products, produce them at competitive
costs and meet high ethical standards.
Novozymes also supplies a range of microorganisms for
industrial use in the cleaning and wastewater markets, while
its biopharma business focuses on improving medical
RETHINK vi
TOMORROW 3);
RETHINK TOMORROW
A growing global population with a rising need for
food, water, energy and other resources is pushing
industries to get smarter and produce more with
less. Novozymes supports this transformation by
replacing conventional chemicals with enzymes and
microorganisms, thereby helping reduce the water,
energy and raw materials needed in many industrial
processes.
13
BUSINESS REVIEW
Company profile
"In 2013, we helped customers prevent an estimated
52 million tons of CO» emissions.”
devices as well as drug delivery and formulation using —,
unique recombinant albumin and hyaluronic acid "md
technologies. Ya
Sustainability — an intrinsic part of the business
The nature of our technology makes sustainability an
intrinsic part of the business, allowing us to offer our
customers solutions that enable them to optimize their use
of raw materials and energy. Furthermore, Novozymes is
committed to the UN Global Compact principles as a LEAD sen
member and takes an active part in the U,N.-led Sustainable Wi
Energy for All (SE4All) initiative. Sustainability is integrated
into our business, across all relevant functions, which gives
us a competitive advantage as more customers look to use
sustainability as a differentiator. enn
To support our ambition to drive sustainability around the .
world, we work closely with all players across the business ( så
value chain: suppliers, customers and society. Novozymes me
mitigates risks and taps into supplier strengths by requiring
suppliers to balance reliability, quality and efficiency with a
focus on sustainability and innovation. We work to increase
COz efficiency by improving production processes and
helping our customers achieve further COz reductions
through the application of our products. In 2013, we
helped customers prevent an estimated 52 million tons of
CO2 emissions.
it is important for Novozymes to be a transparent and
responsible business. Our cross-functional Sustainability
Board, responsible for setting sustainability targets, mirrors
our value chain and is built upon multi-stakeholder
engagement.
Touch the World
Qur vision, company idea, commitment and values form our — Our commitment: To continuously improve our financial,
guide — what we call Touch the World. environmental and social performance to drive the world
toward sustainability
Our vision: A future where our biological solutions create Our values:
the necessary balance between better business, cleaner » Dare to lead — because the future is created by you
environment and better lives & Trust and earn trust — because nothing beats a circle of
trust
idea: Rethink T ; i
Our company idea: Rethink Tomorrow & Connect to create — because the world is full of ideas
& Unlock passion — because passion makes dreams come
alive
1403034FogSN57488
BUNDNE SS BOSE
Business model
Business model
Novozymes envisions a future where our biological solutions create the necessary balance between
better business, cleaner environment and better lives. To deliver on our commitment to continuously
improve our financial, environmental and social performance, we center our business on what we do
best — deliver innovation.
Novozymes is a business-to-business company that provides
biological solutions for a wide variety of industries and
markets. Together with its customers, Novozymes aims to
drive the world toward sustainability by making better use
of natural resources to meet the world's needs for food,
feed, fuel and other consumables. The company's business
model is designed not only to deliver sustainable earnings
growth to shareholders, but also to continuously seek
improvements that benefit both society and the
environment.
Focus on innovation, customers and sustainability
Novozymes operates in numerous markets and employs
various go-to-market strategies for each of its industries, but
there are three ever-present themes in its business model:
innovation, customers and sustainability. The company's
biotechnological platform is founded on its extensive
knowledge and expertise within enzymes and
microorganisms, and over 20% of the workforce, or around
1,400 employees, work with research and development. The
company's ability to improve nature's own technology is the
point at which each of its biosolutions starts.
Sustainability is an integrated part of Novozymes" business
model and is implemented across the business value chain.
An inherent part of our biosolutions, sustainability is also
Production of enzymes
& microorganisms
MWORLDE OT,
Research & € ' i lø
er STOMER NEEDS Je
Development i mi
Kg orrT
Technical services
ie
- Customers &
other partners
BUSINESS MODEL
Inspired by Mother Nature and the needs of
the planet and customers, Novozymes uses its
world-class biotechnology platform, based on
enzymes and microorganisms, to deliver
bioinnovation that not only creates sustainable
earnings growth for shareholders, but also
brings the world closer to better business,
cleaner environment and better lives.
15
BUSINESS REVIEW
Business model
"Our focus on sustainability gives us a competitive
advantage as more consumers look for sustainability as
a differentiator.”
considered in the context of production and MARKET LEADER IN INDUSTRIAL ENZYMES
implementation, agreements with suppliers, and customers' With an estimated 48% of the global enzyme
application of our products and their impact on society. Our market in 2013, Novozymes has strengthened its
position as the world's leading producer of
focus on sustainability gives us a competitive advantage as ' .
industrial enzymes.
more consumers look for sustainability as a differentiator.
Working to deliver more significant innovation to the
market, Novozymes teams up strategically with customers
and other partners to pinpoint market needs and create the
technology to address these needs. Whether the company
acts solely as a supplier or works together in partnerships,
its primary focus is to develop and deliver significant
innovation to the market,
1403034EogSN57489
BUGINEDS RENE VV
Market trends & outlook
Market trends & outlook
As world consumption continues to increase along with demand for more sustainable business
practices, many large, global companies are looking to get a foot in the door of the biotechnology
industry. With its ability to replace petrochemicals and improve the performance and environmental
impact of everyday products, industrial biotechnology is attracting more and more interest and
investment.
The world market for industrial enzymes expanded by 5% in
2013, reaching an estimated DKK 22 billion. Growth drivers
før the industrial enzyme market include an increasing
global population, a burgeoning middle class in emerging
markets such as India, China and Brazil, and an expanding
bioenergy market.
Over the past few years, the biotechnology industry has
witnessed increasing interest from large multinational
companies looking to invest in the field. In 2011, DuPont
acquired Novozymes' largest competitor within industrial
enzymes, Danisco. In 2012, BASE, Bayer CropScience and
Syngenta acquired companies within the agricultural
biologicals market, and in 2013, Novozymes and Monsanto
established The BioAg Alliance, also within agricultural
biologicals. Whether through acquisitions, partnerships or
direct investment in the technology itself, this may spell
increased competition, but also confirms the validity and
potential of industrial biotechnology.
Depending on the industry in which the enzymes or
microorganisms are used, different go-to-market strategies
are used. In some industries and regions, biosolutions
arriving on the market are so new, and at times
Industry trends, growth drivers & challenges
INDUSTRY TRENDS
Household Care
temperature washing, compaction
Food & Beverages
optimzation, health and nutrition
Bioenergy
biomass conversion
Agriculture & Feed
animals, sustainable farming
Technical & Pharma
product performance, sustainability
Higher performance, replacing chemicals, low-
Føod safety, urbanization, nput/cost
Yield maximization, refinery optimization,
Increased productivity & yield of plants and
Non-animal/non-human-derived raw
materials, cost optimization, improving
GROWTH DRIVERS & CHALLENGES
Growth drivers: performance daims, GDP & population,
sustainability, replacement of traditional chemicals, emerging
market growth
Barriers to growth: sustained low oil prices, Conservative
consumers, lack of claim regulation in emerging markets
Growth drivers: high raw material prices, sustainabilty, healthy
foods, nutritional benefits, emerging market growth
Barriers to growth: low raw material prices, Conservative
industries, lack of regulation
Growth drivers: energy security, high oil prices, sustainability,
CO: reduction, political mandates, rural development
Barriers to growth: sustained low oil prices, competing
technologies, lack of infrastructure, loss of political support,
entrenched competitors, feedstock availability and cost
Growth drivers: high fertilizer and feed prices, mcreased food
demand, regulatory requirements, high raw material prices
Barriers to growth: low fertilizer, chemicals, raw material and
animal feed prices
Growth drivers: growing and aging populations, sustainability,
drive for innovation, consistent quality
Barriers to growth: fragmented industries, long sales cycles, cost
constraints on healthcare providers and increasing data
requirements, lack of regulation
17
BUSINESS REVIEW
Market trends & outlook
”Novozymes' go-to-market strategy is focused on
increasing penetration and showing customers how
they may benefit from using more biotechnology.”
revolutionary, that they require operational changes and
investment for some customers. Therefore, the go-to-market
strategies focus more on education, technology de-risking
and adoption. In other industries, such as Household Care,
customers are well established and looking for new ways to
expand the market and make their value chain and products
more sustainable. Here, biotechnology has already been
adopted, and Novozymes” go-to-market strategy is focused
on increasing penetration and showing customers how they
may benefit from using more biotechnology.
Novozymes is the market leader in industrial enzymes with a
48% share of the world market. The diagram presents an
overview of trends, growth drivers and challenges in
Novozymes' industries.
1403034EogSN57490
BUSINESS RO GEA
Market trends & outlook
INTERVIEW: A NEW DAWN FOR ADVANCED BIOFUELS
After years of planning and battling strong headwinds of
skepticism, the advanced biofuel industry is now coming
together at speed. In early October, Novozymes” partner Beta
Renewables officially opened the world's first commercial-
scale cellulosic ethanol facility in Crescentino, Italy. Using
Beta Renewables' PROESATM engineering and production
technology and Novozymes' Cellic& enzymes, the $200
million facility will initially produce up to 50 million liters of
cellulosic ethano! a year from agricultural wastes and energy
crops once up to full capacity.
The obvious and much-discussed benefit of advanced
biofuels is as a more sustainable, less carbori-intensive
alternative to fossil fuels in the transport sector. However,
derivatives of celiulosic ethano! can also serve as building
blocks for many applications in the renewable chemical
industry, including bioplastics. Indeed, the biomass
conversion industry is key to more sustainable value chains
in a variety of industries that currently base their products
on fossil fuels.
These factors present both enormous opportunities and
challenges — logistical, financial and political — for the
players within biomass conversion.
In the following interviews, Thomas Videbæk, Executive Vice
President for Business Development at Novozymes, and
Guido Ghisolfi, CEO of Beta Renewables, discuss the future
of the biomass conversion industry and how to realize its
great promise.
Thomas Videbæk, Executive Vice President for Business
Development at Novozymes
What does Beta Renewables" new facility mean for
Novozymes' partnerships in advanced biofuel plants in
2014 and 20157
it means a lot because now we're not talking about a
fantasy fuel; we're talking about something that is
happening for real on a commercial scale. And to be able to
demonstrate that to potential customers is invaluable.
How is Novozymes doing on iis long-term growth
target of selling enzymes to 15 biomass conversion
facilities by 2017?
We signed a deal earlier this year with Raizen in Brazil,
things are moving at the Beta Renewables plant in
Crescentino, Italy, another plant is being built by GranBio in
Brazil, and we recently agreed to supply enzymes to M&G
Chemicals” planned biorefinery in China. When I look at the
list of prospecis, I feel confident that, by 2017, we'Il have 15
commercial-scale facilities using our enzymes.
What is the benefit to working with various partners
who have different process technologies?
Our partnership with Beta is very important; we work
intensively together to learn about how our enzymes and
Beta's processes work together and how to optimize that.
There are a number of factors that impact the choice of
process technology for advanced biofuel projects, including
biomass type and availability, funding and local conditions.
if some of our partners decide to pursue another technology
due to such factors, then we have the flexibility to work with
them as well.
What might prevent the market from adopting
advanced biofuels?
We can perform our enzyme hydrolysis at a price that's
competitive, but demand is a major bottleneck. That's why
certainty would mean a lot in this industry. This is a new
technology, which means more risk for investors. That risk
includes whether there will be a market for advanced
biofuels. They need clarity about the framewaorks for the
kind of market the ethanol is going into. If we could get
clarification that we have a mandate in the EU, and if we
could feel confident about the Renewable Fuel Standard in
the U.S., that would mean a lot for both these regions and
for those who export to these regions.
Another factor contributing to this uncertainty is the
biomass supply chain, which in some regions is in the
process of being established for the first time. Biomass
suppliers are still working to supply biomass on a secure,
cost-competitive basis. Combined with the uncertainty
surrounding market demand for advanced biofuels, this
could make it more difficult to secure funding at this early
stage of industry commercialization.
What applications are there for biomass conversion
other than advanced biofuels?
There are many players considering the use of cellulosic
feedstock as raw material for biochemicals. When large
bottle manufacturers talk about renewable plastic, a lot of
them are talking about plastic from ceilulosic material. That
could be a very interesting opportunity. Here you already
have the market; people are asking for these solutions
today.
We could also use the same enzyme technology and
activities in Other areas, such as animal feed applications,
where we would benefit from all we've learned about
BUSINESS REVIEW
Market trends & outlook
cellulosic degradation. Like food, there is a growing need to
produce animal feed more sustainably. If we could treat
cellulosic material in a way that made it more digestible,
we"ll have tapped into another emerging opportunity.
Guido Ghisolfi, CEO of Beta Renewables
How is the Crescentino plant performing?
We've been shipping batches to several countries and are
now certified and authorized for France, the Netherlands
and ltaly. With this type of first-of-its-kind plant,
complications tend to stem from a mechanical and handling
point of view. This is a very large plant; the quality of the
biomass is not always consistent, and feeding 25-plus tons
biomass into the plant is an engineering challenge in itself.
From the biochemical — including enzymatic — point of view,
we're very happy: The performance is there. From the
mechanical point of view, we're correcting initial glitches, we
see the plant is running and we want to ensure it runs 24/7.
Where will you build your next biomass conversion
plants?
The outlook is getting steadily brighter. GranBio's cellulosic
plant in Alagoas, Brazil, which uses the PROESATM
technology, is starting up in 2014. Alongside M&G
Chemicals, we're developing a biorefinery in China's Anhui
province to produce bio-MEG (monoethylene glycol) from
biomass, We're also hard at work on Project Alpha in North
Carolina in the U.S., our first project in North America.
Additionally, we're in advanced discussions with a number
of potential licensees in various regions to deploy our
technology and sign agreements or licenses in 2014.
Beyond that, there's a long list of people interested in
building plants in Europe, Africa, South America and the
U.S.
How can the Mossi Ghisolfi Group use its experience in
producing PET (polyethylene terephthalate) plastics,
and now commercial-scale cellulosic ethanol, to create a
viable market for bioplastics?
We've said publicly that we're pursuing the possibility of
producing raw materials for PET, and there's considerable
demand from our customers.
Our design and research are developing the same PET from
renewable materials, while other companies want to change
the polymer itself. We believe we should make
indistinguishable molecules that can be fed to existing
plants to produce the raw materials to make PET, based on
cellulosic sugars, rather than produce different products as
substitutes for PET. We believe PET should remain PET, as
there are hundreds of billions of dollars invested in facilities
worldwide designed to handle PET — and it's not realistic to
expect all this to be thrown away because we invented
another polymer.
What are the threats to growing your business in
cellulosic ethanol and in biochemicals?
A year ago people would tell you there's no technology, no
money, no scale, no biomass. Now they can't say there's no
technology, and competitors' technology will also arrive in
around the next 12 months. Also, multiple feedstock
technologies are now emerging, so it doesn't force the
technology toward one type of biomass, and that's easing
the supply chain issue, which still remains the most
important issue to be solved. But to deploy this technology
worldwide, we have to know which biomass to use, at which
price, and under which social and sustainability conditions.
1403034EogSN57491
20
BUSIND SS EREVDEVV
Risk factors & opportunities
Risk factors & opportunities
Novozymes" business model and markets present both
opportunities and risks. Opportunities must be pursued in a
controlled manner so that the attendant risks are identified
and known in advance and are acceptable.
Formal procedures are in place to ensure that risks are
identified as early as possible and that mitigating activities
are closely monitored. A detailed description of the risk
management setup can be found in the Risk
management section.
The most critical risks for Novozymes are those related to its
overall strategy, as the company's future growth and market
position and the achievement of its long-term targets may
be affected if these risks are not appropriately addressed.
Innovation
Novozymes puts great effort into maintaining its position as
market leader by continually launching new and improved
high-quality solutions that meet customers' needs. Our
projected sales are not dependent on single large product
launches, as we constantly have several new products in the
pipeline. However, an inability to deliver innovation could
increase the risk of a negative impact on Novozymes' sales
growth targets. This places high demands on the Group's
R&D and Business Development functions, requiring it to
sustain a full and flowing pipeline. Novozymes has increased
the focus on how the 13-14% of sales used for R&D are
applied in order to optimize the process from idea to
launch.
Technology and data protection
Our technology is the basis of our business, and we pursue
an active patent strategy by protecting new discoveries as
early as possible. This prevents new products, processes, etc.
from being copied. With more than 7,000 patents granted
or pending, Novozymes has an extensive patent portfolio
that it actively safeguards to prevent and stop infringement
by competitors. At the same time, competitors' activities are
constantly monitored to ensure that Novozymes" innovation
does not infringe any existing patents, whereby resources
and costs for product development can be saved through
early intervention.
In 2013, we worked continuously on securing patent rights
in China, as we have seen an increasing risk in enforcing
intellectual property rights in the Chinese legal system. In
addition to securing valuable patents, Novozymes has
increased surveillance of the Chinese market, in
collaboration with relevant legal advisors, in order to react
quickly and efficiently against patent infringement.
Internally, the process of upgrading our IT security begun in
2012 continued in 2013, and the Protect Knowledge
awareness program implemented in R&D in 2013 will be
transformed into a corporate program covering all
Novozymes employees in 2014.
Success of new products and markets
It is also important that the innovations we launch are
useful to our customers and give them a competitive
advantage in their markets. Failure to deliver the right
products may provide openings for our competitors. As
stated above, Novozymes works closely with major
customers to mitigate this risk by means of joint
development projects, which provide guidance on which
new products should be prioritized and ensure that the
products launched fit with customers' needs.
Biofuels
Unlike most other industries in which Novozymes operates,
the transportation fuel industry is politically regulated, and
sales in this industry are linked to regulatory developments.
In the U.S., our major market for biofuels, any changes in
blend limits and/or the Renewable Fuel Standard can have a
significant impact on our sales in the industry.
A major part of the biofuel industry in the U.S. was founded
on a political initiative to use domestic agricultural resources
to improve energy security, reduce carbon emissions and
support rural economic development. The same three drivers
apply globally, but political support varies due to its
dependence on regional and geopolitical developments.
Sales to this industry may also be affected by the ongoing
debate on whether the use of agricultural resources for
energy production is sustainable. However, Novozymes has
tried to address this concern by developing technology that
can convert biomass, not primary grain, into fermentable
sugars, allowing each region of the world to utilize its own
natural endowments to produce cleaner, renewable biofuels
and bioplastics.
To promote this technology and inform the debate,
Novozymes works with key opinion-makers in academia,
NGOs and intergovernmental organizations worldwide to
encourage a balanced public debate and ensure that policy
is scientifically based. Our engagement in the U.N.-led
Sustainable Energy for All initiative is a good example of
this. Novozymes also works closely with industry partners
such as Beta Renewables to demonstrate the value of the
technology.
novozymes'
Rethink Tomorrow
| THE NOVOZYMES REPORT-2013
1403034EogSN57492
22
STRATEGY & PERFORMANCE
Strategy
Strategy
Novozymes works toward a future where its biosolutions create the necessary balance between better
business, cleaner environment and better lives.
Novozymes drives innovation, expands opportunities and
improves productivity to achieve sustainable long-term
earnings growth. By adhering closely to these three strategic
principles, the company works to change the world together
with its customers.
Drive innovation
As the world's leading developer and producer of industrial
enzymes, Novozymes drives industries forward by rethinking
where and how biosolutions can be used. Innovation and
sustainability are integral parts of our business model and
vital elements in building long-term customer relationships.
The company's biosolutions improve industrial processes
and products and sustainable value chains in industry,
thereby enabling our customers to produce more with less.
Research and development is key to providing these
solutions, and the company invests around 13-14% of
annual sales and employs over 20% of its global workforce
in this area. Additionally, Novozymes is one of the world's
most active patent filers in the field of biotechnology with a
portfolio of more than 7,000 granted or pending patents.
The company's innovations drive its top-line, enabling it to
grow in existing markets as well as succeed in new markets.
A number of ongoing activities aim to sharpen Novozymes'
ability to act on innovation opportunities and drive growth,
ensuring that the organization delivers significant
innovation to the market and reaches its long-term growth
targets. These activities include:
liebe:
BUSINESS STRATEGY
By driving innovation, expanding
opportunities, and improving our own and our
customers” productivity, we aim to establish
profitable new business areas while making
the best use of our own and nature's
resources.
23
STRATEGY & PERFORMANCE
Strategy
"In 2013, Novozymes focused its efforts on finding new
opportunities by seeking closer working relationships
with customers and expanding its reach through new
bartnerships.”
. Innovation pipeline prioritization: targeting the improves financial margins and returns, as well as its .
innovation portfolio to ensure more growth by delivering — environmental footprint.
significant innovation to the market faster
. Collaboration: discovering new opportunities by
increasingly working with customers and other
stakeholders
e New organization structure: operating with a market-
oriented structure from April 2013, with increased focus
on customers as well as on internal leadership
development to cultivate knowledge and drive results
through innovation
The R&D and Supply Operations departments continuously
strive to find ways to improve production strains, increase
product efficacy and optimize production processes. These
improvements allow Novozymes to deliver better and more
sustainable innovation to customers faster. At the same
time, the company is cost-conscious, enhancing its ability to
deliver earnings growth.
Expand apportunities
Novozymes aims to build on its foundation in enzyme
technology and explore biological business opportunities in
other areas as well. Biological solutions, such as
microorganisms and proteins other than enzymes, can also
address the need for safe and cost-effective solutions,
improving industrial processes and reducing the
consumption of raw materials, water and energy.
In 2013, Novozymes focused its efforts on finding new
opportunities by seeking closer working relationships with
customers and expanding its reach through new
partnerships, such as The BioAg Alliance with Monsanto,
M&G Chemicals and Rafzen. Novozymes has also set a long-
term target to champion the inclusion of biofuels as a High
Impact Opportunity in the U.N.-led Sustainable Energy for
All initiative. The aim is to identify needs and provide
biosolutions in new industries and to nurture Novozymes"
four key growth platforms: Biomass Conversion, BioAg,
Animal Health & Nutrition and Biopharma. The company
consistently seeks to turn opportunities into significant
business that can sustain growth and returns over time.
mm
Improve productivity
Novozymes aims to achieve its ambitions by constantly
improving the use of both its own and nature's resources
throughout its business, especially in production processes.
The company uses sophisticated technologies to improve
the efficiency of its fermentation production processes, its
enzyme and microbe production strains, and the
performance of the enzymes and microbes themselves. This
enables Novozymes to increase output from existing
facilities and reduce consumption of raw materials, water
and energy, making for a flexible production setup that
BEER
1403034EogSN57493
STRATEG + & PERFORMANCE
Strategy
INTERVIEW: R&D INNOVATING FOR CUSTOMERS
A robust research and development (R&D) pipeline is the
backbone of Novozymes” business. Protein engineering,
bioinformatics, assaying and fermentation technology are
deployed in close collaboration with customers to come up
with innovative solutions that they actually want and need.
In 2013, a project prioritization process was initiated to
focus the pipeline and create a leaner, møre efficient R&D
process in order to bring more significant innovation to the
market. At the same time, sustainability measures such as
life cycle assessments remain embedded in the pipeline,
helping Novozymes identify the solutions that best promote
sustainable value chains in industry.
Per Falholt, Executive Vice President for R&D, explains how
the company is refocusing to capture growth by
reorganizing the pipeline and keeping customers squarely in
focus:
What changes have been made to the pipeline?
By using the latest available technology to speed up time to
market, we can deliver new molecules more quickly. We've
organized R&D in a way that aims to give all of our
industries a smoother path toward markets and
partnerships. Ao more targeted approach is being taken to
prioritizing the pipeline and determining when a project
shauld move forward or be dismissed. Additionally, we have
tried to make it easier for R&D employees to prioritize
multiple projects. Hopefully, this will lead to a higher
throughput in terms of the number of projects we open and
close, which should translate into a higher hit rate. If we fail
with our projects, R&D is just an expense, including for our
customers. If we succeed, we add value for Novozymes and
customers alike.
How are we ensuring that we deliver relevant
innovation to the market?
We like to work in partnerships. So we align the pipeline to
partners with compelling targets, where there is value for
both the customer and Novozymes, and where there are
technical possibilities and a chance to meet our common
goals for the project within a reasonable timeframe.
Does working with customers guarantee a market for
our biosolutions?
There is no guarantee, but it makes it much more likely. That
is the eternal dilemma for R&D — you can have the most
beautiful technology and fantastic results, but the market
can change and suddenly there's no need for this solution.
There's also an element of timing and luck involved. But I
would argue that working closely with customers increases
the chances of success tremendously.
Big chemical companies such as BASF and DuPont have
been maving steadily into the biotech space in recent
years. How can Novozymes ensure its solutions do not
become irrelevant and it does not lose customers?
It's not so much that there are new players who may have
deep pockets. It's more about who has the best technology,
the best people and the best connections to bring this
technology to the market. The rapid increase in new
available technologies will make the biggest difference. if
Novozymes has the best available technology, we'll be first.
if others develop a better technology than us, then we're
under pressure. That's where the competition is going to be.
I don't actually mind having two or three very capable
competitors out there, as that will keep us on our toes!
What can we do better or differently to ensure our
solutions get to the market faster?
From an R&D perspective, the way we generate value is
through new molecules. if we can deliver new molecules
faster, with more hits on target, we create more value — and
LEAN helps us do that. In the past year, we have
implemented LEAN in our R&D organization and pipeline. if
we get the best LEAN alignment between all the different
functions involved in a project, we'l! shorten time to market.
What will R&D focus on in 2014?
Success før our growth platforms will be incredibly
important, because they hold the potential to transform
Novozymes.
Secondly, making sure our existing markets get resources
and innovation is important. Striking the right balance
between ihese two things will be critical. For me, it's very
important that our existing customers remain very happy
with the innovation Novozymes delivers.
If they don't, we're not spending our resources on them m
the right way.
25
STRATEGY & PERFORMANCE
Long-term targets
Long-term targets
Novozymes” long-term targets reflect its integrated business approach. The company's ambitions
include higher sales growth and financial returns, the most efficient use of resources, reducing the
environmental footprint of production processes and continuing to lead the way within sustainability.
The long-term targets, launched in January 2013, are
integrated into Novozymes" business strategy and business
initiatives, and emphasize the company's engagement and
collaboration with business partners and other
stakeholders.
The targets also serve as a performance benchmark,
allowing Novozymes to see which initiatives are working and
which should be re-evaluated. As market growth drivers and
company performance evolve, Novozymes may reassess
these targets and make appropriate adjustments.
Financial target: sales growth
Growth is expected to be well diversified and come from ali
sales areas during the period 2014-2017, with Household
Care and Bioenergy sales among the strongest contributors.
For the growth platform Biomass Conversion, sales are
expected to materialize slowly in 2014 and contribute more
significantly to sales growth from 2015. Furthermore,
assuming approvals from the relevant authorities, The BioAg
Alliance with Monsanto is expected to drive significant sales
growth from 2015 within BioAg.
Novozymes' long-term targets
Financial targets for the period 2013-2017:
8 Average organic sales growth of more than 10%
& EBIT margin of more than 24%
2 Return on invested capital of more than 22%
The average organic sales growth target is expected to be
reached from 2015 and onward.
The targets are based on the following assumptions and
are contingent upon no major acquisitions being made:
. The global economy stabilizes
& The biofuel market in the U.S, moves toward E15
8 Novozymes sells enzymes to at least 15 biomass
conversion plants by 2017, with a ramp-up in 2015-
2016 ”
1403034FogSN57494
Sustainability targets:
e Ensure 100% supplier adherence to Novozymes"
supplier program for commercial, quality and
sustainability performance in 2015
2 Enable a 75 million ton reduction in COz emissions in
2015 through the application of Novozymes' products
». Improve water efficiency by 40% in 2015 compared
with 2005
e Improve energy efficiency by 50% in 2015 compared
with 2005
e Improve CO; efficiency by 50% in 2015 compared with
2005
e increase energy supply from renewable and CO2-
neutral sources to 50% of total energy supply in 2020
8 Be recognized as a global leader within sustainability
+ Be a globally preferred employer, attracting global
talent as a diverse and inclusive workplace
SERATF Cr X PERFORMANCE
Long-term targets
Novozymes' long-term targets assume that the company will
supply at least 15 biomass conversion plants by the end of
2017. In 2013, Novozymes signed a number of supply
agreements, and Novozymes still expects this assumption to
hold. The 15 plants will come via Beta Renewables and
through close partnerships with other leading global
biomass, ethanol and chemicals companies. By the end of
2013, Novozymes had signed supply agreements for
planned facilities taking it around a third of the way toward
the 15.
Novozymes also assumes that the U.S. biofuel market will
move toward E15. Currently, there are political discussions
in the U.S. about the Renewable Fuel Standard and the role
of biofuels in the American energy mix. The penetration of
E15 or other higher-ethanol blends is therefore slow, but
this is not unexpected.
Financial target: EBIT Margin
Novozymes has delivered on this target for the last two
years. The target allows Novozymes to retain the flexibility to
invest in the business and pursue opportunities for long-
term growth, while keeping the EBIT margin at an ambitious
level.
Financial target: ROIC
As CAPEX is normalizing while sales are growing and
productivity improvements continue to be realized,
Novozymes expects to achieve the ROIC target of 22% (incl.
goodwill) within a couple of years. This outlook includes the &
impact from The BioAg Alliance agreement with Monsanto.
27
STRATEGY & PERFORMANCE
Long-term targets
SOWING THE SEEDS FOR GROWTH IN BIOAGRICULTURE
Global food demand is set to double by 2050, yet global
crop yields are struggling to keep pace. However, applying
the right blends of microorganisms can improve yields,
making it cost-effective for farmers to invest in biological
technologies while also contributing to the development of
møre sustainable agriculture.
Agricultural biological technologies offer natural solutions
to improve plant health and combat disease in both broad-
acre crops, such as corn and soy, and high-value crops, such
as leafy greens, fruit and vegetables. The global market for
these solutions is currently worth $2.3 billion
and has shown mid-teens sales growth in each of the last
several years. That is just a fraction of the $180 billion
market in agrochemical crop input and signals a growing
opportunity. However, farmers sometimes have to be
convinced of, and introduced to, the benefits of adopting
biological technologies, and that can prove challenging
given how widely farming differs by region, crop, soil type
and income level, among other factors.
A targeted, partnership-led response is needed if
Novozymes is to succeed in this varied customer landscape.
The BioAg Alliance: møre choices for farmers globally
In December, Novozymes and Monsanto entered a strategic
alliance for the research, development and
commercialization of sustainable solutions for agriculture.
The BioAg Alliance unites Novozymes” capacity for
researching, developing and producing microbial solutions
with Monsanto's strengths in microbial discovery, advanced
biology, field testing and sales. By doing so, the two
companies expect to deliver an entirely new category of
more effective microbial solutions for broad-acre crops, fruit
and vegetables. The partners will co-manage the alliance
and equally co-fund R&D efforts while maintaining
independent and complementary internal and external
discovery research programs to identify microbial targets
that can help farmers.
”BioAg in Novozymes has had impressive growth rates, but
rather than growing incrementally, The BioAg Alliance
makes it possible to leap ahead,” says Thomas Videbæk,
Novozymes” Executive Vice President for Business
Development. ”The alliance takes us to a new frontier of
product development and sales. Together with Monsanto,
we enhance the possibility for our current portfolio and
speed up the potential for finding solutions that can help
boost global agriculture.”
A million successes, more competition
The BioAg Alliance is a good illustration of how Novozymes
is able to develop and transform its market approach in
selected industries, This flexibility is especially needed to
adapt to the varied customer landscape within agriculture.
For instance, agriculture in Asia is characterized by small
holdings, land fragmentation and scarcity, and reduced
scope for diversification. Novozymes has nevertheless been
able to offer biosolutions to over a million farmers in Asia by
working through a network of distributors in the region.
"it has taken years of intensive work to break into these
markets where Novozymes was previously unknown,” says
Trevor Thiessen, Novozymes' Vice President for BioAg.
"We've had to customize our products and conduct
numerous training programs to achieve a greater impact
and expand our base here.”
in contrast, competition is growing in developed agricultural
markets such as the U.S., Canada and Latin America, as more .-
and more agrochemical companies enter the biological
market by acquiring other players. Novozymes has
responded by offering excellent innovation alongside top-
notch technical support, which has helped build customer
loyalty.
"In 2013, Novozymes delivered and brought us a product
that we call First UPG ST for soybeans,” says Mike Powell
from Helena Chemical Company, a Novozymes customer in
the seed inoculant business for a number of years. ”This
product allowed Helena to bring more value to the market
and strengthen our relationship with customers.”
Outlook
Novozymes is currently a leading player within biofertilizers.
Sales in this area have grown historically by around 15% per
year and are expected 10 grow at a similar rate in the future.
"Together with Monsanto, our aim is to further penetrate
existing markets and expand into new markets, strengthen
the R&D pipeline and deliver more choices for farmers
globally,” says Thiessen.
1403034EogSN57495
STRATEGY & FERHORMANT k
Expectations for 2014
Expectations for 2014
SALES AND EBIT
Sales and EBIT in the past 5 years
DKK milhaon)
Sales (DKK million)
Sales (DKK million)
Sales (DKK million)
Expectations for 2014
Sustainability targets:
Financial targets:
Sales growth of 4-7% in DKK
Sales growth of 6-9% in local currency (LCY)
Organic sales growth of 6-9%
EBIT growth of 6-9%
EBIT margin of around 25-26%
Net profit growth of 6-9%
Investments of around DKK 900-1,100 million
Free cash flow before acquisitions of around DKK 3,200-
3,300 million
s ROIC of around 21%
e 9 8 8& 8 & & 8&
The 2014 expectations include the impact from the
agreement with Monsanto on The BioAg Alliance (see
Company announcement No. 29 of December 10, 2013).
9
eg & 2 &
Ensure 97.5% supplier adherence to our supplier
program for commercial, quality and sustainability
performance
Improve energy efficiency by 42% compared with 2005
Maintain CO efficiency above 50% compared with 2005
Improve water efficiency by 34% compared with 2005
Score at least 75 for "satisfaction and motivation” in our
employee survey
Score at least 75 for ”opportunities for professional and
personal development” in our employee survey
Ensure that at least 30% of new leaders appointed are
women
Ensure that at least 55% of new leaders appointed are of
a nationality other than Danish
Keep the frequency of occupational accidents below 3.0
per million working hours
Keep employee absence below 3%
Keep employee turnover between 4% and 9%
& Obtain Medal Class rating by RobecoSAM in the
Sustainability Yearbook 2015
Enable a 56 million ton reduction in CO, emissions
through our customers" application of our products
Ensure that biofuels are included as a High Impact
Opportunity in the U.N.-led Sustainable Energy for All
initiative
29
STRATEGY & PERFORMANCE
Expectations for 2014
Financial expectations
On December 10, 2013, Novozymes announced the
formation of The BioAg Alliance with Monsanto. This
agreement is expected to close early 2014 and will impact
financial performance in 2014. This outlook builds on the
assumption that the agreement is approved by the relevant
authorities, hence the outlook includes the financial impact
as described in Company announcement No. 29, 2013, and
further explained below.
2013 was an important year for Novozymes. Sales and
earnings grew satisfactorily. Currencies provided headwinds,
but in general the business continued on the right track.
Looking at 2014, we expect a continuation of trends seen in
2013 with good underlying sales and EBIT growth. The
outlook for 2014 is positive and offers scenarios of a
stronger performance in 2014 than in 2013.
Sales expectations
On the sales side, Novozymes expects organic and LCY sales
growth of 6-9%. Based on exchange rates at January 20,
2014, currencies will also in 2014 provide headwinds, and
sales growth in DKK is expected to be 4-7%.
Novozymes expects a positive contribution to sales growth
from all five sales areas. Of these, Househoid Care and
Bioenergy are expected to be the Most significant growth
contributors.
Household Care sales are expected to be driven by a
continued desire by customers to improve wash
performance, enable low-temperature washing and replace
chemicals. As in 2013, emerging markets are expected to
contribute strongly to sales growth.
Food & Beverages sales growth is expected to be driven by
further growth in solutions for the production of healthy.
foods. The large application areas of baking and starch
conversion are also expected to contribute to growth.
Bioenergy sales are expected to benefit from increased
penetration of Novozymes" novel yield discovery solutions
AvantecØ, Spirizyme& Achieve and Olexå0. The 2014 sales
outlook is based on the expectation that U.S. fuel ethanol
production in 2014 will be around 13.5 billion gallons,
slightly higher than in 2013.
Sales to the Technical & Pharma industries are expected to
grow, primarily due to an expected increase in pharma
sales.
The BioAg Alliance
Sales to the Agriculture & Feed industries are expected to be
impacted by The BioAg Alliance. The alliance will not have
MORE WITH LESS
Novozymes" biosolutions bridge the gap
between dwindling natural resources, rising
costs and growing human needs, by enabling
our customers to produce more, higher-quality
products with less energy and fewer raw
materials. A biobased economy is achievable,
and our innovations will help the world get
there,
1403034EogSN57496
30
SIKATEGY & PERFORMANC +
Expectations for 2014
any impact on organic sales growth in BioAg, but
Agriculture & Feed sales in DKK and LCY are expected to be
negatively impacted by up to 7 percentage points (up to 1%
of total sales). The positive contribution from TJ
Technologies will offset about half of this impact, resulting
in a net negative impact from acquisitions and divestments
on Agriculture & Feed sales in DKK and LCY of 3-4
percentage points.
In The BioAg Alliance, Novozymes" BioAg sales recognition
will change to reflect the equal value share with Monsanto.
Agriculture & Feed sales are expected to be negatively
impacted by up to 7 percentage points in 2014, as DKK
150-200 million of the total deferred income arising from
the up-front payment received from Monsanto is expected
to be recognized as sales in 2014. The total deferred income
is around DKK 1,500 million and is expected to be allocated
to sales over a period of 5-10 years starting in 2014.
The net impact on Novozymes” gross margin in 2014 of
Novozymes and Monsanto splitting revenue and of the
deferred income is an expected negative impact of around 1
percentage point.
Total sales and distribution costs as a percentage of sales for
Novozymes are expected to decrease by around 1
percentage point given the transfer of marketing
responsibility to Monsanto. This roughly evens out the
negative impact from the lower gross margin.
As part of the BioAg Alliance, Novozymes will increase its
spending on R&D, but keeps its target of an EBIT margin of
more than 24%.
In 2014, Novozymes expects to realize a one-time gain from
the transfer of predominantly intangible assets to
Monsanto, as the transaction value of the assets exceeds the
book value. The positive contribution to the EBIT margin in
2014 net of transaction costs, transition costs and increased
R&D spend in 2014 is 0.5-1 percentage point.
Organically, Agriculture & Feed sales are expected to show a
similar pattern to 2013. BioAg sales, now through The
BioAg Alliance, are expected to deliver good underlying
growth in the Americas and strong growth in new markets.
Feed sales are expected to deliver only modest growth due
to the competitive situation in phytases.
Earnings expectations
EBIT growth is expected to be 6-9%. Higher sales, continued
productivity improvements and the one-time impact from
The BioAg Alliance are expected to håve a positive impact on
EBIT, whereas currencies are expected to provide yet another
year of headwinds.
The EBIT margin is expected to be 25-26%, including the
one-time positive impact of 0.5-1 percentage point from
The BioAg Alliance.
The effective tax rate is expected at around 23%.
Net profit is expected to grow by 6-9%.
Around 75% of expected USD/DKK exposure for 2014 has
been hedged at 5.79 DKK/USD. In 2013, the full USD/DKK
exposure was hedged at 5.63.
Investments and cash flow expectations
Net investments are expected to be DKK 900-1,100 million.
Besides maintenance CAPEX, most investments target
operational efficiency improvements. Novozymes also
expects R&D-related CAPEX to support The BioAg Alliance.
Free cash flow before acqguisitions is expected at DKK 3,200-
3,300 million. The free cash flow includes the positive
impact from The BioAg Alliance agreement, which is
expected to contribute DKK 1,350-1,400 million, slightly
lower than what was communicated in December 2013 due
to timing of CAPEX.
Return on invested capital is expected at around 21%,
including the positive impact from The BioAg Alliance of
around 1.5 percentage points.
Exchange rates at year-end
The outlook is based on exchange rates for the company's
key currencies remaining at the closing rates on January 20,
2014, for the full year.
(DKK) EUR USD BRL CNY
Average exchange rate 2013 746 562 262 91
Closing rate January 20, 2014 746 550 236 91
Estimated average exchange 746 550 236 91
rate 2014
Change in estimated exchange 0% -2% -10% 0%
rate 2014 compared with
average exchange rate 2013
Other things being equal, a 5% movement in the USD is
expected to have an annual impact on EBIT of DKK 70-90
million.
31
STRATEGY & PERFORMANCE
Expectations for 2014
"Novozymes' sustainability targets for 2014
are
designed to address suppliers, Novozymes, customers
and socliety.'
Sustainability expectations
Like the long-term targets, the sustainability targets for
2014 reflect Novozymes" consideration of the entire
business value chain and its key stakeholders. Therefore, the
targets are designed to address the following categories:
suppliers, Novozymes, customers and society. While the
entire value chain is considered, the majority of the targets
focus on internal efforts.
Sustainable supply chain
As a stepping stone toward our long-term target of 100%
adherence to our supplier program for commercial, quality
and sustainability performance by 2015, the target for 2014
is to ensure that 97.5% of all suppliers with a 12-month
rolling spend above DKK 1 million are assessed.
Novozymes
Within Novozymes, our expectations relate to resource
utilization, workplace development and sustainability
leadership:
Utilization of resources and climate change impact
We have chosen 2005 as the baseline year for our resource
efficiency targets. The 2014 targets for improving resource
efficiency are 42% for energy, 34% for water and above
50% for COz. The COz target is based on emissions from
Novozymes' own production sites and from energy
suppliers.
Workplace development
Novozymes endeavors to cultivate a workforce of satisfied
and motivated employees. Our efforts are addressed
through targets for employee satisfaction and employee
development. In 2014, the target is a score of at least 75 in
our employee survey for both ”satisfaction and motivation”
and ”opportunities for professional and personal
development.”
To ensure a continued føcus on diversity without
compromising our policy of hiring and promoting
employees based on merit, we will maintain both the targets
for diversity introduced in 2013. Therefore, our target for
2014 is for a minimum of 30% of newly appointed leaders
to be female and at least 55% to be of a nationality other
than Danish.
In addition to these targets, we aim to keep the frequency of
occupational accidents below 3.0 per million working hours
and the rate of absence from work below 3% in 2014. The
target for employee turnover is set at a range that reflects
the present job market and Novozymes' aims with regard to
i
LØST
o DB
Olga
an,
Better business
Eee
CUSTOMERS
Cleaner environment 4:
”Better lives
SUPPLIERS ig
SUSTAINABILITY ACROSS THE
VALUE CHAIN
Our focus on sustainability across the
value chain impacts our interaction
with suppliers, customers and society
at large, helping improve livelihoods,
the environment and the way we do
business.
1403034EogSN57497
342
STRATEGY & PERFORMANCE
Expectations for 2014
attraction and retention of employees. We see it as
preferable to have a turnover between 4% and 9% in 2014.
Sustainability leadership
Novozymes prioritizes benchmarking its sustainability efforts
against peers, as shown in the 2014 target of earning a
Medal Class rating from RobecoSAM in the Sustainability
Yearbook 2015. Although we have chøsen Dow Jones
Sustainability Indices and RobecoSAM's rating as
benchmarks, we also participate in a number of other
ratings that are just as valuable.
Customers
We aim to help our customers make better use of the
world's resources and reduce their products' environmental
footprint across their life cycle. Therefore, we have set a
target of enabling COz emission reductions of 56 million
tons through our customers" application of our products in
2014.
Society
To strengthen the pull of sustainable solutions in society,
Novozymes aims to further the success of the U.N.-led
Sustainable Energy for All (SE4All) initiative. m 2013, SE4AII
included Sustainable Bioenergy as a focus area and gave
Novozymes the mandate to begin forming a so-called High
Impact Opportunity. As substantial progress was made with
SE4AII in 2013, Novozymes has decided to accelerate its
ambitions for the initiative. As a result, the target initially set
for 2015 of championing the inclusion of a biofuels
initiative as a High Impact Opportunity has been brought
forward as one of the corporate targets for 2014. This will
require Novozymes to take a leading role in leveraging a
multi-stakeholder coalition that currently includes Beta
Renewables and Bloomberg New Energy Finance.
33
STRATEGY & PERFORMANCE
Sales and markets
Sales and markets
Organic sales growth was 7% in 2013. While all sales areas contributed to growth, Bioenergy and
Household Care were the most significant sales contributors, reaching 6% and 9% respectively. Sales
in Latin America were up 8%, with Agriculture & Feed and Household Care the strongest sales
contributors.
Total sales in 2013 were DKK 11,746 million, an increase of
5% compared with 2012. Exchange rates had a significant
negative impact on sales, and sales in LCY were up by 8%.
Acquisitions contributed approximately 1 percentage point
to sales growth and, organically, sales grew by 7%. All sales
SALES BY GEOGRAPHY
& SALES GROWTH
Geographical distribution of sales and sales
. growth in 2013
areas contributed to this growth, with sales to the
Household Care and Bioenergy industries the most
significant contributors.
2013 NOVOZYMES SALES BY INDUSTRY
” 36%
V 27%
Fi Household Care
El Bloenergy
El Technical & Pharma
EJ Food & Beverages
HH Agriculture & Feed
FI Novozymes:
MH DSM
2013 MARKET SHARE IN ENZYMES FOR
INDUSTRIAL USE
y 7 Novozymes
48%
CI Dupont
FJ Others
1403034EogSN57498
STRATEGY & PERFORMANCE
Sales and markets
Sales by industry
Household Care
Sales to the Household Care industry increased by 6% in
DKK and by 9% in LCY compared with 2012. Sales growth
was driven by continued strong demand from customers
looking to improve wash performance, enable low-
temperature washing and replace chemicals. Sales to
emerging markets were a significant growth contributor.
Food & Beverages
Sales to the Food & Beverages industries were flat in DKK
and increased by 3% in LCY compared with 2012. Sales for
the production of healthy foods were the most significant
growth contributor. Sales to the baking industry ended the
year on par with 2012. Sales in the important freshkeeping
area were slightly lower than last year, but sales growth in
other baking application areas counterbalanced this impact.
Sales to the starch industry also contributed moderately to
growth due to positive developments in a number of
markets making up for lower sales in China due to lower
production of corn syrups and other corn-derived products.
Bioenergy
Sales to the Bioenergy industry were up by 9% in DKK and
by 13% in LCY compared with 2012. Organically, sales grew
by 12%. The U.S. Energy Information Administration
estimates that U.S. fuel ethanol production in 2013 ended
on par with 2012, following a strong fourth quarter with
Product launches in 2013
Q1 2013 Novozymes ViscozymeG Wheat HT: A
thermostable xylanase enzyme solution
that effectively reduces viscosity,
delivering operational flexibility, lower
energy usage and higher yields when
producing ethano! from wheat and other
cereals
Q2 2013 Novozymes OlexaQ: A protease enzyme
solution designed to release more corn
oil for recovery in ethanol production,
while increasing the ethanol yield
through improved yeast health during
fermentation
Q2 2013 Novozymes SpirizymeG Achieve: A
unique saccharification enzyme solution
that improves the conversion of dextrins
into glucose for ethanol fermentation by
unlocking fiber-bound starch that is
inaccessible to traditional fermentation
solutions
Q2 2013 Novozymes BlazeQ EvityO 16 L: A liguid
protease enzyme solution that enables
superior high stability in gels, gelpacs
and liquids for automatic dishwashing
detergents with a new non-boron
stabilization technology (DSAA)
Q3 2013 Peltec& X-Zyme by Novozymes and
Lanxess: The solution optimizes soaking
and liming, and allows leather tanneries
to increase the guality of hides, while
reducing chemicals used and
significantly improving efficiency and
sustainability
Q4 20613
Q4 2013
Q4 2013
Q4 2013
Q4 2013
Q4 2013
EvityQ platform for powder laundry
detergents: Evity is a novel formulation
technology, offering improved enzyme
stability. The launch includes six
granulate products for the powder
detergent segment
EvityQ platform for liquid laundry
detergents: Evity is a novel formulation
technology, offering improved enzyme
stability. The launch includes three
products for the liquid detergent
segment
Novozymes AcrylawayQ HighT: A
thermostable asparaginase that reduces
acrylamide formation in food processing
at high temperatures (above 100?C)
Novozymes CellusoftØ LT: The first true
low-temperature cellulase developed for
textile mills and laundries, giving møre
flexibility in textile processing, improving
textile quality and bringing savings in
water, energy and process time
Novozymes SenseaQ: An amylase for
bread and cakes, targeted to cost-
effectively replace chemical emulsifiers.
Benefits include improved moistiness,
melting characteristics and overall eating
experience
Novozymes Attenuzyme& Pro: A new
blended product før the brewing
industry, allowing cost-effective,
consistent attenuation control regardless
of raw material variability or process
fluctuations
1403034EogSN57499
35
STRATEGY & PERFORMANCE
Sales and markets
estimated growth of 10-12% compared with the fourth
quarter of 2012. Bioenergy sales increased by 28%
organically in the fourth quarter of 2013 compared with the
fourth quarter of 2012. Bioenergy sales benefited from
continued positive developments in Novozymes" novel yield
discovery solutions AvantecQ, Spirizyme& Achieve and
OlexaQ. Penetration of all three solutions continued
strongly in Q4 as seen throughout the year.
Agriculture & Feed
Sales to the Agriculture & Feed industries increased by 3%
in DKK and by 8% in LCY compared with 2012. Organically,
sales grew by 5%. Sales to thé BioAg industry grew double
digit due to a good performance in the Americas and strong
growth in the new markets of Europe and Asia. Double-digit
growth is very satisfactory given the high comparables
following the Syngenta agreement in Q4 2012.
The integration of TJ Technologies, Inc., acquired in June
2013, is considered complete. The sales impact has so far
been limited due to the company's focus.on North American
markets. Toward the end of 2013, Novozymes entered into
an agreement with Monsanto to establish The BioAg
Alliance. The alliance is expected to close early 2014 and is
subject to approval by the relevant national antitrust
authorities. Sales to the animal'feed industry were slightly
higher compared with last year. RONOZYMEG ProAct
continued to perform strongly in Europe and Latin America,
whereas phytase enzyme sales were challenged in a tough
competitive environment.
Technical & Pharma
Sales to the Technical & Pharma industries increased by 7%
in DKK and by 10% in LCY compared with 2012.
Organically, sales grew by 6%. This sales growth was driven
by a strong increase in sales for the manufacture of
pharmaceutical products. Sales growth was also supported
by positive contributions from the textile and leather
businesses.
Sales by geography
Sales in Europe, the Middle East & Africa (Europe/MEA) grew
by 6% in DKK and by 7% in LCY compared with 2012. Sales
to the Household Care and Technical & Pharma industries
were the most significant growth drivers, whereas sales to
the Agriculture & Feed industries were slightly lower due to
the significant BioAg sales in Europe in Q4 2012.
Sales in North America increased by 4% in DKK and by 7%
in LCY compared with 2012. Sales to the Bioenergy and
Agriculture & Feed industries were the strongest growth
drivers, whereas sales to the Household Care and Food &
Beverages industries came in slightly lower than in 2012.
Sales in Asia Pacific were up by 2% in DKK and by 6% in
LCY compared with 2012. Sales to the Household Care and
Food & Beverages industries were the main contributors to
sales growth, whereas sales to the Bioenergy industry were
lower.
Sales in Latin America were up by 8%.in DKK and by 17% in
LCY compared with 2012. All sales areas contributed
positively to the sales growth, with sales to the Agriculture &
Feed and Household Care industries as the strongest
contributors.
FIVE-YEAR SALES DEVELOPMENT AND ORGANIC
GROWTH
DKK mililon
14,000
%
12,000
10,000
8,000
6,000
4,000
2.000
0
i Household'Care
IX Bivenergy
El Technical & Pharma
El Food & Beverages
TH Agriculture & Feed
Li Organic sales growth
2013 SALES BY GEOGRAPHY
Asia Pacifi z
19% %
”— North America
- 33%
Latin America
11%
Europe/MEA'
37%
EH North America
få Europe/MEA
Latin America
EJ Asla Pacific
3€
STRATEGY & PERFORMANCE
Sales and markets
HELPING CUSTOMERS STAY PROFITABLE IN A FIERCELY COMPETITIVE
ETHANOL MARKET
The U.S. Department of Agriculture has called the drought
of 2012 the most severe and extensive in 25 years. When
Novozymes AvantecØ was launched in October of that year,
corn yields were in hasty retreat, and corn prices went from
around $6 to above $8 per bushel. At the time, there was
also a chance that political support for the Renewable Fuel
Standard could wane in Washington, D.C., creating further
uncertainty about future demand for ethanol.
”Customers are looking to improve yield while reducing
overall input costs to improve margins,” explains Andrew
Fordyce, Executive Vice President of Business Operations.
"So we needed to convince them that enzymes are critical,
not only for boosting yields, but also for increasing
efficiency. If they can get more ethanol and high-value co-
products such as corn oil out of their feedstock, they
strengthen their business and maintain profitability.”
Triple boost
Novozymes made the strongest possible case for adopting
enzymatic solutions by launching a new package of yield
discovery solutions in June 2013. The company's industry-
leading liquefaction technology, AvantecØ, was joined by
Novozymes OlexaQ, the first enzyme uniquely designed for
corn oil recovery, and Novozymes SpirizymeQ Achieve, the
industry's first fiber-degrading glucoamylase. Despite major
market challenges, the package succeeded in establishing a
new standard of efficiency for customers, while expanding
the market for enzymes in the biofuel industry.
Avantece, SpirizymeG Achieve and Olexae& together can
deliver up to a 5% higher yield of ethanol, up to 8%
decrease in energy and up to 13% more corn oil.
”By delivering innovations that dramatically increase yield
and at the same time inventing a whole new enzyme
category with OlexaQ, we were able to expand the potential
market for enzymes and deliver more value,” Fordyce adds.
Rapid product adoption
These solutions have been quickly adopted by the market,
thanks in part to an active drive by the sales and technical
service teams. ”Back in April 2013, when our lab tests
revealed how powerful these solutions could be, we
challenged our account teams to reduce the time to trial and
set some very ambitious monthly targets,” says Jack Rogers,
Global Marketing Manager.
customer relationships:
"We were able to Minimize risk by working closely with our
customers to make sure they had the opportunity to
successfully trial the products and experience the benefits.
Without a pre-existing bond of trust, we would not have
been able to complete so many successful trials so quickly.”
Riding out uncertainty
The 2013 corn harvest was one of the best in U.S. history,
and corn prices have dropped to $4-5 per bushel. However,
the price of ethanol! is also down due to overcapacity. And
even though demand is stowly growing, it is not growing
fast enough to make up for the market's inability to
significantly exceed the 10% ”blend wall.”
"There will always be a certain level of uncertainty in the
biofuels market,” Fordyce says. ”Qur strategy is to continue
the evolution of technology that helps our customers boost
yield, increase efficiency and ultimately stay profitable in a
fiercely competitive market.”
Rogers says that the risk of launching solutions that radically
alter the market at a turbulent time was mitigated by strong
37
STRATEGY & PERFORMANCE
Financial and sustainability discussion
Financial and sustainability
discussion
The following section presents realized financial,
environmental and social data for the year. Data and key
figures can be found under Accounts & Data, while an
overview of reporting in accordance with the Global
Reporting Initiative (GRI) guidelines can be found under
Supplementary. Our Communication on Progress with
respect to the UN Global Compact can also be found
under Supplementary.
Sales
Total sales in 2013 were DKK 11,746 million, an increase of
5% compared with 2012. Exchange rates had a significant
negative impact on sales, and sales in LCY were up by 8%.
Acquisitions contributed approximately 1 percentage point
to sales growth and, organically, sales grew by 7%.
Key performance
Realized 2013 Realized 2012 2014 outlook?
Sales, DKKm 11,746 11,234 -
Sales growth, DKK . 5% 7% 4-7%
Sales growth, LCY 8% 3% 6-9%
Sales growth, organic 7% 4% 6-9%
EBIT, DKKm 2,901 2,745 -
EBIT growth 6% 17% 6-9%
EBIT margin 24.7% 24.4% 25-26%
Net profit, DKKM 2,201 2,016 -
Net profit growth 9% 10% 6-9%
Net investments excl. acquisitions, DKKm 783 1,177 900-1,100
Free cash flow before acquisitions, DKKm' 1,816 1,581 3,200-3,300
ROIC incl. goodwill 20.0% ' 19.9% 21%
Avg. USD/DKK 562 579 550
EPS (diluted), DKK 6.93 6.33 . -
SUPPLIERS .
Supplier adherence to supplier program 97% - 97.5%
NOVOZYMES
Water efficiency improvement (compared with 2005) 33% 32% 34%
Energy efficiency improvement (compared with 2005) 40% 38% 42%
CO: efficiency improvement (compared with 2005) 54% 55% 50%
"Satisfaction and motivation" score in employee survey 77 78 ” 75
"Opportunities for professional and personal development" 74 75 75
score in employee survey
Frequency of occupationa!l accidents (per million working hours) 2.4 3.0 <3.0
New leaders appointed who are women 26% 37% 230%
New leaders appointed of a nationality other than Danish 44% 51% 255%
Employee absence 1,8% 1.9% <3%
Employee turnover 7.5% 8.1% 4-9%
RobecoSAM class rating Gold . Gold Medal Class
CUSTOMERS
Estimated reductions in COz emissions through our customers" 52 48 56
application of our products, million tons
SOCIETY . .
Advancing Sustainable Energy for All (SE4All) Hije= - Hjore«
x Assumes exchange rates for the company's key currencies remain at the closing rates on
January 20 for the rest of 2014.
== High Impact Initiative of sustainable biofuel.
=xxHigh Impact Opportunity — inclusion of biofuels.
1403034FogsSN57500
STRATEG” & PERFORMANCE
Financial and sustainability discussion
Costs, Other operating
income and EBIT
Total costs
Total costs excluding net financials and tax were DKK 8,858
million, an increase of 3% on 2012. The increase was due to
a higher cost of goods sold, which was up by 5% from
2012 to DKK 5,030 million. Production costs increased as a
result of higher sales, a higher cost base from acquisitions
and higher costs related to the new enzyme plant in
Nebraska, U.S.
Gross profit
Gross profit was up by 5%, and the gross margin was
57.2%, on par with 2012. Continued productivity
improvements and favorable product mix changes had a
positive impact on the gross margin and offset a negative
impact from acquisitions and currencies,
Other operating costs
Other operating costs increased by only 2% to DKK 3,828
million. The ratio of other operating costs to sales was 33%,
on par with 2012.
» Sales and distribution costs increased by 4%,
representing 13% of sales
. R&D costs were flat, representing 13% of sales
» Administrative costs increased by 2%, representing 7%
of sales
Other operating income
Other operating income was DKK 13 million, down from
DKK 78 million in 2012 due to lower milestone payments
within Technical & Pharma.
Depreciation and amortization
Depreciation and amortization totaled DKK 738 million,
compared with DKK 703 million in 2012.
EBIT
EBIT grew by 6% to DKK 2,901 million, up from DKK 2,745
million in 2012.
The EBIT margin was 24.7%, an increase of 0.3 percentage
point from 24.4% last year. The EBIT margin increased as a
result of continued productivity improvements, favorable
product mix changes and the relatively low increase in other
operating costs, which more than offset lower other
operating income and a negative contribution from
currencies and acquisitions.
Net financials and net profit
Net financial costs
Net financial costs decreased by DKK 19 million to DKK 142
million in 2013, down from DKK 161 million in 2012. The
decrease was mainly a result of a lower loss on net currency
hedging/revaluation of DKK 61 million, which was partly
offset by higher other financial costs. Other financial costs
increased by DKK 42 million due to higher costs associated
with employee stock appreciation rights (SARSs) and
revaluation of balance sheet items. Net interest expenses
were on par with 2012.
Profit before tax
Profit before tax was DKK 2,759 million, an increase of 7%
from 2012.
The effective tax rate in 2013 was 20.2%, against 22.0% in
2012. The effective tax rate benefited from utilization of the
U.S. Advanced Energy Manufacturing tax credit relating to
the new plant in Nebraska and from a deferred tax effect
following the enactment of new lower corporate tax rates in
Denmark.
SALES AND GROWTH
DKK million %
14,000 35
12,000 11,234 74,746 | 29
10,510 mn Di
10,000 9,724 ni "då & los
8,448 "då P 7 i li
8.000 mm, tå bg ; ig 20
6,000 r= ba: : Di js
, & i VE:
4,000! "I! ; ig 110
ud "4 Æ 5:
2,000 : : js
0 mt t i i + då i dg 0
2009 2010 2011 2012 2013
y? Sales
HH Growth
GROSS PROFIT AND GROSS MARGIN
DKK million %
10.000 57.2 een:
9,000 56 57
8,000 55.6 ss 56
7,000 55
6,000 5,412 3,808 p 54
5,000 Dj sk i É 53
4.000 | ; ix |s2
3,000 bå i ; i 51
2,000 i 19 i j . 1] Hso
1,000| ' | id id bu i] )ao
0 —379g 5010 2011 2013 2013 78
£. Gross profit
MH Gross margin
1403034EogSN57501
39
STRATEGY '& PERFORMANCE
Financial and sustainability discussion
Net profit .
Net profit increased by 9% to DKK 2,201 million, up from
DKK 2,016 in 2012, due to the higher EBIT, lower effective
tax rate and lower net financial costs.
Cash flow and Balance sheet
Cash flow
Cash flow from operating activities was DKK 2,599 million
in 2013, down 6% from DKK 2,758 million in 2012. The
lower operating cash flow was mainly a result of lower trade
payables and other liabilities, and higher corporation tax
paid.
Net investments excluding acquisitions totaled DKK 783
million, down from DKK 1,177 million in 2012.
Free cash fiow before åcquisitions was DKK 1,816 million,
up by 15% compared with 2012. Lower net investments
excluding acquisitions were the main driver of the higher
free cash flow, which was partly offset by the lower
operating cash flow.
Balance sheet
Shareholders' equity increased by 15% to DKK 11,066
million at December 31, 2013, up from DKK 9,568 million at
year-end 2012. Shareholders' equity was increased by
comprehensive income and sales of treasury stock, partly
offset by dividend payments.
Net debt-to-equity was 7% at year-end 2013, down from
15% at December 31, 2012.
Return on invested capital (ROIC), including goodwill, was
20.0%, up from 19.9% in 2012. The improved ROIC was a
result of the higher net profit, which more than offset the
increase in invested capital, which was due to higher
acquisitions.
Treasury stock
At December 31, 2013, the holding of treasury stock was
5,5 million B shares, equivalent to 1.7% of the common
stock.
Incentive program for
Executive Leadership 2011-
2013 |
The incentive program for the period 2011-2013,
announced in Company announcement No. 10 of March 2,
2011, has come to an end. The accumulated economic
profit for the three years was DKK 3,818 million, thereby
exceeding the target of DKK 3,750 million. As a result, on
January 21, 2014, the full numbér of shares associated with
the program has been released to the Executive Leadership
Team as follows:
. Recipient No, of shares
Shareholders' equity represented 67% of the balance sheet p
total, up from 63% at year-end 2012. Peder Holk Nielsen 125,075
Net interest-bearing debt was DKK 805. million at December Benny D. Loft 111,177
31, 2013, down from DKK 1,430 million at December 31, Thomas Videbæk 111,177
2012. Cash flow from operating activities and sales of Per Falholt 111,177
Ueuly, stock mpadtsd vet Sebt postive y, vinereas mn Thomas Nagy 111,177
ividend payouts o million, acquisitions totaling '
DKK 640 million and net investments of DKK 783 million Andrew Fordyce 27,794
had a negative impact on net interest-bearing debt.
R&D EBIT AND EBIT MARGIN
DKK million % DKK million Yo
2,000 20 5.000 30
1,800 19 4,500 28
1,600 1,464 1,527 1,528 | 18 4.000 26
1,400 1,360 3 Dr få 117 3,500 24
1,200 Sy dj Fl t | le 3,000 22
1,000 å i Fat Sd lis 2,500 al il 20
B00| i san ; 13,5 ir | 14 2,000! 1,688 Bj [3 5) 18
600! : 7 på ci i: em 13 1,500! ig | | i | el 76
a00| fj DÅ El: D bi | i2 1,000 fj (må Få 14
200! | gå bi i: UX | 1 500| ! j id 5 4 12
: I Sd 13 JE då ild i £ LÅ Bur
c——6og 2010 2011 2012 2013 10 o——og 2010 201 2012 10
FI R&D costs 13 EBIT
MH R&D costs (% of sales)
Mi EBIT margin
STRATEGY & PERFORMANCE
Financial and sustainability discussion
Total number of shares
released to the Executive 597,577
Leadership Team
Steen Riisgaard 125,074
Total
otal number of shares 722,651
granted in the program
New incentive program for
Executive Leadership
A new three-year incentive program for the Executive
Leadership Team has been established. This program
complies with the remuneration guidelines approved by the
2011 Annual Shareholders' Meeting and replaces the
programs that expired at the end of 2013.
The new program is an equal stock and stock option
program. Awards will depend on economic profit, based on
sales growth, EBIT margin and return on invested capital. In
the new program, the Executive Leadership Team will be
awarded stock options annually, whereas the allotted
number of B shares awarded under the program will be
allocated in January 2017, once the aggregated economic
profit is known. The awarded stock options have a vesting
period of three years, after which there is an exercise period
of five years. The stock program has a three-year qualifying
period starting on January 1, 2014, after which the stock
will be transferred to the recipient.
If the economic profit for the period is DKK 5 billion, 80%
of the stock and options will be awarded. The DKK 5 billion
target is ambitious and requires the company to deliver on
its long-term financial targets in 2015 and 2016 following a
ramp-up from 2014. If an economic profit of DKK 5.5 billion
or more is generated, 100% of the stock and options will be
awarded; if economic profit is DKK 2.5 billion or less, no
stock or options will be awarded. Between these three
points, a proportional number of stock and options will be
granted. The BioAg Alliance agreement with Monsanto is
included in the economic profit calculation, whereas other
potential acquisitions or extraordinary BioAg investments
may result in an adjustment of the economic profit realized.
For the Executive Leadership Team, the value of the three-
year program is approximately DKK 134 million as of January
1, 2014. The value of the program corresponds to the
aggregated annual remuneration of the Executive
Leadership Team in 2014-2016 (basic salary, maximum cash
bonus and pension contributions). Like the previous
incentive program, the new program contains a maximum-
value clause. If the intrinsic value of the program for the
Executive Leadership Team rises to more than DKK 268
million on the date on which the Annual Report for 2016 is
approved in January 2017, the Board of Directors may
choose to limit the award of stocks and options to a value of
approximately DKK 268 million.
The stock price used in calculating the number of shares in
the program is based on the average of the closing rates on
Nasdaq OMX Copenhagen for the five trading days
following the publication of the 2013 Annual Report. The
stock price used to calculate the intrinsic value of the
program will be the average of the closing rates on Nasdaq
OMX Copenhagen for the five trading days leading up to
the approval of the 2016 Annual Report. The WACC used to
calculate the economic profit is fixed at 7.0%.
Furthermore, a three-year program has been established for
senior leadership below executive level (approximately 180
vice presidents and directors). To a large degree, the
program follows the same mechanisms as the program for
the Executive Leadership Team. The value of this three-year
program is approximately DKK 150 million as of January 1,
2014, and the maximum-value clause is approximately DKK
300 million.
FIVE-YEAR CASH FLOW AND ACQUISITIONS
OVERVIEW
DKK miilion %
3,000
2,500
2.000
99 10
1,500
1,000! 838 998
500| : NE
NE i (123
2009 2010
”» Free cash flow before acquisltlons
Hi Acqulsitions
HI Free cash flow before acquisitlons (% of sales)
NET INTEREST-BEARING DEBT (NIBD) AND
EQUITY RATIO
DKK million %
4.000 80
3,500 e2. 63.7 63 67.0 | 70
3,000| 53 60
2,500 50
2.000 40
1,500 1,430 30
1000! 999 1,019 i i sos | 20
500! ; 346 Ci i ; u i 10
0 gg RE 22
TI NIBD
Må Equity ratio (%)
41
STRATEGY & PERFORMANCE
Financial and sustainability discussion
Update on financial support
to M&G Chemicals
In Company announcement No. 27 of November 27, 2013,
Novozymes announced that in order to support M&G
Chemicals' vision for producing biomass-based plastics, it
would provide financial support of USD 35 million by way of
a cornerstone investment in M&G Chemicals' initial public
offering (IPO). Novozymes has been informed that the IPO
will not proceed for the time being, and as a result
Novozymes has been released from its Cornerstone
investment. M&G Chemicals has informed Novozymes that it
is still committed to growing its business in China and will
continue to do so irrespective of the decision to
postpone the IPO. As previously announced, Novozymes
remains the exclusive supplier of enzyme technology to the
planned M&G Chemicals biorefinery in Anhui province,
China. The biorefinery remains contingent upon successful
financing. Novozymes remains committed to providing M&G
Chemicals with financial support of USD 35 million, the
exact form and details of which have yet to be determined.
NET INVESTMENTS+
DKK mililon %
1,500 25
1.200 70
200 15
600 10
300 i i R 5
vd DÅ 4 sd ud
od l id Di bil,
2009 2010 2011 2012 2013
id Net investments
HE Net Investments (% of sales)
% Excluding acqulsitions
1403034EogSN57502
42
STRATEGY & PERFORMANCE
Financial and sustainability discussion
REGIONAL SOLUTIONS FOR STRONG GROWTH IN HOUSEHOLD CARE
The Household Care business, which boasts a broad
product portfolio, is Novozymes" largest industry with a
36% share of Novozymes" sales, a global market share of
more than 60% and around 300 customers worldwide.
Retaining this leadership position and maintaining growtin
require a continuous increase in enzyme penetration in both
existing and new markets. In recent years, Novozymes has
deepened focus on regional solutions — for example by
developing special products for emerging markets such as
India. At the same time, the company aims to have enzymes
replace chemical ingredients in detergents by an ever greater
factor.
Breakthrough in India
Novozymes sees great potential in emerging markets where
penetration of enzymes is currently low. India, for instance,
is an ambitious and realistic market for Novozymes given its
huge consumer base. Novozymes' strategy of tailoring
solutions to this market is starting to pay off; in 2013, the
company secured contracts from two leading detergent
manufacturers in India.
Getting these important customers on board has required
patience and mutual trust, as well as many trials and tests
and a constant, open, fact-based dialogue. It is a remarkable
development given that, until a few years ago, Novozymes"
Household Care sales in India were in decline.
Learning fram emerging markets
Emerging markets defy a one-size-fits-all approach.
Novozymes seeks to understand consumer requirements in
these regions so as to develop suitably targeted enzyme
innovations. Novozymes" researchers are constantly learning
about the raw materials used in detergent production in
different regions, and how to optimize its enzyrme solutions
to suit these local formulations. At the same time,
Novozymes” partners in this segment — local and global
manufacturers — are becoming more open to letting
Novozymes get closer to their manufacturing process and
thereby develop products that meet specific market needs.
Such close collaboration with a multinational manufacturer
enabled Novozymes to come up with the first enzymatic
laundry soap bar for the Brazilian market in mid-2013,
helping consumers save on soap, water and time. Other
countries in Latin America, notably Mexico, are in line for
similar solutions within this industry.
Meanwhite, Novozymes continues to provide targeted
innovation in mature markets, In Japan, for example, where
the market share of liquid detergents is growing due to
strong demand for compaction, the company helped a key
customer deliver an alternative: a super-compact powder
detergent that also uses fewer surfactants. This enabled the
manufacturer to save on the raw materials needed in
product formulation and packaging, thereby also lowering
transportation costs. Consumers received an efficient
detergent requiring just one rinse cycle per wash, thereby
saving on water and electricity bills. Novozymes continues to
work with liquid-detergent manufacturers in Japan to
produce more compact and efficient formulations.
Partnerships and innovation for growth
Novozymes” partnership-based approach to global soap
manufacturers is enabling ihe company to maintain a strong
position to innovate in line with market needs. For example,
the biennial Household Care Sustainability Summit in
Copenhagen, Denmark, hosted by Novozymes, is where the
industry's top business and sustainability minds — including
representatives of global brands such as P&G, Henkel and
Unilever — gather to share experience and pragmatic ideas
for achieving true, systematic sustainability. Novozymes”
efforts to replace chemicals with enzymes in formulations
used by detergent manufacturers in both mature and
emerging markets also remain a key success factor.
Part of Novozymes" strategy in Household Care is to focus
on R&D efforts to deliver more sustainable and regionalized
solutions in order to stay competitive. Novozymes believes it
can continue its strong performance by investing in
innovation, product development and partnerships.
STRATEGY & PERFORMANCE
Financial and sustainability discussion
Resource utilization
With the world's natural resources under escalating
pressure, Novozymes is dedicated to improving its own
resource efficiency year on year.
Energy, water and CO, efficiency
Energy efficiency
In 2013, energy efficiency improved by 2 percentage points
from 38% in 2012, which corresponds to an additional
130,000 GJ of energy saved and estimated cost savings of
approximately DKK 15 million in 2013. The energy efficiency
improvement was 40% compared with 2005, which means
that we did not meet our target of 42%. Despite the
successful implementation of all planned energy-saving
projects, we were unable to meet the target, primarily as a
result of lower global capacity utilization following the
inclusion of the American site in Blair, Nebraska, in giobal
supply operations.
CO; efficiency
Although Novozymes' COz efficiency improvement declined
slightly from 55% in 2012 to 54% in 2013, Novozymes
exceeded the target of 50% compared. with 2005. This
improvement in efficiency was achieved mainly as a result of
the use of wind power in Denmark. The inauguration of the
Blair facility is the main reason for the decline in COz
efficiency compared with 2012, because the energy utilized .
in Blair is mainly based on coal-fired power plants.
In 2013, Novozymes and Novo Nordisk joined forces to
install a high-performance biogas reactor in Kalundborg,
Denmark. The new reactor utilizes wastewater from both
Novo Nordisk's and Novozymes' large-scale production
plants in Kalundborg for the efficient production of biogas.
The biogas reactor enables Novozymes and Novo Nordisk to"
reduce COz emissions by approximately 10,000 tons
annually when operating at full capacity. Furthermore, the
reactor is an investment in lower energy costs and thereby
an important step in making Novozymes' production in
Denmark even more competitive. The biogas plant had some
operational start-up problems in its first year of |.
operations and is therefore not vet producing biogas at full
BIG FEET, SMALL FOOTPRINT
Our commitment to sustainability throughout
the value chain has seen us minimize the
environmental footprint of our operations, as
well as that of our customers. By applying
Novozymes” biosolutions, customers reduced
their COz emissions by an estimated 52 million
tons in 2013.
1403034EogSN57503
STRATEGY & PERFORMANCE
Financial and sustainability discussion
"In 2013, Novozymes and Novo Nordisk joined forces to
install a high-performance biogas reactor in
KXalundborg,
capacity. The biogas reactor should be operating at two-
thirds capacity in 2014.
Water efficiency
Water efficiency improved by 33% compared with 2005,
a 1% increase from 32% in 2012. However, we did not
meet our target of 35%. Water efficiency was impacted
by lower global capacity utilization following the inclusion
of the Blair site in global supply operations, leakage from
underground pipes at one of our facilities in China and
product mix changes. When the leakage was discovered,
investigations of the cause were initiated, resulting in the
leaking pipes being replaced. In order to improve water
efficiency and close the gap on our target of 40% by 2015,
we have initiated additional water-saving projects, which
can be expected to positively impact water efficiency in 2015
and thereby also reduce production costs. We have also
started up task forces to analyze water consumption
patterns and propose improvements across our facilities.
Waste
The total volume of waste in 2013 was approximately 18%
lower than in 2012. The reduction was mainly a result of a
different approach to biomass registration at ihe new
production site in Blair. During the startup of this plant in
2012, the waste biomass from production was registered as
industrial waste, but in 2013 it was registered as biomass.
The total amount of waste from all other sites was 3% lower
than in 2012, and recycled waste increased from 33.6% to
38.6%.
Denmark.”
Transportation and distribution
COz emissions from the transport of goods to the first point
of delivery to the customer and from transport between sites
were estimated at 22,000 tons in 2013, which is
an increase from 19,000 tons in 2012.
Animal testing
The use of experimental animals more than doubled from
1,240 animals in 2012 to 2,665 in 2013, primarily as a
result of increased activities in our Agriculture & Feed
business area. The use of experimental animals at
Novozymes is continuously supervised by a Scientific Ethics
Committee (SEC), and all studies involving experimental
animals must be reviewed and approved by the SEC.
Environmental compliance and compfaints
Novozymes aims to comply with all regulations and strives to
minimize the number of complaints. In 2013, 36 breaches
of regulatory limits were registered worldwide, compared
with 15 in 2012. Out of these, 13 breaches were related to
compliance issues with wastewater quality at one of our
facilities in Denmark. In order to resolve this, a new project
has been initiated to ensure that wastewater treatment is
improved. We received 11 complaints from neighbors, the
same as in 2012. The majority of complaints were made by
private residents and related to odor and noise disturbance
from nearby factories.
Novozymes has a pending case in the U.S., after elevated
nitrate levels were found in the groundwater around the site
in Franklinton, North Carolina, a number of years ago.
ESTIMATED ENERGY COST SAVINGS
DKK million
1,000
800
B00
700
600
500
400
300
200
100
Q
sr 4
me! Cd
pr y 5 Dol
; i
få vdi [og
id : 4 pE
fod id mm
|
2013
2011
Cod
For
ou TÉ
2009 2010 2012
,» Estimated energy cost savings compared with 2005 efficlency
M Actual energy cost
EMPLOYEE SATISFACTION AND DEVELOPMENT
OVERVIEW
Score
go
80| 77
70
I g ii i j
60
50
]
s I i
FRE: fj
| MEE fod
sd pod
i
i
i
i.
$ 5
ig
TE
(dj
2010
pol
20 2009 2011 2012
Yi Employee satisfaction score
HE Development opportunities score
å5
STRATEGY & PERFORMANCE
Financial and sustainability discussion
"In 2013, we achieved an estimated 52 million tons of
CO> savings through our customers" application of our
products.”
Subsequent measurements were submitted to the
authorities in early 2008, but no conclusion has been
reached as the data are still under review by the authorities.
There were no significant spills in 2013.
Climate change impact
Novozymes" enzyme technology is part of the solution to
climate change as it offers higher quality, lower costs and
improved environmental performance for customers. We
provide CO2 data for products to customers and partners,
and advise them on the environmental benefits of changing
their product mix and shifting to more concentrated
products. In 2013, we achieved an estimated 52 million tons
of COz reductions through our customers" application of
our producis, ør the equivalent of taking approximately 20
million cars off the road. This is an increase of 4 million tons
compared with 2012, thereby exceeding our target of 50
million tons in 2013. The improvement was driven primarily
by increased sales and performance of Bioenergy and
Household Care enzymes.
Novozymes continues to conduct peer-reviewed
environmental life cycle assessments (LCAs) in order to
document its products" impact and provide customers with
validated claims. In 2013, we published life cycle
assessments in the Household Care and textile industries.
The LCA for the textile industry documents the
environmental benefits of Novozymes' Cellusoft& Combi
enzyme, which combines three steps in the textile industry
NUMBER OF NOVOZYMES EMPLOYEES BY
GEOGRAPHY
Employees
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
i
dj
|
Eg S ft i
2009 2010 201V 2012 2013
få Denmark
El North America
ET Latin America
TH Rest of Europe, Middle East & Africa
ET Asia Pacific
1403034EogSN57504
into one. The concept has the potential for broad
application in the textile industry, with an estimated global
annual savings potential of 5 million tons of fabric, 65
million m? of water and 1.5 million tons of CO2. The water
savings correspond to the freshwater consumption of 1.7
million people, and the COz savings correspond to taking
600,000 cars off the road.
Workplace development
Novozymes' success is dependent on its employees'
satisfaction and motivation in their -daily work. Therefore, we
have set several targets related to the well-being, rights and
development of our employees.
Employee turnover
In 2013, employee turnover was 7.5%, meeting the target
of between 4% and 9%. This target is a key measure of
Novozymes' aim of retaining and attracting skilled
employees.
Satisfaction, motivation and Novozymes" values
To keep track of Novozymes" aspiration to remain an
attractive workplace, all employees are encouraged to take
part in an annual People's Opinion survey measuring, -
amongst other indicators, employee satisfaction and
motivation. '
In 2013, employee satisfaction scored 77'out of 100 inthe
survey. We are proud that we were able to exceed our target
of 75 in a year with substantial organizational changes
providing both new opportunities and new challenges.
With a score of 74 in the employee survey on opportunities
for professional and personal development, we were slightly
off the targeted 75. As an innovation company, we value the
importance of continuous learning, which is why one of our
strategic focus areas launched in 2013 is to cultivate great
leaders and develop people,
In 2014, Novozymes will put extra focus on competency
development for all its employees, Novozymes believes that
high-impact competency development comes from
combining different learning disciplines according to a 70-
20-10 model: on-the-job experience (70%), coaching and
feedback (20%), and courses and training (10%). In 2014,
all employees will be encouraged to reflect on the type of
learning from which they can benefit the-most, both
professionally and personally.
STRATEGY & PERFORMANCE
Financial and sustainability discussion
"Novozymes encourages all employees to take part in
an annual People' s Opinion survey measuring, amongst
other indicators,
Novozymes will additionally introduce a program for senior
leadership development to support leaders in living the
Novozymes' value Dare to Lead, developing both the leaders"
own competencies and their ability to support the
development of their employees.
Diversity and equal opportunities
Employment and promotions are based on merit without
any discrimination, exclusion or preference. In order to
encourage a diverse workforce at managerial level, in 2013
Novozymes introduced targets for new leaders in relation to
nationality and gender.
With 26% of new leaders being female in 2013, we missed
our target of ensuring that at least 30% of new leaders
appointed were women. We are not satisfied with this
performance and will maintain it as a focus area in 2014.
With 44% of new leaders in 2013 being of a nationality
other than Danish, we did not meet our target of at least
55% of new leaders appointed being of a nationality other
than Danish. The percentage is lower than last year's, which
is partly the effect of substantial reorganizations within
Novozymes in 2013.
Novozymes will maintain both diversity targets in 2014 to
ensure continued focus on diversity without compromising
our policy of hiring and promoting employees based on
merit.
Occupational health and safety
Novozymes is determined to offer a safe working
environment. The frequency of occupational accidents was
historically low in 2012 at 3.0 per million working hours,
and in 2013 we set a new record low of 2.4 accidents per
million working hours. This improvement can partly be seen
as a result of Novozymes” safety Campaigns ”Dare to
Care” and ”Stop and Think,” which remind employees to
be cautious in potentially risky situations.
As Novozymes continuously seeks improvement
opportunities within safety, a global safety assessment was
carried out by an American consultancy company in 2013.
The assessment was designed to review Novozymes' global
employee satisfaction and Motivation
setup and performance regarding occupational health and
safety, and to identify potential areas for improvement, The
assessment resulted in a report discussing each site in detail
and providing recommendations for improvement.
Approximately 25% of the recommendations were related
to global or managerial practices, and the remainder were
site-specific. Novozymes is currently developing action plans
for integrating the recommendations in 2014.
Novozymes encourages and helps employees to embrace a
healthy lifestyle, because improved well-being and low
absence benefit employees not only by reducing the
discomfort associated with illness, but also by limiting
unnecessary stress and extra work for colleagues. The
company also benefits, as low absence improves work flows
and saves costs. With an absence rate of 1.8% in 2013, the
target of less than 3% was met.
Compliance with human rights and labor standards
In 2013, Novozymes continued the aim of integrating the
UN Guiding Principles on Business and Human Rights into
its business. Our annual human rights due diligence process
is led by the global People & Organization department and
has the purpose of creating awareness and assessing
compliance with Novozymes' minimum standards on labor
and human rights in alf regions.
Socio-economic impact
At Novozymes, our ambition is to change the world together
with our customers. Consequently, we measure our socio-
economic impact at different levels.
Total tax contribution
In 2013, taxes incurred as corporate income taxes, other
taxes and duties came to approximately DKK 1,125 million,
equal to 9% returned to the community (see chart
Distribution of generated value). In addition, Novozymes
collected and withheld tax contributions on dividends and
wages totaling approximately DKK 1,025 million. Hence,
Novozymes' total tax contribution amounted to
approximately DKK 2,150 million, compared with
"Novozymes safety campalgns "Dare to Care" and "Stop
and Think" remind employees to be cautious in
potentially risky situations.”
47
STRATEGY & PERFORMANCE
Financial and sustainability discussion
approximately DKK 1,850 million in 2012. Novozymes"
overall tax strategy and transfer pricing policy support a
positive tax contribution to society and governments in the
countries in which Novozymes operates. See also
Novozymes' position on tax at www.novozymes.com.
Suppliers
For the past five years, Novozymes has systematically
assessed its suppliers from both a risk and an opportunity
perspective. To strengthen the sustainability impact of its
supplier engagement, in 2013 Novozymes introduced a
target of 100% adherence to the supplier program for
commercial, quality and sustainability performance for
suppliers in 2015. With 97% supplier adherence in 2013,
Novozymes met the 2013 target of 95%, To steer suppliers
toward 100% adherence in 2015, Novozymes has set a
target of 97.5% for 2014.
In 2013, Novozymes maintained its success in innovating in
partnership with suppliers. At the Supplier Innovation Day
2013, the overall theme was packaging, and current and
prospective suppliers were invited to discuss how to improve
Novozymes' current packaging and filling equipment
solutions. Several ideas materialized at the workshop and
will continue as collaborative projects in 2014,
Business integrity
In 2013, we conducted business integrity training for
employees and achieved a 79% completion rate, compared
with 79% in 2012 and 71% in 2011.
A focus area in 2013 was to improve the knowledge and
usability of our grievance mechanisms for employees and
external stakeholders. This was done by making the filing
process in Novozymes' Whistleblower Hotline more
informative for the user, and by including questions related
to Novozymes' grievance mechanisms in the internal
business integrity training module.
As part of the organizational changes, the Ombudsperson
tunction was relaunched in 2013 in a new global network
with a local Ombudsperson in each of the five major
regions: China, India, Europe, South America and North
America. Having local Ombudspersons who speak the local
language ensures that the institution is easily accessible
throughout Novozymes.
Sustainable energy
In 2013, Novozymes set a new target for its societal impact
related to the U.N.-led Sustainable Energy for All (SE4AIl)
initiative. The target for 2013 was to establish a sustainable
biofuel initiative within SE4AII, championed by Novozymes.
The aim of the SE4AII initiative is threefold: to provide
universal access to sustainable energy, to double the rate of
improvement in energy efficiency and to double the share of
renewables in the global energy mix by 2030.
In 2013, SE4AII included Sustainable Bioenergy as a focus
area and gave Novozymes the mandate to begin forming a
so-called High Impact Opportunity by engaging with key
public and private partners and establishing subordinate
High Impact hnitiatives. These initiatives will enable the
deployment of new and innovative projects, such as
advanced biofuels made from agricultural waste. With the
formation of one specific Kigh impact Initiative, Novozymes
reached its target in 2013. As substantial: progress was
made with SE4All in 2013, Novozymes has decided to
accelerate its ambitions for the initiative, As a result, the
target initially set for 2015 of championing the inclusion of
biofuels as a High Impact Opportunity hås been brought
forward as one of the corporate targets for 2014. ;
Read more about the initiative-and Novozymes" role in the
article on SE4AII. '
DISTRIBUTION OF GENERATED VALUE
Generated value
(DKK 11,841 million)
Distributed value
Suppliers
Purchasing of goods
Sales
Community
Corporation tax, other k
taxes and duties 9% i Employees
Wages, pensions,
Capital providers ko. vd
Financial costs, '
i 2
kb — .å ete, 25%
and services, etc, 45%
dividend, etc. 8%
Financial and
other income
Novozymes — for future
value generation
Net profit less dividend 13%
1403034FogsSN57505
STRATEGY & PERFORMANCE
Financial and sustainability discussion
Corporate citizenship efforts
Through our corporate citizenship program, we continued
to share our knowledge of science and environmental
responsibility with local communities in the regions where
we operate. We reached approximately 36,000 learners, up
from approximately 26,000 in 2012. The increase in learners
was primarily a result of our involvement with the Canadian
organization Agriculture in the Classroom in Saskatoon,
Saskatchewan, teaching about plant growth and food
production.
Sustainability leadership
it is Novozymes” ambition to be considered a sustainability
leader and be transparent about its practices. Therefore, we
participate in third-party rankings and benchmarks and
engage with various stakeholders at both local and global
level. ”
Third-party recognitions
Novozymes participates in the most recognized and relevant
sustainability ratings to benchmark its performance against
peers and competitors. The Dow Jones Sustainability Index,
including the underlying evaluation by RobecoSAM, and the
Carbon Disclosure Project are a particular priority for
Novozymes.
in 2013, Novozymes maintained its position as industry
leader in the biotechnology sector in the Dow Jones
Sustainability Index. Based on our 2012 performance,
Novozymes received Gold Class in the RobecoSAM
Sustainability Yearbook 2013 and thereby reached the
target of a Gold Class rating.
Novozymes ranked third in the Nordic Carbon Disclosure
Leadership Index, moving up two places from 2012, with a
score of 99. This improvement is a result of our ability to
reduce COz emissions from both our own processes and
from our customers", It also reflects our ability to document
CITIZYMES: LEARNERS REACHED BY GEOGRAPHY
Learners
50,000
40,000
30,000
20,000
10,600
(1 Asla Pacific
Latin America
MI North America
EC] Europe/MEA
and communicate the importance of sustainability within
our value chain.
Global and regional engagements
In 2013, Novozymes engaged in a series of advocacy
activities. Some of the highlights included our engagements
with the World Business Council on Sustainable
Development (WBCSD), the UN Global Compact (UNGC)
Leaders Summit 2013 and the U.N.-led Sustainable Energy
for All (SE4AIl) initiative.
Under WBCSD's Vision 2050 project, Novozymes has been
working along with other member companies to develop a
vision for a world in 2050 with an increased population and
limited resources. In 2013, Novozymes worked as part of a
core group to further this vision through an initiative called
Action 2020, which aims to provide a framework for action,
specifically within the areas of food, feed and fuel.
Novozymes also participated in the UNGC Leaders
Summit 2013, particularly by sharing insights on stage in
areas such as raw material and energy efficiency in the food
and sustainable energy industries. We also continued to
participate actively in the local UNGC networks in China,
Denmark, India and Brazil.
Novozymes continued to work alongside The Sustainability
Consortium (TSC)— a Walmart-initiated organization with
the aim of promating sustainable products and supply
chains. We shared our insight into the role of enzyme
technology in manufacturing processes, provided life cycle
assessments for consumer products and supported the
efforts of TSC to expand into China.
Fulfilling sustaimability reporting requirements
Under section 99a of the Danish Financial Statements Act, it
is mandatory for large companies to report on corporate
responsibility. As a member of the UN Global Compact,
Novozymes prepares a Communication on Progress, which
can be found under Supplementary. Together with the
integrated financial, environmental and social reporting, the
Communication on Progress meets both the requirements
for reporting on corporate responsibility and the UN Global
Compact's advanced reporting criteria. Furthermore, we
report on our sustainability activities and update our
sustainability materiality overview annually at
www.novozymes.com.
STRATEGY & PERFORMANCE
Financial and sustainability discussion
MAKING THE CASE FOR GLOBAL, SUSTAINABLE BIOENERGY
Global businesses and international institutions can make a
palpable difference to lives and livelihoods by cooperating
to implement sustainability measures on a large scale. In
2014, for instance, Novozymes will champion the inclusion
of biofuels as a High Impact Opportunity (HIO) within the
Sustainable Energy for All (SE4Al) initiative led by the U.N.
and the World Bank. SE4AII aims to ensure universal access
to modern energy services, double the rate of improvement
in energy efficiency and double the share of renewables in
the global energy mix by 2030. As of 2013, nearly 80
countries have opted into SE4AII, and governments,
development banks, businesses and investors have
committed more than $50 billion toward its three
objectives.
Finding opportunities
By improving access to renewable energy, SE4AIl hopes to
spark economic growth in poor and marginalized regions
and communities, and to do sø in a socially and
environmentally responsible way.
it also seeks to generate opportunities for business
development led by the private and public sectors, and is
looking to draw investment and relevant policy toward
deliverable projects. Efforts are focused around HIOs where
the private sector can contribute to, and demonstrate action
in, areas such as a global alliance for clean cook stoves and
gas-flaring reduction.
Novozymes' expertise within renewable fuels makes it
particularly attractive to SE4AII, especially in the scale-up and
rollout of projects in sustainable bioenergy, where energy
and fuels are derived from renewable resources. Therefore,
Novozymes is leading the HIO on Sustainable Bioenergy as a
priority in 2013-2015 and has gathered a multi-stakeholder
coalitjion committed to developing sustainable bioenergy
solutions worldwide. Alongside Novozymes, the coalition
currently comprises Beta Renewables, Bloomberg New
Energy Finance, the International Union for Conservation of
Nature and the New Partnership for Africa's Development.
Securing investment
But if sustainable bioenergy is to succeed, it must be backed
by investment and action at regional and national levels.
Currently, Novozymes is working to secure agreements, in
the form of High Impact Initiatives (Hils), with various
regional development banks to commit funds for
developing SE4AII projects and solutions in several regions,
including Latin America and the Caribbean, sub-Saharan
Africa and Asia. The aim is to provide the scope to involve
national governments, industry, banks and civil society in
financing, building and driving sustainable bioenergy
projects.
Such agreements are expected to send a clear signal that
sustainable bioenergy is a viable, attractive industry, and
mark a big step in opening up business opportunities in
bioenergy markets. They also show Novozymes” commitment
to providing a platform that could benefit a number of
bioenergy solution providers on a collaborative basis.
Targeting success
Bioenergy, including liquid biofuels, has shown a viable
path to reducing dependence on fossil fuels, cutting
greenhouse gas emissions and promoting rural economic
growth.
But bioenergy has also raised some concerns that it may
have a negative impact on food and water security if
pursued in an unsustainable way. Today, however, there is
expertise and experience to demonstrate how bioenergy can
be harnessed from agricultural and household waste and
energy crops. Despite the gradual commercialization of the
advanced biofuel industry, the widespread scale-up and
rollout of sustainable bioenergy is being held back by
inadequate investment and by regulatory and political
uncertainty.
Novozymes is hopeful and excited about its engagement
with SE4AII and expects the initiative to build the consensus
and momentum needed to get sustainable bioenergy
projects off the ground. in 2014, Novozymes will continue
to champion the inclusion of biofuels within a new
sustainable bioenergy HIO for SE4AII.
1403034EogSN57506
se
SIRATEGY & PEKFORMANUE
The Novozymes stock
The Novozymes stock
The Novozymes stock had a good year in 2013, gaining 44%. In April, 5.3 million B shares were
canceled.
The Novozymes stock is listed on Nasdaq OMX Copenhagen
and included in the OMX Copenhagen 20 index
(OMXC20CAP). The stock is listed under ticker code NZYM B
and ISIN DK0060336014. Novozymes is registered with the
Danish Business Authority under 10 00 71 27.
Stock performance
Novozymes' stock (DKK) 2013 2012
Share price, year-end 228.9 159.2
Total market value, year-end (billion)” 73.2. 51.7
Earnings per share, diluted 6.93 6.33
Dividend per share 2.50%% 2.20
+ All A and B shares multiplied by the price of the B share.
=+ Proposed.
Novozymes' share price increased by 44% during the year. In
comparison, the OMXC20CAP gained 32%, the MSCI Pan
Europe Index gained 16%, and the Dow Jones Sustainability
World Index was up 20%.
The average daily trading volume of Novozymes' stock in
2013 was 424,988 shares, or. DKK 84 million, making it the
seventh most actively traded company on Nasdaq OMX
Copenhagen, the same rank as in 2012. At year-end, the
total market value of Novozymes" B shares was DKK 60.9
billion, and the value of the nontraded A shares was DKK
12.3 billion, assuming the same value per share as for the B
shares.
Over the past five years, Novozymes' stock has generated a
compound average annual return to shareholders of 22%
(23% including dividends). This can be compared with a
five-year compound average return without dividends of
20% for the OMXC20, 9% for the MSCI Pan Europe Index
and 11% for the Dow Jones Sustainability World Index.
As resolved at the Annual Shareholders' Meeting in February
2013, 5.3 million B shares were canceled in a capital
reduction on April 5, 2013.
Dividends
The Board of Directors proposes that the Annual
Shareholders' Meeting 2014 approve a dividend of DKK
2.50 per share for the 2013 financial year. This will result in
an expected total dividend payment of approximately
DKK 786 million, corresponding to a payout ratio of 35.7%.
Stock buyback program in 2014
As announced on December 10, 2013, in relation to the
formation of The BioAg Alliance with Monsanto, Novozymes
2013 INDEXED SHARE PRICE DEVELOPMENT
Index
150
140
130
120
110
100
90
80
E
5
w
LO
ET uef
ET qg34
ET3eN
ET-dy
ET AW
ET inf
ET bny
ET dag
ET 20
ET AON
£T >2g
FH Novozymes B MH OMxcC20
HM DW3 Sustainabliity World TI MSCI Pan Europe
CI MSCI Materlals Ej OMXC20CAP
FIVE-YEAR INDEXED SHARE PRICE DEVELOPMENT
Index
320
280
240
200
160
120
80
40
og g o 9 vo
em ø am (J o
A Å å R Å
ag HF - F- Fw
bl ao FH AR w
i? Novozymes MH OMxc20
8
DE DW) Sustainability World
i El MSCI PAN Europe
UI MSCI Materlals
El] OMXC20CAP
51
STRATEGY & PERFORMANCE
The Novozymes stock
expects to initiate a new stock buyback program in 2014
worth up to DKK 2 billion.
2013
Sustainability ratings
Providing information on sustainability performance to
analysts, rating agencies and asset managers is an important
EEN. million) 786% eg ng men mee element of Novozymes! interaction with'shareholders. We
continuously seek to improve our sustainability reporting
Stock buybacks 0 832 400 0 0 and processes, and value this interaction highly. In 2013,
(DKK million) ' Novozymes was: " '
Total (DKK million) 786% 1,519 999 504 358 . .
Net profit (DKK million) 2,201 2,016 1,828 1,614 1,194” Reconfirmed as a member of the Dow Jønes .
Payout ratio (%) 357% 34.0 32.8 31.2 30.0 — »vstalnabillty World Index and the Dow Jones
Sustainability STOXX Index, named as Biotechnology
Number of shares Industry Leader for the 12th time and awarded a Gold
outstanding, Class rating for 2012 performance in RobecoSAM's
year-end (million) 314 312. 315. 315. 311 Sustainability Yearbook 2013
Dividend per share + Ranked third in the Carbon Disclosure Project's Nordic
(DKK) 2,50% 2.20 1.90 1.60 1.15 Carbon Disclosure Leadership Index 2013 with a score of
+ Proposed. 99 out of 100
. Reconfirmed as having PRIME status by Oekom Research
for being among the leaders in the pharmaceuticals &
Dividend dates 2014 biotechnology industry
Resolution adopted at the Annual + Reconfirmed as one of The Global 100 Most Sustainable
Shareholders' Meeting February 26 Corporations in the World
Last day of trading with right to + Reconfirmed as a member of the ET Global 300 Carbon
dividend for 2013 February 26 Index
First day of trading without right to . Reconfirmed as a member company of the FTSE4Good
dividend for 2013 February 27 Index
Disbursement of dividend March 4
Shareholders .
Equity analysts homes Rn mock sons ts of so DRK snares
. . . ,… and B shares, both with a nominal value 0 per share.
ne e following companies have analysts covering Novozymes All A stock is held by Novo A/S, and an'A share carries 10
times as many votes as a B share.
ABG Sundal Collier Jefferies & Company —— Atthe end of 2013, Novo A/S held'25,9% of the total
Alm, Brand Markets J.P. Morgan i men
Carnegie Jyske Bank common stock and, through its holding of'the A stock and a
CA Cheuvreux Nor di ce Kempen & Co. proportion of the B stock (29,131,400 shares), controlied
Citi Nordea Markets 70.5% of the votes. Novo A/S is wholly owned by the Novo
Credit Suisse Nykredit Markets Nordisk Foundation, and Novozymes is therefore included in
Danske Markets SEB Enskilda Equities the consolidated financial Statements of.the Novo Nordisk
DnB NOR Markets Standard & Poor's Foundation. Novo A/S is domiciled in Hellerup, Denmark.
Goldman Sachs Sydbank At year-end, Novozymes had roughly 49,000 shareholders,
Handelsbanken Capital Markets — UBS of whom 99% were private shareholders in Denmark.
Twenty institutional investors, including Novo A/S, owned
approximately 60% of the B shares. Around 65% of the B
shares were held outside Denmark.
Novozymes' common stock
A stock B stock Total
Common stock (DKK)= 107,487,200 531,912,800 639,400,000
Number of shares | 53,743,600 265,956,400 319,700,000
Number of votes 1,074,872,000 531,912,800 1,606,784,800
Voting rights (%) 66.9 33,1 100
x Common stock equals 319,700,000 shares with a nominal value of DKK 2 per share
1403034EogSN57507
12
STRATEGY & PERFORMANCE
The Novozymes stock
"In 2013, Novozymes was named as Biotechnology
Industry I Leader for the 12th time and awarded a Gold
Class rating for 2012
performance in R iobecoS AM 5
Sustainability Yearbook 2013
Novozymes held 2.1% of the B stock, equivalent to 1.7% of
the total common stock.
Besides Novo A/S, only one shareholder, Baillie Gifford &
Co., held more than 5% of Novozymes' common stock on
December 31, 2013.
Financial calendar
Group financial statement for 2013 Jan. 21, 2014
Annual Shareholders' Meeting 2014 Feb. 26, 2014
Interim report for the first 3 months of 2014 April 24, 2014
Interim report for the first half of 2014 Aug. 14, 2014
Interim report for the first 9 months of 2014 Oct. 23, 2014
Group financial statement for 2014 Jan. 20, 2015
Contact Investor Relations
Visit our Investor site at www.novozymes.com for investor
relations guidelines, presentations, tools and downloads,
Group financial statements and other information for both
private and institutional shareholders.
If you have questions for Investor Relations, please contact:
Thomas Steenbech Bomhoff
Head of Investor Relations
Tel.: +45 4446 1226
Email: tsbmænovozymes.com
SHAREHOLDER DISTRIBUTION OF B COMMON
STOCK
Treasury stock 2%
Rest of world 39
UK
Novo A/S 11% 37%
Fr
Rest of Europe
13%
North America
15%
Denmark
19%
" UK
ER North America
EJ Novo A/S
Hi Treasury stack
Mi Denmark
El Rest of Europe
E Rest of world
Martin Riise
Senior Investor Relations Manager, U.S.
Tel.: +1 919 494 3483
Email: mrsnénovozymes.com
Klaus Sindahl
Senior Investor Relations Manager, Europe
Tel.: +45 4446 0134
Email: ksdhæ&novozymes.com
novozymes'
Rethink Tomorrow
om
En
be
— O
vd
ll
eg
MA
. U.
ve
øm
N
- O
O
og
1403034EogSN57508
GOVERNANCE
Board of Directors & Executive Leadership Team
BOARD OF DIRECTORS &
EXECUTIVE LEADERSHIP TEAM
The Board of Directors and Executive Leadership Team have different competencies to ensure the best
possible management of the company. Members possess broad international management
experience, thorough biotech expertise and in-depth knowledge of Novozymes" business.
Board of Directors
HENRIK GURTLER”
Børn 1953. CEO, Novo A/S. Chairman of the Board since 2000,
Elected før one year at a time.
Board positions
Chairman:
Copenhagen Airports A/S
Member:
Novo Nordisk A/S
Special competencies:
In-depth knowledge of Novozymes" business, and expertise in
managing and working in an international biotechnology company
” These board members are not regarded as independent in the sense of the
definition in the Danish Recommendations on Corporate Governance that apply to
Danish listed companies.
KURT ANKER NIELSEN”
Born 1945, Vice Chairman of the Board since 2000. Chairman of
the Audit Committee. Elected for one year at a time.
Board positions
Chairman:
Dalhoff Larsen & Horneman A/S
Special competencies:
Expertise in financial and accounting matters, and in-depth
knowledge of Novozymes' business
55
GOVERNANCE
Board of Directors & Executive Leadership Team
LENA BECH HALSKOV ANDERS HENTZE KNUDSEN .
Børn 1967. Safety Adviser, Employee representative. Member of the Børn 1959, Senior Operator. Employee representative. Member of
Board since 2013. Elected for four years at a time. the Board since 2013. Elected for four years at a time.
LARS BO KØPPLER . LENA OLVING . .
Born 1962. Technician. Employee representative. Member of the Born 1956. President & CEO, Mycronic Mydata AB (publ.). Member
Board since 2010. Elected for four years at a time. of the Board since 2011. Member of the Audit Committee, Elected
for one year at a time. .
Board positions
Member:
SJAB
Special competencies:
Expertise within sales and marketing, supply chain, process
optimization and production. Broad experience in financial and
accounting matters
1403034EogSN57509
56
GOVERNANCE
Board of Directors & Executive Leadership Team
AGNETE RAASCHOU-NIELSEN
Born 1957. Member of the Board since 2011. Member of the Audit
Committee. Elected for one year at a time.
Board positions
Chairman:
Arkil Hotding A/S
Brdr. Hartmann A/S
Pension Fund for Danish Lawyers and Economists
Deputy Chairman:
Danske Invest
Member:
Aktieselskabet Schouw & Co.
Danske Invest Management A/S
Dalhoff Larsen & Horneman A/S
DLH Foundation
Solar A/S
Special competencies: .
Expertise in business development and acquisitions,
macroeconomics and intellectual property rights
JØRGEN BUHL RASMUSSEN
Born 1955. President & CEO, Carlsberg A/S. Member of the Board
since 2011. Elected for one year at a time.
Board positions
Chairman:
JSC Baltika Breweries
Member:
Carlsberg Breweries A/S
DI's Permanent Committee on Business Policies
Special competencies:
International business and management experience, specifically
within sales, marketing, branding and acquisitions
MATHIAS UHLÉN
Born 1954. Professor at the Royal Institute of Technology (KTH) in
Stockholm, Sweden. Member of the Board since 2007. Elected for
one year at a time.
Board positions
Chairman:
Atlas Antibodies AB
Antibodypedia AB
Vice Chairman:
Affibody AB
Member:
Alligator AB
Bure Equity AB
Swetree Technologies AB
Special competencies:
Broad experience in research and biotechnology
57
GOVERNANCE
Board of Directors & Executive Leadership Team
Executive Leadership Team
PEDER HOLK NIELSEN PER FALHOLT '
Born 1956. President & CEO. Born 1958. Executive Vice President, Research & Development.
Board positions Board positions
Member: Chairman:
Hempel A/S Technical University of Denmark (DTU)
LEO Pharma A/S
Member:
DHI Group
ARTS Biologics A/S
ANDREW FORDYCE BENNY D, LOFT .
Born 1963. Executive Vice President, Business Operations. Born 1965. Executive Vice President & CFO.
Board positions
Member:
DONG Energy A/S
The Blue Planet
New Xellia Group A/S
Member of the audit committee:
DONG Energy A/S
New Xellia Group A/S
1403034EogSN57510
58
GOVERNANCE
Board of Directors & Executive Leadership Team
THOMAS NAGY
Born 1963. Executive Vice President, Supply Operations.
Board positions
Member:
American Chamber of Commerce in Denmark
Europa8i0
THOMAS VIDEBÆK
Born 1960, Executive Vice President, Business Development.
Board positions
Member:
Evolva SA
1403034EogSN57511
GOVERNANCE
Corporate governance
Corporate governance
Novozymes has developed effective management systems over many years and regularly updates
these systems to reflect changes in legal requirements, new business developments and stakeholder
expectations. A cornerstone of these management systems is Novozymes” corporate governance
structure.
Board of Directors: composition and responsibilities
In accordance with Danish legislation, Novozymes has a two-
tier management system comprising the Board of Directors
and the Executive Leadership Team, with no individual being
a member of both. The division of responsibility between
the Board of Directors and the Executive Leadership Team is
clearly outlined and described in the Rules of Procedure for
the Board of Directors and Rules of Procedure for the
Executive Leadership Team, available at
www,novozymes.com.
Novozymes" Articles of Association require the Board of
Directors to have four to eight:members elected at the
annual shareholders' meeting. Currently, the Board has six
such members. They are elected for one year at a time and
cannot be elected or re-elected after-reaching the age of 70.
Nominations are based on an evaluation of factors such as
competencies, diversity, independence and prior
performance of current members. The Board of Directors
also includes three members elected by employees, who
serve four-year terms,
The Board of Directors is accountable to the company's
shareholders for the way the company conducts its business.
The composition of the Board of Directors must therefore be
such that the combined competencies of the Board enable it
to inspire, guide and oversee the company's development,
and diligently address and resolve the issues and challenges
faced by the company at any time.
In order to secure the right competencies and promote
diversity, the following targets have been set for the
composition of the Board of Directors:
1... At least half of the shareholder-elected board
members shall'be independent in accordance with the
Danish Code on Corporate Governance
2. Atleast 40% of the shareholder-elected board
members shall have substantial international experience
from the management of large corporations or
institutions headguartered. outside Denmark
3. One-third or more of the shareholder-elected board
members shall be female, and one-third or more of the
shareholder-elected board members shall be male
All targets were met in 2013, and the third bullet fulfills the
requirements of section 99b of the Danish Financial
Statements Acts.
The required competencies are defined in a competency
profile that specifies various personal characteristics, skills
and experience, The individual competencies of the
members of the Board of Directors are shown in the section
Board of Directors & Executive Leadership Team.
The Board's main responsibilities are to:
+» Ensure the right management and organizational
structure
+ Supervise financial, social and environmental
performance and the Executive Leadership Team's day-to-
day running of the company
» Decide the overall management and strategic
development of the company
"The Board of Directors Is accountable to the
company's shareholders for the way the company
conducts its business.”
bo
GOVERNANCE
Corporate governance
For an overview of the tasks performed to fulfill these
responsibilities, see the diagram A year with the Board of
Directors.
A Chairmanship has been established in accordance with
the Articles of Association and the Rules of Procedure for
the Board of Directors. It has two members — the Chairman,
Henrik Gurtler, and the Vice Chairman, Kurt Anker Nielsen —
and is responsible for assisting the Board of Directors in
matters concerning the Executive Leadership Team's
remuneration and nomination, and in overseeing the
Executive Leadership Team's day-to-day running of the
company and reporting back to the Board of Directors. The
Chairmanship is also responsible for planning and
preparing meetings of the Board of Directors, preparing
material for the nomination of candidates for election to the
Board of Directors, and recommending remuneration for the
Board of Directors and the Executive Leadership Team.
In addition, the Board of Directors has established an Audit
Committee. The Audit Committee assists the Board of
Directors in monitoring aspects relating to accounting,
auditing, internal control and financial reporting.
As part of the internal control system, all cases of fraud and
concerns raised, either through Novozymes' Whistleblower
Hotline or directly by internal or external personnel, are
reported to the Audit Committee. All allegations of fraud
are investigated, appropriately dealt with and then
closed. Substantiated fraud will lead to proportionate
disciplinary sanctions for the parties involved and is likely to
result in a police report being filed, although this will be
evaluated on a case-by-case basis. Two cases of
substantiated fraud were reported in 2013, with both cases
leading to the dismissal of employees and one being
reported to the police.
Further information about the Audit Committee can be
found at www.novozymes.com.
Charters and recommendations
In laying down the management principles for Novozymes,
the Board of Directors has followed the Recommendations
on Corporate Governance that form part of the disclosure
requirements applicable to companies listed on Nasdaq
OMX Copenhagen. These recommendations are available at
www.Corporategovernance.dk. The recommendations were
revised in 2013. The revision had only a minor impact on
Novozymes, and the chariges were adopted during the year.
A detailed review of Novozymes" position on all of the
recommendations and a description of the internal control
and risk management system relating to financial reporting
can be found in the statutory report on corporate
governance pursuant to section 107b of the Danish
Financial Statements Act, under Corporate Governance at
www.novozymes.com
(http:/www.novozymes.com/en/investor/corporate-
governance/Statutory%20report%20on%20Corporate%
20Governance/Documents/Statutory%20report%200n%
20corporate%20governance%20for%20the%
20financial%20year%202013.pdf).
December
January
November N
October
September
August " i
July June
May
A YEAR WITH THE BOARD OF DIRECTORS
February
[€ Board meetings
HJ Monthly reports
Ed Annual Shareholders' Meeting
March
Strategy work
FJ Review of financial performance and
strategy map
MH Self-assessment of collaboration
between Board of Directors and
Executive Leadership Team
EJ Organizational performance review
[1] succession planning
[I Next year's budget
1403034EogSN57512
61
GOVERNANCE
Corporate governance
"Novozymes works within the parameters of Touch the.
World and has committed to principles derived from the:
UN Global Compact and UN Convention on Biological
| Diversity.” |
The recommendations require companies to explain any
noncompliance, Novozymes follows 43 of 47
recommendations, the exceptions béing:
… Nomination and remuneration committees have not been
set up. Instead, these responsibilities are laid down in the
Charter for the Chairmanship (Recommendations 3.4.6
and 3.4.7)
e The remuneration policy for the Executive Leadership
Team contains no specific clause on the repayment of
variable remuneration components paid on the basis of
misstated information, as Novozymes considers the rules
in Danish law to be sufficient in such cases
(Recommendation 4.1.2) '
e Due to the limitations imposed by the Novo Nordisk
Foundation's articles of association and Novozymes"
ownership structure, the Board of Directors reserves the
right in certain circumstancés to reject takeover bids
without consulting shareholders (Recommendation
1.3.1)
Novozymes also works within the parameters of Touch the
World- a document outlining our values and commitments
— and has committed to principles derived from the UN
Global Compact and UN Convention on Biological Diversity.
Other Board-related information
The Board of Directors held eight meetings in 2013, with an
overall attendance rate of 94%.
Changes to the Articles of Association require that
shareholders representing at least two-thirds of the total
number of votes in the company are represented at the
shareholders' meeting, and that at least two-thirds of the
votes cast, as well as two-thirds of the voting capital
represented at the meeting, vote in favor of the proposal to
change the Articles of Association. The annual shareholders'
meeting has authorized the Board of Directors to allow the
company to acquire treasury stock on an ongoing basis to
the extent that the nominal value of the company's total
holding of treasury stock at no-time exceeds 10% of its
common stock, cf. section 198 of the Danish Companies
Act. The purchase price must not deviate by more than 10%
from the price quoted on Nasdaq OMX Copenhagen on the
date of acquisition. The authorization applies until March 1,
2017.
Each year, one of the responsibilities of the Board of
Directors is to assess whether the ownership structure with
A and B common stock is optimal. The Board of Directors
remains of the opinion that this is the-best way to safeguard
Novozymes" long-term development to the benefit of the
company's shareholders and other stakeholders.
Novozymes is party to a number of partnership contracts
that can be terminated by the other party in the event of
significant changes in the ownership or control of
Novozymes. A few contracts contain provisions that restrict -
Novozymes' licenses to use specific forms of.technology in
such situations. '
Novozymes is party to contracts where managerial staff can
claim compensation in case of resignation, dismissal or
redundancy due to a takeover bid.
62
GOVERNANCE
Risk management
Risk management
Novozymes' management systems are set up to seek growth and development opportunities, while at
the same time mitigating risk and ensuring compliance with rules and regulations in the
environmental, social and financial areas.
Identification of risks and
opportunities
Novozymes defines risks as ”events or trends that can
prevent the company from achieving its overall targets —
including financial and sustainability targets — or negatively
affect our image or our future results and activities.”
Novozymes strives to identify risks as early as possible. Once
the risks are identified, we work to mitigate them to the
extent possible and monitor them on an ongoing basis.
Throughout the value chain, Novozymes looks at its
business surroundings with the aim of identifying trends
and developments that could impact its business, whether
positively or negatively. The purpose of this is to ensure that
Novozymes can respond to changes in the outside world by
exploiting new opportunities or addressing risks in a timely
manner.
Stakeholder engagement
One way of identifying risks, opportunities and new trends,
while realizing Novozymes' ambition of being open and
transparent, is to engage with stakeholders. Therefore, a
Trendspotting
Materiality V
assessment
5 Integration into
/ Novozymes” business
Target-setting
Strategy development
Strategies
Targets
Proiects
SUSTAINABILITY MATERIALITY ASSESSMENT
Together with stakeholders, Novozymes spots
trends and assesses the potential impact of those
trends on Novozymes' business and its
stakeholders. The most material trends contribute
to Novozymes" strategy and targets.
63
GOVERNANCE
Risk management
"Novozymes looks at its business surroundings with the
alm of identifying trends and developments that could
impact its business, whether positively or negatively.”
priority for Novozymes is to understand stakeholders and
live up to their expectations. To do this, Novozymes engages
with stakeholders across the value chain, from customers to
suppliers to retailers, policymakers and investors. This
enables Novozymes to'spot trends that are relevant to its
business and stakeholders, and to seek deeper engagement
with those stakeholders most material to the business.
Stakeholder engagemerit is about listening and influencing,
which is why we have established ethical principles for
relations with our stakeholders. For example, we have a
management standard defining good business practice
when dealing with authorities, policymakers and political
parties.
Our Sustainability Board (SB) is an example of how we make
systematic use of input from our stakeholders. Consisting of
vice presidents from al! key business functions, the SB is
responsible for driving the integration of sustainability
across Novozymes and developing our sustainability strategy
aimed at ensuring that Novozymes is a leader in
sustainability. Novozymes analyzes the trends spotted to
understand the related risks and opportunities for
Novozymes' business. We do so from both a corporate and a
regional perspective: In this process, the Corporate
Sustainability team selects key trends to present to the SB.
The trend analyses are used to inform discussions and
decisions related to Novozymes' sustainability strategy,
targets and project portfolio. The SB reports directly to the
Executive Leadership Team, which evaluates and endorses
the sustainability targets and strategy input for the Board of
Directors' final approval.
An overview of trends identified and an assessment of their
materiality to Novozymes and its stakeholders are included
in the Supplementary section anid can be found at
www.novozymes.com.
Risk assessments
Novozymes frequently performs risk assessments in various
parts of the organization, often with external partners such
as insurance companies, to maintain an up-to-date,
balanced view of business-related risks. People &
Organization and Environmental Services also conduct
assessments of the company's social and environmental
impact at production sites. These are verified against third-
party risk surveys and recent trends in sustainability risk
assessment.
1403034EogSN57513
As part of these processes, we set targets to improve
performance within the assessed areas. If risks or
noncompliance are discovered, our.systems ensure that
further action is taken, as these shortfalls are included in
management reviews at different levels depending on
severity.
Long-term scenarios
The Executive Leadership Team uses long-term scenarios as
part of an annual evaluation of opportunities for and
barriers to future growth, conducted during the strategy
process. The scenarios are used to evaluate the impact of
major decisions and to assess the potential impact of major
risks. As the scenarios are used as input for strategic
decisions, the reports are supplemented with in-depth
descriptions, sensitivity analyses, risk descriptions and, for
expansion projects and major investment proposals, an
estimate of the net present value of the investment.
Part of this scenario work involves identifying potential
bottlenecks før future growth, such as the need to expand
production capacity and the availability-of resources such as
water, Some of the scenarios presented to the Executive
Leadership Team arise from risks and. opportunities :
identified by the enterprise risk management setup.
Enterprise risk management
setup
In addition to the activities mentioned above to identify
risks, Novozymes has a formal process to continually map,
assess and mitigate risks. All business units and vice
presidents systematically report new. risks and any changes
to previously defined risks. This process, which is headed by
the Vice President of Corporate Finance; ensures that top
management has a high level of risk awareriess, with
involvement and ownership throughout the organization.
Reported risks are collated and mapped on the basis of
probability and possible consequences. Risks are assessed
and classified on the basis of both financial and
reputational impact, and the reporting covers both financial
and nonfinancial risks.
The aim of risk management at Novozymes is to ensure
proactive management of key risks, so that efforts to reduce
both probability and unwanted consequences are = made
where possible.
GOVERNANCE
Risk management
"This systematic and analytical approach to risk
management provides Novozymes with a More
transparent overview of risks and a stronger basis for
making decisions.”
Every six months, risks are reported to Risk Management &
Controls. These are then assessed, and a shortlist of
approximately 30 risks judged to be the most significant is
reported to the Executive Leadership Team, and any
appropriate mitigation actions are decided and
implemented. Twice a year, around 10 of the most
significant financial and reputational risks are also
presented to, and discussed with, the Board of Directors.
This systematic and analytical approach to risk management
provides Novozymes with a more transparent overview of
risks and a stronger basis for making decisions about
investing, resources and the necessary actions in relation to
the risk profile.
Mitigation of risks
Once identified, Novozymes mitigates the risks in many
different ways and at many different levels. Some risks can
be mitigated through behavior and others through
processes and procedures, while some risks require specific
actions.
Behavior
At the top of Novozymes' management system, Touch the
World sets out the company's vision, company idea,
commitment and values. It outlines our philosophy and
guides us in how we operate and behave as a responsible
corporate citizen. By acting in accordance with these
principles, we encourage the right behavior and thereby
reduce the risk of misconduct. To ensure that the company
lives up to the values in Touch the World, an organizational
performance review is conducted annually to assess the
impact of each business unit's work to support and uphold
the principles in Touch the World. Our business integrity
principles are an example of how the desired behavior is
encouraged in the organization through mandatory
training. We also seek to implement these principles outside
our organization: For example, our suppliers and agents,
among others, are informed of the principles and
encouraged to adopt them. Systems to evaluate partners"
performance against our principles are also in place, such as
our long-term sustainability target of 100% supplier
adherence to our supplier program for commerciality,
quality and sustainability.
Qur business integrity principles can be found
at www.novozymes.com.
Procedures
Risks can also be related to internal procedures, such as
errors leading to the misstatement of information,
malfunctioning of products, etc. Novozymes strives to
minimize these procedural risks through the extensive use of
quality management systems and ISO certifications. These
systems include general policies and standards, as well as
detailed contro! and action requirements covering both
global procedures and specific requirements dependent on
location, business area and function.
To ensure compliance with the requirements of quality
management systems, a large number of internal quality
audits are performed. The results of these audits are
distributed to relevant management levels.
Specific actions
There will always be risks that cannot be avoided by the
usual means, but where mitigating actions should be
tailored and planned to åchieve the greatest possible
impact. These are usually risks that are either very special in
their nature or significant in their scope and impact.
Novozymes
Rethink Tomorrow
ER
1403034EogSN57514
KS
ACCOUNTS & DATA
Consolidated income statement
2013 2012
Note DKK million DKK million
Revenue 2.1, 2.2 11,746 11,234
Costofgoodssold Te ea eenree os 4,811
Gross profit 6,716 6,423
Sales and distribution costs 2,3, 4.1, 4.2 1,476 1,421
Research and development costs 2,3, 4.1, 4.2 1,528 1,527
Administrative costs 2,3, 4.1, 4.2, 6.5 824 808
Other operating Income ME sees meeemer BA eeuueececuesenenunsenernsne 13 oeecuceeeseren LER
Operating profit / EBIT 2,901 2,745
Financial income 5.1 82 22
Financial cost oo eseseeneueev even une meeen mr sneen Sa eeuececueueeneennennranee 224 euuuuueueeerne 183
Profit before tax 2,759 2,584
een ennen een renerne Me eeceneussunnunnnenenserred 58 eseneneesucenned 568
Net profit 2,201 2,016
Attributable to
Shareholders in Novozymes A/S 2,200 2,015
Non-controlling ES erne UDEN r
2,201 2,016
Proposed dividend per share DKK 2.50 DKK 2.20
Earnings per share 6.7 DKK 7.01 DKK 6.42
Earnings per share, diluted 6.7 DKK 6.93 DKK 6.33
67
ACCOUNTS & DATA
Consolidated statement of comprehensive income
2013 2012
Note .DKK million DKK million
Net profit 2,201 2,016
items that may be reclassified subsequently to the income statement:
Currency translation adjustments
Subsidiaries and non-controlling interests (370) (68)
Tax on currency translation adjustment reen 16 Bee (2)
Currency translation adjustments (354) (70)
Cash flow hedges
Fair value adjustments 113 (6)
Rectassification to Financial costs 8 51
Tax on value adjustments of hedging instruments essens eue cen eumeneunernnne em ED ne
Cash flow hedges 91 37
Other comprehensive Ineom eee rer 8) (33)
Comprehensive income for the YE rr 138 1,983
Attributable to
Shareholders in Novozymes A/S ” 1,937 . 1,982
Non-controlling NE rr eee an En ele r
1,938 1,983
1403034EogSN57515
08
ACCOUNTS & DATA
Consolidated balance sheet
Dec. 31, 2013 Dec. 31, 2012
Note DKK million DKK million
ASSETS
Intangible assets 2.1, 4.1 2,864 2,672
Property, plant and equipment 2.1, 4.2 7,135 7,084
Deferred tax assets 4.6 456 224
Other financial assets 5.2 14 -
Investment in associate 4.4 45 52
ere 3.3 162 191
Non-current assets 10,676 10,223
Inventories 3.1 1,902 1,808
Trade receivables 3.2 2,242 2,080
Tax receivables 4.6 151 138
Other receivables 3.3 301 284
Other financial assets 5.2, 5.3 87 45
Cash at bank and mhand 6.8 1,003 535
5,686 4,890
Assets held forske oo sseseeesenueeuser erne ennen AT eeceeuceceeeeeeeueeernee 144 i l
Current assets 5,830 4,890
BEES ST 16506 — 0, 15,113
LIABILITIES AND SHAREHOLDERS" EQUITY
Common stock 6.6 639 650
Other reserves 169 432
Betzer emmer Or 8473
Equity attributable to shareholders in Novozymes A/S 11,054 9,555
Non-controlling interesse reen ere renerne LÆRER 13
Shareholders' equity 11,066 9,568
Deferred tax liabilities 4.6 956 741
Provisions 4.3 151 140
Other finne ae. senere SL seu LES RDNENDNEENNNEE 1,749
Non-current liabilities 2,841 2,630
Provisions 4.3 128 90
Other financial liabilities 5,2, 5.3 105 286
Trade payables 976 1,044
Tax payables 4.6 356 371
there ER EU OS 1,124
Current liabilities 2,599 2,915
aen TT rer 5440 0 5,545
Liabilities and shareholders' eguity 16,506 15,113
69
ACCOUNTS & DATA
Consolidated statement of shareholders' equity
Attributable to shareholders in the company
Currency Non-
Common translation Cash flow Retained controlling
stock adjustments hedges earnings Total interests Total equity
DKK million DKK million DKK million DKK million DKK million DKK million DKK million
Shareholders' equity at January 1, 2013 650 428 4 8,473 9,555 13 9,568
Net profit for the year 2,200 2,200 1 2,201
Other comprehensive income faren 4 DD eeeeeucucuuncnene (263) (263)
Total comprehensive income far the year - (354) gi 2,200 1,937 1 1,938
Sale of treasury stock 167 167 167
Write-down of common stock (11) 11 - s
Dividend (690) (690) (2) (692)
Stock-based payment 55 55 55
Tax related to equity its een ennen ener een 30 30 sene 30
Changes in shareholders' equity (11) (354) 91 1,773 1,499 (1) 1,498
Shareholders' equity at December 31, 2013 00 639] Aa gg" 10,246 1 1054 1 20 11,066
Sharehotders' equity at January 1, 2012 650 498 (33) 7,694 8,809 15, 8,824
Net profit for the year 2,015 2,015 1 2,016
Other comprehensive income forhen … JY ST een neuen una nar nn 23)
Total comprehensive income for the year - (70) 37 2,015 1,982 Un 1,983
Purchase of treasury stock (832) (832) (832)
Sale of treasury stock 156 156 156
Dividend (600) (600) (3) (603)
Stock-based payment 69 69 69
Tax related to equity en ennen erennnnn rn grrr ener renen sn renee ED RD ennen PI)
Changes in shareholders' equity - (70) 37 779 746 (2) 744
Shareholders' equity at December 31, 20120 65000 48 HG 8473 | Ø555 130" 9,568
The proposed dividend of DKK 786 million for 2013 is
included in Retained earnings.
Reference is made to Note 6.6 concerning treasury stock
and average number of shares.
1403034EogSN57516
ACCOUNTS & DATA
Consolidated statement of cash flows
2013 2012
Note DKK million DKK million
Net profit 2,201 2,016
Reversal of non-cash items 6.8 1,565 1,337
Income tax paid (599) (393)
Interest received 3 15
Interest pad seerne ener me reen rerr rer (63) (77
Cash flow before change in working capital 3,107 2,898
Change in working capital
increase in receivables (277) (265)
Increase in inventories (82) (85)
Increase/(decrease) in trade payables and other payables (134) 211
Currency translation adjustm er i eeeceeenen en enenennn enn enenne SE EREDEENEENEE mn
Cash flow from operating activities 2,599 2,758
Investments
Purchase of intangible assets 4.1 (24) (54)
Sale of property, plant and equipment 3 5
Purchase of property, plant and equipment 4.2 (762) (1,122)
Capitalized interest costs re purchase of property, plant and equipment 4.2 - (6)
Business acquisitions and purchase of financiatases oo 68 nunne Ga) (732)
Cash flow from investing activities (1,423) (1,909)
eePerr YTRER ae egg
Financing
Borrowings 263 797
Repayments of borrowings (270) (683)
Purchase of treasury stock - (832)
Sale of treasury stock 167 156
Dividend sa ene uenneeeneernn renen nerne ener rens ranen ennen nrnnee Go) el (603)
Cash flow from financing activities (532) (1,165)
NE ES ER TTT ME (316)
Unrealized gain/(loss) on currencies and financial assets included in cash and
cash equivalents er] eee 22
Net change in cash and cash equivalents 612 (294)
Cash and cash eguivalents alanere urnn ennen ee nerne nerne erne 330 uuuuuueeesl 624
Cash and cash equivalents at December 31 6.8 942 330
Undrawn committed credit facilities were DKK 4,119 million at December 31, 2013 (2012: DKK 3,000 million). DKK 3,000 million expires in 2017 and the rest
in 2014.
71
ACCOQUNIS & DATA
Environmental and social data
Note 2013 . 2012
ENVIRONMENTAL PERFORMANCE
Resource utilizatjon
Consumption of resoures oo. une nnann een TE seem emnerne
Water . 1,000 må 6,807 6,446
Energy 1,000 GJ 4,174 4,078
Raw materials 1,000 tons 492 445
Packaging 1,000 tons 18 17
Efficiency improvement compared with 2005 0 TE en uuuummmmmnemenenenneemnn erne ennen ren rannnnnne
Water % 33 32
Energy % 40 38
CO, % 54 55
Waste SELEN
Volume 1,000 må 4,653 4376
BOM seernes reens ennen senere renser TE seen ennen ensdee
Biomass volume 1,000 m? 546 553
Ud SEE 7 5 Eee
Waste Tons 11,670 11,912
Percentage of total waste recycled % 38.6 33.6
Environmental impact af Emi EES T eeeeeeeemrenrhe menes
Global warming … 1,000 tons CO, egv. 406 "381
Ozone layer depletion ' Kg CFC, 4-egv. 26 48
Environmental compliance, eter see Pr REE
Breaches of regulatory limits No, "36 ” 15
Significant spills No. - KE
Neighbor complaints ” No. 11 11
Animals for testing sense ueeuedereenemrnene eee needs
Animals for testing No. 2,665 "1,240
Climate change impact
Impact of application of Novozymes' products 0 emne
Estimated CO» reductions from customers' application of Novozymes" Million tons
products in their products or processes" 52 48
1403034EogSN57517
2
ACCOUNTS & DATA
Environmental and social data
Note 2013 2012
SOCIAL PERFORMANCE
Workplace development
Employee sas 2,3, 8.1
Employees, total No. 6,236 6,041
Women % 36.4 35,4
Men % 63.6 64,6
Rate of employee turnover % 75 8.1
Average age Years 40.5 40.5
Average seniority Years 9.1 9.0
Rate of absence % 1,8 1.9
Expatriates No. 75 84
Percentage of new leaders who are women % 26 37
Percentage of new leaders of a nationality other than Danish % 44 51
ag Er se nerne
Average spent per employee DKK 5,004 6,002
Costs as percentage of total employee costs % 1.0 1.2
Health and safety EEEEEEEEEEEEEEEEEEEEEEEEEEEE BE
Fatalities No. - 1
Occupational accidents with absence No. 24 29
Of which life-threatening accidents No. - 1
Occupational diseases No. 8 7
Frequency of occupational accidents Per million working hours 2.4 3.0
Frequency of occupational diseases Per million working hours 0.8 0.7
Sacio-economic impact
Processes and techno seen BB uens enedes
New products No. 11 6
Active patent families No. 1,242 1,165
Training and compliance senere Br seen nen renerne
Supplier performance management % 97 93
Completion of business integrity training for employees % 79 79
Fraud cases No. 2 13
Corporate citizens Br ner EL ELE,
Regional flagship projects No. 9 13
Learners reached No. 36,320 26,035
73
ACCOUNTS & DATA
Notes
Note list
Basis of reporting
1
Reading guide
Basis of reporting
Primary operations
2.1
2.2
2.3
24
Segments
Revenue
Employees
Other operating income, net
Working capital
3.1
3.2
3.3
3,4
Inventories
Trade receivables
Other receivables
Other liabilities
Other assets and liabilities
4,1
4.2
4.3
4.4
4.5
4.6
4.7
Intangible assets and impåirment test of goodwill
Property, plant and equipment
Provisions
Joint operations and associates
Business acquisitions '
Tax
Assets held for sale
Financial activities
5.1
5,2
5,3
5,4
Financial income and Financial costs
Other financial assets and liabilities
Derivatives - hedge accounting
Financial risk factors
1403034EogsSN57518.
Other notes
6.1
6.2
6,3
6.4
6,5
6.6
6.7
6.8
6,9
Management remuneration
Stock-based payment
Commitments ånd contingencies
Related party transactions
Fees to statutory auditor
Common stock
Earnings per share
Cash flow
Group companies
Environmental data
7,1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
Consumption of resources .
Efficiency improvement compared with 2005
Wastewater volume by treatment method
Biomass volume by product
Waste volume by type and disposal method
COz--equivalent emissions by scope and source
Emissions of ozone layer-depleting substances
Environmental compliance, etc.
Animals for testing
7,10 Climate change impact
Social data
8,1. Development of the workforce
8.2. Occupational accidents and occupåtional diseases
8.3 Processes and technology
8.4. Training and compliance
8.5. Corporate citizenship
ACCCUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
Reading guide
The financial statements have been presented in a manner that attempts to
make them less complex and more relevant to stakeholders.
The notes have been structured to provide enhanced understanding of each
accounting area, by describing relevant accounting policies and sources of
estimation uncertainty in the notes to which they relate. Accounting policies
applied to the consolidated financial statements as a whole are described
below.
Novozymes focuses on describing the accounting choices that have been
made within the framework of the prevailing IFRS policy and has elected not
to repeat the actual text of the standard, unless Novozymes considers it
7 Basis of reporting
The consolidated financial statements of the Novozymes Group have been
prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU and additional Danish requirements for the
presentation of financial statements. Novozymes has prepared its
consolidated financial statements in accordance with all the IFRS standards in
force at December 31, 2013. The fiscal year for the Group is January 1 —
December 31. The consolidated financial statements have been prepared on
a going concern basis and under the historical cost convention, with the
exception of derivatives, which are measured at fair value. The accounting
policies are unchanged from fast year.
The consolidated environmental and social statements are prepared in
accordance with principles that adhere to the following internationally
recognized voluntary reporting standards and principles:
+ AA1000 framework for accountability. The framework states that
reporting must provide a complete, accurate, relevant and balanced
picture of the organization's approach to and impact on society
e UN Global Compact. Novozymes is a signatory to the UN Global Compact,
a strategic policy initiative for businesses that are committed 1o aligning
their operations and strategies with 10 universally accepted principles in
the areas of human rights, labor, environment and anticorruption
« Global Reporting Initiative's (GRI) Sustainability Reporting Guidelines. The
Guidelines (G3) include an internationally recognized set of indicators for
economic, environmental and social aspects of business performance that
enables stakeholders to compare companies" performance
The accounting policies are unchanged from last year.
Novozymes" reporting according to GRI and UN Global Compact
(Communication on Progress), including the required disclosures, can be
found under Supplementary.
Impact of new accounting standards
In 2013, the following standards and amendments with relevance for
Novozymes were brought into effect and implemented:
. Annual Improvements to lFRSs (2009-2011)
. Amendments to IAS 1 Presentation of items of Other Comprehensive
Income
Amendments to lAS 19 Employee Benefits
Amendments to IFRS 7 Disclosures — Offsetting Financial Assets and
Financial Liabilities
« Amendments to IFRS 10, IFRS 11 and JFRS 12 Consolidated Financial
Statements, Joint Arrangements and Disclosure of Interests in Other
Entities: Transition Guidance
s |FØS 13 Fair Value Measurement
« IFRS 10 Consolidated Financial Statements
particularly important to the understanding of the note content. The
descriptions of accounting policies in the notes form part of the overall
description of accounting policies.
Environmental and social data are an integrated part of The Novozymes
Report and are covered by the statutory audit performed by the auditor
elected by the Annual Shareholders' Meeting. The notes for these data are
structured in the same way as described for the financial notes.
The following symbols HE, 553 and show which amounts in the
notes can be found in the income statement, balance sheet or environmental
and social data respectively.
IERS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
Amendments to JAS 27 Separate Financial Statements
Amendmenits to IAS 28 Investments in Associates and Joint Ventures
Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial
Assets
None of these have had a significant impact on recognition and
measurement, but they have led to further specifications in the Notes and in
the Consolidated statement of comprehensive income.
New standards and interpretations not yet adopted
The !ASB has issued a number of new or amended standards and
interpretations with effective date after December 31, 2013. None of these
are expected to have a significant impact on recognition and measurement,
but they will lead to further specifications in the Notes.
Defining materiality
Novozymes" annual report is based on the concept of materiality, to ensure
that the content is material and relevant to the user. This objective is pursued
by providing relevant rather than generic descriptions.
The consolidated financial statements consist of a large number of
transactions. These transactions are aggregated into classes according to
their nature or function and presented in classes of similar items in the
financial statements and in the notes as required by IFRS. ff items are
individually immaterial, they are aggregated with other items of similar
nature in the statements or in the notes. The disclosure requirements
throughout iFØS are substantial and Novozymes provides these specific
disclosures required by IFRS unless the information is considered immaterial
to the economic decision-making of the users of these financial statements
or not applicable.
The consolidated environmental and social statements include data
parameters that, based on an assessment of materiality for Novozymes and
for our stakeholders, are deemed the most relevant parameters. The
materiality assessment can be found in the Supplementary Reporting.
The environmentat data cover those activities that, based on an overall
annual assessment, could have a significant impact on the environment. Sites
with activities considered not to have a significant environmental impact are
not included, Such sites comprise sales offices, R&D labs and sites with
limited blending and storage of products. However, measures are taken to
ensure that at least 97% of the total Novozymes quantity of the measured
environmental parameter is included in the reported numbers.
75
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
1 Basis of reporting
BE Accounting policies
The descriptions of accounting policies in the notes form part of the overall
description of accounting policies. Description of financial accounting
policies are included in the following notes:
Révenue Note 2.2
Other operating income, net Note 2.4
Inventories Note 3,1
Trade receivables Note 3.2
Other receivables Note 3.3
Other liabilities Note 3.4
Intangible assets and impairment test of goodwill Note 4.1
Property, plant and equipment " Note 4.2
Provisions Note 4.3
Joint operations and associates Note 4.4
Business acquisitions Note 4,5
Tax Note 4.6
Assets held for sale Note 4.7
Financial income and costs Note 5,1
Other financial assets and liabilities - Note 5.2
Derivatives - hedge accounting Note 5.3
Stock-based payment Note 6.2
Common stock Note 6.6
Earnings per share Note 6.7
Cash flow Note 6,8
Consolidation
The consolidated financial statements comprise the financial statements of
Novozymes A/S (the parent company) and subsidiaries controlled by
Novozymes A/S, prepared in accordance with Group accounting policies. The
consolidated financial statements are prepared by combining items of a
uniform nature and subsequently eliminating intercompany transactions,
internal stockholdings and balances, and unrealized intercompany profits
and losses.
Environmental and social data are similarly based-on data for the parent
company and for all subsidiaries by combining items of a uniform nature
compiled using the same accounting principles. Recognition of newly
acquired or divested sites and subsidiaries follows the same principles as for
the financial reporting. . '
Resource consumption from construction work in'relation to new production
plants is not included, unless the resource consumption (water and energy) is
registered by meters that measure-resource consumption at Novozymes'
premises. Resource consumption from production trials at new facilities is
included. ”
Translation of foreign currencies
The consolidated financial statements are presented in Danish kroner (DKK).
Foreign currency transactions are translated into the functional currency
defined for each company using the exchange rates prevailing at the
transaction date. Monetary items denominated in foreign currencies are
translated into the functional currency at the exchange rates prevailing at the
balance sheet date.
Financial statements of foreign subsidiaries are translated into Danish kroner
at the exchange rates prevailing at the balance sheet date'for assets and
liabilities, and at average exchange.rates for income statement items.
1403034EogSN57519
All exchange rate differences are recognized as Financial income or Financial
costs, with the exception of the following, which are recognized in Other
comprehensive income, translated at the exchange rates prevailing at the
balance sheet date: '
+ Translation of foreign subsidiaries' net assets at the beginning of the year
» Translation of foreign subsidiaries' income statemients from average
exchange rates to the exchange rates prevailing at the balance sheet date
+ Translation of long-term intercompany balances, which are considered to
be an addition to net assets in subsidiaries
Goodwill arising on the acquisition of new companies is treated as an asset
belonging to the new foreign subsidiaries and translated into Danish kroner
at the exchange rates prevailing at the balance sheet date.
Unrealized gains/losses relating to hedging, of future cash flows, and fair
value adjustments of financial liabilities that qualify for hedging of net assets
in foreign subsidiaries, are recognized in Other comprehensive income,
Critical accounting estimates and judgmentis
The preparation of the consolidated financial statements in conformity with
IFRS requires Management to make estimates and assumptions that affect
the application of policies and reported amounts of assets, liabilities,
income, expenses and related disclosures. The estimates and underlying
assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results of which
form the basis for making the assessment of carrying amounts of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Changes in accounting estimates may be necessary if there are
changes in the circumstances on which the estimate was based, or as a result
of new information or møre experience, Such changes are recognized in the
period in which the estimate is revised.
Key assumptions about the future and key sources of accounting estimates |
where there is a significant risk of a material adjustment being made to the
carrying amounts of assets and.liabilities within the next 12 months are
described in the notes to which théy relate. The table below shows which
notes contain descriptions of accounting estimates.
Classification of other income Note 2.4
Cost of work in progress and finished goods. Note 3.1
Allowance for doubtful trade receivables ' Note 3,2
Useful life of intangible assets - Note 4,1
Impairment Note 4.2
Provisions Note 4,3
Business acquisitions Note 4.5
Taxation Note 4,6
CO savings Note 7.10
The application of the Group's accounting policies may require Management
to make judgments, which can have a significant effect on the amounts
recognized in the consolidated financial statements.-Management judgment
is required in particular when assessing the substance of transactions that
have a complicated structure or legal form. This'indludes, but is not limited -
to, the following area:
Note 4,4
Investment in Beta Renewables S.p.A.
76
ACCOUNIS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOJE
2.1
New organization — no segments
As of April 1, 2013, the new Executive Leadership Team in Novozymes has
introduced a new functional organization structure to ensure that the
Novozymes Group utilizes the Graup's global potential even further. As a
consequence of the new organization, a new internal financial reporting
framework has been implemented. The reporting framework has changed
the reporting on revenue and expenses to the Executive Leadership Team and
Board of Directors, in order to reflect the global functional responsibility
setup in Novozymes.
Segments
The operating segments previously used have been consolidated in the new
organization and separate reporting abandoned. As a result, segment
reporting is no longer used.
The sates information for 2012 has been restated to reflect the new
reporting framework, while the segment information provided in 2012 is not
included as it is no longer relevant.
2013 2012
DKK million DKK million
Denmark 144 106
Rest of Europe, Middle East & Africa 4,235 4,032
North America 3,863 3,716
Asia Pacific 2,234 2,200
Latin America . . . . 1,270 . … 1,180
EEN TT 11746 > 11,234
Denmark 4,767 4,646
Rest of Europe, Middle East & Africa 76 81
North America 2,904 2,685
Asla Pacific 1,903 1,953
Latin America Eee Sd 3 49 el 3: 91 i
Intangible assets and Property, plant and equipment 9,999 9,756
Denmark 342 378
Rest of Europe, Middle East & Africa 19 20
North America 224 576
Asia Pacific 149 173
aA nn 2 uusucecceeuneee 35
Capital expenditure 786 1,182
The Group operates in four geographical regions: Europe/MEA, North
America, Asia Pacific and Latin America.
The geographical distribution of revenue is based on the country in which
the customer is domiciled. With a number of strategic customers, central
deliveries are made to specified locations, and the final recipient is unknown.
The stated geographical distribution of revenue may therefore vary
significantly from year to year if the delivery destination for these strategic
customers changes.
71
ACCOUNTS & DATA
Notes
Basis of reporting Primarv operations Working capital Other assets and ljabilities Financial activities Other notes Environmental data Social data
NOTE
7 2 Revenue
2013 . 2012
DKK million DKK million
Household Care 4,222 . . 3,973
Food & Beverages 3,190 3,186
Bioenergy 1,909 . 1,748
Agriculture & Feed 1,668 1,617
Technical 8 Ra essensen enn une na nn menuen nn ener unee 757 710
Reed OSL Éå El maa 11,234
Sales to the five largest customers'as a percentage of revenue 29% ' 28%
Revenue consists of sales of goods and related services less goods returned
and volume and cash discounts.
ی Accounting policies
Revenue includes sales of goods and related services, commission income Sales are recognized using information on the other contracting party's
and royalties less goods returned and volume and cash discounts. Sales are realized sales, and a receivable/liability is recognized for the distribution of
recognized at the time of risk transfer relating to the gåods sold, provided the profit, which is calculated and settled with finateffect once a year. '
that the revenue can be measured on a reliable basis and is expected to be
received. A liability is recognized when it is permitted for goods to be
returned and this is likely. '
The Group has entered into commission agreements where agents
undertake sales to third parties in return for commission on realized sales.
The Group has entered into few agreements where the other contracting
party undertakes sales to third parties and the profit is distributed between
the Group and the other contracting party on the basis of a predetermined
formula.
NOTE
72 3. Employees
2013 2012
DKK million DKK million
Wages and salaries 2,546 . 2,400
Pensions 237 226
Other social security costs 208 183
Other employee costs 124 137
Stock-based payment . eee EE SENE 99
Eno Es 3770 3,045
Recognized in the income statement under the following items: |
Cost of goods sold 1,151 1,093
Sales and distribution costs 732 690
Research and development costs 808 798
Administrative OSS DER ME 455
TTT eee 3,173 ” 3,036
Recognized in assets as:
Change in employee costs recognized in inventories er rer 83 nere ser Ree 9
Employee oe 3,170 3,045"
1403034EogSN57520.
18
ACCOUNIS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
2.3 Employees
2013 2012
No. DKK million No. DKK million
Geographical distribution:
Denmark 2,628 1,746 2,580 1,710
Rest of Europe, Middle East & Africa 270 186 279 194
North America 1,226 750 1,120 678
Asta Pacific 1,718 345 1,710 333
anal] 394 . 143 352 130
Employes 0 ( 6236 0 3,770 6041 3,045
Average number of employees in the Group 6,162 5,950
Average number of employees that work with R&D 1,387 1,371
Number of employees outside Denmark as a percentage
of total number of employees 58% 57%
2013 2012
No No
Women 2,270 2,140
ME innen ennen renerne sneen 3,966 … 3,901
Es RR] 236 6,041
Full-time employees 5,896 5,689
amme es Fr 352
ERE TR 6,236 6,041
Senior management 194 168
Management 1,004 950
Professional 1,877 1,824
Administrative 588 572
Skilled workers, laboratory technicians and other technicians 1,408 1,137
eee e 1,390
ERE es rå 6,236 6,041
Percentage of women by job category % %
Senior management 22.2 17.9
Management 28.8 29.7
As there is a particular focus on the percentage of women at management
level, the percentage of women is only reported for Senior management and
Management, and not for other job categories.
(ER Accouming policies Job categories are defined as follows:
The number of employees is derived from contractual obligations but does Senior management comprises the CEO, executive vice presidents, vice
not include employees on unpaid leave, temporary replacements, student presidents and directors. Management comprises middle managers and
interns, agency employees, consultants or PhD students. In calculating the specialists. Professional comprises employees with academic backgrounds as
number of full-time employees, employees with a working-time ratio of 953% well as team leaders. Administrative comprises administrative personnel.
or over are stated as full-time employees. Process operators comprises operators and unskilled workers.
The average number of employees is calculated as the average of the number
of permanent employees at the end of each quarter.
79
ACCOUNIS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
2 å. Other operating income, net
2013 2012.
. . DKK million DKK million
Income and grants concerning research projects/collaborations 3 34
Gain on sale of activities -. 17
Other send inde 10 En 27
"Other operating Income, Me LERNER 78
GE) Accounting policies
Other operating income comprises income that is not product-related. This
includes income from research and collaboration agreements, government
grants, and sale of licenses, patents, etc. and other income of a secondary
nature in relation to the main activities in the Group. This item also includes
non-recurring income items in respect of damages, outlicensing, etc.
1403034EogSN57521
> Critical accounting estimates and judgments |
The Group is party to various outlicensing and research and collaboration
agreements, which can involve upfront and milestone payments that may
occur over several years and may also. involve certain future obligations.
Income is recognized only when, in Management's judgment, the significant
risks and rewards of ownership have been transferred and when the Group
does not retain managerial involvement in or effective control over the assets
sold or when the obligation-has been fulfilled. These assessments are
essential før timing of income recognition and for classification of income as
Revenue or Other operating income according to the revenue definitions,
80
ACCGUNIS 8 DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilites Financial actwities Other notes Environmenta! data Social data
NOTE
3 1 Inventories
2013 2012
DKK million DKK million
Raw materials and consumables 276 273
Work in progress 467 399
Finished goods 1,159 1,136
inventories at December 31
Cost of materials, included under Cost of goods sold, is DKK 2,873 million
(2012: DKK 2,733 million).
Inventory write-downs expensed during 2013 amount to DKK 86 million
(2012: DKK 68 million), while reversal of inventory write-downs amounts to
DKK 58 million (2012: DKK 49 million).
ER Accounting pøhaes
Inventories are measured at cost determined on a first-in first-out basis or
net realizable value where this is lower.
The cost of Work in progress and Finished goods comprises direct
production costs such as raw materials and consumables, energy and labor
directly attributable to production as well as indirect production costs such
as employee costs, maintenance and depreciation of plant, etc.
If the expected sales price less any completion costs and costs to execute
sales (net realizable value) of inventories is lower than the carrying amount,
the inventories are written down to net realizable value.
NOTE
3 | 7 Trade receivables
Some of the reversal of write-downs can be attributed to written-down
inventories being reused in production.
<5> Critical accounting estimetes and judgments
Work in progress and Finished goods are measured at cost including indirect
production costs. The indirect production costs capitalized under Inventories
amount to DKK 640 million at the end of 2013 (2012: DKK 581 million). The
costs are assessed on an ongoing basis to ensure optimal measurement of
raw material consumption, payroll costs, capacity utilization, cost drivers and
other relevant factors. Changes in these parameters may have an impact on
the gross margin and the overall valuation of work in progress and finished
goods.
2013 2012
DKK million DKK million
Trade receivables 2,338 2,181
Allowances for doubtful trade receivables (152) (153)
Trade receivables at December 31 2,242 2,080
2013 2012
DKK million DKK million
Changes in allowances for doubtful trade receivables:
At January 1 153 164
Allowances during the year 59 61
Write-offs during the year (4) (8)
Reversed alla serne aner 63)
Allowances at December 31 152 153
The cost of allowances for doubtful trade receivables is included in Sales and distribution costs.
81
ACCOUNTS & DATA
Notes
Basis of reporting. Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
32
Trade receivables
2013 2012
DKK million DKK million
Allocation of overdue net receivables (not written off) by maturity period is as follows:
Up to 30 days 191 238
Between 30 days and 90 days 48 41
Between 91 days and 365 da 2 -
Overdue net receivables at Deer Og
ER) Accounting poticies
Trade receivables are measured at amortized cost or net realizable value
equivalent to nominal value less allowances for doubtful receivables,
whichever is lower.
NOTE
33
Other receivables
&> Critical accounting estimates and judgments
Allowances for doubtful trade receivables are based on a country-specific
credit rating by external rating agencies. However, the allowances also reflect
Management's assessment and review of the individual receivables based on
individual customer creditworthiness, overdues and current economic trends.
lf customers' financial situations Change in the future, this may give rise to
additional indications of impairment in future accounting periods.
2013
2012
DKK million. DKK million
Deposits 17 18
Prepaid expenses 223 246
Loans 72 63
PE ET ed EEE 151 eN 48
Other receivables at December 3 re 463 475
Non-current 162 191
Current 301 284
(1) Accounting policies
Prepaid expenses comprise expenses paid relating to subsequent financial
years such as sales commission, rent, insurance premiums, subscription fees
and interest.
NOTE
3.4
Other liabilities
Prepaid expenses plus Loans and receivables are measured at amortized cost
or net realizable value, whichever is lower.
2013 2012
DKK million DKK million
Employee costs payable 593 558
Deferred income 77 87
Stock-based payment settled in cash 29 27
' 335 452
Other payables
Other liabilitijes at December 31
( Accounting policies
Deferred income comprises påyments received relating to income in
subsequent years, such as revenue and interest,
Other payables and Deferred income are measuréd at amortized cost.
1403034EogSN57522
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and habilties Financial activities Other notes Environmental data Social data
NOTE
A. 1 Intangible assets and impairment test of goodwill
Acquired
patents, IT
Completed IT trademarks, development
development licenses and projects in
projects know-how Goodwil! progress Total
DKK million DKK million DKK million DKK million DKK million
Cost at January 1, 2013 225 2,492 811 62 3,590
Currency translation adjustments - (49) (93) - (142)
Additions from business acquisitions - 282 344 - 626
Additions during the year 4 18 - 2 24
Disposals during the year - (11) - - (11)
Transfer to assets held for sale - (133) (40) - (173)
Transfer to/from) other isse esesnnrrenernne 20 i Te ME) Nee
Cost at December 31, 20 eee 210 2,599 2 20 3,914
Amortization and impairment losses at January 1, 2013 185 733 - 918
Currency translation adjustments - (12) - (12)
Amortization for the year 20 168 - 188
Disposals for the year - (11) - (11)
Transfer to assets held for sale h - (33) - (33)
Carrying amount at December 31, 2013 86 1,754 1,022 2 2,864
Cost at January 1, 2012 270 1,896 835 45 3,046
Currency translation adjustments - (15) (31) - (46)
Additions from business acquisitions - 600 7 - 607
Additions during the year 21 11 - 22 54
Disposals during the year (71) - - " (71)
Transfer tollfrom) ther SS 8 TT
Cost at December 31, 201 225. 2,492 811 62 3,590
Amortization and impairment losses at January 1, 2012 247 578 - 825
Currency translation adjustments - (2) - (2)
Amortization for the year 9 157 - 166
Disposals for the year . rr 74)
Amortization and impairment losses at December 31, 2012 485 733 . 918
Carrying amount at December 31, 2012
83
ACCOUNTS.-& DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data. Social data
NE
4,1
Amortization and impairment losses -
Intangible assets and impairment test of goodwill
2013 2012
DKK million DKK million
Recognized in the income statement under the following items:
Cost of goods sold ” 87 79
Sales and distribution costs 23 16
Research and development costs 76 69
Administrative ost seeren 2 2
Tern EST
Amortization and impairment losses, intangible assets
Impairment
No impairment losses on intangible assets have been recognized in 2013
(2012: no impairment losses recognized).
Management only monitors goodwill for the Novozymes Group as a whole,
which means that the impairment test of goodwill is performed for the
Novozymes Group as a whole.
The fair market value of Novozymes is significantly greater than equity and,
with reference to our materiality concept, no further key assumptions are
used in determining whether impairment of goodwill exists.
GE Accounting polides |.
Intangibte assets other than goodwill.are measured at cost less accumulated
amortization and impairment losses. Goodwill is not subject to amortization.
Costs associated with large IT projects for the development of software for
internal use are capitalized if they are incurred with a view to developing new
and improved systems.
Amortization is based on the straight-line method over the expected useful
lives of the finite-lived assets, as follows: '
. Completed IT development projects are åmortized over the useful life. IT
development assets are amortized over 3-5 years '
+ Acauired patents, trademarks, licenses and know-how are amortized over
their useful lives. Patents and trademarks åre amortized over their useful
lives, normally identical to the patent period, and licenses are amortized
over the agreement period. Recognized patents, trademarks, licenses and
know-how are amortized over 7-15 years
Some assets are amortized over a shørter period or by using the unit of
production method.
1403034EogSN57523
Development costs pertaining to development af new products where the
development costs meet the criteria for recognition in the balance sheet are
capitalized within intangible assets. Research and development costs
pertaining to ongoing optimization of production processes for existing
products, or to development of new products, where lack of approval by the
authorities, acceptance by customers and other uncertainties mean the
development costs do not fulfill the criteria-for, recognition in the balance
sheet, are expensed as incurred. ”
Goodwill is tested for impairment annually or whenever. there is an
indication that the asset may be impaired.
<85 Critical accounting estimates and judgments
The estimated useful life reflects the period over which the Group expects to
derive economic benefits from intangible assets. The most significant |
intangible assets are patents, trademarks, licenses and know-how, which are
amortized over 7-15 years. The economic lives are reviewed on an annual
basis, taking into consideration future events that may impact on them, such
as changes in scope of patents and in technology. Given the current market
situation, there is no significant uncertainty about the.carrying amount of
patents, trademarks, licenses and know-how at the end of 2013.
84
ACCOUNIS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and frabikties Financial activities Other notes Environmental data Social data
NOTE
AÅ, 2 Property, plant and equipment
Assets
under con-
Land and Plant and Other struction and
buildings machinery equipment prepayments Total
DKK million DKK million DKK million DKK million DKK million
Cost at January 1, 2013 4,492 7,456 1,218 677 13,843
Currency translation adjustments (107) (140) (29) (21) (297)
Additions from business acquisitions - 35 6 - 41
Additions during the year 17 164 81 500 762
Disposals during the year - (38) (30) - (68)
Transfer to assets held for sale - - (5) - (5)
Transfer toro ahr see eeeeenem erne mnernenne 67 257 BR 608) en
Cost at December 317 20 4,469 " 7834 1,323 850 14,276
Depreciation and impairment losses at January 1, 2013 1,873 4,143 743 6,759
Currency translation adjustments (38) (59) (20) (117)
Depreciation for the year 154 298 98 550
Disposals during the year - (26) (24) (50)
Transfer to assets held for sale
Carrying amount at December 31, 2013
Cost at January 1, 2012 4,011 6,279 1,103 1,499 12,892
Currency translation adjustments (33) (31) (11) (20) (95)
Additions from business acquisitions - 2 - - 2
Additions during the year 51 472 89 516 1,128
Disposals during the year (38) (6) (40) - (84)
Transfer t0/(from) other ens 501 000] We 741318) 2
Cost at December 31,202 442 7,456 1,218 677 13,843
Depreciation and impairment losses at January 1, 2012 1,764 3,876 695 6,335
Currency translation adjustments (16) (19) (8) (43)
Depreciation for the year 155 290 92 537
Disposals during the year
Carrying amount at December 31, 2012 i 2,619 3,313 475 677 7,084
Interest of DKK 0 million (2012: DKK 6 million) is capitalized under purchases Land and buildings with a carrying amount of DKK 306 million (2012: DKK
of property, plant and equipment above and under investing activities in the 317 million) are pledged as security to credit institutions. The mortgage loan
statement of cash flows. expires in 2029.
Depreciation and impairment losses
2013 2012
DKK million DKK million
Recognized in the income statement under the following items:
Cost of goods sold 433 414
Sales and distribution costs 21 24
Research and development costs 73 79
Administrative costs 23 20
Depreciation and impairment losses, property, plant and equipment 550 537
85
ACCOUNTS & DATA.
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
Å 7 Property, plant and equipment
Impairment
No impairment losses on property, plant and equipment have been
recognized in 2013 (2012: no impairment losses recoqnized).
GE Accounting policies If the recoverable amount of an asset is estimated to be less than its carrying
Property, plant and equipment is measured at cost less accumulated amount, the carrying amount is reduced to the recoverable amount.
depreciation and impairment losses. Borrowing costs in respect of . .
construction of major assets are capitalized. Impairment losses are reversed only to the extent of changes in the
assumptions and estimates underlying the impairment calculation.
Depreciation is based on the straight-line method over the expected useful '
lives of the assets, as follows: <2> Critical accounting estimates and judgments -
If there is any indication that an asset maybe impaired, the value in use of
the asset is estimated and compared with the current value. The value in use
calculation is based on the discounted cash flow method using estimates of
future cash flows from the continuing use of the asset. The key parameters
The assets' residual value and useful life are reviewed on an annual basis, are expected utilization of the asset, expected growth in sales of products
and adjusted if necessary at each balance sheet date. produced by the asset, expected growth in cash flow in the terminal period
' etc. All these parameters are based on estimates of the future and may give
rise to changes in future accounting periods. ”
+ Buildings: 12-50 years
+ Plant: 5-25 years
« Other equipment: 3-18 years
The Group regularly reviews the carrying amounts of its property, plant and
equipment and finite-lived intangible asséts to determine whether there is
any indication that those assets have suffered an impairment loss. if any such
indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss, if any.
NOTE
Å. 3 Provisions
2013 2012
Legal, Legal,
Dismantling contingent Dismantling contingent
and consideration and consideration
restoration and other Total restoration and other Total
. DKK million DKK million DKK million DKK million DKK million . DKK million
Provisions at January 1 114 116 230 113 137 250
Currency translation adjustments ” (3) - (3) - (3) ”— 43)
Additions during the year ' 1 97 98 1 29 30
Reversals during the year - (19) (19) - —— (31) (31).
Utilization during they eneeueeeenen mr RET ens nerne TE (18)
Provisions at December 31, 2013 2 167 279 114 116. 230
Non-current 107 44 151 103 37 140
Current 5 123 128 11 79 90
1403034EogSN57524
86
ACCOUNTS 8 DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilrtes Financial activities Other notes Environmental data Social data
NOTE
4.3
Dismantling and restoration
Dismantling and restoration relates to estimated future costs of
environmental restoration — Novozymes aims for production sites not to have
a negative environmental impact — and restoration of leased premises when
terminating the lease and vacating the premises. These liabilities relate to
established circumstances, and these costs are expected to be incurred either
when concrete measures are implemented or when the sites are vacated. By
nature the expected costs and timing are uncertain. With regard
to restoration of leased premises, amounts are considered uncertain as the
final settlements will depend on thorough inspection of the premises, and
negotiations with the lessor at the time of vacating. The costs are expected to
be incurred on termination of the leases in a minimum of two
years/maximum of 15 years.
Provisions
AR accounting polices
Provisions are recognized where a legal or constructive obligation has been
incurred as a result of past events and it is probable it will lead to an outflow
of financial resources. Provisions are measured at the present value of the
expected expenditure required to settle the obligation.
«37 Critical accounting estimates and judgments
Management assesses the need for provisions on an ongoing basis. This
Joint operations and associates
Joint operations
In 2012 Novozymes formed a strategic partnership (jointly controlled
operation) with Beta Renewables S.p.A. The objective of the partnership is
globally to market, demonstrate and guarantee cellulosic biofuel solutions
based on technologies held by Beta Renewables S.p.A. and Novozymes. Both
parties have equal controlling interests in the partnership. The partnership
had no material impact on revenue and earnings in 2013 (2012: no material
impact).
Further, Novozymes A/S has interests in jointly controlled operations with
Novo Nordisk. These are houseowners' associations and related utility
facilities in connection with the shared production sites in Kalundborg and
Bagsvaerd, Denmark. The operations had no impact on revenue and earnings
(2012: no impact). Novozymes A/S and Novo Nordisk share control of the
arrangements equally.
Ga Accounting polrcies
Joint operations
The Group's holdings in joint operations are consolidated by including its
interest in the joint operations' assets, liabilities, revenue and costs.
Associates
Investments in associates are accounted for using the equity method of
accounting. Under the equity method, the investment in associates is initially
recognized at cost, and the carrying amount is increased or decreased to
recognize Novozymes' share of the profit or loss of the investee after the date
of acquisition. The Group's investment in associates includes goodwill
identified on acquisition.
Legal, contingent consideration and other
Novozymes is involved in a number of ongoing legal disputes, and provision
is made for the estimated costs af these based on the current evaluation of
the outcomes. The cases are expected to be finalized in 2014.
In Management's opinion, the outcome of these cases will not give rise to
any significant loss beyond the amounts provided at December 31, 2013.
The contingent consideration relates to acquisitions, mainly made in 2013,
and the måjority is expected to be settled before the end of 2014.
in addition, other provisions covers a number of minor obligations, including
liability for returned goods, other long-term employees benefits, etc. These
obligations are mainfy expected to be incurred over a longer period.
NO provisions are discounted as discounting does not have any significant
impact on the carrying amounts.
assessment takes account of the likelihood of Novozymes being obliged to
expend financial resources and the amount at which the liabilities are
expected to be settled. As these assessments are based on estimates of the
future, they are subject to a high level of uncertainty and may give rise to
changes in amounts in future accounting periods.
Associates
Novozymes holds 9,95% of the shares in Beta Renewables S.p.A., with which
Novozymes has formed a jointly controlled operation within cellulosic biofuel
solutions. Situated in Crescentino, Italy, Beta Renewables S.p.A. has the first
plant in the world to produce bioethanol from agricultural residues and
energy crops at commercial scale using enzymatic conversion. The plant was
officially opened in October 2013 and builds on the PROESATM engineering
and production technology, and the Novozymes Cellic& CTeC enzyme
systems.
Profits and losses resulting from transactions between the Group and its
associates are recognized in the Group's financial statements only to the
extent of unrelated investors' interests in the associates. The accounting
policies of associates have been changed where necessary to ensure
consistency with the accounting policies adopted by the Group.
Crrucal accounting esumates and judgments
Although Novozymes holds less than 20% of the equity shares in Beta
Renewables S.p.A., the Group exercises significant influence by virtue of its
contractual right to appoint members of key management boards, and has
the power to participate in Beta Renewables' financial and operating policy
decisions, Consequently, this investment has been classified as an associate.
87
ACCOUNTS 8 DATA
Notes
Basis of repørting Primary operations Working capital Other assets and fiabilities Financial activities Other notes "Environmental data Social data
NOTE
AB Business acquisitions
2013
logen Bio-Products
DKK million
2013
TJ Technologies Inc.
DKK million
The assumed fair value of acquired assets and liabilities is as follows:
308
Intangible assets 208
Property, plant and equipment 33 8
Inventories "42 25
Trade and other receivables 10 4
Cash and cash equivalents - 27
Provisions (3) (5)
Financial and other liabilitiers eee (7) (86)
Acquired net ass SSF es 181
The purchase price is as follows:
Cash 374 227
Contingent consideration Eee 69 23
Total purchase PR TOO GS ]”S”SST SN
Goodwill 60 69
Cash flow for acquisition:
Cash payment 374 239
Less cash and cash equivalents in acquired business eee Re EeEEENNNNEE (27) -
Cash roer EL EET VE E 2]
2012 2012
Beta Renewables S.p.A.
DKK million
Natural Industries Inc.
DKK million
The assumed fair value of acquired assets and liabilities is as follows:
Intangible assets 224 90
Investment in associate 55 -
Trade and other receivables 104 6
Deferred tax asset 71 -
Financial and other liabilitiees 1837)
Acquired hear 454 59
The purchase price is as follows:
Cash 669 63
Contingent consideration EEN ER” 3
Total purchase re 669 66
Goodwill 215 7
Cash flow for acquisition:
Cash payment 669 63
Less cash and cash equivalents in acquired business nere
Cash outflow for acquisition rr 669 63.
1403034EogSN57525
68
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and habilites Financial activities Other notes Environmental data Social data
NOTE
Å. H | Business acquisitions
logen Bio-Products
On February 22, 2013, Novozymes acquired control of logen Bio-Producis, The fair value and allocation of the acquired assets and liabilities are
an industrial enzyme business of Ottawa-based logen Corporation, through provisional, pending receipt of the final valuations.
an asset deal. logen Bio-Products produces and sells enzymes for the pulp &
paper, textile, grain-processing and animal feed industries, and the
acquisition provides Novozymes with all the commercial rights to logen Bio-
Products' existing product portfolio, pipeline, facilities and know-how,
complementing the current enzyme business.
Beta Renewables 5.p.A.
On November 5, 2012, Novozymes acquired 50% of the voting interests in a
jointly controlled operation with Beta Renewables S.p.A., including an
investment in 9.95% of the shares in Beta Renewables S.p.A. The purpose of
the jointly controlled operation is to market, demonstrate and guarantee
cellulosic biofuel solutions based on technologies held by Beta Renewables
S.p.A. and Novozymes. The valuation of acquired intangible assets was
finalized as per September 30, 2013. The final valuation has led to
recognition of goodwill of DKK 215 million, intangible assets of DKK 224
million and a deferred tax asset of DKK 71 million (previously reported DKK 0
million, DKK 510 million and DKK 0 million respectively).
Goodwill of DKK 60 million is attributable to acquired customer relations,
the distribution network and expected synergies with the existing enzyme
business. The goodwill is tax-deductible. The purchase agreement includes a
contingent consideration of up to DKK 69 million. The consideration is
contingent on achievement of specified technology and market targets in
2013 and 2014. If the targets are not met, no extra consideration will be
paid. The transaction cost amounts to DKK 8 million and is included in Natural Industries Inc.
Administrative costs. On November 30, 2012, Novozymes bought 100% of the voting shares in
Natural Industries Inc., which manufactures, markets and distributes unique
biological control products based on proprietary microorganism technology.
The company, which is located in the U.S., has established a nationwide
TJ Technologies Inc. distribution setup in the U.S. and is well positioned for further growth and
to acceterate Novozymes BioAg's efforts in high-value markets.
The fair value and allocation of the acquired assets and liabilities are
provisional, pending receipt of the final valuations.
On June 28, 2013, Novozymes acquired 100% of the voting shares in TJ
Technologies Inc. TJ Technologies Inc. provides North American farmers with Other transactions
biological sofutions that enhance plant growth, increase stress tolerance and Other minor acquisitions with a total purchase price of DKK 52 million were
improve yields. Combining Novozymes" existing BioAg business with TJ also made in 2013.
Technologies' strong and proven portfolio, brands and regional market
coverage will strengthen Novozymes' commercial position in important crop
markets.
Goodwili of DKK 69 million is attributable to expected synergies in the
existing BioAg business. The goodwill is not tax-deductible, The purchase
agreement includes a contingent consideration of up 10 DKK 34 million. The
consideration is contingent on achievement of a number of specific
registrations and sales targets, and is recognized at the anticipated fair value
at the acquisition date.
() Accounting polices 5 Critical accounting estimates and judgmen!s
On acquisition of companies, the identifiable assets acquired and the In business acquisitions for which the final valuations are pending, the
liabilities and contingent liabilities assumed are recognized at the fair values acquired assets and liabilities are recognized at provisional fair values.
at the acquisition date. The consideration transferred includes the fair value Assumptions are used to determine the provisionat fair values, and these
at the acquisition date of any contingent consideration arrangement. values may differ significantly from the final valuation of the assets and
liabilities, which are based on more complex and detailed assumptions and
projections. Specific uncertainty exists regarding intangible assets including
goodwill. Based on provisional fair values, intangible assets including
goodwill recognized on December 31, 2013, amount to DKK 609 million.
Acquisition-related costs are expensed as incurred. if uncertainty exists at the
acquisition date concerning the measurement of identifiable net assets
acquired, initial recognition is based on provisional fair values.
Goodwill may subsequently be adjusted for changes in the fair value of the
consideration transferred and/or changes in the fair value of the identifiable
net assets acquired until 12 months after the acquisition date, to the extent
such changes relate to facts and circumstances present at the acquisition
date. Acquired companies are consolidated from the date of acquisition.
89
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
Å. 6 i Tax
2013 2012
DKK million - DKK million
Tax payable on net profit ' ” "568 REE 538
Change in deferred tax 109 . 62
Revaluation of deferred tax due to changes in corporation tax rate (78) -
Adjustment for PERUS YES (41) i (32)
Tax in the income statement Og en re 568
Calculation of effective tax rate:
Corporation tax rate in Denmark 25,0% ” 25.0%
Non-deductible expenses, net (133% 0.5%
Difference in foreign tax rates 0.3% . . (0.3)%
Revaluation of deferred tax due to changes in Corporation tax rate (2.8)% -
hes ES (1.0)% (3.2)%
Effective tax rate —e Tr 2 TT 22.0%.
Deferred tax
2013 FE 2012
. . DKK million DKK million
Deferred tax at January 1 (517) (348)
Currency translation adjustments (6) ' (3)
Effect of business acquisitions (8) (35)
Tax related to the income statement ” 32 (65)
Tax on shareholders ey ES (ORNE (66)
Deferred tax at Dee (50) (517)
Deferred tax assets
Deferred tax liabilities
Deferred tax at December 31
Deferred Deferred
tax assets tax liabilities Total
DKK million DKK million DKK million
Intangible assets and property, plant and equipment 203 (1,181) (978)
Inventories 247 (113) ' 134
Tax-loss carry-forwards 3 - 3
Stock options 106 - 106
Deferred tax at December 31, 2013 456 (956) . (500)
Due after more than 12 months (450)
Unrecognized share of tax-loss carry-forwards, tax credits, etc, (of '
which DKK 22 million expires in 2032) | 47
1403034EogSN57526
op
ACCOUNIS & DAFA
Notes
Basis of reporting Primary operations Working capital
Other assets and habikties Financial activities Other notes Environmental data Social data
NOTE
AO Ta
Deferred Deferred
tax assets tax liabilities Total
DKK million DKK million DKK million
intangible assets and property, plant and equipment 88 (1,168) (1,080)
Inventories 376 (129) 247
Tax-loss carry-forwards 25 - 25
Stock options 68 - 68
Deferred tax at December 31, 2012 224 (741) (517)
Due after more than 12 months (435)
Unrecognized share of tax-loss carry-forwards, tax credits, etc. (of
which DKK 52 million expires in 2032) 81
Tax-loss carry-forwards are recognized in deferred tax assets to the extent
that the losses are expected to be offset against future taxable profits.
Tax receivables and payables
2013 2012
DKK million DKK million
At January 1 (233) (152)
Currency translation adjustments 1 2
Tax related to the income statement (590) (503)
Tax on shareholders' equity items 18 27
Tax paid for the current year, FE renen Se 393
Tax receivables, net, at Been 25) (233)
Tax receivables
Tax payables
Tax receivables, net, at December 31
Of which due after more than 12 months
Tax risk
Novozymes operates in many markets via sales companies and distributors,
while production takes place in a small number of countries. This leads to
transactions between Group companies. Novozymes follows the OECD
principles in setting internal transfer prices for these transactions, but this is
a complicated area and entails a tax risk, partly because the area is subject to
political judgment in each individual country. Novozymes regularly enters
into dialogue with the tax authorities to reduce this risk, and we have
entered into advance pricing agreements with the tax authorities in the
countries where internal transactions are most significant, such as the U.S.
and China.
For Novozymes, such agreements create predictability in relation to taxation
and reduce the risk of Novozymes becoming part of the ongoing transfer
pricing debate around the world. A major part of internal transactions in the
Group is covered by advance pricing agreements.
ACCOUNIS & DATA
Notes
Basis of reporting
NOTE
Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental datå Social data
Tax
46
(Fa (5) Accounting policies
Corporation tax, comprising the current tax liability, change i in deferred tax
for the year and possible adjustments relating 'to previous years, is
recognized in the income statement, except to the extent that it relates to
items recognized either in Other comprehensive income or directly in
Shareholders' equity. Deferred tax is measured using the balance-sheet
liability method and comprises all temporary differences between the
carrying amount and tax base of assets and liabilities. No deferred tax is
recognized for goodwill, unless amortization of goodwill for tax purposes is
allowed. Deferred tax is measured and recognized to cover retaxation of
losses in jointly taxed foreign subsidiaries if this is expected to be realized on
the divestment of stock or when'recapture of tåx losses becomes applicable.
The tax value of tax-loss carry-forwards is included in the calculation of
deferred tax to the extent that the tax losses can be expected to be utilized in
the future.
Deferred tax is measured according to current tax rules and at the tax rate
expected to be in force on elimination, of the temiporary differences. Changes
in deferred tax due to tax rate changes are recognized in the income
statement, except to the extent that they relate to items recognized either in
Other comprehensive income or directly in. Shareholders' equity.
Assets held for sale
In December 2013 Novozymes signed an agreement with Monsanto
Company with a view to the two companies combining their strengths
within microbial solutions for global broad-acre crops, fruit and vegetables.
The commercial responsibility for Novozymes" cufrent product portfolio in
agricultural biologicafs will be transferred to Monsanto along with much of
3) Critical accounting estirmates and judgments
The Group's tax charge is the sum of the total current and deferred tax
charges. The calculation of the Graup's total tax charge necessarily involves a
degree of estimation and judgment in respect of certain items whose tax
treatment cannot be finally determined until resolution has been reached
with the relevant tax authority or, as appropriate, through a formal legal
process. The final resolution of some of these items may give rise to material
profits, losses and/or cash flows. The complexity of the Group's structure
following its geographic expansion makes the degree of estimation and
judgment more challenging. The resolution of issues is not always within the
control of the Group and is often depéndent on the efficiency of the legal
processes in the relevant tax jurisdictions in which the Group operates. Issues
can, and often do, tåke many years to resolve, Payments in respect of tax
liabifities for an accounting period result from payments on account and on
the final resolution of open items. As a result, there can be substantial
differences between the tax charge in the consolidated income statement
and actual tax payments. The Group regularly enters into dialogue with the
tax authorities to reduce this risk and has a major part of its internal
transactions covered by advance pricing agreements.
the Novozymes commercial organization currently responsible for that work.
Non-current assets related to Novozymes" current commercial
organization that will be trånsferred to Monsanto are classified as assets
held for sale. The transaction is expected to be completed in February
2014.
2013 2012
DKK million DKK million
Carrying amount of non-current assets held for sale:
Goodwill 40 -
Trademarks and other commercial intangibles 100 -
Other equipment isens seu annaneeene nm ere rammen generne Å snuuuuuuanunenusreres
Total 144 -
The amount of intangible assets is provisional as this includes assets
acquired through business acquisitions in 2013 for which the final purchase
price alfocation is pending, The amount of goodwill to be disposed
of/transferred is based on preliminary assessments and valuations. The final
amount is pending final valvations of the commercial BioAg i activities
transferred.
um Accounting policies
Non-current assets are classified as assets held for såle when their carrying
amount is to be recovered principally through'a sale transaction and a sale is
considered highly probable.
1403034EogSN57527
They are stated at the lower of carrying amount and fair value less costs to
. Sell,
92
ACCOUNIS & DAFA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financal activities Other notes Environmental data Social data
NOTE
Do 1 Financial income and Financial costs
2013 2012
DKK million DKK million
interest income 5 13
Gains on derivatives, net 77 -
Fair value adjustments of stock options settled in cash - 9
Finans , 2 0 —0—0—0—0c0c0c0c—icioi5i5o< 22
Interest costs 66 80
Other financial costs 30 23
Share of loss in associate 8 3
Other foreign exchange losses, net 99 83
Fair value adjustments of stock options settled in cash 21 -
Capitalized interest costs at an interest rate of 3.8% p.a. in 2012 - (6)
Financial costs 224 183
Financial inom ets Re (142) 161)
(HH Accounting policies Financial income and Financial costs also include fair value adjustments of
derivatives used to hedge assets and liabitities, and income and costs relating
to cash flow hedges that are transferred from Other comprehensive income
on realization of the hedged item.
Financial income and Financial costs comprise interest income and interest
costs, realized and unrealized foreign exchange gains and losses, as well as
fair value adjustment of cash-settled programs, which are offset against
Other liabilities.
NOTE
o . 7 Other financial assets and liabilities
2013 2012
DKK million DKK million
Other financial assets
Derivatives 87 45
SEERE DS eg
Other financial assets at December 31 ” 101 45
Non-current 14 -
Current 87 45
93
ACCOUNTS & DATA
Notes
Basis of reporting Primary'operations Working capital Other assets and liabilities Financial activities Other notes Environmental data. Social data
NOTE
B 2. Other financial assets and liabilities
2013 NE 2012
… DKK million. DKK million .
Other financial liabilities
Credit institutions 1,788 1,944
Derivatives 31 70
Other NE 20 ” 21
Other financial liabilities at December 37 er 183 2,035
Non-current 1,738 1,749
Current 101 286
The debt is denominated in the following currencies:
DKK 61 205
EUR 1,702 ' 1,706
SF 25 33
Credit institutions at December 3 eee rs 1,944
Debt to credit institutions runs to 2014-2029. The interest rates are between
1.0% and 5.2% for debt in DKK and EUR.
The interest rates on the variable loans will be adjusted in 2014.
(18) Accounting policies .
Unrealized fair value adjustments of.derivatives and securities are recognized —— Write-offs are recognized as Financial costs.
in Other comprehensive income. Value adjustmients are transferred from
Other comprehensive income to Financial income or Financial costs when
realized.
Other financial assets and liabilities are measured at.amortized cost.
NOTE
5 3 Derivatives - hedge accounting
Fair value hedges
The table below shows the derivatives that the Group has contracted to
hedge currency exposure on financial assets and liabilities that give rise to
currency adjustments in the income statement. Gains or losses on fair value
adjustments at year-end are entered-in the income statement.
1403034Eog3N57528
94
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial actvities Other notes Environmental data Social data
NOTE
5.3
Derivatives - hedge accounting
2013 2012
Contract Contract
amount based amount based
øn agreed Fair value on agreed Fair value
DKK million rates Dec. 31 rates Dec, 31
Forward exchange contracts
AUD - - (78) (2)
CAD (241) (1) 2 -
CHF (305) - (370) 1
EUR - - 52 -
GBP (136) 1 (181) (1)
JPY 69 1 73 2
MXN 10 - 13 -
SEK - - (25) 1
USD EEN 3,188 (8) 3,266 32
Fair value hedges at December 2585 nm 2752" 33
The forward exchange contracts fall due in the period April
2014 to December 2014 (2012: January 2013 to April 2013).
The fair value hedges were 100% effective, as the gain on forward exchange
contracts was DKK 79 million (2012: DKK 65 million), compared with a gain
on the hedged items of DKK 79 million (2012: DKK 65 million).
Cash flow hedges
The table below shows the derivatives that the Group has contracted to
hedge currency exposure, interest rate exposure or price exposure in future
cash flows. The total fair value adjustment at year-end is entered directly in
Other comprehensive income and will be taken to the income statement as
the financial contracts are realized.
2013 2012
Contract Contract
amount based amount based
on agreed Fair value on agreed Fair value
DKK million rates Dec. 31 rates Dec. 31
Forward exchange contracts (sales)
EUR - - 926 (6)
1,320 84 RTE (12)
rer 1,320 00084 2,204 (18)
Interest rate swaps
EUR/EUR - pays fixed rate of 3.06% / earns variable rate of 0.33% (2012: 0.78%) 112 (6) 112 (9)
EUR/EUR - pays fixed rate of 3.58% / earns variable rate of 0,33% (2012: 0.78%) 112 (1 5) En 11 FEE (20)
FEEREEEEEEEEEEEEEEEEEREEEEEEREEEREAREREEEREREEEERREEREEERE 77 NER ey za 029)
No electricity price agreement at year end - average payment of DKK 300/MWh in 2012 DD SENE 772 dm
BEER 77 (11)
Cash flow hedges at December 1400000" 2505 0 (58)
Forward exchange contracts fall due in the period January 2014 to December
2014 (2012: January 2013 to December 2013), while swaps fall due in the
period July 2015 to July 2019 (2012: July 2015 to July 2019), and there are
no electricity agreements at year-end (2012: January 2013 to December
2014).
Atthe end of 2013 the Group had hedged 76% of expected future cash
flows in USD for 2014 (2012: 76%) and 0% of future cash flows in EUR for
2014 (2012: 42%).
Other information
The derivatives are not traded on an active market based on quoted prices,
but are individual contracts. The fair value of the derivatives is determined
using valuation techniques that utilize market-based data such as exchange
rates, interest rates and electricity prices (level 2).
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
53
er ÅAccounting policies
Hedge accounting consists of positive and negative fair values of derivatives,
which are itemized in the balance sheét under Other financial assets and
Other financial liabilities respectively.
Derivatives - hedge accounting
Derivatives used for fair valué hedges are measured at fair value on the
balance sheet date, and value adjustments are recognized as Financial
income or Financial costs,
Derivatives used for cash flow hedges are measured at fair value on the
balance sheet date, and value adjustments are recognized in Other
comprehensive income,
NOTE
Income and costs relating to cåsh flow hedges are transferred from Other
comprehensive income on realization of the hedged item and are re recognized
as Financial income or Financial costs.
Derivatives are recognized on the settiement date, while other financial
instruments are recognized on the transaction date.
Financial risk factors
5.4
Novozymes' international operations mean that the income statement and
balance sheet are exposed to a number of financial risk factors. Financial risks
are managed centrally for the entire Group. The use of financial instruments
is governed by the treasury policy approved by:Novozymes' Board of
Directors. The treasury policy is adjusted continuously to adapt to the market
situation. The treasury policy contains rules on which financial instruments
can be used for hedging, which counterparties can be used and the risk
profile that is to be applied. Financial instruments are used to hedge existing
assets, liabilities and future net cash flows.
Currency risk
Currency risk arises due to imbalances between ir income and costs in each
individual currency and because Novozymes has' more assets than liabilities in
foreign currencies in connection with its many foreign companies.
Operating profit is most exposed to the USD, EUR and JPY. A movement of
5% in the USD would result in a change in operating profit of around DKK
70-90 million (2012: DKK 60-80 million). A 0.5% movement in the EUR
would, other things being equal, result in a change in operating profit of
around DKK 15-20 million (2012: DKK 15-20 million). A movement of 5% in
the JPY would result in a change in operating profit: of around DKK 5-10
million (2012;.DKK 5-10 million).
Shareholders' equity is most exposed to the CNY; USD-and CHF, A 5%
movement in the CNY would, other things being equal, result in a change in
Shareholders" equity of around DKK 103 million (2012: DKK 99 million),
while a movement of 5% in the USD would result in a change in
Shareholders' equity of around DKK 35 million (2012: DKK 27 million). A
movement of 5% in the CHF would result in a change in Shareholders'
equity of around DKK 28 million (2012: DKK 28 million),
Currency risk relating to net investments'in foreign subsidiaries is hedged
where this is deemed appropriate and is managed. primarily by taking out
loans and entering into swaps. Currently, there are no loans or currency
swaps that are used to hedge equity investments.
1403034EogSN57529
Interest rate risk
Interest rate risk arises in relation to interest-bearing assets and liabilities. An
increase of 1 percentage point in the average interest rate on Novozymes' net
interest-bearing debt would have an effect-on profit of DKK 5 million (2012:
no effect). In accordance with Novozymes” treasury policy, a minimum of
30% of loans must be at fixed interest rates. At year-end 2013, 78% (2012:
77%) of the loan portfolio was at fixed interest rates, based on financial
instruments.
According to Novozymes' treasury policy, free funds may only be invested in
government bonds, ultra-liquid mortgage credit bonds and money market
deposits.
Credit risk
Credit risk arises especially on cash and cashequivalents, derivatives
and trade receivables. The credit risk on trade receivables is countered by
thorough, regular analyses based on customér type, country and specific
conditions. In general, customers are creditworthy.
The credit risk on cash and cåsh equivalents and derivatives is countered
by Novozymes" treasury policy, which limits the exposure to counterparties
based on a credit rating. The credit risk is calculated on the basis of net
market values and is governed by the Group's treasury policy. Novozymes has
entered into netting agreements (ISDA) with all the banks used for trading in
financial instruments, which means that Novozymes' credit risk is limited to
net assets, At December 31, 2013, the Group considered its maximum credit
risk to be DKK 3,586 million (2012: DKK 2,889 million), which is the total of
the Group's financial assets. At December 31,-2013, the maximum credit risk
related to one counterparty was DKK 350 million (2012; DKK 211 million).
Liquldity risk .
In connection with the Group's ongoing financing of operations, including
refinancing risk, efforts are made to ensure adequate and flexible liquidity.
This is guaranteed by placing 'deposits in cash and ultra-liquid negotiable
instruments and using binding credit facilities.
96
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capita! Other assets and liabilities Financial actwittes Other notes Environmental data Social data
NOTE
L Å. Financial risk factors
The table below shows the future net draw on liquidity based on the
financial assets and financial liabilities at December 31, 2013, The table is
broken down by payment periods, in accordance with the contractual due
date.
Less than Between Møre than
2013 Tyear 1 and 5 years 5 years
Note DKK million DKK million DKK million DKK million
Trade receivables 3.2 2,242 2,242 - -
Deposits 3.3 17 - 17 -
Loans 3,3 72 72 - -
Other receivables 3.3 151 121 30 -
sas at banke sees een een snnenennnenen 1003 1003 ned.
Loans and receivables 3,485 3,438 47 -
BEES 2 É—— 87 i BEEENNNNNGEER 14
Hedge accounting (asset) 101 87 - 14
Credit institutions 5.2 (1,788) (92) (877) (819)
Other financial liabilities 5.2 (20) - (20) -
Trade payables (976) (976) - -
Other pay seen eeen renerne 4 35) BD
Financial liabilities (3,119) (1,403) (897) (819)
Deri esse ueueeuerenenereerer EADUEUDENDDDE BD RD (3)...
Hedge accounting (liability) (31) (9) (18) (4)
BEER 2113 4e68) (809)
Less than Between More than
2012 YTyear 1 and 5 years 5 years
Note DKK million DKK million DKK million DKK million
Trade receivables 3.2 2,080 2,080 - -
Deposits 3.3 18 - 18 -
Loans 3.3 63 - 63 -
Other receivables 3.3 148 143 5 -
Cashatbankandinha eeeneeeeeeueenuenane remme veer ennen enerd 535 835 eee ueeeereennee
Loans and receivables 2,844 2,758 86 -
Derivater ennen eee sd 45 su AS eee eee eenenernneedde
Hedge accounting (asset) 45 45 " -
Credit institutions 5.2 (1,944) (243) (504) (1,197)
Other financial liabilities 5.2 (21) - - (21)
Trade payables (1,044) (1,044) - -
her aa eee enennrd 4 3 GS) succeser
Financial liabilities (3,461) (1,739) (504) (1,218)
Deri ennen ennee 2 GG JO ID GG GV
Hedge accounting (liability) (70) (43) (21) (6)
eee 02 438) (4,224)
97
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Envirorimental data Social data "
Management remuneration
2013 . 2012
Executive Executive
Leadership Board of Leadership Board of
Team Directors Total Team Directors Total
. DKK. million DKK million DKK million DKK million DKK million DKK million
Sataries and other short-term benefits ” 35 6 41 33 ' 6 39
Defined contribution plans | 8 : 8 8 : 3
Remuneration excl, expense SUE eee
based incentive programs ' 43 6 49 41 6 47
Expensed stock-based incentive programs 35 - 35 44 - 44
Remunertion Li ms en sa, Es 6 1
Executive Leadership Team
Remuneration paid to individual members of the present Executive
Leadership Team:
2013
Expensed
stock-based
Contribution- incentive
Salary Cash bonus based pension programs Total
Remuneration DKK million DKK million DKK million DKK million DKK million
Peder Holk Nielsen” 6.1 2.2 2.2 6.1 16,6
Benny D, Loft 3.9 1.3 1.2 5.4 11,8
Per Falholt 3.9 1.1 1.2 . 5,4 116
Andrew Fordyce"” 2.7 0.9 0,9 1.6 6.1
Thomas Videbæk 3.9 1.4 1,2 54 11.9
ENE ennen une 1 suc ne 5.4 11,8
Executive Leadership Team SEERE 24.4 82 —n 7.9 eu ” 29,3 REE 69,8
= Peder Holk Nielsen took over as CEO on April 1, 2013.
xx Joined on April 1, 2013.
Executive Leadership Team
Remuneration to the Executive Leadership Team comprises a base salary,
pension, a bonus scheme and stock-based incentive programs. The variable
part of the total remuneration (cash bonus and stock-based programs) is
relatively large compared with the base salary and is dependent on
achievement of individual targets and the company's targets for financial,
social and environmental results. The maximum cash bonus is equivalent to
tive months" fixed base salary. General! guidelines for femuneration of
the Executive Leadership Team are approved at the Annual Shareholders'
Meeting, and more detailed information is available at www.novozymes.com.
1403034EogSN57530
Members of the Executive Leadership Team have contracts of employment
containing standard conditions for executive officers of Danish listed
companies, including the periods of notice that both parties are required to |
give and noncompetition clauses, if the executive officer!s contract of
employment is terminated by the company without there having been
misconduct on the part of the executive officer, the executive officer has the
right to compensation, which, depending on the circumstances, may amount
to a maximum of two years' base salary and pension contributions.
og
ACCOUNIS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
6.1] … Management remuneration
Board of Directors
Remuneration paid to individual members of the Board of Directors:
2013 2012
Board of Audit Board of Audit
Directors Committee Total Directors Committee Total
Remuneration DKK "000 DKK "000 DKK '000 DKK '000 DKK '000 DKK "000
Henrik Gurtler 1,250 - 1,250 1,250 - 1.250
Kurt Anker Nielsen 833 417 1,250 833 417 1,250
Paul Petter Aas” - - - 69 - 69
Søren Henrik Jepsen" + 69 - 69 417 - 417
Lars Bo Køppler 417 - 417 417 - 417
Ulla Morin" = 69 - 69 417 - 417
Lena Olving 417 208 625 417 208 625
Agnete Raaschou-Nielsen 417 208 625 417 208 625
Jørgen Buhl Rasmussen 417 - 417 417 - 417
Mathias Uhlén 417 - 417 417 - 417
Lena Bech Holskovt == 347 - 347 - - -
Anders Hentze Knuder BAT un ene BET eee eee senerenenneed
Remuneration 5,000 833 5833 0000 5,071 0 833 5,904
Resigned on February 29, 2012.
xx Resigned on February 28, 2013.
xæx Joined on February 28, 2013.
Directors' remuneration does not include minor social security contributions
paid by Novozymes.
Holdings of equity instruments
The foliowing members of the Board of Directors and Executive Leadership
Team hold shares of stock and stock options in Novozymes A/S:
Shares of stock at Purchased Sold during Shares of stock at Market value
Shares of stock Jan. 1, 2013 during the year the year Dec. 31, 2013 DKK million
Kurt Anker Nielsen 49,845 - - 49,845 11.4
Agnete Raaschou-Nielsen 430 - - 430 0.1
Lena Bech Holskov ed 2 LEDDENE LE
Board of Dire sas - ” - 50,545 11.6
Benny D. Loft 2,260 - - 2,260 0.5
Executive Leadership Team 2,260 - - 2,260 0.5
99
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
0.1] … Management remuneration
Options and Options and
. awards at Jan. 1, Additions Exercised . awards at . Market value
Stock options including stock awards 2013 during the year during the year Det. 31, 2013 DKK million
Peder Holk Nielsen 121,215 - - 121,215 16.7
Benny D. Loft 121,215 - 60,000 61,215 8.4
Per Falholt 245,435 - 124,220 121,215 16.7
Andrew Fordyce" 37,542 5,293 - 42,835 6.2
Thomas Videbæk 118,295 - 118,295 - -
Wammen 143,565 - 83,565 60,000 8,3
Executive Leadership Team 781267 5,293 0 386,080 0 406480 56.3
+ Joined on April 1, 2013.
Members of the Board of Directors do not hold støck options. However,
employee-elected board members hold a limited number of stock options in
Novozymes A/S due to Group-wide-émployee stock option programs.
NOTE
6.2. Stock-based payment
Novozymes has established stock-based incentive programs for the Executive
Leadership Team, key employees and other employees, The purpose of the
stock-based incentive programs has been to ensure common goals for
Management, employees and shareholders. Allocation of all programs 'has
been, and remains, dependent on profit, value-creation and sustainability
targets being achieved. At the time of granting stock options, there is no
difference between exercise price and share price.
In 2011 a stock award program comprising a total of 699,300 stock awards
was established for the Executive Leadership Team. The program was a three-
year stock-based program and covered the period 2011-2013, with shares
released in January 2014, The number of total stock, awards was based on
expected economic profit and dividend. The fair value at grant date was DKK
108 million, which has been expensed over the three-year period. The
accumulated economic profit generated in the three year period is DKK
3,818 million, and thereby exceeds-the target of DKK 3,750 million. A total
number of 722,651 shares will be released in January 2014, as shares
purchased from dividends from the 699,300 shares during the three year
period are included. '
The number of outstanding options (excl. stock awards) has developed as
follows:
For further information on stock-based payment, refer to Note 6.2.
In 2011 Novozymes established a stock-based incentive program for key
employees (grades of vice president and director) covering the period 2011-
2013, with restricted shares or options expected to be offered each year. In
2013 a total of 1,154,609 stock options (2012: 204,350 stock awards) were
granted based on this program. The program was based on fulfillment of
specified financial and sustainability targets. The'stock options granted in
2013 will be released in January 2017 (2012: January 2016).
For the period 2003-2012 stock option programs were established for all or
selected groups of employees conferring the right to purchase one share per
stock option. Allocations were made on the båsis of the individual
employee's base salary and achievement of a.series of business targets —
both financial and nonfinancial — set by the Board of Directors for each year.
The stock options have avesting period of four years, followed by an exercise
period of five years. in order to exercise the options, the employee must still
be employed on the exercise date. This does not apply to persons who have
retired, taken a voluntary early retirement pension or been given notice.
2012
2013
Avg. exercise Avg. exercise
Number price per option Number price per option
of options in DKK of options in DKK
Outstanding at January 1 6,756,311 86 9,290,020 . 80
Granted 1,258,122 186 32,871 132.
Exercised (2,056,364) 84 (2,435,985) 65
Forfeited . (110,000) 104 (35,045) ' 92
red sene enenunene venn nnnnn nen e er ennnnee 2,930) seu DP nemme ED nnenennenel mo
Outstanding at December 31 5,845,130 8 6,756,311 86
1403034EogSN57531
100
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
6.2
The weighted average share price at the time of exercise was DKK 193 in
2013 (2012: DKK 163). Of the 5,845,139 outstanding options (2012:
Stock-based payment
The stock options outstanding have the following characteristics:
6,756,311), 4,540,966 options were exercisable (2012: 4,463,805), and the
weighted average price for these options is DKK 86 (2012:.DKK 84).
2013 2012
Remaining Remaining
Number Avg. exercise term to Number Avg. exercise term to
of options price per option maturity (years) of options price per option maturity (years)
Employees 1,221,314 87 3 1,825,781 87 4
Key employees 4,221,947 116 5 3,470,695 86 4
Executive Leadership ER 401,878 . 89 4 1,459,835 87 3
Outstanding at December 31 5,845, 138 8 aA BI63N 68 4
For stock options outstanding at December 31, the range of exercise prices is
DKK 69-209 per option (2012: DKK 69-165 per option).
Fair value of services received is measured by reference to the fair vålue of the
equity instruments granted. All values are measured on the basis of the
Black-Scholes model. The weighted average fair value of options granted
during 2013 was DKK 53 per option (2012: DKK 19 per option). The fair
value of stock awards granted during 2013 was.DKK 67 million (2012: DKK
31 million), to be expensed over the four-year period.
Fair value at grant date is measured using the average exercise price (which is
0 for stock awards), the option ferm and the following significant
assumptions:
2013 2012
Expected future dividend per share, DKK 9.3 7.9
Volatility, % 23.2 21.9
Annual risk-free interest rate, % 0.5 0.6
Weighted average share price at grant date, DKK 186 163
Further, the options are expected to be exercised one year after the vesting
period or at the option's expiry date if this is within one year. Volatility is
estimated using the historical volatility over the last year. The risk-free
interest rate is based on Danish government bonds with a maturity
equivalent to the option's term to maturity.
Most programs are equity-settled, and no liability is recognized for these. In
the case of allocations in countries where ownership of foreign stock is not
(ER Accounting polces
The Group has established stock-based incentive programs comprising
equity-settled and cash-settled programs.
The fair value of the employee services received in exchange for the grant of
stock options and stock awards is calculated using the value of the granted
stock options and stock awards. ”
The fair value of stock-based payment on the grant date is recognized as an
employee cost over the period in which the stock options are vested. In
measuring the fair value, account is taken of the number of employees
permitted, the value of stock options is settled in cash, and a liability of
DKK 29 million has been recognized for this in 2013 (2012: DKK 27 million).
The intrinsic value of exercisable cash-settled programs in 2013 was. DKK 27
million (2012: DKK 16 million).
During 2013, DKK 55 million arising from stock-based payment has been
recognized in the income statement (2012: DKK 99 million), of which DKK 55
million arises from equity-settled programs (2012: DKK 69 million).
expected to gain entitlement to the options as well as the number of options
the employees are expected to gain. This estimate is adjusted at the end of
each period such that only the number of options to which employees are
entitled, or expected to be entitled, is recognized.
The value of equity-settled programs is recognized in Shareholders' equity.
The value of cash-settled programs, which are recognized as Other liabilities,
is adjusted to fair value at the end of each period, and the subsequent
adjustment in fair value is recognized in the income statement under
Financial income or Financial costs.
1403034FogSN57532
101
ACCOUNIS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities
NOTE
6.3
Commitments and contingencies
Other nates Environmental data "Social data
2013 2012
. | DKK million DKK million
Rental commitments expiring within the following periods from the balance sheet date:
Less than 1 year 111 74
Between 1 and 2 years 41 43
Between 2 and 3 years 32 37
Between 3 and 4 years 26 31
Between 4 and 5 years 22 23
Alter el aen e renee 85 96
- Rental commitments at Bede ET SA 34
Of which commitments to related companies at December 31, 2013, amount
to. DKK 39 million, compared with DKK 22 million at December 31, 2012,
The above rental commitments relate to noncancelable operating lease
contracts, primarily for buildings and offices.
Dec. 31, 2013 Dec. 31, 2012
. : DKK million DKK million
The following amount has been recognized in the consolidated income statement in respect of 83 , 95
rentals
Other commitments
Contractual obligations to third parties relating to capital expenditure, etc. 88 157
Other guarantees
Other guarantees and commitments to related companies 68 125
Other guarantees and commitments 640 524
Pending litigation and arbitration
Novozymes is a party to a patent lawsuit imwhich Novozymes claims that
Danisco A/S, Genencor Int'] Wisconsin, Inc., Danisco US Inc. and Danisco USA
Inc. (DuPont companies) have infringed Novozymes" U.S. Patent No.
7,113,723. In 2011 a jury in the US District Court for the Western District of
Wisconsin found Novozymes US Patent No. 7,713,723 valid ånd infringed by
Danisco and ordered Danisco to pay damages. On May 5,,2012, the judge in
the US District Court for the Western District of Wisconsin overturned the
jury's verdict. In 2013 the US Court of Appeals for the Federal Circuit
affirmed the ruling of the judge in the US District Court, The case remains
under appeal.
In addition, Novozymes is engaged in certain other legal proceedings but, in
the opinion of the Board of Directors and Executive Leadership Team,
settlement or continuation of these proceedings will not have a material
effect on the Group's financial position: A ljability has been recognized
under Provisions where the risk of a losse ona legal proceeding is considered
more likely than not.
Contract conditions
Several of the partnership contracts to which Novozymesiis a party could be
terminated by the opposite party in the event of significant changes
concerning ownership or control of Novozymes. Furthermore, a few contracts
contain provisions that restrict Novozymes" licenses' to use specific forms of
technology in such situations,
Novozymes is committed to increase its production capacity in Latin America
if a specific customer meets certain milestones, The amount required to meet
this commitment cannot be estimated reliably for the moment.
Joint taxation
Novozymes A/S and its Danish subsidiaries are jointly taxed with the Danish
companies in the Novo A/S Group. The joint taxation also covers withholding
taxes in the form of dividend tåx, royalty tax and interest tax. The Danish
companies are jointly and individually liable for the joint taxation. Any
subsequent adjustments to income taåxes and withholding taxes may lead to
a larger liability. The tax for the individual companies is alløcated in fuil on
the basis of the expected taxable income.
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
Novozymes A/S is contralled by Novo A/S, which holds 70,1% of the votes in
Novozymes A/S. The remaining stock is widely held. The ultimate parent of
the Group is the Novo Nordisk Foundation (Incorporated in Denmark). Both
entities and the directors of these entities are considered related parties.
Other related parties are considered to be the Novo Nordisk Foundation's
subsidiaries, that is the Novo and Novo Nordisk Groups, associated
companies, the Chr. Hansen Group and the Board of Directors and Executive
Related party transactions
The Novo Nordisk Group
- Sale of goods and materials
- Sale of services
- Purchase of goods and materials
- Purchase of services
Leadership Team of Novozymes A/S, together with their immediate families.
Related parties also include companies where the above persons have
control or joint control.
All agreements relating to these transactians are based on market price
(arm's length). The majority of the agreements are renegotiated regularly.
The Group has had the following transactions with related parties:
2013
DKK million
2012
DKK million
The Chr. Hansen Group
- Sale of goods and materials
32 2
77 90
(82) (80)
(132) (175)
14 10
There have not been any material transactions with the Novo Nordisk
Foundation or with Management of Novozymes A/S, Novo A/S, the Novo
Nordisk Foundation or the Novo Nordisk Group, other than normal
The Novo Nordisk Group
remuneration, The remuneration of the Board of Directors and Executive
Leadership Team is presented in Note 6.1.
2013
DKK million
2012
DKK million
- Receivables 56 52
- Financial liabilities (19) (21)
PE Es NEDEN (133)
The Chr. Hansen Group
Rees sner reen eee rnnnee Duun 3
NOTE i . . — .
6.5 fees to statutory auditor
2013 2012
DKK million DKK million
Statutory audit 8 8
Other assurance engagements . -
Tax advisory services 6
ker SEE ERNE 3
Fees to statutory auditor 18 17
103
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data: Social data
NOTE
6 | 6 Common stock
2013 2012
Nominal value - ” Nominal value
No. DKK million Na DKK million
Common stock . HE
A common stock (shares of DKK 2) 53,743,600 107 53,743,600 107
B common stock (shares of DKK 2) esse 265,956,400 en 532 271,256,400 ' 543
Common stock at December 3 3197000 88 325,000,000 0 650
Each A share gives an entitlement to 20 votes, while each B share gives an with A and B common stock is optimal. The Board of Directors maintains that
entitlement to 2 votes. this is the best way to safeguard Novozymes' long-term development and
. . thus to benefit the company's shareholders and other stakeholders,
Each year the Board of Directors assesses whether the-ownership structure
2013 ” 2012
No. ” . No.
Shares of common stock in circulation
Shares of stock at January 1 ' 312,225,366 315,084,570
Purchase of treasury stock on (5,247,588)
Sale of treasury stack BE 1,975,158 2,388,384
Shares of common stock in circulation at December 31 ao 312,225,366
2013 . 2012
Nominal value Nominal value
. No. DKK million …% No. DKKmillion %
Treasury stack - B stock
Shares of stock at January 1 …. . 12,774,634 26 3.9% 9,915,430 - 20 — 31%
Additions during the year - - - 5,247,588 10 1.6%
Disposals during the year ' (1,975,158) (4) (0.6%) (2,388,384) (4) . (0.8%)
Write-down of common stock 53000) I 6) eu ned
Treasury stock at December 31 5,499,476 11 17% 12,774,634 . 26 39%
(57) Accounting policies
The cost price and proceeds from the sale of treasury stock are recognized in
Retained earnings. Among other things, the company!s holding of treasury
stock is used to hedge employees" exercise of granted stock awards and
stock options.
NØTE
6.7 Earnings per share
2013 2012
. DKK million . DKK million
Profit used to calculate earnings per share . Ba 2,200 . 2,015
2013 2012
No. No.
Average number of shares
Average shares of stock . 313,757,042 313,981,216
Adjustment for stock option see evenerenenenree renen ren n ener en nerne 36544 42991368.
Average number of diluted shåres 317,408,486 318,280,584
1403034EogSN57533
Id
ACCOUNIS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and habihties Financial activities Other notes Environmental data Social data
NOTE
(9 Accounting poliues
Basic earnings per share is calculated as net profit attributable io
shareholders in Novozymes A/S divided by the average number of shares
outstanding.
Earnings per share
Dituted earnings per share is calculated as net profit attributable to
shareholders in Novozymes A/S divided by the average number of shares
outstanding, including the dilutive effect of stock options "in the money.”
NOTE
6.8 Cash flow
2013 2012
Note DKK million DKK million
Non-cash items
Accrued interest income and interest costs 62 61
(Gain)/loss on financial assets, etc., net 21 (9)
Depreciation, amortization and impairment losses 738 703
Allowances for doubtful trade receivables 16 2
Financial gain/loss on sale of assets (2) 4
Unrealized foreign exchange gain 160 (49)
Tax 558 568
Stock-based payment 55 74
Change in provisions (49) (17)
there ses snennnannnnnnnme rr rernnnnenene 6 el
Non-cash items TE ere 1 565 rr 1,337
Cash flow from acquisitions
Acquisition of Natural Industries Inc. 4.5 - 63
investment in Beta Renewables S.p.A. and jointly controlled operation 4.5 - 669
Acquisition of logen Bio-Products 4.5 374 -
Acquisition of TJ Technologies Inc. 4.5 212 -
Other acquisitions and purchase of financial asseis Ed ES RENeEeNNNNENGNNEN -
Cash flow from ag is 40 732
Cash and cash equivalents
Cash at bank and in hand 1,003 535
Credit institutions - on demand . ET (205)
Cash and cash equivalents at December 942 330
Ca Accounting policies
The Consolidated statement of cash flows, which is compiled using the
indirect method, shows cash flows from operating, investing and financing
activities, and the Group's cash and cash equivalents at the beginning and
end of the year.
Cash flow from operating activities comprises net profit adjusted for non-
cash items, paid financial items, corporate income tax paid and change in
working capital. Cash flow from investing activities comprises payments
relating to the acquisition and sale of companies and non-controlling
interests, intangible assets, and property, plant and equipment.
Cash flow from financing activities comprises proceeds from borrowings,
repayment of principal on interest-bearing debt, payment of dividends,
proceeds from stock issues, and the purchase and sale of treasury stock and
other securities.
Cash and cash equivalents comprises cash at bank and in hand less current
bank loans due on demand.
105
ACCOUNTS & DATA
Notes
Basis of reporting Primary operatiåns Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
6.9 Group companies
Issued common Percentage of
Country Activity stock/paid-up stock shares owned
Parent company
Novozymes A/S Denmark DKK 639,400,000
Subsidiaries
Novozymes Biologicals Argentina S.A. - Argentina > ARS 12,000 100
Novozymes BioAagS.A. Argentina ad. od Å ARS 700,000 100
Novozymes Australia Pty. Ltd. Australia Q AUD .500,000 100
Novozymes Belgium BVBA Belgium 1 EUR 18,600 100
Novozymes Latin America Ltda, Brazil ga O c BRL 23,601,908 100
Novozymes BioAg Productos Para Agricultura Ltda. Brazil mi O BRL 7,454,860 100
Novozymes Biologicals Brasil Participacdes Ltda. — Brazil n BRL 8,640,000 100
Novozymes BioAg Limited Canada ECi O Å CAD 4,079,799 100
Novozymes Canada Limited Canada [i o A CAD 100 100
Novozymes (China) Biotechnolagy Co: Ltd. China Hd do CNY 859,058,400 100
Novozymes (China) Investment Co. Ltd, China o Å CNY 816,449,373 100
Novozymes (Shenyang) Bialogicals Co, Ltd. China On G CNY 31,793,578 100
Suzhou Hongda Enzyme Co. itd. China [I] do CNY 356,744,150 96
Novozymes (China) Biopharma Co. Ltd. China no €D CNY 327,242,564 100
Novozymes Adenium Biotech A/S Denmark o DKK 600,000 100
Novozymes Bioindustrial A/S Denmark O DKK 1,100,000 100
Novozymes Bioindustrial China A/S Denmark oo DKK 729,700,000 100
Novozymes Biopharma DK A/S Denmark GQ Å ( DKK 612,000 100
Novozymes BioAg A/S ' Denmark 9 DKK 600,000 100
Novozymes Bioindustrial Holding A/S . Denmark oOo DKK 500,000 100
Novozymes Biologicals France 5.A.5. France O EUR 650,000 100
Novozymes France S,A.S. France > EUR 45,735 100
Novozymes Deutschland GmbH Germany &) EUR 255,646 100
Novozymes Hong Kong Ltd. Hong Kong & HKD 768,285,140 100
Novozymes Biopharma Hong Kong Co. Ltd. Hong Kong O HKD 551,386,045 100
Novozymes South Asia Pyt. Ltd. India [i 2 Å INR 1,550,000,020 100
Novozymes Italia S.r.l. Italy O EUR 10,400 100
Novozymes Japan Ltd. Japan & Å JPY 300,000,000 100
Novozymes Malaysia Sdn. Bhd. Malaysia Q MYR 6,666,414 100
Novozymes Mexicana, 5.A, de C.V. . Mexico o MXN 338,100 100
Novozymes Mexico, 5.A. de C.V. Mexico O MXN 35,224,200 100
Novozymes Netherlands BVBA Netherlands o EUR 18,000 100
Novozymes RUS LLC Russia O RUB 10,000 100
Novozymes Singapore Pte. Ltd. Singapore OD SGD 59,071,000 100
Novozymes South Africa (Pty) Ltd. South Africa & ZAR 100 100
Novozymes Korea Limited South Korea OG KRW 300,000,000 100
Novozymes Spain 5.A. Spain wo EUR 360,607 100
Novozymes Biopharma Sweden AB Sweden o SEK 28,001,000
1403034EogSN57534
100
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes
NOTE
6.9
Group companies
NS
ACCOUNIS & DATA
Notes
Environmenta! data Social data
Issued common Percentage of
Country Activity stock/paid-up stock shares owned
Novozymes Switzerland AG Switzerland ØD CHF 5,000,000 100
Novozymes Switzerland Holding AG Switzerland O CHF 3,000,000 100
Novozymes Enzim Dis Ticaret Ltd. Sirketi Turkey Q TRY 21,000 100
Novozymes Biopharma UK Ltd. UK o Fa3 GBP 22,535,113 100
Novozymes UK Ltd. UK O GBP 1,000,000 100
Novozymes BioAg, Inc. USA [3 O Å USD 1 100
Novozymes Biologicals, Inc. USA Q o Å USD 3,000,000 100
Novozymes Biologicals, td. USA (2 USD 10,000 100
Novozymes Biopharma US, Inc. USA G USD 1 100
Novozymes Blair, Inc. USA on USD 1 100
Novozymes, Inc. USA Å USD 1,000 100
Novozymes North America, Inc. USA La mn £D Å USD 17,500,000 100
Novozymes US, Inc. USA GQ USD 115,387,497 100
Joint operations/associates
Houseowners' Association SMørmosen Denmark
Houseowners' Association Hallas Park Denmark
Beta Renewables S.p.A. italy EUR 9.95
[1150 14001-certified sites. All major companies are also ISO 9001-certified.
EJ production
O sales & Marketing
Å Research & Development
O Holding companies, etc.
107
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
Consumption of resources
7.1
The large-scale production of our products requires raw materials, utilities
and packaging materials. Acquisition and subsequent disposal of such
resources can impact the environment and is-therefore important for
Novozymes to monitor.
Efficient use and disposal of resources are,key to Novozymes in order to both
reduce costs and improve its environmental footprint. Measures used to
track developments in this area are illustrated in Notes 7.3-7.5.
2013 2012
Water by primary source 1,000 må 1,000 må
Drinking water 4,464 3,949
Industrial water 2,037 2,182
Water, total
2013 2012
Energy by primary source 1,000 G) 1,000 GJ
Town gas 151 66
Diesel oil - 1
Gas cil - 21
Heavy fuel oil - 78
haard eee ne rr ennee 88 537
Internally generated energy, total " 7390 00 00723
District heat 175 171
Electricity 2,421 2,363
Steam 861 821
Energy from waste (22) -
Energy consumption, total
(EJ Accounting policies
Water includes drinking water, industrial water and externally supplied
steam.
Drinking water is water of drinking water quality.
Industrial water is water that is not of drinking water quality, but which is
suitable for certain industrial processes, for example for use in cooling
towers, Industrial water can come from lakes or from own wells.
The reported quantities are stated on the basis of-the metered intake of
water to Novozymes and include quantities consumed both in the
production process and in other areas: The reported quantities of steam are
converted to volume of running water and are therefore subject to
calculation, ”
The energy consumption includes quantities consumed both in the
production process and in other areas.
Internally generated energy is measured-as fuel consumption converted to
energy on the basis of the lower combustion vålue and weight by volume,
except in the U.S., where legal requirements for reporting of COz state that
the higher combustion value is to be applied.
1403034FogsSN57535
Fuel consumption comprises all types of fuels used to produce electricity,
heat and steam on site. Fuel consumption does not include fuel for
transportation.
Externally generated energy is the input to Novozymes of externally
generated electricity, heat and steam, less energy production from
Novozymes" waste. Energy produced from waste or wastewater is the total
amount of energy (heat, electricity or steam) produced by an internal or
external utility provider. Energy produced from waste or wastewater is
renewable, Examples are energy produced from biomass waste or biogas.
Reported quantities are based on meter readings, with the exception of
steam, which may be subject to calculation.
Raw materials comprises materials:used directly or indirectly inthe
production process. Packaging comprises all products made of any material
of any nature to be used for the containment, protection, handling, delivery
and preservation of goods from the producer to the user or consumer.
108
ACCOUNIS & DATA
Notes
Basis of reporting Primary operations Working capita! Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
7.2
A key factor for Novozymes" success is its ability to continuously optimize its
production processes. The resulting savings in water and energy
consumption and COz emissions not only benefit the environment but also
have a significant effect on production costs.
Accounting poliues
The three efficiency improvement indicators (for water, energy and CO2)
measure the weighted sum of the efficiency improvement for Novozymes"
production plants. The efficiency improvement is calculated as the relative
improvement in efficiency compared with the efficiency calculated for the
base year (2005).
The water, energy and COz quantities used in the calculation correspond to
those reported as water consumption, energy consumption and COz
emissions, less energy produced from Novozymes" biomass waste by a utility
provider.
NOTE ke i — Eee ——
7.3. Wastewater volume by treatment method
Wastewater fram Novozymes' production is treated internally or externally in
biological wastewater treatment systems before it is discharged to the
recipient, or used as water for irrigation in agriculture.
Efficiency improvement compared with 2005
For sites acquired in 2005 or later, the baseline index is calculated based on
the data reported in the first full year of operating as a Novozymes site.
Divested sites are removed from the index for the full period. Newly
constructed sites are included the first quarter after qualification. Transport-
related COz emissions are not included in the index.
2013 2012
1,000 må 1,000 må
Wastewater used for irrigation 430 541
Waste dish ennen eger renen 23 neuen 3,835.
Wastewater volume, tal E=3 4,653 4,376
CH Arcounting policies
Wastewater is measured as the volume discharged by Novozymes or
calculated on the basis of water consumption.
NOTE
ræs
Biomass is liquid waste from Novozymes" production that is rich in nitrøgen
and phosphorus and can therefore be used as fertilizer. Instead of disposing
of this biomass as waste, a major part of it is turned into a product,
NovoGro?, and distributed to farmers, who use it as organic agricultural
Tertilizer in the fields, thus reducing their need for commercial fertilizers.
Biomass volume by product
When part of the by-products from production is reused by farmers, the
quantity of by-products that needs to be handled as waste is accordingly
reduced, This reduces not only the costs associated with waste treatment,
but also the negative impact on the environment.
109
ACCOUNIS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
] LÅ. Biomass volume by product
2013 2012
. 1,000 må 1,000 må
Volume, NovoGro? 321 ' 333
Volume, NovoGro? 30 140 - 145
Volume, compost 77 . 73:
Volume tolandri %2 8 2
BOM ASS, ET 1553
Gå Accounting policies
Biomass is measured or calculated on the basis of volume or weight
produced and transported from Novozymes as liquid fertilizer (NovoGroé),
converted 10 a fertilizer product with a higher dry matter content (NovoGro?
30 or compost) or dried and used as fuel for energy production. Biomass
from a newly built plant is sent to landfill with energy production (biogas) as
a temporary disposal method.
NOTE .
7] Waste volume by type and disposal method
2013 2012
Nonhazardous waste Tøns ” Tons
Incineration 1,017 1,577
Landfill 4,454 4,188
Recycling 3,638 … 3,788
SE nen LE: SNEEN 161
Nonhazardous waste, total ” 9,337 9,714
Hazardous waste .
Incineration 1,174 864
Landfill ' 120 211
Recycling 863 1,004
Se eee ng
Hazardous Wa Er 2,333 2,198
WES, TT 11,670 11,912
Biomass sent for landfill was previously reported as waste. In 2013 this
quantity was reported as biomass, and comparative data for 2012 have
therefore been adjusted accordingly.
Em Accounting policies .
Waste is the registered volume of waste broken down into hazardous and
nonhazardous waste and by disposal method. The amount recycled is the
quantity recycled internally or sent to an external service provider for
recycling. Biomass is not included in the reported amounts of waste,
1403034EogSN57536
va
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Working capita! Other assets and liabilities Financial actvities Other notes Environmental data Social data
NOTE
7.6
The reported COz emissions are broken down by scope and source. In
accordance with the definition used in the Greenhouse Gas (GHG) Protocol,
emissions are defined by scope:
Scope 1: All direct GHG emissions.
Scope 2: Indirect GHG emissions from consumption of purchased electricity,
heat or steam.
CO-z-equivalent emissions by scope and source
Scope 3: Other indirect emissions, such as the extraction and production of
purchased materials and fuels, transport-related activities in vehicles not
owned or controlled by the reporting entity, etc.
The reported scope 3 emissions comprise emissions from transport of goods
from the primary production site to the customer and from transport
between sites. The emission of other greenhouse gases, such as HCFCS, is
converted into a COz-equivalent quantity.
2013 2012
1,000 tons 1,000 tons
Town gas g 4
Gas oil - 2
Heavy fuel oil - 6
Natur ener eer er ererrerrer er see 31 29
SEER ERE ae], 4
District heat 3 9
Electricity 269 239
Steam 68 71
Energy from waste … . enn neuen ennen dl
er ERE ERE 319
Ship 4 5
Truck 11
Air freight 7 … 5
(2 SEES YE BEER 2 00 19
OLESEN HEE 9 VO OOA as 344
CO--equivalent emissions:
ES eee nen nunne 2
COrequivalents, tal Sa 406 381
(ø Åccounung polres
Reported COz emissions are calculated on the basis of internally and
externally generated energy, and outbound transport of products.
CO; from internally generated energy (scope 1) is calculated on the basis of
the amount of fuel consumed, using local emission factors.
CO: from externally generated energy (scope 2) is calculated using annually
determined local emission factors from power plants or their organizations.
If emission factors are not available, annually determined emission factors
from Danish authorities and suppliers are used.
Transport-related COz emissions (scope 3) are calculated on the basis of
principles described in the GHG Protocol. Reported quantities comprise COz
emissions related to transport from all primary enzyme production sites to
the customer where Novozymes pays for the freight. Transport between
production sites is also included. Transport of raw materials to a production
site is not included. COz emissions generated at external warehouses are not
included.
Emission data are calculated on the basis of distance and emission factors
from the GHG Protocol.
ACCOUNTS & DATA
Notes
Basis of repørting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
NOTE
7.] Emissions of ozone layer-depleting substances
This note specifies the volume in kilograms of the emitted substances before
conversion to CFC,-equivalent emissions,
2013
Kg Kg
CFCs - 7
ES 5 880
Total 475
wa Accounting policies
Emissions to air of ozone layer-depleting substances comprise consumption
of CFCs, HCFCs and halons.
The environmental impact potentials for global warming and ozone layer
depletion are calculated on the basis of data published by the U.S.
Environmental Protection Agency (EPA) and the Montreal Protocol! published
by the United Nations Environment Programme (UNEP).
NOTE
7 . 8 Environmental compliance, etc.
ttis important for Novozymes to act as a good corporate citizen. These three
measures cover both legal requirements anid moral obligations, and together
they are key to ensuring that Novozymes maintains its license to operate.
aa Accounting policies
Breaches of environmental regulatory limits is measured as the number of
incidents in the reporting year considered not to be in conformity to
environmental permits or requirements under environmental law,
Breaches related to annual control measurements of spills reported in
previous years are not included, as they are not indicative of performance
during the reporting year. ” ”
Significant spills is measured as the number of spills of chemicals, oil, etc.
into water, air or soil and includes both on-site and transport-related spills.
NOTE
].Q Animals for testing
Novozymes" objective is to stop using animals for experimental purposes.
However, we realize that at present not all tests cån be replaced by
acceptable alternatives.
Novozymes uses laboratory animals for safety testing, antibody production
and research where no acceptable alternative methåds exist,
1403034EogSN57537
Significance is assessed both on the basis of extent of the spill and impact on
the environment. ”
Minor spills not considered to have an impact on the environment are not
included in this figure.
Neighbor complaints is the number of registered environmental complaints,
primarily odor- and noise-related. '
Ethical considerations and animal welfare are given a high priority at
Novozymes and severe suffering is never accepted, As-an integral part of our
approach to animal testing, we are constantly looking for new ways to
replace, reduce and refine the use of animals for testing.
Basis of reporting Primary operations Working capital
NOTE
7 9 Animals for testing
117
ACCOUNIS & DATA
Notes
Other assets and ltabilkties Financial activities Other notes Envronmental data
Social data
2013 2012
No. No.
Mice 842 87
Rats 973 949
Guinea pigs 30 .
Rabbits 107 32
Minipigs 8 -
Goats 4 4
Fisk 151 -
Monkeys 8 .
BEES el. 542 168
ER ag zees 1,240
(ED) Accounting pohcies
Animals for testing covers the number of animals used far all commenced
internal and external testing undertaken for Novozymes. The figures include
animals for testing used both by Novozymes and by external test companies
during tests ordered by Novozymes.
113
ACCOUNTS & DATA
Notes
Basis of reporting Primary operations Workirig capital Other assets and liabilities Financial-activities Other notes Environmental data Social data
NOTE
7 10 Climate change impact
With its products, Novozymes hås:a unique ability to facilitate COz savings
for its customers, whether as a consequence of improved production
processes or performance of the customer's product, An example of this
is detergents optimized for washing at low temperatures that help save
energy. The total annual reduction of COz emissions through the application
of Novozymes" products is comparable to those of a smail country.
(ED Accounting policies 5) Critical accounting estimates and judgments
The estimated reduction in COz emissions as a consequence of customers' Novozymes uses LCAs to estimate the COz emissions that customers
application of Novozymes' products is based on annually updated life cycle avoid when they use Novozymes products in their processes or products, A
assessments (LCAs) of Novozymes' products. The LCAs are prepared and calculation methodotogy to consolidate the LCAs has been defined and
updated by Novozymes and subject to assumptions and estimates. consistently applied, but the individual LCAs depend on assumptions and
estimates, which means that the result of the calculation will be an
approximation.
In 2013, customers reduced their CO, emissions by 52 million tons through the application
of Novozymes' products, equivalent to taking 20 million cars off the road.
1403034EogSN57538
ACCOUN
15 & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilitres Financial activities
NOTE
8.1
Novozymes' success is dependent on its employees” satisfaction and
motivation in their daily work. Therefore, we monitor several parameters to
ensure the well-being and development of our employees.
Development of the workforce
Other notes Environmental data Social data
Changes in number of employees 2013 2012
No. No.
Net growth in number of employees, organic 112 217
Terminations - retirement 40 44
Terminations - dismissat 134 166
Terminations - voluntary 266 252
Terminations, total 440 462
Rate of absence 2013 2012
% %
Senior management, management, professional and administrative 1.1 1.1
Skilled workers, laboratory technicians, other technicians and process operators 2.8 2.9
Rate of absence has been broken down by grouped job categories based on
whether the work carried out is primarily office-based and is therefore not
stated per job category.
ty Accounting policies
Absence is stated as time lost due to the employee's illness, including
pregnancy-related sick leave and occupational accidents and diseases. The
rate of absence is calculated as the number of registered days of absence as a
percentage of the total number of normal working days in one year, less
vacation and public holidays.
The rate of employee turnover is calculated as employee turnover divided by
the average number of permanent employees.
Employee turnover is measured as the number of permanent employees who
left the Group during the last four quarters (excluding employees at divested
entities transferred to the acquiring company).
Average age and seniority are calculated as the sum of employees' total
seniority in whole years at the reporting date, divided by the number of
employees.
NOTE
Expatriation refers ta Novozymes employees temporarily reassigned within
Novozymes from the country of original employment for a period that
extends beyond six months.
A leader is defined as a person who has line management responsibility for
at least three employees, not including students and trainees. New leaders
are defined as leaders who have been promoted or hired to a position within
the reporting period, and must not have been leaders within the last 12
months prior to promotion. New employees joining through acquisitions do
not qualify as new leaders.
Training costs is the costs of external training courses and seminars,
translated into Danish kroner at average exchange rates. Training costs is
also shown as a percentage of total employee costs.
Occupational accidents and occupational
8.2
Novozymes has the ambition to maintain a safe and healthy workplace and
thereby save both human suffering and production costs. In order to ensure
this, Management continuously monitors developments in accidents and
diseases
illnesses with the aim of optimizing equipment, processes and the Group's
safety culture.
115
ACCOUNIS & DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Social data
Occupational accidents and occupational diseases
2013 2012
Consequences of occupational accidents No. No.
Return to original job 23 28
Out of work or early retirement - 1
as pen eee eeucenernreee 1 ;
Occupational accidents, total CSR! 24 29
Total days of absence related to accidents registered in the same year 192 491
For comparison purposes, cases that were pending at the end of 2012 have
been updated in line with information available at the end of 2013. The
derived figure for total days of absence has also been updated.
2013 2012
Consequences of occupational diseases No. No.
Return to original job 2 1
Return to a different job in the same department 3 3
Transfer to a different job in another department 1 2
Transfer to a different job outside Novozymes 1 -
Out of work or early retirement - 1
ERE Er neuen n
Occupational diseases, total ES 8 7
Total days of absence related to diseases registered in the same year - 215
For comparison purposes, cases that were pending at the end of 2012 have
been updated in line with information available at the end of 2013. The
derived figure for total days of absence has also been updated.
2013 2012
Types of occupational diseases No. No.
Musculoskeletal disorder - 1
Skin disease 2 1
Cancer - 1
me KE er renere 6 nur 4
Occupational diseases, total i 8 7
(HY Accounting policies
1403034EogSN57539
Occupational accidents is defined as the reported number of occurrences
arising out of or in the course of work that result in fatal or nonfatal injury
with at least one day's absence from work apart from the day of injury.
Occupational diseases is defined as the number of diseases contracted as a
result of an exposure to risk factors arising from work activity and notified as
work-related in accordance with national legislation.
The consequences of occupational accidents with absence and occupational
diseases are measured by recording the work situation once the outcome of
the incident has stabilized, for example whether the employee has returned
to his original job, and the total number of calendar days of absence.
The frequencies of occupational accidents with absence and occupational
diseases are stated per million working hours,
ACCOUNTS 8 DATA
Notes
Basis of reporting Primary operations Working capital Other assets and liabilities Financial activities Other notes Environmental data Socal data
NOTE
8.3
In 2013, 11 new products were launched compared with 6 in 2012. A
description of the new products can be found in Sales and markets.
Processes and technology
7 Accounting policies
New products comprises the number of new products with new or improved
characteristics launched during the year.
Active patent families comprises the number of inventions for which there
are one or More active patent applications or active patents at year-end.
NOTE
8 Å Training and compliance
Fraud cases 2013 2012
No. No.
Dismissal of employee 1 8
Dismissal of employee and reported to the police 1 5
Fraud cases, to GM OOLOLOLOOLOLOLLSLLSL: RENEE 13
(HD Accounting poliges
The supplier performance management indicator measures the ratio of
suppliers with an annual spend above DKK 1 million that are covered by the
supplier evaluation system.
The completion of business integrity training refers to the number of
employees who have undergone business integrity training in the last
training period.
NOTE
8 HB | Corporate citizenship
Through our corporate citizenship program we give back to communities
around the world by presenting our competencies in science understanding
and environmental responsibility to benefit and inspire the next generation
(ER) Accounting policies
Regional flagship projects is the number of corporate citizenship/community
engagement projects currently in progress where Novozymes engages with a
community by providing competencies in the areas of scientific
understanding and environmental awareness, for example through transfer
of knowledge to help meet the community's needs.
All allegations of fraud are investigated until it can be determined whether
or not they can be substantiated. The number of fraud cases represents
substantiated matters reported to the Audit Committee in the reporting year.
of scientist and innovators. We measure our efforts by tracking the number
of learners reached through the program and the number of corporate
citizen projects (flagship projects).
Learners reached comprises the total number of indirect and direct learners
that Novozymes reaches via its corporate citizenship activities in the areas of
scientific understanding and environmental awareness.
ACCOUNIS & DATA
Statements
Statement of the Board of
Directors and Executive
Leadership Team
The Board of Directors and Executive Leadership Team have
today considered and approved the Annual Report of
Novozymes A/S for the financial year January 1 — December
31, 2013.
The Consolidated Financial Statements are prepared in
accordance with International Financial Reporting Standards
as adopted by the EU, and the Parent Company Financial
Statements are prepared in accordance with the Danish
Financial Statements Act. Moreover, the Consolidated
Financial Statements and the Parent Company Financial
Statements are prepared in accordance with additional
Danish disclosure requirements for listed companies.
Management's Review is also prepared in accordance with
Danish disclosure requirements for listed companies.
In our opinion, the accounting policies used are
appropriate, and the Group's internal controls relevant to
preparation and presentation of the Annual Report are
adequate. The Consolidated Financial Statements and
the Parent Company Financial Statements give a true and
fair view of the financial position of the Groupand
the Parent Company at December 31, 2013, and of the
results of the Group and'the Parent Company operations,
and of consolidated cash flows for the financial year 2013.
In our opinion, Management's Review includes a true and
fair account of the developments in the operations and
financial circumstances of the Group and the Parent
Company, of the result for the year, and of the financial
position of the Group and the Parent Company as well as a
description of the most significant risks and elements of
. uncertainty facing the Group and-the Parent Company.
In our opinion, Novozymes A/S adheres to the AA1000 .
AccountaAbility principles, and environmental and social data
are stated in accordance with the accounting policies.
We recommend that the Annual Report be adopted by the
Annual Shareholders' Meeting.
Bagsvaerd, January 21, 2014
Executive I cadership Tem
1] Ø
På DLL
Peder Holk Nielsen
President & CEO
Per Falholt
Board of Directors
ormene, runerne”
Thomas Nagy 2" Ramas Videbæk Hs
Å f fj, | horder 4 ler ele fan Mltrej
Henrik Gurtler
Charman Å) ; |.
entze Knudsen
Kurt Anker Nielsen
Vice Chairman
(Meal
Agnete Raaschou-Nielsen
g
Ander
1403034EogSN57540
Lars Bo Køppler
W
Lena Bech Holskov
Mathias Uhlén Lena Olving
VK
Jørgen Buhi Rasmussen
ACCOUNIS & DATA
Statements
Independent Auditor's Report
To the Shareholders of Novozymes A/S
Report on Financial
Statements and
Environmental and Social
Data
We have audited the Consolidated Financial Statements, the
Parent Company Financial Statements and the
Environmental and Social Data of Novozymes A/S for the
financial year January 1 to December 31, 2013. The
Consolidated Financial Statements and the Parent Company
Financial Statements comprise income statement, balance
sheet, statement of changes in equity and financial notes,
including summary of significant accounting policies for
both the Group and the Parent Company, as well as
statement of cash flows and financial resources and
statement of comprehensive income for the Group. The
Consolidated Financial Statements are prepared in
accordance with International Financial Reporting Standards
as adopted by the EU, and the Parent Company Financial
Statements are prepared under the Danish Financial
Statements Act. Moreover, the Consolidated Financial
Statements and the Parent Company Financial Statements
are prepared in accordance with Danish disclosure
requirements for listed companies. The Environmental and
Social Data are prepared in accordance with the accounting
policies stated in the accounting policies for the
Environmental and Social Data.
Management's Responsibility for Financial Statemenis
and Environmental and Social Data
Management is responsible for the preparation of
Consolidated Financial Statements that give a true and fair
view in accordance with International Financial Reporting
Standard