Earnings Call: Q2 2020

Aug 12, 2020

Thank you, operator, and thank you, everyone, for joining us here today. I'm joined by the Novozymes management team and the rest of our Investor Relations team. My name is Tobias Bjergen, I'm the head of Investor Relations. Earlier today, we released yesterday, we released our full year interim report for the first half of twenty twenty. After having preannounced our sales and preliminary EBIT margin on July 8. At this call, we will review our performance and key events from the 1st 6 months of the year. The call will take around 50 minutes, including time for questions. Before we begin, I would like to remind you that the information presented at this call is unaudited and the management that management may make forward looking statements. These statements are based on current expectations and beliefs, and involve risks and uncertainties that could cause actual results to differ materially from those described in any forward looking statements. With this introduction, I will now hand you over to our CEO, Estabashi, Estabashi. Thank you. Thank you, Tobias and thank you all for calling in. As you all know, we announced our sales and preliminary EBIT for the 1st 6 months of 2020 on July 8, Therefore, the focus of today's call will be on our review of full financial performance for the first half of the year as well as the reinstated full year outlook for 2020. During the first half of the year, our main priorities were to ensure the safety of our employees and the continuity of our services to our customers and supply chain partners. I am proud to say that we succeeded in that effort while also delivering on sales, earnings and cash flows. We continue to progress on the projects in our innovation pipeline. In the second quarter, we launched 5 exciting products and we continued the commercialization of our recently launched solutions such as freshness in house fallen care and valentius in animal feed. In other words, our innovation machine is running close to full throttle. And even in these unprecedented conditions, we are introducing high performance and sustainable solutions to the world. As societies carefully reopen across the world, we have decided to reinstate the outlook for 2020. But before we dive deeper into that, let me spend a few minutes on our performance for the 1st 6 months of the year. Could you please turn into slide number 2? In the first half of the year, the business was both positively and negatively impacted by events related to the COVID-nineteen pandemic. Changing consumer behavior such as stockpiling increased focus on personal hygiene and more at home food consumption had a positive impact on both our Household And Care And Food Related Businesses. At the same time, stay at home orders and social distancing had a significant negative impact on our bioenergy, beverages and textile businesses. Overall, we delivered a solid set of numbers in the first half of twenty twenty. Total sales grew organically by 4%. With a strong cash and food and beverages delivered 7% growth. At the opposite end of the spectrum, technical and pharma and bioenergy declined by 22 and 15% respectively. And looking at the 2nd quarter performance, sales declined by 2% organically. Which is sound considering the severe headwinds in the U. S. Ethanol market and the Textile Global Industry. We delivered a healthy first half EBIT margin at 27.5 percent and a strong free cash flow before acquisitions of 2,100,000,000 daycare K. Nescountries and economies carefully reopen Novozymes now reinstate it full year 2020 outlook. We expect an organic sales performance of minus 2% to plus 2%. With the development in the U. S. Ethanol industry being the main source of uncertainty. And last we'll go later in the call of the full financial outlook a bit later. Please turn into this number, In the first half, organic sales in emerging markets grew by 9% and developed markets grew by 1%. Growth was broad based across all major regions except North America, where the severe decline in the U. S. Ethanol production had a significant negative impact on overall growth in the developed markets. The decline in the North American Bioenergy businesses was the main reason for the second quarter organic decline of the 5% in developed markets. Sales in emerging markets grew 4% in the quarter, primarily driven by Household And Care, but somehow hampered by the development in the textile businesses. Organically in both the first half and the second quarter of 2020. The strong sales performance was led by increased enzymatic penetration of laundry and dishwashing detergents, the continued roll out of the freshness platform as well as the COVID-nineteen induced stockpiling and changes to the consumer behavior. COVID-nineteen related stockpiling continued from March into April, but eased through the end now of the quarter. And on the innovation front, we launched our first enzymatic solution for cleaning medical ancillary in the pipeline. And looking ahead, enzymatic penetration into more detergents, especially in the emergency markets and the rollout of the freshness will continue to drive growth. However, the destocking by both the consumers, the customers and the consumers is expected to hamper growth in the second half. We're moving to slide 5. Food and beverages sales in the first half grew by 7% organically. The sales performance was led by strong growth in baking, followed by solid results in both starch and food and nutrition. While beverages declined slightly. Sales of enzymes for food production benefit for more at home consumption due to the COVID-nineteen. Where our enzymes for beverages, especially for brewing, were impacted negatively by the lower on trade demand. In the second the sales of food and beverages grew 3 percent organically with positive contributions from baking and food and nutrition offsetting the decline in beverages. Starch sales were flat in the second quarter. On the innovation front, Food And Beverages delivered 2 new solutions, in the second quarter, Quara Bust and Protana Prime. Quaraboost increases the yield of vegetable oil Processors by retaining oil that is usually wasted in the gum fraction. And Protana Prime enables test year meat alternatives by the extraction of the natural flavor from Pam Pratins. Looking ahead, the positive effects of increase at home food consumption are expected to ease While beverages will likely still be affected by the COVID-nineteen related restrictions. And please turn into Slide 6. Bio Energy sales in the first half of the year declined by 15% as COVID induced their home restrictions severely disrupted U. S. Demand from ethanol and in March onwards. This resulted in a 13% decline in global organic sales for Bioenergy in the 2nd quarter The U. S. Production rates improved towards the end of the quarter from the lows in April and May. Outside of North American expansion of starch based ethanol capacity in Brazil generated a minor positive sales contribution in the second quarter. While sales to the European producers decline. And we still believe there is a high level of uncertainty to the production levels for U. S. And the global ethanol volume for the remainder of the year. And please turn into the Slide 7. Sales in agricultural and feed grew 17% organically in the first half and 20% in the second quarter. Both feed and ag bio businesses contributed to growth in the first half and the second quarter. The feed businesses performed well in the second quarter, likely supported by the inventory changes in the value chain. This was also seen the former BioAg set up. Adjusted for this factor, agricultural and fit would have still have posted healthy double digit organic sales growth in the second quarter. And looking at the full year, we expect continued penetration of the line shows, our binoculars for corn and thae grow all contributing to growth. However, Global Farm Economics, Trade Economics And COVID-nineteen continued to be sources of uncertainty for the businesses. Organic sales in Technical And Pharma declined by 22% in the first half and 34% in the second quarter. The decline was due to COVID-nineteen related impacts on the apparel and textile industry as well as the continuation of last year decline in textile in Chinese textile production. And with that, I will hand that to our CFO, Lars. Thank you, Esther. Please turn to slide 8. Organic sales declined by 2% in the second quarter, but was up by 4% for the 1st 6 months of 2020. Household Care And Agriculture And Feed posted strong double digit growth in the first half, while our bioenergy and technical and pharma declined significantly. We delivered a solid set of financials despite the very challenging conditions. Good gross margin was up by 120 basis points, to 56.3% in the first half. The improvement was driven by higher operational leverage, improved production efficiencies, as well as slightly lower input cost compared to 2019. The gross margin of 55.4% in the 2nd quarter benefited from a 1 off settlement related to the former BioX setup. The first half EBIT margin was 27.5% or 250 basis points lower than for the same period of last year as the 2019 EBIT margin was reported by the recognition of deferred income related to the termination Excluding one offs in both 2019 2020, the EBIT margin grew roughly 200 basis points from around 25% in the first half of 2019 to an underlying EBIT margin of roughly 27% in the same period of 2020. This corresponds to double digit growth in underlying EBIT. The improvement from 2019 to 2020 was mainly driven by increased gross profit as well as hiring and travel related savings. The return on invested capital, including goodwill, was 19.3% in the first half of twenty twenty. This was 260 basis points lower than for the same period of 2019. The write declined due to both higher average invested capital and the lower net operating profits after tax. The average invested capital in 2019 benefited from the deferred income related to the now terminated Biowag Alliance. Together with the acquisition of Precision Biologics Group in 2020, These were the main explanations of the increase in average invested capital from 2019 to 2020. The net operating profits after tax declined due to the lower reported EBIT from Net investments excluding acquisitions were DKK 364,000,000 in the first half of twenty twenty. This was slightly less than for the same period of 2019. Our free cash flow before acquisition was 2051,000,000 Danish kroner in the 1st 6 months. This was DKK 833,000,000 higher, and for the same period of 2019. The strong improvement was mainly due to higher sales, gross margin expansion, savings on operating expenses and improved net working capital. In the second quarter, cash flows also benefited from the BioAg settlement and a postponement of tax payments from the second to third quarter of 2020. Please turn to Slide 9 for the reinstated 2020 outlook. After careful consideration, we have decided to reinstate the full year outlook for 2020. We expect an organic sales performance from minus 2 to plus 2 in 2020. Organic sales in Household Care food and beverages and agriculture and feed are expected to deliver solid mid single digit growth, while Bioenergy And Technical And Farm are subject to the most uncertainty in terms of full year performance. In this scenario of a 2% decline in organic sales, we assume sales in Bioenergy will decline significantly more in the second half than the 15% decline seen in the first half. Also, sales in Technical And Pharma would continue to decline severely. In this scenario, over 2% organic sales growth, we assume that the decline in U. S. Ethanol production will be more in line with the current EIA outlook of around 12% and that the pressure from around 27% in January. Gains from productivity improvements and cost controls are expected to be outweighed by negative effects from deteriorating currencies lower operational leverage and added amortization from the acquisition of Precision Biologics. The outlook for Ryg Including goodwill is expected at 18% to 19%, which is 2 percentage points lower than the outlook from January. This is due to lower sales, lower EBIT margin, negative impact from currencies and the negative effects from the Precision Biotech acquisition on both net operating profits after tax and the invested capital. And finally, free cash flow before acquisitions is expected at between two point DKK4.8 billion, reflecting a good underlying cash generation. With this walk through of the financials and our reinstated outlook, I'll pass the word back to Esther. Thank you, Lars. If we could please turn into Slide 10. And let me summarize our key messages. In the first half, we delivered solid results by being there for our customers. We launched 5 new products and most importantly, we work to ensure the safety of our employees. Less countries and economies carefully reopen, we now provide a full year 2020, our outlook with an expected organic sales performance of -2to+2percent. We believe the wide range is the right approach considering the turmoil and high volatility in the U. S. Ethanol industry. While conditions are challenging, the agility and the resilience of the business demonstrate that we are on the right track to deliver more value with innovative and sustainable solutions for better lives in a growing world. We act supporting on the strategy with a clear prioritization driven agenda both commercially and in R&D. This has most recently been exempllied by the acquisition of precision Bionics adding to promising human health alternatives. And as a final remark, I'm very proud of the commitment and dedication of our colleagues during this challenging times. And to them, I would like to thank and extend my sincere gratitude. I would also like to say thank you for listening to our call this morning and we're now ready you. If you find it's answered before it's your turn to speak, you can dial 02 to cancel. Now first question comes from the line of Eunice Skobel of Danske Bank. Thank you for taking my questions. First question on organic growth. You, you say it's down 5% in developed markets in Q2, primarily due to Bioenergy in the U. S, but what was the growth in developed markets, excluding this U. S. Ethanol. And then I also guess that the fact that you are stating that July is shown negative growth is mainly due to Bioenergy, but how much is July actually down? I'm talking low single digit or mid single digit or what? And specifically is Household Care down in July? Then my second question is on currencies. You are expecting or guiding for a significant, negative impact in H2 on on revenue. I was just thinking, how is this feeling through to to gross profit and EBIT? And is there also still a high effect on H1 next year as well? And my third question is on the reinvestments. So how large a part of the 250,000,000 Krona, you plan to reinvest in the business in 2020 has been reinvested here in H1. And then how much do you expect to reinvest in 2020? Is there 2 50 or has you or have you reduced that number? Thank you. So first question, on the organic growth, so when you say that we are down 5% in the developed markets, including Bioenergy. Then, you could then, without the Bioenergy then that's probably on the opposite side of, of, you could say, 0. So that's probably likely plus 5% level. So I think when you take and isolate the bioenergy decline, then that has that impact of changing it from minus 5 to plus 5 roughly in both in big numbers. If you look at July, what we say is slightly negative, and we are not giving details on the individual divisions but we are giving that as a comfort that we are looking, you can say, to deliver on the 2 to plus 2 for the year. If you look at Bioenergy specifically, there is a correlation between the external numbers of production that see in the external statistics and our numbers, but of course, it's not a full 100% correlation, but there is a correlation. And that will give you an indication of where Bioenergy is also in July. When you look at currencies, we have provided a guidance or as or a separation of currencies in our Stock Exchange Announcement and has done that for years. You'll see in there that roughly one third of our sales is denominated in U. S. Dollar. And obviously, it's very transparent what the U. S. Dollar is and what it means both on sales and also on EBIT. What is harder to assess and calculate is the impact from emerging market currencies. So if you look at our sales distribution, you'll see that roughly 25% if you exclude China, is sold in Asia Pacific, Latin America, Middle East and Africa. And when you look at the graph we have in the stock exchange announcement on currency, you'll see that 13% of the sales is denominated currencies outside of euro dollar, the Chinese UN and Danish kroner. So roughly half of that sales, therefore, is invoiced in hard currencies. The other half is invoiced in local currencies. And you see currencies like the Brazilian real which has depreciated by 24% on average between 20192020. You see other emerging market currencies like the Russian ruble, the Argentinean peso and others that has also decreased and devalued quite substantially. So that's why and that's how the impact on the top line is derived. So how that's built over to the EBIT margin and the gross margin, well, because we have more relatively speaking of our costs denominated in hard currencies and in particular, the Danish Kroner, then we have our sales, then you can say that it has a negative impact on the margin. And that's what we're calling out. So the vast majority of the difference between 27% guidance in January 26% guidance now is related to currency. A little bit to the impact from our acquisition of Precision Biotics, as we also shared with you in June, Whereas, for other items, we are really, you can say, balancing or offsetting the lower leverage on the on the gross margin from a lower midpoint of our sales with savings on our operational expenses and postponed investments, like we've also said all the year. Those 2 or 3 components are offsetting each other. So to your last question, how much are the reinvestments So we have not been able to effectively invest the full $250,000,000 or so this year we are probably pushing something like half of it in front of us and have included roughly half of it in our outlook But of course, as time goes by, it becomes harder and harder to separate what is the saving on a not feeling a replacement and what is sort of a specific investment in expansion. But I would say, if you sort of consider it in in the big terms that roughly half of the total release of resources last year, we expect in our guidance to be able to spend and also spend effectively will investments picking up in the second half. So I hope that answer your questions. Sure. Very helpful. Thank you very much, Lars. Thank you. Our next question comes from the line of Matthew Yates, DeBanc of America. Please go ahead. Your line is open. Hey, good morning. I've got two questions, please. The first is just to clarify on the Ag and Feed business. I think your full year guidance is around a mid single digit growth Can I just check, does that include the significant one off that you had in Q2? And can you give us a little bit more color on the severity of the destocks that you're seeing in Q3? The second question is just a follow-up. On the prior gentleman around the margin. And I'm interested in your thoughts going into 2021. You explained the impact of the foreign exchange there on the revised guidance. But in terms of the cost base, if you've only made half the planned reinvestments, next year, should we assume that you'd still intend to make the other half or in light of the the weaker volume development, are you revisiting those plans on the cost side? Thanks very much. Tina, if you could take the question, the guidance from Iron feet and Lars on margins, please? Yes. So on air and feed, we in Q2 report 27% growth and roughly 15% of that is due to the the agriculture one off. So that means that if you look at the half year, we grew 17%. And if you then correct for the one off we had in Q2, we'll get into the high single digit for the half year without that one off. That also means that when you look at, we are saying the mid single digit growth for the full year yes, that do include the one off. And we are looking at some destocking in in feed, we know the inventory level of our alliance partner, and you would also be able to see from the reporting of our alliance partner have also been out talking about stocking in the value chain. You have to remember that roughly twothree of sales in ag and feed comes from the feed part. And roughly a third comes from ag part from the ag part. And we still believe that there are uncertainty ahead of us in ag. That's due to farm economics, and we are also ahead of the Brazilian planting season, which we have ahead of us. Well, though we do still see innovation, continue to penetrate, both for us, as the was alluding to before, with the corn inoculants with TACRA and also with Balenciers. Thanks, Tina. And so on the margin, Yes, we are still committed to invest what we released the resources last year in support of accelerated growth, towards the 5 plus percent we have shared as our long term financial targets towards 2022. So specifically for 'twenty one, then of course, the actual margin, that we will record in 'twenty one will be a result of the leverage we get from, hopefully, growing, again, in 2021. And then with these investments, to support that growth, offsetting, then we will have to see where our current is at the time. But I think you should still think about our development in margin towards the 28% margin we have set as the long term target at the end of twenty 2. And then those were set. I'll just remind you, based on the level of currencies we had at the time of release in June of last year, We will see where those currencies are at the end of 'twenty two, but the underlying fundamentals are unchanged, and we are still committed to invest to accelerate our growth. Thanks for taking the questions. Thank you. Our next question comes from the line of Michael Nordea. Please go ahead. Your line is open. Thanks a lot. Yes, Michael Nordea. Just two short questions. Just going back to the comment on July. I know you're not going to give any major details, but also just to figure out whether July last year was sort of strong July, a soft July, a normal July. And then whether what you see in your July numbers, whether the slight decline is what you sense being mainly destocking or what is going on with it's more sort of the fundamentals of the market. And then secondly, maybe if you could just elaborate a bit more on how you see a potential recovery in tech and pharma? Given what we probably have ahead of us in the next 6 to 12 months in terms of a very tough environment globally in the economy? Thank you. I will let Hannah for the elaborate on the tech and pharma. But then to your specific question on July, last year was a strong July that makes the comparison for the relative from the results that we're seeing today. Even probably stronger, but it's important to mention that, we have seen a high level of volatility in the past. We saw it in Q2 especially on BioAg with the Bioenergy, where the sales drop, we saw a decline of higher than 30%. The signs that we see of a recovery, they are there, but we have also learned that it can change very fast and very rapidly. And that's the driver, the main driver of the range of that we're putting on the new guidance, the volatility and uncertainty, specifically on bioethanol. It is also true that in the first half of the year, specifically in Q1, we saw an increased demand because of stockpiling both at our customers or the end user facilities from both the surgeons and changing consumer habits on foot. We see the underlying dynamic of the demand and the consumers still there and continue to be there. We also see the strong penetration and commercialization of our innovation But we will we foreseeing the destocking effect strongly on the second half than the one and then that would be the expenses of what we the pickup that we saw in the first one. Johannes? Thanks, Jester. On Chicken Pharma, we continue to be impacted in this business also a full year, and we expect to see improvements over where we were in Q2 but not back to the levels of 2019. And I think it's important to stress that it's mainly textile that's our issue here and you can follow what retailers are saying. And when I look at the reports that's been coming out from Sarah and H and M and GAAP, they talk about 40%, 50% declines in their businesses. And that does translate almost directly into our sales. They expect improvements and so do we. Okay. Well, that was exactly my point that it's difficult see the major improvements going into the next 6 months of economic environment. Next question please. Question comes from the line of Son Samsung of SEB. Please go ahead. Your line is open. Just two questions from my side. In your guidance, the range of minus 2, plus 2, maybe you could elaborate a little bit on how much destocking you have included in, in, even say, each end of the range. That's the first question. And the second question is, you've seen actually a significant surge in the corn prices in China recently. Would that impact your starch business in China negatively in second half? Do you think? And if that's case, how have you factored that into your guidance for second half? Yeah. So, so in terms of, of of destocking, as we have said, there has been, a component of, stocking in the supply chain, and, in the beginning of the corona period, that was very, sort of a visible although we didn't have transparency of how much in both household care and food and beverage. In second quarter, we have seen some of that stocking in the supply chain return, so to speak, in food and beverage, whereas there is probably not so much of change during the quarter in Household Care. So I would say in the upper end of the range, we would assume a very little correction the supply chain, whereas if we are at the bottom, that would also imply somehow a recurrence of corona And so, so you could say in that end, that will probably not be a very significant impact from the, from any change in the supply chain. So I think that's how you should look at it. Again, probably household care where it is most prevalent. And we do in our guidance assume a bit of correction in the half from what we have seen in the first half. Andy? Yes. On the start side, I think one thing to note is that, we had a pretty big order pattern related effect in the first quarter in China in starch where we had really nice growth. 2nd quarter, we saw it slow down a little bit, but we're actually kind of ahead of where we expected to be. It's been a bit more robust than anticipated. I think for the back half of the year, we kind of expect it to stabilize at the higher corn price levels. And it's going to be somewhat related to how well the beverage industries perform. We expect a bit of recovery and that'll support, starch processing. Next question please. That comes from the line of Lars Shoppan of Carnegie. Please go ahead. Your line is open. Yes. A couple of questions for me. Last one is just a follow-up when you commented on the 28 percent margin target for the end of 2022, you pointed out that it was agreed upon in the summer of 2019 based on the exchange rates valid back then. Everything else equal, what would 28% look like based on the exchange rates we have today. And then is a question for you because now you've been around for for half a year. You have inherited a midterm growth target of more than 5% organic growth you haven't changed it. So does that mean you are happy with this target? And if you are, maybe you can comment on which divisions will more than that and which will grow less. And if you are not happy with it, maybe you can share some thoughts on when this might be reviewed, if it's going to be reviewed at all? Thanks, Lars. I'll take the first question on the margin. So I have to admit, I have not calculated with the current spot rates, what would it be in end of 'twenty two on our long term guidance? I think what occupies me more is that the underlying improvement in our margin stays intact and that we, through acceleration of growth, can continue to deliver gross margin expansion. And that we actually allocate the resource and capital to invest in that acceleration of growth to succeed. So I think that's where I have my focus, to answer your question specifically. I guess the impact of currency for this year is a good proxy for what the impact is since last year. But again, let's see where the currencies are at the end of 'twenty two And then, then, that will give us the final answer. And to your question, Lars, on guidance, we will have to wait for the final answer on the guidance when we're coming with the new guidance for next year. But what I can tell you for sure is that during this 1st 6 months, my 1st 6 months, we have been swiftly and firmly moving ahead with implementation of our strategy, and that's across the whole areas. Through prioritization and allocation of resources of innovation in the areas that deliver the most, and I'm focusing on the productivity and on the cash release on the areas that we see as the drivers of growth in those BPUs. Solid examples of the implementation of the strategy and the development new launches that we have provided across all areas. That's also a sign of the appetite of the world to the answers that we provide and to the breakthrough innovations to respond to the society needs. Another solid example is the penetration and the successful commercialization as we're seeing it in the supermarkets of freshness. Despite the challenging environments. Another example of the implementation of, our strategy is the acquisition of Precision Bionics. Where we set the platform and the foundation of growth for an area that we identified in a strategic priority for us. So in a growing world, I am very confident on the capability of us as a company to deliver sustainable earnings growth. And that's the commitment that they're getting from the team. And that's also the space that we're going to continue to work. As we did in the first half, its resilience, its liquidity, it's responding to the market needs and providing those questions into answers and moving formally and strongly every day a little step. Pay you happy with the more than 5 percent organic growth ambition until 2022? I'm, you know, going world, when a in an environment as in a way that it was set when we put the guidance, I'm fully comfortable on our capability to deliver. Then we have also learned and we have seen that there is a volatile wall, the one that we're living. And we just reinstalled guidance. I mean, that shows a sign of our confidence as we're learning and getting embracing the reality that we're living in. And we're going to do the same when we come with a new guidance for the long term. Thank you. Our next question comes from the line of Annette Luk of Handelsbanken. Please go ahead. Your line is open. Yes. Thank you so much for taking my question. Just want to go back to growth for Household Care plus 11% both Q1 and Q2. To reach the mid single growth, this means that it should be flattish And I assume this is primarily coming from a destocking effect. Can you tell us if we already saw that the destocking effect in July. And also, if we could share a little bit more on the components that we have talk about that. Do you have a better insight to what the components are behind the plus 11%? The period and all, I suggest that the weekly production is indicating a negative of around 10% for July. And that seems that you should be in the top end of your guidance. Do you agree on that if this is something that would persist for the remainder of the year. And then of course, how close are the correlation? I know it's not one to one. Are you possible, is it possible for you to increase your market share or are you increasing market share in this declining market? And what about the prices? That is my question. I will let Hannah Santana answer, respectively. So thanks for the question. Let me start out by answering the first household care question. And let me maybe start off by saying that we are very pleased with the sales performance in Household Care for the first half. Obviously, 11% is very, very strong. What drives us is a combination of a few things. First of all, we were building a good momentum in the second half of twenty nineteen. Driven by freshness in emerging markets that continued into the first half, and we are very pleased with that. And then we got a bump up with some COVID related effects. That relates to a few different things. 1 is stockpiling in the chain. It's both with consumers, it's in retailers and it's with our customers. And then we have also seen that some of our customers have now talking about more wash loads being done by consumers. And we've also seen a search towards higher quality detergents. So that's the drivers for the 11%. And that's also one of the reasons for us believing that we can't stay in that level that some of that will be reversed, especially when it comes to the COVID related effects on stockpiling. The exact effect of that is difficult to estimate. But in addition to that, we also had some very easy comps in the first half of 2020. And that, of course, does reverse as we get into much more difficult comps in the second half. You have to think about it this way that last year, first half performance or second half performance was 10% higher than the first half performance. And that's, of course, the territory that we get into now. I hope that answers the question. And then on Bioenergy And Ed. Yes, so as you're saying, in there isn't always a direct correlation between the behavior our customers are having and the EIN numbers. But as Lasse has alluded to earlier, it is a good indication. And we also see that in our numbers and in our close interactions with our customers that they are also starting to pick up If you look at the first half of twenty twenty, then our performance is roughly aligned with what it is that EIA have come out with. However, when we look ahead, you are right in that EIA is looking at a slight increase compared to where you are year to date in the EIA numbers. So they are looking at moving from roughly around minus 15% to 11.12 percent minus for the full year. So they are looking at, at, at some increase, in second half. However, we do believe that there are uncertainty in the fuel area still. So in the lower end of our guidance, we have included a worse situation than what it is that EIA is a this is expecting almost twice the decline as what it is you saw in first half. You also asked about what were the effects due to, and I would say that it's the performance we have seen in the first half is due to less ethanol being produced we see limited or hardly any share moves and and limited effect of price mix. I hope that answers your question. Our next question comes from the line of Sebastian Bray at Berenberg Bank. Please go ahead. Your line is open. Good morning and thank you for taking my questions. I would have 2 please. The first one is on the ramp up in Fashion sales from memory at the outset of this product, a guidance of about 1,000,000,000 DKKK was given per annum or an ambition. How far are we there? Are we currently at about a 40% to 50% run rate as a rough guess? My second question is on the acquisition of Precision Biotech Historically Novozymes, I think, has had a ratio of roughly 10% microorganisms to 90% enzymes in sales. Is there any scope for this to shift in future? Thank you. Hannas, if you can take the first question, and then Thomas on the comprehensive biodex please? Yes. So thanks for the question. We don't guide specifically on the sales of freshness And maybe a few comments that I will make is that Freshsians for Novozymes right now is still with Procter And Gamble only We are on the plan that we set some years back with PNG and that actually is being executed very well. If you follow what's happening in on the commercial side of this, you can also see that they are out talking about the technology relate to what we have developed with them. So one thing is we are on target with P and G for the launch. The other one is that we are in investing in other technologies for the broad market. And those are also, coming along as we planned originally. And we are talking about a launch in the mid of 22, where we expect to go out to the broad market with solutions in this space. But giving an exact number of where we are, we are not, but we are still committed to the 1,000,000,000 on freshness. And when it comes to the acquisition, then you're absolutely right that currently, our business has a split of my crops around 10% and in times around 90%. We're not operating on this ratio. This is just where we are. And looking at Novozymes, we have the toolbox of microbes and enzymes. And whenever we see opportunities in the marketplace, we're looking at the totality of our toolbox, not that it has to be one of the other, and that's actually one of the strengths within our one health activities, we're also looking at enzymes and within our more existing businesses. We're also looking at microbes. So we will apply the total toolbox going forward. Bear with me. There's a little bit of a follow-up. Yes. So sorry, I just want to correct that now for everybody on the call. It's mid-twenty one that we come out with a broad market solution, not mid-twenty two, sorry about that. The last question the queue so far is from the line of Silke Cook of JPMorgan. Please go ahead. Your line is open. I was wondering if you can discuss your organic growth performance in July on a regional basis. So on Slide 4, you're going to talk about your first quarter results and your first half results. I was wondering whether you can do something similar for your July sales. And I was also wondering whether when you look at the 1st 2 weeks of August, I was wondering what you've seen so far. Thank you. Thank you for this very this last question. We typically don't disclose results by the month, not by the way either if anything, it is the guide or the sentiment that we're bringing in, it is that we it's in alignment or what would be projected. And then it's included in our forecast for the year. And I'm going to repeat probably what it has been said during the call that we are aiming for strong for a solid mid digit or single digit growth for 3 of our businesses. For household and care, for food and beverages and for ag and fit. And being the surgeons or technical industry and BioAg, the drivers of highest level of uncertainty, especially on bioethanol, the highest driver and certainly bioethanol, bioenergy. And that's the poles that we're living in. We're seeing good signs, but we've also seen fast moves in the industry and we've seen them fast. As US Economy recovers as the social distancing lease and as gasoline demand consumption increase, then we will translate those opportunities into sales for our enzymes and make sure that we capitalize them to the bottom line. Thank you. As there are no further questions this time. I'll hand back for the closing comments. With many of you.