Good morning, everyone, and welcome to this Novozymes conference call. Thank you all for calling in. My name is Tobias Björklund. I am the head of investor relations. I am joined here today by the full management team, as well as the rest of the investor relations team. Our CEO, Ester Baiget, will begin today's call by reviewing our performance in the first quarter, followed by CFO Lars Green, who will cover the financials. The presentation should take around 15 minutes, and after that, we will be happy to take your questions. Some of the matters we will discuss in this conference call are forward-looking, and I would like to remind you that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.
With that, I will now hand you over to our CEO, Ester Baiget. Ester, please.
Thank you, Tobias. It's a pleasure to be here speaking to you all. I started my role as CEO of Novozymes on the 1st of February, and I embrace this responsibility with a lot of pride. In Novozymes, we translate some of the world's most pressing needs into opportunities, and we answer them with science. When I look at Novozymes, I see a healthy company. I see a company with skilled people, an incredible innovation pipeline, and very strong financials. I also see a company that holds a great potential for further growth. To unleash that potential, we simply have to do what we are designed, what we are set for, solving global needs with biology. While doing so, we also commit to deliver higher sales, earnings, and value creation. I am a Spanish national by birth and a chemical engineer by training.
I came to Novozymes with 25 years of professional experience from Dow, where I worked in a broad range of businesses, functions, and across different regions. I've had the privilege of leading strong teams, making good businesses even better, and advancing from challenging situations. I know for a fact that change rarely comes easy. It takes hard work. It takes dedication. It takes a strong purpose. It takes good leadership, and it takes clear direction. That is why I and the executive leadership team, together with the Board of Directors, we are determined to deliver. I look forward to leading Novozymes on its exciting journey, and I can assure you my full commitment towards delivering on our strategy, Better business with biology. Now, please, if you could turn into slide number two for review of our first quarter performance.
As you already know, we delivered a very strong first quarter with 10% organic growth coming from all main businesses and geographies. I am impressed with how the organization has been able to fully meet customer-specific demands and even in these very difficult and turbulent times. However, as we communicated on April 7th, the ongoing COVID-19 pandemic has forced us to suspend the 2020 outlook, and this is still the case. The first quarter EBIT margin came in at 28.9%, which is a significant improvement on the last year. The good development was driven by efficiency gains and higher operational leverage. The cash flow for the quarter was also strong with DKK 825 million , which is roughly twice the amount we reported on the first quarter of 2019. From an innovation perspective, we launched two new products in addition to making new Freshness solutions available to the market.
Before we review the business segment, let's look at the geographical sales performance. Please, if you could turn into slide number three. In the first quarter, organic sales grew by a strong 13% in emerging markets and by a solid 8% in developed markets. The strong performance in emerging markets was mainly driven by Bioenergy, Household Care, and Food & Beverages. Sales in the developed market was led by Household Care and Food & Beverages. The growth on these two segments was partially supported by a higher underlying COVID-19 related consumption and consumer and customer stockpiling. Now please turn into slide four for Household Care. In Household Care, we had a strong start of the year with 11% organic sales growth in the first quarter.
Our good underlying momentum continued into 2020, driven in part by our Freshness platform, where we made a new enzyme for liquid and unit dose detergents available. This new solution is now on the shelves in many European countries. The sales on the first quarter also benefit from the COVID-19 related demand, especially in Europe and in North America, as we saw customers there stockpiling critical materials and where the consumers also loaded their pantries and did more laundry and more dishwashing at home. In emerging markets, we delivered a strong growth in Middle East, in Africa, and in Latin America, where the sales in Asia Pacific were hampered by declining sales in China as consumers experienced COVID-19 restrictions. Looking ahead, the COVID-19 related stockpiling effects will likely be offset when the pandemic eventually subsides.
We also expect sales to benefit from continued market penetration with existing enzyme technologies and our Freshness solutions. The full year sales indication for Household Care remains volatile but roughly intact, and that's based on our current insight and the assumption that both our own and our customers' logistics will continue to function relatively normally. You could please turn to slide five. Our organic sales in Food & Beverages grew 11% in the first quarter. Strong performance was driven by growth in baking, in beverages, and grains, while sales in food and nutrition declined slightly. The sales were particularly strong in baking, with growth from both well-established fresh keeping and flower correction technologies, as well as from consumer health-oriented offerings such as acrylamide reduction for baked and fried goods. In the first quarter, we launched a new member of the Saphera product range, Saphera Fiber.
Saphera Fiber is a solution that converts lactose in milk into soluble dietary fiber. This new product offers multiple consumer benefits in milk, including sweetness without added sugar. It also brings increased dietary fiber content for better digestion and reduced lactose for consumers with lactose intolerance. Saphera Fiber grain extraction, it will support the dairies to provide healthier foods to the consumers. The sales in the first quarter were affected by COVID-19 related demand. Although it's difficult to assess its impact, it's likely that stockpiling and the shift to eating at home, that lead to extra demand to some of our solutions. For example, in baking. This trend we'll assume to be offset when the situation eventually settles.
The full year sales indication for Food & Beverages remains volatile, but roughly intact based on our current insight and assumption that both our own and our customers' logistics will continue to function relatively normal. We could please turn into slide six. Our Bioenergy business posted a strong performance with 11% organic sales growth. The overall performance was as expected, with growth coming from the continued capacity expansion of corn-based ethanol production in Brazil, the increased penetration of our yeast technology, and growing U.S. production volumes. The first quarter sales were not significantly impacted by the sudden drop of U.S. ethanol production as it only started in the last week of March. Looking at the full year, however, the social distancing and the people are staying at home, that will have an impact for gasoline demand and ethanol, leading to significant drops of our production volumes.
Bioenergy is the segment where we see the most uncertainty for the full year, and it was also the main reason why we had to suspend the outlook. If we could please turn into slide seven for reviewing Agricultural & Feed. In Agricultural & Feed, we grew 8% organically in the first quarter, led by a strong growth in Bio-Ag and accompanied by a solid performance in Feed. The growth in Bio-Ag was driven by a strong inoculant sales in North America, but also enabled by the relatively easy comps. The business was transitioned very well into the new partnership model with Bayer. We have also made progress with other Bio-Ag partners, including Syngenta, with whom we just launched Taegro, both in Europe and in Latin America.
Taegro is a unique biological fungicide used to combat fungal diseases. This technology helps farmers to protect their fruit and vegetable crops against frequently occurring diseases, and today are currently mainly combated with the use of chemical pesticides. Animal Feed also benefit from inventory moves across the value chain and continued the commercialization of Balancius. Balancius is an exciting technology for improved gut and health in poultry, which together with our bio-inoculants, will continue to drive sales in 2020 and beyond. We continue to highlight that the full sales in Agricultural & Feed are subject to market uncertainty related to global farm economics, trade concerns, and potential COVID-19 disruptions. Finally, let me add a few comments on Technical & Pharma.
Organic sales in Technical & Pharma declined 10% in the first quarter, and this decrease was mainly caused by the timing in pharma, as well as the declining sales we saw in textile due to COVID-19 disruptions in China. With that, I will hand over to Lars for the financials and for the wrap-up. After you, Lars.
Thank you, Ester. Please turn to slide eight for a review of our financial performance in the first quarter. Sales in the first quarter grew 10% organically and 9% in reported DKK. Strong performance was led by double-digit growth in Household Care, Food & Beverages, and Bioenergy, accompanied by solid growth in Agricultural & Feed, while sales in Technical & Pharma declined. Gross margin for the first quarter ended at 57.1%. This was 160 basis point improvement on the first quarter of 2019. That was mainly due to productivity gains, lower input costs, and higher operational leverage resulting from the strong sales performance. Strong top-line performance also had a positive impact on the EBIT margin, which ended at 28.9% for the first quarter. This was a 320 basis point improvement on the EBIT margin compared to the first quarter of 2019.
In addition to the higher operational leverage driving a lower OpEx to sales ratio, the EBIT margin also benefited from the improved gross margin. The return on invested capital, including goodwill, ended at 21.3% after the first quarter of 2020. This was 300 basis points higher than in the first quarter of 2019. Improvement was due to the higher net operating profit after tax, which more than offset the increase in average invested capital. Net investments in the first quarter of 2020 amounted to DKK 138 million. This was on par with the first quarter of 2019. Free cash flow before acquisitions was DKK 825 million in the first quarter of 2020. This was DKK 405 million higher than the free cash flow of DKK 420 million in the first quarter of 2019. The strong development between the periods was mainly driven by higher sales and margin expansion.
Even with a very good first quarter realized in the books, uncertainty persists for the full year. Our outlook for 2020 remains suspended until we get a better understanding of the implications of the current situation. As we communicated on April 7, the share buyback program totaling up to DKK 1.5 billion will continue as planned, and the company's dividend policy and its capital structure policy are unchanged. Please turn to slide number nine. Let me summarize the messages here today. We are operating in turbulent times with limited visibility. Despite this, it's very encouraging to see that we are able to capture growth opportunities as they arise. Novozymes is geared to deliver even in difficult times when supply chains are under pressure and access to consumers becomes more difficult.
With a strong start to the year in sales, earnings, and cash flows, we are showcasing our company's strengths and what we can achieve together. That said, there is still a lot of uncertainty, especially with respect to the U.S. ethanol market and stockpiling effects. Thus, our outlook remains suspended. Looking beyond 2020, we are seeing good progress in the implementation of our strategy, Better Business with Biology, and we are working hard to drive sustainable and profitable growth. For obvious reasons, we will not be traveling in the coming days, but we will instead host a series of conference calls. We're looking forward to meeting you in that virtual setting. That concludes today's presentation, and we're now ready to take your questions. Operator, please begin.
Thank you very much. Ladies and gentlemen, if you have a question, please press star and then two on your phone keypad now in order to enter the queue. After I announce you, just ask that question. The first question is from the line of Søren Samsøe of SEB. Please go ahead.
Yes. Good morning.
Good morning.
My question is regarding Household Care. If you could talk a little bit about how you see the rest of the year progressing. I was not completely sure how you saw it from what you wrote it in your report. If you can say something about what you have seen in April and how quickly you will see from your customers, the detergent producers, when they react, how quickly can you normally see that reaction in your numbers? For bioethanol, as what you see currently in April is quite different from Q1, I guess, and also what you see for the rest of the year in that division. Thank you.
Thank you. I will let Anders and Tina go deeper on the results for the other drivers as we're seeing, answering your question in more detail for individual segments. Overall, on the net effect that we have seen in Q1, the positive effect and the translation into sales of the increased demand for the change of consumer habits from both from a stockpiling in detergents, but also the intrinsic increased demand of detergents with a higher quality, or also the increased number of dishwashers or detergent laundry at home. The combination of those aspects, that was an increased accelerated sales that we captured in Q1.
The areas that we saw in bioethanol, we saw that forecasted decline in Q1 area, but not necessarily reflected in our books because it was a trend or for projections that we would see from the demand to come as we are forecasting now. The overall net stockpiling effect and increased consumer trends for both detergents and consumer changing dynamics with also the forecasted tendencies of bioethanol linked to the lower gasoline demand, that's continued to prevail as long as the gasoline is not increasing. With that, I leave it to you, Anders and Tina, to go in deeper.
Three questions, and thanks for those, Søren. On the rest of the year, I think it's fair to say that there are a lot of uncertainties as we look into the year. We've had a very strong start to the year. I think Ester alluded to two of the factors. One relates to stockpiling, the other one relates to intrinsic demand. We believe that the majority of what we have seen of the positive momentum above what we had of momentum in the back half of 2019, it relates to stockpiling, but there is also a demand component, especially in North America and in Europe. I think some of the uncertainties that we see are partially split between stockpiling and demand, but we don't have full visibility to how that will play out the rest of the year.
I think the emerging markets in general is a place to watch out for in terms of their supply chains and the stability in the economies that can concern me a little bit. I think we will have more stability in North America and in Europe for a year. In relation to April, we have seen continued good momentum in April.
If you follow, which I guess relates to your last question, if you follow the cash register data that comes out of Nielsen, you'll also see that it has been going up and down quite dramatically. Over the last couple of weeks, we've seen demand softening quite a bit, and even in some geographies it's gone down to negative. That means that will hit us back to more normalized levels as we get into Q2. When you talk about customers and the effect on us, I think this is a very special case, and I would not use that as a proxy for the future. We have seen sort of a delay in our business of around a couple of weeks with these very, very dramatic jumps that we've seen in the consumer off takes.
That's a very unusual situation, and I think in all of the years I've been in this business, I've never seen week-by-week variations as we have seen over the last six to eight weeks. Again, I would not use it as proxy, but that's the development we've seen over the last couple of months. I hope that answers the questions.
Over to the Bioenergy part. Already when we started the year, we talked about that the Q1 would have a wider range, compared to company average, and that has indeed been the case. As you have seen, we had a very strong Q1 driven especially by capacity getting online as well as some of our innovations, especially in the yeast space, as Ester already has alluded to. It was also supported by, if you look at the EIA data, some increased production volumes. However, as you also are so right, Søren, when you look at the year-to-date numbers, they are in EIA, and if you follow the weekly numbers, they are in significant negative territories, which is the reason or one of the key reasons for why it is we suspend our guidance. We also see that in our numbers.
However, I think it's important to remember that when margins gets back up, when it is we get ethanol producer margins into more positive territory, then Novozymes is very well positioned given our broad product offerings as well as the closeness we have to the customers in order to take advantage of when we get back up and get sales back on track. You are right, what we see in April is very different from what we saw in Q1.
Our next question is over to the line of Laurence Alexander at Jefferies. Please go ahead, Laurence, your line is now open.
Good morning. Hi, Ester. I guess a quick question on how do you think about Novozymes' operating rhythm compared to what you're used to in terms of how fast the system is responding? Secondly, can you give a sense for with Bioenergy, is the mapping from the EIA data going to be linear, or do you have some offsets that will reduce the volatility in your segment?
The way I see Novozymes, it's been a little bit more than two months since I'm in this incredible company, and I'm amazed on the strength of the company. It's well fit and positioned for the long-term growth, and also our commitment in long-term shareholder creation. If anything you can say on the rhythm of the pulse of the corporation, I think that Q1 results clearly speak for that. 10% growth and nothing else than the sum of a collective efforts across many areas. It was, yes, a good momentum from Q4. It was also the effective implementation of our strategy. It was moving ahead with implementation of commercialization of innovation, but it was also swiftly and effectively reacting to unpredicted change on demand. We first absorbed the volatility in Asia, that we saw the decline, and we reacted to that resiliently.
We have kept all our plants running despite the headwinds. We translated the increased demand that we saw at the quarter end from stockpiling and change in food and in detergents into sales. That pretty much to me speaks about the good rhythm, a good pulse, a good resilience. Yes, it's a journey. We have done good progress on the prioritization of our innovation pipeline, ensuring we're putting the right focus, good momentum, and you have my commitment to continue on that direction. On your question on Bioenergy, I will let Tina go deeper on that one. What I can tell you is that we are not immune what is happening in North America. Up to 50% drop demand in some of the states, that's a big number. At the same time, we're broader than North America, and we're broader than enzymes.
We have a global portfolio. We have a strong pipeline and efforts on penetration of yeast. We were capitalizing, in Q1, and we're going to continue on the momentum of the growth in Asia. Those are areas that we're backing up, and Tina's team is fully committed on mitigating the downsides that we're seeing in North America.
Elaborating on what Ester said, we are influenced by the decline in miles driven as well as the low margin environment which there are in the U.S. The biggest impact is the decline in miles driven. When gasoline is not consumed in the U.S., there's no need for ethanol either in that miles which are not driven. You should not expect us to be immune. As Ester also alluded to, we are still seeing, in Q1, growth coming from especially Latin America, but also other emerging markets, and then our innovations in the yeast platform. We are well-positioned when miles come back up. Hope that answers the question.
Thank you. Yes. Thank you.
Okay, the next question is from the line of Gunther Zechmann at Bernstein. Please go ahead. Your line is open.
Hi. Good morning. Thanks for taking my questions. Two, if I may. First of all, you mentioned in the press release a negative mix on gross margin. Can you just describe what's driving that negative mix? The second one for Anders, can you just talk us through what you're planning for the rest of the year for the European rollout of the Freshness platform and the exclusivity with Procter, how long that will continue? If I can sneak in a follow-up on that, when you're planning to launch the product in North America? Thank you.
Thank you, Gunther. Anders, if you could answer the Health and Hygiene related. Then I pass it afterwards to Lars on the margin.
Yes, thanks for the question, Gunther. The European rollout is moving according to plan. We're now, as we have also said, coming into the liquid segment and the unit dose segment, and we are sort of progressing throughout most of Europe and several countries have been rolled onto with the technology. Essentially just as we had planned a couple of years ago. When we talk about exclusivity, yes, we have exclusivity, and the good thing about that is that as long as our partner commits to the volumes that we've agreed, we will remain having that exclusivity. It looks very much as if that's the case. That does not mean that we will not have Freshness technology for the broad market, but it's not the same technology. We have all along planned that that will be launched sometimes in 2021.
That is still our expectation for the broad market. For North America, we do not give specific guidance. Of course, we have plans together with our development partner, but we do not give specific guidance on timing simply because of the agreement that we have made with our development partner. I hope that answers the questions.
When it comes to the gross margin, I think, first of all, I'd like to reiterate that we actually had 160 basis points expansion of the gross margin. We sort of try to explain in our note, how is that composed. Compared to history, we actually have a less negative impact from product mix and price in this first quarter. Actually a bit better than what we have seen in the past. I remind you also that in the first quarter of last year, we had deferred income in our sales, a little bit of that did not carry any production costs. That also is a small negative on the gross margin when you compare it quarter-over-quarter. Underlying improvement is actually stronger than the 160 basis points that we have as the reported number.
That's really helpful. Thank you both.
Okay. The next question is from the line of Michael Novod at Nordea Markets. Please go ahead, Michael. Your line is open.
Thank you very much. Just two Bioenergy questions. One is to the emerging markets and Brazil. We've seen Brazil going out saying that they're cutting growth forecast by approximately 15%. How are you planning for this? Is that something that you also see sort of continuing into quarters beyond the second and third quarter? Secondly on U.S. Bioenergy, we saw ADM cutting around one third of their capacity, a bit more than one third of their capacity, and furloughing employees for next four months. Just to get a feeling on how you are sort of planning for this, because that's into August that they are furloughing employees.
Just to get a sense of how long you see that this pressure in the ethanol market, of course, driven by fewer miles, but just in your planning processes, how you see the sort of the stretch of this going on.
Thank you, Michael. I will let Tina follow up and give you further details. In general, we saw healthy growth in Q1 on Bioenergy. That was the good momentum in North America, the new capacity adds in Latin America and Brazil, also the penetration of our yeast technology. It is true that the industry is facing headwinds across many different areas, being probably North America, the region most exposed. Before we go deeper in Bioenergy, I only want to remind that the versatility of our portfolio. That's the beauty that Novozymes bring in on how we're playing globally. Also the diversification of our mix on how to overcome what is a fantastic market over the cycle. That we have a strength in other areas for the next of the year.
Thanks, Michael. First on the emerging market, and especially on the Latin American setup. As I know you know, most of the ethanol in Latin America is coming from sugarcane. You'll have to think about the profitability of sugarcane ethanol versus corn-based ethanol, and corn-based ethanol is more profitable there. However, that doesn't mean we are immune to the decline in miles driven in that segment either. I think that what you should look at is a healthy growth into one in emerging markets, and especially in Latin America, and then think about that, in general, the volatility we have in the Bioenergy markets, but especially in the U.S., but also in other geographies, is one of the key reasons for why it is we are suspending guidance. It is difficult for me to predict on how it's going to end.
More specifically on ADM and the U.S. setup and them cutting back capacity into August. I think you'll have to look at that we need to get the miles back up, but when we have got the miles back up, we also have seen, you've heard me talk a number of times about increased inventories in the Bioenergy space, and that has not become smaller in this period where, in fact, inventories have got up higher. There's also some inventory to be burned off. That means that there are uncertainties. The way we operate with it is that we have some different scenarios which we are trying to navigate. In all cases, we are preparing in order to be ready to be there, work with our customers, even in these times.
We have our guys out working closely with customers in order to be able to deliver the products and the solutions which they need for those who operate, but also when they're ready to ramp back up. It is one of the key reasons why we have suspended our guidance. I unfortunately cannot give you more insight into how long and how deep is this crisis going to be.
Thank you very much.
Okay. Before going on to the next question, which is the line of Silke Kueck from JP Morgan, if anyone has a question, again, could you please press star and then two on your phone keypad now? Silke, we're over to you. Please go ahead.
Thanks so much. Good morning. My question is that going into the quarter before the COVID-19 pandemic, it looks like expectations were maybe for mid-single-digit growth across the various businesses. As best as you can estimate, do you think the benefit from the pandemic and pre-buying was maybe about half of your organic growth in the first quarter? Or do you think it was less than that? My second question has to do with the trends in detergent enzymes. We also do look at the Nielsen data, and it does look like that many things continued. Personal care items were in demand in April as well. Detergent enzymes specifically, market detergent sales dropped off.
I was wondering whether you can discuss what happened to your detergent enzyme sales in April, whether they, in fact, were positive, up slightly, or whether you think your April results were negatives. Lastly, I have a question on your cost structure. That is, given the volatility in demand, what do you think the levers are that you can pull, or what are the things that you can do? Do you have a general idea over shorter, over longer term, what the right level of SG&A expense and R&D expense should be for Novozymes? Thanks very much.
Thank you. That was a broad question, and I'll give it to Lars to go in detail. In an overall scope, we are here for the long run. We are a long-term growth company, and we consistently and continually investing for the long term. Having said that, we're very conscious on the situation that we're living today, and we also align into the reality. We're taking precise measurements to ensure we maximize the use of our cash, and we align to the situation that we're living today, but not at the expenses of compromises for the long term. There is a future after coronavirus, and we're continually investing for that future because our solutions are going to be part of that future.
To your question on what is the split of the growth between organic growth and stockpiling, maybe I will take that from another angle, and that, yes, we capture both. The good momentum that we saw for Q4, but also the increase of, or the change of dynamics from consumers, and then the stockpiling effect. What it's important is that we did capture unprojected or unpredicted demand. That speaks for the resilience of the organization, the strength of our supply chain, the reliability of our operations, and yes, the good relationship of our sellers with the customers that were there to translate that unpredicted opportunity into sales.
Lars, after you.
Yeah. Thanks, Ester. Just adding a little more flavor to it then, as we also said in our call early April, we came into 2020 with good momentum from second half of last year. We also did see our sales accelerate through the first quarter. Therefore, I think it is fair to assume that part of the extra or accelerating sales in the latter half of the quarter has been related to stronger demand in some areas, but also a level of stockpiling. The reason we suspended guidance is that we really cannot say exactly how much is what, and also for how long this situation will last. Maybe just one more comment to it. First quarter of last year in 2019 was a relatively weak quarter, and so therefore the comparison was also relatively easy.
We are somewhat ahead of our plans in the first quarter, so you should see the performance and the 10% in that light. On the cost structure, we did, in the third quarter of last year, implement a restructuring of some of our functions, and we did release a certain level of resources that we are planning as part of our strategy to reinvest to support our pipeline and support our commercial activities to accelerate our growth. We are committed to do that, although in these circumstances it is a bit difficult to execute completely on the plan. We're trying to then be smart about how we do it, and for instance, accelerate some of our digital investments that allows us to interact with our customers in a smarter way. That's how we go about it.
We are committed for the long term to implement the investments as we planned in our strategy.
If you want an answer on the question on April on Household Care, specifically, as I also said before, we see a solid momentum continue. My analysis of the situation is that the disruptions we're seeing in the supply chain, driven by very strong consumer demand in March and parts of April, is now being replenished in the entire supply chain, That's the effects that we see continuing into April. Again, as I said before, we see around a two-week delay in this period where when disruptions happen, we see that translate into our numbers in a couple of weeks' time.
Does that answer your question?
Yeah, I'll get back into queue. Thank you.
Thank you. In that case, I believe the next question is from the line of Jonas Hansen at Danske Bank. Please go ahead, Jonas, your line is open.
Thank you, good morning, all. A couple of questions from my side. First of all, could you talk about how the lower oil price is affecting your business, besides in Bioenergy, of course, in general terms, both positives and negatives? Specifically within the Household Care, where you're also talking about a continued penetration story of enzymes into detergents, but how is that affected by the lower oil price? Secondly, on Bioenergy then, and yeast, how is the sales in yeast being affected by the sharp decline in ethanol production? I guess it must be much more tough to sell and push the penetration story here. As a follow-up, how much of revenue in Bioenergy is coming from yeast today?
Thank you, Jonas. In the oil price relationship to our sales or the dependence, I would call it more like an indirect effect. If you would see oil as a indication of the consumer demand, because typically, historically, they have been related, then there is a very strong correlation. There is in some areas that we have a high exposure or higher linkage to oil prices on the excess demand of bioethanol beyond the 10%, which is required by regulatory. There is also some elasticity on replacement of enzymes from other alternatives oil-based. In general, demand of our products, it depends more of consumer needs and demand and acquisition power than oil prices itself. It's the value and the differentiation that we bring in and the willingness to pay for those attributes. Historically, typically, it has been related to oil prices.
There is a correlation, but maybe oil price, it's the effect or the symptom, not necessarily the driver or the area that triggers the demand of our products. With that, also I will pass it to Anders and to Tina, if you could maybe further level out on the specific trends that we see in detergent and also the implementation of yeast.
Thanks for the question. Short term, there's little effect on developments in oil price on Household Care business. It is not triggered on weekly developments. Longer term, as you can also see if you make sort of a correlation analysis, there is a certain correlation, but it's not a 100% correlation. I think the way that I look at this is that the best for Novozymes is long-term, sustained high oil prices with stability in price
That is what creates the least disruption in the chain, and it's also where you sort of have the longest motivation for our customers to make the reformulations. The opposite to that is, of course, a long-term low oil price, and I think we have to accept that that makes some of our reformulations positioning more challenging and more difficult.
On the Bioenergy and the yeast side, you are right that it's more difficult for us to push the continued penetration of yeast, simply given that we cannot travel out to customers and run the trial them and support them in doing that. We are using a number of digital means, and that is helping us part of the way. It is slowing down the general penetrations also because yeast sales, you could say, when you have implemented the yeast, also follows the production of ethanol. From that perspective, it's true that it is in general with new solutions, it is more difficult to try them in these circumstances. In terms of how much yeast is out of our Bioenergy sales, it is getting to, I would say, a significant part.
I think where you should look at it is mostly that it's growing very nicely given we have got a number of new plants online, and therefore, when you compare to Q1 for last year, it is a key growth driver. From competitive reasons, I would like to refrain from giving you the exact number on how much yeast is, but it is getting a significant part, but enzymes are still the vast majority of what we sell in Bioenergy.
Okay. Fair enough. Thank you very much for your answers.
The next question is from the line of Sam Perry at Credit Suisse. Please go ahead, Sam. Your line is now open.
Hi. You talked about the pull-forward impact of COVID in Household Care and Food and Bev. Is there any aspect of that within the Feed business within Ag and Feed?
Thank you. I'm going to pass this last question to Tina to further elaborate on that one.
On the Ag and Feed side, we have seen, I would say, less of an influence directly. We do see some moves in the supply chain, and part of that will be, you could say, normal supply chain moves. Part of it may be COVID-19 related. That is not COVID-19 related, but think back of our January announcement, we were also calling out that we expected more volatility in the Ag and Feed segment, and that has not become less after outbreak of the COVID-19. Some moves in the supply chain we do see, especially on the Feed side, but also some on Ag, but mostly on Feed.
Great.
Thank you for your time, for the dialogue, and I'm looking forward for continuing the conversations with many of you and for the Q session in soon. Thank you.
This now concludes today's call. Thank you all very much for attending. You can now disconnect.