Earnings Call: Q3 2018

Oct 24, 2018

Good morning, and welcome to the Novozymes Conference Call. My name is Peter Holginilsen, and I'm the CEO of Novozymes. I'm joined here today by the executive leadership team and investor relations. Today, we'll review our performance for the 1st 9 months of 2018 and key events for the We delivered a satisfactory set of numbers in the 1st 9 months. Organic sales growth was 4%, including 5% in the 3rd quarter. Both earnings and cash flow were solid. Our innovation pipeline is strong. We have several near to market opportunities, and we commercializing products from a majority of our priority innovation platforms. We support our innovations with solid investments in commercial activities including increased presence in growth markets such as Southeast Asia and Africa. While there's good momentum in the overall business, there are variations between industries. Bioenergy and BioAg are performing well. Household care and food and beverage Both grew in the quarter, but came in below our expectations as they are impacted by instability in markets in the Middle East. We expect this challenge to continue through the fourth quarter. Despite this, we maintain our full year organic growth guidance but believe it's more likely we'll finish the year with organic sales growth in the lower part of the 4% to 6% range. For EBIT margin, we report a solid 28.2 percent after the 1st 9 months, including 28.5% in the 3rd quarter. Net profit grew by 3% for the 1st 9 months, and we're increasing our full year outlook from flat to now 1% to 3% growth. But let's move on to a closer look on the of the regional sales development. Please turn to Slide number 3. It's satisfying to see that both emerging and developed markets overall are posting growth. Latin America grew by 8% after the 1st 9 month, and was mainly driven by increased corn ethanol production in Brazil and by food and beverage. In Asia Pacific, Household Care is performing well, whereas our starch business is a bit challenged by the lowest spread between starch and sugar prices. Growth in the developed markets was driven by strong bioenergy and bio act sales in North America, whereas Household Care is still challenged. With this quick review, I'll hand it over to Anders to go through Household Care. Anders, please. Thank you, Peter. Please turn to slide number 4. Household Care grew organically by 2% in the third quarter and ended flat after the 1st 9 months of the year. Continue to see good momentum with regional customers, particularly in the emerging markets. China delivers strong growth supported by new innovation and growth of liquid detergents. Africa And Southeast Asia also delivered solid growth in the 3rd quarter. The emerging markets are more dynamic and we are experienced weakness in the Middle Eastern markets where economic distress and trade conflicts create instability. This was especially true in the third quarter where sales came in lower than expected. As I've communicated earlier, Our laundry business is negatively impacted by some of our large global customers, and it dampens the overall growth for Household Care, especially in the developed markets. From an innovation perspective, I'm very excited that our first product of the Freshness and hygiene platform ramp up and gain positive attention. See good development in the Philippine market and the technology is gaining traction on social media. The search impediment include the technology will launch in more emerging markets during fourth quarter before a broader rollout next year. Outside laundry, our dishwash business delivers solid growth. This was driven partly by the recent addition of a new enzyme class and by increased demand for phosphate free automatic dishwash detergents. Moving on to technical and pharma, organic sales declined by 9% in the third quarter and by 7% for the 1st 9 months of the year. Timing remains the main explanation for the decrease and relates primarily to farm. In addition, 3rd quarter sales was weak as the textile business performed below expectations, again, due to challenging Middle Eastern markets. Rounding off, I'm happy to announce that we will launch a new enzyme technology that allows wastewater plants to reduce water content in their slots in the fourth quarter. This helps plants reduce chemical usage, energy consumption and overall disposal costs, while initial sales are expected to be limited We are we are excited about the new launch as it brings significant benefits to wastewater operators and to the environment. And with that, I'll hand it over to Andy. Thanks, Alice. Please turn to Slide 5. Overall, we're satisfied with how food and beverages developed over the 1st 9 months. The business grew 4% organically compared with last year, and we're making good progress commercializing our innovation platforms, including Frontier for grain milling, and Palmora for vegetable oil processing. I'm also happy with the increased traction for our solutions that address the growing level of health awareness among consumers. While performance for the 1st 9 months of the year was satisfactory, our Q3 result presented a mixed picture. Beverages and food nutrition both had a strong quarter, while baking and starch were somewhat weaker. As mentioned in the Q2 comp call demand in certain Middle Eastern markets are under pressure because of the economic distress and tension from trade conflicts. We see this negative effect creating drag in our third quarter sales. Food nutrition delivered another strong quarter, driven by Safira, our product for lactose reduction in dairy. In starch, there is good traction for our new grain milling technology, but commodity price movements in Asia Pacific are creating headwinds. Outside Asia Pacific, the starch business performed well. In baking, our revenue is down as expected due to planned fresh keeping price reductions. Some of the pricing headwind is balanced by increased volumes as well as growth in the emerging markets. By the end of first quarter the year. Summing up, there's solid progress in the food and beverages business. Our growth platforms are advancing as we target innovation towards new segments such as palm oil and grain milling. Our emerging market expansion is showing good progress in delivering results, although the Middle East is putting a damper on our performance, especially in Q3. We're currently working through some headwinds in baking and starch, but once these are resolved, we expect an improved overall result for the business with healthy growth. With that, I'll pass it to Tina. Thank you, Andy. Let's start by looking at Bioenergy on Slide 6. 9 months into the year, I'm very pleased to report that Bioenergy continues to deliver strong growth. Organic growth was up 14% and 3rd quarter growth was a touch better at 15%. Sales of enzymes for conventional biofuels benefit from our strong technology base and innovative product portfolio. And our recently launched these products in Nova Drive is increasingly contributing to growth. In early October, we launched yet another yeast product under the name of Inova List. This product strengthened an already broad product portfolio. Similar to the first half, U. S. And global ethanol production grew by an estimated 2% in the 3rd quarter. The trend with elevated inventories and tight margins for Ethanol producers are still the same. Latin America is performing very well, with Brazilian producers expanding into corn based ethanol production. A number of plants are operating with more expected to come on stream over the next few years. And finally, we're happy to see that E15 in the U. S. Now appears more likely to be implemented by the Environmental Protection Agency. There are still some legacy hurdles to be overcome, but longer term, this is a good, supportive measure for the U. S. Ethanol industry, for Novozymes and for the environment. Now let's turn to Slide 7 for an update on agriculture and seed. Organically, sales in agriculture and feed grew by 5% in the 1st 9 months, including a healthy 10% in the third quarter. In BioAg, both the 2nd and third quarter were good. As you might recall, we were able to produce and ship some of our new combined corn inoculant volumes to our aligned partner in the 2nd quarter. These shipments continued in the third quarter and most of the estimated 2018 volumes have now been shipped. Sales to the animal feed industry grew in the third quarter, but are still down after the 1st 9 months. The Latin American market and Brazil, in particular, remains challenging. We saw a strong development in animal probiotics, and while it's still early days for our new car sales in San Balencios, we are excited by the positive feedback and increased number of customer trials. So to summarize the message for the 1st 9 months, Bioenergy continued its strong performance, animal feed is negative due to Latin America, more specifically the Brazilian market, BioAg posted good growth explained by timing and sale of the corn inoculant combination product. And last but not least, The loans of financials in September and in Overlift here in October are 2 good examples of our strong innovation that Thomas will talk more about. So now over to you Thomas. Thank you, Tina. Please turn to Slide number 8. As mentioned by my colleagues, we're commercializing products coming out of the priority innovation platforms. The unique freshness and hygiene product is ramping up according to plan. In animal health and nutrition, we recently launched Balancius and improved chicken for improved chicken cocktails. In BioAg, we launched the new corn in Auckland for higher and more sustainable yeast. For the latest edition, solutions For water, we are preparing to launch the first product for wastewater treatment later this year. And on top of that, I'm also excited about broadening of our yeast portfolio will in Overlift. Let me share some of the more details around the most recent activities valentures, which is the 1st more rapid days for feed application, uses a completely new mode of actions to improve digestion to improve their users are completely new mode of action to improve digestion and gut health in animals. This enzyme degrades the bacteria cell debris in the gut that prevents optimal digestion and absorption of nutrients For now, it's registered for use in chickens, and we are looking to expand into other species. Earlier this year, Novozymes in the the yeast market for conventional biofuels with the launch of Inova Drive. And now we are introducing Inovolift, our latest addition to the portfolio. It's designed for ethanol plants with longer fermentation times and improves yields up to 4% compared with conventional dry yeast. So to sum up, I'm happy that our impactful innovations are reaching the market with attractive value propositions and strong sustainability impact. Helping our customers produce more business. 9 months into the year, our financial performance was satisfactory. Our reported sales in Danish kroner were down 2% comprising 4% organic sales growth, 5% negative currency, impact, and 1% from the divestment of Appomattox in December 2017. For the 3rd quarter in isolation, organic growth was 5%. Negative currencies were 2% and the divestment of AlbaMedics impacted roughly 1%, so giving a total of 2% growth in Danish kroner. The gross margin was at 57.5%, Productivity gains benefited the gross margin, whereas higher input costs, lower deferred income and currencies were all negative factors. At 28.2 percent, the reported EBIT margin was 30 bps higher than last year, adjusted for reorganization costs in the first half of the year The EBIT margin was down 70 bps. This is mainly due to a result of negative currencies, but also higher input costs and lower deferred income. The effective tax rate was 18.5 percent, 1.5% lower than last year. This relates to the transfer of P Assets from Switzerland to Denmark, which we initiated at the end of 2017. While hedging losses were 1,000,000 higher than in the 1st month compared to the same period last year. Net profit came in 3% higher year on year. This was driven by a lower tax rate as well as the absence of a DKK 60,000,000 write down of a financial guarantee in Q3 last year. Free cash flow was approximately DKK 2,000,000,000. This is DKK 100,000,000 lower than last year, which is mainly a result of an unfavorable development in working capital, This in turn is explained by timing in receivables and inventories, while payables ended lower as less deferred income was released to the income statement as we had expected. CapEx stood close to DKK 900,000,000 for the 1st 9 months, which is roughly DKK 100,000,000 lower than last year. I'm pleased to report that we are now initializing the trial production at our new facility in Yamumba, India. All in all, we delivered a satisfactory set of financials. Now please turn to Slide 10 for the 2018 outlook. With organic sales growth after the 1st 9 months 4%, we maintain our guidance of 4% to 6% for the full year. We are experiencing difficult Middle Eastern markets that are impacted by trade sanctions and economic distress. But despite this, we expect to end the year towards the lower part of the percent full year range. On reported sales, with the spot rates as of yesterday, we expect a negative currency impact of roughly 3% for the full year. Is similar to what we expected after the first half. If we now look at various segments, we expect Bioenergy to end the year on a strong note despite tougher comparables in the first quarter the 4th quarter sorry. For Agriculture fee, do we expect to finish in positive territory for the year? Driven by good buyback performance, whereas animal feed will be challenged. And the instability in the Middle Eastern market is expected to somewhat dampen expectations in Household Care, food and beverage and for technical and pharma. As we communicated earlier, we'll continue to invest in prices to support future growth. And currencies, as you know, will remain a drag in reported terms at the current spot rates. All in all, we maintain our guidance of an EBIT margin of around 28% for the full year. As you know, we have hedged our 2018 exposure at the rate of 6.18 Danish kroner to the U. S. Dollar, which is well below the current spot rate and the average rate for 2017. The effective tax rate is now expected to be around 19% and we increased the outlook for the full year net profit growth from around 0% to now 1% to 3%. The outlook for CapEx is maintained at 1,000,000,000 DKK5 billion and the outlook for free cash flow at between DKK2.3 billion to DKK2.6 billion. And now I'll hand you over to Peter for a wrap up. Peter, please. Thanks, Pisca. Please turn to Slide 11. So let me summarize our message here today. Overall sales performance after the 1st 9 months is satisfactory and earnings are solid. We are on track to deliver in the 4 to 6 percent full year organic sales growth range. It does though look as if it's more likely we end the year towards the lower part of the range. And this is despite difficult markets in the Middle East has affected and will continue to affect our business. From a strategic point of view, we're moving ahead according to plans. We're expanding our emerging market activities. We focus on the commercialization of our innovative solutions, and we enter the market with more of our impactful innovation platforms. Freshness in hygiene is one of them, and it's off to a good start. In the third quarter, we presented several new innovations to the market. We launched our new corn in Ocala and B360 for higher and more sustainable corn yields, and we launched the lanchers for improved gut health in chickens. In early October, we added a new yeast product for the ethanol industry. We process a unique toolbox and technology that has a very favorable position. Our enzymes and microbes create a more sustainable world with more efficient use of water energy and raw materials. As a side note, Hurricane Florence unfortunately led us to cancel our Capital Markets Day in days in Raleigh in September. We've decided to host a 3 hour session focusing on the R and D and BioAg part of the original event. This will be a webcasted event on November 19th. I hope you'll be able to make time for this. We'll send out invitation shortly. And this concludes today's presentation. And now we're ready to take your questions. Thank question comes from the line of Jonas Colbo from Danske Bank. Please go ahead. Your line is open. Thank you. And morning, everybody. A couple of questions from my side. First of all, if you could kind of elaborate a bit on how the dialogue with your big clients and household care is going with regards to the oil price. We're still at a higher levels than seen over the past couple of years. So if you could get some update on this. And then on Bioenergy, you see a 15% organic growth in the quarter. Market is growing 2% could you kind of break down the risk of the growth into what is yeast, what is market share, what is, growth from last, LatAm and so forth? Thanks for your questions. So while Tina is preparing for the details of Bioenergy, we'll let Alice talk about the big customers in Household Care. Alice, please? So generally, what happens when oil prices go up? The formulations, the degenerative formulations are challenged on costs and of costs, that's an opportunity. And we, of course, bring that forward in the dialogues with customers. Now it's not as if enzymes and surfactants, for example, are 1 to 1 replaceable, but of course, the it favors enzyme inclusion when the overall raw materials go up. But I think the important thing is that they need to see this as a sustainable long term event before they will make the switches. But we've seen historically when these things happen, that it opens an opportunity. And on bioenergy. So the growth is a composition of several things. I mean, for sure, the market growth Then there's also Brazilian ethanol coming online. We have some better price and mix. We've taken some share And then I think a very important part of it is also the innovations we have brought out both the yeast, which we brought out earlier in the year, but also earlier innovations are continue to contribute to the growth. Okay. Are you able to say how much yeast is impacting the number No. And the next question comes from the line of Sean Samsuri from SEB. Please go ahead. Yes, hello. It's Soren from SEB. First a question on Household Care. You're now saying that you don't expect growth to fall or drop in for the full year, which would indicate flattish growth in Q4. If you just confirm that because you've earlier said that the year would be back end loaded. And related to that, also, if you could elaborate a bit on the hygiene platform, I would have expected that you had in more markets than Philippines in Q3. What's the reason why this has not happened? And then Regarding Food And Beverage, starts conversion seems to now not grow anymore in Asia Pacific does this mean that we should expect growth for the divisions to come down a notch from the good growth you've had the last six quarters? Thank you very much for asked is that we have seen a worsening in the situation in the Middle East and that is essentially the reason why we now talk about that we do not expect Household Care to decline. Of course, in 9 months into the year, and we are flat improving that full year will mean that we'll have to have a rather substantial pickup in, in Q4. And with the challenges in the Middle East, we now guide slightly more negatively. In terms of the hygiene rollout, I think it's very important to stress that we are on the plan, as we have already always expected, we are selling in more markets into the emerging markets, but our customers not yet out commercializing with their campaigns. So I think it's important to stress that we are not only in the Philippines, we are in more markets, and then they will start to pick up their campaigns later in Q4 and in 2019. And Andy, start in Asia Pacific And Food And Beverage Growth in general, please? Yes. So, the, the, starch business is comprised of 2 parts once the refining part. That's the part that's challenged in Asia Pacific right now. And it's actually quite a regular cycle where sugar prices move up and down compared to start sources and customer switching between the 2. Right now, we're seeing a bit of headwind because of high starch prices and lower sugar prices but that's not a sort of structural change. The other part of the starch business is grain milling, which is brand new in an area that we're moving into and trading. So that provides a longer term sort of positive growth driver for the business going forward. So I'm not overly worried about starts becoming a problem. There's actually good opportunities there. When you look at food and beverage in general, we've just seen very high comps from last year. And we're, we're actually, averaging out at a lower rate, but that, those comps actually get easier going forward. And we think we're in good shape to any good growth over the long term. The next question comes from the line of Laurence Alexander from Jefferies. Please go ahead. Your line is open. Good morning. On BioAg, can you speak a little bit about how you're thinking about the impact of lower crop prices affecting farmer reception of the new products or of your products in 2019 2020. And one of your very distant peers in the ag industry flagged some adverse changes in the regulatory environment. Have you seen anything in BioAg in the biological close arena when our regulatory standards are starting to tighten. Thank you. We'll let Tina have a go at that. So on the lower crop prices, you are right. In the beginning of the year, we also called out that it's the continued depressed access cycle continues to be in place. And for sure, that is that is a drag on the industry as such. One of the things, which I think is important for us and what we have talked about for quite some time now is that innovation is important even in a depressed market. And that's also what we're seeing with the B300 B360 launch. That we need to innovate in order to be able to create a good performance in a depressed market. On the regulatory bio act situation, no, it's not so that we see any major change there. Okay. Thank you. And the next question comes from the line of Annette Lueder from Hans Bunson. Please go ahead. Your line is open. Thank you very much. Tina, could you share with us a little bit of information on how you see an over lift compared to one of your competitors in terms of the yield improvements? And also still confirm that you see the market size for yeast II, I think you've said the $200,000,000 before. And then on the soft market for household Care and your, instructions of hygienic enzymes. Will this means that some of the formulations or you were working on for liquid and pets or parts. Are these changing? How do you see the timing of of launching in more soft markets? That's the question for me. Thank you. Thanks. So on In Overlyst and In Overdrive, we see In Overlyst, it be particularly strong at long fermentation times. So some of the plants run at long fermentation times, while you know, what drive is better for shorter fermentation times. It's also true a number of competitors have products out there, but we are quite comfortable with the performance our products are delivering. On the market, you're correct on the market size and it's Okay. Can you say anything specific on yield improvement? Yes. So, as we alluded to in the in the call, I mean, with, in over lift, you see up to 4% yield increase, but for sure, It depends on how you run the plants, what are the conditions and so forth. But we see an uptick in performance, for both lift and drive, And especially at when the plans are, you could say, on the stress conditions. So when it's hot, when you have a lot of solid when you have a lot of assets and so forth. That's typically times where the yeasts are, you could say, lowering the ethanol yields simply because they cannot form under these circumstances, while the yeast we are bringing out is something, from a unique background that they are more tough than the traditional yeast in the market. So what you're saying in average, your products are delivering a high yield, but sometimes eboost can do higher because I think we see data around 6% yield improve. Improvement for that product. Okay. I'll not comment on competitions products, but we are quite comfortable with the performance as you also can in our numbers? I think just to add, with the limited insight though, I think the you should look at these 200 and some ethanol plants in the U. S. As individual plants. And they operate in different ways. They have different unit operations. And obviously, we do not expect our Inova platform to gain 100 percent of the market, but we think we found some really interesting niches where we can help customers drive their performance to a better level. We'll now have to see, how it picks up. We're very excited about the 1st yeast we bought to market and it has enough volume for us to sit here and talk about it. It matters. We also think Inover lift is going to be a real significant addition to that portfolio. So with that, I will give Arnaus a chance to talk about hygiene and freshness, Alice, please. Yes, so thanks for the question. If anything we actually front of our plan on freshness and hygiene. And what we have said is actually where we are, we are exactly where we plan to be. So we are rolling it out into the emerging markets in team. We'll have a broader rollout of the powder version in 2019. In late 2019, early 2020, we'll be rolling out the liquid version. And then as we have said all along, the North American market has some specific challenges that has will take the launch of the solution to North America, somewhat out into the future. And then we are right working on something like 22 for North American rollout. And the next question comes from the line of Nicola Chang from Exane BNP Paribas. Please go ahead. Hi, everyone. Thanks for taking my questions. Firstly, on the Middle East, could you talk a little bit more about that? Is it that we're seeing an impact from sanctions typically or is it weak demand because of geopolitical tensions? In other words, I'm wondering whether some of the business has gone to 0 because of sanctions or whether whether we should assume that this has gone forever or it could come back maybe after Q4? And secondly, on biology, can you remind us how big Brazil is as a percentage of your bioenergy business. As you understand it, it's relatively small, but I guess it could grow. And can you give any details in terms of your market share in the core SNL market in Brazil and how much use capacity you think is being added within and the Brazilian ethanol production. We'll let Prisca have a go at the Middle East, so to say, Prisca, please? Yes. So you're right. As we pointed out, Middle East is is dampening our expectation for the full year growth. Now it is a mix of things. So, yes, there is, obviously, reinstated U. S. Sanctions towards Iran, but we also see, we saw obviously the weakening of the Turkish lira and the whole economy in Turkey is actually under pressure. And we also see weaker markets such as Saudi Arabia and Egypt. So it's a mix of things that we saw as Andy pointed out, we already saw a sign of that in Q2, but we see more of it in Q3. And on your question going forward, obviously, it's very hard me to comment on future developments, we expect the trend definitely continue into Q4, which is why we're calling out the the likelihood of ending at the lower part of the range, but it's very hard for me to give you any insight into beyond that because obviously visibility is quite low for us. Thank you, Christian. On Brazil. Just to follow-up on that, sorry, would you be able to quantify how big those countries are? Fee in terms of your group sales? I didn't. Could you repeat that? I didn't specifically understand it. Are you able to quantify group sales exposure to these specific countries? So what I can say is that we for 2018, we estimate the impact to be closer to our percentage point in growth, which is also the reason we're pointing towards the low end of the range. Beyond that, it's hard for me to comment at this point of time. I hope that helps. Okay. Thanks. And then Tina on Bioenergy in Brazil, Tina, Yes. So right now, Brazil is moving really fast on corn ethanol. They did a new piece of legislation here in 2017. And we expect that the output will triple to around 0.4000000000 gallons this year compared to where we were in 2017. Right now, investments in core ethanol capacity gives a better return than it does in sugarcane crushing right now. So that is helping producers to move to corn ethanol. And a lot of them do it all as bolt on to the sugarcane operations. We expect that over the years to come, the next 4 or 5 years, that there'll be another tripling of the amount of corn ethanol meals. So it's a significant boost up there we have. And in terms of market share, it was the second part of your question. We do have a quite nice position in Latin America above the average for the segment. And yeast in Brazil? Eastern Brazil. So, yeast in Brazil is still we're not playing that much there. When we talk yeast, it's North America so far. 1st generation yeast. So far. Thank you. And the next question comes from the line of Lars Taqong from Carnegie. Please go ahead. Your line is open. Yes. A couple of questions on my side. Tina, in your presentation, you mentioned that In BioAg, most of the sell in have now taken place, I assume, slightly earlier than last year. Just to help me out, what does that imply for BioAg growth in the 4th quarter? Okay. So that implies that there'll be a tough comparison. Because we had the growth in a strong performance in BioX. So you need to look at it at a yearly number. So I know I have to look at the full year, but there's just 1 quarter left for guessing. So are you implying it won't grow in Q4? What I'm saying, and we are not guiding on individual quarters last, but overall, BioAg will be delivering a strong performance for the full year. Okey dokey. And then on Bioenergy, So you've obviously had an extremely impressive growth for the 1st 9 months, a contract getting somewhat tougher in Q4. And I have this slide feel that Green Plains shifting to Energen might hurt you in Q4. Are you foreseeing any significant and change in momentum and bioenergy in Q4 compared to the year to date momentum. So in terms of, I do not expect any impact from, energy and green planes on our numbers in Q4. I expect the momentum to continue. However, as you rightfully are pointing outcomes will be more difficult. Okeydoke. And then then maybe a final question to your cash flow because now your cash conversion is down. And, and, Prisca, you mentioned, it's partly because of higher net working capital, which is about timing. So Can you comment on what causes this timing and will we see networking capital go down again towards the end of Q4 or what can you comment on that? Yes, thanks for the question, Lars. So maybe first of all, cash flow in Q3, as you've seen, was pretty strong. I also want say that there was a little bit of a timing impact there as the quarter ended on a Sunday. So but nevertheless, we have strong cash generation in Q3. For the working capital. So I think it's twofold of the story. Working capital has come down somewhat since the mid of the year, But obviously, it's still on fairly high levels, particularly the part where it's about receivables and inventories. We expect still timing to impact. So we expect some improvement there. The payables part is a mix of things, but the deferred income part, of course, that's as exit going down. So I think overall, the most important thing we speak to our free cash flow guidance And I would see that the timing will help us in the, in that part of the working capital. I hope that has clarified a little bit. And then one final very brief question for me. Is there any particular reason why you don't disclose a full cash flow statement for the quarter? No, there's no particular reason. We disclosed the 9 months statement. And of course, we're always looking into what we can improve, so we'll definitely look into your inputs there. And the next question comes from the line of Ben Gorman from UBS. Please go ahead. Hi guys, and just a few quick ones from me. Just coming back to bioag and feed. Maybe if we could, just clarify a few things coming into the comp again on in Q4. Because it looked like feed actually grew in Q3 against an easy comp. So I was just wondering what the comp in feed specifically looks like going into Q4 and whether you expect that to be down, in that quarter. And then whether your still seeing the negative impacts from the tariffs and the impact on Canadian pulses. So that's the first question on from BioAg. Secondly, on Bioenergy, I'm just wondering what you're seeing in terms of China at the moment. So, whether you're seeing them continue to ramp up and potentially the growth contribution from that region, And then finally, just, if you can clarify the deferred income for for the quarter and what you think that that does into, into year end in terms of impact on the EBIT like Thanks very much. So on the feet and the bio split. So we do not report on feed and bio ag individually, but what I can say is that for the quarter, as you rightfully say, we do have a growth also from the feed part of it or the animal health nutrition part of it. In general, though, the animal health and nutrition business is challenged for the full year and while bioagas as we talked about earlier here in the call is doing very well. In the animal health and nutrition space, it's it's the probiotics part is doing very well, while the feet, particularly Latin America, is not doing well. And you're also right that we do have in the Ag and Feed segment a significant step up from Q3 to Q4 So we have a very tough comparison for Q4 as we've talked about before. Then you asked about pulses and bioag in India. And you're right that that has been hitting our sales. Yeah, for the full year. On China and Bioenergy, We do see that the provinces are starting to put legislation in place. And so they are starting to get ready for the E10, but it is still early days for them to get through it. But we are starting to see things happening, but still at a low level. And deferred income, I'll leave that to Frisco. Yes. So thank you for your question. So in we saw about 2.2 percent, the 20 bps impact from deferred income. Now if you want to look at year to date on Page 4 of our Stock Exchange Announcement, you see the full year sorry, you see the 9 months number. Which is SEK 108,000,000 in this year compared to SEK 122,000,000 of last year. So I think you can from that extrapolate and also the full year trend. And the next comes from the line of Hans Claerson from Nordea. Please go ahead. Bioethanol, there's been some changes in the U. S. Regarding E15. So when you can give a little bit perception on how you see the market outlook from this affecting the industry in, let's say, in a 1 to 3 year outlook. Going back to Household Care in terms of the hygiene refreshness, you mentioned that we could see more rollout in 2019. Can I understand you cannot give specific countries, but could you allude to, is it more developed versus emerging markets and, let's say, number of markets just giving a little bit of insight into that? And then for Andy on baking, could you talk about how the Novomuel volume performance has been? I understand, of course, that you have seen negative price, but I was more interested in the underlying volume development. And then finally for Peter, for the webcast, you have announced Will you still release the original full SIMD slide deck? Thank you. Thank you for your questions. I will let Tina take the E15 question North America, Tina, please. Perfect. So on E15, yes, it is for sure, a good support to the biofuel industry in the U. S. With the possibility to adding the ban on E15 in the summer months lifted. However, there is still a number of things which need to happen before that gets into place. So there's some legislation. We see PA needs to secure before that comes real. And then when that's done, so that's the first thing to be done. Then in first structure and the customer or consumer habits also needs to be adapted to Efitting So it's not something which will happen, which will have an impact short term, but it is for sure as support to the biofuel producers in the U. S. And in the long run, it is a positive for the industry. Growth Energy has been out with some estimates on how much they expect it to be by 2021. You can see these numbers there, but you also have to remember that so far, there's less than 1% of E15 stations in the U. S. Particularly, could you just explain to us? You said there's some legislation for APA that needs to get done. Is that something APA can decide internally or does it has to get political improvement? Yes. So what we can see is that that here, EPA have started to do the investigations and they need to put that piece of legislation in or get that in place. So it's with the EPA who needs to secure that it's that it happens. Thank you. Ginny, you mentioned growth energy. What was the number? Thank you. So what growth Energy are saying is that they expect that the number of stations will increase from around from less than 1% today to up to 9% by 2021. So I think, we've, of course, viewed it as very positive news. It's going to add volume and and also make the whole business proposition for our customers in the US better. It's a bit too early to be really arms up on it, because, I mean, I was, I was naively expecting that it would add like 50% volume if you from 10 to 15, but I don't think it's that simple. Now we need to see the legislation get in place. And I'm sure there are political risks around that. Although the business that the market is quite upbeat about it. And then secondly, we need to see it travel to market and that's where the roughly 9%, 10% volume growth gets into play. That could come off E15 over some years. So we'll have to see what happens. And of course, we'll be more specific about what we expect in 2019 when we get to guide for 2019. And on 2019, Alice, household care, please? Yes, specifically on the hygiene and freshness powder rollout, we will see roll out in both developed and more emerging markets throughout the course of 2019. Think it's important to, remind ourselves of that our sales actually get booked quite some months before you will see the actual campaigns in the market. So we have our rollout plans and we'll have effects before you will see it in the marketplace. And as you mentioned also that the U S, there were some technical problems, is that only related to liquids or is that also powders? So it's not a technical problem. It's been in our plans all along. The issue we have in North America relates to the fact that they have more dilute formulations or dilute wash conditions. And that means that the effect of our technology needs to be more potent than what currently had meat in the European market liquid markets and for that matter, all the liquid markets that use front loader machines We are working very actively together with a partner on finding solutions and we actually have a number of leads that looks to be quite solid. But we do not have the final formulations yet for the North American market. That has been the plan all along that we would only get to those markets later. Thank you, Alice. And then, Alice, Andy, on Novo Mill volumes in the U. S. Andy, please? Yes. So we've seen a slight bump in volume, but that's not been able to overcome the price glide path. The bigger positive for baking has been growth outside of the North American market, even in fresh keeping? Thanks, Andy. On the, on Hurricane Florence, apologies for having to cancel it. We're trying our best to do a repeat. I mean, the Capital Markets Day was supposed to be more educational. So we're taking the core of that, and we're doing that as a web cost, obviously, in the webcast of 3 hours, we cannot cover, the entire program. So I cannot promise you that there weren't slight that we have prepared that will not show. I think slides come has to come with the commentary. As you can see in, in this slide deck, we concentrate on research and innovation as we planned. There'll be a lot about some of the innovation platforms that we've taken to market now and that will matter to growth going forward, freshness and hygiene, grain, milling and animal health. We'll do some deep dives on BioAg and we'll do some poster sessions on the new products in BioAg. So we'll try covered most of it, but of course, we cannot cover a 2 day program, including exciting visits to our facilities, And I tell you people who are really unhappy would not have not getting the pleasure of doing the show. They have prepared it very well. I hope we'll get a chance later on, but for this year, it's going to be a webcast that will concentrate on these pieces. Thank you. And the next question comes from the line of Michael Lapasbosch from ABG. Please go ahead. Yes, thank you so much. 3 questions from my side, please. First of all, what number of product launches are you expecting to bring to the market in 2019 versus 2018, please? My second question is on yeast in the U. S. So what is your estimated mark year currently on Innova Drive here? And then the final question, a bit of a follow-up on the E15 Discussions. What about capacity? I understand obviously that the outcome can be can vary a lot between maybe the 0% 50%. But assuming that the market needs to bring new ethanol capacity to the market, do you think it will be conventional core methanol plants? Or are you looking at the 2 key plants now that they seems to be a little bit more reliable or imports or anything certainly? Thank you. Thank you. So I think we've finally got a question for Thomas Thomas, please. Yes. So thank you very much for that. Over the last number of years, we have been having product launches in the range of 15, 20 launches a year. And that's also what we expect to do this year. So somewhere along the lines of what what you have been looking at to last year and the year before that? And on yeast in the U. S. And market share. So it is still early days. We launched the product here in the 1st product here in February. And then with the follow-up product here in October, but it is a nice part of our growth, but it is still a smaller market share number. Then on E 5th, I think the question was on E15. There wasn't breaking up off the line, so I'm not sure I fully understood it. But what I heard was whether it would be conventional or 2G in order to get to E15. And I think that in the U. S, it was that correct, Michael? Yes, yes. Yes, yes. So on E15, it will mostly be a stats based ethanol. Thank you very much. Thank you very much. I think with the technologies that we have And you may remember that in 2013 2014, we were able to change mix to our favor because yield was really important. If you combine all these technologies and you look at the installed capacity in the U. S. Today, there's a lot of extra volume that can come out of the existing capacity. So with the current expectations for for volume demand that's driven by E15, I think it's likely that it will be the existing plans that actually just do more, which will be really good news for us. Great. That's very interesting. Thanks so much. And the next question comes from the line of Klaschke from UCCAT Please go ahead. Yes. Hello. Just two follow-up questions from me. First of all, there's no, I guess, there's no big secret that Brazil is starting to impact the numbers. But at the same time, it must still be very early days for Brazil in bioethanol. So could you give us any kind of idea what impact it has here in 2018? It's in order to get a feeling for what it could be in 2019 2020? That will be my first question. And secondly, Did you say that the market potential for your yeast products is in the range of US200 $1,000,000? Yes, was that correctly understood? That was my questions. I think we'll save Tina's voice a bit. I'll actually take both of them. First of all, Brazil is a is exactly one of the pioneers in bioethanol just to get that right But most of the volume in Brazil is Caine Ethanol, which is about a third of the U. S. Total volumes So it's by far, I mean, it's a very clear number 2 when it comes to the world of ethanol. Brazil is expanding in two ways. Brazil is expanding its output through corn ethanol, where we just at the beginning, I think there's a ramp up that's there'll be a lot more coming. Corn is growing in the north western part of the country. And corn is then pretty much with American, the American way converted into ethanol. On top of that, you We also excited about the biomass opportunities in Brazil because they had probably the most serious entities in the world is working in Brazil to add some extra volume from 2 g. And again, Brazil is trying to get its current 5,000,000,000 gallon output to increase to about the double of it. How that is going to work and what the balance is going to be. We don't know. Of course, in this world of trade conflicts, there's also new channels exports and imports that we need to or our customers need to think about. But in my mind, Brazil is a significant ethanol country and with a very large $200,000,000. And we're trying to find interesting segments of that market where our technology can really get to play. So it's not our products that we see get to $200,000,000. It's the total market. Okay. Thank you very much. We have a follow-up question from Ben Gorman from UBS. Please go ahead. Hi, thanks. Just a quick follow-up on E15. I just wanted to clarify some of the logic on the sort of limitations of, you've just been growing the market significantly as you mentioned. I just wanted to clarify that you were talking about 1% of perpetual stations offering it going to 9% by 2021. And you mentioned sort of in the region of 10% growth, I'm guessing just purely on the back of that infrastructure growth. Can you clarify a few reasons why you think that it wouldn't grow the market 50%. I mean, obviously, if gasoline prices are as high in comparison to ethanol prices, sort of on a long an ongoing basis, which I know is a big question. And it would be it would be odd for it not to increase by more. Can you just clarify why you think that's the case? Obviously, we would love it to grow more. I just think, I mean, we're listening to our customers, people who are close to the American market, people who are close to I mean, the trade between gasoline and ethanol, and they are estimating lower than 50% now we'll have to see where it goes. And we'll be much more specific about 2019 when we get to January. Of course, we're trying to as much information from the American market as possible. So I don't it's not because we have any particular insights we listen to our customers. Obviously, all of us would like to go as high as As there are no further questions, I'll hand back to the speakers. Thank you so much. And thank you for all your questions. Thanks for the interest in Novozymes. And then Again, it's going to be a webcast on November 19th, but we'll try to make it as exciting as you can make a webcast And I hope we'll be able to really convey some of the things, some of the new innovation piece that's going to drive the business over the next 5 years. So I would encourage you to sign up and accept the invitation. But of course, we also know that it's a short timeline, but you'll get invitation shortly. And I hope you'll sign up. Thank you so much