Novozymes cuts growth outlook due to low oil price

Biotech specialist Novozymes has cut its long-term growth expectations as the prolonged oil price slump is delaying the development of the advanced biofuel industry and hurting sales to other sectors, the firm said.

Novozymes, which makes enzymes that speed up or improve chemical processes in a variety of industries, now expects organic sales growth of 6-7 % a year from 2017 through 2020, down from an earlier target of 8-10%.

According to media agency Reuters, shares in the world's largest maker of industrial enzymes were trading 12% lower at 1102 GMT, with analysts citing the lowered long-term outlook as the main reason.

The firm said the cut was due to "current depressed commodity prices and the uncertainties these entail for bioenergy and growth in emerging markets".

It is the second time in a year the company has cut its organic sales growth target through 2020, having lowered it last year to 8-10% per year from 10% or more.

According to Reuters, the Danish company has spent years and millions of dollars developing the technology needed to produce advanced biofuel, but the low oil price has scared investors away from building the costly plants needed to develop the industry.

Unlike conventional bioethanol, advanced bioethanol is based on cellulose or biomass, such as corn cobs, that humans do not eat.

Novozymes is a leading provider of enzymes for the corn-based industry, mainly a US business, and had hoped that advanced, or second-generation, biofuels would ensure strong growth for years to come.

"In the absence of strong political support to secure a market for advanced biofuels, and as the ramp-up times for the first commercial-scale facilities have been longer than expected", the company said it was now unlikely that it will sell enzymes to 15 so-called biomass conversion plants by 2020 as it had earlier forecast.

According to Reuters, Seven plants are being built globally but none are fully up and running yet.

"The next wave of new plants will probably not come until around the end of this decade," CFO Benny Loft told Reuters.

He still believes in the long-term viability of the industry.