Kurt Anker Nielsen - Conclusion and outlook for 1997
Now, we have addressed several of the important issues our company is facing and how we are going to manage these issues. We have also touched upon how Novo Nordisk in late 1994 initiated a process of accelerated radical change, the purpose of which is to place Novo Nordisk among the industry's top performers before the turn of the century.
With our focused business strategy, with our organisation in place and with our determination to reach our ambitious goals, we believe we are very well positioned to build value for our shareholders in the long-term.
Slide 34 - Building Shareholder Value
In doing this we are focusing on:
maximising the long-term returns of our businesses, both in terms of cash flow and profits
evaluating opportunities for acquisitions of businesses, projects or products as well as opportunities for divestitures of selected products or projects if this is expected to increase the value of Novo Nordisk
delivering a financial return above our cost of capital and preferably within the top end of companies in the pharmaceutical industry
increase the dividend pay-out ratio to our shareholders
living up to our long-term financial targets,
which are:
- a growth in operating profit of at least 15% p.a.
- an operating margin of at least 20%
- a return on non-financial assets (RONFA) of at least 20% p.a.
positive free cash flow
And, we are striving hard to reach all of these goals as soon as possible.
Novo Nordisk has a strong balance sheet and by the end of 1996 we still were in a net cash on our balance sheet. One reason for this is the improved business performance. Other reasons include lower investments than anticipated and the cash incurred from the divestiture of non-core businesses in 1995 and 1996.
But the question that needs to be answered in this connection is, if we are going to leverage ourselves more in the coming years. The answer is that we will use our financial strength when we get the opportunity to buy either businesses, projects or products that fit our core businesses or in cases where the establishment of strategic alliances demands equity participation.
Now, let me comment on our dividend policy.
The Board of Directors proposes to raise the dividend for 1996 by 50% to DKK 3.75 per share of DKK 10. Further, we have now announced a formal dividend policy. It is our policy, over the coming years, gradually to increase the pay-out ratio, ie the dividend's share of earnings. However, we will do that with due respect to the company’s development in earnings and capital need.
Finally, let me summarise Novo Nordisk's expectations for 1997.
We expect our business to continue to develop favourably in 1997.
Consolidated sales are expected to increase, primarily driven by volume increases and product mix improvements.
Improved efficiency and productivity throughout Novo Nordisk will continue to curb the cost development in 1997. The increase in the Group’s total costs is expected to be lower than that of sales. Against this background, and assuming stable currency exchange rates at the current levels, we expect also in 1997 to live up to the company’s goal of an increase in operating income of at least 15%. The same rate of increase is expected to apply to income before tax, provided that current currency and interest rates do not change significantly. The largest part of the earnings increase is expected to be realised in the last quarters of the year as earnings in the 1st quarter of 1997 could be lower than earnings in the 1st quarter of 1996.
Slide 37 - Forward-looking Statements
For 1997, the rate of taxation on income before tax is expected to be at the level of 29%.
Our capital expenditure for property, plant and equipment is expected to be at the level of DKK 2 billion in 1997.
For the sake of good order, I will show the following slide.
We are now ready to take questions.
