Kurt Anker Nielsen - Enzyme Business
And now to our Enzyme Business.
1998 was a year where the world market for industrial enzymes stagnated, and when you have a market share of close to 45%, this has a significant impact on your sales line.
Slide 12 - Enzyme Business - Sales development 1994 - 1998
Sales in 1998 closed at DKK 4.3 billion, down by 2% from 1997. However, we maintained our market share and prices were kept stable.
Currency impact during 1998 compared to 1997 was negative by 1%.
Slide 13 - Major issues in 1998
The major reasons for the stagnation in the world enzyme market - and therefore also in our volumes sold - was firstly a reduction in the use of enzymes for the textile industry - especially in the stone wash segment - most importantly due to a reduction in the number of pairs of blue jeans being produced and to a shift in fashion. Introduction in 1998 of our new mono-component product with significantly higher cost-effectiveness makes us much more competitive in this particular market segment.
Secondly the enzymes consumption was impacted by the recession in South East Asia which turned out to be more severe than we originally expected and also to influence the economies of more emerging markets than believed at the outset of the crisis.
We foresee, however, that the Asia-Pacific market will rebound after 1999 and we continue to show a long-term commitment in the region. Consequently, our efforts to penetrate this region remain unchanged in order to capitalise on the development in Asia, once unrest settles.
An improved production economy has resulted in an improved profitability of our enzyme business, despite the stagnating sales to the tune that the Enzyme Business has an operating margin at the same level as that of the Health Care area when adjusting for Seroxat® licensing income.
Finally the liberated production capacity due to more efficient production has postponed the need for further major investments.
The new products introduced for the textile industry at the end of 1997 now seem to initiate sales growth and in detergents, Kannase™, the low temperature detergent protease for the Japanese market introduced at the end of 1997, has proven a success throughout 1998.
Slide 14 - Enzyme Business - the future: Intellectual Property Rights (IPR)
Novo Nordisk has by far the largest portfolio in the world of patents concerning enzymes, technology for their production and for their uses. In 1998, Novo Nordisk received 148 new patents globally.
We have a very strong patent position in the areas: cellulase, lipase, carbohydrase and oxidoreductase classes, and in the field of rights to proteases and amylases we have only one competitor.
In addition to our own developments, we have over the past several years also in-licensed a large number of patents, particularly in the fields of fungal and bacterial expression systems, protease and amylase engineering, enzymes for baking purposes and gene shuffling, giving Novo Nordisk considerable operational freedom.
The strengthened Intellectual Property Right position brings us in a position with a strong portfolio of proprietary rights and an effective entry barrier against new as well as established competitors.
Slide 15 - Enzyme Business - future growth
Within the existing focus areas, we are very confident that our products within the baking industry will continue their success during the coming years. In 1998, we experienced a sales growth of close to 20% in this segment. Also within the animal feed industry, we expect that a further penetration of our products which with the joint effort with Roche will yield a considerable growth in the years to come.
In the textile industry, we see clear growth potentials in the new products for the mill segment, the bio-polishing product introduced in 1998 and the bio-preparation product to be introduced in 1999.
In reality the denim laundry products already on the market represent a very limited area within potential applications of enzymes in the textile industry. We are now focusing much more on the mill segment of this industry, which is providing enzymatic solutions for treatment of cotton fabrics. Within this segment, we have already seen a steady usage of enzymes for bio-polishing, the process to increase softness and smoothness of the cotton fabrics. In 1999 we plan to introduce a new promising enzyme product for bio-preparation of cottons. The new enzyme will be able to remove natural wax and oil from the cotton in order to improve the dyeing, replacing traditional chemical processes.
Further, we are hopeful to be able to introduce products in Personal Care within a few years.
During last year we initiated detailed analyses on new applications of enzymes for the industries of Forestry, Dairy and Meat processing. One or several of those will be turned into a focus industry in 1999. Those three industries were selected due to the significant potentials already identified.
Enzyme Business is continuously looking into new leads, which in intermediate terms can provide us with interesting new products.
We are confident that we do have a good platform to further expand our business: The industry's most comprehensive portfolio of high quality products combined with a worldwide presence, which enables us to identify local as well as global opportunities.
The emerging markets are in turmoil right now, but we are well positioned and well prepared to rejoin the development there once the unrest is settled.
For 1999 we expect the prices to stay stable and a small increase in volume and for the next three to five years we expect an average annual growth in volume of 5%.
We are convinced that in the future we can continue to grow the enzyme market as we have done since we created it more than 30 years ago.
We have
- A strong pipeline of new products
- A lean and efficient organisation that works together constantly increasing productivity
- Representations in all important markets
- Production capacity in place
With this our Enzyme Business is set for the future.
In saying this, I will give the word to Lars Rebien Sørensen.
