Novozymes Healthcare Denmark 2010 Novozymes Report THE NOVOZYMES REPORT 2010 © Novozymes A/S 2011-01471-01 · Print run: 2,000 18 REPORT Financial and sustainability discussion 19 REPORT Financial and sustainability discussion 95 million compared Net million als plained by n schemes. ease of Free cash flow before acquisitions came to DKK 998 million in 2010, against DKK 839 million in 2009. The increase was the result of higher operating cash flow, which benefited from higher net profit and a relative improvement in net working capital, but was reduced by higher net investments. Acquisitions amounted to DKK 23 million in 2010 and related to the acquisition of the Brazilian company Turfal in August. Climate change impact It is important for Novozymes to be able to position our enzyme technology as part of the solution to address climate change. At the same time we also need to consider our own carbon footprint. Accordingly, Novozymes has set a 2015 efficiency target to improve CO2 efficiency by 50% compared to 2005. With an improvement of 38% in 2010, compared to 24% in 2009, we improved our CO2 efficiency by 14 %-points. This was a result of the implementation of several projects, including an increased share of purchased electricity from wind turbines. We also set a target for global reduction of CO2 emissions based on LCA studies. With a calculated reduction of 40 million tons for 2010 through our customers’ application of our products, we achieved a considerable improvement compared to 2009 as a result of improved product performance as well as a positive product mix, with increased sales volumes of products with a high CO2 reduction potential. assessment of the raw materials with the greatest environmental impact in order to identify areas for improvement in raw material sourcing. Furthermore, the system will be used to advance specific supply chain engagement initiatives. To be able to adequately respond to stakeholders’ needs and expectations, we need to know how partners, investors, employees, customers, NGOs, etc. evaluate our sustainability management performance. Analysts and rating agencies continuously assess the overall sustainability performance of companies, and we use the most valid ratings to compare ourselves with our peers. Our rating from Dow Jones Sustainability Indexes and the underlying evaluation completed by Sustainability Asset Management (SAM) were our yardsticks when formulating the target for 2010 to obtain a Gold Class rating from SAM in the Sustainability Yearbook. This target was reached, and Novozymes maintained our position as leader in the biotech sector. In 2003, high nitrate levels were found in the groundwater around Novozymes’ site in Franklinton, North Carolina, USA. Subsequent measurements were submitted to the authorities in early 2008. The data are still under review by the authorities. Employer performance The target for employee turnover was defined as a range between 4% and 9%, reflecting the present job market and Novozymes’ aim to attract and retain employees. With a realized employee turnover of 7.5% for 2010, this target was met. Every year, Novozymes’ employees have the opportunity to express their opinions in our People’s Opinion survey. Employees’ satisfaction and motivation, as measured by the survey this year, reached a score of 76 and thereby exceeded the target of 75. Asked to rate opportunities for professional and personal development, our employees gave a score of 73 this year, which is above the company target of 70. Thus both targets were reached. The 2010 target for absence from work was a rate of below 3%. With a rate of absence of 2.1%, this target was achieved. The frequency of occupational accidents in 2010 decreased to 4.1 accidents per million working hours from 5.1 in 2009. As the target was a frequency below 4.5, the target was met. The majority of the accidents were related to routine activities. In 2010, we implemented a program called “Dare to Care” at all major sites with the purpose of fostering an attentive and caring culture to safeguard everyone’s safety and well-being at work. The program uses observations of work operations and feedback as a tool for eliminating hazards and improving our safety behavior. Balance sheet and Statement of shareholders’ equity Shareholders’ equity was DKK 7,836 million at December 31, 2010, up from DKK 5,841 million at year-end 2009. Shareholders’ equity was increased by comprehensive income and decreased by dividend payments of DKK 359 million. Shareholders’ equity represented 62% of the balance sheet total, against 54% at year-end 2009. Net debt-to-equity was 4% at December 31, 2010, against 16% at year-end 2009. Return on invested capital (ROIC), including goodwill, was 22.2%, against 20.3% in 2009. At December 31, 2010, the holding of treasury stock was 2.1 million B shares, equivalent to 3.2% of the total number of shares outstanding. s DKK 346 9. million t 26.3% in negotiated Compliance and complaints We do not have targets for compliance and complaints, but we make efforts to comply with regulations and to minimize complaints. In 2010, 36 breaches of regulatory limits were registered worldwide. Of these, 31 were related to pH in wastewater or concentrations of polluting substances in wastewater. In 2010, HFC emissions increased to 1,532 kg, compared to the usual maintenance level of around 550 kg. This was mainly due to a technical breakdown at one of our sites in the US. Novozymes received 21 complaints from neighbors in 2010, with the majority being related to odor and noise from nearby factories. By way of comparison, we received 33 complaints in 2009. Novozymes always strives to avoid significant spills such as the release of chemicals into watercourses or soil. There were no significant spills in 2010. from DKK profit was t in net d to 2009. Stakeholder engagement Sustainability is key in our engagement and dialogue with stakeholders. In 2010, the goal for our work on supplier performance management and sustainability management was a Gold Class rating in the Sustainability Yearbook. Having worked dedicatedly to cover more and more of our purchasing with our supplier performance management system introduced in 2009, the target for 2010 was to establish action plans for all suppliers with performance issues. This target was met with 168 action plans developed, of which the majority have resulted in engagement with suppliers to resolve commercial, quality, and sustainability issues. For 2011, we do not have a quantitative target for our supplier performance management, but since this is still one of our focus areas, we will continue working on improving our suppliers’ sustainability performance. Focus areas in 2011 will include further sustainability training of purchasers and supplier auditors. We will also initiate an 28% to as primarily nt in net capital s. Utilization of resources Water and energy consumption are key indicators of efficiency and environmental impact related to the utilization of resources. We therefore implemented a set of efficiency indexes with targets for relative improvement for 2015 compared to 2005. For water the 2015 target is to improve efficiency by 40% and for energy by 50% compared to 2005. The realized improvement in water efficiency in 2010 was 29% and for energy efficiency 30%, compared to 27% realized improvements for both in 2009. Thus we are well on our way to meet the long-term targets. KK 1,326 atively high lant in luronic f enzyme FIVE-YEAR CASH FLOW AND ACQUISITION OVERVIEW DKK million NET INTEREST-BEARING DEBT (NIBD) AND EQUITY RATIO % DKK million NET INVESTMENTS* % MDKK FREQUENCY OF OCCUPATIONAL ACCIDENTS Occupational accidents per million working hours Free cash flow before acquisitions Acquisitions NIBD (DKK million) Equity ratio (%) Net investments (DKK million) Net investments (% of sales) * Net investments are excluding acquisitions Routine activities Total * The split between routine and nonroutine activities is not available for 2006 pp 18-19 Novozymes have moved from providing a traditional financial performance discussion to presenting a ‘financial and sustainability discussion’ which includes quantitative data for all the business’s material issues. www.blacksunplc.com © Black Sun Plc 2011 39
