Report 2018
Rethink Tomorrow
Report 2018

Net operating profit after tax

  • Organic sales growth 4%
  • Net profit growth up from 2% in 2017 to 3%
  • The EBIT margin grew by 0.4 percentage point to 28.3%
DKK million Note 2018 2017
Revenue 2.2 14,390 14,531
Cost of goods sold (6,135) (6,118)
Gross profit 8,255 8,413
Sales and distribution costs (1,571) (1,619)
Research and development costs 2.4 (1,865) (1,913)
Administrative costs (792) (831)
Other operating income, net 2.5 43 (3)
Operating profit (EBIT) 4,070 4,047
Exchange gains/(losses) (89) 27
Tax on adjusted operating profit (717) (795)
Share of loss in associates (17) (14)
Adjusted operating profit (NOPAT) 3,247 3,265
Average invested capital (see Invested capital section) 13,417 12,732
ROIC 24.2% 25.6%

Segment reporting

The internal reporting framework used for reporting on revenue and expenses to the Executive Leadership Team and the Board of Directors has been established to reflect and report on the global functional responsibility setup at Novozymes. This setup consolidates functions by type, and Management reviews the results of the Group as a whole to assess performance. Thus, there is only one operating segment.


Worldwide operations

The Group operates in four geographical regions: Europe, Middle East & Africa (including Denmark), North America, Asia PacificAustralia, Bangladesh, Cambodia, China, Hong Kong, India, Indonesia, Iran, Japan, Kazakhstan, Kyrgyzstan, Laos, Malaysia, Myanmar, Nepal, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, Turkmenistan, Uzbekistan, Vietnam. and Latin America. From a revenue perspective, the US is the single largest market, contributing ~32% of the Group's revenue (2017: ~32%).


The geographical distribution of revenue is based on the country in which the goods are delivered. With a number of customers, central deliveries are made to specified locations and the final destination is unknown.


The stated geographical distribution of revenue may therefore vary from year to year if the delivery destination for these customers changes. 


Most of the Group's intangible assets and property, plant and equipment are located in Denmark, the US and China at ~50%, ~30% and ~13% respectively (2017: ~50%, ~30% and ~13%).


Revenue 2018 (2017)
DKK million
  • Denmark
  • Rest of Europe, Middle East & Africa
  • North America
  • Latin America
  • Asia Pacific
Intangible assets and property, plant and  equipment 2018 (2017)
DKK million
  • Denmark
  • Rest of Europe, Middle East & Africa
  • North America
  • Latin America
  • Asia Pacific
Net investments 2018 (2017)
DKK million
  • Denmark
  • Rest of Europe, Middle East & Africa
  • North America
  • Latin America
  • Asia Pacific
DKK million 2018 2017
Household Care 4,625 4,717
Food & Beverages 4,122 4,041
Bioenergy 2,806 2,644
Agriculture & Feed 2,045 2,108
Technical & Pharma 792 1,021


14,390 14,531
Emerging markets 4,980 5,023
Developed markets 9,410 9,508


14,390 14,531
Sales to the five largest customers as a percentage of revenue 28% 30%

At the beginning of 2018, contract liabilities amounted to DKK 573 million, of which DKK 224 million has been recognized as revenue in 2018.


The majority of Novozymes' revenue consists of sale of goods to customers, where revenue is recognized when goods are delivered. Less than 1% of Novozymes' total revenue arises from royalties.

Sales by currency 2018
DKK million
  • DKK
  • EUR
  • USD
  • CNY
  • Other
Sales growth 2018
DKK million

Novozymes has entered into partnerships where Novozymes manufactures and sells products to a partner, who undertakes the sales to end customers, and where the profit on products sold to end customers is shared between the partner and Novozymes based on predetermined profit-sharing mechanisms. Revenue related to this type of partnership comprises approximately 13% of Novozymes’ total annual revenue (2017: approximately 13%).


A minor part of the revenue, related to the expected profit share on products sold to the partner, requires significant judgment and estimates by Management. This involves estimating future sales prices to end customers, along with their impact on rebate schemes, and estimating product returns from end customers.


Novozymes produces a wide range of industrial enzymes and microorganisms. Revenue includes sales of goods and related services and royalties, and is recognized at an amount that reflects the consideration to which Novozymes expects to be entitled. Revenue from straightforward sale of goods to customers is recognized when control of the goods is transferred to the customer, i.e. when goods are delivered. Variable considerations are included in revenue to the extent that they are not subject to significant uncertainty.


The performance obligations in the contracts are to deliver enzymes and microorganisms to the customers, and each batch delivered is considered a separate performance obligation, as each batch is distinct.



Enzymes and microorganisms are sometimes sold with a rebate. A rebate agreement can be set up in various ways, but common to all agreements is that revenue is recognized based on the price specified in the contract, net of the estimated rebate. The rebates are estimated based on experience, as well as information related to expected orders 3-12 months in advance. The estimated rebates are reassessed at the end of each reporting period.



A few of Novozymes' partnerships and collaborations are granted a right of return. No revenue is recognized for the goods expected to be returned, but a refund liability is recognized. Estimates of the expected level of returns are based on an analysis of historical returns and knowledge of the relevant markets/products. These estimates are updated at the end of each reporting period. As the goods returned are usually scrapped, no inventory asset is recognized.


Profit split

Novozymes has entered into partnerships where Novozymes manufactures and sells products to a partner, who undertakes the sales to end customers. The profit on products sold to end customers is shared between the partner and Novozymes based on predetermined profit-sharing mechanisms.


Revenue from these arrangements consists of sales of products to the partner and the shared profit, and is recognized in full when the goods are delivered to the other contracting party. This is done by calculating the expected profit based on insights, experience and other input factors. The calculated profit is recognized as a contract asset or contract liability until an invoice is issued. The realized profit is settled periodically.



Novozymes has entered into commission agreements where agents undertake sales to third parties in return for commission on realized sales. Revenue from such agreements is recognized when the goods are delivered, as the nature of the performance obligation is to provide the specified goods.



Revenue collected on behalf of third parties is not recognized as revenue.


Novozymes' obligation to provide a refund for products that are not of the agreed quality or according to agreed specifications under the standard warranty terms is recognized as contract liabilities. Reference is made to Note 4.4.


A trade receivable is recognized when the customer obtains control of the goods and an invoice is issued, as this is the point in time when the consideration is unconditional and only the passage of time is required before the payment is due. Typical payment terms are around 60 days. 


Contract liabilities consist of advance payments, deferred revenue and liabilities for refund goods. The contract liabilities are recognized as revenue as the performance obligations under the contracts are fulfilled.

DKK million 2018 2017
Wages and salaries 2,960 2,965
Pensions – defined contribution plans 306 289
Other social security costs 232 273
Other employee costs 114 139
Stock-based payment 100 107
Employee costs 3,712 3,773
Recognized in the income statement under the following items:
Cost of goods sold 1,350 1,342
Sales and distribution costs 778 811
Research and development costs 1,057 1,070
Administrative costs 492 531
3,677 3,754
Change in employee costs recognized in Inventories 35 19
Employee costs 3,712 3,773
Number of employees end of year 2018 (2017)
No. of employees
  • Denmark
  • Rest of Europe, Middle East & Africa
  • North America
  • Asia Pacific
  • Latin America
Employee costs 2018 (2017)
DKK million
  • Denmark
  • Rest of Europe, Middle East & Africa
  • North America
  • Asia Pacific
  • Latin America
2018 2017
Average number of employees in the Group 6,351 6,301
Average number of employees who work with R&D 1,522 1,473
Number of employees outside Denmark as a percentage of total number of employees 58% 58%
Part-time employees 296 272
Full-time employees 6,131 5,973
Employees, end of year


6,427 6,245
Senior management 188 186
Management 1,207 1,122
Professional 1,820 1,816
Administrative 602 558
Skilled workers, laboratory technicians and other technicians 1,364 1,344
Process operators 1,246 1,219
Employees by category


6,427 6,245
Employee gender distribution 2018 (2017)
  • Women
  • Men
Employee growth
  • Growth in total number of employees
  • Growth in number of female employees

The number of employees is derived from contractual obligations, but does not include employees on unpaid leave, temporary replacements, student interns, agency employees, consultants or PhD students. In calculating the number of full-time employees, employees with a working-time ratio of 95% or above are stated as full-time employees.


The average number of employees is calculated as the average of the number of permanent employees at the end of each month.


Job categories are defined as follows: Senior management comprises the CEO, executive vice presidents, vice presidents and directors. Management comprises middle managers and specialists. Professional comprises employees with academic backgrounds as well as team leaders. Process operators comprises operators and unskilled workers.

DKK million Note 2018 2017
Internal and external research and development costs 564 615
Employee costs 2.3 1,057 1,070
Amortization and impairment losses, intangible assets 3.1 120 122
Depreciation and impairment losses, property, plant and equipment 3.2 124 106
Total research and development costs


1,865 1,913
As a percentage of revenue 13.0% 13.2%

In 2018, Novozymes launched eight new products (2017: eight new products). New products comprises products with new or improved characteristics.


In 2018, Novozymes had 1,041 active patent families (2017: 1,049). Active patent families comprises the number of inventions for which there are one or more active patent applications or active patents at year-end.


Reference is made to the Innovation pipeline update in the business model for an overview of significant market-expanding opportunities that are currently being pursued in Research & Development.



Research and development costs primarily comprises employee costs, internal and external costs related to development of new products and to ongoing optimization of production processes for existing products, and amortization, depreciation and impairment losses related to intangible assets and property, plant and equipment used in the research and development activities.


Research and development costs are expensed as incurred unless the criteria for capitalization are deemed to have been met. Due to significant uncertainty associated with the development of new products, research and development costs are not capitalized.


Income received from research and collaboration agreements is recognized in Other operating income.

DKK million 2018 2017
Income and grants concerning research projects/collaborations 33 26
Other secondary income, net 10 37
Loss on divestment of Albumedix - (66)
Other operating income, net


43 (3)

Tax risk

Novozymes operates in many markets via sales companies and distributors, while production takes place in a small number of countries. This leads to transactions between Group companies. Novozymes follows the OECD principles in setting internal transfer prices for these transactions, but this is a complicated area and entails a tax risk, partly because the area is subject to political judgment in every country. Novozymes regularly enters into dialogue with the tax authorities to reduce this risk, and has entered into advance pricing agreements (APAs) with the tax authorities in the countries where internal transactions are most significant.


For Novozymes, such agreements create predictability in relation to taxation and reduce the risk of Novozymes becoming part of the ongoing transfer-pricing debate around the world. A major part of internal transactions in the Group is covered by APAs. See Novozymes' Position on Tax on


Joint taxation

Novozymes A/S and its Danish subsidiaries are jointly taxed with the Danish companies in the Novo Holdings A/S Group. The joint taxation also covers withholding taxes in the form of dividend tax, royalty tax and interest tax. The Danish companies are jointly and individually liable for the joint taxation liability. Any subsequent adjustments to income taxes and withholding taxes may lead to a larger liability. The tax for the individual companies is allocated in full on the basis of the expected taxable income.

Tax in the income statement
DKK million 2018 2017
Tax payable on net profit (890) (1,015)
Change in deferred tax 150 253
Revaluation of deferred tax due to changes in corporate tax rate - (33)
Adjustment for previous years 31 39
Tax in the income statement


(709) (756)
Calculation of effective tax rate:
Corporate tax rate in Denmark (22.0)% (22.0)%
Non-taxable income less non-deductible expenses (0.1)% (0.6)%
Difference in foreign tax rates 3.3% 2.9%
Revaluation of deferred tax due to changes in corporate tax rate - (0.8)%
Other adjustments 0.8% 1.0%
Effective tax rate (18.0)% (19.5)%

In 2017 and 2018, Novozymes transferred further intellectual property from Switzerland to Denmark. This had a positive impact on the effective tax rate of 2.5 and 3.1 percentage points respectively, included in "Difference in foreign exchange rates".

Deferred tax
Deferred tax assets Deferred tax liabilities
DKK million 2018 2017 2018 2017
Intangible assets and property, plant and equipment 742 536 (1,193) (1,064)
Inventories 471 441 (188) (156)
Tax loss carry-forwards 34 6 - -
Stock options 75 185 - -
Other 266 255 (161) (169)
1,588 1,423 (1,542) (1,389)
Offsetting items (650) (668) 650 668
Deferred tax at December 31


938 755 (892) (721)
The tax value of the unrecognized share of tax loss carry-forwards, tax credits, etc. that do not expire amounted to DKK 23 million (2017: DKK 26 million).
DKK million 2018 2017
Deferred tax at January 1 34 (247)
Currency translation adjustments 1 (33)
Tax related to the income statement 123 240
Tax on shareholders' equity items (112) 74
Deferred tax at December 31 46 34
Deferred tax assets


938 755
Deferred tax liabilities


(892) (721)
Deferred tax at December 31 46 34
Tax receivables and payables
DKK million 2018 2017
Tax payables, net, at January 1 (348) (295)
Currency translation adjustments 3 (5)
Tax related to the income statement (832) (996)
Tax on shareholders' equity items 15 96
Tax paid for the current year, net 761 852
Tax payables, net, at December 31 (401) (348)
Tax receivables


174 135
Tax payables


(575) (483)
Tax payables, net, at December 31 (401) (348)
Of which due within 12 months (80) (70)
Of which due after more than 12 months (321) (278)
Tax payables, net, at December 31 (401) (348)
Corporate income taxes paid are specified as follows:
Income taxes paid in Denmark 546 527
Income taxes paid outside Denmark 215 325
Total income taxes paid 761 852

As the Group operates across many different countries, the calculation of the Group’s total tax charge in the income statement necessarily involves a degree of estimation and judgment. Tax and transfer-pricing disputes with authorities in various countries may occur, and Management judgment is applied to assess the possible outcome of such disputes.


Payments in respect of tax liabilities for an accounting period result from payments on account and on the final resolution of open items. As a result, there can be substantial differences between the tax charge in the consolidated income statement and actual tax payments. 


Corporation tax, comprising the current tax liability, change in deferred tax for the year and possible adjustments relating to previous years, is recognized in the income statement, unless it relates to items recognized either in Other comprehensive income or directly in Shareholders’ equity. Uncertain tax positions are assessed individually and recognized if it is probable that an amount will be paid or received. Deferred tax is measured using the balance sheet liability method and comprises all temporary differences between the carrying amount and tax base of assets and liabilities. No deferred tax is recognized for goodwill, unless amortization of goodwill for tax purposes is allowed. The tax value of tax loss carry-forwards is included in the calculation of deferred tax to the extent that the tax losses can be expected to be utilized in the future.


Deferred tax is measured according to current tax rules and at the tax rate expected to be in force on elimination of the temporary differences. Changes in deferred tax due to tax rate changes are recognized in the income statement, unless they relate to items recognized either in Other comprehensive income or directly in Shareholders’ equity.

DKK million 2018 2017
Profit used to calculate earnings per share 3,226 3,119
Average number of shares
Weighted average number of shares in circulation 290,422,325 295,338,610
Average dilutive effect of outstanding stock options and stock awards 1,940,030 1,863,742
Average number of diluted shares 292,362,355 297,202,352
Earnings per share DKK 11.11 DKK 10.56
Earnings per share, diluted DKK 11.03 DKK 10.49

Earnings per share is calculated as net profit attributable to shareholders in Novozymes A/S divided by the average number of shares in circulation.


Diluted earnings per share is calculated as net profit attributable to shareholders in Novozymes A/S divided by the average number of shares in circulation, including the dilutive effect of stock options "in the money."

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