For the first quarter ended March 31, 2015, Danish industrial enzymes producer, Novozymes reported an 8 per cent year on year organic sales growth.
In Danish currency, it posted a massive growth of 18 per cent from the prior year quarter and also posted an EBIT margin above 27 per cent.
In a press release, Novozymes said, “The Company remains positive about the year ahead, and increases its outlook due to the continued appreciation of the US dollar.
“Sales in Danish crowns are now expected to rise by 16-18 per cent compared with previous guidance of 13-15 per cent, with EBIT growth expected to be 15-17 per cent, also up from 12-14 per cent forecast earlier.
According to Novozymes, during the last 12 months, the US dollar has increased by 27 per cent when compared to the euro.
“And since, the Danish crown is pegged to the euro and so follows the depreciation, the euro has experienced versus the dollar,” it added.
“One dollar now costs 6.95 crowns up from 6.41 crowns at the beginning of 2015 and 5.45 crowns to the dollar one year ago,” it explained.
“The rising dollar is a two-edged sword. As we have more sales than costs in US dollars, the strong dollar has a positive impact on our numbers, but there can be a flipside to this,” CFO Benny Loft said.
“Our US based, internationally oriented customers who sell their products in local currencies on the global market suddenly receive less for their goods in U.S. dollars,” he explained.
He too added, “There is a risk that the strong dollar could result in these customers changing their short-term course, focusing on costs, and holding back on innovation initiatives.”
Coinciding with these unusual currency fluctuations are the prices of global commodities on grain and energy markets, which have also seen extraordinary movement.
The current drop in oil prices combined with strong grain markets create a challenging market environment for the US ethanol industry, a period with low ethanol margins and a strong focus on reducing costs.
“Commodity prices can impact Novozymes’ business in many ways, since it has a direct impact on our own costs as we spend billions of crowns every year on energy, raw materials, and other commodities,” Loft informed.
According to Novozymes, 100 per cent of the expected USD/DKK net exposure for 2015 has been hedged.
Around 45 per cent of the exposure has been hedged via options at 5.65 USD/DKK and the rest has been hedged using forward contracts at an average of 5.89 USD/DKK.
