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Annual Report 2014/15Detailed Picture

Financial review

REVENUE

Revenue increased by 14% to EUR 859 million, corresponding to organic growth of 10%. Revenue was impacted positively by approximately 5% by changes in exchange rates, primarily by the appreciation of USD. The use of EUR-based pricing in certain countries led to price increases in local currencies, impacting organic growth positively by around 1 percentage point. 

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GROSS PROFIT

Gross profit was EUR 446 million, up 14% on 2013/14. The gross margin increased by 0.3 percentage point to 52.0%. Improved operating efficiency and a positive impact from a stronger USD were partly offset by an unfavorable product mix, startup costs related to new fermentation capacity in the Cultures & Enzymes Division during the first half of 2014/15, and higher raw material prices in the Natural Colors Division.

OPERATING EXPENSES (% of revenue)

Operating expenses totaled EUR 214 million (24.9%), compared to EUR 187 million (24.7%) in 2013/14.

Research & development (R&D) expenses including amortization and depreciation amounted to EUR 51 million (5.9%), compared to EUR 43 million (5.7%) in 2013/14.

The net impact from capitalization less amortization of development costs was EUR 4 million (0.5%) in 2014/15, compared to EUR 3 million (0.4%) in 2013/14.

Total R&D expenditures incurred increased by 19% to EUR 55 million (6.4%), compared to EUR 47 million (6.1%) in 2013/14. The increase was mainly due to increased activity within biological plant protection and the human microbiome initiative. The increase relative to revenue was held back by an increase in revenue due to the appreciation of USD, whereas most research & development costs are in EUR.

Sales & marketing expenses amounted to EUR 102 million (11.8%), compared to EUR 93 million (12.3%) in 2013/14. Expenses relative to revenue were reduced mainly through scale efficiencies.

Administrative expenses amounted to EUR 61 million (7.1%), compared to EUR 54 million (7.1%) in 2013/14. The increase was partly due to costs related to the reorganization of natural colors activities.

Net other operating income/expenses was nil, compared to income of EUR 3 million in 2013/14. The change was primarily due to the reorganization of natural colors activities and a gain from divestment of property in 2013/14.

SPECIAL ITEMS

There were no special items in 2014/15, compared to a negative EUR 10 million in 2013/14.

OPERATING PROFIT (EBIT)

EBIT amounted to EUR 233 million, compared to EUR 195 million in 2013/14. The EBIT margin was 27.1%, compared to 27.1% before special items (25.8% after special items) in 2013/14. A positive impact from higher sales volume, a stronger USD and improved operating efficiency in the Cultures & Enzymes Division was offset by increased research & development expenses, an unfavorable product mix, higher raw material costs for natural colors, and costs related to the reorganization of natural colors activities.

NET FINANCIALS AND TAX

Net financial expenses amounted to EUR 13 million, compared to EUR 14 million in 2013/14. The decrease was primarily due to lower interest rates. Income taxes were EUR 57 million, equivalent to an effective tax rate of 26%, compared to 27% in 2013/14, mainly due to a reduction in the corporate tax rate in Denmark.

PROFIT FOR THE YEAR

Profit for the year increased by 23% to EUR 163 million from EUR 132 million in 2013/14.Earnings per share, diluted, from continuing operations increased by 23% to EUR 1.23 from EUR 1.00 in 2013/14.

ASSETS

At 31 August 2015, total assets amounted to EUR 1,445 million, compared to EUR 1,375 million a year earlier.

Total non-current assets amounted to EUR 1,116 million, compared to EUR 1,090 million at 31 August 2014.

Intangible assets amounted to EUR 784 million, unchanged from a year earlier.

Property, plant and equipment increased by EUR 25 million to EUR 325 million, primarily driven by investments in freeze-drying, warehousing, packaging and fermentation capacity for cultures as well as laboratory facilities for plant protection and the human microbiome initiative.

Total current assets amounted to EUR 329 million, compared to EUR 285 million at 31 August 2014. Inventories increased by EUR 9 million, or 9%, while receivables increased by EUR 17 million, or 13%, driven by higher sales and a stronger USD. Cash increased by EUR 19 million to EUR 76 million.

NET WORKING CAPITAL

Net working capital was EUR 138 million, or 16.1% of revenue, compared to EUR 130 million, or 17.2%, in 2013/14.

EQUITY

Total equity amounted to EUR 601 million at 31 August 2015, compared to EUR 657 million a year earlier. Dividends for the financial year 2013/14 totaling EUR 66 million were paid out in Q2 2014/15, while an interim dividend totaling EUR 115 million related to the financial year 2014/15 was paid out in Q4 2014/15.

NET DEBT

Net interest-bearing debt amounted to EUR 488 million, or 1.7x EBITDA, compared to EUR 404 million, or 1.6x EBITDA, at 31 August 2014. The increase was due to dividend payouts.

RETURN ON INVESTED CAPITAL (ROIC) EXCLUDING GOODWILL

The return on invested capital excluding goodwill was 37.6%, compared to 34.9% in 2013/14. Invested capital excluding goodwill increased to EUR 632 million from EUR 604 million at 31 August 2014, due to capacity expansions and higher net working capital.

CASH FLOW

Cash flow from operating activities was EUR 222 million, compared to EUR 176 million in 2013/14. The increase was mainly due to the improved operating profit.

Cash flow used for investing activities was EUR 70 million, or 8.2% of revenue, compared to EUR 62 million, or 8.2% of revenue, in 2013/14. Major investments in 2014/15 included freeze-drying, warehousing, packaging and fermentation capacity for cultures as well as laboratory facilities for plant protection and the human microbiome initiative.

Development expenditures of EUR 10 million, or 1.2% of revenue, were capitalized during 2014/15, compared to EUR 9 million, or 1.2%, in 2013/14.

Free cash flow was EUR 151 million, up from EUR 115 million in 2013/14, primarily due to an improved cash flow from operating activities.