Novozymes A/S (NSISB) Earnings Call Transcript & Summary

[Foreign Language] [Interpreted] I think we are ready to begin today's meeting, the AGM of Novozymes A/S shareholders. I'd like to welcome you to the Ballerup Super Arena, to our ordinary Annual General Meeting 2020. We, on the Board, look forward to this afternoon. We look forward to offering you refreshments after the meeting. I have been looking forward to today's meeting. It's the first time you will be saying hello to our new CEO, Ester Baiget, but we'll get back to that. We will also be talking about what we have been spending our time on during 2019 in Novozymes to get closer to the ambition and the targets defined for us. We will also tell you our plans for 2020 and the ensuing years to have a positive effect on the world or to make sure an attractive return is paid to all shareholders and stakeholders. You probably know that I am Jorgen Rasmussen, I'm the Chairman of the Board of Novozymes. They are the members of the Board: Agnete Raaschou-Nielsen, Vice Chair; Kasim Kutay; Kim Stratton; Mathias Uhlen. So those are the 5 members elected by the AGM. As announced, we will today be proposing the reelection of 4 members and the election of 3 new nominees. They are Sharon James, Cees de Jong and Heine Dalsgaard, which also means that our current Vice Chair, Agnete Raaschou-Nielsen, who has been a member on the Board since 2011 will leave the Board as part of our succession plan. I'd like to take this opportunity, I know Agnete is with us today, to thank for her great commitment and long-standing valuable contribution to the work on the Board, and I wish her all the best in future. We will miss you, Agnete, and I mean it. But back to the election of members to the Board of Directors, we'll come back to that later in the agenda. The employee representatives are Lena Bech Holskov; Anders Hentze Knudsen and Lars Bo Koppler. You see them now on the screen. So the total Board looks like this. And then we have the registered members of the executive leadership team: Ester Baiget, President and CEO; Lars Green, Executive Vice President, responsible for Finance, Legal Affairs, IT and Investor Relations; and Thomas Videbaek Executive Vice President, responsibility for Research, Innovation & Supply. These 3 people are on the stage today, together with me. The executive leadership team consists of a total of 6 people. The other 3 EVPs, each responsible for one of our commercial divisions are: Tina Sejrsgard Fano EVP, Agriculture and Bioenergy; Andrew Fordyce, EVP, Food and Beverages; and Anders Lund, EVP, Household and Technical Industries. And you see the full executive leadership team now on the screen. Our auditors are PricewaterhouseCoopers. And in pursuance of Article 8-1 of our Articles of Association, we have once again asked Niels Kornerup, attorney-at-law, to act as Chair of our AGM. And I'll hand over to him now. You have the floor.

[Interpreted] Thank you for letting me as Chairman of the meeting. On behalf of the AGM, I hope that we will have a smooth meeting and a good discussion in a positive spirit. My first task is to ensure the lawfulness and legal competency of the Shareholders' Meeting. Pursuant to Article 7.5 of the Articles of Association, the notice convening the meeting shall be published on the company's website no more than 5 weeks and no less than 3 weeks in advance. And this was done on the 31st of January. On the same date, the meeting notice was sent directly to shareholders registered by name who have so requested with the links to forms for registration, for proxies and for personal voting. The agenda, the full proposals and the audited Annual Report have been available to the shareholders on the company's website since the same date, the 31st of January this year. So I can confirm that this Annual Shareholders' Meeting has been lawfully convened in according with the company's Articles of Association. And that we are legally competent to transact our business in accordance with the agenda, and we will enter that in the minutes unless there are any objections. That does not seem to be the case. Thank you. I'd like to draw your attention to the fact that, again, this year, the entire Annual Shareholders' Meeting is being transmitted directly via a webcast on Novozymes' website. So you can watch the meeting or you can watch it later on, on the website, if you so wish. I can tell you that just before we started, we have seen that we have 337 people available; 238 of them are shareholders; 86.8% of the votes in the company are represented after deduction of our own shares. And if you look at it, 64.1% on the basis of the share capital, that is represented also after the deduction of treasury shares. The Board has received a number of proxies and personal votes corresponding to 99.8% of the represented votes and 99.1% of the represented share of capital. The final figures will appear from the minutes from this meeting. The adoption of Item 9b, 9c and 9e on the agenda requires 2/3 of the total number of votes in the companies we represented at the AGM. That is the case, as just stated, so we are in compliance. In addition, at least 2/3 of the votes cast and of the voting capital represented must be in favor of a given proposal according to Article 9.2 of the Articles of Association approvals. Adoptions and Elections are otherwise by simple majority, apart from the items just mentioned. The AGMs in previous years have mentioned the provision in Section 101, subsection 5 of the Danish Companies Act. This requires a full account of voting to be provided for each resolution. So how many were in favor, against or abstained even if the outcome is reasonably clear. It is possible to waive from this requirement if the shareholders agree. We've done that in previous years. So I'm proposing to do that again this year. So in other words, there will be no full account of each item, so we don't have to register the voting for each item. I can ascertain whether a motion has been adopted or not. Only if there is any doubt, we will have a written vote. I hope you can accept that we will proceed in that way. So that we comply with the provision concerning a full account in this way. Thank you very much. For practical reasons, I would ask that shareholders who wish to speak during the various items on the agenda, hand me their admission ticket that you have in print or on your mobile phone because I need to make sure it is a shareholder who is asking for the floor. And please come up here to the rostrum when you want to speak, and please do so early. There are some chairs up here, as you can see. So before you speak, please come up and sit here. So we can have a smooth running of speeches. The agenda for the AGM has been sent out. Item 1 is the Report of the Board of Directors. Item 2 is Presentation and Approval of the Audited Annual Report. Item 3 is a Resolution on Distribution of Profit in accordance with the proved Annual Report. Item 4 is the Approval of the Remuneration of the Board of Directors for 2019 and the remuneration level for 2020. Item 5 is the Election of Chairman. Item 6, Election of Vice Chairman. Item 7 is the Election of other Board members. Item 8 is the Election of the Auditor. And then we have Item 9 that is proposals from the Board of Directors, and we have 6 proposals to be discussed this year. So 9a is Approval of the New Remuneration Policy; b, Renewal of the Authorization to Implement Capital Increases; 3 (sic) [ c ], that's the Proposal to Reduce the capital -- Share Capital; d, is Authorization to Acquire Treasury Shares; Item e, 9e, amendment of the Articles on 3 different places, 3 different places; and f, that's the authorization to yours truly to register, whatever has been adopted here. And item 10 on the agenda is any other business. So that's where the final point is for me. We can start with the agenda. By tradition, we will deal with items 1, 2 and 3 jointly. They will be debated also jointly. So I will give the floor to Jorgen Paul Rasmussen, who will give the report and also talk about expectations for 2020. And he will introduce Ester Baiget as the new CEO. And the CFO, Lars Green will also be up here to talk about the results for 2019. And the Chairman will go through remuneration and governance and the proposal for a new remuneration policy for Board and management, and that is 9a on the agenda. So over to the Chairman of the Board.

[Interpreted] Thank you to our Chairman. I have been looking forward for a long time to introducing our new CEO to you all. Ester joined us on the 1st of February, which means that she's been the new CEO for almost 4 weeks. She comes from a position as Business President of Dow Industrial Solutions and a member of the large global Dow Group. She's been with Dow for 25 years and is an experienced international leader with a strong track record from her various management roles over the past many years. We, the Board and myself, are confident that her skills in setting the course in an R&D-driven environment, combined with her strong operational execution skills and her passion for sustainability, all make her an excellent match for Novozymes. Ester is Spanish, and I will invite her to the stage to introduce herself in a moment. We will then switch to English. But there will be simultaneous interpretation of her message into Danish. In this way, you can all hear and follow her. A warm welcome, and Ester, please come up here and introduce yourself.

Thank you, Jorgen. Dear shareholders, it's a pleasure to be here with you and meet you today. I started, as Jorgen mentioned, my role as CEO of Novozymes, the 1st of February. And I embrace this responsibility with a lot of pride. My Danish is not so strong yet. So I needed to be here with the translation at this moment. [Foreign Language] Since the very first day that Jorgen and I, we started having the conversations with the Chairman. We started the conversation with the Chairman, I really, I was immediately thrilled. I was immediately engaged with the visibility of being part of such a company with a strong -- with such a strong purpose, with such a significant growth potential. We, Novozymes, we translate the society most pressing needs into answers based on science, into enzymes and microbes. And when I look at Novozymes, I see a healthy company. I see a company with a very strong financial backbone. I see a company with an incredible innovation pipeline. And I see a company with highly skilled people. I also see a company that holds a huge potential of growth, a potential that we are on the journey to fully unleash. And to unleash that growth potential, to materialize that, we only have to do what we are meant for to translate the society needs into answers, into enzymes, into microbes, into sales, into earnings growth, into cash. That is the way. That is the only way to help our customers stand out in our -- in the markets and to deliver solid value growth generation and returns for our shareholders. Over the last couple of weeks, I have had the opportunity to be exposed to our innovation pipeline, impressive. Impressive probably is the word that better described, the one that comes immediately into my mind. The power of our innovation toolbox is simply extraordinary. And with the required focus, I have no doubt that we will translate it, we will materialize it and we will deliver its full potential. And at the same time, we are working [ we are messaging ] and we're fine tuning and we're enhancing our commercial muscle. So in other words, we're working on both sides of the spectrum. We're gearing up from all the angles that we require for stronger growth. Jorgen said it. I have 25 years of experience as a backbone in a broad range of businesses, in a broad range of functions and businesses around the world. I have had the privilege to work with very good teams in excellent businesses. And even better, in businesses that we move into a better place, into a higher earnings growth and making them prosper again. I know that this journey is difficult. Change never is easy. It takes hard work. It takes dedication. It takes a strong purpose. It takes good leadership. It takes clear direction. And that is what I, the executive leadership team and the Board, we are determined to deliver. Together with assignments around the world as well as our important stakeholders, I look forward continuing Novozymes exciting journey. I can ensure you my full commitment towards delivering on our strategy, better business with biology. And when we meet next year in the Annual General Meeting, I will be sharing with you about the progress we're making. But for now, I'll leave it back to Jorgen. Thank you.

Thanks a lot, Ester. And I can promise you the entire Board, we are looking forward to working with you in the coming months and years and together with the executive leadership team. [Interpreted] Right. I'll switch back into Danish to talk to you about our overall performance. 2019, was certainly a challenging year for Novozymes in terms of our performance. Even though our results were consistent with our most recent guideline and guidance, they were somewhat disappointing in an overall perspective. Organic sales development was minus 1%, but we did deliver solid earnings. Our solid earnings, they're satisfactory not least, considering the disappointing sales development. If you look at external factors that have impacted negatively on our sales performance in 2019, it is the extreme weather conditions in the U.S. Midwest in the first half of the year and the unstable macroeconomic conditions, especially in the Middle East and headwind for agriculture-exposed business segments. These are factors that are generally beyond our control. Other than these are external factors, we should have been better at focusing our efforts. We should be able to make it more the heart of our commercial execution. Our updated strategy, Better business with biology, addresses these issues. That said, we have witnessed a positive trend in Household Care especially in the third and fourth quarters, and that's encouraging. The positive performance, improved performance in the Household Care segment was driven partially by increased sales of the freshness solution, one of our recent innovations. And innovation is at the core of what we do at Novozymes. The Board is pleased with the progress we've made in the year under review when it comes to bringing new innovation to the market and the way our solutions can contribute to a more sustainable world. In 2019, we also launched a new strategy and made substantial changes across the organization. We've done that to secure our future success, so we can continue to have positive impact on the world and generate attractive returns for our shareholders and stakeholders. The implementation of the new strategy is proceeding quite well, very well and according to plan. 2019 was another year when sustainability and climate change were at the top of the global agenda. Some countries in the world where severely hit by forest fires and other natural disasters. And more and more people took to the streets to protest saying we're not making enough progress when it comes to finding sustainable solutions to the greatest challenges in human history. I've said it before, but Novozymes is in a unique position to play an active role at helping to solve all these problems. We produce and sell biological solutions that enable our customers to enhance the quality of their products and customer experience. And we enable consumers and customers. We enable our customers to produce more with fewer resources. The product we sell make the world more sustainable. And in the vast majority of cases, they are profitable for businesses, for our customers, end users and Novozymes. But our product potential is not fully reflected in our results for 2019. We can do so much more. We updated our strategy, as I mentioned, in the first half of '19. And I do believe we are now on the right track. So let me hand over to Lars Green, our CFO, who will talk to us about the financial performance.

[Interpreted] So thank you to the Chairman for the introductory comments. 2019 was indeed a challenging year. We ended the year with organic sales development at minus 1%. That was disappointing, although it was within the guidance range announced in October of last year, when we anticipated that sales growth would be between minus 2% and 0%. The EBIT margin was favorably affected by one-offs, came to 28.1%. The underlying EBIT margin was about 26% after adjustments. Net profit was down 2% year-on-year, and free cash flows before acquisitions came to DKK 2.2 billion. Household Care delivered the results expected when the year began. Sales picked up towards the end of the year, and this was well supported by our freshness solution that is starting to deliver on expectations. Bioenergy and agriculture were adversely affected by flooding and extreme weather in the U.S. Midwest. More about that later. Also, there were unstable macroeconomic conditions in the Middle East, and that contributed to the negative development in sales. But you can read more about the individual segment performances in the Novozymes Report 2019. Novozymes maintained a strong balance sheet in 2019. Net interest-bearing debt was approximately DKK 4 billion at year-end. The financial gearing, defined as the ratio of net debt-to-EBITDA rose to 0.8, approaching, thus, the level of 1 that we have announced is what we find appropriate for Novozymes. The free cash flow before acquisition was, as I said, DKK 2.2 billion, a year-on-year decline of DKK 100 million due primarily to higher tax payments that were only partially offset by lower net investments. The return on invested capital, including goodwill, came to 21.1% against 24.2% the year before. This was primarily due to accounting technology, which increased the invested capital on the balance sheet. We sell our solutions to many industries, and we operate in multiple geographies and segments. This ensures a balanced and well-diversified business and we often see that if one industry fails to deliver the expected results, there will probably be another that will outperform expectations. We experienced headwinds in several business areas in 2019 also because of the severe flooding in the U.S. Midwest where several customers simply had to suspend production for long periods of time and farmland could not be sown as planned because everything was underwater. This affected our sales to the ethanol industry, the agriculture export businesses and starch processing in food and beverages. We also saw growing macroeconomic and political instability in several countries in the Middle East, and that affected most of our business segments. So generally, 2019 was a challenge. But we're able to navigate troubled waters. Without that, we couldn't be successful. And to that end, we will maintain a diversified business portfolio and continue to deliver potent innovations and invest where our efforts produced the biggest rewards. In 2019, we upheld the tradition of returning more to our shareholders through higher dividend payments than the year before and buybacks of shares. Today, we're proposing to distribute a dividend of about DKK 1.5 billion for the 2019 financial year or a dividend of DKK 5.25 per share and a payout of 46.8% of net profit, which is 5% above last year. In '19, we bought back stock worth DKK 2 billion, meaning that we sent a total of DKK 3.5 billion back to shareholders for 2019 with proposing the dividend we do. This is in keeping with the capital structure strategy announced at the Capital Markets Day in June last year, which sets out to maintain interest-bearing debt at EBITDA level, return on free cash flows to shareholders through a combination of dividends where we will increase the payout ratio to about 50% over coming years and going ahead with share buybacks with the rest of the free cash flows. At end 2019, our market capitalization stood at around DKK 95 billion, assuming the same price for A shares and the free float B shares. This is an increase of 12% on the year before, reflecting the increase we've seen in the share price. As a shareholder in Novozymes, the total return in 2019 was 14%, consisting of the increase in share price and dividend for the year. With that, I give the floor back to Jorgen, who'll provide more details on developments in Novozymes, including our updated business strategy, Better business with biology.

[Interpreted] Thank you, Lars Green. Not surprisingly, innovation is a cornerstone in the development of Novozymes. In 2019, we delivered significant new innovations that provide a strong platform for future growth. We have a robust pipeline, and we support our product launches through solid investments in commercial activities and increased presence in emerging markets. To be specific, we launched 9 new innovations in 2019 across a range of industries and 11 exclusive innovations for specific customers. Let me just mention a few of them. In many parts of the world, clothes are still washed by scrubbing them hard with a bar of soap to remove dirt and stains. This is hard work. Takes a long time. It's hard on the clothes and it's hard on the hands doing the washing. In 2019, Novozymes made it much easier to wash the clothes by launching an enzymatic solution for soap bars for the Indian market. The first innovation of its kind to come out of our household care design center in Bangalore, just 18 months after the center opened. This product makes it much easier to remove stains and dirt especially from cuffs and collars, resulting in less wear of clothes and hands, of course. In the bioenergy sector, in 2019, we launched Innova Force, the strong add-on to our Innova yeast portfolio. Since we launched our first Innova yeast at the end of '18, more and more North American bioethanol producers have embraced our yeast. Innova Force represents the next addition. Combined with our enzymes, it constitutes the most reliable and flexible solution in the market. Innova Force offers exceptional robustness to high ethanol concentrations and substantial temperature variations and resistance to lactic acid excursions, and they are a well-known challenge in ethanol production. So we have better production and higher yields for customers. The new solution is classified as a transformative innovation. It really has the potential to have a major impact on the industry. Frontia Jade is another new product for the processing of corn specifically designed for the Chinese market. The product releases more starch, fiber and protein during corn processing. This helps our customers to get a better yield and to reduce the consumption of energy and reduce costs. While it is not an innovation as such, it is certainly innovative that we opened an online store on Alibaba, the Chinese e-commerce platform. This will make it easier for small customers to order enzymes for their production online. In 2019, we spent 13.7% of sales on R&D. The Board supports reinvesting significant amounts in the business to ensure continued development of potent innovations. We have also intensified our focus on bringing new solutions faster to market and more efficiently to market. To support our future growth, we are continuing the activity ramp-up in emerging markets. These markets have great potential, particularly within Household Care and Food & Beverages. In 2019, we opened our first household care customer experience center in Beijing in China to show local customers what our solutions can do for them, their end customers and consumers. We expect more growth in the emerging markets in this industry. We want to ensure we can meet the needs of local customers better and faster and this new center in Beijing will help us achieve that. In 2019, we were also able to welcome many of our Danish Zymers to the new innovation camp, the campus in Lyngby here, outside Copenhagen. Years ago, we had a vision of creating a new workplace, bringing together multiple Novozymes functions, back office to labs to have functions under one roof rather than scattered across many buildings. We have now done that, and I have to say, it is so interesting to walk through our campus now to see the work that's going on with the global innovation here. There's buzzing with life and activity there in Lyngby. I'm also very pleased to say that we have met all our sustainability targets in 2019. I'm particularly proud to tell you that we have reduced the number of occupational injuries to a record low. 10 Zymers across the world were injured at work. That is 0.9 lost time injuries per million working hours, down from 2.4 in 2018. This is a significant improvement and reflects the massive efforts by management and employees to reduce the number of injuries and reduce and secure our safety for our Zymers on the job. So 2019 was a challenging year for Novozymes, but it was also a year in which we updated our strategy. This will make it possible to make an even greater difference for our customers, our business and the world. We have achieved a lot over the last 5 years. With the most recent strategy we've reached out to billions of people with our solutions. We've helped customers produce more with less, and we have contributed to a greener future. But we can do much more. And that is where our updated strategy comes in. We've struggled to generate the sales growth we were aiming for, and our business has been facing headwinds in several respects. So now it's time to embark on a new chapter and to make an even greater difference than what we are already doing. With the updated strategy, we want to achieve Better business with biology. This is not just for Novozymes, but it's a key element of our pledge to customers and to the world. As part of this strategy, Better business with biology, we've implemented a new portfolio structure with clear roles and specific targets for each business area. This is done to ensure we can deliver products and services that are better aligned with the individual business areas and create maximum value for our customers. In order to finance these strategic initiatives, we have carried out a major reallocation and efficiency enhancing program. A major part of the funds released will be reinvested in projects with strong growth potential. The long-term projects are called strategic opportunity areas and they are intended to enable us to expand our business in new areas, such as probiotics for humans and plant proteins. We've also streamlined our innovation pipeline to have fewer projects, but they will get more resources. This will give us more clout in our innovation. As part of the Better business with biology project, we've launched a number of ambitious financial targets and sustainability targets. Let me just highlight the financial targets. From '20 to '22, we aim to generate annual organic sales growth of 5% or more. 2020 will have a negative impact by the portfolio investments, the portfolio adjustments and the organizational changes but I'll talk about the 2020 guidance later. But when we come to 2022, at the latest, we expect an EBIT margin of 28% or more, and the return on the invested capital, including goodwill of 23% or more. So these are sadly ambitious targets and our updated strategy will help us achieve them. The work to implement the strategy is progressing very well and according to plan. The Board looks forward to continuing to work to execute the strategy with Ester and the rest of the leadership team. Unfortunately, in August 2019, we had to part with a number of good colleagues in Novozymes to free up resources for investment in high potential growth areas. That was tough on all Zymers. We and the leadership team have worked hard to ensure that the employees we had to let go, and those staying on, received the right support. Now sustainability is at the core of everything we do. Accordingly, together with that -- accordingly, we also introduced new sustainability targets together with our Better business with biology. You can see them up here. We have defined commitments for 2030 and midterm targets for '20 to '22 for people in and outside the organization and 3 global challenges: climate, water and production and consumption. For each of these 3 areas, we commit ourselves to increasing the positive impact of our products and reducing the negative effects of our operations. We want to ensure consistency between our commercial opportunities and our operational responsibilities, but to maximize our contribution towards the U.N. SDGs. We commit ourselves to building up a culture where all employees thrive and develop. We want to ensure that we help people in local communities to have a good life, to help them live a good life. We are proud to be among the first companies in the world to commit ourselves to keeping global warming below 1.5 degrees and to have this externally validated. These are ambitious goals, also bearing witness to the potential that we have for making a positive difference in the world. One of the Board's main responsibilities is to ensure Novozymes always has the right skills and an appropriate succession plan. We also want to ensure we have an appropriate level of diversity among managers and employees across the company in order to be able to capitalize on opportunities that arise. In 2019, we carried out a number of changes to the Board of Directors and the executive leadership team. In September, Lars Green, who is sitting up here, he was appointed the new CFO of Novozymes, in charge of Finance, IT, Legal and Investor Relations. Lars joined us from Novo Nordisk A/S, where he worked for 27 years, most recently as the EVP, in charge of business services and compliance. He was a member of the executive management of Novo Nordisk. He has served on the Board of Novozymes since 2014, and he's Chair of the Audit Committee. As a member of the Board of Directors so before he was appointed as CFO, he was involved in the work with the strategy. Since September, he has played a very active role in anchoring the strategy across the organization. In October, the Board of Directors and Peder Holk Nielsen announced that he would step down as CEO. Later that month, we were able to appoint Ester Baiget, as our new CEO. I'd like to take this opportunity to thank Peder for his huge contribution to Novozymes over the past 35 years, 7 of them as President and CEO. He has been instrumental in positioning Novozymes for long-term growth and expanding our global presence, especially in emerging markets. Under Peder's leadership, Novozymes has delivered many transformative innovations that will have a great impact on our customers' business and on the world around us for years to come. At the same time, as I said before, the Board now looks forward to implementing the strategy, together with Ester Baiget and the rest of the executive leadership team. In connection with the election of Board members at today's AGM, the Board of Directors proposes to reelect 4 members. We propose to elect 3 new nominees: Sharon James, Cees de Jong and Heine Dalsgaard. I'd like to take this opportunity to say a few words about all these 3 proposed candidates. Sharon James is British. She's a very experienced leader in research and development. For more than 25 years, she's been in charge of managing and developing major global R&D teams, focusing on commercial innovation. Sharon's most recent job was as Senior Vice President of Global R&D with Bayer's Consumer Health Division. She also has extensive experience from R&D management positions, Reckitt Benckiser and GSK, she has worked for. I'm very confident that Sharon will be a valuable asset when we want to focus on prioritization and strategic opportunities. Cees de Jong is Dutch, a highly respected business leader with extensive experience from the global food ingredients and pharmaceutical industries. Most recently, he was with Chr. Hansen in Denmark. He served as the CEO from '13 to '18. With his research acumen and global industry experience, I'm confident that Cees will make value contribution towards developing our results and strategy. Heine Dalsgaard is Danish. He's the CFO of Carlsberg. Previously, he was the CFO of ISS and Grundfos. He has a strong financial background, extensive experience in driving strategic results. With Heine on board, we will be able to strengthen our performance in these fields. We'll come back to the election of members for Board of Directors in a little bit. And now a look at 2020. In 2020, we expect organic sales growth of between 1% and 5%. All business areas are expected to contribute to organic sales growth and the wider range is due to the fact that there's some uncertainty associated with, in particular, the more agriculture-oriented business segments. Growth will come from innovation and an even wider market presence, combined with stronger focus on execution and follow-up. This will be supported mainly by the continued development and rollout of our freshness solution for Household Care, Balancius for Feed, Palmora and Frontia for Food & Beverages and yeast for Bioenergy. We expect continued uncertainty with respect to ethanol production for the U.S. market. But we anticipate unchanged levels compared with 2019. The updated strategy is focused on our development over the next 3 years. We expect the new strategic measures to not only boost organic sales growth, which is an important value driver, but also to help generate greater value creation for Novozymes by focusing also on cash flows. Not many companies can match the reach and impact of our products. In 2019, an estimated 5.9 billion people used products made with our solutions. The Board believes that our company has the potential to continue to create significant value together with customers and partners. We must generate attractive returns for shareholders and stakeholders and do even more together with our customers and partners to ensure our solutions contribute to making the world more sustainable. As I said before, that's what our updated strategy is about. I look forward to, together with the Board and the leadership team, creating even more value in 2020 for customers, shareholders, Novozymes and the world around us. I'd like to extend my sincere thanks to all Zymers for their passion for the company and for their huge contribution in 2019. It hasn't been an easy year, and it's been fantastic to see the unwavering commitment of all Zymers in improving our solutions and making our processes more efficient. It's truly uplifting. I'm also seeing signs of renewed Zymer optimism in the wake of the many initiatives and changes implemented in the course of 2019. I'd have liked to have seen better growth numbers for 2019, but I'm proud of the solutions that we delivered during the year. I'm confident that they will make a difference for the world and for Novozymes. Thank you very much to all the Zymers. We now have now reached my report concerning remuneration and corporate governance. I will also present the Board's proposal for a new remuneration policy for 2020 and beyond and report on our corporate governance. The remuneration of the executive leadership team is fixed by the Board of Directors within the limits of the remuneration policy. As you would have seen from the announcement convening the Annual Shareholders' Meeting, the Board is proposing today a new remuneration policy for 2020 and beyond. The remuneration paid for 2019 and the preceding years were regulated by the existing remuneration policy. Before I explain the Board's proposal for a new policy, let me first take you through the remuneration of the executive leadership team and the Board of Directors in 2019. The current remuneration paid to executive leadership team members consists of a base salary, pension contributions, a short-term annual incentive program in the form of a cash bonus and a long-term stock-based incentive program. As you can see from the remuneration report in the Novozymes report 2019, members of the executive leadership team received an average of 22% of their maximum cash bonus. The cash bonus was exclusively paid out based on individual targets. There was no allocation based on EBIT targets. In 2017, the Board of Directors approved a 3-year incentive program for the executive leadership team applicable to the period 2017 to '19, the period that has just ended. The incentive program for the executive leadership team was split evenly between stock and stock options. 75% of the program was based on the achievement of economic profit, which includes sales growth, EBIT margin and return on invested capital, with the remaining 25% being based on organic sales growth performance. The program was awarded at the beginning of 2020, and the amount of stock and stock options granted for the period 2017 to 2019 was 61% of the total program. This is the lowest level ever and is a reflection of the disappointing results for 2019 and the results for 20 -- 7 -- 2018, which were closer to target level. You can find more information about the remuneration of the executive leadership team in the Remuneration Report included in the Novozymes Report 2019. In late 2019 and in 2019, the Board of Directors conducted a thorough review of the remuneration programs applicable to the executive leadership team. We did this to ensure that the remuneration of the executive leadership team is consistent with the updated strategy, shareholder expectations and market practice. In reviewing the remuneration guidelines, we obtained independent advice from external executive remuneration experts in Denmark and Europe. On the basis of this review, we found that the current salary package is competitive compared to external benchmarks in Denmark and Europe, including a group of peers of comparable size within the European biotech, chemicals, pharmaceuticals and healthcare industries. Nonetheless, with the proposal for a new remuneration policy, the Board of Directors aims to simplify the company schemes, align the policy better with investor expectations for best practice, ensure our packages are competitive and drive improved performance and further align shareholder and executive interests. The Board proposes that the new remuneration package for executive management comprises fixed remuneration and variable remuneration. While fixed remuneration levels will remain largely unchanged at 11% of the base salary, the pension contribution will be significantly reduced from the current 25% to 30% of the base salary. At the same time, the company car allowance will be reduced and the base salary will therefore be increased proportionately to maintain the current fixed remuneration level. This balance is much closer to market standards and makes for a simpler and more flexible package for current and future members of executive management. The Board proposes a variable remuneration consisting of several components. I'll briefly review them here: an annual short-term cash-based incentive program of up to 9.5 months' base salary subject to the achievement of challenging financial and individual targets; an annual long-term incentive program of up to 19 months' base salary at the date of allocation in the form of stock and stock options at market value, subject to the achievement of challenging financial and sustainability targets measured over a period of 3 years. Since 2011, our long-term incentive program has been based on consecutive time blocks of 3 years. Such blocks are very rare in the market. And therefore, going forward, we will instead make annual allocations based on 3-year overlapping performance periods. In this way, we will have the possibility of reviewing the targets for each annual allocation period to ensure that they are sufficiently challenging and consistent with the strategy. At on-target performance and thus, 65% program payout, Novozymes' remuneration structure will have a bias towards variable performance-related remuneration as compared with the rest of the market. The Board also proposes to introduce a so-called best practice measure that consists of 3 elements: One is to authorize the Board to change the payout level under the short-term or the long-term incentive program if exceptional circumstances make it imprudent to pay incentives even if the agreed targets have been met. However, this will be the exception rather than the rule. Secondly, we will introduce provisions on the repayment of short-term and/or long-term incentive remuneration if too much has been paid out due to an error or due to incorrect information. And thirdly, a new one, introducing a requirement that members of the executive management must acquire shares corresponding to 100% of their base salary over a period of 5 years. The Board of Directors find that the proposed policy will ensure a simple performance-based package that provides executive management with strong incentives to enhance value creation and drive growth. This is in the interest of our shareholders. I can also tell you that we have had an ongoing direct dialogue with several of our major shareholders about the new remuneration policy, and I, therefore, hope that the Annual Shareholders' Meeting will endorse the proposal for a new remuneration policy. Remuneration of the Board of Directors. The Board of Directors received a total amount of DKK 7 million in total remuneration in 2019, down from DKK 7.7 million in the year before. The decline was attributable to a reduction in the number of Board members. Patricia Malarkey resigned from the Board in January 2019 to avoid a conflict of interest after taking up a leading role with DSM. And Lars Green resigned in September 2019 after being appointed CFO of Novozymes. It is proposed to maintain the base fee per Board member at the 2019 level. The fee has not changed since 2015. Like a number of other Danish companies, the Board was authorized by the Annual Shareholders' Meeting in 2018 to reward ad hoc efforts exceeding what is generally expected of Board members. No such fees were paid in 2019. In connection with the 2019 assessment of management efficiency and collaboration, there was an indication of a high level of satisfaction with the open dialogue between the executive leadership team and the Board of Directors and with the way in which meetings are conducted. Based on this evaluation, the executive leadership team and the Board of Directors have agreed to focus on strategic -- or strategy implementation and to intensify efforts to predict developments in our markets. The Board of Directors is required to follow the Danish corporate governance recommendations on a comply or explain basis. In 2019, we complied with 45 out of the 47 recommendations. All of these recommendations and the Board's position on them can be found on our website. And I will now give the floor to Niels Kornerup, our Chairman.

[Interpreted] Thank you to Jorgen Rasmussen, Ester Baiget and Lars Green. That was the verbal report of the past year and the outlook for 2020 and was the presentation of the audited Annual Report and the proposed remuneration report. Before I open the meeting for a debate, I would like to point out that the Annual Report has been signed by the Board of Directors and the Executive Leadership Team and certified by the company's auditors without any modifications or remarks. And the Board of Directors proposes payment of a dividend for 2019 of DKK 5.25 per share or DKK 2. This is an increase of 5% compared with '18. The dividend payout is then 46.8% of the profit for the year equivalent to DKK 1,478,000,000. It is proposed that the remaining profit of DKK 1,677,000,000 will be taken to retained to earnings. We have 3 people asking for the floor so far, and please come up here and register if you want to speak. The first speaker is ATP, the labor market supplementary pension fund. Claus Moller, you have the floor.

[Interpreted] Thank you. So I am Claus Berner Moller. I represent ATP. I'd like to start by thanking you for the report and the review of the Annual Report. 2019, in many ways, was a challenging year for Novozymes. Many of the industries in which Novozymes is active were under pressure. Also because of the weather, poor economic performance by farmers, particularly in the U.S., lack of political support for more use of bioethanol and weakness in different geographies, particularly the Middle East, these were all external causes, you could say, that help explain a disappointing 2019 when organic sales growth was negative by 1%. However, negative growth also needs to be explained through internal problems. Too low conversion of R&D costs into organic growth of revenue. But Novozymes has understood now that the internal processes need to be optimized. So I'm very pleased to see that Novozymes in 2019 made a number of important decisions so as to optimize the company. Among them, these decisions, I'd like to mention the following new strategy: focusing on more resources for fewer R&D projects; strengthening of the Board, 3 new strong members joining the Board; engagement of a new CEO, a new CFO, both recruited outside Novozymes so as to ensure there is renewal and inspiration coming to the company. These changes make me hope that Novozymes will be able to reactivate its strong base, its strong foundation. In recent years, not everything has been achieved, so let us hope that the coming years will turn out to be the beginning of a new strong period of growth so that we can see Novozymes implementing the potential that the company really should have. Today, we need to decide on the new remuneration policy. In many ways, I think it's a good policy. For example, there's a good split between fixed and variable pay and short- and long-term incentive programs. Also, organic top line growth has been given higher priority as a KPI and shareholders have wanted that. And I'm happy that you're encouraging members of the executive leadership team to buy shares. You could have asked for even more from them, I think, but still. The Board has also simplified the pay package, and we see that positively. Even if here, they could have taken it one step further by avoiding share option programs. But anyway, the overall conclusion is that ATP will vote in favor of the remuneration policy. As mentioned, there are 3 new members joining the Board of Directors: Sharon James, Heine Dalsgaard and Cees de Jong. Welcome to all 3 of you. We know Cees de Jong because he was the CEO of Chr. Hansen. So we have high expectations from you in regard to your work for Novozymes. Heine Dalsgaard we know as a strong CFO at Carlsberg. Here, too, you have found a candidate from the top shelf. So again, I'd like to praise the Chairman and the rest of the Board of Directors, you are strengthening the board with these 3 new members. That is for sure. Agnete Raaschou-Nielsen will finish on the Board today. I'd really like to thank you very much for the contribution you have given since 2011. And finally, thank you to all people working at Novozymes. Thank you for the effort you have made in 2019, and I hope that this new year will develop in a satisfactory direction. Thank you for your attention.

[Interpreted] Thank you very much to ATP. And the next speaker on my list is the Association of Danish Private Shareholders. You have the floor.

[Interpreted] I am [ Katie Jurgens ]. I represent the Association of Danish Private Shareholders. We take care of the interest of small- and medium-sized shareholders. And many of our members have shares in Novozymes and are present at the meeting today, and that's why I have decided to do this in Danish. I find that management has decided to present total set of accounts in English, but we do have 5 key figures in Danish. And some of the frequently asked questions can be found on the Danish part of the website. And here, they try to introduce many of the things our members want to know about, and that puts them in a good position. Organic sales growth was 1% compared to '18, but it was flat reported in DKK, but it's difficult to grow the top line when you hold a market share of 50%. Gross margin is declining but the result for the year was benefited by a 17% corporate tax rate. This gives a bottom line of DKK 3.15 billion, down 2% from the year before. The reasons are manyfold. For instance, poor weather, climate change and geopolitical challenges, all factors that are very difficult to control. Sustainability was once again at the top of the agenda but that alone didn't boost growth. Novozymes has had a good journey since the year 2000. But the curve has become flat in recent years. This is clearly evident from the performance in 2019. Is it possible to get back to the growth rates from the past? A dividend of DKK 5.25 per share is definitely satisfactory, it's 1.4% of the current stock price as of the 15th of February. And that's fine. It's okay in the present situation where we have 0 negative rates of interest paid by the banks. There has been little to take pride in -- or to take joy in, in Novozymes in recent years. The share price has been flat or declining. Perhaps there has been a lack of faith in the strategy and the top line growth of 1.5%. I'd like to hear why you have presented an interval of 1% to 5% in the guidance. One of our focus points this year is cybersecurity or IT security. This is a threat that has cost dearly for many Danish businesses in recent years. I don't see a lot of mention made of cybersecurity in the Annual Report, which is a whole 159 pages. This may be a reflection of the necessary measures having been taken but it is a relevant topic that ought to be mentioned in the Annual Report because if there is an attack, it will have a lot of implications to not only the company but also shareholders. The incentive program from '17 to '19, directly performance-related, 75% to 25%. There is an individual list with figures for comparison, there is full transparency. 2019's disappointing growth was actually a hard hit for many. The CEO, also saw a decline in total paydown, 44%. DKK 56.3 million was paid out in total in 2019, a significant decline from the year before. But I don't see any information about where the top management invested in shares paid for by their own private money. We've had 7 years with Peder Holk Nielsen as CEO and that meant it was time for a change. I'd like to thank him for his achievements. And I'm satisfied to see that Novozymes has found a new President and CEO, Ester Baiget, an experienced international leader with a strong track record in relation to sustainable growth and profitable growth and change management. We always prefer cognitive diversity. But I'm so pleased to see that it's now a woman that will be at the helm. Welcome to you. Novozymes is a business with a strong purpose driven by sustainable innovation, and we already see the incorporation of 5 of the U.N.'s global targets. Thank you for that. I'd like to say thank you for the past, and I wish you all a good 2020, Zymers and shareholders alike.

Thank you very much, [ Katie Jurgens ]. And those 2 interventions, I think, the Chairman would like to give any feedback. You have the floor.

It's always a pleasure to have comments and questions. Thank you so much. First of all, thank you, Claus Berner Moller, from ATP, the Supplementary Pension Fund. Thank you for your comments on our report and the results achieved in '19. And you commented also on many of the initiatives we've taken in 2019 to improve from 2020 onwards. There were no direct questions from you, but I know we have a close dialogue with your people at ATP. We do appreciate that. And I hope we can continue that dialogue, not only at the AGMs, but also in between, as we have done before. So thank you. And thank you for your comments. And to the Danish Association of Shareholders, you had a number of questions. I think I'll address most of them. And the CFO can address a couple of them, and he will talk a bit about the guidance of 1% to 5% while we have used that particular guidance. One question was, why do we believe that we can get back on track when it -- in terms of growth, the way it was before? Well, depending how you define it, I'd say, what we can do is get back to organic, 5%-plus from 2021. 2020 will have a slightly negative impact of some of the changes to the organization and to the portfolio. But we do believe in that, and there are a number of driving forces and changes that make us confident we can deliver on that. Claus also talked about it, Claus from ATP. He talked about our new strategy, focusing resources, money and people on initiatives that we really believe in, those that we believe can really make a difference. So we've reduced our renovation pipeline from about 140, 145 projects down to 100 projects so we can give more money to the projects that we are continuing. Another point is that we have split up our portfolio differently now, the way we look at it and address it, so we know better where to invest, where to spend resources, depending on opportunities. We've made substantial changes to the organization. And as discussed, we've also changed management structure. So we do have a new strategy in place. We do believe we can get back to where we should be because we are a company that has so many opportunities in this world. Campaigns on our new strategy. We also have what we call, as mentioned, strategic opportunity areas. And this is where we will spend quite a lot of money, developing new business areas that can help us with a more long-term growth. So yes, we are very confident that we can deliver on what we've said concerning 2020 to 2022, the growth we promised earlier. Now cyber and cyber risk security -- cybersecurity, yes, we spent a lot of time on that, Board and management. The management and the organization, spent a lot of time on it in our everyday work. We are aware of the risk. It is a risk we must take very seriously. Can we solve everything? No, we cannot. New things pop up all the time, but we do our level best. But let me just list a few of the things that we already have in place. We have an IT emergency response plan, for instance, what to do in our production. What to do in R&D, everywhere, a complete plan of what to do. We also have a defense center always all the time monitoring our systems, all the time monitoring all our screens. If something strange happens, we can catch it very early on. We also have a system outside of Novozymes, so that if something happens, our communication can go back up. It's called out of band system, so we can come back and be up and running quite soon. We are making it as difficult as ever possible for anybody to carry out a cybersecurity attack on Novozymes. Another element here is information, information and more information. I know the Executive Leadership Team, they communicated a lot with employees, strange e-mail, strange invoices. Tag it, tag it, tag it. Do not open this, that can ruin our system. So yes, a lot of information, a lot of communication is also being used and is required. Before I give the floor to Lars to talk about the 1% to 5% guidance for '20 to '22, there was another question, have managers bought shares? You can find all the information in the Annual Report, I think it's page -- is it 47? You can see who is holding shares, how many shares, who has bought in the period under review. So the information is open, it's available in the Annual Report. With our new program that we are now introducing, the new remuneration program, we have a new requirement, right? Every member of the Executive Leadership Team must purchase shares worth 1 year of their basic pay, and they must do that within 5 years. Lars, would you take over from here?

Thank you, and thank you for the question concerning our guidance for sales, 2020. We've set in the range between 1% and 5% growth. All in all, for the company, we've also said that, that covers variation regarding the individual elements of our business. If you look at the more well-established areas where we have more certainty of future sales, this is Household Care, that division but also food and beverages. It's still within this interval but the -- but it's a narrower interval than overall. In hindsight, we can also see -- say that there are a number of factors that influence particularly business areas in agriculture. There's more uncertainty there. So those areas, that's the bioenergy, the agricultural activities. They will have a wider uncertainty, if you like. So all in all, the range is 1% to 5%, and that covers the variation between different business areas that I just talked about.

Thank you to the Chairman and Lars Green for their comments to the 2 speakers and their comments and questions, which brings us to the last speaker on my list, [ Fleming Haas ], you have the floor.

My name is [ Fleming Haas ]. I have been asked by Bjorn Hanson, who has departed for Dubai, to read out his comments. The Board has already received this in writing. The first question is the Nebraska plant. Since 2013, has it met the water savings requirements with -- by the U.S. in relation to bacteria, among other things? That's the first question. Next, enzymes from Novozymes in detergents in strong price competition, they should be cheaper or other solutions should be found with manufacturers of also washes in the EU. What are your development plans with all-in solutions for the period '20 to '25? And I myself have a topical question. The new coronavirus, what are you doing to respond to the changes that may happen? I know this is a difficult question, but it's difficult for all of us to be shareholders in times like this. So you need to sort of pull yourselves together now because this may be a very difficult situation.

Thank you very much for 3 very specific questions. The 2 first questions will be responded to by the Chairman, and the last question will be responded to by Ms. Baiget.

Thank you once again for these questions. First one had to do with the factory in Nebraska. Are we working to reduce our water consumption so we pollute as little as possible? And we are doing that. We're focused on that for many years. You can also see from the new sustainability goals that I took you through, this is a focal point going forward. Not only in the U.S., but at all our sites. So we want to reduce the water consumption in our production. So we have full focus on that. The second one had to do with detergents. They have been under pressure. It was that, that business has been under pressure. Should we refocus in some way, going for all-in solutions, not just at such. It's true, the business has been under pressure in this business area. But after we introduced our new innovation, the Freshness solution, we have actually, over the last couple of quarters, we've seen quite a strong performance from our detergents from that segment. So we do believe, in general, that we should continue doing what we are good at, what seems to be working for the Household Care business, not enter into all-in solutions. Ester, would you deal with the last question, please? Coronavirus?