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

Ladies and gentlemen, welcome to the Novonesis' conference call. I am Youssef, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Tobias Cornelius Björklund. Please go ahead.

Yes. Good afternoon, and welcome, everyone. My name is Tobias Björklund, I'm heading up the Investor Relations team here at Novonesis. Our educational spotlight sessions like the one we're hosting today -- here today are virtual events that we will be hosting also in the future, and we focus on different areas of our business. In today's spotlight session, which will last for around 45 minutes, including Q&A, we will be focusing on our energy business as part of our agriculture, energy and tech area. To help us understand the business better, we have Tina Fano, EVP of Planetary Health Biosolutions; and also Rikke Klingenberg, Vice President, Marketing and Business Development of Energy also in Planetary Health. If you have questions, the operator will instruct you on how to get in line after we have concluded the formal presentation. To ask questions, you need to have registered to do so. If you have not done so, you can find the registration link at novonesis.com under Investors. Then you will be prompted with the phone number and the pass code. With this short introduction, I'm very happy to leave the word and introduce you to Tina Fanø. Tina, please.

Thank you so much, Tobias. And what a pleasure to be here today to talk about energy because energy is part of the group, which we call Agriculture, Energy and Tech, which is roughly 35%, 36% of Novonesis' turnover. And roughly half of the Agriculture Energy and Tech Group is coming from energy. If you look at the fundamental growth drivers, which we have, it's the increasing fuel demand, it is the decarbonization agenda. It is an aim to replace chemicals in your production. And then it's the wish to be energy independence. These together is creating a pull for liquid biofuels. In our talks, for example, in the quarterly calls, we have had a lot of talks about diversification and how it is that the market and we, in particular, have been diversifying the energy exposure or the energy mix. We have done diversification in many different ways. So first of all, we have been diversifying the end market in which our solutions are supporting. In the near term, it's about the DDGs and corn oil, which we have enabled production of and mid to longer term, our solutions are enabling that we can go to sustainable aviation fuel, maritime fuels or chemicals. We'll come back to that later in this spotlight. We are also diversifying which feedstocks is being used. So for example, in biofuel, it is grain-based ethanol and in biodiesel, it is vegetable oils. And in biomass, it's waste products from the fields. Here, the vast biggest is still grain-based biofuel, as you can see in the numbers. We have also geographically diversified our business. So you will be able to see that the vast majority is still North America. However, Latin America, as we have talked about a number of times, is becoming more and more and more important, and the rest of the world is also gaining more and more traction, especially in India. Again, that, we will also come back to, in fact, just on the next slide, where we'll look at how the world is today and how it is we expect growth to come in the future. Ten years back, ethanol was mostly a North American business. And as you can see, that diversification geographically has been a good growth driver for us. And we also expect that to keep being a growth driver for us as we look ahead. This is what we have here is the biofuel or bioethanol market volumes. We have chosen to highlight 3 overall geographies, North America is very important simply given the size. You can see that the numbers at the chart, it is the biggest region where bioethanol is being used. A key here is both from an innovation point of view, a full focus on productivity but also the product or the end market diversification. So for example, the solutions which we are having, which are supporting further corn oil or lower CI ethanol being produced, so some of our fiber solutions. Latin America and India is worth looking at and taking a closer look at because of the growth they are showing. Also, these geographies are where biomass is emerging but even -- but also here, as I said, you have the industry expansion in the 1G space. Europe and rest of the world is still growing nicely. However, it is more solid. However, as we already -- I've already mentioned, there is further end market diversification, so Hans Ole, is that something you will talk a bit more about.

Thank you, Tina, and thanks so much for joining us here today. We'll try to dive in over the next couple of slides a bit to talk about how our customers are evolving and also how, when we think about the future, we see innovation playing a role in the bioenergy space. So on the slide here, you have a pretty straightforward illustrative outlook on how a typical corn-based biorefinery or a bioethanol plant runs. And if we go back just about 5 years or so, most of these refineries or bioethanol plants would have primarily focused on ethanol as their main output. Today, if we use U.S. as an example, we see an increasing diversification in the end markets they're serving. So in particular, we see corn oil playing a bigger role and that corn oil as an example in the U.S. going to the renewable diesel market. We see fiber ethanol emerging as a new market in regulated spaces like the California CARB market. And we also, longer term, see that areas like protein and higher-value protein in feed are likely to play a role. And so in that sense, we believe that there will be a future where our customers will continue to diversify where they're unlocking value. And as a result of that, we are, of course, adapting our innovation model to that. On a global level, the innovation we're seeing is of course, not just in North America, and it's something that's really playing out across multiple regions. And if we go back again to 2019, some 5 years ago, there, if we look at the U.S. and we look at enzymes only, at that point in time, about 2/3 of our revenue would have been U.S. only and enzymes only for corn ethanol. Today, as we leave 2023, we've actually now seen a pretty big shift in dynamic where roughly half of our revenue is anchored in the U.S. based on enzymes, but now half and in fact, more than half of our revenue increasingly is coming from other drivers, if you will. Those are the diversification drivers you see on the right-hand side namely geographical diversification that Tina talked about, meaning growth in areas like L.A. and India, end market diversification. So areas like, for example, corn oil or areas like feed that are changing. And then feedstock diversification as the last. So what we see is really a decoupling, if you will, from what was perhaps a historical narrative where we were quite strongly correlated to U.S. volume growth to a point where now we are to a greater degree, less coupled to U.S. volume growth and to a larger extent, see a portfolio or a business that is more diversified in as a whole. And if we double-click on the last point around feedstock diversification, then we wanted to highlight really specific areas today, which we would call emerging. So they're still, you could say, in the early stages of development and growing, but there are also two areas that have a pretty substantial upside to potential if we see them materialize. On the left-hand side of the slide here, you can see first biomass-based ethanol. It's an area that, of course, we've been following for many years. And I think after quite a long time, we're now finally beginning to see what we would say, the beginnings of some critical mass emerging really centered on Brazil as the initial driver, but also India also increasingly playing a role there. And we are hopeful at this point in time that we continue to see this market scale in volume and scale in terms of number of players. And if that scaling is successful, then I certainly think that this is something that has the potential to significantly expand the market potential for ethanol as a feedstock and as an end fuel into new markets, both in road transport, but also potentially in heavy transport in the longer term. On the right-hand side here is the other feedstock space that we're quite focused on, which is the diesel space. And here, it's important to distinguish between core end products being biodiesel and renewable diesel. We've been in the market for biodiesel for quite some time now. And again, this is one of those markets where we feel we are finally seeing strong critical mass evolving. At this point in time, we see enzyme-based solutions now roughly 10% penetrated into the biodiesel market. And so while the underlying growth in the biodiesel market itself might not be very strong, we still see a very significant opportunity to grow into that market. That's driven by really two things. One is we see a stronger growth in mandates for biodiesel in emerging markets in particular. So as an example, Brazil continues to underpin a strong mandate for biodiesel areas like India, Malaysia, also India and late -- now also South Korea and Japan beginning to talk about biodiesel. We see that as an opportunity to grow those markets long term. And here, the significant benefit of enzymes is an opportunity to, in a very strong way, improve both the CapEx and the OpEx for these processes and also increased feedstock flexibility in a world that for certain will see more diverse feedstocks used as we talk about using waste-based feedstocks for diesel. Last but not least, on the slide, we have the area of renewable diesel, which we would say is much more on the front end. That's about pretreating the feedstocks that are coming into renewable diesel plants. That's at an earlier stage, I would say, but nonetheless, an opportunity area that we are focused on keeping an eye on. Across all of these different market spaces, you can say one thing that really has been a red thread for us is this really critical point around having a deep understanding of customer needs, being very, very close to customer and understanding what the problems are that they have that we need to solve. And this, in many ways, parallels other parts of our business, including areas like dairy, where we have an equally strong customer intimacy. And there are a couple of things that are really important for us to point out here. The first is that being close to customer is an opportunity, of course, to understand core problems, but it's also an opportunity to think holistically about how we can improve their process conditions as a whole. And because biology is core to the process, it's an essential part of the process, it has been a really important journey for us to continue to have these strong engagements and help drive even more productivity together with our key customers. The other thing is that when it comes to many of these biorefineries, really while they might look alike on the surface, each and every one of them are quite different. And what is critical to success in our eyes here is the ability to tailor solutions to the individual needs of these biorefineries. And as a very simple example, some of the new yeast technologies that we have there, we are very strongly customizing those solutions to, for example, a shorter fermentation time plant versus a longer fermentation time plan or customizing to plants that are running at higher solid levels. So each one of the opportunity to take our yeast platform and differentiate specific yeast that have specific traits that are specifically matched to that set of refining conditions. And in fact, we will be launching a new yeast, we've just announced here in Q4 that we're launching the latest in yeast in our Innova platform called Eclipse. So we expect to see that roll out with strong adoption in the coming year. All in all, when it comes to the innovation space, what I think we will see going forward and what we certainly are guiding from our side is an expectation that we will continue to expand our toolbox of biosolutions to both seek a broader set of biosolutions that can support these biorefineries and also go deeper with the various solutions we have. That means that we will continue investing in the core enzyme classes that are critical for success for these biorefineries. We'll continue to invest in yeast and different forms of yeast. And at the end of the day, the end goal remains very much the same for us, regardless of whether it's a biodiesel plant or a bioethanol plant, and it is driving continuous performance improvements here, where we lift the bar year-on-year on a consistent basis. And on an average basis, we would say that generally, we will typically deliver about 1% to 2% performance improvements every single year to the biorefineries out there so that they can drive continued improvements and drive a healthier, stronger and more robust business over time. So Tina?

Yes. So we have now talked about the diversification in the end market and into new value streams. Because if we look at what we have on existing value streams. That is, for example, the high-value protein feed component. It could also be for human consumption later on or it's the vegetable, it's the corn oil as an extra end market. Mid to longer term, we will diversify into sustainable aviation fuel, bioderived chemicals as well as maritime fuels. So it is a diversification journey, both as we have talked about on the feedstock and on the geography, but also on the end market we are delivering to. But we would like us to take a closer look at the sustainable aviation fuel because it is a market where there's been a lot of discussions and where we think it's worth double clicking on. So Hans Ole, will you take that away?

Thank you. So first and foremost, and I know this is a pretty busy slide, so I'll start from left to right. I think one of the core messages when we look at a very sort of large variation of forecasts out there, is that liquid sustainable fuels are going to be critical really across all scenarios that we see when it comes to decarbonizing transport. That means that both across road transport and across heavy transport we see ethanol playing a critical role. We see biodiesel and renewable diesel playing a critical role. And in fact, in most scenarios, we actually see growth in biofuels as we approach 2030, 2035. So that's a starting point. Now if we then double-click on sustainable aviation fuel and we look at the right-hand side, then there are a couple of critical points here to note on this particular area that what you're seeing here is a graph that essentially outlines the industry's own expectations for decarbonization journey. And really, there are two core levers that they are pointing to. The first, which is covered by the blue areas of the curve are efficiency improvements. So the industry's own ability to improve either engine efficiency or fuel efficiency. But beyond that, the core component that is set to drive decarbonization in aviation is liquid sustainable fuels. And that's because in this particular area, it's difficult to see that different fuel types like electric or hydrogen can play a role at least in the near term. So all things being equal across these two graphs, we're likely to see some form of a scenario where road transport continues to play a role. And at some point in time, there's a tipping point where aviation. If we're going to continue down that decarbonization journey, we'll have to think about a liquid renewable fuel. Moreover, it's also worth noting that in the aviation industry, there are, across the range of scenarios, an expectation of very strong continued growth, and that also means continued growth in emissions which, in fact, really just increases, you could say, the burning platform and the need to find alternative means to deal with those emissions. Now if we then dive into the pathways that could be relevant for aviation fuels, we see in this particular curve and the source here is from LEK really a 3-phase approach, which is about an initial phase where we'll see the market develop over the next 4, 5 years, then later a scaling and then, of course, later a maturation. And I think core to the thesis here is that there was likely to be a step-wise approach with different pathways that are likely to drive liquid renewable fuels. And so under that first graph on the left-hand side, what we've seen across the board is an expectation that HEFA, meaning renewable diesel that's being taken to sustainable aviation fuels. So that's hydro-treated vegetable oils and wastes that HEFA is likely to be the technology that will be first to market. It's already established in terms of infrastructure and has the best cost of conversion, if you will, and the best carbon intensity score on the docket today. So likelihood is that, that will continue to play a role and step into the market. But because HEFA is also feedstock limited, as we move through the cost curve, the next likely approach on that cost curve will be alcohol-to-jet or ethanol-to-jet which is likely where, for example, biorefineries that produce biofuel could potentially have a role in converting ethanol to synthetic kerosene. And then, of course, longer term, there could be more advanced rules using, for example, biomass and converting either biomass-based ethanol or gasification that could come into play. And on the even longer horizon, we have things like e-fuels where we're using CO2 and hydrogen that could come into play. So likely a market that sees a step-wise approach. Now on the right-hand side, what we've tried to illustrate here is where could Biosolutions play a role when it comes to these various pathways. And I think the core takeaway is that biosolutions actually has a role to play in at least 3 of these various markets, meaning that if we start with the market for HEFA or renewable diesel, we have an opportunity here emerging potentially for pretreatment of those oils that I spoke of before. Then in the middle here, a core, you could say, market to Novonesis being ethanol and how you may be able to take ethanol to jet through a dehydration and oligomerization and that either coming from a crop feedstock or from a biomass feedstock. And then last but not least, there are 2 additional, you could say, routes where Novonesis and biosolutions could play a role. One is that long term, there are questions on whether you would want to, for example, ferment a different pathway in an existing biorefinery. And we see some early work ongoing there in various pockets and then the latter being that if you do go down the path of liquid fuels from SAF or e-SAF, meaning you're going to use CO2 and hydrogen for e-fuels then you're going to need a pretty substantial source of CO2. And in fact, the biorefineries that we service today are a fantastic source of biogenic CO2. So even on that level we see them fitting into this economy that plays into the aviation space as a whole. Now if we then go forward and say, what might the world look like if there's actually a future where aviation scales, then we've tried to ask the question of saying, well, if we took the market for aviation fuel today, which is about 450 million metric tons, and if we assume that SAF scales and about 30% of the aviation fuel market goes to sustainable aviation fuel that would mean going from 450 million metric tons to 150 million metric tons of sustainable aviation fuel. And if we, in this particular case, assumed that somewhere between 10% to 40% of that market were to actually be captured by ethanol to jet as a pathway. Then we're talking something around 7 billion to 27 billion gallons of sustainable aviation fuel in ethanol volumes based on current fuel demand in the aviation market today. And to put that in context, the global ethanol market today is roughly 30 billion gallons if we include both crop and sugarcane and the North American crop ethanol market is a roughly a 15 billion-gallon market. So a sizable potential. And of course, it goes without saying, and you see that on the bottom of the screen that there, of course, are some critical steps required for a market like this to take hold and to actually drive that expansion, which includes some fundamental requirements on regulation. We need to see long-term incentives come in place, and we need to see that there is clarity on carbon intensity frameworks for this type of fuel. There's work to be done on the technology, of course, although you could say for ethanol to jet, many of the technologies are there today. And so there, the critical component will be really CapEx for scaling and hitting the right carbon intensity targets. And of course, on the commercial side, there will need to be offtake agreements and a successful deployment of technology that ensures that there is a path to grow this market. So those are kind of the summary components there. Tina?

Yes. So thank you so much, Hans Ole. I hope that we, with this relatively short presentation, have tried to show how that there are fundamental growth drivers. The one we talked about in the beginning that are continuing to pull for liquid biofuels and that we have diversified into different geographies, feedstocks and end markets. However, our ability to do so requires innovation. And innovation and innovation toolbox is fueled by understanding the application and being close to the customers and thereby being able to cater to a specific the needs they are having. Because as Hans Ole highlighted earlier, every biofuel plant is different. And there are also on top of the liquid transport fuel, there are other optionalities, both on the feedstock side, for example, on biomass, but also on the end market side in terms of longer term for sustainable aviation fuels, biochemicals and much more. So with that, operator, let's start with the questions, and we look forward to answering them.

[Operator Instructions] The first question comes from Alex Sloane from Barclays.

I've got a few questions if that's all right. Firstly, just one, I mean, in the news, there's been some speculation that Congress in the United States may approve E15 to be used all year round. Currently, I think some restrictions in the summer. I'd be interested how material you think that could be for industry volumes next year, if confirmed? Then the second one, just digging into the future value streams for customers in corn-based ethanol that you highlighted in one of the opening slides. I mean, I guess one corn dry miller is starting to produce dextrose of what they claim is 40% lower carbon intensity than traditional corn wet milling using enzyme technology. Is that something your solutions are involved in? And how meaningful could that be? And then just a final one, just in terms of the competitive landscape in bioenergy, are you seeing any change in the dynamics there? Any more investment from peers and any implications for your pricing power in this area going forward?

Well, that was a very nice range of questions, Alex. Let me try to start with them, and then I'll hand part of it over to Hans Ole and ask for extra comments. So first of all, it is true that the Congress is talking about E15 all year-round and lifting some of the summer restrictions, which there in a number of states have been on utilizing E15 year-round. And it is positive. Already today, I would say that roughly 10.2% is blended into ethanol -- into the gasoline mix of ethanol. And that, you could say, above the 10% is a good example of how it is that E15 is getting more and more traction in the U.S. market. However, this is not something which comes overnight. And your question, in fact, was about how material is it for next year. And I would say you should not expect a huge change for next year. It's a good underlying. It is supporting further the pull for liquid fuels or liquid biofuels, and we are pleased to see that. However, first, it needs to be approved. And secondly, it is a gradual rollout. So don't expect too much for next year. But it is positive for the industry. Then in terms of future value streams, I would say, for me, that is another example of the, you could say, the low CI dextrose is another example of how the industry keeps diversifying. And I think that this is a testimony to the creativity of the industry and how is they have kept evolving. So I see that as a good -- as an extra testimony to the diversification. In terms of the competitive landscape, I would say that we have, as Hans Ole were going through a very strong position in especially the U.S. ethanol market, but not only the U.S. ethanol market. Our position in the energy space is, in fact, built over many years, and that's also why we have that global presence and that closeness with customers across the board. And we see us having a very strong position there. Anything you want to add, Hans Ole?

No, I'd just maybe say very quickly that, yes, it is public knowledge that we have a collaboration with the -- one of the players who is working on dextrose. So just confirm that.

The next question is from André Thormann from Danske Bank.

Just one more question about E15 and not about 2025, but more about the long-term potential, and I realize it needs to be approved. But if we look at Slide #3 at least 5% growth there is for U.S., I mean, how do you think the E15 potential approval could affect that number? That's one question. The second thing is also on the third slide. Maybe you can comment on how does the electrical vehicles play into these estimates. Yes, what is the effect from that?

Thank you, André. Good questions. So let me maybe start from the bottom with EV and the estimates. So you could say the estimates we have on the slide, Slide 3, is our best estimate and including our current view of electrical vehicles and how they will expand as well. So that is, you could say, included in the thinking there. And for North America, you could see it's a change of 5% in the period 2025 to 2030. So it is -- I think you would call it a low single digit, maybe flat to low single-digit growth in that market. And for sure, that is going to -- E15 is going to accelerate that further, but it is still uncertain, and it is not -- it's the current level and the continued slow rollout, which is included in the estimate. Anything you want to add, Hans Ole?

No, I think that covers it pretty well. I think we'll, from a step-wise point of view, see what happens really this coming year. So one thing is we get, hopefully, a congressional approval that moves it into a bill I think from there, there are just a lot of steps that have to happen before we see that transition into material volumes.

But again, it is positive, but it's too early to celebrate, André.

And can I just come with one follow-up, just on the electrical vehicles, to be sure this 2030 estimates there is on volumes for North America. What's the assumption of how much of the fleet will be electrical vehicles in that number?

Well, that, I think we'll have to come back to you on in order to be precise, André. Because it is a matter of for sure, it is growing in the various markets. So what we have focused on here is the ethanol volumes. But let's come back to you on that.

The next question is from Chetan Udeshi from JPMorgan.

I actually have a few. I'll ask them one by one. I was just looking at your slide about new yeast. Now I'm just trying to understand, is this additional content for -- or is this the additional yeast that you are supplying to the same customer? Is it a replacement where you are substituting existing yeast with a more effective one? And if that's the case, how much additional value do you generate from this new yeast versus what you might be supplying today? The second question, I just wanted to just have a sense of what is the content for Novonesis today in biomass space, ethanol versus 1G, I think I mean I have some weight numbers in mind, $0.05 per gallon for 1G. Where are we with 2G today in terms of content? And I also asked this because we've seen Raízen recently talk about a 30% reduction in their enzyme use for second generation. Just curious how does the content differ between 1G and 2G? The third question was just going back to the biodiesel penetration. Why is the enzyme penetration so low? And can you just remind us how enzymes fit in the biodiesel side? What exactly enzymes do? And why would the penetration actually go up, given that it's pretty low right now? And last question on Biochemicals. I was surprised this wasn't really a focus. We've seen a bit more activity on bioethylene, especially in a few markets. But I'm just curious why this is not a focus for you in terms of a growth driver compared to something like sustainable aviation fuel?

Wow, thank you so much for a lot of good questions. So first of all, on the new yeast, it is an extra toolbox in our yeast toolbox. It gives up to 2% extra efficiency, and depending on what producer is part of it will be replacing part of it will be further penetrating. So that's on the yeast side. Then on the biomass and the enzyme use in the biomass industry. So if you look at it, biomass is still a small percentage point of our total offerings in the bioenergy space. So as you saw, the vast majority, more than 90% or roughly 90% is in bioethanol grain based. So it is still one of the minor ones. And what we have said externally is that it is roughly at 10x in terms of enzyme usage per gallon. But you have to bear in mind that these numbers are approximate numbers, and there are quite significant variations even in a 1G ethanol plant on how much enzyme do you use per gallon. Then the last one on biochemicals, why it's not a focus? The way -- well, it is, in fact, also a focus. And it is one -- another one of the elements where it is we see a possibility to further diversify into new end markets and we are also in talks with some players where they mostly are targeting also a chemical space. So it is also part of the radar or it is also on the radar. On the biodiesel, why don't we hand that over to you, Hans Ole?

Thanks, Tina. So a very good question on biodiesel. And you could say it is interesting because it's a market we've been in for more than 10 years. And I would almost liken it a little bit to a catch-up effect where I think you have to get to a certain critical mass of reference plants. And I feel we have gotten there now where we are in the tens of plants that are running enzyme-based biodiesel processes. And the core value proposition, which you asked about there is in very round numbers. And again, similar to the 1G versus 2G value piece, take the numbers with a grain of salt because there's a lot of regional variation. But all things being equal, when we step in with an enzyme-based process, we're delivering 30% lower CapEx, 30% lower OpEx versus the chemical pathway, and you're helping that producer deliver more feedstock flexibility and less waste. So it is actually in our eyes, a very, very strong value proposition and one that we have expectations will continue to grow strongly in the next 5-year period.

Next question comes from Sebastian Bray from Berenberg.

I have two, please. The first is on the biomass-based bioethanol. What kind of ramp-up are we looking at on a 2- to 3-year view? How many end customers are potentially involved over that period historically? It looks as if there's just been one in Brazil that has been particularly influential. And what is -- if I take a step back and it leads into my second question. If I look at the portfolio in Bioenergy, it substantially outperformed expectations over the last 2 or 3 years. I just like to understand, I suspect it's outperformed your own expectations internally. What exactly were the drivers of this? And what are the reasons to get excited about the next 2? Because a lot of what we have seen in today's presentation. Is that 2030 onwards view, particularly if ethanol gets into SAF. But what could happen in the next 2 years where this really catches fire?

Thank you, Sebastian. So on the biomass, you are right that there's, you could say, one particular customer, which is leading the way in Brazil. But I would say it's getting more and more. We have also talked about India, where a couple of plants are getting up and running. And even in Europe, we have a bit happening, and there's also a few plants in China. So it's getting more, but maybe a bit back to the catch-up as Hans Ole were talking about before. It's too early to get all that catch-up out. And as we have talked about in the near term, so the next 1, 2, 3 years, it is something I will highlight when it comes out, but I do expect that it will remain a smaller part of the portfolio, at least in the next couple of years. But it is growing and it's growing nicely. And as you know, whenever it's, you could say, significant in our numbers, I will be highlighting it. Then on the portfolio and what there are of drivers going forward and why it is that it has outperformed so much the last years. Well, let me put it that way. I think that we have put a lot of focus into the diversification journey. And it gained traction some years back. As we have also talked about, a lot of this is also innovation driven. And when we are successful with innovation in this industry, then it really takes up. But I would also say that as we have talked about, I remember exactly this time of the year, a year back, we talked about that, yes, we would, for sure, outgrow the U.S. ethanol market, and so we will into 2025. But it is not to be expected that we'll have these growth rates as we move ahead, but we'll, for sure, keep having growth despite having a very good year this year. So I think that's -- it is really about innovation and getting it right. I hope that answered your question, Sebastian.

Yes. Can I just clarify an earlier question from Chetan as well? What is it exactly that the enzymes do in HEFA? I haven't quite grasped this one.

Let's get that over. That's true. That was a follow-up question. And maybe just before we go there, I think the key and the way I look at it on the biofuel side is that we have these fundamental growth drivers. As they say in India, it is about economy, it is about environment, it is about employment. And all these 3 elements is exactly what it is biofuel is delivering for the various geographies. And that's why we do expect to continue to see growth. And on our slide, the Slide 3 or whatever number it was, you'll be able to see how we expect the various geographies to grow from 2025 to 2030. But on the HEFA and what is it exactly the enzyme is doing, Hans Ole?

Sure. So maybe I think when we talk about HEFA, it's almost worth starting with a little bit of an S-curve where you could say we have a quite mature business in corn-based ethanol. We have a growing business in biodiesel and degumming, and that sits a little bit further down the S-curve. Down at the beginning of the S-curve, we have biomass, which is beginning to walk its way up. And then I think at the very early start of that S-curve, we're now also looking at pretreatment for the HEFA process. And specifically, what we're looking at is that as you bring in these waste-based feedstocks and you're putting them into a cracking process where you use very, very expensive chemical catalysts, any time those catalysts get poisoned, so to speak, with inorganics, be it, for example, phosphorus. That's an extremely expensive step and costly situation for those renewable diesel plants. And here, there is actually an opportunity where enzymes can go in and, for example, dephosphorize or degum some of those feedstocks. And essentially, in that sense, this is a little bit similar to running what we call degumming or pretreatment of vegetable oils, but just running it on a waste-based feedstock.

But maybe, Hans Ole, can you also explain what is it enzymes do in biodiesel?

Yes. And maybe this is a good point to sort of separate the 2 -- the chickens from the hen, so to speak. So if you think about the biodiesel process there, what we're doing is we're actually esterifying. We're taking enzymes and we're combining essentially fatty acids and glycerides to form diesel. And that's, you could say, an entirely enzyme-based process. When it comes to renewable diesel, renewable diesel is actually an entirely, you could say, chemical, thermochemical process. It's a cracking process that you could run in an existing fossil refinery. And so there, our role is much more upstream. And those are basically 2 ways to make diesel. The HEFA or the renewable diesel is a full drop in diesel, where biodiesel is something you can blend in the diesel up to about 20%. So really 2 different feedstocks.

Super. I hope that answered your question, Sebastian.

Yes, indeed.

The next question comes from Alex Jones from Bank of America.

Just one from my side, please. On the sort of diversification point that you mentioned at the start, you talked about fiber ethanol going to California. You talked about corn oil going to renewable diesel producers. Could you talk about the importance, therefore, of Californian regulation, both of those drivers, how important are LCFS credit prices for determining how quickly some of your customers adopt that innovation and diversification that you're providing them?

Good question. And for sure, California is an important element in our business. But will you talk a bit about the RIN pricing and how that influences what California is doing, Hans Ole?

Yes. So you're right, both of the core markets there right now in North America are essentially selling into California. And California has a low carbon fuel standard where they regulate essentially a credit system that will pay for low carbon fuels. We are also seeing like credit systems pop up in Washington and a couple of other states. And what we're seeing right now in California is that really, if you go back a couple of years, the price of carbon or carbon intensity was trading at about $100, $120 per ton some years back. It had dropped down to about $60. California actually went in, the CARB went in here very recently and actually tightened regulation and essentially tightened supply of those credits in order to start working that price back up, which I think is a signal that the California institution is very much still pro renewable fuels and wanting to see continued penetration. And there had been a point where there was, to some extent, an oversupply of renewable diesel coming into that market. So they're seeking to correct that. Now from a value proposition point of view, when we work with enzymes, you could say, to some extent, the enzymes are really a very quick payback. So I would say, regardless of whether credit prices had been lower or higher, it's still a good, you could say, return for our customers in the market spread that we've seen. And so from that perspective, we have not been materially impacted by relatively low or relatively high prices per se. You could say higher prices, of course, drive higher demand.

Yes. And as you're saying, the RIN or the Californian credits is only one part of the profit mix for a producer. I hope that answered your question, Alex.

The next question comes from Soren Samsoe from SEB.

Yes. I had 3 questions. First one is just a clarifying question on Page 2, where you say that 90% or above 90% share of energy sales is in biofuel. I assume that's including the side streams or the byproducts that come when you produce corn-based ethanol. If you can just confirm that? Then secondly, a question on -- if you can say a little bit more about these biorefineries or ethanol producers that also has sort of gone on the journey of doing different byproducts. How big part of the bioethanol refinery or the bioethanol companies in the U.S. today is on that journey? And how many more can you penetrate, so to speak? And then thirdly, what is your market share today in the U.S., if you can say that? And also then indicate whether when you go in and start selling enzymes to making these side streams -- value streams, is your market share then higher or lower than your sort of average market share?

So thank you, Soren. Let me start with 1 and 3, and then I'll get Hans-Ole to answer the one on biorefineries and how far we are on the journey or at least add some extra flavor to that. So first of all, on the first question, yes, it is including the, if you would say, the byproduct products or the products supporting the byproducts or the side products. So you're right there. And then on the market share, so we have a solid presence in North America. We have a -- we are the market leader in that area, and that also goes for products supporting side streams. I'll prefer not to comment into the details in terms of how much is it exactly. So you'll have to bear with me that we do have a strong position, and we are a market leader. In terms of biorefineries using or -- have an interest in these solutions enhancing the byproducts. I would say in the U.S., it's becoming quite widely used. But I think, Hans-Ole, can you add some more flavor to it?

Yes. So if we take them separately, so corn oil, I'd say the vast majority of producers in the U.S. are using technology for corn oil extraction. And there's an important component here. They're mostly running, I'd say, on an average, about GBP 1 pound per bushel using American terminology. And of course, now the hunt is on because we know there's more oil. And so we're, of course, chasing higher and higher targets to extract even more oil. And that's the journey we're on with North America. Similarly, in Latin America, we're quite focused on also corn oil extraction there. And however, not fully adopted across the board, and you'll see us also chase the corn oil story in other regions. So that's corn oil. Then fiber, that's a very specific North American market, as we talked about with the California credit system. And there, I would say roughly about 1/3, give or take, of the market is working with fiber-based credit systems. And of course, there's some more room to grow in there, both in terms of penetration, but also we continue to chase even more ethanol from fiber because right now, we're only extracting a small portion of the fiber that's there. And then, of course, the last piece being the biomass that's coming out from these facilities, the feed component, where there's quite a few of these guys that are now also working to look at different strategies for higher-value feed that go into the animal feed market, particularly higher protein.

Yes. So I think, Soren, the way you should see it is that people might be using it and there might be a relatively wide adoption, but there is still so much to go for. So it's back to the discussion we have had about diversification and the constant evolution of the industry. So it's not so that because people start using solutions for extra corn oil that it's over and we can't keep innovating. It's the same we talked about in one of the earlier questions on yeast and so forth. So I think I'm being told now the last -- the very last question is what -- I think we're already out of time. But the very last question, operator, can you give me that?

The next question is from Georgina Fraser from Goldman Sachs.

I've got 3 questions, 2 quick ones, one longer. The first is, can you say a bit more about what your market share looks like in bioenergy as a whole and then by the various technologies? The second question is, looking at the third slide where you show the regional growth rates from 2025 to 2030, is it fair to conclude that you expect Bioenergy to be one of the segments delivering accelerated growth for the Beyond 2025 targets for Novonesis as a group? And then my third question is if you could just give us a bit of a picture of what does the sales model look like in the Bioenergy business? Who are the customers? When do you get involved? Is it at CapEx stage? Can you see switching for existing biorefineries if somebody is using a competing product? How often are you selling new technologies? When do you price? Just a bit of a summary of what the sales model looks like in bioenergy would be really helpful.

Okay. So on the 2 first question, Georgina, we do have a very strong position. We are a market leader across the board in -- across geographies and also across technologies in the bioenergy space. In terms of the regional growth, yes, we do expect to outgrow the underlying ethanol markets, what you have on the slide in the presentation, and there are many growth drivers in this industry. I'll prefer not to come into details with both the specific market share numbers as well as whether you could say the level of growth we expect for 2025. We'll come back to that after New Year when we guide. Then in terms of the sales cycle, so it is a bit different depending on what stage it's in. So I'll try to give a relatively short explanation and then maybe if you want to add something, Hans Ole. So in the new capacity being built, being it in biomass, being it in biodiesel or in the geographies where new ethanol plants are being built or corn-based or grain-based ethanol plants are being built. We are there upfront. We talk with players. As an example, we were the lead organizer and we're hosting a bioethanol conference, which, in fact, is the industry-leading conference in Brazil. That covers all of Latin America. It took place specifically in Brazil. And there, new projects, new producers is coming in. So we are very, very well engaged or very, very well connected to projects even before they are being built, we are supporting also customers in terms of what is it that is important to think about and how is it to get ready. I've also talked about that then when the plants start up, we have teams who are supporting the plant start-up, in some cases, even living in the plants in order to secure that this start-up will be successful. And then in terms of the ongoing cycle, yes, whenever we have launched it, but also on a daily troubleshooting basis, we do have technical people who are out there. In terms of contract length, which I also heard you talk about, it is on a global business, this is everything from, you could say, about to say, spot orders to yearly contracts to more longer-term contracts. So you have the full spectrum of commercial cycle. Anything you want to add, Hans Ole?

Maybe just complement with a few sort of touch points here. One is that Bioenergy is one of the areas, and here I talk about crop bioenergy that has one of our shorter innovation cycles, relatively speaking, to some other industries. And that does mean that from a cadence point of view, I would anticipate for most of our customers that we are touching them with new innovation on a yearly basis. And that also means that if you think about a calendar or a sales cycle perspective, we are sitting with multiple engagements per month that are focused on how we optimize their performance, how we understand the issues they're facing, the opportunities they're facing. We're setting plans for how we, in that current year and coming year can drive even more performance. And so a very, very close collaboration that really is aligned around their goals. And then that feeds back into our innovation engine to say, okay, if that's what they need, how do we make sure that we keep up the pace. And so I think from our perspective, this is -- it's not a sprint, it's a marathon, and that's a marathon where we take small sprints at a time with this very, very strong focus of continually pushing the bar forward and really a mindset that we're never satisfied that we're done.

I hope that answered your question, Georgina. And then with that, I would like to end the session and say thank you so much for all the questions. Please reach out in case you have further follow-up questions. I'm sure our Investor Relations and I would love to answer them. Just get back to us, and thank you so much for dialing in this afternoon. Have a great end to the year and happy holidays.