Denmark’s Dynamic Duo – Novozymes and Vestas
Two Danish companies – both listed on US stock exchanges – are leaders in their respective fields in green technology. Here for investors are brief introductions to both of them.

Novozymes is the world’s leading producer of industrial enzymes, for use in a wide range of industries, from detergents and animal feed to textiles and leather, and in the production of bread, wine and fruit juice, with sales around the world.

However, the company has sparked particular investor interest for its research into the enzymes used to make cellulosic ethanol, for use as a biofuel.

Some experts believe that cellulosic ethanol –produced at low cost from a variety of plants and plant waste, and used as a fuel for vehicles - could be the saviour of the world, liberating us from our dependence on oil.

Novozymes has around 100 researchers working on this product, and has begun supplying some of the companies that are now building pilot plants to try to demonstrate the commercial viability of cellulosic ethanol.

Here are highlights of the company’s 2007 financial results (figures in DKK = Danish kroner; 1,000 DKK = US$197):

                                               2006      2007
Sales (DKK million)               6,802      7,438
Gross profit (DKK million)     3,655      3,949
Gross margin (%)                   53.7        53.1
Net profit (DKK million)           909       1,048
EPS (kroner)                          14.5        16.5
PER (x, ttm)                                           25.9

Sales of enzymes for bio-ethanol jumped by more than 40 per cent to one billion DKK, equivalent to 13 per cent of total company sales. Thanks to this, the company said North America was by far its fastest-growing region, with sales up 26 per cent in local currency, and it plans to build a new US enzyme plant in 2009-10.

Vestas Wind Systems is the world leader in the manufacture and supply of turbines for the wind power industry, with roughly a third of the global market. It was founded in 1945, and began selling wind turbines in 1979.

Its powerful market position has been based on its comparative strength in Europe, where power generation from wind energy has been considerably more advanced than elsewhere. However, the focus has now been shifting to Asia and North America, where demand is growing considerably faster than in Europe. Merrill Lynch has forecast that its market share could eventually slip to 20 per cent.

But a rising tide lifts all boats, and for the time being Vestas continues to grow. Though it has yet to announce its 2007 results, in February 2008 it said it expected that 2007 sales would be up 26 per cent on the previous year to 4,850 million euros, with the EBIT margin jumping from 5.2 per cent to nine per cent.

Like most of the turbine manufacturers it has enjoyed growing success in the US, sales there leaping from 465MW of installed capacity in 2006 to 953MW in 2007. In the fast-growing Chinese market it has built three factories and has an estimated quarter of the market.

There is just one problem for potential investors. At least until it announces its 2007 results, it carries an historic price-earnings ratio of more than 100 times.

February 17th, 2008

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Denmark’s Dynamic Duo – Novozymes and Vestas Two Danish companies – both listed on US stock exchanges – are leaders in their respective fields in green technology. Here for investors are brief introductions to both of them.

Denmark’s Dynamic Duo – Novozymes and Vestas
Two Danish companies – both listed on US stock exchanges – are leaders in their respective fields in green technology. Here for investors are brief introductions to both of them.