Bloomberg News

Novozymes Drops on Concern DSM Taking Client: Copenhagen Mover

January 24, 2012

(Adds closing share price in second paragraph.)

Jan. 24 (Bloomberg) -- Novozymes A/S, the world’s biggest maker of enzymes for biofuel, fell for a fourth day in Copenhagen trading, the longest losing streak in five months, on concern Royal DSM NV will take one of its U.S. clients.

Novozymes fell 2.3 percent making it today’s third-largest loser in the benchmark Copenhagen 20 Index. The stock, which had lost as much as 8.2 percent in earlier trading, declined 3.7 kroner to close at 155.5 kroner, giving the Bagsvaerd, Denmark- based company a market value of 43.9 billion kroner ($7.65 billion).

Poet LLC, the largest U.S. corn-based ethanol producer by installed capacity, said yesterday it will establish a joint venture with DSM to produce cellulosic ethanol and license the technology to other plants in the U.S. and globally. Novozymes has previously provided enzymes to Poet and was expected to sell to the Sioux Falls, South Dakota-based company’s Project Liberty facility, according to DnB Markets analyst Rune M. Dahl.

“With DSM being an enzyme producer and 50 percent owner of the JV, we now consider this unlikely,” London-based Dahl, said today in a note to clients. “This could have a significantly negative effect on Novozymes’ potential in second-generation biofuel enzymes in the U.S.”

The next-generation biofuels use plant waste to turn organic waste into energy. So-called first-generation biofuel uses food crops such as corn and sugar.

At Novozymes’ Expense

Novozymes said Jan. 19 it expects the U.S. biofuel industry will produce about 14.2 billion gallons of ethanol in 2012, which means the annual growth rate will slow to 2 percent to 3 percent from 4 percent to 5 percent in 2011.

“We assume Novozymes will keep delivering first-generation enzymes to Poet’s 27 ethanol plants, but see a risk that DSM could benefit -- at Novozymes’ expense -- over time as both the JV and second-generation enzymes develop,” said Dahl, who has a “sell” recommendation on Novozymes shares.

It will take a few years for DSM to become the exclusive provider of enzymes and yeasts to the JV, Feike Sijbesma, chief executive officer at the Heerlen, Netherlands-based company, said today at a conference call for analysts.

“Of course, we will respect current contracts,” the DSM chief said. “But at the end of the day, it is fully exclusive for DSM.”

--Editors: Andrew Noel, Robert Valpuesta

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net.


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