Novozymes A/S, the world’s largest maker of enzymes for biofuel, was the biggest decliner in the Copenhagen benchmark index today after UBS AG said investors should avoid the stock as new U.S. legislation may hurt sales.
Novozymes fell as much as 1.7% to 183.70 kroner, the lowest price since Feb. 1. The shares declined 1.2% to 184.60 kroner at 9:59 a.m. in the Danish capital, with volume at 16% of the three-month daily average. The stock was today’s biggest loser in the Nasdaq OMX Copenhagen 20 Index, which fell 0.2%.
UBS said U.S. lawmakers face "significant" lobbying from oil and food producers to limit the yearly volume of biofuels required for blending with gasoline. The bank today added Bagsvaerd, Denmark-based Novozymes to its list of least preferred European chemical company stocks and repeated a sell recommendation.
"In our view this is probably the strongest collection yet of resistance to the increase in U.S. ethanol blends," UBS analysts, including Thomas Gilbert, said in a note to clients. "Novozymes’ valuation implies long term top line growth of 18 percent. We see 13% growth at best."
The U.S. Renewable Fuel Standard sets quotas for the use of alternatives to gasoline or diesel, such as corn-based ethanol and biodiesel. A panel of the House Energy and Commerce Committee is set to hold a hearing on the program next week, as Republicans such as Representative Bob Goodlatte of Virginia push to scrap it.
Novozymes, which is lobbying for an increase in the use of ethanol, provides about 60% of the enzymes used in global biofuel production and generated 16% of its revenue from that business last year, according to its 2012 earnings report.