Annual Result s 2014 Feike S ij besma, CEO / Chairman Managing - - PowerPoint PPT Presentation

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Annual Result s 2014

Feike S ij besma, CEO / Chairman Managing Board Annual General Meet ing April 30 2015

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S afe harbor statement

This present at ion may cont ain forward-looking st at ement s wit h respect t o DSM’ s fut ure (financial) performance and posit ion. S uch st at ement s are based on current expect ations, estimates and proj ections of DS M and informat ion current ly available to the company. DS M caut ions readers that such st atements involve cert ain risks and uncert aint ies t hat are difficult t o predict and t herefore it should be underst ood t hat many factors can cause act ual performance and position to differ materially from t hese st at ement s. DS M has no obligat ion t o updat e t he st at ement s cont ained in t his present at ion, unless required by law. A more comprehensive discussion of the risk factors affect ing DS M’ s business can be found in t he company’ s lat est Annual Report , which can be found on t he company's corporate websit e, www.dsm.com

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WFP fundraising for Nepal

• Eart hquake in Nepal: t housands of

people have died; 8 million people in distress; almost 1.5 million people are in need of food aid

• The World Food Program of the UN is a

strat egic partner of DS M and is raising money t o deliver food and supplies t o Nepal

• DS

M calls employees to action to donat e t o t he WFP. DSM will mat ch these donations up t o $100.000 ‘ matchen’ , with a minimum of $50,000.

Join us and donat e at wfp.org/ DS MNepal

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DS M Year in review 2014 [movie]

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Highlights year 2014

• 2014 sales of ~€9.2 billion with 3%
• rganic growth

This includes ~€ 2.1 billion sales of the activit ies for which we announced a

part nership (polymer int ermediat es, composit e resins) in March 2015, of which DS M remains a 35% shareholder

This excludes ~€ 1.1 billion pro-forma (annualized) sales of non-consolidat ed

Associates & JV’s (mainly DPx, DSP)

• Relatively solid EBITDA of €1,168 million wit h good cash flow from operating

act ivit ies, despit e subst ant ial negat ive exchange rat e effect s (€50m) and t ough market condit ions in Nutrit ion and caprolactam

Rest at ed for t he announced part nership, 2014 EBITDA is €1,038 million This excludes ~€ 140 million pro-forma (annualized) EBITDA of non-consolidat ed

Associates & JV’s (mainly DPx, DSP)

• Proposed dividend stable at €1.65 per ordinary share

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Highlights year 2014 cont .

Impressive progress on strategy

• Cont inued delivery on t he st rat egic value drivers

High Growt h Economies, Innovat ion and Sust ainabilit y

• DS

M significant ly t ransformed, including value creat ing part nerships

Part nerships in Pharma (DPx, DSP) Part nership in Polymer Int ermediat es and Composit e Resins announced

• DS

M is now well posit ioned wit h at t ract ive port folio

High qualit y, Nut rit ion and Performance Mat erials businesses wit h a good growt h

and ret urn profile

At t ract ive emerging business areas est ablished (Innovat ion Cent er) providing

significant fut ure value

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Results full year 2014 - Key figures

(€ million) FY 2014 FY 2013

%

Continuing operations before exceptional items: Net S ales EBITDA EPS (€) Core EPS (€)* 9,181 8,858 4% 1,168 1,261

• 7%

2.42 2.84

• 15%

2.85 3.19

• 11%

Total DS M before exceptional items: Net S ales EBITDA 9,283 9,429

• 2%

1,166 1,261

• 8%

Total DS M after exceptional items: Net profit EPS (€) 145 271

• 46%

0.78 1.52

• 49%

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* Core EPS is the EPS from cont inuing operat ions before except ional it ems and before acquisition relat ed (intangible)asset amortization

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EBITDA – development full year 2014

EBITDA (€ million) FY 2014 FY 2013

%

Nutrition 850 914

• 7%

Performance Materials 343 319 8% Polymer Int ermediat es 83 113

• 27%

Innovat ion Center

• 18
• 9

Corporat e Act ivit ies

• 90
• 76

Cont inuing Operations 1,168 1,261

• 7%

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• Nutrition EBITDA declined 7%

, despit e st rong volume growt h in Animal Nut rit ion. The decline was due negative currency effect s, lower volumes in Human Nut rit ion and lower vit amin E prices

• Performance Materials EBITDA was up 8%

. All t hree business groups cont ributed t o t his growt h, mainly due to higher volumes and cont inued cost control

• Polymer Intermediates decreased given lower caprolact am margins and lower license income,

despite higher volumes and lower costs

• EBITDA of t he Innovat ion Cent er declined due to int ensified innovation programs. DSM Biomedical

performed well. DSM Advanced S urfaces made good progress

• EBITDA of Corporat e Act ivit ies was lower due t o the impact of a fire at DS

M Nutrit ional Products on t he result of DSM’s capt ive insurance company

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Headwindsimpacting 2014 Nutrition growth & margin

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Topic Remarks/ actions

Vitamin E: price decline in

Vit amin E due t o intensified compet ition

• Actively protect market share leveraging our low cost base
• Further reduce cost s
• Expand market: leverage st rong science t o move cust omers

t o increased inclusion levels

• Product form different iat ion

Sluggish Western Food &

Beverage market s; declining

consumer spending in mid-segment

• Support ing cust omers by launching new innovations
• Focus on growth opportunities in HGE
• Macro-blends and forward solut ions strategy

Weakness US vitamins and fish-oil based Omega-3 Dietary

Supplements markets

• US

multivitamins coalition promoting Dietary S upplements

• GOED Omega-3 indust ry coalit ion’s campaign
• Upgrade of the Omega-3 production facility

Asian Infant Nutrition markets have slowed down / destocking

• Offtake normalized albeit at lower t han historic growth

rates

Exchange Rates (FX)

• Hedging policy
• Global asset spread

Organic growth impacted by ~3% and EBITDA >€100m

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Dividend proposal to AGM: stable at € 1.65

Dividend per ordinary share (€)

• Dividend policy “ stable and preferably rising”
• Proposal t o AGM on 30 April 2015: Maint ain the

dividend of €1.65 per ordinary share – € 0.55 interim dividend (paid in August ’ 14) – € 1.10 final dividend (payable in May’ 15)

• Payable in cash or ordinary shares at the
• pt ion of t he shareholder
• Dividend in cash will be paid after deduction
• f 15%

Dut ch dividend wit hholding t ax

• The ex-dividend date: 5 May 2015

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€ 0.50 € 0.75 € 1.00 € 1.25 € 1.50 € 1.75 '04 '05 '06 '07 '08 '09 '10 '11 12 13 14

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Overview

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• 2014 Operational performance
• Good progress on strategy
• Part nership wit h CVC
• Highlights Q1 2015

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Populat ion growt h Wealth increase Resources constraints Sust ainabilit y concerns Urbanization drive Healthcare issues Energy concerns Food composition Aging populat ion

Materials Nut rit ion Health

Megatrendsmore significant than ever; driving our growth

Global S hift s Climate & Energy Health & Wellness

DS M well positioned to capitalize on key megatrends

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DS M in motion: driving focused growt h

Creating sustainable value along all growth drivers

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S ignificantly expanding global presence

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Well positioned t o capture global growth including High Growth Economies

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• Sales t o High Growt h Economies (HGEs)

increased from 32% in 2010 to 43% in 2014

• Current slowdown HGEs likely not st ruct ural
• DS

M will cont inue t o expand presence in HGEs (incl. Africa) driving growt h from t hese regions: – Locally t ailored product s/ services – Cont inue t o expand local presence (research, innovat ion, product ion, M&S) – S ince 2010, >60 execut ive positions moved

• ut side t he Net herlands

33% 2% 48% 17%

High Growth Economies Rest of World North America Western Europe

43% 4% 34% 19%

High Growth Economies Rest of World North America Western Europe

Global employee base (ult. 2014) S ales by dest inat ion (FY 2014)

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• DS

M st rongly commit t ed t o innovat ion in exist ing businesses as well as in emerging business plat forms

• Good progress achieved:

Sales from innovat ive product s / solut ions,

int roduced over last 5 years, account for 18%

• f

2014 sales (t arget 20% )

• Nut rit ion at 17%

, Performance Mat erials at 24%

Three emerging business plat forms (EBAs)

est ablished

• Sust ainable innovat ions in exist ing businesses are

delivering higher growt h and >5% higher gross margins

Improving financial performance through a younger, greener portfolio

DSM’s FERMENTATI VE STEVIA

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Innovation driving higher growth and margins

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• FY 2014 ECO+ sales at 49%

; well on t rack towards 2015 aspiration of 50%

• More t han 90%
• f DS

M’s innovat ion pipeline is ECO+, strongly driving a greener portfolio

• ECO+ sales have grown ~10%

/ year since 2010

• ECO+ sales have significant ly higher cont ribut ion

margins versus non-ECO+ sales

• People+: DS

M at the forefront of a new methodology to measure impact of product s on people’s life, creat ing credibility and t ransparency

S ustainability is a strong business driver

S ustainable solutions delivering higher growth and higher margins

Bio-based Coating Resins

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Active portfolio management delivering results

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• More than €2.8bn of acquisitions since 2010:

Creat ed a leading Nut rit ion business position Established a new business: DS

M Biomedical

• Value creat ion confirmed:

Mart ek/ Fortit ech/ Tortuga: ~2.0x EV paid Ocean Nutrit ion Canada:

~1.5x EV paid

• Partnerships est ablished in Pharma:

DS

M S inochem Pharmaceuticals

DPx Holdings: 2015 value of DS

M share est imat ed at ~€1bn

• Ot her value-enhancing part nerships:

POET-DSM Advanced Biofuels Reverdia wit h Roquet t e Act amax wit h DuPont

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S ignificant value creation by portfolio transformation

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* Core is pro-forma split aft er deconsolidation of Polymer Intermediat es and Composite Resins

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Continuous shift to higher quality portfolio with reduced cyclicality

2000 2005 2010 2014 pro-forma* 1995

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Established a unique business in Nutrition

~15% ~ 7.5% Est imat ed average EBITDA margins for t he st eps in t he value chain Active ingredient s Premixes

GLOBAL PRODUCER LOCAL SOLUTION PROVIDER

Solut ions Act ive ingredient s Forms Premixes i-Healt h/ B2C

Fat soluble vitamins (e.g. A,D,E) Water soluble vitamins (e.g. B,C) Carotenoids Marine PUFAs Microbial PUFAs Enzymes & Cultures Minerals & DCP Savory / yeast extracts Nutraceutical ingredients Aroma intermediates Other blend ingredients Other

Broadest portfolio of ingredients S ales, split over st eps value chain

Forms & delivery syst ems

Broad portfolio providing resilience

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Diversified into multiple end-markets

24% 8% 16% 4% 20% 9% 4% 13%

Food & Beverages Personal care S wine Poultry Aqua Infant nutrition Dietary S upplements Other Ruminants

End-market diversification as strong nat ural hedge providing resilience

Dairy R TE meals S

• ups/ S

auces/ S preads Wine-Beer-Fruit drinks

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Clear Performance Materials strategy

Differentiated strategy:

• Accelerat e:

Accelerat e growt h in highly innovat ive market s t o fully benefit from megat rends

• S

trengthen: Combine sust ainable innovat ion sales growt h wit h margin

• ptimization programs
• Rest ruct ure*:

Composite Resins*

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Furt her port folio upgrade via a different iat ed st rat egy

* Partnership with CVC announced (16 March 2015)

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Value creating emerging business areas established

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Current value est imat ed at €0.5 – 1bn

DS M Biomedical Innovative materials for Medical Devices delivering clinical improvement s DS M Bio-based Products & Services Advanced enzymes and yeasts for Bio-Energy & Bio-based chemicals DS M Advanced Surfaces S mart coat ings and surface technologies boosting solar performance

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POET-DS M: Grand Opening [movie]

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• 2014 Operational performance
• Good progress on strategy
• Part nership wit h CVC
• Highlights Q1 2015

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Partnership announced with CVC

• Partnership (NewCo) for Caprolactam, Acrylonit rile &

Composit e Resins business : 65% CVC, 35% DS M

• Pro-forma 2014 numbers for NewCo:
• Third party sales of ~€2.1 billion
• EBITDA of €106 million (excluding non cont rolling int erest)
• ~ 1,950 Employees
• The ent erprise value of t he t ransact ion is €600m plus an

earn-out of up t o €175m

• NewCo t o cont inue t o supply caprolact am t o DS

M, securing DS M’ s position as a global leader in polyamide 6

• Closing of t he t ransact ion, subj ect t o cust omary

condit ions and approvals, is expected in Q3 2015

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DS M delivers on the strategic actions it announced for these businesses

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Overview

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• 2014 Operational performance
• Good progress on strategy
• Part nership wit h CVC
• Highlights Q1 2015

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Highlights Q1 2015

• S

ales of €1,886 million, up 11% , including 2%

• rganic sales growth
• EBITDA up 4%

t o €248 million

• Nut rition delivered good organic growt h of 4%

, driven by volumes in animal nut rit ion

• Performance Mat erials cont inued t o improve EBITDA t hrough higher volumes and

margins

• Cash from continuing operat ing activit ies improved to €84 million (Q1 2014: €11

million)

• Good progress wit h set t ing up a number of efficiency improvement and cost

reduction programs especially in Nut rition and in all support functions across the company

• Out look 2015 updat ed for posit ive foreign exchange development s:

DS M aims t o deliver an EBITDA in 2015 ahead of 2014, t he increase mainly driven by posit ive foreign exchange effect s

26 S ales, EBITDA, operating working capital and cash flow refer t o continuing operations