Driving focused growth DS M Capital Markets Day 2013 Page - - PowerPoint PPT Presentation

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Rolf-Dieter S chwalb, CFO / Member of t he Managing Board

Driving focused growth

DS M Capital Markets Day 2013

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Overview

• What has been achieved since 2010
• Mid-t erm review outcome
• Financial policies and met rics to steer t he business
• Way forward

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What we have delivered so far

Profitability targets 2013 2013 expectation

EBITDA € 1.4 - 1.6bn Towards € 1.4bn ROCE >15% 9-10%

Sales targets 2015 2013 H1 realization

Organic sales growth 5%

• 7%

annually 1% China sales from US $ 1.5bn to >US$ 3bn US$ 0.8bn High Growt h Economies sales from ~32% towards 50%

• f total sales

~40% * Innovation sales from ~12% to 20%

• f total sales

18%

EBA aspiration 2020 2013 H1 realization

EBA sales >€ 1bn ~€ 75m

* 40% in 2013 H1 is incl. pro forma sales Tortuga in Q1 2013

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Overview

• What has been achieved since 2010
• Mid-term review outcome
• Financial policies and met rics to steer t he business
• Way forward

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Updated 2015 targets

Profit targets 2015

• EBITDA margin (%

) 14%

• 15%
• ROCE

11%

• 12%

Sales target 2015

• Organic sales growt h

5%

• 7%

annually

• China sales

towards US $ 3bn

• High Growth Economies sales

about 45%

• f t otal sales
• Innovat ion sales

20%

• f t otal sales
• ECO+ sales

towards 50%

• f tot al sales

Cluster targets 2015

• Nut rit ion

EBITDA margin 20%

• 23%

S ales growt h GDP +2%

• Performance Mat erials

EBITDA margin 13%

• 15%

S ales growth at double GDP

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Profit Improvement Program on track

100 200 300 2013 2014 2015 PIP Extension PIP DSM Resins

Cumulat ive Benefit s (€ million)

€160m €200-220m €250-280m

• Expect ed struct ural annual benefit s of €250-280 million by 2015; several programs will cont inue

t hereafter

• PIP one-off costs in 2013 will be ~ €80 million
• Total cumulative EBITDA benefits of these PIP programs by end 2013 are estimated at ~ €160

million

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• The restruct uring of DNP sit es (Grenzach, Dalry) is progressing as

planned

• Restruct uring of Pharma Chemicals in Linz, Aust ria has started and will

cont inue t o run unt il 2015. Biosolut ions in Capua, Italy is nearly completed

• Closure of anti-infect ives site in Zhangj iakou, Hebei province, China
• In Engineering Plast ics, a comprehensive program was init iat ed in 2012

to cut fixed costs, to improve operational efficiency, pricing and margin management and to accelerate t he growth of innovat ive specialt y product s. This program is well under way

• Rest ruct uring init iat ives at Dyneema are being complet ed
• In Resins, a program was init iated in 2011 and result ed in strong cost

reduction in 2013

• Worldwide payroll is being outsourced to 3rd part y service provider
• Transfer of support activities t o shared service centers in India and

China ongoing

• Restruct uring of t he global IT support net work ongoing

Examples of broad range of projects started

Life Sciences

Headcount reductions on track with plan

Materials Sciences Corporate Activities*

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Savings to be fully effective by 2015

Life Sciences Materials Sciences Corporate Activities

Annual Savings by 2015 Provisions / Impairments 2012

Total DSM

~ €90-100m ~ €110-120m ~ €50-60m ~ €250-280m ~ €70m ~ €150m Provisions / Impairments 2013e ~ €80m ~ €40m ~ €40m ~ €25m ~ €10m ~ €45m

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Overview

• What has been achieved since 2010
• Mid-t erm review outcome
• Financial policies and metrics to steer the business
• Way forward

• Priorit ies for cash allocation unchanged:
• 1. Capex for organic growth
• 2. Dividend
• 3. Acquisit ions
• 4. Cash ret urn t o shareholders
• Dividend policy

“ stable and preferably rising dividend”

• Commitment to S

ingle A rating

• Syst ematic, risk-management-orient ed hedging

st rat egy

Financial policies clearly defined and unchanged

Dividend paid to shareholders

Dividend per ordinary share (€)

• Dividend policy “ stable and preferably

rising”

• Since t he announcement of t he CSD in 2010,

dividend has been increased by 25% from €1.20 to €1.50

• Payable in cash or ordinary shares
• Interim dividend for the year 2013: €0.50

per ordinary share, which, as usual, represent s one t hird of t he t ot al dividend paid for the previous year (2012)

€ 0,50 € 0,75 € 1,00 € 1,25 € 1,50 € 1,75 '04 '05 '06 '07 '08 '09 '10 '11 '12 € 1.75 € 1.50 € 1.25 € 1.00 € 0.75 € 0.50

0% 10% 20% 30% 40% 50% 60% Final Dividend 2010 Interim Dividend 2011 Final Dividend 2011 Interim Dividend 2012 Final Dividend 2012 Interim Dividend 2013

Supportive uptake of stock dividend

• Of t he int erim dividend paid on August 28,

49.5% was paid as stock dividend

• Current number of t reasury shares are

sufficient t o pay st ock dividend unt il t he FY dividend for 2015

• In Q4 2013, DSM expects t o launch a

share buyback program for 4-5 million shares to cover its commitments under exist ing management and personnel

• ption plans. This program is anticipated

to cont inue into Q1 2014

% Stock dividend pay out

Solid financial base, committed to Single A

200 400 600 800 1000

2013 2014 2015 2016 2017 2018

Debt maturity profile (€ m)

• Tot al long t erm debt ~€2bn, no covenants

in out st anding bonds

• S

ingle A credit rating by Moody’s (A3) and S &P (A)

• Committ ed credit facilities of €1bn, fully

undrawn

• Updated €4bn EMTN program
• Continued risk mit igation, including

hedging of currency exposures

OWC development reflects changes in portfolio

• The move to higher value/ specialties business and away from typical chemical commodities has

not lead to a relevant change in the overall level of OWC since 2008

500 1000 1500 2000 2500 2008 2009 2010 2011 2012 2013e Nut rition Pharma PM PI Innovation Base Chem

OWC per clust er (in € m)

OWC needs further improvement

0% 5% 10% 15% 20% 25% 30% 35% 2008 2009 2010 2011 2012 2013e Nutrition Pharma PM PI Group

• Because our clusters have different OWC ratios, any mix effect on t he overall OWC ratio
• Nut rit ion OWC rat io needs improvement
• For 2013, we expect OWC/ sales on group level t o be around 21%

, at the same level as in 2012 OWC/ sales per cluster 2008-2013e OWC in AR% , AP% , Inventory% 2008-2013e

10% 12% 14% 16% 18% 20% 22% 2008 2009 2010 2011 2012 2013e Accounts Receivable Accounts Payable Invent ory

CAPEX

• After a period of low capex, some

special proj ect s impacted the overall spending levels in 2012/ 2013:

• New ammonium sulfate plant
• Second line CPL Nanj ing
• 2G Biofuel POET

100 200 300 400 500 600 700 800 2008 2009 2010 2011 2012 2013e Nutrition Pharma PM PI Other Innovation

457 416 477 686 ~700 592

Cash capex per clust er (€ m) 2008-2012

Capex mainly driven by growth ambitions

0,0 0,2 0,4 0,6 0,8 1,0 1,2 1,4 1,6 100 200 300 400 500 600 700 800 2008 2009 2010 2011 2012 2013e 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0

Capex DA Capex/ DA

Towards an increase in ROCE

4% 8% 12% 16% 20% 2009 2010 2011 2012 2015e

• Exceptional ret urns at Polymer Int ermediat es

combined with low capital employed inflated ROCE in 2010/ 2011

• Over the mid term, the target remains to

reach at least 15% ROCE

ROCE (% )

Nutrition ROCE impacted by M&A effects

0% 5% 10% 15% 20% 25% 30% 2008 2009 2010 2011 2012 2013e ROCE Nut rit ion clust er ROCE Nut rit ion before acquisit ions

• The Nut rit ion business before acquisit ions continues t o realize strong ROCE above 20%

, despit e t he strengt hening of CHF in 2011 affecting bot h operating earnings and capit al employed

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Overview

• What has been achieved since 2010
• Mid-t erm review outcome
• Financial policies and met rics to steer t he business
• Way forward

Changes in accounting policy

• From 2014 onwards DS

M will have to apply IFRS 11 Joint Arrangements

• IFRS 11 changes t he account ing for ent it ies t hat are under j oint cont rol. This will have an

impact on the financial reporting of DS M:

• Current ly, t he following JVs are impact ed by IFRS 11: DSM Sinochem Pharmaceut icals,

POET-DS M Advanced Biofuels, Reverdia, Japan Fine Coatings Lt d, Act amax, Meltagel and Percivia

Current reporting of JVs JV reporting as of 2014 P&L Proportionat e consolidation of 50% interest in all lines Results will be shown below the EBIT line, in the line “ share of the profit of associates” Balance sheet Proportionate consolidation of 50%

• f

the asset s and liabilities in all lines Net asset value in “ Associat es” Cash Flow Included for 50% in the relevant lines Capital payments, loans granted and dividends received are part of cash from invest ing act ivities. Capital Employed Assets and liabilit ies included for 50% (like PPE, Intangibles and WC) Not included anymore.

High level estimate of IFRS 11 impact

• Restated comparat ive figures for 2013 (per cluster) will be published prior t o the Q1 2014

earnings announcement

• Information on proportionat ely consolidated JVs is available in the Integrated Annual Report

2012 (page 202)

• The t able below present s an est imat e of the impact on key performance indicat ors for t he

year 2013 for t otal DSM

DSM Impact of reporting change on 2013e pro forma S ales Decrease of around €200m EBITDA Decrease of around €10m EBIT Negligible OWC Decrease of around €40m CE Decrease of around €200m ROCE Increase of 0.2% point Capex Decrease of around €100m Headcount Decrease of around 860 FTE

Information on joint ventures in future periods

• In t he annual report :

– Mandat ory disclosure: Summarized balance sheet and profit and loss account s for significant j oint vent ures individually and for all j oint vent ures in tot al – Based on t he current evaluat ion, t he only j oint vent ure that current ly qualifies as being significant is DSM Sinochem Pharmaceut icals

• In t he quart erly report :

– No mandatory disclosure according to IFRS – Volunt ary DSM disclosure: net sales and business development for significant j oint ventures individually and net sales for all j oint ventures in t otal

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2013 Outlook

• Nutrition is expected to show clearly higher results than in 2012 due to organic growt h moving t owards t he

target of 2% above GDP and t he acquisit ions made, with EBITDA margins well wit hin the 20-23% range. However, t he recovery in animal prot ein market s remains fragile, currently leading t o some pricing pressure especially in Vitamin E. Addit ionally, fish oil-based Omega 3 sales are being impacted by somewhat lower consumer demand following recent sharp retail price increases. Overall, the compelling growth drivers of the Nut rition business remain unchanged.

• Business conditions in Pharma remain challenging, but DSM is confident t hat it will be able t o deliver

subst antially bet ter result s, notwithst anding t he usual uneven delivery patt erns between quarters.

• Performance Materials is expected to show improved result s in 2013, despite the negative effects of

caprolactam.

• Polymer Intermediates is expected t o show lower result s than in 2012.
• For t he Innovation Center the result of the second half of 2013 is expected to be in line wit h the second half
• f 2012.
• Overall, DS

M expects a significant increase in EBITDA during 2013 from the €1.1 billion realized in 2012. This is a result of st ronger organic growt h, support ed by DSM’ s Profit Improvement Program, as t he benefit s of acquisitions and a more resilient portfolio are having an increased impact. Foreign exchange rates and t he recently announced Dut ch “ crisis t ax” renewal are likely to have a negative impact on EBITDA. Overall, based

• n current economic assumpt ions, DSM cont inues t o expect to move towards its 2013 EBITDA t arget of €1.4
• billion. The combination of the above factors could however result in an EBITDA for 2013 slightly below €1.35

billion.

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Contact:

DS M Investor Relations

P.O. Box 6500, 6401 JH Heerlen, The Net herlands

(+31) 45 578 2864

e-mail: invest or.relat ions@ dsm.com int ernet : www.dsm.com visit ing address: Het Overloon 1, Heerlen, The Net herlands

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DISCLAIMER This document may contain forward-looking statements with respect to DS M's future(financial) performance and position. S uch statements are based on current expectations, estimates and projections of DS M and information currently available to the company. Examples of forward-looking statements include statements made or implied about the company’s strategy, estimates of sales growth, financial results, cost savings and future developments in its existing business as well as the impact of future acquisitions, and the company’s financial position. These statements can be management estimates based on information provided by specialized agencies or advisors. DSM cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should be understood that many factors can cause the company's actual performance and position to differ materially from these statements. These factors include, but are not limited to, macro-economic, market and business trends and conditions, (low-cost) competition, legal claims, the ability to protect intellectual property, changes in legislation, changes in exchange and interest rates, changes in tax rates, pension costs, raw material and energy prices, employee costs, the implementation of the company’s strategy, the company’s ability to identify and complete acquisitions and to successfully integrate acquired companies, the company’s ability to realize planned disposals, savings, restructuring or benefits, the company’s ability to identify, develop and successfully commercialize new products, markets or technologies, economic and/or political changes and other developments in countries and markets in which DSM operates. As a result, DS M’s actual future performance, position and/or financial results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. DSM has no obligation to update the statements contained in this document, unless required by law. The English language version of this document is leading. A more comprehensive discussion of the risk factors affecting DS M’s business can be found in the company’s latest Annual Report, a copy

• f which can be found on the company's corporate website, www.dsm.com