Rolf-Dieter S chwalb, CFO Royal DS M Capit al Market s Day, 5 - - PowerPoint PPT Presentation

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Life S ciences and Materials Sciences

Rolf-Dieter S chwalb, CFO Royal DS M

Capit al Market s Day, 5 November 2014

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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 t o t he company. DS M caut ions readers t hat such st at ements 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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Overview

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• Portfolio changes achieved
• Update on DPx
• Capital allocation and operat ing efficiencies
• Financial policies

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DS M in motion: driving focused growt h

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S trong track record in portfolio transformation

Nutrition

• Martek
• Vitat ene
• Premix plants
• Food enzymes business and

technology (Verenium)

• Ocean Nut rition Canada
• Tortuga
• Cargill Bio-products
• Fortit ech
• Unitech
• Announced: Aland (Vitamin C)

Innovation center

• Kensey Nash
• C5 Y

east Company Performance Materials

• ICD China
• AGI Taiwan
• Novamid

Pharma

• DSM S

inochem Pharmaceuticals

• DPx Holdings

Innovation center

• POET-DS

M Advanced Biofuels

• Reverdia
• DuPont : Actamax
• Polymer Technology Group

PARTNERSHIPS since 2010 ACQUISITIONS since 2011 Performance Materials

• KuibyshevAzot Russia: P

A6

• Rost ec Russia

Nutrition

• Partnerships Russia (Tatarst an)
• Andre Pect in (text ures, China)
• Energy
• Urea Licensing
• Agro
• Melamine
• Cit ric Acid
• Special Product s
• Elastomers
• Polycarbonat e
• Anti-Infect ives

DIVESTMENTS in 2009-2011

~ ~ €2.4bn ~ ~ €0.1bn ~ 0.3bn ~ 0.3bn ~ ~ €1.5bn 4

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S trict acquisition criteria for focused growth

S trategic

• Business fit
• Leadership posit ion and

Innovat ion pot ential

• Geographic ambitions
• Sust ainabilit y drive

Financial

• Value creat ion
• Sust ain single A rating
• Cash and EPS accret ion
• Other financial targets

Unchanged discipline in t arget ident ificat ion

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Value accretive acquisitions

• Key acquisit ions (Mart ek, ONC, Fort it ech, Tort uga and Kensey Nash):

Earnings accret ive in year 2 Aggregated, sales CAGR of 7%

post acquisition

• Value creation confirmed

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

~1.5x EV paid

• For now, focus on int egrat ion. No large M&A proj ect s cont emplat ed

Int egrat ions progressing according t o plan and wit hout issues In 2014, additional optimizat ion actions are taken at Nut rition

(mainly reducing R&D asset foot print )

• Targeting €50m in savings by 2015 of which €10-15m to be reinvest ed

int o ext ernal (open) innovat ion and local, front -line support

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4% 8% 12% 16%

• Except ional ret urns at Polymer

Intermediates combined wit h low capital employed inflated ROCE in 2010/ 2011

• 2011-2014 ROCE impacted by M&A related

int angibles and goodwill

• Mid term ROCE ambition remains at 15%

EBIT growt h driven by operational

efficiencies and at tract ive port folio

S

trict CAPEX allocation

Control Operating Working Capital

ROCE (% )

Mid-term ROCE ambition remains to be 15%

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Profit targets 2015 YTD 2014

• EBITDA margin (%

) 14%

• 15%

13%

• ROCE

11%

• 12%

8-9% (FY14E) Sales target 2015

• Organic sales growth

5%

• 7%

annually 3%

• China sales

t owards USD 3bn >USD 2.0bn (FY14E)

• High Growth Economies sales

about 45%

• f total sales

43%

• Innovation sales

20%

• f tot al sales

18%

• ECO+ sales

towards 50%

• f total sales

45% Cluster targets 2015

• Nutrition

EBITDA margin 20%

• 23%

20.2% S ales growth GDP+2% 1%

• Performance Materials

EBITDA margin 13%

• 15%

12.2% S ales growth at double GDP 2%

Where we are versus 2015 targets

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Overview

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• Portfolio changes achieved
• Update on DPx
• Capital allocation and operat ing efficiencies
• Financial policies

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Combination DPP/ Patheon is leading pharma services company in CMO market (DS M 49% )

• Post closing March 2014, t he init ial int egrat ion was execut ed at high speed and

complet ed end Oct ober

• First acquisit ion (Gallus Biologics) closed in S

ept ember

• Full year pro-forma revenues of about US

D 2bn. 2014 sales growt h of ~9% , growing ahead of market

• Net debt is current ly around US

D 2bn

DPx Holdings off to an excellent start

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DPx: strong value generation potential for DS M

• Synergy harvest ing and st rong growt h expect ed in 2015
• DPx to reach 2015 EBITDA margins close to indust ry leaders’ margins of 20%

. EPS accret ive in 2015

• St rong value generat ion moment um t o cont inue beyond 2015

S

• lid market growth

Indust ry leader wit h unique offering Ample growt h pot ent ial in current asset base

• 2015 value of DS

M share estimated at ~€1bn

• Cat alent good benchmark for valuat ion:

Comparable leading CMO player S

imilar sales and profitabilit y

S

uccessful IPO August 2014

• More than 10x EBITDA and comparable leverage

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Overview

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• Portfolio changes achieved
• Update on DPx
• Capital allocation and operat ing efficiencies
• Financial policies

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S ignificant capital allocated to Nutrition

• Capital allocat ion criteria linked to strat egic obj ectives
• After significant M&A capital allocat ed to Nutrit ion, Capex allocat ion is following

500 1000 1500 2000 2500 2010 2011 2012 2013 rest ated 2014e Nut rition Nut rition M&A Pharma PM PI Ot her Innovation Innovation M&A 477 ~600 602 686 416 XXX M&A DS M ~0 509 1262 929

Cash Capex and M&A per cluster (€m) 2010-2014e

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XXX Cash capex DSM

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• S

tandardization of processes (HR, sales & marketing, supply chain, sourcing, etc.)

• Maximizing use of shared service platforms
• Opt imizing margins t hrough pricing and margin management
• Operat ional efficiencies and growt h accelerat ion t hrough innovat ion
• Addit ional opt imizat ion act ions in Nut rit ion announced in 2014
• Cost reduct ions original Profit Improvement Program announced in 2011/ 12 on track

Extract efficiencies and reduce costs

100 200 300 2013 2014 2015 PIP Extension PIP DS M Resins

Cumulat ive Benefit s of t he original PIP (€ million)*

€140m €160-180m €210-240m

* Restated after Pharma deconsolidation

Page 0% 5% 10% 15% 20% 25% 30% 35% 2010 2011 2012 2013 2014e Nutrition Pharma PM PI Group

S trong focus on OWC improvement

• Invent ory management :

Hands-on, aggressive approach Improve t he int egrat ed global sales & operat ions planning Pursue st ruct ural net work opt imizat ion

• Receivables and Payables management

Cont inue overdue management

OWC/ sales per cluster 2010-2014e OWC in AR% , AP% , Inventory% 2010-2014e

10% 12% 14% 16% 18% 20% 22% 2010 2011 2012 2013 2014e Accounts Receivable Accounts Payable Invent ory 15

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Overview

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• Portfolio changes achieved
• Update on DPx
• Capital allocation and operat ing efficiencies
• Financial policies

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• Priorities for cash allocat ion unchanged:
• 1. Capex for organic growt h
• 2. Dividend
• 3. Acquisit ions
• 4. Cash ret urn t o shareholders
• Dividend policy

“ stable and preferably rising dividend”

• Commit ment t o Single A rat ing
• Syst emat ic, risk-management-orient ed

hedging st rat egy

Financial policies clearly defined

Cash use 2010 – H1 2014 (in €bn) 2.6 2.8 0.9 0.6

capex M&A Dividend SBB 17

4.0 0.8 1.3

Cash from operations Debt Divestment

Cash sources 2010 – H1 2014 (in €bn)

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Dividend policy: “DSM aims to provide a stable and preferably rising dividend” Dividend per share increased 37.5% since 2010 (CAGR 8.3% )

S ignificant cash return for shareholders

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% Stock dividend pay out

39% 39% 38% 37% 42% 50% 45% 47% 30% 40% 50% 60% Fin 2010 Int 2011 Fin 2011 Int 2012 Fin 2012 Int 2013 Fin 2013 Int 2014

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Wrap up

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Innovation Center Innovation Center

• Att ractive portfolio wit h high qualit y, Nut rit ion and Performance Mat erials businesses

with a good growt h and ret urn profile

• Focused strategy to improve financial performance and consolidate portfolio further:

Drive improved performance of t he Nut rition and Performance Materials

businesses

Act ive port folio management: st rategic actions to be pursued for

Polymer Int ermediates and Composite Resins

Unlock hidden pocket s of value in Pharma and Innovat ion asset s Focus on cash generation S

trict capital allocation

No large M&A contemplated for now;

current focus is on int egrat ion of Nut rit ion acquisit ions of recent years

Commit ted to policy of stable, preferably rising, dividend

DS M actively generating shareholder value