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DSM N.V. : DSM reports Q2 2014 results

2014-08-05 07:15:00
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DSM XAMS Netherlands Heerlen

* Q2 2014 EBITDA from continuing operations ?293 million

* Q2 2014 EBITDA includes negative currency effect of about ?29 million and a

?16 million impact from the fire at a nutrition plant in Switzerland

* Nutrition delivered improved result versus last two quarters with ?222

million EBITDA

* Performance Materials Q2 EBITDA of ?88 million up compared to Q2 2013 and Q1


* Q2 cash flow from operating activities ?126 million

* Interim dividend of ?0.55 per ordinary share

* Full year 2014 outlook in line with current market expectations

Royal DSM, the Life Sciences and Materials Sciences company, today reported

second quarter 2014 EBITDA from continuing operations of ?293 million compared

to ?332 million in Q2 2013, and ?272 million in Q1 2014. Nutrition showed

improvement compared to the last two quarters. Performance Materials continued

its encouraging underlying trend and delivered higher results. Polymer

Intermediates was negatively impacted by lower caprolactam margins.

Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing

Board, said: "DSM delivered improved results versus the first quarter, despite

persistent currency headwinds. Performance Materials saw continued positive

momentum in a number of end-markets, whereas Polymer Intermediates has seen

weaker business conditions for caprolactam.

Market conditions in Nutrition have shown some improvement with good Animal

Nutrition performance in Q2, while Human Nutrition still operates in a low

growth macro environment for some end-markets due to ongoing pressure on

consumer spending. In this environment, the resilience of our integrated value

chain is demonstrated by robust margins, highlighting the quality of our

Nutrition business. In addition we are undertaking initiatives in the US to

reinforce the attractiveness of our dietary supplements end-user categories.

We continue to focus on efficiencies to protect profitability and improve cash

flow in the current environment. Despite the weakness in caprolactam, we

continue to anticipate to deliver improving financial results in the coming


Key figures


  second quarter


2014 2013 +/-   in ? million volume price/mix rates other


2,288 2,421 -5%   Net sales 5% -2% -3% -5%

1,073 1,111 -3%   Nutrition 2% -1% -5% 1%


702 709 -1%   Materials 3% -2% -3% 1%


429 375 14%   Intermediates 25% -8% -3%

38 39 -3%   Innovation Center 2% 0% -5%


46 48     Activities

Total continuing

2,288 2,282 0%   operations 6% -2% -4% 0%


0 139     operations



quarter           first half

2014 2013 +/-   in ? million 2014 2013 +/-


293 345 -15%   EBITDA 563 653 -14%

222 250 -11%   Nutrition 425 465 -9%


88 80 10%   Materials 165 159 4%


17 27 -37%   Intermediates 37 55 -33%

-5 -2     Innovation Center -11 -4


-29 -23     Activities -51 -42

Total continuing

293 332 -12%   operations 565 633 -11%


0 13     operations -2 20

125 153 -18%   Core net profit 239 285 -16%

Net profit before

        exceptional items,


110 137 -20%   operations 209 262 -20%

Net profit after

exceptional items,

78 112 -30%   total DSM 159 231 -31%


0.73 0.89 -18%   Core EPS (?/share) 1.39 1.67 -17%

Net EPS before

exceptional items,



0.64 0.80 -20%   (?/share) 1.21 1.51 -20%

Net EPS after

exceptional items,

total DSM

0.45 0.64 -30%   (?/share) 0.90 1.33 -32%

Cash flow from

126 251     operations 89 202



117 148     (cash) 268 300

        Net debt -2,393 -1,841 *

        * year-end 2013

In this report:

* 'Organic sales growth' is the total impact of volume and price/mix;

* 'Discontinued operations' comprises net sales and operating profit (before

depreciation and amortization) of DSM Pharmaceutical Products up to and

including 10 March 2014;

* 'Net profit' is the net profit attributable to equity holders of Koninklijke


* 'Core net profit' is the net profit from continuing operations before

exceptional items and before acquisition related (intangible) asset


* From 2014 onwards interest receipts and payments are no longer included in

operating activities in the cash flow statement but reported in investing

activities (interest received) and financing activities (interest paid).

2013 figures are restated accordingly;

* All 2013 figures are restated for the impact of the termination of

proportional consolidation for joint ventures as from 1 Jan 2014 onward.

Note: all tables are available in the attached Press release-PDF

Review by cluster


Sales in Q2 declined by 3% compared to Q2 2013, as organic growth and the

contribution of new consolidations was offset by 5% weaker currencies. Organic

sales growth was 1% versus Q2 2013, with volume growth (2%) partly offset by

lower prices (-1%).

EBITDA for Q2 was ?222 million, down 11% compared to Q2 2013. The combination of

good demand in Animal Nutrition and the continued soft consumer demand in some

of DSM's Human Nutrition end-markets resulted in total into a modest organic

growth of 1%, which was offset by the foreign exchange impact. The EBITDA margin

of 20.7% reflecting the significant impact of foreign exchange rates compared to

Q2 2013 was within DSM's target range of 20-23%.

Human Nutrition & Health net sales were ?403 million in Q2. Organic sales

development was negative at -6% compared to Q2 2013 owing to lower volumes. The

price/mix development was flat.

Sales in dietary supplements for vitamins and fish-oil based Omega-3 in the US

were down versus the same period last year. Recovery of these end-markets is

slower than expected. Promotional initiatives and industry wide campaigns are

being launched to support the vitamins and Omega-3 dietary supplements markets.

Momentum for dietary supplements outside the US continued to be positive. Demand

for i-Health remained robust.

Sales in infant nutrition were weaker compared to the same period last year due

to the after-effects from the false botulism scare, with China and South East

Asia markets being the most affected. Furthermore, recent changes in Chinese

regulatory policy have created additional uncertainty for the industry. As a

result infant nutrition suppliers have reduced their inventories.

Food & beverage markets have continued to show sluggish growth, while demand for

premixes stayed healthy. In order to stimulate growth, "A-label" customers are

investing in new product launches, promotional campaigns and acceleration of


Animal Nutrition and Health net sales were ?519 million in Q2. Organic sales

growth in Q2 was 5% driven by good global volume growth. Overall, the price/mix

effect was flat.

Market conditions in animal feed continued to improve in Q2 as premix businesses

showed strong performance. Vitamin E volumes and prices were lower versus the

same period last year.

DSM Food Specialties delivered good organic growth in enzymes and cultures

driven by a continued focus on innovation and high margin applications.

Performance Materials

Organic sales growth in Q2 2014 was 1% compared to Q2 2013 with 3% volume growth

driven by improved market demand and 2% lower prices. Adverse currency effects

amounted to 3%. DSM Engineering Plastics showed good volume growth, while

polyamide 6 prices were slightly lower, due to lower caprolactam prices. DSM

Resins & Functional Materials saw good volume growth, while prices were down due

to lower input costs and some product mix effects. DSM Dyneema Q2 sales were

lower compared to same period last year as a result of the timing of large


EBITDA in Performance Materials for the quarter was up by 10% compared to Q2

2013 largely driven by volume growth, good cost control and improved

efficiencies. DSM Resins & Functional Materials showed a strong improvement in

EBITDA. DSM Engineering Plastics also reported a higher EBITDA despite lower

results in the polyamide 6 value chain. In Q2 DSM Dyneema delivered EBITDA that

was in line with last year after a substantially higher EBITDA in Q1.

Polymer Intermediates

Organic sales growth in Q2 was 17% compared to the same quarter of 2013, with

25% higher volumes and 8% lower prices. Sales were negatively impacted by

currency effects of 3%. Volumes were up due to increased caprolactam production

from the 2(nd) line in China.

EBITDA for the quarter declined compared to Q2 2013 resulting from the

maintenance stop of the caprolactam plants in Europe and lower caprolactam

margins resulting from lower prices, while benzene costs remained high.

Acrylonitrile results were in line with last year.

Innovation Center

Sales in Q2 2014 were slightly down compared to Q2 2013 due to negative currency

effects (-5%). Organic growth in DSM Biomedical is progressing well, with new

products in the pipeline. DSM Advanced Surfaces continues to make progress by

testing its new anti-reflecting coatings at large solar parks. In Bio-based

Products and Services the second generation advanced biofuels plant of the

POET/DSM joint venture in Iowa is in the start-up phase.

EBITDA declined due to increased costs resulting from intensified innovation

programs. The underlying business did well.

Corporate Activities

EBITDA in Q2 2014 benefitted from lower project costs, but the captive insurance

was negatively impacted by a fire at an intermediates plant at DSM Nutritional

Products in Sisseln, Switzerland. Of the total damages caused by the fire, an

amount of ?15 million is retained by DSM's captive insurances and as such

accounted for in Q2. Nutrition incurred ?1 million. Costs above these ?16

million are covered by external insurers.

Pharma activities and other associates

Total Q2 2014 sales of joint ventures amounted to ?116 million (100% base) of

which ?108 million coming from DSM Sinochem Pharmaceuticals (Q2 2013: ?98


DPx Holdings (49% DSM) realized total sales (100%) of ?217 million from 11 March

up to and including April with good margins. The DSM share in the net result of

DPx was impacted by ?25 million exceptional items related to the formation and

start-up of the new company.

Financial overview

Exceptional items

Total exceptional items from fully consolidated companies in the second quarter

amounted to a loss of ?10 million before tax (?8 million after tax). This

includes ?12 million in expenses related to ongoing restructuring activities.

Net profit

Financial income and expense in Q2 2014 amounted to -?36 million equal to Q2


The effective tax rate in Q2 2014 was 18%, in line with the full year 2013.

Net profit from continuing operations before exceptional items in Q2 2014

amounted to ?110 million compared to ?137 million in Q2 2013.

Net earnings per ordinary share (continuing operations, before exceptional

items) amounted to ?0.64 in Q2 2014 compared to ?0.80 in Q2 2013.

Cash flow, capital expenditure and financing

Cash provided by operating activities in Q2 2014 was ?126 million (Q2 2013: ?251


Operating working capital increased from ?1,843 million at year-end of 2013 to

?2,178 million at the end of Q2 2014 due to higher inventories and receivables.

Expressed as a percentage of annualized sales this represents 23.8% compared to

23.2% in Q2 2013.

Cash used for capital expenditure amounted to ?117 million in Q2 2014 compared

to ?148 million in Q2 2013.

Net debt increased by ?552 million compared to year-end 2013 and stood at ?2,393

million (gearing 29%).

Interim dividend

DSM's policy is to provide a stable and preferably rising dividend. It has been

decided to pay an interim dividend of ?0.55 per ordinary share for 2014. As

usual, this represents one third of the total dividend paid for the previous

year. The interim dividend should not be taken as an indication of the total

dividend for the year 2014. The dividend will be payable in cash or in the form

of ordinary shares, at the option of the shareholder. Dividend in cash will be

paid after deduction of 15% Dutch dividend withholding tax. The ex-dividend date

is 6 August 2014. The interim dividend will be payable as from 27 August 2014.

DSM in motion: driving focused growth

Strategy update

DSM is firmly committed to its strategy, which has delivered and will continue

to deliver sustainable value. DSM in motion: driving focused growth is the

strategy that the company embarked on in September 2010, which was updated in

September 2013. The next update is planned for Q4 2015. DSM in motion: driving

focused growth  marks the shift from an era of intensive portfolio

transformation to a strategy of maximizing sustainable and profitable growth.

DSM's strategic focus on Life Sciences and Materials Sciences is fueled by three

main societal trends: Global Shifts, Climate & Energy and Health & Wellness. DSM

aims to meet the unmet needs resulting from these societal trends with

innovative and sustainable solutions.

Below are some highlights of DSM's Q2 2014 achievements.

High Growth Economies: from reaching out to being truly global

Sales to High Growth Economies reached a level of 42% of total sales in Q2 2014

versus 39% in Q2 2013. Sales in China amounted to USD 487 million, versus USD

395 million in Q2 2013, largely driven by substantially higher volumes for

caprolactam resulting from the second caprolactam facility.

DSM opened its China Animal Nutrition Center in Bazhou, south of Beijing. With

its focus on swine and poultry nutrition and the capabilities to conduct world-

class scientific and application research, the facility will support the

development of tailored solutions to meet the needs of the fast growing poultry

and swine markets in China.

Innovation: from building the machine to doubling innovation output

Innovation sales in the first half of 2014 - measured as sales from innovative

products and applications introduced in the last five years - amounted to 18% of

total sales equal to the first half of 2013, which is close to DSM's 2015 target

of approximately 20%. Examples of innovations, recently launched are:

* The world's first high-heat plastic air intake manifold with integrated

charge air cooler made from Stanyl(?) Diablo, DSM's high temperature

resistant polyamide 46.

* Rapidase(?) Pro Color, DSM's fruit enzymes that help to obtain the highest

possible juice yield.

* A high intensity sweetener platform based on fermentation of steviol

glycosides, the sweet tasting molecules present in Stevia plants. This

breakthrough technology will provide clean taste and a secure and scalable


* A new coagulant, Maxiren(?) XDS that helps cheese producers to maximize

their value.

Sustainability: from responsibility to business driver

It is DSM's goal to have an injury and incident-free working environment. DSM

has set itself the target of reducing the Frequency Index of Recordable Injuries

by 50 percent or more by the year 2020 compared to 2010. This will require an

index score that is less than or equal to 0.25 by 2020, compared to the 0.57

achieved in 2010. At the end of the first half of 2014 this index amounted to


The share of ECO+ products in DSM's innovation pipeline was well above 90% in H1

2014, higher than the 2015 aspiration of 80%. The Eco+ share in the running

business in H1 2014 was slightly ahead of the 45% in 2013, well on track towards

the 2015 aspiration of 50%. DSM's energy efficiency is well on target: 16%

improvement in the first half year of 2014 compared to 2008. The aspiration

calls for a 20% improvement in 2020 compared to 2008. Greenhouse-gas emissions

in CO(2) equivalents were 7% less than in 2008. DSM's aspiration is a 25%

reduction by 2020, compared to 2008.

In India DSM completed construction of a 1MW solar facility adjacent to its

plant in Ranjangaon.

Acquisitions & Partnerships: from portfolio transformation to driving focused


DSM reached agreement to acquire Aland (HK) Holding Limited ("Aland"), a Hong

Kong-based company producing vitamin C in mainland China. Subject to customary

conditions, the transaction is expected to close in the next six to nine months.

DSM and Niaga, a Netherlands-based provider of sustainable solutions for the

carpet industry, announced a joint venture, DSM-Niaga, to further develop and

commercialize sustainable technology for recyclable carpet. Based on proprietary

and complementary technologies, DSM-Niaga will enable the industry to close the

carpet materials loop.

Outlook 2014

DSM targets for 2014 to deliver an improved underlying business performance in a

challenging macro environment. DSM is on track to meet current market

expectations, notwithstanding the adverse impact from foreign exchange rates of

about ?70 million and weakness in the caprolactam supply-chain.

Additional information

Today DSM will hold a conference call for the media from 08.00 AM to 08.30 AM

CET and a conference call for investors and analysts from 09.00 AM to 10.00 AM

CET. Details on how to access these calls can be found on the DSM website,

www.dsm.com. Also, information regarding DSM's half year result 2014 can be

found in the Presentation to Investors, which can be downloaded from the

Investors section of the DSM website.

Important dates

Ex interim dividend quotation                      Wednesday, 6 August 2014

Record date                                                 Friday, 8 August


Interim dividend payable                              Wednesday, 27 August 2014

Report for the third quarter of 2014              Tuesday, 4 November 2014

Capital Markets Day                                     Wednesday, 5 November


Full year results 2014                                    Wednesday, 11 February


Report for the first quarter of 2015               Wednesday, 29 April 2015

Report for the second quarter of 2015           Tuesday, 4 August 2015

Report for the third quarter of 2015              Tuesday, 3 November 2015

Heerlen, 5 August  2014

The Managing Board

Feike Sijbesma, CEO/Chairman

Rolf-Dieter Schwalb, CFO

Stefan Doboczky

Geraldine Matchett

Stephan Tanda

Dimitri de Vreeze

DSM - Bright Science. Brighter Living.(TM)

Royal DSM is a global science-based company active in health, nutrition and

materials. By connecting its unique competences in Life Sciences and Materials

Sciences DSM is driving economic prosperity, environmental progress and social

advances to create sustainable value for all stakeholders simultaneously. DSM

delivers innovative solutions that nourish, protect and improve performance in

global markets such as food and dietary supplements, personal care, feed,

medical devices, automotive, paints, electrical and electronics, life

protection, alternative energy and bio-based materials. DSM's 24,500 employees

deliver annual net sales of around ?10 billion. The company is listed on NYSE

Euronext. More information can be found at www.dsm.com.

Or find us on:

For more information:

DSM Corporate Communications DSM Investor Relations

Herman Betten Dave Huizing

tel. +31 (0) 45 5782017              tel. +31 (0) 45 5782864

e-mail media.contacts@dsm.com e-mail investor.relations@dsm.com

Forward-looking statements

This press release may contain forward-looking statements with respect to DSM's

future (financial) performance and position. Such statements are based on

current expectations, estimates and projections of DSM and information currently

available to the company. 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 actual performance and position

to differ materially from these statements. DSM has no obligation to update the

statements contained in this press release, unless required by law.

Press release-pdf:


Presentation to Investors Q2 2014:


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Source: DSM N.V. via GlobeNewswire