This site uses cookies to store information on your computer. Learn more x

Financial Results: Q4 & Full Year 2014

  • 2014 sales of €9,181 million
  • Organic sales growth 5% in Q4 2014 and 3% for 2014
  • Q4 2014 EBITDA €288 million and 2014 EBITDA €1,168 million
  • Strong cash from operating activities of €418 million in Q4 2014 (€808 million in 2014)
  • Non-cash impairment of €186 million of the caprolactam business (after tax and non-controlling interests) included in exceptional items, leading to a net loss in Q4 2014
  • Proposed dividend stable at €1.65 per ordinary share
  • DSM will take further actions to improve efficiencies and to reduce costs
  • DSM aims to deliver 2015 EBITDA slightly ahead of 2014
On 11 February 2015 Royal DSM reported its unaudited results for 2014. DSM reported sales of €9,181 million, a 4% increase versus 2013. In line with market expectations, DSM reported EBITDA of €1,168 million compared to €1,261 million in 2013. The fourth quarter 2014 EBITDA was €288 million compared to €297 million in Q4 2013.

Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: “DSM generated 3% organic growth and delivered a relatively solid EBITDA with good cash flow from operating activities, amongst others due to improved operating working capital management. This was achieved despite the fact that 2014 was not an easy year for DSM with substantial negative exchange rate effects and tough market conditions in Nutrition and caprolactam.

DSM is already taking steps to address the challenging external environment. We will continue to focus on operational performance and this will be complemented by accelerated actions to improve efficiencies and reduce costs, specifically in Nutrition and across all functions in the company. For 2015, DSM aims to deliver an EBITDA slightly ahead of the result of 2014.”

Key figures

Q4 2014 Q4 2013 +/- in € million volume price/mix exch. rates other
      Net sales        
1,124 1,039 8% Nutrition 3% 1% 3% 1%
699 655 7% Performance Materials 4% -1% 3% 1%
465 393 18% Polymer Intermediates 25% -11% 4% 0%
42 39 8% Innovation Center 3% -3% 8% 0%
44 49   Corporate Activities        
2,374 2,175 9% Total continuing operations 7% -2% 4% 0%
0 159   Discontinued operations        
FY 2014 FY 2013 +/- in € million volume price/mix exch. rates other
      Net sales        
4,335 4,205 3% Nutrition 3% -1% -1% 2%
2,792 2,729 2% Performance Materials 4% -2% -1% 1%
1,727 1,579 9% Polymer Intermediates 16% -7% 0% 0%
154 150 3% Innovation Center 4% -1% 0% 0%
173 195   Corporate Activities        
9,181 8,858 4% Total continuing operations 5% -2% 0% 1%
102 571   Discontinued operations        

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;

Key figures

Q4 2014 Q4 2013 +/- in € million FY 2014 FY 2013 +/-
      EBITDA      
200 208 -4% Nutrition 850 914 -7%
87 77 13% Performance Materials 343 319 8%
23 30 -23% Polymer Intermediates 83 113 -27%
-3 -3   Innovation Center -18 -9  
-19 -15   Corporate Activities -90 -76  
288 297 -3% Total continuing operations 1,168 1,261 -7%
0 19   Discontinued operations -2 51  
112 118 -5% Core net profit, continuing operations 492 549 -10%
89 101 -12% Net profit before exceptional items, continuing operations 419 497 -16%
-107 -77   Net profit after exceptional items, total DSM 145 271 -46%
0.65 0.68 -4% Core EPS (€/share) 2.85 3.19 -11%
0.52 0.57 -9% Net EPS before exceptional items, continuing operations  (€/share) 2.42 2.84 -15%
-0.63 -0.46   NET EPS after exceptional items, total DSM (€/share) 0.78 1.52 -49%
418 476   Cash flow from operations 808 998  
241 204   Capital expenditures (cash, net of customer funding) 628 629  
      Net debt 2,420 1,841  

In this report:

  • ‘Core net profit’ is the net profit from continuing operations before exceptional items and before acquisition related (intangible) asset amortization;
  • 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 January 2014 onward.

Nutrition

Q4 2014 Q4 2013 yoy in € million FY 2014 FY 2013 yoy
1,124 1,039 8% Nets sales of which: 4,335 4,205 3%
    3% volume growth     3%
    1% price/mix effect     -1%
    3% fx impact     -1%
    1% other     2%
200 208 -4% EBITDA 850 914 -7%
17.80% 20%   EBITDA margin 19.60% 21.70%  
125 142 -12% EBIT 596 680 -12%
      Capital employed 5,034 4,496  

Organic sales growth in Q4 was 4% compared to Q4 2013 driven by 3% volume growth and 1% price/mix effect. Organic sales growth in Animal Nutrition & Health (ANH) was 10% and Human Nutrition & Health (HNH) was down by 3%.

EBITDA for Q4 was €200 million, down 4% compared to Q4 2013. Actions to reduce inventories positively impacted cash flow but negatively impacted EBITDA. Mix effects of higher sales in ANH and lower sales in HNH negatively impacted the EBITDA-margin, as the latter has, on average, somewhat higher EBITDA margins. The manufacturing performance of DSM Food Specialties also had a negative impact on EBITDA. The strengthening of the US dollar started to contribute positively during the quarter partly offset by movements in other currencies.

In Q4 DSM has made solid progress with the initiatives that address the challenging external environment. In Animal Nutrition & Health DSM decisively held its vitamin E market share in a growing market and it is reducing its costs, differentiating its offerings and supporting market expansion. In Human Nutrition & Health DSM is working on market expansion by promoting multivitamin and omega-3-based dietary supplements and implementing strategies to further penetrate the value chain in these markets. In addition, Nutrition is accelerating measures to improve operational efficiencies.

Animal Nutrition & Health net sales were €572 million in Q4 2014, up €60 million compared to Q4 2013. Sales volumes showed 7% growth with strong performance in almost all active ingredients and premix businesses. Tortuga continued to develop well and had a strong quarter.

Prices were up 3% due to higher prices for several vitamins and other active ingredients, partly offset by lower vitamin E prices.

Human Nutrition & Health net sales were €394 million in Q4 2014, slightly above Q4 2013 (€386 million) driven by a 5% positive currency development, mainly due to the stronger US dollar. Organic sales development was -3% compared to Q4 2013 owing to 1% lower volumes and 2% lower price/mix.

Sales continued to be impacted by ongoing weakness in both multivitamin and fish oil-based omega-3 markets for dietary supplements in the US. The momentum for these dietary supplements outside the US continued to be positive. DSM’s consumer business i-Health again showed strong growth.

Sales in infant nutrition normalized during Q4 2014 after the destocking in previous quarters, albeit at lower growth rates compared to historic averages. DSM is uniquely positioned in this attractive end-market with its strong IP portfolio and the long-term supply agreements with major infant nutrition customers.

Western food & beverage markets remained sluggish; low consumer spending continued to weigh on the growth in various end-markets. Food and beverage sales in Asia continued to develop well.

Growth in premixes stayed healthy in all segments as customers value the innovation, quality, global footprint, and service responsiveness offered by DSM.

DSM Food Specialties continued its strong performance in enzymes. Manufacturing performance in Savoury Ingredients and cultures negatively impacted the EBITDA.

Full year organic growth for the Nutrition cluster was 2% with 3% higher volumes driven by healthy growth in Animal Nutrition & Health, partly offset by weakness in Human Nutrition & Health. Prices were down 1% versus 2013, particularly due to lower vitamin E prices.

Full year EBITDA of the cluster declined 7% in 2014, despite strong volume growth in Animal Nutrition & Health. The decline was due to the impact of negative currency effects, lower volumes in Human Nutrition & Health and lower vitamin E prices.

Performance Materials

Q4 2014 Q4 2013 yoy in € million FY 2014 FY 2013 yoy
699 655 7% Nets sales of which: 2,792 2,729 2%
    4% volume growth     4%
    -1% price/mix effect     -2%
    3% fx impact     -1%
    1% other     1%
87 77 13% EBITDA 343 319 8%
12.40% 11.80%   EBITDA margin 12.30% 11.70%  
40 39 3% EBIT 193 180 7%
      Capital employed 1,928 1,902  

Organic sales growth in Q4 amounted to 3% compared to Q4 2013 driven by 4% volume growth and slightly lower price/mix. Overall sales benefited from positive currency effects of 3%. DSM Engineering Plastics showed good volume growth driven by compounds and high performance plastics. Sales in DSM Dyneema showed strong growth driven by higher volumes. In DSM Resins and Functional Materials higher volumes were offset by lower prices reflecting lower raw materials costs.

EBITDA in Performance Materials for the quarter was up 13% compared to Q4 2013, largely driven by good volume growth, cost control and better efficiencies, resulting in improved margins. All three businesses contributed to this growth, with particular strong performance in DSM Dyneema.

Full year organic sales growth was 2%, with 4% higher volumes and 2% lower prices predominantly driven by lower raw materials costs.

Full year EBITDA was up 8% compared to 2013. All three business groups contributed to this growth, mainly due to higher volumes and continued cost control.

Polymer Intermediates

Q4 2014 Q4 2013 yoy in € million FY 2014 FY 2013 yoy
465 393 18% Nets sales of which: 1,727 1,579 9%
    25% volume growth     16%
    -11% price/mix effect     -7%
    4% fx impact     0%
    0% other     0%
23 30 -23% EBITDA 83 113 -27%
4.90% 7.60%   EBITDA margin 4.80% 7.20%  
6 16 -63% EBIT 24 71 -66%
      Capital employed 419 570  

Organic sales growth in Q4 2014 was 14% compared to Q4 2013 with higher sales volumes and lower prices. Sales benefited from positive currency effects of 4%.

EBITDA for the quarter declined compared to the same period last year as higher sales were more than off-set by inventory adjustments and somewhat lower license income.

Full year organic sales growth was 9% compared to 2013 due to the increased caprolactam sales from the second line in China, partly offset by lower caprolactam prices.

Full year EBITDA decreased compared to 2013 given lower caprolactam margins and lower license income, despite higher volumes and lower costs.

Innovation Center

Q4 2014 Q4 2013 yoy in € million FY 2014 FY 2013 yoy
42 39 8% Nets sales of which: 154 150 3%
    3% volume growth     4%
    -3% price/mix effect     -1%
    8% fx impact     0%
    0% other     0%
-3 -3   EBITDA -18 -9  
-9 -11   EBITDA margin -45 -43  
      Capital employed 523 469  

Net sales in Q4 2014 were 8% above Q4 2013 due to DSM Biomedical benefiting from strong dollar-related sales.

EBITDA in Q4 2014 was flat compared to Q4 2013. Full year 2014 EBITDA declined due to intensified innovation programs. DSM Biomedical performed well. DSM Advanced Surfaces made good progress. The main focus of DSM Bio-based Products & Services was on starting-up the POET-DSM plant in Iowa.

Corporate Activities

Q4 2014 Q4 2013 in € million FY 2014 FY 2013
44 49 Net sales 173 195
-19 -15 EBITDA -90 -76
-37 -29 EBIT -149 -127

EBITDA in Q4 2014 of -€19 million was below the same period in previous year which was positively impacted by some incidentals. EBITDA for the full year 2014 was below 2013 due to the impact of a fire at an intermediates plant at DSM Nutritional Products in Sisseln (Switzerland) on the result of DSM’s captive insurance company (in Q2 2014).

Pharma activities and other associates

Q4 2014 sales of joint control entities amounted to €103 million on a 100% basis (Q4 2013: €99 million) of which €94 million from DSM Sinochem Pharmaceuticals (Q4 2013: €90 million).

Total 2014 sales of joint control entities amounted to €432 million on a 100% basis (2013: €406 million million) of which €399 million from DSM Sinochem Pharmaceuticals (2013: €368 million). DSM Sinochem Pharmaceuticals’ performance was supported by solid growth and operational improvements at its Yushu (China) intermediates plant.

DPx Holdings (49% DSM) realized total sales (100%) of €383 million from August up to and including October 2014 (end of DPx fiscal year) with good margins. EBITDA margin in this quarter, before exceptional items, amounted to 21.5%.

Sales (100%) for the period from the closing on 11 March 2014 until 31 October 2014 amounted to €984 million. The integration of the businesses contributed to DPx by JLL Partners and DSM has been completed successfully. DPx closed the acquisition of Gallus Biopharmaceuticals, a leading contract manufacturing company specializing in biologics, on 28 October 2014. DSM is well on track to create significant value through DPx.

Financial overview

Exceptional items

Total exceptional items from consolidated companies in the fourth quarter amounted to a loss of €291 million before tax (€219 million after tax), mainly due to the impairment of the caprolactam business for an amount of €291 million which represents €186 million after tax and non-controlling interests.

Total exceptional items from consolidated companies for the full year amounted to a loss of €334 million (€252 million after tax) including €291 million impairment of the caprolactam business, €59 million restructuring costs, €12 million acquisition-related and other costs as well as a reversal of €28 million on the loss of the contribution of DSM Pharmaceutical Products to DPx that was recognized upon classification of the business as an asset held for sale at the end of 2013.

Exceptional items from associates and joint control entities all related to DPx. In the fourth quarter this resulted in a loss of €55 million (100%) before tax (€35 million after tax) all relating to integration, restructuring and realization of synergies by the new company. For the full year they amounted to €157 million (100%) before tax (€135 million after tax).

Net profit

Financial income and expense (before exceptional items) in the fourth quarter amounted to -€29 million compared to -€34 million in Q4 2013 due to favorable hedge results and higher capitalization of interest during construction. Full year financial income and expense (before exceptional items) improved from -€137 million to -€118 million. Main reason for this improvement was a positive hedge result which was partly offset by the impairment of a loan.

The effective tax rate (continuing operations, before exceptional items) was 18%, in line with 2013.

Net profit from continuing operations before exceptional items in the fourth quarter amounted to €89 million compared to €101 million in Q4 2013. Full year net profit from continuing operations before exceptional items amounted to €419 million compared to €497 million in 2013.

Net earnings per ordinary share (continuing operations, before exceptional items) amounted to €0.52 in the fourth quarter compared to €0.57 in Q4 2013. Full year net earnings per ordinary share (continuing operations, before exceptional items) were €2.42 compared to €2.84 in 2013.

Dividend

DSM’s dividend policy is to provide a stable and preferably rising dividend. DSM proposes to maintain the dividend at €1.65 per ordinary share. This will be proposed to the Annual General Meeting of Shareholders to be held on 30 April 2015. An interim dividend of €0.55 per ordinary share having been paid in August 2014, the final dividend would then amount to €1.10 per ordinary share. 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 5 May 2015.

Cash flow, capital expenditure and financing

Cash provided by operating activities in the fourth quarter amounted to €418 million (Q4 2013: €476 million) supported by a strong decrease of operating working capital. For the full year cash provided by operating activities amounted to €808 million compared to €998 million in 2013.

Operating working capital increased over the year from €1,843 million at year-end 2013 to €1,968 million at the end of 2014 due to currency effects, however, expressed as a percentage of annualized Q4 sales this represents a lower percentage of 20.7% (year-end 2013 21.2%).

Cash used for capital expenditure net of customer funding in Q4 2014 was €241 million (€247 million before customer funding) compared to respectively €204 million and €211 million in Q4 2013. For the full year, cash used for capital expenditure net of customer funding amounted to €628 million (€653 million before customer funding) which was at the same level as in 2013 being respectively €629 million and €649 million.

Net debt increased by €579 million compared to year-end 2013 and stood at €2,420 million.

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 continues to pursue strategic actions for Polymer Intermediates (caprolactam and acrylonitrile) and Composite Resins, which will be combined in a separate cluster as from 1 January 2015. Re-stated figures will be published in March 2015.

Below are some highlights of DSM’s 2014 achievements.

High Growth Economies: from reaching out to being truly global

Sales to high growth economies reached a level of 43% of total sales in 2014 compared to 41% in 2013 and 32 percent at the start of the strategic period in 2010. DSM expanded its sales significantly in China and India with double-digit growth rates. Latin America and Eastern Europe showed mid-single digit growth. Today around 35% of DSM employees live and work in high growth economies. Sales in China amounted to USD 2.0 billion, versus USD 1.7 million in 2013.

Innovation: from building the machine to doubling innovation output

In 2014 innovation sales as percentage of total sales amounted to 18% compared to 17% in 2013. DSM is therefore well on track to deliver on its target for 2015 that innovative products and solutions will account for 20% of total sales. Gross margins of DSM’s innovation sales were higher than the average of DSM’s running business. In the year good progress was made in DSM’s Emerging Business Areas.

Sustainability: from responsibility to business driver

In 2014 DSM delivered good progress on all of its sustainability aspirations for 2015. In 2014, 95% of DSM’s innovation pipeline was ECO+, while ECO+ sales as a percentage of DSM’s running business increased to 49% in 2014 from 45% in 2013. DSM is on track to achieve its target of ‘towards 50%’ for 2015. Across DSM’s businesses, ECO+ sales have higher margins compared to non-ECO+ sales.

Acquisitions & Partnerships: from portfolio transformation to driving focused growth.

The combination of DSM Pharmaceutical Products and Patheon in DPx Holdings in March 2014 has resulted in a leading pharma services company in the Contract Development and Manufacturing Organization market. DSM owns 49% of DPx. DSM also announced its intention to acquire Aland, a Hong Kong-based company producing vitamin C in China, which is expected to close in the first half of 2015.

Outlook

Macro-economic uncertainty and low consumer confidence continue to impact market dynamics. DSM assumes low growth in Europe, continued economic resilience and growth in the US and a slowdown of growth in some of the high growth economies.

The volatility in currencies with the weakening of the Euro against the US Dollar and the strengthening of the Swiss franc against the Euro could have an impact on DSM’s 2015 results. Based on current rates and the 2015 hedge effects, the overall impact of currencies on EBITDA in 2015 would be roughly neutral.

Spot prices in vitamin E have declined significantly in the second half of 2014. Assuming the January 2015 prices persist, the negative impact on DSM’s 2015 EBITDA will be around €80 million.

DSM is addressing the current challenging external environment by continuing its focus on operational performance and commitment to enhancing profitability. The running programs will be complemented by accelerated actions to improve efficiencies and reduce costs, specifically in Nutrition and across all functions in the company. In addition, in 2015 further focus will be given to improve operating working capital management.

Taking the above into account, DSM aims to deliver an EBITDA in 2015 that is slightly ahead of the result of 2014.