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Financial Results: Q1 2015

  • Sales of €1,886 million, up 11%, including 2% organic sales growth
  • EBITDA up 4% to €248 million
  • Nutrition delivered good organic growth of 4%, driven by volumes in animal nutrition
  • Performance Materials continued to improve EBITDA through higher volumes and margins
  • Cash from continuing operating activities improved to €84 million (Q1 2014: €11 million)
  • Non-cash impairment of €130 million (after tax) related to the partnership for Polymer Intermediates and Composite Resins announced in March, leading to a net loss after exceptional items
  • Outlook 2015 updated for positive foreign exchange developments

On 29 April 2015 DSM reported its results for Q1 2015. DSM reported sales of €1,886 million, an 11% increase versus Q1 2014, due to 3% higher volumes, 1% lower prices and 9% foreign exchange effects. DSM delivered an increased EBITDA of €248 million compared to €239 million in Q1 2014. The increase in operating working capital of €199 million to €2,102 million at the end of Q1 2015 was entirely due to the foreign exchange translation effect. Cash operating working capital remained flat, contrary to usual seasonality.

Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: “DSM delivered higher results in Q1 2015 compared to prior year, driven by higher volumes in both Nutrition and Performance Materials. Nutrition delivered mixed results with good volume growth in animal nutrition, partly offset by low prices in vitamin E and weak performance in human nutrition. Performance Materials had another strong quarter with higher volumes and margins. The mix of foreign currencies had an overall positive impact on both clusters.

In Q1 we announced a partnership with CVC Capital Partners for Polymer Intermediates and Composite Resins, a significant step in further optimizing our portfolio and reducing our cyclicality. This strategic action will enable us to focus fully on improving the operational performance of our core businesses while capitalizing on the longer term potential for value creation of our various partnerships.

We are progressing well with setting up a number of efficiency improvement and cost reduction programs especially in Nutrition and in all support functions across the company.

DSM aims to deliver an EBITDA in 2015 ahead of 2014, the increase mainly driven by positive foreign exchange effects.”

Key Figures

in € million Q1 2015 Q1 2014 +/- volume price/mix exch.
Net sales              
Nutrition 1,199 1,047 15% 3% 1% 11% 0%
Performance Materials 632 589 7% 3% -4% 8% 0%
Innovation center 36 34 6% -12% 0% 18% 0%
Corporate Activities 19 22          
Total continuing operations 1,886 1,692 11% 3% -1% 9% 0%
Discontinued operations 506 606          
in € million Q1 2015 Q1 2014 +/-
195 203 -4%
Performance Materials
86 71 21%
Innovation center -5 -6  
Corporate Activities -28 -29  
Total continuing operations 248 239 4%
Discontinued operations 38 31  
Core net profit (continuing operations) 88 106 -17%
Net profit before exceptional items, continuing operations 69 91 -24%
Net profit after exceptional items, total DSM -70 81  
Core EPS (€/share) 0.51 0.61 -17%
Net EPS before exceptional items, continuing operations (€/share) 0.39 0.52 -26%
Net EPS after exceptional items, total DSM (€/share) -0.42 0.45  
Cash flow from continuing operations 84 11  
Capital expenditures (cash, net of customer funding) 135 146  
Net debt 2,932 2,420*  

* year-end 2014

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 as well as DSM Fibre Intermediates and DSM Composite Resins up to and including Q1 2015;
  • Core net profit’ is the net profit from continuing operations before exceptional items and before acquisition related (intangible) asset amortization.

Review by cluster


in € million Q1 2015 Q1 2014 YoY
Net sales of which: 1,199 1,047 15%
- volume growth     3%
- price/mix effect     1%
- fx impact     11%
- other     0%
EBITDA 195 203 -4%
EBITDA margin 16.3% 19.4%  
129 143 -10%
Capital employed 5,509 5,034*  

* year-end 2014

Sales in the first quarter increased by 15% compared to Q1 2014. Organic sales growth was 4% compared to Q1 2014 as a result of 3% higher volumes and 1% higher prices. Good volume growth in animal nutrition was partly offset by lower vitamin E prices and by weakness in human nutrition. Currencies had an 11% positive impact on sales.

EBITDA for Q1 was €195 million, down 4% from Q1 2014. Higher volumes in animal nutrition were offset by lower vitamin E prices, lower volumes in human nutrition, intensified marketing and sales activities as well as actions to reduce inventory levels. These factors and the relative higher share of animal nutrition impacted the EBITDA margin. Positive effects of foreign exchange rates, especially the US dollar, were partly offset by the negative impact of the Swiss franc.

Animal Nutrition and Health net sales were €574 million in Q1, a 23% increase versus the €467 million in Q1 2014. Organic sales growth in Q1 was 14%, entirely driven by higher volumes. This development reflects the continued positive growth momentum throughout 2014 versus a slow start in Q1 2014. Premixes showed strong growth and Tortuga continued to develop well and delivered a strong quarter.

Vitamin E prices were significantly lower compared to Q1 2014. This negative price effect of more than €20 million was compensated by higher prices for other ingredients. However, as a substantial part of these other ingredients are in-sourced for DSM’s premix activities and as such these increased prices only have a limited EBITDA effect.

Human Nutrition & Health net sales increased by 7% to €452 million versus €422 million in Q1 2014. Volumes declined 6% and prices were flat while currencies had a positive effect of 13%. However, compared to Q4 2014, Q1 showed a positive organic sales growth of 7%, breaking the trend of successive sales declines over the last three quarters of 2014.

The weakness in volumes was broadly across expected product categories, in particular low sales in fish oil based Omega 3 dietary supplements in the US. DSM is addressing organic growth in human nutrition with intensified marketing and sales activities and organizational changes.

Food & Beverage markets in developed economies as well as retail sales of vitamin-based dietary supplements in the US showed early signs of improvement. Volume growth in infant nutrition has normalized since Q4 2014, albeit at lower than historic growth rates. I-Health enjoyed strong sales growth.

DSM Food Specialties delivered a solid performance in Q1, with good organic growth in enzymes and cultures. Issues around manufacturing performance in savory ingredients and cultures reported in Q4 2014 have been resolved.

Performance Materials

in € million Q1 2015 Q1 2014 YoY
Net sales of which: 632 589 7%
- volume growth     3%
- price/mix effect     -4%
- fx impact     8%
- other     0%
EBITDA 86 71 21%
EBITDA margin 13.6% 12.1%  
53 43 23%
Capital employed 1,930 1,744*  

* year-end 2014

Organic sales development in Q1 amounted to -1% compared to Q1 2014 as a result of 3% volume growth and 4% lower prices reflecting lower raw materials costs. Sales benefited from positive currency effects of 8%.

DSM Engineering Plastics showed good volume growth. Sales were further supported by a substantial FX effect, which more than compensated for lower prices in the polyamide 6 value chain.

Business conditions in DSM Dyneema remained favorable, although organic sales in the quarter were flat due to timing of orders.

In DSM Resins and Functional Materials volumes were flat. Higher volumes in coating resins were offset by lower volumes in functional materials. Positive FX effects were partly offset by slightly negative price effect, driven by lower raw materials costs and some mix effects.

EBITDA in Performance Materials for the quarter increased 21% compared to Q1 2014. Higher margins were achieved in all businesses, resulting from positive foreign exchange effects and lower raw material costs. The EBITDA-margin increased significantly to 13.6%, now in line with the 2015 target range of 13-15%.

EBITDA of DSM Engineering Plastics was substantially up compared to previous year as a result of good volume growth in combination with increased margins. DSM Dyneema delivered solid EBITDA growth. EBITDA of DSM Resins & Functional Materials was slightly up; growth in coating resins was offset by lower results in functional materials.

Innovation Center

in € million Q1 2015 Q1 2014 YoY
Net sales 36 34 6%
EBITDA -5 -6  
-12 -14  
Capital employed 572 523*  

* year-end 2014

Net sales in Q1 2015 were 6% higher compared to Q1 2014. DSM Biomedical benefited from a stronger US dollar. Volumes in DSM Biomedical were lower compared to Q1 2014, mainly due to destocking at a major customer. Furthermore, Q1 2014 still included the St. Jude royalty revenues, which ended in April 2014.

EBITDA in Q1 2015 improved versus Q1 2014 supported by positive currency developments, despite the lower royalty income.

Corporate Activities

in € million Q1 2015 Q1 2014 YoY
Net sales 19 22  
EBITDA -28 -29  
-39 -39  

EBITDA in Q1 2015 was in line with the same period in previous year.

Pharma activities and other associates

Total Q1 2015 sales of joint control entities amounted to €128 million on a 100% basis (Q1 2014: €105 million) of which €117 million from DSM Sinochem Pharmaceuticals (Q1 2014: €98 million).

DPx holdings (49% DSM) realized total sales (100%) of €433 million, from November 2014 up to and including January 2015, with a corresponding EBITDA margin of 17%. The net result of DPx was negatively impacted by €24 million exceptional items (before tax) related to restructuring, integration and realizing synergies of the company.

Discontinued Operations

in € million Q1 2015 Q1 2014 YoY
Net sales 506 606  
EBITDA 38 31  
20 11  

Polymer Intermediates and Composite Resins

Net sales amounted to €506 million, positively impacted by currency effects of 7% and EBITDA amounted to €38 million. The activities currently in discontinued operations showed an increase in EBITDA. Polymer Intermediates (higher volumes and margins) and DSM Composite Resins (higher volumes) both contributed to the increase. The Q1 2014 discontinued operations also included DSM Pharmaceutical Products (€102 million sales, €2 million EBITDA) which is now part of the DPx joint venture.

Financial overview

Exceptional items

Total exceptional items in the first quarter amounted to a loss of €163 million before tax (€145 million after tax). This includes €137 million (€130 million after tax) due to the impairment following the announced partnership for Polymer Intermediates and Composite Resins businesses and €26 million restructuring and related expenses.

Net profit

Financial income and expense in Q1 2015 amounted to -€52 million compared to -€19 million in Q1 2014. The main reason for these higher costs were unfavorable hedge results amongst others due to a downward shift in the interest curve of the Swiss franc.

The effective tax rate in Q1 2015 was 18%, in line with the full year 2014.

Net profit, continuing operations before exceptional items in Q1 2015 decreased by €22 million compared to Q1 2014 and stood at €69 million.

Net earnings per ordinary share (continuing operations, before exceptional items) amounted to €0.39 in Q1 2015 compared to €0.52 in Q1 2014.

Cash flow, capital expenditure and financing

Cash provided by operating activities from continuing operations in Q1 2015 was €84 million (Q1 2014: €11 million).

Operating working capital, continuing operations expressed as a percentage of annualized sales amounted to 27.9% compared to 26.3% at year-end 2014. The operating working capital increased by €199 million from €1,903 million at year-end of 2014 to €2,102 million at the end of Q1 2015. This was entirely due to the foreign exchange translation effect. Cash operating working capital from continuing operations remained flat, contrary to usual seasonality.

Cash used for capital expenditure net of customer funding amounted to €135 million in Q1 2015 compared to €146 million in Q1 2014.

Net debt increased by €512 million compared to year-end 2014 and stood at €2,932 million by the end of Q1 2015. The increase was mainly driven by the mark-to-market change in fair value of financial derivatives held.

DSM in motion: driving focused growth

Strategy update

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.

Improvement programs

The steps DSM is taking to address the ongoing challenging external environment, including a focus on operational performance and enhancing profitability, are going to plan. DSM is progressing well with setting up a number of efficiency improvement and cost reduction programs, especially in Nutrition and across all support functions of the company. In addition, in 2015 further focus will be given to improve operating working capital management.

Below are some highlights of DSM’s Q1 2015 achievements.

High Growth Economies: from reaching out to being truly global

DSM finalized the previously announced acquisition of Aland, a Hong Kong-based company producing vitamin C in mainland China. Aland is one of the leading Vitamin C manufacturers in China with a production facility in Jingjiang, Jiangsu Province. In 2014 the company realized net sales of about USD 110 million in vitamin C with around 1,800 employees. The transaction excludes Aland’s consumer health activities.

Innovation: from building the machine to doubling innovation output

DSM opened its Nutrition Innovation Center for Asia Pacific in Singapore. It is an integral part of an expanded DSM Singapore office, alongside similar facilities located in China, Brazil, Switzerland and the United States. By extending its global network of innovation expertise, the new center anchors DSM’s status as the world’s premier nutrition solutions provider while enhancing its ability to address the needs of its regional customers.

Sustainability: from responsibility to business driver

DSM published its 2014 Integrated Annual Report. The report is now based on the G4 guidelines of the Global Reporting Initiative, the fourth generation of sustainability reporting guidelines.

Acquisitions & Partnerships: from portfolio transformation to driving focused growth

DSM and CVC Capital Partners announced a partnership for DSM’s activities in Polymer Intermediates (Caprolactam and Acrylonitrile) and Composite Resins through the formation of a new company, provisionally called NewCo. The new company will be 65% owned by CVC and 35% by DSM, with 1,950 employees. Pro-forma third-party sales of NewCo in 2014 amounted to €2.1 billion with a 2014 EBITDA of €106 million.

In accordance with the applicable accounting standards, DSM’s caprolactam, acrylonitrile and composite resins businesses are classified as assets held for sale in Q1 2015 and an initial book loss after tax of €130 million is recognized as an exceptional item in Q1 2015. Post-closing, expected in Q3 2015, DSM will present the investment in NewCo as an associate, accounted in accordance with the equity method. Re-stated figures have been made available.

DSM finalized the previously announced divestment of Euroresins to Cathay Investments and the sale of DSM Synres to Standard Investment. Both divestments are in line with the strategic actions DSM announced in November 2014.


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.

Assuming current low spot prices in vitamin E persist, the negative price impact on DSM’s 2015 EBITDA will be around €80 million compared to 2014.

The volatility in currencies, including the strengthening of the Swiss franc and the US Dollar against the Euro, will have a mixed effect on DSM’s 2015 results compared to 2014. Based on current exchange rates and the 2015 hedge effects, an overall annual positive impact on 2015 EBITDA is estimated at approximately €45 million, should current rates persist throughout the remainder of the year.

Taking the above into account, DSM aims to deliver an EBITDA in 2015 ahead of 2014, the increase mainly driven by positive foreign exchange effects.

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