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Financial Results: Q2 2015

  • Solid sales performance with a 12% increase to €1,965 million, supported by foreign exchange rates and 3% volume growth
  • EBITDA increase of 6% to €279 million
  • Nutrition delivered good organic growth of 3%, driven by 5% volume growth
  • Performance Materials showed strong EBITDA growth of 25%, benefiting from lower input costs and 2% volume growth
  • Cash from continuing operating activities of €103 million
  • Interim dividend of €0.55
  • 2015 outlook maintained

On 4 August 2015 DSM reported its results for Q2 2015. Sales were €1,965 million, a 12% increase versus Q2 2014, due to 3% higher volumes, 2% lower prices, 10% positive foreign exchange effects and 1% acquisition effects. DSM delivered a 6% higher EBITDA of €279 million compared to €264 million in Q2 2014. In the second quarter operating working capital remained stable versus Q1 2015.

DSM delivered improved results in Q2 driven by overall higher volumes and positive foreign exchange effects as well as margin expansion in Performance Materials. While Nutrition continues to be negatively impacted by lower vitamin E prices, volumes developed well in both animal and human nutrition. In animal nutrition volume growth would have been higher without the impact of a supply interruption of a key raw material due to a fire at the port of Santos (Brazil). Performance Materials had a strong quarter due to higher volumes, cost savings programs implemented over the recent years, positive foreign exchange effects and the temporary effect of significantly improved margins as a result of lower input costs.

Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: “I am pleased to report good progress in Q2 with a solid volume growth in Nutrition and a step-up in Performance Materials. The priority of improving our operational performance is starting to deliver results. With increasingly challenging macro-economic conditions we remain focused on further improving the operational performance of DSM’s businesses while making continued progress in innovation and sustainability. The setting-up of efficiency and cost reduction programs with a particular focus on the Nutrition business and the DSM-wide support functions is progressing well. We will announce the scope of the program for the DSM-wide support functions by the end of this month. More information on the efficiency and cost reduction programs for the Nutrition business will be shared at the Capital Markets Day on 4 November.

We maintain our full year outlook: DSM aims to deliver an EBITDA in 2015 ahead of 2014, the increase mainly driven by positive foreign exchange effects.”

in € million Q2 2015 Q2 2014 +/- volume price/mix exch.
Net sales              
Nutrition 1,247 1,073 16% 5% -2% 11% 2%
Performance Materials 664 615 8% 2% -4% 10%  
Innovation Center 37 38 -3% -14% 0% 11%  
Corporate Activities 17 28          
Total continuing operations 1,965 1,754 12% 3% -2% 10% 1%
Discontinued operations 550 534          
in € million Q2 2015 Q2 2014 +/- H1 2015 H1 2014 +/-
208 222 -6% 403 425 -5%
Performance Materials
106 85 25% 192 156 23%
Innovation center -3 -5   -8 -11  
Corporate Activities -32 -38   -60 -67  
Total continuing operations 279 264 6% 527 503 5%
Discontinued operations 53 29   91 60  
Core net profit (continuing operations) 129 122 6%
217 228 -5%
Net profit before exceptional items, continuing operations 110 108 2% 179 199 -10%
Net profit after exceptional items, total DSM 99 78 27% 29 159 -82%
Core EPS (€/share) 0.74 0.71 4% 1.25 1.32 -5%
Net EPS before exceptional items, continuing operations (€/share) 0.63 0.62 2% 1.02 1.14 -11%
Net EPS after exceptional items, total DSM (€/share) 0.56 0.45 24% 0.14 0.90 -84%
Cash flow from continuing operations 103 124   187 135  
Capital expenditures (cash, net of customer funding) 107 90   208 182  
Net debt       2,863 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 Q2 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 Q2 2015 Q2 2014 YoY H1 2015 H1 2014 YoY
Net sales of which: 1,247 1,073 16% 2,446 2,120 15%
- volume growth     5%     5%
- price/mix effect     -2%     -1%
- fx impact     11%     10%
- other     2%     1%
EBITDA 208 222 -6% 403 425 -5%
EBITDA margin 16.7% 20.7%   16.5% 20.0%  
137 165 -17% 266 308 -14%
Capital employed       5,474 5,034*  

* year-end 2014

Sales in the second quarter increased by 16% compared to Q2 2014. Organic sales growth was 3% as a result of 5% higher volumes and 2% lower price/mix effects. The acquisition of Aland, which was finalized on 31 March 2015, had a 2% positive effect on sales. Currencies had an 11% positive impact versus Q2 2014.

EBITDA for Q2 was €208 million, down €14 million or 6% from Q2 2014. Positive volume developments were more than offset by significantly lower vitamin E prices which had a negative impact of around €30 million in the quarter. Positive effects of certain 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 €571 million in Q2, a 10% increase versus Q2 2014. Organic sales growth in Q2 was 3%, with 4% higher volumes and 1% lower prices. The premix business continued to perform strongly. Reported volume growth in Q2 2015 was impacted by a key raw material supply interruption at Tortuga due to a fire in the port of Santos (Brazil). This led to lost sales of €15 million with €7 million business interruption damages, the latter being covered under DSM’s captive insurance. Excluding this business interruption at Tortuga, organic growth in the quarter would have been 5% for animal nutrition and 4% for the total Nutrition cluster.

As expected, vitamin E prices were significantly lower compared to Q2 2014. The negative price effect on sales was largely compensated by higher prices for other ingredients. However, as a substantial part of these other ingredients are in-sourced for DSM’s premix activities, these increased prices only have a limited benefit at EBITDA level.

Human Nutrition & Health net sales increased by 19% to €479 million in Q2. Volumes were up 5% and prices were down 2% while currencies had a positive effect of 16%.

US dietary supplements showed a mixed picture: I-Health continued to deliver strong growth and (multi) vitamin sales were growing on the back of increased promotional activities by multi-vitamin producers, whereas fish oil-based Omega 3 dietary supplements were still down versus Q2 last year. Fish oil-based Omega 3 sales showed good growth in Europe and Asia. Sales in DSM’s food & beverage segments also showed a mixed picture with Europe and Asia performing well, but with ongoing tough business conditions in North and South America. Infant nutrition returned to normalized growth rates after the destocking in Q2 last year.

DSM Food Specialties showed good volume growth, supported by positive currency developments. In particular the enzymes and cultures businesses performed well with double-digit volume growth and increased market share.

Performance Materials

in € million Q2 2015 Q2 2014 YoY H1 2015 H1 2014 YoY
Net sales of which: 664 615 8% 1,296 1,204 8%
- volume growth     2%     3%
- price/mix effect     -4%     -4%
- fx impact     10%     9%
- other     0%     0%
EBITDA 106 85 25% 192 156 23%
EBITDA margin 16.0% 13.8%   14.8% 13.0%  
74 55 35% 127 98 30%
Capital employed       1,897 1,744*  

* year-end 2014

Sales in Q2 2015 increased by 8% compared to Q2 2014 as a result of 2% volume growth, 4% lower prices (reflecting lower raw materials costs) and 10% positive currency effects.

DSM Engineering Plastics showed good volume growth versus Q2 2014. Sales were supported by a substantial foreign exchange effect. Prices were lower mainly in the polyamide 6 value chain.

DSM Dyneema showed double digit volume growth with somewhat lower prices due to mix effects.

In DSM Resins and Functional Materials volumes were lower versus Q2 2014 with relatively weak demand in coating resins as well as lower volumes in functional materials. Foreign exchange had a positive effect. Pricing was slightly down reflecting lower input costs and severe price competition for DSM AGI in Asia.

EBITDA in Performance Materials for the quarter increased by 25% versus Q2 2014 to €106 million which is a new record for the cluster. On a structural base, volume growth and efficiency & cost savings programs over recent years contributed positively. The increase in EBITDA was, however, also enhanced by positive foreign exchange effects as well as temporarily strong margin improvements due to lower input costs.

EBITDA of DSM Engineering Plastics was substantially up compared to previous year as a result of volume growth in combination with substantially higher margins.

DSM Dyneema delivered solid EBITDA growth on the back of double-digit organic growth and favorable currencies.

EBITDA of DSM Resins & Functional Materials was flat with lower volumes, stable margins and lower costs.

Innovation Center

in € million Q2 2015 Q2 2014 YoY H1 2015 H1 2014 YoY
Net sales 37 38 -3% 73 72 1%
EBITDA -3 -5   -8 -11  
-10 -12   -22 -26  
Capital employed       564 523*  

* year-end 2014

Net sales in Q2 2015 were 3% lower than in Q2 2014. Positive foreign exchange effects could not fully compensate for the lower volumes in DSM Biomedical, which were mainly caused by destocking at a major customer and the absence of St. Jude royalty revenues which were still partly included in Q2 2014.

EBITDA in Q2 2015 improved versus Q2 2014 driven by a stronger focus in the innovation activities, cost savings and positive currency developments.

Corporate Activities

in € million Q2 2015 Q2 2014 H1 2015   H1 2014
Net sales 17 28 36 50
EBITDA -32 -38 -60 -67
-44 -51 -83 -90

EBITDA in Q2 2015 was slightly below the average quarterly run-rate mainly due to timing of certain costs. In Q2 2014 higher captive insurance costs were incurred resulting from last year’s fire at Sisseln. In Q2 2015 the insurance costs of the Tortuga supply interruption amounted to €7 million, largely offset by other insurance related results.

Pharma activities and other associates

Total Q2 2015 sales of joint control entities amounted to €122 million on a 100% basis (Q2 2014: €115 million) of which €112 million from DSM Sinochem Pharmaceuticals (Q2 2014: €108 million). DSM Sinochem Pharmaceuticals further improved results, with an EBITDA margin for the quarter of about 15%.

DPx holdings (49% DSM) realized total sales (100% basis) of €447 million, for the period 1 February - 30 April 2015, with a corresponding EBITDA margin of about 20%. The net income of DPx was negatively impacted by €15 million exceptional items (before tax) related to restructuring, integration and realizing synergies of the company. In Q2 2015, following a successful refinancing of DPx, DSM received a capital distribution of €155 million.

DPx, to be renamed Patheon, has filed a registration statement on Form S-1 with the United States Securities and Exchange Commission relating to the proposed initial public offering of its common stock. The timing of the offering as well as the number of shares to be offered and the price range for the offering have not yet been determined.

Discontinued Operations

in € million Q2 2015 Q2 2014 H1 2015
H1 2014
Net sales 550 534 1,056 1,140
EBITDA 53 29 91 60
53 8 73 19

Polymer Intermediates and Composite Resins

Net sales amounted to €550 million supported by foreign exchange rates. EBITDA amounted to €53 million, an increase of €24 million mainly related to positive exchange rate effects and currently elevated margins as a result of lower input costs.

Financial overview

Exceptional items

Total exceptional items in the second quarter amounted to a loss of €44 million before tax (€31 million after tax). This includes a €20 million impairment of a DSM Dyneema tape production line in the US, primarily used for vehicle protection, and €24 million restructuring and related expenses.

Net profit

Financial income and expense in Q2 2015 amounted to -€35 million compared to -€32 million in Q2 2014 which was mainly due to higher interest expenses as a result of a higher debt.

The effective tax rate in Q2 2015 remained 18%, in line with the full year 2014.

Net profit from continuing operations, before exceptional items in Q2 2015 amounted to €110 million compared to €108 million in Q2 2014.

Net earnings per ordinary share (continuing operations, before exceptional items) amounted to €0.63 in Q2 2015 compared to €0.62 in Q2 2014.

Cash flow, capital expenditure and financing

Cash provided by operating activities from continuing operations in Q2 2015 was €103 million (Q2 2014: €124 million).

Operating working capital (continuing operations) expressed as a percentage of annualized sales amounted to 26.7% compared to 26.3% at year-end 2014. The operating working capital in absolute terms increased by €197 million from €1,903 million at year-end of 2014 to €2,100 million at the end of Q2 2015 which was largely due to the foreign exchange translation effect and some seasonality. In Nutrition, operating working capital as a percentage of annualized sales declined from 34% at year-end 2014 to 33%, in line with DSM’s target to further reduce operating working capital.

Cash used for capital expenditure net of customer funding (continuing operations) amounted to €107 million in Q2 2015 compared to €90 million in Q2 2014.

Net debt decreased by €69 million compared to Q1 2015, reflecting the cash flow contribution and a positive development in mark-to-market value of financial derivatives held, partially offset by interest and dividend payments as well as the buy-back of own shares for management options.

Interim dividend

DSM will pay an interim dividend of €0.55 per ordinary share for 2015. 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 2015. 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 August 2015. The interim dividend will be payable as from 25 August 2015.

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

DSM continues to address the ongoing challenging external environment with a focus on improving operational performance and enhancing profitability. The setting-up of efficiency and cost reduction programs with a particular focus on the Nutrition business and the DSM-wide support functions is progressing well.

DSM will announce the scope of the program for the DSM-wide support functions by the end of this month. More information on the efficiency and cost reduction programs for the Nutrition business will be shared at the Capital Markets Day on 4 November.

Below are some highlights of DSM’s H1 2015 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 H1 2015 compared to 41% in H1 2014. Sales in China amounted to USD 514 million, versus USD 516 million in H1 2014.

In China, DSM and NHU announced the formation of a joint venture company for the market development and manufacturing of high performance plastics PPS compounds.

Innovation: from building the machine to doubling innovation output

Innovation sales in the first half of 2015 – measured as sales from innovative products and applications introduced in the last five years – amounted to 23% of sales compared to 19% in the first half of 2014.

MedDay, a biotechnology company focused on the treatment of nervous system disorders, and DSM announced a partnership and co-investment for the manufacturing and exclusive supply by DSM for MedDay’s lead product MD1003, a pharmaceutical grade D-Biotin, which is currently being tested in a series of Phase III clinical trials to treat progressive multiple sclerosis.

Sustainability: from responsibility to business driver

The share of ECO+ products in DSM’s innovation pipeline is on track to achieve the full year aspiration of 80%. The ECO+ share in the running business in H1 2015 was 49%, well on track towards the 2015 aspiration of 50%.

DSM is progressing well in achieving its aspirations regarding energy efficiency and the reduction of greenhouse-gas emissions. The energy efficiency of DSM's continuing business improved by 17% in the first half year of 2015 compared to the reference year 2008. DSM is on track to reach its aspiration for a 20% energy efficiency improvement in 2020.

DSM’s greenhouse-gas emissions, measured in absolute CO2 equivalents, in the first half year of 2015 were similar to the low (activity) level of 2008. DSM’s aspiration calls for an (absolute) reduction of 25% by 2020, compared to 2008. With the upcoming deconsolidation of Polymer Intermediates and Composite Resins, DSM will achieve this target.

For both, energy efficiency and reduction of greenhouse-gas emissions, DSM will formulate new targets by the end of 2015.

In the Netherlands DSM completed a five-year upgrade of its Engineering Plastics facility in Emmen. The investment, which represents several million euros, includes a capture system that uses waste water from the production plant to reduce emissions to the air of Volatile Organic Compounds (VOCs) to almost zero.

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 2015 this index amounted to 0.46.

Acquisitions & Partnerships: from portfolio transformation to driving focused growth

On 31 July DSM and CVC Capital Partners finalized the partnership for DSM’s activities in Polymer Intermediates (caprolactam and acrylonitrile) and Composite Resins through the formation of a new company 65% owned by CVC and 35% by DSM, with 1,900 employees.

DSM Dyneema finalized the acquisition of Cubic Tech Corporation. This privately owned company, based in Mesa (Arizona, USA), is focused on high-end solutions in applications as diverse as racing yacht sails, equipment and apparel for sportswear, outdoor and future soldier programs as well as emergency medical equipment.


Macro-economic uncertainty has increased, impacting DSM’s end-markets, with continued low growth in Europe, somewhat weaker growth in North America and a prolonged slowdown in key emerging economies.

Assuming current low spot prices in vitamin E persist, the negative price impact on DSM’s 2015 EBITDA is estimated to be €80 to €90 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 €35 million versus the estimated €45 million indicated in Q1 2015, should current rates persist throughout the remainder of the year.

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

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