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

Financial Results Q1 2016

   

Highlights

  • DSM reports a strong first quarter
  • Group net sales up at €1,913 million, with 2% organic growth
  • Group EBITDA up 19% to €296 million
  • Nutrition: 6% organic sales growth, EBITDA up 15%
  • Materials: EBITDA up 10%, supported by low input costs
  • Group ROCE: improved to 9.8% (Q1 2015: 6.8%) driven by EBIT growth
  • Outlook maintained

Key figures and indicators (continuing operations)

in € million Q1 2016 Q1 2015 % change
volume price/
mix
FX
other
Sales 1,913 1,886 1% 5% -3% -2% 1%
Nutrition 1,250 1,199 4% 7% -1% -4% 2%
Materials 600 632 -5% 1% -6% 0%  
EBITDA 296 248 19%        
Nutrition 225 195 15%        
Materials 95 86 10%        
ROCE (%) 9.8% 6.8%          

CEO statement

Feike Sijbesma, CEO/Chairman of the DSM Managing Board, commented: “We are pleased to report that we delivered a strong first quarter in terms of growth, profitability and returns, with all businesses seeing the effects of our improvement programs.

Both Animal and Human Nutrition delivered above-market volume growth, with Human Nutrition showing a marked improvement, albeit against a relatively weak comparable quarter in 2015. Our efforts resulted in EBITDA growth and an improved margin in Nutrition. Materials remained robust, helped in part by the shift towards higher added-value products in the portfolio. In addition, low input prices continued to support margins during Q1 2016 despite softer volumes in some segments, although we expect this support to diminish somewhat going forward.

While the macro-economic environment remains uncertain, we are confident that we will deliver in line with our medium-term goals. This will be supported by innovation, our growth initiatives and underpinned by our group-wide cost and productivity improvement programs.

Outlook 2016

DSM aims to deliver increased full-year EBITDA and ROCE in line with the targets set out in its Strategy 2018: Driving Profitable Growth.

Key figures and indicators (cont’d)

in € million Q1 2016 Q1 2015 % change
volume price/
mix
FX
other
Sales - Continuing Operations 1,913 1,886 1% 5% -3% -2% 1%
Nutrition 1,250 1,199 4% 7% -1% -4% 2%
Materials 600 632 -5% 1% -6% 0%  
Innovation Center 43 36 19% 19% 0% 0%  
Corporate Activities 20 19          
Discontinued Operations 0 506          
in € million Q1 2016 Q1 2015 % change
YTD Q1 2016 YTD Q1 2015 % change
Sales - Continuing Operations 1,913 1,886 1% 1,913 1,886 1%
Nutrition 1,250 1,199 4% 1,250 1,199 4%
Materials 600 632 -5% 600 632 -5%
Innovation Center 43 36   43 36  
Corporate Activities 20 19   20 19  
Discontinued Operations 0 506   0 506  
EBITDA - Continuing Operations 296 248 19% 296 248 19%
Nutrition 225 195 15% 225 195 15%
Materials 95 86 10% 95 86 10%
Innovation Center 1 -5   1 -5  
Corporate Activities -25 -28   -25 -28  
Discontinued Operations 0 38   0 38  
EBITDA margin - Continuing Operations 15.5% 13.1%   15.5% 13.1%  
EBIT - Continuing Operations 185 131 41% 185 131 41%
Capital Employed - Continuing Operations2 7,456 8,143   7,456 8,143  
Average Capital Employed2 7,505 7,750   7,505 7,750  
ROCE - Continuing Operations (%)1 9.8% 6.8%   9.8% 6.8%  
Profit for the period, before exceptional items - Cont. Ops. 109 69 58% 109 69 58%
Profit for the period, after exceptional items - Total DSM 85 -71   85 -71  
Net EPS before exceptional items - Cont. Ops. 0.60 0.39 54% 0.60 0.39 54%
Net EPS after exceptional items - Total DSM 0.46 -0.42   0.46 -0.42  
Cash Flow - Continuing Operations 137 84   137 84  
Capital Expenditures - Continuing Operations1 99 101   99 101  
Net debt2 2,269 2,3213   2,269 2,3213  

1 Cash, net of customer funding
2 Before reclassification to held for sale
3 Year-end 2015

In this report:
The ‘Performance Materials’ cluster is henceforth referred to as ‘Materials’;
'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 Fibre Intermediates and DSM Composite Resins up to and including 31 July 2015;
‘Total Working Capital’ refers to the total of ‘Operating Working Capital’ and ‘non-Operating Working Capital’
Strategy 2018: Driving Profitable Growth

Review by cluster

Nutrition

in € million Q1 2016 Q1 2015 % change
YTD Q1 2016 YTD Q1 2015 % change
Sales 1,250 1,199 4% 1,250 1,199 4%
EBITDA
225 195 15% 225 195 15%
EBITDA margin (%) 18.0% 16.3%   18.0% 16.3%  
EBIT
161 129 25% 161 129 25%
Capital Employed       5,252 5,509  
Average Capital Employed       5,281 5,234  
ROCE (%)       12.1% 9.9%  
Total Working Capital
      1,399 1,438  
Total Working Capital as % of Sales1       28.0% 30.0%  

1 Annualized last quarter sales

Sales development:

Q1 2016 sales were up 4% compared to Q1 2015. Nutrition delivered 6% organic sales growth driven by strong volume growth in Human Nutrition and continued good volume development in Animal Nutrition. Price/mix was slightly down. Exchange rates had a 4% negative impact on sales, mainly due to the effect of the Brazilian real in Animal Nutrition.

Q1 2016 EBITDA was €225 million, up 15% compared to Q1 2015. EBITDA benefitted from strong organic growth and the effects of the improvement and savings programs. All businesses contributed to this strong improvement in results, especially Human Nutrition, albeit against relatively weak comparable figures in 2015.

Q1 2016 EBITDA margin was 18.0%, markedly up compared to the same period last year (16.3%), reflecting a proportionally higher contribution from Human Nutrition relative to Animal Nutrition, as well as a favorable product mix within Human Nutrition.

Margins in Q1 2016 also improved when compared to Q4 2015, when the margin ―adjusted for the maintenance shutdown as reported in Q4 2015― was slightly above 17%.

Animal Nutrition & Health

Sales development

Q1 2016 sales in Animal Nutrition showed a 4% organic growth, including 5% volume growth, compared to Q1 2015. This was a good result in particular considering the positive year-end effects on the timing of orders reported in Q4 2015.

Business conditions in all major regions remained robust, with the exception of Latin America, where export conditions in Brazil were good but domestic demand was soft.

Overall, prices showed a 1% decline versus the same period last year while currencies had a 7% negative impact on sales owing to the exposure of the business to the Brazilian real.

Human Nutrition & Health

Sales development

Q1 2016 sales in Human Nutrition developed strongly, with 8% organic growth, albeit against a relatively weak comparable quarter in 2015. Prices as well as currency effects in this business were stable compared with Q1 2015. Margins in the quarter were supported by a favorable product mix with a good contribution from higher-margin businesses. As of this quarter, the Aland vitamin C business (renamed DSM Jiangshan) is included in the results of Human Nutrition and reported under ‘Other’. It made a 4% contribution to growth in Q1.

  • Food & beverage performed well overall, despite continued weak market conditions in the US and especially in Latin America.
  • Dietary Supplements showed improved sales of both fish oil- and (multi) vitamin-based supplements, as customers’ branded products performed better even though conditions in North American markets were soft overall. i-Health, DSM’s consumer business, again delivered double-digit sales growth in Q1 2016.
  • Infant Nutrition performed well in a healthy market.

Food Specialties

The Food Specialties businesses delivered 4% organic growth in the first quarter of 2016 driven by food enzymes and hydrocolloids.

Materials

in € million Q1 2016 Q1 2015 % change
YTD Q1 2016 YTD Q1 2015 % change
Sales 600 632 -5% 600 632 -5%
EBITDA
95 86 10% 95 86 10%
EBITDA margin (%) 15.8% 13.6%   15.8% 13.6%  
EBIT
62 53 17% 62 53 17%
Capital Employed       1,755 1,930  
Average Capital Employed       1,739 1,837  
ROCE (%)       14.4% 11.6%  
Total Working Capital
      293 418  
Total Working Capital as % of Sales1       12.2% 16.5%  

1 Annualized last quarter sales

Sales development:

Q1 2016 sales were 5% below Q1 2015. While volumes were slightly up (+1%), prices were down 6% versus prior year on the back of lower input costs. Key markets remained soft in Q1 2016.

  • DSM Engineering Plastics: Volumes were down slightly in Q1 versus the previous year as overall market conditions remained weak. Prices were lower reflecting lower input costs, notably in polyamide 6 polymers.
  • DSM Resins and Functional Materials: Volumes were up slightly compared to Q1 2015, in a continued soft volume environment in key markets. Prices reflected lower input costs.
  • DSM Dyneema showed good organic sales growth in the quarter.

Q1 2016 EBITDA increased by 10% compared with Q1 2015 as result of the efficiency and cost saving programs carried out over recent years, good margin management with support from low input costs and the focus on improving the quality of the portfolio.

Q1 2016 EBITDA margin was 15.8%, up from 13.6% in Q1 2015 supported by the significant effects of lower input costs, although this effect faded somewhat towards the end of the quarter.

Innovation Center

in € million Q1 2016 Q1 2015 % change
YTD Q1 2016 YTD Q1 2015
% change
Sales 43 36 19% 43 36 19%
EBITDA
1 -5   1 -5  
EBIT
-5 -12   -5 -12  
Capital Employed       549 572  

Q1 2016 sales were 19% above Q1 2015, with the increase fully driven by higher volumes. There was good volume development at DSM Biomedical, which saw sales volumes normalize following de-stocking in 2015. DSM Advanced Surfaces also showed a healthy development in volumes.

Q1 2016 EBITDA was slightly positive, demonstrating significant progress when compared with Q1 2015 and previous years. This improvement was driven by higher sales, more focused innovation activities and cost savings.

Corporate Activities

in € million Q1 2016 Q1 2015 YTD Q1 2016
YTD Q1 2015
Sales 20 19 20 19
EBITDA
-25 -28 -25 -28
EBIT
-33 -39 -33 -39

Q1 2016 EBITDA was €3 million better than Q1 2015, supported in part by the effects of the savings implemented in the DSM-wide support functions.

Key Joint Ventures and Associates

in € million, based on 100% Q1 2016 Q1 2015 % change
YTD Q1 2016 YTD Q1 2015
% change
DSM Sinochem Pharmaceuticals
           
Sales 112 117 -4% 112 117 -4%
EBITDA% 16% 13%   16% 13%  
Patheon1
           
Sales 376 377 0% 376 377 0%
EBITDA% 15% 18%   15% 18%  
ChemicaInvest            
Sales 455 n.a. n.a. 455 n.a. n.a.
EBITDA% 4% n.a.   4% n.a.  

1 1) Patheon (formely reported as DPx Holding) respective periods are from 1 November - 31 January

  • DSM Sinochem Pharmaceuticals (50% DSM) EBITDA improved, supported by favorable exchange rates and growth in new products.
  • Patheon (49% DSM) Q1 EBITDA was lower versus prior year due to required, non-recurring quality improvement activities at the Ferentino (Italy) site.
  • ChemicaInvest (35% DSM) EBITDA was low due to caprolactam results.

Discontinued Operations

in € million Q1 2016 Q1 2015 YTD Q1 2016 YTD Q1 2015
Sales 0 506 0 506
EBITDA
0 38 0 38
EBIT
0 20 0 20

Financial Overview

Exceptional Items

Exceptional items in the first quarter amounted to -€25 million (-€19 million after tax) of which -€24 million were related to restructuring costs and -€1 million related to acquisition costs.

Net profit (continuing operations)

in € million Q1 2016
Q1 2015 YTD Q1 2016
YTD Q1 2015
EBIT 185 131 185 131
Financial Income & Expense -37 -52 -37 -52
Income Tax -27 -14 -27 -14
Effective Tax Rate (%)     18.5% 18.0%
Share of profit of associates/  Joint control entities -12 4 -12 4
Non-controlling interest -1 2 -1 2
Net Profit from Cont. Operations (before exceptional items)1 108 71 108 71
Net Earnings per ordinary share
- Cont. Operations, before exceptional items (€)
0.60 0.39 0.60 0.39

1 Net profit of continuing operations attributable to equity holders of Koninklijke DSM N.V.

Financial income and expense amounted to -€37 million in Q1 2016 compared to -€52 million in Q1 2015, whereas Q1 last year was impacted by the negative development in the valuation of derivatives.

Cash Flow, Capital Expenditures and Financing

in € million Q1 2016 Q1 2015 YTD Q1 2016 YTD Q1 2015
Cash from Operating Activities - Continuing Operations 137 84 137 84
Total Working Capital - Continuing Operations     1,394 1,722
Total Working Capital as % of Sales - Continuing Ops.     18.2% 22.8%
Capital Expenditure (cash, net of customer funding)
  - Continuing Operations
99 101 99 101
Net Debt     2,269 2,321

1 Year-end 2015

Total Working Capital amounted to €1,394 million at the end of Q1 2016 compared to €1,722 million at the end of Q1 2015, which represents 18.2% as a percentage of annualized Q1 sales (Q1 2015: 22.8%).

Net debt decreased by €52 million compared to the end of 2015 and stood at €2,269 million. The decrease was mainly due to the cash flow from operations and value changes of derivatives.