DSM reports Q1 2016 results

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 - Continuing Operations	109	69	58%	109	69	58%
Profit for the period, after exceptional items - Total DSM	85	-71		85	-71
Net EPS before exceptional items - Continuing Operations	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

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	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) 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 2015	YTD Q1 2015
Sales	506	506
EBITDA	38	38
EBIT	20	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 Continuing Operations (before exceptional items)¹	108	71	108	71
Net Earnings per ordinary share - Continuing 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 Operations			18.2%	22.8%
Capital Expenditure (cash, net of customer funding) - Continuing Operations	99	101	99	101
Net Debt			2,269	2,321¹

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.

Press release