Press release
DSM reports results first nine months 2018
Heerlen, NL, 31 Oct 2018 07:00 CET
Highlights YTD 20181
- DSM reports a very good Q3, contributing to a strong first nine months
- Strong organic sales growth in underlying business at 8%
- Underlying Adjusted EBITDA growth at 7%, despite significant negative FX
- ROCE of underlying business at 13.6%, up 130 bps
- Total temporary vitamin price benefit of €290m on Adjusted EBITDA
- Total Adjusted EBITDA up 34%; Net profit €821m
- Cash from Operating Activities €933m up 51%
- Full year outlook unchanged
Key figures and indicators2
| in € million | Jan - Sep 2018 | Jan - Sep 2017 |
% change | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Underlying business2 |
Temporary vitamin effect2 |
Total Group |
Total Group |
Underlying organic growth2 |
FX & ‘other’2 |
Underlying total growth2 |
Temporary vitamin effect2 |
Total Group |
|
| Sales | 6,644 | 415 | 7,059 | 6,456 | 8% | -5% | 3% | 6% | 9% |
| Nutrition | 4,278 | 415 | 4,693 | 4,151 | 9% | -6% | 3% | 10% | 13% |
| Materials | 2,215 | 2,215 | 2,132 | 7% | -3% | 4% | 4% | ||
| Adjusted EBITDA | 1,162 | 290 | 1,452 | 1,086 | 7% | 27% | 34% | ||
| Nutrition | 847 | 290 | 1,137 | 786 | 8% | 37% | 45% | ||
| Materials | 393 | 393 | 369 | 7% | 7% | ||||
| Innovation | 1 | 1 | 5 | ||||||
| Corporate | -79 | -79 | -74 | ||||||
| EBITDA | 1,124 | 290 | 1,414 | 1,032 | |||||
| Adjusted EBITDA margin |
17.5% | 20.6% | 16.8% | ||||||
1) Underlying business is defined in this press release as the performance measures sales and Adjusted EBITDA, corrected for DSM’s best estimate of the vitamin effect, which is expected to be temporary.
2) Adjusted EBITDA is an Alternative Performance Measure (APM) that reflects continuing operations.
CEO statement
Feike Sijbesma, CEO/Chairman DSM Managing Board, commented: “We are delighted to report another very good quarter and are confident that we can achieve our full year outlook. The continued organic sales and Adjusted EBITDA growth rates in the underlying business position us well for a strong year which would once again exceed our Strategy 2018 targets.
While there are currently uncertainties around macro-economic developments, we see continued good business conditions in Nutrition and most of our Materials businesses. The strategic plan that we have successfully delivered over the past few years has resulted in a robust portfolio of solution-led, higher value specialty products in Nutrition, Health & Sustainable Living. We are well placed to move forward with our ambitious 2019-2021 strategy. Above market, innovation-led organic growth, as well as inorganic growth will enable us to deliver upon our 2021 strategic targets.”
Q3 Highlights1
- DSM reports a very good Q3
- Continued good underlying organic sales growth at 5%
- Underlying Adjusted EBITDA growth at 7%, despite the negative FX impact
- Nutrition (underlying business): 7% organic sales growth and 10% Adjusted EBITDA growth
- Materials: 3% organic sales growth and Adjusted EBITDA growth of 3%
- Additional temporary vitamin price benefit of €15m on Adjusted EBITDA
- Total Adjusted EBITDA up 11%
Key figures & indicators2
| in € million | Q3 2018 | Q3 2017 | % change | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Underlying business2 |
Temporary vitamin effect2 |
Total Group |
Total Group |
Underlying organic growth2 |
FX & ‘other’2 |
Underlying total growth2 |
Temporary vitamin effect2 |
Total Group |
|
| Sales | 2,215 | 50 | 2,265 | 2,136 | 5% | -1% | 4% | 2% | 6% |
| Nutrition | 1,438 | 50 | 1,488 | 1,373 | 7% | -2% | 5% | 3% | 8% |
| Materials | 723 | 723 | 706 | 3% | -1% | 2% | 2% | ||
| Adjusted EBITDA | 391 | 15 | 406 | 365 | 7% | 4% | 11% | ||
| Nutrition | 283 | 15 | 298 | 258 | 10% | 6% | 16% | ||
| Materials | 132 | 132 | 128 | 3% | 3% | ||||
| Innovation | 1 | 1 | 4 | ||||||
| Corporate | -25 | -25 | -25 | ||||||
| EBITDA | 370 | 15 | 385 | 343 | |||||
| Adjusted EBITDA margin |
17.7% | 17.9% | 17.1% | ||||||
1) Underlying business is defined in this press release as the performance measures sales and Adjusted EBITDA, corrected for DSM’s best estimate of the vitamin effect, which is expected to be temporary.
2) Adjusted EBITDA is an Alternative Performance Measure (APM) that reflects continuing operations.
Outlook 2018
DSM confirms its full year outlook 2018 and expects an Adjusted EBITDA growth of approximately 25% and a related higher ROCE growth. This is based on:
- a low double-digit Adjusted EBITDA growth in the underlying business at constant currencies,
- a negative foreign exchange effect on Adjusted EBITDA of about €70 million, and
- a total Adjusted EBITDA benefit for the full year estimated at €290 million from a temporary exceptional vitamin pricing environment
Key figures & indicators1
| in € million | Jan - Sep 2018 | Jan - Sep 2017 | % change | Volume | Price /mix | FX | Other |
|---|---|---|---|---|---|---|---|
| Sales | 7,059 | 6,456 | 9% | 3% | 11% | -5% | 0% |
| Nutrition | 4,693 | 4,151 | 13% | 4% | 15% | -7% | 1% |
| Materials | 2,215 | 2,132 | 4% | 3% | 4% | -3% | 0% |
| Innovation Center | 118 | 126 | |||||
| Corporate Activities | 33 | 47 |
| in € million | Q3 2018 | Q3 2017 | % change | Volume | Price /mix | FX | Other |
|---|---|---|---|---|---|---|---|
| Sales | 2,265 | 2,136 | 6% | 0% | 7% | -1% | 0% |
| Nutrition | 1,488 | 1,373 | 8% | 1% | 9% | -2% | 0% |
| Materials | 723 | 706 | 2% | -2% | 5% | -1% | 0% |
| Innovation Center | 43 | 42 | |||||
| Corporate Activities | 11 | 15 |
| in € million | Jan - Sep 2018 | Jan - Sep 2017 | % change | Q3 2018 | Q3 2017 | % change |
|---|---|---|---|---|---|---|
| Sales | 7,059 | 6,456 | 9% | 2,265 | 2,136 | 6% |
| Adjusted EBITDA | 1,452 | 1,086 | 34% | 406 | 365 | 11% |
| Nutrition | 1,137 | 786 | 45% | 298 | 258 | 16% |
| Materials | 393 | 369 | 7% | 132 | 128 | 3% |
| Innovation Center | 1 | 5 | 1 | 4 | ||
| Corporate Activities | -79 | -74 | -25 | -25 | ||
| Adjusted EBITDA margin | 20.6% | 16.8% | 17.9% | 17.1% | ||
| EBITDA | 1,414 | 1,032 | 385 | 343 | ||
| Adjusted EBIT | 1,100 | 717 | 53% | 283 | 239 | 18% |
| EBIT | 1,049 | 647 | 249 | 206 | ||
| Capital Employed | 8,221 | 7,620 | ||||
| Average Capital Employed | 7,960 | 7,779 | ||||
| ROCE (%)2 | 18.4% | 12.3% | ||||
| Effective tax rate3 | 18.0% | 18.0% | ||||
| Adjusted net profit4 | 852 | 504 | 69% | 209 | 166 | 26% |
| Net profit - Total DSM4 | 821 | 1,603 | -49% | 188 | 1,291 | -85% |
| Adjusted net EPS | 4.82 | 2.81 | 71% | 1.18 | 0.91 | 30% |
| Net EPS - Total DSM | 4.64 | 9.09 | 1.06 | 7.34 | ||
| Operating Cash Flow | 933 | 619 | 51% | 430 | 290 | 48% |
| Capital Expenditures5 | 445 | 384 | 150 | 134 | ||
| Net debt | 680 | 703 | ||||
| Average number of ordinary shares | 175.2 | 174.9 | 175.7 | 174.7 | ||
| Workforce (headcount end of period) |
20,928 | 21,0546 |
1) Including temporary vitamin effect
2) ROCE from underlying business H1 2018 is estimated at 13.8%
3) Over Adjusted taxable result
4) Including result attributed to non-controlling interest
5) Cash, net of customer funding, investment grants and excluding financial leases
6 )Year-end 2017
In this report:
‘Organic sales growth’ is the total impact of volume and price/mix;
‘Total Working Capital’ refers to the total of ‘Operating Working Capital’ and ‘non-Operating Working Capital’
Nutrition
Underlying business1
| in € million | Jan - Sep 2018 | Jan - Sep 2017 | % change | Q3 2018 | Q3 2017 | % change |
|---|---|---|---|---|---|---|
| Sales | 4,278 | 4,151 | 3% | 1,438 | 1,373 | 5% |
| Adjusted EBITDA | 847 | 786 | 8% | 283 | 258 | 10% |
| Adjusted EBITDA margin (%) | 19.8% | 18.9% | 19.7% | 18.8% | ||
| ROCE (%) | 15.1% | 14.1% |
Temporary vitamin effect
| in € million (estimated) | Jan - Sep 2018 | Q3 2018 |
|---|---|---|
| Sales | 415 | 50 |
| Adjusted EBITDA | 290 | 15 |
Total cluster
| in € million | Jan - Sep 2018 | Jan - Sep 2017 | % change | Q3 2018 | Q3 2017 | % change |
|---|---|---|---|---|---|---|
| Sales | 4,693 | 4,151 | 13% | 1,488 | 1,373 | 8% |
| Adjusted EBITDA | 1,137 | 786 | 45% | 298 | 258 | 16% |
| Adjusted EBITDA margin (%) | 24.2% | 18.9% | 20.0% | 18.8% | ||
| Adjusted EBIT | 918 | 575 | 60% | 220 | 192 | 15% |
| Capital Employed | 5,671 | 5,292 | ||||
| Average Capital Employed | 5,546 | 5,454 | ||||
| ROCE (%) | 22.1% | 14.1% | ||||
| Total Working Capital | 1,567 | 1,472 | ||||
| Average Total Working Capital as % of Sales | 24.9% | 27.3% |
Sales development (underlying business)
Nine months 2018 organic sales
Nutrition realized 9% organic sales growth in the underlying business, with strong volumes, up 5%, as well as 4% price growth, supported by good conditions across most regions and market segments. Customers are attracted by the strength of DSM’s solutions-based offerings, helping to drive above-market growth.
Q3 2018 organic sales
Nutrition delivered another very good quarter with 7% organic sales growth in the underlying business. Volumes were up 3%, achieved despite a challenging comparable prior year period in Animal Nutrition. Prices were 4% higher, in part reflecting price initiatives to offset higher input costs and negative foreign exchange effects, similar to the first half of 2018.
Nine months 2018 Adjusted EBITDA
Adjusted EBITDA growth in the underlying business was 8%. This was driven by strong volume growth, pricing strength, and contributions from the savings and efficiency improvement programs, partly offset by significant negative foreign exchange effects. The Adjusted EBITDA margin was 19.8%, up 90 bps when compared to the same period in 2017.
Q3 2018 Adjusted EBITDA
Q3 saw another period of strong Adjusted EBITDA growth of 10% in the underlying business, slightly above the level of the first half of the year, including lower negative foreign exchange rate effects. The Adjusted EBITDA margin was 19.7%, a step-up of 90 bps versus Q3 2017.
Temporary vitamin effect
In addition, due to the exceptional supply disruptions in the industry, the first nine months further benefitted from €290 million additional Adjusted EBITDA contribution from an exceptional temporary vitamin price environment. Although prices had started to normalize by the end of H1, there was a small, residual positive effect in the third quarter of €15 million. This temporary vitamin price effect was mainly related to animal nutrition.
Safety incident
On 19 September 2018, a tragic accident took place at DSM’s site in Pecém, Brazil (Tortuga), where a subcontractor lost his life. This has shocked all at DSM, and stresses once again that Health and Safety always has to remain our top priority to continuously improve our safety performance every day
Animal Nutrition & Health (underlying business)
Sales development
Nine months 2018 organic sales
Animal Nutrition delivered a strong year to date performance, with 6% volume growth in the underlying business. This was achieved against a tough prior year comparable period (8% volume growth in the first nine months of 2017).
Prices in the underlying business increased by 6% driven by pricing initiatives to mitigate higher input costs and the impact of negative exchange rate developments. Furthermore, prices were supported by the effects of the ‘Blue Skies policies’ in China.
Q3 2018 organic sales
Q3 saw continued good business conditions across regions, with especially strong sales in Asia. In China there was a minor impact from the outbreak of African swine flu, but these effects were largely compensated by increased demand for poultry, which highlights the benefit of DSM’s diversified presence over species and geographies.
For Q3 DSM reported 2% volume growth against a tough comparison (14% in Q3 2017). This 2% included the residual effect from the Brazilian truckers’ strike in Q2 and the temporary shut-down of DSM-Tortuga’s Pecém operations following the fatal accident. Therefore, a normalized volume growth would have been about 4% in the quarter.
Prices rose by 5%, in line with both Q1 and Q2.
Human Nutrition & Health (underlying business)
Sales development
Nine months 2018 organic sales
Human Nutrition is well on track to deliver a strong year. All regions and segments continued to perform well with an especially strong growth in premix solutions and i-Health, resulting in an overall 4% volume growth year to date.
Prices were up by 3% driven by a combination of a favorable mix due to strong growth in premix and i-Health, as well as benefits from higher prices for premix and advanced formulations, supported by the effects of the ‘Blue Skies policies’ in China.
Q3 2018 organic sales
Volumes grew with 3%, with good sales in Europe and North America, while Latin America and Asia were particularly strong. Segment-wise, Dietary Supplements and Pharma performed strong, while Early Life Nutrition maintained its good performance across all regions. Food & Beverages showed slightly softer sales in developed markets, maintaining good momentum in this segment where DSM can realize well above market growth through its pre-mix solutions.
Prices were up with 2%, in line with H1.
Other Nutrition activities
DSM’s other activities in Nutrition delivered an overall strong performance in the first nine months, as well as in Q3, with a mid-single digit organic sales growth.
Materials
| in € million | Jan - Sep 2018 | Jan - Sep 2017 | % change | Q3 2018 | Q3 2017 | % change |
|---|---|---|---|---|---|---|
| Sales | 2,215 | 2,132 | 4% | 723 | 706 | 2% |
| Adjusted EBITDA | 393 | 369 | 7% | 132 | 128 | 3% |
| Adjusted EBITDA margin (%) | 17.7% | 17.3% | 18.3% | 18.1% | ||
| Adjusted EBIT | 298 | 275 | 8% | 99 | 98 | 1% |
| Capital Employed | 1,890 | 1,811 | ||||
| Average Capital Employed | 1,850 | 1,814 | ||||
| ROCE (%) | 21.5% | 20.2% | ||||
| Total Working Capital | 415 | 368 | ||||
| Average Total Working Capital as % of Sales | 13.2% | 12.3% |
Sales development
Nine months 2018 organic sales
DSM Engineering Plastics delivered a very strong sales performance in the first nine months of the year across all regions. Towards the end of Q3 automotive demand in China softened and automotive sales in Europe were temporary impacted by the implementation of the new WLTP-test requirements. Business conditions in all other segments continued to be good.
DSM Resins & Functional Materials: Coating resins in North America and Asia continued to show good performance year to date while there was a gradual slow-down in the European building and construction markets. Functional Materials are well on track to deliver a very good year, reflecting strong demand for these high margin materials for IT infrastructure.
DSM Dyneema had a very strong performance throughout the first nine months of 2018 driven by high demand in personal protection.
Overall for the first nine months, Materials reported an organic sales growth of 7% with 3% higher volumes. Prices were 4% higher, mainly reflecting commercial pricing initiatives to offset higher raw material costs.
Q3 2018 organic sales
Materials reported a 3% organic sales growth in Q3. Volumes were down 2%, driven by lower sales in Coating Resins. This reported -2% volume growth was against a tough comparison with last year when DSM reported 9% volume growth. The 5% price growth largely reflected initiatives to offset higher input costs.
Nine months 2018 Adjusted EBITDA was up 7%, driven by good volume growth and DSM’s continuing shift towards a specialty portfolio, despite a negative foreign exchange effect. The Adjusted EBITDA margin was 17.7%, versus 17.3% in the same period last year.
Q3 2018 Adjusted EBITDA was up 3% with an Adjusted EBITDA margin of 18.3%, versus 18.1% in Q3 2017.
Innovation center
| in € million | Jan - Sep 2018 | Jan - Sep 2017 | % change | Q3 2018 | Q3 2017 | % change |
|---|---|---|---|---|---|---|
| Sales | 118 | 126 | -6% | 43 | 42 | 2% |
| Adjusted EBITDA | 1 | 5 | 1 | 4 | ||
| Adjusted EBIT | -16 | -29 | -4 | -17 | ||
| Capital Employed | 587 | 552 |
First nine months 2018 sales were lower predominantly due to negative foreign exchange effects. The Emerging Business Areas started the year with slightly lower organic sales growth in H1. DSM Biomedical was impacted by timing of orders and DSM Advanced Solar saw a slowdown of sales following a policy change by the Chinese government to reduce the number of subsidized solar parks to be installed. Sales in DSM Biomedical picked up in Q3, resulting in an overall almost flat organic sales growth over the first nine months of the year.
Adjusted EBITDA in the first nine months of 2018 as well as Q3 2018 had a tough comparison with the same periods last year which included a one-time positive amount related to the release of a liability following the decision to stop a development project. The Adjusted EBIT included an impairment loss on the related assets in Q3 2017. Excluding this one-time effect, the Adjusted EBITDA from the operational activities of the Emerging Business Areas in the first nine months of this year were only slightly lower than same period last year.
Corporate Activities
| in € million | Jan - Sep 2018 | Jan - Sep 2017 | Q3 2018 | Q3 2017 |
|---|---|---|---|---|
| Sales | 33 | 47 | 11 | 15 |
| Adjusted EBITDA | -79 | -74 | -25 | -25 |
| Adjusted EBIT | -100 | -104 | -32 | -34 |
Nine months 2018 Adjusted EBITDA was slightly below the first nine months of 2017, mainly due to higher insurance claims at DSM’s captive insurance company in the first half of the year.
Condensed Cash Flow Statement and (Operating) Working Capital
| in € million | Jan - Sep 2018 | Jan - Sep 2017 | Q3 2018 | Q3 2017 |
|---|---|---|---|---|
| Cash provided by Operating Activities | 933 | 619 | 430 | 290 |
| Operating Working Capital | 2,341 | 2,023 | ||
| Average Operating Working Capital as % of Sales | 23.8% | 23.7% | ||
| Total Working Capital | 1,853 | 1,635 | ||
| Total Working Capital as % of Sales | 18.5% | 18.6% |
Cash flow from operating activities amounted to €933 million in the first nine months of 2018 showing an increase of €314 million (+51%) compared to the first nine months of 2017.
Total Working Capital amounted to €1,853 million at the end of Q3 2018 compared to €1,635 million at the end of Q3 2017. Average Total Working capital as a percentage of sales amounted to 18.5%. The increase in Operating Working Capital was due inventory build-up in view of the scheduled maintenance stops in Q4 2018 as well as higher receivables as a result of higher sales levels in Nutrition.
Overview of Alternative Performance Measures (APM) adjustments to EBIT(DA)
The following overview gives a summary of the APM adjustments for the period January - September 2018 (for reconciliation see page 11 of PDF version).
Nutrition: EBITDA adjustments amounted to -€6 million of which -€14 million costs related to the profit improvement programs, -€3 million to acquisition related costs and +€11 million profit followed the deconsolidation of Yantai Andre Pectin and the subsequent revaluation of the equity interest to fair value. EBIT adjustments amounted to -€21 million including a -€15 million asset impairment.
Materials: EBITDA adjustments amounted to -€17 million of which -€18 million related to restructuring programs and +€1 million due to the release of a provision. EBIT adjustments amounted to -€15 million including +€2 million reversal of an asset impairment.
Innovation: EBITDA adjustments amounted to -€1 million (EBIT -€1 million) all related to restructuring programs.
Corporate Activities: EBITDA adjustments amounted to -€14 million (EBIT -€14 million) of which -€18 million related to restructuring programs and +€4 million to a received earn-out from a previous divestment.
For more information
Lieke de Jong-Tops
Senior Communications Manager
+31 45 578 2420
media.contacts@dsm.com
Dave Huizing
Vice President Investor Relations
+31 45 578 2864
investor.relations@dsm.com
Lieke de Jong-Tops
Senior Communications Manager
+31 45 578 2420
Dave Huizing
Vice-President Investor Relations
+31 45 578 2864