Press release

DSM reports a very strong 2018, including a robust Q4

Heerlen, NL, 14 Feb 2019 07:00 CET

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Highlights Full Year 20181

  • DSM reports a very strong year, including a robust Q4
  • Underlying business:
    • Strong organic sales growth of 6%
    • Adjusted EBITDA growth of 6%; 10% adjusted for FX
    • ROCE of 13.3%, up 100 bps
  • Total business (including temporary vitamin effect):
    • Adjusted EBITDA up 26%, including €290m temporary vitamin effect
    • Adjusted Net profit of €1,034m, up 46%, with Net profit of €1,079m
    • Cash from Operating Activities €1,391m, up 40%
  • 25% dividend increase from €1.85 to €2.30 per ordinary share2
  • Full year outlook 2019 in line with strategic targets
  • Launch of €1bn share buy-back program, reflecting strong balance sheet and resilient business

Key figures and indicators3

in € million Full Year 2018
Full Year
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 8,852 415 9,267 8,632 6% -4% 2% 5% 7%
Nutrition 5,722 415 6,137 5,579 7% -4% 3% 7% 10%
Materials 2,913   2,913 2,825 5% -2% 3%   3%
Adjusted EBITDA 1,532 290 1,822 1,445     6% 20% 26%
Nutrition 1,117 290 1,407 1,053     6% 28% 34%
Materials 512   512 488     5%   5%
Innovation 8   8 9          
Corporate -105   -105 -105          
EBITDA 1,464 290 1,754 1,348          
Adjusted EBITDA
margin
17.3%   19.7% 16.7%          

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 temporary vitamin effect. See page 8 of the PDF for further details.
2) Subject to AGM approval.
3) Adjusted EBITDA is an Alternative Performance Measure (APM) that reflects continuing operations.

CEO Statement

“This has been again a record year in which we successfully completed Strategy 2016-2018, outperforming our ambitious financial and sustainability targets. We have created a strong platform of solution-led, higher value specialty products in Nutrition, Health & Sustainable Living. This has positioned the company well to drive continued above market organic growth and deliver further improvement in profitability, shareholder return and sustainability as we execute Strategy 2021 Purpose led, Performance driven.

"During the fourth quarter, Nutrition performed well once again, with continued good business conditions, whilst Materials delivered solid results, despite softness in some of its end-markets.

"Reflecting excellent underlying results for the financial year and confidence in our future earnings growth profile, as also reflected in our 2019 outlook, we propose an increase in the 2018 full year dividend of about 25% to €2.30 per share, in line with guidance given at our 2018 Capital Markets Day.

"In addition, having built a resilient portfolio with future upside from our large innovation projects, we are confident about our earnings prospects and cash generation. Based on this and our strong balance sheet we are pleased to announce a €1 billion share buy-back program which also increases capital efficiency while still retaining financial flexibility to deliver on our growth plans.”

Outlook 2019

DSM expects to deliver a full-year 2019 mid-to-high single digit increase in Adjusted EBITDA compared to prior year Underlying Adjusted EBITDA (pre-temporary vitamin effect), together with an improvement in Underlying Adjusted Net Operating Free Cash Flow in line with its Strategy 2021 targets. This outlook excludes the impact of IFRS16 (see page 15 of PDF).

New Share Buy-Back program

DSM intends to repurchase ordinary shares with an aggregate market value of €1 billion starting in Q2 2019, with the intention to reduce its issued capital. This will be in addition to the usual repurchase programs which DSM executes from time to time to cover commitments under share-based compensation plans and the stock dividend.

Q4 Highlights

  • DSM reports a robust Q4
  • Nutrition reports 1% organic growth with Adjusted EBITDA up 3%. Corrected for an estimated temporary vitamin effect in Q4 2017:
    • The organic growth would have been 4% against a strong prior year
    • The Adjusted EBITDA would have been up 7%.
  • Materials reports solid results with flat sales and Adjusted EBITDA despite soft business conditions in some end-markets, against a strong prior year
  • Total reported sales growth of 1% and Adjusted EBITDA growth of 3%
  • Cash from operating activities of €458m, up 21%

Key figures & indicators1,2

in € million Q4 2018 Q4 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 2,208 - 2,208 2,176 1% 0% 1% - 1%
Nutrition 1,444 - 1,444 1,428 1% 0% 1% - 1%
Materials 698   698 693 0% 1% 1%   1%
Adjusted EBITDA 370 - 370 359     3% - 3%
Nutrition 270 - 270 267     1% - 1%
Materials 119   119 119     0%   0%
Innovation 7   7 4          
Corporate -26   -26 -31          
EBITDA 340   340 316          
Adjusted EBITDA
margin
16.8%   16.8% 16.5%          

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 temporary vitamin effect. See page 8 of the PDF for further details.
2) Adjusted EBITDA is an Alternative Performance Measure (APM) that reflects continuing operations.

Temporary vitamin effect

Underlying (business) is defined in this press release as the performance measures sales and Adjusted EBITDA, corrected for DSM’s best estimate of the temporary vitamin effect due to exceptional supply disruptions in the industry in the first nine months, providing estimated additional sales of €415 million and a corresponding Adjusted EBITDA of €290 million.

These supply disruptions started already in November 2017. While we did not quantify an additional benefit in Q4 2017, since then we have estimated a contribution of €40 million to total sales and a corresponding Adjusted EBITDA impact of €15 million. In the explanation of the sales and Adjusted EBITDA growth of total Nutrition and Animal Nutrition, comparisons are made versus the reported Q4 2017 figures, as well as the figures excluding these temporary vitamin effects.

Key figures & indicators1

in € million FY 2018 FY 2017 % change Volume Price/mix FX Other
Sales 9,267 8,632 7% 3% 8% -4% 0%
Nutrition 6,137 5,579 10% 3% 11% -4% 0%
Materials 2,913 2,825 3% 2% 3% -2% 0%
Innovation Center 172 169          
Corporate Activities 45 59          
in € million Q4 2018 Q4 2017 % change Volume Price/mix FX Other
Sales 2,208 2,176 1% 0% 1% 0% 0%
Nutrition 1,444 1,428 1% 1% 0% 0% 0%
Materials 698 693 1% -3% 3% 1% 0%
Innovation Center 54 43          
Corporate Activities 12 12          
in € million FY 2018 FY 2017 % change Q4 2018 Q4 2017 % change
Sales 9,267 8,632 7% 2,208 2,176 1%
Adjusted EBITDA 1,822 1,445 26% 370 359 3%
Nutrition 1,407 1,053 34% 270 267 1%
Materials 512 488 5% 119 119 0%
Innovation Center 8 9   7 4  
Corporate Activities -105 -105   -26 -31  
Discontinued Operations            
Adjusted EBITDA margin 19.7% 16.7%   16.8% 16.5%  
EBITDA 1,754 1,348   340 316  
Adjusted EBIT 1,345 957 41% 245 240 2%
EBIT 1,245 846   196 199  
Capital Employed 8,181 7,766        
Average Capital Employed 8,005 7,776        
ROCE (%)2 16.8% 12.3%        
Effective tax rate3 17.4% 16.8%        
Adjusted net profit4 1,034 706 46% 182 202 -10%
Net profit - Total DSM4 1,079 1,781 -39% 258 178 45%
Adjusted net EPS 5.84 3.92 49% 1.02 1.11 -8%
Net EPS - Total DSM 6.10 10.07   1.46 0.98  
Operating cash flow5 1,391 996 40% 458 377 21%
Capital expenditures6 646 546   201 162  
Net debt 113 742        
Average number of ordinary shares 175.3 174.8   175.6 174.5  
Workforce (headcount end of period) 20,977 21,054        

1) Including temporary vitamin effect
2) ROCE from underlying business for the year 2018 is estimated at 13.3%
3) Over Adjusted taxable result
4) Including result attributed to non-controlling interest
5) Operating Cash flow from Underlying business is estimated at €1,126m
6) Cash, net of customer funding, investment grants and excluding financial leases
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’

The complete version of this press release with accompanying financial statements and the Presentation to Investors are below in PDF format.

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

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