Press release
DSM reports Q1 2019 results
Heerlen, NL, 07 May 2019 07:00 CEST
Highlights1,2,3
- DSM reports a good start to the year
- Results compared to Underlying business in Q1 2018:
- Group sales up 3%, Adjusted EBITDA up 10% to €412m (up 14% to €424m including IFRS 16 impact of €12m)
- Nutrition: organic sales +3%, Adjusted EBITDA up 11% to €309m (up 14% to €316m including IFRS 16 impact of €7m)
- Materials: organic sales -5%, Adjusted EBITDA flat on €126m (up 1% to €127m including IFRS 16 impact of €1m)
- Adjusted Net Operating Free Cash Flow €60m
- Total Net profit €196m, up versus Q1 2018 of €331m when correcting for the temporary vitamin effect of €165m EBITDA following an exceptional supply disruption in the industry
- Full year outlook increased
Key figures and indicators
| in € million | Q1 2019 | Q1 2018 | % change | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Underlying business1 |
Temporary vitamin effect |
Total Group |
Underlying Organic growth1 |
FX & ‘other’1 |
Underlying total growth1 |
Temporary vitamin effect |
Total Group |
||
| Sales | 2,292 | 2,215 | 220 | 2,435 | 1% | 2% | 3% | -9% | -6% |
| Nutrition | 1,517 | 1,430 | 220 | 1,650 | 3% | 3% | 6% | -14% | -8% |
| Materials | 717 | 738 | 738 | -5% | 2% | -3% | -3% | ||
| Adjusted EBITDA | 424 | 373 | 165 | 538 | 14% | -35% | -21% | ||
| Nutrition | 316 | 277 | 165 | 442 | 14% | -43% | -29% | ||
| Materials | 127 | 126 | 126 | 1% | 1% | ||||
| Innovation | 6 | -1 | -1 | ||||||
| Corporate | -25 | -29 | -29 | ||||||
| EBITDA | 416 | 361 | 165 | 526 | |||||
| Adjusted EBITDA margin | 18.5% | 16.8% | 22.1% | ||||||
1) Underlying (business) in 2018 is defined as the performance measures sales and Adjusted EBITDA, corrected for DSM’s best estimate of the temporary vitamin effect.
2) Adjusted EBITDA is an Alternative Performance Measure (APM) that reflects continuing operations.
3) IFRS 16 is only effective as per 1 January 2019, the 2018 figures have not been adjusted.
CEO statement
Feike Sijbesma, CEO/Chairman DSM Managing Board, commented: “I am pleased to report a good start to the year, with continued positive momentum, led by our Nutrition business, while Materials continues to demonstrate its resilience. Last year we benefitted from an exceptional growth and profit contribution in Nutrition following a supply disruption in the vitamin industry. When comparing our results excluding this special event, we realized strong, double digit Adjusted EBITDA growth in the first quarter against a very strong comparable period in the Underlying business.
With our business performance progressing in-line with our plans, we remain confident in our positive outlook for 2019. We are well positioned to deliver on our ambitious Strategy 2021 targets, which aim to deliver above market growth and strong financial performance, driven by our commitment to be a purpose led, performance driven science-based company in Nutrition, Health and Sustainable Living.”
Outlook 2019
DSM increases its full year outlook 2019 and now expects to deliver a full year 2019 high single digit increase in Adjusted EBITDA compared to prior year Underlying Adjusted EBITDA (pre-temporary vitamin effect), together with an improvement in Adjusted Net Operating Free Cash Flow in line with its Strategy 2021 targets. This outlook excludes the impact of IFRS16 (see page 18 of PDF).
Share Buy-Back program started
As per 1 April, DSM commenced its ordinary share repurchase program of an aggregate market value of €1 billion as announced on 14 February 2019, with the intention to reduce its issued capital. This program is 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.
Key figures and indicators (comparison with Q1 2018 excluding temporary vitamin effect)
| in € million | YTD Q1 2019 | YTD Q1 2018 | % change | Volume | Price/mix | FX | Other |
|---|---|---|---|---|---|---|---|
| Sales | 2,292 | 2,215 | 3% | 1% | 0% | 2% | 0% |
| Nutrition | 1,517 | 1,430 | 6% | 3% | 0% | 2% | 1% |
| Materials | 717 | 738 | -3% | -6% | 1% | 2% | 0% |
| Innovation Center | 47 | 36 | |||||
| Corporate Activities | 11 | 11 |
Q1 2019 excluding IFRS 16 impact
| in € million | YTD Q1 2019 | YTD Q1 2018 | % change | Q1 2019 | Q1 2018 | % change |
|---|---|---|---|---|---|---|
| Sales | 2,292 | 2,215 | 3% | 2,292 | 2,215 | 3% |
| Adjusted EBITDA | 412 | 373 | 10% | 412 | 373 | 10% |
| Nutrition | 309 | 277 | 11% | 309 | 277 | 11% |
| Materials | 126 | 126 | 0% | 126 | 126 | 0% |
| Innovation Center | 5 | -1 | 5 | -1 | ||
| Corporate Activities | -28 | -29 | -28 | -29 | ||
| Adjusted EBITDA margin | 18.0% | 16.8% | 18.0% | 16.8% | ||
| ROCE % | 13.2% | 13.3% |
Q1 2019 including IFRS 16 impact
| in € million | YTD Q1 2019 | YTD Q1 2018 | % change | Q1 2019 | Q1 2018 | % change |
|---|---|---|---|---|---|---|
| Adjusted EBITDA | 424 | 373 | 14% | 424 | 373 | 14% |
| Nutrition | 316 | 277 | 14% | 316 | 277 | 14% |
| Materials | 127 | 126 | 1% | 127 | 126 | 1% |
| Innovation Center | 6 | -1 | 6 | -1 | ||
| Corporate Activities | -25 | -29 | -25 | -29 | ||
| Adjusted EBITDA margin | 18.5% | 16.8% | 18.5% | 16.8% | ||
| ROCE % | 12.9% | 13.3% |
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’;
‘Adjusted Net Operating Free Cash Flow’ is the cash flow from operating activities, corrected for the cash flow of the APM adjustments, minus the cash flow of capital expenditures and drawing rights.
Key figures and indicators (comparison with Q1 2018 including temporary vitamin effect)
| in € million | YTD Q1 2019 | YTD Q1 2018 | % change | Volume | Price/mix | FX | Other |
|---|---|---|---|---|---|---|---|
| Sales | 2,292 | 2,435 | -6% | 0% | -8% | 2% | 0% |
| Nutrition | 1,517 | 1,650 | -8% | 2% | -13% | 2% | 1% |
| Materials | 717 | 738 | -3% | -6% | 1% | 2% | 0% |
| Innovation Center | 47 | 36 | |||||
| Corporate Activities | 11 | 11 |
| in € million | YTD Q1 2019 | YTD Q1 2018 | % change | Q1 2019 | Q1 2018 | % change |
|---|---|---|---|---|---|---|
| Sales | 2,292 | 2,435 | -6% | 2,292 | 2,435 | -6% |
| Adjusted EBITDA | 424 | 538 | -21% | 424 | 538 | -21% |
| Nutrition | 316 | 442 | -29% | 316 | 442 | -29% |
| Materials | 127 | 126 | 1% | 127 | 126 | 1% |
| Innovation Center | 6 | -1 | 6 | -1 | ||
| Corporate Activities | -25 | -29 | -25 | -29 | ||
| Adjusted EBITDA margin | 18.5% | 22.1% | 18.5% | 22.1% | ||
| EBITDA | 416 | 526 | 416 | 526 | ||
| Adjusted EBIT | 279 | 423 | -34% | 279 | 423 | -34% |
| EBIT | 271 | 411 | 271 | 411 | ||
| Capital Employed | 8,907 | 7,741 | ||||
| Average Capital Employed | 8,652 | 7,753 | ||||
| ROCE (%) | 12.9% | 21.8% | ||||
| Effective tax rate1 | 18.0% | 18.0% | ||||
| Adjusted net profit2 | 200 | 337 | -41% | 200 | 337 | -41% |
| Net profit - Total DSM2 | 196 | 331 | -41% | 196 | 331 | -41% |
| Adjusted net EPS | 1.12 | 1.91 | -41% | 1.12 | 1.91 | -0.41 |
| Net EPS - Total DSM | 1.1 | 1.88 | 1.1 | 1.88 | ||
| Operating Cash Flow | 201 | 310 | -35% | 201 | 310 | -35% |
| Adjusted Net Operating Free Cash Flow | 60 | 154 | -61% | 60 | 154 | -61% |
| Capital Expenditures3 | 148 | 170 | 148 | 170 | ||
| Net debt4 | 414 | 579 | ||||
| Average number of ordinary shares | 176.1 | 174.8 | 176 | 174.8 | ||
| Workforce (headcount end of period) | 21,438 | 20,9775 |
1) Over Adjusted taxable result
2) Including result attributed to non-controlling interest
3) Cash, net of customer funding, investment grants and excluding leases
4) Net debt end of Q1 2019 includes €206 million following the adoption of IFRS 16 on ‘Leases’
5) Year-end 2018
Nutrition
Underlying business
Underlying business in 2018 is defined as the sales and Adjusted EBITDA, corrected for the temporary vitamin effect due to exceptional supply disruptions in the industry in the first nine months of 2018, with additional sales of €220 million and a corresponding Adjusted EBITDA of €165 million in Q1 2018, as estimated and reported last year.
| in € million (estimated) | YTD Q1 2019 | YTD Q1 2018 | Q1 2019 | Q1 2018 | ||
|---|---|---|---|---|---|---|
| Sales | 1,517 | 1,430 | 6% | 1,517 | 1,430 | 6% |
| Adjusted EBITDA1 | 316 | 277 | 14% | 316 | 277 | 14% |
| Adjusted EBITDA margin1 | 20.8% | 19.4% | 20.8% | 19.4% | ||
| ROCE % | 15.1% | 15.3% | 15.1% | 15.3% |
Temporary vitamin effect
| in € million (estimated) | YTD temporary vitamin effect Q1 2018 | Temporary vitamin effect Q1 2018 |
|---|---|---|
| Sales | 220 | 220 |
| Adjusted EBITDA | 165 | 165 |
Total cluster
| in € million | YTD Q1 2019 | YTD Q1 2018 | % change | Q1 2019 | Q1 2018 | % change |
|---|---|---|---|---|---|---|
| Sales | 1,517 | 1,650 | -8% | 1,517 | 1,650 | -8% |
| Adjusted EBITDA1 | 316 | 442 | -29% | 316 | 442 | -29% |
| Adjusted EBITDA margin (%)1 | 20.8% | 26.8% | 20.8% | 26.8% | ||
| Adjusted EBIT | 228 | 370 | -38% | 228 | 370 | -38% |
| Capital Employed | 6,286 | 5,406 | ||||
| Average Capital Employed | 6,035 | 5,413 | ||||
| ROCE (%) | 15.1% | 27.4% | ||||
| Total Working Capital | 1,650 | 1,434 | ||||
| Average Total Working Capital as % of Sales | 26.3% | 22.8% |
1) Including IFRS 16 impact of €7 million in Q1 2019
Sales development
All comparisons in this section are versus the Underlying business in Q1 2018.
Q1 2019 sales
Nutrition reported 3% organic growth, against a tough comparison of 12% organic growth in Q1 2018 (excluding the one-time vitamin effect). Total sales were 6% higher compared to Q1 2018. Currencies, especially the US dollar had a 2% positive effect on sales. The consolidation of Andre Pectin contributed 1% sales growth (€12 million).
Q1 2019 Adjusted EBITDA
Nutrition reported 14% growth in Adjusted EBITDA. This increase includes €4 million contribution from the consolidation of Andre Pectin and €7 million from IFRS 16. Excluding these two items, Adjusted EBITDA growth was 10%.
Q1 2019 Adjusted EBITDA margin was 20.8% (excluding IFRS 16: 20.4%) compared to 19.4% in Q1 2018. The margin growth in Q1 2019 was driven by a positive business mix and some support from one-off lower costs and foreign exchange effects.
Animal Nutrition & Health
Q1 2019 organic sales
The first quarter saw continued good business conditions across all regions except for China where the African swine fever intensified. The effect was partly compensated by higher poultry production in the region and increased pork production in other regions, demonstrating DSM’s integrated and diversified business model.
Animal Nutrition reported -2% organic sales with stable volumes and price/mix slightly down 2%. This is a solid performance when compared with the 18% organic growth in Q1 2018. Overall, sales were 1% lower as currencies had a 1% positive impact resulting from a stronger US-dollar, partly offset by a weaker Brazilian real.
Human Nutrition & Health
Q1 2019 organic sales
Overall business conditions were good across regions and segments. i-Health, pharma and early life nutrition performed strongly. Food and beverage showed strong premix sales to regional and smaller customers. Dietary supplements delivered a solid performance.
Q1 saw organic growth of 5%, a good result especially when compared with a strong comparable period last year with 8% organic growth. Total sales were up 11% as sales growth was supported by a 6% foreign exchange effect largely US-dollar related.
Other Nutrition activities
DSM’s other Nutrition activities which include Food Specialties, Personal Care, Aroma Ingredients and Hydrocolloids, delivered a strong performance with 12% organic sales growth.
Andre Pectin was re-consolidated in Q1 2019 after DSM acquired an additional 46% of the shares in the company, bringing DSM’s total shareholding in Andre Pectin to 75%. Andre Pectin realized €12 million sales with an EBITDA of €4 million in Q1.
Materials
| in € million | YTD Q1 2019 | YTD Q1 2018 | % change | Q1 2019 | Q1 2018 | % change |
|---|---|---|---|---|---|---|
| Sales | 717 | 738 | -3% | 717 | 738 | -3% |
| Adjusted EBITDA1 | 127 | 126 | 1% | 127 | 126 | 1% |
| Adjusted EBITDA margin (%)1 | 17.7% | 17.1% | 17.7% | 17.1% | ||
| Adjusted EBIT | 93 | 95 | -2% | 93 | 95 | -2% |
| Capital Employed | 1,959 | 1,824 | ||||
| Average Capital Employed | 1,930 | 1,805 | ||||
| ROCE (%) | 19.2% | 21.0% | ||||
| Total Working Capital | 443 | 367 | ||||
| Average Total Working Capital as % of Sales | 15.3% | 11.9% |
1) Including IFRS 16 impact of €1 million in Q1 2019
Sales development
Q1 2019 organic sales
Market conditions for some of DSM’s businesses remained challenging, especially in Asia. Automotive, building & construction and electrical & electronics markets experienced continued softness, while the market conditions in the other business segments stayed robust. DSM remains well positioned with its specialty portfolio and continues to drive innovation in the future growth areas such as new mobility.
Organic sales development of -5%, driven by 6% lower volumes against a tough comparable period with 7% volume growth. Overall sales were 3% lower as currencies had a 2% positive impact resulting from a stronger US dollar.
- DSM Engineering Plastics saw continued softness in automotive (China and Europe) and electrical & electronics (Asia). Business conditions in other segments remained robust.
- DSM Resins & Functional Materials continued to face subdued building & construction markets, especially in Europe and Asia. The high-margin functional materials business continued to perform well.
- DSM Dyneema had a good first quarter, driven by continued high demand in personal protection. New production lines in the US and the Netherlands are scheduled to be completed in the second half of 2019, to fulfil the growing demand, especially for law enforcement.
Q1 2019 Adjusted EBITDA of €127 million (excluding IFRS 16: €126 million) is in line with the same period in Q1 2018. Lower volumes were compensated by good margin management, cost savings, a small benefit from currencies and a positive mix effect.
Q1 2019 Adjusted EBITDA margin was 17.7% (excluding IFRS 16: 17.6%) compared to 17.1% in Q1 2018 demonstrating the resilience of the business.
Innovation Center
| in € million | YTD Q1 2019 | YTD Q1 2018 | % change | Q1 2019 | Q1 2018 | % change |
|---|---|---|---|---|---|---|
| Sales | 47 | 36 | 31% | 47 | 36 | 31% |
| Adjusted EBITDA1 | 6 | -1 | 6 | -1 | ||
| Adjusted EBIT | -1 | -6 | -1 | -6 | ||
| Capital Employed | 614 | 553 |
1) Including IFRS 16 impact of €1 million in Q1 2019
Innovation Center had a good start to the year. Biomedical showed a solid top and bottom line growth. Bio-based Products & Services also contributed strongly to the results partly based on new and recurring license income for yeast technologies used for bio-based fuels. Solar showed continued softness due to the subdued Chinese market. In total, the Adjusted EBITDA increased from -€1 million in Q1 2018 to €6 million in Q1 2019.
Corporate Activities
| in € million | YTD Q1 2019 | YTD Q1 2018 | Q1 2019 | Q1 2018 |
|---|---|---|---|---|
| Sales | 11 | 11 | 11 | 11 |
| Adjusted EBITDA1 | -25 | -29 | -25 | -29 |
| Adjusted EBIT | -41 | -36 | -41 | -36 |
1) Including IFRS 16 impact of €3 million in Q1 2019
Q1 2019 adjusted EBITDA improvement compared to Q1 2018 mainly due to the adoption of IFRS 16.
Condensed Cash Flow and (Operating) Working Capital
| in € million | YTD Q1 2019 | YTD Q1 2018 | Q1 2019 | Q1 2018 |
|---|---|---|---|---|
| Cash provided by Operating Activities | 201 | 310 | 201 | 310 |
| Cash from APM adjustments | 11 | 19 | 11 | 19 |
| Cash from capital expenditures | -150 | -172 | -150 | -172 |
| Cash from drawing rights | -2 | -3 | -2 | -3 |
| Adjusted Net Operating Free Cash Flow | 60 | 154 | 60 | 154 |
| Operating Working Capital | 2,430 | 2,117 | ||
| Average Operating Working Capital as % of Sales | 25.7% | 22.0% | ||
| Total Working Capital | 1,941 | 1,616 | ||
| Average Total Working Capital as % of Sales | 20.5% | 17.3% |
Adjusted Net Operating Free Cash Flow amounted to €60 million in Q1 2019 compared to €154 million in Q1 2018 which includes the impact from the temporary vitamin effect of €165 million EBITDA. Operating Working Capital and Total Working Capital were negatively impacted by exchange rates, the re-consolidation of Andre Pectin as well as timing effects of both receivables and payables. Inventories remained stable. The cash impact from working capital was -€165 million in Q1 2019 versus -€233 million in the comparable period last year.
Overview of Alternative Performance Measures (APM) adjustments to EBIT(DA)
The following overview gives a summary of the APM adjustments for the first quarter of 2019 (for reconciliation see page 14 of PDF).
Nutrition: EBITDA adjustments amounted to -€4 million (EBIT -€4 million) of which -€3 million related to restructuring costs and -€1 million to acquisition related costs.
Corporate Activities: EBITDA adjustments amounted to -€4 million (EBIT -€4 million) of which -€2 million related to restructuring costs and -€2 million to acquisition related costs.
Q1 2019 sustainability highlights
Planet
DSM further improved the environmental impact of its own operations:
- In March, DSM set science-based reduction targets for greenhouse gas emissions that have been reviewed and approved by the Science Based Targets initiative and aligned with the Paris climate agreement. DSM was the first European company in its sector to join the group of almost 180 leading companies with validated science-based targets.
- DSM is progressing well with its target to reduce 30% of its greenhouse gas emissions from direct production and to have 75% of its purchased electricity in absolute terms by 2030 compared to 2016:
- DSM, together with energy company ENGIE and Swiss energy provider ewz opened a new green energy plant at its vitamin facility in Sisseln (Switzerland), reducing CO2 emissions by 50,000 tons/year (about ~4% of total group emission reduction)
- DSM opened a newly expanded 66-acre solar field in Belvedere (NJ, USA). This is now the largest net-metered solar installation in New Jersey and is estimated to produce 25,000,000 kWh of renewable electricity annually.
- DSM introduced a system for a 30 to 40% reduction of waste to landfill at its Zhangbin site (Taiwan), supporting DSM’s ambition level of 80-90% waste recycled in 2020.
- DSM made progress with innovations such as project Clean Cow, Veramaris®, fermentative stevia and NIAGA® enabling its customers to deliver more sustainable solutions to their (end) consumers.
- DSM advocated for environmental topics such as putting a responsible price on carbon and convergence of financial and sustainability disclosures.
People
DSM put additional attention in improving further its safety performance which was below target in 2018. In Q1 we launched an update of our 12 Life Saving Rules, incorporating lessons learned over recent years. These rules should prevent any accidents from happening and cover those activities with the highest risk. They are part of a broader range of safety rules.
DSM continued its Inclusion & Diversity journey:
- With the appointment of the new Chief Innovation Officer, 43% of DSM’s Executive Committee is female. The newly appointed President DSM Netherlands is also female.
- With the proposed (re)appointment of members of the Supervisory Board, DSM will have an even more diverse board in terms of gender, nationality, background, knowledge and experience; including 5 different nationalities and 50% female members.
- With these percentages DSM is clearly achieving its aim to have at least 30% male and at least 30% female members in the Executive Committee, Managing Board and Supervisory Board.
DSM’s Annual General Meeting will take place on 8 May. An update on DSM’s progress on governance can be found in the notes to agenda.
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