Press release

DSM reports H1 2019 results

Heerlen, NL, 01 Aug 2019 07:00 CEST

Highlights1,2,3

  • DSM reports a good H1
  • Results compared to Underlying business in H1 2018:
    • Group sales +3%, Adjusted EBITDA up 12% (including 3% from IFRS 16)
    • Nutrition: organic sales +4%, Adjusted EBITDA up 13% (including 2% from IFRS 16)
    • Materials: organic sales -6%, Adjusted EBITDA flat (including 1% from IFRS 16)
  • Adjusted Net Operating Free Cash Flow €257m, up 14% versus H1 2018
  • Total Net profit €401m, up versus H1 2018 of €633m when correcting for the temporary vitamin effect of €275m EBITDA following an exceptional supply disruption in the industry
  • Interim dividend of €0.77 per ordinary share
  • Full year outlook maintained

Key figures and indicators

in € million H1 2019 H1 2018 % change
    Underlying
business1
Temporary
vitamin effect
Total
Group
Underlying
Organic growth1
FX &
‘other’1
Underlying
total growth1
Temporary
vitamin effect
Total
Group
Sales 4,568 4,429 365 4,794 1% 2% 3% -8% -5%
Nutrition 3,029 2,840 365 3,205 4% 3% 7% -12% -5%
Materials 1,427 1,492   1,492 -6% 2% -4%   -4%
Adjusted EBITDA 862 771 275 1,046     12% -30% -18%
Nutrition 639 564 275 839     13% -37% -24%
Materials  262 261   261     0%   0%
Innovation 11 0   0          
Corporate -50 -54   -54          
EBITDA 823 754 275 1029          
Adjusted EBITDA margin 18.9% 17.4%   21.8%          

1) In 2018 DSM benefitted from a temporary vitamin effect (see page 6 of PDF). Underlying (business) is defined as the performance measure sales and Adjusted EBITDA, corrected for DSM’s best estimate of this temporary vitamin effect.
2) Adjusted EBITDA is an Alternative Performance Measure (APM) that reflects continuing operations.
3) DSM adopted IFRS 16 as per its effective date of 1 January 2019 and has not restated 2018 (see page 23 of PDF).

CEO statement

Feike Sijbesma, CEO/Chairman DSM Managing Board, commented: “I am pleased to report a good performance for the first half year, achieved against a challenging macro-economic environment. The Nutrition business saw continued good business conditions and delivered a strong performance, demonstrating the quality of its innovative portfolio of value-added solutions. Materials experienced ongoing soft market conditions in some of its end-markets, especially in China. Through a continued strong performance in the Dyneema and Functional Materials businesses, combined with good margin management, our Materials business demonstrated resilience with stable earnings.

DSM continues to be well positioned to deliver on our ambitious Strategy 2021 targets, driven by our commitment to be a purpose led, performance driven science-based company in Nutrition, Health and Sustainable Living. We reiterate our outlook for the full year.”

Q2 Highlights1,2,3

  • DSM reports another good quarter
  • Results compared to Underlying business in Q2 2018:
    • Group sales +3%, Adjusted EBITDA up 10% (including 3% impact from IFRS 16)
    • Nutrition: organic sales +4%, Adjusted EBITDA up 13% (including 3% impact from IFRS 16)
    • Materials: organic sales -7%, Adjusted EBITDA flat (including 1% impact from IFRS 16)

Key figures and indicators

in € million Q2 2019 Q2 2018 % change
    Underlying
business1
Temporary
vitamin effect
Total
Group
Underlying
Organic growth1
FX &
‘other’1
Underlying
total growth1
Temporary
vitamin effect
Total
Group
Sales 2,276 2,214 145 2,359 1% 2% 3% -7% -4%
Nutrition 1,512 1,410 145 1,555 4% 3% 7% -10% -3%
Materials 710 754   754 -7% 1% -6%   -6%
Adjusted EBITDA 438 398 110 508     10% -24% -14%
Nutrition 323 287 110 397     13% -32% -19%
Materials 135 135   135     0%   0%
Innovation 5 1   1          
Corporate -25 -25   -25          
EBITDA 407 393 110 503          
Adjusted EBITDA margin 19.2% 18.0%   21.5%          

1) In 2018 DSM benefitted from a temporary vitamin effect (see page 6 of PDF). Underlying (business) is defined as the performance measure sales and Adjusted EBITDA, corrected for DSM’s best estimate of this temporary vitamin effect.
2) Adjusted EBITDA is an Alternative Performance Measure (APM) that reflects continuing operations.
3) DSM adopted IFRS 16 as per its effective date of 1 January 2019 and has not restated 2018 (see page 23 of PDF).

Outlook 2019

DSM maintains its full year outlook as provided at Q1 2019: DSM 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 Underlying Adjusted Net Operating Free Cash Flow in line with its Strategy 2021 targets. This outlook excludes the impact of IFRS 16 (see page 23 of PDF).

Share Buy-Back program

On 1 April 2019, DSM commenced its ordinary share repurchase program of an aggregate market value of €1 billion, with the intention to reduce its issued capital, as first announced on 14 February 2019. This program is in addition to the regular repurchase programs to cover commitments under share-based compensation plans and the stock dividend. As per 30 June DSM has repurchased 2.6 million shares for a total consideration of €265 million; 2 million shares relate to the regular repurchase programs and 0.6 million shares relate to the €1 billion share buy-back program.

Key figures and indicators (comparison with H1 2018 excluding temporary vitamin effect)

in € million YTD H1 2019 YTD H1 2018 % change Volume Price/mix FX Other
Sales 4,568 4,429 3% 1% 0% 2% 0%
Nutrition 3,029 2,840 7% 4% 0% 2% 1%
Materials 1,427 1,492 -4% -5% -1% 2% 0%
Innovation Center 90 75          
Corporate Activities 22 22          
in € million Q2 2019 Q2 2018 % change Volume Price/mix FX Other
Sales 2,276 2,214 3% 1% 0% 2% 0%
Nutrition 1,512 1,410 7% 3% 1% 2% 1%
Materials 710 754 -6% -5% -2% 1% 0%
Innovation Center 43 39          
Corporate Activities 11 11          

H1 2019 including IFRS 16 impact

in € million H1 2019 H1 2018 % change Q1 2019 Q1 2018 % change
Sales 4,568 4,429 3% 2,276 2,214 3%
Adjusted EBITDA 862 771 12% 438 398 10%
Nutrition 639 564 13% 323 287 13%
Materials 262 261 0% 135 135 0%
Innovation Center 11 0   5 1  
Corporate Activities -50 -54   -25 -25  
Adjusted EBITDA margin 18.9% 17.4%   19.2% 18.0%  
ROCE % 13.1% 13.8%        

H1 2019 excluding IFRS 16 impact

in € million H1 2019 H1 2018 % change Q1 2019 Q1 2018 % change
Adjusted EBITDA 837 771 9% 425 398 7%
Nutrition 625 564 11% 316 287 10%
Materials 259 261 -1% 133 135 -1%
Innovation Center 10 0   5 1  
Corporate Activities -57 -54   -29 -25  
Adjusted EBITDA margin 18.3% 17.4%   18.7% 18.0%  
ROCE % 13.4% 13.8%        

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 H1 2018 including temporary vitamin effect)

in € million YTD H1 2019 YTD H1 2018 % change Volume Price/mix FX Other
Sales 4,568 4,794 -5% 1% -8% 2%  
Nutrition 3,029 3,205 -5% 4% -12% 2%  
Materials 1,427 1,492 -4% -5% -1% 2%  
Innovation Center 90 75          
Corporate Activities 22 22          
in € million Q2 2019 Q2 2018 % change Volume Price/mix FX Other
Sales 2,276 2,359 -4% 2% -8% 2%  
Nutrition 1,512 1,555 -3% 5% -11% 2%  
Materials 710 754 -6% -5% -2% 1%  
Innovation Center 43 39          
Corporate Activities 11 11          
in € million, incl. IFRS impact where applicable YTD H1 2019 YTD H1 2018 % change Q2 2019 Q2 2018 % change
Sales 4,568 4,794 -5% 2,276 2,359 -4%
Adjusted EBITDA 862 1,046 -18% 438 508 -14%
Nutrition 639 839 -24% 323 397 -19%
Materials 262 261 0% 135 135 0%
Innovation Center 11 0   5 1  
Corporate Activities -50 -54   -25 -25  
Adjusted EBITDA margin 18.9% 21.8%   19.2% 21.5%  
EBITDA 823 1,029   407 503  
Adjusted EBIT 568 817 -30% 289 394 -27%
EBIT 518 800   247 389  
Capital Employed 8,735 8,115        
Average Capital Employed 8,680 7,874        
ROCE (%) 13.1% 20.8%        
Effective tax rate1 18.0% 18.0%        
Adjusted net profit2 415 643 -35% 215 306 -30%
Net profit - Total DSM2 401 633 -37% 205 302 -32%
Adjusted net EPS 2.32 3.64 -36% 1.20 1.73 -31%
Net EPS - Total DSM 2.24 3.58   1.14 1.70  
Operating Cash Flow 507 503 1% 306 193 59%
Adjusted Net Operating Free Cash Flow 257 226 14% 197 72 174%
Capital Expenditures3 264 295   116 125  
Net debt4 589 831        
Average number of ordinary shares 176.3 175.0   176.5 175.2  
Workforce (headcount end of period) 21,595 20,977        

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 H1 2019 includes €202 million following the adoption of IFRS 16 on ‘Leases’
5) Year-end 2018

Strategy 2021: Growth & Value – Purpose led, Performance driven

In 2018, DSM presented its strategic update, detailing how it will evolve further toward being a purpose led, science-based company operating in the fields of Nutrition, Health and Sustainable Living. DSM’s strong growth platform together with increased customer centricity and its large innovation projects, will drive above-market growth. Concurrently, DSM will remain focused on cost control and operational excellence, allowing it to accelerate profit growth and cash generation. Organic growth will be complemented by acquisitions, predominantly in Nutrition given its growth potential, resilience, strong leadership position and value creation potential.

The following table describes the ambitious targets for profit growth and cash generation for the period 2019 – 2021, as well as the ambitions underpinning these.

2021 targets1

High single-digit percentage annual Adjusted EBITDA increase

~10% average annual Adjusted net operating free cash flow2 increase
 

Ambitions underpinning our targets1

1. Sales Above-market sales growth (~5%) for Group, Nutrition and Materials
2. Adjusted EBITDA margin Nutrition: >20%
Materials: 18-20%
 
3. Working capital Reduce by 50 bps annually to ~16%
4. Capex ~6.5% of sales
5. ROCE ~1% point increase per annum
6. Adjusted EPS Increase ahead of Adjusted EBITDA growth

1) Based on 2018 underlying business, defined as Sales and Adjusted EBITDA corrected for DSM's best estimate of the temporary vitamin effect.
2) 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.

Purpose sets the scope for further growth and evolution

With its unique science-based competences, DSM is ideally positioned to capture the growth opportunities offered by the global megatrends and the UN Sustainable Development Goals (SDGs), with emphasis on Nutrition & Health, Climate & Energy and Resources & Circularity. DSM will therefore further evolve into a Nutrition, Health and Sustainable Living company.

By improving the impact of its own operations, enabling sustainable solutions for its customers and advocating sustainable business, DSM can grow faster and reduce its cost and risk profile.

1) Based on ‘underlying business’ 2018 Base Line corrected for the temporary vitamin effect.
2) Adjusted net operating free cash flow is cash flow before share purchases for options/ exercise of options, interest, dividend, M&A and financing activities.

Nutrition

Underlying business

‘Underlying’ business is defined as the sales and Adjusted EBITDA, corrected for the temporary vitamin effect due to exceptional supply disruptions in the industry which occurred in the first nine months of 2018. This event provided additional sales for €365 million and a corresponding Adjusted EBITDA of €275 million in H1 2018, as estimated and reported last year. 

in € million (estimated) H1 2019 H1 2018   Q2 2019 Q2 2018  
Sales 3,029 2,840 7% 1,512 1,410 7%
Adjusted EBITDA1 639 564 13% 323 287 13%
Adjusted EBITDA margin1 21.1% 19.9%   21.4% 20.4%  
ROCE % 15.1% 15.4%        

Temporary vitamin effect

in € million (estimated) Temporary vitamin effect H1 2018 Temporary vitamin effect Q2 2018
Sales 365 145
Adjusted EBITDA 275 110

Total cluster

in € million H1 2019 H1 2018 % change Q2 2019 Q2 2018 % change
Sales 3,029 3,205 -5% 1,512 1,555 -3%
Adjusted EBITDA1 639 839 -24% 323 397 -19%
Adjusted EBITDA margin (%)1 21.1% 26.2%   21.4% 25.5%  
Adjusted EBIT 462 698 -34% 234 328 -29%
Capital Employed 6,289 5,689        
Average Capital Employed 6,127 5,505        
ROCE (%) 15.1% 25.4%        
Total Working Capital 1,684 1,669        
Average Total Working Capital as % of Sales 27.2% 24.3%        

1) Including IFRS 16 impact of €7 million in Q2 2019 and €14 million in H1 2019

Nutrition is ideally positioned to capture the growth opportunities offered by the UN Sustainable Development Goals and global megatrends such as solutions against malnutrition, addressing the need for healthier diets and diversified proteins, preventing non-communicable diseases, enabling a more sustainable production of food and feed, as well as avoiding food loss and waste. Nutrition focuses on continued above-market growth through expanding its portfolio of higher-value feed, food and personal care solutions, as well as through customer centricity programs and sustainability-driven innovation projects.

Sales development

All comparisons in this Nutrition section are versus the Underlying business in H1 2018.

H1 2019 sales

Nutrition saw good business conditions across regions and business segments. Nutrition realized 4%-volume driven- organic growth, against 10% in H1 2018. Total sales were 7% higher compared to H1 2018 including 1% from the consolidation of Andre Pectin.

Q2 2019 sales

Overall, Nutrition reported 4% organic growth, which was -as in Q1 2019- largely driven by volume.

H1 2019 Adjusted EBITDA

The Adjusted EBITDA growth was 13%, including a 2% contribution from the IFRS 16 effect and 1% from Andre Pectin (€10 million), driven by higher volumes, lower costs and positive foreign exchange effects. The adjusted EBITDA margin was 21.1% (including a 0.5% impact from IFRS 16) versus 19.9% in H1 2018.

Q2 2019 Adjusted EBITDA

Nutrition reported 13% growth in Adjusted EBITDA (including IFRS 16), fully in line with H1 2019, with same earnings drivers. The Q2 2019 Adjusted EBITDA margin was 21.4% (including a 0.5% impact from IFRS 16) versus 20.4% in Q2 2018.

Animal Nutrition & Health

Animal Nutrition continues to strengthen its global market positions, by developing new specialty solutions, expanding its premix offerings, investing in go-to-market capabilities, and focusing on higher growth segments such as aquaculture. Good progress was made in the first half year on key innovation programs:

  • Veramaris, which began commercial production of its algae-based omega-3 fatty acids for aquaculture in its new plant in Blair, Nebraska.
  • ‘Clean Cow’, a feed ingredient for cows that significantly reduces methane emissions, reached a key milestone, as the registration filing was done in Europe in order to get the product authorized for commercial use.

Sales development

H1 2019 organic sales

The first six months saw continued good business conditions across all regions and species, except for China and South East Asia, where the African swine fever intensified. The impact for DSM continued to be largely compensated by higher poultry production in the region and higher pork production in other regions, demonstrating the value of DSM’s global footprint and broad species coverage.  

Animal Nutrition reported 4% organic growth, driven by volumes, against 8% volume growth last year. Prices in the first six months were slightly up. Product mix effects caused the reported price swings over the first two quarters.

Q2 2019 organic sales

The second quarter saw strong organic growth of 10%. Volumes were up by 6%. Prices were up 4% reflecting a favorable product mix, supported by price increase actions to offset higher input costs. Additionally, prices continued to benefit from the effects of the environmental and safety enhancement policies implemented in China.

Human Nutrition & Health

Human Nutrition focuses on moving closer to the customer by strengthening the value propositions of its products and services, creating end-to-end customer experiences, and enhanced innovation and application capabilities. The i-Health b2c business is continuously being expanded beyond the United States and DSM explores the opportunities of personalized offerings (‘business-to-me’). The dynamic challenges of the food & beverage industry are being addressed by providing global customers with new value propositions, as well as increasingly developing premix solutions to regional and local players. With a new premix facility under construction that will be dedicated to early life nutrition, DSM keeps expanding its premix footprint.

Sales development

H1 2019 organic sales

Overall, business conditions remained good. Early life nutrition, pharma and dietary supplements performed well, with especially a strong growth in i-Health, DSM’s business-to-consumer business. Food & beverage had a softer second quarter in ingredient sales to large global customers. Premix sales to regional and smaller customers showed strong growth during the first half. Geographically, the business realized good sales in North America (supported by strong i-Health sales) and Asia, weak sales in Europe and strong sales in LATAM.

In the first six months, organic growth was 2% compared with a strong 8% organic growth in the same period last year. Volumes were up 3% and prices were slightly down. Total sales were up 7% as sales growth was supported by a 5% foreign exchange effect which is largely US dollar related.

Q2 2019 organic sales

Human Nutrition reported -1% organic growth (with volumes up 2% and price/mix down 3%) against an organic growth of 9% in the same period last year (driven by 5% increase in volume and 4% increase in price). Food & beverage volumes to large global customers were soft, partly relating to order patterns. The price decline was largely driven by the unfavorable comparison with a strong Q2 last year which had benefitted, amongst others, from strong sales in i-Health and premixes. Total sales increased by 3% as the quarter benefitted from a foreign exchange effect driven by the US dollar.

Other Nutrition activities

DSM’s other Nutrition activities which include Food Specialties, Personal Care, Aroma Ingredients and Hydrocolloids, continued to deliver a good performance in Q2 2019 with 8% organic sales growth in H1 2019. Personal Care showed a very strong growth in sun and skin care. Food Specialties enjoyed good growth in enzymes and cultures in the dairy and baking segments. The established Avansya joint venture between DSM and Cargill for fermentative Stevia has successfully produced testing materials in the first half of 2019.

Andre Pectin was re-consolidated as of 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 an EBITDA of €10 million in H1 2019.

Materials

in € million H1 2019 H1 2018 % change Q2 2019 Q2 2018 % change
Sales 1,427 1,492 -4% 710 754 -6%
Adjusted EBITDA1 262 261 0% 135 135 0%
Adjusted EBITDA margin (%)1 18.4% 17.5%   19.0% 17.9%  
Adjusted EBIT 193 199 -3% 100 104 -4%
Capital Employed 1,938 1,901        
Average Capital Employed 1,933 1,837        
ROCE (%) 20.0% 21.6%        
Total Working Capital 432 417        
Average Total Working Capital as % of Sales 15.1% 12.8%        

1) Including IFRS 16 impact of €2 million in Q2 2019 and €3 million in H1 2019

Materials continues its ongoing transformation into a high-growth, higher-margin specialty business, focused on Improved Health & Living, Green Products & Applications and New Mobility & Connectivity. Additional production capacities are being put in place to facilitate further growth. Dyneema has two new production lines under construction, while DSM Engineering Plastics expands its production capacity for specialty plastics in India through the announced acquisition of SRF. At the same time, being currently confronted with weak macro-economic conditions in some of its end-markets, Materials has strengthened its margin management and cost control.

Sales development

H1 2019 organic sales

Market conditions for some of DSM’s businesses remained challenging, especially in China. Automotive, building & construction and electrical & electronics markets experienced softness, while the market conditions in the other business segments remained robust, especially in Dyneema and Functional Materials.

In the first six months, organic growth was down 6%, driven by a 5% decline in volumes.

  • 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 experience uncertain building & construction markets, especially in Asia and Europe. The high-margin functional materials business performed well.
  • DSM Dyneema had a strong first half year, driven by continued high demand in personal protection. New production lines in the US and in the Netherlands are on track to be completed in the second half of 2019 to fulfil the growing demand, especially for law enforcement.

Q2 2019 sales were in line with Q1 and H1 2019 with volumes down 5%. Prices reflected developments in input cost.

H1 2019 Adjusted EBITDA was flat compared to previous year (including 1% from IFRS 16). Lower volumes were compensated by a positive mix effect driven by Dyneema and Functional Materials. This was supported by margin management, cost control and a small benefit from currencies. The Adjusted EBITDA margin was 18.4% (including 0.3% from IFRS 16) compared to 17.5% achieved in the previous year.

Q2 2019 Adjusted EBITDA was flat year-over-year (including 1% from IFRS 16), fully in line with H1. Margins in Q2 were supported by lower input cost. Q2 2019 Adjusted EBITDA margin was 19.0% (including 0.3% from IFRS 16) compared to 17.9% in Q2.

Innovation Center

in € million H1 2019 H1 2018 % change Q2 2019 Q2 2018 % change
Sales 90 75 20% 43 39 10%
Adjusted EBITDA1 11 0   5 1  
Adjusted EBIT -6 -12   -5 -6  
Capital Employed 606 589        

1) Including IFRS 16 impact of €0 million in Q2 2019 and €1 million in H1 2019

Biomedical delivered 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. The Adjusted EBITDA increased to €11 million in H1 2019.

Corporate Activities

in € million H1 2019 H1 2018 Q2 2019 Q2 2018
Sales 22 22 11 11
Adjusted EBITDA1 -50 -54 -25 -25
Adjusted EBIT -81 -68 -40 -32

1) Including IFRS 16 impact of €4 million in Q2 2019 and €7 million in H1 2019

H1 2019 adjusted EBITDA increased from H1 2018 predominantly driven by the adoption of IFRS 16 whereas EBIT was negatively impacted by some asset impairments.

Condensed Cash Flow Statement and (Operating) Working Capital

in € million H1 2019 H1 2018 Q2 2019 Q2 2018
Cash provided by Operating Activities 507 503 306 193
Cash from APM adjustments 23 41 12 22
Cash from capital expenditures* -269 -301 -119 -129
Cash from drawing rights -4 -17 -2 -14
Adjusted Net Operating Free Cash Flow 257 226 197 72
         
Operating Working Capital 2,361 2,347    
Average Operating Working Capital as % of Sales 25.8% 23.2%    
Operating Working Capital as % of Sales - end of period 25.9% 24.9%    
Total Working Capital 1,823 1,807    
Average Total Working Capital as % of Sales 20.7% 18.3%    
Total Working Capital as % of Sales - end of period 20.0% 19.2%    

* H1 2018 and Q2 2018: excluding €18 million payment of lease liability

Adjusted Net Operating Free Cash Flow amounted to €257 million in H1 2019 up 14% compared to €226 million in H1 2018 which included the impact from the temporary vitamin effect of €275 million EBITDA.

Operating Working Capital and Total Working Capital end of June 2019 was in line with end of H1 2018, although as percentage of sales it increased versus H1 2018 due to exchange rates, the re-consolidation of Andre Pectin and the absence of the temporary vitamin effect in 2019. The cash impact from working capital was -€239 million in H1 2019 versus -€504 million in the comparable period last year.

Dividend and equity

On 3 June 2019, the final dividend of €1.53 per share for the year 2018 was paid to holders of ordinary shares and a dividend of €0.11 per share was paid to holders of cumulative preference shares A. The total distribution to shareholders amounting to €275 million was recorded against retained earnings.

An interim dividend for 2019 of €0.77 per ordinary share and €0.06 for cumulative preference shares A was recognized as a liability in the second quarter of 2019. This distribution to shareholders amounting to €139 million will take place in Q3 2019. The interim dividend represents about one third of the total dividend paid over the prior year. The interim dividend will be payable in cash or in the form of ordinary shares at the option of the shareholder, with a maximum of 40% of the total dividend amount available for stock dividend. If more than 40% of the total dividend is requested by the shareholders to be paid out in shares, those shareholders who have chosen to receive their dividend in shares will receive their stock dividend on a pro rata basis, the remainder being paid out in cash. Dividend in cash will be paid after deduction of 15% Dutch dividend withholding tax. The ex-dividend date is 5 August 2019. The interim dividend will be payable as from 26 August 2019.

In the first half of 2019, 3.6 million shares were released into circulation in connection with stock dividend, the exercise of options and delivery of performance shares. In the same period, 2.6 million shares were repurchased with the intention, to cover commitments under share-based compensation plans, stock dividend and to reduce the issued capital.

Overview of Alternative Performance Measures (APM) adjustments to EBIT(DA)

The following overview gives a summary of the APM adjustments for the first half of 2019 (for reconciliation see page 17 of PDF).

Nutrition: EBITDA adjustments amounted to -€6 million of which -€4 million related to restructuring costs and -€2 million to acquisition related costs. EBIT adjustments amounted to €-17 million including -€11 million asset impairment.

Materials: EBITDA adjustments amounted to -€4 million (EBIT -€4 million) of fully related to restructuring cost.

Innovation Center: EBITDA adjustments amounted to -€1 million (EBIT -€1 million) related to restructuring cost.

Corporate Activities: EBITDA adjustments amounted to -€28 million (EBIT -€28 million) of which -€26 million related to restructuring costs and -€2 million to divestment related costs.

Share of the profit of associates: Net result includes a positive book result of €23 million on its existing share of 29% following the acquisition of an additional 46% of the shares of Andre Pectin in Q1 2019.

Sustainability performance realized in H1 2019

Continued step-up in sustainability leadership

~10%1

GHG absolute reduction (vs. 2016)

(target 30% by 2030)

1.7%2

Energy efficiency improvement year-on-year

(target >1%/year till 2030)

46%

Purchased renewable electricity

(target 75% by 2030)

76%3

Employee engagement favorable score

(target >75% by 2021)

0.34

Safety Frequency Recordable Index

(target <0.25 by 2021)

19%

Female
executives

(target 25% by 2020)

63%

Under-represented nationalities

(target 60% by 2020)

63%

Brighter Living
Solutions

(target >65% by 2021)

1) DSM estimates the effect of the underlying structural improvements in absolute GHG emissions to be roughly 10% versus 2016, while the total absolute GHG emission reduction (including volume and product mix effects) versus 2016 is approximately 17%.
2) The energy efficiency has improved by 2.2 % in H1 2019 compared to the full year of 2018. However, H1 Energy efficiency improvement results are typically more positive than full year. Based on a comparison of H1 2019 to H1 2018 the energy efficiency improvement is estimated at ~1.7%.
3) 2018 score: employee engagement will be measured again in Q3 2019.

H1 Planet highlights

DSM further improved the environmental impact of its own operations:

  • DSM is well on track this year with respect to its greenhouse gas, energy efficiency and purchased renewable electricity targets.
    • The underlying structural improvement in absolute greenhouse gas reduction in H1 2019 compared to the 2016 baseline is ~10%.
    • Energy efficiency has improved by ~1.7% compared to H1 2018 versus a >1% average annual ambition.
    • 46% of purchased electricity came from renewable resources compared with 41% in 2018.
  • DSM implemented new equipment at the Dalry site (Scotland), significantly improving the energy efficiency of the site.
  • Together with energy companies ENGIE and EWZ, DSM opened a new green energy plant at its Sisseln (Switzerland) facility, which will reduce CO2 emissions up to 50,000 tons/year.
  • DSM opened the largest net-metered solar installation in New Jersey (USA), estimated to produce 25,000,000 kWh of renewable electricity annually.
  • DSM was the first company in its sector to set new science-based reduction targets for greenhouse gas emissions, reviewed and approved by the Science Based Targets initiative and aligned with the Paris climate agreement.

DSM made good progress in its large innovation projects such as Veramaris, Avansya, Clean Cow and NIAGA®, enabling its customers to deliver more sustainable solutions to their (end) consumers.

  • For Clean Cow, DSM has commenced filing for EU authorization for the new feed additive for dairy cows that will reduce methane emissions by around 30% and thereby significantly reduce the environmental footprint of milk and dairy products.
  • Veramaris started the commercial production of algae-based Omega-3 fatty acids DHA and EPA. This innovation helps to reduce the pressure on wild fish stocks, supports the aquaculture industry to sustainably meet the rapidly growing global demand for seafood, and enables healthier fish for the consumer.
  • After a successful launch last year in the Americas of Balancius™, a feed additive for broilers which improves digestion and nutrient absorption, thus helping farmers to get more from their feed and to reduce greenhouse gas, this product is now also introduced in Europe.
  • DSM stepped-up its collaboration with Chenyang, a Chinese-based world-leading manufacturer of environmentally friendly paints and coatings, to help shape a more sustainable coatings industry.

DSM advocated for environmental topics such as putting a responsible price on carbon and convergence of financial and sustainability disclosures.

  • The Institute for Sustainable Development Goals of the Tsinghua University appointed DSM’s CEO Feike Sijbesma as a member of its International Advisory Committee, recognizing DSM’s commitment to sustainability and the pursuance of people, planet and profit.

H1 People highlights

DSM continued its Inclusion & Diversity journey:

  • 63% of its executives are from under-represented nationalities, while 19% of its executives are female.
  • 43% of DSM’s Executive Committee is female. With 5 nationalities represented and 50% of its members being female (after the May AGM), DSM’s Supervisory Board is even more diverse than previously in terms of gender, nationality, background knowledge and experience.
  • DSM is clearly achieving its aim to have at least 30% female members in its Executive Committee, Managing Board and Supervisory Board.

H1 other highlights

  • ~63% of DSM sales came from Brighter Living Solutions. These are products and services that that have a better environmental (ECO+) and/or social (People+) impact than mainstream solutions.
  • MSCI, a leading global index provider upgraded DSM’s EGG rating to AAA. DSM now has the highest rankings in both MSCI and Sustainalytics (ranked number one within its sector).
  • DSM was awarded the Best UN Sustainable Development Goals Award at the Sustainable Business Awards in Singapore.

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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