Heerlen, NL, 07 May 2020 07:00 CEST
1) Adjusted EBITDA is an Alternative Performance Measure (APM) that reflects continuing operations.
in € million | Q1 2020 | Q1 2019 | % change | Volume | Price/mix | FX | Other |
---|---|---|---|---|---|---|---|
Sales | 2,293 | 2,292 | 0% | 1% | -3% | 1% | 1% |
Nutrition | 1,575 | 1,517 | 4% | 5% | -3% | 1% | 1% |
Materials | 660 | 717 | -8% | -6% | -4% | 1% | 1% |
Adjusted EBITDA | 423 | 424 | 0% | ||||
Nutrition | 324 | 316 | 3% | ||||
Materials | 118 | 127 | -7% | ||||
Innovation | 5 | 6 | |||||
Corporate | -24 | -25 | |||||
EBITDA | 358 | 416 | |||||
Adjusted EBITDA margin | 18.4% | 18.5% |
Geraldine Matchett and Dimitri de Vreeze, Co-CEOs, commented: “COVID-19 has led to unprecedented global challenges. We took very early actions and focused on ensuring the health and safety of our employees and partners, keeping our operations running and serving customers and society with our essential products. We are proud of how our people are responding to the new challenges and are also supporting the communities around them in so many different ways.
“We saw good underlying business conditions in Nutrition, with momentum increasing through the quarter, and with an overall small increase in demand from COVID-19. At the same time, trading conditions in Materials deteriorated rapidly at the end of Q1 as customers’ operations were impacted by COVID-19 restrictions, especially in Europe and North America.
“While these are uncertain times, we are taking all necessary actions to address recent challenges in end markets. We remain well-positioned to manage near-term developments with a growing Nutrition business and a strong financial position. We stay focused on our long-term strategy to deliver above-market growth, pursuing our innovation programs, and growth initiatives, supported by the execution of our self-help actions.”
There is considerable uncertainty as to how the COVID-19 pandemic will develop and what will be the global ramifications. Within this context, DSM expects Nutrition to deliver at least a mid-single digit increase in Adjusted EBITDA for 2020 compared to prior year, but given current limited visibility in Materials it feels prudent not to express an overall earnings outlook at this time.
DSM responded quickly to the COVID-19 outbreak, initiating very strict protocols to increase already stringent hygiene and safety precautions throughout its facilities and supply chain worldwide. Through these measures DSM is protecting the well-being of its employees and partners while keeping production facilities running. Given that many of its products and solutions are considered vital by national governments, DSM’s facilities are typically permitted to keep operating and are less impacted by logistics restrictions.
DSM estimates that Nutrition overall saw a slight increase of about 1% on its Q1 sales from COVID-19. Materials saw a negative impact of about 7% of sales with the main effect at the end of the quarter as customers’ operations were severely impacted by COVID-19 measures especially in Europe and North America. As these measures continue into Q2, DSM is taking actions in Materials to limit capital expenditure and operating costs to protect its earnings and cashflow without compromising the medium- and long-term potential of its businesses.
In addition, DSM is also supporting the fight against the pandemic. DSM is applying scientific know-how and its resources through a variety of global and local initiatives including helping to improve personal protective equipment designs, producing critical disinfectants and equipment for hospitals, leading a consortium to produce face masks, distributing immunity-optimizing vitamins to healthcare workers, and more as shown in the sustainability highlights.
DSM continues to benefit from a strong balance sheet and available liquidity, with Q1 2020 Net Debt to EBITDA of 0.8x, strong cash generation and committed, undrawn revolving credit facilities of €1.5 billion. These facilities, comprised of a €1 billion revolving credit facility maturing in 2025 and €500 million new revolving credit facilities concluded recently, are not subject to any financial covenants or a MAC clause. Additionally, the company has no bond maturities in 2020 and 2021. DSM remains committed to maintaining a strong investment-grade credit profile.
Reflecting the strength of its financial position, DSM remains committed to its capital allocation policy. DSM will continue to reinvest capital into driving organic growth via disciplined capex and is committed to pursue its existing policy of distributing stable, preferably rising, dividends to its shareholders. DSM’s dividend proposal for approval at its AGM on 8 May 2020 remains €2.40 per share, as communicated in February 2020, up 4% versus 2019.
Concurrently, having bought back €745 million shares as at Q1 2020, DSM believes it prudent to pause the remainder of its €1 billion share buy-back program, launched in 2019, as a precaution given the current environment.
On 1 April 2020 DSM completed the acquisition of Glycom, as announced on 21 February 2020, for an enterprise value of €765 million, which will be incorporated in the results as of Q2 2020. Glycom is the world’s leading supplier of Human Milk Oligosaccharides (HMO).
in € million | Q1 2020 | Q1 2019 | % change | Volume | Price/mix | FX | Other |
---|---|---|---|---|---|---|---|
Sales | 2,293 | 2,292 | 0% | 1% | -3% | 1% | 1% |
Nutrition | 1,575 | 1,517 | 4% | 5% | -3% | 1% | 1% |
Materials | 660 | 717 | -8% | -6% | -4% | 1% | 1% |
Innovation Center | 48 | 47 | |||||
Corporate Activities | 10 | 11 |
in € million | YTD Q1 2020 | YTD Q1 2019 | % change | Q1 2020 | Q1 2019 | % change |
---|---|---|---|---|---|---|
Sales | 2,293 | 2,292 | 0% | 2,293 | 2,292 | 0% |
Adjusted EBITDA | 423 | 424 | 0% | 423 | 424 | 0% |
Nutrition | 324 | 316 | 3% | 324 | 316 | 3% |
Materials | 118 | 127 | -7% | 118 | 127 | -7% |
Innovation Center | 5 | 6 | 5 | 6 | ||
Corporate Activities | -24 | -25 | -24 | -25 | ||
Adjusted EBITDA margin | 18.4% | 18.5% | 18.4% | 18.5% | ||
EBITDA | 358 | 416 | 358 | 416 | ||
Adjusted EBIT | 272 | 279 | -3% | 272 | 279 | -3% |
EBIT | 207 | 271 | 207 | 271 | ||
Capital Employed | 9,344 | 8,907 | ||||
Average Capital Employed | 9,328 | 8,652 | ||||
ROCE (%) | 11.7% | 12.9% | ||||
Effective tax rate1 | 18.0% | 18.0% | ||||
Adjusted net profit2 | 216 | 200 | 8% | 216 | 200 | 8% |
Net profit - Total DSM2 | 168 | 196 | -14% | 168 | 196 | -14% |
Adjusted net EPS | 1.24 | 1.12 | 11% | 1.24 | 1.12 | 11% |
Net EPS - Total DSM | 0.96 | 1.10 | 0.96 | 1.10 | ||
Operating Cash Flow | 287 | 201 | 43% | 287 | 201 | 43% |
Adjusted Net Operating Free Cash Flow | 151 | 60 | 152% | 151 | 60 | 152% |
Capital Expenditures3 | 142 | 148 | 142 | 148 | ||
Net debt | 1,324 | 414 | ||||
Average number of ordinary shares | 171.4 | 176.1 | 171.4 | 176.1 | ||
Workforce (headcount end of period)4 | 21,866 | 22,174 |
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) Headcount 2019 refers to headcount at year-end
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.
in € million | YTD Q1 2020 | YTD Q1 2019 | % change | Q1 2020 | Q1 2019 | % change |
---|---|---|---|---|---|---|
Sales | 1,575 | 1,517 | 4% | 1,575 | 1,517 | 4% |
Adjusted EBITDA | 324 | 316 | 3% | 324 | 316 | 3% |
Adjusted EBITDA margin (%) | 20.6% | 20.8% | 20.6% | 20.8% | ||
Adjusted EBIT | 229 | 228 | 0% | 229 | 228 | 0% |
Capital Employed | 6,688 | 6,286 | ||||
Average Capital Employed | 6,709 | 6,035 | ||||
ROCE (%) | 13.7% | 15.1% | ||||
Total Working Capital | 1,678 | 1,650 | ||||
Average Total Working Capital as % of Sales | 27.9% | 26.3% |
Nutrition showed healthy organic sales growth in Q1, supported by a slight increase from COVID-19 of about 1% on its sales. Animal Nutrition saw continued good business conditions through the quarter, and benefitted from some additional COVID-19 driven demand. Human Nutrition had a soft start, as expected, but saw strong momentum building by the end of the quarter due in part to changes in COVID-19 driven customer purchasing behavior. Food Specialties and Personal Care had a slightly negative impact from COVID-19.
Nutrition reported 2% organic growth, with volumes up 5% and prices down 3%. Overall, sales were up 4%, including the contribution of the acquired specialty dairy solutions provider CSK (1%) and foreign exchange effects (1%).
The Adjusted EBITDA growth was 3%, driven by higher volumes and the contribution from CSK, offset in part by higher logistics costs and a negative foreign exchange effect. The Adjusted EBITDA margin remained broadly stable at 20.6% versus 20.8% in same period last year.
Early in the year DSM launched a program, communicated in February 2020, to increase its agility to drive above-market profitable growth. By simplifying the operating model and further improving business steering, the program aims to better serve customers and respond to the differentiated needs of their respective end-markets. At the same time, it creates a more efficient organization, which will help to adjust to a more challenging environment. The program is well underway with the new operating model having being implemented.
Animal Nutrition reported 12% organic growth, fully driven by volumes, with good business conditions across all regions and species, highlighting the strength of our integrated and diversified global business model.
The effects of African Swine Fever continued to recede during the quarter, with only a few new cases being reported in China and South-East Asia since the end of 2019, contributing to good growth in the region for Q1. The rebuilding of the swine population in the region will be gradual but significant given the devastation caused by the disease. This growth is predominantly happening at larger professional farming operations. Going forward, this trend will continue to benefit DSM’s ever-expanding portfolio of higher value-added nutrition solutions.
In relation to the COVID-19 outbreak, the rapid shift from food services to at-home eating, resulting from “lock down” measures around the world, led to increased demand for easy-to-prepare protein such as poultry and eggs.
During the quarter, DSM also saw additional purchases from feed producers who increased stocks of nutritional ingredients in anticipation of logistics disruptions as a result of the COVID-19 outbreak.
The overall price/mix effect for Q1 was neutral.
As expected, Human Nutrition had a slow start to the year with the continuation of softer conditions seen in Q4 in Early Life Nutrition and Food & Beverage, exacerbated by low vitamin C prices.
However, as lockdown measures began to take effect in more markets, strong demand for packaged goods and infant nutrition altered business conditions from mid-March, intensified by household pantry loading. Dietary Supplements had a strong start to the year as the good business conditions of Q4 continued into 2020. The increasing demand for immunity-optimizing products led to further growth over the quarter. These effects continued into April.
The overall price/mix was down 6% in the quarter owing to continued lower vitamin C prices and lower contractual Early Life Nutrition prices compared to the same period last year.
On 1 April 2020 DSM completed the acquisition of Glycom, as announced on 21 February 2020. Glycom is the only fully-integrated Human Milk Oligosaccharides (HMO) supplier in the world with its own product development, preclinical and clinical development, regulatory and large-scale production with an exciting innovation roadmap for next-generation HMOs. With these products, DSM adds a new category of ingredients for next-generation early-life nutrition solutions to its infant nutrition portfolio. HMO’s will also be interesting for other market segments like medical nutrition, dietary supplements, food and beverages, and pet food, as HMOs are believed essential for the development of immunity, cognitive and digestive functions.
DSM’s other Nutrition activities, which include Food Specialties, Hydrocolloids, and Personal Care & Aroma Ingredients, delivered -4% organic growth, with a good performance in Food Specialties and a weak performance in Personal Care.
Food Specialties delivered a good performance, despite having a slightly negative impact from COVID-19 effects. China-based activities (especially Hydrocolloids) experienced a shortfall in demand in their home markets. During the quarter, the COVID-19 effects started to impact European and North American activities leading to a strong demand for baking and dairy. Beverages however saw a decline as breweries had to reduce their production on weak demand. Savory saw a strong demand for packaged food applications.
CSK was consolidated for the full first quarter, realizing €18 million sales with an Adjusted EBITDA of €4 million in Q1.
Personal Care & Aroma Ingredients had a weak quarter due to soft demand in its Personal Care segment especially for sun filters, while demand for Aroma Ingredients strengthened over the quarter on increased demand for detergents and disinfectants.
in € million | YTD Q1 2020 | YTD Q1 2019 | % change | Q1 2020 | Q1 2019 | % change |
---|---|---|---|---|---|---|
Sales | 660 | 717 | -8% | 660 | 717 | -8% |
Adjusted EBITDA | 118 | 127 | -7% | 118 | 127 | -7% |
Adjusted EBITDA margin (%) | 17.9% | 17.7% | 17.9% | 17.7% | ||
Adjusted EBIT | 83 | 93 | -11% | 83 | 93 | -11% |
Capital Employed | 1,975 | 1,959 | ||||
Average Capital Employed | 1,951 | 1,930 | ||||
ROCE (%) | 17.0% | 19.2% | ||||
Total Working Capital | 405 | 443 | ||||
Average Total Working Capital as % of Sales | 15.3% | 15.3% |
After a solid start to the year, Materials was affected by COVID-19 with demand deteriorating rapidly at the end of the quarter. The lockdowns enforced across China/Asia, Europe and North America have impacted the operations of several DSM customers and closures of retail operations have significantly reduced demand. Overall, DSM estimates a 7% negative sales impact due to COVID-19 effects on Materials in Q1.
Towards the end of the quarter, as China gradually lifted its lockdowns, local demand started to show initial signs of a slow recovery, especially in non-automotive applications. With lockdowns in place in the rest of the world, and especially in Europe and North America since mid-March, significant uncertainty persists over sales development going forward.
Materials reported 6% lower volumes. Prices were down 4%, fully reflecting lower input costs.
Q1 Adjusted EBITDA was -7% compared to previous year fully driven by lower volumes. Q1 2020 Adjusted EBITDA margin was 17.9% compared to 17.7% in Q1 2019, as the quarter saw a small benefit from lower raw material prices and lower costs.
1) DSM Engineering Materials was formerly known as DSM Engineering Plastics. DSM Protective Materials was formerly known as DSM Dyneema.
in € million | YTD Q1 2020 | YTD Q1 2019 | % change | Q1 2020 | Q1 2019 | % change |
---|---|---|---|---|---|---|
Sales | 48 | 47 | 2% | 48 | 47 | |
Adjusted EBITDA | 5 | 6 | 5 | 6 | ||
Adjusted EBIT | -5 | -1 | -5 | -1 | ||
Capital Employed | 618 | 614 |
Q1 sales were up 2%. Biomedical reported good sales growth. Bio-based Products & Services had somewhat lower license income from bio-based fuels. Solar remained soft due to the challenging Chinese market.
Q1 Adjusted EBITDA was slightly down as a result of a negative price/mix effect.
in € million | YTD Q1 2020 | YTD Q1 2019 | Q1 2020 | Q1 2019 |
---|---|---|---|---|
Sales | 10 | 11 | 10 | 11 |
Adjusted EBITDA | -24 | -25 | -24 | -25 |
Adjusted EBIT | -35 | -41 | -35 | -41 |
Q1 Adjusted EBITDA was in line with previous year.
in € million | YTD Q1 2020 | YTD Q1 2019 | Q1 2020 | Q1 2019 |
---|---|---|---|---|
Cash provided by Operating Activities | 287 | 201 | 287 | 201 |
Cash from APM adjustments | 20 | 11 | 20 | 11 |
Cash from capital expenditures | -152 | -150 | -152 | -150 |
Cash from drawing rights | -4 | -2 | -4 | -2 |
Adjusted Net Operating Free Cash Flow | 151 | 60 | 151 | 60 |
Operating Working Capital | 2,373 | 2,430 | ||
Average Operating Working Capital as % of Sales | 26.4% | 25.7% | ||
Operating Working Capital as % of Sales - end of period | 25.9% | 26.5% | ||
Total Working Capital | 1,951 | 1,941 | ||
Average Total Working Capital as % of Sales | 22.1% | 20.5% | ||
Total Working Capital as % of Sales - end of period | 21.3% | 21.2% |
Adjusted Net Operating Free Cash Flow amounted to €151 million being an increase of 152% compared to previous year. The step-up in cash flow is driven by limited cash-out related to working capital in Q1 2020 of €100 million, compared to €165 million in Q1 2019.
Operating Working Capital and Total Working Capital: Operating working capital end Q1 2020 decreased by €57m compared to end of Q1 2019, which was mainly due to an increase in payables on the back of accelerated sourcing of materials. This was also reflected in the OWC as % of sales end-of-period which decreased by 0.6.
The following overview provides a summary of the APM adjustments for the first quarter of 2020 (for the reconciliation see page 13 of PDF below).
Nutrition: EBITDA adjustments amounted to €59 million (EBIT €59 million) of which €50 million related to the Fit for Growth restructuring program and €9 million to acquisition related costs.
Materials: EBITDA adjustments amounted to €3 million (EBIT €3 million) fully related to restructuring costs.
Innovation Center: EBITDA adjustments amounted to €1 million (EBIT €1 million) fully related to restructuring costs.
Corporate Activities: EBITDA adjustments amounted to €2 million (EBIT €2 million) fully related to restructuring costs.
DSM’s long-standing priority has been the health, safety and well-being of its employees and partners, and this remains especially true during the COVID-19 pandemic:
DSM is applying its scientific know-how and resources, including financial contributions, to help ease the impact of COVID-19 in society at large:
DSM advocated for topics such as the role of business in response to COVID-19:
DSM took further steps to address malnutrition:
DSM continued its Inclusion & Diversity journey:
DSM further improved the environmental impact of its own operations:
DSM enabled its customers to deliver more sustainable solutions to their (end) consumers:
DSM received a platinum sustainability medal from EcoVadis in March 2020, putting DSM in the top 1% of its industry. DSM is already ranked first out of 120 companies in its industry according to Sustainalytics, has an AAA rating from MSCI, has achieved Prime Status with ISS-ESG and has a leading position in the rankings of Vigeo Eiris.
Senior Communications Manager
+31 45 578 2420
media.contacts@dsm.com
Vice President Investor Relations
+31 45 578 2864
investor.relations@dsm.com
Senior Communications Manager
+31 45 578 2420
Vice-President Investor Relations
+31 45 578 2864