DSM maintains positive momentum in challenging markets

HEERLEN, Netherlands, Nov. 5, 2013 (GLOBE NEWSWIRE) --

* DSM records 27% higher Q3 EBITDA compared to Q3 2012 (€342 million versus €270 million) * Life Sciences EBITDA up 23% from Q3 2012 * Materials Sciences EBITDA up 27% from Q3 2012 * Q3 cash flow from operating activities €310 million, higher than Q3 2012 * Core Earnings per Share Q3 2013 up 28% from Q3 2012 * Outlook full year 2013 unchanged Royal DSM, the Life Sciences and Materials Sciences company, today reported a third quarter EBITDA of €342 million compared to €270 million in Q3 2012. This improvement of 27% was realized despite an ongoing challenging macro-economic environment. Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: "I am pleased to report increased profitability in all our business clusters despite the initial impact from adverse currency movements and a continued challenging macro-economic environment. Nutrition continued its good performance notwithstanding some headwinds that emerged towards the end of Q3. Materials Sciences also delivered solid performance with higher profits. Our focus remains on the full integration of acquisitions and delivery of synergies, which together with continued success in our wide-ranging Profit Improvement Program will help improve DSM's returns. Current trading conditions are similar to those experienced at the end of Q3, while foreign exchange rates deteriorated. Nevertheless, we are firmly on track to deliver a significant increase in EBITDA for the full year. The 2013 outlook given at our Capital Markets Day remains unchanged." Key figures -------------------------------------------------------------------------------- third quarter 2013 2012 +/- in € million volume price/mix exch. rates other -------------------------------------------------------------------------------- 2.397 2.304 4% Net sales 5% -2% -4% 5% 1.061 945 12% Nutrition 5% -3% -4% 14% 183 172 6% Pharma 6% 4% -4% 700 703 0% Performance Materials 6% -2% -3% -1% 374 384 -3% Polymer Intermediates 3% -3% -3% 36 35 3% Innovation Center 0% 6% -3% 43 65 Corporate Activities --------------------------------------------------------------------------- third January - quarter September 2013 2012 +/- in € million 2013 2012 +/- --------------------------------------------------------------------------- 342 270 27% EBITDA 998 866 15% 242 202 20% Nutrition 706 589 20% 12 4 200% Pharma 34 26 31% 84 72 17% Performance Materials 246 228 8% 28 16 75% Polymer Intermediates 83 115 -28% -4 -4 Innovation Center -11 -29 -20 -20 Corporate Activities -60 -63 148 111 33% Core net profit 433 378 15% Net profit before 136 103 32% exceptional items 398 362 10% Net profit after 117 81 44% exceptional items 348 267 30% --------------------------------------------------------------------------- 0,86 0,67 28% Core EPS (€/share) 2,53 2,29 10% Net EPS before exceptional items 0,76 0,61 25% (€/share) 2,27 2,15 6% Net EPS after exceptional items 0,65 0,47 38% (€/share) 1,98 1,57 26% Cash flow from 310 253 operations 463 547 Capital expenditures 175 186 (cash) 507 474 Net debt 2.043 1.668 * * year-end 2012 In this report: - 'net profit' is the net profit attributable to equity holders of Koninklijke DSM N.V.; - 'core net profit' is the net profit before exceptional items and before acquisition accounting related intangible asset amortization; - 'organic sales growth' is the total impact of volume and price/mix. Note: all tables are available in the attached Press release-pdf Review by cluster Nutrition Sales in Q3 rose 12% compared to Q3 2012, mainly driven by acquisitions. Organic sales growth was 2% compared to Q3 2012. Currencies had a -4% impact on sales compared to Q3 2012. EBITDA for Q3 was €242 million, up 20% from Q3 2012. The increase was driven by acquisitions, organic growth and the Profit Improvement Program. The EBITDA margin of 22.8% was again at the upper end of DSM's target range. The favorable product mix was partly offset by the initial impact from adverse currency movements. Human Nutrition & Health delivered 5% organic growth compared to Q3 2012, mainly driven by volume. Compared to the previous quarter, organic sales development was -5% driven by the soft demand faced by Food & Beverage customers in developed markets. Moreover, demand for fish oil based Omega 3 dietary supplements was impacted by sharp retail price increases as the entire value chain pushed through higher raw materials prices. Infant nutrition and premixes performed well. In Q3 Fortitech realized sales of €47 million and EBITDA of €12 million, in line with expectations. Animal Nutrition & Health delivered an organic sales growth of 1% compared to Q3 2012, driven by the continued recovery in global animal protein production. However, this recovery remains fragile creating price pressure towards the end of the quarter especially in vitamin E. In addition, poultry and aquaculture protein markets continued to be impacted by diseases in several high growth economies. In Q3 Tortuga delivered sales of €76 million and EBITDA of €15 million, in line with expectations. DSM Food Specialties showed sales growth driven by the contribution of the acquired cultures and enzymes business. Pharma Organic sales growth was 10% compared to Q3 2012, mainly driven by higher volumes at DSM Pharmaceutical Products and improved pricing at DSM Sinochem Pharmaceuticals. Currencies had a 4% negative impact on cluster sales. EBITDA for the quarter grew to €12 million from €4 million in the same quarter of 2012 mainly due to DSM Pharmaceutical Products. Higher sales together with cost savings contributed to this positive development. Performance Materials Organic sales growth was 4% compared to Q3 2012. Volumes increased in all three business groups, with DSM Dyneema delivering double-digit growth. Prices decreased at DSM Resins & Functional Materials, driven by the continued weak European economic climate and mix effects. Prices were stable at DSM Dyneema and DSM Engineering Plastics. Adverse currency movements, mainly in DSM Engineering Plastics, offset a significant part of the cluster's organic growth. EBITDA for Q3 was €84 million compared to €72 million in the same quarter of 2012. EBITDA margins continued to improve, reaching 12% in the quarter. DSM Dyneema saw its EBITDA improve significantly compared to 2012, driven by strong top-line growth. EBITDA of DSM Resins & Functional Materials showed an improvement due to strong cost control. DSM Engineering Plastics delivered a stable EBITDA performance, with negative currency effects compensated for by cost savings. Polymer Intermediates Organic sales development was in line with Q3 2012, with higher volumes fully offset by lower prices. Overall sales were lower due to currency effects. EBITDA for the quarter was higher than in the same quarter of 2012, when there were negative effects from scheduled plant turnarounds in China and the USA. Cost savings and license income also contributed to the improvement in EBITDA. Innovation Center The sales level of the Innovation Center was the same as in 2012. Following the completion of the integration of Kensey Nash in DSM, its sales contribution is from Q3 onward reported as part of organic growth and is no longer disclosed separately. EBITDA remained at the same level as Q3 2012. Corporate Activities EBITDA in Q3 2013 was in line with Q3 2012. The effects of costs related to the Dutch 'crisis tax', higher share-based payments costs, and the non-recurrence of a profit on the sale of certain assets at the Chemelot site which was included in Q3 2012 were compensated for by lower corporate costs. Financial overview Exceptional items Total exceptional items in the third quarter amounted to a loss of €26 million before tax (€19 million after tax). These included €6 million in expenses related to the Profit Improvement Program, €5 million for restructuring to capture acquisition related synergies and €15 million in acquisition and integration related costs. Net profit Financial income and expense in Q3 2013 was in line with the previous quarter and amounted to -€38 million compared to -€23 million in Q3 2012. This increase was mainly caused by unfavorable hedge results, higher interest expense due to increased net debt and a change in presentation of pension related interest income and expense. The effective tax rate was 18%, in line with the full year 2012. Net profit before exceptional items in Q3 2013 increased by 32% and amounted to €136 million, compared to €103 million in Q3 2012. This was mainly due to a higher operating profit, which was partly offset by higher net finance costs. Net earnings per ordinary share (before exceptional items) increased by 25% and amounted to €0.76 in Q3 2013 compared to €0.61 in Q3 2012. Core net profit (net profit before exceptional items and before acquisition accounting related intangible asset amortization) increased by 33% and amounted to €148 million, compared to €111 million in Q3 2012. Core net earnings per share increased by 28% and amounted to €0.86 in Q3 2013 compared to €0.67 in Q3 2012. Cash flow, capital expenditure and financing Cash provided by operating activities in Q3 2013 was €310 million (Q3 2012: €253 million). Operating working capital increased from €1,936 million at the end of 2012 to €2,268 million at the end of Q3 2013 (OWC as a percentage of annualized sales increased from 20.7% to 23.7%). Cash used for capital expenditure amounted to €175 million in Q3 2013 compared to €186 million in Q3 2012. Capital expenditure in Q3 2013 included investments in the POET joint venture for advanced biofuels and the second caprolactam line in China as well as the new ammonium sulfate plant for Polymer Intermediates. Net debt increased by €375 million compared to year-end 2012, mainly due to the acquisition of Tortuga, and stood at €2,043 million (gearing 25%). Share buy-back program In Q4 2013 DSM intends to repurchase 2.5 million shares in order to cover its commitments under existing management and personnel option plans. This share repurchase program is anticipated to continue into Q1 2014 and is the first part of a program of in total 4-5 million shares, which was announced in September 2013. Strategy update DSM in motion: driving focused growth is the strategy that the company embarked on in September 2010. It marks the shift from an era of intensive portfolio transformation to a strategy of maximizing sustainable and profitable growth. DSM's strategic focus on Life Sciences (Nutrition and Pharma) and Materials Sciences (Performance Materials and Polymer Intermediates) is fueled by three main societal trends: Global Shifts, Climate & Energy and Health & Wellness. DSM aims to meet the unmet needs resulting from these societal trends with innovative and sustainable solutions. In September 2013 DSM presented a review of its strategic progress and an update on its 2015 targets. These targets reflect a transformed portfolio and market dynamics and include a new group EBITDA margin target of 14-15% with a ROCE target of 11-12%. Below is an overview of DSM's Q3 2013 achievements. High Growth Economies: from reaching out to being truly global Sales to high growth economies reached a level of 41% of total sales in Q3 2013 compared to 37% in Q3 2012. The strongest contribution to growth in sales to high growth economies was in Nutrition through the acquisition of Tortuga in Latin America. Sales to China amounted to USD 449 million, compared to USD 398 million in Q3 2012. Innovation: from building the machine to doubling innovation output DSM received top 10 honors in Biofuels Digest's prestigious '50 Hottest Companies in Bioenergy' and '30 Hottest in Renewable Chemicals' polls. Sustainability: from responsibility to business driver DSM was once again named among the leaders in the Materials industry group (previously named Chemicals supersector) in the Dow Jones Sustainability World Index. Since 2004 DSM has ranked among the very top leaders in the sector four times and has held the worldwide sustainability leader position six times. Acquisitions & Partnerships: from portfolio transformation to driving focused growth DSM completed the acquisition of a 19% equity interest in Yantai Andre Pectin Co. Ltd., a China based producer of texturing ingredients, in addition to the 10% stake that the company already owned. DSM continues to explore opportunities to reduce its exposure to the merchant caprolactam market as well as options for a partnership in DSM Pharmaceutical Products. Outlook The challenging macro-economic environment experienced during the first three quarters of 2013 continues, with little or no growth in Europe. Asia continues to show good levels of economic activity, though at more modest levels, while the US maintains a modest rate of recovery. Nutrition is expected to show clearly higher results than in 2012 due to organic growth moving towards the target of 2% above GDP and the acquisitions made, with EBITDA margins well within the 20-23% range. However, the recovery in animal protein markets remains fragile, currently leading to some pricing pressure especially in vitamin E. Additionally, fish oil-based Omega 3 sales are being impacted by somewhat lower consumer demand following recent sharp retail price increases. Overall, the compelling growth drivers of the Nutrition business remain unchanged. Business conditions in Pharma remain challenging, but DSM is confident that it will be able to deliver substantially better results, notwithstanding the usual uneven delivery patterns between quarters. Performance Materials is expected to show improved results in 2013, despite the negative effects of caprolactam. Polymer Intermediates is expected to show lower results than in 2012. For the Innovation Center the result of the second half of 2013 is expected to be in line with the second half of 2012. Overall, DSM expects a significant increase in EBITDA during 2013 from the €1.1 billion realized in 2012. This is a result of stronger organic growth, supported by DSM's Profit Improvement Program, as the benefits of acquisitions and a more resilient portfolio are having an increased impact. Foreign exchange rates and the recently announced Dutch 'crisis tax' renewal are likely to have a negative impact on EBITDA. Overall, based on current economic assumptions, DSM continues to expect to move towards its 2013 EBITDA target of €1.4 billion. The combination of the above factors could however result in an EBITDA for 2013 slightly below €1.35 billion. Additional information Today DSM will hold a conference call for the media from 07.30 AM to 08.00 AM CET and a conference call for investors and analysts from 09.00 AM to 10.00 AM CET. Details on how to access these calls can be found on the DSM website, www.dsm.com. Also, information regarding DSM's Q3 2013 results can be found in the Presentation to Investors that can be downloaded from the Investors section of the DSM website. Important dates Integrated Annual Report 2013 Wednesday, 26 February 2014 Report for the first quarter of 2014 Tuesday, 6 May 2014 Report for the second quarter of 2014 Tuesday, 5 August 2014 Report for the third quarter of 2014 Tuesday, 4 November 2014 Heerlen, 5 November 2013 The Managing Board Feike Sijbesma, CEO/Chairman Rolf-Dieter Schwalb, CFO Stefan Doboczky Stephan Tanda Dimitri de Vreeze DSM - Bright Science. Brighter Living.(TM) Royal DSM is a global science-based company active in health, nutrition and materials. By connecting its unique competences in Life Sciences and Materials Sciences DSM is driving economic prosperity, environmental progress and social advances to create sustainable value for all stakeholders. DSM delivers innovative solutions that nourish, protect and improve performance in global markets such as food and dietary supplements, personal care, feed, pharmaceuticals, medical devices, automotive, paints, electrical and electronics, life protection, alternative energy and bio-based materials. DSM's 23,500 employees deliver annual net sales of around €9 billion. The company is listed on NYSE Euronext. More information can be found at www.dsm.com. For more information Media DSM, Corporate Communications tel.: +31 (45) 5782017 e-mail: media.relations@dsm.com Investors DSM, Investor Relations tel.: +31 (45) 5782864 e-mail: investor.relations@dsm.com www.dsm.com Press release-pdf: http://hugin.info/130663/R/1740428/584499.pdf Presentation to investors: http://hugin.info/130663/R/1740428/584502.pdf [HUG#1740428] Source:DSM N.V.