Sector News

DSM raises 2017 forecast after promising quarter

August 3, 2017
Food & Drink

03 Aug 2017 — DSM has reported a very good Q2, with sales up 8 percent to €2,161m (US$2,559m), and 6 percent organic growth. The company’s adjusted EBITDA is up 15 percent to €376m (US$445.3m). In the nutrition segment, the company has reported a 4 percent organic sales growth and its adjusted EBITDA is up 14 percent.

DSM now expects to deliver full-year 2017 results above the targets set out in its Strategy 2018, with an EBITDA growth for the year moving slightly up from high single-digit to double digit, and with an ROCE increase moving from double-digit basis points to over 100 basis points.

Feike Sijbesma, CEO/Chairman of the DSM Managing Board, commented: “DSM maintained its positive momentum with a very strong first half-year performance. The second quarter was another very good quarter.”

“Halfway through Strategy 2018, we are well ahead of our targets. All businesses are delivering on their growth initiatives, helping us outpace the market; we increasingly provide our customers with innovative solutions, resulting in a continued shift toward specialties. Furthermore, we are fully on track with our wide-ranging cost-reduction and efficiency improvement programs, while anchoring the high-performance culture we strive for. We also continued to make good progress with our sustainability agenda, future-proofing our operations and delivering products and solutions which help our customers to make their businesses more sustainable. The expected Patheon transaction demonstrates our commitment to monetize the significant value within our associates and earlier than anticipated.”

“While being mindful of the volatile macroeconomic environment and the higher-base results achieved since 2015, we are confident for the remainder of the year and have increased our outlook for the full year.”

Nutrition
DSM’s Nutrition business is well on track toward its aspirations as outlined in Strategy 2018. The businesses continued their strong momentum, delivering above-market growth with an increasingly higher-value portfolio of feed and food solutions. At the same time, productivity, market clout and profitability are being supported by improvement programs, covering cost reduction, operational excellence, and sales, the company writes. Over the strategy period to date, these growth and profitability initiatives have enabled Animal Nutrition to continue to grow well despite the economic malaise in Latin America, while bringing Human Nutrition back to a solid growth footing.

H1 2017 sales increased by 9% of which 6% organic growth, mainly coming from 5% volume growth at relatively stable prices, up 1%.

H1 2017 Adjusted EBITDA increased by 14% compared to the same period in 2016. Although Nutrition benefited from an easier year-on-year comparison in prices and currencies in the first half-year, the main drivers behind this strong performance were healthy volume growth and the contribution of the improvement programs. The EBITDA margin of Nutrition increased in this first half year to 19.0%, 80 basis points higher than H1 2016, well within the targeted range of 18-20% by the end of 2018.

Q2 2017 sales were 7% up on prior year with 4% organic growth, fully driven by higher volumes.

Q2 2017 Adjusted EBITDA was €271 million, up 14% compared to Q2 2016, driven by solid organic growth, favorable currencies and the execution of the improvement programs. In addition, both Adjusted EBITDA and Adjusted EBITDA margin benefited in Q2 from highly favorable mix effects in Human Nutrition with a relatively high share of high-margin businesses.

Food Specialties
Food Specialties showed solid organic growth in food enzymes and savory ingredients in H1 2017. Demand for DSM’s market-leading lactase enzyme Maxilact remained buoyant, fueled by the drive to reduce sugar in dairy products.

The Rosalind Franklin Biotechnology Center was officially opened in Delft (NL) in H1. This state-of-the-art facility will accelerate DSM’s biotechnology R&D capabilities for applications in food, feed, fuel and bio-based materials, helping enable the transition from a fossil- to a bio-renewable based economy.

Hydrocolloids started the year soft, but showed a healthy improvement in the second quarter.

The company noted that DSM is currently in a dispute with one of its partners in Andre Pectin (Hydrocolloids) regarding the execution of its called-upon option to purchase the remainder of the shares held by these parties.

Stepping up DSM’s financial performance
Reflecting its disciplined focus on performance as a whole, DSM has implemented a three-year strategic period 2016-2018 with two headline financial targets: high single-digit percentage annual Adjusted EBITDA growth and high double-digit basis point annual ROCE growth.

DSM is delivering significantly ahead of schedule at the halfway point of Strategy 2018, having achieved EBITDA growth rates and improvements in return on capital double the original targets set.

DSM has defined clear actions to achieve its targets, including outpacing market growth, cost reduction and efficiency improvement programs and making a continuous push for consistent improvements in capital efficiency.

Outpaced market growth
DSM has outpaced market growth in 2016 and again in H1 2017, growing at rates around double the markets it operates in. DSM continued to leverage its innovation capabilities together with market insights and close customer relationships to accelerate growth for its solutions in its key segments and to develop and open new segments. DSM also took further steps on promising innovation projects for future growth with a wider societal impact, such as Clean Cow, Green Ocean, Stevia and Niaga.

Source: Food Ingredients

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