DSM reports solid Q3 results despite weak economic conditions
(Thomson Reuters ONE) -
* Q3 EBITDA from continuing operations ?270 million (Q3 2011: ?339 million)
* Life Sciences, driven by Nutrition, showed good performance, representing
76% of Q3 EBITDA
* Materials Sciences continued to perform well, except for caprolactam
* Further strategic progress with acquisitions
* Strong Q3 cash flow from operating activities of ?253 million
* Outlook 2012 largely unchanged
Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing
Board, said:
"Despite a challenging global trading environment DSM continued to generate good
results mainly driven by our Nutrition cluster. We continued to make good
progress towards our strategic goals with the purchase of Tortuga and Cargill's
cultures and enzymes business. We have now invested ?2.3 billion in acquisitions
since the end of 2010, of which ?1.9 billion in Nutrition. With these
acquisitions we are building new platforms and are strengthening our downstream
network. This will create significant future value for the company whilst
further increasing the resilience of DSM's earnings profile."
"Our Profit Improvement Program, designed in part to offset the impact of
adverse external developments, is on track to deliver significant cost savings.
We expect that trading conditions will remain tough. Our strong focus on cost
control and cash flow together with our strong balance sheet leaves DSM well
placed to navigate near term external challenges."
Find the tables on www.dsm.com or in the pdf version of the quarterly report.
Overview
During the third quarter of 2012, the weak conditions in the global economy seen
throughout the previous quarter continued. The Eurozone challenges remained
significant and the slow-down in China persisted. The US continued to grow at a
modest rate. Despite these conditions, DSM continued to deliver solid
operational results generating Q3 EBITDA of ?270 million which included a
negative caprolactam related impact of ?105 million compared to Q3 2011.
Nutrition delivered a 15% higher EBITDA than in Q3 2011 as a result of organic
growth, positive exchange rate effects and the contribution of Ocean Nutrition
Canada.
Pharma results were adversely impacted by an uneven delivery pattern at DSM
Pharmaceutical Products and by lower margins.
Performance Materials performed well, except for the continued weakness of
caprolactam which impacted the results of DSM Engineering Plastics.
As expected, results at Polymer Intermediates declined significantly versus last
year as already in Q2, mainly due to lower caprolactam margins.
Results at the Innovation Center improved as a result of higher Biomedical sales
and the acquisition of Kensey Nash.
Cash provided by operating activities amounted to ?547 million during the first
three quarters of 2012 versus ?479 million during the same period last year. Net
debt increased by ?839 million compared to year-end 2011 to a level of ?1,157
million, mainly due to acquisitions.
Net sales
Organic sales development was -7% compared to Q3 2011 mainly due to Polymer
Intermediates.
Nutrition continued to deliver organic growth by increasing volumes.
Pharma showed organic growth due to a more favorable product mix.
In Performance Materials the organic sales development of -7% was due to lower
prices and lower volumes.
The organic sales development in Polymer Intermediates was due to lower volumes
as well as lower caprolactam prices.
Business review by cluster
Nutrition
Organic sales growth was 1% compared to Q3 2011 with volume growth (2%) and
slightly reduced prices
(-1%). Sales growth was positively impacted by favorable exchange rates (4%) and
the impact of the Ocean Nutrition Canada acquisition (4%).
Animal Nutrition & Health achieved modest volume growth despite the drought in
the US which resulted in higher grain prices. This subsequently led to lower
feed and meat production. Prices were slightly down.
Human Nutrition & Health prices were up slightly while volumes remained
relatively stable. Nutritional Lipids experienced strong growth outside North
America with synergies realized in line with targets. The integration of Ocean
Nutrition Canada is on track with sales of ?30 million and EBITDA of ?8 million.
Personal care continued to grow especially in sun care and skin care.
DSM Food Specialties realized growth in all market segments. Especially enzymes
showed strong organic growth.
EBITDA for the third quarter was ?202 million, up ?26 million from the same
quarter a year earlier driven by higher margins, favorable exchange rates and
the contribution of Ocean Nutrition Canada. At 21.4% the Q3 EBITDA margin was in
line with the defined target of 20% - 23%.
Pharma
Net sales growth was 1% compared to Q3 2011 driven by a more favorable product
mix (+1%), favorable exchange rates (+3%) and the deconsolidation of DSM
Sinochem Pharmaceutical combined with the re-integration of the Maleic Anhydride
and Derivatives business (-3%). Higher volumes at DSM Sinochem Pharmaceutical
compensated for reduced volumes at DSM Pharmaceutical Products.
EBITDA for the quarter was ?4 million, down from ?13 million in the same quarter
a year earlier. Lower volumes caused by uneven delivery patterns in the DSM
Pharmaceutical Products business and lower margins at DSM Sinochem
Pharmaceutical, despite higher volumes, had a negative impact.
Performance Materials
Organic sales development was -7% compared to Q3 2011 due to lower volumes in
DSM Resins and lower volumes and lower prices at DSM Engineering Plastics,
mainly as a result of lower polyamide-6 prices stemming from lower caprolactam
prices. Currency developments and acquisitions had a positive impact on sales.
EBITDA was below Q3 last year as lower margins in the polyamide-6 value chain of
DSM Engineering Plastics offset the good performance of the rest of the cluster.
Despite ongoing subdued market conditions DSM Resins delivered improved results
due to better margins and the implementation of cost saving actions.
Polymer Intermediates
Organic sales development was -24% compared to Q3 2011, due to 15% lower prices
and 9% lower volumes. Currencies had a 5% positive impact on sales. Volumes were
lower mainly due to scheduled caprolactam plant turnarounds in China and the US.
As expected, EBITDA was clearly below the record levels of Q3 2011. Caprolactam
margins remained at the low levels reached at the end of Q2 2012. In addition,
the scheduled plant turnarounds in China and the USA contributed to the lower
EBITDA.
Innovation Center
Sales improved strongly compared to Q3 2011 as a result of higher Biomedical
sales as well the acquisition of Kensey Nash which has been consolidated as of
June 22.
EBITDA improved due to higher sales and the acquisition of Kensey Nash which now
has been integrated into the biomedical business. Kensey Nash contributed in
line with expectations with sales of ?17 million and EBITDA of ?7 million.
Corporate activities
The lower sales compared to Q3 2011 were due to the re-integration of the Maleic
Anhydride and Derivatives business into the Pharma cluster.
EBITDA improved slightly compared to Q3 2011 as a result of the sale of certain
assets at the Chemelot site which was partly offset by higher share based
payment costs and higher project related costs.
Exceptional items
Exceptional items amounted to a loss of ?26 million before tax (?22 million
after tax). In connection with the Profit Improvement Program, restructuring
costs and provisions were recognized for an amount of ?13 million. Acquisition
related costs amounted to ?13 million.
Net profit
Net finance costs increased by ?8 million compared to Q3 2011 to a level of ?23
million mainly as a consequence of currency effects and less average cash at
lower interest rates.
The effective tax rate was 18% compared to 19% for the full year 2011.
Net profit before exceptional items decreased by ?56 million compared to Q3
2011 to ?103 million mainly due to the lower Polymer Intermediates' operating
profit.
Compared to Q3 2011 total net profit decreased by ?90 million to ?81 million.
Net earnings per ordinary share (continuing operations, before exceptional
items) amounted to ?0.61 in Q3 2012 compared to ?0.94 in Q3 2011.
Cash flow, capital expenditure and financing
Cash provided by operating activities was ?253 million in Q3 2012 compared to
?323 million in Q3 2011.
Year-to-date Q3 2012 cash provided by operating activities amounted to ?547
million versus ?479 million in the same period last year.
Excluding the acquisition effect of Ocean Nutrition Canada and Kensey Nash,
Operating working capital decreased by ?50 million compared to the level at the
end of Q2 2012.
Cash flow related to capital expenditure amounted to ?186 million in Q3 2012
compared to ?144 million in Q3 2011. In the first three quarters of 2012 cash
flow related to capital expenditure amounted to ?474 million compared to ?304
million in the same period last year.
Net debt increased by ?839 million compared to year-end 2011 and stood at ?1,157
million (gearing 16%).
DSM in motion: driving focused growth
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.
Below is an update on DSM's strategic achievements in the third quarter.
Acquisitions & Partnerships: from portfolio transformation to driving focused
growth
In July, DSM successfully completed the acquisition of Ocean Nutrition Canada,
the leading global provider of fish-oil derived nutritional products to the
dietary supplement and food and beverage markets. With this acquisition DSM
strengthens and complements its Nutritional Lipids growth platform, established
after the acquisition of Martek in 2011. DSM can now uniquely offer a full
product range in the rapidly growing nutritional lipids category, offering both
fish oil derived omega-3 fatty acids and microbially derived nutritional lipids.
In July, DSM successfully completed the acquisition of the Italian animal health
and nutrition premix specialist, Cilpaz Srl. Although relatively minor in size,
this acquisition underlines DSM's strategy of focused growth.
In August DSM entered into a definitive agreement to acquire Tortuga, a
privately held Brazilian company, in a cash transaction for a total enterprise
value of about ?465 million (BRL 1,160 million). Tortuga is a leading company in
nutritional supplements with a focus on pasture raised beef and dairy cattle.
The company is headquartered in Sao Paulo, Brazil with approximately 1,200
employees. Subject to regulatory approvals, the transaction is expected to close
in Q1 2013.
In October, DSM entered into a definitive agreement to acquire Cargill's
cultures and enzymes business in a cash transaction for a total enterprise value
of about ?85 million. This business is a globally leading manufacturer of
cultures and enzymes for the dairy and meat industries with manufacturing
operations in Wisconsin (USA) and France. The business generates net sales of
about ?45 million per year with approximately 200 employees.
Since it set out its current strategic course in September 2010, DSM has
invested ?2.3 billion worth of growth-enhancing acquisitions. Nearly ?1.9
billion is being spent in the Nutrition cluster as the company continues to
further improve its attractive portfolio in health, nutrition and materials to
deliver value with stronger, more stable growth and profitability.
Innovation: from building the machine to doubling innovation output
Bio-based Products & Services is making further strategic progress. The bio-
succinic acid facility in Italy is currently in the start-up process. DSM and BP
have extended their cooperation on the joint development of advanced bio-diesel.
DSM successfully produced its first commercial batch of advanced C5 yeast for
cellulosic ethanol producers.
High Growth Economies: from reaching out to being truly global
Sales to High growth Economies accounted for 37% of total sales versus 41% of
total sales in Q3 2011 which was mainly due to lower caprolactam sales in China.
Net sales to China amounted to USD 398 million versus USD 554 million in Q3
2011 which was mainly due to lower sales prices at DSM Polymer Intermediates.
Outlook
The outlook for the global economy remains uncertain. DSM's Profit Improvement
Program is fully on track and aims to deliver ?150 million of benefits by 2014.
This program together with an on-going focus on cash generation will help to
offset adverse external factors. The acquisitions announced since the end of
2010 will create considerable economic value for DSM whilst increasing the
resilience of its earnings.
Nutrition continues to demonstrate its resilience with EBITDA expected to be
clearly above 2011. Ocean Nutrition Canada will add about ?20 million in EBITDA
in 2012.
Business conditions in Pharma are likely to remain challenging for the remainder
of the year, although DSM continues to expect to deliver a slightly improved
EBITDA despite the 50% deconsolidation of the anti-infectives business. DSM
continues to seek opportunities to make further strategic progress in this
cluster.
Full year EBITDA for Performance Materials is expected to be slightly below
2011, due to continuing weak market conditions for caprolactam.
The adverse market conditions for Polymer Intermediates are not expected to
improve during Q4 and therefore DSM anticipates EBITDA to be clearly below the
exceptional 2011 result.
For the Innovation Center, EBITDA is expected to improve compared to last year
due to the acquisition of Kensey Nash which will add about ?10 million in EBITDA
in 2012.
Overall, DSM remains cautious about the economic outlook for the remainder of
2012. DSM's expectations for the year are largely in line with its previous
guidance, with the exception of ongoing weakness in caprolactam which also
affects the Performance Materials cluster.
Assuming no further deterioration of the economic conditions, and based on its
strategy, financial strength and the Profit Improvement Program, DSM will move
towards the 2013 EBITDA target.
Additional information
Today DSM will hold a conference call for the media from 07.30 AM to 08.00 AM
CET which can be followed via a webcast 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 here. Also, information regarding DSM's third quarter results 2012 can
be found in the Presentation to Investors, which can be downloaded from the
Investors section of the DSM website.
Important dates
Annual Report 2012 Wednesday, 20 February
2013
Report for the first quarter 2013 Thursday, 2 May 2013
Annual General Meeting of Shareholders Friday, 3 May 2013
Report for the second quarter 2013 Tuesday, 6 August 2013
Report for the third quarter 2013 Tuesday, 5 November
2013
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
22,000 employees deliver annual net sales of about ?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) 5782421
e-mail: media.relations(at)dsm.com
Investors
DSM, Investor Relations
tel.: +31 (45) 5782864
e-mail: investor.relations(at)dsm.com
www.dsm.com
Financial summary-pdf:
http://hugin.info/130663/R/1655251/534840.pdf
Integrated report-pdf:
http://hugin.info/130663/R/1655251/534841.pdf
Press release-pdf:
http://hugin.info/130663/R/1655251/534839.pdf
This announcement is distributed by Thomson Reuters on behalf of
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(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: DSM N.V. via Thomson Reuters ONE
[HUG#1655251]
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Datum: 06.11.2012 - 07:15 Uhr
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News-ID 199793
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