- 2013 FY EBITDA substantially up to €1,314 million (2012 FY: €1,109 million)
- Q4 2013 EBITDA €316 million (Q4 2012: €243 million)
- Strong cash generation from operating activities of €889 million in 2013 (2012: €730 million)
- Dividend increase of 10% proposed to €1.65 per ordinary share (2012: €1.50)
- Share repurchase program to hedge existing option plans continues
- Target for 2014 to improve business performance to at least offset negative currency impact
HEERLEN, Netherlands, Feb. 26, 2014 (GLOBE NEWSWIRE) -- Royal DSM, the Life Sciences and Materials Sciences company, today reported final, audited, results for 2013. These results confirm the preliminary, unaudited results DSM published on 21 January 2014. DSM today also issues its Integrated Annual Report, which can be found on DSM's corporate website.
For the full year 2013, DSM delivered 18% higher EBITDA, while facing a challenging economic environment.
For Q4 the company realized 30% higher EBITDA.
In Q4 all clusters delivered a solid performance despite negative exchange rate effects. Nutrition was in addition impacted by a combination of unrelated market headwinds. These included weakness in dietary supplements and fish oil based Omega 3 markets in the US, soft demand in Western food & beverage markets, and price pressures especially in vitamin E following weak demand in animal feed markets earlier in the year. DSM previously signaled these adverse conditions, but the impact through the end of the year was more pronounced than anticipated.
Due to the transaction announced with JLL Partners, DSM Pharmaceutical Products has been classified as Asset held for Sale and discontinued operations.
Commenting on these results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: "We achieved significant strategic progress in 2013, also demonstrated by an 18% increase in full year EBITDA and strong cash generation. We were pleased with the strong performance in Materials Sciences in Q4. Despite the moderate Q4 results in Nutrition, due to currencies and market weakness, DSM's market positions remained strong. This business with its broad, global offering across the value chain is well positioned to benefit from the structural megatrends, with the need to nourish a growing and aging global population, living increasingly in urban areas, paying more attention to health and well-being. This will continue to drive increased demand for nutritional ingredients.
We remain firmly on track to deliver on our strategy and to create sustainable value with all our clusters. Therefore we propose a dividend increase of 10%. In the short term our focus will continue on the operational performance of our businesses, supported by our Profit Improvement Program and intensified R&D and innovation programs."
Key figures
| fourth quarter | exch. rates | ||||||||
| 2013 | 2012 | +/- | in € million | volume | price/mix | other | |||
| 2,377 | 2,269 | 5% | Net sales | 6% | -2% | -3% | 4% | ||
| 1,038 | 923 | 12% | Nutrition | 4% | -1% | -4% | 13% | ||
| 45 | 46 | -2% | Pharma | -4% | 11% | -9% | |||
| 659 | 655 | 1% | Performance Materials | 7% | -2% | -3% | -1% | ||
| 393 | 393 | 0% | Polymer Intermediates | 11% | -9% | -2% | |||
| 38 | 33 | 15% | Innovation Center | 21% | -3% | -3% | |||
| 46 | 68 | Corporate Activities | |||||||
| 2,219 | 2,118 | 5% | Total continuing operations | 7% | -3% | -3% | 4% | ||
| 158 | 151 | 5% | Discontinued operations | 6% | 1% | -2% | |||
| full year | exch. rates | ||||||||
| 2013 | 2012 | +/- | in € million | volume | price/mix | other | |||
| 9,618 | 9,131 | 5% | Net sales | 5% | -3% | -2% | 5% | ||
| 4,195 | 3,667 | 14% | Nutrition | 5% | -3% | -3% | 15% | ||
| 184 | 183 | 1% | Pharma | 0% | 7% | -6% | |||
| 2,746 | 2,772 | -1% | Performance Materials | 4% | -2% | -2% | -1% | ||
| 1,579 | 1,596 | -1% | Polymer Intermediates | 7% | -7% | -1% | |||
| 149 | 102 | 46% | Innovation Center | 17% | -2% | -3% | 34% | ||
| 198 | 268 | Corporate Activities | |||||||
| 9,051 | 8,588 | 5% | Total continuing operations | 5% | -3% | -3% | 6% | ||
| 567 | 543 | 4% | Discontinued operations | 4% | 1% | -1% | |||
In this report:
- 'Organic sales growth' is the total impact of volume and price/mix.
- 'Discontinued operations' comprises net sales and operating profit (before depreciation and amortization) of DSM Pharmaceutical Products.
Key figures
| fourth quarter | full year | ||||||
| 2013 | 2012 | +/- | in € million | 2013 | 2012 | +/- | |
| 316 | 243 | 30% | EBITDA | 1,314 | 1,109 | 18% | |
| 208 | 204 | 2% | Nutrition | 914 | 793 | 15% | |
| 1 | 0 | Pharma | 3 | 3 | 0% | ||
| 78 | 52 | 50% | Performance Materials | 324 | 280 | 16% | |
| 30 | 14 | 114% | Polymer Intermediates | 113 | 129 | -12% | |
| -6 | -9 | Innovation Center | -17 | -38 | |||
| -14 | -31 | Corporate Activities | -74 | -94 | |||
| 297 | 230 | 29% | Total continuing operations | 1,263 | 1,073 | 18% | |
| 19 | 13 | 46% | Discontinued operations | 51 | 36 | 42% | |
| 118 | 71 | 66% | Core net profit, continuing operations | 549 | 463 | 19% | |
| Net profit before exceptional items, | |||||||
| 101 | 70 | 44% | continuing operations | 497 | 449 | 11% | |
| -77 | 18 | Net profit after exceptional items, total DSM | 271 | 278 | -3% | ||
| 0.68 | 0.42 | 62% | Core EPS (€/share) | 3.19 | 2.80 | 14% | |
| Net EPS before exceptional items, | |||||||
| 0.58 | 0.41 | 41% | continuing operations (€/share) | 2.84 | 2.59 | 10% | |
| -0.46 | 0.10 | Net EPS after exceptional items, total DSM (€/share) | 1.52 | 1.62 | -6% | ||
| 426 | 183 | Cash flow from operations | 889 | 730 | |||
| 228 | 212 | Capital expenditures (cash) | 735 | 686 | |||
| Net debt | 1,862 | 1,668 | |||||
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 from continuing operations before exceptional items and before acquisition accounting related intangible asset amortization;
- Joint ventures are included in the results of 2013; proportional consolidation will be terminated from 2014 onward.
- The 2013 EBITDA on comparable basis for 2014 is €1,261 million due to the discontinuation of DSM Pharmaceutical Products and the changed accounting for joint ventures.
- From 2014 onward these entities will be reported in the line Associates and the results thereof will be shown in DSM's net profit, but not anymore in EBITDA. A restatement of 2013 for these effects is attached as an annex to this press release.
Note: all tables are available in the attached Press release-PDF
Review by cluster
Nutrition
Sales in the fourth quarter increased 12% compared to Q4 2012, mainly driven by acquisitions. Organic sales growth was 3% compared to Q4 2012, including 4% higher volumes and 1% lower prices. Currencies had a negative impact of about 4% on sales compared to Q4 2012. DSM's overall market positions remained strong.
EBITDA for Q4 was €208 million, up 2% from Q4 2012. The positive impact of the organic growth, the contribution from acquisitions and the Profit Improvement Program was offset by negative foreign exchange developments, lower prices and a less favorable product mix resulting in an EBITDA margin of 20% for the quarter.
In Human Nutrition & Health net sales were €386 million in Q4. Organic sales growth in Q4 was 1% due to 1% higher price/mix. Volumes were essentially flat compared to Q4 2012 but down 5% from Q3 2013. Lower consumer demand in the US for dietary supplements, even more pronounced for fish oil based Omega 3 dietary supplements negatively impacted sales volumes in Q4. Also the food & beverage markets in Western countries were soft. Premixes and Infant Nutrition showed good performance. In Q4 Fortitech realized sales of €43 million with a strong EBITDA of €14 million.
In Animal Nutrition and Health net sales were €512 million in Q4. Organic sales growth in Q4 was 9% as volumes were up 12% compared to the weak Q4 2012 and 3% above Q3 2013. Price/mix had a negative effect of 3% compared to Q4 2012. A prolonged period of demand weakness earlier in the year has affected prices of several animal nutrition products negatively in 2013, most notably vitamin E. This demand weakness in combination with market speculation about possible increases in supply has increased price pressure on this vitamin. In Q4 Tortuga delivered sales of €68 million and an EBITDA of €9 million.
DSM Food Specialties had a good Q4 with continued growth in food enzymes and cultures.
Full year organic growth for the cluster was 2%. Volumes increased by 5%, while price/mix was down 3%. In Human Nutrition & Health, organic growth was 4% with volumes up 5% and price/mix down 1%. Animal Nutrition & Health organic growth was almost flat with volumes up 5% and price/mix down 4%. The EBITDA of the Nutrition cluster increased 15% in 2013, driven by the positive impact of acquisitions, organic growth and operational performance, despite a negative impact from currencies.
Overall the acquisitions have performed well in Q4 as well as the full year. Martek, Fortitech and Tortuga exceeded expectations. Ocean Nutrition Canada was confronted with market headwinds towards the end of the year. The integration of the acquisitions is well advanced. Synergies have been delivering according to plan. DSM continues to implement further efficiency improvements in support of its unique business model in Nutrition.
Pharma (continuing operations)
Organic sales growth at DSM Sinochem Pharmaceuticals, which is consolidated on a proportional basis for 50%, in the fourth quarter was 7% due to higher prices. This was more than offset by unfavorable exchange rates. Q4 2013 EBITDA was in line with 2012. For the full year, sales were flat and profitability still too low. Organic sales growth of 7% was offset by negative exchange rate developments, which intensified towards the end of the year.
Pharma (discontinued operations)
DSM Pharmaceutical Products, which is now reported as discontinued activities, delivered an improved performance in Q4 2013, with good volume growth and higher prices being reflected also in good EBITDA growth. For the full year, the performance of DSM Pharmaceutical Products made significant progress, which will support a good start for the value-creating venture with JLL Partners.
Performance Materials
Organic sales growth in Q4 2013 was 5% compared to Q4 2012. Overall sales were driven by good volume growth (7%) with lower prices (2%). Adverse currency effects amounted to 3%. Volumes in Q4 2013 increased versus same period last year especially in DSM Engineering Plastics. Prices decreased at DSM Resins & Functional Materials, driven by the weak market conditions in Building and Construction in Europe.
EBITDA for the quarter was €78 million compared to €52 million in Q4 2012 with considerable increases in all three business groups, supported by a strong execution of the Profit Improvement Program. DSM Engineering Plastics showed good sales volumes, while at DSM Resins & Functional Materials cost control more than offset lower prices. DSM Dyneema reported a higher EBITDA thanks to a more favorable price/mix.
Full year organic sales growth was 2%, with 4% higher volumes and 2% lower prices.
Full year EBITDA was up 16% compared to 2012. DSM Engineering Plastics delivered a strong underlying performance in its specialty business. This, and strong cost control, was offset by negative currency effects and lower results in polyamide 6. DSM Resins & Functional Materials saw a considerable EBITDA increase due to strong cost control and a one-off book profit. DSM Dyneema's full year result showed a strong improvement driven by sales growth and operational performance.
Polymer Intermediates
Organic sales growth in Q4 2013 was 2% compared to the same quarter last year, with higher volumes (11%) and lower prices (9%). Sales were negatively impacted by currency effects of 2%.
EBITDA for the quarter doubled compared to Q4 2012, when there was a negative effect from a plant turnaround in the US. Cost savings and license income further contributed to the improvement in EBITDA.
Full year organic sales development was in line with 2012 as higher volumes (7%) were offset by lower prices (7%). Full year EBITDA decreased compared to 2012 given the lower caprolactam prices and higher benzene prices since Q2 2012. This impact could not be completely compensated for by cost savings and license income.
Innovation Center
Both Q4 EBITDA and full year showed an increase compared to the same period last year as a result of higher biomedical sales and lower project costs. Kensey Nash performed well in Q4 as well as the full year, in line with expectations. The cellulosic bioethanol plant DSM is building together with POET is nearing completion and is scheduled to start up in Q2 2014.
Corporate Activities
EBITDA of Q4 as well as for the full year improved compared to the same period in 2012, as a result of lower share-based payments costs, lower project costs and some incidentals.
Financial overview
Exceptional items
Total exceptional items in the fourth quarter amounted to a loss of €192 million before tax (€187 million after tax). These included a €152 million impairment of DSM Pharmaceutical Products following the announced transaction with JLL Partners, a €18 million impairment of capitalized product/process development cost, €16 million in expenses related to the Profit Improvement Program, and €10 million in acquisition and integration related costs.
Full year exceptional items amounted to a loss of €270 million before tax (€237 million after tax) including the €152 million impairment of DSM Pharmaceutical Products, €76 million in restructuring costs, €35 million in acquisition related costs and €10 million in costs for restructuring to capture synergies.
Net profit
Financial income and expense in Q4 2013 decreased by €4 million and amounted to -€31 million compared to
-€35 million in Q4 2012. This decrease was mainly due to favorable hedge results. Full year financial income and expense increased by €33 million compared to the previous year to a level of -€142 million. This increase was mainly the result of unfavorable hedge results and higher interest expenses due to higher net debt.
The effective tax rate was 18%, in line with the full year 2012.
Net profit from continuing operations, before exceptional items in Q4 2013 increased by 44% and amounted to €101 million, compared to €70 million in Q4 2012. Full year net profit, from continuing operations before exceptional items increased by 11% and amounted to €497 million, compared to €449 million in 2012.
Net earnings per ordinary share (continuing operations, before exceptional items) increased by 41% and amounted to €0.58 in Q4 2013 compared to €0.41 in Q4 2012. Full year net earnings per ordinary share (continuing operations, before exceptional items) increased by 10% to a level of €2.84 compared to €2.59 in 2012.
Core net profit (net profit from continuing operations, before exceptional items and before acquisition accounting related intangible asset amortization) in Q4 2013 increased by 66% and amounted to €118 million, compared to €71 million in Q4 2012. For the full year 2013 core net profit increased by 19% and amounted to €549 million compared to €463 million in 2012.
Core net earnings per share increased by 62% and amounted to €0.68 in Q4 2013 compared to €0.42 in Q4 2012. For the full year 2013 core net earnings per share increased by 14% to a level of €3.19 compared to €2.80 in 2012.
Dividend
DSM's dividend policy is to provide a stable and preferably rising dividend. DSM proposes to increase the dividend by 10% from €1.50 to €1.65 per ordinary share. This will be the fourth consecutive increase. This will be proposed to the Annual General Meeting of Shareholders to be held on 7 May 2014. An interim dividend of €0.50 per ordinary share having been paid in August 2013, the final dividend would then amount to €1.15 per ordinary share. The dividend will be payable in cash or in the form of ordinary shares at the option of the shareholder. Dividend in cash will be paid after deduction of 15% Dutch dividend withholding tax. The ex-dividend date is 9 May 2014.
Cash flow, capital expenditure and financing
Cash provided by operating activities in Q4 2013 was very good at €426 million (Q4 2012: €183 million) due to a strong reduction in operating working capital. Cash provided by operating activities for the full year resulted in a healthy improvement and amounted to €889 million compared to €730 million in 2012.
Total cash used for capital expenditure amounted to €228 million in Q4 2013 (Q4 2012: €212 million). Cash used for capital expenditure for the full year 2013 amounted to €735 million of which €37 million was funded by customers (2012: €686 million, of which €13 million funded by customers).
Net debt increased by €194 million compared to year-end 2012, mainly due to the acquisition of Tortuga, and stood at €1,862 million (gearing 23%).
Operating working capital (continuing operations) increased from €1,807 million at the end of 2012 to €1,873 million at the end of 2013 (OWC as a percentage of Q4 annualized sales increased from 20.7% to 21.1%).
Share repurchase program
In September 2013 DSM announced a repurchase of 4-5 million shares in order to cover its commitments under existing management and personnel option plans. In Q4 2013 and Q1 2014 in total 2.5 million shares were repurchased. DSM intends to commence the repurchase of the remaining part (2.5 million shares) as from 27 February 2014 with finalization anticipated in Q2 2014.
Strategy update
DSM is firmly committed to its strategy, which has and will continue to deliver sustainable value. 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 and Materials Sciences 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 of 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%.
In Nutrition DSM continues to implement further efficiency improvements (affecting some 300 positions) in support of its unique business model, emphasizing increasingly local solutions in addition to its strong global product positions. This will further strengthen its customer relationships, while increasing its ability to deliver tailor-made local applications and blends, meeting increasingly demanding requirements from customers through deeper insights and customized solutions. The Nutrition targets for 2015 are unchanged: sales growth of GDP +2% with an EBITDA-margin of 20-23%.
In Performance Materials DSM is seeking to accelerate growth and improve performance by upgrading its portfolio and leveraging opportunities arising from megatrends, implementing differentiated strategies for its business to capture profitable growth. At the same time it is implementing its Profit Improvement Program to further offset macro-economic headwinds and actively manage its margins and costs. The 2015 targets for Performance Materials are unchanged: sales growth at double GDP with an EBITDA-margin of 13-15%. In Polymer Intermediates the company continues to look at options to reduce its exposure to the merchant caprolactam markets.
Below are some highlights of DSM's 2013 achievements. More can be found in DSM's 2013 Integrated Annual Report, published today.
High Growth Economies: from reaching out to being truly global
Sales to high growth economies reached a level of 39% of total sales in 2013 compared to 38% in 2012. Today more than 30 percent of DSM employees live and work in high growth economies.
Innovation: from building the machine to doubling innovation output
In 2013 innovation sales as percentage of total sales amounted to 19% compared to 18% in 2012. Gross margins of DSM's innovation sales are over 5% higher than the average of DSM's running business. DSM's efforts in R&D and Innovation will be intensified to generate in particular more radical innovations that offer higher returns.
Sustainability: from responsibility to business driver
For 2013 DSM reported good progress on all of its sustainability aspirations for 2015. In 2013, over 90% of DSM's innovation pipeline was ECO+, while ECO+ sales as a percentage of DSM's running business increased to 45% in 2013. Data from DSM Engineering Plastics and DSM Resins & Functional Materials show that ECO+ sales have grown by around 10% per year since 2010. Moreover, ECO+ sales make a significantly higher contribution to the margins of these two business groups.
Acquisitions & Partnerships: from portfolio transformation to driving focused growth
Upon closing of the announced transaction with JLL, DSM will have created partnerships for its Pharma activities that will enhance the value of these businesses in the mid-term, offering excellent value creation opportunities. DSM also finalized the acquisition of Tortuga, Unitech, Bayer's animal health premix business in the Philippines and a 29% stake in Andre Pectin (China).
Outlook
For 2014 DSM takes a prudent approach, assuming the unfavorable January 2014 foreign exchange rates are maintained for the year. Furthermore, DSM assumes a continued challenging macro-economic environment, with low growth in Europe, modest growth in the US, and a slowdown in the high growth economies.
Based on the above, DSM targets for 2014 to improve its business performance to at least offset the negative currency impact of €70 million at January 2014 exchange rates.
Comparable EBITDA in 2013 from continuing operations after new accounting rules for Joint ventures amounted to €1,261 million.
A restatement of 2013, following the discontinuation of DSM Pharmaceutical Products and the new accounting rules for Joint ventures, is included as an annex to this press release.
Additional information
Today DSM will hold a conference call for the media from 08.00 AM to 08.30 AM CET and a conference call for investors and analysts from 11.00 AM to 12.00 AM CET. Details on how to access these calls can be found on the DSM website, www.dsm.com. Also, information regarding DSM's full year 2013 results can be found in the Presentation to Investors that can be downloaded from the Investors section of the DSM website.
Important dates
Report for the first quarter of 2014 Tuesday, 6 May 2014
Annual General Meeting of Shareholders Wednesday, 7 May 2014
Ex-dividend date 2014 Friday, 9 May 2014
Report for the second quarter of 2014 Tuesday, 5 August 2014
Report for the third quarter of 2014 Tuesday, 4 November 2014
Capital Markets Day Wednesday, 5 November 2014
Notes to the financial statements
The full financial statements of DSM are included in the Integrated Annual Report 2013 that is available on www.dsm.com as of today.
Accounting policies
The consolidated financial statements of DSM for the year ended 31 December 2013 were prepared according to International Financial Reporting Standards (IFRS) as adopted by the European Union and valid as of the balance sheet date.
Heerlen, 26 February 2014
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 simultaneously. DSM delivers innovative solutions that nourish, protect and improve performance in global markets such as food and dietary supplements, personal care, feed, medical devices, automotive, paints, electrical and electronics, life protection, alternative energy and bio-based materials. DSM's 24,500 employees deliver annual net sales of around €10 billion. The company is listed on NYSE Euronext. More information can be found at www.dsm.com.
For more information:
| DSM Corporate Communications Herman Betten tel. +31 (0) 45 5782017 e-mail media.relations@dsm.com | DSM Investor Relations Dave Huizing tel. +31 (0) 45 5782864 e-mail investor.relations@dsm.com |
Press release-pdf http://hugin.info/130663/R/1764545/598350.pdf
Presentation to Investors http://hugin.info/130663/R/1764545/598351.pdf
HUG#1764545