Rolf-Dieter S chwalb, CFO / Member of t he Managing Board Driving focused growth DS M Capital Markets Day 2013 Page
Overview • What has been achieved since 2010 • Mid-t erm review outcome • Financial policies and met rics to steer t he business • Way forward Page
What we have delivered so far Profitability targets 2013 2013 expectation EBITDA € 1.4 - 1.6bn Towards € 1.4bn ROCE >15% 9-10% Sales targets 2015 2013 H1 realization Organic sales growth 5% - 7% annually 1% China sales from US $ 1.5bn to >US$ 3bn US$ 0.8bn High Growt h Economies sales from ~32% towards 50% of total sales ~40% * Innovation sales from ~12% to 20% of total sales 18% EBA aspiration 2020 2013 H1 realization EBA sales >€ 1bn ~€ 75m * 40% in 2013 H1 is incl. pro forma sales Tortuga in Q1 2013 Page
Overview • What has been achieved since 2010 • Mid-term review outcome • Financial policies and met rics to steer t he business • Way forward Page
Updated 2015 targets Profit targets 2015 • EBITDA margin (% ) 14% -15% • ROCE 11% -12% Sales target 2015 • Organic sales growt h 5% -7% annually • China sales towards US $ 3bn • High Growth Economies sales about 45% of t otal sales • Innovat ion sales 20% of t otal sales • ECO+ sales towards 50% of tot al sales Cluster targets 2015 • Nut rit ion EBITDA margin 20% - 23% S ales growt h GDP +2% • Performance Mat erials EBITDA margin 13% - 15% S ales growth at double GDP Page
Profit Improvement Program on track Cumulat ive Benefit s (€ million) €250-280m 300 €200-220m €160m PIP Extension 200 PIP 100 DSM Resins 0 2013 2014 2015 • Expect ed struct ural annual benefit s of €250-280 million by 2015; several programs will cont inue t hereafter • PIP one-off costs in 2013 will be ~ €80 million • Total cumulative EBITDA benefits of these PIP programs by end 2013 are estimated at ~ €160 million Page
Examples of broad range of projects started • The restruct uring of DNP sit es (Grenzach, Dalry) is progressing as planned • Restruct uring of Pharma Chemicals in Linz, Aust ria has started and will Life Sciences cont inue t o run unt il 2015. Biosolut ions in Capua, Italy is nearly completed • Closure of anti-infect ives site in Zhangj iakou, Hebei province, China • In Engineering Plast ics, a comprehensive program was init iat ed in 2012 to cut fixed costs, to improve operational efficiency, pricing and margin management and to accelerate t he growth of innovat ive Materials specialt y product s. This program is well under way Sciences • Rest ruct uring init iat ives at Dyneema are being complet ed • In Resins, a program was init iated in 2011 and result ed in strong cost reduction in 2013 • Worldwide payroll is being outsourced to 3 rd part y service provider Corporate • Transfer of support activities t o shared service centers in India and China ongoing Activities* • Restruct uring of t he global IT support net work ongoing Headcount reductions on track with plan Page
Savings to be fully effective by 2015 Annual Savings Provisions / Provisions / by 2015 Impairments 2012 Impairments 2013e Life Sciences ~ €90-100m ~ €70m ~ €25m Materials ~ €110-120m ~ €40m ~ €10m Sciences Corporate ~ €50-60m ~ €40m ~ €45m Activities Total ~ €150m ~ €80m ~ €250-280m DSM Page
Overview • What has been achieved since 2010 • Mid-t erm review outcome • Financial policies and metrics to steer the business • Way forward Page
Thi s im Financial policies clearly defined and unchanged • Priorit ies for cash allocation unchanged: 1. Capex for organic growth 2. Dividend 3. Acquisit ions 4. Cash ret urn t o shareholders • Dividend policy “ stable and preferably rising dividend” • Commitment to S ingle A rating • Syst ematic, risk-management-orient ed hedging st rat egy
Thi s im Dividend paid to shareholders Dividend per ordinary share (€) • Dividend policy “ stable and preferably rising” € 1,75 € 1.75 • Since t he announcement of t he CSD in 2010, € 1,50 € 1.50 dividend has been increased by 25% from €1.20 to €1.50 € 1,25 € 1.25 • Payable in cash or ordinary shares € 1,00 € 1.00 • Interim dividend for the year 2013: €0.50 per ordinary share, which, as usual, € 0,75 € 0.75 represent s one t hird of t he t ot al dividend paid for the previous year (2012) € 0,50 € 0.50 '04 '05 '06 '07 '08 '09 '10 '11 '12
Thi s im Supportive uptake of stock dividend 60% % Stock dividend pay out • Of t he int erim dividend paid on August 28, 49.5% was paid as stock dividend 50% 40% • Current number of t reasury shares are sufficient t o pay st ock dividend unt il t he 30% FY dividend for 2015 20% • In Q4 2013, DSM expects t o launch a share buyback program for 4-5 million 10% shares to cover its commitments under exist ing management and personnel 0% option plans. This program is anticipated Final Dividend 2010 Interim Dividend 2011 Final Dividend 2011 Interim Dividend 2012 Final Dividend 2012 Interim Dividend 2013 to cont inue into Q1 2014
Thi s im Solid financial base, committed to Single A Debt maturity profile (€ m) • Tot al long t erm debt ~€2bn, no covenants 1000 in out st anding bonds • S ingle A credit rating by Moody’s (A3) and 800 S &P (A) • Committ ed credit facilities of €1bn, fully 600 undrawn • Updated €4bn EMTN program 400 • Continued risk mit igation, including hedging of currency exposures 200 0 2013 2014 2015 2016 2017 2018
Thi s im OWC development reflects changes in portfolio OWC per clust er (in € m) 2500 2000 1500 1000 500 0 2008 2009 2010 2011 2012 2013e Nut rition Pharma PM PI Innovation Base Chem • The move to higher value/ specialties business and away from typical chemical commodities has not lead to a relevant change in the overall level of OWC since 2008
Thi s im OWC needs further improvement OWC/ sales per cluster 2008-2013e OWC in AR% , AP% , Inventory% 2008-2013e 22% 35% 20% 30% 25% 18% 20% 16% 15% 14% 10% 12% 5% 0% 10% 2008 2009 2010 2011 2012 2013e 2008 2009 2010 2011 2012 2013e Nutrition Pharma PM PI Group Accounts Receivable Accounts Payable Invent ory • Because our clusters have different OWC ratios, any mix effect on t he overall OWC ratio • Nut rit ion OWC rat io needs improvement • For 2013, we expect OWC/ sales on group level t o be around 21% , at the same level as in 2012
Thi s im CAPEX Cash capex per clust er (€ m) 2008-2012 800 • After a period of low capex, some 686 ~700 700 592 special proj ect s impacted the overall 600 477 spending levels in 2012/ 2013: 457 500 416 • New ammonium sulfate plant 400 • Second line CPL Nanj ing 300 200 • 2G Biofuel POET 100 0 2008 2009 2010 2011 2012 2013e Nutrition Pharma PM PI Other Innovation
Thi s im Capex mainly driven by growth ambitions 800 1,6 1.6 1.4 700 1,4 600 1.2 1,2 500 1,0 1.0 Capex Capex/ DA DA 400 0.8 0,8 300 0,6 0.6 0.4 200 0,4 100 0.2 0,2 0.0 0 0,0 2008 2009 2010 2011 2012 2013e
Thi s im Towards an increase in ROCE ROCE (% ) 20% • Exceptional ret urns at Polymer Int ermediat es combined with low capital employed inflated 16% ROCE in 2010/ 2011 • Over the mid term, the target remains to 12% reach at least 15% ROCE 8% 4% 2009 2010 2011 2012 2015e
Thi s im Nutrition ROCE impacted by M&A effects 30% 25% 20% ROCE Nut rit ion clust er ROCE Nut rit ion before acquisit ions 15% 10% 5% 0% 2008 2009 2010 2011 2012 2013e • The Nut rit ion business before acquisit ions continues t o realize strong ROCE above 20% , despit e t he strengt hening of CHF in 2011 affecting bot h operating earnings and capit al employed
Overview • What has been achieved since 2010 • Mid-t erm review outcome • Financial policies and met rics to steer t he business • Way forward Page
Thi s im Changes in accounting policy • From 2014 onwards DS M will have to apply IFRS 11 Joint Arrangements • IFRS 11 changes t he account ing for ent it ies t hat are under j oint cont rol. This will have an impact on the financial reporting of DS M: Current reporting of JVs JV reporting as of 2014 P&L Proportionat e consolidation of 50% Results will be shown below the EBIT line, in interest in all lines the line “ share of the profit of associates” Balance sheet Proportionate consolidation of 50% of Net asset value in “ Associat es” the asset s and liabilities in all lines Cash Flow Included for 50% in the relevant lines Capital payments, loans granted and dividends received are part of cash from invest ing act ivities. Capital Employed Assets and liabilit ies included for 50% Not included anymore. (like PPE, Intangibles and WC) • Current ly, t he following JVs are impact ed by IFRS 11: DSM Sinochem Pharmaceut icals, POET-DS M Advanced Biofuels, Reverdia, Japan Fine Coatings Lt d, Act amax, Meltagel and Percivia
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