Presentation to investors Q1 2018 results ROYAL DSM HEALTH NUTRITION MATERIALS
S afe harbor statement § This present at ion may contain forward-looking statement s wit h respect t o DSM’ s fut ure (financial) performance and position. Such statements are based on current expectations, estimates and proj ections of DS M and information current ly available t o t he company. DSM cautions readers t hat such st at ements involve cert ain risks and uncert aint ies that are difficult to predict and t herefore it should be understood that many factors can cause act ual performance and position to differ materially from these statements. DS M has no obligation to update the statements contained in this present at ion, unless required by law. § More det ails on DSM’ s Q1 2018 performance can be found in t he Q1 2018 result s press release, published t oget her wit h t his present at ion. A more comprehensive discussion of t he risk fact ors affecting DSM’ s business can be found in t he company’ s latest Annual Report, which can be found on the company's corporate website, www.dsm.com Page 1
Highlights Q1 2018 Full Q1 2018 results are in line wit h t he previously announced preliminary figures for Q1 2018 on 12 April 2018 § Cont inued strong organic sales growt h in underlying business estimat ed at 11% § Adj ust ed EBITDA growt h of underlying business est imat ed at 8% , despit e significant FX headwind § ROCE of underlying business estimat ed at 13.3% , up 200 bps § Addit ional temporary vitamin price benefit estimated at €165m on Adj usted EBITDA § Total Adj usted EBITDA up 56% and Net profit up 122% t o €331m § Cash from operating act ivit ies up 58% , amount ing t o €310m § Increased full year outlook confirmed Page 2
Quote from CEO Feike S ij besma § “ We are very pleased that the strong underlying performance of our business continues, with growth well above market. In addition, we are currently benefitting from substantially higher prices in some vitamins due to exceptional supply disruptions in the industry, which are expected to be temporary and heavily weighted towards the first half of the year. These two combined resulted in a significantly higher outlook for the full year 2018, which we announced with our preliminary Q1 2018 results on 12 April 2018.” Feike Sij besma CEO / Chairman of t he DSM Managing Board Page 3
Outlook 2018 § DS M confirms its increased full year outlook 2018, as announced on 12 April 2018, and expects an Adj usted EBITDA growth towards 25% and a related higher ROCE growth. This is based on: – a low double-digit Adj usted EBITDA growth in the underlying business at constant currencies, – a negative foreign exchange effect on Adj ust ed EBITDA of about €80 million, and – an additional Adj usted EBITDA benefit estimated at €250 – 300 million from an exceptional vitamin pricing environment, that is expected to be temporary and heavily weighted towards the first half of the year Page 4
Group | Key figures and indicators 1 Q1 2018 Q1 2017 in € million % Change Underlying 2 Temporary 2 Total Reported Underlying 2 FX & Underlying 2 Temporary 2 Total business vitamin effect Group organic growth ‘ other’ 2 total growth vitamin effect Group Sales 2,215 220 2,435 2,159 11% -8% 3% 10% 13% Nutrition 1,430 220 1,650 1,398 12% -10% 2% 16% 18% Mat erials 738 738 701 11% -6% 5% 5% Adjusted EBITDA 373 165 538 345 8% 48% 56% Nutrition 277 165 442 257 8% 64% 72% Mat erials 126 126 113 12% 12% Innovation -1 -1 1 Corporate -29 -29 -26 Adj usted EBITDA 16.8% 22.1% 16.0% margin 1 Adj usted EBITDA is an Alternative Performance Measure (APM) that reflects continuing operations. 2 Underlying business is defined in this press release as the performance measures sales and adj usted EBITDA, corrected for DSM’ s best estimate of the vitamin effect, which is expected to be temporary. Page 5
Group | Key figures and indicators – including t emporary vitamin effect in € million Q1 2018 Q1 2017 % Change Sales 2, 435 2, 159 13% Adjusted EBITDA 538 345 56% Adjusted EBITDA margin 22.1% 16. 0% ) 2 ROCE (% 21.8% 11. 3% Adjusted net profit 4 337 163 107% Net profit - Total DSM 4 331 149 122% Adjusted net EPS 1. 91 0.92 108% Net EPS - Total DSM 1. 88 0.84 Operating cash flow 310 196 58% cc 2 R OCE under lying business 13.3% 3 Over Adj ust ed net t axable result 4 Including result at t ribut ed t o non-cont r olling int erest . 5 Cash, net of cust omer funding 6 Year -end 2017 1. Including temporary vitamin effect Page 6
Nutrition | Key financials Underlying Underlying § in € million (est imat ed) Q1 2018 Q1 2017 % Change Nutrition continues to outperform its S trategy business 2018 aspirations wit h ongoing strong momentum in S ales 1, 430 1,398 2% Adj usted EBITDA 277 257 8% it s underlying business, delivering clearly above- Adj usted EBITDA margin (% ) 19. 4% 18. 4% market growth wit h an increasingly higher-value ROCE (% ) 15. 3% 13. 3% port folio of feed and food solut ions Temporary Temp Vitamin effect vitamin effect Q1 2018 § in € million (est imat ed) Due t o t he except ional supply disrupt ions in t he S ales 220 indust ry, the first quarter also benefited from an Adj usted EBITDA 165 est imated €220 million additional sales effect and an est imat ed €165 million addit ional Adj ust ed Total cluster Total EBITDA cont ribut ion from an exceptional vit amin in € million Q1 2018 Q1 2017 % Change price environment , which is expect ed to be S ales 1, 650 1,398 18% temporary and heavily weighted towards the first Adj usted EBITDA 442 257 72% half of the year. This temporary vitamin price Adj usted EBITDA margin (% ) 26. 8% 18. 4% effect is mainly related to animal nut rition Adj usted EBIT 370 185 100% Capital Employed 5, 406 5,555 Average Capital Employed 5, 413 5,546 ROCE (% ) 27. 4% 13. 3% Total Working Capit al 1, 434 1,500 Average Total Working Capit al as % of Sales 22. 8% 27. 2% Page 7
Nutrition | overview – underlying business Sales bridge (underlying business) | Q1 2017 to Q1 2018 § Q1 2018 organic sales growt h in t he underlying Nutrition business was an estimated 12% , driven by continued strong volume growth of 8% , well above market – Higher prices in the quarter of 4% partly off-set the 4% 11% negat ive foreign currency effect s and higher input cost s -11% § Q1 Adjusted EBITDA growth in t he underlying business 1,430 8% was est imated at 8% compared to Q1 2017, despite 1% significant negative foreign exchange effects 1,398 § The est imat ed Adjusted EBITDA margin in t he Q1 2017 Volume Price/ mix FX Other Q1 2018 underlying business was 19.4% , a further step-up versus 18.4% in Q1 2017 Page 8
Animal Nutrition & Health | S ales overview – underlying business § Q1 2018 organic sales growth in t he underlying business Sales bridge (underlying business) | Q1 2017 to Q1 2018 was an estimated 18% § Volumes were up 13% mainly due to very strong premix sales – All regions delivered strong underlying volume growth, particularly North America and Asia Pacific 5% – Increased focus from customers on security of supply -13% was noticed, amongst others driven by the ‘ Blue Skies 692 policies’ in China (relating t o t he significant ly st rict er enforcement of environment al regulat ions) 4% 13% – Volume growth benefitted from the introduction of reformulated forms due to new European regulations, 634 wit h sales in the order of €15-20 million § The 5% higher prices in t he quart er were driven by price Q1 2017 Volume Price/ mix FX Other Q1 2018 initiatives to mitigate higher input costs and the impact of negat ive exchange rate development s, led by the weaker US dollar and the Brazilian real – Prices were support ed by t he effect s of ‘ Blue Skies policies’ Page 9
Human Nutrition & Health | S ales overview – underlying business § Q1 2018 organic sales growth in t he underlying business Sales bridge (underlying business) | Q1 2017 to Q1 2018 was an estimated 8% § Volumes were up 5% , with good growth across all regions and market segments, well above the market. Volume growt h was specifically strong in premix sales as well as in t he i-Healt h business 3% § Prices were up 3% – Result from a combination of a favorable mix due to -11% strong growth in premix and i-Healt h, as well as 5% benefits from higher prices for premix and advanced 512 formulat ions, support ed by t he effect s of t he ‘ Blue 496 Skies policies’ in China 0% § Exchange rates had a 11% negative impact in Q1 2018, led Q1 2017 Volume Price/ mix FX Other Q1 2018 by the weaker US dollar 1. Underlying business Page 10
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