The acquisition of Tortuga Strengthening our animal nutrition business Invest or Relat ions 8 August, 2012
Overview • Tortuga at a glance • Acquisition rationale S lide 1
DSM to acquire Tortuga in an all-cash transaction Acquisition • Total ent erprise value ~ € 465m (*) in cash • 2012 expectations: net sales ~ € 385m and EBITDA ~ € 60m • Value creat ing acquisition; immediately EPS accret ive • Execution of Nutrition cluster strategy “ continued value growth ” Strategic fit • St rengthens DSM in t he highly at t ract ive animal nut rit ion market in Latin America • Extends DSM’s nut rit ional ingredient s range wit h organic t race minerals portfolio • Allows DS M to become a full animal nutrition solution provider • Acquisit ion consist ent wit h DSM’s st rat egic focus on High Growth Economies • Int roducing DSM ingredients int o Tort uga’s product range and distribut ion channels Growth • Leveraging Tortuga’s know-how and strong position in ruminant supplements globally • Introduction of Tortuga's trace mineral products to other market segment s worldwide ( e.g. swine, poult ry) *: Depending on the actual 2012 EBITDA, an adj ustment in the purchase price up to a maximum enterprise value of ~ €490 million can be made, based on the same EBITDA-multiple S lide 2
Tortuga, leader in supplements for ruminants Financials Tortuga locations in Brazil • 2012 expectat ions: Net sales ~ €385m and EBITDA ~ €60m Privately held Brazilian company • Leading company in nut rit ional supplements wit h focus on past ure raised beef and dairy catt le Pecém • HQ in S ao Paulo, 1200 employees • 3 product ion locat ions • Vast and exclusive agent net work (>1000) Market positions • Global market leader in nutritional supplements t o ruminant / beef cat t le wit h ~12% market share S ão Paulo Mairinque globally(~30% in Lat in America) São Vincent e • Int egrat ed product ion of key act ive ingredient s: #2 globally in organic trace minerals – HQ Production (minerals bound t o chelat ing agent ) Di-Calcium Phosphat es (DCP’ s) for captive use – • S trong technology, application and performance knowhow S lide 3
Supplements for pasture based ruminants Ruminant in feedlot vs pasture based Free Choice Nutritional Supplements • DS M’ s current feed act ivit ies for ruminant s are focusing on ruminants in feedlot • Pasture based ruminant s, where Tort uga is focusing on, is a relat ively new market t o DS M Free Choice Nutritional Supplements • Ruminant s in past ures oft en lack: – Minerals (Ca, Mg, Na, Zn and organic trace minerals) – Phosphorous, sulfur and nit rogen sources – specialt y micronut rient s Freely available t o the cattle • Supplement ation improves t he product ivit y and decreases mort alit y • S upplements are provided, mostly as powders, freely available t o t he cat t le: ‘ free choice nut rit ional supplement s’ formulat ions S lide 4
Tortuga is recognized for its premium brand Fosbovi, “at the top of the farmer’s mind” in Latin America • Specific supplements for regions (e.g. low mineral cont ent areas) or season (e.g. rain or dry season). • Product s for various life stages (e.g. beef calves lactat ing, growing phase) • Increasing reproduct ive performance of breeders • Covering a wide range of animal market s (ruminant s, poultry, swine) S lide 5
Supplying highly attractive markets Global supplements market for ruminants Brazil is one of the largest markets • Total size est imat ed well in access of (Tot al Cat t le numbers in millions) € 4bn globally • Brazil is #2 market • Global market growt h ~3% (Brazil: ~4-5% ) Organic trace minerals • Current market size > € 0.3bn wit h st rong growt h pot ent ial bot h for ruminant s as well as swine and poult ry • 7-10% growt h per year expect ed, globally Di-Calcium Phosphates • Overall use in animal nut rit ion is est imat ed ~ 1200 kt per year; • Tortuga DCP production is 100% captive for it s supplement product ion ource: http:/ / www.indexmundi.com/ agriculture / * S S lide 6
Overview • Tortuga at a glance • Acquisition rationale S lide 7
Total acquisitions now reaching € 2.2bn* PARTNERSHIPS ACQUISITIONS € ~1.8bn Nutrition Nutrition • Premix plant Russia • Martek (microbial DHA/ ARA) • Vitatene (natural carotenoids), Pharma • Premix plant s (Rumania, Italia) • DSM Sinochem Pharmaceuticals • Food enzymes business and t echnology (Verenium) Innovation center • Ocean Nut rit ion Canada • JV POET; cellulosic bioet hanol (fish derived Omega-3) • JV Actamax; biomedical materials • Tortuga (animal diet ary supplements) Performance Materials € ~0.3bn Innovation center • KuibyeshevAzot Russia; P A6 • Kensey Nash (biomedical materials) • JV Kemrock India; composit e resins • C5 company (cellulosic bioet hanol) € ~0.1bn Performance Materials • ICD China; High performance fibers • AGI Taiwan; UV resins * S ince S eptember 2010 S lide 8
Nutrition: Continued value growth Aspiration by 2015 Continuous profit increase • Growth GDP + 2% • EBITDA margin >20 - 23% Strategic progress • Expanded offering t hrough M&A activit ies • Expanded to 55 premix facilities • S uccessful process developments; improving cost position • Asset s opt imizat ion/ rest ruct uring S lide 9
Animal feed: customer value through efficacy Vitamin Macro Premix Prot ein S upplement ary Vit amin St raight s Premix Complete Feed forms / supplements Concent rat e Feed Animal feed composit ion Grains Various Protein Components Different iat ion by feed (S oya, sunflower meal, et c.) conversion know-how S ingle Animal or Vegetable Protein Macro Element s (salt s, Ca, P via DCP , Na, Mg, et c.), Trace elements delivered through organic trace minerals Other additives (eubiotics, amino acids, etc.) Vit amin forms (f.e. concent rates, dry mixes, on carrier) S traight Vitamins (f.e. vitamin A, E) • Feed efficacy (“ feed t o prot ein” ) largely det ermined by premix and supplement S lide 10
Next step in Nutrition’s value growth strategy Key elements of Nutrition strategy Acquisition of Tortuga • Cont inued st rengt hening of t he • St rengt hens DS M’s presence in core of the business nut rit ional supplements and addit ives for ruminant s • Est ablishment of new growt h • St rengt hens presence in Brazil, t he platforms in adj acent areas leading global beef producer and export er wit h at t ract ive growt h • Increased leveraging of t he • Broadens DSM’s port folio wit h t he clust er’s unique full value chain unique organic trace minerals position portfolio of products • Use innovation headroom for • Tort uga is considered an aut horit y furt her different iat ion in t he ruminant market S lide 11
The acquisition offers value creating synergies Sales synergies • Int roducing DS M ingredient s int o Tort uga’ s product range and dist ribut ion channels • Leveraging Tort uga’ s know-how and st rong posit ion in ruminant supplement s globally • Int roduct ion of Tort uga's t race mineral product s t o ot her market segment s worldwide (e.g. swine, poult ry) • St rengt hens DS M in t he highly at t ract ive animal nut rit ion market in Lat in America • Allows DSM t o become a full animal nut rit ion solut ion provider Cost synergies • Optimization of DS M asset s in Brazil • Cust omary operat ional efficiencies S lide 12
Tortuga complements value chain presence Sourced by DSM DSM production • Vitamins • Carotenoids • Di-Calcium Phosphate • Enzymes • Organic trace minerals • Eubiot ics Complete feed Active Premix Forms ingredients Supplements Sourced by Tortuga Tortuga production • Vitamins • Di-Calcium Phosphate • Organic trace minerals S lide 13
Value creating, EPS accretive from the start Financial impact • 2012 expectat ions: Net sales ~ €385m and EBITDA ~ €60m • Immediately EPS accretive • Predominantly sales synergies, some cost synergies Expectations by 2015 • Sales growt h above Nut rit ion clust er aspiration (GDP +2% ) • Increasing EBITDA% margin The Wall St reet Bull • Subj ect t o cust omary condit ons, t he transaction is expect ed to close in Q1 2013 S lide 14
Conclusion • Fully support s DSM’ s growt h st rat egy “ DSM in mot ion: driving focused growth” • Good st rat egic fit wit h Nut rit ion clust er st rat egy • Acquisit ion st rengt hens and complement s DS M’ s animal nut rit ion & healt h business • Capt ure value from DS M’ s ext ended value chain presence wit h a broad port folio of nut rit ional ingredient s for animal nut rit ion, while leveraging it s st rong int ernat ional foot print • Value creat ing acquisit ion; immediat ely EPS accret ive • Assuming no furt her det eriorat ion of t he economic condit ions, and based on it s st rat egy, financial st rengt h, and t he addit ional act ions now t aken, DS M will move t owards t he 2013 strat egic target s. S lide 15
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