DSM Reports 10% Rise in Nutrition Sales on Acquisitions

2 May 2013 --- Royal DSM, the Life Sciences and Materials Sciences company, today reported a first quarter EBITDA of €311 million compared to €306 million in Q1 2012 and €243 million in Q4 2012. The improvement compared to Q1 2012 was realized despite a negative caprolactam effect of €65 million.

This was achieved in a context of uncertain global macro-economic conditions as the European economy remained weak, Asia continued to show good levels of growth whilst the US maintained its modest rate of recovery. Life Sciences delivered growth once again, driven by Nutrition, while Materials Sciences performed well, except for caprolactam. During the quarter DSM benefited from the sale of certain DSM Resins & Functional Materials related distribution activities.

Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: "In a challenging economic environment, I’m pleased to report a good start to the year with a robust performance. Nutrition, which accounts for about 70% of group EBITDA, has proved the resilience and quality of its broad offering across the value chain, delivering another quarterly improvement in profitability, together with healthy margins.”

“Where the last two years were characterized by acquisitions, in 2013 we will fully focus on the operational performance and the integration of acquisitions, with special attention to capturing synergies whilst also ensuring the successful execution of our group-wide profit improvement initiatives. We expect strong EBITDA growth in 2013, moving towards €1.4 billion."

In Nutrition, Sales in Q1 rose 10% compared to Q1 2012, driven primarily by acquisitions. Organic sales growth in Human Nutrition & Health and DSM Food Specialties was offset by lower sales in Animal Nutrition & Health. Overall 3% volume growth was offset by a 3% decline due to price/product mix effects. Despite some softness in established Food & Beverage markets, Q1 delivered good organic growth in Human Nutrition & Health, driven by increased volumes with slightly lower prices, mainly due to mix effects. Ocean Nutrition Canada (ONC) and Fortitech delivered healthy double digit growth in line with expectations. ONC has been successfully integrated in DSM Nutritional Products and is therefore no longer reported separately. In Q1 Fortitech realized sales of €52 million and EBITDA of €9 million. Animal Nutrition & Health experienced a decline in volume and an unfavorable price/mix impact, driven by the after-effects of the historically high grain prices in 2012 and the resulting lower demand that rolled through the production and downstream value chains for animal protein. Price increases for some vitamins were announced in Q1 2013. DSM Food Specialties showed higher sales through organic growth and the contribution of the Cultures & Enzymes business acquired from Cargill. The integration of Ocean Nutrition Canada, Fortitech and Cargill’s Cultures & Enzymes business is proceeding well and the acquired businesses are meeting expectations. The integration of Tortuga started after the closing on 5 April 2013. EBITDA for Q1 was €215 million, up 12% compared to Q1 2012, driven by strong operational performance including acquisitions, with an overall EBITDA margin of 21.8%, well within the target range.

DSM’s outlook stays unchanged:
The Profit Improvement Program is fully on track and is expected to deliver structural annual EBITDA benefits of €150 million by 2014 and €200-250 million to be fully achieved by 2015.
Nutrition is expected to show clearly higher results than in 2012 due to organic growth moving towards the target of 2% above GDP and due to the acquisitions made.
Business conditions in Pharma are likely to remain challenging, but DSM is confident that it will be able to deliver substantially better results, notwithstanding the usual uneven delivery patterns between quarters.
Performance Materials is expected to show improved results in 2013, despite the expected negative effects of caprolactam, especially compared to the first half of 2012.
Polymer Intermediates is expected to show lower results than in 2012.
For the Innovation Center the activity level will be in line with 2012, with EBITDA clearly improving following the full year contribution of Kensey Nash. Overall, based on current economic assumptions, DSM expects a step up in EBITDA during 2013 due to stronger organic growth, supported by DSM’s Profit Improvement Program and as the benefits of acquisitions and a more resilient portfolio start to have impact. In 2013 the focus will be on the operational performance and integration of the acquisitions DSM completed in 2012 with special attention to capturing synergies. Overall, based on current economic assumptions, the above will enable DSM to move towards its 2013 EBITDA target of €1.4 billion.