Nutrition Cluster Drives Solid DSM Q3, Despite Weak Economy

Organic sales growth for the Nutrition Cluster was 1% compared to Q3 2011 with volume growth (2%) and slightly reduced prices (-1%). Sales growth was positively impacted by favorable exchange rates (4%) and the impact of the Ocean Nutrition Canada acquisition (4%).

6 Nov 2012 --- DSM has reported solid Q3 results despite weak economic conditions, with Q3 EBITDA from continuing operations of €270 million (Q3 2011: €339 million). Life Sciences, driven by Nutrition, showed good performance, representing 76% of Q3 EBITDA.

DSM reported that organic sales development was -7% compared to Q3 2011 mainly due to Polymer Intermediates. Nutrition continued to deliver organic growth by increasing volumes. Pharma showed organic growth due to a more favorable product mix. In Performance Materials the organic sales development of -7% was due to lower prices and lower volumes. The organic sales development in Polymer Intermediates was due to lower volumes as well as lower caprolactam prices.

During the third quarter of 2012, the weak conditions in the global economy seen throughout the previous quarter continued. The Eurozone challenges remained significant and the slow-down in China persisted. The US continued to grow at a modest rate. Despite these conditions, DSM continued to deliver solid operational results generating Q3 EBITDA of €270 million which included a negative caprolactam related impact of €105 million compared to Q3 2011. Nutrition delivered a 15% higher EBITDA than in Q3 2011 as a result of organic growth, positive exchange rate effects and the contribution of Ocean Nutrition Canada. Pharma results were adversely impacted by an uneven delivery pattern at DSM Pharmaceutical Products and by lower margins. Performance Materials performed well, except for the continued weakness of caprolactam which impacted the results of DSM Engineering Plastics. As expected, results at Polymer Intermediates declined significantly versus last year as already in Q2, mainly due to lower caprolactam margins. Results at the Innovation Center improved as a result of higher Biomedical sales and the acquisition of Kensey Nash. Cash provided by operating activities amounted to €547 million during the first three quarters of 2012 versus €479 million during the same period last year. Net debt increased by €839 million compared to yearend 2011 to a level of €1,157 million, mainly due to acquisitions.

Organic sales growth for the Nutrition Cluster was 1% compared to Q3 2011 with volume growth (2%) and slightly reduced prices (-1%). Sales growth was positively impacted by favorable exchange rates (4%) and the impact of the Ocean Nutrition Canada acquisition (4%). Animal Nutrition & Health achieved modest volume growth despite the drought in the US which resulted in higher grain prices. This subsequently led to lower feed and meat production. Prices were slightly down. Human Nutrition & Health prices were up slightly while volumes remained relatively stable. Nutritional Lipids experienced strong growth outside North America with synergies realized in line with targets. The integration of Ocean Nutrition Canada is on track with sales of €30 million and EBITDA of €8 million. Personal care continued to grow especially in sun care and skin care. DSM Food Specialties realized growth in all market segments. Especially enzymes showed strong organic growth. EBITDA for the third quarter was €202 million, up €26 million from the same quarter a year earlier driven by higher margins, favorable exchange rates and the contribution of Ocean Nutrition Canada. At 21.4% the Q3 EBITDA margin was in line with the defined target of 20% - 23%.

Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: “Despite a challenging global trading environment DSM continued to generate good results mainly driven by our Nutrition cluster. We continued to make good progress towards our strategic goals with the purchase of Tortuga and Cargill’s cultures and enzymes business. We have now invested €2.3 billion in acquisitions since the end of 2010, of which €1.9 billion in Nutrition. With these acquisitions we are building new platforms and are strengthening our downstream network. This will create significant future value for the company whilst further increasing the resilience of DSM’s earnings profile.” “Our Profit Improvement Program, designed in part to offset the impact of adverse external developments, is on track to deliver significant cost savings. We expect that trading conditions will remain tough. Our strong focus on cost control and cash flow together with our strong balance sheet leaves DSM well placed to navigate near term external challenges.”