DSM Nutrition Q2 Sales Rise 23%, Driven By Acquisitions And Organic Growth

06 Aug 2013 --- Royal DSM has reported a second quarter EBITDA of €345 million compared to €290 million in Q2 2012 and €311 million in Q1 2013. The improvement compared to Q2 2012 was realized despite a negative caprolactam effect of €20 million and a challenging macro-economic environment, which mainly affected Materials Sciences.

Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: “We are pleased to report that the momentum in our Nutrition business that we saw at the end of Q1 continued into Q2. Nutrition, with its higher profits and healthy margins, is demonstrating the quality of its broad offering across the value chain. Materials Sciences’ profit remained at the same level as last year despite a negative caprolactam impact of €20 million and a challenging market environment.”

“For the rest of this year, we will continue to fully focus on operational performance and on the integration of our acquisitions, ensuring the capture of synergies. In addition, the early successes of our profit improvement initiatives leave us confident that this group-wide program is well on track. We expect strong EBITDA growth in 2013, moving towards €1.4 billion.”

For the Nutrition cluster, sales in Q2 rose 23% compared to Q2 2012, driven primarily by acquisitions. Organic sales growth was 3% versus Q2 2012, with strong volume growth (6%) partly offset by lower prices (-3%). Overall prices have stabilized compared to Q1 2013 as DSM continues to pursue its value over volume strategy. EBITDA for Q2 was €249 million, up 28% compared to Q2 2012, driven by acquisitions, organic growth and strong operational performance including cost savings. The EBITDA margin of 22.5% was at the upper end of DSM’s target range due to a favorable mix.

Human Nutrition & Health delivered 6% organic growth in Q2 versus Q2 2012, driven by healthy volume growth. A particularly strong performance was delivered in infant nutrition, dietary supplements and premixes. In Q2 Fortitech realized sales of €49 million and EBITDA of €11 million in line with expectations. Animal Nutrition & Health experienced an organic sales decrease of 3% in Q2 compared to Q2 2012, due to lower prices, which have now stabilized, offsetting higher volumes. Compared to the previous quarter, Q2 2013 showed organic growth of 5%, driven by higher volumes due to recovery in meat production, despite temporarily lower sales for poultry in China as a result of the avian flu. Tortuga delivered a good result in Q2 with sales of €98 million and EBITDA of €18 million in line with expectations.

Food Specialties showed healthy sales growth through a combination of organic growth and the contribution of the acquired cultures and enzymes business.

Innovation sales in the first half of 2013 – measured as sales from innovative products and applications introduced in the last five years – reached 18% of total sales equal to the first half of 2012, which is close to DSM’s 2015 target of approximately 20%. Examples of innovations, recently launched are:

- OatWell beta-glucan, a dietary supplement with clinically proven health benefits including cholesterol reduction, blood glucose control and gastrointestinal health.

- Multirome LS, a concentrated yeast extract produced with DSM’s unique enzyme technology. By replacing the use of low salt basic yeast extracts with Multirome LS, savory food producers can reduce the CO2 footprint of the yeast extracts they use by 81%.

DSM announced plans to help provide effective nutrition interventions to 50 million beneficiaries (pregnant or lactating women, children under the age of 2) per year by 2020. This commitment is part of DSM’s endorsement of the Global Nutrition for Growth Compact, which aims to provide 500 million beneficiaries with effective nutrition interventions by 2020.

In terms of overall outlook, the challenging macro-economic environment experienced during Q1 2013 continued, with little or no growth in Europe. Asia continues to show good levels of economic activity, though at more modest levels, while the US has maintained a modest rate of recovery.

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. The result of the second half of 2013 is expected to be in line with the second half of 2012.

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 has an increasing impact. In 2013 the focus is on the operational performance and the 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.