DSM’s Nutrition segment contributes strongly to “very good” Q3 performance

02 Nov 2017 --- DSM’s results for the first nine months of 2017 show strong outcomes in the company’s nutrition sector. Overall highlights of the results, buoyed by an especially impressive Q3 performance, include a 9 percent increase in sales to €6.46 billion (US$7.51 billion), with 8 percent organic growth. The adjusted EBITDA is up 15 percent to €1.08 billion, driven by both Nutrition and Materials, and the company’s outlook for 2017 is unchanged.

“We are pleased to report another strong quarter, resulting in a very good performance during the first nine months,” comments Feike Sijbesma, CEO and Chairman of the DSM Managing Board. “Nutrition and Materials once again delivered organic growth rates well above their respective markets, with particularly good volume growth.”

“These results demonstrate significantly improved operational and financial performance, well ahead of plan, with all businesses delivering on their ambitious growth initiatives, and we are firmly on track with our cost-reduction and efficiency improvement programs,” Sijbesma adds. “Furthermore, we successfully divested our share in Patheon ahead of schedule.”

“DSM confirms its full-year 2017 outlook, despite slightly less favorable currency developments,” Sijbesma reports. “In addition, with all of these developments ahead of plan we are bringing forward our regular strategic review process for the period beyond 2018 and anticipate communicating the results before mid-year 2018, as announced at our September Investor Event.”

DSM expects to deliver full-year 2017 results above the targets set out in its Strategy 2018, with an EBITDA growth for the year slightly up from high single-digit to double-digit, and with a ROCE increase from double-digit basis points to over 100 basis points.

Nutrition segment performs strongly
Nine months 2017 sales in the Nutrition segment increased by 7 percent organically compared to the same period last year, with 6 percent volume growth and 1 percent higher prices.

Nutrition performed strongly as its growth initiatives led to organic growth rates in all its businesses outpacing their respective markets. Animal Nutrition delivered strong volume growth, with exceptionally high volumes in the third quarter. Human Nutrition and Food Specialties continued to deliver good volume growth, despite soft conditions in some end-market segments.

Nine months 2017 Adjusted EBITDA increased by 13 percent compared to the same period in 2016, mainly driven by volume growth and the contribution of the efficiency and cost improvement programs. Currency and price/mix effects made a small contribution. EBITDA margin year-to-date was 18.9 percent, versus 18 percent in the same period last year.

Q3 2017 sales were 5 percent up on the prior year with 8 percent organic growth partly offset by 3 percent negative currency effects as the Euro strengthened against DSM’s other key currencies. The 9 percent higher volumes were driven by exceptionally strong growth in Animal Nutrition, as well as good growth in Human Nutrition.

Q3 2017 Adjusted EBITDA was up 12 percent compared to Q3 2016, driven by strong organic growth and the contribution of the improvement programs. Currencies had a small negative effect.

The adjusted EBITDA margin was 18.8 percent, versus 17.7 percent in Q3 2016.

Human Nutrition & Health
Nine months 2017 sales rose 8 percent with 7 percent organic growth, driven mainly by volumes.

Year-to-date, Human Nutrition maintained its positive momentum, delivering good sales growth through its growth initiatives despite softness in some of its end-market segments, which became even more pronounced in Q3.

Food & Beverages markets are being addressed successfully through tailored premixes, DSM notes, adding that sales excellence programs – as well as the introduction of new product solutions – resulted in above-market growth for both multivitamins and fish oil-based omega 3s. The i-Health business has continued its double-digit growth path, whilst early life nutrition remained a strong performer.

Overall, prices were stable, with higher prices for advanced formulations and premixes compensating for somewhat lower contractual prices in early life nutrition.

In Q3 2017, Human Nutrition reported a solid 5 percent volume growth with good sales in all segments. Early Life Nutrition had a particularly strong quarter due to high demand for China where markets still show some volatility due to the new regulations coming into effect next year.

Prices were up by 4 percent, of which a substantial part was due to positive mix effects.

Animal Nutrition & Health
Nine-month 2017 sales saw 8 percent organic growth, fully driven by volumes, significantly outperforming the market. DSM says that it continues to benefit from its ability to address a wide range of species, as well as from its diversified geographic presence, covering all the major growth areas in the world, and its strong forward-integrated premix position.

Market conditions were favorable year-to-date, except for Latin America where domestic demand was impacted by weak economic conditions. This weakness was exacerbated in Q2 due to the “meat scandal” in Brazil, DSM notes, severely impacting beef exports. Recently however, these exports have recovered swiftly.

Overall prices were flat, while for some vitamins a positive price effect in the first half of the year was offset by a negative price effect in Q3.

Q3 2017 organic growth was exceptionally strong at 10 percent, driven by 14 percent higher volumes. All regions were strong. The beef exports market in Brazil staged a rapid recovery, especially in September. Sales also benefitted from positive timing of order effects in Brazil as well as in some other geographies. Furthermore, the reported sales growth is somewhat flattered by the easy comparison with Q3 last year, DSM admits.

Prices had a 4 percent negative effect, which was largely due to lower comparable prices for some of the vitamins versus 2016 when these prices spiked in the second half of the year.

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