Easing pandemic effects bolster DSM’s H1 growth despite dropping birth rates

03 Aug 2021 --- DSM is targeting further growth for its nutrition offerings following “very good” H1 2021 results. Personalization and bioscience will continue to be a significant focus, as well as increasing its sustainability credentials with a more ambitious carbon reduction program.

However, COVID-19 is continuing to impact the results, with one knock-on effect being falling birth rates emerging as a factor behind “soft” sales in the Early Life Nutrition business. 

Overall, there was 0 percent organic sales growth in Q2 2021 for Human Nutrition (HNH). “This was against a very tough comparable of 13 percent in Q2 2020, when sales were boosted by pantry loading,” explains the company. 

Sectors recover from pandemic impacts
DSM notes that consumer trends toward foods that are healthy, affordable, convenient and fit in with their cultural and personal preferences are helping to drive overall growth. It also observes an increased awareness of products that boost immunity. 

Conditions for dietary supplements have remained favorable, and Food & Beverage delivered a “solid performance,” driven by good demand for packaged foods as well as increased demand for food services. 

Additionally, Food Specialties had 8 percent organic sales growth with good volume growth in all key segments, which are dairy, baking, brewing and savory. 

Personal Care & Aroma reported 13 percent organic sales growth in H1 2021, driven by the post-COVID-19 recovery of demand for sun care, skin care and fine fragrances. Implementing best practices and technologies across species can reduce carbon emissions.  

Increasing sales impact expectations
Overall, group sales were up by 10 percent, with adjusted net profit up 21 percent to €444 million (US$523 million). Nutrition’s sales were up 6 percent, and Materials’ were up 33 percent. 

For the full year, DSM continues to expect an adjusted EBITDA increase in Nutrition at the upper end of its mid-term strategic ambition of high single-digit growth. 

Together with a stronger performance in Materials than foreseen at the Q1 2021 trading update, DSM now expects an adjusted EBITDA growth rate for the Group in the mid-teens, with a continued good adjusted net operating free cash flow.

Building on its business model
DSM sees “significant headroom” for further growth and innovation in Nutrition. It will continue to build on its business model of combining global products with local solutions. 

The company is also adding a third dimension of precision and personalization that captures emerging big data, digital and bioscience capabilities.

For example, the first half of this year saw the launch of Sustell, a data-driven sustainability service that helps drive improvements in the environmental footprint and economics of animal farming. 

DSM also created Hologram Sciences, a consumer-facing company that provides people with holistic solutions to manage their health by combining health diagnostics, digital coaching and personalized nutrition.

The company will continue to pursue mergers and acquisitions to build the future business model, as well as honing a stronger branding focus on its “health through nutrition” messaging.  DSM has already made significant progress on many of its sustainability ambitions.

Sustainable protein for booming population
With the population set to reach nearly 10 billion people by 2050, DSM emphasizes that a huge step up in food production is needed for food security. It also argues that a growing, more affluent population offers significant demand for both animal and alternative proteins. 

However, animal farming must become more sustainable, with DSM highlighting key aspects like reducing emissions, protecting ecosystems and fighting food waste. 

It argues that productivity gains, improved nutrient utilization and enteric methane inhibition can all make animal proteins more sustainable. 

More ambitious carbon emission targets
DSM has also unveiled a target of halving its 2016 greenhouse gas emissions from its own operations by 2030. The company says the acceleration of its initial 30 percent reduction target is based on the strong progress over the past few years. 

The new target has been reviewed and approved by the Science Based Targets initiative.

DSM ultimately aims to achieve net-zero by 2050. “We have no time to waste, and the private sector has a crucial role to play in proactively delivering on the Paris Agreement,” say co-CEOs Geraldine Matchett and Dimitri de Vreeze. 

Other steps the company has taken include doubling its internal carbon price to guide its investments and operational decisions toward carbon-neutral operations and agreeing to make all of its North American electricity needs 100 percent renewable by 2022. 

By Katherine Durrell

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