Resilient in nutrition: DSM reports “very strong” 2018, reveals €1 billion buyback strategy

14 Feb 2019 --- DSM has reported a “very strong year,” including robust Q4 figures, organic sales growth of 6 percent and adjusted EBITDA up 26 percent, including €290 million (US$327 million) due to temporary exceptional vitamin effects. With Q4 core profit topping expectations, the company has announced that it will buy back €1 billion in shares.

“This has been again a record year in which we successfully completed Strategy 2016-2018, outperforming our ambitious financial and sustainability targets. We have created a strong platform of solution-led, higher value specialty products in Nutrition, Health & Sustainable Living,” DSM CEO, Feike Sijbesma reports.

“During the fourth quarter, Nutrition performed well once again, with continued good business conditions, while Materials delivered solid results, despite softness in some of its end-markets,” Sijbesma says.

“Having built a resilient portfolio with future upside from our large innovation projects, we are confident about our earnings prospects and cash generation. Based on this and our strong balance sheet, we are pleased to announce a €1 billion share buy-back program which also increases capital efficiency while still retaining financial flexibility to deliver on our growth plans.”

Temporary vitamin effect continues
Nutrition reported 1 percent organic growth in the underlying business. However, when adjusted for the estimated €40 million temporary vitamin effect in Q4 2017, the organic sales growth was 4 percent with volumes up 3 percent and price 1 percent, despite a strong organic sales growth in the prior year.

The temporary vitamin pricing environment was mainly the result of a fire at a BASF plant last year, which forced the company to declare force majeure, leading to elevated vitamin prices.

Human Nutrition reportedly delivered a strong year with 7 percent organic growth and 4 percent volume growth. All regions and segments performed “well” with an especially strong growth reported in dietary supplements, i-Health and the pharma segment. 

Early Life Nutrition enjoyed a solid performance in all regions, while construction started on DSM’s second premix solutions facility in Poland, which will be exclusively dedicated to the maternal and infant nutrition market. Sales to food & beverages continued to develop well. This was driven by tailored multiple-ingredient premix solutions, supported by marketing & sales excellence and local application know-how.

Prices were up by 3 percent driven by a combination of a favorable mix due to strong growth in premix and i-Health, as well as benefits from higher prices for premix and advanced formulations, supported by the effects of the “Blue Skies policies” in China.

Volumes grew by 3 percent, with continued good sales in all regions. Segment-wise, Dietary Supplements, i-Health and Pharma performed strong. Early Life Nutrition and Food & Beverages maintained their solid performance across all regions. Premix solutions across the segments performed well.

Nutrition remains a strong pillar for DSM. In January, the company announced that it would acquire a 75 percent shareholding in a joint venture with Nenter & Co., Inc in in a move aimed at fulfilling the company’s projected needs for vitamin E. The deal is reportedly set to amount to €135 million (US$155 million). The acquisition will include all of Nenter’s production and related assets for vitamin E in China.

The deal will provide DSM with cost-effective access to additional capacity, allowing DSM to continue to grow organically in vitamin E, which is an essential ingredient in its animal nutrition premix solutions, says the company.