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    DSM   NL0000009827

ROYAL DSM N.V.

(DSM)
  Report
Real-time Euronext Amsterdam  -  06:31 2022-11-28 am EST
124.50 EUR   -0.68%
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Royal DSM N : PRESS RELEASE & FINANCIAL STATEMENTS

08/02/2022 | 02:50am EST

Heerlen, NL, 02 Aug 2022 07:00 CET

Highlights1,2,3

Continuing operations:

  • Health, Nutrition & Bioscience delivered a good first half year with sales up 17%, organic sales up 10% and Adjusted EBITDA up 8%
    o Animal Nutrition & Health: organic sales +10%
    o Health Nutrition & Care: organic sales +9%
    o Food & Beverages: organic sales +10%
  • Adjusted net profit was up 14% to €335m
  • Adjusted Net Operating Free Cash Flow of €0m, due to higher working capital
  • Interim dividend of €0.93 per ordinary share
  • Full year outlook 2022 unchanged

Total Group:

  • Net profit of €458m
Key figures - continuing operations
in € million H1 2022 H1 2021 % Change Volume Price/mix FX Other
Sales 4,115 3,517 17% 2% 8% 5% 2%
HNB 4,076 3,471 17% 2% 8% 5% 2%
ANH 1,839 1,581 16% -1% 11% 6%
HNC 1,464 1,260 16% 5% 4% 7%
F&B 753 609 24% 5% 5% 5% 9%
Adjusted EBITDA 746 693 8%
HNB 794 741
Corporate -48 -48
Adjusted EBITDA margin 18.1% 19.7%
HNB 19.5% 21.3%

1) Following the reclassification of DSM's Materials businesses to Discontinued Operations, Continuing Operations now reflects the results of DSM's Health, Nutrition & Bioscience and Corporate Activities. Please refer below for more details.

2) DSM's Health, Nutrition & Bioscience structure became effective as of 1 January 2022. Please refer below for more details.

3) Adjusted EBITDA is an Alternative Performance Measure (APM) that reflects results from usual operations. Organic sales growth is the total impact of volume and price/mix. Adjusted Net Operating Free Cash Flow is the cash flow from operating activities, corrected for the cash flow of the APM adjustments, minus the cash flow of capital expenditures and drawing rights.

Co-CEOs statement

Geraldine Matchett and Dimitri de Vreeze, Co-CEOs, commented: "Our Health, Nutrition & Bioscience businesses delivered a good half year performance, underpinned by resilient market demand and strong pricing. We are proud of our people who continue to deliver for our customers navigating difficult supply chain conditions. Whilst acknowledging the challenging global macroeconomic environment, we see continuing good market demand, positive pricing momentum and favorable foreign exchange effects supporting our full year outlook.

The first half marked a pivotal moment in our history as we reached the final phase of our exciting strategic transformation. We announced our intention to merge with Firmenich, the world's largest privately-owned fragrance and taste company, to create the leading creation and innovation partner in nutrition, beauty and well-being. We also reached agreement to sell our two remaining Materials businesses.

As a purpose-led company, we are also accelerating our route to net zero again by enhancing our renewable electricity and greenhouse gas emissions reduction targets, as we constantly seek to enhance our positive impact for all stakeholders."

Outlook 2022

Following the announcements in April and May 2022 of the intended sale of DSM's two remaining Materials businesses, these are now reported as assets held for sale and as Discontinued Operations. Going forward, DSM will only provide an outlook for its Continuing Operations (Health, Nutrition & Bioscience, and Corporate Activities). The outlook for these continuing activities is unchanged: DSM expects to deliver a high-single digit Adjusted EBITDA increase.

Strategy

DSM's purpose-led, performance-driven strategy has sustainability and innovation as key growth drivers of a long-term focused plan, underpinned by ambitious targets across People, Planet and Profit.

New Health, Nutrition & Bioscience organization reporting from 2022

In September 2021, DSM announced the acceleration of its strategic journey to become a fully-focused Health, Nutrition & Bioscience ('HNB') company, organized, as from 1 January 2022, in three market-focused business groups: Animal Nutrition & Health, Health, Nutrition & Care and Food & Beverage.

This structure enables DSM to leverage its strong combination of scientific competences and growing portfolio of nutrition and health solutions, as well as harness the latest advancements in digital technology and bioscience, to address the significant environmental and societal challenges associated with the global food systems.

Recent acquisitions and disposals

On April 20, 2022 DSM announced that it had reached an agreement to sell its Protective Materials business to Avient Corporation for an Enterprise Value of €1.44 billion. DSM expects to receive €1.33 billion net in cash following closing, after transaction costs and capital gains tax. Completion of the transaction, which is only subject to customary conditions and approvals, is expected in H2 2022.

On May 31, 2022 DSM announced that it had reached an agreement to sell its Engineering Materials business to Advent International and LANXESS for an Enterprise Value of €3.85 billion. DSM expects to receive about €3.5 billion net in cash following closing, after transaction costs and capital gains tax. Completion of the transaction, which is only subject to customary conditions and approvals, is expected in H1 2023.

DSM has reclassified these businesses as assets held for sale and presented them in the Discontinued Operations in the Income Statement. Continuing Operations now reflects the results of the three HNB business groups and Corporate Activities.

Following these changes, DSM has published prior year restated comparative figures.

Merger

On May 31, 2022 DSM and Firmenich announced that they have entered into a business combination agreement to establish the leading creation and innovation partner in nutrition, beauty and well-being. DSM and Firmenich anticipate that the proposed combination will close in H1 2023. All related information can be found at www.creator-innovator.com.

Sustainability

DSM aims to create value for all stakeholders through the focused development of scientific innovation and the application of a growing portfolio of solutions that positively impact people and the planet, in line with its long-term purpose-led, performance-driven strategy. This approach is reinforced by improvements in the sustainability of DSM's own operations, continually raising safety and quality standards, and promoting health and well-being throughout its workforce.

Planet targets progress

During the first half of 2022 DSM made further progress on its path to reaching net-zero greenhouse gas emissions across its value chain by 2050. Initiatives include installing state-of-the art cooling machines in multiple sites in China and working with major suppliers to introduce greenhouse gas emissions reduction assets.

Building on its rapid actions over recent years, DSM has now announced an acceleration of its plan to purchase electricity from renewable sources, targeting 100% purchased renewable electricity worldwide by 2030, up from 75%. Within this context, DSM has also submitted revised scope 1 and 2 emissions reduction targets to the Science Based Targets initiative (SBTi) for independent assessment. The outcome is expected later this year. DSM will also move from a relative intensity target for the reduction of indirect value chain GHG emissions (scope 3), to an absolute reduction target. The exact target is being finalized and will be proposed for validation with the SBTi next year.

To better support DSM's customers to also deliver sustainable and healthy solutions, DSM has developed a new methodology for product portfolio steering which will allow for greater comparability, support reporting against new and future requirements of regulating authorities, plus create transparency on our contribution towards achieving the UN Sustainability Development Goals. Details of this methodology are available here.

DSM remains committed to obtaining reasonable assurance on its impact reporting. This includes quantifiable progress against the commitments announced in September 2021 aimed at addressing urgent societal and environmental challenges linked to how the world produces and consumes food.

People targets progress

DSM's long-standing priority remains the safety, health and well-being of people. The company continued to take proactive measures to support employees and their families during the first half of 2022, expanding local health initiatives and facilitating hybrid working where feasible. DSM has also continued to make progress on its broad inclusion and diversity efforts, endorsing highly motivated employee resource groups and accelerating female representation at the executive level. DSM's improvement in recordable safety incidents reversed after reaching all-time lows in January. With the company striving to be incident and injury free, DSM has increased face-to-face trainings with site visits now feasible again following COVID-19 limitations.

Q2 Highlights

Continuing Operations results:

  • Health, Nutrition & Bioscience delivered a solid quarter with sales up 19%, organic sales up 10% and Adjusted EBITDA up 5% despite COVID-19 lockdowns in China and supply chain disruptions

o Animal Nutrition & Health: +11% organic sales growth
o Health, Nutrition & Care: +7% organic sales growth
o Food & Beverage: +10% organic sales growth

Key figures - continuing operations
in € million Q2 2022 Q2 2021 % Change Volume Price/mix FX Other
Sales 2.107 1,790 18% 1% 8% 7% 2%
HNB 2.089 1,760 19% 2% 8% 7% 2%
ANH 958 803 19% 0% 11% 8%
HNC 738 635 16% 2% 5% 9%
F&B 391 313 25% 3% 7% 6% 9%
Adjusted EBITDA 379 360 5%
HNB 403 382
Corporate -24 -22
Adjusted EBITDA
margin
18.0% 20.1%
HNB 19.3% 21.7%

The second quarter saw resilient market demand, strong pricing, and more favorable foreign exchange effects.

Animal Nutrition & Health performed well, except in China where consumer demand suffered from COVID-19 lockdowns.

Both Health, Nutrition & Care, and Food & Beverage had a good quarter with sales supported by continued good market demand and successful pricing initiatives, partly offset by some product shortages resulting in order backlogs.

Overall, conditions improved during the quarter with a strong volume and price momentum in June and going into Q3.

Adjusted EBITDA was up 5% with 1% contribution from M&A and 6% from foreign exchange effects, with the COVID-19 lockdowns impact in China estimated to be about 3%. Higher prices largely offset the continuously rising energy, input and logistics costs, albeit with a time lag.

This resulted in an Adjusted EBITDA margin of 19.3% for HNB that reflects the dilutive mathematical effect of these price increases and foreign exchange effects of 160 bps. Without this effect, the margin would have been around 21%.

Disclaimer

Koninklijke DSM NV published this content on 02 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 August 2022 06:49:03 UTC.


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Net income 2022 665 M 691 M 691 M
Net Debt 2022 238 M 247 M 247 M
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