DSM in motion: driving focused growth · can be found in the company’s latest Annual Report, ......

DSM in motion: driving focused growth

Volkert ClaassenVP Strategy DSM Biobased Products & Services

Marc SilvertandInvestor Relations Manager Royal DSM

UBS Biomaterials Conference, Frankfurt am Main, May 19 2011

This presentation may contain forward-looking statements with respect to DSM’s future (financial) performance and position. Such statements are based

on current expectations, estimates and projections of DSM and information currently available to the company. DSM cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it

should be understood that many factors can cause actual performance and position to differ materially from these statements. DSM has no obligation to update the statements contained in this presentation, unless required by law.

The English language version of this document is leading.

A more comprehensive discussion of the risk factors affecting DSM’s business can be found in the company’s latest Annual Report, which can be found on the

company's corporate website, www.dsm.com

Safe Harbor Statement

Overview

• DSM in motion: driving focused growth• DSM and our biobased future• Annex: Highlights Results Q1 2011

DSM: Transformation completed2000 2005 2010*

Polymer Intermediates

Performance Materials

Pharma

Nutrition

Brea

kdow

n D

SM s

ales

(%

)Others

Petrochemicals

Engineering Plastic Products

Base Chemicals & Materials

Others

Base Chemicals & Materials

Others

* Excluding discontinued

DSM in motion: driving focused growth

Driving focused growth, ambitious targets

€ 1.4 - 1.6bnEBITDA

> 15%ROCE

Profitability targets 2013

from US$ 1.5bn to > US$ 3bnChina sales

from ~ 32% towards 50% of total salesHigh Growth Economies sales

5% - 7% annuallyOrganic sales growth

from ~ 12% to 20% of total salesInnovation sales

Sales targets 2015

> € 1bnEBA sales

EBA aspiration 2020

Accelerating growth in High Growth Economies

From reaching out to becomingtruly global

• Sales to High growth Economies in 2010 was 37% of total sales

• Over 70% of DSM’s growth in period to 2015 is expected to come from high growth economies

• Other recent Highlights– Partnerships to produce and sell

Engineering Plastics in Russia– JV with Russian Tatanergo

(Tatarstan) in feed premixes– Manufacturing collaborations for

resins in Turkey and India

High Growth Economies sales %

2005 2010 2015T

22%

37%

50%

Impressive growth China sales

Further step-up in China

Doubling China sales by 2015

• 2010 China sales is US$1.6 bn• Above Vision 2010 target

• Other recent Highlights:– Partnership announced with

Sinochem in anti-infectives– Premix network further enlarged– Cooperation in food & feed

research with Fudan University– New research centers for

engineering plastics and composites

– New 200kt caprolactam facility announced with Sinopec

– Acquisition in high performance fibers

2005 2010 2015T

US$0.5bn

US$1.6bn

US$3.0bn

Innovation

From building the machine todoubling the output

• € 1.3bn innovation sales (2010)• € 1.0bn 2010 target exceeded despite

strong headwinds• 2015: innovation sales 20% of total sales

(new definition)• 2020: EBA sales >€ 1bn

• Other recent Highlights:– Continued high level of new

launches (65 launches in 2010 )– a.o. breakthroughs in 2nd

generation biofuels, new ingredient for heart health, halogen free flame retardant materials

– 244 patent applications filed

Total innovation sales (€m)

0

500

1000

1500

2006 2007 2008 2009 2010

2010:€ 1.3bn

Sustainability

From responsibility to business driver

• 2010: no. 1 in Dow Jones Sustainability Index (DSJI) for Chemicals; No. 1 in 5 out of 7 years

• ~ 89% of DSM innovation pipeline are ECO+• ~ 40% of DSM’s running business is ECO+

• Other recent highlights:– Improved employee engagement– Working with suppliers to reduce

carbon footprint by 20% by 2020 – CEO Feike Sijbesma received the

UN “Humanitarian of the Year” Award

Responsible care

Business driverResponsibility

Innovative new

products

Creating sustainable

value chains

Redesigning value chains

Value

Responsible care

Business driverResponsibility

Innovative new

products

Creating sustainable

value chains

Redesigning value chains

Value

Acquisitions and partnerships: strong progress

From portfolio transformation to growth

• Partnership with Sinochem in anti-infectives • DSM to acquire Martek and adding new

growth platform

Other recent highlights:– Acquisition of AGI: adding green winning

UV resins– Acquisition of Shandong ICD High

Performance Fibre Co Ltd. in Fiber solutions

– 2 JVs and licensing deal with KuibyshevAzot: DSM moving in fast growing Russian market

– partnership with Kemrock for the production of specialty composite resins in India

Overview


1000 30002000

mbd

Living off the land Living off the landA brief

momentin history

And / or become much more expensive

Hydrocarbons are running out …..

‘Bio’ is already a well established alternative supply

Source: SRI, BCC, IEA 2009, F.O. Licht, Technon Frost and Sullivan, Press Clippings, McKinsey

ESTIMATES(*)

‘Bio’ is most significant renewable source for nextdecades

Source: SRI, BCC, IEA, F.O. Licht, Technon Frost and Sullivan, McKinsey

BiomassBiomassOilOilCoalCoal

Non-renewable Renewable

Where did it start and where are we heading?

First generation Second generation

Need for new and sustainable energy resources

DSM track record in modern biotechnology

Maxirenfor cheeseindustry

Arachidonicacid for

infant nutrition

Cephalexin

Aldolases forcholesterol–lowering drugVitamin B2

Strong innovation record as a basis for further growth

Aspirations

• Sales in 2020 > € 1bn

• High EBITDA margin

• Develop EBA Advanced Surfaces

Strategy Bio-based Products & Services• License and service model to

cellulosic ethanol industry

• Production of bio-based chemicals from traditional crops

• Focus on green materials with better performance

Strategy Biomedical• Expand current biomaterials,

application and technology portfolio

• Grow emerging drug delivery business through market presence/access

• Venture/partner for regenerative medicine & tissue engineering

EBA Strategy: Building new growth platforms

DSM frontrunner in 2nd generation biofuel tech

• DSM’s yeast and enzyme technologies is unique combination

• New robust enzymes-mix able to break down biomass more efficiently

• Advanced yeast strain capable of converting C5/C6 sugars into bio-ethanol

• DSM engaged with 2nd generation bio-ethanol front-runners and on-track for commercial demonstration facilities to start up in 2014

• UBS estimates 2G: 40bn gallon market by 2020• Enzymes / Yeasts ~ 20% of costs• NREL recently increased their enzyme cost

outlook to $0.34 / gallon

• At BIO Toronto (May 2011): DSM and Abengoa presented further breakthrough results with DSM’s C5/C6 advanced yeast technology for 2nd generation bio-fuels

• The yield on cellulose derived C5/C6 sugars can exceed 90% conversion rate, making this new DSM Advanced Yeast technology more economically feasible

Breakthrough results presented by Abengoa

Understanding the emerging new value chain

Feedstock Provision

FeedstockProcessing

Primary Conversion

Secondary Conversion

BioCompounds

& formulationConverters

• Grain seed milling• Biomass pretreatment - enzymatic conversion

• Farming• Storage • Distribution

• Fermentation• Chemical

conversion• Enzymatic

conversion

• Polymerization• Chemical

Synthesis

• Compounding• Formulation• Reactive

Extrusion

• Molding• Film extrusion

MaterialsMaterialsSciencesSciences

Life SciencesLife Sciences

Food & FeedFood & Feed Bio MedicalBio Medical

Personal CarePersonal Care

CoatingsCoatings AutomotiveAutomotive

ElectricalElectricalPharmaPharma

Know how on end-markets needs and capabilities to make it happen

Selection criteria of high potential bio-solutions

• High market potential• High return on investment• Intrinsically better for

environment• Fast to the market• Not competing with high capital

intensive sector (recent capex)• High certainty of technological

success• Down to earth: understand

nature’s design, don’t try to change

• High technological spin-off

New Biobased Chemical Building Blocks

Numerous projects ready for (commercial) launch

Valu

eVa

lue

C18+

CommercialDevelopmentFeasibility

C3

C2

C4

C5+

C18+

CommercialDevelopmentFeasibility

C3

C2

C4

C5+

Ethanol

IsosorbideIsosorbide

Succinic acid

Lactic AcidLactic Acid

1,3 Propanediol1,3 Propanediol3-HP3-HP

GlycolsGlycols

FumaricFumaricPHAsPHAs

CaprolactamCaprolactam

Adipic AcidAdipic Acid

EthyleneEthylene

Chain Length

Long chaindiacids/diols( plants oilseeds) 2017+Long chaindiacids/diols( plants oilseeds) 2017+

Butanol (non-ABE)Butanol (non-ABE)

Citric Acid

Progress: Partnership Bio-succinic acid

• Replacing oil-based succinic acid with biobased succinic acid:• More cost effective• GHG emissions reduction of >60%

• Significantly larger market size than synthetic succinic acid

• Market estimated to be ~500kt by 2020• Collaboration DSM – Roquette• Commercial scale bio-based succinic acid

plant in Italy in 2012

Sheet: courtesy of Roquette

SolventsCoatings and pigments

Pharmaceuticals

PlasticizerFood

Freezing point depression agents

Renewable thermoplastics - PBS

Pyrrolidones

Polyurethane1,4 BDO/THF

Huge additional market potential bio-succinic

Example: Palapreg® ECO

• DSM’s new bio-based Composite Resin• For SMC and BMC applications

– 55% bio-based - highest bio-based content on the market – No compromise on processing standards and product performance– From under-body shields to Class-A exterior body panels

• Supports automotive industry's sustainability targets• Palapreg® ECO P55-01 is commercially available

Example: EcoPaXX™

• DSM’s new biobased engineering plastic: bio-based & high performance• Polyamide with excellent mechanical properties• Very good resistance to automotive coolant, fuels, salts (eg calcium

chloride) oils and greases• 100 % carbon neutral from cradle to gate• Replacing conventional plastics or metal

DSM in leading position

• DSM in unique & leading position– Understanding market needs– Knowing the customer– Knowing the end-markets

• DSM has the unique combination– Enzymes & Yeasts– Chemical / Polymerization / Biotech

competences– Building on strong biotech base

• Significant progress announced:– breakthrough results with DSM’s C5/C6

advanced yeast technology for 2G bio-fuels– DSM engaged with 2G bio-ethanol front-

runners and on-track for commercial demonstration facilities to start up in 2014

– Commercial size bio succinic plant to be build

Overview


Highlights Q1 2011

DSM reports very strong Q1 2011 continuing its positive momentum

• Q1 EBITDA from continuing operations up 14% to € 325 million

• Life Sciences results driven by ongoing good performance in Nutrition

• Materials Sciences posts solid results reflecting volume gains and pricing strength

• EPS € 0.91, 30% higher also due to a lower tax rate

• Martek integration underway; EBITDA in line with expectations

• 2011 is expected to be a strong year for DSM towards achieving the 2013 targets

Results Q1 2011 - Key figures

+4%335348

+5%2,2302,345Net Sales

EBITDA

Total DSM before exceptional items:

+16%1,9332,234Net Sales

EBITDA

EBIT

EPS (€)

+14%284325

+26%0.780.98

+28%130166Net profit

EPS (€)

Total DSM including exceptional items:

+27%

+30%

182

0.70

231

0.91

Continuing operations before exceptional items:

Δ%Q1-2011 Q1-2010(€ million)

EBITDA – DSM continuing business

(**)(**)-13-13Innovation Center (*)

284

-4

50

71

14

166

Q1-2010

110174173Nutrition

23250Pharma

101691Performance Materials

46-2299Polymer Intermediates

-5-25-25Corporate Activities (*)

275158325DSM core business

Q1–2008 (*)Q1–2011 Q1–2009 (*)EBITDA (€ million)

* 2008 & 2009 not restated for changes in pension accounting and corporate research costs** 2008 & 2009 Innovation Center is reported in Corporate Activities

Nutrition: differentiation through value chain

Pure Actives Forms Premix

VitaminsCarotenoidsEnzymesNutritional Ingr.Functional Foods

• Chemistry• Fermentation

Personal care ingr.

Stability / Shelf Life

Delivery / Solubility

Bio-availability

Powder / Flow Properties

• Spray drying• Encapsulation• Absorption

Custom Formulation

Dilution

• Logistics• Sourcing• Blending

Quality, Reliability, Traceability, Sustainability

15% of revenues15% of revenues 85% of revenues85% of revenues

Animal feed: customer value through efficacy

• Feed efficacy (“feed to meat”) is largely determined by the premix

Vitamin Straights

Vitamin forms Premix Macro Premix Protein

ConcentrateSupplementary

Feed Complete Feed

Straight Vitamins (f.e. vitamin A, E)

Vitamin forms (f.e. concentrates, dry mixes, on carrier)

Other additives (eubiotics, amino acids, etc.)

Macro Elements (salts, Ca, P, Na, Mg, etc.)

Single Animal or Vegetable Protein

Various Protein Components

(Soya, sunflower meal, etc.)

Grains

Anim

al f

eed

com

posi

tion

Differentiation by feed conversion know-how

Nutrition sustained good business conditions

Demand growth• Unchanged growth fundamentals

– Urbanization especially in high growth economies

– Demand for healthier lifestyle • Sales growth aspiration: 2% above GDP

Pricing strength• Prices increases expected• Contract structure delays impact

Sensitivities• Currencies • Energy/raw materials

Sales development of Nutrition

400

500

600

700

800

Q1-07 Q1-08 Q1-09 Q1-10 Q1-11

Qua

rterly

Sal

es (€

milli

on)

Performance Materials positive momentum

Continued global growth• Healthy demand development in

Automotive, E&E and packaging• Asia as continuing engine of growth

Pricing strength• Price increases ongoing• Profit improvement despite higher input

costs • Average period for which prices are agreed

in contracts has been reduced

0

30

60

90

120

150

Q1'09 Q3'09 Q1'10 Q3'10 Q1'11

200

400

600

800

EBITDA Sales

Sales & EBITDA growthEBITDA (€ m) Sales (€ m)

Polymer Intermediates excellent performance

• Q1 prices and margins driven by strong demand and high GUR

• Very strong position in Asia

• Healthy demand expected to continue

• Limited additional caprolactam supply:– 200kt announced by DSM / SinoPec– Further 100-300kt might be on

stream in the period 2012-2015

• GURs expected to stay > 90% for caprolactam and acrylonitrile

GUR Caprolactam

Outlook

• Nutrition results are expected to be clearly above last year

• Pharma results are expected to be lower than in 2010

• Performance Materials results are expected to be clearly above last year

• Polymer Intermediates is expected to continue its excellent performance

• 2011 is expected to be a strong year for DSM towards achieving the 2013 targets

Contact:

DSM Investor RelationsP.O. Box 6500, 6401 JH Heerlen, The Netherlands

℡ (+31) 45 578 2864e-mail: [email protected]

internet: www.dsm.com

visiting address: Het Overloon 1, Heerlen, The Netherlands

DSM in motion: driving focused growth · can be found in the company’s latest Annual Report, ......

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