DSM in motion: driving focused growth … · DSM in motion: driving focused growth ... can be found...

DSM in motion: driving focused growth

Volkert ClaassenVP Strategy DSM Biobased Products & Services

Marc SilvertandInvestors Relations Manager Royal DSM

KBC Conference, Brussels March 29 2011

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

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

should be understood that many factors can cause actual performance andposition to differ materially from these statements. DSM has no obligation toupdate 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 businesscan 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

http://www.dsm.com/

Overview

• Strategy Vision 2010 successfully completed

• DSM in motion: driving focused growth

• Operational performance 2010 and outlook

• DSM and our biobased future

DSM: Transformation completed2000 2005 2010*

PolymerIntermediates

PerformanceMaterials

Pharma

Nutrition

Brea

kdow

n D

SM s

ales

(%

)

Others

Petrochemicals

EngineeringPlastic Products

Base Chemicals& Materials

Others

Base Chemicals& Materials

Others

* Excluding discontinued

“Vision 2010” strategic objectives achieved

• Successful transformation to Life Sciences and Materials Sciences

• Building strong China position• Establishing innovation infrastructure, culture and goals• Maintaining industry leadership in sustainability (a.o. by using biotech)• Launching successfully Cultural Change Program• Weathering the downturn whilst “staying the course”• Focus on innovation and customers as well as cost and cash management

• DSM Energy Closed 2009• Urea Licensing Closed 2009• DSM Agro Closed 2010• DSM Melamine Closed 2010• Citric Acid Closed 2010• TPV Sarlink Closed 2010• DSM Special Products Closed 2010• EPDM Expected 2011

• DSM Energy Closed 2009• Urea Licensing Closed 2009• DSM Agro Closed 2010• DSM Melamine Closed 2010• Citric Acid Closed 2010• TPV Sarlink Closed 2010• DSM Special Products Closed 2010• EPDM Expected 2011

Divestments Acquisitions & Partnerships

• Polymer Technology Group (Biomedical)• Pentapharm (Personal Care)• DSM’s polycarbonate business swap for MCC’s

polyamide business (Performance materials)• Several venturing activities (Innovation)• JV with Crucell/Johnson&Johnson (Pharma)• JV with Roquette (Biobased products)• JV with DuPont (Biomedical)

• Polymer Technology Group (Biomedical)• Pentapharm (Personal Care)• DSM’s polycarbonate business swap for MCC’s

polyamide business (Performance materials)• Several venturing activities (Innovation)• JV with Crucell/Johnson&Johnson (Pharma)• JV with Roquette (Biobased products)• JV with DuPont (Biomedical)

Overview





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 in2010 was 37% of total sales

• Over 70% of DSM’s growth in periodto 2015 is expected to come fromhigh 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 andcomposites

– New 200kt caprolactam facilityannounced with Sinopec

– Acquisition in high performancefibers

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 ingredientfor heart health, halogen freeflame 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 tobusiness driver

• 2010: no. 1 in Dow Jones SustainabilityIndex (DSJI) for Chemicals; No. 1 in 5 outof 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

Responsiblecare

Business driverResponsibility

Innovativenew

products

Creatingsustainable

valuechains

Redesigningvaluechains

Value

Responsiblecare

Business driverResponsibility

Innovativenew

products

Creatingsustainable

valuechains

Redesigningvaluechains

Value

Acquisitions and partnerships: strong progress

From portfolio transformationto 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 Fibersolutions

– 2 JVs and licensing deal withKuibyshevAzot: DSM moving in fastgrowing Russian market

– partnership with Kemrock for theproduction of specialty composite resinsin India

DSM to acquire Martek Biosciences in NutritionA

cqui

stiio

n

• Positions DSM as a leader in PUFAs and in Infant Nutrition• Greatly strengthens DSM’s presence in the United States• Expands DSM’s technology platform in the field of algal fermentation

Cont

ext • PUFAs are clinically proven to have important human health benefits

• One of the largest, fastest growing health ingredients introduced in recent history• Martek is a leader in this field with strong positions, especially in Infant Nutrition

applications

Gro

wth

• Martek’s growth globally will be accelerated by• DSM’s global market reach, technology base and application skill capabilities• DSM’s insights in food and beverage and dietary supplement markets• DSM’s strength in industrial biotechnology and related applications

EPS accretive from day one

Financial impact of acquisition• DSM impact on a full year basis*

– Additional sales € 270-290m– Additional EBITDA € 85-90m

• Expected restructuring costs € 25-30m in 2011• EPS accretive by 15 to 20 euro cents per ordinary share

Expectations by 2015• Double digit sales growth• Stable to rising EBITDA margins

• The transaction has closed at the end of February 2011

* Based on FY 2010 Martek reporting

DAI Partnership enables strong growth in ChinaJV

• Sinochem excellent JV partner in context of DAI strategy• JV will enable accelerated growth in high growth economies

Cont

ext

• Demand and supply moving to Asia and high growth economies• DSM strongest global player (market and technology position)• DAI partnership in Asia/China key for further development

Gro

wth

• Global 50/50 joint venture with Sinochem• Strategic focus of JV fully in line with DSM strategy• Strengthening position -lactam anti infectives business, especially in China• Forward integration into finished dosage in selected markets• 50 % Participation by Sinochem for € 210m

Overview





Highlights Q4 / FY 2010

DSM reports strong 2010 results and proposes dividend increase to € 1.35

• Vision 2010 strategy successfully completed; DSM will now drive focused growth

• Q4 operating profit from continuing operations up 17% to € 170 million

• Full-year operating profit from continuing operations up 74% to € 752 million

• Very good Nutrition performance drives Life Sciences results

• Significant improvement in Materials Sciences results

• Continued strong cash flow from operating activities of € 1.1 billion in 2010

• Dividend increase of 12.5% to € 1.35 per ordinary share proposed for 2010

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

Proposal to AGM to increase dividend

• Dividend policy “stable and preferablyrising”

• Proposal to AGM (April 2011):– Increase dividend by 12.5% to € 1.35– Introduce optional stock dividend

• Further dividend increase to at least€ 1.50 in coming years

€ 0,50

€ 0,75

€ 1,00

€ 1,25

€ 1,50

2004 2007 2010

2010:€ 1.35

Dividend per ordinary share (€)

Outlook 2011

• Nutrition is expected to achieve sustained good performance• Business conditions are expected to be similar to 2010 for Pharma• Performance Materials is expected to benefit significantly from continued

global growth• Polymer Intermediates is expected to continue its excellent performance

• Dutch pension plan changed into a defined contribution plan(accounting effect of - € 33 million on EBITDA)

• The tax rate considerably lower ~21% - including Martek

• 2011 is expected to be another strong year for DSM towards achieving the2013 targets

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

StrategyBio-based Products & Services• License and service model to

cellulosic ethanol industry

• Production of bio-based chemicalsfrom traditional crops

• Focus on green materials withbetter performance

Strategy Biomedical• Expand current biomaterials,

application and technology portfolio

• Grow emerging drug deliverybusiness through marketpresence/access

• Venture/partner for regenerativemedicine & tissue engineering

EBA Strategy: Building new growth platforms

DSM frontrunner in 2nd generation biofuel tech

• DSM’s yeast and enzymetechnologies is uniquecombination

• New robust enzymes-mix ableto break down biomass moreefficiently

• Advanced yeast straincapable of converting C6 / C5sugars into bio-ethanol

Understanding the emerging new value chain

FeedstockProvision

FeedstockProcessing

PrimaryConversion

SecondaryConversion

BioCompounds

& formulationConverters

• Grain seed milling• Biomass pretreatment- enzymatic conversion

• Farming• Storage• Distribution

• Fermentation• Chemicalconversion

• Enzymaticconversion

• 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 tochange

• High technological spin-off

New Biobased Chemical Building Blocks

Numerous projects ready for (commercial) launch

Val

ueV

alue

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 chain diacids/diols( plants oilseeds) 2017+Long chain diacids/diols( plants oilseeds) 2017+

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

Citric Acid

Example: European alliance: DSM - Roquette (F)

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

• Collaboration DSM – Roquette• DSM: White Biotechnology• Roquette: demo plant in France

Sheet: courtesy of Roquette

Solvents Coatings andpigments

Pharmaceuticals

PlasticizerFood

Freezing pointdepression agents

Renewablethermoplastics - PBS

Pyrrolidones

Polyurethane

1,4 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

• Understanding market needs:– Knowing the customer (needs)– Knowing the end-markets

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

• Building on strong biotech base

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

mailto:[email protected]

http://www.dsm.com/

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