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
Slide 2
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
Slide 3
Overview
• Strategy Vision 2010 successfully completed
• DSM in motion: driving focused growth
• Operational performance 2010 and outlook
• DSM and our biobased future
Slide 4
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
Slide 5
“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)
Slide 6
Overview
• Strategy Vision 2010 successfully completed
• DSM in motion: driving focused growth
• Operational performance 2010 and outlook
• DSM and our biobased future
Slide 7
DSM in motion: driving focused growth
Slide 8
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
Slide 9
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%
Slide 10
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
Slide 11
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
Slide 12
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
Slide 13
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
Slide 14
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
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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
Slide 16
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
Slide 17
Overview
• Strategy Vision 2010 successfully completed
• DSM in motion: driving focused growth
• Operational performance 2010 and outlook
• DSM and our biobased future
Slide 18
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
Slide 19
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 (€)
Slide 20
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
Slide 21
Overview
• Strategy Vision 2010 successfully completed
• DSM in motion: driving focused growth
• Operational performance 2010 and outlook
• DSM and our biobased future
Slide 22
1000 30002000
mbd
Living off the land Living off the landA brief
momentin history
And / or become much more expensive
Hydrocarbons are running out …..
Slide 23
‘Bio’ is already a well established alternative supply
Source: SRI, BCC, IEA 2009, F.O. Licht, Technon Frost and Sullivan, Press Clippings, McKinsey
ESTIMATES(*)
Slide 24
‘Bio’ is most significant renewable source for nextdecades
Source: SRI, BCC, IEA, F.O. Licht, Technon Frost and Sullivan, McKinsey
Slide 25
BiomassBiomassOilOilCoalCoal
Non-renewable Renewable
Where did it start and where are we heading?
Slide 26
First generation Second generation
Need for new and sustainable energy resources
Slide 27
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
Slide 28
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
Slide 29
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
Slide 30
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
Slide 31
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
Slide 32
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
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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
Slide 34
Solvents Coatings andpigments
Pharmaceuticals
PlasticizerFood
Freezing pointdepression agents
Renewablethermoplastics - PBS
Pyrrolidones
Polyurethane
1,4 BDO/THF
Huge additional market potential bio-succinic
Slide 35
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
Slide 36
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
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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
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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