Dsm-firmenich Ag · EURONEXT:DSFIR

Dsm-firmenich — Royal DSM — Investor Day (November 2015)

30 slides from Dsm-firmenich's investor day presentation, Nov 4, 2015

  1. Slide 1: Driving Profitable Growth

    DSM STRATEGY 2018 Driving Profitable Growth GERALDINE MATCHETT - CFO ROYAL DSM CAPITAL MARKETS DAY 4 NOVEMBER 2015 AMSTERDAM

  2. Slide 2: Safe harbor statement

    Safe harbor statement 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 reade

  3. Slide 3: Agenda

    Agenda 1 Strategy 2018: financial targets & sensitivities 2 Financial Policies 3 Wrap-up Slide 2

  4. Slide 4: Strategy 2018: Driving profitable growth through science-based, sustainable solutions

    Strategy 2018: Driving profitable growth through science-based, sustainable solutions IMPROVING 2018 TARGETS Global shifts FINANCIAL RESULTS & Digitization Health & Climate & Wellness Energy Growth annual EBITDA growth: high single-digit Cost & Productivity --- annual ROCE growth: Capital high doubl

  5. Slide 5: Strategy 2018: financial targets on EBITDA and ROCE

    Strategy 2018: financial targets on EBITDA and ROCE to be achieved via sales growth, cost savings and capital efficiency High single- High double- digit annual digit bps growth annual growth 2018 Targets EBITDA growth ROCE growth Above ~€250-300m <20% How ~6.5% of market savings of sales by sales to

  6. Slide 6: Driving profitable growth supported by above market sales growth

    Driving profitable growth supported by above market sales growth High single- High double- digit annual digit bps growth annual growth 2018 Targets EBITDA growth ROCE growth Above ~€250-300m <20% How ~6.5% of market savings of sales by sales to achieve growth by 2018 2018 Sales growth Costs & Produc

  7. Slide 7: Revenue development 2010-2015: driven by M&A and organic growth

    Revenue development 2010-2015: driven by M&A and organic growth €bn 10  Upgraded quality of €8.2bn1 ~€3.1bn ~€1.2-1.4bn 8 portfolio ~€1.4bn 6  Organic growth was 3-4% 4 per year on average 2  FX contributed ~1% on 0 average per year 2010 deconsolidated acquisitions growth 2015 divested 1 2010 Sal

  8. Slide 8: We will extract further value from the Nutrition acquisitions

    We will extract further value from the Nutrition acquisitions (2010) (2012) (2012) (2012) USDm CADm BRLm USDm 7% 4%2 2% 10% 8%1 16% 24% -6% Acq. 20153 Acq. 2015 3 Acq. 20153 Acq. 2015 3 Acq. 20153 Acq. 20153 Acq. 20153 Acq. 20153 date Date date Date date Date date Date 100% 90% 75% 75% Sales Growth

  9. Slide 9: More balanced regional sales split provides a natural hedge

    More balanced regional sales split provides a natural hedge both for growth and currency impact 2015 Sales by region (destination / origin) 40% 30%  Sales to High Growth Economies are now 43% 20%  Better balance of costs & 10% revenues in North and South America as well as 0% in China CH Rest NAM

  10. Slide 10: 2016-2018 'above market' growth plans of businesses are achievable

    2016-2018 ‘above market’ growth1 plans of businesses are achievable Performance  Growth validated by scrutiny of sub-segments, Nutrition market trends and track record Materials growth growth2  Both Nutrition and Performance Materials have upgraded their portfolio 5% excl VE  Good growth in Nutri

  11. Slide 11: Driving profitable growth supported by cost savings & efficiency improvements

    Driving profitable growth supported by cost savings & efficiency improvements High single- High double- digit annual digit bps growth annual growth 2018 Targets EBITDA growth ROCE growth Above ~€250-300m <20% How ~6.5% of market savings of sales by sales to achieve growth by 2018 2018 Sales growth C

  12. Slide 12: Improvement programs: combined savings of €250-300m by 2018

    Improvement programs: 1. DSM-wide support functions program and 2. Nutrition Improvement program; with combined savings of €250-300m by 2018 ~€m 400 Nutrition Program 300 2017 €130-150m ~€50m DSM wide (by 2018) 200 2016 Support ~€100m functions Perform. €125-150m Mat. 100 2015 (by end 2017) ~€80m 0

  13. Slide 13: Program 1: DSM wide savings in support functions & staffs

    Program 1: DSM wide savings in support functions & staffs: Structural savings of €125-150 million to be fully achieved by the end of 2017 Breakdown by function Breakdown by cluster Aim of the program  External benchmark identified savings Other functions Corporate Activities potential Finance  New

  14. Slide 14: Program 2: Nutrition improvement program

    Program 2: Nutrition improvement program: Cost savings & efficiency improvements in Nutrition €130-150m by 2018 Breakdown by category Aim of the program PURCHASING  Purchasing savings related to direct raw EFFICIENCY GAINS materials sourcing, energy, intermediates  Yield “Lowering the cost of our

  15. Slide 15: Cost saving and improvement programs: Close monitoring

    Cost saving and improvement programs: Close monitoring of the design, maturity and achieved benefits  Governance / Steering: – monthly reporting in Executive Committee – owner: CEO & CFO (overall), Dimitri de Vreeze (support functions & staffs), Stephan Tanda (nutrition improvement)  Close monitor

  16. Slide 16: Driving returns supported by reduction of working capital

    Driving returns supported by reduction of working capital High single- High double- digit annual digit bps growth annual growth targets EBITDA growth ROCE growth Above ~€250-300m <20% of How ~6.5% of market savings sales by sales to achieve growth by 2018 2018 Sales growth Costs & Productivity Worki

  17. Slide 17: Operating working capital increase reflects portfolio change

    Operating working capital increase reflects portfolio change OWC/sales per cluster 1 OWC in AR%, AP%, Inventory% 1 2010-2015 Q3 2010-2015 Q3 45% 25% Increased due to deconsolidation PI 30% 26% 20% 25% 15% 15% 2015 0% 10% 2010 2011 2012 2013 2014 2015-Q3 2010 2011 2012 2013 2014 2015-Q3 Nutrition Pha

  18. Slide 18: Strategy 2018: Bring down total working capital below 20%

    Strategy 2018: Bring down total working capital below 20% Comparison: Impact from OWC% to Alignment with common practice WC% (2014 year end)1 40%  External reporting will be aligned with common peer practice and changed from Operating 34% 31% Working Capital (OWC) to total Working Capital 30% 26% (

  19. Slide 19: Driving returns supported by disciplined & focused capital investments

    Driving returns supported by disciplined & focused capital investments High single- High double- digit annual digit bps growth annual growth targets EBITDA growth ROCE growth Above ~€250-300m <20% How ~6.5% of market savings of sales by sales to achieve growth by 2018 2018 Sales growth Costs & Produ

  20. Slide 20: Targeted capital allocation to profitably grow the business

    Targeted capital allocation to profitably grow the business CAPEX (€m) excl. M&A 800 Other 2016-2018: Annual average 600 estimate DSM Corporate Activities  Strict and targeted capital allocation to growth areas 400 Innovation Center – two-thirds of capex focus on Nutrition 200 Performance Materials

  21. Slide 21: These well-identified improvements will drive delivery of Strategy 2018 targets

    These well-identified improvement will drive delivery of Strategy 2018 targets High single- High double- digit annual digit bps growth annual growth 2018 Targets EBITDA growth ROCE growth Above ~€250-300m <20% How ~6.5% of market savings of sales by sales to achieve growth by 2018 2018 Sales growth

  22. Slide 22: Strategy 2018: EBITDA target

    Strategy 2018: EBITDA target ~€130-150m ~€100-125m Nutrition Inflation Above program market sales Support functions growth & services program 2018 target 2015 2018 Slide 21

  23. Slide 23: Strategy 2018: High double-digit bps annual ROCE growth target

    Strategy 2018: High double-digit bps annual ROCE growth target driven by: EBIT(DA) growth and capital efficiency  ROCE1 in the prior strategy period 20% 30% was negatively impacted by: – M&A related intangibles and 15% 20% goodwill – Negative impact CHF on EBIT 10% while at same moment inflating 10

  24. Slide 24: How the clusters are expected to contribute to the financial targets

    How the clusters are expected to contribute to the financial targets of the group Strategy 2018 financial targets for DSM  High single-digit annual EBITDA growth  High double-digit bps annual ROCE growth 2018 Targets Nutrition Performance Materials  Annual EBITDA growth: high single-digit  Annua

  25. Slide 25: Key assumptions for Strategy 2018

    Key assumptions for Strategy 2018 No major macro downturn assumed…. Current FX rates versus € assumed….  global GDP growth rates of 3.2%1 is  US$ 1.10, CHF 1.08, BRL 4.00, RMB 7.00 assumed for 2016-18  DSM hedges approximately 50% of its  challenges in certain markets are transactional exposure

  26. Slide 26: Strategy 2018: Generate stronger free cash flow

    Strategy 2018: Generate stronger free cash flow (excl. exceptionals) Working Stronger EBITDA Balanced Growth + Capital Reduction + CAPEX - Tax = Free cash flow High single-digit Disciplined CAPEX, annual EBITDA growth focus on Nutrition total working capital <20% 18%-20% Slide 25

  27. Slide 27: Cash allocation: Rewarding shareholders with stable, preferably rising dividend

    Cash allocation: Rewarding shareholders with stable, preferably rising dividend Dividend per ordinary share (€)  Cash allocation priorities € 1.75 1. Disciplined capex to support profitable growth € 1.50 2. Dividend 3. Acquisitions € 1.25 4. Share buy-backs € 1.00  Dividend policy unchanged “stabl

  28. Slide 28: DSM is committed to maintain a strong balance sheet

    DSM is committed to maintain a strong balance sheet Debt maturity profile (€m)  DSM’s refinancing has been geared towards evenly 800 spread maturity profile, to reduce refinance risk  Average cost of long term funding has been reduced 600 from 4.2% (2013), 3.9% (2014) to 3.4% (2015e)  Net Debt in

  29. Slide 29: Wrap-up: Committed to drive shareholder value & maintain strong balance sheet

    Wrap-up: Committed to drive shareholder value & maintain strong balance sheet Committed to Committed to Drive shareholder value Maintain a strong balance sheet 1. Above market growth 1. Extract value from joint ventures 2. Cost reductions & efficiencies 2. Improve operating cash flow 3. High single-

  30. Slide 30: Bright Science. Brighter Living.

Royal DSM — Investor Day (November 2015) on 6ix