Life Sciences and Materials Sciences. DSM in motion: driving focused growth

Transcription

1 Life Sciences and Materials Sciences DSM in motion: driving focused growth Nico Gerardu Member of the Managing Board Particuliere Aandeelhouders, Urmond/Geleen 19 November 2010

2 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 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,

3 Overview Achievements Vision 2010 Making the next leap Four drivers delivering growth Transforming our organization Delivering value through our businesses Share holder value creation Highlights Q Conclusions

4 Strategy Vision 2010 Climate and Energy Health and Wellness Functionality and Performance Emerging Economies Life Sciences Materials Sciences Nutrition Pharma EBAs Performance Materials Polymer Intermediates Focus on Life Sciences and Materials Sciences

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 Transformation almost completed

6 DSM transformation almost completed H Petrochemicals Engineering Plastic Products Base Chemicals & Materials others Elastomers others Polymer Intermediates Breakdown DSM Sales (%) Base Chemicals & Materials others Performance Materials Pharma Nutrition

7 Strong performance in a challenging period Organic growth EBITDA margins Nutrition Pharma Performance Materials Polymer Intermediates Sales in China Growth from innovation CFROI Sustainability Target 2010 (set in 2005; increased in 2007) > 5% annually >18% >19% >17% >13 % (average) US$ 1.5bn by bn by 2010 WACC (7.5%) + 100bp Energy savings 2% / year Other targets Expected achievement in 2010 Achieved 4 out of 5 years Achieved Not Achieved Not Achieved Not Achieved Achieved Achieved Achieved 4 out of 5 years Achieved 1) 1) Currently above target Most of the targets are achieved

8 Overview Achievements Vision 2010 Making the next leap Four drivers delivering growth Transforming our organization Delivering value through our businesses Share holder value creation Highlights Q Conclusions

9 Successful transformation track record DSM new brand Coal Mining Commodity Chemicals Specialty Chemicals Life Sciences & Materials Sciences Making the next leap: entering a new era

10 Business impact of the societal trends increasing Global Shifts Climate & Energy Health & Wellness

11 DSM in motion: driving focused growth People - Planet - Profit: creating value along three dimensions

12 Strategic and financial targets Profitability targets 2013 EBITDA: bn ROCE: > 15% Sales targets 2015 Organic sales growth: 5%-7% annually China sales: from $ 1.5bn to > $ 3bn High Growth Economies sales: from ~ 32% towards 50% of total sales Innovation sales: from ~ 12% to 20% of total sales EBA aspiration 2020 EBA sales: > 1bn Driving focused growth with ambitious targets

13 Sustainability targets Sustainability aspirations Dow Jones Sustainability Index: Top ranking ( Gold ) ECO+ (innovation): ~ 80% of pipeline is ECO+ ECO+ (running business): from ~34% towards 50% Energy efficiency: ~ 20% savings from 2008 till 2020 Greenhouse Gas emissions: ~ 3.5% reduction per year (over 3-5 years) Engagement Survey: towards High Performance Norm Diversity & People+: to be defined in 2011 Driving focused growth with clear sustainability goals

14 Overview Achievements Vision 2010 Making the next leap Four drivers delivering growth Transforming our organization Delivering value through our businesses Share holder value creation Highlights Q Conclusions

15 High Growth Economies ~ 70% of DSM growth from High Growth Economies Increased Increased Centrally-driven Truly global international Truly global growth international approach 2005 presence presence presence 2010 approach 2015 Proud to have achieved 32% of sales in High Growth Economies Ambitious China sales target of US$1.5bn New Shanghai R&D centre Full-time China President; stronger management in China and India Next level aspiration High growth economies: sales towards 50% China sales to > $ 3bn Set up Innovation Centers China/India Presence in India, LATAM, Russia Fully align organization with growth ambitions (strengthening regions) From reaching out to becoming truly global

16 Intended regional setup with strategic ambition DBM DBM DBPS DBPS (BF) (BF) MB DPP Inno Inno Center Center DFS DR DR MB DNP DD DD Inno Inno Center Center DFI DEP DEP DAI MB Inno Inno Center Center Businesses HQ Regional MB role Regional / country President Strengthening regional business management

17 Innovation Proud to have achieved 1bn sales from innovation Increased speed of innovation Setting up (4) EBAs Setting up innovation infrastructure/culture External recognition as leading innovator Next level aspiration Innovation sales 20% of total sales EBA sales > 1bn Innovation focus on defined platforms Value creation via best practices Set up Innovation Centers in China/India From building the machine to doubling the output

18 Sustainability Securing & leveraging value Responsible care Innovative new products Creating sustainable value chains Redesigning value chains Increasing value: business driver Proud to have achieved From responsible care Reduced GHG emissions DJSI and GRI recognition To corporate responsibility UN World Food Programme collaboration Bio-based economy advocacy Next level aspiration To sustainability as business driver Deliver on three dimensions (Triple P) 80%+ of innovation to be ECO+ 50% of running business sales ECO+ Leading in People+ Products & diversity Integral part of all business activities Part of overall remuneration system From responsibility to business driver

19 Acquisitions & Partnerships Proud to have achieved Divestments of Agro, Melamine, Energy, Urea Licensing and ongoing: Special Products, TPV (Elastomers) Acquisitions like PTG, PA6 and smaller acquisitions/venturing activities Partnerships such as Mitsubishi CC, Novozymes, Crucell, Sinopec, etc Next level aspiration Partnerships for DAI, DPP (also linked to potential in High Growth Economies) Co-investments with Sinopec (Caprolactam) Expand innovation partnerships such as Medivas Acquisitions and partnerships in Nutrition and Materials for growth From portfolio transformation to growth

20 Overview Achievements Vision 2010 Making the next leap Four drivers delivering growth Transforming our organization Delivering value through our businesses Share holder value creation Highlights Q Conclusions

21 Organization and culture Collaborating in One DSM Global high performance organization Business Groups as building blocks Strengthened by Regions Optimized via Functional Excellence & Shared Services Supported by Culture Change program Change Themes: External Orientation Accountability for Performance Inspirational Leadership Based on joint belief in: Sustainability & Diversity Next step in organizational development to realize our ambitions

22 Mission of DSM

23 Overview Achievements Vision 2010 Making the next leap Four drivers delivering growth Transforming our organization Delivering value through our businesses Share holder value creation Highlights Q Conclusions

24 Strategy for Nutrition Improve cost position at par with best of industry Use innovation headroom for further differentiation Selective acquisitions to leverage unique infrastructure / market access Leverage DSM s strong position towards naturals trend Aspirations (2015) Sales growth 2% above GDP Sustainable EBITDA level and EBITDA margin >20% towards 23% Nutrition: Continued value growth

25 Strategy for DSM Anti-Infectives Aspirations (2015) Building a world-scale 6-APA plant in China Pharma EBITDA margin (back) towards 15% - 20% range Launch of several new APIs Development of special grades for existing products Forward integration into Finished Dosage & Dossiers in selected regions DSM Market leader in β-lactam APIs Technology leader Global reach and production Price premium Partner China/India based Leading industry player Strong local presence with global growth ambition Leading the industry consolidation Pharma: Leveraging partnerships for growth

26 Strategy for DSM Pharmaceutical Products Aspirations (2015) Establish operating position in India/China Pharma EBITDA margin (back) towards 15% - 20% range Integrate offering of APIs & FD Obtain own product positions for generic APIs/FDs Offer total supply chain solutions Build on biologics technology position in CMO & bio-similars DSM Strong western customer network Cutting edge technology US formulation business Gold standard cgmp Partner Asset base in low cost country Generic product portfolio Product development Sales channels Accelerated growth through partnerships Pharma: Leveraging partnerships for growth

27 Strategy for Performance Materials Expand leadership in selected segments Strong sales growth and presence in High Growth Economies Growth via sustainable and innovative solutions Strengthen leadership through selective acquisitions Aspirations (2015) Sales growth at double GDP level EBITDA margin > 17% Increasing contribution margin / sales 30% H1 Performance Materials: Growing via innovative sustainable solutions

28 Strategy for Polymer Intermediates Support DSM Engineering Plastics growth ambitions by strengthening backward integration Further strengthen leadership position in Asia Keep US and European plants in prime condition Limit capital intensity of the business and reduce exposure Commitment to sustainability Aspirations (2015) Doubling production in China by 2014 Further improve cost position EBITDA margin ~ 14% (on average over the cycle) PA6 EP + film China >10% cagr Polymer Intermediates: Strengthening backward integration for DEP

29 Strategy for Emerging Business Areas 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 Aspirations Sales in 2020 > 1bn High EBITDA margin Develop EBA Advanced Surfaces Biomedical Expand current biomaterials, application and technology portfolio Grow emerging drug delivery business through market presence/access Venture/partner for regenerative medicine & tissue engineering Strategy EBAs: Building new growth platforms

30 Overview Achievements Vision 2010 Making the next leap Four drivers delivering growth Transforming our organization Delivering value through our businesses Share holder value creation Highlights Q Conclusions

31 Creating shareholder value Transparent communication Financing efficiency Sales growth Capital efficiency Shareholder Value Value Creation Margin improvement Cash generation Target: EBITDA bn in 2013

32 Financial policies unchanged Priorities cash allocation unchanged Dividend policy stable and preferably rising Increase by 0.10 to 1.30 per share will be proposed to AGM Further increase of 0.20 in coming years Commitment to single A rating Systematic, risk-managementoriented hedging strategy continued Dividend per ordinary share ( ) Proposal to AGM to increase dividend

33 Higher return on Capital Employed targeted Intended capital expenditure bn in Improvements: Increase share of growth investments Change investment approach Optimize current asset footprint Reduce working capital Grow without investments; new business models Target: ROCE > 15% in 2013

34 Overview Achievements Vision 2010 Making the next leap Four drivers delivering growth Transforming our organization Delivering value through our businesses Share holder value creation Highlights Q Conclusions

35 Highlights Q DSM delivers continued strong earnings and cash performance in Q3 Q3 operating profit from continuing operations up 28% to 185 million (versus 144 million in Q3 2009) Sales growth from continuing operations 19% compared to Q Continued strong Nutrition performance drives Life Sciences results Very good results for Materials Sciences Cash flow from operating activities in Q3 330 million New strategy announced; DSM in motion: driving focused growth Dividend increase of 0.10 to 1.30 per ordinary share proposed (2010) Based on the continued positive business environment, 2010 is expected to be a strong year for DSM

36 Portfolio transformation largely completed Sale of Citric Acid Europe to Adcuram on 1 October Sale of Thermoplastic Elastomers (Sarlink ) to Teknor Apex Company closed on 1 November Selling process for remaining businesses in BC&M underway Acquisition of biotechnology R&D specialist Microbia (US) JV announced with Crucell EBIT (ytd) Core Business million Q1-Q3 '07 Q1-Q3 '08 Q1-Q3 '09 Q1-Q3 '10 Increasing profitability from core businesses

37 Further strategic progress in third quarter Q3 sales to China increased by 15% y-o-y to US$ 385m. Innovation sales clearly surpasses the 1 billion target Partnerships in (biomedical) materials and innovations UN Humanitarian of the Year Award for DSM's CEO Number 1 in Dow Jones Sustainability World Index Mr. Sijbesma: "It is an honor to receive this award as an acknowledgement of DSM s commitment to addressing the issue of hidden hunger" Creating sustainable value and getting recognition

38 Overview Achievements Vision 2010 Making the next leap Four drivers delivering growth Transforming our organization Delivering value through our businesses Share holder value creation Highlights Q Conclusions

39 The new strategic vision: entering a new era of growth High Growth Economies Innovation Sustainability Acquisitions & Partnerships from reaching out to becoming truly global from building the machine to doubling the output from responsibility to business driver from portfolio transformation to growth Nutrition Pharma Perf Mat Pol Int EBAs Life Sciences and Materials Sciences addressing key global trends & exploiting cross fertilization in One DSM continued value growth leveraging partnerships for growth growing via innovative sustainable solutions strengthening backward integration for DEP building new growth platforms DSM in motion: driving focused growth

40 Conclusions Transformation nearing completion: a new era starts High growth aspirations going forward Bringing all four growth drivers to the next level Solid balance sheet, sufficient financing for growth Resulting in: Higher sales growth and stronger results and better returns Further increasing dividend Being truly international and innovative with sustainability as a clear business driver DSM in motion: driving focused growth