Life Sciences & Materials Sciences. Staying the Course. Bond Investor Update. 4th March Page 0

Transcription

1 Life Sciences & Materials Sciences Staying the Course Bond Investor Update 4th March 2010 Page 0

2 Disclaimer This document 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. Examples of forward-looking statements include statements made or implied about the company s strategy, estimates of sales growth, financial results, cost savings and future developments in its existing business as well as the impact of future acquisitions, and the company s financial position. These statements can be management estimates based on information provided by specialized agencies or advisors. 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 the company's actual performance and position to differ materially from these statements. These factors include, but are not limited to, macro-economic, market and business trends and conditions, (lowcost) competition, legal claims, the ability to protect intellectual property, changes in legislation, changes in exchange and interest rates, changes in tax rates, pension costs, raw material and energy prices, employee costs, the implementation of the company s strategy, the company s ability to identify and complete acquisitions and to successfully integrate acquired companies, the company s ability to realize planned disposals, savings, restructuring or benefits, the company s ability to identify, develop and successfully commercialize new products, markets or technologies, economic and/or political changes and other developments in countries and markets in which DSM operates. As a result, DSM s actual future performance, position and/or financial results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. DSM has no obligation to update the statements contained in this document, 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, a copy of which can be found on the company's corporate website, Page 1

3 Introduction The purpose of today s Credit Investor Update call is to provide an update on DSM s annual results for 2009, which were published on the 24th February The presentation includes a status update on the progress of DSM s strategy Vision 2010 DSM intends to hold a Credit Investor Update call annually, in connection with the annual results publication Page 2

4 Agenda DSM In Brief Strategy Financial Performance Financial Policy Summary Page 3

5 Investment Highlights DSM is a leading life science and material science company Strong business profile Diversification Leading market position Conservative financial profile Strong management commitments DSM is listed on Euronext Amsterdam with a market capitalisation of approx. 5.7 bn Strong cash generation, with cash flow from operating activities of 1,276m for FY 2009 DSM is active worldwide in Nutrition and Pharma markets as well as Performance Materials, Polymer Intermediates and Base Chemicals and Materials targeting a broad client base DSM is well balanced geographically and has a diverse customer portfolio DSM holds leadership positions in a majority of its businesses DSM aims to maintain this leadership positions through innovation and focus on customers DSM is financially sound, with a strong balance sheet DSM strong credit ratings (A3/A- ratings, both with stable outlook) A3 rating from Moody s unchanged since 2007 and A- rating from S&P unchanged since 1998 DSM s Vision 2010: accelerate shift to a Life Sciences and Materials Sciences company and increased focus on innovation and higher value added products Well-regarded management team with proven track record Strong board level commitment to a long term single A credit rating Source: Bloomberg as of 26 February 2010 Page 4

6 DSM is everywhere Page 5

7 DSM Today Nutrition Pharma Performance Materials Polymer Intermediates Base Chemicals and Materials DSM Nutritional Products Animal Nutrition & Health Human Nutrition & Health DSM Pharmaceutical Products DSM Anti-Infectives DSM Resins DSM Engineering Plastics DSM Dyneema DSM Fibre Intermediates DSM Agro DSM Melamine DSM Elastomers DSM Food Specialties (for divestment) 2009 Sales 2.8bn 0.7bn 1.8bn 0.8bn 1.1bn % of total* 37% 9% 24% 11% 15% EBITDA 655m 91m 174m 36m 2m Margin 23% 13% 10% 4% 0% Difference to 100% in Other Activities Source: DSM Annual Report 2009 Page 6

8 Balanced portfolio 2009 Sales per end market Fibers/ Textiles Electrical & Electronics Transportation/ Automotive 7% Building & Construction Other 5% 5% 11% Agriculture 12% 5% 6% Packaging 10% 39% Health & Nutrition Pharmaceuticals DSM is well positioned in the current economic environment thanks to a solid geographical split as well as a balanced portfolio (1) Source: DSM Annual Report Page 7

9 Strategic focus on emerging economies Sales by Destination 2009 Sales in China (in US$ m.) North America 18% % 5% C/E Europe 7% Latin America 11% China % Emerging Asia Pacific Western Europe 44% Rest of World 6% (incl. Japan, Korea) Sales in China in 2009 increased to almost USD 1.2bn, a new record Page 8

10 Strong innovation sales growth despite recession million 1000 Innovation sales 1.0bn m m m m Nutrition Performance Materials Pharma/Other All clusters 2009 good basis to reach 1.0bn target Page 9

11 Agenda DSM In Brief Strategy Financial Performance Financial Policy Summary Page 10

12 DSM -100 years of successful transformations Evolution Bioterials / Biologics Petrochemicals Life Science Products Performance Materials Fertilizers Coal classical modern Technological competences Mechanical engineering Chemical engineering Polymer technology Material science Fine chemicals Biotechnology Profile and strategy Page 11

13 Focus on Life Sciences and Material Sciences Climate and Energy Health and Wellness Functionality and Performance Emerging Economies Life Sciences Materials Sciences Nutrition Pharma EBAs Performance Materials Polymer Intermediates Exploiting strong market positions and technology platforms Page 12

14 Main contributors to current innovation sales Climate and Energy Health and Wellness Functionality and Performance Emerging Economies Stanyl Food enzymes Advanced Composites e.g. Automotive and Electronic applications Dyneema Maxarome e.g. windmill blades Feed enzymes e.g. Cut-resistant Gloves Ronozyme Focus on societal trends drives innovation success Page 13

15 Vision 2010 Builds on the company s solid track record of portfolio transformation and sharpens its focus on Life Sciences and Materials Sciences at an increased pace Vision 2010 Building on Strengths Accelerating profitability and growth through: Building on Strengths Increased innovation in established markets Accelerating internationalisation Increased Presence Emerging Economies Market-driven Growth and Innovation Operational Excellence Extending operational excellence programs Value creation targets (margins, TSR) Value creation Page 14

16 Vision Driving Value Acceleration to specialty business Better quality of earnings and more stable growth Stakeholder Value Higher organic growth Market driven growth and innovation Emerging economies >5% growth Operational excellence Higher margins Capital discipline Disposal of non-core businesses and other assets Clear allocation of cash, 250m share buyback cancelled Stable and conservative dividend policy Capital efficiency Lower WACC Greater opportunities for growth Committed to Single A ratings Page 15

17 Progress with the portfolio shift Swap announced of DSM's polycarbonate business for MCC's polyamide business (PM) Acquisition of full control of PA6 polymerization facility NPC in US (PM) Smaller acquisitions / venturing investments: Biopract, MediVas, Segetis and BioProcess Control Disposal of urea licensing business and Energy business Closure of Citric Acid in China (BC&M) and Clavulanic Acid in Sweden (Pharma) Other disposals ongoing Target completion of disposals by end of 2010 Page 16

18 Summary update Vision 2010 Shift to Life Sciences and Materials Sciences continued Successful acquisitions achieved Disposal program planned within time horizon of Vision 2010 China sales US $ 1.2bn in 2009, target US $ 1.5bn in 2010 Innovation sales 0.8bn in 2009, target 1bn in 2010 Dividend proposal at 1.20 per share Progress in sustainability Good progress but some drawbacks due to the economic downturn Page 17

19 Agenda DSM In Brief Strategy Financial Performance Financial Policy Summary Page 18

20 Highlights DSM ends 2009 with solid Q4 and very strong cash generation Q4 operating profit from continuing operations 141m in line with Q Life Sciences performance reflects robust Nutrition business Materials Sciences recovery remains on track Full year operating profit from continuing operations 370m Full year cash flow from operating activities very strong at 1,276m Solid financial position dividend maintained at 1.20 in cash No quantitative outlook provided for Page 19

21 Financial Summary Key Figures m Net sales* 7,732 9,297 8,757 8,380 8,195 EBITDA* 836 1,357 1,247 1,274 1,311 EBIT* * Before exceptional items Net profit excl. exceptional items Net profit from exceptional items 93 (31) (129) (4) (36) Net profit Shareholder s equity 5,011 4,695 5,383 5,855 5,568 Net debt 830 1,781 1, Source: DSM Page 20

22 Cash flow & balance sheet highlights Cash Flow ( million) Cash from operating activities FY ,276 FY Cash flow from operating activities Cash from investing activities Free cash flow from operations , Balance Sheet ( million) YE 2009 YE Net debt Gearing % 1,781 28% 0 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Strong cash performance and continued net debt reduction Page 21

23 Development cost savings program Cost savings program 2009 Total achieved savings over 150m Headcount reduced by 1,314 (from Q to ultimo 2009) Cost development 2010 Upper limit of 200m in reach 2/3 expected to be sustainable 25,000 24,000 23,000 22,000 21,000 20,000 Headcount development Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Successful implementation of cost savings program Page 22

24 Operating working capital development million % 25% 20% 15% 10% 5% 0 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 0% OWC (left axis) % OWC/Sales (right axis) Successful reduction of operating working capital achieved Page 23

25 Agenda DSM In Brief Strategy Financial Performance Financial Policy Summary Page 24

26 Financing Policy Target A long-term credit rating Target financial ratios unchanged Gearing 40 % EBITDA /interest cover 8.5 adj. FfO / adj. Net Debt >30 % Secure on EBITDA / interest cover Normative gearing 30-40%, defined as net debt / total capital, in normal times - currently the objective is to stay below 30% Scope for gearing level depends on adj. FfO / adj. Net Debt Page 25

27 Financial Targets & Key Credit Statistics IFRS Financial Targets EBITDA / Net Interest 14.0x 15.3x 16.6x 15.7x 18.7x Gearing 14% 28% 20% 14% 13% Adj. FFO / Adj. Net Debt* 85% 31% 33% 37% 33% Other Credit Statistics Net Debt/EBITDA 0.99x 1.31x 1.07x 0.73x 0.64x * Adjusted Funds From Operations: Net Operating Cash Flow less Dividends. Adjusted Net Debt: Net Debt adjusted for contingent liabilities, guarantees and unfunded pensions. Cumulative Preferred Shares A have been included in net debt for 100% up to and including Starting 2008 these have been counted for 50% only, in line with the treatment by Moody s Source: DSM Target of maintaining A category long-term credit rating: A3 (Stable)/A- (Stable) by both Moody s and S&P A3 rating of Moody s unchanged since 2007 and A- rating of S&P unchanged since 1998 Page 26

28 Strong Liquidity Position Financing Highlights of 2009 Gearing of 14% at the end of 2009 Successful bond issue of 500m in March Gross borrowings end of 2009 were 2.2bn at an average interest rate of 3.8%, including financial instruments Spread of maturity dates of long-term debt provides flexibility in the current economic downturn Good access to Liquidity 1.34bn of cash and cash equivalents at the end of m of committed and currently undrawn credit facilities maturing in Commercial Paper market continuously available for DSM at relatively low spreads No financial covenants in existing facilities Pension funds sufficiently funded DSM Debt maturity profile Eur million Conservative financing mix in current uncertain markets Page 27

29 DSM s Credit Ratings no change in 2009 Moody s (A3, stable) November 2009 Standard & Poor s (A-, stable) August 2009 Single A-rating since 1998 Significant size and diversity of the Company Ongoing efforts to shift its business profile towards Life Sciences and Material Sciences Leading market positions in Nutrition and material science segments - demonstrated resilience in the Nutrition business Conservative balance sheet management and strong operating performance before the downturn created a substantial headroom with regards to guidance for the A3 rating Conservative financial policy and solid liquidity profile maintained Financial metrics in line - Solid cash flow coverage of debt Manages proactively its liquidity position and refinancing A-rating consistently held since 1998 The group is well diversified by customer, geography, and product Strong business profile Leading positions in many markets, notably where know-how and technology are key barriers to entry The strong business profile continues to be supported by a well-balanced earnings structure Modest financial risk profile and commitment to maintain a conservative financial profile Emphasis on organic and external growth over shareholder distributions Key metrics remain comfortable for the rating Prudent liquidity management Page 28

30 Agenda DSM In Brief Strategy Financial Performance Financial Policy Summary Page 29

31 DSM is Staying the Course in 2010 Execution of the strategy commitment to customers, innovation and sustainability exiting the remaining non-core operations capitalizing on any opportunity that might arise Continuation of current priorities Focus on cash, OWC, cost savings and market opportunities Prepared for a further recovery Fulfill additional demand Financial flexibility to finance growth Page 30

32 Summary Very strong cash generation in 2009 Vision 2010 is the right strategy; DSM is staying the course Life Sciences performance reflects robust Nutrition business Materials Sciences recovery remains on track Strong balance sheet and financial flexibility Strong credit ratings from both Moody s and S&P no change during crisis Page 31

33 Contact: DSM Investor Relations P.O. Box 6500, 6401 JH Heerlen, The Netherlands (+31) (+31) internet: Visiting address: Het Overloon 1, Heerlen, The Netherlands Page 32

34 Appendix Page 33

35 DSM Nutrition DNP Human Nutrition and Health DSM Food Specialties Selected 2009 Financials DNP Animal Nutrition and Health Trends Better nutrition to stay healthy Increased convenience foods Innovation to protect brands Food chain productivity and safety Sales 2.8bn EBITDA 655m Margin 23.2 % EBIT 521m R&D 144m # Employees 7,110 Market-position DNP has a differentiation and Innovation strategy in vitamins DSM holds leading positions in markets for ingredients for human and animal health and personal care Page 34

36 DSM Pharma DSM Anti-Infectives DSM Pharmaceutical Products Trends Aging demographics Emergence of generics Growth of biopharma Selected 2009 Financials Sales 0.7bn EBITDA 91m Margin 12.6 % EBIT 32m R&D 73m # Employees 4,374 Market-position DSM Anti-Infectives is one the few penicillin producers outside of China DSM is one of the leading independent suppliers to the pharmaceutical industry across the globe Page 35

37 DSM Performance Materials DSM Resins DSM Engineering Plastics DSM Dyneema Diverse end-markets Electrics & Electronics Automotive & Aviation Building & Construction Paint & Coatings Life-Protection & Safety Sports and Leisure Selected 2009 Financials Sales 1.8bn EBITDA 174m Margin 9.5 % EBIT 68m R&D 138m # Employees 4,633 Market-position DSM Engineering Plastics is the global leader in high-heat polyamide and one of the world leaders in other polyamides, polyesters and polycarbonates DSM invented and developed Dyneema, the world strongest fibre on a weight-for-weight basis DSM Resins is a leading global player in the production and sale of high-quality resins Page 36

38 DSM Polymer Intermediates DSM Polymer Intermediates consists of DSM Fibre Intermediates only Selected 2009 Financials Sales 0.85bn EBITDA 36m Margin 4.2 % EBIT 6m R&D 13m # Employees 1,321 Profile DSM Fibre intermediates produces raw materials for synthetic fibres and plastics DSM Fibre Intermediates distinguishing characteristics are process technology, reliability and service Market-position Fibre Intermediates has a strong worldwide position, i.e it is the largest merchant caprolactam producer in the world and a major player in the merchant acrylonitrile market in Europe Page 37

39 DSM Base Chemicals & Materials DSM Agro Other DSM Melamine DSM Elastomers DSM Energy Highlights Base Chemicals and Materials have been carved out from other clusters DSM aims to complete the disposal of this cluster within the timeframe of Vision 2010 Selected 2009 Financials Sales 1.1 bn EBITDA 2 m Margin 0.2 % EBIT -/- 68 m R&D 16 m # Employees 1,846 Market-position Melamines: Global market leader, strong cost position Agro: Regional position, good cost position, increasing market share in certain products Elastomers: Global market leader Energy: DSM is a relatively small player in this field. Non core Page 38