DSM beats estimates as sales rise, profits rocket

February 14, 2017 | Michael Ravenscroft

DSM reports full-year 2016 sales of €7.92 billion ($8.4 billion), versus sales of €7.72 billion in 2015, an increase of 3% year over year (YOY), with organic growth of 4%. Adjusted EBITDA was €1.26 billion, compared with €1.07 billion in the year-ago period, an increase of 17% YOY. Fourth-quarter 2016 sales were €2.02 billion, up 5% YOY, with 2% organic growth. Adjusted EBITDA jumped 21% YOY in the latest quarter, to €315 million. Fourth-quarter EBITDA was 1% ahead of the consensus estimate provided by Vara Research (Frankfurt).

DSM’s nutrition business achieved sales of €1.32 billion in fourth-quarter 2016, an increase of 5% YOY, and up 3% after adjusting for foreign exchange effects. Adjusted EBITDA for the segment leapt 16% YOY, to €238 million. Higher volumes in human nutrition and food specialties were offset by slightly lower volumes in animal nutrition. Exchange rates had a positive effect of 3%, mainly driven by a stronger US dollar and Brazilian real.

The materials unit reports sales of €639 million, up 7% YOY and on the back of a 3% decline in sales prices. Adjusted EBTDA for materials was €105 million, a YOY increase of 17%, resulting from organic growth and contributions from efficiency-improvement and cost-saving programs. The higher sales for the materials business included 7% volume growth, driven by specialties on the back of continued favorable trading conditions, DSM says. Prices were 3% lower, reflecting the low input costs. The increase in adjusted EBITDA is attributed to “disciplined margin management, strong growth in the specialty segments, and the benefits of the efficiency and cost saving,” the company says. Input costs were still at a low level versus the previous year.

Full-year 2015 sales for the nutrition segment were €5.17 billion, versus €4.96 billion one year before, or up 4% YOY. The segment reports adjusted EBTDA of €931 million for the full year, an increase of 13% YOY. Efficiency and cost-saving programs made a positive contribution to adjusted EBITDA, according to DSM. The materials business managed sales of €2.51 billion in full-year 2015, a decline of 1% YOY. Adjusted EBITDA climbed 13% YOY, to €435 million. The solid performance reflects the success of a differentiated approach of focusing on higher-growth specialty businesses, DSM says. Volumes rose 4% in the year. The increase in adjusted EBITDA was “driven by strong volume growth in higher-margin specialties, the benefits of efficiency and cost-saving programs, and support from low input costs,” DSM says.

The results show that, “We are clearly delivering on the goals we set out at the end of 2015,” says Feike Sijbesma, CEO and chairman of DSM. “We achieved strong EBITDA and ROCE [return on capital employed] growth, well ahead of the mid-term targets set out in strategy 2018,” Sijbesma says.

DSM aims to deliver adjusted EBITDA growth in the high single-digit percentage range and ROCE growth in the high double-digit range. Macroeconomic conditions are uncertain, but DSM is “confident that in 2017 we will again deliver on our strategic objectives, despite a higher comparative base year.”