DSM Factbook 2017 ROYAL DSM HEALTH NUTRITION MATERIALS

Transcription

1 DSM Factbook 2017 ROYAL DSM HEALTH NUTRITION MATERIALS

2 DSM Investor Relations Contact Dave Huizing Vice President Investor Relations t e. Sandra Segers IR Support Officer t e. Marc Silvertand IR Manager t e. Thijs van der Heide IR Manager t e. Petra Volk IR Support Officer t e. Page 1

3 Stay connected IR app Stay up to date with all DSM share-related info via DSM s IR app Download DSM s IR app for iphone, ipad or Android Mobile devices Web Find us on: Follow us on YouTube; The app is available for free from the App Store or Google play Page 2

4 1 DSM at a glance/strategy Business overview 3 Financial data 4 Share-related information ROYAL DSM HEALTH NUTRITION MATERIALS

5 DSM at a glance People, planet, profit in 2016 Watch clip: People Planet Profit 1 1. Continuing operations unless stated otherwise 2. See page 142 of the Integrated Annual Report 2016 for reconciliation Page 4

6 DSM at a glance 2016 key financial data Watch clip: Sales Adj. EBITDA & Adj. EBITDA margin (%) Adj. EBIT & Adj. EBIT margin (%) 5,169 2, , , Nutrition Materials Innovation Center Corp. Act. Group Nutrition Materials Innovation Center Corp. Act. Group Nutrition Materials Innovation Center Corp. Act. Group Capital Employed 1 and ROCE (%) Capital Expenditure (accounting) R&D Expenditure 2 5,537 1, , Nutrition Materials Innovation Center Corp. Act. Group Nutrition Materials Innovation Center Corp. Act. Group Nutrition Materials Innovation Center Corp. Act. Group 1. At 31 December 2. Income statement expense and capitalized costs (including associated IP expenditure) Page 5

7 DSM history Successful transformation building on an impressive history Extensive experience in chemical synthesis and biotechnology Est Hoffman La Roche Vitamins Chemical synthesis & biotechnology Formation of coal mining company De Nederlandse Staatsmijnen (Dutch State Mines) Continuous shift to (petro) chemical and fertilizer products incl. industrial chemicals and raw materials for synthetic/ polyethylene fibers and yarns DSM listed on the AEX stock exchange Acquisition of Gist- Brocades which was integrated into the DSM Life Science cluster Sale of Petrochemicals business Acquisition of Roche s Vitamins & Fine Chemicals division, subsequently renamed DSM Nutritional Products Focus on Life Sciences and Materials Sciences and divestment of noncore businesses Melamine, Agro, Elastomers Acquisition of Martek (2011), ONC, Kensey Nash, Fortitech (2012), Tortuga (2013) and Aland (2015) Establishment of partnerships DSP (2011), Patheon (2014) and ChemicaInvest (2015) Est DSM Chemistry, energy, polymer technology Est Gist-Brocades Biotechnology Page 6

8 DSM history Business portfolio streamlined and simplified, creating good platform for growth Significant portfolio transformation (in % of DSM sales) Petrochemicals Energy Engineering Plastic products Curver Base Chemicals & Materials Others Other Pharma Petrochemicals Energy Engineering Plastic products Base Chemicals & Materials Others Base Chemicals & Materials Energy Polymer Intermediates & Composite Resins Innovation Center Materials Nutrition Innovation Materials Nutrition 100% Built a broad, deep and global Nutrition business Upgraded Materials businesses Became a more global, innovative and sustainable company Extensive experience in chemical synthesis and biotechnology binds Nutrition and Materials Created 3 new growth platforms: Innovative materials for medical devices Clean energy (from crop residues) and bio-chemicals for biomass conversion Yield-boosting solutions for solar energy Page 7

9 DSM today DSM expects to extract significant value from further exiting its legacy partnerships in the coming years DSM Sinochem Pharmaceuticals (50%) Pharma - Antibiotics Patheon (34%) 1 Pharma - Contract Manufacturing ChemicaInvest (35%) Bulk Chemicals JV with Sinochem created in 2011 when Sinochem took a 50% interest in DSM Anti-Infectives Global leader in generic antiinfective In million at 100% 2016 Sales 431 Adjusted EBITDA% 14% Created in 2014, when DSM combined DSM Pharmaceutical Products with JLL Partners Patheon Produces a unique breadth of offerings from finished dosage (drug products) to active substances (APIs) In million at 100% Sales 1,786 Adjusted EBITDA% 20% Created in 2015 when CVC Capital Partners took a 65% stake in the (bulk chemical) activities of DSM in caprolactam, acrylonitrile and composite resins In million at 100% 2016 Sales 1,802 Adjusted EBITDA% 6% 1. On 15 May 2017, DSM informed markets that it had unanimously approved the acquisition of Patheon by Thermo Fisher Scientific. Thermo Fisher will commence a tender offer to acquire all shares for $35 per share. The transaction is expected to be completed by the end of Book year 1 November until 31 October. Based on continuing operations Page 8

10 DSM today A broad, deep and global Nutrition business and a focused, high-quality, specialty Materials portfolio Sales Adj. EBITDA Adj. EBITDA% ROCE 7,920 1, % 10.4% Nutrition Materials Animal Nutrition Human Nutrition DSM Food Specialties Pers. Care & Aroma Ingr. Nutrition is active in nutritional ingredients for animal feed and food, as well as in food specialty ingredients and performance ingredients for personal care, serving the global feed, food & beverage, pharmaceutical, infant nutrition, dietary supplements and personal care industries DSM Engineering Plastics DSM Dyneema DSM Resins & Functional Materials Advanced materials for high-performance components for the electrical and electronics, automotive, (flexible food) packaging, consumer goods, life protection, transportation and telecom industries Sales EBITDA EBITDA% Sales EBITDA EBITDA% 5, % 2, % Page 9

11 DSM today Emerging Business Areas provide long-term growth platforms based on the company s core competences DSM Biomedical Enabling innovative medical devices DSM Bio-based Products & Services Enzymes/yeast for biomass conversion DSM Advanced Solar Efficiency-increasing products for solar DSM Biomedical supplies innovative biomedical materials that enable medical device manufacturers to make less invasive devices. These can speed up recovery, shorten hospital stays and minimize reoperations, lowering health costs and helping people to lead longer, healthier and more active lives DSM Bio-based Products & Services is at the forefront of building a more sustainable, bio-based economy with solutions for clean fuel from agricultural residue and for renewable chemical building blocks such as bio-based succinic acid DSM Advanced Solar develops and provides solutions to increase the yield of solar panels Same sun. More power. Page 10

12 DSM today A well-balanced and diversified portfolio Net sales by origin (%) Net sales by end-use market (%) 7% 18% 11% 1% 1% 1% 3% 2% 25% 31% The Netherlands Rest of Western Europe Eastern Europe North America Latin America China India Japan Rest of Asia Rest of the World 5% 1% 7% 6% 6% 8% 67% Animal Nutrition (31%) Human Nutrition (24%) Food Specialties (7%) Other (1%) PC & AI (4%) 1 Nutrition and Health Metal/building & construction Automotive/transport Textiles Electrical & electronics Packaging Other Net sales by destination (%) Net sales by business segment (%) 10% 2% 3% 12% 12% 3% 4% 25% 6% The Netherlands Rest of Western Europe Eastern Europe North America Latin America China India Japan Rest of Asia Rest of the World 32% 2% 1% 65% Nutrition Materials Innovation Center Corporate Activities 23% 1. Personal Care & Aroma Ingredients Page 11

13 DSM today Global production while offering a local approach Watch clip: Global presence 1 Employees per region 1 North America 3,187 Europe 9,180 Asia 6,090 Total employees 20,786 22% 4% 2% 1% 1% 19% The Netherlands Rest of Western Europe Eastern Europe North America Latin America China 10% 23% India Japan Latin America 2,069 Africa: 73 employees RoW 260 4,460 2, % Employees per business segment 1 2% 13,260 Rest of Asia Rest of World Nutrition Materials Innovation Center Corporate Activities 1. As per 31 December 2016 Page 12

14 DSM today Sustainability agenda is core to DSM s business strategy 1 Key sustainability focus areas Nutrition Climate change and renewable energy Circular and bio-based economy Sustainability as business growth driver Eco+ People+ Brighter Living Solutions: ECO+ and People+ Profitable solutions better for people and planet Aspiration: 65% of DSM products by % Securing sustainable operations GHG and Energy Efficiency Renewable energy Health & Safety Engagement Diversity Operational Aspirations Leading in reporting benchmarks Long-term goals Gold class DJSI GHG efficiency improvements 40-45% ( ) Energy efficiency improvements >10% ( ) Purchased electricity from renewables 50% by 2025 Employee engagement favorable score 75% by 2020 Safety: Frequency recordable index 0.25 by Gold class 23% 2% 8% 71% Please see DSM s Integrated Annual Report 2016 for definitions and additional information Page 13

15 DSM today DSM and the Sustainable Development Goals At DSM, we believe that companies have a crucial role to play in creating the impact needed at scale to achieve the 17 Global Goals for Sustainable Development We believe that our expertise in health, nutrition and materials position DSM well to actively contribute to the SDGs While all the Goals are important, there are five SDGs on which we believe our company and its businesses can be most influential DSM collaborates with multiple partners and stakeholders, in line with SDG 17 (Partnering for the Goals), including UN agencies, governments, academia, NGOs and peers (see also next page) Main intersections between the SDGs and DSM 1 SDG 2 End hunger, achieve food security and improved nutrition and promote sustainable agriculture. DSM works to improve nutrition via initiatives such as the Nutrition Improvement Program and Africa Improved Foods, providing fortified food solutions and micronutrient products, as well as through partnerships such as with WFP. We continue to support the independent nutrition think-tank, Sight and Life SDG 3 Ensure healthy lives and promote well-being for all at all ages. DSM s health, nutrition, biomedical and high-performance materials portfolios are geared to maintaining, protecting or regenerating health in all age groups (for example, by reducing salt and sugar levels in processed foods, or by reducing emissions associated with chemical manufacturing processes). Our First 1,000 Days Program supports mother and child health. We employ the DSM Life Saving Rules to protect our employees from harm and the DSM Vitality Program to promote awareness of good health and healthy living options among our employees SDG 7 Ensure access to affordable, reliable, sustainable and modern energy for all SDG 13 Take urgent action to combat climate change and its impacts. In partnership with RE100, we are increasing the use of renewables in our energy mix, reducing our carbon footprint. DSM enables solar and bio-based energy solutions and supports the move toward a low-carbon economy through solutions such as POET-DSM advanced biofuels and high-performance materials for solar panels. Our Bright Minds Challenge is identifying innovative solutions and new materials that will fast-track the movement toward 100% renewable energy. We advocate responsible action on climate change in combination with our stakeholders SDG 12 Ensure sustainable consumption and production patterns. DSM contributes to a bio-based, circular and low-carbon economy with products such as Akulon oil pans and Arnite car lighting. DSM-Niaga enables the manufacture of carpets that can be recycled, again and again. Food waste is reduced through DSM food solutions such as Pack-Age. Bio-based chemicals such as bio-succinic acid replace fossil-fuel based alternatives in applications from packaging to footwear. Through our Brighter Living Solutions program we consider the impact of our products throughout the value chain 1. Please see DSM s Integrated Annual Report 2016, pages 12 and 13 for additional details Page 14

16 DSM today Rewarding partnerships to fight malnutrition around the world As a leading micronutrient provider DSM develops innovative solutions for improved nutrition. In order for these solutions to have the broadest reach, and in line with SDG 17, we work with partner organizations that have direct access to beneficiaries DSM s main cross-sector nutrition partnerships 1 DSM s nutrition partnerships focus on the following objectives: Wider base of scientific evidence and endorsement; Increased market for nutrition products; Improved employee engagement DSM s partners range from UN agencies, governments, academia and NGOs to industry peers We commit support through financial and non-financial means including time, technical expertise, products and volunteers 1. For a more extensive list and description of DSM s other nutrition platforms and partnerships, please see our website Page 15

17 DSM today External recognition 1 In August 2016, Fortune Magazine revealed that DSM was included in its second annual Change the World List which highlights the 50 leading companies that are innovating to solve the world s biggest challenges through core profit-making strategy and operations On 8 September, DSM was named the worldwide leader in the Materials industry group in the Dow Jones Sustainability World Index. DSM has consistently been recognized for integrating sustainability into its business, having been named among the global leaders in each of the last 13 years and holding the number one position in the sector seven times On 30 September, DSM s Science Can Change the World campaign won in the Best Communication category at the Ethical Corporation Responsible Business Awards DSM was also highly commended in the Best Sustainable Company category. The Awards recognize genuine, truly innovative and meaningful approaches to making responsible business a reality DSM has been identified as a global leader for its actions and strategies in response to climate change and has been awarded a position on the Climate A List by CDP, the international not-for-profit that drives sustainable economies. 193 A Listers appear on the list, which has been produced at the request of 827 investors with assets of US$100 trillion On 25 October 2016, DSM was reconfirmed as a constituent of the Ethibel Sustainability Index (ESI) Excellence Europe. The ESI Excellence Europe contains shares of 200 European companies that are included in the Russell Global Index that display the best performance in terms of corporate social responsibility (CSR) On 4 November 2016, Reverdia, the joint venture between DSM and Roquette Frères that produces Biosuccinium (succinic acid), the first non-fossil feedstock derived chemical building block, topped the Biofuels Digest 40 Hottest Emerging Companies in the Advanced Bioeconomy Each year Corporate Knights publishes their Global 100 Index of the most sustainable corporations in the world. In the 2017 Index published on 16 January, DSM was the highest ranked materials company for a second successive year and rose from 23rd place overall in 2016 to 9th in Those featured are considered leaders in transparency, in resource productivity and on a range of other social and governance indicators 1. For more information please see Page 16

18 DSM today DSM management DSM Managing Board Feike Sijbesma CEO/Chairman of the Managing Board Nationality: Dutch CEO since 1 May 2007, member of the Managing Board since 2000 With DSM since 1998 when DSM acquired Gist- Brocades. Joined Gist-Brocades in 1987 Geraldine Matchett Chief Financial Officer Nationality: British, French, Swiss CFO since December 2014, member of the Managing Board since August 2014 Prior to joining DSM, Global CFO of SGS Group, a publicly quoted company on the SIX Swiss stock exchange Dimitri de Vreeze Member of the Managing Board Nationality: Dutch Member of the Managing Board since September 2013 With DSM since 1990 DSM Supervisory Board DSM Executive Committee Rob Routs (Chairman) Victoria Haynes Feike Sijbesma (CEO/Chairman) Chris Goppelsroeder (Nutrition) Tom de Swaan Eileen Kennedy Geraldine Matchett (CFO) Philip Eykerman (Strategy and M&A) Pauline van der Meer Mohr Pradeep Pant Dimitri de Vreeze (Materials) Peter Vrijsen (People & Organization) John Ramsay Frits van Paasschen Rob van Leen (R&D and Innovation) Page 17

19 Strategy 2018 Summary and 2016 achievements Two headline financial targets High single-digit percentage annual Adjusted EBITDA growth High double-digit basis point annual ROCE growth 2016 achievements: 17% 2016 achievements: 280 bps Clear actions identified to achieve targets Businesses aim to outpace market growth m cost reduction & efficiency improvements Consistent improvements in capital efficiency 2016 achievements: Nutrition 5% organic growth Materials 4% volume growth 2016 achievements: On track: ~ 110m cumulative savings by year-end achievements: Cash from operating activities up 27% Capex at 475m, < m guidance Total Working Capital at 18.4%, better than aspiration level Additional items underpinning strategy Stepping up sustainability aspirations Global organizational and operational adjustments Extract value from Pharma and Bulk Chemicals JVs 2016 achievements: On track 2016 achievements: On track 2016 achievements: 1 st step taken with sale of 4.8m shares in Patheon Page 18

20 Strategy 2018 Driving profitable growth through science-based, sustainable solutions Global shifts & Digitization Climate & Energy Health & Wellness IMPROVING FINANCIAL RESULTS Growth Cost & Productivity 2018 TARGETS annual Adj. EBITDA growth: high single-digit percentage HEALTH. NUTRITION. MATERIALS Capital Efficiency annual ROCE growth: high double-digit bps BRIGHT SCIENCES Result-driven organization & culture Following a period of important transformation, DSM is now focusing on ensuring that the potential of the current business portfolio translates into improved financial results during the period Two headline financial targets High single-digit percentage annual Adjusted EBITDA growth & high double-digit basis point annual ROCE growth Page 19

21 Strategy 2018 Well-identified initiatives to drive Strategy 2018 targets ~ m 1 ~ m Support functions & services program Nutrition program Inflation Sales above market growth 2015 EBITDA 2018 EBITDA DSM is confident it has the right business strategies in place to meet the needs of its customers and succeed in its markets, providing innovative and sustainable solutions Aims to accelerate growth and outpace market growth in all its key segments In addition to its growth initiatives, self-help programs will further help delivery of the Strategy 2018 targets 1. Savings as of 2015 Page 20

22 Strategy 2018 Nutrition growth strategy Nutrition strategy 2018 Aspirations underlying Group targets Profitable growth via: 1 Expanding the core 2 New products and solutions 3 Growing in underpenetrated categories/regions 2 Annual EBITDA growth: high single-digit percentage Annual ROCE growth: high double-digit bps EBITDA margins: 18-20% over the period 4 Accessing new segments/new business models Above-market sales growth (at stable prices) Reducing costs and increasing productivity Driving cash generation Increasing capital efficiency Excellence in execution Page 21

23 Strategy 2018 Growth projects in Nutrition are delivering Watch clip: Nutrition Strategy 2018 and 2016 milestones 1 Expand the core New vitamin B6 plant and expansion of the gellan-gum and pectin facilities all in China; 2 Add new products and solutions Excellence in execution 2016 Organic growth: 5% EBITDA growth: 13.3% ROCE up 170 bps Product offering broadened e.g. eubiotics for antibioticfree poultry; Good progress in the Green Ocean and Clean Cow projects; Page 22

24 Strategy 2018 Growth projects in Nutrition are delivering (cont d) Nutrition Strategy 2018 and 2016 milestones 3 Expand in new segments/regions Launch of MEG-3 Ultra allowing for varieties of (high-concentrate) DHA and EPA; Excellence in execution Successful expansion of fast-growing i-health consumer line of products outside of the US; 4 New business models Business to farmer (B2F) network expanded with new brand (YiWeiZhuang) and new mobile order platform Page 23

25 Market growth Strategy 2018 Materials growth strategy High Growth Maximize returns PA6 Polymers Accelerated growth PA6 Compounds Functional Materials High-Performance Plastics Specialty Coating Resins Solar 1 Biomedical 1 Dyneema Fiber Solutions Materials Strategy 2018 Focus on the higher-growth specialty segments, while maximizing returns in PA6 Polymers and Powder Coating Resins Aspirations 2018 underpinning Group targets Annual EBITDA growth: high single-digit Powder Coating Resins Dyneema Life Protection Annual ROCE growth: high double-digit bps EBITDA margins: >15% over the period - DSM Engineering Plastics - DSM Dyneema - DSM Resins & Functional Materials - Emerging Business Areas Above-market sales growth (at stable prices) Low DSM s capability to extract value High 1. Whilst not part of the cluster, the Emerging Business Areas of DSM Biomedical and DSM Advanced Solar are also related to Materials and represent promising growth platforms for the longer term Page 24

26 Market growth Strategy 2018 Materials is delivering good growth in specialties Materials Strategy 2018 and 2016 milestones High Growth Accelerated growth PA6 Compounds Functional Materials High-Performance Plastics Solar Biomedical For DSM s specialty materials, DSM is using new technologies and (sustainable) customer solutions to accelerate growth: Maximize returns PA6 Polymers Specialty Coating Resins Dyneema Fiber Solutions DSM Engineering Plastics Powder Coating Resins Dyneema Life Protection Used in new ultra-thin USB Type-C connectors - DSM Engineering Plastics - DSM Dyneema - DSM Resins & Functional Materials - Emerging Business Areas ForTii PA4T Low 2016 DSM s capability to extract value High Launch of next-generation hightemperature polyamides PA410 PPS PA46 Volume growth: 4% EBITDA growth: 13.3% ROCE up 320 bps New high-performance thermoplastic copolyester PA6, PA66 Page 25

27 Market growth Strategy 2018 Materials is delivering good growth in specialties (cont d) Materials Strategy 2018 and 2016 milestones High Low Growth Maximize returns PA6 Polymers Accelerated growth PA6 Compounds - DSM Engineering Plastics - DSM Dyneema Functional Materials High-Performance Plastics Specialty Coating Resins Powder Coating Resins DSM s capability to extract value Solar Biomedical Dyneema Life Protection - DSM Resins & Functional Materials - Emerging Business Areas Dyneema Fiber Solutions High DSM Dyneema Increased global demand for Dyneema Force Multiplier Technology for personal protection Launch of a woven laminated anti-stab solution Launch of Dyneema Carbon hybrid composite fabrics that improve impact resistance and vibrational dampening of traditional carbon fiber composites without compromising on weight and performance DSM Resins & Functional Materials Good progress with sustainable waterborne coatings for marine containers in China; High acceptance of powder and waterborne coatings in Europe Page 26

28 Key business/innovation projects driving earnings growth beyond 2018 DSM has set itself strategic targets for the period to At the same time, we are also preparing for further longerterm growth Range of key business and innovation projects across the clusters will drive earnings growth beyond 2018 and we will continue to develop more initiatives in light of market dynamics Nutrition Materials Emerging Business Areas Fermentative stevia Algae-based omega-3 for aquaculture Clean cow Hydrocolloids Eubiotics i-health (B2C nutrients) New bio colorants (blue/red) ForTii (HPPO polymer) Niaga (recycle carpets) Decovery (bio-based resins) Apparel (Dyneema textile apps) Force multiplier technology (light personal protection) 3D options (combine Somos, Resins, Biomedical & Engineering Plastics) Solar materials Bio-based products and services New Bio-Medical products Page 27

29 Strategy 2018 Driving profitable growth supported by cost reduction and efficiency improvement programs Cost savings: total m by 2018 Timing of cumulative cost savings ~ m Realized Forecast DSM-wide support functions m (by end 2017) Nutrition Program m (by 2018) Materials ~110 ~ DSM is rigorously executing its ambitious cost reduction and efficiency improvement programs across the company Cost reduction/efficiency improvement programs target overall savings of m by 2018 The plans are firmly on track by end of 2016 Page 28

30 Strategy 2018 FTE reduction on track and one-time costs within budget 1 Cumulative FTE reduction 2 One-time costs 5,000 4,000 ~4,400 Realized Forecast 400 Realized Forecast 3, ,000 1,000 ~ , ~80 ~80 ~70 0 Total FTE in Support Functions (2014 baseline) 2016 (vs base) Reduction target FTE reduction in service organization on track to reach target: FTE reduction up to and incl. FY2016 is ~675 FTE vs. an ambition of 900-1,100 FTE (end of 2017) One time restructuring costs in 2016 amounted to ~ 80m 1. By end of Vs baseline Page 29

31 Strategy 2018 Strong progress made with globally leveraging support functions, saving DSM-wide support functions & staff costs Savings: m 1 Progress (%) 2 Remarks Achieved by end of 2016 Remaining 2017/ Run Rate EoY Support Funct. Finance Shared Services Improvement Plan completed, incl. shift of most activities to Global Service Centre in India Finance Regions (EMEA, North America, Asia) staffed and operational in Financial, Commercial & Operations Control HR Shared Services operational and payroll outsourced Updated processes and tools for talent development, career review, recruitment, learning & development IT IT Operating Model defined and related FTE reductions announced, implementation has started Standardization/outsourcing of personal workplaces and other saving initiatives realized Ind. Sourcing Supplier base rationalization, FTE reduction and related savings in external spend progressing well Funct. Excell. Regions Comms Shared Services Global external & internal Communications function fully operational across regions and business groups Supplier rationalization in (Marketing-)Communications progressing well One Shared Services Organization with Global Delivery Centre in India and satellite in China live One multi-functional Service Desk and Portal in development Operating Models implemented (FTE reduction of ~40%); good progress in implementing new mandates Regional organizations brought in line with new DSM Operating Model; Finance, HR implementing Functional Operating Models 1. Vs baseline 2. By end of 2016 Page 30

32 Strategy 2018 Nutrition-specific improvement program running well with purchasing savings ahead of plan and cost-reductions on track Savings: m 1 Cost improvements Work streams closely monitored and on track Current status as per end of 2016: Actions Financial benefits Efficiency gains (Yield & Energy) Purchasing Purchasing Purchasing savings so far exceeding target, helped by low commodity prices Fixed cost reduction Cost reduction programs are being executed. Remaining part will be captured in the upcoming period Throughput gain in sold-out units Fixed cost reduction (~100 FTE) Throughput gains Efficiency gains Program on track, planned benefits end of 2016 realized. Target gains are expected to be secured Program on track, planned benefits end of 2016 realized. Target gains are expected to be secured 1. Vs Page 31

33 Strategy 2018 Disciplined approach to capital allocation Capital efficiency is a key driver of cash generation; in 2016 we undertook a number of improvement projects in this area throughout DSM One of these has been to take a more integrated approach to business planning, in particular in our Nutrition cluster Holistically addressing processes instead of approaching them as a series of individual steps has resulted in clear improvements in inventory management, production and distribution efficiencies. Driving financial performance Cash from operating activities up 27% 1, Reducing working capital 1 Average Total Working Capital better than aspiration level <20% 20.7% 18.6% Strict capital allocation Cash capex at 475m below m per annum guidance Discontinued operations figure added for comparison only: based on non-audited, restated estimates adjusting for divestitures, acquisitions and other non-recurring items Page 32

34 Strategy 2018 Organization adjustments to deliver A new -strengthened- top structure: Executive Committee aligns finance, business, innovation, strategy & people, enabling faster strategic alignment & operational execution A new operating model: Business Groups: focus on M&S, Operations, Sourcing, R&D Support Functions: globally leveraged: Finance, HR, Legal, Comms, IT, Business Services & Corporate Departments A new way of working: Focus on Accountability (delivering) and Collaboration (trust/speed) Examples: reduction internal meetings, reducing demand, increased speed, feedback loops, clearer expectations and engagement with more skills, supported by incentives Page 33

35 1 DSM at a glance/strategy Business overview 3 Financial data 4 Share-related information ROYAL DSM HEALTH NUTRITION MATERIALS

36 Nutrition ROYAL DSM HEALTH NUTRITION MATERIALS

37 Nutrition A unique, global and broad portfolio in food/feed nutritional ingredients with increased solutions offering capabilities Nutrition - Overview Sales by end-market (%) Global leader in nutrition, with broadest portfolio of specialty nutritional ingredients DSM serves the global industries for animal feed, food and beverages, pharmaceuticals, infant nutrition, dietary supplements and personal care Sales 5,169m 7% 1% 10% 46% Animal Nutrition & Health Human Nutrition & Health Food Specialties Other Personal Care & Aroma Ingredients DSM is uniquely positioned in all steps of the feed and food value chains: the production of pure active ingredients, their incorporation into sophisticated forms, and the provision of tailored premixes and forward solutions 35% Sales by region (%) Sales 5,169m 4% Europe 25% 31% North America Latin America Asia Rest of the World 18% 22% Page 36

38 Nutrition 2016 key financial data (continuing operations) 1 Sales and organic sales growth (%) Adj. EBITDA & Adj. EBITDA margin (%) Adj. EBIT & Adj. EBIT margin (%) 4,335 4,963 5, ROCE (%) Capital employed (at 31 Dec.) Capital expenditure (accounting) 5,034 5,309 5, figures added for comparison only. Figures are based on non-audited, restated estimates adjusting for divestitures, acquisitions and other nonrecurring items Page 37

39 Nutrition Broad portfolio is providing resilience with limited exposure to single product lines or customers Portfolio of ingredients (%) Sales split over value chain steps (%) Profit contribution per product line (%) Fat soluble vitamins (e.g. A,D,E) Water soluble vitamins (e.g. B,C) Carotenoids Marine PUFAs Microbial PUFAs Enzymes & cultures Minerals & dicalcium phosphates Savory / yeast extracts Nutraceutical ingredients Aroma intermediates Other blend ingredients Other Top-10 represent <50% of Nutrition profit in 2016 Product range includes ~100 product lines Largest profit contributor less than 10% of Nutrition profit Several products have a strong IP position Sales per customer (top 10) Active ingredients Forms Premixes i-health/b2c Largest customer represents less than 3% of Nutrition sales Page 38

40 Nutrition Product portfolio overview Value chain positioning Raw Materials Active Ingredients Forms/delivery systems Premix and nutritional solutions Feed, Food, Cosmetics, Pharma Retail/end consumer Vitamins Essential ingredients required for growth and well-being ranging from fat-soluble vitamins (A, D, E, K) to watersoluble vitamins (C, all B vitamins, folic acid and pantothenic acid) Carotenoids Essential ingredients that are important in nutrition and reproduction. Providing sufficient carotenoids increases animal performance across species. Carotenoids also ensure consistent pigmentation of eggs and fish such as salmon Key carotenoids are beta carotene, lutein, canthaxanthin, astaxanthin and zeaxanthin Nutritional Lipids Polyunsaturated fatty acids ( PUFAs ) play a critical role in the development and maintenance of proper brain function, cardiovascular and eye health, immune and inflammatory responses and the production of hormone-like molecules. Omega-3 and omega-6 are used in food, dietary supplements and infant nutrition and are manufactured from algae, fungi as well as fish oil Enzymes & Cultures for food and feed Adding enzymes to animal feed improves feed conversion leading to a reduction of the cost of feed while at the same time improving the ecological impact of animal protein production by reducing the amount of raw materials needed and by reducing pollutants in the manure. In food & beverage, enzymes and cultures enhance taste, texture or act as processing aids functioning as a catalyst for biochemical reactions Page 39

41 Nutrition Product portfolio overview (cont d) Value chain positioning Raw Materials Active Ingredients Forms/delivery systems Premix and nutritional solutions Feed, Food, Cosmetics, Pharma Retail/end consumer (Trace) minerals & Dicalcium Phosphates (DCP) Minerals that are needed in very small amounts. As minerals they come from soil and water and cannot be made by living organisms. Most of the trace elements in our diets come directly from plants or indirectly from animal sources Savory/yeast extracts Extracts and process flavors to enhance taste while reducing salt in snacks, ready-meals, sauces, soups and meat Natural anti-microbials - Fermentation based anti-microbial solutions, effective to protect foodstuffs and beverages from microbial spoilage, extending shelf life and improving flavor Nutraceutical ingredients Deliver the optimal balance of microflora in the gastrointestinal tract of livestock animals optimizing nutrient absorption, while in human nutrition, nutraceutical ingredients enable consumers to perform at their peak, as well as helping cope with future health concerns such as cardiovascular disease and weight management Aroma intermediates - Products of the highest purity and quality, from authentic foods packed with taste to aromatic scents and perfumes UV-filters Range of high performing UV-A and UV-B filters for skin and hair applications Skin Bio-actives Range of vitamins, synthetic peptides and natural extracts for skin care markets Page 40

42 Nutrition Product portfolio overview (cont d) Value chain positioning Raw Materials Active Ingredients Forms/delivery systems Premix and nutritional solutions Feed, Food, Cosmetics, Pharma Retail/end consumer A broad range of technologies transform the active ingredients into a different state of presentation, e.g. a fat-soluble vitamin oil into a powder form Allows for maximum differentiation in terms of stability, shelf-life, heat resistance, bioavailability, physical properties Examples of forms Through customized blending of active ingredients and/or forms, DSM offers its clients regional and segment-specific finished products solutions A broad network of around 60 premix plants allows DSM to offer tailor-made, customerdriven solutions, i.e. global products & local solutions Spray dried Beadlet Multi-layer micro encapsulate Flavor flake Page 41

43 Nutrition Global presence and unparalleled local network Unique global network 1 1. Excl. DSM(-wide) Research & Development locations Page 42

44 Animal Nutrition & Health ROYAL DSM HEALTH NUTRITION MATERIALS

45 Animal Nutrition DSM has the broadest portfolio in the industry Provide antioxidants & pigmentation Carotenoids PRODUCTIVITY Improve digestion Vitamins Enzymes HEALTH Required for growth and well-being Tortuga minerals Premixes Core Eubiotics Strengthen gut health Page 44

46 Animal Nutrition Focused on sustainable animal nutrition Page 45 Advocate science-based knowledge about balanced diets; the right amount and quality of proteins are essential Improved end-product quality and food safety Support small-scale farmers with training and services Reduce use of scarce resources Reduce greenhouse gas emissions from livestock Reduce food waste Capture the opportunities of new, emerging technologies Combat antibiotic resistance Improved gut health Find and develop new sources of protein and marine omega 3 oils Care for safe and controlled production, including animal welfare continuous drive to increase animal health

47 Animal Nutrition Serving global feed ingredients markets with local solutions Overview Animal Nutrition & Health serves the global feed ingredients markets for poultry, swine, aquaculture, ruminants and pets with a focus on the nutritional ingredients and additives segments ( 2,399m in sales in 2016) These markets are spurred by population growth and rising standards of living The global animal nutrition market is driven by the need to improve production efficiency in response to the growing global demand for animal protein while at the same time reducing the environmental impact of farming This results in feed with higher nutritional content (i.e. higher degree of nutritional ingredients) Increased focus on alternatives to antibiotic growth promoters Few global players in feed/premix and animal protein, next to many mid-size, local and/or regional feed/premix companies and animal protein producers DSM is uniquely positioned, offering a complete portfolio of targeted feed ingredients, while competitors cover only part(s) of the value chain Global ingredients market for animal feed (%) DSM active in colored parts with market share of ~30% 2bn (0.1%) Other 10bn (~4%) Additives 9bn (~4%) Premix 350bn (~2%) ~370bn (~2%) Compound feed Minerals & chelates (4-6%) Eubiotics 4-5%) Enzymes (5-6%) Fat soluble vitamins (4-6%) (x) = Growth rate (CAGR, %) Total potential market: 10bn Amino Acids (4-6%) Water soluble Carotenoids vitamins (2-3%) (2-3%) DSM is active in the ~ 10bn additives and ~ 9bn premix segments Page 46

48 Animal Nutrition Value chain Feed ingredients (soy, corn, etc.) ~ 140bn Compound feed - 198bn Processors/farmers - > 1,200bn Specialty feed additives > 10bn Chinese players Premix Additives for pasture raised animals Nutrition serv. & consultants Various consultants Medical feed additives > 10bn A full chain player, providing active ingredients globally and (tailored) premix solutions at a local level Page 47

49 Animal Nutrition Overview Sales by region (%) Sales by active ingredients (%) Europe North America Latin America Asia Rest of the World Fat-soluble vitamins Water-soluble vitamins Carotenoids Feed enzymes Minerals/DCP Other blending ingredients Other Sales by application landscape (%) Sales by differentiated segment (%) Aqua Pet Swine Poultry Ruminant Straight actives Forms Premix Page 48

50 Animal Nutrition Implementation of Strategy 2018 Expected market growth vs. DSM aspiration Key actions driving profitable growth Double-digit growth from feed enzymes and eubiotics solutions, tailored to local conditions/requirements Growth in underpenetrated species (aqua, pet, dairy) ~3-4% 1 Grow beyond the historical core area of poultry Leverage Tortuga in Latin America beyond Brazil Further expansion of global premix network Market DSM CAGR % Page 49

51 Animal Nutrition Case Study DSM and Evonik are developing a sustainable omega-3 solution for aquaculture Watch clip: EPA and DHA omega-3 fatty acids are essential for animal and human health Essential at all life stages for humans Essential nutrients to support normal growth and health for salmon A supply-demand gap for fish oil will limit the growth of the aquaculture industry Urgent need to find an alternative, sustainable solution for EPA and DHA 17% of global wild catch is consumed for the production of fish oil and fishmeal Driving growth of aquaculture 1 t million Aquaculture Wild capture Aquaculture production Wild catch production 1. Source: FAO (2016) Page 50

52 Volume Animal Nutrition Case Study Algal oil as a high-quality source of omega 3 for the use in animal nutrition Joint development between DSM and Evonik started in 2015 to find a sustainable solution for aquaculture Produce omega-3 fatty acids for animal nutrition without using fish oil from wild-caught fish In March 2017, parties announced their intention to jointly (50/50) produce omega-3 fatty acids (EPA and DHA) from natural marine algae: Build new facility in the US, scheduled to open in 2019 Total capex in the facility will amount to ~$200m Initial annual production capacity will meet ~15% of total current annual demand for EPA and DHA by the salmon aquaculture industry Market size of fish oil and alternatives Supply/demand gap will emerge in the near future present Approx. 1 million tons per year limited supply of fish oil as source of omega-3 fatty acids future 1. Sources: IFFO, FAO Page 51

53 Animal Nutrition Case Study Project Clean Cow - Tackling methane emissions from cows Watch clip: Ruminants are a significant source of methane Studies have shown that a cow emits 500l of methane per day, which is equivalent to 10% of the energy it would otherwise use for performance and milk production Within Project Clean Cow, a special feed solution has been developed that: Reduces enteric methane emissions from cow/cattle by at least 30% (indicated by published studies) Focused on markets with highly developed dairy and beef production Potential: triple-digit sales ( million) Launch after 2018 Anthropogenic methane sources (%) 1 Fossil fuels 29% Waste decomposition 23% Rice fields 10% Biomass burning & biofuel 11% Ruminants 27% 1. Source: S. Kirschke et al., Nature Geosci. 2013, 6, Page 52

54 Human Nutrition & Health ROYAL DSM HEALTH NUTRITION MATERIALS

55 Human Nutrition Providing local nutritional solutions on a global scale Overview Global specialty food ingredients market (%) Human Nutrition & Health provides (local) nutritional solutions for the food and beverage, dietary supplements and early-life and clinical nutrition markets, with a parallel focus on solutions for the pharmaceutical industry for the use of vitamins, nutritional lipids (ARA/EPA/DHA) and carotenoids as Active Pharmaceutical Ingredients (APIs) ( 1,823m in sales in 2016) Fundamental growth driver for DSM is the link between nutrition & health, supported by a number of global megatrends: Macro-economic: Nutritional ingredients/products with health benefits for an aging population or local solutions for processed foods for new customers in emerging economies; Behavioral trends: Nutritional solutions that lead to healthier, safer and more sustainable foods that can be customized to local taste and preference Structural trends: Reforming the retail landscape by creating a shift to modern trade, by being the only integrated premix, vitamin and nutraceutical manufacturer capable of creating and delivering tailor-made formulations anywhere Main segment is Nutritional Ingredients but DSM is active in all segments Texture (4%) Color (5%) (x) = Growth rate (CAGR, %) Preservation (2%) Total potential market: 36bn 1 Taste (4%) Processing aids (3%) Nutritional ingredients (3-4%) DSM market share in Nutritional Ingredients ~20% 1. Total specialty food ingredients market, excluding ~ 20bn of commodity ingredients, e.g., soy proteins Page 54

56 Human Nutrition Value chain Fresh food: 1,375bn Farmer: 2,865bn Non-food (tobacco, feed, textile, seeds, etc.): 830bn Food additive manufacturers 33bn 1 Vitamins Enzymes Antioxidants Hydrocolloids Colors Yeasts Cultures Carotenoids Minerals Lipids Probiotics Dairy Fruits Cereals Proteins Meat/ fish Oils Spices Flour Salt Sugar Commodities 660bn F&B manufacturers 2,130bn Dietary suppl. companies 39bn Early life/ medical 60bn Retail brands 2,740bn Store brands 315bn Food service 2,430bn Consumers: > 5,245bn (excl. unprocessed foods) 1. Total specialty food ingredients market, excluding ~ 20bn of commodity ingredients, e.g., soy proteins Page 55 The only integrated premix, vitamin and nutraceutical producer for tailor-made formulations in the value chain

57 Human Nutrition Overview Sales by region (%) Sales by active ingredient (%) Europe North America Latin America Asia Rest of the World Fat-soluble vitamins (e.g. A,D,E) Water-soluble vitamins (e.g. B,C) Carotenoids Marine PUFAs Microbial PUFAs Nutraceutical ingredients Other blend ingredients Other Sales by application landscape (%) Sales by differentiated segment (%) Dietary supplements Food and Beverage Infant Straight actives Forms Premix B2C Page 56

58 Human Nutrition Implementation of Strategy 2018 Expected market growth vs. DSM aspiration Key actions driving profitable growth From product to segment marketing with segmentspecific local solutions and an aligned front-end operating model ~3% 1 Repair growth in North America, returning Dietary Supplements (vitamins, omega-3) and F&B to growth Continue double-digit growth of i-health business Continue strong growth from base brands and expand in category (e.g. bladder control, cough & cold, etc.) and channels (e.g. medical, natural, digital, etc.) Market DSM Accelerating forward solutions and premix globally Have stepped up our efforts to truly create a global premix business with best in class systems and processes Capture new business in nutritional ingredients for Pharma, Clinical, and Sports Nutrition applications 1. CAGR % Page 57

59 Human Nutrition Case Study Culturelle, a probiotic megabrand in the broader health and wellness space Watch clip: The global dietary supplements probiotics market is predicted to grow at around 7% per year ( ) New product innovation is helping to fuel this growth The market is highly segmented and extremely competitive: product differentiation supported by authenticated health claims is vital for success Culturelle is currently the #1 selling consumer dietary supplement probiotic brand in the US Top-line growth has been achieved by creating consumer demand for Culturelle Important to understand and validate consumers health and wellness needs Delivered on those needs across three growth platforms (Digestive Health, Everyday Wellness, and Kids) based around Lactobacillus GG the leading clinically-studied probiotic strain Positioned Culturelle as the proven probiotic brand in the broader health and wellness space Culturelle Adult Chewables New form expands consumer base Culturelle Digestive Health Ex. Strength Providing growth from more committed loyal consumer base Culturelle Kids Regularity Expands Kids line with new benefits Culturelle Pro-Well Expands probiotic benefits to heart health with Omega- 3s Page 58

60 Human Nutrition Case Study Focus now on global expansion and footprint Global expansion strategy focused on distribution and consumer brand-building in Asia first and Europe later Different local market characteristics require new routes to market Currently building expertise in these new segments Aggressive marketing support deployed to drive growth, yet operation still in its infancy First signs of successful launch International marketing supporting ongoing branbuilding Page 59

61 DSM Food Specialties ROYAL DSM HEALTH NUTRITION MATERIALS

62 DSM Food Specialties A leading global supplier of food enzymes, cultures, yeast extracts, flavors and other specialties Overview DSM Food Specialties is a leading global supplier of food enzymes, cultures, bio-preservation, hydrocolloids, taste and health ingredients ( 536m in sales in 2016) DSM helps make existing diets healthier and more sustainable, giving increasing numbers of people access to affordable, quality food enabling better food for everyone - driven by: Customer proximity and the ability to deliver highly tailored products are the basis for our continually expanding portfolio of innovative fermentation-based product solutions 1. Total specialty food ingredients market, excluding ~ 25bn of commodity ingredients, e.g., soy proteins Page 61 Health Convenience and taste Clean label More and faster 1bn new consumers Sugar, salt, fat reduction without compromise on taste & mouthfeel Convenience and taste are key purchase drivers Strong consumer demand for kitchen cabinet ingredients, removal of undesired chemicals, clean and clear labels Rapidly growing world population, food production more than 8 times more efficient since 1940 Diverse cultures, eating habits and taste/flavor preference, localized solutions key despite globalisation Global food ingredients market (%) DSM s main segments in food specialty ingredients include, amongst others, processing aides (enzymes, cultures) and taste (savoury) DSM typically has number 1-3 positions in the segments where active Texture (4%) Color (5%) Taste (4%) (x) = Growth rate (CAGR, %) Preservation (2%) Total potential market: 36bn 1 Processing aids (3%) Nutritional ingredients (Human Nutrition) (3-4%)

63 DSM Food Specialties Value chain Retail brands 2,740bn Food additive manufacturers 36bn 1 Commodities 790bn Enzymes Antioxidants Hydrocolloids Colors Cultures Flavors Dairy Fruits Cereals Proteins Meat/ fish Oils Spices Flour Salt Sugar F&B manufacturers 2,130bn Store brands 315bn Food service 2,430bn Consumers: > 5,485bn (excl. unprocessed foods) 1. Total specialty food ingredients market, excluding ~ 25bn of commodity ingredients, e.g., soy proteins Page 62 Playing a pivotal role in the value chain offering healthier solutions that enhance taste and texture

64 DSM Food Specialties Enabling better food through advanced fermentation and biotechnology Watch clip: Sugar Reduction Digestive Health Taste Experience Food Chain Efficiency Bio Preservation BIOTECHNOLOGY & FERMENTATION Baking Savory Dairy Beverages Brewing Page 63

65 DSM Food Specialties Technology plays a key role in finding solutions Biotechnology in food development Efficiency in traditional food production systems, e.g. robotics Innovative production methods, e.g. urban farming Disruptive production methods, e.g. 3D printing Page 64

66 DSM Food Specialties Overview Sales by region (%) Sales by ingredient (%) EMEA North America Asia-Pacific Latin America Enzymes Savory Cultures Food & crop protection Hydrocolloids Other Sales by application landscape (%) Beverages Baking Savory Dairy Other Page 65

67 DSM Food Specialties Implementation of Strategy 2018 Expected market growth vs. DSM aspiration ~5% 1 Savory Market DSM Cultures & enzymes Hydrocolloids Non-artificial sweeteners Bio-preservation Market growth % 5-6% 3-4% >10% DSM growth % 6-7% 7-8% 4% 5% Create value through marketdriven innovation based on insights and in close cooperation with customers Focus on high growth segments of the market such as sugar reduction, bio-preservation, taste modulation, digestive health and food chain efficiency 1. CAGR % Page 66

68 DSM Food Specialties Case Study Consumers and governments globally moving away from sugar Page 67

69 DSM Food Specialties Case Study Sugar reduction offers big opportunity for fermentative stevia Sugar is ~80% of current sweetener market Stevia is the only viable and large scale new alternative in the foreseeable future Fermentative stevia is the future for: Sustainable production Several relevant sweetener molecules, e.g.: Reb A -Available in plants Reb M - The most potent rebaudioside, but availability in plants is limited Potentially Reb D DSM has developed a unique cost effective technology to produce Reb A and Reb M Development program for stevia well on track Regulatory submissions as well as FTO/IP work streams ongoing Launch plans in close cooperation with major customers Commercial availability projected by end of 2018 Page 68

70 DSM Food Specialties Case Study Maxilact offers dairy producers opportunities for sugar reduction and digestibility Watch clip: Lactose-free and no added sugar are two of the fastest growing segments in dairy, driven by increasing awareness of lactose-intolerance and health & wellness DSM was the first company to commercialize lactase and has been innovating ever since DSM s Maxilact lactase breaks down lactose in dairy products, making them suitable for lactose-intolerant consumers Maxilact meets the needs of lactose-intolerant customers worldwide. Its natural sweetness also enables dairy producers to achieve a 20 to 50% sugar reduction in dairy products Page 69

71 Personal Care & Aroma Ingredients ROYAL DSM HEALTH NUTRITION MATERIALS

72 Personal Care & Aroma Ingredients Providing active, performance and technical ingredients for cosmetic products Overview Global personal care market (%) Personal Care & Aroma Ingredients provides innovative solutions for some of the world s best-selling beauty products for sun, skin and hair care as well as aroma ingredients to the flavor and fragrance industries which are used in many of the world s best-known consumer brands ( 337m in sales in 2016) DSM s extensive portfolio of key ingredients includes peptides, natural bio-actives, UV filters, hair polymers, vitamins and (specialty) aroma ingredients (such as lavender fragrance) The product portfolio is complemented by a unique range of services in the areas of formulation expertise, sensory competence, technical support, quality assurance, and regulatory approval The business is driven by global megatrends, local consumer beauty regime insights, and growth opportunities presented by emerging markets Total potential market 11.5bn DSM active in colored parts 13% 21% 30% 35% (x) = Growth rate (CAGR, %) Active ingredients (3-6%) UV-filters, vitamins, skin care actives (natural extracts, synthetic peptides, biotech ingr. Performance ingredients (3-4%) Hair conditioning & styling polymers, skin sensory modifiers & enhancers, pigments & dyes Technical ingredients (2-3%) (Co) emulsifiers, thickeners & rheology control agents, emollients, solubilizers, etc. Surfactants (0-1%) Fatty alcohols, FA sulphates/ ethoxylates/ ethersulphates, betaines, amphoacetates, etc. Page 71

73 Selected Specialty Ingredients segments Personal Care & Aroma Ingredients Value chain Active and UV Ingredients ( 1.5bn) Chinese players Cosmetic brand companies and Private Label Consumer products value at manufacturer level: 240bn Fast Moving Consumer Goods Consumer products value at manufacturer level: 380bn Performance Ingredients ( 2.5bn) Technical Ingredients ( 3.5bn) Surfactants ( 4.0bn) Base Chemicals ( 14.obn) Leading position in selected key ingredients for cosmetic companies Page 72

74 Personal Care & Aroma Ingredients Overview Watch clip: Sales by region (%) Europe North America Latin America Asia Pacific excl. China China Sales by segment (%) Sun Vitamins Skin Aroma Ingredients Other Page 73

75 Personal Care & Aroma Ingredients Aroma Ingredients provides lavenders and ionones to the fragrance and flavor industry The aroma ingredients portfolio consists of lavenders and ionones that are sold to the world s leading fragrance and flavor companies Products find their use mainly in home and personal care products fine fragrances as well as food in the food industry DSM product range includes: Ionones Beta-Ionone Methyl-Ionone Irone Lavender Linelool Linalyl Acetate Tetrahydrolinalool Overview of the fragrance and flavor industry ( m) Synthetic Essential oil/natural 4.5bn 1.1 Terpenes 1.0 Benzoids 0.2 Musk 2.4 Lavender & Ionones Citrus Pinene Menthol 1,1bn 350 F&F ingredients Terpenes Page 74

76 Personal Care & Aroma Ingredients Case Study An innovative inorganic UV filter suitable for a wide range of products Watch clip: Titanium dioxide finds extensive applications in the personal care sector, being used as a pigment, sunscreen and thickener Its high refractive index, strong UV light-absorbing properties and resistance to discoloration under UV light make this the fastest-growing technology segment in the UV filters market DSM offers a unique grade of titanium dioxide: PARSOL TX, an inorganic UV filter with excellent formulation compatibility, which makes it suitable for a wide range of product applications PARSOL TX became the first titanium dioxide UV filter to comply with the amended EC Regulation on Cosmetic Products Speedy compliance with the amended EC regulation offered us a significant competitive advantage, establishing PARSOL TX as the global number one product grade in titanium dioxide technology As a direct result of our regulatory expertise and dedicated customer support, sales of PARSOL TX increased by 55% in 2016 Page 75

77 Personal Care & Aroma Ingredients Case Study Revealing the power of beautiful skin with responsible and natural ingredients Health and Wellness societal trend encourages customers and consumers to search for more sustainable solutions in personal care ALPAFLOR line is a pioneer in the organic market: Standardized high altitude organic cultivation contributing to Alpine flora diversity Quality, efficacy, and traceability from seed to bioactive Green production principles 100% renewable energy 40% water reduction No production of chemical waste Vegetable waste used in compost Extraction solvent recycled Focused on all major skin care applications Potential: triple-digit sales Page 76

78 Materials ROYAL DSM HEALTH NUTRITION MATERIALS

79 Materials A high-quality portfolio focused on well-defined, highergrowth specialty segments Materials - Overview Sales by region (%) The Materials cluster comprises DSM Engineering Plastics, DSM Dyneema and DSM Resins & Functional Materials The cluster consists of a high-quality portfolio of specialty materials serving global automotive, electrical & electronics, building & construction, consumer goods, flexible foodpackaging, high-performance textiles and life protection industries Key trend is substitution; customers are looking to replace existing parts and materials with newer, more sustainable alternatives Through its materials, DSM is a leading provider of these sustainable innovations, meeting demands for greater efficiency, safer materials and improved environmental performance Sales 2,513m 1% 36% 2% 21% Sales by end-market (%) Sales 2,513m 27% 17% 40% Europe North America Latin America Asia Rest of the World Building & Construction Automotive & Transport Electrics & Electronics (Food) Packaging 23% Other 18% 15% Page 78

80 Market growth Materials Silent transformation of the Materials portfolio toward higher-value, more sustainable specialty products continues High Accelerated growth Functional Materials Growth PA6 Compounds High-Performance Plastics Solar 1 Biomedical 1 Maximize returns PA6 Polymers Specialty Coating Resins Dyneema Fiber Solutions Powder Coating Resins Dyneema Life Protection - DSM Engineering Plastics - DSM Dyneema - DSM Resins & Functional Materials - Emerging Business Areas Low DSM s capability to extract value High 1. Whilst not part of the cluster, the Emerging Business Areas of Biomedical and Advanced Surfaces are also related to Materials and represent promising growth platforms for the longer term Page 79

81 Materials Implementation of Strategy 2018 Expected market growth vs. DSM aspiration Key actions driving profitable growth ~3-4% 1 Market DSM DSM Engineering Plastics Highly specified application development for global customers in high-performance plastics winning segments Continue to grow by leveraging global footprint of commercial and technical resources to lead the PA6 and high-performance polyamides markets in innovative growth DSM Dyneema Development of new application segments and product solutions in existing segments for Fiber Solutions Continue re-focus on growing Life Protection segment DSM Resins & Functional Materials Grow customer base profiting from fiber-to-home trend Drive substitution from solvent to water and other sustainable solutions in coatings 1. CAGR % Page 80

82 Materials 2016 key financial data 1 Sales and sales volume growth (%) Adj. EBITDA & Adj. EBITDA margin (%) 2,460 2,528 2, Adj. EBIT & Adj. EBIT margin (%) ROCE (%) Capital employed (at 31 Dec.) Capital expenditure (accounting) ,744 1,723 1, figures added for comparison only. Figures are based on non-audited, restated estimates adjusting for divestitures, acquisitions and other nonrecurring items Page 81

83 Materials End-market segments offer growth options enhanced by substitution based on application development capabilities DSM Engineering Plastics 1 DSM Dyneema DSM Resins & Functional Mat. DSM Biomedical DSM Advanced Surfaces Automotive Electronics Life Protection Fiber Solutions Sustainable Coatings Functional Materials Regenerative Biomaterials Solar Replace metals & hazardous materials Replace steel/aluminum & aramids Environmentally friendly solutions Replace traditional solutions Fossil fuel replacement Growth via end markets and substitution based on application development Page 82

84 Materials Locations Global presence in R&D and production supporting preferred partnerships in winning segments Page 83

85 DSM Engineering Plastics ROYAL DSM HEALTH NUTRITION MATERIALS

86 DSM Engineering Plastics A global engineering plastics player with a broad range of value-adding polyamides and polyesters DSM Engineering Plastics is a global engineering plastics player with a broad range of value-adding, high performance polyamides and polyesters ( 1,312m in sales in 2016) DSM targets three key industries: automotive, electrical and electronics and flexible food packaging: In automotive, focus is on lower fuel consumption and emissions reduction via weight and friction reduction and via electrification and on connectivity, safety and comfort The electrical and electronics industry continually demands improvements in terms of functionality, miniaturization and process efficiency, as well as looking for ways to address the issue of e-waste Reduction of food waste and longer shelf-life is the main driver in flexible food packaging Engineering Plastics market by product (%) Key segments Automotive Powertrain Air/turbo management Safety components Automotive electronics and lighting Interior/exterior 20% 3% 21% 9% Total potential market: 19bn 27% 20% Electronics & Electricals Connectors Frames & casings Wire & cable Power distribution Electrical components (LED) lighting PA6 PA66 PBT/PET HPEP TPC POM Packaging Flexible food packaging for meat, fish and cheese Page 85

87 DSM Engineering Plastics Product overview Watch clip: Today, DSM Engineering Plastics has one of the broadest portfolios of high-performance plastics with global leadership positions in many of its products in the areas of high-performance plastics such as Stanyl, ForTii, Xytron, Arnitel, Arnite, EcoPaXX, Akulon and Novamid Using its broad, high-quality materials portfolio and indepth technology know-how, DSM works in close collaboration with customers to develop breakthrough innovative solutions Low emission concepts Halogen- and lead-free concepts Eco-efficiency Cradle-to-Cradle certified solutions Recycle-based concepts Bio-based concepts Extensive high-performance plastics portfolio PEI PSU PES PC mppo Blends ABS PMMA PS PVC PEEK PPA PA4T PA46 PA410 PPA LCP PPS TPC PET PA6 PA66 P6/66 PBT POM PE PP Amorphous Semi-crystalline ForTii Ace ForTii Page 86

88 DSM Engineering Plastics DSM invented the high temp. polyamides space and continues to introduce more advanced grades to its offering Watch clip: Stanyl PA46 was the first high performance polyamide in the market and opened up High Temperature Polyamides (HTPA) as a new class of materials Launched in 2008, DSM s semi-aromatic polyamide, ForTii (PA4T), combined the benefits of existing PPA with improved high temperature mechanics of Stanyl PA46 Unique proprietary position with PA46, PA4T In Q DSM launched the next generation high performance polyamide family, again opening a new market space: ForTii Ace has a glass transition temperature of 160ºC and has a higher resistance to various automotive oils and chemicals DSM materials are in 87% of all cars and nearly every mobile device Historic development overview (PA46) Reflow soldering increases required T DDR, I/O, Data connectors Launch Diablo Halogen-free wave starts Full halogen-free portfolio Stanyl Diablo BM ForTii Ace Page 87

89 DSM Engineering Plastics Value chain DSM + Strategic Partners Parts producers/ molders System suppliers OEMs Polyesters Automotive High Performance Polyamides Electronics & electrical PPS JV (PPS) Consumer Goods PA66 Compounds Strat. partnership PA6 (Polymer and Compounds) Russia JV Food packaging Developing applications further down the value chain Page 88

90 DSM Engineering Plastics Value chain driven by application development at leading OEMs and system integrators Material and performance specifications Monomer Polymer Compound Convertor Injection, Moulding, Extrusion Parts producer System supplier OEM End user DSM s solutions provide high value-add materials combined with design and processing support 75% of our business is highly specified by leading global brands Value is captured at the converters Commercial and technical resources equally distributed throughout the globe Page 89

91 Grams CO 2 /Km (equivalent) DSM Engineering Plastics Overview Sales by region (%) Sales by end-market (%) Europe North America Latin America Asia-Pacific Automotive Electrics & Electronics Flexible Food Packaging Consumer Goods CO 2 requirements drive substitution growth Engineering plastics in a car Australia Europe China USA Japan Page 90

92 DSM Engineering Plastics Case Study Arnitel offers real design freedom while ensuring extreme ease of wear demanded by consumers The wearable electronics market is poised to triple in size between 2015 and 2020 Applications range from fitness & wellness through medical & healthcare to infotainment & industrial The quest for improved connectivity, greater functionality and enhanced design is driving growth Physical comfort and the possibilities of color play a crucial role in the design of today s wearables: Arnitel TPE from DSM is easy to process via injection molding, and can be used in combination with other thermoplastics such as polycarbonate, ABS, PET and PBT, providing excellent adhesion Being intrinsically bright, with high UV resistance, Arnitel permits the production of compounds in a broad range of colors Arnitel gives the strap the required soft touch and feel, and is very comfortable to wear in direct contact with the skin, causing no allergic reactions Watch clip: Page 91

93 DSM Engineering Plastics Case Study Stanyl Diablo delivers performance in the world s first high-heat plastic air intake manifold For the i8, BMW was looking for a high-heat thermoplastic solution for its AIM/CAC1 that offered superior performance and thermal stability and stiffness above 200 C With Stanyl Diablo, DSM offered the solution leading to the world s first high-heat plastic AIM/CAC combination: Revolutionary design of air intake manifolds Eliminates need to return to metals due to increasing temperature requirements Higher-performing engine while still meeting new emission limits Weight reduction of up to 40% over aluminum 1. Air Intake Manifold with integrated liquid-cooled Charged Air Cooler Page 92

94 DSM Dyneema ROYAL DSM HEALTH NUTRITION MATERIALS

95 DSM Dyneema DSM is the inventor of the world s strongest fiber Watch clip: DSM produces the world s strongest fiber : 15 times stronger than steel 1, 40% stronger than aramid, and floats on water ( 297m in sales in 2016) The business is driven by the need for lightweight, sustainable solutions that offer extreme durability coupled with improved safety and ergonomics DSM s global product leadership is based on unique, IPprotected technology platforms Applications with Dyneema push the boundaries of lightweight strength, offer comfort and safety and are inherently more sustainable than the materials substituted Dyneema products typically replace traditional materials such as steel and aramid DSM s well-established Fiber Solutions business serves the highprotective textiles and commercial marine & sports segments, while Life Protection provides personal and vehicle ballistic protection solutions New applications include performance fabrics, hybrid carbon composites and synthetic chains 1. On a weight-for-weight basis Page 94 High-performance fiber market (%) 53% 1% Dyneema UHMwPE Other UHMwPE Total potential market: > 1.2bn 27% 19% p-aramid LCP and other

96 DSM Dyneema Value chain Commercial Marine & Sports Rope & netting manufacturer Assembler System integrator End customer UHMwPE resin producer Fiber manufacturer High Protection Textiles Glove knitter Brand owner/ Private Label / Distributor/ direct End customer Life Protection UD manufacturer UD presser/ weaver Vest manufacturer Distributor (optional) End customer As the world s strongest fiber, DSM Dyneema is uniquely positioned when continuous high performance is of utmost importance Page 95

97 DSM Dyneema Overview Sales by region (%) Sales by end market (%) EMEA North America Latin America APAC Life Protection Fiber Solutions Other Only UHMWPE player with assets in 3 main continents Geleen-Heerlen, NL Stanley, NC Laiwu, China Tsuruga, Japan Mesa, Arizona Greenville, NC Singapore Manufacturing Site Manufacturing JV with Toyobo Tech Center Global HQ Regional HQ Page 96

98 DSM Dyneema Product overview Technologies and form factors Key markets Overview Industry Applications Value proposition Polymer Sheets Military & Law Enforcement Ballistic Vests, Inserts, Helmets, Vehicle protection Lightest weight protection and increased comfort Fiber Maritime, Fishing, Offshore, Industrial, Aviation Ropes, cables, slings, nets, fishing and yachting lines Lower operation cost and footprint and increased worker s safety Fabrics & Laminates Automotive, Manufacturing, Food Cut resistant gloves, Protective workwear Better cut protection at higher comfort level Sports & Lifestyle Jeans, Athletic Footwear, Sports Apparel Ultra lightweight, improved durability, increased protection Page 97

99 DSM Dyneema Case Study Meeting the deep water challenge Watch clip: Developed for use offshore, mooring ropes with Dyneema Max Technology outperform the alternatives, surpass industry standards for deep water permanent mooring, and will outlast the operational life of the installation Seven times stronger than steel wire rope, the fiber opened the door to applications where the strengths of Dyneema are now no longer compromised by an excessive creep The DM20 fiber extended the range of Dyneema applications in offshore to long-term permanently loaded systems and set the standard for permanently mooring FPSO vessels 1 : 30% smaller diameter than equivalent polyester rope 30% stiffer and 70% lighter than equivalent polyester rope More freedom in riser design, planning, and installation 1. Floating production, storage and offloading vessel Page 98

100 DSM Dyneema Case Study High stiffness and low weight for safe station keeping Petrojarl Knarr was the first FPSO vessel to employ Lanko force riser tethers made with Dyneema DM20 fiber Production was started successfully in April 2015, 120 kilometers off the coast of Norway Its riser tethers, made with Dyneema DM20, provide permanent subsea anchoring of the risers between seabed and vessel Each of the riser tethers comprises two tethers made with Dyneema DM20 connected to a hold-down clamp with an anchor Allows for rotation around two axes Using Dyneema DM20 from DSM not only led to reduced system and installation costs but also to increased worker safety during handling Page 99

101 DSM Resins & Functional Materials ROYAL DSM HEALTH NUTRITION MATERIALS

102 DSM Resins & Functional Materials A global coatings producer with a well-balanced portfolio in sustainable coatings DSM Resins & Functional Materials is a global leader of sustainable, waterborne coating and powder coating resins that are used in a wide range of applications, while its UV-curable fiber-optic coatings are recognized worldwide as the standard for fiber protection and identification ( 904m in sales in 2016) Coating resins determine to a large extent the properties of the final product Key trend is the shift from traditional solvent-based coatings that contain hazardous materials to the use of more sustainable coating technologies Expanding the field of properties to enlarge the range of applications in which waterborne, powder and UV coatings can be used remains key Besides end-user preference, legislation on the reduction of substances such as Volatile Organic Compounds continues to be an important driver for this substitution world-wide In fiber-optic coatings, signal reliability and field performance are main drivers for growth as global bandwidth demand for networks continue to surge Global paints and coatings market (%) 9% 9% 2% 9% 8% 3% 1% 14% Architectural wall Architectural trim Industrial wood General industrial Protective Total potential market: ~ 30bn 25% 20% Automotive OEM Automotive refinish Powder Marine Plastic coatings 1. On a weight-for-weight basis Page 101

103 DSM Resins & Functional Materials Value chain Resins - ~ 30bn Customer base Impression of end market Solvent-based resins Powder resins Water-based resins UV curing resins Ideally positioned as the industry continues to move to more sustainable coatings Page 102

104 DSM Resins & Functional Materials 5 business lines overview Sustainable coating resins Functional Materials DSM-AGI Powder Coating Resins Specialty Resins Fiber Optic Materials SOMOS 3D Printing UV Powder Waterborne Fiber Optics 3D printing Applications for Industrial and Packaging applications Very sustainable technology for Industrial Coating High performance low/ no VOC coatings and packaging Protecting Optical Fibers Prototyping and small runs Page 103

105 DSM Resins & Functional Materials Resin is a key component in coatings ~30%: Water or Volatile Organic Compounds ~5%: Additives & Preservatives ~20%: Pigments ~45%: Resin (binder) Page 104

106 DSM Resins & Functional Materials Coatings contribute 21% to global NMVOC s. Continuous move to sustainable technologies Global emission of NMVOC (%) Increasing shift away from solvent Coatings sales by end market (value) Solvents from Coatings & Paint 21% Solvent and product use 15% Road transport 15% Commercial, institutional and households 15% Energy production and distribution 10% Industrial processes 15% WB 44% UV 2% Powder 5% SB 49% Asia 52% India 8% Rest Of Asia 14% China 29% Oceania 1% 50mTs 100b North America 15% Middle East 3% CIS 4% Africa 2% North America 15% Central and South America 4% Brazil 4% Europe 16% EMEA 25% LatAm 8% Page 105

107 DSM Resins & Functional Materials Ideally positioned in the more sustainable coatings segments Sales by region (%) Sales by end markets (%) EMEA North America Latin America Asia-Pacific Industrial Architectural Packaging & graphic arts Others Extensive portfolio in sustainable specialty resins Func. Mat. Specialty Resins Powder Solvent-based Page 106

108 DSM Resins & Functional Materials After designing the first ever fiberoptic coatings 40 years ago, DSM is the global leader in this segment Without fiber-optic cable there is no fast internet connecting the world. And without UV-curable coatings, there is no fiber-optic cable DSM is the world s leading supplier of fiber-optic coatings, which help assure signal reliability and protect fibers from harsh environmental conditions DeSolite Supercoatings made by DSM is the industry leading coating solution for fiber protection worldwide In additive manufacturing 3D printing DSM offers highly efficient and effective prototyping technologies and supports the industry in accelerating the pace at which new products are designed and brought to market Page 107

109 DSM Resins & Functional Materials Case Study Transforming the Chinese, solvent-based, sea freight container industry Since the beginning of 2014, the Chinese government has been paying increasing attention to environmental protection This includes introducing more stringent regulations on VOC emissions from solvent-based coatings 95% of the world s sea freight containers are made in China, and almost all are painted with solvent-borne coatings To mobilize industry support for the switch to waterborne coatings in China, DSM founded the Waterborne China Platform in 2010 Represents leading coatings, resins and additive manufacturers who are in a position to influence key bodies such as the Guangdong Coating Association, the Container Owner Association and the China Container Industry Association, as well as the Chinese central and regional Environment Protection Bureau in the drafting of VOC and coating standards for the container industry In 2015, 2.5 million 20 foot equivalent containers were built, generating some 130,000 tons of VOC emissions and constituting one of the major VOC emission sources in China A new container requires 60-70kg of paint: if all new containers were painted with waterborne coatings, this would require 165,000 tons of waterborne coatings a year Today, only a small number of these some 20,000 in 2015 are coated with waterborne coatings Page 108

110 DSM Resins & Functional Materials Case Study Further driving the switch to waterborne coatings in China As a result of these efforts, in 2016, the Chinese container industry decided to sign a convention to introduce waterborne coatings in two steps Guangdong Province made the switch in July 2016 and the rest of the country will follow by April 2017 Working with paint and coatings customers such as Valspar (now Sherwin Williams), DSM is already seeing considerable growth in its business as a result Other industries and governing bodies are now following suit: The Chinese furniture industry is switching to waterborne coatings ahead of the introduction of the relevant legislation The Shenzhen Municipality has forbidden the use of solvent-borne coatings for external wall applications Page 109

111 DSM Resins & Functional Materials Case Study First and important steps in creating coatings using plant-based materials Watch clip: Decovery plant-based resins are based on a novel process of converting renewable materials Free of Volatile Organic Compounds, has an extremely low odor and offers many additional benefits to the end-products Praxis, one of the largest Dutch hardware chains, was looking for a sustainable solution for its premium range of private label decorative paints In close cooperation with DSM, Praxis was able to further improve quality and sustainability using Decovery In 2016, DSM and ICA Group together announced a new water-based coatings line for interiors called IRIDEA BIO BEST PRODUCT OF THE YEAR Page 110

112 Innovation Center ROYAL DSM HEALTH NUTRITION MATERIALS

113 Innovation Center Accelerating and supporting innovation at DSM Watch clip: The DSM Innovation Center has two main functions: Enable and accelerate innovation power and speed in DSM s core businesses as a center of excellence. It protects DSM s intellectual property, and also focuses on adjacent technologies and business opportunities for growth through DSM s Corporate Research Program and Venturing & Licensing activities; Focus on areas outside the current scope of the business groups, investing in new and innovative growth options through the DSM Business Incubator and by developing and extracting value from the company s Emerging Business Areas ( EBAs ) in promising endmarkets that provide strong long-term growth platforms which are based on the company s core competences in health, nutrition and materials Organization Accelerators Supporting Business Groups and EBAs in accelerating innovation and meeting innovation targets Chief Technology Officer Excellence in innovation Intellectual Property Venturing & Licensing Innovation Center New business development Creating new businesses for DSM, outside the current scope of the existing Business Groups Emerging Business Areas Biomedical Bio-based Products & Services Advanced Solar Business Incubator Page 112

114 Innovation Center The Emerging Business Areas provide long-term growth platforms Focus lies on development and extracting value DSM Biomedical Enabling innovative medical devices DSM Bio-based Products & Services Enzymes/yeast for biomass conversion DSM Advanced Solar Efficiency-increasing products for solar Partners with the medical industry worldwide to develop innovative biomaterials and regenerative medical devices that improve patients lives With facilities in the US and the Netherlands, DSM develops innovative materials, components and full medical devices based on biomedical polyurethanes and polyethylenes, resorbable polymers, ceramics, collagens, extracellular matrices, silicone hydrogels, device coatings, and drug delivery platforms Aim is to outpace market growth in highgrowth segments of the medical device market including cardiology, neurology, ophthalmics, diabetic care, and orthopedics Pioneers advances in biomass conversion and seeks to demonstrate the commercial viability of sustainable, renewable technologies in collaboration with strategic partners in the value chain (e.g. POET in cellulosic bio-ethanol and Reverdia in biosuccinic acid) Leveraging the expertise and products DSM has built up in 2 nd generation bio-fuels to create new business in making the production of all generations of bio-fuels more efficient and sustainable Strategy is to license technology and expertise, enabling future partners to convert biomass in a commercially viable and sustainable way Aim is to accelerate the uptake and effectiveness of solar energy by focusing on the development and commercialization of technologies and materials that increase the efficiency of solar modules, reducing the cost of energy delivered DSM has built a strong position as a solution provider for high-performance solar PV materials, primarily driven by our marketleading anti-reflective coating and an innovative new type of backsheet Page 113

115 Innovation Center Implementation of Strategy 2018 Aspirations underpinning Group targets Support innovation in core businesses to facilitate earnings and profit growth towards and beyond 2018 Develop and extract value from Emerging Business Areas Cost of Innovation Support: m EBITDA/year EBITDA contribution of the Emerging Business Areas: from + 5m (2015) to m (2018) Overall Innovation Center EBITDA break-even as of CAGR % Page 114

116 Innovation Center Case Study DSM is meeting the needs of an attractive growth market Solar PV has emerged as a mainstream source for power generation Driven by incentive schemes and increasing competitiveness In 2015, solar photovoltaic ( PV ) accounted for 25% of new power capacity added globally Continued strong market growth expected Enabled by further reduction of the price of solar power ($/kwh) DSM has established a leading position in anti-reflective coatings and is recognized as high performance material supplier to the PV industry: DSM s highly durable, proprietary technology for antireflective coatings delivers unparalleled transmission gain and easy handling and durability even in extreme weather conditions DSM offers a portfolio of innovative PV backsheet products based on a patented technology Growth of global PV capacity YoY ~40% ( ) Lower PV prices driven by higher efficiency and durability Page 115

117 Innovation Center Case Study DSM solutions are lowering the cost of solar power Watch clip: Frame Glass Encapsulant Cells Encapsulant Backsheet Anti-reflective coating Lowering cost through enhanced PV glass light transmission, resulting in higher module power output A closed pore structure is established through a differentiating core-shell technology, provides unique optical, mechanical and durable properties Backsheet Lowering cost through enhanced light management and improved barrier properties resulting in higher power output and reduced degradation during lifetime of the module Junction box +1.5W Page 116

118 1 DSM at a glance/strategy Business overview 3 Financial data 4 Share-related information ROYAL DSM HEALTH NUTRITION MATERIALS

119 Financial data Income statement Income statement DSM Continuing ( ) and Total DSM (5 year summary) DSM Continuing Total DSM in million Net sales 7,920 7,722 7,920 8,935 9,283 9,429 9,131 1 Adjusted EBITDA 1,262 1,075 1,262 1,170 1,166 1,312 1,109 EBITDA 1, ,146 1,046 1,134 1, Adjusted operating profit (EBIT) Operating profit (EBIT) Financial income and expense (133) (164) (133) (174) (125) (144) (109) Income tax expense (89) (46) (89) (68) (7) (76) (46) Share of profit of associates and joint ventures (59) 13 2 Profit for the year Profit attributable to non-controlling interest 8 (2) 8 4 (46) (2) 10 Net profit attributable to equity holders of DSM Dividend on cummulative preference shares (4) (10) (4) (10) (10) (10) (10) Net profit attributable to equity holders of DSM See page 142 of the Integrated Annual Report 2016 for reconciliation Page 118

120 Financial data Other key figures Other key figures Total DSM (5 year summary) Total DSM in million Cash provided by operating activities 1, n.a. Capital Employed 7,889 7,553 8,105 8,060 8,084 Capital Expenditure: Intangible assets and PP&E Acquisitions ,265 Disposals Depreciation, amorization and impairments Net debt (2,070) (2,321) (2,420) (1,841) (1,668) Dividend Workforce at 31 December, headcount (#) 20,786 20,750 21,351 23,485 23,498 Employee benefit costs 1,752 1,778 1,713 1,822 1, As reported 2. Restated due to retrospective application of IFRS 11 'Joint Arrangements' that came into effect from 1 January 2014 Page 119

121 Financial data Ratios Ratios Total DSM (5 year summary) Total DSM ROCE (%) Sales/ average Capital Employed Current assets/ current liabilities Equity/ total assets Gearing (net debt/ equity plus net debt) Adjusted EBIT/ Sales (%) Net profit/ Avg. shareholders' equity available to holders of ordinary shares (%) Adjusted EBITDA/ net finance costs Page 120

122 Financial data Balance sheet - Assets Balance sheet Assets - Total DSM (5 year summary) Total DSM in million Intangible assets 3,188 3,228 2,867 2,690 2,793 Property, plant and equipment 3,325 3,171 3,673 3,611 3,811 Deferred tax assets Share in associates and joint ventures Other financial assets Non-current assets 7,917 7,828 7,859 7,112 7,125 Inventories 1,800 1,627 1,739 1,638 1,803 Receivables 1,653 1,556 1,769 1,597 1,799 Financial derivatives Current investments Cash and cash equivalents ,121 Assets held for sale Current assets 5,041 3,915 4,267 4,787 4,841 Total assets 12,958 11,743 12,126 11,899 11, Application of IFRS 11 'Joint Arrangements' that came into effect from 1 January has been restated. The years 2012 has not been restated Page 121

123 Financial data Balance sheet Equity and liabilities Balance sheet Assets - Total DSM (5 year summary) Total DSM in million Shareholders' Equity 6,072 5,541 5,723 5,908 5,874 Non-controlling Interests Equity 6,180 5,631 5,936 6,096 6,042 Deferred tax liabilities Employee benefits liabilities Provisions Borrowings 2,552 2,557 1,637 1,725 1,922 Other non-current liabilities Non-current Liabilities 3,606 3,698 2,667 2,598 2,765 Employee benefits liabilities Provisions Borrowings , Financial derivatives Current liabilities 1,972 1,842 1,915 1,845 2,081 Other liabilities held for sale Current liabilities 3,172 2,414 3,523 3,205 3,159 Total liabilities 12,958 11,743 12,126 11,899 11, Application of IFRS 11 'Joint Arrangements' that came into effect from 1 January has been restated. The years 2012 has not been restated Page 122

124 DSM is committed to maintain a strong balance sheet, while rewarding shareholders with stable, preferably rising dividends Financial policies 1 DSM s refinancing has been geared towards evenly spread maturity profile, to reduce refinance risk Average cost of long-term funding has been reduced from 4.2% (2013), 3.9% (2014) to 3.4% (2016) No significant pension fund liabilities Committed to maintain a strong investment grade credit rating Borrowings by maturity , After 2021 Cash allocation priorities Dividend per ordinary DSM share - DSM has set the following priorities for cash allocation 1) Disciplined capex to support profitable growth 2) Dividend 3) Acquisitions 4) Cash back to shareholders Dividend policy of stable and preferably rising dividends More detailed information regarding DSM s financial policies can be found in DSM s Integrated Annual Report 2. In 2016 favorable market conditions allowed to already lock-in low interest rates and refinance the upcoming maturing of a 750m ten-year bond in 2017 Page Dividend yield (based on average share price) 6.0% 4.0% 2.0% 0.0%

125 1 DSM at a glance/strategy Business overview 3 Financial data 4 Share-related information ROYAL DSM HEALTH NUTRITION MATERIALS

126 Information about the DSM share DSM has two types of shares: 1 class of ordinary shares and 2 classes of Cumulative Preference Shares, series A (issued, not listed) and B (not issued, not listed) 1 Ordinary shares in Koninklijke DSM N.V. are listed on the NYSE Euronext stock exchange in Amsterdam, the Netherlands (Stock code 00982, ISIN code NL ) Options on ordinary DSM shares are traded on the European Option Exchange in Amsterdam, the Netherlands (Euronext.liffe) In the US a sponsored unlisted American Depositary Receipts (ADR) program is offered by Deutsche Bank Trust Co. Americas (Cusip ), with four ADRs representing the value of one ordinary DSM share per ordinary share in Adjusted net profit Net profit Operating Cash Flow Dividend Interim Dividend Final Dividend Pay-out incl. dividend on cumulative preference shares as % of adjusted net profit Dividend yield (dividend as % of average price of an ordinary DSM share) Share prices on Euronext Amsterdam (closing price) Highest price Lowest price At 31 December Number of ordinary shares outstanding (x 1,000) At 31 December 175, , , , ,684 Average 175, , , , ,543 Daily trading volumes on Euronext Amsterdam Average Lowest Highest 2,554 4,506 7,981 3,049 2, More detailed information can be found on page 124 of DSM s Integrated Annual Report 2016 Page 125

127 Information about the DSM share (cont d) Development of number of ordinary DSM shares Issued Repurchased Outstanding Outstanding Balance at 1 January 181,425,000 6,501, ,923, ,536,815 Changes Reissue of share in connection with exercise of options rights - (3,243,102) 3,243,102 1,056,880 Repurchase of shares - 5,200,000 (5,200,000) (2,300,000) Dividend in the form of ordinary shares - (2,035,537) 2,035,537 2,629,332 Balance at 31 December 181,425,000 6,423, ,001, ,923,027 Market capitalization at 31 December ( million) 10,334 8,396 Geographical spread of DSM shares (total) 6% North America Switzerland 3% 4% 3% The Netherlands Germany 31% 6% United Kingdom Asia-Pacific France Other countries 14% 33% Page 126

128 DSM Investor Relations Overview and events DSM attaches great value to a good relationship with its shareholders The Investor Relations team s primary tasks are to maintain contacts with current and potential shareholders as well as with sell-side analysts and to provide quality information about developments at DSM that is equally and simultaneously provided and accessible to all interested parties Silent periods In the period preceding the publication of the financial results, DSM will be in a silent period where it will not engage in a business dialogue with analysts or investors Consensus At regular intervals, DSM asks VARA research to compile a consensus number for key financial parameters by approaching a number of sell-side analysts that actively cover DSM. This consensus is published on the DSM website Calendar 1 2 May h CEST Publication Q results 3 May h CEST Annual General Meeting of Shareholders May 2017 Ex-dividend date May 2017 Payment date of net cash dividend/ stock dividend 8 July h CEST Silent Period Q Aug h CEST Publication Q Sept Investor Seminar Oct h CEST Silent period Q Nov CEST Publication Q For the latest, most up to date information, please see Page 127

129 Additional information and disclaimer All financial data in this Factbook 2017 are based on 2016 continuing operations and in Euro million unless stated otherwise (e.g. indicated as Total DSM) Information in this presentation has not been audited 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. More details on DSM s performance can be found in the latest Integrated Annual Report together with a more comprehensive discussion of the risk factors affecting DSM s business, which can be found on the company's corporate website, Page 128

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