DSM reports Q1 2020 results

Heerlen, NL, 07 May 2020 07:00 CEST

Highlights¹

• DSM reports a solid quarter
• Early actions on COVID-19 ensured continuity of operations and supply to customers
• Group sales and Adjusted EBITDA stable
  • Nutrition: sales +4%, organic sales +2%, Adjusted EBITDA +3%
  • Materials: sales -8%, volumes -6%, Adjusted EBITDA -7%
• Adjusted net profit up 8% to €216m. Net profit: €168m
• Strong Adjusted Net Operating Free Cash Flow of €151m, up 152%
• Outlook 2020: DSM expects Nutrition to deliver at least a mid-single digit increase in Adjusted EBITDA, but given current limited visibility in Materials the overall earnings outlook is suspended at this time

1) Adjusted EBITDA is an Alternative Performance Measure (APM) that reflects continuing operations.

Geraldine Matchett and Dimitri de Vreeze, Co-CEOs, commented: “COVID-19 has led to unprecedented global challenges. We took very early actions and focused on ensuring the health and safety of our employees and partners, keeping our operations running and serving customers and society with our essential products. We are proud of how our people are responding to the new challenges and are also supporting the communities around them in so many different ways.

“We saw good underlying business conditions in Nutrition, with momentum increasing through the quarter, and with an overall small increase in demand from COVID-19. At the same time, trading conditions in Materials deteriorated rapidly at the end of Q1 as customers’ operations were impacted by COVID-19 restrictions, especially in Europe and North America.

“While these are uncertain times, we are taking all necessary actions to address recent challenges in end markets. We remain well-positioned to manage near-term developments with a growing Nutrition business and a strong financial position. We stay focused on our long-term strategy to deliver above-market growth, pursuing our innovation programs, and growth initiatives, supported by the execution of our self-help actions.”

Outlook 2020

There is considerable uncertainty as to how the COVID-19 pandemic will develop and what will be the global ramifications. Within this context, DSM expects Nutrition to deliver at least a mid-single digit increase in Adjusted EBITDA for 2020 compared to prior year, but given current limited visibility in Materials it feels prudent not to express an overall earnings outlook at this time.

COVID-19 impact

DSM responded quickly to the COVID-19 outbreak, initiating very strict protocols to increase already stringent hygiene and safety precautions throughout its facilities and supply chain worldwide. Through these measures DSM is protecting the well-being of its employees and partners while keeping production facilities running. Given that many of its products and solutions are considered vital by national governments, DSM’s facilities are typically permitted to keep operating and are less impacted by logistics restrictions.

DSM estimates that Nutrition overall saw a slight increase of about 1% on its Q1 sales from COVID-19. Materials saw a negative impact of about 7% of sales with the main effect at the end of the quarter as customers’ operations were severely impacted by COVID-19 measures especially in Europe and North America. As these measures continue into Q2, DSM is taking actions in Materials to limit capital expenditure and operating costs to protect its earnings and cashflow without compromising the medium- and long-term potential of its businesses.

In addition, DSM is also supporting the fight against the pandemic. DSM is applying scientific know-how and its resources through a variety of global and local initiatives including helping to improve personal protective equipment designs, producing critical disinfectants and equipment for hospitals, leading a consortium to produce face masks, distributing immunity-optimizing vitamins to healthcare workers, and more as shown in the sustainability highlights. 

Financial strength

DSM continues to benefit from a strong balance sheet and available liquidity, with Q1 2020 Net Debt to EBITDA of 0.8x, strong cash generation and committed, undrawn revolving credit facilities of €1.5 billion. These facilities, comprised of a €1 billion revolving credit facility maturing in 2025 and €500 million new revolving credit facilities concluded recently, are not subject to any financial covenants or a MAC clause. Additionally, the company has no bond maturities in 2020 and 2021. DSM remains committed to maintaining a strong investment-grade credit profile.

Reflecting the strength of its financial position, DSM remains committed to its capital allocation policy. DSM will continue to reinvest capital into driving organic growth via disciplined capex and is committed to pursue its existing policy of distributing stable, preferably rising, dividends to its shareholders. DSM’s dividend proposal for approval at its AGM on 8 May 2020 remains €2.40 per share, as communicated in February 2020, up 4% versus 2019.

Concurrently, having bought back €745 million shares as at Q1 2020, DSM believes it prudent to pause the remainder of its €1 billion share buy-back program, launched in 2019, as a precaution given the current environment.

On 1 April 2020 DSM completed the acquisition of Glycom, as announced on 21 February 2020, for an enterprise value of €765 million, which will be incorporated in the results as of Q2 2020. Glycom is the world’s leading supplier of Human Milk Oligosaccharides (HMO).

1) Over Adjusted taxable result
2) Including result attributed to non-controlling interest
3) Cash, net of customer funding, investment grants and excluding leases
4) Headcount 2019 refers to headcount at year-end

In this report:

‘Organic sales growth’ is the total impact of volume and price/mix;
‘Total Working Capital’ refers to the total of ‘Operating Working Capital’ and ‘non-Operating Working Capital’;
‘Adjusted Net Operating Free Cash Flow’ is the cash flow from operating activities, corrected for the cash flow of the APM adjustments, minus the cash flow of capital expenditures and drawing rights.

The complete version of this press release with accompanying financial statements and the Presentation to Investors are below in PDF format.

• Press Release & Financial Statements
• Presentation to Investors: Q1 2020 results
• Media Conference Call: Q1 2020 results
• Analysts Conference Call: Q1 2020 results