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Profit in 2015 - Annual Report 2015 - DSM

Profit in 2015

Financial results

Within the Profit dimension of DSM’s Triple P approach, DSM delivers a sustainable financial return. This ensures business continuity and allows the company to grow, while at the same time providing a good financial return to its shareholders. This chapter reports DSM’s financial performance and provides an overview of the key financial metrics of the company. A model of how DSM creates value for its stakeholders through the financial, intellectual and manufactured capitals is shown on How DSM creates value for its stakeholders.

Table 1: Income statement

Income statement
x € million
2015
20141
     
Net sales, continuing operations
7,722
7,051
     
Operating profit before depreciation and amortization (EBITDA)2
1,075
1,038
     
Operating profit before exceptional items2
573
587
Net finance costs
(149)
(102)
Income tax expense
(97)
(84)
Share of the profit of associates
54
8
Profit attributable to non-controlling interests
2
5
     
Net profit continuing operations before exceptional items
383
414
     
Net profit from discontinued operations before exceptional items
33
12
     
Net result from exceptional items, continuing operations
(199)
(122)
Net result from exceptional items, discontinued operations
(129)
(159)
     
Total net profit attributable to equity holders of Koninklijke DSM N.V.
88
145
     
ROCE, continuing operations
(in %)
7.6
8.2
EBITDA / net sales, continuing operations (in %)
13.9
14.7
1 Restated due to the disposal of the caprolactam, acrylonitrile and composite resins business
2 From continuing operations
Net sales and EBITDA

At €7,722 million, net sales from continuing operations in 2015 were 10% higher than in 2014 (€7,051 million). Volume development accounted for a 3% improvement, with strong growth in Nutrition, while price/mix was on average 2% down on 2014, due to lower input prices being partially passed on down the value chain in Performance Materials. Exchange rate fluctuations had a positive impact of 8%, while other effects such as acquisitions contributed 1%.

Table 2

 
Net sales
 
EBITDA
x € million
2015
2014
% change
 
2015
2014
% change
DSM, continuing operations
7,722
7,051
10%
 
1,075
1,038
4%
               
Nutrition
4,963
4,335
14%
 
822
850
(3%)
Performance Materials
2,528
2,460
3%
 
384
323
19%
Innovation Center
155
154
1%
 
(9)
(18)
 
Corporate Activities
76
102
   
(122)
(117)
 
EBITDA / net sales, continuing operations

EBITDA, operating profit from continuing operations before depreciation and amortization (before exceptional items), grew by 4% or €37 million, from €1,038 million in 2014 to €1,075 million in 2015. Nutrition EBITDA declined by 3% as good organic growth and the positive impact of the strengthened US dollar were more than offset by the negative impact of significantly lower vitamin E prices, the appreciation of the Swiss franc and the weakening of the Brazilian real. Cost savings and good margin management as well as support from lower input prices and currency effects led to a strong increase in EBITDA for Performance Materials of 19%. DSM's overall EBITDA margin (operating profit before depreciation and amortization as a percentage of net sales) was 13.9% (2014: 14.7%).

Operating profit from continuing operations before exceptional items went from €587 million in 2014 to €573 million in 2015, down 2%.

Net sales by origin, continuing operations Net sales by destination, continuing operations Net sales by business segment, continuing operations Net sales by end-use market, continuing operations
Net profit

Net profit from continuing operations attributable to shareholders DSM (before exceptional items) decreased by €31 million to €383 million. Expressed per ordinary share, net earnings from continuing operations before exceptional items amounted to €2.14 in 2015 (2014: €2.34).

Net finance costs rose by €47 million compared to the previous year to €149 million. This was mainly the consequence of unfavorable hedge results and higher interest expenses.

The effective tax rate (before exceptional items) for 2015 was 23% (2014: 17%), with a limited cash outflow impact. The increase was due amongst others to a one-time tax settlement related to the internal transfer of a business and a somewhat less favorable geographical mix.

Total net profit for the full year came to €88 million compared to €145 million in 2014. This decrease was mainly caused by €47 million higher net finance costs and €47 million higher exceptional items, partly offset by a €46 million higher share of the profit of associates.

Exceptional items

Total exceptional items from consolidated companies for the full year amounted to a loss of €361 million (€304 million after tax) consisting of a €130 million book result on the deconsolidation of the caprolactam, acrylonitrile and composite resins business, €102 million restructuring costs related to the cost-reduction programs announced in the year, €92 million impairments and €37 million acquisition-related and other costs.

Table 3: Cash flow statement

Cash flow statement
x € million
2015
2014
     
Cash and cash equivalents at 1 January
669
770
     
Cash flow provided by operating activities
696
808
of which provided by continuing operations
800
660
     
Cash from / used in investing activities
(275)
(515)
     
Cash used in financing activities
(440)
(419)
     
Effect of exchange differences
15
25
     
Cash and cash equivalents at 31 December
665
669

Cash flow provided by operating activities is driven by the EBITDA over the year (€1,170 million) and offset by various cash-out items including the settlement of derivatives of -€218 million. The focus on cash flow and total working capital resulted in a strong full-year operating cash flow from continuing operations of approximately €800 million.

The cash used in investing activities includes capital expenditures (-€543 million) and the settlement of the net investment hedge (-€136 million), partly offset by the proceeds from disposals (€297 million) and the dividend received from associated companies (€144 million).

The cash used in financing activities consists mainly of dividend paid (-€174 million), interest paid (-€303 million) and repayment of commercial paper (-€250 million), partly offset by the increase in loans (€351 million). For the full cash flow statement, see 'Consolidated financial statements' on Consolidated cash flow statement (note 27).

Balance sheet

The balance sheet total (total assets) reached €11.7 billion at year-end (2014: €12.1 billion). Equity decreased by €305 million compared to the position at the end of 2014. This decrease was due to the fact that the net profit for the year and the proceeds from reissued shares were more than offset by the dividend, the repurchase of shares, the impact from deconsolidation and the net actuarial losses on defined benefit obligations. Equity as a percentage of total assets went from 49% at the end of 2014 to 48% at the end of 2015.

Compared to year-end 2014, net debt went down by €99 million to €2,321 million. The gearing was 29% at year-end, the same as in the prior year.

Capital expenditure on intangible assets and property, plant and equipment amounted to €570 million in 2015 and was above the level of amortization and depreciation.

Total working capital amounted to €1,343 million compared to €1,587 million at year-end 2014, which represents 17.4% as a percentage of annualized sales 2015. Total working capital at year-end 2015 included cash-related liabilities of joint ventures and associates of €137 million. Excluding these liabilities, total working capital as a percentage of annualized sales amounted to 19.2%. The operating working capital (continuing operations before reclassification to 'held for sale') was €91 million lower than in the previous year and came to 24% of annualized net sales (2014: 26%). Cash and cash equivalents came to €665 million at the end of the year; including current investments this came to €674 million (2014: €675 million).

Capital employed per business segment at  31 December 2015, continuing operations Equity at 31 December

Table 4: Balance sheet profile

Balance sheet profile
 
2015
2014
 
x € million
in %
x € million
in %
         
Intangible assets
3,228
27
2,867
24
Property, plant and equipment
3,171
27
3,673
30
Other non-current assets
1,429
12
1,319
11
Cash and cash equivalents
665
6
669
6
Other current assets
3,250
28
3,598
29
         
Total assets
11,743
100
12,126
100
         
Equity
5,631
48
5,936
49
Provisions
139
1
147
1
Other non-current liabilities
3,600
31
2,562
21
Other current liabilities
2,373
20
3,481
29
         
Total liabilities
11,743
100
12,126
100
Outlook

DSM expects to make further progress with its growth initiatives in 2016 both in Nutrition and Materials, although the macro-economic context remains challenging. These will be underpinned by the group-wide cost and productivity improvement programs as well as the company’s disciplined focus on capital allocation and working capital.

DSM aims to deliver increased full-year EBITDA and ROCE in line with the targets set out in its Strategy 2018: Driving Profitable Growth.