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Performance Materials - Annual Report 2015 - DSM

Performance Materials

Table 1

x € million
2015
2014
     
Net sales:
   
DSM Engineering Plastics
1,378
1,324
DSM Dyneema
284
264
DSM Resins & Functional Materials
866
872
     
Total
2,528
2,460
     
Organic sales growth (in %)
(4)
3
Operating profit plus depreciation and amortization (EBITDA)
384
323
Operating profit
250
204
Capital expenditure
98
71
Capital employed at 31 December
1,723
1,744
ROCE (in %)
14.4
11.9
EBITDA as % of net sales
15.2
13.1
R&D expenditure
143
135
     
Workforce at 31 December (headcount)
4,477
4,496

Business

The Performance Materials cluster is made up of DSM Engineering Plastics, DSM Dyneema and DSM Resins & Functional Materials. DSM Engineering Plastics is a global player in specialty plastics. These materials are used in components for the electrical and electronics, automotive, flexible food packaging and consumer goods industries. DSM Dyneema is the inventor, manufacturer and marketer of Dyneema®, the world’s strongest fiber™. DSM Resins & Functional Materials is a global player in innovative, sustainable resins solutions for paints and industrial and optical fiber coatings.

In 2015, total sales for the Performance Materials cluster were up by 3% from €2,460 million to €2,528 million. This was driven by a positive 7% currency effect on overall flat volumes, while lower input costs led to a 4% decrease in prices.

Total EBITDA for the full year 2015 increased by 19% to €384 million from €323 million in 2014. The cluster benefitted from the efficiency and cost-saving programs that have successfully been implemented over recent years, as well as good margin management. This positive development was further supported by lower input costs and currency developments.

Trends

Resource scarcity and climate change have become key drivers in the materials industry. In nearly every market, customers demand products and solutions that help to reduce energy consumption and harmful emissions, both within their operations and across the value chain. Legislators are increasingly driving this agenda with more stringent regulatory requirements. DSM addresses these needs through innovative materials that offer the same or better functionalities whilst being lighter and more versatile with a lower environmental footprint than metals and other conventional materials. These include high-performance plastics; waterborne resins; and bio-based and renewable plastics and resins.

The use of hazardous substances is a further topic of concern for consumers and regulators, which is driving demand for safer alternatives. In response, DSM Engineering Plastics and DSM Resins & Functional Materials offer products and solutions that eliminate or reduce the use of substances including halogens and volatile organic compounds (VOC).

Substitution of existing materials through better performing alternatives is therefore a major growth driver in the Performance Materials cluster’s businesses, alongside the overall development of their respective markets and segments.

Sustainability

DSM delivers innovative solutions that make a positive difference to people’s lives and reduce the environmental footprint. Sustainability is a significant driver of new business and innovations in Performance Materials.

Sustainable innovation is consequently one of the cluster’s cornerstones and leads to the development of new applications that address key challenges. DSM has shifted its materials portfolio to a higher added-value mix by introducing innovative and more sustainable solutions, some examples of which are described elsewhere in this chapter and the Report.

Strategy

DSM applies a differentiated strategy in its Performance Materials portfolio based on its positions in various market segments. In the period 2010-2015, this strategy aimed to restructure, strengthen or accelerate its businesses. This approach has enabled the cluster to successfully upgrade its portfolio and DSM will continue to differentiate its Performance Materials business strategies in the coming years, focusing on well-defined, higher-growth specialty segments, while maximizing returns in PA6 Polymers and Powder Coating Resins. See 'Strategy 2018' on Strategy 2018: Driving Profitable Growth.

In 2015, the company completed the strategic actions it was pursuing for Composite Resins, which became part of the ChemicaInvest partnership with CVC Capital Partners alongside the Polymer Intermediates businesses, thereby finalizing the restructuring aspect of its strategy for the period.

Whilst not part of the cluster, the Emerging Business Areas of DSM Biomedical and DSM Advanced Surfaces are also related to Performance Materials and represent promising growth platforms for the longer term.

DSM Engineering Plastics

Highlights 2015

  • Specialty portfolio upgraded with PPS and PA66 compounds
  • Stanyl®ForTii™ selected for new USB-Type C connectors
  • New office on US West Coast to support growth in consumer electronics

DSM Engineering Plastics booked full-year sales of €1,378 million in 2015 compared to €1,324 million in 2014.

The markets for engineering plastics increasingly require sustainable, innovative solutions that make people’s lives safer, more convenient and healthier, while addressing climate change and food waste. DSM aims to create shared value by providing high-performance materials and solutions to help lower carbon footprints over the life cycle, eliminate the use of substances of concern, use recycled content or offer improved recyclability, and use content that is entirely or partly bio-based.

DSM Engineering Plastics targets three key industries: automotive; electrical and electronics; and flexible food packaging. It has a focused portfolio with global leadership positions in many of its products in the areas of high-performance plastics such as Stanyl®, Arnite® and Akulon®. DSM seeks to continually shift its portfolio towards higher-value, specialty materials, introducing more advanced grades to its offering.

In automotive, vehicle and parts manufacturers seek to lower fuel consumption and emissions by reducing weight and friction as well as through the use of alternative energy systems such as electric and hybrid technologies. They also look to fulfill regulations on end-of-life vehicles and reduce vehicle footprints with the use of bio-based or recycled materials, while improving safety and comfort. Furthermore, vehicles are becoming increasingly 'connected', enhancing the use of electronics. DSM’s expertise and broad portfolio of advanced and sustainable solutions enable customers to meet these requirements, reduce vehicle footprints and drive downstream innovation.

DSM’s high-performance plastics are being used in an increasing number of innovative applications by vehicle manufacturers. DSM’s Diablo range of high-temperature resistant Stanyl® and Akulon® polyamides are aimed at applications in automotive engine compartments. Diablo has been used in the world’s first high-heat plastic air-intake manifold on BMW’s electric i8 vehicle. Together with its partner ZKW Group, DSM also developed a new lightweight LED lighting module for the Audi Q7 using DSM’s Arnite® XL-T, which is able to withstand the intense heat the prisms used in these modules can generate.

The electronics industry is particularly dynamic and continually demands improvements in terms of functionality, miniaturization and process efficiency, for example for use in smartphones, tablets and ultrabooks, as well as looking for ways to address the issue of e-waste, which is also relevant for producers of electrical goods. DSM offers a unique portfolio of materials and technical expertise and assistance to support these developments. At the end of 2015, DSM opened an office on the US West Coast to be able to give closer support to major consumer electronics customers and brands in and around Silicon Valley.

Introduced in 2014, DSM’s Stanyl®ForTii™ has been selected for use by customers in key applications such as in the new generation of USB connectors; USB Type-C will become the universal standard connector in consumer electronics. Stanyl®ForTii™ offers an unparalleled combination of strength, durability and aesthetics in miniature applications and during the year it was selected by Xiaomi, the world’s fastest growing manufacturer of mobile handsets, for the antenna splitters used in its Mi4 device.

In November, DSM announced a capacity expansion for production of the Akulon® XS polyamide at its facility in Emmen (Netherlands) to meet strong-growing market demand for this material, which has been specifically developed for blown films used in flexible food packaging. Demand is rising in response to the growing need to reduce food waste and longer shelf-life. Akulon® XS was also introduced in the Chinese market during the year.

DSM’s 70% bio-based engineering plastic EcoPaXX® found a novel application in 2015 in a range of innovative mountaineering footwear. The material’s properties give climbers more stability on smaller stances coupled with improved comfort when walking.

DSM formed partnerships during the year to strengthen its position in polymer compounds. It entered a global strategic alliance with Ascend for the supply of compounds based on polyamide 66 and announced the formation of a joint venture with NHU in China for the development and manufacture of high performance plastic compounds based on polyphenylene sulfide (PPS compounds). These additional capabilities complement DSM Engineering Plastics' existing range of materials, particularly for use in the automotive and electrical and electronics segments.

DSM Dyneema

Highlights 2015

  • Strong growth Force Multiplier Technology
  • Strong growth in Dyneema® Diamond Technology
  • Acquisition of Cubic Tech expanded portfolio in Performance Apparel

DSM Dyneema reported total sales of €284 million in 2015 compared to €264 million in 2014.

Dyneema® is the world’s strongest and lightest fiber. It is 15 times stronger than steel on a weight-for-weight basis and 40 times stronger than aramid. Yet it can float on water. This combination of extreme strength and low weight makes it suitable for a wide and expanding range of applications such as commercial fishing and aquaculture nets; ropes, slings and synthetic chains; vehicle and personal multi-threat protection; radomes; high-performance fabrics in apparel; cut-resistant gloves; as well as medical sutures. Applications with Dyneema® push the boundaries of light-weight strength, offer comfort and safety and are inherently more sustainable than the materials they substitute. Products with Dyneema® weigh less, use less material, need less energy to process and deploy in their final application, and have longer lifetimes.

DSM Dyneema has a well-established Fiber Solutions business serving the high-protection textiles and commercial marine & sports segments. It has also started entering and forward integrating into new segments in performance apparel, synthetic chains and radomes. The Fiber Solutions business is driven by customers’ needs for light-weight, sustainable solutions offering extreme durability coupled with improved safety and ergonomics. DSM is well positioned to address these demands. It has global product leadership with the lightest, strongest fiber available; unique, IP-protected technology platforms; and an increasing range of end-use applications for its segments, often developed in collaboration with industry partners.

The Dyneema® Diamond Technology platform, which offers maximum protection with no loss of comfort in applications like cut-resistant gloves, showed strong sales growth in the year. Good progress was also made with developing solutions based on Dyneema® Max Technology; this technology has for example been applied in the offshore market to provide best-in-class permanent subsea anchoring for a major floating production storage and offloading vessel.

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In 2015, Black Dyneema® was introduced to the market. The Fiber Solutions portfolio was further boosted during the year with the acquisition of Cubic Tech, a company specialized in the custom design, development and production of innovative high-performance ultra-lightweight flexible fabrics. This acquisition accelerates DSM Dyneema’s entry into the performance apparel market and is also expected to enable additional developments and revenue streams in existing markets. In 2015, there were also initial sales in the new markets for radomes and synthetic chains.

The Life Protection business provides personal and vehicle protection solutions to the law-enforcement, peace-keeping and defense sectors. One of the key drivers in personal protection is wearability. DSM’s Force Multiplier Technology offers the lightest and most flexible solution on the market, without compromising protection for the user. This technology platform delivered strong sales growth during 2015. The company furthermore expanded its portfolio in the year by bringing the innovative Dyneema® Anti Stab technology to market.

DSM Dyneema increased its cooperation with key value chain partners in sustainability-related programs, an example being the Circular Ropes project, addressing end-of-life solutions for mooring ropes. DSM Dyneema was also granted membership of the Sustainable Apparel Coalition during 2015.

During the year, brand licensing partnerships expanded significantly in both existing as well as new markets.

DSM Resins & Functional Materials

Highlights 2015

  • Growth in China in sustainable coatings, both waterborne and powder
  • Capacity expansion for waterborne urethane resins at Wilmington (Massachusetts, USA) facility
  • DSM and Dutch DIY-retailer Praxis launch high-quality paint with plant-based resins

DSM Resins & Functional Materials reported sales of €866 million in 2015 compared to €872 million in 2014.

The key trend in coatings markets worldwide is the shift away from traditional solvent-based coatings that contain hazardous materials to the use of more sustainable coating technologies. Besides end-user preference, legislation on the reduction of substances such as VOC will continue to be an important driver for this substitution world-wide.

DSM is a global leader in the coatings industry in the development and production of waterborne coating resins and powder coating resins with clear sustainability advantages. In functional materials, DSM is the global leader in fiber-optic coatings. In additive manufacturing, 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.

DSM finalized the divestments of Euroresins and the solvent-based coatings business Synres during the year, whilst the Composite Resins business became part of the ChemicaInvest partnership.

DSM Coating Resins

DSM Coating Resins focuses on products for three types of sustainable coatings: waterborne coatings, powder coatings and UV-curable coatings. These resins are used in a wide range of applications, such as architectural, industrial wood, flooring, graphic arts, can, coil and powder coating applications.

In China, the trend towards increased attention for reduction of the environmental impact of paint and coatings manufacturing has accelerated, supported by the introduction of new standards and legislation in this area. Having anticipated these changes, DSM was able to capture growth in all segments.

In the US, vigorous commercial efforts resulted in above-average market growth. The business is well-positioned to capture further growth with its innovation portfolio, which has been developed together with customers.

The European market for building and construction remained relatively weak in 2015.

DSM Coating Resins measures the carbon footprint of its innovations and conducts multiple Life Cycle Assessments (LCAs), using the data generated to stimulate cooperation across the value chain. One example in 2015 was an LCA study for Uralac® Ultra, a powder coating technology that enables fast curing at low temperatures. This technology has a significantly lower environmental footprint by reducing processing steps, avoiding waste by regaining overspray and using less energy for curing.

In February, driven by its commitment to grow the sustainable coatings market, DSM announced an investment in its manufacturing facility in Wilmington (Massachusetts, USA), allowing for production of an extensive portfolio of state-of-the-art waterborne resins for ink and coatings. These resins are used in a wide range of applications, from packaging, textiles and flooring to automotive, adhesive and general industry segments.

DSM’s joint venture with Niaga entered a new phase in the development of sustainable carpet technology in the year. Successful tests were held at scale with leading industry partners and the Niaga® technology is now ready for full-scale implementation. Based on proprietary and complementary technologies, the venture will enable carpets to be created and re-created from waste to close the carpet materials loop.

In October, DSM and the Dutch retail organization Praxis introduced a quality paint with DSM’s Decovery® plant-based resins. This unique paint, a combination of high performance and sustainability, is available at all Praxis DIY stores in the Netherlands.

The Taiwan-based DSM-AGI business for certain UV-curing resins continued to face very challenging market conditions throughout the year.

DSM Functional Materials

DSM’s UV-curable materials for optical fiber are recognized worldwide as the standard-bearer for fiber protection and identification. They help to ensure greater signal reliability and field performance within fiber-optic networks, which remains highly relevant as global bandwidth demand continues to surge.

DSM offers telecommunications network owners a broad portfolio of DeSolite® Supercoatings. It added a new class of products to the portfolio in 2015, known as High Efficiency DeSolite® Coatings, which provide enhanced processing robustness with excellent on-fiber performance and durability.

DSM is also actively developing, protecting and where needed defending its intellectual property position to support the significant research and development investment for its telecommunications portfolio.

A capacity expansion to increase production of Somos® 3D printing materials at the Hoek van Holland (Netherlands) site was announced in the year.

DSM Functional Materials furthermore announced a collaboration between DSM Somos and EnvisionTEC, a world leader in 3D printing equipment, for the development of high performance materials to enable the production of industrial parts at much faster speeds.