Alternative performance measures (APMs)

In presenting and discussing DSM’s financial position, operating results and cash flows, management uses certain alternative performance measures not defined by IFRS. These alternative performance measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used as supplementary information in conjunction with the most directly comparable IFRS measures. Alternative performance measures do not have standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies.

Respectively Adjusted EBITDA, organic growth and ROCE are important measures of the group’s performance and are the basis for measuring management performance. ROCE is defined as Adjusted EBIT as a percentage of weighted average capital employed. 'EBIT' is an alternative term for the IFRS performance measure ‘operating profit’. Where a non-financial measure is used to calculate an operational or statistical ratio, this is also considered an APM.

For DSM, the most important APM is the application of APM adjustments to the IFRS measures to provide clear reporting on the underlying developments of the business, these APM adjustments may impact the EBIT(DA), net profit and the EPS. A reconciliation of these alternative performance measures to the most directly comparable IFRS measures can be found below.

The APM adjustments to net profit, as included in the APMs, can be specified as follows:

 
2016
2015
 
Continuing operations
Discontinued operations
Total
Continuing operations
Discontinued operations
Total
APM adjustments:
      
- Acquisitions / divestments
(13)
28
15
7
5
12
- Restructuring
101
-
101
102
-
102
- Other
-
-
-
10
-
10
- Impairments of PPE, intangible assets and business activities
18
-
18
92
130
222
- Adjustments to financial income and expense
-
-
-
15
-
15
- Income tax related to adjustments
(31)
-
(31)
(51)
(6)
(57)
- Adjustments to share in result associates
(212)
-
(212)
24
-
24
       
Total APM adjustments (income) / expense
(137)
28
(109)
199
129
328

2016

The APM adjustments in 2016 are listed below:

  • Restructuring costs of €101 million relate to project costs of the restructuring projects together with the redundancy schemes connected to the dismissal and transfer of employees and costs of termination of contracts.
  • The impairments of property, plant and equipment (PPE), intangible assets, and business activities of €18 million in total relate mainly to the impairment of PPE at DSM Engineering Plastics in the US (€10 million) and intangible assets at DSM Bio-based Products & Services in Brazil (€10 million).
  • Acquisition and divestment costs of €15 million relate to the adjustments due to various settlements relating to the divestment of DSM Fibre Intermediates and Composite Resins to ChemicaInvest of €28 million and other acquisition-related costs (€4 million), offset partly by the release of an acquisition-related liability (€17 million).
  • APM adjustments to share in result associates mainly relate to the gain of €232 million on the IPO of Patheon N.V. and the secondary offering, partly offset by financing, reorganization and acquisition-related costs of Patheon (€20 million). See Note 10 for further details.

2015

The APM adjustments in 2015 are listed below:

  • Acquisition and divestment costs of €12 million mainly relate to the acquisition of Aland and Cubic Tech (€5 million) and divestment-related costs (€ 5 million).
  • Restructuring costs of €102 million relate to project costs of the restructuring projects together with the redundancy schemes connected to the dismissal and transfer of employees and costs of termination of contracts.
  • The impairments of PPE and business activities of €222 million relate mainly to the impairment of the DSM Fibre Intermediates and DSM Composite Resins business, divested per 31 July 2015 (€130 million; discontinued operations); the impairment of the DSM-AGI business (€26 million), of which goodwill €16 million; an impairment of US tape line assets at DSM Dyneema (€19 million) and an impairment at the site of DSM Resins & Functional Materials in Stanley (North Carolina, USA) (€15 million). Furthermore, impairments were recognized of equipments by DSM Nutritional Products (€9 million) and DSM Innovation Center (€ 5 million) and of software within DSM Business Services (€16 million).
  • APM adjustments to financial income and expense of €15 million relate to the revaluation of monetary positions in Venezuela.
  • APM adjustments to share in result associates mainly relates to financing, reorganization and acquisition-related costs of Patheon (€32 million), offset by the share in the gain of the divestment of Banner Life Sciences (€8 million).

Alternative performance measures

 
2016
2015
 
Continuing operations
Discontinued operations
Total
Continuing operations
Discontinued operations
Total
       
Operating profit
685
(28)
657
362
(58)
304
Depreciation, amortization and impairments
489
-
489
594
148
742
EBITDA
1,174
(28)
1,146
956
90
1,046
       
APM adjustments to EBITDA:
      
- Acquisitions / divestments
(13)
28
15
7
5
12
- Restructuring
101
-
101
102
-
102
- Other
-
-
-
10
-
10
Total APM adjustments
88
28
116
119
5
124
       
Adjusted EBITDA
1,262
-
1,262
1,075
95
1,170
       
Operating profit
685
(28)
657
362
(58)
304
       
APM adjustments to Operating profit:
      
- APM adjustments to EBITDA
88
28
116
119
5
124
- Impairments of PPE and intangible assets
18
-
18
92
130
222
Total APM adjustments
106
28
134
211
135
346
       
Adjusted operating profit
791
-
791
573
77
650
       
Net profit (for equity holders of of Koninklijke DSM N.V.)
649
(28)
621
184
(96)
88
       
APM adjustments to:
      
- Operating profit
106
28
134
211
135
346
- Financial income and expense
-
-
-
15
-
15
- Share in result associates
(212)
-
(212)
24
-
24
Income tax related to APM adjustments
(31)
-
(31)
(51)
(6)
(57)
Total APM adjustments
(137)
28
(109)
199
129
328
       
Adjusted net profit
512
-
512
383
33
416
Dividend on cumulative preference shares
(4)
-
(4)
(10)
-
(10)
       
Adjusted net profit available to holders of ordinary shares
508
-
508
373
33
406
       
Earnings per share
      
       
Weighted average number of ordinary shares outstanding (x 1,000)
  
175,100
  
174,357
Effect of dilution due to share options (x 1,000)
  
603
  
624
Adjusted weighted average number of ordinary shares outstanding (x 1,000)
  
175,703
  
174,981
       
Earnings per share (EPS) (in €):
      
- Net basic EPS
3.68
(0.16)
3.52
1.00
(0.55)
0.45
- Net diluted EPS
3.67
(0.16)
3.51
1.00
(0.55)
0.45
- Adjusted net basic EPS
2.90
-
2.90
2.14
0.19
2.33
- Adjusted net diluted EPS
2.89
-
2.89
2.13
0.19
2.32