Change in the scope of the consolidation

Acquisitions


2016
In order to further strengthen and integrate its Resins business, DSM agreed with joint venture partner JSR Corporation to increase its stake in Japan Fine Coatings (JFC) to 70% in the coming years. As a first step, DSM increased its shareholding from 50.0% to 50.1% in July 2016. Based on the changes in the joint venture agreement and the articles of incorporation, together with acquiring the voting rights of JFC, DSM obtained a controlling interest in JFC in July 2016. Prior to obtaining control, DSM accounted for its investment in accordance with the equity method. Revaluation of this existing 50% investment in JFC to fair value resulted in a book profit of € 6 million. From the date of control, the financial statements of JFC are consolidated by DSM and reported in the Materials cluster. In accordance with IFRS 3, the purchase price of JFC was allocated to identifiable assets and liabilities acquired. Goodwill amounted to €10 million. The goodwill relates to the expected synergies from integrating JFC within DSM's existing Coating Resins business. The non-controlling interest in JFC was measured at the proportionate share of the fair value and amounted to €6 million at the acquisition date.

The consolidation of JFC contributed €18 million to net sales and €6 million to Adjusted EBITDA (€5 million to EBITDA) in 2016.

Up to one year from the acquisition date, the initial accounting for business combinations needs to be adjusted to reflect additional information that has been received about facts and circumstances that existed at the acquisition date and would have affected the measurement of amounts recognized as of that date. As a result of such adjustments, the values of assets and liabilities recognized may change in the one-year period from the acquisition date, which resulted in some adjustments to the opening balance sheet of Cubic Tech, acquired in May 2015. The Purchase Price Allocation (PPA) was finalized in the course of the year.

The impact of the acquisitions on DSM's consolidated balance sheet at the date of acquisition is shown in the following table.

Acquisitions 2016

 
Japan Fine Coatings
 
Cubic Tech adj.
  
Total
 
Book value
Fair
value
 
Book value
Fair value total
Change in fair value
 
Book value
Fair
value
Assets
         
Intangible assets
-
9
 
-
5
5
 
-
14
Property, plant and equipment
16
11
 
1
1
-
 
17
11
Other non-current assets
(4)
(4)
 
-
-
-
 
(4)
(4)
Inventories
3
4
 
-
-
-
 
3
4
Receivables
3
3
 
1
1
-
 
4
3
Cash and cash equivalents
5
5
 
-
-
-
 
5
5
          
Total assets
23
28
 
2
7
5
 
25
33
          
Non-controlling interests
5
6
 
-
-
-
 
5
6
          
Liabilities
         
Non-current liabilities
-
2
 
-
2
2
 
-
4
Current liabilities
19
19
 
1
1
-
 
20
19
          
Total non-controlling interests and liabilities
24
27
 
1
3
2
 
25
29
          
Net assets
(1)
1
 
1
4
3
 
-
4
          
Acquisition price (in cash)
 
-
  
10
-
  
-
Fair value of associate contributed
 
10
  
-
-
  
10
Acquisition price (payable earn-out)
 
6
  
5
-
  
6
          
Consideration
 
16
  
15
-
  
16
          
Elimination book value associate
 
(5)
  
-
-
  
(5)
          
Goodwill
 
10
  
11
(3)
  
7
Acquisition costs recognized in APM adjustments (see Note 2)
 
1
  
-
-
  
1

2015
On 31 March 2015, DSM obtained control of Aland Nutraceutical Holding, Ltd., a Hong Kong-based company producing vitamin C in China, by buying 100% of the shares. Aland was founded in 1990 and is one of the leading vitamin C manufacturers in China. The company has a production facility in Jingjiang (China). From the acquisition date onwards, the financial statements of Aland have been consolidated by DSM and reported in the Nutrition segment. The acquisition strengthens and complements DSM’s position as a producer of vitamin C. In accordance with IFRS 3, the purchase price of Aland had to be allocated to identifiable assets and liabilities acquired. Goodwill amounted to €15 million. The value of goodwill and intangible assets acquired was rather limited because the principal driver for the acquisition was the ability to obtain plant and equipment and related production capacity. The acquisition of Aland contributed €63 million to net sales and €8 million to EBITDA in 2015. Acquisition-related costs in this respect amounted to €5 million before tax (see Note 2 'Alternative performance measures').

On 13 May 2015, DSM Dyneema finalized the acquisition of Cubic Tech Corporation by buying 100% of the shares. This privately-owned company based in Mesa (Arizona, USA) is focused on high-end solutions in applications as diverse as racing yacht sails, equipment and apparel for sportswear, outdoor and future soldier programs as well as emergency medical equipment. From the acquisition date onwards, the financial statements of Cubic Tech have been consolidated by DSM and reported in the segment Materials. In accordance with IFRS 3, the purchase price of Cubic Tech has to be allocated to identifiable assets and liabilities acquired. The goodwill relates to buyer-specific synergies due to DSM’s unique value chain proposition in ultra high molecular weight polyethylene.

Acquisitions 2015

 
Aland
 
Cubic Tech
 
Total
 
Book value
Fair
value
 
Book value
Fair
value
 
Book value
Fair
value
Assets
        
Intangible assets
8
16
 
-
-
 
8
16
Property, plant and equipment
58
64
 
1
1
 
59
65
Other non-current assets
1
1
 
-
-
 
1
1
Inventories
15
16
 
-
-
 
15
16
Receivables
11
11
 
1
1
 
12
12
Cash and cash equivalents
4
4
 
-
-
 
4
4
         
Total assets
97
112
 
2
2
 
99
114
         
Liabilities
        
Non-current liabilities
8
11
 
-
-
 
8
11
Current liabilities
25
25
 
-
1
 
25
26
         
Total liabilities
33
36
 
-
1
 
33
37
         
Net assets
64
76
 
2
1
 
66
77
         
Acquisition price (in cash)
 
74
  
10
  
84
Acquisition price (payable earn-out)
 
17
  
5
  
22
         
Consideration
 
91
  
15
  
106
         
Goodwill
 
15
  
14
  
29
Acquisition costs recognized in APM adjustments
 
5
  
-
  
5

Disposals


2016
In the second quarter of 2016, DSM completed the sale of certain assets and liabilities of the cultures and enzymes business of DSM Food Specialties in La Ferté (France). This business had been impaired in 2015 by €1 million and reclassified to held for sale. The divestment was finalized for a net consideration of €11 million with no additional book result. In view of the limited importance of the activities, they are not presented as discontinued operations. These activities were reported in the Nutrition cluster prior to disposal. The impact of the deconsolidation of these activities on the DSM consolidated financial statements is presented in the following table:

Disposals 2016

 
Cultures and Enzymes France
Other
Total
Assets
   
Property, plant and equipment
(7)
-
(7)
Inventories
(3)
-
(3)
Receivables
(2)
-
(2)
    
Total assets
(12)
-
(12)
    
Liabilities
   
Current liabilities
(1)
-
(1)
    
Total liabilities
(1)
-
(1)
    
Net assets
(11)
-
(11)
    
Consideration
12
-
12
Transaction and other costs
(1)
-
(1)
    
Consideration (net of selling costs, translation differences and net debt)
11
-
11
    
Book result
-
-
-

In 2015, the partial divestment of DSM Fibre Intermediates and Composite Resins to ChemicaInvest was finalized. See also Disposals 2015 for more details. In 2016, following various settlements relating to this partial divestment, an amount of -€28 million was included in discontinued operations without any impact on the cash flow statement.

2015
In March, DSM and CVC Capital Partners announced the establishment of a partnership comprising the DSM Fibre Intermediates and DSM Composite Resins businesses. The formation of ChemicaInvest, in which DSM has a 35% shareholding, was finalized on 31 July. From 31 July onwards, both businesses are no longer consolidated by DSM. The 35% shareholding in ChemicaInvest is reported as an associate and accounted in accordance with the equity method. The result on the contribution of DSM Fibre Intermediates and DSM Composite Resins to ChemicaInvest amounted to a loss of €130 million and was recognized in 2015. The impairment/book result and the impact of the deconsolidation of these activities on the DSM consolidated financial statements is presented in the following table:

Disposals 2015

 
Bulk Chemicals
Other
Total
Assets
   
Intangible assets
(15)
-
(15)
Property, plant and equipment
(818)
(3)
(821)
Other non-current assets
(65)
(2)
(67)
Inventories
(200)
(12)
(212)
Receivables
(416)
(29)
(445)
Cash and cash equivalents
(31)
(1)
(32)
    
Total assets
(1,545)
(47)
(1,592)
    
Non-controlling interests
(126)
-
(126)
    
Liabilities
   
Provisions
(44)
-
(44)
Non-current liabilities
(369)
-
(369)
Current liabilities
(333)
(32)
(365)
    
Non-controlling interests and liabilities
(872)
(32)
(904)
    
Net assets
(673)
(15)
(688)
    
Consideration
502
21
523
Transaction and other costs
(18)
(5)
(23)
Realization cumulative translation reserves
59
(2)
57
    
Consideration (net of selling costs, translation differences and net debt)
543
14
557
    
Impairment / book result
(130)
(1)
(131)
Income tax
-
-
-
    
Net impairment / book result
(130)
(1)
(131)

The impact of disposals on the cash flow statement is presented in the following table:

 
2015
  
Net cash provided by / used in
 
- Operating activities
(112)
- Investing activities
(21)
Net change in cash and cash equivalents
(133)

Deconsolidation and other changes

In 2016, there were no material deconsolidations or material changes in the percentage of ownership of subsidiaries (same as in 2015).