x € million
DSM Nutritional Products:
- Animal Nutrition & Health
- Human Nutrition & Health
- Personal Care & Aroma Ingredients
DSM Food Specialties
Organic sales growth (in %)
Adjusted operating profit
Capital employed at 31 December
ROCE (in %)
Adjusted EBITDA margin (in %)
Workforce at 31 December (headcount)
DSM Nutritional Products and DSM Food Specialties form our Nutrition cluster. This cluster provides solutions for animal feed, food and beverages, pharmaceuticals, infant nutrition, dietary supplements and personal care. DSM is positioned in all steps of the feed and food value chains: the production of pure active ingredients, their incorporation into sophisticated forms and the provision of tailored premixes and forward solutions. Our unique portfolio of products and services is global and highly diversified, serving customers and other stakeholders across various end-markets around the world. More information is available in the DSM Factbook on the company website.
Nutrition cluster performance
Nutrition is outperforming the aspirations outlined in Strategy 2018. The business continued strong momentum, clearly delivering above-market growth with an increasingly higher-value portfolio of feed and food solutions. The nutrition improvement programs, covering cost reductions, operational and sales excellence, continued to underpin ongoing progress.
Full year 2017 sales increased by 8% organically when compared to 2016, led by volumes up 7% and prices up 1%. The successful implementation of the growth initiatives continued to drive organic growth, both in Animal Nutrition and Human Nutrition, clearly outpacing market growth.
Full year 2017 Adjusted EBITDA was €1,053 million, up 13% driven by organic sales growth in combination with the impact of the cost-saving and efficiency improvement programs. This increase in Adjusted EBITDA equals the very strong 2016, when Adjusted EBITDA also grew by 13%. The Adjusted EBITDA margin of 18.9% further improved in 2017 compared with 18.0% in 2016.
Pressure on our food systems is increasing because of population growth, climate change, resource scarcity, government policies and rising political tensions. DSM is committed to delivering nutritional solutions that help keep both people and planet healthy.
Urbanization and higher living standards continue to drive demand for food that is fresh, convenient, healthy, perceived as more natural, and sourced in an ethical and sustainable way. Of course, it also has to be safe. As people have more disposable income, they look for healthier options, including food with less added sugar and salt. Generally, the growing middle classes are also eating more meat (i.e. animal protein). DSM works with customers and other stakeholders to deliver more sustainable solutions that have less impact on the environment, especially in Animal Nutrition & Health. For example, our enzymes help animals improve digestion and extract more nutritional value from feed. That way, they still grow well even when they eat less. As a result, fewer natural resources, such as land and water, are needed for protein production.
People around the world are also living longer because of rising incomes and higher living standards. Aging people have different nutritional needs than children and other adults. DSM can offer tailored solutions to support health and well-being at every stage of life thanks to our expertise in food fortification and dietary supplementation.
Despite higher living standards around the world and a growing focus on health, there are still many people who do not have access to the food and nutrients they need to live to their full potential. About 800 million people go hungry and two billion are malnourished. Climate change and geopolitical tensions that lead to more refugees and migrants are exacerbating the problem. DSM is committed to ending hunger and malnutrition. Through our Nutrition Improvement Program (NIP), we support better nutrition for some of the world's most vulnerable people, especially mothers and children in places like Africa, India and areas of southern Asia. Science shows that good nutrition during the first 1,000 days of life — from conception to a child's second birthday — is critical for growth and development. Inadequate nutrition at this stage has irreversible negative consequences that can last a lifetime, including reduced cognitive ability. Women of child-bearing age, as well as pregnant and lactating mothers, need special support. Fortified foods and supplements can play a valuable role where available diets are inadequate.
In India, approximately 470 million people suffer from malnutrition. DSM's Project MANDI (Making A Nutrition Difference to India) aims to build a socio-commercial business model that will be able to deliver innovative local product solutions including fortified food and staple products, especially rice, as well as vitamin and mineral supplements. The model also aims to facilitate community education to help solve the issue of malnutrition in India, especially for children and pregnant women.
Sustainability & Innovation
Sustainability is one of the key drivers of DSM's Nutrition cluster. Our nutrition businesses support many of the UN Sustainable Development Goals (SDGs), especially SDGs 2, 3, 12 and 13.
At DSM, we are proud of our strategic partnership with the UN World Food Programme (WFP). We help improve the nutritional content of the food distributed by WFP. Together with WFP, we also raise awareness of the importance of nutrition, particularly micronutrients, both for individual health as well as the foundation for a healthy, economically successful society. Today, DSM reaches more than 30 million people each year with improved nutrition through the partnership. DSM also partners with the UN Children's Fund (UNICEF) and other organizations around the world to directly address malnutrition.
In addition to our work on hunger, malnutrition, health and well-being, DSM's innovations are increasingly focused on improved sustainability throughout the product lifecycle and the value it brings to customers and society at large. For example, in 2017 we continued our work on Project Clean Cow to develop a feed solution that helps reduce methane emissions from cows. Methane is a very potent greenhouse gas that contributes to climate change. Ruminants, such as cows, are responsible for ~27% of anthropogenic methane emissions globally. We also made progress on more plant-based solutions, including Project Green Ocean (see Animal Nutrition & Health) and alternatives to animal protein such as CanolaPRO™ (see DSM Business Incubator).
Governments around the world are increasingly focused on the environmental footprint of domestic industry. In recent years, China in particular stepped up enforcement of its environmental regulations, also known as the government's 'Blue Skies' policy. This policy addresses air, soil and water pollution and sets significantly higher standards, including higher standards for the many small and medium-sized vitamin manufacturers. The result is a more level playing field for these manufacturers versus Western competitors. DSM has been a very reliable player in the market and able to support customers through this era of uncertainty, while at the same time being a frontrunner in compliance.
The Nutrition cluster has unparalleled access to customers thanks to our global footprint and our ability to customize formulations for local markets. The cluster is active in more than 60 countries. Our strategy accelerates growth by focusing on four key areas:
- Expanding our core
- Adding new products and solutions
- Expanding in new segments and regions
- New business models
We have been expanding our core by adding new premix facilities to our global network, including a new animal premix facility in China as well as the acquisition of Twilmij B.V., a nutritional feed solution provider in the Netherlands. The acquisition of BioCare Copenhagen A/S (Denmark) in December further expanded our offering in human gut health ingredients with probiotics, an attractive market segment in nutritional ingredients.
Another example of our strategy in action is the new products and solutions we will develop through our cooperation with Amyris, involving vitamins and other nutritional ingredients. DSM made an equity investment in Amyris, Inc. in the US in mid-2017. At the end of the year, we also acquired Amyris' production facility in Brazil and intellectual property related to farnesene, a bio-based key intermediate for many applications for food, feed and personal care.
Expanding into new segments and regions is also a key part of the nutrition strategy. DSM's investment in hydrocolloids with the acquisition of a majority equity stake in Inner Mongolia Rainbow Biotechnology Co., Ltd. is one such example.
Our fourth growth area, new business models, mainly represents our drive to move further down the value chain, closer to consumers and farmers. In 2017, we stepped up the expansion of our branded, direct-to-consumer dietary supplement business (i-Health) into the Asian market, especially in China. Also in China, we significantly broadened our branded, direct-to-farmer feed solutions, a strategy that has provided us with extensive access to the relatively fragmented local farming community.
In 2017, we reorganized some parts of our nutrition business, namely Human Nutrition & Health, by market segment (e.g. dietary supplements, food & beverage, early-life nutrition, NIP). In addition to the regional geographic focus, these global market segments have been designed to drive even greater customer intimacy and growth, while at the same time providing insights to key innovation needs for the future.
As we pursue opportunities across the Nutrition cluster, DSM takes a balanced view. We consider potential risks to our business and make an effort to mitigate these, including long-term changes in food preferences and food systems, demand for dietary supplements, commoditization of nutritional ingredients, the spread of infectious diseases in animals, and the effects of geopolitical and macroeconomic developments. For more information on how DSM manages risks, see Risk management.
DSM Nutritional Products
DSM Nutritional Products has three market-facing entities: Animal Nutrition & Health, Human Nutrition & Health and Personal Care & Aroma Ingredients. DSM Nutritional Products had total sales of €5,038 million in 2017, a 9% increase compared to the €4,633 million in 2016.
Animal Nutrition & Health
- Strong organic growth
- New facility within the China network
- Acquisition of Twilmij B.V. in the Netherlands
- Strengthened organization of the global commercial headquarters
- Strong progress on innovation projects
The Animal Nutrition & Health business achieved sales of € 2,660 million in 2017 versus €2,399 million in 2016. Sales were exceptionally strong, with 11% organic growth, driven by 9% higher volumes, albeit against an easy comparative base. The business continued to benefit from its strategy to address a wide range of species, as well as from its diversified geographical presence, covering all the major growth areas in the world, and its strong forward-integrated premix position. Markets in animal feed were favorable and supportive in 2017, except for Latin America, where weak economic conditions impacted domestic demand. Prices were 2% above 2016, owing to higher premix and vitamin prices.
DSM Animal Nutrition & Health serves the global feed industry with innovative and sustainable nutritional solutions. A pioneer since the earliest days of feed additives, we draw on the latest science to provide a unique portfolio that runs from vitamins through carotenoids to cutting-edge eubiotics and feed enzymes.
Growing population and growing incomes are driving demand for animal protein. Our products help producers of animal feed and meat, including farmers, raise animals more efficiently and sustainably. Products that boost efficiency are supporting DSM's organic growth, while solutions for more sustainable production present new business opportunities now and in the future.
Greater interest in where food comes from and how it is produced is driving some of this change. For example, concerns about antimicrobial resistance are leading to consumer and regulatory pressure to reduce antibiotic use in animal nutrition. DSM anticipated this development and has worked over the last ten years to position our broad and proven portfolio of eubiotics as the solution. In 2017, we stepped up our gut health strategy for antibiotic-free animal production and rolled it out globally. As a result, sales of eubiotics for gastrointestinal functionality grew by 20% versus 2016. CRINA® Poultry Plus performed particularly well. This patented formulation of benzoic acid and essential oils is an innovative eubiotic solution for broiler chickens.
In 2017, the core portfolio also had strong growth with the reinforcement of our Hy-D® positioning in the vitamin D segment. Used worldwide, Hy-D® is a vitamin D3 metabolite that specifically supports bone development, muscle formation and immune response in poultry and swine.
In China, we continued to expand our core with the growth of premix solutions. This year in Shandong, we opened our sixth Chinese premix facility. The country is the largest feed producer in the world and one of the most dynamic markets for Animal Nutrition & Health. Over the last five years our business in China grew by double digits. Food consumption trends remain strong and continue to be led by coastal cities. However, the densely populated inland regions increasingly present opportunities thanks in part to the development of e-commerce including Alibaba, an important sales channel for our business. Our growth in China is bolstered by our ability to reliably access, supply and support a relatively fragmented market through our direct-to-farmer business model.
In Europe, we also expanded our core business with the acquisition of Twilmij B.V., a Dutch nutritional solutions company in the animal feed sector. Twilmij's geographic location in the Netherlands strengthens our foothold in Northwest-European markets, bringing us closer to customers and allowing better service levels.
In Latin America, domestic demand was impacted by weak economic conditions and then exacerbated by a meat scandal in Brazil that was unrelated to DSM. Beef and poultry exports were impacted but both recovered quickly in the third quarter, leading to a strong overall performance in the second half of the year.
In 2017, the organization of the global headquarters of Animal Nutrition & Health was strengthened. This included reinforcing marketing and sales capabilities that will further support our growth strategy.
DSM's innovation pipeline is broadening our portfolio of radical breakthroughs for more sustainable production of animal protein. Project Clean Cow is an excellent example. Trials show a greater than 30% reduction in methane emissions from cows fed with our new feed solution. Clean Cow is scheduled to launch after 2019.
Another example is Project Green Ocean, now branded as Veramaris. Veramaris is a joint venture of DSM and Evonik to produce omega-3 fatty acids from natural algae for animal nutrition in the aquaculture and pet food segments. This Brighter Living Solution is a breakthrough innovation that will enable cost-effective production of omega-3 fatty acids (DHA and EPA) without using fish oil from wild caught fish, a finite resource. Together, DSM and Evonik are investing USD 200 million in a manufacturing facility, which is under construction in Blair (Nebraska, USA) and scheduled to open in 2019.
Human Nutrition & Health
- Organic growth from business-to-business and direct-to-consumer solutions
- Culturelle® becomes world's top branded probiotic supplement
- Active Pharmaceutical Ingredient applications gain momentum
- Africa Improved Foods plant opening
- Acquisition of BioCare Copenhagen A/S in Denmark
Human Nutrition & Health had sales of €1,939 million in 2017 versus €1,823 million in 2016, led by 7% organic growth. After a significant step-up in organic growth in 2016, the business maintained its positive momentum with 6% volume growth and a slightly positive price development, despite ongoing softness in some of its end-market segments. The growth initiatives embarked on under Strategy 2018 resulted in this above-market growth.
Human Nutrition & Health provides solutions for the food & beverage, dietary supplements, early-life nutrition, medical nutrition and Active Pharmaceutical Ingredients (API) markets. We serve these industries with vitamins, nutritional lipids, carotenoids, nutraceuticals and custom nutrient premixes.
Our ability to deliver at a global scale while fostering local customer intimacy continues to support above-market growth. In fact, Human Nutrition & Health had strong organic growth of 7% in 2017 with all reporting units and strategic customer segments showing strong performance. By strengthening our innovation pipeline in each market segment, we are positioning ourselves for continued above-market growth opportunities in the near future.
Our organization is now fit for purpose. We are better positioned to serve each market segment with targeted solutions.
Chris Goppelsroeder, DSM Executive Committee and President & CEO DSM Nutritional Products
Human Nutrition & Health is moving closer to the consumer. More than 40% of the revenue comes from custom nutrient premixes, retail-ready solutions and consumer products that address areas of health such as cardiovascular, eye, cognitive and gut health. Our consumer products unit, i-Health, continued double-digit growth in 2017 and expanded ahead of expectations globally. Its star brand, Culturelle®, became the world's top-selling probiotic in 2017. The omega-3 business also grew across several regions thanks to innovations like MEG-3® Ultra. Following the North America launch of the MEG-3® Ultra in late 2016, DSM helped successfully convert the US omega-3 dietary supplement category towards concentrates throughout 2017 and further escalated growth of the omega-3 business in other regions. MEG-3® Ultra products leverage our new 3C technology that delivers highly-concentrated and customizable combinations of EPA and DHA while providing peace of mind through a consistent supply chain. It provides brand owners with the versatility to innovate tailored health-focused products to meet consumer needs across a lifetime and to eliminate key consumption barriers of omega-3 supplements such as capsule size.
DSM's business in API applications continued to gain momentum in 2017. The trend for higher levels of vitamins, omega-3 and carotenoids in pharmaceutical applications supported growth. DSM is still the only company that holds CEPs (Certificate of Suitability of Monographs of the European Pharmacopoeia) and the US Drug Master Files for all 13 essential vitamins. This means that pharmaceutical companies working with DSM can get products to market faster.
Our Human Nutrition & Health business also plays an important role in achieving SDG 2 (Zero Hunger) and SDG 3 (Good Health and Well-being). The nightmare of hunger continues for 800 million people around the world and two billion more suffer from micronutrient deficiencies, or hidden hunger. That means they receive enough calories to survive, but not enough nutrients to thrive. Children are especially vulnerable. DSM works with a range of stakeholders including regional and global partners to develop solutions like custom micronutrient interventions and fortified foods.
In May, DSM opened a plant in Rwanda for Africa Improved Foods (AIF), a joint venture with the Government of Rwanda and other international partners. In Rwanda, nearly 40% of children under the age of five have stunted growth, a condition that is caused by malnutrition and often goes hand in hand with impaired cognitive development and other serious, sometimes lifelong health issues. AIF's mission is to address micronutrient deficiencies. The new plant employs 260 people who produce fortified cereals and porridges. AIF sources maize and soy from more than 9,000 local farmers. For more information about AIF and other initiatives that address hunger and malnutrition, see Collaborative platforms and networks or visit the company website.
In December, DSM acquired BioCare Copenhagen A/S (Denmark). This acquisition expands our offering in gut health ingredients with probiotics, an attractive market segment in nutritional ingredients, growing an estimated 7% per year.
Personal Care & Aroma Ingredients
- Continued growth in both personal care and aroma ingredients
- Improved cost competitiveness in UV filters
- Now offering largest portfolio of UV filters in the world
- Further organizational integration of the two businesses
Sales were €353 million in 2017, up from €337 million in 2016.
Personal Care & Aroma Ingredients offers solutions for customers in the personal care, home care and fine fragrance markets. Our extensive portfolio includes aroma ingredients, vitamins and natural bio-actives, as well as UV filters, peptides and polymers. DSM's solutions support the health and beauty needs of an aging population with various skin and hair types around the world, and the increasing concerns around global public health issues like air pollution and skin cancer.
This business grew well in 2017 thanks to an optimized supply chain and product mix as well as accelerated innovation and stronger customer relationships. We improved cost competitiveness in certain segments like sun care and satisfied high, sustained demand for aroma ingredients. New innovations boosted performance in our skin and hair care segments. We also continued expansion into make-up and body care with sensory modifiers and new performance ingredients.
Sun care was a highlight for the personal care business in 2017. We are on track with our ambitions in the UV filters market. Thanks to a new partnership with Nanjing Cosmos Chemical Co., Ltd., DSM now has the world's largest portfolio of UV filters with the broadest range of protection across UVB, UVA and blue light. The partnership will deliver two new UV filters, PARSOL® Max and PARSOL® Shield. The agreement also improves our supply chain and our ability to expand.
We expect demand for sunscreen to increase. For example, only 14% of men and 30% of women in the US use sunscreen daily. Skin cancer rates are rising and sunscreen is proven to reduce incidence of skin cancer. DSM and our customers are creating awareness around this issue. In 2017, we launched a skin cancer prevention initiative and started offering customers the DSM Sunscreen Optimizer™, a free online tool that helps them develop and fine-tune sunscreen formulations before costly, time-consuming SPF testing. DSM is also raising awareness around the issue of blue light from both the sun and electronic devices. With the launch of PARSOL® Max, DSM was the first to offer solutions that protect skin against oxidative stress from blue light.
DSM's ALPAFLOR®, a successful range of organic bio-actives, is a great example of innovating for the natural trend and was eagerly picked up by customers. Equally, aging populations provide opportunities for growth in the anti-aging segment, where DSM's SYN®-AKE, a small synthetic peptide, is a successful ingredient.
Toward the end of the year, the more centrally organized Aroma Ingredients were further integrated into the regionally-driven Personal Care organization, while retaining strong global key account management and connection to the core manufacturing facility in Lalden (Switzerland).
DSM Food Specialties
- New product introductions supporting health & wellness trends
- Solid growth especially in savory ingredients
- Acquisition of Inner Mongolia Rainbow Biotechnology in China for hydrocolloids
- Grand opening of the state-of-the-art biotechnology center in Delft (Netherlands)
In 2017, sales for DSM Food Specialties amounted to €541 million, compared to € 536 million in 2016. Organic growth of 3% was driven by a solid performance in hydrocolloids, savory ingredients, bio-preservation, food & crop protection, cultures and enzymes. The latter was hampered by some capacity constraints and therefore not able to fully benefit from strong demand. Initiatives to expand capacity and optimize supply are underway. Savory Ingredients had a strong year driven by strong demand for its portfolio of yeast extracts, process flavors, and taste modulators to provide an enjoyable taste experience in low-sugar, low-salt, and low-fat applications.
DSM Food Specialties is a leading global supplier of specialty food enzymes, cultures, bio-preservation solutions, hydrocolloids, savory ingredients and solutions for sugar reduction. Our ingredients and solutions are widely used to create a broad range of food products from grocery favorites like yogurt, cheese and soups to specialized products like gluten-free bread or beer, meat substitutes, lactose-free milk and sugar-reduced beverages. With nearly 150 years of experience in biotechnology and fermentation for the food industry, the business group aims to enable better food for everyone, helping make existing diets healthier and more sustainable, and giving increasing numbers of people around the world access to affordable, quality food.
There are five main market trends driving demand for our products: sugar reduction, enhanced taste experience, improved health and wellness, bio-preservation and food chain efficiency. At DSM we are fully committed to delivering innovative solutions that enable food producers to capture the opportunities presented by these trends, providing valuable consumer and market insights alongside our innovative specialty ingredients.
We opened a new state-of-the-art biotechnology facility at our site in Delft (Netherlands) in April 2017, further expanding our R&D capabilities for applications in food and nutrition, feed, fuel, pharma and bio-based materials.
In food enzymes, our market-leading lactase enzyme, Maxilact®, is increasingly popular for its natural sweetening properties, which allow dairy producers to reduce the amount of sugar used in products such as yogurts and flavored milks. Pending legislation in Europe drove demand for PreventASe®, an enzyme that reduces the levels of acrylamide in baked goods and snacks.
We further expanded our dairy portfolio with the introduction of Delvo®Guard, a new range of protective cultures that reduce food waste in dairy. Effectively combating yeast and mold growth, Delvo®Guard helps producers who are looking for clean-label solutions to reduce losses and increase product shelf life.
Solutions such as DSM's ModuMax™ enable producers of foods and beverages to deliver an enjoyable taste experience in low-sugar, low-salt, and low-fat applications, by creating a fuller mouthfeel and masking negative off-notes. ModuMax™, which was made widely available during the year, is also dairy allergen-free, suitable for vegetarian foods, and certified natural according to EU and US regulations.
DSM's development program for fermentation-derived steviol glycosides, the sweet tasting, zero-calorie molecules from the stevia plant, remained well on track in 2017. Targeted major customers were engaged in prototyping and sampling during the year, with commercial availability expected in 2018.
Another growth platform in specialty food ingredients is hydrocolloids — thickeners and stabilizers that dissolve, disperse or swell in water to provide a broad range of critical functionalities and physical attributes including gelling, texture, mouthfeel, viscosity and suspension. Demand for hydrocolloids, especially our natural hydrocolloids, is driven by three underlying consumer trends:
- The quest for affordable nutrition in the form of dairy and protein products
- The trend toward clear labeling
- Recognition of the benefits of probiotics and prebiotics
Our hydrocolloids are primarily delivered in the form of pectin and gellan gum. Both are used as gelling and stabilizing agents in a variety of foods and beverages. DSM's natural hydrocolloids are enjoying strong sales growth especially versus synthetic and animal derived products. In 2017, we acquired a majority equity stake in Inner Mongolia Rainbow Biotechnology Co., Ltd. in China, further expanding our global hydrocolloids business.