Strategy 2010-2015, DSM in motion: driving focused growth - Annual Report 2015 - DSM

Strategy 2010-2015, DSM in motion: driving focused growth

Last year was the fifth and final year of the strategy DSM in motion: driving focused growth, which the company launched in 2010 to become a global leader in health, nutrition and materials. This strategy has provided DSM with the framework to drive sustainable and profitable growth in the company’s core activities.

In 2015, DSM’s focus was on improving the operational performance of its Nutrition and Performance Materials businesses, while pursuing strategic actions for Polymer Intermediates and Composite Resins. These were delivered in March with the establishment of the ChemicaInvest partnership with CVC Capital Partners. In August, the company announced adjustments to its organizational and operating model to support its growth, creating a more agile, focused and cost-efficient organization. The final major development of the year was announced in November, when DSM presented its Strategy 2018: Driving Profitable Growth at its Capital Markets Day, details of which are given on Strategy 2018: Driving Profitable Growth.

Results 2015

Financial results

DSM delivered solid results in 2015, posting net sales of €7,722 million, up 10% on 2014 (€7,051 million). Overall organic sales growth for the year amounted to 1%, as a 3% increase in volumes, with strong growth in Nutrition, was largely off-set by 2% lower price/mix, 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%.

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%). In 2015, Return on Capital Employed (ROCE) was 7.6% compared to 8.2% in 2014.

Sales in emerging economies amounted to 44% of total sales in 2015, up from 43% in 2014. Innovation sales, defined as sales from products and solutions introduced within the last five years, made up 24% of total sales in 2015 (2014: 18%).

DSM’s Emerging Business Areas (EBAs) DSM Biomedical, DSM Bio-based Products & Services and DSM Advanced Surfaces continued to make steady progress during the year. Collectively they made a positive EBITDA contribution, reducing the overall costs of the DSM Innovation Center.

Table 1: Financial targets and aspirations as updated in 2013

Financial targets and aspirations as updated in 2013
Realization 2015
Profitability targets 2015
- EBITDA margin 14%-15%
- ROCE 11%-12%
Sales targets 2015
- Organic sales growth
5%-7% annually
- China sales towards USD 3 bn1
USD ~1 bn
- High growth economies sales
about 45% of total sales
- Innovation sales 20% of total sales
- ECO+ sales towards 50% of total sales
Cluster targets 2015
- Nutrition
EBITDA margin 20%-23%
Organic sales growth GDP +2%

- Performance Materials
EBITDA margin 13%-15%
Organic sales growth at double GDP

Aspiration regarding Emerging Business Areas for 2020
- EBA sales > €1 bn
€155 m
1 The China sales target was set in 2010 and included the contributions of the Pharma, Base and Bulk Chemicals activities, which have since been (partially) divested
The DSM Managing Board (from left to right): Dimitri de Vreeze, Feike Sijbesma (CEO/Chairman), Geraldine Matchett (CFO) and Stephan Tanda

Sustainability results

Sustainability is DSM's core value as well as a business driver and enables the company to provide higher-margin products and solutions. DSM has successfully implemented its sustainability program and ECO+ solutions now make up 57% of DSM’s total sales, exceeding the aspiration of towards 50%. ECO+ solutions also accounted for 91% of DSM’s innovation pipeline in 2015, which exceeded the company’s target of 80%.

DSM made further progress with its People+ strategy, which aims to deliver products that have a measurable positive impact on people's lives. Going forward, DSM will refer to its ECO+ and People+ solutions collectively as Brighter Living Solutions. DSM again featured among the chemical industry leaders in the Dow Jones Sustainability World Index in 2015. DSM improved its ranking and has returned to RobecoSAM Gold Class status for 2016.

DSM’s Employee Engagement Survey determines levels of engagement, measuring how employees score in terms of commitment, pride, advocacy and satisfaction expressed as an index. It is now carried out on a two-year cycle with a shorter Pulse survey held in the intervening year, which is what DSM held in 2015. This showed an Employee Engagement Index of 69% (2014: 70%), which is broadly in line with the global standard of 70%. For further details on the outcome of this survey and other people-related aspirations, see chapter 'People' on People in 2015.

Table 2: Sustainability aspirations 2011-2015

Sustainability aspirations 2011-2015
Realization 2015
Dow Jones Sustainability Index
Top ranking (RobecoSAM Gold Class)
Silver Class1
ECO+ (innovation)
At least 80% of pipeline is ECO+2
ECO+ (running business)
From approximately 34% towards 50%
Energy efficiency
20% improvement in 2020, compared
to 2008
Greenhouse-gas emissions
25% reduction (absolute) by 2020,
compared to 2008
75% reduction3
Employee Engagement Survey
Towards High Performance Norm4
69% favorable
Diversity 5
Women in executive positions
Under-represented nationalities in executive positions
People+ 5
DSM People LCA
1 DSM has returned to Gold Class for 2016
2 See ECO+ for a definition of ECO+
3 Reduction of total emissions (absolute) of 75% was mainly attributable to the deconsolidation of DSM Fibre Intermediates; the GHG efficiency, which accounts for changes in production volume, has improved by 20% in 2015 compared to 2008
4 The High Performance Norm (over 80% favorable) is the composite of the top 25% employee responses of the selected external benchmark organizations
5 See 'People+' and 'Inclusion & Diversity' in the chapter 'People' in 2015 on People in 2015 and ECO+ for a definition of People+

Growth Drivers

Over the last five years, DSM has utilized the strategic growth drivers High Growth Economies, Innovation, Sustainability and Acquisitions & Partnerships to leverage its unique position and capitalize on the business opportunities created by key global megatrends.

In doing so, DSM has successfully increased its global presence, became more innovative and more sustainable, and built a streamlined and simplified portfolio of high-value businesses.

High Growth Economies

One of the key elements of the company strategy has been the successful expansion of DSM’s global presence to be better placed to capture opportunities arising from the megatrends in economies such as Brazil, Russia, India and China as well as in more mature economies of the West. The share of sales in these economies as a proportion of DSM’s total sales has increased significantly, giving the company a well-balanced global footprint. In 2015, sales to emerging economies accounted for 44% of total sales. In 2010, this was 32%.

In China, domestic consumption is playing an increasingly important role in re-balancing the economy to the so-called 'New Normal'. During the year, there was a change in the pace of economic growth in the country, in particular in the second half of the year. Overcapacity, low global commodity prices and weak demand impacted industrial production. However, the fundamental drivers resulting from the megatrends remain as valid as ever. In terms of DSM's end-user segments, this could be seen in a noticeable slowdown in automotive and construction-related industries, whilst the service sector and food industry segments developed well. DSM's sales in China for its continuing operations came to €937 million in 2015, up 12% from €833 million in 2014. During the year DSM finalized the acquisition of vitamin C producer Aland and began the expansion of a site in Tongxiang with the aim of establishing a world-class development center for hydrocolloids including gellan gum.

DSM’s business in India showed double-digit growth. DSM focuses in particular on locally made products for markets in the country, for example partnering with SOBISCO in the year to produce and market fortified biscuits and snacks.

Growth in Latin America was 11% in 2015, despite a very challenging overall economic picture in the region that has impacted consumption in various markets. DSM has established a robust platform in particular for its Animal Nutrition & Health business in the region and will leverage this as it expands the animal health capabilities it acquired with Tortuga outside Brazil.

Sales in Russia remained on par with 2014, despite the severe recession in the country, supported by particularly strong performance in Animal Nutrition & Health, which also performed well in DSM’s other key markets in the region.

With their rapidly expanding urban populations and burgeoning middle classes, it is clear that emerging economies will remain important growth engines for the world economy in the future. Moreover, increasing attention for environmental concerns and related legislation to tackle them presents further opportunities.

Over recent years it has become evident that rates of economic growth in these economies are both divergent and changeable. In future, DSM will refer to the economies themselves by the commonly-used term ‘emerging economies’ rather than ‘high growth economies’. The capitalized term High Growth Economies relates specifically to DSM’s strategic growth driver.

Net sales by destination, continuing operations


DSM in motion: driving focused growth targeted an increase in the proportion of sales coming from innovative products and solutions from 16% in 2010 to 20% by 2015 (see PEOPLE for the definition of innovation sales). At the end of 2015, these products accounted for 24% of total sales. This was up from 18% in 2014, with the increase driven by both higher sales as well as by the deconsolidation of DSM Fibre Intermediates and DSM Composite Resins and their inherently more traditional portfolio in the year. In Nutrition this was 21% and in Performance Materials 29%.

Innovation sales

Innovation sales play an important role in driving both top-line and bottom-line growth. Besides providing benefits to customers and end-users in terms of new or improved functionality, they also deliver margins that are on average higher than in the running business.

DSM looks to foster and sustain its innovation practices on an ongoing basis. The DSM Innovation Center supports innovation by offering functional excellence to the company’s established Nutrition and Performance Materials businesses, as well as through venturing and its business incubator. At the same time it focuses on developing and extracting value from new growth platforms outside the current scope of DSM’s business groups with its EBAs, which currently comprise DSM Biomedical, DSM Bio-based Products & Services and DSM Advanced Surfaces.

DSM has established best practices in innovation and manages its major innovation activities at a platform level within selected areas, including Food and Nutrition Security, Health, Sustainable Manufacturing and Energy Security. This platform-based approach to innovation under the direction of the Chief Technology Officer aims to develop larger initiatives and enables the company to increase the focus of its efforts and improve coordination. This structure provides the basis for an effective management of company-wide competence-building programs in Research & Development (R&D).

R&D is instrumental to the realization of DSM’s innovation strategy, and most of the expenditure in this area is directed toward business-focused programs.

Table 3: R&D expenditure (including associated IP expenditure), continuing operations

R&D expenditure (including associated IP expenditure), continuing operations
x € million
Performance Materials
Innovation Center
Corporate Activities
Total as % of net sales
Staff employed in R&D activities

The more than 2,000 internal scientists in DSM’s science network are spread around the world. They cooperate extensively with external R&D institutions. Academic collaboration efforts are normally specific and bilateral, while DSM is also active in broader public-private partnerships that increase its scientific scope, such as the Bio-based Industries Consortium.

A crucial element of DSM’s approach and an important business enabler is Open innovation. By combining its own capabilities with the vast pool of ideas, know-how and expertise that are available outside the company, DSM is better able to develop and discover solutions.

DSM collaborated in a number of R&D and innovation partnerships in 2015. For further details see 'Stakeholder engagement' on Stakeholder engagement and 'Review of business – Innovation Center' on Review of business - Innovation Center.


In the realization of its 2010-2015 strategy DSM in motion: driving focused growth, the company continued to fulfill its responsibilities towards society while simultaneously developing sustainability into a strategic and successful growth driver. For DSM this means pursuing activities that create shared value for all DSM’s stakeholders in the areas of People, Planet and Profit.

Sustainability is a key differentiator and a driver of value in DSM's markets. Using its strong science competences, the company aims to deliver profitable products and solutions that have a positive impact on society. DSM does this by embedding sustainability practices across the company. Sustainability plays a central role in innovation, new product and business development, operations and strategic decisions. By continuously developing innovative science-based products and solutions that contribute to a brighter future, DSM is also creating a more sustainable and profitable future for itself.


ECO+ is DSM’s program for the development of sustainable, innovative products and solutions with environmental benefits. Products qualify as ECO+ when their environmental impact is lower than competing mainstream products that fulfill the same function. When considered over their entire life cycle, ECO+ solutions offer superior performance with a lower eco-footprint. The environmental benefits can be created at any stage of the product life cycle, from the raw materials through to manufacturing and potential re-use and end-of-life disposal. DSM uses comparative Life Cycle Assessments (LCAs) and/or expert opinions to determine whether a solution should be considered ECO+. For more information about the ECO+ program, see 'Planet' on ECO+.


People+ is DSM’s program to develop solutions that measurably improve the lives of consumers, employees and communities across the value chains, better than competing alternatives in the market. People+, together with ECO+, makes DSM’s ‘Bright Science, Brighter Living™’ mission more tangible. Applying and road-testing harmonized joint standards for product social metrics across all DSM business groups and regions has laid the foundations for DSM to also set targets for People+ products within its Brighter Living Solutions for the coming period. For more information about the People+ program, see 'People' on People in DSM's value chain and civil society.

Acquisitions & Partnerships

During the 2010-2015 strategy period for DSM in Motion: driving focused growth, acquisitions have been a key vehicle for DSM to add new growth platforms, especially in emerging economies and in North America. The company also established a number of value-enhancing partnerships in this time, most notably for the Pharma activities in 2011 (DSP) and 2014 (Patheon), details of which can found in 'Review of business – Partnerships'
on Partnerships.

The four most significant acquisitions during the period, which are all in the Nutrition cluster, have strengthened DSM’s portfolio, boosted growth and already made strong contributions to earnings, with further potential for the future. Collectively, the Martek (2010), Ocean Nutrition Canada (2012), Tortuga (2012) and Fortitech (2012) businesses added €210 million in EBITDA at the time of acquisition. DSM has since successfully grown this contribution by 11% per year and in 2015 these acquisitions delivered a total of over €300 million in EBITDA. The profitability of Ocean Nutrition Canada has however declined somewhat over the period, impacted by a sharp increase in the price of fish oil and weakness in the US market for fish oil-based omega-3 dietary supplements.

Acquisitions & Partnerships in 2015

In 2015, DSM engaged in partnerships that serve clear strategic and financial objectives. These business partnerships sometimes involve long-term supply agreements and are material to DSM's business performance.

The most significant partnership of 2015 was entered into in March, when 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 at the end of July. The transaction delivered on the strategic actions DSM said it would pursue for the businesses in order to simplify its portfolio and reduce cyclicality in the Performance Materials cluster, whilst effectively maintaining DSM Engineering Plastics’ backward integration through a long-term purchasing agreement. See also 'Review of business – Partnerships' on DSM Sinochem Pharmaceuticals.

DSM entered into or completed a number of other business-related acquisitions and partnerships during the year, details of which can be found in 'Review of business – Nutrition' on Nutrition, 'Review of business – Performance Materials'
on Performance Materials and 'Review of business – Innovation Center' on Innovation Center.

In the summer of 2015, Patheon filed a registration statement (Form S-1) with the US Securities and Exchange Commission (SEC), preparing itself for a public offering. To date, neither the timing of such a public offering, nor the number of shares, nor the price have been confirmed.