This business addresses the global feed ingredients markets for poultry, swine, aquaculture, ruminants and pets. For all these segments, DSM is a full value chain player, providing active ingredients, delivery systems, and nutritional and premix solutions both globally and at a local level. We focus on the nutritional ingredients and additives segments of these markets.
In 2016, DSM's activities were grouped into three clusters: Nutrition, Materials and Innovation Center. In addition, DSM reports separately on Corporate Activities. Results presented in this section (and elsewhere in the management report) relate to consolidated activities only (therefore non-consolidated partnerships are excluded).
x € million
DSM, continuing operations
The Nutrition cluster comprises DSM Nutritional Products and DSM Food Specialties. These businesses serve the global industries for animal feed, food and beverages, pharmaceuticals, infant nutrition, dietary supplements and personal care. DSM is uniquely 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. With a global and highly diversified portfolio of products, services and end-markets, DSM provides innovative solutions to the benefit of customers and other stakeholders worldwide. For more information on DSM's Nutrition cluster and its portfolio of businesses and products as well as their value chains, please refer to DSM’s Factbook on the company website.
Nutrition performed well in 2016, with good growth in our Animal Nutrition & Health business, improved growth in Human Nutrition & Health, and strong demand for DSM Food Specialties’ innovative enzymes portfolio.
Stephan Tanda, DSM Managing Board
DSM's Nutrition cluster had a strong year in 2016. Total sales amounted to €5,169 million in 2016, up 4% from €4,963 million in the previous year. Organic sales growth was 5%, driven by higher volumes and price/mix. Animal Nutrition & Health had a strong year with 8% organic sales growth, driven by strong volume growth in all regions with the exception of Latin America, due to the weak economic conditions in that region. Human Nutrition & Health delivered a significant step-up in organic growth (4%) in 2016 versus recent years. This highlights the successful implementation of the strategy to drive above-market growth through new market initiatives and innovation.
Adjusted EBITDA was up 13% versus 2015 to €931 million (2015: €822 million), with all businesses contributing well to this growth. Adjusted EBITDA also benefited from the efficiency and cost-saving programs.
This business provides nutritional solutions for the food and beverage, dietary supplements and early-life and clinical nutrition markets, with a parallel focus on solutions for the pharmaceutical industry for the use of vitamins, nutritional lipids (ARA/EPA/DHA) and carotenoids as Active Pharmaceutical Ingredients (APIs). Its fundamental driver is the link between nutrition and health, supported by a number of global megatrends.
Personal Care provides ingredients and innovative solutions for some of the world’s best-selling beauty products. Our extensive portfolio of key ingredients includes peptides, natural bio-actives, UV filters, hair polymers and vitamins; this is complemented by a range of additional services. We also supply aroma ingredients to the flavor and fragrance industries which are used in many of the world’s best-known consumer brands. The business is driven by global megatrends, local consumer beauty regime insights, and growth opportunities presented by emerging economies.
DSM Food Specialties is a leading global supplier of food enzymes, cultures, bio-preservation, hydrocolloids, taste and health ingredients. With over a century of experience in fermentation for the food industry, the business group helps make existing diets healthier and more sustainable, giving increasing numbers of people around the world access to affordable, quality food. Customer proximity and the ability to deliver products highly tailored to local requirements are the basis for our continually expanding portfolio of innovative fermentation-based product solutions. This was underlined by the 2016 launch of the business group’s new vision: Enabling Better Food for Everyone.
DSM's Materials cluster comprises 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. For more information on DSM’s Materials cluster and its portfolio of businesses and products as well as their value chains, please refer to DSM’s Factbook on the company website.
In 2016, we continued the 'silent' transformation of the Materials portfolio toward higher-value specialty products. This transformation capitalizes on the growing opportunities presented by the global drive for more sustainable alternatives.
Dimitri de Vreeze, DSM Managing Board
The Materials cluster delivered strong financial performance in 2016, which reflected the success of the differentiated approach of focusing on higher-growth specialty businesses in the Materials portfolio. While volumes were up 4% in the year, prices were considerably lower, fully reflecting low input costs, meaning that total sales for the Materials cluster were down by 1% from €2,528 million in 2015 to €2,513 million in 2016.
Total Adjusted EBITDA for the full year 2016 increased by 13% to €435 million from €384 million in 2015. This was driven by strong volume growth in higher-margin specialties, the benefits of the efficiency and cost savings programs and the support from low input costs.
DSM Engineering Plastics is a global supplier of high-performance engineering thermoplastic solutions. 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 Engineering Plastics addresses key markets in automotive and electronics, and provides solutions to specialized industries including water management, breathable textiles and flexible food packaging.
DSM’s Dyneema® business is driven by our customers’ and end-users' needs for lightweight, sustainable solutions that offer extreme durability coupled with improved safety and ergonomics. Dyneema® products typically replace traditional materials such as steel and aramid. Dyneema® is the world’s strongest fiber™. It is 15 times stronger than steel on a weight-for-weight basis, 40% stronger than aramid, and floats on water. This combination of extreme strength and lightness makes it suitable for a wide and expanding range of applications.
DSM is a global leader in the development and production of these innovative solutions by offering waterborne, UV and powder coating resins with clear sustainability advantages over solvent-borne coatings. In functional materials, DSM is the global leader in fiber-optic coatings. In additive manufacturing – 3D printing – 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.
The DSM Innovation Center has two main functions. In the first place, it serves as a center of excellence to accelerate the innovation power and speed of our core businesses. In this role it also focuses on adjacent technologies for growth through its Corporate Research Program, which is steered by the Chief Technology Officer through the DSM Science & Technology Department, as well as through the DSM Venturing & Licensing activities. In its second function, the Innovation Center has a business development role, focusing on areas outside the current scope of DSM’s business groups. It identifies and invests in new and innovative growth options, initially through the DSM Business Incubator. Moreover, the Innovation Center is responsible for developing and extracting value from the company’s Emerging Business Areas (EBAs).
Innovation is about creating business from knowledge. The DSM Innovation Center ensures that the company always has a robust innovation pipeline. 2016 was a positive year for us, not just in terms of scientific achievements and financial performance but also regarding the holistic way we think about innovation at DSM.
Rob van Leen, DSM Executive Committee
The Innovation Center made good progress in its results in 2016 with 6% organic growth, driven by higher volumes in both DSM Biomedical and DSM Advanced Solar. Profitability clearly improved due to a combination of organic growth, more focused innovation and reduction of costs. Adjusted EBITDA in 2016 achieved break-even, in line with the ambition of Strategy 2018.
DSM filed over 220 patents in 2016. This is somewhat below our long-term average. It reflects our changed business portfolio and further focus in innovation projects, in particular aimed at delivering business impact in specific innovation growth areas.
Emerging Business Areas
DSM Biomedical partners with the medical industry worldwide to shape the future of biomaterials and regenerative medical devices that improve patients’ lives. With global reach backed by a leading research and distribution network with facilities in the US and the Netherlands, DSM Biomedical’s portfolio, technologies and expertise enable medical device companies to advance care across medical specialties. These products address key trends in medicine, from treating an aging population to supporting more active lifestyles − meeting the need for safer, less invasive procedures that are also more cost-effective.
As the world increasingly seeks alternatives to fossil resources and progresses toward a more sustainable, bio-renewable economy, significant commercial opportunities are presenting themselves in advanced biofuels and in renewable chemical building blocks such as bio-based succinic acid. DSM Bio-based Products & Services pioneers advances in biomass conversion and seeks to demonstrate the commercial viability of sustainable, renewable technologies in collaboration with strategic partners in the value chain.
DSM Advanced Solar aims to accelerate the uptake and effectiveness of solar energy by focusing on the development and commercialization of technologies and materials that increase the efficiency of solar modules, reducing the cost of energy delivered.
As part of DSM’s strategic transformation and move away from more commoditized and cyclical areas, we have established joint ventures for the pharma activities (DSM Sinochem Pharmaceuticals for anti-infectives in 2011 and Patheon for contract development and manufacturing services in 2014) and for the bulk chemical businesses in Polymer Intermediates and Composite Resins (ChemicaInvest in 2015).
Any consolidated activities that are outside the three reporting clusters are reported as Corporate Activities. These comprise operating and service activities, as well as a number of costs that cannot be allocated to the clusters. While this segment reports net sales from its service units to third parties, it normally has a negative operating result.