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.
DSM's activities are grouped in three clusters: Nutrition, Materials and Innovation Center. We report separately on Corporate Activities. Results presented in this section (and elsewhere in this Report) relate to consolidated activities only (therefore non-consolidated partnerships are excluded).
x € million
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 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.
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.
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.
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.
DSM's Materials cluster consists of DSM Engineering Plastics, DSM Dyneema and DSM Resins & Functional Materials. DSM is a global player in specialty plastics for the electrical components and electronics, automotive, flexible food packaging and consumer goods industries. The materials portfolio also includes Dyneema®, the world's strongest fiber™, as well as resins for paints, industrial applications and optical fiber coatings. For more information on DSM's Materials cluster, see the DSM Factbook on the company website.
The Materials cluster delivered another year of strong financial performance, continuing the excellent progress made since the start of Strategy 2018. The 'silent transformation' of the materials portfolio through a differentiated approach focusing on specialty products, provides a clear framework to outpace market growth and supported the cluster's performance again in 2017. Growth continued to be driven by demand for more sustainable, innovative, lightweight, environmentally friendly, safer and higher performing solutions.
Full year 2017 sales were up 12% versus the same period last year. Strong growth in specialties was the main driver behind the 13% organic growth, of which 7% was volume growth. The 6% price effect reflected increased input costs. All three businesses in Materials delivered a double-digit percentage organic growth.
Full year 2017 Adjusted EBITDA increased by 12% versus 2016, driven by higher volumes. The Adjusted EBITDA margin was stable at 17.3% as pricing and group-wide cost-saving and efficiency improvement programs offset higher input costs and negative foreign currency effects. This robust financial performance demonstrates the improvements achieved in the quality of returns in Materials over recent years.
DSM Engineering Plastics addresses key market trends in automotive and electronics. About 90% of cars and virtually all mobile devices currently sold contain our materials. During 2017, we continued to shift our portfolio toward higher-value, specialty materials with advanced grades and improved properties.
Dyneema®, the world's strongest fiber™, 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, lightness and high durability makes it suitable for a wide and expanding range of applications.
DSM is a global leader in the development and production of waterborne, UV and powder coating resins. These products offer clear sustainability advantages over the solvent-borne resins traditionally used in paints and coatings. In functional materials, DSM is the global leader in fiber-optic coatings.
The DSM Innovation Center has two functions. The first is to help develop new business, focusing on areas outside the current scope of the company's business groups. It identifies and invests in new and innovative growth options, initially through the DSM Business Incubator and then by developing and extracting value via the company's Emerging Business Areas (EBAs). The second function is accelerating the innovation power and speed of our core businesses. In this role, the Innovation Center supports all businesses through the Excellence in Innovation Program, DSM Venturing and the IP & Licensing department. In addition, the Chief Technology Officer, through the DSM Science & Technology Department, ensures the quality of the total R&D competence base and adds adjacent technologies for growth through DSM's Corporate Research Program.
The Innovation Center made good progress over the year, delivering on its Strategy 2018 goals to extract value from the Emerging Business Areas, the acceleration of large innovation projects, while simultaneously supporting the Nutrition and Materials business with their growth initiatives.
Full year 2017 sales in the main Emerging Business Area DSM Biomedical showed a strong underlying growth, largely offsetting the gradual discontinuation of a large contract during the year. DSM Advanced Solar delivered good growth in anti-reflective coatings and through the new backsheet activities for solar panels which were added in 2017 through the Sunshine acquisition.
Full year 2017 Adjusted EBITDA increase was largely driven by one-time positive effects from restructurings in DSM Advanced Solar, which had a positive EBITDA effect due to releases of liabilities, whereas the redundancy of certain assets related to these restructurings led to an impairment loss impacting the EBIT negatively.
Emerging Business Areas
DSM Biomedical is a trusted partner to the global medical device industry, enhancing the quality and delivery of healthcare, and shaping the future of biomaterials and regenerative medical devices. Every nine seconds, a patient somewhere in the world receives a medical device containing a DSM biomedical solution.
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. In particular, DSM has developed patented bioconversion technologies (yeast and enzymes) for various feedstocks and processes (including starch-based and cellulosic) in the biofuels industry.
Solar photovoltaic (PV) capacity is growing faster than any other fossil or renewable power source. 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. Increased efficiency reduces the cost of energy delivered.
As part of DSM's strategic transformation and move away from more commoditized and cyclical areas, we 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.