If 2020 had been an eventful year for us all worldwide, the level of challenge remained unchanged in 2021. At DSM, we dealt well with the volatility of our operating environment in the face of the continuing COVID-19 pandemic, maintaining supplies to our customers despite widespread supply chain and logistics disruptions. The spirit of ‘One DSM’ was stronger than ever. We are very proud and thankful that all around the world, our employees demonstrated resilience, initiative, flexibility and teamwork in dealing with this demanding environment and at the same time cared for the safety and well-being of colleagues, customers and partners. And this was achieved in a year that was also full of important projects and changes linked to the further shaping of DSM’s future.
Accelerating our strategic journey to become a focused Health, Nutrition & Bioscience company
In September 2021, we took an important strategic decision to focus our resources and capabilities to address the urgent societal and environmental challenges linked to the way the world produces and consumes food. With a growing global population, the world is facing multiple and interconnected food system challenges that impact the health and wellbeing of people, animals, and the planet. Advances in digital technology and bioscience offer realistic, scalable solutions to tackle these challenges, creating new markets and innovation opportunities. With our strong combination of scientific competences and a growing portfolio of nutrition and health solutions, we are ideally positioned to capture these opportunities. Our Health, Nutrition & Bioscience strategy is underpinned by our ‘global products, local solutions’ business model and complemented by our growing competences in the rapidly emerging area of precision & personalization.
In view of our new strategic priorities, we simplified our operating structure and reorganized our Health, Nutrition & Bioscience activities into three Business Groups as of 1 January 2022, each with clear opportunities to benefit the health of people and the health of the planet, underpinning our growth plans. In line with our ambition to have a meaningful impact on improving the world’s food systems, we are proud to have also announced a series of measurable new commitments related to Health for People, Health for the Planet and Healthy Livelihoods, as we strongly believe that with capability also comes responsibility.
Our ambition to become the global leader in Health, Nutrition & Bioscience, and to contribute to the food system transformation, requires huge efforts and therefore laser-like focus. This is why we took the carefully considered decision to review the strategic options for both our Engineering Materials and Protective Materials businesses, including a possible change in ownership. We are very proud of these two excellent Materials businesses, and they deserve the best possible environment in which to thrive and help drive the important shifts to a bio-based and circular economy that will underpin their continued success.
Very good 2021 financial performance
We delivered a strong full-year financial performance as we continued to successfully navigate dynamic market conditions, including global supply chain and logistics disruptions. Both Nutrition and Materials realized strong results, reflecting the quality of these businesses. On a continuing operations basis, our group sales were up 14% and Adjusted EBITDA was up 18%. Nutrition sales were up 10%, and Adjusted EBITDA was up 8% as the business demonstrated its operational performance and reliability as a supplier throughout the year, strengthening its customer relationships. Materials saw an exceptionally strong performance, with a recovery in Protective Materials and high demand for Engineering Materials leading to an increase in sales and Adjusted EBITDA of 27% and 60% respectively. Inflationary pressures, especially toward the end of the year, required appropriate pricing actions, of which the first positive effects were seen in the fourth quarter. Ultimately we realized an Adjusted Net Operating Free Cash Flow from continuing operations of €949 million, up 9%.
Continuing progress on People and Planet targets
Our people showed remarkable resilience as we continued to adapt our ways of working to the COVID-19 pandemic circumstances either by supporting remote and hybrid working or by establishing safe working environments in our laboratories and plants. In line with our culture and our philosophy of hybrid working we will build a new, highly sustainable, modern and inspiring head office in Maastricht (Netherlands). In terms of safety, we are pleased with an improvement in the Frequency Index of DSM Recordable Injuries to 0.22 from 0.24 in 2020, achieving our target level of less than 0.24. We continue to take action on our ambition to make our company fully incident- and injury-free. It was also encouraging to see that in such an eventful year, overall employee engagement remained at the high level of 76% and many associated indicators in the Employee Engagement Survey saw an increase. Looking at Inclusion & Diversity, the Executive Committee is now 40% female, the Management Board and Supervisory Board are now both 50% female, and progress was made on improving the representation of women (23% female executives) and under-represented nationalities at executive level (31%). We developed new ambitious Inclusion & Diversity commitments for the period 2022–2025.
On Planet, we remained well on track in terms of our greenhouse gas (GHG) emissions reduction, energy efficiency and purchased renewable electricity targets in 2021. We also accelerated our Science Based Target for GHG emissions reduction from 30% to 50% by 2030. This step-up provides a firm foundation for DSM to achieve net-zero by 2050. We doubled our internal carbon price from €50 to €100/t CO2eq and signed an additional power purchase agreement whereby all our electricity needs in the USA became 100% renewable in 2021. We are therefore well positioned to exceed our target of meeting 75% of our global electricity needs from renewable sources by 2030 and to reach 100% at the earliest possibility. We received a double A rating on Climate and Water from CDP. And in 2021, an encouraging 64% of our total sales came from our Brighter Living Solutions — products that have a better environmental and/or social impact than mainstream solutions.
Relentless execution of our strategy
Our strategy served us very well in 2021. It helped us to set our priorities in order to drive organic growth, especially in view of the rapidly changing circumstances brought about by the COVID-19 pandemic. It also helped us make the right capital allocation choices, including the selection of acquisition targets and the development of our Health, Nutrition & Bioscience portfolio.
We made four important acquisitions: Midori in Animal Nutrition & Health; First Choice Ingredients and Vestkorn Milling in Food & Beverages; and the Flavor & Fragrance bio-based intermediates business of Amyris in Personal Care & Aroma. We progressed as per plan with the integration of the Erber businesses, and we completed the sale of our Resins & Functional Materials and associated businesses for an equity value of €1.6 billion.
We expanded our capabilities in the field of precision & personalization with, for example, the launch of the start-up Hologram Sciences, a consumer-facing company providing consumers with personalized solutions to manage their health. Meanwhile, we also launched Sustell™, an intelligent sustainability service that supports precision animal farming.
We also executed on our platform-based approach to driving innovation, resulting in good progress for our pipeline of exciting new products and solutions. Bovaer®, our innovative feed ingredient for reducing enteric methane emissions in ruminants, received market approval in Brazil and Chile and a positive EFSA opinion in the European Union. Bovaer® also formed the basis of collaborations with New Zealand dairy co-operative Fonterra and with JBS, one of the world’s largest food companies. We also announced plans to create large-scale production capacity for Bovaer® by constructing a new plant at our site in Dalry (UK), with the support of Scottish Enterprise. Our EVERSWEET™ stevia sweetener was successfully launched by a number of customers, and we made good progress with our omega-3-rich algal oil Veramaris®. We launched ampli-D®, our fast-acting form of vitamin D for dietary supplements. We also laid the foundation stone of our future state-of-the-art Health & Nutrition Innovation Campus in Kaiseraugst (Switzerland).
The year 2021 saw the retirement of two important figures for DSM who have made a huge contribution to our company. Rob Routs, Chair of our Supervisory Board since 2010, retired in May 2021. Under Rob’s guidance, DSM continued the bold and progressive restructuring of its portfolio and its evolution into the purpose-led, performance-driven company it is today. Rob’s successor is Thomas Leysen, who originally joined the Supervisory Board in 2020. Chris Goppelsroeder, President and CEO of DSM Nutritional Products, retired in April 2021 after a long and successful career in the company during which he developed this business into a world leader in health through nutrition. We would like to express our deep gratitude to both Rob and Chris, and to wish them both the very best for the future.
Our new organization, which was announced in September, came into effect on 1 January 2022 and was accompanied by a realignment of our leadership structure, with a new Executive Committee reflecting the establishment of three new Business Groups. We are now ready for the next step in our strategic journey, accelerating the growth of our company in Health, Nutrition & Bioscience. We would like to thank our employees for everything they achieved in 2021, and also to thank our customers, suppliers and shareholders for their continued trust in us as reflected, for example, in our higher Customer NPS score. We look forward to the next phase of our evolution with optimism and confidence, ready to address the challenges and seize the opportunities that lie ahead.
Stay safe and stay healthy!
Geraldine Matchett and Dimitri de Vreeze, Co-CEOs Royal DSM
Brighter Living Solutions (BLS) is DSM’s program for the development of sustainable, innovative solutions with environmental and/or social benefits, creating shared value for our stakeholders. Brighter Living Solutions are products, services and technologies that, considered over their life cycle, offer a superior environmental impact (ECO+) and/or a superior social impact (People+) when compared to the mainstream alternative for the same application. The impact of Brighter Living Solutions can be realized at any stage of the product life cycle, from raw materials through the manufacturing process to potential re-use and end-of-life disposal.
More information and definitions can be found on the company website.