3 Change in the scope of the consolidation

Acquisitions

In 2022, DSM acquired businesses for a total consideration of €77 million (in 2021: €757 million).

Prodap

On 31 August 2022, DSM Nutritional Products acquired a 100% interest in Prodap, headquartered in Belo-Horizonte, Brazil for a total consideration of €77 million. Prodap is a Brazilian animal nutrition and technology company that combines technology offerings, consulting services, and customized nutritional solutions to drive efficiency and sustainability in animal farming. The consideration consists of an upfront cash payment of €70 million and an additional earn-out amount between €5 and €12 million, depending mainly on the EBITDA and customer loyalty, to be paid out in three installments in 2024, 2025 and 2026.

In accordance with IFRS 3, the purchase price was provisionally allocated to identifiable assets and liabilities acquired, pending final confirmation of the local valuator. This allocation resulted in a non-tax-deductible goodwill amount of €51 million and intangible assets for technology of €20 million, customer relations of €11 million and trade names of €4 million.

The acquisition of Prodap contributed €9 million to net sales, -€2 million to operating result and -€1 million to Adjusted EBITDA during a period of four months in 2022. If the acquisition had occurred on 1 January 2022, additional net sales would have been approximately €26 million, operating result -€2 million and Adjusted EBITDA €1 million.

Finalization of Vestkorn Milling PPA

In the reporting year, the Purchase Price Allocation (PPA) related to the acquisition of Vestkorn Milling in 2021 was finalized, resulting in an additional allocation of €22 million to intangible assets, mainly for customer relations and technology, a decrease of the goodwill amount by €23 million and an increase of other net assets by €1 million. The comparative information for the reference year has been modified for these measurement period adjustments. As the impact on the profit and loss account is negligible, no comparative information has been adjusted.

Valuation techniques intangible assets

Part of a Purchase Price Allocation is the recognition of intangible assets which are recognized apart from goodwill. The valuation techniques DSM used for measuring the fair value of these intangible assets in 2022 were as follows:

The acquired technology and trade names were valued by applying the relief-from-royalty method, a form of the income approach whereby the value of an asset is estimated by capitalizing the royalties saved as a result of owning the asset.

The fair values of customer relationships were determined by applying the multi-period excess earnings method (MEEM), considering the present value of the projected cash flow revenues and adjusted for retention.

Summary acquisitions in 2022

The accounting of the acquisitions upon closing impacted DSM’s consolidated balance sheet 2022 as shown in below table (measured at the date of acquisition).

Divestments

Protective Materials

On 1 September 2022, DSM completed the divestment of its Protective Materials business (DPM) to Avient Corporation. Prior to this divestment, DSM reclassified the results of this business (the ‘disposal group’) to ‘discontinued operations’.

Engineering Materials

On 31 May 2022, DSM announced that it had reached an agreement to sell its Engineering Materials business (DEM) to Advent International and LANXESS. Completion of this transaction is expected in the first half of 2023. DSM reclassified the results of this business (the ‘disposal group’) to ‘discontinued operations’.

Summary divestments in 2022

See below table for the book result of the divestments that took place in the reporting year.

Impact on comprehensive income

The impact of the business that has been presented as discontinued operations in the income statement and statement of comprehensive income, is presented in the below tables.

The Operating profit in discontinued operations amounting to €1,312 million comprises the regular activities of the DPM business in the first eight months of the reporting year (€53 million), the book profit on the sale of the DPM business on 1 September 2022 (€1,031 million) and the full-year activities of the remaining Materials business (€228 million). The business results reclassified to discontinued operations include also intercompany recharges that will cease to be earned/incurred on disposal. Corporate costs have been excluded from the reclassification to discontinued operations. The comparative numbers in the Income statement and OCI are re-presented as if the activities of the DPM and DEM businesses had been discontinued from the start of the comparative year 2021. In addition, these comparative numbers also include three months of business results related to DSM’s former Resins and Functional Materials business, which was divested in April 2021.

See also the section Assets and liabilities held for sale.

Impact on cash flow statement

The impact of the business that has been included as discontinued operations in the cash flow statement is shown in the following table.

See also Note 26 Notes to the cash flow statement.

Assets and liabilities held for sale

Engineering Materials business (DEM)

On 31 May 2022, DSM announced that it had reached an agreement to sell its Engineering Materials business to Advent International and LANXESS. DSM reclassified the results of this business (the ‘disposal group’) to ‘discontinued operations’, and reclassified all related assets and liabilities as held for sale on 1 April 2022. The related assets and liabilities of the disposal group on 31 December 2022 have been reclassified as held for sale. Completion of the announced transaction, which is subject to the customary conditions and approvals, is expected in the first half of 2023. Before reclassification, these activities were reported in the segment Materials.

Pentapharm

At the end of 2021, DSM had announced its intention to dispose of its Pentapharm business, and therefore classified the relevant assets and liabilities as held for sale. As at the end of 2022, the closure of this divestment was not expected within the year, the conditions for held for sale were no longer met, hence the related assets and liabilities were transferred back from held for sale to the respective balance sheet line items in the reporting year.

Impact on balance sheet

The impact of the reclassification of the DEM activities on the DSM consolidated balance sheet is presented in the following table.