The global science company Royal Dutch DSM Group recently announced on the capital market day that the company's strategy is updated to: 'Growth & Value-Purposeled, Performance Drive'.
• 2015-2018 strategic period exceeds all targets completed
• The 2018 outlook announced on May 8 was reconfirmed
• DSM will reposition itself as a company focused on 'nutrition, health and sustainability', pursuing enhanced organic growth, focusing on goal-oriented, business activities
• DSM has developed new ambitious growth and financial goals:
Organic sales revenue growth is higher than the market
Adjusted EBITDA grows in high single digits
Strengthen cash flow
Dividends increase by 25% compared to 2018, future dividend growth will be linked to long-term earnings growth
• Value-creating M&A will focus on nutrition
Mr. Xie Baiman, CEO and Chairman of the Board of Directors of DSM, said:
'Our 2015-18 strategy has achieved great success. Through the transformation during the period of 2010-2015, we have achieved strong growth, greatly improved our operational and financial performance, and all our businesses have created tremendous value. In addition, We have taken significant steps to sell our non-core pharmaceutical and bulk chemical joint ventures. DSM has transformed itself into a growth-oriented company, and our tremendous efforts in sustainability are all for the benefit. Related parties have created significant value in the three dimensions of people, earth and profit.
DSM will further transform itself into a global science company focused on nutrition, health and sustainability. We have built a strong growth platform dedicated to developing innovative nutrition and health, climate and energy, and resource and recycling solutions. Our increasingly customer-centric and large-scale innovation projects will enable these markets to grow further. At the same time, we will continue to focus on cost control and operational performance to increase profit and cash flow. Our organic growth will come from Support for the nutrition business sector M&A project.
I am convinced that our strategy will bring greater value to all stakeholders, and the increase in dividends indicates that we are full of confidence in the future.
DSM Strategic Update
Set goals, further growth and transformation
• With the company's unique scientific expertise, DSM hopes to actively capture the growth opportunities offered by global megatrends and (United Nations) Sustainable Development Goals (SDGs), especially in nutrition and health, climate and energy, and resources and recycling. aspect.
• Therefore, DSM will be transformed into a company focused on nutrition, health and sustainability:
DSM's nutrition business will focus on human nutrition (food and beverage ingredients and solutions, as well as specific nutrients, nutraceuticals, branded products and customized nutrition), animal nutrition (premixes and professional solutions for all animal species), Personal care and fragrance materials.
DSM's materials business will further develop into a high-growth, high-margin specialty business focused on health, bio/green applications and new mobility and connectivity applications.
• By increasing the impact of its operations, providing customers with sustainable solutions and advocating sustainable business, DSM is able to grow faster and reduce costs and risks.
• DSM will further reduce greenhouse gas emissions, improve energy efficiency and renewable energy utilization.
Performance-driven, achieving growth, creating value
Develop ambitious profit growth and cash flow goals to drive value creation
• Two financial objectives for the period 2019-2021 have been identified:
Adjusted EBITDA achieves high single digit annual growth percentage
Adjusted net operating cash flow grows by about 10% annually
Achieve financial goals through overall value creation:
• Sales revenue growth ahead of the market, achieving 5% organic growth
Expanded solutions, further customer-centric, and large-scale innovation projects to support organic growth in all businesses
About 20% of sales come from innovative businesses and 45% from sales in high-growth economies
DSM will continue to invest in leading technology with an investment of approximately 5% of sales
• DSM will continue to leverage digital capabilities to enhance customer intimacy and increase productivity/efficiency to support new business models
• New adjusted EBITDA margin target (to 2021):
More than 20% of nutrition business
Material business 18-20%
Achieve these goals by increasing efficiency and focusing on specialized solutions with higher profit margins
• Combine organic sales revenue growth with increased profit margins to achieve high single digit adjusted EBITDA growth
• Focus on investment and cash flow, increase returns, and accelerate the growth of operating cash flow, about 10% per year
Working capital fell by about 50 basis points per year to 16% of turnover (18.4% in 2017)
Strictly control capital expenditures, the overall expenditure is limited to about 6.5% of turnover
Return on Organic Capital (ROCE) is increased by approximately 1% per year
Merger capital
Mainly used in the field of nutrition, because the nutrition business has more growth potential, resilience, and leading position, more value creation potential
Capital allocation that drives earnings per share (EPS) higher than EBITDA growth
Dividend increase is linked to underlying income growth
Steady and rising dividend distribution policy remains unchanged
In 2018, DSM plans to pay a dividend of 2.3 euros per common share, up 25% year-on-year. The 2018 interim dividend will be cashed initially.
DSM's strong performance will support further dividend increases, with dividends expected to average 40-50% of adjusted base earnings
Cash allocation policy remains unchanged
Clear cash deployment priorities
Strictly abide by capital expenditure regulations and promote organic growth: capital expenditure will account for 6.5% of annual sales
The dividend has risen steadily
Strictly abide by the M&A policy, M&A is mainly concentrated in the field of nutrition
In the absence of a value-creating merger, capital will be returned to shareholders
DSM will continue to maintain a high investment grade credit rating