- DSM records 19% higher Q2 EBITDA versus Q2 2012 (€345 million versus €290 million)
- Nutrition EBITDA up 28% versus Q2 2012 driven by acquisitions and organic growth
- Materials Sciences continues to deliver a solid performance
- Q2 cash flow from operating activities €231 million, higher than Q2 2012 and Q1 2013
- Core earnings per share Q2 2013 up 28% compared to Q2 2012
- Interim dividend of €0.50, in line with DSM's dividend policy
- Outlook 2013 unchanged, moving towards EBITDA of €1.4 billion

Royal DSM, the Life Sciences and Materials Sciences company, today reported a second quarter EBITDA of €345 million compared to €290 million in Q2 2012 and €311 million in Q1 2013. The improvement compared to Q2 2012 was realized despite a negative caprolactam effect of €20 million and a challenging macro-economic environment, which mainly affected Materials Sciences.

Commenting on the results, Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said:
"We are pleased to report that the momentum in our Nutrition business that we saw at the end of Q1 continued into Q2. Nutrition, with its higher profits and healthy margins, is demonstrating the quality of its broad offering across the value chain. Materials Sciences' profit remained at the same level as last year despite a negative caprolactam impact of €20 million and a challenging market environment."

"For the rest of this year, we will continue to fully focus on operational performance and on the integration of our acquisitions, ensuring the capture of synergies. In addition, the early successes of our profit improvement initiatives leave us confident that this group-wide program is well on track. We expect strong EBITDA growth in 2013, moving towards €1.4 billion."

Review by cluster

Nutrition
Sales in Q2 rose 23% compared to Q2 2012, driven primarily by acquisitions. Organic sales growth was 3% versus Q2 2012, with strong volume growth (6%) partly offset by lower prices (-3%). Overall prices have stabilized compared to Q1 2013 as DSM continues to pursue its value over volume strategy.

EBITDA for Q2 was €249 million, up 28% compared to Q2 2012, driven by acquisitions, organic growth and strong operational performance including cost savings. The EBITDA margin of 22.5% was at the upper end of DSM's target range due to a favorable mix.

Human Nutrition & Health delivered 6% organic growth in Q2 versus Q2 2012, driven by healthy volume growth. A particularly strong performance was delivered in infant nutrition, dietary supplements and premixes. In Q2 Fortitech realized sales of €49 million and EBITDA of €11 million in line with expectations.

Animal Nutrition & Health experienced an organic sales decrease of 3% in Q2 compared to Q2 2012, due to lower prices, which have now stabilized, offsetting higher volumes. Compared to the previous quarter, Q2 2013 showed organic growth of 5%, driven by higher volumes due to recovery in meat production, despite temporarily lower sales for poultry in China as a result of the avian flu. Tortuga delivered a good result in Q2 with sales of €98 million and EBITDA of €18 million in line with expectations.

Food Specialties showed healthy sales growth through a combination of organic growth and the contribution of the acquired cultures and enzymes business.

Pharma
Organic sales growth was 4% compared to Q2 2012, mainly driven by higher volumes at DSM Pharmaceutical Products. Sales of DSM Sinochem Pharmaceuticals were at the same level as in Q2 2012.

EBITDA for the quarter was €14 million versus €17 million in the same quarter last year (of which €7 million due to a non-recurring profit coming from the restructuring of the Biosimilar activities in Q2 2012). Higher sales at DSM Pharmaceutical Products and cost savings positively contributed to a higher underlying result for the cluster.

Performance Materials

Organic sales growth in Q2 was 3%. Volumes were up in all three business groups compared to the same period last year, mainly because of new business through application development. Prices were down at DSM Resins & Functional Materials and DSM Engineering Plastics, with the latter being impacted by lower polyamide-6 prices reflecting lower caprolactam prices. Prices were stable at DSM Dyneema.

EBITDA for Q2 was up in all three business groups compared to the same period last year. Volume growth and the impact of the Profit Improvement Program offset lower prices. EBITDA of the specialty businesses in DSM Engineering Plastics more than compensated for the lower results in polyamide-6.

Polymer Intermediates

Organic sales development was -3% compared to Q2 2012, with higher volumes unable to fully compensate for lower prices.

EBITDA for the quarter was slightly lower than Q2 2012. Higher volumes, license income and the initial benefits of the cost savings programs largely offset lower caprolactam margins. The impact of the fire related shutdown of the caprolactam plants in the Netherlands was very limited.

Innovation Center
The strong growth in sales versus Q2 2012 was driven by DSM Biomedical, mainly due to the contribution of Kensey Nash (€17 million). All other activities at the Innovation Center were at the same level as in Q2 2012. The POET-DSM Advanced Biofuels joint venture continues to progress with the construction of its cellulosic bio-ethanol refinery, which is on track for timely completion.

EBITDA increased by €7 million compared to Q2 2012. This is fully attributable to the €7 million contribution of Kensey Nash in the quarter.

Corporate Activities
EBITDA in Q2 2013 was lower than in Q2 2012, which was mainly due to higher share-based payments costs as a result of a higher share price increase in Q2 2013 compared to Q2 2012 and non-recurring costs for the captive insurance company following the fire incident at DSM Fibre Intermediates, which were partly compensated for by lower corporate costs.

Financial overview
Exceptional items

Total exceptional items in the second quarter amounted to a loss of €41 million before tax (€29 million after tax). These included €28 million in expenses related to the Profit Improvement Program, €4 million for restructuring to capture acquisition related synergies and €9 million acquisition related costs.

Net profit
Financial income and expense in Q2 2013 amounted to -€38 million, which is €9 million more negative than Q2 2012. This was mainly caused by higher interest expense due to increased net debt and a change in presentation of pension related interest income and expense.

The effective tax rate was 18%, in line with the full year 2012.

Net profit before exceptional items in Q2 2013 increased by 24% and amounted to €141 million, compared to €117m in Q2 2012. This was mainly due to a higher operating profit, which was partly offset by higher net finance costs.

Core net profit (net profit before exceptional items and before acquisition accounting related intangible asset amortization) increased by 32% and amounted to €156 million, compared to €118 million in Q2 2013.

Net earnings per ordinary share (before exceptional items) increased by 18% and amounted to €0.79 in Q2 2013 compared to €0.67 in Q2 2012.

Core net earnings per share increased by 28% and amounted to €0.91 in Q2 2013 compared to €0.71 in Q2 2012.

Cash flow, capital expenditure and financing

Cash provided by operating activities in Q2 2013 was €231 million (Q2 2012: €197 million).

Operating working capital increased from €1,936 million at the end of 2012 to €2,291 million at the end of Q2 2013 (OWC as a percentage of annualized sales increased from 20.7% to 23.2%). Compared to the end of Q1 2013, the percentage decreased by 0.4%.

Cash used for capital expenditure amounted to €168 million in Q2 2013 compared to €162 million in Q2 2012. Capital expenditure in Q2 2013 included investments in the joint venture with POET for advanced biofuels and the second caprolactam line in China as well as the new ammonium sulfate plant for Polymer Intermediates.

Net debt increased by €598 million compared to year-end 2012 and stood at €2,266 million (gearing 27%).

Interim dividend
DSM's policy is to provide a stable and preferably rising dividend. It has been decided to pay an interim dividend of €0.50 per ordinary share for 2013. As usual, this represents one third of the total dividend paid for the previous year. The interim dividend should not be taken as an indication of the total dividend for the year 2013. The dividend will be payable in cash or in the form of ordinary shares, at the option of the shareholder. Dividend in cash will be paid after deduction of 15% Dutch dividend withholding tax. The ex-dividend date is 7 August 2013. The interim dividend will be payable as from 29 August 2013.

Strategy update
DSM in motion: driving focused growth is the strategy that the company embarked on in September 2010. It marks the shift from an era of intensive portfolio transformation to a strategy of maximizing sustainable and profitable growth. DSM's strategic focus on Life Sciences (Nutrition and Pharma) and Materials Sciences (Performance Materials and Polymer Intermediates) is fueled by three main societal trends: Global Shifts, Climate & Energy and Health & Wellness. DSM aims to meet the unmet needs resulting from these societal trends with innovative and sustainable solutions. Below is an overview of DSM's Q2 2013 achievements.

High Growth Economies: from reaching out to being truly global
Sales to High Growth Economies reached a level of 40% of total sales in Q2 2013 versus 39% in Q2 2012. The strongest contribution to growth in sales to High Growth Economies was in Nutrition through the acquisition of Tortuga in Latin America. Sales to China amounted to USD 403 million, versus USD 430 million in Q2 2012 as healthy growth in most businesses could not compensate for lower sales prices for caprolactam in China.

Innovation: from building the machine to doubling innovation output

Innovation sales in the first half of 2013 - measured as sales from innovative products and applications introduced in the last five years - reached 18% of total sales equal to the first half of 2012, which is close to DSM's 2015 target of approximately 20%. Examples of innovations, recently launched are:

OatWell® beta-glucan, a dietary supplement with clinically proven health benefits including cholesterol reduction, blood glucose control and gastrointestinal health.

Multirome® LS, a concentrated yeast extract produced with DSM's unique enzyme technology. By replacing the use of low salt basic yeast extracts with Multirome® LS, savory food producers can reduce the CO2 footprint of the yeast extracts they use by 81%.

EcoPaXX® , a high performance, 70% bio-based polyamide, which has been selected by Mercedes Benz for the engine cover in their new A-class, helping it to improve the carbon footprint of the car.

Beyone(TM) 1, a styrene and cobalt-free composite resin containing around 40% bio-based raw materials.

Sustainability: from responsibility to business driver

DSM launched some major Eco+ products in H1 2013. This increases Eco+ in the Innovation pipeline to 93% in H1 2013, which is above the 2015 aspiration of 80%. The Eco+ share in the running business was 41% in H1 2013, well on track towards the 2015 aspiration of 50%.

DSM announced plans to help provide effective nutrition interventions to 50 million beneficiaries (pregnant or lactating women, children under the age of 2) per year by 2020. This commitment is part of DSM's endorsement of the Global Nutrition for Growth Compact, which aims to provide 500 million beneficiaries with effective nutrition interventions by 2020.

DSM and World Vision, a global development organization, announced an ambitious partnership that aims to improve the lives of 165 million of the world's most vulnerable children under the age of five across the globe who are affected by stunted growth due to under-nutrition.

Acquisitions & Partnerships: from portfolio transformation to driving focused growth

DSM acquired Unitech Industries Limited, a New Zealand based producer of micronutrient premixes and blends for the rapidly growing Asian Nutrition & Health markets.

DSM further grew in Nutrition, by acquiring Bayer's animal nutrition premix business in the Philippines.

DSM signed agreements to acquire a 19% equity interest in Yantai Andre Pectin Co. Ltd., a China based producer of texturing ingredients. In addition a 10% stake has already been acquired from Hony Capital.

DSM continues to explore opportunities to reduce its exposure to the merchant caprolactam market as well as options for a partnership in DSM Pharmaceutical Products.

Outlook
The challenging macro-economic environment experienced during Q1 2013 continued, with little or no growth in Europe. Asia continues to show good levels of economic activity, though at more modest levels, while the US has maintained a modest rate of recovery.

DSM's outlook remains unchanged:

The Profit Improvement Program is fully on track and is expected to deliver structural annual EBITDA benefits of €150 million by 2014 and €200-250 million to be fully achieved by 2015.

Nutrition is expected to show clearly higher results than in 2012 due to organic growth moving towards the target of 2% above GDP and due to the acquisitions made.

Business conditions in Pharma are likely to remain challenging, but DSM is confident that it will be able to deliver substantially better results, notwithstanding the usual uneven delivery patterns between quarters.

Performance Materials is expected to show improved results in 2013, despite the expected negative effects of caprolactam, especially compared to the first half of 2012.

Polymer Intermediates is expected to show lower results than in 2012.

For the Innovation Center the activity level will be in line with 2012, with EBITDA clearly improving following the full year contribution of Kensey Nash. The result of the second half of 2013 is expected to be in line with the second half of 2012.

Overall, based on current economic assumptions, DSM expects a step up in EBITDA during 2013 due to stronger organic growth, supported by DSM's Profit Improvement Program and as the benefits of acquisitions and a more resilient portfolio has an increasing impact. In 2013 the focus is on the operational performance and the integration of the acquisitions DSM completed in 2012, with special attention to capturing synergies. Overall, based on current economic assumptions, the above will enable DSM to move towards its 2013 EBITDA target of €1.4 billion.

Additional information
Today DSM will hold a conference call for the media from 07.30 AM to 08.00 AM CET and a conference call for investors and analysts from 09.00 AM to 10.00 AM CET. Details on how to access these calls can be found on the DSM website, www.dsm.com. Also, information regarding DSM's result for the first half of 2013 can be found in the Presentation to Investors, which can be downloaded from the Investors section of the DSM website.


Important dates
Ex interim dividend quotation Wednesday, 7 August 2013
Record date Friday, 9
August 2013

Interim dividend payable Thursday, 29 August 2013

Report for the third quarter of 2013 Tuesday, 5 November 2013


Annual Report 2013 Wednesday, 26 February 2014

Report for the first quarter of 2014 Tuesday, 6 May 2014

Report for the second quarter of 2014 Tuesday, 5 August 2014

Report for the third quarter of 2014 Tuesday, 4 November 2014

DSM - Bright Science. Brighter Living.(TM)
Royal DSM is a global science-based company active in health, nutrition and materials. By connecting its unique competences in Life Sciences and Materials Sciences DSM is driving economic prosperity, environmental progress and social advances to create sustainable value for all stakeholders. DSM delivers innovative solutions that nourish, protect and improve performance in global markets such as food and dietary supplements, personal care, feed, pharmaceuticals, medical devices, automotive, paints, electrical and electronics, life protection, alternative energy and bio-based materials. DSM's 23,500 employees deliver annual net sales of around €9 billion. The company is listed on NYSE Euronext. More information can be found at www.dsm.com.


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