Growth & Value - Purpose led, Performance driven.
We’ve set two ambitious targets for profit growth and cash generation for the period 2019-2021: high single-digit annual percentage increase in Adjusted EBITDA and about 10% average annual increase in adjusted net operating cash flow.
Purpose sets scope for further growth and evolution
With its unique science-based competences, DSM is ideally positioned to capture the growth opportunities offered by the global megatrends and Sustainable Development Goals (SDGs), with a particular focus on Nutrition & Health, Climate & Energy and Resources & Circularity.
DSM will therefore evolve into a Nutrition, Health and Sustainable Living company:
- DSM’s Nutrition business will focus on human nutrition (ingredients and solutions for food & beverages, as well as specialty nutrition, nutritional ingredients, consumer branded products and personalized nutrition), animal nutrition (covering all species with premix and specialty solutions) and personal care and aroma ingredients; while,
- DSM’s Materials business will further develop into a high-growth, higher-margin specialty business and focus on health, bio/green applications and new mobility & connectivity applications.
By improving the impact of its own operations, enabling sustainable solutions for its customers and advocating sustainable business, DSM can grow faster and reduce its cost and risk profile. DSM will further step-up its ambitions regarding the reduction of GHG emissions, energy efficiency and use of renewable energy.
Performance-driven to deliver growth and value
DSM has set two ambitious targets for profit growth and cash generation to drive value creation for the period 2019-2021:
- High single-digit annual percentage increase in Adjusted EBITDA
- About 10% average annual increase in adjusted net operating cash flow
These financial targets will be supported by an holistic value-creation approach.
DSM is committed to top-line growth ahead of market, resulting in about 5% organic growth, that will be supported by expanded solutions offerings, putting the customer even more in the center, and the delivery of large innovation projects. Approximately 45% of sales will come from high growth economies and 20% of sales will come from innovation. DSM continues to invest in differentiating science and technology with circa 5% of sales and harness digital capabilities to increase customer intimacy, improve productivity/efficiency and support new business models.
Greater efficiencies and an increased focus on higher-margin specialty solutions will enable new Adjusted EBITDA margin ambitions by 2021 for Nutrition (over 20%) and Materials (18-20%). Organic top-line growth combined with these enhanced margins will drive DSM’s high single-digit Adjusted EBITDA growth.
DSM aims to accelerate growth in adjusted net operating free cash flow of about 10% average annual increase. This results in the ambition to reduce working capital levels of around 50 bps annually to about 16% of sales (from 18.4% in 2017), a disciplined approach to capex with an overall level of approximately 6.5% of sales, and the ambition to drive improvements in organic ROCE of around 1% annually.
DSM’s overall deployment of capital is expected to drive Adjusted EPS growth ahead of Adjusted EBITDA growth.
DSM cash allocation policy remains unchanged and has a clear order of priority for cash deployment:
- Disciplined capex for organic growth: about 6.5% of annual sales;
- A stable, preferably rising dividend;
- Disciplined M&A, predominantly in Nutrition;
- In the absence of value-creating M&A, capital to be returned to shareholders.
DSM remains committed to maintaining a strong, investment grade credit rating.
While keeping its policy of a stable, preferably rising dividend unchanged, DSM will propose a dividend increase of about 25% to €2.30 per ordinary share over 2018, already reflected in the interim dividend over 2018 to be paid 24 August 2018. This step-up in dividend is linked to underlying earnings growth. In line with the targets set for the period 2019-21, DSM’s performance is expected to result in further dividend growth, which could lead to an expected average payout of 40-50% of adjusted (underlying) earnings.
DSM targets M&A predominantly in Nutrition given its growth potential, resilience, strong leadership position and value creation potential.