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DSM Finalizes Portfolio Transformation and Enters Era of Focused Growth

Published on 2010-09-23. Author : SpecialChem

DSM in motion: driving focused growth

Royal DSM N.V., the global Life Sciences and Materials Sciences company headquartered in the Netherlands, announces ambitious new targets as key elements of its new strategy, DSM in motion: driving focused growth. This strategy further builds on Vision 2010, a phase of portfolio transformation during which DSM achieved most of its targets despite the economic downturn.

DSM in motion: driving focused growth marks the shift from an era of intensive portfolio management to a strategy of maximizing sustainable, profitable growth of the 'new' DSM. It is the company's ambition to fully leverage the unique opportunities in Life Sciences and Materials Sciences.

The four growth drivers - High Growth Economies, Innovation, Sustainability and Acquisitions & Partnerships - will result in growth across all businesses and regions:

  • High Growth Economies: from reaching out to becoming truly global DSM's ambition is to accelerate growth in high growth economies. DSM expects the high growth economies to contribute from currently ~32% towards 50% of DSM's total net sales by 2015. Over 70% of DSM's total growth in the period to 2015 is expected to come from high growth economies. DSM will continue its strong focus on China and expects to more than double its China sales to > $ 3.0 billion by 2015, supported by intended capital expenditures of $ 1 billion.
  • Innovation: from 'building the machine' to doubling the output DSM aspires to take value creation from innovation to the next level. In addition to its regional R&D centers, DSM will open new Innovation Centers in China and India. The next level will result in an even higher speed of innovation. Consequently a new ambitious innovation target has been set. DSM aims to grow innovation sales (new products and applications introduced in the last five years) from ~12% currently to 20% of total net sales by 2015.
  • Sustainability: from responsibility to business driver DSM believes sustainability will be the key differentiator and value driver in the coming decades. DSM is uniquely positioned to capture new opportunities across the value chain. DSM aims for eighty percent of its pipeline to be ECO+ products. In 2015 ECO+ products are expected to account for 50% of the total net sales compared to less than 35% now.
  • Acquisitions & Partnerships: from portfolio transformation to growth DSM's focus for the future will be on market-driven organic growth enhanced by acquisitions and partnerships. DSM applies stringent strategic and financial criteria to potential acquisitions or partnerships.

To realize its growth ambitions, DSM is transforming its organization and culture to become truly global and agile. DSM will strengthen its regional businesses. Accountability for regional growth and synergy will be allocated to designated members of the Managing Board. DSM also intends to relocate the headquarters of the business groups DSM Anti-Infectives, DSM Engineering Plastics and DSM Fibre Intermediates to Asia to be closer to their key markets and customers. DSM Biomedical intends to move its headquarters to the United States.

The above growth drivers apply to all businesses with their strategies as outlined below.

Cluster strategies

Nutrition: continued value growth Building on the successful value creation of the past years, the Nutrition cluster will focus on further improving the quality of earnings and leveraging the scale and scope of its global activities. This will be done by growing and strengthening the core of the cluster's businesses while also developing new business areas. The focus will be on structural cost improvements, building on the successful differentiation and innovation strategy, expansion of its premix network and pursuing acquisitions and partnerships.

The aspirations for the Nutrition cluster are a sales growth of 2% above GDP and a sustainable EBITDA-margin level of more than 20% towards 23%.

Pharma: leveraging partnerships for growth

DSM's Pharma cluster has faced considerable challenges due to a shifting pharma landscape.

DSM Anti-Infectives (DAI) has successfully tackled key issues and transformed its business. To exploit its unique technology position, DSM is building a new, industry leading 6-APA plant in China, which will make the business less dependent on external penicillin sources. The business is adding differentiated, higher-value specialty products to the range and can now grow on its own strength. Nevertheless, DSM remains convinced that growth and profit improvement in DAI can be accelerated via an alliance or partnership in Asia and is actively pursuing this option.

DSM Pharmaceutical Products' (DPP) business environment is very challenging as its customers continue to focus more on cost, especially in view of healthcare budget pressures. At the same time, there is a shift towards generics and high growth economies. A partnership strategy for DPP - with a focus on Asia - to enhance and accelerate growth, is the fastest way to improve results.

DSM aspires to restore the cluster's profitability back towards an EBITDA-margin of 15-20% range by 2015.

Performance Materials: growing via sustainable, innovative solutions

In Performance Materials, DSM continues to focus on high performance, ECO+ solutions, driven by customer and end-user demands for stronger and lighter materials and environmentally friendly coatings. The businesses in the cluster have achieved strong leadership positions in chosen segments.

In these segments, DSM seeks to strengthen and expand its leadership positions, also with acquisitions and partnerships. In high growth economies, strong sales growth is foreseen. With the great majority of innovations driven by sustainability, the cluster is recognized as a front-runner in this field.

For the cluster, DSM has an aspiration of sales growth at double GDP level and an EBITDA-margin level of more than 17% by 2015.

Polymer Intermediates: strengthening backward integration for DEP

Polymer Intermediates has a uniquely strong starting point: its global market position, a solid partnership in China, excellent performance, technological leadership and a growing, captive supply to DSM Engineering Plastics in the three key regions.

Due to the backward integration, DSM Engineering Plastics will benefit from a further strengthening of Polymer Intermediates' market and technology position. By building a next generation second production line as part of its joint venture in China, DSM aims to double its capacity in the country by 2014. At the same time, DSM will limit its exposure and capital intensity via partnerships and joint ventures.

The aspiration for the cluster is an EBITDA-margin of approximately 14% over the cycle.

Emerging Business Areas: Build new growth platforms

Emerging Business Areas (EBAs) were launched five years ago to develop new growth platforms, building on the strengths and synergies of DSM's position in Life Sciences and Materials Sciences. Two EBAs have developed well and have evolved into two large business opportunities: White Biotechnology (which will be renamed to DSM Bio-based Products & Services) and DSM Biomedical. Both EBAs will be taken to the next level. A new EBA, DSM Advanced Surfaces, will be established.

An ambitious growth perspective of a combined turnover of € 1 billion by 2020 has been formulated for the Emerging Business Areas.

Ambitious targets

DSM announces ambitious new targets based on its leading technologies in Life Sciences and Materials Sciences, and to be delivered through its four business clusters - Nutrition, Pharma, Performance Materials and Polymer Intermediates - and its Emerging Business Areas:The company does not envisage any further significant divestments out of its current core portfolio during this next strategy period.

About DSM:

Royal DSM N.V. creates solutions that nourish, protect and improve performance. Its end markets include human and animal nutrition and health, personal care, pharmaceuticals, automotive, coatings and paint, electrical and electronics, life protection and housing. DSM manages its business with a focus on the triple bottom line of economic performance, environmental quality and social responsibility, which it pursues simultaneously and in parallel. DSM has annual net sales of about €8 billion and employs some 22,700 people worldwide. The company is headquartered in the Netherlands, with locations on five continents. DSM is listed on Euronext Amsterdam.

Source: DSM


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