Our ambitious financial targets

Growth & Value: Purpose-led, Performance-driven

Strategy 2019-2021

On 20 June 2018 DSM presented?Growth & Value - Purpose-led, Performance-driven, its corporate strategy for the period 2019-2021.

DSM’s strong growth platform, centered on developing innovative solutions addressing Nutrition & Health, Climate & Energy and Resources & Circularity, together with increased customer centricity and its large innovation projects, will drive above-market growth, while DSM will remain focused on cost control and operational excellence, allowing it to accelerate profit and cash generation. Organic growth will be complemented by acquisitions, predominantly in Nutrition.

1) Based on ‘underlying business’ 2018 Base Line corrected for the temporary vitamin effect.
2) Adjusted net operating free cash flow is cash flow before share purchases?for options/ exercise of options, interest, dividend, M&A and financing?activities.

Financial targets 2019-2021

DSM has set two ambitious targets for profit growth and cash generation to drive value creation for the period 2019-20211:

  1. High single-digit annual percentage increase in Adjusted EBITDA
  2. About 10% average annual increase in adjusted net operating cash flow2

These financial targets will be supported by an holistic value-creation approach:

2021 targets1

High single-digit percentage annual Adjusted EBITDA?increase

~10% average annual Adjusted net operating free cash flow2?increase
?

Ambitions underpinning our targets1

1. Sales Above-market sales growth (~5%) for Group, Nutrition and Materials
2. Adjusted EBITDA margin Nutrition: >20%
Materials: 18-20%
?
3. Working capital Reduce by 50 bps annually to ~16%
4. Capex ~6.5% of sales
5. ROCE ~1% point increase per annum
6. Adjusted EPS Increase ahead of Adjusted EBITDA growth

1) Based on 2018 underlying business, defined as Sales and Adjusted EBITDA corrected for DSM's best estimate of the temporary vitamin effect.
2) Adjusted net operating free cash flow is the cash flow from operating activities, corrected for the cash flow of the APM adjustments, minus the cash flow of Capital expenditures and drawing rights.

Ambitions underpinning targets

Sales1

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.

Adjusted EBITDA margin1

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.

Working Capital, CAPEX & ROCE1

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.

Adjusted EPS1

DSM’s overall deployment of capital is expected to drive Adjusted EPS growth ahead of Adjusted EBITDA growth.

1) Based on ‘underlying business’, 2018 baseline is corrected for the temporary vitamin effect.

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.

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 paid on 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 remains committed to maintaining a strong, investment grade?credit rating.

DSM targets M&A predominantly in Nutrition given its growth potential, resilience, strong leadership position and value creation potential.

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  • Key financials

    DSM's latest net sales from continuing operations, adjusted net earnings per ordinary share, balance sheet, income statement and cash flow statement

  • Share center

    DSM's ordinary shares, share performance, share listings, share structure, cumulative preference shares and shareholder base.

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