Animal Nutrition unit sees strong year
DSM’s robust fourth quarter contributed to strong results for its 2018 fiscal year, it reported on Thursday.
Adjusted EBITDA was up 26 percent, including EUR290 million (US$327.7 million) in temporary vitamin effect due to exceptional supply disruptions in the industry in the first nine months. Adjusted net profit of EUR1,034 million was up 46 percent, with net profit of EUR1,079 million.
“This has been again a record year in which we successfully completed Strategy 2016-2018, outperforming our ambitious financial and sustainability targets, said DSM CEO Feike Sijbesma. “We have created a strong platform of solution-led, higher value specialty products in Nutrition, Health & Sustainable Living. This has positioned the company well to drive continued above market organic growth and deliver further improvement in profitability, shareholder return and sustainability as we execute Strategy 2021 Purpose led, Performance driven.
“During the fourth quarter, Nutrition performed well once again, with continued good business conditions, whilst Materials delivered solid results, despite softness in some of its end-markets.”
Animal Nutrition delivered a strong year, with 8 percent organic growth in the underlying business. Volumes showed 4 percent growth, achieved against a tough prior year. Business conditions in almost all regions were favorable in 2018. Sales to Brazil were softer due to temporary shutdowns, mainly caused by strikes in the second quarter.
Prices in the underlying business increased by 4 percent driven by pricing initiatives to mitigate higher costs of sourced ingredients and the impact of negative exchange rate developments. Furthermore, prices were supported by the effects of the “Blue Skies policies” in China.
In 2018, DSM made significant progress in Veramaris, the joint venture with Evonik to produce the omega-3 fatty acids EPA and DHA from natural marine algae as an alternative to fish oil-based omega-3. Norwegian salmon producer Lingalaks AS has started to replace fish oil by feeding 50 percent of their salmon a diet which includes omega-3 oil produced by Veramaris, in order to ensure greater sustainability and differentiation of their products. DSM also made good progress with Project Clean Cow, the new, highly innovative, feed solution that reduces methane emissions from cattle by more than 30 percent. DSM has successfully gathered the data needed to file for regulatory approvals in targeted launch markets for this project.
DSM expects to deliver a full-year 2019 mid-to-high single-digit increase in adjusted EBITDA compared with prior year underlying adjusted EBITDA (pre-temporary vitamin effect), together with an improvement in underlying adjusted net operating free cash flow in line with its Strategy 2021 targets.
DSM intends to repurchase ordinary shares with an aggregate market value of EUR1 billion starting in the second quarter of 2019, with the intention to reduce its issued capital. This will be in addition to the usual repurchase programs which DSM executes from time to time to cover commitments under share-based compensation plans and the stock dividend.