KAISERAUGST, Switzerland and HEERLEN, Netherlands, Feb. 15, 2024 /PRNewswire/ —
Management Report
2023 highlights
Successful creation of dsm-firmenich with integration well ahead of planMerger-related cost and sales synergies gaining tractionAnimal Nutrition & Health to be separated from the GroupSolid performance across the company, significantly impacted by unprecedented low vitamin pricesGood operating cash flow driven by a strong performance in the second halfStable dividend of €2.50 proposedSynergies and the vitamin transformation programs will deliver a significant earnings step-up in 2024 and beyondOutlook 2024: Adjusted EBITDA of at least €1.9 billion
Key figures
in € millions
Pro forma
FY 2023¹
Pro forma
FY 2022¹
% Change
Actual
Q4 2023
Pro forma
Q4 2022¹
% Change
Sales
12,310
13,238
(7)
3,112
3,295
(6)
Organic sales growth (%)
(5)
(3)
Adj. EBITDA
1,777
2,275
(22)
439
499
(12)
Adj. EBITDA margin (%)
14.4
17.2
14.1
15.1
Core adj. net profit
555
1,013
(45)
1 Represents the figures on a pro forma basis, including the Firmenich results as if the merger had occurred on January 1, 2022. The pro forma figures represent the results from continuing operations – please also refer to the section Definitions.
Key figures on an IFRS basis2
in € millions
FY 2023
FY 2022
% Change
Sales
10,627
8,390
27
Net profit from continuing operations
(636)
475
(234)
Net profit (total group)
2,153
1,715
26
2 Represents the figures on an IFRS basis, including the Firmenich results as of the merger date May 8, 2023.
Dimitri de Vreeze, CEO, commented: “We are proud that the company is already operating seamlessly with integration well ahead of plan, including the development of a common culture, as demonstrated in our recent employee engagement survey. Our employees have done a truly amazing job building momentum, positioning dsm-firmenich as a world leader in nutrition, health and beauty.
In light of the unprecedented conditions with very low vitamin prices and a continued destocking cycle, we took a number of immediate and effective actions. We accelerated our plans for driving through additional self-help measures and advanced the review of all our business segments. This led us to the initiation of a process to separate out the Animal Nutrition & Health business from the Group which we announced today. This should strongly reduce our exposure to vitamins earnings volatility and reduce our capital intensity in line with our long-term strategy. We believe that the full potential of the ANH business could be best realized through a different ownership structure.
Supported by our exciting innovation pipeline, all these actions would help us to prioritize and accelerate the company’s nutrition, health and beauty high-growth and higher-margin businesses, all of which is reflected in our mid-term financial targets.”
Outlook 2024
As the global political and economic environment remains uncertain, and given that it is early in the year, we feel it prudent to base our full year outlook for the entire company only on those elements which are under our control, namely a €200 million step-up in Adjusted EBITDA from a combination of synergy delivery and the vitamin transformation program. Considering that the full negative vitamin effect emerged only in Q2 2023, the effective Adjusted EBITDA run-rate in the period Q2-Q4 2023 on an annualized basis was about €1.7 billion, the company estimates for FY 2024 Adjusted EBITDA of at least €1.9 billion.
Strategy
The merger of DSM and Firmenich created a world-leader in nutrition, health and beauty, through which its highly integrated portfolio of nutritional, natural and renewable ingredients, together with complementary science capabilities and technologies, will deliver superior innovation-led growth.
By creatively applying proven science and drawing on data-driven innovation capabilities as well as exceptional standards of operational excellence, dsm-firmenich seeks to tackle the tension between what society needs, what people individually want, and what the planet demands in the areas of nutrition, health and beauty. By working closely together with customers to create what is essential for life as well as desirable for consumers yet simultaneously more sustainable for the planet, dsm-firmenich is poised to bring progress to life for billions of people around the world.
dsm-firmenich is a purpose-led company where people and planet as well as financial success are at the core of its strategy that is aimed at further enhancing its positive impact in the world, continually raising the bar to help tackle climate change, protect nature, and care for people all along the value chain.
Delivering synergies through integration
dsm-firmenich is on track to achieve its target synergies of approximately €350 million Adjusted EBITDA per year. Around half of this is expected to come from cost efficiencies, with the full run rate achieved by the end of year 3. Initial benefits of about €15 million were delivered in Q4. The remaining synergies are expected from incremental revenues of €500 million, generated by an acceleration of innovation with customers. There has been good early progress and the full run rate is still expected by the end of year 4. These revenue synergies are driven by complementary capabilities and realized in the three business units with the strongest strategic adjacency – Perfumery & Beauty (P&B); Taste, Texture & Health (TTH); and Health, Nutrition & Care (HNC) – with roughly the following balance:
60% in TTH business unit25% in HNC business unit15% in P&B business unit
Overall, we expect to see an Adjusted EBITDA contribution of about €100 million in 2024, coming mainly from cost synergies.
Separation of Animal Nutrition & Health from the Group
The Company initiates a process to carve-out and separate out the Animal Nutrition & Health (ANH) business from the Group. Full focus on nutrition, health, and beauty would enable dsm-firmenich to better drive superior innovation-led growth. Separating out Animal Nutrition & Health from the Group would minimize dsm-firmenich’s exposure to vitamins earnings volatility and reduce capital intensity in line with its long-term strategy. The Company believes that the full potential of the ANH business could be best realized through a different ownership structure for which all potential separation options will be considered. The Company would expect to be in a position to separate the business in the course of 2025.
Progressing the vitamin transformation program
In mid-2023 the company embarked on a major restructuring program in its vitamin activities to reduce costs and restore profitability. This program is expected to result in an estimated Adjusted EBITDA contribution of around €200 million per year with the full run rate to be reached by the end of 2024. These savings will be in addition to the previously announced €350 million Adjusted EBITDA synergies target. Neither of these targets will be disrupted by the separation of Animal Nutrition and Health.
dsm-firmenich has already made strong progress in executing the program through the closure of the Xinghuo vitamin B6 plant in China and shutting down the Jiangshan vitamin C production in China. The sales model now supports a ‘go-to-market’ approach which is simpler and more efficient in the current market environment.
In Q4 2023, the program generated an about €10 million savings contribution to Adjusted EBITDA. For 2024, dsm-firmenich expects to achieve an additional around €100 million Adjusted EBITDA contribution.
Stable dividend
At the Annual General Meeting on May 7, 2024, dsm-firmenich’s Board of Directors will propose a cash dividend of €2.50 per share for the financial year 2023.
Key figures and indicators
in € millions
Pro forma
FY 2023¹
Pro forma
FY 2022¹
% Change
Actual
Q4 2023
Pro forma
Q4 2022¹
% Change
Net sales
12,310
13,238
(7)
3,112
3,295
(6)
P&B
3,709
3,792
(2)
914
916
(0)
TTH
3,038
3,174
(4)
768
806
(5)
HNC
2,270
2,418
(6)
581
587
(1)
ANH
3,227
3,784
(15)
833
971
(14)
Corporate
66
70
(6)
16
15
7
Adj. EBITDA
1,777
2,275
(22)
439
499
(12)
P&B
783
748
5
192
166
16
TTH
556
549
1
133
137
(3)
HNC
389
533
(27)
94
121
(22)
ANH
128
524
(76)
32
95
(66)
Corporate
(79)
(79)
–
(12)
(20)
(40)
Adj. EBITDA margin (%)
14.4
17.2
14.1
15.1
P&B
21.1
19.7
21.0
18.1
TTH
18.3
17.3
17.3
17.0
HNC
17.1
22.0
16.2
20.6
ANH
4.0
13.8
3.8
9.8
Adj. EBIT
666
1,361
(51)
.
Core adj. EBIT
850
1,361
(38)
Core adj. net profit
555
1,013
(45)
.
Average number of shares (x millions)
265.1
264.5
Core adj. EPS
2.03
3.77
.
(Avg.) core capital employed
16,423
16,271
Core adj. ROCE (%)
5.2
8.4
.
Operating working capital
3,872
4,021
Capital expenditures (cash)
734
775
Adj. gross operating free cash flow
999
918
1 Represents the figures on a pro forma basis, including the Firmenich results as if the merger had occurred on January 1, 2022. The pro forma figures represent the results from continuing operations – please also refer to the section Definitions.
Key figures and indicators on an IFRS basis2
in € millions
FY 2023
FY 2022
% Change
Net sales
10,627
8,390
27
EBITDA
810
1,304
(38)
EBITDA margin (%)
7.6
15.5
EBIT
(497)
682
(173)
Net profit (total group)
2,153
1,715
Net EPS (total group)
9.14
9.80
.
Effective tax rate (%)
2.8
20.9
Net debt
(2,215)
(87)
Workforce (headcount)
29,367
20,6823
2 Represents the figures on an IFRS basis, including the Firmenich results as of the merger date May 8, 2023
3 Refers to total group, including discontinued operations.
dsm-firmenich FY 2023 and Q4
in € millions
Pro forma
FY 2023¹
Pro forma
FY 2022¹
% Change
Actual
Q4 2023
Pro forma
Q4 2022¹
% Change
Sales
12,310
13,238
(7)
3,112
3,295
(6)
Organic sales growth (%)
(5)
(3)
Adj. EBITDA
1,777
2,275
(22)
439
499
(12)
Adj. EBITDA margin (%)
14.4
17.2
14.1
15.1
1 Represents the figures on a pro forma basis, including the Firmenich results as if the merger had occurred on January 1, 2022. The pro forma figures represent the results from continuing operations – please also refer to the section Definitions.
FY 2023
Good performance in Perfumery & Beauty (P&B)Solid performance in Taste, Texture & Health (TTH)Weak performance in Animal Nutrition & Health (ANH), and Health, Nutrition & Care (HNC) on exceptionally low vitamin prices and persistent de-stocking
The results for the full year were impacted by a combination of unprecedented market dynamics that led to very low vitamin prices, together with a deep destocking cycle.
Adjusted EBITDA, significantly impacted by the vitamin effect and foreign exchange was 22% lower than in the prior year, resulting in a 280bps margin decline. This includes a negative vitamin effect which is estimated at about €500 million. Without this effect, the Adjusted EBITDA would have been in line with prior year, despite a negative foreign exchange effect of about €90 million.
Q4 2023
Market conditions broadly unchangedFirst contribution from self-help initiatives materializedStrong cash flow generation, driven by disciplined action on inventory management
P&B continued to perform well, against a soft prior year comparable period, with TTH remaining resilient. ANH and HNC continued to see the same unprecedented market conditions. The quarter was notable by strong cashflow generation owing to a greater focus on, in particular, improving working capital through inventory reduction, together with the first benefits of cost synergies being realized.
Adjusted EBITDA was down 12%, owing mainly to the ongoing vitamin effect and destocking. The negative vitamin effect was estimated around €120 million and negative foreign exchange effect was slightly more than €20 million. Without this negative vitamin effect, Adjusted EBITDA would have been 24% higher than reported, despite a 5% negative FX effect. The quarter saw the initial contribution from the integration synergies of about €15 million and, in addition, savings of around €10 million from the vitamin transformation program.
Note for editors:
The full text of the press release is available here.
The presentation to investors is available here.
Financial calendar
February 22, 2024: North American Investor Event in Princeton, USA
May 2, 2024: Q1 2024 trading update
May 7, 2024: Annual General Meeting
June 3, 2024: Capital Markets Day in Paris
July 30, 2024: H1 2024 financial results
October 31, 2024: Q3 2024 trading update
Additional information
Today dsm-firmenich will hold a webcast for investors and analysts at 9:00 am CET. Details on how to access this call can be found on the dsm-firmenich website, www.dsm-firmenich.com.
For more information
Media relations
Ingvild Van Lysebetten
tel. +41 (0)79 833 72 52
e-mail media@dsm-firmenich.com
Investor relations
Dave Huizing
tel. +31 (0)45 578 2864
e-mail investors@dsm-firmenich.com
About dsm-firmenich
As innovators in nutrition, health, and beauty, dsm-firmenich reinvents, manufactures, and combines vital nutrients, flavors, and fragrances for the world’s growing population to thrive. With our comprehensive range of solutions, with natural and renewable ingredients and renowned science and technology capabilities, we work to create what is essential for life, desirable for consumers, and more sustainable for the planet. dsm-firmenich is a Swiss-Dutch company, listed on the Euronext Amsterdam, with operations in almost 60 countries and revenues of more than €12 billion. With a diverse, worldwide team of nearly 30,000 employees, we bring progress to life™ every day, everywhere, for billions of people.
www.dsm-firmenich.com
Forward-looking statements
This press release may contain forward-looking statements with respect to dsm-firmenich’s future (financial) performance and position. Such statements are based on current expectations, estimates and projections of dsm-firmenich and information currently available to the company. dsm-firmenich cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should be understood that many factors can cause actual performance and position to differ materially from these statements. dsm-firmenich has no obligation to update the statements contained in this press release, unless required by law. The English language version of this press release prevails over other language versions.
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