The Netherlands-based company announced its refined strategy and financial goals during its Capital Markets Day on Thursday.
The new focus areas were released in mid-2018 as the company is coming to the end of a previous multi-year plan that was set to culminate at the end of 2018, said Feike Sijbesma, CEO and chairman of DSM’s managing board. In the preceding period, the company went through stages of divesting and acquiring businesses to change DMS and it's portfolio.
“We changed DSM – we changed the portfolio, and the last couple of years we’ve showed that that portfolio can grow, can grow above market, [and] that the portfolio can deliver the right financial returns,” he said in a conference call. “We overachieved on all targets, therefore we’ve pulled forward this strategic update to mid-2018 instead of the end of 2018.”
Looking forward, the next stage for DSM is to continue to sharpen its focus on work in specific areas – nutrition, which includes animal nutrition, health and sustainable living, he said.
“We address three important domains, we address the domain of nutrition and health which people are concerned about, we address climate and energy people are concerned about, about scarce resources and the circle economy,” he said.
Growing the company sustainably
DSM also will be able to align its efforts with the UN sustainable development goals, said Sijbesma.
“We can do well and we can do good for the world at the same moment,” he said. “We believe increasingly the combination of the two will be important – it’s not either or.”
“In the future you have to do both together, to give a contribution to the world and your financial results,” he added. “Clean cow is a good example of that – a product in nutrition [it is] a new feed ingredient that is addressing climate and reduction of emissions.”
The clean cow feed ingredient is demonstrating that ability, when used as a feed additive to reduce enteric methane emissions, the company reported. DSM is currently preparing for registration and completing commercial trials.
Other company initiatives in a similar space could include efforts with enzymes and yeast, eubiotics and gut health and the work DSM is doing on Veramaris, it said. The Veramaris joint venture project is seeking to provide a sustainable EPA/DHA fish feed ingredient.
A goal for the animal nutrition segment is to continue to have business growth be above market growth, which is expected to be about 2-3% per year, the company said.
Additionally, the focus of the company will look to expand the work done in animal nutrition along with efforts in the food and beverage spaces, consumer brands, personalized nutrition and nutritional ingredients, said Sijbesma.
The sharpening of the company’s focus also is intended to provide more guidance to the materials side of the business by indicating areas where it is important to operate or to not operate, he said.
Not all company growth is expected to be organic, he said. DSM has been lowering its net debt and generating cash, which is expected to allow for more flexibility in acquisitions predominantly in the nutrition space.
As “a company that is exactly positioned in the right growth domains with our innovation programs we can really show a difference there to the world,” he said. “Financially we can grow faster top line, we can grow faster bottom line, we can grow faster in our cash generation and we can grow also inorganically via M&A.”
The company also announced that it is planning to provide a 25% dividend increase starting later this year.
“Now, for the first time, we announce a step up of 25% already applying to the interim dividend [in] August coming,” said Sijbesma. “That indicates a little bit our trust into the future otherwise we would not do that. We feel very comfortable with this strategy that DSM is on the right track.”
The two financial targets set for the 2019-2021 period include providing high single-digit EBITDA growth and cash growth, he said. The adjusted net operating cash flow is forecast to be about 10% a year, up from about 5% previously.