DSM: Factbook 2013

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DSM: Factbook 2013

  1. 1. Life Sciences and Materials Sciences DSM at a glance Factbook 2013
  2. 2. DSM, the Life Sciences and Materials Sciences company Our purpose is to create brighter lives for people today and generations to come. We connect our unique competences in Life Sciences and Materials Sciences to create solutions that nourish, protect and improve performance. DSM uses its Bright Science to create Brighter Living for people today and for generations to come. Based on a deep understanding of key global trends that are driving societies, markets and customers, DSM creates solutions to some of the world’s biggest chal- lenges, thus adding to both its own and its customers’ success. DSM believes that its continued success will be driven by its ability to create shared value for all stakeholders, now and in the fu- ture. It creates sustainable shared value by innovating in ways that allow its customers to provide better People, Planet and Profit solutions solutions to the challenges facing society, the environment and end-users. In this way, DSM’s customers derive value from being able to offer end-users improved products; society and the planet derive value from the impact of more sustainable, longer-lasting, safer, healthier and more nutritious alternatives; and, as a result, DSM and its shareholders derive value from stronger growth and profitability. Finally, DSM’s employees feel engaged and motivated both through the contribution they make to a better world and the success this creates for the company in which they work. DSM – Bright Science. Brighter Living.™ Royal DSM is a global science-based company active in health, nutrition and materials. By connecting its unique competences in Life Sciences and Materials Sciences DSM is driving economic prosperity, environmental progress and social advances to create sustainable value for all stakeholders. DSM delivers innovative solutions that nourish, protect and improve performance in global markets such as food and dietary supplements, personal care, feed, pharmaceuticals, medical devices, automotive, paints, electrical and electronics, life protection, alternative energy and bio-based materials. DSM’s 23,500 employees deliver annual net sales of around € 9 billion. The company is listed on NYSE Euronext. More information can be found at www.dsm.com. © 2013 Royal DSM. All rights reserved. Life Sciences and Materials Sciences
  3. 3. 3 Table of Contents Page 5 Bright Science. Bright Living.™ 7 Our businesses 9 Strategy 14 Overview key financial data 12 Clusters 16 Nutrition 26 Pharma 32 Performance Materials 40 Polymer Intermediates 44 Innovation Center 50 Sourcing/Purchasing 51 Organization 52 Share structure 53 Remuneration 54 History 55 Five Year Financial Summary 56 Disclaimer .
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  5. 5. 5 DSM has transformed itself into a leading Life Sciences and Materials Sciences company that is active in health, nutrition and materials and creates value for its customers by helping them provide solutions to the world’s great challenges. DSM uses its bright science to create brighter lives for people today and generations to come by providing the ingredients to devel- op innovative, more sustainable, healthier, more nutritious and better performing products. DSM has a very strong starting position to realize its ambitious growth targets as set in its strategy for the period till 2015, all based on its strong global market position (with about 38 per- cent of its total sales of € 9.1 billion coming from high growth economies), its unique technological knowledge as a basis for innovation, its strong track record in sustainability, its very solid balance sheet, and the experience and expertise of its 23,500 people. DSM believes that its continued success will be driven by creat- ing shared value for all stakeholders, now and in the future. It creates sustainable shared value by innovating in ways that allow its customers to provide better People, Planet and Profit solutions to the challenges facing society, the environment and end-users. In this way, DSM’s customers derive value from be- ing able to offer end-users improved products. Society and the planet derive value from the impact of more sustainable, longerlasting, safer, healthier and more nutritious alternatives. DSM and its shareholders derive value from stronger growth and profitability. What's more, DSM’s employees feel engaged and motivated through the contribution they make to a better world and the success this creates for the company in which they work. In- short, DSM is a multi-stakeholder-oriented company with a tri- ple bottom line (People-Planet-Profit) creating value for its customers, shareholders and employees as well as society at large. As a global company, DSM is actively engaged in addressing the same key trends that face all its stakeholders: meeting chang- ing demands arising from global shifts in demographics and technology, mitigating the impact of climate change while searching for new forms of energy and trying not just to feed but also to improve the health of a growing population. In DSM’s Life Sciences markets, these trends manifest them- selves through the related impacts of increasing personal wealth, urbanization and expanding life expectancy. Urbanization drives the consumption of processed foods and the need for a more efficient food chain, while rising wealth translates into increased demand for proteins from meat, fish, eggs and milk – in turn driving demand for DSM’s food and feed products. Food security (access to nutritious food for all people at all times) is one of the main themes to which DSM is contrib- uting. At the same time, a focus on healthy and active aging is driving demand for fortified foods and supplements. And finally, an aging population means increased healthcare spending, which DSM addresses through its engagement in preventive health and services to pharmaceutical companies. Bright Science. Brighter Living.™ Performance and sustainability are key drivers impacting de- mand in DSM’s Materials Sciences markets, where the company is accelerating the transformation toward the production and use of materials that are lighter, healthier, safer, stronger and more durable and that have lower environmental footprints throughout their value chains than traditional materials. Bringing DSM’s Life Sciences and Materials Sciences competenc- es together offers cross-fertilization opportunities allowing further advances. This cross-fertilization is managed through DSM’s Emerging Business Areas. A thorough understanding of how advanced materials can be used in the human body to strengthen or replace body parts and accurately deliver medi- cines is driving DSM’s biomedical materials business. By merg- ing its broad biotechnology capability with its materials busi- nesses, DSM is able to find renewable solutions for the post fossil age by creating bio-based materials and building blocks and by actively working to create commercially viable cellulo- sic biofuels that do not compete with the food value chain. While DSM continues to meet the needs of customers in the mature markets of North America and Western Europe which remain central to its core business – the company’s investment focus is increasingly on the high growth economies such as Asia, Central and Eastern Europe, and Latin America. In these mar- kets DSM expects 70 percent of its growth up to 2015. DSM con- sequently is becoming steadily more international, enabling it to bring a global perspective to the challenges of all its cus- tomers. In addition to achieving sustainable, innovative organic growth, DSM will continue to take advantage of opportunities to acquire exciting businesses and to partner with others to the benefit of all its stakeholders. And finally, the company will continue to improve its shareholder returns, supported by its solid dividend policy. In short, after having transformed itself into a Life Sciences and Materials Sciences company, DSM now focuses on further growing the company through an integrated strategy, using four growth drivers: High Growth Economies, Innovation, Sustaina- bility and Acquisitions & Partnerships.
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  7. 7. 7 Strengthening backward integration for DSM Engineering Plastics The Polymer Intermediates product cluster comprises caprolac- tam and acrylonitrile produced by DSM Fibre Intermediates (DFI). These products are raw materials for synthetic fibers and plastics. Caprolactam is a key feedstock for DSM Engineering Plastics’ polyamide production. Globally, DFI is the largest mer- chant caprolactam supplier and the third largest merchant ac- rylonitrile supplier. In addition, the business group produces ammonium sulfate, sodium cyanide, cyclohexanone and dia- minobutane. Continued value growth The Nutrition cluster comprises DSM Nutritional Products and DSM Food Specialties. These serve the food and beverage, feed, personal care, dietary supplements and pharmaceutical indus- tries with global capabilities and a deep understanding of cus- tomer and market needs. With customized formulation activi- ties at more than 60 locations and a presence in more than a hundred countries, customer intimacy is key. DSM's nutrition technologies are broad, utilizing competences in biotechnology (including fermentation) and state-of-the-art process technolo- gy. DSM has the world's broadest ingredients portfolio and holds leading positions in many large ingredient markets for animal and human nutrition and health, like vitamins, carotenoids, enzymes, cultures, yeast extracts, polyunsaturated fatty acids, premixes and formulations. DSM at a glance Nutrition Pharma Life Sciences Leveraging partnerships for growth The Pharma cluster includes the business group DSM Pharma- ceutical Products (DPP), one of the world’s leading custom manufacturing suppliers to pharmaceutical and biopharmaceu- tical industries. Many of today’s medicines around the world contain ingredients produced by DPP. The cluster also contains DSM’s 50 percent interest in the DSM Sinochem Pharmaceutical joint venture (DSP). DSP was formed in 2011 from the former DSM business group DSM Anti-Infectives. DSP is one of the few producers and marketers of beta-lactam active pharmaceutical ingredients with a global presence, using cutting-edge manu- facturing technology with a low environmental footprint. Performance Materials Polymer Intermediates Materials Sciences Growing via sustainable, innovative solutions The Performance Materials cluster comprises DSM Engineering Plastics, DSM Dyneema and DSM Resins & Functional Materials. These business groups specialize in the manufacture of techno- logically sophisticated, high-quality materials that are tailored to meet customers’ performance criteria, and that help cus- tomers substitute traditional solutions with more sustainable and durable alternatives. DSM's performance materials are used in a wide variety of end-use markets like automotive, aviation, electrical and electronics, marine, sports and leisure, paint and coatings, and construction. Sustainability is a true driver of new business and innovations in materials. DSM's materials portfolio is shifting towards a higher value added mix by introducing in- novative, more sustainable solutions. As an enabler and accelerator of innovation, the Innova- tion Center facilitates DSM's strategic transition towards becoming an intrinsically innovative organization. Innova- tion at DSM is guided by functional excellence in order to find the best sustainable and commercially viable solu- tions to market needs, helping create profitable growth. In addition to the activities of the DSM Innovation Center (including DSM Venturing), this part of the company also includes the three Emerging Business Areas (EBAs). These EBAs are growth engines that focus on new business areas outside the scope of the company's business groups. DSM Biomedical develops novel materials-based solutions to meet the needs of the medical device and biopharma- ceutical industries with coatings, drug delivery platforms and a wide range of biomedical materials for use in im- plantable medical devices. The EBA Bio-based Products & Services creates solutions for bioconversion of feed stocks for the production of bio-based chemicals and materials and develops the technologies to enable the production of bioenergy such as cellulosic biofuels. DSM Advanced Sur- faces provides solutions for the development and applica- tion of smart coatings and is focused on solutions for the solar industry. Innovation Center
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  9. 9. 9 DSM in motion: driving focused growth The strategy that DSM embarked on in September 2010, DSM in motion: driving focused growth, marks the shift from a time of intensive portfolio transformation to a new era of maximiz- ing sustainable and profitable growth. After a long history of successful transformations, DSM is now halfway this next devel- opment phase, becoming a truly global leader in health, nutri- tion and materials, delivering on its mission of creating brighter lives for people today and generations to come. Embedded in this mission is DSM’s core value that its activities should contribute to a more sustainable world. This guides how DSM pursues sustainable value creation for all stakeholders on three dimensions simultaneously: People, Planet and Profit. The businesses that form DSM’s core in Life Sciences and Mate- rials Sciences are built around finding innovative and sustaina- ble solutions to some of the world’s main challenges, based on a clear understanding of key global societal trends and their consequences for the planet, consumers and societies. Most of the world’s biggest challenges stem from population growth. The global population has surpassed seven billion peo- ple and is expected to grow to nine billion by 2050. The popula- tion is aging and becoming increasingly urban and wealthy. This leads to increased consumption per capita and a bigger claim on the world’s resources. All this comes together in three key global societal trends: a global demographic shift, challenges in the field of climate and energy usage and a growing focus on how to secure health and wellness for all. DSM’s strategic focus on Life Sciences and Materials Sciences is fueled by the three main societal trends that it explored with stakeholders as part of its strategy development process: Glob- al Shifts, Climate and Energy, and Health and Wellness. The company aims to meet the unmet needs resulting from these societal trends with innovative and sustainable solutions. Global Shifts The accelerating shift of wealth from West to East and from North to South is the basis of a whole series of global shifts which are creating a more urban, more connected and more prosperous world but with huge resource and cultural chal- lenges as a result. We live in a world which is changing faster than ever. These changes influence where demand comes from, how and where people are living and how we connect with one another. Urban- ization and economic prosperity are promoting dietary changes and increased spending on housing, transport, lifestyle and en- ergy. Increased demand around the world is also driving a high- er use of natural resources, underlining the need for further efficiency improvements. Several new technologies, especially in the communications industry, are having a high impact on society and behavior. Climate and Energy The accepted reality that our fossil age is causing considerable change to our climate is driving the search for alternative ener- gy, chemicals and materials sources as well as efforts to reduce resource consumption in a multitude of ways as the world will enter an era of resource scarcity. Strategy Climate change is a reality and future energy is a central chal- lenge for society both in terms of how to create it and how to get more out of it. In this context, customers are seeking sus- tainable value chains with higher yields, reduced waste, lower energy use and fewer greenhouse-gas emissions. At the same time there is a growing focus on renewable energy sources. Health and Wellness The impact of a growing, aging, increasingly urban population is being felt across the world, but in remarkably different ways. The drive to improve well-being and the increasing life span among the growing middle classes of the high growth econo- mies contrasts with the continuing struggle to effectively feed the populations in less well-off parts of the world, especially children in their first 1000 days after conception. There is an increasing need to address core health issues, whether through nutrition, medicines or lifestyle improve- ments. In the West, cost pressure on all healthcare systems is rising because of the aging population. Healthcare demand in high growth economies is increasing. Nutrition security and access is increasingly important, and there is also growing de- mand for safer and healthier foods and for pharmaceuticals. DSM’s focus is on providing its customers with the innovations and sustainable products they need to meet the societal and market demands arising from these trends. By adding to its customers’ success, DSM adds to its own success too. In responding to these three megatrends, it is DSM’s ambition to fully leverage the unique opportunities in Life Sciences and Materials Sciences, using the four growth drivers defined in its corporate strategy: High Growth Economies, Innovation, Sus- tainability and Acquisitions & Partnerships. The company wants to bring all four drivers to the next level. At the same time DSM aims to make maximum use of the potential of all four growth drivers to mutually reinforce each other and generate a greater number of compelling business opportunities. Regional organizations, functional excellence groups and shared services enhance the performance of the business groups. DSM will capture regional business opportunities and synergies and implement excellence throughout its organization.
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  11. 11. 11 Strategic and financial targets DSM has set itself ambitious targets for the current strategy period. The company has high aspirations, based on an assessment of the opportunities, particularly in high growth economies, innovation, sustainability, acquisitions and part- nerships, and aims at accelerated growth and increased prof- itability. 1 This means a total score within 1% of the SAM sector leader 2 See page 224 of the 2012 Annual Report for a definition of ECO+ 3 The High Performance Norm (80% favorable) is the composite of the top 25% employee responses of the selected external benchmark organizations 4 The aspirations for Diversity and People+ were both updated in 2012. Targets have now been set. See page 44 and page 49 of the Annual Report 2012. In 2012, DSM delivered on its strategic ambitions in particular with acquisitions and partnerships, helping the company ex- pand its presence in high growth economies and boost its range of innovative products and solutions. At its Capital Markets Days presentation for investors and finan- cial analysts in Basel (Switzerland) in September 2012, the company confirmed the 2013 EBITDA target. Assuming no fur- ther deterioration of the economic conditions, and based on its strategy, financial strength, and the additional actions now taken, DSM will move towards the 2013 strategic targets. The ROCE target is unlikely to be achieved due to (a) the fact that despite DSM’s drive to accelerate acquisitions, many of these acquisitions — and hence also their synergy effects — came later than expected, and (b) the deterioration of the global macroeconomic conditions. High Growth Economies from reaching out to being truly global A key element of DSM in motion: driving focused growth is for DSM to move from being a European company reaching out to the world to becoming a truly global company. Fast-growing economies such as China, India, Brazil and Russia are proving to be the main growth engines for the world economy this decade. The share of high growth economies in DSM’s total sales has increased significantly in recent years and reached 38 percent in 2012. DSM’s strategic target is to increase this share towards 50 percent by 2015. DSM expects more than 70 percent of its growth in the 2010-2015 strategy period to come from high growth economies. China As in previous years, sales in China in 2012 contributed signifi- cantly to DSM's total sales in high growth economies. The com- pany has a clear focus on China, where it aims to increase its sales to at least USD 3 billion by 2015. Latin America, India and Russia DSM is also increasing its presence in other markets, mostly through acquisitions and partnerships, seeking to double or even triple sales in Latin America, India and Russia. Innovation from ‘building the machine’ to doubling innovation output By 2015, DSM wants innovative products and solutions to ac- count for 20 percent of its total sales. Innovation sales, defined as sales created by new products and applications introduced in the last five years, accounted for 18 percent of total sales in 2012. The inflow of innovations continued. Significant process innovations at DSM Fibre Intermediates no longer qualified as innovation solutions because they were introduced more than five years ago. Achieving the 2015 innovation sales target is a cornerstone of DSM’s innovation strategy. DSM is firmly on track to reach this target and expects to be able to maintain its innovation sales at this level after 2015. Strategy
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  13. 13. 13 from the credit metrics commensurate with its ratings objec- tive. However, DSM believes that Single A ratings are the right place to be for the company to ensure sufficient financial and strategic flexibility at all times. The company would seek to manage its balance sheet and underlying financials after such an acquisition to allow the company to realign ratios with Sin- gle A ratings within a short period of time. People at DSM DSM's human resources strategy contributes to the development of inspiring and collaborative leaders, creates an engaged and competitive workforce and fosters an inclusive environment where people trust and respect one another, and where they encourage each other to achieve sustainable focused business growth. The approach is supported by the ONE DSM Culture Agenda. DSM aims to further internationalize its business in order to bring its organization closer to its key markets and customers, strengthen the business and stimulate inclusion, diversity and innovation. DSM combines a strong regional infrastructure with clear board level accountability for regional growth. Its human resources strategy supports the internationalization goal. ONE DSM Culture Agenda During 2012, DSM transitioned its Change Agenda into the ONE DSM Culture Agenda. The themes of the ONE DSM Culture Agen- da have been simplified and more aligned with DSM’s business environment and business strategy, as well as with its global footprint. With the ONE DSM Culture Agenda, DSM is developing the culture required to achieve its strategic ambitions, to mir- ror the world it operates in, and to become a high performance organization. The four themes of the agenda are: External Ori- entation, Accountability for Performance, Collaboration with Speed and Inclusion & Diversity. Accelerating the four themes across DSM will lead to a more agile organization that is fit to cope with fast moving developments in the business environ- ment. Sustainability from responsibility to a business driver DSM believes sustainability will be the key differentiator and value driver in the coming decades. The company is uniquely positioned to capture new opportunities across the value chain. Sustainability is an integral part of the company's operations, strategic actions and decisions. DSM’s businesses are coming up with new science-based products and solutions that con- tribute to brighter living while also helping grow the bottom line of the business. Acquisitions & Partnerships from ‘portfolio transformation’ to ‘driving focused growth’ DSM applies stringent strategic and financial criteria to any potential acquisition or partnership. During the screening process, a first selection is made to determine the strategic fit. This results in a shortlist to which DSM then applies finan- cial criteria. A key strategic consideration is that the business or partner needs to add or improve a leadership position and needs to add value to DSM in terms of technological and/or market competences. The key financial criteria for acquisitions are: Acquisitions should enable DSM to remain within the boundaries defined for maintaining its desired Single A credit rating. They should contribute to cash earnings per share from the beginning. They should contribute to earnings per share from year two. They should support DSM’s other financial targets. In the exceptional case that a very attractive acquisition op- portunity arises of a size that would put pressure on financial metrics, DSM may be willing to accept a temporary deviation Strategy
  14. 14. 14 Overview key financial data
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  16. 16. 16 The Cluster The Nutrition cluster consists of DSM Nutritional Products and DSM Food Specialties. These businesses serve the feed, food and beverage, pharmaceutical, dietary supplements and personal care industries. The activities are based on in-depth knowledge of local and global customer and market needs. Trends Key societal trends in the world driving the company’s nutri- tion and health business remain intact despite the difficult macro-economic environment. With more than half of the world’s population now living in cities, the need for conven- ience and processed food continues to grow. This perfectly matches the company’s ability to deliver tailor-made local applications and blends. Business With customized formulation and premix (blending) activities and a marketing & sales presence reaching more than sixty countries, customer intimacy is a key success factor. The technical expertise in the cluster is based on application knowhow and innovation, translating market trends into products and services with new benefits. Formulation for example is a key expertise that DSM offers its customers. Specialist teams work closely with customers to jointly devel- op the right ingredient formulation for their wide range of end products. Formulations, sometimes referred to as 'forms', Nutrition 2012 Sales by end-market 47% 38% 5% 10% Animal Nutrition & Health Human Nutrition & Health Personal Care Food Specialities 2012 Sales by destination 36% 37% 22% 5% Europe Americas Asia RoW need to be customized in order to ensure the best ingredient characteristics for each specific end product. DSM has particularly strong positions in vitamins, nutritional lipids, enzymes, cultures and carotenoids. New nature-identical or natural ingredients as well as the expansion of the premix footprint in emerging economies are important drivers in the areas of human and animal nutrition and health. Moreover, this strategy is further enhancing the company’s differentiation, ensuring that it focuses on profitable approach- es, including activities that take it further down the value chain. Acquisitions Since the launch of the DSM in motion: driving focused growth strategy in 2010, the company has announced acquisitions in Nutrition for a total of € 2.4 billion, taking annual cluster sales to € 4.6 billion on a pro forma basis. The Nutrition cluster now accounts for approximately half of total company sales and for about three-quarters of EBITDA, with EBITDA margins of 20-23 percent. The Nutrition cluster has delivered a compounded annual growth rate of 7 percent over the last five years, taking net sales to € 3.7 billion in 2012.
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  18. 18. 18 About DSM Nutritional Products DSM Nutritional Products is the leading supplier of vitamins, carotenoids, nutritional ingredients, UV filters, premixes and macroblends for human and animal nutrition & health. It also has the most complete feed enzymes portfolio worldwide. Its customers are global, regional and local feed and premix companies, animal protein producers and food, beverage, dietary supplement, pharmaceutical, personal care and flavor/fragrance companies. Vitamins Carotenoids Enzymes Eubiotics Nutritional lipids DCP/ Metal Chelates Amino acids UV filters Skin peptides Micro encapsulates Beadlets Emulsions Adsorbates Vitamin concentrates Full premixes Complete feed Specialty feed: young animals dairy Supplements Formulated products Human health & well being Nutrient & feed com- position Growth Disease prevention Fertility Raw Raw Materials Feed/Food Pharma Cosmetic industry Retail End consumer DSM Nutritional Products DSM Nutritional Products Nutritional Consultancy & ServicesActive Ingredients Forms & delivery systems Premix Macro Blends Ingredient Producer 5% 52%43% Animal Nutrition & Health Human Nutrition & Health Personal Care Sales distribution (2012) Key drivers of profitability Leadership in global markets: scale, costs, differentiation, innovation and quality Strong customer value proposition - Quality for Life™ seal Long history of nutrition innovation Focus on value before volume Key success factors Global sales, marketing and distribution network including global / regional key account management Innovation (products, concepts and processes) Complete product portfolio and full value chain player Strong differentiation Integration of acquisitions Strategy Continued differentiation in the market has enabled us to secure ongoing value and margin growth. DSM Nutritional Products will continue to be the premium player in the sector, connecting technological advances with consumer trends and customer needs. This allows us to leverage daily the unique breadth of our portfolio, the comprehen- sive position across the entire ingredients value chain and an unrivalled global & local presence. The company will also look to grow by extending partner- ships and via acquisitions. This will focus on complemen- tary ingredients, with a bias towards naturals, which can be marketed through DSM’s existing global infrastructure. Through operational excellence, DSM Nutritional Products must maintain a cost position that is at least at par with the competition. This means continuing to look for pro- cess innovations and improvements and rigorous site se- lection.
  19. 19. 19 Main competitive advantages Global reach, proximity to customers Scale Full value chain player Commitment to quality management Innovation capabilities Most attractive markets The high growth economies with big population represent substantial growth opportunities for the nutrition and personal care business. We are actively expanding our business in the high growth economies while extending our competitive advantages continuously in Europe and North America. Current DSM Market position DSM holds leading positions in the ingredient markets for human and animal nutrition & health and for personal care. Recent acquisitions (2010—2012) Microbia Technology platform to produce high-quality, natural carot- enoids HQ Lexington, USA No financial details given Closed 22 September 2010 Martek New growth platform for healthy and natural food ingredi- ents for infant formula and other food & beverage applica- tions, especially focused on algae derived poly unsaturated fatty acids Omega-3 (DHA) and Omega-6 (ARA) HQ Columbia, USA, 600 fte Enterprise value €790m Closed 28 February 2011 Vitatene Production of natural carotenoids HQ León, Spain No financial details given Closed 4 July 2011 Ocean Nutrition Canada (ONC) Leading global provider of fish-oil derived poly-unsaturated fatty acids (EPA/DHA, Omega-3) to the dietary supplement and food & beverage markets. HQ Halifax, Canada, 415 fte Enterprise value €420m Closed 19th of July, 2012 Fortitech Leader in customized, value added food ingredient blends for food & beverage, infant nutrition and dietary supple- ments industries. HQ Schenectady, USA, 520 fte Enterprise value €495m Closed 19 December 2012 Tortuga Leading company in nutritional supplements with a focus on pasture raised beef and dairy cattle. HQ Sao Paulo, Brazil, 1200 fte Enterprise value €465m—€490m Closing expected in Q1 2013 Position acquisitions in value chain Production Facilities Premix facility Main Sales Offices Chris Goppelsroeder President “With our broad portfolio and science, our deep industry-specific expertise and our extensive global footprint, we are well positioned to serve our customers with unique solutions and services. We help dif- ferentiate their products and create real value to them and their consum- ers.” Locations
  20. 20. 20 Main products Vitamins (13 in total): DSM Nutritional Products is the only player that can supply the whole range of vitamins in the most suitable form for all animal species. A broad range of different carotenoids to increase the at- tractiveness / appealing of our customer's products towards consumers. The most complete Feed enzymes portfolio in the industry (e.g. Ronozyme P and ProAct) helping our customers to address costs and environmental issues more efficiently. Premixes for Animal Nutrition and Health Specialty ingredients such as: eubiotics, HyD™ , Crina® , Vevovital® and MicroSource® . Key innovations RONOZYME® ProAct - a protease enzyme that maximizes protein utilization in feed. ROVIMIX® MaxiChick™ – a unique poultry feed solution to improve egg fertility, embryo survival and chick livability. RONOZYME® HiPhos – Helps monogastric animals utilize, otherwise non hydrolysable plant phosphorus which occurs in form of Phytate. This reduces the supplementation of miner- al phosphates, its environmental impact and allows our cus- tomers to formulate their animal diets more cost efficiently and nutritionally. Market Animal Nutrition & Health (2011) Animal Nutrition & Health addresses the nutritional additives segment of the feed ingredients market which is estimated at € 8.5 billion in 2011. Most relevant markets are carotenoids, feed enzymes and vitamins. Average market growth is 2-4%. Main customers Global players in feed / premix and animal protein produc- ers (e.g. Nutreco, Cargill, Tyson , CP, BR Foods, AHIC) Many midsize local and/or regional organized feed/premix companies and animal protein producers Main competitors DSM is the only company to offer the complete value chain of forms and pre-mixes. In addition DSM provides a broad range of animal nutrition and health ingredients. All competitors cover only part(s) of the value chain. Typical ones are BASF, Adisseo, NEPG, NHU, ZMC for Vitamins and Carotenoids; DuPont for Enzymes and Trouw Nutrition, Nutreco and Cargill in the premix segment. Animal Nutrition & Health ANH Market distribution (2011) Vitamins Feed enzymes Carotenoids Amino acids Other 28% 16% 10% 4% 42% Poultry Swine Aqua Ruminant Others Examples of brands Key market segments (sales, 2012)
  21. 21. 21 Market Human Nutrition & Health (2011) Within the global food ingredients market, estimated at € 42 billion in 2011, Human Nutrition & Health address the colora- tion, preservation and nutritional ingredients segments. Main customers Large world class food and beverage companies (e.g. Abbott Nutrition, Coca Cola, Danone, General Mills, Kraft , Mead Johnson, Nestlé, PepsiCo, Unilever) World class dietary supplement companies (e.g. Bayer, Pfizer, Sanofi) Strong regional, players in these segments Main competitors DSM is the only company that operates across the full value chain offering a broad portfolio of active ingredients, applica- tion specific forms, premixes and macroblends. Competitors cover only part(s) of the value chain or specific ingredients. Ingredients: BASF, Epax, NHU, Omniactive, NCPC, ZMC Premixes & Macroblends: Glanbia, Lycored, Wright Nutrition Human Nutrition & Health HNH market distribution (2011) Taste Nutrional ingredients Texture Processing aids Preservation Color 39% 22% 39% Dietary Supplements Food & Beverages / other Infant Nutrition Main products Vitamins. DSM produces and markets all essential vitamins which is unique in the industry. Our Quali® brand Vitamins are recognized as having the highest quality, reliability and traceability standards in the industry. Carotenoids. Including leadership positions in beta carotene (coloration and pro-vitamin A); lutein and zeaxanthin (eye health); and lycopene. Nutritonal Lipids. Offering the most complete and diverse portfolio of Omega 3 and Omega 6 from our lifes’s® brand vegetarian (algal) and MEG-3® fish oil sources, providing our customers and their consumers the broadest range of choice. Nutritional Premixes. The leading custom solutions premix and macroblends formulator with broadest global footprint. Provider to food, beverage and dietary supplement customers in the countries where they operate. Specialty ingredients and products. Including Culturelle® all natural pro-biotic, dietary enzymes, OatWell® oat beta- glucan, Resvida® (resveratrol) and several proprietary clini- cally proven ingredients like Fruitflow® for cardiovascular health. Key innovations Improved Performance. DSM continues to deliver our cus- tomers more functional forms of many of our ingredients including improved functionality, bioavailability and stability, many with associated IP. Science and Regulatory. DSM invests in new nutritional and health science with a variety of Value Chain partners, both in terms of R&D and clinical studies. DSM has been instrumental in obtaining FTO for novel ingredients as well as science based, relevant health claims. Nutritional Science and Advocacy. DSM is the industry lead- er in nutritional science, building awareness with academia, customers, and consumers. i-Health brands - our dietary supplement ‘Business-to- Consumer’ unit which continues to grow and lead in their specialty categories. This provides us unique insight on con- sumer trends and behavior. Examples of brands Key market segments (sales, 2012)
  22. 22. 22 Market Personal Care Ingredients (2012) The global Personal Care ingredients market has a size of est. € 10 billion. Average market growth is 3-6%. Key market segments DSM Personal Care is focusing on the active and performance ingredients such as Vitamins, UV filters and bio-actives in the Skin care, Sun care and Hair care market segments. Main customers Global leading cosmetic companies (e.g. Unilever, Procter & Gamble, L’Oreal, Beiersdorf, Johnson & Johnson, etc.) Regional/local medium sized cosmetic companies Contract manufactures and distributors within the cosmetic industry Main competitors Typical ones are BASF/Cognis, Croda, ISP, Evonik, Symrise Main products Active ingredients such as synthetic peptides, natural bio- actives, UV filters and vitamins Performance ingredients such as conditioning and styling polymers Technical ingredients such as specialty emulsifiers Key innovations TILAMAR® - most innovative polymers for hair care. REGU® -FADE – a high performing and fast acting skin bright- ener. REGU® -AGE PF - Visibly reduces dark circles and eye puffi- ness. SYN® -TC - experience a new dimension of skin smoothing in only 28 days. Alpaflor® EDELWEISS - A new level of protection for ulti- mate skin sensation. Personal Care Examples of brands Personal Care Ingredient market (>€10bn, 2012) Basic Active Technical
  23. 23. 23 Manufacturing details Manufacturing locations (CH, DE, FR, UK, ES, China, US) 56 premix facilities globally distributed Innovation strategy Innovate through entire life cycle Continued improvements via incremental application driven innovations Open innovation with key customers and other partners Technology Highly complex multi-step synthesis Biotechnology Formulation technology, ActileaseTM Natural product synthesis Heterogenous catalysis Micronisation and encapsulation Application in feed, food, nutritional supplements and personal care Key raw materials / intermediates Diverse set of various raw materials. Main raw materials are secured through long-term partnerships. Investments Expansion of pre-mix facilities in both ANH and HNH business. Improvement & expansion projects in large Manufacturing locations. Manufacturing & Technology
  24. 24. 24 Markets (2012) Total Food ingredients market adds up to EUR 34bn. Global market growth 2008-2012 (AAGR) Food enzymes 6-8% Cultures and media 5-7% Savory ingredients 3-5% The growth in high growth economies is above average. Most attractive markets Dairy, baking, savory and beverage industry in North America and Western Europe, with a growing focus on high growth economies such as China, India, Brazil and Russia. About DSM Food Specialties DSM Food Specialties is a leading global manufacturer of food enzymes, cultures, yeast extracts and other specialty ingredients for the food and beverage industries. DSM Food Specialties’ advanced ingredients make a considerable contribution to the success of the world’s favorite food brands for the dairy, baking, beverages, and savory segments. Main customers Leading, large, world class food manufacturing companies Many medium-sized food and beverage processors Main competitors DSM Food Specialties main competitors, e.g. DuPont, Chr. Hansen, and Novozymes offer a comparable portfolio or are focused on one of DSM Food Specialties’ market segments. Current DSM market position DSM Food Specialties is leading in food and beverage enzymes, yeast extracts and cultures. DSM Food Specialties holds leading positions (#1 or #2) in the relevant segments of its portfolio. DSM Food Specialties Raw materials Food Ingredients and Additives Food producer Retail/End consumer 17% 16% 11%1% 39% 9% 6% 1% Savory Beverages Bakery Dairy Meat/Fish Preserves Oils/fats Others Food ingredients by application (global) 15% 12% 11% 11%5% 2% 33% 6% 5% DSM DuPont Hansen Novozymes BioSpringer ABF Kerry BS Cargill Others DSM relevant marketsize (€ 3bn) DSM Food Specialties Key drivers of profitability Innovation in enzymes, cultures, savory ingredients and other bio-ingredients Scale and production efficiency Volume growth Margin growth Key success factors Innovation and value differentiation Key customer intimacy Global distribution network Quality and regional application know-how
  25. 25. 25 Strategy DSM Food Specialties’ growth strategy is to exploit opportunities of current businesses via organic growth based on radical innovation, geographical expansion in emerging economies and acquisitions. Main competitive advantages Innovation capabilities Unique patent protected ingredients, both on (fermentation) process and applications Quality for Life™ program Global reach through local distribution and application network Main products The product portfolio consists of many branded unique products that can be categorized in: Food & Beverage Enzymes Cultures Savory Flavor Ingredients Food protection systems Antibiotic Residue Tests Manufacturing details DSM Food Specialties has manufacturing locations across the world: 6 Sites in Europe, 4 Sites in the US, 4 in Asia-Pacific (3 China, 1 Australia) . Technology DSM Food Specialties has a world-class knowledge-intensive technology base, founded on two leading technologies: fermentation enzyme technology This technology base is focused on the core functionalities Taste, Texture and Nutrition. DSM Food Specialties uses both classical and modern biotechnology techniques including proteomics to produce its products. Key raw materials / intermediates Glucose and molasses. Investments Drying capacity for yeast extracts Innovation strategy Market driven product, process and system innovation Continued improvements via incremental application driven innovations Open innovation with key customers and other partners Recent acquisitions Cargill Cultures & Enzymes Leading global manufacturer of cultures and enzymes for the dairy and meat industries Enterprise value € 85m Closed 6th of December, 2012 Verenium food enzymes and oilseed processing business Business, IP portfolio, licenses for certain food enzymes and access to biodiversity libraries Total consideration US$37m Closed 26th of March, 2012 Key Innovations Delvotest® BLF, a revolutionary ‘fast test’ product that enables farmers and dairies to test milk for betalactam in as little as five minutes, with no new laboratory equipment needed. Delvo® Yog, a yoghurt culture which helps to reduce the fat content and to improve the texture Purifine PLC, an oil degumming enzyme, providing a significantly higher yiels in soybean degumming, using less energy and chemicals. Pack-Age®, a ripening concept including a revolutionary film which protects moldgrowth on the surface of cheese "Growth in the food ingredients industry will be largely driven by innovation. Consumer demand for convenient and indulgent products, health & wellness, sustainability and food safety concerns create clear innovation opportunities. DSM has the leading technologies, in-depth application expertise and world-class facilities to develop (new) solutions in reply to these demands" Hans-Christian Ambjerg President Production Facilities Main Sales Offices
  26. 26. 26 The Cluster The Pharma cluster includes the business group DSM Pharma- ceutical Products (DPP), one of the world’s leading custom manufacturing suppliers to the pharmaceutical industry. Many of today’s medicines around the world contain ingredi- ents produced by DPP. The cluster also includes DSM's 50 percent interest in the DSM Sinochem Pharmaceuticals joint venture (DSP). Trends The pharmaceutical market is facing a range of trends and dynamics that question existing business models and that are leading to some fundamental changes in the industry. Never- theless, these trends also provide a number of future growth opportunities for DSM's Pharma activities. For DPP's customers, innovative pharmaceutical companies, it is becoming more difficult to discover new active mole- cules which have sufficient additional patient benefits, which have an acceptable risk profile and which can obtain approv- al from the FDA and other regulatory bodies. The cost of developing such molecules is rising, while at the same time health service providers – governments or insurance compa- nies – are under enormous pressure to reduce healthcare costs. As medicines are becoming an increasingly important element of total healthcare costs, typically accounting for around 10 percent of total healthcare spend, the pressure on reducing the costs of pharmaceuticals is high. Pharma 2012 Sales by end-market 9% 1% 12% 78% Pharmaceuticals Agriculture Health & Nutrition Other 2012 Sales by destination 40% 37% 21% 2% Europe Americas Asia RoW Pharmaceutical companies are consolidating, reviewing their business models and product ranges, and competing to develop increasingly niche, narrow spectrum and specialized drugs. These can be highly active pharmaceutical ingredients (APIs), often biopharmaceutical products, and volumes are typically lower. The intensity of cost pressure and the need to review business models result in above-GDP growth in the pharmaceu- tical outsourcing market, especially for drugs nearing the end of their (patented) life cycle. The imperative for pharmaceuti- cal companies to optimize their asset base leads to a strong focus on finding experienced, cost-efficient and highly qualified partners to take on manufacturing challenges as a supplier. Business DSM Pharmaceutical Products focuses on the innovative and generic pharmaceuticals, biologics and biosimilars, pharma/ agro chemicals, and markets for fine chemicals. DSM Sinochem Pharmaceuticals is the global market leader in beta-lactam APIs such as semi-synthetic penicillins (SSPs) and semi-synthetic cephalosporins (SSCs), which represent the big- gest class of APIs in anti-infectives, and other active ingredi- ents such as nystatin. The joint venture manufactures nearly all its beta-lactam APIs and the related intermediates using propri- etary biotechnology.
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  28. 28. 28 About DSM Pharmaceutical Products DSM Pharmaceutical Products (DPP) is a leading provider of custom manufacturing, technologies and development services to the pharmaceutical, biopharmaceutical and fine chemicals industries. With the increased focus on outsourced resources, DSM provides sustainable solutions for the future of manufacturing. This group’s business model also includes ownership of registered products including active pharmaceutical ingredients (APIs) as well as finished dosage drugs with ANDA and DMF filings. R&D Services Inter- mediates Active Pharma- ceutical Ingredients Final dosage Pharma distribution End consumer DSM Pharmaceutical Products Markets (2012) DSM is active globally in the primary and secondary manufacturing of pharmaceuticals and focuses on the innovative (bio)pharma market as well as pharma fine chemicals markets and generic drugs. The pharma outsourcing market has a size of USD 30 bn. Market growth 2008-2013 The global contract manufacturing market is expected to increase at a CAGR of 9% (2003-2013) with the respective segments growing at the following rates: primary manufacturing, 7% secondary manufacturing, 7% biopharmaceutical, 10% (Source: Kalorama, PharmSource, High Tech Business Decisions) The average growth of worldwide pharmaceuticals sales for 2011-2012 was 3% and for biopharmaceuticals 7%, down slightly from 2010. (Source: EvaluatePharma) Main markets Biopharmaceutical API (primary, Cell culture-based) manu- facturing Biopharmaceutical technology licensing and equipment sales Biopharmaceutical API (primary, microbial-based) manufac- turing Chemical API (primary) manufacturing and marketing Solid dosage (secondary) manufacturing and marketing Sterile dosage (secondary) biopharmaceutical manufacturing and marketing Food, personal care and bio/industrial manufacturing products Crop protection (primary) manufacturing DSM holds a leading position in the global pharma contract manufacturing market. Main customers DSM serves 9 of the top 10 global pharmaceutical companies, large biotechs, and mid-size pharmaceutical companies as well as selected emerging pharmaceutical companies all over the world. Main competitors Pharma Chemicals: Lonza, BASF, Siegfried, Evonik, Divis, Dr. Reddy's, Dishman Biologics: Rentschler, Boehringer Ingelheim, Lonza, CMC Finished Dosage: Patheon, Catalent, Vetter BioSolutions: Lonza DSM Pharmaceutical Products Global outsourcing market 41% 22% 20% 7% 10% Contract research Primary mfg Secondary mfg Formulation dev. Other Key drivers of profitability Focus on new innovative products pipeline and end-of- lifecycle drugs Operational excellence Innovative technologies Expansion of proprietary product portfolio Key success factors Commitment to first-time-right principles and DSM Quality for Life™ standards Continued demonstration of sustainable and innovative solutions for customers Strong relations with strategic partners Increased presence in Asia and high growth economies
  29. 29. 29 Production Facilities Main Sales Offices DSM Pharmaceutical Products’ facilities are approved by the US FDA, EMEA, Japan and many foreign regulatory agencies. DSM Pharmaceuticals, Inc. is licensed by the US DEA to manufacture scheduled drugs. Technologies A broad range of technologies with world-class competencies including: biocatalysis, homogeneous catalysis, mammalian cell lines, fermentation and chiral technologies. Key raw materials / intermediates Very diverse set of raw materials, of which procurement is mainly driven by customers’ regulatory filings. Sourcing of other volumes from low cost countries such as China and India. Investments Our new Brisbane, Australia 70,000 square-foot mammalian biopharmaceutical manufacturing facility, to be operational in 2013, in close cooperation with the Australian Governments (Queensland State Government and the Commonwealth of Australia). Innovation strategy To maintain a leading and proactive position in delivering customer solutions through innovations in R&D, (bio)chemistry, biologics and fermentation production technologies to support increasingly sustainable outsourcing by pharmaceutical companies, while growing own product portfolio with ANDA and DMF filings. Key Innovations Micro Reactor technology – unique proprietary high productivity technology for pharma chemicals XD® technology – unique proprietary technology to improve yield dramatically in biologics Lyo Advantage™ / Liquid Advantage™ – state of the art distribution control system Rhobust® a purification technology through direct capture of biologics “As we see the pharmaceutical business model continue to shift, outsourcing of manufacturing becomes more of a strategic focus for pharma. With changes in the value chain, DSM offers a range and breadth of services that can enhance our customers’ ability to succeed.” Alexander Wessels President Strategy Further optimization of DPP’s current assets and re-focus them towards high growth economies in Asia. Intention to significantly expand range of own products. Partnership with another company which has strengths com- plementary to DPP. Main competitive advantages Extensive portfolio of services across the supply chain for small and large molecules and final dosage delivery Broad range of innovative and cost-effective technologies particularly in biotechnology including for biopharmaceuti- cals, including cell culture-based and microbial fermenta- tion as well as green chemistry Strong quality and regulatory compliance track record Main products / premium services DSM Pharmaceutical Products is a global provider of contract manufacturing and development services including: Clinical to commercial scale production of Active Pharma- ceutical Ingredients (APIs) – chemical and biological Clinical trial and commercial scale finished dosage forms and packaging XD® proprietary mammalian cell culture production yield optimization technology Rhobust® biopharmaceutical harvest optimizing technology Innovative technologies in Green Chemistry (e.g. InnoSyn™ route scouting services) Micro reactor commercial scale production Aseptic liquid filling and Lyophilization, including Cytotoxics More complex crop protection actives Manufacturing details Groningen, Netherlands, cGMP biologics custom mfg. Brisbane, Australia, cGMP biologics custom mfg. (2013) Capua, Italy, cGMP microbial fermentation for pharma Delft, NL, DSM Biotechnology Center Linz, Austria, cGMP/ISO custom manufacturing Venlo, Netherlands, cGMP custom manufacturing Regensburg, Germany, cGMP scale-up facility Geleen, NL, Research & Development Greenville, US Sterile and finished dosage products
  30. 30. 30 About DSM Sinochem Pharmaceuticals DSM Sinochem Pharmaceuticals (DSP) is a leading supplier of raw materials, intermediates and active pharmaceutical ingre- dients (API) for anti-infectives such as antibiotics (for combat- ing bacterial infections), anti-fungals (for combating fungal infections), and for other therapeutic classes like cholesterol lowering medicines. DSP is one of the few generic API manu- facturers that continuously invests in R&D and therefore is able to manufacture nearly all APIs and intermediates using proprietary biotechnology. DSP is also the only FDA approved penicillin producer in the Western hemisphere. Markets The total global anti-infectives market is estimated to be USD 50bn (2010). DSM is mainly active in the beta-lactams: (penicillin (SSPs) and the cephalosporins (SSCs). In addition, DSM sells intermediates such as 6-APA and 7-ADCA . Market growth 2009-2013 Average overall market growth is 3-5% for semi-synthetic cephalosporins (SSCs) to 4-5% for semi-synthetic penicillins (SSPs) with the highest market growth expected in Asia (SSPs 6-8%, SSCs 3-5%) . Active Pharma ceutical Ingredient Glucose PEN/Inter- Mediates (e.g. 6-APA, 7-ADCA) Finished dosage Pharma distribution End consumer DSM Sinochem Pharmaceuticals 23% 23% 12% 16% 26% SSPs SSCs Macrolides Quinolones Others Key drivers of profitability Glucose and energy prices Access to regulated markets Currency exchange rate Operational excellence Current DSP market position DSM Sinochem Pharmaceuticals belongs to the largest players in the field of beta-lactams with leading positions in the higher value added segments based on the combination of our global spread with our unique technology platform. Most attractive markets Although the Western economies currently are the most at- tractive markets, DSM Sinochem Pharmaceuticals has a strong focus on the rapidly growing markets in Asia and Latin America. Main customers Leading large pharmaceutical companies such as GSK, Sandoz, Teva, as well as local midsized pharmaceutical companies all over the world. Main competitors Competition is coming predominantly from Chinese and Indian producers (e.g. United Laboratories, CSPC, Lupin and Aurobindo). European competitors are e.g. Sandoz, GSK. Strategy The company has retained profitability by implementing signifi- cant cost reductions and introducing new technologies. DSM Sinochem Pharmaceutical’s strategy has three main pillars: to retain its leading position in the global market for penicil- lin and penicillin derivatives, further strengthening of the position in especially China is a prerequisite. to broaden the portfolio with generic APIs from other thera- peutic classes beyond anti-infectives, and to integrate forward into finished dosage in selected markets DSM Sinochem Pharmaceuticals AMEA China EU&USRoW 0 20 40 60 80 2005 2008 2010 2015 High growth economies RoW SSPs, SSCs market (2010) SSPs, SSCs market growth (2010) 5%-7% Key success factors Market access through global presence / alliances New products Product differentiation / brand value Low environmental footprint
  31. 31. 31 Benefits of DSMPureActivesTM Higher yield due to higher purity Less overages required due to higher purity and an increased retest period Improved machine efficiency due to better flowablility With larger batch size, testing and administration at QC departments is reduced Relief of registration efforts due to reduced impurity level Guaranteed activity of active substance over shelf life Waste from production is reduced by up to 90% Greenhouse-gas emissions reduced by over 50% Reduced emissions of residual solvents to air Emissions to water are reduced by approximately 50% Reduced toxicity of antibiotic ingredient, owing to absence of almost all chemicals and solvents Better taste due to the absence of residual solvents The joint venture between DSM and Sinochem of China strongly supports the achievement of these strategic targets. Partner- ships continue to be a potential driver for further growth. Main competitive advantages Regulatory and product quality Reliability and after sales service Unique enzymatic technology Global market access Main products DSM Sinochem Pharmaceuticals is a leading supplier of active pharmaceutical ingredients such as: Penicillin (PEN) Intermediates such as 6-amino-penicillanic acid (6-APA), 7-amino-deacetoxycephalosporanic acid (7-ADCA) Semi-synthetic penicillins (SSPs) such as amoxicillin and ampicillin Semi-synthetic cephalosporins (SSCs) such as cephalexin and cefadroxil Nystatin, Atorvastatin Process enzymes Manufacturing details Penicillin Mexico 6-APA China, Mexico, India 7-ADCA Netherlands SSPs Spain, Mexico, India SSCs Spain, China Nystatin Italy Atorvastatin India Technology DSP has integrated its competences in biotech and chemistry for the development of a new range of high quality semi- synthetic penicillins and semi-synthetic cephalosporins. The results of this effort are the DSMPureActives™, each produced with our innovative enzymatic technology. APIs produced via these proprietary biotechnology routes offer advantages in terms of increased patient safety based on the higher purity of the products, and lower spillage in the processing step from API to finished dosage form. Key raw materials / intermediates Glucose, sodium phenylacetate/phenylacetic acid, phenyl glycin. Investments Capacity expansion and a significant improvement in econo- mies of scale for the production (captive use) of 6-APA. Facilities for the marketing and production of newer genera- tion SSCs via proprietary enzymatic routes. Key Innovations Innovation in technology (implementing best technologies throughout global network) Expansion of DSP portfolio in generic APIs through product innovation Branding DSMPureActives™ (green routes and sustainable antibiotics) “At DSP our goal is to provide high quality and reliable products for people in need of healthcare. This can be achieved through our unique enzymatic technology plat- form. In our strategy to grow our API portfolio we have successfully transferred the technology and its benefits to new APIs such as our Atorvastatin, and we will continue to build on this.” Karl Rotthier Chief Operating OfficerProduction Facilities Tolling manufacturing site R&D facility Main Sales Offices
  32. 32. 32 The cluster The cluster consists of DSM Engineering Plastics, DSM Dynee- ma and DSM Resins & Functional Materials. These business groups manufacture technologically sophisticated high- quality products and offer specialized value propositions that meet the needs of customers. Trends The most important trends in the materials industry continue to be related to resource scarcity and climate change. Cus- tomers in virtually every industry ask for products that re- duce energy use or emissions in their own operations or, even more importantly, throughout the value chains. DSM offers materials that reduce weight versus metals and other tradi- tional materials and supports customers who want polymer solutions based on biobased raw materials, as opposed to fossil feedstocks. Demand for alternative solutions without substances of haz- ardous concern is increasing in line with regulatory scrutiny. Against this background, DSM Engineering Plastics and DSM Resins & Functional Materials actively seek to provide cus- tomers with new products and solutions that eliminate or reduce the content of substances such as halogens, styrene or cobalt. Performance Materials 2012 Sales by end-market 22% 19% 14% 14% 31% Metal/B&C Automotive/Transport E&E Packaging Other 2012 Sales by destination 44% 20% 35% 1% Europe Americas Asia RoW Business DSM Engineering Plastics is a global supplier of high- performance engineering thermoplastic solutions. DSM Dynee- ma is the global supplier of Dyneema®, the world’s strongest fiber™. DSM Resins & Functional Materials is a global supplier of innovative high-quality resins solutions for paints and coatings, composite materials and optical fiber coatings. With major investments in high growth economies, notably Chi- na and India, the Performance Materials cluster is a significant contributor to DSM’s growth in Asia. The portfolio has evolved in recent years towards more specialized, higher value-added businesses, turning it into a front-runner in creating and intro- ducing more sustainable innovations. The businesses in the cluster have achieved strong leadership positions in their chosen segments of the global markets for advanced performance materials.
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  34. 34. 34 About DSM Engineering Plastics DSM Engineering Plastics is a global player in polyamides and polyesters. These materials are used in components for the electrical & electronics, automotive, flexible food packaging and consumer goods industries. DSM Engineering Plastics Markets Key segments for semi-crystalline engineering plastics: electrical & electronics, automotive, flexible food packaging and consumer goods industries. Key products are polyamide 6, 66, 6/66, 410, High Performance Engineering Plastics (e.g. PEEK, LCP, PPS, high performance polyamides), polyesters (PBT, PET), POM, thermoplastic copolyester (TPC) Total global market size for engineering plastics: ~ EUR 28bn in 2012 Most attractive markets Segments: consumer electronics, lighting, automotive powertrain, turbo and safety components and flexible packaging film for meat, fish and cheese Regions: Asia, especially China and India, but also Europe. US is becoming more and more attractive because of increasing drive for sustainable solutions Products: high performance engineering plastics (HPEP) and (co-)polyesters (TPC) Market growth 2010-2015 Growth of the engineering plastics market is expected above GDP, especially in China, India, Russia and Brazil Distribution by region China Rest of Asia Europe North America RoW Market by segment Automotive Electrical & Electronics Flexible food packaging Consumer goods Market by products PA6 PA66 PBT.PET HPEP POM TPC DSM Engineering Plastics Oil/gas/ Biomass Monomer Part System OEM/ End user Polymer Compound Key drivers of profitability Market growth in key segments and high growth economies Sustainability: materials reducing the carbon footprint over the value chain Innovation: be at the forefront of functionality and performance Growth in market share in high-end innovative applications Improved cost position Key success factors Global market leadership in chosen markets Global presence (follow customers) Engineering plastics portfolio Ability to commercialize market-driven innovations Products, application and value chain know-how
  35. 35. 35 Main customers Automotive: Bosch, Valeo, Peugeot, Tata Motors E&E: Schneider, Siemens, Samsung, Philips, Nokia (Food) packaging: VF Verpackungen, Wipack General: Salomon Main competitors Polyamide 6: BASF, Lanxess, UBE High Performance Engineering Plastics : Dupont, Kuraray, Solvay, Mitsui Thermoplastic copolyester: Dupont, Toyobo Current Global DSM Market position #1 in high temperature polyamides #2 in polyamide 6 #2 in thermoplastic copolyester #3 overall in semi-crystalline engineering plastics Strategy Further reduce impact of general economic conditions and input costs by focusing on selected high growth segments, global presence and backward integration Extend global leadership in high temperature polyamides, polyamide 6 and thermoplastic copolyester Extend leadership positions in selected end markets Main competitive advantages Global reach through regional network Innovation and sustainability drive and excellence in launching innovations Upstream integration with DSM Fibre Intermediates (caprolactam for polyamide 6) Manufacturing details see world map below “In our dynamic and challenging environment, we need to have in depth understanding of the business we are in. Together with our cus- tomers, we are dedicated to create impact beyond today’s frontiers in engineering plastics with innovative sustainable solutions. Today and tomorrow.” Roelof Westerbeek President Key products of DSM Engineering Plastics Akulon® and Novamid® polyamide 6, polyamide 66, polyamide 6/66 Stanyl® polyamide 46 Stanyl® ForTii™ polyamide 4T EcoPaXX™ polyamide 410 Arnite® polyester PET and PBT Arnitel® thermoplastic copolyester Technology Polymerization and compounding Key raw materials / intermediates Caprolactam, di-aminobutane, adipic acid, butanediol Investments New production unit for Stanyl® ForTii on stream Substantial revamp of the polymersation facilities at Kaoshuing (Taiwan) Innovation strategy Create maximal profitable growth as solution provider for performance thermoplastics. Capture opportunities from main societal trends such as Climate and Energy and Global Shifts. Key Innovations Akulon® Fuel Lock for fuel tanks for outdoor power equipment Akulon® RC with recycle content for automotive parts Arnite® XT for extreme precision components Arnite® XL for automotive lighting Arnitel® Eco, a bio-based TPC for food packaging and more Arnitel® VT, a PFC-free solution for breathable films Arnitel® XG, a PVC-free solution for cables EcoPaXX™, bio-based polyamide 410 for engine covers & more Stanyl® Diablo, a high temperature polyamide for automotive engine parts Stanyl® ForTii, a high temperature polyamide for electronics and automotive parts Stanyl® TC, a thermoconductive high temperature polyamide for LED lighting Production Facilities Regional Sales Offices
  36. 36. 36 Markets Dyneema® is used extensively in ropes, cables and nets in the fishing, shipping and offshore industries. It is also used in safety gloves for the metalworking industry and in fine yarns for applications in sporting goods. In addition, it is applied in bullet -resistant armor and clothing for law-enforcement personnel and the military. A number of new markets are in various stages of scouting & development. The business group will continue to focus on the further development of ultra high- performance polyethylene materials and technologies and on extracting value from its IP assets. Most attractive markets Life protection (e.g vests, vehicle protection) Commercial marine (shipping, offshore, fishing) Sports (sails & rigging, fishing lines) High performance textiles (cut resistant gloves, clothing) Market growth 2010-2015 UHMwPE fiber and its derivative products are regarded as high performance, high-value replacements for more traditional materials such as polyester, polyamide, steel or other high- performance fibers, such as aramids. Competitive products are segment specific. Growth in industrial segments remains close to double-digit, while demand in the tender-driven defense market remains weak. In addition, solid progress is being made in entering new application markets such as radomes, performance apparel and aviation containers. With technical breakthroughs in fiber per- formance providing further access to new applications, the attainable market is continuously growing. DSM Dyneema About DSM Dyneema DSM Dyneema is the inventor, manufacturer and marketer of Dyneema® , the world’s strongest fiber™. This product, based on ultra high molecular weight polyethylene (UHMwPE) is produced by means of DSM’s proprietary processes. The Dyneema® brand enjoys very high recognition in the value chains served UHMwPENaphta / ethylene Converter OEM End userFibre, UD (unidirectional fabrics) Tape Examples of customers Life Protection: Ten Cate (vests, vehicle protection) Commercial Marine: Unitex (lifting slings), Badinotti (fishing nets), Samson (mooring lines) Sports: Gottifredi Maffioli (sailing ropes), Pure Fishing (fishing lines) High Performance Textiles: Ansell (Gloves) Main competitors Honeywell (Spectra® UHMwPE). DuPont (Kevlar® aramid, UHMwPE tape) Steel & polyester producers Teijin (Twaron Aramids, UHMwPE Tape) Current DSM market position Market leader in UHMwPE, overall leader in high performance fibers in many segments. DSM Dyneema Key drivers of profitability Market growth and penetration into existing applications Success of innovations, new launches Dyneema® brands Key success factors Capability to manage growth, both in hardware and in people Ability to commercialize market-driven innovations Product, application and value chain know how Strong, healthy IP position (patents and trademarks) Brand value (trust and innovation)
  37. 37. 37 Production Facilities Main Sales Offices “The Dyneema® brand stands for a business culture which enables its people to do what it takes to consistently deliver the brand promise to all its stakeholders. “ Strategy Drive penetration of existing applications, exploiting advantages in total cost of ownership and sustainable solutions to substitute traditional offerings Establish strong relationships with key value chain players Accelerate entry into targeted new markets (geographies and end-uses) Position 2nd brand (Trevo™ ) as “no-frills” offering in certain segments Main competitive advantages Technical benefits related to physical attributes. Dyneema® is up to 15 times stronger than quality steel and up to 40% stronger than aramid fibers; it floats on water and is extremely durable and resistant to moisture, UV light and chemicals Dyneema® brand: managed for value throughout the value chains under trademark licenses Innovation capabilities (products, applications, technologies) and excellence in launching innovations Clear eco-footprint advantages Global commercial and operations footprint Manufacturing details Dyneema® yarn and Dyneema® UD are produced in Greenville, North Carolina (USA) and Heerlen (Netherlands) The new tape technology is applied in Greenville (USA) DSM is also a partner in a manufacturing joint venture in Japan for fiber Trevo™ is produced at ICD Shandong (China) Technology Dyneema® is manufactured through DSM’s proprietary gel spinning process. Dyneema® Tape and UD are also subject to extensive patent coverage. Gerard de Reuver President Key raw materials / Intermediates Ultra High Molecular Weight Polyethylene (UHMwPE) Investments Optimize existing assets Innovation strategy Introduce new applications and new products for Dyneema® Continue to build and extend Dyneema® brand value Protect and strengthen IP positions Extend eco+ and benefits of product portfolio Key innovations Dyneema® Tape Technology for vehicle and personal protection Dyneema® Diamond Technology for optimum cut re- sistance and wearability of protective gloves Dyneema MaxTech technology for off shore mooring appli- cations
  38. 38. 38 Main markets / applications Focus for DSM Resins & Functional Materials is to combine the ‘winning solutions’ with a market-oriented, innovation-driven organization and already existing strong market positions. Main markets are shown in the graphs. DSM Resins & Functional Materials About DSM Resins & Functional Materials DSM Resins & Functional Materials is a global player in devel- opment, manufacturing, marketing and sales of high-quality resins solutions for paints and coatings, composite materials and optic fiber coatings. The company employs over 2,500 people and has 21 manufacturing plants across the world. This reflects DSM Resins’ global activities and its dedication to lo- cal and global customers. MonomersRaw Materials Coatings Composites OEM End userResins Market growth 2010 - 2015 Markets for Coating Resins, Functional Materials and Composite Resins are long term expected to grow above GDP. However, with ~50% end-market exposure to the Building and Construction market, growth rates are currently lower. Most attractive markets Selected key segments: right combination of end-markets, regions and technologies to capture the fastest growth such as industrial wood, architectural, metal (can & coil), automotive, optical fiber, 3D printing and light weight containers. Current DSM market position DSM has a leadership position in many segments: Coating Resins: DSM is global leader in sustainable resins systems for many industrial and architectural* applications with pioneering technology in waterborne and powder coatings (*excl. waterborne wall paints in the architectural segment) Functional Materials: In telecommunications, DSM is the global leader in UV curable, fiber optic materials. Composite Resins: DSM Composite Resins is the European market leader in unsaturated polyester resins and global leader in sustainable innovation for composites. Examples of customers Coating Resins: Large global coating companies such as AkzoNobel, PPG, Jotun Composite Resins: Menzolit, IDI, Beneteau, Brandenburger, Fiberline Functional Materials: Corning, Prysmian Group, Sumitomo Global Coating Resins market 2012 (€20bn) Architectual Automotive Metal (incl. Can & Coil) Industrial Wood Powder Others (incl. graphic art) Global Composite Resins market 2012 (€5bn) Building & Construction Automotive Marine Industrial DSM Resins & Functional Materials Key drivers of profitability Market growth in key segments and regions Sustainability: lighter materials and environmentally friendlier, safer paints Growth in market share in high-end innovative applications Key success factors Global market leadership and presence Brand value (differentiation, reliability) Ability to commercialize market-driven innovations Leading low footprint technology platforms geared towards markets
  39. 39. 39 Main competitors Coating resins: BASF, Dow, Cytec, Evonik, Momentive, Nu- plex Composite Resins: Cray Valley, Reichhold, Ashland, Scott Bader, Polynt, AOC Functional Materials: Momentive, Phichem, 3D Systems Strategy Coating Resins: Shaping a sustainable coatings future. Composite Resins: Creating value by enhancing perfor- mance, improving health & safety and minimizing the envi- ronmental footprint. Functional Materials: Growing global no 1 position in Fiber Optic Materials and leadership position in stereolithography materials. DSM's resins & functional materials business generates value with and for customers through continuous innovation so that they meet regulatory needs (such as REACH) and re- spond better to end-user demands for more sustainable and environmentally friendly materials. Main competitive advantages Global reach through regional network Innovation and sustainability drive and excellence in launch- ing innovations Strong unique technology position (waterbased resins, high solid resins, UV and sustainable solvents, styrene-free, co- balt-free, renewables, GMP) Extensive patent portfolio DSM brand highly valued through the resins value chain Main products The resin primarily determines the properties of the end- products, such as coatings and composites. Coating Resins: Waterborne resins for coatings and inks High solid resins Powder resins UV-curable resins and coatings Composite Resins: Unsaturated polyester / vinyl ester resins Sizings and binders Functional Materials UV curable coatings Light weight panels Manufacturing details Coating Resins: United States (Illinois, North Carolina, Indi- ana, Massachusetts, Rhode Island), China, Japan, Taiwan, Germany, Spain and the Netherlands Composite Resins: China, France, Italy and the Netherlands Functional Materials: United Stated (Illinois, North Caroli- na), Japan and the Netherlands Investments New plant in Nanjing for Composite Resins New plant in Changbin for UV Resins Key raw materials / intermediates Glycols, styrene, maleic-, phthalic anhydride, acrylates, isocyanates, acrylic monomers Innovation strategy Investment to create and execute innovation pipeline Market-driven dedicated organization Sustainable innovations: providing solutions to global societal issues Key Innovations NeoCryl: the latest generation waterborne acrylic emulsions in performance for industrial woods applications NeoRez: universal ink binders as well as resins for flooring applications with superior indoor air quality, without sub- stances of hazardous concern Desolite® Supercoatings: the newest generation of optical fiber coatings, with improved microbend sensitivity RP-10: aluminum replacing panel material made from Dyneema® HPPE fiber and Aeronite® composite resin UVolve®: instant floor coatings Uralac® EasyCure: low temperature cure powder coating resins Atlac® 580 A10/A20: Cobalt-free Vinyl ester resins based on BluCure TM Technology, replacing hazardous substances Synolyte™ 7524-N-1 FC: resin for artificial stone: high con- tent of bio raw materials, produced in line with GMP "Driven by the fact that most traditional materials are made of non-renewable finite resources, sustainability and responsible behavior are quickly gaining importance within the resins and functional materials industries. We, as DSM, want to provide new, more sustainable solutions, and look for example at bio-based and bio- renewable products to move towards potentially limitless raw material supplies." Dimitri de Vreeze President Production Facilities Main Sales Offices
  40. 40. 40 Polymer Intermediates The Cluster The Polymer Intermediates cluster comprises DSM Fibre Inter- mediates, the global market and technology leader in capro- lactam and the leading acrylonitrile supplier in Europe. Its head office is in Shanghai, China. Trends Overall, global demand for caprolactam and acrylonitrile is expected to grow by approximately 3 percent per year in the coming period. The strongest growth, at up to 6 percent per year, will be seen in China. Demand from the US and Europe is expected to be relatively stable. By 2015, China and Tai- wan are expected to consume over half of the world’s capro- lactam. The caprolactam business will be affected by a rapidly chang- ing industry landscape in China. New caprolactam plants are being built which bring more product to the local market, resulting in significant price pressure. A number of new mar- ket entrants are announcing further plans for new caprolac- tam plants, raising the likelihood of additional capacity. However, it remains to be seen to what extent all of these announced caprolactam initiatives will materialize. 2012 Sales by end-market 7% 13% 43% 12% 13% 12% Metal/B&C Automotive/Transport Textiles E&E Packaging Other 2012 Sales by destination 45% 15% 39% 1% Europe Americas Asia RoW Business Caprolactam Caprolactam is the raw material for polyamide 6, also known as nylon 6, of which about 4.5 million tons are produced annually worldwide. The applications of polyamide 6 are very diverse, covering many end-markets, from carpets and textiles to car parts, electrical devices and packaging film. DSM is the major supplier to the merchant caprolactam market. A major part of all caprolactam produced globally is made using DSM’s proprietary technology. The company actively licenses this technology. Acrylonitrile DSM Fibre Intermediates is the leading supplier in the European merchant acrylonitrile market with a market share of 25 per- cent. Globally, it ranks third. Acrylonitrile is a raw material for acrylic fibers, plastics, rub- ber, water treatment chemicals and a wide range of specialty products. It is a key ingredient for bright, fashionable acrylic textile and carpet fibers and for materials such as acrylonitrile- butadiene-styrene (ABS) and styrene-acrylonitrile (SAN) that are used for automobile components, electronic devices, toys and sports equipment. The application of acrylonitrile in a wide range of valuable specialty products like carbon fibers, water treatment additives and detergents is rapidly growing.
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  42. 42. 42 Most attractive markets (2012) Polyamide 6 for E&E, automotive and food packaging Textiles in Asia (mainly China and Taiwan) About DSM Fibre Intermediates DSM Fibre Intermediates is the largest merchant caprolactam producer in the world. With plants in the Netherlands, the United States and China, it holds a global market position, a solid partnership in China, excellent performance, technological leadership and a growing secured supply to DSM Engineering Plastics. With a market share of 25%, DSM Fibre Intermediates is a major player in the merchant acrylonitrile market in Europe. In addition, the business group produces ammonium sulfate, sodium cyanide and diaminobutane. DSM Fibre Intermediates Oil Gas Phenol Cyclohexane Ammonia Caprolactam Acrylonitrile Polyamide 6, Polyamide 46 Engineering polymers OEM (parts) Yarns Films Automotive E&E, Films, Textiles Carpets Markets Caprolactam, with a total global demand of some 4,400kt (merchant and captive) in 2012, is used predominantly for polyamide 6, a high performance polymer, used in: Textiles (lingerie, sportswear, leisurewear, fashion wear, travel and outdoor gear) Floor coverings (carpets, rugs) Industrial yarns (tyre cord, conveyor belts, mechanical rub- ber goods, ropes, nets, fishing lines) Engineering plastics: automotive (air-inlets, engine covers), E&E (switches, connectors), equipment housings Films (food packaging, industrial packaging) Acrylonitrile’s main applications are textiles, building & construction (acrylic fibers), automotive and E&E (ABS), water purification (acrylamide). Global acrylonitrile demand is around 5200kt. Ammonium sulfate is mainly used as fertilizer, sodium cyanide is used in detergents and in vitamins synthesis, diaminobutane is an intermediate for Stanyl® Textiles Engineering plastics Industrial yarns Floor covering Film Caprolactam merchant market distribution DSM Capro Corp. CPDC Ube Honeywell BASF Sinopec Others Acrylonitrile production distribution Ineos Asahi Ascend DSM Secco FPC Taekwang Jilin Others Main markets Caprolactam (2012) DSM Fibre Intermediates Key drivers of profitability Growth (DSM Engineering plastics and China) High utilization rates Raw material prices Low-cost operations Key success factors Security of sales (excellent global coverage) Reliable supply, consistently good product quality Technology leadership
  43. 43. 43 “We will remain at the forefront of technological developments with a clear focus on sustainability. We aim to produce the best quality possible, with the smallest environmental im- pact.” Ed Sheu President Market growth 2012-2016 Global demand growth of acrylonitrile / caprolactam over 3% per year Regional: Strongest growth caprolactam in China > 6% per year US and Europe relatively stable About 60% of the world's supply of caprolactam is consumed in Asia. By 2015, half the world’s polyamide 6 consumption is ex- pected to be in China / Taiwan. Main customers Caprolactam: manufacturers of polyamide-6 products such as DSM Engineering Plastics and textile yarn producers. Acrylonitrile: manufacturers of acrylic fibers, adiponitrile, ABS/SAN, acrylamide, nitrile rubber Strategy Caprolactam: DSM Fibre Intermediates has a threefold ap- proach to capitalize on the opportunities that are arising: doubling production capacity in China; continuously improv- ing existing assets by means of life time extension and vari- able cost reduction projects; and a firm commitment to sustainability. Acrylonitrile: maintain our sustainable position as one of the leading players in Europe. Main competitive advantages Global presence Cost leadership Only global producer in fast growing China Reliable partner Technology leadership Integration with DSM Engineering Plastics (polyamide 6) Manufacturing details Caprolactam over ~700 kt total (Geleen, Netherlands; Nanjing, China; Augusta, US) Acrylonitrile (Geleen, Netherlands) 285 kt Sodium cyanide 28 kt Ammoniumsulfate 1200 kt Technology DSM has proprietary world-class caprolactam technologies (HSO, HPO+™, HPO™, Hydranone™, Oxanone™) with multiple licensees worldwide. Key raw materials / intermediates Benzene derivatives (Cyclohexane or phenol), ammonia for caprolactam Ammonia and propylene for acrylonitrile Investments Second line (200kta), world class caprolactam production line in China (startup end of 2013) Life time extension projects Sustainability projects, efficiency driven investments to save on energy and raw materials and reduce emissions in- cluding investment in sustainable lowest cost ammonium- sulfate facility Innovation strategy New caprolactam production technologies from bio- renewable resources Sustainability programs to radically reduce carbon footprint and reinforce our ‘green’ industry leadership Process innovations to lower cost per ton produced Production Facilities Main Sales Offices
  44. 44. 44 Innovation Center The Cluster The cluster contains the activities of the DSM Innovation Center (including DSM Venturing) and the Emerging Business Areas (EBAs). DSM Innovation Center The DSM Innovation Center was originally set up in 2006 to help facilitate the company’s strategic transition toward an intrinsically innovative organization. It serves as an enabler and accelerator of innovation within DSM. With its Emerging Business Areas and the business incubator, the DSM Innova- tion Center has a general business development role, focus- ing on areas outside the current scope of the business groups. Emerging Business Areas DSM’s Emerging Business Areas provide strong long-term growth platforms based on the company’s core competences in Life Sciences and Materials Sciences. The company has three Emerging Business Areas: DSM Biomedical DSM Bio-based Products & Services DSM Advanced Surfaces DSM aspires to realize € 1 billion in sales by 2020 in its com- bined Emerging Business Areas. DSM Biomedical DSM Biomedical intends to be the medical industry’s leading development partner, trusted to shape the future of bio- materials and regenerative medicine devices that improve and brighten patients’ lives throughout the world. DSM Bio-based Products & Services At the core of DSM’s strategic focus on Life Sciences and Mate- rials Sciences is its key competence in industrial biotechnology. The move towards a bio-based economy presents significant opportunities, particularly in renewable energies such as cellu- losic ethanol, renewable diesel and biogas as well as renewable building blocks and materials like bio-based succinic acid. DSM Advanced Surfaces DSM Advanced Surfaces provides solutions for smart coatings. In 2012, the unit recalibrated its strategic approach, which led to a decision to fully focus on solutions for the solar industry, with its anti-reflective coating KhepriCoat™. DSM Business Incubator The DSM Business Incubator is an independent unit of the DSM Innovation Center. It explores opportunities and technologies in new areas where its technologies can meet current and future market demands. Platforms are created within the scope of securing food, health and energy requirements of society, in close collaboration with industry partners and existing and potential customers. DSM Venturing DSM Venturing actively invests in early stage companies that create innovative products and services in health, nutrition and materials. DSM Venturing plays an important part in DSM’s open innovation policy and invests in activities that are of immediate or future strategic relevance to DSM business groups and/or the DSM Innovation Center. “ Innovation is in our genes; it is our sport. Our mission is to enable and accelerate innovation efforts DSM wide and to create new businesses outside the scope of the current Busi- ness Groups, while addressing upcom- ing needs as a consequence of Global Shifts, in the areas of Climate & Ener- gy and Health & Wellness, based on our combined strengths in Life Scienc- es and Materials Sciences. ” Rob van Leen Chief Innovation Officer
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  46. 46. 46 About DSM Bio-based Products & Services By means of our ‘Bright Science’ - combining DSM’s competen- cies from life sciences with our competencies in materials sciences, this unit will open up huge opportunities in the move towards a bio-based economy, particularly in bioenergy such as cellulosic bio-ethanol, advanced biodiesel and biogas, and renewable chemicals and building blocks such as bio-based succinic acid and bio-based adipic acid. DSM Bio-based Products & Services Biomass RecoveryBio conver- sion Pre- treatment Further Conversion Markets Cellulosic Bio-ethanol Global cellulosic bio-ethanol market expected to grow to 18bn gallons by 2022, ~US$ 50bn Market value for enzymes & yeasts of ~US$ 3-5 bn by 2022 US EPA forecasts ~7.8bn gallons of cellulosic bio-ethanol from crop residue by 2022 Advanced biodiesel Diesel is becoming a larger percentage of the mix of liquid fuels in both US and EU (currently ca. 50%) Industrial Biogas Market expected to grow by ~7% p.a. to ~100 BCM in 2020 (US$ 35bn) Resulting market for biogas enzymes and process improve- ment: ~US$ 1bn by 2020 Bio-based Chemicals & Materials The growth trend of Industrial Biotech is forecasted at 15- 20% per year between 2010-2020 Accessible market for selected renewable chemicals ex- pected to grow to ~US$ 12bn in 2020 DSM Bio-based Products & Services 0 5 10 15 20 2011 2015 2020 2022 US China Brazil EU Market Cellulosic Bio-Ethanol (*) (Global demand in billion gallons) *: derived from Hart’s Global Energy Study 0 2 4 6 8 10 12 14 2010 2015e 2020e Substitute Bio- based chemicals New Bio- based chemicals Growth Selected Renewable Chemicals (Market value in billion US$) Key success factors Time to the market High certainty of technological success and high technological spin-off Successful alliances throughout the value chain Policy stability / level playing fields re. governmental policies Current DSM market position Leadership cellulosic bio-ethanol market (with POET-DSM) No. 1 position in yeasts and top position in enzymes Unique and essential combination of yeasts and enzymes for cellulosic bio-ethanol production Leadership in bio-succinic acid (with Roquette Frères) Most efficient production process with best-in-class environmental footprint Unique proprietary low-pH yeast-based bioconversion technology in the market World’s first commercial-scale plant Unique combination of biotechnology and traditional chemi- cal synthesis and polymer technologies (materials) Most attractive markets Licensing integrated technology packages Enzyme, yeast and other micro-organisms for the cellulosic bio-ethanol market Bio-based chemicals (e.g. succinic acid, adipic acid) Main customers Cellulosic Bio-ethanol Existing corn-ethanol plants (USA, via JV POET-DSM), and sugar cane mills in Brazil New cellulosic ethanol plants Cellulosic bio-ethanol prospects/refineries Industrial Biogas Cellulosic bio-ethanol prospects/refineries Breweries and food processing residue streams Bio-succinic acid (via JV Reverdia) Several new market outlets (e.g. Polyester Polyols (for Polyu- rethanes), Polybutylene Succinate (PBS), Plasticizers) Key drivers of profitability Market potential of renewable solutions Performance in applications (chemicals and materials) Eco-footprint: Intrinsically lower carbon footprints Competitiveness (price, availability and eco-footprint) versus conventional alternatives (Continued) market access (Ethanol – USA.) Policy stability (USA, EU)
  47. 47. 47 Geleen (NL), Delft (NL), Bergen op Zoom (NL), Columbia (US), Elgin (US), Sao Paulo (Brazil), Shanghai (China) POET-DSM Advanced Biofuels: Sioux Falls (US), Emmetsburg (US) Reverdia (JV with Roquette Frères): Lestrem (France), Cas- sano (Italy) Technology Unique combination of biotechnology competences: yeasts, enzymes, bacteria, algae Utilizing existing Life Sciences technologies to address to- day’s needs in renewable energy and sustainable materials Biotechnology knowledge and skills with DSM’s in-depth knowledge of traditional chemistry and manufacturing ex- cellence to bring novel integrated solutions Key raw materials / intermediates Sugar/starch (for chemicals – not for fuels) Cellulosic biomass e.g. corn crop residue, sugar cane ba- gasse/energy cane Main intermediates: (fermentable) sugars Investments Reverdia, the JV between DSM and Roquette, has started up production of bio-based succinic acid Initial capex of USD 250 million in POET-DSM advanced bio- fuels JV, fully on stream in 2014 Key Innovations New robust enzymes mix able to break down biomass more efficiently at higher temperatures Advanced yeast strain capable of simultaneous conversion of C6 / C5 sugars into bio-ethanol A route for non-photosynthetic conversion of sugars into oils for transportation fuels (biodiesel, aviation fuels) based on DSM’s microbial oil platform Production routes for Bio-based succinic acid and Bio-based adipic acid “With its unique focus on Life Scienc- es and Materials Sciences, DSM is well positioned at the forefront of an emerging bio-industrial era brought about by the need for renewable en- ergy sources and sustainable chemis- try and materials. We see that viable alternatives can and will be created by harnessing the power of nature in creative sustainable ways” Anton Robek President Main competitors Cellulosic Bio-ethanol Technology licenses: DuPont, Chemtex/Beta Renewables Enzymes: Novozymes, DuPont Yeast: Novozymes/Terranol, Fermentis Lesaffre Bio-succinic acid Myriant, BioAmber, BASF/Purac Main products Integrated technology licenses Bio-succinic acid (via JV Reverdia) Cellulosic bio-ethanol (via JV POET-DSM) Yeasts to convert C5/C6 sugars Enzymes to break down biomass Strategy Dual track approach in bio-based products & services for Bio-energy (Cellulosic Bio-ethanol, Advanced renewa- ble biodiesel and Industrial biogas) and Bio-based Chemicals & Materials (Bio-based succinic acid, Bio-based adipic acid) DSM’s business model is: Demonstrate technology (bioconversion ‘software’) through strategic investments and partnerships along the value chain Sell conversion technology/consumables (yeast, enzymes) Sell products from demonstration plants (biofuels, biogas, bio-based chemicals) Focus on green materials with better performance and low- er environmental footprint Main competitive advantages Strong value chain partnerships (a/o Roquette, POET) DSM’s unique combination of competences in biotechnolo- gy, chemistry, process technology and material science: Yeasts (cellulosic bio-ethanol, renewable diesel, in- dustrial biogas, bio-based chemicals) Enzymes (cellulosic bio-ethanol and biogas) Value chain and end-user understanding because of back- ground in Materials Sciences DSM holds leading biotechnology positions built on 150 years of experience and innovation in enzymes and yeast Production / research facilities DBPS DSM Bio-based Products & Services locations

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