The Press Release includes information that is presented on a pro forma basis ('pro forma figures') as well as other alternative performance measures (APMs), and information that is presented in accordance with IFRS as issued by the International Accounting Standard Board ('IFRS figures'). Please refer to the section Definitions for the definitions as applied – in the long version of the Press Release.

Management Report

H1 2023 highlights

• DSM and Firmenich merger successfully completed on May 8, 2023 
• Integration progressing in-line with plan, with initial benefits of synergies already being delivered
• Perfumery & Beauty and Taste, Texture & Health delivered good performances in a volatile macro-economic environment
• Weak vitamin market conditions primarily affected Animal Nutrition & Health, but also, to a lesser extent, Health, Nutrition & Care, leading to an acceleration of plans to structurally improve performance

Geraldine Matchett and Dimitri de Vreeze, Co-CEOs, commented: "We are well advanced in the integration phase of the merger and excited by the positive response of customers to our enhanced business proposition, giving us even greater confidence in the delivery of our synergy targets. The performance of our Perfumery & Beauty and Taste, Texture & Health units in the first six months demonstrates the quality of these businesses and the synergy potential of the merger.

As communicated in our trading update of June 28, 2023, market conditions in our vitamin activities weakened throughout the first half, impacting in particular Animal Nutrition & Health, leading to an acceleration of our plans aimed primarily at structurally improving the earnings quality and reducing the volatility of our vitamins business. We expect these measures to deliver savings of around €200m annually. These are on top of our integration synergy cost savings.

Through principally the quality of our core activities, our targeted synergies and the decisive and impactful actions recently announced, we are confident that we will realize our mid-term financial targets. All of this is underpinned by the attractive opportunities presented by our highly complementary portfolio of ingredients, science and technologies enabling us to deliver superior innovation-led growth as the world leader in nutrition, health and beauty."

Outlook 2023

As announced on June 28, 2023, given the current weak macro-economic outlook, dsm-firmenich does not anticipate a material improvement in business conditions in the second half of 2023. As a result, the company estimates a FY 2023 on a pro forma basis Adjusted EBITDA of between €1,800-1,900 million (versus €2,275 million in FY 2022). Within this, the company estimates a negative vitamin effect on full year Adjusted EBITDA of about €400 million as well as a negative foreign exchange effect for dsm-firmenich of about €100 million. The vitamin effect has been exacerbated by high vitamin inventories, produced at elevated costs, delaying the expected positive impact from lower input costs in H2 2023. 

Strategy

The merger of DSM and Firmenich created a world-leader in nutrition, health and beauty, through which its highly integrated portfolio of nutritional, natural and renewable ingredients, together with complementary science capabilities and technologies, will deliver superior innovation-led growth.

By creatively applying proven science and drawing on data-driven innovation capabilities as well as exceptional standards of operational excellence, dsm-firmenich seeks to tackle the tension between what society needs, what people individually want, and what the planet demands in the areas of nutrition, health, and beauty. By working closely together with customers to create what is essential for life as well as desirable for consumers yet simultaneously more sustainable for the planet, dsm-firmenich is poised to bring progress to life for billions of people around the world.

dsm-firmenich is organized in four distinct high-performing businesses, rooted in complementary world-class scientific research and manufacturing excellence: Perfumery & Beauty (P&B); Taste, Texture & Health (TTH); Health, Nutrition & Care (HNC); Animal Nutrition & Health (ANH).

dsm-firmenich is a purpose-led company where people and planet as well as financial success are at the core of its strategy. Created through two growth companies that are also global sustainability leaders, dsm-firmenich is determined to further enhance its positive impact in the world, continually raising the bar to help tackle climate change, protect nature, and care for people all along the value chain.

Integration: synergies

dsm-firmenich expects to realize annual revenue synergies of around €500m, with a full run rate achieved by the end of year 4, as a result of an acceleration of innovation with customers, roughly split as follows:

• 60% in TTH business unit 
• 25% in HNC business unit 
• 15% in P&B business unit 

Total synergies are expected to generate approximately €350m of additional Adjusted EBITDA per year, of which roughly half is estimated to come from cost synergies, with the full run rate achieved by the end of year 3.

Vitamin transformation program: acceleration of strategic actions

As announced on June 28, 2023, dsm-firmenich made the decision to accelerate a series of planned actions to restructure its vitamin business following the further weakening of the vitamin markets which predominantly impacts the performance of its ANH business. These actions aim to reduce its exposure to vitamins and related earnings volatility, thereby increasing the company's earnings quality. The action plan includes:

• Restructuring of the vitamin asset footprint 
• Creating a new separate vitamin unit within ANH 
• Reducing working capital/inventories 
• Establishing a new senior executive role, Vitamin Transformation Program Director, reporting directly to the CEO
• Accelerating the growth of ANH in its higher-margin Performance Solutions and Precision Services businesses

Combined, all these actions are expected to result in an estimated saving of around €200 million per year with the full run rate to be reached by the end of 2024. These savings will be in addition to the previously announced €350m Adjusted EBITDA integration synergies target. 

To see more details, please refer to the announcement in our trading update on June 28, 2023.

Mid-term targets

Further to the specific actions in vitamins, the company will also take a broader view on all business segments to prioritize and accelerate the company's high growth/higher margin segments. The company will maintain strict cost controls, accelerated by a wide range of self-help cost saving initiatives, fully focused on maximizing the operational performance of its activities and significantly improve its cash flow generation supported by reducing its working capital.

dsm-firmenich is confident that through principally the quality of its core activities, the targeted €350m Adjusted EBITDA synergies, and all actions being taken, it will realize its mid-term financial targets of 22-23% Adjusted EBITDA margins and 5-7% annual organic sales growth.

The company remains committed to operating with a strong balance sheet and maintaining a strong investment grade rating, and will prioritize capex, innovation-led organic growth, and dividends in the coming period. Within all the actions taken, the company remains committed to science, research, sustainability and innovation, to ensure our growth for the short, mid, and long term and build the company for the future.

Dividend

On June 29, 2023, the Extraordinary General Meeting of dsm-firmenich AG adopted the proposed dividend per ordinary share of €1.60. The dividend was fully paid out of the capital contributions reserve and therefore paid without deduction of any Swiss withholding tax. The payment was made on July 6, 2023.

Share Placement

On May 25, 2023, dsm-firmenich executed a share placement of 6,696,477 ordinary shares that had been created at the incorporation of the company, but which had not been tendered for by DSM NV shareholders. These dsm-firmenich ordinary shares - representing approximately 2.5% of dsm-firmenich's share capital - were sold to institutional investors, at a price of €109.50 per share. dsm-firmenich intends to use these total proceeds of €733 million to fund the cash consideration payable in relation to the buy-out procedure of the DSM NV shareholders that had not tendered.

Buy-Out of remaining DSM Shareholders

dsm-firmenich has commenced the statutory buy-out procedure to acquire the 6,696,477 DSM ordinary shares that were not tendered in the exchange offer. These remaining DSM Shareholders will receive as a buy-out price a cash consideration for their shares to be transferred to dsm-firmenich. More information can be found on the DSM website.

dsm-firmenich H1 2023 on a pro forma basis

H1 2023 
The company recorded a 5% decline in organic sales with a small positive price effect offset by lower volumes. While Perfumery & Beauty (P&B) and Taste, Texture & Health (TTH) delivered good performances, Animal Nutrition & Health (ANH) was significantly impacted by low vitamin prices, which also affected, but to a lesser extent, Health Nutrition & Care (HNC).

The first half Adjusted EBITDA was €929 million compared to €1,177 million in the comparable period, resulting in a 300bps margin contraction to 15.1%, largely reflecting an estimated vitamin effect of around €200 million and a negative foreign exchange impact. P&B and TTH continued to deliver strong Adjusted EBITDA growth in a volatile macroeconomic environment, while ANH was impacted by the low vitamin prices, which also impacted, but to a lesser extent, HNC.

Q2 2023
Organic sales development in the quarter was lower at -7%, mainly due to the increasing impact of low vitamin prices in ANH and HNC, as well as the Pinova plant fire in P&B. This was also reflected in the development of the Adjusted EBITDA.

Note for editors:

The full text of the press release is available here.
The presentation to investors is available here.

Financial calendar

October 31, 2023, 7:00 CEST – publication of dsm-firmenich Q3 trading update
February 15, 2024 – publication of dsm-firmenich 2023 results

Additional information

Today dsm-firmenich will hold a webcast for investors and analysts at 14:00 CEST. Details on how to access this call can be found on the dsm-firmenich website, www.dsm-firmenich.com

About dsm-firmenich 

As innovators in nutrition, health, and beauty, dsm-firmenich reinvents, manufactures, and combines vital nutrients, flavors, and fragrances for the world’s growing population to thrive. With our comprehensive range of solutions, with natural and renewable ingredients and renowned science and technology capabilities, we work to create what is essential for life, desirable for consumers, and more sustainable for the planet. dsm-firmenich is a Swiss-Dutch company, listed on the Euronext Amsterdam, with operations in almost 60 countries and revenues of more than €12 billion. With a diverse, worldwide team of nearly 30,000 employees, we bring progress to life™ every day, everywhere, for billions of people. 

www.dsm-firmenich.com